DISTRICT COURT OF QUEENSLAND

Introduction

1. [1]
   This is an application for leave to appeal from two decisions of the Commercial and Consumer Tribunal (“the Tribunal”) dated 1 November 2004 and 18 April 2005 respectively relating to a dispute between a builder and the owners of the house which was being built by him.

2. [2]
   The master builder, Kenneth Henry Marshall (“the applicant”), was engaged by homeowners, David and Glennis Seckold (“the respondents”), to complete the partial construction of a house (“the building”) at Closeburn in the Pine Rivers Shire to a stage of construction commonly called “lock-up” stage.

3. [3]
   The applicant was only required to construct the building to this stage as the respondents were to continue and complete the construction of the building undertaking the following works by themselves:

“(a) internal partitioning, internal doors, internal plumbing (except under slab drainage);

(b) all electrical installation;

(c) all painting;

(d) all cabinet work; and

(e) all floor coverings.”^[1]

4. [4]
   A written contract was entered into between the parties on 27 June 2001 for the contract price of $121,051.00 of which a deposit of $6,053.00 was paid by the respondents to the applicant. The contract itself is made up of three parts: a Contract Schedule (“the Schedule”); General Conditions of Residential Building Contract (“the Conditions”); and Specifications of materials to be used and workmanship to be employed (“the Specifications”).^[2]

5. [5]
   Clause 11.6 of the Conditions permitted the builder to make progress claims of the contract price in writing. Three such progress claims were made by the applicant after particular stages of construction had been completed. Those progress claims can be summarised as follows:

1. (a)
   Progress Claim 1 dated 10 August 2001 after the completion of the base stage of construction;

2. (b)
   Progress Claim 2 dated 25 September 2001 after the frame stage of construction; and

3. (c)
   Progress Claim 3 dated 14 December 2001 after the enclosed stage of construction.^[3]

6. [6]
   Both Progress Claims 1 and 2 were paid by the respondents to the applicant in full and no dispute arises out of either of them. The dispute arises essentially out of Progress Claim 3 dated 14 December 2001 (“Progress Claim 3”) and particularly in relation to the roofing work done to the building.

7. [7]
   Under the Specifications, the parties agreed that the roof covering that was to be used in the construction of the roof was “Colourbond Customorb roof sheeting and flashings”^[4].  The applicant engaged a subcontractor to install the roof who used a roof covering material called “MultiCote G6” instead of the “Colourbond Customorb” as specified in the Specifications.  It was subsequently discovered that the alternate product had been used by the subcontractor when defects in the roof were being rectified by another subcontractor and ultimately the respondents alleged that there were defects in the roof as a result of the installation of the “MultiCote G6” product.

8. [8]
   The respondents paid the applicant the amount of $20,000.00 only of the $53,783.00 claimed by him in Progress Claim 3 and being the balance of the contract price outstanding, retaining the balance amount pending resolution of the “roof” dispute. The applicant then commenced proceedings against the respondents to recover the balance of the contract price including interest and costs.

The Tribunal’s Decisions

9. [9]
   The substantial dispute was heard before the Tribunal on 12 and 13 August 2004. In the introduction to his reasons, the learned Tribunal Member outlined the dispute in the following terms:

“This is a claim by a builder against homeowners for the balance owing on a progress/final claim pursuant to a contract entered into between the parties on 27 June 2001.  For the respondents’ part they contest the amount alleged to be owing by them to the applicant on the basis that the claim was a final claim under the contract and accordingly did not take into account the proper value to be attributed to certain variations and deletions and further did not take into account certain variations and deletions.  The respondents further set up by way of counterclaim a claim for damages for defective works in respect of the roof of the dwelling together with liquidated damages.”^[5]

10. [10]
    The Tribunal delivered two (2) decisions in this matter on 1 November 2004 and 18 April 2005 being the substantive decision in the application and the costs decision respectively.

11. [11]
    The effect of the Tribunal’s decision dated 1 November 2004 was in the following terms:

1. (a)
   The respondents pay the applicant the sum of six thousand, six hundred and thirty-one dollars, thirty-one cents ($6,631.31) calculated on the basis that the roof of the building be “replaced” rather than “rectified”; and

2. (b)
   The applicant is not entitled to an award of interest on any outstanding amount as “progress claim 3” failed to meet the requirements of Clause 11.7 of the contract in that the amount claimed included “variations and deletions” which had not been finally determined either by the parties or under s 84 of the Domestic Building Contracts Act 2001(Qld).

12. [12]
    The Tribunal’s further decision dated 18 April 2005 was as follows:

“1. The applicant will pay the respondents’ costs on and from 20 February 2004 on an indemnity basis.

2. Otherwise there will be no order as to costs….”^[6]

13. [13]
    The applicant seeks leave to appeal to this court from both of these decisions of the Tribunal in his amended notice of appeal, subject to leave, filed in this court on 6 May 2005 on the following grounds:

“1. The learned Tribunal member erred by:

The Law

14. [14]
    The appeal to this court is pursuant to s 100 of the Commercial and Consumer Tribunal Act 2003 (“the Act”) which relevantly provides:

“ (1) A party to a proceeding before the tribunal may appeal to the District Court against a decision of the tribunal, with the court’s leave, only on the ground of—

1. (a)
   error of law; or

2. (b)
   excess, or want, of jurisdiction…

…

6. (6)
   On an appeal, the District Court may do any of the following—

1. (a)
   confirm, annul, vary or reverse the tribunal’s decision; or

2. (b)
   remit the case to the tribunal for further hearing or rehearing; or

3. (c)
   make consequential or ancillary orders or directions.”

15. [15]
    The applicant’s primary, if not only ground of appeal, is that the Tribunal erred in law in a number of respects as set out in the amended notice of appeal. However the applicant must firstly satisfy the court that he should be granted the court’s leave to appeal.

Leave to Appeal

16. [16]
    The basis of the applicant’s seeking leave to appeal is as follows:

“(a) the demonstrable errors in the decision and the injustice thereby done to the applicant;

(b) the general importance of the questions to be decided: that is, the questions concern, effectively, standard form contractual clauses;

(c) the nature of the questions to be considered: that is, whether such standard form clauses are susceptible to the implied terms found by the learned Tribunal Member;

(d) the fact that the outcome of this decision will add to the certainty and clarity of the law in relation to such clauses;

(e) “the decision” being appealed finally determined the parties’ rights.”^[7]

17. [17]
    At the hearing of this matter the court was advised that there was at that time no relevant authority on the question of what test was to be applied for an application for leave to appeal after a matter had been fully heard and a decision had been given by the Tribunal.^[8]  However reference has been made by both parties to the decision of Wilson SC DCJ in Albem Pty Ltd v PKF Queensland Pty Ltd [2004] QDC 013 (“Albem”).  In that case, the applicant had applied to the Tribunal under s 126 of the Act for a summary order dismissing the respondent’s proceedings.  The application was dismissed by the Tribunal and the applicant then sought leave to appeal under s 100 of the Act to this court.  The parties in the current proceedings made reference to the comments made by his Honour at [10] and [11] of his reasons:              

“The very requirement for leave indicates the Legislature’s concern to reduce appeals from the decisions of this Tribunal: Décor Corp Pty Ltd v Dart Industries Inc (1991) 104 ALR 621, at 623.  That conclusion is strengthened, I think, by s 100(8) of the CCT Act which also requires that appellants pay the costs of appeals, including the costs of any transcript…

…this is an application for leave to appeal from an interlocutory order, a jurisdiction in which appellate courts traditionally exercise particular caution: Décor Corp Pty Ltd v Dart Industries Inc (supra) at 623; Adam Peter Brown Male Fashions Pty Ltd v Phillip Morris Incorporated (1981) 148 CLR 170 at 176-177.  That caution is manifest in judicial warnings that an applicant for leave must be able to demonstrate not only a prima facie error in the judgment below, but also that the question in issue is one of general importance, something which the public interest requires should be the subject of further argument and the decision of an appeal court:  Glenwood Properties Pty Ltd v Delmoss Pty Ltd (1986) 2 Qd R 388 per Carter J at 389.”

18. [18]
    The applicant submits that the proceeding currently before the court is by way of an application for leave to appeal from a final decision of the Tribunal after a full hearing of the matter as opposed to an application for leave to appeal from an interlocutory order dismissing an application for summary relief as was the case in Albem and therefore the test to be applied in the current case is not as “strict” as the test as repeated by Wilson SC DCJ above.

19. [19]
    While there may be understandable policy considerations as to why courts would impose “stricter” tests for the granting of leave to appeal for applications arising after the interlocutory stage than upon applications arising after a full hearing has taken place, the reference in [17] above as to the desire of the legislature to limit appeals from such a “specialist” tribunal to this court cannot be denied.

20. [20]
    However on balance, I am of the view that the applicant is entitled to leave to appeal the Tribunal’s decisions as the issues inherent in those decisions are ones of general importance and therefore of public interest in the administration of the Act.

The Issues

21. [21]
    As stated in [15] above the only challenge to the Tribunal’s decision can be on the basis of “error of law”.

22. [22]
    To succeed on this basis the applicant must state its grounds of appeal “with precision”^[9] and be able to point to some act or omission on the part of the judicial tribunal from which the decision is appealed which demonstrates a failure by it to apply proper legal principles in reaching its decision, or that it received or excluded relevant evidence which denied the applicant the opportunity to receive a fair consideration of the issues involved.

23. [23]
    The applicant’s basic submission was that the issues in the appeal are:

• “…firstly the refusal of the Tribunal to allow interest at the contractual rate…”;

• “Secondly, the appellant appeals as against the respondents’ relief it obtained on the counterclaim, that is we say it was more properly a case in which repair rather than replacement ought to have been ordered”; and

• “thirdly, there is an appeal against the order for costs”^[10]

24. [24]
    The respondents summarise the applicant’s issues as:

• “…the interest, the counter-claim, the replace versus repair argument…and the costs”;

• but that “…only the first one of those (the interest) can be characterised in any way as an argument about legal issues…”^[11].

The Applicant’s Submissions

25. [25]
    On the first issue the applicant submits that the Tribunal erred in finding that the applicant was not entitled to be awarded interest “…on the amount owing pursuant to Clauses 11.8 and 11.9 at the rate of 15% per annum…”^[12] by construing the contract in the way the learned Tribunal member did at paragraphs 282 and 283 of his reasons where he said:

“It is, in my view, implicit in Clause 11.7 of the contract that, if any progress claim includes an amount by way of adjustment or otherwise which is incorrectly claimed (or later is found to be so), then the progress claim itself fails to meet the requirements of Clause 11.7, and therefore is not a proper progress claim in terms of the contract.

I consider that such a strict construction of Clause 11.7 is warranted, as the clause is contained in a contract prepared by the applicant/builder, and has major repercussions as far as the respondent owners are concerned, namely requiring payment of the progress claim in full without set-off, failing which interest at the somewhat generous rate of 15% applies to any amount left unpaid.  In such circumstances it could not be contemplated that the contract, upon any reasonable interpretation, requires an owner to any an amount in a progress claim that is not actually found to be due to the builder and/or, as in this instance, results from an unlawful variation, remuneration for which can only be secured by special application to the Tribunal”.

26. [26]
    The applicant submits that the learned Tribunal member’s reasons above amount to a finding of an implied term within Clause 11.7 “that if the progress claim was incorrect in its amount, then it could not be termed a ‘progress claim’ for the purposes of that clause and no money was thereby payable”^[13].  The applicant further submits that such a finding was not open to the learned Tribunal member at law or on the evidence that was placed before the Tribunal and as such he “erred in applying a construction to the Contract that was neither warranted nor available in the circumstances”^[14].

27. [27]
    On the second issue the applicant submits that the learned Tribunal member failed to apply the principle enunciated in Belgrove v Eldridge (1954) 90 CLR 613 at 618-619 (“Belgrove”) and order “repair and rectification” of the roof rather than total replacement and that by adopting the latter option the learned member failed the “necessary and reasonable” test espoused in Belgrove.

28. [28]
    Thirdly, it was submitted by the applicant that the Tribunal’s costs order failed to take into account the applicant’s offer to settle dated 20 December 2002 to the respondents which was in the nature of a “Calderbank” offer, but on the contrary acted upon the respondents’ offer to settle contained in their letter of 19 February 2004 which also qualified as a “Calderbank” offer.

The Respondents’ Submissions

29. [29]
    The respondents’ submissions in respect of the “interest” argument were that the Tribunal was correct in its construction of Clause 11.7 of the contract at paragraph 282 of its reasons. The respondents submitted that the final progress claim “was not truly a progress claim within the meaning of the Contract, with the consequence that it did not give rise to an entitlement to payment, or any consequent entitlement to interest”^[15].  The respondents cited the case of Ian Delbridge Pty Ltd v Warrandyte High School Council [1991] 2 VR 545 to support its contention in this regard.  The respondents further submitted that such a conclusion did not involve a finding of an implied term of the contract but rather “a question of construction of the Contract” itself^[16].

30. [30]
    Secondly, in respect of the “roof” argument the respondents submit that the Tribunal was entitled to come to the conclusion it did (“replacement” as opposed to “repair and rectification”) on the expert evidence it received in the hearing and by relying on one expert’s opinion over another’s there was no “error in law” in its so doing.

31. [31]
    Thirdly the Tribunal’s costs order was open to it in the manner in which the parties’ respective offers to settle unfolded in the course of the litigation from the time of the applicant’s first offer dated 20 December 2002 to the respondents’ final offer of 19 February 2004.

The Tribunal’s Findings

32. [32]
    The history of this dispute is lengthy and highlights the difficulties and problems that can arise when parties enter into a contractual relationship with each other using what might be described as a “standard” type of contract but not specifically suited to the peculiar circumstances applicable to the instant case (ie construction to “lock-up” stage). Be that as it may a serious dispute arose which has propelled the parties into prolonged and expensive litigation.

33. [33]
    The hearing before the Tribunal of the substantive dispute extended over 2 days with evidence from three “lay” witnesses (the applicant; his estimator Ian Brimblecombe, and the respondent David Seckold) and two “expert” witnesses (Kevin Jackson and Ray Griffiths) all of whom were cross-examined at length in respect of the various aspects of the claim and counter-claim respectively.

34. [34]
    It would seem from the learned Tribunal member’s comprehensive reasons in the decisions he reached on the application before him that he analysed carefully the nature of the claims and counter-claim presented to him; had regard to the contractual relationship of the parties contained in the various exhibits before the Tribunal; applied the relevant law to the facts of the case; considered the principles enunciated in Belgrove on the issue of “replacement versus rectification” and made formal findings on the evidence before him at paragraph 226 and following of his reasons in the substantive application.

35. [35]
    In my view the learned Tribunal member was entitled to find that the applicant was not entitled to a payment of interest for the reasons he set out comprehensively at paragraphs 275 to 286 of his reasons. I find that the learned Tribunal member did not make a finding of an “implied term” in relation to Clause 11.7 of the contract in reaching this decision but rather made a finding on the construction of the clause itself. In particular his use of the word “implicit” in paragraph 282 of his reasons in the connotation in which it is used denotes the absence of qualification or question in his interpretation of the clause in that he concludes that “progress claim 3” was not in fact a “progress claim” under Clause 11.7 and therefore did not attract the accrual of interest under Clause 11.9 which might otherwise have been the case. In my view therefore, the applicant’s appeal on this issue must fail as he has not demonstrated any “error in law” in the learned member’s reasoning in reaching his decision.

36. [36]
    Likewise in respect of the “replacement versus repair and rectification” issue I find that the learned Tribunal member correctly applied the law to the facts of the case before him as set out at paragraphs 287 to 308 of his reasons in that he considered the evidence before him; preferred the opinion of one expert over the other and in respect of Clause 31 of the specifications relied on by the applicant to challenge the learned member’s findings on the point, determined that the applicant had not discharged his onus of proof in the assertion he made which I find is a proper interpretation of the clause. I therefore find that the learned Tribunal member did not err in the manner which he applied the law on this issue.

The Tribunal’s Order for Costs

37. [37]
    The issue of whether a party is entitled to recover costs in the application before the Tribunal is governed by ss 70 and 71 of the Act together with s 142 if parties make offers to settle a proceeding.

38. [38]
    The law on the interpretation of ss 70 and 71 has been recently set out in the judgment of Tamawood Ltd & Anor v Paans (2005) QCA 111 (“Tamawood”) although s 142 did not arise for consideration in that decision.  Keane JA stated at paragraph [24] of the judgment:

“…The language of the provisions of the Act to which I have referred [that is ss 70 and 71 of the Act] is sufficiently clear to negate the proposition that success in the proceedings is sufficient to establish a prima facie entitlement to the beneficial exercise of the discretion conferred by s 71(1) of the Act. The approach of the learned District Court judge seems to me, with respect, to deny the words of both s 70 and s 71(5) their ordinary meaning; it is not to the point that another form of words might have been used to make that position even clearer.”

39. [39]
    With this as the starting point it is then necessary to consider what the Tribunal did in relation to the awarding of costs in its consideration of s 142 of the Act where parties make “offers to settle” in the course of a proceeding.

40. [40]
    The Tribunal delivered a separate order and reasons in respect of costs on 18 April 2005 whereby:

“1. The applicant will pay the respondents’ costs on and from 20 February 2004 on an indemnity basis.

2. Otherwise there will be no order as to costs….”^[17]

41. [41]
    In his reasons the learned Tribunal member canvassed the respective offers made by each party; determined which of those offers qualified as a “Calderbank” offer; set out the history of the proceedings before the Tribunal and the conduct of the parties upon which the Tribunal’s discretion to award costs is based in terms of s 71(4) of the Act; properly considered the Tribunal’s obligations under s 142(4)(a) of the Act; had regard to “…what is meant by ‘reasonable costs’ in s 142(2) of the CCT Act”; and finally determined that “indemnity costs” were the appropriate category of costs to award on the basis of what was said by the Chief Justice in Bottoms v Reser & Anor (2000) QSC 413.

42. [42]
    It seems to me that it was open to the learned Tribunal member to conclude that the applicant’s offer to settle of 20 December 2002 was not in terms precise enough to be regarded as one which could satisfactorily be compared with the Tribunal’s ultimate order in the substantive application and therefore be assessed against the Tribunal’s order within the terms of s 142(1)(d) of the Act.

43. [43]
    In respect of the respondents’ offer to settle^[18] the Tribunal’s determination that it was unequivocal; compatible with the Tribunal’s decision and capable of assessment within the terms of s 142(1)(d) was again open to the Tribunal and I find that there was no error of law in the Tribunal’s finding in this respect.

Costs of Appeal

44. [44]
    In light of the decision in Tamawood and the reasons of Keane JA at paragraphs [39] and following, it would seem that this court’s discretion to award costs of the appeal is unfettered save for s 100(8) of the Act and on the basis of my findings herein I will allow the respondents their costs of and incidental to this appeal.

Orders

45. [45]
    It follows therefore that my orders are:

1. Leave to appeal is granted;

2. The appeal is dismissed.

3. The appellant to pay the respondents’ costs of and incidental to the appeal to be agreed or assessed on the standard basis under the District Court scale.