Dyer v Spence [2017] QCAT 211

CITATION: Dyer v Spence [2017] QCAT 211 PARTIES: Rowan John Dyer (Applicant) v Robyn Spence (Respondent) APPLICATION NUMBER: BDL285-14 MATTER TYPE: Building matters HEARING DATE: 9 June and 8 September 2016 Written submissions filed 22 September 2016 HEARD AT: Brisbane DECISION OF: Member Deane DELIVERED ON: 19 June 2017 DELIVERED AT: Brisbane ORDERS MADE: 1. Rowan John Dyer is to pay Robyn Spence the sum of $138,826.18 by 4:00pm on 31 July 2017. 2. Rowan John Dyer is to pay Robyn Spence interest at the rate of 10% per annum on the sum of $138,826.18 on and from 1 August 2017 until and including the day the sum is paid. 3. Any application for costs is to be made by filing in the Tribunal one (1) copy and providing to the other party one (1) copy of any submissions and evidence as to costs by 4:00pm 21 July 2017. 4. If an application as to costs is made in accordance with order 3 then: a) the other party is to file in the Tribunal one (1) copy and provide to the party making the application for costs one (1) copy of any submissions and evidence as to costs in response by 4:00pm 4 August 2017. b) the application as to costs shall be determined on the papers and -- 1 of 22 -- 2 without an oral hearing unless a party requests an oral hearing, not before 4:00pm 4 August 2017. 5. If an application as to costs is not made in accordance with order 3 then there shall be no order as to costs in this proceeding. 6. The Registry is to return Rowan John Dyer’s original diary to him after the appeal period expires. CATCHWORDS: CONTRACTS – BUILDING, ENGINEERING AND RELATED CONTRACTS – PERFORMANCE OF WORK – REMEDIES FOR BREACH OF CONTRACT – DAMAGES – MEASURE OF – Domestic Building Dispute – builder’s failure to comply with statutory requirements as to variations – claim for refund of all moneys paid – voluntary payments – whether builder prohibited from retaining sums paid – whether builder or owner entitled to terminate – where defective work – reasonable costs of rectification – whether owner entitled to liquidated damages Domestic Building Contracts Act 2000 (Qld), s 18, s 84 Queensland Building and Construction Commission Act 1991 (Qld), s 42 Queensland Building and Construction Commission and Other Legislation Amendment Act 2014 (Qld), s 62 Queensland Building and Construction Commission Regulation 2003 (Qld), s 34B Queensland Civil and Administrative Tribunal Act 2009 (Qld), s 28, s 92, s 93 Bartlett v Contrast Constructions Pty Ltd [2016] QCA 119 Bellgrove v Eldridge (1954) 90 CLR 613 Chelbrooke Homes Pty Ltd v Russell & Anor [2011] QCAT 278 Coshott v Fewings Joinery Pty Ltd [1996] NSWSC 270 Mt Cotton Constructions Pty Ltd v Greer [2017] QCAT 11 QLine Interiors Pty Ltd v Jezer Construction Group Pty Ltd & Ors [2002] QSC 088 Ruxley Electronics & Constructions Ltd v Forsyth [1996] AC 344 -- 2 of 22 -- 3 Salam v Henley Properties (Qld) Pty Ltd [2015] QCATA 118 Shevill v Builders Licensing Board (1982) 149 CLR 620 William George Carlsen t/as W & E Carlsen Builders v Tresidder [2015] QCAT 260 Willshee v Westcourt Ltd [2009] WASCA 87 APPEARANCES: APPLICANT: No appearance by Rowan John Dyer RESPONDENT: Robyn Spence REPRESENTATIVES: APPLICANT: No representative for Rowan John Dyer RESPONDENT: AC Harding of Counsel instructed by Garland Waddington, Solicitors REASONS FOR DECISION Mr Dyer, a licensed builder, entered into a contract to perform building work for Ms Spence to extend and renovate her home. Mr Dyer commenced proceedings claiming the sum of $30,146 in respect of moneys owing for work performed under the contract and in respect of variations and claimed interest and costs. Ms Spence disputes that moneys are owing to Mr Dyer. She counterclaims for damages for defective work, liquidated damages and for the refund of moneys paid in respect of undocumented variation works. The final hearing of this matter was set down for two days commencing on 9 June 2016. At the commencement of the hearing, Mr Dyer requested, and I permitted him, an adjournment to allow him to seek advice. The adjourned hearing was set down for two days commencing on 8 September 2016. Prior to the adjourned hearing Mr Dyer filed a Notice of Withdrawal of his claim. The hearing on 8 September 2016 proceeded on the basis that I was to determine Ms Spence’s Counter-application. Mr Dyer did not appear. Having regard to the Tribunal’s file, I was satisfied that the Notice of Hearing was sent to Mr Dyer on 30 August 2016.1 I was also satisfied that through that notice and the directions made on 22 July 20162 he was aware that the hearing was to proceed in relation to the Counter-application even though he had chosen not to continue with his claim. In the circumstances, I decided to hear and decide the Counter-application in his absence.3 Mr 1 Queensland Civil and Administrative Tribunal Act 2009 (Qld) (QCAT Act), s 92. 2 Providing an opportunity to Mr Dyer to file a Response to the Counter-application and listing the Counter-application for hearing. 3 QCAT Act, s 93. -- 3 of 22 -- 4 Dyer did not file a Response to the Counter-application and did not file any statements of evidence or independent expert reports, which responded to the specific claims made by Ms Spence or the expert evidence submitted by Ms Spence. Naturally, at least some of the issues raised by the Counter- application relate to matters raised by Mr Dyer’s Application. Essentially Mr Dyer’s position was that: a) He performed both the work under the contract and the variation work requested by Ms Spence to an acceptable standard; b) Ms Spence, who was well versed in building matters, considered the work acceptable during the course of the contract and indicated acceptance of the work by making payments; c) There were many prime cost items so that where the actual cost was more, he was entitled to an adjustment in the contract price in his favour; d) Ms Spence was not entitled to withhold the enclosed stage progress payment on the grounds that certification of the frame stage had not been obtained; e) He validly terminated the contract on 5 November 2014, prior to reaching practical completion, relying upon a Notice to Remedy Breach given by him on 21 October 2014 pursuant to clause 27.2 of the General Conditions; f) He should be paid the amount he claimed. Ms Spence denied that Mr Dyer was entitled to terminate. By letter dated 17 February 2016, she accepted the purported termination as a repudiation of the contract and purported to terminate the contract. 4 Ms Spence’s Amended Response and Counter-application filed 18 November 2015 claimed: a) Liquidated damages; b) Refund of moneys paid under the terms of the contract when not yet owing; c) Refund of moneys overpaid for variation work; d) Refund of moneys paid in respect of materials not used for or incorporated into the works or the variation works; e) The costs to rectify defective work and defective variation work; f) An accounting for and details of calculation of progress payments; g) Refund of moneys paid for variation work pending approval pursuant to section 84 of the Domestic Building Contracts Act 2000 (Qld) (DBC Act); h) Costs. 4 Exhibit 2, RS34. -- 4 of 22 -- 5 After the oral hearing, written submissions were filed on 22 September 2016, a copy of which Ms Spence’s solicitors advised were sent to Mr Dyer. In those submissions, Ms Spence claims that the evidence supports her claim for: a) Damages for breach of contract quantifiable in the sum of $22,321.16 but to be assessed globally in the sum of $30,000; b) Refund of amounts paid for variations in the sum of $63,270; c) Liquidated damages in the sum of $27,250; d) Interest on amounts payable pursuant to section 34B of the Queensland Building and Construction Commission Regulation 2003 (Qld) at the rate of 10%; e) Costs, with additional submissions to be made after the primary determination of the issues. It was common ground that a written building contract dated 19 February 2014 for work described as ‘extension/renovation to existing dwelling’ was entered into by Mr Dyer and Ms Spence.5 The contract provided that: a) The contract price was for $86,063 (incl GST). b) The works were to reach practical completion within 150 days after commencement subject to clause 16, which set out the builder’s rights to claim extensions of time. c) Late completion damages were payable at $50 per day. d) Progress payment claims were to be made at defined stages as follows: i) ‘Demolition works’ $10,7306 ii) ‘Footings poured’ $ 8,0007 iii) ‘Blocks & Slab’ $16,833.258 iv) ‘Frame’ $16,833.259 v) ‘Inclosed’(sic) $16,833.2510 vi) ‘Completion’ $16,833.2511 e) ‘Frame stage’ was defined as the stage when a building’s frame is finished.12 5 Exhibit 2, RS 4. 6 Mr Dyer admits this amount was paid prior to his termination. 7 Mr Dyer admits this amount was paid prior to his termination. 8 Mr Dyer admits this amount was paid prior to his termination. 9 Mr Dyer admits this amount was paid prior to his termination. 10 Mr Dyer claimed this amount prior to his termination but Ms Spence did not pay it. 11 Mr Dyer had not claimed this amount prior to his termination. 12 Schedule 2. -- 5 of 22 -- 6 f) The contractor was to complete the works in accordance with the contract as set out in the contract documents, which included the general conditions, special conditions, the specification and plans.13 Prior to filing the Notice of Withdrawal, Mr Dyer set out certain matters in his Application and in his statements of evidence.14 He did not make himself available during the hearing to give evidence under oath or affirmation as to the truth of the matters in the Application and his statements and to be questioned by Ms Spence’s Counsel or by me. As set out earlier in these reasons, Mr Dyer did not file a Response to the Counter-application. Nor did he file any statements of evidence by himself or any independent expert responding to the specific allegations of defective work and the costs of rectification. Whilst the Tribunal is not bound by the strict rules of evidence, it must observe the rules of natural justice.15 Ms Spence relied upon statements of evidence by Mr Carey, a quantity surveyor,16 Mr Witt, a building consultant17 and herself.18 Each witness was available to give oral evidence and to be questioned by me and by Mr Dyer if he had appeared at the hearing. In the circumstances, where there is a conflict in the evidence between Mr Dyer’s evidence and the evidence of Ms Spence, I prefer the evidence of Ms Spence. In particular, I find that: a) Ms Spence had limited knowledge of building matters at the time of the entering into of the contract and during its performance, contrary to Mr Dyer’s assertions. I accept Ms Spence gained significant building knowledge during the course of these proceedings and that in the course of preparing for it she compiled a number of comprehensive schedules, which demonstrated the significant extent to which Mr Dyer had departed from the work required by the contract; b) During the works Ms Spence complained to Mr Dyer on a regular basis as to the progress of and quality of the works, contrary to Mr Dyer’s assertions that she considered the work acceptable;19 c) Mr Dyer provided an oral quote of $188,000, which Ms Spence did not accept. She asked Mr Dyer to requote the work but to exclude the work above the garage on the first floor (sheet 3 of the approved plans) and the second floor (sheet 4 of the approved plans) on the basis that this work could be done at a later date. I accept that Ms Spence 13 Exhibit 2, RS 4, Clause 1.1, Clause 37.1, Schedule1 Item 12. 14 Filed 7 May 2015 and 9 February 2016. 15 QCAT Act, s28. 16 Exhibit 3. 17 Exhibit 4 and Exhibit 5, a bundle of photographs. 18 Exhibit 2 and Exhibit 1, which replaced some attachments to Exhibit 2. 19 Exhibit 2 at [266]. -- 6 of 22 -- 7 stressed to Mr Dyer that it was very important that the structural elements of the works had to be sufficient to support the extension work, which would be done at a later time; d) Mr Dyer provided an oral quote of $88,063 for this work. Mr Dyer subsequently prepared the written contract, which stated the contract sum was $86,063 (incl GST) and requested Ms Spence to pay $2,000 in respect of the preparation of the quotations; e) Ms Spence signed the written contract and paid Mr Dyer $2,000 on or about 19 February 2014. In these circumstances, I find that the payment of the $2,000 should not be regarded as a part payment of the contract price of $86,063; f) The contract20 was contained in: i) A HIA Alteration, Addition and Renovation Contract comprising Schedules 1 – 5 (pages i – ix) and General Conditions (pages 1 – 39); ii) 9 pages of plans titled ‘proposed extension’ being the redrawn approved plans, which Ms Spence had drawn in September 2013 to depict the works completed by her husband together with additional work;21 iii) the original 11 pages of engineering drawings drawn by STA Consulting Engineers (date of issue 15 October 2010); iv) the original 9 page Foundation Design Report dated 20 July 2010. g) At the time Mr Dyer and Ms Spence signed the contract they had agreed that the works would not include the underpinning of the slab as shown on page 2 of the Foundation Design Report but instead the demolition of the old beach house would include its footings and slab and therefore new footings and slab were to be constructed. This change was made at Mr Dyer’s request with Ms Spence’s agreement and was subsequently recorded in the further Foundation Design Report issued 17 March 2014. I, therefore, find that the contract price was not based upon the reuse of the existing footings and that there was no variation of the works in respect of the footings, contrary to Mr Dyer’s assertions;22 h) Mr Dyer had discussions with the engineer, which lead to revised drawings being issued. Mr Dyer excluded Ms Spence from these discussions. The engineer did not inform Ms Spence about the discussions and therefore Ms Spence did not approve variations depicted in the Foundation Design Report issued on 17 March 2014 (except to the extent referred to above) or revised drawings issued on 26 March 2014; 20 Exhibit 2, RS4. 21 The works to be performed did not include the extension depicted on sheet 3 and sheet 4 of the plans. 22 Exhibit 2, RS5. -- 7 of 22 -- 8 i) There was only one Prime Cost item in the contract;23 j) Progress claims: i) were to be made upon completion of each stage;24 ii) were to state the amount claimed for the stage and the amount of any addition or deduction for variations or due to a prime cost item;25 k) The payment of progress claims, other than the final claim, are on account only so that payment by Ms Spence of amounts demanded by Mr Dyer did not amount to acceptance of the work;26 l) Invoice no 47227 in respect of the demolition stage progress claim was not delivered to Ms Spence until Mr Dyer provided a copy in these proceedings and therefore Ms Spence was denied the opportunity to question Mr Dyer about the notation about finalising Prime Cost allocations in respect of excess refuse and excavation given that there was only one Prime Cost item in the contract; m) Mr Dyer was not entitled to or required to adjust the contract sum as if many items of work under the contract were Prime Cost items. In particular, Mr Dyer issued invoices where he claimed there were prime cost allowances, which required adjusting given the actual cost alleged to have been incurred. I also accept Ms Spence’s evidence that copies of supporting invoices to support such claimed adjustments were not provided; n) Amounts claimed in Invoice no 475, Prime Cost adjustments, were not validly claimed. For the same reason the credit adjustment in Invoice no 477 was not required to be given; o) Mr Dyer demanded and Ms Spence made a cash payment of $2,500 in respect of asbestos removal. There is no sufficient evidence before me to suggest that this was a valid variation. In those circumstances, such work ought to have formed part of the demolition stage claim work. Ms Spence paid the demolition stage claim in full in addition to this sum; p) In or about mid-March 2014 Ms Spence and Mr Dyer agreed to vary the work required to be performed to add work on level 1 and level 2 of the dwelling directly above the existing workshop on the ground floor at the request of Ms Spence. The additional work was to add on level 1 a bathroom and a small deck and on level 2 a bathroom, a small deck and sun room (the Variation Works); q) The Variation Works were agreed to be charged at cost for materials upon production of invoices and at $50 per hour for Mr Dyer and $40 per hour for his employees upon production of timesheets. At that 23 Exhibit 2, RS 4, Schedule 4 sets out one Prime Cost item, Windows and front door in the sum of $4,000. 24 Exhibit 2, RS 4, Clause 4.3. 25 Exhibit 2, RS 4, Clause 4.4. 26 Exhibit 2, RS 4, Clause 4.8. 27 Exhibit 2, RS9. -- 8 of 22 -- 9 time, Mr Dyer indicated the likely costs of the Variation Works would be in the order of $20,000. The Variation Works were to be completed as Mr Dyer completed the work under the contract; r) The Variation Works requested by Ms Spence were not so urgent that it was not reasonably practicable for Mr Dyer to record them in accordance with the terms of the contract and the DBC Act before carrying out the work; s) Mr Dyer demanded payments without providing documentation including in respect of progress claims contrary to the terms of the contract and when Ms Spence attempted to resist payment Mr Dyer wrongly threatened to suspend work; t) On 2 October 2014 Mr Dyer delivered numerous invoices for the first time bearing different dates, including invoice no 486 dated 1 July 2014 in respect of the frame stage, which indicated that $20,000, which had been paid had been applied to the frame stage claim of $16,833.25 and the balance to ‘extra framing’; u) As at 1 September 2014 the frame stage was incomplete because the framing had failed an inspection by STA Consulting Engineers. In these circumstances, I find that the frame stage was not ‘finished’ as at 1 July or 1 September because I am satisfied that failing to perform the work required to achieve certification and obtain a form 16 was not a minor defect or omission and therefore the right to payment of the frame stage payment had not arisen;28 v) As at 7 October 2014 the frame stage remained incomplete because the framing had failed a second inspection by STA Consulting Engineers. For the reasons outlined above the right to payment of the frame stage payment had not arisen;29 w) Ms Spence paid to Mr Dyer or at his request the following amounts: i) $2,000 in cash on 19 February 2014 in respect of the preparation of the quotations. ii) $590 on 17 March 2014 in respect of the hire of a skip bin used in the demolition work. Mr Dyer contends that Ms Spence used the bin for removal of her own rubbish. I find Ms Spence put two items of her own in the skip bin and only at the last minute. There is no evidence before me that the removal of the demolished materials would have cost less if these items were not placed in the bin for removal. Mr Dyer was obliged to remove the demolished materials from site as part of the works under the contract. This amount ought to have formed part of the demolition stage payment but was claimed and paid in addition to it. iii) $2,500 in cash on 21 March 2014 in respect of demolition works and not in order to secure a discount as alleged by Mr Dyer. Demolition was not a Prime Cost item under the contract and 28 Exhibit 2, RS18. 29 Exhibit 2, RS19. -- 9 of 22 -- 10 therefore the actual cost was of no concern to Ms Spence. This amount ought to have formed part of the demolition stage payment but was claimed and paid in addition to it. iv) $10, 730 by cheque on 26 March 2014 in respect of the demolition stage although no written progress claim was provided to her until after the proceedings commenced and there was no allowed deduction for the amounts previously paid by Ms Spence in relation to this stage. v) $916.55 for BSA Insurance and $162 for Q-Leave premium on 1 April 2014. The contract does not expressly state which party is to pay these charges. They are not specified as excluded items in Schedule 3 for which the owner is responsible. I accept Ms Spence’s evidence that the usual practice is for such fees to be built into the contract price30 and that Mr Dyer attended to the payment of the increase in BSA Insurance premium due to the increased value of the works.31 In these circumstances, I find that it is more likely than not that the fees were included in the contract price and Mr Dyer wrongly demanded Ms Spence attend to payment in addition to the contract price. vi) $9,757.25 on or about 16 April 2014 in respect of invoices 475 and 477. Having regard to the description of work on invoice 475, I accept Ms Spence’s evidence that it related to the demolition stage. Mr Dyer wrongly purported to make adjustments as if work claimed related to Prime Cost items, when they did not. Having regard to the description of work on invoice 477, I accept it was in substance the footings poured stage claim. vii) $16,833.25 on 30 April 2014 in respect of invoice 478, in respect of the blocks and slab stage claim. viii) $2,000 on or about 6 May 2014 in respect of a concrete slab in the undercroft of the ground floor works, which Ms Spence accepts was an undocumented variation to the works required under the contract. ix) $290 for additional Q-Leave premium on or about 29 May 2014. For the reasons indicated earlier in these reasons in respect of the first Q-Leave premium payment, I find that it is more likely than not that the fees were included in the contract price and Mr Dyer wrongly demanded Ms Spence attend to payment in addition to the contract price. x) $10,000 on 13 June 2014 upon wrongful demand by Mr Dyer and without any substantiation. xi) $20,000 on 1 July 2014 upon wrongful demand by Mr Dyer and without any substantiation. I accept Ms Spence’s evidence that it is more likely than not that Mr Dyer has applied this amount in payment of the frame stage claim for $16,833.25 in invoice 486 30 Such evidence is consistent with my experience in this jurisdiction. 31 Exhibit 2, RS12. -- 10 of 22 -- 11 dated 1 July 2014 but received by Ms Spence on or about 2 October 2014. xii) $20,000 on 25 July 2014 upon wrongful demand by Mr Dyer and without any substantiation. xiii) $600 in cash on 12 August 2014, upon demand by Mr Dyer so he could pay his labourer. There is insufficient evidence to find that this amount was due to Mr Dyer under a collateral contract or in respect of any undocumented variations. I find that it is more likely than not that Mr Dyer wrongly demanded Ms Spence attend to payment in addition to the contract price. xiv) $10,000 on 14 August 2014 upon wrongful demand by Mr Dyer and without any substantiation. xv) $850 in cash on 29 August 2014, upon demand by Mr Dyer so he could pay his labourer. There is insufficient evidence to find that this amount was due to Mr Dyer under a collateral contract or in respect of any undocumented variations. I find that it is more likely than not that Mr Dyer wrongly demanded Ms Spence attend to payment in addition to the contract price. xvi) $20,000 on 5 September 2014 upon wrongful demand by Mr Dyer and without any substantiation. xvii) $1,200 in cash on 12 September 2014, upon demand by Mr Dyer so he could pay his labourer. There is insufficient evidence to find that this amount was due to Mr Dyer under a collateral contract or in respect of any undocumented variations. I find that it is more likely than not that Mr Dyer wrongly demanded Ms Spence attend to payment in addition to the contract price. xviii) $330 on 22 September 2014 upon wrongful demand by Mr Dyer and without any substantiation. x) Ms Spence requested and Mr Dyer agreed to carry out work to construct a mezzanine floor in the back of the garage on the basis of Mr Dyer’s oral advice that there would be no additional charge for labour and that the materials would cost in the order of $200. This work was an undocumented variation to the contract work. Mr Dyer purported to claim $1,500 for this work in invoice 495 delivered on 2 October 2014 but Ms Spence did not pay this amount. Where there is a conflict in the evidence between the generic evidence of Mr Dyer, that he performed the work to an acceptable standard and the specific evidence of Mr Witt and Mr Carey I prefer the specific evidence of the independent experts. In particular, I accept Mr Witt’s evidence that: a) There were 32 items identified in respect of the ground floor work which were defective, not in accordance with the contract/plans or incomplete work of which only item 6.14 could be regarded as incomplete work. -- 11 of 22 -- 12 b) There were 7 items identified in respect of the first floor work which were defective, not in accordance with the contract/plans or incomplete work of which items 7.04 and 7.06 could be regarded as incomplete work. c) There were 4 items identified in respect of the second floor work which were defective, not in accordance with the contract/plans or incomplete work of which items 8.01 and 8.04 could be regarded as incomplete work. d) There were 8 other items identified which were defective, not in accordance with the contract/plans or incomplete work of which items 9.03 and 9.05 could be regarded as incomplete work. e) There were 58 items of work not built in accordance with the STA Consulting Engineering drawings, that the extent of omissions and variations is significant and has compromised the structural soundness of the dwelling requiring an engineer to inspect to assess the structural integrity of the works.32 No such engineering evidence was before me such that I am not able to make findings in respect of the extent to which the structural soundness has been compromised. f) The overall workmanship was below average and not to a standard expected from a licensed builder; g) Rectification of substandard work will require significant repairs; h) All renovated areas of the dwelling are incomplete and require significant work for finishing. Mr Dyer did not file any evidence as to the reasonable costs of rectification either from himself or from an independent expert. Given the state of Mr Dyer’s evidence and that he was not available to be questioned at the hearing, I prefer Mr Carey’s evidence and accept his evidence that: a) The reasonable costs of rectification of the garage work i.e. the work under the contract, for items he has quantified, is $24,178.75 (excl GST). b) The estimated saving to Mr Dyer from departing from the contract requirement for external walls to be block work is $12,867(excl GST). c) The estimated saving to Mr Dyer from departing from the contract requirement for a deck to the workshop wall ($1,100 excl GST), balustrading to the deck ($1320 excl GST), a 2400 x 1400 pivot door ($2500 excl GST) and waterproofing to block walls ($930 excl GST) totals $5,850 (excl GST). d) The above calculations do not take into account a number of defects, which would be difficult to rectify short of demolition: 32 Exhibit 4, at [10.04]. -- 12 of 22 -- 13 i) Mr Dyer’s change to the external walls does not allow for the extensions to the upper floors to be built at a later date; ii) the entry slab is not correct; iii) the slab to the storage area is at the incorrect height; iv) the wall to the storage area is missing; v) the new extensions do not line up with the rest of the house; vi) the setback at the entrance way is incorrect so that the door cannot fit; vii) the windows to the garage are in the wrong place. e) The estimated costs to rectify the Variation Works is $13,225 (excl GST). f) The reasonable value of the Variation Works performed by Mr Dyer is $31,277 (excl GST). g) The reasonable value of the variation work to construct the mezzanine in the garage area is $2382 (excl GST). I accept Mr Carey’s evidence that the size of the joists used is excessive and therefore the estimate is high for a storage area particularly when regard is had to Ms Spence’s evidence that Mr Dyer estimated $200 for this work. Mr Carey’s report does not separately set out the reasonable value of another undocumented variation to the ground floor requested by Ms Spence i.e. concrete slab in the undercroft for which Mr Dyer demanded and Ms Spence paid $2000. In view of the evidence regarding the mezzanine and Mr Dyer’s failure to provide evidence as to the items in the counter-application, I accept the amount of $2382 (excl GST) as the reasonable value of both ground floor variations. h) The reasonable costs to complete the works under the contract is $37,202.50 (excl GST).33 Is Ms Spence entitled to recover amounts paid to Mr Dyer for variation work? I find that Ms Spence is not entitled to recover amounts paid voluntarily to Mr Dyer for variations. As set out earlier in these reasons, Ms Spence and Mr Dyer agreed that Mr Dyer would perform the Variation Works and two other variations to the ground floor work. Ms Spence contends that this work was sought by her within the meaning of that term in section 84 (2) of the DBC Act. Although the DBC Act has 33 Although Mr Carey’s report refers to this amount as the estimate to ‘finish the garage and other stage 2 items’ I am satisfied that this amount is separate from his estimate to finish levels 1 & 2, which is a reference to the Variation Works. -- 13 of 22 -- 14 been repealed, it continues to apply to domestic building contracts entered into before 1 July 2015.34 The DBC Act limits the right of builders to recover amounts for variations. The undisputed evidence before me is that Mr Dyer did not reduce variations to writing as required by clause 19 of the General Conditions of the contract nor as required by section 79 of the DBC Act. The Appeal Tribunal has previously accepted that a builder is required to apply to the Tribunal for an order pursuant to section 84 of the DBC Act before the Tribunal may approve that an amount is payable.35 Even before Mr Dyer filed his Notice of Withdrawal, no such application had been made. Ms Spence contends that in the absence of such an application by Mr Dyer he is not entitled to retain the benefit of amounts paid in respect of variations because he is prohibited from recovering an amount for variation work and that the sums paid for variation work must be repaid. No specific authority was advanced for this proposition. Ms Spence contends that amounts totalling $63,270 were paid in respect of variations and that such sum ought to be repaid. Given the way in which Mr Dyer claimed and Ms Spence paid amounts there is some doubt as to whether amounts paid were under the contract, for variations or otherwise. The Tribunal has recently considered whether homeowners were entitled to recover moneys paid for variations where no application under section 84 of the DBC Act had been made. In Mt Cotton Constructions Pty Ltd v Greer36 Member Howe considered whether section 84 of the DBC Act had a similar prohibitive effect on a builder’s right to payment as section 42 of the Queensland Building and Construction Commission Act 1991 (Qld) (QBCC Act), which prohibits an unlicensed builder from receiving remuneration.37 Member Howe set out at some length the authorities concerning the construction of section 42 of the QBCC Act and compares and contrasts the wording in section 84 of the DBC Act.38 I respectfully agree with that reasoning, that the wording is different39 such that: there is no clear intention to be derived from the wording of s84(3) and (4) that the builder’s right to retain payment of monies made to it voluntarily for variations which fail to comply with the requirements of the Act is intended to be abrogated so as to entitle the owners to subsequently recover monies so paid.40 Ms Spence’s evidence is that she felt compelled to pay Mr Dyer. Given the mirror provisions in the contract and the DBC Act there can be no assertion that the payments were made under a mistaken belief that there was a legal obligation to pay, which might arise in respect of payments to an unlicensed 34 Queensland Building and Construction Commission and Other Legislation Amendment Act 2014 (Qld), s 62. 35 Salam v Henley Properties (Qld) Pty Ltd [2015] QCATA 118. 36 [2017] QCAT 11. I note that the decision is under appeal, including on this point in APL044-17. 37 Given the submissions are that Mr Dyer is ‘prohibited’ from retaining the amounts paid for variations I understand that this is the basis for that claim. 38 [2017] QCAT 11, [73] – [90]. 39 Ibid, [82]. 40 Ibid, [88]. -- 14 of 22 -- 15 builder prior to discovering the builder was not licensed. As in the Greer’s case Ms Spence paid the amounts ‘pursuant to a course of compromise and conciliation’.41 I find that the payments were made voluntarily and cannot now be recovered under this ground. In the alternative, Ms Spence contends orders ought to be made for Mr Dyer to provide an account of the progress payments claimed and paid by Ms Spence including an account of the labour performed and the materials incorporated into the works and the variation work and that her loss is at least $45,218 calculated as follows: a) The amount paid to the builder in the sum of $63,270; b) Less the value of the variation work assessed as $31,277;42 c) Plus the estimated cost to rectify the variation work assessed as $13,225.43 In view of Mr Dyer’s failure to participate in these proceedings: a) By withdrawing his Application; b) Not filing any Response to the Counter-application, which included a claim for an accounting for and details of calculations of progress claims; c) Not filing any evidence in response to Ms Spence’s claims; and d) Failing to appear at the hearing, I consider Mr Dyer is unlikely to comply with any directions to him to provide an account. As the Tribunal is required to attempt to expedite resolution of proceedings,44 I assess Ms Spence’s loss below. Did Ms Spence validly terminate the building contract? I find that Ms Spence validly terminated the contract by accepting Mr Dyer’s repudiation of the contract. Mr Dyer contends that Ms Spence was in breach of the contract and that he was entitled to terminate the contract. On or about 29 September 2014 Mr Dyer sought to make the enclosed stage progress claim in the sum of $16,833.25.45 As stated above, on 2 October 2014 Mr Dyer delivered numerous other invoices. By email dated 6 October 2014 Ms Spence: 41 Ibid, [89]. 42 Exhibit 3, page 2, item 1. 43 Ibid, page 3, item 2 and oral evidence of 15% builders margin on $11,500. 44 QCAT Act, s 28(3). 45 Invoice no 494. -- 15 of 22 -- 16 a) Confirmed that she did not want Mr Dyer to return to site until ‘we have sorted out what is to be paid to you in respect of your current claims’; b) Confirmed that the engineer was to inspect the works the following day; c) Sought invoices and receipts in respect of the materials claimed and timesheets in respect of the labour claimed; d) Disputed that the enclosed stage had been reached. Mr Dyer contended that: a) Ms Spence’s exclusion of him from the site was a breach of the obligation to provide the builder exclusive possession46 and a substantial breach.47 b) Failure to pay the enclosed stage claim, when that stage was complete, was a substantial breach. c) There was no right to withhold the amount of the enclosed stage claim on the basis of a dispute over amounts paid for variation works as payment constituted acceptance of the work and a waiver of any rights. d) There was no right to withhold the amount of the enclosed stage claim on the basis of the lack of certification of the frame stage, as: i) the work to be inspected by the engineer was not defective, the issue being investigated by the engineer was a minor issue and he was agreeable to installing additional ply if the engineer considered it necessary. ii) any issue the engineer had with the frame stage was irrelevant to the enclosed stage claim payment and that he was ready, willing and able to carry out the minor enhancements to the frame at Ms Spence’s cost as the enhancements had arisen as a result of variations requested by her.48 e) By email dated 17 October 2014, Mr Dyer requested evidence of Ms Spence’s capacity to pay.49 f) By email dated 21 October 2014, Mr Dyer delivered a Notice to Remedy Breach, which claimed that Ms Spence was in substantial breach by failing to pay the enclosed stage progress claim,50 failing to provide evidence of capacity to pay 51 and failing to give possession.52 The notice called for Ms Spence to remedy the breaches within 10 working days. 46 Clause 10.1. 47 Clause 27.2 (g). 48 Email Rowan Dyer to Robyn Spence dated 14 October 2014. 49 Clause 7.3. 50 Clause 4. 51 Clause 7. 52 Clause 10.1. -- 16 of 22 -- 17 g) By letter dated 5 November 2014, Mr Dyer terminated the contract relying upon the Notice to Remedy Breach given by him on 21 October 2014. By letter dated 29 October 2014 Ms Spence sought information as to the basis of various claims made by Mr Dyer and stated that there was ‘significant uncertainty as to whether any monies are payable to you or whether, in fact, a refund is due.’ I find that as at 21 October 2014, Mr Dyer was in substantial breach of the contract. The notice was therefore ineffective and he was not entitled to rely upon it in terminating, even if Ms Spence was in breach.53 The contract contemplates that the parties’ common law rights arising from the other’s breach are not affected by the termination clause.54 Ms Spence was not limited to seeking to terminate the contract by delivering a Notice to Remedy, under clause 27. I am satisfied that Mr Dyer was in substantial breach of the contract as he had repudiated the contract by showing that he intended to fulfil the contract only in a manner substantially inconsistent with his obligations and not in any other way.55 In particular, Mr Dyer: a) As referred to earlier in these reasons, made oral demands for payment rather than making written progress claims as required by clause 4; b) Made written demands for payment, which were not in accordance with clause 4 including because he sought adjustments to the contract sum as if items of work were Prime Cost items when they were not; c) Did not give variation documents to Ms Spence in breach of clause 19; d) Departed from the terms of the contract, without Ms Spence’s approval, including by constructing the frame of the garage with timber rather than block work as specified;56 e) Failed to achieve finalisation of the frame stage despite having effectively demanded and received payment for it. The engineer inspected the framing work twice57 and was not prepared to issue the necessary form 16 as the work required was incomplete as at 7 October 2014; f) Demanded payment of the enclosed stage claim, when the work required had not been completed. Mr Dyer contended that it was not necessary to have obtained certification of the prior frame stage in order to have achieved the enclosed stage. Having regard to the 53 Clause 27.7. 54 Clause 27.9. 55 Shevill v Builders Licensing Board (1982) 149 CLR 620, 625 – 627 (Gibbs CJ). 56 Exhibit 2, RS17 at sheets 11, 12 and 13. 57 On 1 September 2014 and 7 October 2014. -- 17 of 22 -- 18 definitions of the stages58 and clause 4 of the contract, I am satisfied that the preferable construction of the contract is that the stages are to be regarded as consecutive and not independent. This is also consistent with the prohibition on starting the next stage of work until a builder has been given a certificate of inspection for the relevant stage stating that the stage complies with the building development approval if a builder has given a notice for inspection for a stage of assessable building work.59 As set out earlier in these reasons, I am not satisfied that the frame stage was ‘finished’ apart from minor defects or omissions and therefore the subsequent enclosed stage could not have been achieved; g) Failed to complete the work within the building period, a period of 150 days since commencement on 5 March 2014, such that it had expired a number of months before the Notice to Remedy breach was delivered. Having regard to Mr Carey’s estimate to complete the contract works ($37,202.50 excl GST) when compared with the contract price ($86,063 incl GST) there remained a significant amount of work to be performed. Mr Dyer had not made any claims for extensions of time in accordance with clause 16 of the contract or at all. As he did not comply with clause 19 of the contract in respect of variations, he had not indicated whether variations were likely to cause delay. The purported termination was repudiatory conduct as Mr Dyer again evinced an intention not to be bound by the terms of the contract.60 Ms Spence was entitled to accept Mr Dyer’s repudiatory conduct and terminate. Where there is a wrongful repudiation of a building contract, the owner’s measure of damages has been held to be the difference between the contract price less any amount for progress claims paid and less the costs to complete the works and rectify any defective works.61 In Chelbrooke Homes Pty Ltd v Russell & Anor62 liquidated damages were also deducted. The measure of damage is usually described as the amount of money that will put the owner in the same position as if the contract had been performed. Where an owner sues for damages the calculation is also to take into account any benefit acquired by the owner. In calculating the amount payable, the Tribunal recently considered the authorities and took into account the reasonable value of variation work performed although the builder did not comply with the DBC Act and no application under section 84 of the DBC Act had been made.63 To what damages is Ms Spence entitled? 58 Schedule 2. 59 Building Regulation 2006 (Qld), s 28. 60 Shevill v Builders Licensing Board (1982) 149 CLR 620. 61 QLine Interiors Pty Ltd v Jezer Construction Group Pty Ltd & Ors [2002] QSC 088, [112]. 62 [2011] QCAT 278. 63 Mt Cotton Constructions Pty Ltd v Greer [2017] QCAT 11. -- 18 of 22 -- 19 I find that Ms Spence’s loss before liquidated damages is $ 111,326.18. Ms Spence claims that her loss for Mr Dyer’s breach of contract is at least $22,321.16 and that having regard to a number of items of defective work for which Mr Carey was unable to quantify rectification costs and his conservatism in the quantification of other items damages should be assessed globally in the sum of $30,000. No specific authority is provided for this ‘rounding up’. In Bellgrove v Eldridge64 the High Court found that a builder in breach of contract would usually have to pay damages necessary to achieve conformity with the contract subject to the qualification that Not only must the work undertaken be necessary to produce conformity, but that also, it must be a reasonable course to adopt.65 Where a defect can only be rectified by demolition but is relatively minor in nature an award of damages on the basis of the cost of rectification by demolition will not be made because doing so is not a reasonable course to adopt. Where demolition is not reasonable, owners may lead evidence which seeks to quantify the loss e.g. as to the diminution in value. No evidence as to diminution in value was placed before me. I accept Mr Carey’s evidence as to the savings, which Mr Dyer would have achieved by not building in accordance with terms of the contract, is some measure of the loss Ms Spence suffered as it is akin to an adjustment to the contract sum by way of negative variation. Ms Spence’s submissions that I should effectively round up the loss on her calculation of at least $22,321.16 to a global loss of $30,000 appears to be essentially a submission that Ms Spence seeks compensation for ‘solatium’. The NSW Court of Appeal in Coshott v Fewings Joinery Pty Ltd66 found that it was appropriate to award a natural person the amount of $5,000, where there was a finding of a breach of the building contract but the rectification was not both necessary and reasonable. This amount, referred to as ‘solatium’ or as ‘loss of amenity’ by the House of Lords in Ruxley Electronics & Constructions Ltd v Forsyth67 was to compensate for inconvenience and disappointment that the owner was not receiving the result for which the owner contracted. The Western Australian Court of Appeal also allowed the amount of $5,000 in similar circumstances in Willshee v Westcourt Ltd.68 The Tribunal considered the various authorities on claims for ‘solatium’ in William George Carlsen t/as W & E Carlsen Builders v Tresidder69 and in that case awarded $1,500. 64 (1954) 90 CLR 613. 65 Ibid, 618. 66 [1996] NSWSC 270. 67 [1996] AC 344. 68 [2009] WASCA 87. 69 [2015] QCAT 260, [233] – [252]. -- 19 of 22 -- 20 In view of the number of departures from the contract documents and the potential seriousness of the change to the external walls not allowing for the extensions to the upper floors to be built at a later date, I allow $5,000. Even if Mr Dyer had validly terminated the contract, Ms Spence would be entitled to damages being the reasonable and necessary costs to rectify defective work under the contract and the variations. I calculate Ms Spence’s loss as follows: a) Contract price including GST $ 86,063.00 b) Plus value of variations as assessed70 $ 37,024.90 c) Sub-total $123,087.90 d) Less money paid to builder71 $126,759.05 e) Sub-total ($ 3,671.15) f) Less cost of rectification of the contract works72 $ 26,596.08 g) Less adjustment to reflect savings to builder73 $ 20,588.70 h) Less ‘solatium’ $ 5,000.00 i) Less costs of rectification of the Variation Works74 $ 14,547.50 j) Less costs of completion of the contract works75 $ 40,922.75 k) Owner’s loss before liquidated damages $ 111,326.18 Is Ms Spence entitled to liquidated damages? I find that Ms Spence is entitled to liquidated damages in the sum of $27,250. Ms Spence claims liquidated damages at the rate of $50 per day until she accepted Mr Dyer’s repudiation on 17 February 2016, the day the contract was ended. Ms Spence’s submissions claim that period is 545 days. Clause 31.1 of the contract provides that the owner is entitled to liquidated damages for each day after the end of the building period to and including the earlier of: a) The date of practical completion; b) The date the contract is ended; or c) The date the owner takes control of, possession of, or uses the site or any part of the site. 70 $31,277 plus $2382 plus GST. 71 Excludes the $2,000 paid on 19 February 2014 in respect of quotes. 72 $24,178.25 plus GST. 73 $18,717 plus GST. 74 $13,225 plus GST. 75 $37,202.50 plus GST. -- 20 of 22 -- 21 I accept Ms Spence’s evidence that: a) The building period commenced on 5 March, 2014;76 b) Item 10 of the contract schedule provided that the works must reach practical completion within 150 calendar days after commencement; c) The building period expired on 2 August 2014; d) Mr Dyer did not seek any extensions of time within which to perform the work under the contract nor in respect of variations; e) The works did not reach practical completion by 2 August 2014;77 f) The works remained incomplete at the time Mr Dyer purported to terminate the contract on 5 November 2014; g) The works remained incomplete as at 17 February 2016. There is no evidence before me that Ms Spence took control of, possession of or used the site or part of it prior to accepting Mr Dyer’s repudiation. The DBC Act provides a builder with a limited right to apply to the Tribunal for extensions of time where the contract is varied but the builder has not complied with the variation provisions in the contract or the DBC Act.78 As previously stated in these reasons, Mr Dyer did not reduce the variations to writing as required by clause 19 of the General Conditions of the contract nor as required by section 79 of the DBC Act. Even before Mr Dyer filed his Notice of Withdrawal, no application to the Tribunal under the DBC Act had been made. The Court of Appeal in Bartlett v Contrast Constructions Pty Ltd79 held that the obligation to act reasonably and to mitigate one’s loss does not apply to a claim for liquidated damages unless the contractual provision requires the owner to act reasonably. In that case, as in this, the owner sued on the builder’s promise to pay liquidated damages on a specified event occurring and the event had occurred. On my calculation there is at least 545 days in the period between 3 August 2014 and 17 February 2016. Ms Spence is therefore entitled to liquidated damages as claimed. Is Ms Spence entitled to interest? I find that Mr Dyer is to pay interest on the sums awarded to Ms Spence at the rate of 10% per annum from the day after the day that the damages are payable until and including the day the amount is paid. Ms Spence claims interest at the rate of 10% on the amount awarded pursuant to section 34B of the Queensland Building and Construction 76 Clause 2.7. 77 Even on Mr Dyer’s evidence, the works had only reached the enclosed stage in or about late September 2014. 78 The DBC Act, s 18. 79 [2016] QCA 119. -- 21 of 22 -- 22 Commission Regulation (Qld) 2003. The contract did not provide a relevant agreed rate for amounts owing to the homeowner and therefore the applicable rate is 10%. Costs It is appropriate to make directions in respect of submissions as to costs. -- 22 of 22 --