Dunmoor Pty Ltd AFT Tiny Turtle Trust Fund v Queensland Building and Construction Commission & Mainz [2015] QCAT 449

CITATION: Dunmoor Pty Ltd AFT Tiny Turtle Trust Fund v Queensland Building and Construction Commission & Mainz [2015] QCAT 449 PARTIES: Dunmoor Pty Ltd ATF Tiny Turtle Trust Fund (Applicant) v Queensland Building and Construction Commission Mainz Development Pty Ltd (Respondents) APPLICATION NUMBER: GAR371-13 / BDL073-14 MATTER TYPE: General administrative review matters HEARING DATE: 23 June 2014; 24 June 2014 HEARD AT: Brisbane DECISION OF: Dr Cullen, Member DELIVERED ON: 5 February 2015 DELIVERED AT: Brisbane ORDERS MADE: 1. That the Queensland Building and Construction Commission’s decision of 26 September 2013, to not issue a direction to rectify to pursuant to s 72(1) of the Queensland Building and Construction Commission Act 1991 to Mainz Developments Pty Ltd be confirmed. 2. Dunmoor Pty Ltd ATF Tiny Turtle Trust Fund to pay Mainz Developments Pty Ltd the sum of $40,981.34, inclusive of GST, plus interest at the contractual rate of 15% from the time of invoicing on 2 October 2008, until the date of decision. CATCHWORDS: Queensland Building and Construction Commission - review of refusal to issue builder with a Direction to Rectify due to monies outstanding on contract – corresponding domestic building dispute commenced by builder seeking payment of monies owed – dispute between homeowner and builder in relation to -- 1 of 8 -- 2 nature of contract – whether cost-plus or fixed price – Tribunal determines contract is cost-plus Queensland Building and Construction Commission Act 1991 (Qld), s 72 Briginshaw v Briginshaw (1938) 60 CLR 336 REPRESENTATIVES: APPLICANT: Dunmoor Pty Ltd ATF Tiny Turtle Trust Fund represented by Mr CM Tam, of Counsel, instructed by Hickey Lawyers RESPONDENTS: for the Queensland Building and Construction Commission represented by Ms Emily Roberts, in-house legal counsel Mainz Development Pty Ltd represented by Mr P Van Grinsven, M + K Lawyers REASONS FOR DECISION Background [1] In late 2008, the Applicant, Dunmoor Pty Ltd ATF The Tiny Turtle Trust Fund (‘Dunmoor’), entered into a contract with the Second Respondent, Mainz Developments Pty Ltd, to carry out renovations and extensions to a home on Selkirk Avenue in Benowa, Queensland (‘the property’). The contract amount nominated at Item 6 of the Master Builders Residential Building Contract was $215,000.00. Dunmoor operates as the family trust for Dr Chris Leat, a cosmetic surgeon with a practice on the Gold Coast, and his wife and children. Mainz Developments had undertaken work on Dr Leat’s surgery prior to entering into the contract in relation to his home. [2] In April of 2012, Dunmoor lodged a complaint with the Queensland Building and Construction Commission regarding works carried out by Mainz Developments at the Leat’s home. The QBCC investigated, and determined that the complaint items were ‘Category 2’ defects within the QBCC policy, and refused to issue Mainz Developments with a direction to rectify for the reason that the QBCC determined that it was not notified in accordance with the defects policy (i.e. within the prescribed period). [3] Subsequently, on 8 April 2013, Dunmoor lodged a second complaint with the QBCC in relation to the work performed by Mainz Developments at Selkirk Avenue. On 2 September 2013, QBCC inspector BJ Luckan attended the property to undertake an inspection. -- 2 of 8 -- 3 [4] Following his inspection, Mr Luckan determined that the following items were Category 1 building defects, and the responsibility of Mainz Developments to rectify: Items 1 and 2: timber floor boards in the hallways adjacent to the sliding windows and the living room adjacent to the sliding doors; Item 3: timber floor near the rear right hand side corner of the living room behind the tv cabinet; and Item 7: cracking to the tiles on the rear external deck. [5] However, because Mr Luckan concluded that Dunmoor owed Mainz Developments approximately $45,000.00, and the costs to rectify the defects would not exceed $34,000.00, Mr Luckan declined to issue Mainz Developments with a direction to rectify. [6] Dunmoor argues that Mr Luckan’s decision was infected by his mistaken acceptance of Mainz Development’s assertion that the contract between the parties was a ‘costs plus contract.’ Dunmoor asserts that the contract was a ‘fixed price contract’ in the amount of $215,000.00. If the Tribunal accepts this argument, there is no dispute that Dunmoor has paid this amount. [7] Dunmoor now seeks an Order requiring the QBCC to direct Mainz Development to rectify the defects identified by Mr Luckan. On 13 February 2014, Mainz Development was joined as a party to Dunmoor’s review application. [8] On 31 March 2014, Mainz Developments filed Application BDL073-12 in the Tribunal, seeking that Dunmoor pay the $40,981.34 it alleged was owing pursuant to what it says is a cost-plus contract, together with interest at the contractual rate of 15%, as set out in the Master Builders contract signed by the parties. [9] As the issues arising in the review matter (GAR371-13) and domestic building dispute matter (BDL073-14) both require determination by the Tribunal of the issue surrounding the nature of the contract (whether it be fixed price or cost-plus), on 27 May 2014, the Tribunal ordered that: GAR371-13 and BDL073-14 will remain as separate proceedings, but be heard and determined together. Dunmoor’s submissions [10] Dunmoor emphatically argues that the contract was for a fixed price. Dr Chris Leat, the husband of Dunmoor’s sole director, alleges that the contract was not signed until after work was commenced by Mainz Developments and further claims that he was not provided with a copy of the contract after it was signed. -- 3 of 8 -- 4 [11] Dr Leat says that Mainz Developments advised that (1) the contract would be $215,000.00 in total, and (2) did not inform him that it was not possible to calculate a price for a substantial amount of the works to be carried out. [12] Dunmoor points to the scoping document it provided Mainz Developments with, which it says set out the 22 items of work to be undertaken for the total price of $215,000. This document, Dunmoor submits, is proof that the nature and extent of work was known with sufficient precision, pointing to the conclusion that the contract was indeed for a fixed price. [13] Although Dr Leat conceded that some small changes had been made to the contract, he initially claimed that the only ‘variation’ was the addition of a zip tap in the kitchen. During his cross-examination, Dr Leat conceded that he was not present when his wife selected the electrical fit-out with Ideal electrical, and that there was a level of uncertainty in the kitchen plans. In particular, the appliances had not been selected by the Leats. It was also necessary to upgrade the power board one month after the contract was signed. [14] Since the conclusion of the contract, although the works were not complete, Dr Leat alleges that there are a number of defects. In relation to the defects, Dunmoor has obtained an expert report from Enviropest which states that the damage to the floor boards located in the right hand corner of the living room behind the TV unit was caused by termites. The Enviropest report concludes that the work carried out by Mainz Developments in this area was inadequate, which led to the termite infestation. Mainz Development’s submissions [15] Mr Craig Maindonald, the managing director of Mainz Developments, gave evidence that he was unsure of the scope of the works and extent of renovations required by Dunmoor, and further that no drawings or plans were provided. For this reason, Mr Maindonald says that he informed Dr Leat that he could not reasonably calculate the cost and could not guarantee the works for $215,000.00. [16] Mr Maindonald agrees that Dunmoor provided him with a scoping document, but says this was to provide an indicative amount only. In direct contradiction to Dr Leat’s evidence, Mr Maindonald says that he explained to Dr Leat what a cost plus contract was, and then specifically included handwritten notes in the contract to state its definition. [17] A cost-plus contract, also termed a cost reimbursement contract, is a contract whereby the contractor is paid for all of its allowed expenses to a set limit, plus additional payment to allow for a profit. Section 55 of the Domestic Buildings Contracts Act 2000 (Qld) prohibits cost-plus contracts, save for in certain circumstances. One such circumstance is where, as Mainz Developments says is the case here, is where a substantial portion of the subject work cannot be calculated prior to the contract being entered into. -- 4 of 8 -- 5 [18] In the absence of Mainz Developments having been provided with drawings or plans, the Tribunal finds that entering into a cost-plus contract was permissible. The scoping document was not adequate for anything more than an indicative price. [19] According to Mr Maindonald, Dunmoor continually changed the scope of the works after works commenced. As a consequence, by the time that works were completed, Mainz Development had incurred costs and expenses in the sum of $255,981.34. Mr Maindonald agreed that Mainz Developments had been paid $215,000.00 by Dunmoor. [20] Mr Maindonald says that although he was owed money on completion of the work at Selkirk Avenue, and told Dr Leat that it would need to be paid prior to handover, Dr Leat assured him that he would be repaid once he received his tax refund. Despite these assurances, upon presentation of the invoices at the end of the job, around July of 2008, he claims Dr Leat told him to call a lawyer. [21] Mr Maindonald gave evidence that he received advice that it would not be commercially sensible to chase the final monies outstanding by Dunmoor, given the legal costs involved. As such, it was not until Dunmoor commenced the review proceedings in this matter involving the QBCC that Mainz Developments sought payment of the monies it says are outstanding. The written contract in evidence [22] Considering the nature of the dispute between the parties, one would think that the parties had entered into an oral contract. That is not the case, however. Mr Mainsdonald has provided his copy of the contract, which is the only copy of the contract in evidence before the Tribunal.1 [23] The contract is the standard ‘Master Builders’ contract. On the face of it, at ‘Item 3 Description of Services’, the following words have been written in by Mr Maindonald: Renovation of House at 14 Selkirk Ave Benowa is a Cost Plus Contract Because there are No Plans or specifications as owner Do Not want to Pay Council fees. [24] Dr Leat admits that his signature appears on the contract, but alleges that a fraud has occurred in relation to the words contained at ‘Item 3’ as set out above. Dr Leat claims that the words were inserted after he signed the contract. [25] At Item 11 of the contract, Dr Leat says he cannot recall whether he told Mr Mainsdonald that the ‘Bank of Queensland’ was his financer. He has not offered any explanation as to why Mr Mainsdonald would have entered this information on the contract on his own volition. Rather, he argues that Mr 1 Statement of Reasons, 321-332. -- 5 of 8 -- 6 Mainsdonald filled the contract out before he arrived at Dr Leat’s office to sign it. Mr Mainsdonald denies this. [26] In relation to the signing of the contract, Dr Leat’s evidence was that it was done hurriedly at his office. He claimed that the ticks which appear in the boxes of the only copy of the contract before the Tribunal (at Items 22 and 26) must have been added later. Dr Leat told the Tribunal that he ‘doesn’t do contracts’ and that these items were left blank on the contract at the time of his signing. [27] Mr Mainsdonald says that he gave Dr Leat a copy of the contract, which Dr Leat denies. In line with his evidence in this respect, Dr Leat has been unable to provide the Tribunal with his copy of the contract, which he says does not include the words written at Item 3. Although there is a third copy of the contract that would have been given to the lending institution (the pink copy), neither party has obtained the pink copy by way of a Notice to Produce. Burden of Proof [28] The Tribunal is not in a position where it is possible to tell which witness, Dr Leat or Mr Mainsdonald, is telling the truth in relation to the nature of the contract. On Dr Leat’s version of facts, the Tribunal would have to accept that Mr Mainsdonald engaged in what Dr Leat referred to as ‘fraud’ in writing in the term that the contract was cost-plus, following Dr Leat’s signature. [29] An allegation of fraud is serious, and as such, the Tribunal considers that the standard of proof required by Briginshaw v Briginshaw2 must be met, should Dr Leat wish to rely upon this allegation as a defence to the debt claim commenced by Mainz Development. In relation to Dr Leat’s review of the decision made by the QBCC, it isn’t quite correct to refer to Dr Leat as having a burden of proof in relation to those proceedings. However, it is mighty difficult for the Tribunal to reach the conclusion that the QBCC has not made the correct and preferable decision where there is no information capable of satisfying the Tribunal that the contract was not a cost-plus contract, save for Dr Leat’s own assertions. [30] In Briginshaw, the High Court stated at pages 361–2 that the balance of probabilities test required the Tribunal in that case to: feel an actual persuasion of its occurrence or existence before it can be found. It cannot be found as a result of a mere mechanical comparison of probabilities independently of any belief in its reality … [A]t common law … it is enough that the affirmative of an allegation is made out to the reasonable satisfaction of the tribunal [31] Dr Leat invites the Tribunal to find fraud on the part of Mr Mainsdonald, in circumstances where the evidence establishes that he himself did not take any reasonable care, nor devote any time to ensuring that the contract that bears his signature was completed prior to being signed. Dr Leat is a 2 (1938) 60 CLR 336. -- 6 of 8 -- 7 sophisticated, well-educated man. Yet, his position is that he was too busy to properly read and complete a contract worth in excess of $200,000.00. The Tribunal does not accept that Dr Leat would not have understood the potential legal importance of entering into a contract. [32] The contract that is before the Tribunal is consistent with the evidence given by Mr Mainsdonald in all respects. Faced with conflicting evidence, and Dr Leat’s bare assertions that Mr Maindonald has behaved fraudulently, the Tribunal prefers the evidence that is corroborated by the only copy of the contract before it. [33] With hindsight, Dr Leat should have insisted upon a copy of the contract, and then filed it away, in order to protect himself down the track if something went wrong. Had he done this, he would now be able to produce a copy of the contract that corroborates his version of events. Issues in a review of refusal to issue a direction to rectify [34] In an administrative review by a homeowner in relation to a decision by the QBCC to not issue a builder with a direction to rectify, the Tribunal must consider 3 issues: a) Was the work ‘building work’ and was it ‘defective’? b) Was the Applicant responsible for the defective work? And c) Was the Commission’s direction to direct the Applicant to rectify the defective building work reasonable in the circumstances? [35] There is no dispute amongst the parties that the work performed at Selkirk Avenue was building work. Although some of the work was rectified by another contractor following Mainz Development’s departure from the site, there is no serious argument that the work was performed by Mainz Developments. [36] The real issue in these proceedings is whether it would have been reasonable for the QBCC to issue Mainz Developments with a Direction to Rectify. The Tribunal concludes that the QBCC correctly decided that money was owed pursuant to the contract, which is a cost-plus contract. [37] Mainz Developments has raised the question of timeliness in relation to the timeframe within which Dunmoor complained. Under s 72(8) Queensland Building and Construction Commission Act 1991 (Qld), Mainz Developments is responsible for defective work for six years and three months from the date the work is completed or left in an incomplete state, where there is a Category 1 defect. [38] This Tribunal has not addressed this argument for the reason that its finding that the contract was cost plus, and not fixed price, is determinative of the issues. -- 7 of 8 -- 8 [39] In all of the circumstances, the QBCC’s decision not to issue a direction to rectify to Mainz Developments, due to the monies owing by Dunmoor under the contract, was the correct and preferable decision. [40] Having made this determination in relation to Dunmoor’s review application, the Tribunal must now consider the application by Mainz Developments seeking payment of the amounts it says are outstanding. [41] The Tribunal considers it just in the circumstances that Mainz Developments now be paid for the work it has performed. Mr Mainsdonald has satisfied the Tribunal that the work invoiced for was performed for the benefit of Dunmoor pursuant to the contract. [42] Mainz Developments claims $40,981.34, inclusive of GST, plus interest at the contractual rate of 15% from the time of invoicing on 2 October 2008, until the time of decision. As there is no real dispute that the work was performed, this is the amount that the Tribunal orders be paid by Dunmoor to Mainz Developments. Orders [43] That the Queensland Building and Construction Commission’s decision of 26 September 2013, to not issue a direction to rectify to pursuant to s 72(1) of the Queensland Building and Construction Commission Act 1991 (Qld) to Mainz Developments Pty Ltd be confirmed. [44] Dunmoor Pty Ltd ATF Tiny Turtle Trust Fund to pay Mainz Developments Pty Ltd the sum of $40,981.34, inclusive of GST, plus interest at the contractual rate of 15% from the time of invoicing on 2 October 2008, until the date of decision. -- 8 of 8 --