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  4. McGibbo Pty Ltd v Willex Projects Pty Ltd - [2013] QDC 313

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McGibbo Pty Ltd v Willex Projects Pty Ltd[2013] QDC 313

McGibbo Pty Ltd v Willex Projects Pty Ltd[2013] QDC 313

DISTRICT COURT OF QUEENSLAND

CITATION:

McGibbo Pty Ltd v Willex Projects Pty Ltd [2013] QDC 313

PARTIES:

McGIBBO PTY LTD as trustee for the McGIBBO FAMILY TRUST

ACN 143 266 817
(Plaintiff)

v

WILLEX PROJECTS PTY LTD

ACN 123 600 975
(Defendant)

FILE NO/S:

4937/12

DIVISION:

Civil

PROCEEDING:

Trial

ORIGINATING COURT:

District Court at Brisbane

DELIVERED ON:

18 December 2013

DELIVERED AT:

Brisbane 

HEARING DATE:

25 - 27 November 2013

JUDGE:

Kingham DCJ

ORDER:

  1. The defendant must pay the plaintiff the sum of $85,516.50 plus interest on that sum pursuant to s 58 of the Civil Proceedings Act 2011 (Qld), calculated from 13 December 2012 to the date of judgment, in accordance with District Court Practice Direction No. 6 of 2013.
  2. Unless either party files written submissions within 7 days seeking a different order, Willex must pay McGibbo’s costs of and incidental to the proceedings as assessed on the standard basis, if not agreed.
  3. If any party submits for a different order, they must serve a copy of their submissions on the other party, who will have 7 days within which to provide written submissions in response. Costs will be determined without a further oral hearing, unless either party requests one.

CATCHWORDS:

CONTRACTS – BUILDING, ENGINEERING & RELATED CONTRACTS – where McGibbo engaged Willex to build a house – where McGibbo disputed the quality of the concrete slab constructed by Willex – where Willex claimed payment for completing the base stage of the construction – where Willex denied there were any substantial defects in the slab – where McGibbo claimed it was entitled to terminate the contract as Willex claimed payment it was not entitled to & was unwilling to rectify the defects – whether McGibbo was entitled to terminate the contract – whether the base stage was completed when the payment claim was issued – whether the method of construction complied with the contract – whether the slab was defective when the base stage claim was issued or when the contract was terminated.

CONTRACTS – BUILDING, ENGINEERING & RELATED CONTRACTS – DAMAGES – where it is found that Willex breached a number of contractual conditions – where it is found that Willex was not entitled to issue the relevant payment claim – where it is found that McGibbo was entitled to terminate the contract – where McGibbo later engaged a different contractor to complete the house – where McGibbo carried out remediation work on the slab – whether McGibbo took reasonable steps to minimise the loss that flowed from termination.

CONTRACTS – DOMESTIC BUILDING CONTRACTS ACT 2000 (QLD) – DESIGNATED STAGES CONTRACT – where the contract excluded certain works – whether the contract was a designated stages contract – whether the contract was to build to the fixing stage – whether the builder could claim more than the regulated percentage for the base stage.

Civil Proceedings Act 2011 (Qld), s 58.

Domestic Building Contracts Act 2000 (Qld), s 66 & Schedule 2.

Domestic Building Contracts Regulation 2010 (Qld), s 5.

Mazelow Pty Ltd v Herberton Shire Council [2002] QCA 119, cited.

Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17, cited.

Robinson v Harman (1848) 1 Exch 850, cited.

COUNSEL:

Mr. M.J. Drysdale for the Plaintiff

Mr. A.R. Lonergan for the Defendant.

SOLICITORS:

CBP Lawyers for the Plaintiff.

Otto Martiens Lawyers for the Defendant.

Background

  1. [1]
    This case concerns the quality of a concrete house slab and the dispute between an owner and a builder about their rights under a building contract to construct a house. The owner of the land (in Hidden Woods Estate, Gold Coast) is McGibbo Pty Ltd, as trustee for the McGibbo Family Trust. Willex Projects Pty Ltd is the builder. All relevant dealings were through Mr McCullough, for the owner, and either Mr Jeynes or Ms Cullum for the builder.
  1. [2]
    In April 2012, the parties entered into a HIA Plain Language New Home Construction Contract to construct a large single story house and detached garage. Work commenced in June. By the end of July that year, the parties were in dispute about the quality of the construction of the house slab and the contractor’s entitlement to payment for the base stage.
  1. [3]
    In December 2012, both parties purported to terminate the contract because of the other’s conduct. Who was entitled to terminate the contract remains in dispute, but the parties agree it is no longer on foot.
  1. [4]
    McGibbo claims the work done on the slab was deficient in a number of respects and failed to comply with contractual requirements. It argues the builder was not entitled to issue a claim for the base stage and, in any case, claimed more than the builder was entitled to claim.
  1. [5]
    McGibbo says it was entitled to terminate the contract because the builder claimed payment it was not entitled to; was unwilling to rectify the defects and had otherwise breached conditions relating to the scope of work and method of construction of the slab. McGibbo seeks either damages in breach of contract; or a refund (in full or in part) of the money it paid to Willex, upon adjudication of the base stage claim.
  1. [6]
    For its part, Willex denies there were any substantial defects. It accepts there were some minor issues with the slab as poured but says these had been attended to before McGibbo purported to terminate the contract. It denies there was any impediment to issuing the base stage claim, whether due to the scope of works or the condition of the slab. It denies McGibbo had the right to terminate the contract and relies on McGibbo’s attempt to do so as an act of repudiation. It says it acted upon McGibbo’s repudiation when it terminated the contract. It denies any damages are payable but, if they are, McGibbo should not get all it has claimed for two reasons. Firstly, because McGibbo has used timber paid for by Willex without making allowance for it in its claim. Secondly, because McGibbo has not mitigated its loss, having entered into a new construction contract which Willex says is not at arms length.
  1. [7]
    Further, Willex counterclaims damages for McGibbo’s breach of contract (including legal costs and the costs of expert reports). McGibbo denies any liability to compensate Willex and argues the legal costs and the costs of the expert reports were incurred because of the dispute about the quality of the slab, not because of any breach of contract by McGibbo.
  1. [8]
    The primary legal issue is whether McGibbo was entitled to terminate the contract. That question is affected by disputes about the scope of the works, the method of construction, other contractual requirements about the base stage and how certain terms of the contract should be interpreted. These might be summarised as claims about the areas to be concreted; the effect of the failure of the builder to cure the concrete and the extent of cracking in the slab; the depth of cover of reinforcing steel in the slab; the strength of the concrete (and testing for it); and whether the slab was compacted by mechanical vibration.
  1. [9]
    If McGibbo does not succeed on its contract claim there are competing claims by Willex for damages for breach of contract and by McGibbo for refund of the base stage claim.
  1. [10]
    The issues will be discussed under the following headings:
  1. Was McGibbo entitled to terminate the contract?
  1. (a)
    What was the agreed scope of works for the base stage?
  1. (b)
    Did the method of construction comply with the contract?
  1. (c)
    Was the slab defective when the base stage claim was issued or when the contract was terminated?
  1. (d)
    Was the building floor finished when the base stage claim was made?
  1. If McGibbo was entitled to terminate the contract, what damages should be awarded?
  1. If McGibbo was not entitled to terminate the contract, what relief should be granted?

1.)  Was McGibbo entitled to terminate the contract?

  1. [11]
    McGibbo sought to terminate the contract on 13 December 2012 when its solicitors wrote to the solicitors for Willex. McGibbo claims it had the right to terminate because Willex had not complied with its obligations under the contract. Further, it says Willex issued a base stage claim when it was not entitled to do so and that claim, itself, constituted a breach of contract. It argued the claim was invalid as was any subsequent action taken on the strength of it, including suspension of works. Finally, it argues Willex evidenced an intention not to fulfil its contractual obligations when it responded to McGibbo’s notice to remedy defects by asserting there were no defects requiring attention.

(a) What was the agreed scope of works for the base stage?

  1. [12]
    The concrete work was defined by the footing and ground slab plan which forms part of the specifications for the contract.[1]It shows both the floor of the house itself, internal and external, and some features that might be considered external to or an adjunct to the house. Some of these were not completed when the slab was poured on 26 and 27 July 2012. The areas are highlighted in yellow on a copy of the footing and ground slab plan.[2]
  1. [13]
    Ms Cullum, the quantity surveyor who negotiated the contract for Willex, said she did not consider the concrete slabs formed part of the base stage.[3]That was not put to Mr McCullough in cross-examination.
  1. [14]
    The contract is governed by the DomesticBuilding Contracts Act 2000 (Qld). It defines base stage to mean, relevantly for this contract:

“base stagemeans –

  1. (d)
    for a building with a concrete floor, other than a suspended concrete slab floor – the stage when… the building’s floor is finished.”[4]
  1. [15]
    Given that definition, there is an argument the omitted areas (or some of them) did not form part of the base stage. It is difficult to resolve that question on the limited evidence given about the highlighted areas. The specifications[5]and the architectural drawings[6] show these as external terraces, which appear to be at a different level to the house floor, and concrete pads outside bedrooms. Whether those areas fall within the meaning of the building’s floor is debatable.
  1. [16]
    Mr Jeynes, for Willex, said Mr McCullough did not want those areas poured at that stage of the project. He recalled a conversation on 24 July 2012, when the site was being framed up for the pour. He said Mr McCullough told him not to worry about doing those areas then, because he wanted to ensure they were at the same level and had the same decorative finish as the driveway, which was to be constructed later in the project.[7]He also said that Mr McCullough told him he had not decided whether he wanted the pads at all.[8]Mr McCullough denied the conversation took place.[9]
  1. [17]
    Both parties point to conduct by the other to support their evidence on this issue. McGibbo points to the history of variations to the contract. It argues Willex was meticulous in documenting variations, yet had not done so in response to the alleged conversation.[10]Nor did it make any allowance for the reduced scope in the payment claim itself.
  1. [18]
    Willex asks me to have regard to the extensive communications between the parties about McGibbo’s complaints about the slab. McGibbo did not complain the base stage could not be claimed because the building floor was not finished in any of the following:
  • its payment schedule (7 August 2012) in response to Willex’s payment claim (pursuant to the Building and Construction Industry Payment Act 2004 (Qld));
  • its response (27 August 2012) to Willex’s adjudication application pursuant to that Act; or
  • the correspondence passing between the parties and their representatives between the date Willex issued the base stage claim and the date McGibbo terminated the contract.
  1. [19]
    Regardless of whether the omitted areas fall within the definition of base stage, I am satisfied on the balance of probabilities that they were not poured then on Mr McCullough’s direction. That is consistent with McGibbo’s failure to raise the issue throughout their dispute regarding the base stage claim. It seems probable, also, that an owner would want to ensure consistency between different external elements of the construction. The admitted failure by Willex to document this as a variation is not so surprising, given the dispute emerged as soon as the pour was complete and the claim was issued.
  1. [20]
    Given that finding, I am not satisfied that the failure to complete the highlighted areas meant the building floor was not finished when the claim for payment for the base stage was issued on 27 July 2012.[11]

(b) Did the method of construction comply with the contract?

  1. [21]
    McGibbo has raised a number of issues about the construction method used by Willex and its failure to meet contractual requirements. They can be summarised as follows:
  1. The slab was not cured;
  2. Steel reinforcing was exposed;
  3. The concrete was not tested as required by the contract; and
  4. The mechanical vibration of the slab was inadequate.

(i) The slab was not cured

  1. [22]
    Willex concedes the contract required it to cure the concrete for seven days but this was not done.[12]It argues this did not affect the utility of the slab. In fact, McGibbo subsequently built a house upon it with only limited further work. John Reid, the structural engineer engaged by Willex said curing affected the timing of cracking, not whether the concrete would crack. Curing the concrete will delay the onset of cracking.[13]He accepted, however, that curing could indirectly affect the number of cracks, because the concrete may have a little more tensile strength if the onset of cracking was delayed.[14]
  1. [23]
    Mr Hills, the engineer engaged by McGibbo, took a different view about the impact of curing. He said it is fundamental to minimising cracking by ensuring the hydration process continues, which provides a better quality concrete in the end.[15]
  1. [24]
    I consider the difference between the two is one of degree. Mr Hills places more value on minimising cracking than does Mr Reid. That is relevant to another dispute about the long term effect of cracking. However, the requirement to cure is an industry standard, presumably because, as Mr Hills said, it produces a better quality outcome. To the extent their evidence does conflict on this issue, I prefer the evidence of Mr Hills to that of Mr Reid.
  1. [25]
    Regardless of whether the cracking rendered the slab defective or of less utility, the fact remains that it was a contractual requirement that the slab was cured and Willex has raised no satisfactory answer to the argument that its failure to do this constituted a breach of contract.

(ii) Steel reinforcing was exposed

  1. [26]
    It is common ground there were some areas on the edges of the slab where steel reinforcing was exposed in the vertical face of the slab. They are noted on four different sites on the marked up footing and slab plan.[16]
  1. [27]
    Mr Evans, a concrete technologist engaged by Willex, noted there were two clauses in the specification which related to the depth of cover on the steel reinforcing. One required construction in accordance with AS3600 Concrete structures; and the other specified 40mm cover for exposed parts of the slab.[17] AS 3600 provides a tolerance level for coverage up to 10mm less than specification.[18]
  1. [28]
    Although there is an inherent tension between the two clauses in the specifications, neither was met if the reinforcing was exposed. At the time the base stage claim was issued (on 27 July 2012, the second day of the pour) the slab did not comply with the contractual requirement whether it required 40mm of cover or could be satisfied by 30mm because of the tolerance level in AS3600.

(iii) The concrete was not tested as required by the contract

  1. [29]
    Another complaint relates to the testing regime for the concrete. As I understood his submissions, counsel for McGibbo did not argue that a failure to test in accordance with the contract would, were it the only breach, entitle McGibbo to terminate the contract. No particular damage was alleged to flow from it. Nevertheless, I will state my conclusions in relation to this matter.
  1. [30]
    The engineering specifications required all concrete testing to occur in accordance with AS 1012 Methods of Testing Concrete.[19]It also required the concrete to slump test at no less than 60 millimetres and not more than 90 millimetres.[20]Willex conceded there was no on-site testing of the concrete.
  1. [31]
    In his report, Mr Evans reported that the concrete was specified, ordered and delivered to meet the specifications. He also referred to Production Assessment Records provided by Boral for the mix which he said showed the previous and recent performance for the mix complied with the compressive strength requirement of 25MPa at 28 days.[21]
  1. [32]
    AS 1012 specifies the method for testing concrete for compressive strength, it does not require the testing to be done on site. Again, it is debatable whether the effect of the specification was that any testing, other than a slump test, needed to be done on the concrete on site. Mr Evans said on site testing for compressive strength was usually required only for high rise structures, not for a single storey domestic building.[22]In the absence of an express requirement for on site sampling to test for compressive strength, I consider the better view of the specification is that this was not required.
  1. [33]
    However, the slump test was not undertaken. Based on my experience in hearing building disputes in this and other jurisdictions, I am aware the purpose of a slump test is to test the wetness of the mix, a feature relevant to both workability of the batch and its strength. It was not argued that any damage flowed from the failure to slump test. I accept that this is an example of Willex failing to meet the contract requirements in its method of construction.

(iv) The mechanical vibration of the slab was inadequate.

  1. [34]
    The final complaint about the method of construction was the extent to which the slab was compacted by mechanical vibration. The specifications required the concrete to be compacted by means of a mechanical vibrator.[23]Mr McCullough agreed that he did see a mechanical vibrator used on the second day of the pour.[24]The dispute seems to be about the extent to which the slab was compacted in this way and whether it was effective.
  1. [35]
    The basis for this issue seems to be evidence about what Mr McCullough described as air voids in concrete cores taken from the slab for testing by Odyssey Consulting Group, structural and civil engineers engaged by McGibbo. Although McGibbo did not rely on its report, he tendered photographs of the cores which he asked the expert witnesses to comment on.[25]
  1. [36]
    Mr Reid agreed some air had got caught up in some of the samples but for most of them he considered the bubbles were quite normal and could not be properly described as voids. He thought it indicative of normal but not full compaction. A normal building site compaction will leave quite a few bubbles behind.[26]However, he agreed that he would not expect to see air pockets the size shown in photograph 12 of that exhibit. Mr Hills agreed with that.[27]
  1. [37]
    Mr Evans, however, did not. He said that he didn’t think those pockets were unusual for a slab that was 100 mm to 120 mm in depth.[28]It was not possible to use a poker vibrator (which is what is used for this purpose) at that depth without risking hitting the subsoil. The result is, inevitably, that the poker is dragged through the concrete. It would be reasonable to expect a higher probability of inadequate compaction underneath reinforced steel and this might explain the larger voids in that sample.[29]
  1. [38]
    In his report he recommended the use of a second vibrator would provide a more effective outcome, but observed that it was common practice to use a single vibrator.[30]Interesting though that evidence is, the specifications did not expressly require more than one mechanical vibrator to be used. That is consistent with what the experts advised was the industry practice for domestic building projects.
  1. [39]
    It is open to the court to infer from Mr McCullough’s evidence that the mechanical vibrator was not used across the entire slab. He says he did not observe one being used on the first day of the pour.[31]Again, there is a conflict in the evidence given by Mr McCullough and Mr Jeynes, who said that the entire slab was compacted this way.[32]
  1. [40]
    Mr McCullough was not present throughout the pour on both days and cannot say what occurred when he was not there.[33]Having heard evidence from the experts about the photographs, I do not consider they call into question Mr Jeynes’ evidence. Finally, Mr Jeynes’ evidence that a mechanical vibrator was used across the slab is supported by Mr Evans’ conclusion that good and adequate compaction had been achieved, based on his observation of the concrete surface into the core holes after coring.[34]I am not persuaded that Willex breached the contractual requirement for compaction by mechanical vibration.
  1. [41]
    In summary, in relation to the complaints that Willex did not meet the contract specifications as to the method of construction, I find that when it issued the base stage claim it had not cured the slab, there was exposed steel reinforcing in a number of places in the vertical face of the edge of the slab and it had not performed any slump test on the concrete poured. However, I do not find that it was required to perform other on site testing of the concrete or that it breached the requirement to compact the slab by means of a mechanical vibrator.

(c) Was the slab defective when the base stage claim was issued or when the contract was terminated?

  1. [42]
    Whilst a number of deficiencies were pleaded, by the time of the hearing McGibbo seemed to confine its allegations that the slab was defective to two issues: excessive cracking of the slab, because it was not cured; and inadequate cover of the steel reinforcing. Counsel for McGibbo also asked the expert witnesses about the compaction strength of the slab and suggested that it did not meet the contractual standard. I did not consider he went so far as to argue the slab was defective because of the compaction of the strength of the concrete in situ. However, in case I have misunderstood counsel’s argument. I have also addressed the evidence about the strength of the concrete under this heading.
  1. [43]
    The base stage claim was issued on the second day of the pour and before Willex made any attempt to deal with McGibbo’s complaints about the slab. McGibbo argues both the alleged defects now relied upon were not adequately remediated. When Willex communicated that it did not consider any further remediation was necessary, McGibbo purported to terminate the contract.

(i) Was the slab defective because of excessive cracking?

  1. [44]
    There is no dispute there is cracking on the surface of the slab. Mr Reid and Mr Hills agreed the failure to cure the slab accelerated (or did not delay) the onset of cracking.[35]However, there is a fundamental conflict about whether the extent of cracking observed for this slab required remediation.
  1. [45]
    The early advice given by Mr Evans to Willex was to undertake remediation by epoxy injection into the cracks in the slab.[36]However, at the hearing he deferred to Mr Reid’s opinion that the cracking was not excessive and remedial work was not required.[37]He explained his recommendation was intended to address the owner’s concerns about the slab, and should not be taken to mean that he considered remediation was required.[38]
  1. [46]
    Mr Hills took a different view. He considered the cracks had the potential to create problems in the long-term. His particular concern was the potential for water ingress leading to oxidisation of the steel reinforcing and, ultimately, concrete cancer. He agreed this was unlikely to be a short-term issue. He considered the consequence of the slab deficiency may not be realised for 15 years or so. He also agreed that this was only an issue in relation to external slabs which were not otherwise made waterproof.[39]At its highest, then, Mr Hills identified a potential issue for exposed parts of the slab.
  1. [47]
    There was a different focus in the opinions given by Mr Reid and Mr Hills which seems to me to explain the divergence in their views about whether remediation was required. Mr Reid was concerned with the condition of the slab in so far as it affected the structural integrity of a house built upon it. Mr Hills was concerned about the impact of moisture incursion on the concrete itself.
  1. [48]
    I am persuaded there was no issue with the utility of the slab for the purpose of house construction. However, I prefer Mr Hills’ evidence about the latent potential of moisture incursion if the external areas were not otherwise sealed. His report includes a photograph of a significant external crack.[40]His evidence is also consistent with Mr Evans’ report, in which he identified a potential for ingress of moisture through cracking in external patio slabs.[41]It is also worth noting that Mr Evans considered the cracking on the external rear patio was due mainly to inadequate jointing in the patio areas.[42]
  1. [49]
    Willex did do some remediation work in October 2012. The experts agreed that, if remediation was required, the steps taken by Willex Projects were inappropriate and would be ineffective. That is borne out by photographs included in Mr Hills’ report. I am satisfied that the cracking in exposed parts of the slab only presented a long term risk and, to that extent, there was a latent defect in the slab if it was not otherwise protected from water ingress. I also find that Willex had not adequately remediated the external cracking.
  1. [50]
    Mr McCullough said the external areas were to be left as polished concrete. Because of the extent of the external cracking, however, he made the decision to tile the external patio areas to limit the potential for water ingress. Mr Jeynes said he thought McGibbo always intended to tile the external areas.[43]That proposition was not put to Mr McCullough, however, he did say that McGibbo was to tile the internal areas of the house.[44]The contract is ambiguous because it excludes floor coverings, internal and external, from the scope of works.[45]
  1. [51]
    Whatever its intention for the external slab, I consider it was prudent for McGibbo to take steps to protect it from water incursion. While the structural integrity of the slab for house construction was not in issue, the external slab subject to cracking was at risk of long term deterioration unless action was taken to prevent water ingress through the cracks.

(ii) Was the slab defective because of inadequate cover of the steel reinforcing

  1. [52]
    The second defect related to the depth of cover of the reinforced steel at the edges of the slab. Unfortunately, the evidence before the court on this point was vague and undocumented. Certainly at the time the base stage claim was issued, there was exposed steel and a clear breach of the specifications.
  1. [53]
    However, by the time the contract was terminated, the depth of cover had not been determined. Subsequently, Mr Hills tested a 10 metre edge at the front of the slab. Unfortunately, he did not record the readings. His recollection is that more than 30% of the readings along that 10 metre face were below 30 millimetres, which is below the tolerance level for an exposed slab provided for by AS 3600.[46]He only tested this area because his brief was to assess whether Willex had implemented Mr Reid’s and Mr Evan’s recommendations for remediation of the slab. He was not asked to assess the depth of cover across the whole of the slab.
  1. [54]
    Although it is unfortunate that Mr Hills did not document his readings, I know of no reason to question either his recollection, in broad terms, or his integrity in this matter. Mr Reid’s report proves the slab, as poured, was non-compliant. While Mr Reid understood that remediation work he had recommended was undertaken he could not say whether the concrete cover met the contractual standard.
  1. [55]
    It is no answer that Mr Hills’ report was not obtained until after the contract was terminated. At the time of termination, there was no evidence to establish that the slab had been brought up to the contractual standard. Given the clear evidence of inferior workmanship, it was for Willex, not McGibbo, to demonstrate the defect in the work on the slab had been properly remediated. The evidence obtained after the event demonstrated McGibbo had a reasonable basis for ongoing concern about whether the defects had been remediated.
  1. [56]
    McGibbo did not urge the court to infer from Mr Hills’ test of that one area that there was, generally, a defect across the entire slab. Nevertheless, McGibbo relied upon Mr Hills’ evidence to demonstrate the slab was defective, because of the issue in that area.
  1. [57]
    Willex used a product which Mr Reid considered would provide a superior protection for the steel to concrete cover.[47]Nevertheless, given Mr Hills’ evidence, I cannot be satisfied that the slab met the AS 3600 or contractual standard for cover. Later, McGibbo poured new concrete beside a number of the slab’s vertical faces to provide better cover protection. These areas were marked on exhibit 147. It also tiled the face identified by Mr Hills, to improve its integrity.[48]It was not suggested to Mr McCullough, nor did any of the expert witnesses say, that the work done by McGibbo was either unnecessary or unreasonable.
  1. [58]
    I find the slab was defective at the time the base stage claim was issued. I am not persuaded that Willex had remedied the defect when McGibbo terminated the contract.

(iii) Were the contract requirements regarding the compaction strength of the concrete met?

  1. [59]
    I found McGibbo’s position about the compaction strength of the concrete somewhat elusive. Although the complaint seemed to be largely about testing, the way in which counsel for McGibbo questioned the expert witnesses implied an argument that the slab was defective because it did not have a compaction strength, in situ, at the contract standard.
  1. [60]
    The specifications required the characteristic compressive cylinder strength (fc) of the various concrete elements at 28 days to be, for the ground slab, 25 MPa. Mr Evans’ report referred to core testing by Civilec, for McGibbo and Concrete Diagnostics, for Willex. He disregarded the testing done by Civilex and it was not argued at trial that he was wrong to have done so. As to the testing done by Concrete Diagnostics, he concluded that the core test results for concrete poured on the first day was 23.2 MPa and, for the second day, 26.3 MPa. Both exceeded the deemed not to comply level of 21.25 fixed by clause 6.5.2(e) of AS 1379 – Specification and supply of concrete. In the absence of any contrary evidence, I accept Mr Evans’ interpretation of the core test results and his opinion of the strength of the slab.
  1. [61]
    Mr Reid advised concrete ordered at 25MPa would not test at 25MPa in situ. Concrete to that specification is concrete with the potential to go to 25MPa if moulded properly, with all air pushed out of it and kept underwater for 28 days. These conditions cannot, of course, be replicated on a building site. The concrete may reach compaction strength of 25 MPa some years later, but not within a month or three of being laid.[49]
  1. [62]
    It seemed to me that the three experts agreed that, if the specifications required concrete with a compactive strength of 25 MPa, the builder would be expected to order concrete of that quality.[50]The specifications did not expressly require that strength to be achieved in situ within 28 days.
  1. [63]
    I find the contract required concrete with that compactive strength to be used, not that it required the builder to achieve compactive strength of 25 MPa in situ demonstrated at 28 days. Further, the evidence establishes that the strength of the slab, in situ, exceeded the minimum requirement in AS1379 and, therefore, was not defective.
  1. [64]
    In summary, in relation to the alleged defects in the slab, at the time the base stage claim was issued, the slab was defective because of the latent risk arising from cracking in the external slab and because of exposed steel reinforcing evident in some vertical faces of the slab. I am not satisfied that, when McGibbo terminated the contract, those defects had been adequately remediated.

(d) Was the building floor finished when the base stage claim was made?

  1. [65]
    This is not a question of the physical area constructed but rather the legal interpretation of when a base stage can be said to be finished. Willex issued the base stage payment claim on 27 July 2012, the second day of the concrete pour. McGibbo argues that for various reasons, payment was not then due and owing and Willex had no entitlement under the contract to issue the claim when it did.
  1. [66]
    The base stage is achieved when the building’s floor is finished.[51]It is clear, from my discussion of the issues above, that I find the slab as constructed by Willex did not meet some contractual requirements as to the method of construction. Further, when the base stage claim was made, the slab was defective because of the cracking on the external slab and the exposed steel reinforcing. The remediation work was undertaken by Willex after the base stage claim was issued. In any case, it is implicit in my findings above, that the defects were not adequately remediated. If the extent of the defects meant the building floor was not finished, then the remediation work did not change the parties’ legal positions.
  1. [67]
    The question is what criteria must be met before a progress claim may be made for a staged contract. Willex’s defence appears to proceed on the basis that any defects in the slab at the time the claim was made were minor and could be rectified later. Notwithstanding those minor defects it was entitled to claim a progress payment.
  1. [68]
    McGibbo argues strongly against that proposition. It contrasted the right for a progress payment claim with the right to payment for the Practical Completion Stage. The latter provides payment is due and payable notwithstanding that the works may be incomplete, in the sense that there are minor defects or minor omissions. There is no such qualification to the precondition that the building floor is finished.
  1. [69]
    In support of its submission, McGibbo relies on the following passage from Hudson’s Building and Engineering Contracts, at paragraph 4-024:[52]

“It will be immediately apparent that entire performance will not be of much relevance in cases of periodic valuation, save only that, until expiry of any relevant stipulated period, clearly nothing will be due to the contractor. In the case of stage payments, on the other hand, there will be no room for any theory of substantial performance, it is submitted, save in regard to purely trivial failures, although sometimes it may not be an easy question of fact, when dealing with stipulated stages of construction of an uncompleted project, to determine when sufficient completion of a stage of the work on which an instalment depends has been achieved.

Since the purpose of such provisions is to secure an interim payment on account, with a possible substantial retention, extreme exactitude is no doubt not envisaged but effective and satisfactory completion of the required stage will be a condition of any instalment payment, it is submitted, and there could be no question of substantial performance arguments entitling a contractor to sue for the instalment while giving credit for incomplete or defective work, such as might be possible with a price or final balance due for work on completion.”

  1. [70]
    That passage was cited with approval by Patten DCJ in Chelton Pty Ltd v Stanton.[53]He said:

“In my respectful opinion the passage quoted above accurately states the law in relation to the matter I have under consideration. In other words, in my view, the defendant was entitled to strict compliance with the terms of schedule 5 before he could be held liable for payment under progress claim.”

  1. [71]
    Willex did not raise any argument to meet the proposition that McGibbo was entitled to strict compliance with the contract requirements before a progress claim could be made. I accept the test as adopted by Patten DCJ should be applied in interpreting the contract before me.
  1. [72]
    At the time the base stage claim was issued, Willex was aware there was a contractual requirement of at least 40 millimetres of cover between the outside of the steel reinforcing and the edge of the perimeter of the concrete slab. Mr McCullough pointed out various areas to Mr Jeynes where the steelwork was completely exposed. In those circumstances it was clear to Willex that something was wrong with the construction of the slab and it should have investigated and made good any defects prior to issuing any base stage claim. In fact, Willex proceeded the following week to commence the framing work without undertaking any further work on the slab and without first curing the slab.
  1. [73]
    At the time the base stage claim was issued, the building’s floor was not finished and the claim was not due. The demand for payment, therefore, constituted a breach of contract and invalidated the claim. Action taken subsequently on the basis of that claim, such as the notice to suspend the works on 9 August 2012,[54]was also invalid. The right to suspend the works rested on an unmet obligation to pay a progress claim.[55]If there was no right to claim payment, there could be no unmet obligation upon which the suspension could be based.
  1. [74]
    Counsel for Willex devotes considerable attention in his written submissions to defeating an argument that it had not evinced an intention not to be bound by the contract. He refers to the history of reference to adjudication and to QCAT and extensions of time to complete the work. He argues Willex had not failed to diligently progress the works. He submits the proper course was for McGibbo to rely upon the contractual process for termination, which required the owner to issue a notice to remedy if the builder was in substantial breach and which allowed the builder time to remedy.
  1. [75]
    It is common ground that McGibbo did not follow the contractual process in terminating the contract on 13 December 2012. However, by then Willex had communicated its position that any defects were minor and had already been attended to. Further, whatever the contractual process, Willex did not argue against the proposition that McGibbo retained its common law right to terminate for breach or for conduct which shows the defaulting party is unable or unwilling to comply with the contract.[56]
  1. [76]
    I have found Willex breached a number of contractual conditions about the method of construction. I have concluded that the slab was defective when the base stage claim was issued and I was not satisfied that all defects had been remediated when the contract was terminated. I concluded Willex was not entitled to demand payment when it issued the claim, because the building floor was not finished due to a number of defects evident when the claim was made. Because not all those defects had been attended to when it denied the need for further remediation, it evinced an intention not to remedy its breach of contract. Given those findings, it follows that McGibbo was entitled to terminate the contract relying either on Willex’s breaches of various conditions of the contract or upon its act of repudiation in continuing to demand payment when it was not entitled to do so because of the state of the works.

2.) If McGibbo was entitled to terminate the contract, what damages should be awarded?

  1. [77]
    McGibbo is entitled to damages assessed on the principle that a party is entitled to be placed in the same position, in so far as money can do it, as if the contract had been performed.[57]
  1. [78]
    Mr McCullough gave evidence about his attempts to secure other builders to complete the works. Eventually he established a company McBarker Constructions and Developments Pty Ltd to complete the works.[58]Willex complained this meant the contract was not at arms length. I am not persuaded that is relevant to mitigation of damage. The question is whether McGibbo took reasonable steps to minimise the loss that flowed from termination.
  1. [79]
    Mr McCullough was not cross-examined about the structure or reasonableness of the quote from McBarker Constructions. It was not suggested that it included different or additional work that was not required or was unreasonable, given the condition of the slab when McGibbo terminated the contract. Nor did Willex lead any evidence that indicated that was so. I am satisfied that McGibbo did take reasonable steps to mitigate its loss.
  1. [80]
    McGibbo claims the sum of $95,785. That is the difference between the balance payable under the contract with Willex (assuming it ran its full course without further variations) and the contract price with McBarker Constructions to complete the work, excluding an allowance for slab remediation.[59]The McBarker Constructions contract includes amounts relating to the timber frame and the work done in pouring extra concrete and tiling some external surfaces. I have given my reasons for accepting the works done in relation to external areas of the slab. As to the work on the frame, this was necessary because the timber had warped and was affected by mould.[60]It cannot be disputed some treatment was required. Mr Jeynes said that he was investigating this at the time McGibbo terminated the contract.[61]
  1. [81]
    The timber frame was partly installed on 3 August 2012.[62]Willex paid $10,268.50 for that timber.[63]McBarker re-used some of the timber frame installed by Willex.[64]That benefit has not been accounted for in McGibbo’s calculation of damages and the amount awarded should be reduced. There is no evidence about the extent to which the timber could be re-used and, in the absence of a submission that damages might be reduced in a different way, I have allowed the full cost of the timber.
  1. [82]
    Willex must pay McGibbo the sum of $85,516.50 as damages for breach of contract.

3.) If McGibbo was not entitled to terminate the contract, what relief should the parties receive?

  1. [83]
    Given my findings on McGibbo’s primary claim for relief, it is not strictly necessary for me to consider the remaining issues. However, I will state my conclusions in brief, in the event that I am found to have erred in my findings thus far.

(a) Willex’s damages for breach of contract

  1. [84]
    If McGibbo was not entitled to terminate the contract, its attempt to do so was an act of repudiation that Willex was entitled to rely upon in terminating the contract. Willex calculates its damages to be $54,605. That calculation was set out in the Amended Counterclaim at [14] & [15].[65]McGibbo did not deny or state that it did not admit that calculation of damage. Applying Rule 166 of the Uniform Civil Procedure Rules 1999 McGibbo is taken to have admitted the allegations in [14] & [15]. McGibbo did not seek to be relieved from the operation of that rule. If Willex was entitled to terminate the contract, then, those damages would be awarded.

(b) Willex’s claim for legal fees and the cost of expert reports

  1. [85]
    Willex also claimed an amount of $37,807.60 for legal fees and expert reports which it says are recoverable under clause 34 of the contract. That clause requires the owner to pay the builder any debt collection costs, including any legal fees, associated with recovering or the attempted recovery of an amount under this contract.
  1. [86]
    In the alternative, Willex claims those amounts as damages for breach of contract. The basis for that claim is the conduct described in [124] to [129] of its written submissions.[66]That conduct is McGibbo’s alleged wrongful termination of the contract in December 2012 and its assertions in August of an intention to modify the contract or to require the slab to be demolished and redone.
  1. [87]
    I am not satisfied that the costs claimed are referable to that alleged conduct. Nor do I consider they were debt collection costs. The fees were incurred in investigating the complaints about the quality of construction of the slab. Willex’s own expert reports established that, at the time the base stage claim was issued, there were deficiencies that required attention. Willex did undertake remediation works in response to the advice it obtained. To the extent that any of the items claimed related to investigations or correspondence about matters that required remediation, I would not allow them under clause 34 or as damages for breach of contract.

(c) How much could Willex claim for the base stage?

  1. [88]
    The remaining issue was whether Willex was entitled to claim the amount it did for the base stage. The parties agreed the construction contract was a domestic building contract as defined in the DomesticBuilding Contracts Act 2000 (Qld). McGibbo relied on s 66 of the DBC Act as limiting the amount that could be claimed by Willex for the base stage. That section sets out the maximum percentage of the contract price that can be claimed for various stages depending on the type of contract. For a contract to build to the enclosed stage the maximum allowed is 20%. For a contract to build to the fixing stage it is 12% and for a contract to build all stages, the amount is 10%.
  1. [89]
    Willex’s base stage claim represented 19% of the overall contract price. McGibbo argues the provision in the contract which allowed the claim at that amount was in contravention of the DBC Act and Willex must refund the full amount paid by McGibbo after adjudication ($98,743.13). Alternatively, McGibbo argues that Willex cannot retain more than 10% (which is the percentage applied to an all stages contract) and claims a refund of the difference.
  1. [90]
    Willex argues s 66 does not apply because the contract was not a designated stages contract because the scope of works did not fit any of the types of contract that fall within that definition. There is a statement in Schedule 2 Part B to the contract that the home was only being built to the enclosed stage. But it is common ground that the scope of works exceeded the definition of enclosed stage and counsel for Willex argues that, in fact, the contract was not one to build only to the enclosed stage.
  1. [91]
    The contract excluded wet area tiling, built in shelves, built in cabinets and built in cupboards. These fall within the definition of fixing stage. Willex argues that the effect of excluding those items is the contract cannot be considered a contract to build to the fixing stage either. Self evidently, it is not a contract to build to all stages. McGibbo argues that excluding some items from a stage does not mean that it is not a contract to build to that stage. I accept that is the better interpretation of the definitions in the DBC Act, picked up in the construction contract. I find that the contract was one to fixing stage and that the regulated percentage was 12%.
  1. [92]
    However, s 66(6) provides scope for the parties to the contract to agree that the provision is not to apply. There is evidence of agreement to a base stage claim at 19%. Mr McCullough accepted he agreed to it, although it was proposed by Ms Cullum.[67]Further, he initialled the relevant page of the contract.[68]
  1. [93]
    However, s 66(6) also requires that the agreement is made in the way, and satisfies any requirements, prescribed under a regulation. Section 5 of the DomesticBuilding Contracts Regulation 2010 (Qld) sets out those requirements. I am not satisfied that Willex has fully complied with them. One requirement is that the builder must explain why it considers the prohibition on charging more than the regulated amount should not apply. In the contract, the explanation given is conceded to be erroneous. It would defeat the purpose of these provisions if a false description of the nature of the contract could qualify as an explanation to avoid a cap intended to protect consumers from excessive progress claims.
  1. [94]
    If I had not found in McGibbo’s favour on its claim based on Willex’s breach of contract, I would have awarded a refund of the difference between 19% (the amount of the claim) and 12% (the regulatory cap for a contract to build to the fixing stage).

Conclusion

  1. [95]
    Willex must pay McGibbo the sum of $85,516.50 as damages for breach of contract. I award interest on that sum pursuant to s 58 of the Civil Proceedings Act 2011 (Qld), calculated from 13 December 2012 to the date of judgment, in accordance with District Court Practice Direction No 6 of 2013.
  1. [96]
    Unless either party provides written submissions within 7 days for a different order, Willex must pay McGibbo’s costs of and incidental to the proceedings as assessed on the standard basis, if not agreed.
  1. [97]
    If any party submits for a different order, they must serve a copy of their submissions on the other party, who will have 7 days within which to provide written submissions in response. Costs will be determined without a further oral hearing, unless either party requests one.

Footnotes

[1] Exhibit 14 – Engineering Drawings on Job 2174.

[2] Exhibit 147 – Scale Plan of Works Completed.

[3] Transcript of Proceedings, District Court at Brisbane, 26/11/2013, 2-21 [8] – [12].

[4] Schedule 2 Domestic Building Contracts Act 2000 (Qld): Definition of ‘base stage’.

[5] Exhibit 14: Engineering Drawings on Job 2174: Sheets S3 & S4.

[6] Exhibit 13: Architectural Drawings 1-17 of Job 10405, Revision A.

[7] Transcript of Proceedings, District Court at Brisbane, 26/11/2013, 2-32 [15] – [24].

[8] Transcript of Proceedings, District Court at Brisbane, 26/11/2013, 2-45 [15] – [17].

[9] Transcript of Proceedings, District Court at Brisbane, 25/11/2013, 1-41 [40] – 1-42 [2].

[10] Exhibits 15 – 18: Variations V01, V03, V05 & V08.

[11] Exhibit 19 – Willex Constructions Tax Invoice 044HID-002, 27/07/2012.

[12] Exhibit 13 – Architectural Drawing S1C: Reinforced Concrete, Clause 14.

[13] Transcript of Proceedings, District Court at Brisbane, 25/11/2013, 1-68 [14] – [21].

[14] Transcript of Proceedings, District Court at Brisbane, 25/11/2013, 1-68 [33] – [35].

[15] Transcript of Proceedings, District Court at Brisbane, 25/11/2013, 1-69 [27] – [44].

[16] Exhibit 147 – Scale Plan of Works Completed: areas marked ‘ES’.

[17] Exhibit 13 – Architectural Drawing S1C: Reinforced Concrete, Clauses 1 &.2.

[18] Exhibit 152 – AS 3600-2009 Concrete Structures: Clause 17.5.3(a)(ii).

[19] Exhibit 13 – Architectural Drawing S1C: Reinforced Concrete, Clause 4.

[20] Exhibit 13 – Architectural Drawing S1C: Reinforced Concrete, Clause 6.

[21] Exhibit 29 – Uniquest Report: Mr. Steve Evans, 27/09/2012, page 3.

[22] Transcript of Proceedings, District Court at Brisbane, 25/11/2013, 1-96 [17] – [27].

[23] Exhibit 13 – Architectural Drawing S1C: Reinforced Concrete, Clause 8.

[24] Transcript of Proceedings, District Court at Brisbane, 25/11/2013, 1-42 [34] – 1-43 [4].

[25] Exhibit 148 – Bundle of Photographs from Odyssey Consulting Group.

[26] Transcript of Proceedings, District Court at Brisbane, 25/11/2013, 1-88 [15] – [23].

[27] Transcript of Proceedings, District Court at Brisbane, 25/11/2013, 1-89 [31] – [40].

[28] Transcript of Proceedings, District Court at Brisbane, 25/11/2013, 1-90 [10] – [20].

[29] Transcript of Proceedings, District Court at Brisbane, 25/11/2013, 1-91 [14] – [25].

[30] Transcript of Proceedings, District Court at Brisbane, 25/11/2013, 1-91 [22] – [27].

[31] Transcript of Proceedings, District Court at Brisbane, 25/11/2013, 1-42 [31] – [32].

[32] Transcript of Proceedings, District Court at Brisbane, 26/11/2013, 2-43 [2] – [6].

[33] Transcript of Proceedings, District Court at Brisbane, 25/11/2013, 1-42 [7] – [29].

[34] Exhibit 29 – Uniquest Report: Mr. Steve Evans, 27/09/2012, page 8.

[35] Transcript of Proceedings, District Court at Brisbane, 25/11/2013, 1-68 [14] – [21] & 1-69 [27] – [44].

[36] Exhibit 29 – Uniquest Report: Mr. Steve Evans, 27/09/2012, page 6.

[37] Transcript of Proceedings, District Court at Brisbane, 25/11/2013, 1-59 [29] – [43] & 1-61 [1] – [9].

[38] Transcript of Proceedings, District Court at Brisbane, 25/11/2013, 1-60 [23] – 1-61 [3].

[39] Transcript of Proceedings, District Court at Brisbane, 25/11/2013, 1-61 [19] – [22] & 1-62 [14] – [23].

[40] Exhibit 32 – Jeffrey Hills & Associates Pty Ltd Report, 12/12/12, page 4.

[41] Exhibit 29 – Uniquest Report: Mr. Steve Evans, 27/09/2012, page 6.

[42] Exhibit 29 – Uniquest Report: Mr. Steve Evans, 27/09/2012, page 3.

[43] Transcript of Proceedings, District Court at Brisbane, 26/11/2013, 2-35 [4] – [10].

[44] Transcript of Proceedings, District Court at Brisbane, 25/11/2013, 1-16 [29] – [32].

[45] Exhibit 12 – HIA Home Construction Contract: 3.

[46] Transcript of Proceedings, District Court at Brisbane, 25/11/2013, 1-75 [37] – [39].

[47] Transcript of Proceedings, District Court at Brisbane, 25/11/2013, 1-66 [29] – [32].

[48] Transcript of Proceedings, District Court at Brisbane, 25/11/2013, 1-29 [36] – [39].

[49] Transcript of Proceedings, District Court at Brisbane, 25/11/2013, 1-95 [34] – [39].

[50] Transcript of Proceedings, District Court at Brisbane, 25/11/2013, 1-95 [43] – [46], 1-97 [13] – [15].

[51] Exhibit 12 – HIA Home Construction Contract: Schedule 2, Part A – definition of ‘base stage’, (d).

[52] I.N. Duncan Wallace, Hudson’s Building and Engineering Contracts (Sweet & Maxwell, 11th ed, 2003).

[53] Chelton Pty Ltd v Stanton, unreported, NSW District Court, 5875 of 2000.

[54] Exhibit 50 – Letter from Willex Constructions to J & R McCullough, 9/08/2012.

[55] Exhibit 12 – HIA Home Construction Contract: Clause 19.1(a).

[56] Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 at 55 per Deane J; Mazelow Pty Ltd v Herberton Shire Council [2002] QCA 119 at [7] per McPherson JA.

[57] Robinson v Harman (1848) 1 Exch 850 at 855 per Parke B.

[58] Transcript of Proceedings, District Court at Brisbane, 25/11/2013, 1-15 [21] & 1-27 [26] – [31].

[59] Amended Statement of Claim, filed 17/06/2013, court file document #5, para 41(a).

[60] Transcript of Proceedings, District Court at Brisbane, 25/11/2013, 1-31 [8] – [33].

[61] Transcript of Proceedings, District Court at Brisbane, 26/11/2013, 2-36 [22] – [37].

[62] Exhibit 155: Statement of Agreed Facts – [15].

[63] Exhibits 117 – 120: Trussmaster Invoices DP & CM Rollinson Quote.

[64] Transcript of Proceedings, District Court at Brisbane, 25/11/2013, 1-30 [39] – [43].

[65] Amended Counterclaim of the Defendant, filed 27/06/13, court document #6, paras [14] & [15].

[66] Exhibit 156: Defendant’s Written Outline of Submissions.

[67] Transcript of Proceedings, District Court at Brisbane, 25/11/2013, 1-16 [1] -[2] & [13] – [15].

[68] Exhibit 12 – HIA Home Construction Contract: Schedule 2, Part A – page v.

Close

Editorial Notes

  • Published Case Name:

    McGibbo Pty Ltd v Willex Projects Pty Ltd

  • Shortened Case Name:

    McGibbo Pty Ltd v Willex Projects Pty Ltd

  • MNC:

    [2013] QDC 313

  • Court:

    QDC

  • Judge(s):

    Kingham DCJ

  • Date:

    18 Dec 2013

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

Cases Cited

Case NameFull CitationFrequency
Mazelow Pty Ltd v Herberton Shire Council[2003] 1 Qd R 174; [2002] QCA 119
2 citations
Jump To
Cite 1 - [2002] QCA 119
Cite 2 - [2002] QCA 119
Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17
2 citations
Jump To
Cite 1 - (1985) 157 CLR 17
Cite 2 - (1985) 157 CLR 17
Robinson v Harman (1848) 1 Ex Ch 850
2 citations
Jump To
Cite 1 - (1848) 1 Ex Ch 850
Cite 2 - (1848) 1 Ex Ch 850

Cases Citing

Case NameFull CitationFrequency
Instyle Homes Qld Pty Ltd v Middler [2017] QCAT 3761 citation
Partington v Urquhart (No 2) [2018] QCATA 1203 citations
Thompson Residential Pty Ltd v Hart [2014] QDC 1323 citations
1

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