3:4:5 Pty Ltd & Fung v Warriner & Robertson [2015] QCAT 271

CITATION: 3:4:5 Pty Ltd & Fung v Warriner & Robertson [2015] QCAT 271 PARTIES: 3:4:5 Pty Ltd Alwin Fung (Applicants) v David Warriner Emma Robertson (Respondents) APPLICATION NUMBER: BDL016-14 MATTER TYPE: Building matters HEARING DATE: 10 December 2014 HEARD AT: Brisbane DECISION OF: Member Paratz DELIVERED ON: 9 July 2015 DELIVERED AT: Brisbane ORDERS MADE: 1. The Application is dismissed. 2. It is declared that David Warriner and Emma Robertson lawfully terminated the contract. 3. 3:4:5 Pty Limited and Alwin Fung are to pay the costs of David Warriner and Emma Robertson of and incidental to these proceedings on a standard basis on the District Court scale of costs. 4. David Warriner and Emma Robertson shall deliver to 3:4:5 Pty Limited and Alwin Fung, a realistic estimate of the costs claimed, including an explanation of the basis of the estimate, sufficiently detailed to facilitate some broad examination of its reasonableness, having regard to the District Court scale of costs. 5. If 3:4:5 Pty Limited and Alwin Fung and David Warriner and Emma Robertson are unable to agree on an amount of the costs within 14 days of the delivery of the estimate of costs, the costs shall be assessed by an -- 1 of 12 -- 2 assessor to be nominated by the Registrar upon request by either party. 6. 3:4:5 Pty Limited and Alwin Fung shall pay the costs of David Warriner and Emma Robertson (as agreed or assessed) within 14 days of such agreement or assessment. CATCHWORDS: BUILDING DISPUTE – whether a homeowner was entitled to terminate a building contract – where the ceiling height as constructed was less than the plans – whether the ceiling height was a substantial consideration – whether the builder would have been able to achieve the specified ceiling height due to the required fall for a sewer - where costs were allowed Queensland Building and Construction Commission Act 1991 (Qld) s 77 Queensland Civil and Administrative Tribunal Act 2009 (Qld) s 100 Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2009] NSWSC 1302 Qantas Airways Ltd v Joseland & Gilling (1986) 6 NSWLR 327 Imperial Homes (Qld) Pty Limited v Queensland Building and Construction Commission (No 2) [2014] QCAT 135 Mulford v Queensland Building Services Authority [2009] QCCTB 64 Residential Resorts of Australia Pty Ltd v QBSA [2009] QCCTB 39 APPEARANCES: APPLICANT: 3:4:5 Pty Ltd and Alwin Fung represented by Mr M Panayi of Industry Lawyers RESPONDENT: David Warriner and Emma Robertson represented by Mr R Ensbey of CBP Pty Ltd, Solicitors REASONS FOR DECISION [1] Mr Warriner and Ms Robertson (the owners) were the owners of a timber house at Paddington in Brisbane, Queensland. They signed a “Works Agreement” with 3:4:5 Pty Ltd (the builder) on 7 August 2012 to renovate the house for a contract total of $222,280.97. -- 2 of 12 -- 3 [2] The company traded as “Renovations HQ”. It was the holder of a Queensland Building and Construction Commission (formerly Queensland Building Services Authority) (the QBCC) contractor licence from 3 August 2010 to 27 March 2013 in the category “Builder – Low Rise” and held QBCC Licence Number 11922221. Mr Alwin Fung was the nominee. [3] The work involved lifting the existing house and building in underneath. Plans were prepared by “AAD Design” for the owners. Work commenced on 23 August 2012. [4] The builder and Mr Fung filed an Application for domestic building disputes in the Tribunal on 29 January 2014. The Application sought the following orders against the owners: (a) An order that the Respondents pay the Applicants the sum of $28,080.23 plus interest, on account of unpaid work plus damages/loss of profit. (b) An order stopping the QBSA/QBCC insurance. [5] The owners filed a Response on 21 February 2014 seeking orders as follows:1 (a) A declaration that the respondents lawfully terminated the contract for the applicant company’s breaches. (b) An order that the applicants pay the respondents costs of and incidental to the proceeding. [6] The Application was heard before me on 10 December 2014 by an oral hearing. At the commencement of the hearing, the Solicitor for the builder advised that the Orders that were being sought were: (a) A declaration that the Respondents did not lawfully terminate the contract. (b) An order that the Respondents pay damages to the Applicant in the sum of $26,534.18 being damages for loss of profit, and the sum of $1,546.05 being monies payable under the contract. (c) An order pursuant to Section 77(3)(f) of the Queensland Building and Construction Commission Act 1991 that the policy of insurance under the statutory insurance scheme is avoided (d) Interest. (e) Costs. [7] In the course of the hearing, after discussion on the point, the Solicitors for the builder advised that they had received new instructions, and as s 77(3)(f) did not say “avoid a claim”, that the builder would not pursue an order under that section. 1 Response filed 21 February 2014, at [34]. -- 3 of 12 -- 4 [8] At the conclusion of the Hearing, I gave directions for the filing of submissions by 6 February 2015, with the decision to be delivered not before 13 February 2015. This is the decision in the Application. The course of the dispute [9] On or about 7 January 2013, the parties fell into dispute about the height of the ground floor ceiling that had been constructed, the beams that were used, and other matters. [10] The owners sent the builder a letter on 10 January 2013 saying that the Builder had stated that he was not willing or financially able to rectify the defects, and that they wished to register a claim with BSA Insurance. The defects were listed as follows:2 Item 1 – The height of poured slab to underside of beam 7 is 2.58 metres wherein the plan states a height of 2.75 metres. Item 2 – Posts in bathroom are out of plumb. Item 3 – The welded join existing beam to Beam 10 is not complete. Item 4 – The post adjacent to B9 is not bolted as per plan detail and only tack welded. Item 5 – The Parking Bay detail / retaining Wall North has been modified and not as per plan showing a space of 1875 x 3400. [11] The Solicitors for the owners sent a letter on 22 February 2013 to the Solicitors for the builder setting out nine items of defective work, and requesting advice as to what work the builder intended to undertake to rectify the work. On 2 April 2013, the Solicitors for the owners sent a Notice of Intention to Terminate Building Contract to the builder. On 19 April 2013 the Solicitors for the owners sent a letter to the builder stating that “our clients terminate the contract for your breaches”. [12] The owners made a complaint to the QBCC about the work, and an inspection was conducted on 19 June 2013. As a result of the inspection, the QBCC gave “Direction to rectify and/or complete No.39152” in relation to welding of a column on the south east corner of the lower level of the building, and the installation of the connections between the existing timber flooring frame work and the new steel bearer system to the lower level of the building. [13] The QBCC subsequently approved an Insurance Claim of $79,388.83 and sent a Notice of Debt dated 23 December 2013 to the builder. Separately, the QBCC approved an insurance claim on 15 August 2014 for the cost of raising the house in the sum of $28,501.40. [14] The owners also made complaints as to the external retaining wall construction, external sanitary pipework, and ground level concrete slab at 2 Letter Ms Robertson to Mr Fung dated 10 January 2013. -- 4 of 12 -- 5 the garage step down, and an inspection was conducted on 17 January 2014, but no Direction to Rectify was issued. [15] No Application to review any of the decisions of the QBCC was made. The Solicitor for the builder advised at the hearing that his client had come to him out of time to seek a review. The review applications would have had to be made within 28 days of the decisions. [16] The central issue concerned the ceiling height of the lower floor as constructed by the builder. The ceiling height as shown on the plans was 2.74 metres from the top of the slab to the underside of the ceiling. The as constructed height, due to the way the slab was constructed, was 2.58 metres. [17] Mr Warriner states that he became aware of the constructed height after he returned from work commitments in Papua New Guinea about 12 December 2012, and discussed it with Mr Fung by telephone on 7 January 2013. What does the builder say? [18] Mr Fung’s argument is that he had no option other than to raise the slab height in order to achieve sufficient fall for the sewer. [19] It was submitted that as a result of the dispute, Mr Fung fell into financial difficulty, and was put in a “no-win” situation, and handed in his builder’s licence. [20] In his evidence, Mr Fung said that when he laid out the job and the posts were set up, he realised there was an issue and contacted the clients, and met them downstairs onsite in October 2012. He said that he explained that the slab would have to be raised by 100mm, which would reduce the ceiling height, and that Mr Warriner said to go ahead and do that. He said he did not get the change in writing, as he trusted the clients. [21] Mr Fung was asked about a discussion he had with Mr Warriner about increasing the ceiling height by recessing the steel beams at a cost of $15,000. Mr Fung denied that Mr Warriner had offered to pay half of the cost. He said he told Mr Warriner that Mr Warriner would have to pay the full cost. He said that he could not proceed with the work until the issue of the ceiling height was resolved. [22] Mr Fung said that if the beams were raised, that would have increased the ceiling level to 2.7 metres, that the cost was $15,000.00, and that if he had raised the beams then he could have proceeded with the work. [23] He said that when the dispute about the ceiling height was unresolved, that it was clear that everyone was happy to stop work. [24] Mr Fung said that he handed in his company licence in March, but kept his personal licence, and is trading under that. -- 5 of 12 -- 6 [25] Mr Fung said that if the dispute about the slab height had been resolved, that he would have rectified the retaining wall and any other defective items. What does the owner say? [26] Mr Warriner said that he is a Civil Engineer. He said that he spoke to Mr Fung on about 23 November about the ceiling height, and said that he was concerned about the height as he wanted wheelchair access as he had an elderly father-in-law, and wanted a nine foot minimum height as he had specific light fittings and large works of art. He said that he had not authorised the drawings to be changed to show two steps to the garage, and said that he wanted it to be as flat as possible and limited to one step. [27] He said that he did not agree to have the ceiling height reduced, and that he had lost 21 cubic metres of space. [28] He explained that he had offered to pay half the cost of recessing the beams in order to resolve the situation, even though he was “annoyed that Mr Fung had disregarded my express instructions not to change the slab height”3. The expert evidence [29] Evidence was given by Mr Martin Helisma, a building consultant; and by Mr Morgan Way, from the technical services section of the Master Plumbers Association. Their evidence was heard concurrently. [30] The builder had used an I.O. connection at the southwest corner of the garage. The experts agreed that sufficient fall could not be achieved to that connection without lifting the slab, as otherwise 300mm of cover over the pipe could not be achieved as required by the Australian Standard.4 [31] Mr Way discussed an alternate course that may have been open to the builder, which was to obtain a concession from the Brisbane City Council as to the minimum depth of cover. He said that 90% of plumbers would be unaware of such a mechanism. [32] Mr Helisma contended that the builder could have used an I.O. connection point at the south-east corner of the building, and this would have given sufficient fall without lifting the slab. Mr Way agreed with that, but said that approval from the Brisbane City Council would need to be obtained. [33] Both experts agreed that the cost of the alternate connection to the existing I.O. at the south-east corner of the building would have been minimal. Mr Helisma’s estimate was about $500.00, whilst Mr Way’s estimate was about $1,000.00. [34] Mr Way said that he would have continued down the drain until he got to a point where he could get the fall required. Mr Helisma agreed with that. Mr 3 Statement David Warriner filed 13 October 2014, at [25]. 4 AS 3500.2:2003 Plumbing and Drainage (s 3.7.2). -- 6 of 12 -- 7 Way said that approval could have been obtained for a dual connection into the existing sewer stub. The claim for monies payable [35] The builder has claimed $1,546.05 as moneys payable under the Contract. No evidence was given at the hearing as to the basis of this amount, and I note that the Submissions filed on behalf of the builder5 do not address this issue. [36] There was discussion at the hearing of a shortfall of payment. Mr Fung said that this was $506.40, whereas Mr Warriner said it was $759.85. However, Mr Warriner said that he had paid the shortfall of $759.85 by February 2013, and this was accepted by Mr Fung. [37] There is therefore no substance to the claim for outstanding moneys, and it cannot succeed. Discussion [38] It is common ground that there was a discussion about the ceiling height in the final week of November 2012 between Mr Fung and Mr Warriner, but disagreement as to what was decided. [39] Mr Warriner impressed me as a careful and methodical man who had a good understanding of building practice. I do not think that he would have been confused about, or have misunderstood, what Mr Fung was discussing, or as to what he agreed to. Immediately he saw the constructed ceiling height on about 19 December 2012, he attempted to contact Mr Fung and subsequently raised serious complaints with him, but was unable to talk to him until 7 January 2013. [40] Mr Fung’s recollection of events was adamant, but he said that it was a busy time after the slab was poured, and he did not recall when some of his alleged discussions with Mr Warriner occurred. It is notable that he had not recorded the claimed variations to the contract in writing. [41] Where the evidence of Mr Fung and Mr Warriner is at variance, I prefer the evidence of Mr Warriner. [42] Mr Fung could have rectified the issue the ceiling height issue by raising the ceiling height at a cost of $15,000.00. That was only about 7% of the contract amount. Once he refused to alter the ceiling height, the owners were only left with the alternatives of accepting the reduced height, or terminating the Contract in order to be able to bring another builder onto the site who would rectify the work to attain the required ceiling height. [43] I am satisfied that the ceiling height was a significant issue, having regard to Mr Warriner’s express concern as to the height from the outset. I note 5 Applicant’s submissions filed 5 January 2015. -- 7 of 12 -- 8 that Mr Fung conceded in cross-examination that the ceiling height was a significant change. [44] The builder was given reasonable and clear opportunity to rectify the height issue. He refused and failed to do so. [45] The builders submissions highlight the central issue of approval of the changed height of the slab:6 31. The Builder’s position rests on the Tribunal finding that in fact an accord was reached and a direction was given to retain the existing sewer connection and pour at the higher slab height. [46] I am not satisfied that such an accord was reached. This finding has a determinative effect on the application, as the builder submits. [47] The owner submits that there were substantial defects in the works which entitled them to terminate the contract in the face of the refusal of the builder to remedy them. He submits that the evidence of Mr Helisma is that there were major defects that required rectification as follows: Item 1 – Both sides of the floor slabs between the garage and laundry are not straight. Item 2 – Wall between the garage and the dining room where the chords and pipe are tied to the posts intersects at approximately 95 degrees (running east to west) whilst the wall running west to east intersects with approximately 85 degrees. Item 3 – Timber beams have been installed between Beam 5 and Beam 6 instead of steel beams. Item 4 – In the garage, there is no post under the beam running under the floorboards to support it. Item 5 – At beams 5 and 6 timber fillets have been used as packing instead of steel specified Item 6 (first part) – The side block wall on the eastern boundary of the property has been constructed 450mm from the boundary instead of 300mm as stipulated on the plans. Item 6 (second part) – The plans also show that the retaining wall was to extend approximately two thirds along the side of the boundary and instead the retaining wall is constructed along the whole length which was done without approval. Item 7 – At the top of the side wall, there is meant to be a space for a vertical garden noted on the site plan as “proposed retaining wall and the landscape path” with the ability to exit the bedroom 4. It is not possible to do that as the area has been constructed as too narrow. Item 8 – At the western wall end, a wall return has been constructed which is not meant to be there. Item 9 – The northern block wall of the garage running east-west is not straight 6 Ibid, at [31]. -- 8 of 12 -- 9 [48] The builder submits that the evidence of alleged defects (other than the slab height issue) has little material weight to the issues in dispute.7 He cites cases supporting the propositions that if defects were capable of being remedied prior to practical completion, they are not a valid ground for termination,8 and that at law the primary obligation of the builder is to deliver up the work free of defective work upon final completion.9 [49] I accept the general thrust of those propositions of law put forward by the builder (without necessarily accepting them as a comprehensive summary of the relevant law), and have primary regard to the slab height issue. [50] However, if those propositions of law were not accepted, or were qualified, and regard was to be had as to the defects in determining whether a right to terminate arose, I would accept the evidence of Mr Helisma as to the defects. Mr Helisma considered that they constituted major defects as he outlined in his evidence, which would then give the owners a right to terminate. [51] The evidence of Mr Way raises the possibility that the builder could in fact have obtained sufficient fall to the sewer connection, if he had applied for and obtained a concession as to the standard 300mm cover, at minimal cost. This option does not appear to have been properly explored, as Mr Fung advised Mr Warriner that there was an option of getting plumbing from the rear of the house, but that would require the permission from neighbours and the Certifier, and would cost around $20,000.00.10 [52] The possibility of obtaining the concession as proposed by Mr Way erodes the builder’s contention that he had no option but to increase the slab height, and casts his position into doubt, such that I am not satisfied that the builder could not have achieved sufficient fall without raising the slab. [53] The owners submit that if in fact there had been an agreement between Mr Fung and Mr Warriner as to the reduced ceiling height, then there was no reason why the builder should not have proceeded with the construction.11 I accept the force of that argument. [54] I do not consider that the owners prevented the builder from progressing the work. [55] Although the builder claimed that he had payments to make to subcontractors for work on the job, the builder did not give evidence of a financial link between the suspension of the works and the financial problems of his company. I am not satisfied that any action of the owners due to late payment amounted to a repudiation on their part, or that they 7 Ibid, at [38]. 8 Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2009] NSWSC 1302. 9 Qantas Airways Ltd v Joseland & Gilling (1986) 6 NSWLR 327. 10 Statement of Mr Fung dated 29 August 2014, at [33]. 11 Respondent’s submissions filed 23 January 2015, at [33]. -- 9 of 12 -- 10 placed the builder in such a position where he was rendered financially incapable of completing the works. [56] I find that the builder failed to continue to progress the work in a timely manner, which also would give the owner a right to terminate. [57] The only Contractual document that was entered into by both parties was the Works Agreement. There was an intention to enter into a formal contract using a standard Master Builders Contract, but that did not eventuate. The Works Agreement does not contain any specific contractual terms. In this circumstance, the usual rules of Contract at common law apply. [58] The owners submit that a contract is repudiated if one party renounces its liabilities under it, if the party evinces an intention to no longer be bound by the contract or shows that the party intends to fulfil the contract only in a manner substantially inconsistent with the parties’ obligations and not in any other way.12 I accept that proposition of law. [59] The builder gave evidence that he was not prepared to pay for the cost of recessing the beams, which would have provided the required ceiling height and enabled the construction to proceed. As I have found that there was no agreement to reduce the ceiling height, the refusal of the builder to proceed with the works and to fulfil the original agreement as to the ceiling height, is a repudiation of the Contract, which gives the owners the right to terminate. [60] I am satisfied that the owners were entitled to, and were justified in terminating the Contract. The builder is accordingly not entitled to damages for breach of contract by way of loss of profit. Costs [61] The owner has sought costs in the event that the Application is dismissed. [62] Whilst the basic rule in the Tribunal is that costs are not awarded,13 this is subject to the provisions of an enabling Act. Section 77(3)(h) of the Queensland Building and Construction Commission Act 1991 (Qld) provides that in a building dispute the Tribunal may award costs. [63] The Tribunal does not infrequently allow costs on the District Court scale in a building dispute of this nature, where complex questions of law and fact are involved, and particularly where the parties have legal representation. [64] In a previous decision14 I noted the decision in Mulford v Queensland Building Services Authority.15 The learned Member there referred with 12 Applicant’s submissions filed 23 January 2015, at [48]; cf Shevill v Builders Licensing Board [1982] HCA 47 at [6]. 13 Queensland Civil and Administrative Tribunal Act 2009 (Qld) s 100. 14 Imperial Homes (Qld) Pty Limited v Queensland Building and Construction Commission (No 2) [2014] QCAT 135. 15 [2009] QCCTB 64 at [23]. -- 10 of 12 -- 11 approval to the decision in Residential Resorts of Australia Pty Ltd v QBSA16 where the learned Member noted that:17 The Tribunal has historically found that the appropriate scale in a review application of an administrative character is the District Court scale. In Peter Boyd Enterprises Pty Ltd v Queensland Building Services Authority [2008] QCCTB 126 (7 August 2008), Member Heyworth-Smith was minded to award costs on a District Court scale in circumstances analogous to the case at hand, where the applicant: (a) reviewed a direction to rectify issued by the Authority; (b) was entirely successful in its application and the ultimate result; and (c) the ultimate result and that the matter was complex both legally and in terms of its factual context. [65] In this matter I have found that the Builder has wholly failed in his application. The owner has had to defend at significant cost an application which I have found to be without merit. [66] I am also mindful that the Builder is perhaps seeking to use these proceedings to seek to influence proceedings for recovery of debt against him by the QBCC, in circumstances where he has not sought a timely review of the relevant decisions of the QBCC. The builder has therefore also had collateral motives in pursuing these proceedings, which the owner should not be required to bear the costs of. These circumstances also make these proceedings akin to a Review Application. [67] I will therefore allow the Owners their costs of these proceedings on a standard basis on the District Court scale. [68] The District Court costs will need to be agreed or assessed. In order to minimise costs, and to avoid the necessity for the full preparation of a costs statement in compliance with the Uniform Civil Procedure Rules 1999 (Qld), if possible, I shall adopt the procedure envisaged in District Court of Queensland Practice Direction Number 3 of 2007 for agreed or fixed costs, to provide for provision of a realistic estimate of costs. [69] The Application was brought by Mr Fung in his own name, as well as that of the company. No issue was taken as to this by any party. Accordingly, it is appropriate that the costs order should encompass both Mr Fung and the company. Conclusion and Orders [70] I am satisfied that the owners were entitled to terminate the Contract. [71] I order that: 16 [2009] QCCTB 39. 17 Ibid, at [66], cf Peter Boyd Enterprises Pty Ltd v QBSA [2008] CCT QR098-06 and Habitat Development Pty Ltd v QBSA [2008] CCT QR01-06. -- 11 of 12 -- 12 1. The Application is dismissed. 2. It is declared that David Warriner and Emma Robertson lawfully terminated the contract. 3. 3:4:5 Pty Limited and Alwin Fung are to pay the costs of David Warriner and Emma Robertson of and incidental to these proceedings on a standard basis on the District Court scale of costs. 4. David Warriner and Emma Robertson shall deliver to 3:4:5 Pty Limited and Alwin Fung, a realistic estimate of the costs claimed, including an explanation of the basis of the estimate, sufficiently detailed to facilitate some broad examination of its reasonableness, having regard to the District Court scale of costs. 5. If 3:4:5 Pty Limited and Alwin Fung and David Warriner and Emma Robertson are unable to agree on an amount of the costs within 14 days of the delivery of the estimate of costs, the costs shall be assessed by an assessor to be nominated by the Registrar upon request by either party. 6. 3:4:5 Pty Limited and Alwin Fung shall pay the costs of David Warriner and Emma Robertson (as agreed or assessed) within 14 days of such agreement or assessment. -- 12 of 12 --