Ellis Developments Qld Pty Ltd v Lavis [2024] QCAT 80

QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL CITATION: Ellis Developments Qld Pty Ltd v Lavis [2024] QCAT 80 PARTIES: ELLIS DEVELOPMENTS QLD PTY LTD (applicant) V CALLAN JOHN LAVIS (respondent) APPLICATION NO/S: BDL213-21 MATTER TYPE: Building matters DELIVERED ON: 14 February 2024 HEARD AT: Brisbane DECISION OF: Member Lember ORDERS: Within 21 days of the date of this order the respondent must pay the applicant the sum of $55,086.84 comprising: (a) Claim $42,027.50; (b) Interest $11,901.34; (c) Costs $1,158.00. CATCHWORDS: CONTRACTS – BUILDING, ENGINEERING AND RELATED CONTRACTS – THE CONTRACT – GENERALLY – where the parties entered a building contract – where contract was not subject to finance – where the homeowner did not have finance to complete – where the builder seeks payment of the first progress payment, damages, costs and interest Queensland Building and Construction Commission Act 1991 (Qld), s 77, sch 2 Queensland Civil and Administrative Tribunal Act 2009 (Qld), s 28, s 32 Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 Robinson v Harman [1848] Eng R 135; 1 Exch 850 APPEARANCES & REPRESENTATION: Heard and determined on the papers, pursuant to section 32 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld) and directions made 9 February 2023. -- 1 of 7 -- 2 REASONS FOR DECISION What is this application about? A contract for the construction of a new home was terminated by the builder, Ellis Developments Qld Pty Ltd (‘Ellis’) after the homeowner, Mr Lavis could not obtain finance to fund the build, in circumstances where the contract was not subject to finance. By an application for a domestic building dispute filed 13 August 2021, Ellis sought orders that Mr Lavis pay: (a) $63,041.25 for work carried out under the contract; plus (b) $67,244 in damages for breach of contract; plus (c) Interest on the outstanding sum at 10% per annum; plus (d) Costs. In a response filed 19 September 2021 Mr Lavis resisted the claim and sought updated contract pricing so that he can obtain a mortgage and complete the build. He says that due to an illness in the family, and border closures during the COVID-19 pandemic, he fell out of contact with Ellis for a time, but says that he had contacted their office to tell them that he was applying for a mortgage to complete the build. By directions made 9 February 2023 the application was to be determined on the papers, based on the written evidence and submissions of the parties and the decision now follows. Does the tribunal have jurisdiction to hear this application? Section 77 of the Queensland Building and Construction Commission Act 1991 (Qld) (‘QBCC Act’) confers jurisdiction on the tribunal to hear building disputes. A building dispute includes a “domestic building dispute”1 which, in turn, includes (among other things) a claim or dispute arising between a building owner and a building contractor relating to the performance of reviewable domestic work or a contract for the performance of reviewable domestic work. ‘Reviewable domestic work’ means ‘domestic building work’,2 which includes the construction of a detached dwelling. It is clear from the material filed, and not disputed by either party, that the construction of the detached dwelling to be undertaken by the applicant was domestic building work, and that the claims relate to a contract for the performance of ‘reviewable domestic work’. By a letter dated 11 August 2021 the parties have established compliance with section 77(2) of the QBCC Act, that qualifies jurisdiction by first requiring an applicant to comply “with a process established by the commission to attempt to resolve the dispute” and, accordingly, I find that the tribunal has jurisdiction to hear the dispute. 1 QBCC Act, Schedule 2 (Definition of “building dispute”). 2 Ibid, Schedule 2 (“Definition of “reviewable domestic work”). -- 2 of 7 -- 3 The contract entered into by the parties The parties signed a Master Builders Queensland Residential Building Contract – Level 23 on 20 October 2020 (‘the contract’). Among other things, the contract stated: (a) In item 3(a) that the fixed price component was $420,275.00, payable by Mr Lavis under clause 11.4. (b) In item 4 that a deposit of $18,000.75 was payable by Mr Lavis on signing of the contract under clause 11.5 (amended to $21,013.75, per the below). (c) In item 5 that the building works comprised construction of a “5 bedrooms, theatre room, 2 bathroom, double garage single dwelling”. (d) In item 11 that the contract was not conditional upon Mr Lavis obtaining loan approval to fund the build (and, according to Ellis,4 Mr Lavis had informed Ellis that he was a “cash buyer”). (e) In item 20 that the time for payment of a progress claim was within five business days after the date Mr Lavis received the claim. (f) In part D of the Appendix, that the designated stages to trigger progress claims were: Stage % of Contract Price $ Value (GST incl.) Deposit 5% $21,013.75 Base Stage 15% $63,041.25 Frame Stage 20% $84,055.00 Enclosed Stage 25% $105,068.75 Fixing Stage 20% $84,055.00 Practical Completion 15% $63,041.25 Total 100% $420,275.00 The General Conditions to the contract included the following terms: (a) in clauses 11.6 and 11.7 that the contractor is entitled to claim payment of the contract price progressively and the owner must pay the contractor the claimed progress payments claimed; (b) in clause 11.9 (read with items 19 and 20 of the schedule) that if the owner fails to make any payment to the contractor within five business days of the due date for payment, the owner must pay interest at 10% per annum from the day after the date that payment is due until the date of payment; (c) in clause 21.1 that the contractor could give notice of intention to terminate the contract if the owner failed to comply with obligations including any under clause 11, giving ten business days to the owner to rectify the breach, and in 3 Version RBC-L2 07/2018.1. 4 Witness statement of Sarah Wheatley signed 28 September 2022. -- 3 of 7 -- 4 clause 21.2 that if the breach was not rectified, the contractor may terminate the contract; and (d) in clause 21.3 that if the contractor terminated the contract, it was entitled to recover from the owner “all loss, costs, expenses and damages it incurs or suffers as a result of, or otherwise in connection with the owner’s breach and the termination”. Relevant factual background to the dispute According to a witness statement of Sarah Wheatley, Operations Manager for Ellis, signed 28 September 2022: (a) After signing the contract on 20 October 2020 and receiving the deposit around that time, the parties undertook colour selections and pre-construction processes, including the preparation of plans and interior design plans which were signed off by Mr Lavis.5 (b) Construction was due to commence on 1 March 2021, confirmed in an email sent to Mr Lavis on 25 February 2021.6 (c) In or around March 2021, Mr Lavis discussed with Ms Wheatley the prospect of him applying for finance. Ms Wheatley informed Mr Lavis that while the finance application was in progress, he would still be required to pay any claims as construction had commenced and his contract was not subject to finance. (d) Works reached base stage, as contemplated in the contract, on or around 8 April 2021,7 and a claim issued on that date.8 (e) Mr Lavis did not pay the progress claim by the due date for payment, or at all. (f) On 9 April 2021 Kevin Paine from Aussie Home Loans emailed Ellis requesting build specifications and plans, which were provided to him by Ellis on 12 April 2021.9 (g) On 15 April 2021 Mr Lavis informed Ms Wheatley that his finance application was delayed due to outstanding documents required of him by the lender. Mr Paine also confirmed this to Ms Wheatley. (h) On 7 July 2021, solicitors for Ellis sent Mr Lavis a notice of intention to terminate pursuant to section 21.1 of the contract, which demanded payment of the base stage invoice.10 (i) Mr Lavis did not respond to the notice within the timeframe required by the notice, or at all. (j) On 27 July 2021, Ellis terminated the contract by notice of termination to Mr Lavis.11 5 Signed plans marked ‘Attachment 2’ and ‘Attachment 3’ to Ms Wheatley’s statement. 6 Ibid, at ‘Attachment 4’. 7 A photo of the base stage as completed is marked ‘Attachment 6’ to Ms Wheatley’s statement. 8 Ibid, at ‘Attachment 5’. 9 Ibid, at ‘Attachment 7’. 10 Ibid, at ‘Attachment 8’. 11 Ibid, at ‘Attachment 9’. -- 4 of 7 -- 5 (k) On 4 August 2021 solicitors sent a letter of demand to Mr Lavis demanding payment of the invoice and further costs, including legal costs of $800.00.12 Ms Wheatley’s evidence is uncontested and, in any event, supported by the documents tendered with her statement. I accept her evidence in full. Is Ellis entitled to payment of the progress claim? I am satisfied that Ellis is entitled to payment of the progress claim because: (a) The base stage was completed in accordance with the contract. (b) Clauses 11.6 and 11.7 require Mr Lavis to pay Ellis for the base stage works within five business days of receiving an invoice for the claim. (c) The claim was invoiced on 8 April 2021 in the sum of $63,041.25, which is the fixed price payable for that stage contemplated in the contract. (d) Mr Lavis has not paid the claim. As Ellis has received from Mr Lavis the deposit of $21,013.75 and the contract was terminated such that there will be no further claims, the deposit amount sets off the sum claimed, for a net result requiring payment by Mr Lavis to Ellis of $42,027.50. Damages Pursuant to clause 21.3 of the contract, Ellis claims damages for loss of profit quantified in the sum of $67,244.00 calculated as follows “using a reasonable industry standard percentage for the contractor’s margin”:13 Contract Sum: $420,275.00 Less amounts already paid $ 21,013.75 Less invoice claim $ 63,041.25 Multiplied by 0.2 $ 67,244.00 The basic purpose of any award of damages is to restore an injured party to the position they would have been in had the wrongful act not occurred: Robinson v Harman [1848] Eng R 135; 1 Exch 850, 855: The rule of the common law is, that where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed. I accept that Ellis suffered a loss of profit on the basis that the full contract was not completed by reason of Mr Lavis’ breach and inability to complete. However, Ellis has not made adequate submissions or filed adequate evidence to support its damages claim, despite an explicit opportunity given to it to do so by directions made 15 December 2023. 12 Ibid, at ‘Attachment 10’. 13 Application for a domestic building dispute filed 13 August 2021. -- 5 of 7 -- 6 For example: (a) The contract does not provide for a builder’s margin as Part A and Part B of the Appendix have been left silent on point. (b) Ellis has not filed any empirical evidence supporting the claimed percentage as an industry standard builder’s margin. (c) Ellis has not filed any evidence, by way of financial or accounting records or other data to establish the profit it reasonably expected to make on the build. (d) The contract having ended early, Ellis might reasonably have been expected to commence another project sooner, or to otherwise redirect its resources (labour and equipment) to other projects to mitigate its losses. Ellis did not lead any evidence addressing this. (e) Ellis not having to expend materials, equipment or resources to complete the build would necessarily have resulted in some savings to it from expenses not incurred. This has not been adequately addressed in submissions or evidence filed, risk being that it might profit from an award of damages in the sum claimed. Whilst the rules of evidence are relaxed in the tribunal and the tribunal may inform itself in any way it considers appropriate,14 it would amount to an error of law to make a decision that is entirely unsupported by evidence.15 As I cannot, on balance, be sure that the sum claimed will place Ellis in the same situation, with respect to damages, as if the contract had been performed by Mr Lavis, and I do not have sufficient evidence that would enable me to calculate with a reasonable degree of confidence what such a sum might be, the damages claim is dismissed. Interest The contract provides that interest is payable at the rate of 10% on payments that are outstanding five business days after they fall due. Progress Claim Invoice 02148 was issued on 8 April 2021 and expressed to be payable within seven days, namely, by 15 April 2021. Less the deposit held by Ellis, the net claim payable by Mr Lavis is $42,027.50. I award interest on the net claim at 10% per annum from 16 April 2021 until today’s date, 14 February 2024, being a period of 1,034 days, for a total of $11,901.34.16 Costs Section 77(3)(h) of the QBCC Act empowers the tribunal to award costs in building disputes, displacing the usual position in tribunal proceedings that each party bear their own costs. 14 Queensland Civil and Administrative Tribunal Act 2009 (Qld), section 28(3)(b). 15 Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321, 356. 16 $42,027.50 x 10%/365 days = $11.51 per day x 1034 days. -- 6 of 7 -- 7 As Ellis has been largely successful in these proceedings and was put to expense running the claim where Mr Lavis was largely unresponsive, I see no reason to depart from the parties’ contractual agreement on debt recovery costs. The only evidence before me as to those costs is the demand for $800.00 for legal costs incurred on the breach and termination and the $358.00 filing fee paid. I award Ellis the sum of $1,158.00 for its costs in the proceeding. Decision The decision of the tribunal is that, within 21 days of the date of this order, Mr Lavis must pay Ellis the sum of $55,086.84 comprising: (a) Claim $42,027.50; (b) Interest $11,901.34; and (c) Costs $1,158.00. -- 7 of 7 --