A2Z Sheetmetal Pty Ltd v Mills [2014] QCAT 456

CITATION: A2Z Sheetmetal Pty Ltd v Mills [2014] QCAT 456 PARTIES: A2Z Sheetmetal Pty Ltd (Applicant) v Vaughan Mills and Justine Mills (Respondents) APPLICATION NUMBER: BDL045-14 MATTER TYPE: Building matters HEARING DATE: 30 May 2014 HEARD AT: Brisbane DECISION OF: Member Allen DELIVERED ON: 11 September 2014 DELIVERED AT: Brisbane ORDERS MADE: 1. Vaughan Mills and Justine Mills must pay the amount of $16,200 to A2Z Sheetmetal Pty Ltd within 14 days of the date of this order. CATCHWORDS: BUILDING DISPUTE – where primary contractor abandoned site – homeowner enters agreement with sub-contractor for completion of work – whether homeowner obliged to pay for work performed under contract between original builder and subcontractor – whether interest payable on disputed amount Coghlan v S H Lock (Aust) Pty Ltd (1987) 8 NSWLR 88 Ringrow Pty Ltd v BP Aust Pty Ltd [2005] HCA 71 APPEARANCES and REPRESENTATION (if any): APPLICANT: Mr Robert de Clara, Director appeared for A2Z Sheetmetal Pty Ltd RESPONDENT: Mr Vaughan Mills appeared for Mr and Mrs Mills -- 1 of 6 -- 2 REASONS FOR DECISION [1] A2Z Sheetmetal was a sub-contractor for building work performed for Mr and Mrs Mills at 116 Carey Street, Bardon. The head-contractor, Full On (WA) Pty Ltd ceased work on the site and went into liquidation. After a time A2Z Sheetmetal agreed to complete its part of the work on the site under a direct contract with Mr and Mrs Mills. The contract amount following a variation was $80,765.30 and payments made total $64,565.30, which leaves $16,200 outstanding. A2Z Sheetmetal says that it has completed all of the works under the contract and has made application to the Tribunal to recover the amount unpaid with interest under clause 6(d) of the contract. [2] The amount in dispute is in respect of work which was undertaken by A2Z Sheetmetal under its contract with Full On (WA) which was unpaid at the time Full On (WA) ceased work on the site. A2Z Sheetmetal alleges that it agreed to undertake the further work on the site on the basis that Mr and Mrs Mills also agreed to pay to it the sum of $16,200 that was owing by Full On (WA). [3] Mr and Mrs Mills say that they did not at any time agree to be responsible for payment of any debt due by Full On (WA) to A2Z Sheetmetal. That they have no knowledge of the contractual arrangements between A2Z Sheetmetal and Full On (WA) nor any amount owing under any contract. That the total amount payable by them under the contract was $62,945.30 and they actually paid $64,656.30, so there is an overpayment of $1,620. This amount represents the GST on the amount of $16,200 which is in dispute. [4] Mr and Mrs Mills state that through their agent, Sokip Pty Ltd and its construction manager, Grant Scott they invited A2Z Sheetmetal to quote to install balustrading for the dwelling. A2Z Sheetmetal issued a quotation dated 10 October 2013, that quoted for the supply and installation of the balustrading, and also other work (referred to at items 1,2,3 and 9 of the quotation, and which is not balustrading) and not required by Mr and Mrs Mills as it was work previously supplied to them by Full On (WA). They entered into a contract with A2Z Sheetmetal dated 16 October 2014 to supply and install balustrading. They deny that they agreed to, or that the balustrading contract was entered into on the basis that they pay to A2Z Sheetmetal any amount owing by Full On (WA) and the contract makes no mention of Full On (WA) or any amount that company or anyone else may owe to A2Z Sheetmetal. [5] Mr and Mrs Mills agree that A2Z Sheetmetal completed for them under the contract the work described in items 4, 5, 6, 7, 8, 10, 12, 13, 14, 15, 16 and 17 of the quotation referred to in the balustrading contract and that they have paid and as mentioned overpaid for the work under the balustrading contract. They deny they are in breach of the contract, or that any amount payable by them under the contract remains unpaid. -- 2 of 6 -- 3 [6] Mr and Mrs Mills deny that A2Z Sheetmetal has any entitlement to interest under clause 6(b) of the contract on the basis that it is a penalty and is not enforceable as a matter of law. That a payment claim or final claim was not made or not made until 13 December 2013. Mr and Mrs Mills disputed part of the claim to the extent of $16,200 by notice, an email, dated 19 December 2013 after payment of the amount not in dispute on 17 December 2013 under and in accordance with clause 6(c) (ii) of the Contract. [7] Mr and Mrs Mills say that they have suffered substantial losses as a result of the Full On (WA) abandoning the site and have filed a proof of debt in the amount of $1,000,000. And that other subcontractors have also filed proof of debts and that is the course of action which they expected A2Z Sheetmetal to take. [8] A2Z Sheetmetal filed a copy of the quote dated 10 October 20141 in the amount of $69,091 plus GST which totals $76,000.10 and the contract dated 16 October 20142 for the supply and installation of balustrading in accordance with attached quotation with the contract sum of $69,091 (which was GST inclusive), this appears to be an error. In his statement Mr de Clara confirms that the contract amount was $69,091 plus GST. There was a requirement that a deposit of 50% be paid and the balance paid 7 days upon completion. The 50% deposit was said to have been paid within a week. Mr Mills confirms in his statement that the deposit in the amount of $38,000 was paid before work commenced3. [9] There are 17 items on the quote and it is common ground that item 9 in respect of Alum Awnings in the amount of $7,200 was completed during the period that Full On (WA) were engaged as builders and A2Z Sheetmetal provided a copy of an invoice that was forwarded to that company in the amount of $7,920 including GST. [10] In the email to A2Z Sheetmetal disputing the final invoice Mr Mills stated that there were three other items which were completed prior to Full On (WA) abandoning the site. They were Make up Glazing Support Frames out of 3 x1 pine $3,000, install glazing support frames for pool area $3,000, site fabricate glass templates. [11] This work with the addition of the alum awning comprises $16,200 excluding GST and that is the amount of the claim by A2Z Sheetmetal. Mr Mills in his email states any liability to pay for that work rests with Full On (WA). At the hearing Mr Mills stated that it was his understanding that he would only be required to pay for the items on the quote which were performed after the contract was entered and there was no requirement to pay the full amount. 1 Exhibit 1 attachment b. 2 Exhibit 1 attachment c. 3 Exhibit 3 attachment h. -- 3 of 6 -- 4 [12] The email also raises issues about defective work costing $5,000 there is no counter application made in this regard and no evidence provided in proof of it. As a result it was not given any consideration by the Tribunal. [13] Mr Mills in his oral evidence made it clear that the work of Mr Mollenhauer in particular in preparation of the rosewood balustrading was of a high standard and he wished to ensure that Mr Mollenhauer finalised this work. [14] Mr Mills statement has a copy of a number of transcribed text messages4. In one Mr de Clara questions the short payment on 18 December 2013 and was told by Mr Mills that “it was on advice”. Following further messages, Mr de Clara states “it is very foolish not to pay money you owe especially when you signed a contract to say you would and agreed on the amount”. [15] Mr de Clara confirmed at the hearing that it was only after Mr Mills had agreed to pay an amount to cover all of the work including that already done that he agreed to continue work on the site. Mr Mollenhauer has provided a statement supporting this5. Mr Mollenhauer has problems with his memory and conceded to Mr Mills at the hearing that he had signed a document prepared by Mr de Clara. [16] If the only work which Mr and Mills were agreeing to pay A2Z Sheetmetal for was work which had previously been performed and billed to Full ON (WA) there may be issues in regard to the enforceability by A2Z Sheetmetal of the agreement in terms of them only providing past consideration6. Here there was substantial other work to be performed and payment made by Mr and Mrs Mills can clearly be ascribed to this work. While the quote provided sets out all of the work performed with costs for each item of work the contract price is for the total amount of all of the work. [17] The fact that Mr and Mrs Mills were eager for Mr Mollenhauer to complete his work is a good reason for them to agree to payment including the work which had already been performed. This represented the premium that was required to ensure that the work was finalised by the person they wanted. [18] It would have been easy for Mr and Mrs Mills to amend the contract amount by deducting the price of the work which had already been performed by A2Z Sheetmetal as subcontractor for Full On (WA) on the basis that they were not responsible for any payment in respect of it. [19] The obligation to pay the original amount was confirmed at the time the contract was varied and a purchase order was issued by Sokip Pty Ltd for the amount of $80,765.30. 4 Exhibit 3 attachment g. 5 Exhibit 2. 6 Coghlan v S H Lock (Aust) Pty Ltd (1987) 8 NSWLR 88. -- 4 of 6 -- 5 [20] This supports the view that it was intended that the works were to be completed for an amount sufficient to cover the price of all of the works including the works which Full On (WA) had liability to pay. It is not though that Mr and Mrs Mills were taking on this liability to pay. The Tribunal is satisfied that A2Z Sheetmetal made clear that they would enter a contract to complete the works on the basis that the payment to be received by them covered all of the works including the works that had already been performed under the sub-contract with Full On (WA). [21] The Tribunal understands that Mr and Mrs Mills have suffered losses as a result of Full On (WA) and they feel that they should not be obliged to pay A2Z Sheetmetal for its own loss. The facts are that by entering the contract with A2Z Sheetmetal Mr and Mrs Mills agreed to pay the total amount for the completion of the works. That was the consideration required to persuade A2Z Sheetmetal to enter the contract. It was not for Mr and Mrs Mills to later say that they could exclude payment for certain amounts on the basis that there was a liability for another party to pay for those works. [22] The Tribunal wished to ensure that A2Z Sheetmetal could not be unjustly enriched by receiving payment from both Mr and Mrs Mills and Full On (WA). Mr Mills stated to the Tribunal that there was no possibility of payment being made by the liquidators of Full On (WA) to A2Z Sheetmetal as there were no funds available for payment. [23] The Tribunal is satisfied that Mr and Mrs Mills agreed to pay A2Z Sheetmetal the amount of $80,765.30 upon completion of the contract. There is no dispute that the contract has been completed and A2Z Sheetmetal states that it has received $64,565.30 which is not denied by Mr and Mrs Mills. This leaves $16,200 outstanding which A2Z Sheetmetal is entitled to. [24] A2Z Sheetmetal have requested that they be awarded interest on the amount they are entitled to in accordance with clause 6(d) of the contract, this would be at the rate of 20% per annum. Mr and Mrs Mills submit that the clause represents a penalty and is not enforceable7 or if it is enforceable then they have as required under the clause disputed the amount payable. [25] Clause 6 which deals with payments states in sub-clause 6(e) that the proprietor shall pay interest, calculated on a daily basis to the contractor on any overdue amount including any part of the amount of a payment claim or final progress claim wrongly withheld. In this case the amount was withheld in accordance with the terms of the contract, clause 6(c), and the amount not in dispute was paid. The issue of whether A2Z Sheetmetal was entitled to the amount in dispute has now been decided and it is only now that it can be said that A2Z Sheetmetal had an entitlement to the amount of $16,200. Therefore the amount was not wrongly withheld it was 7 Ringrow Pty Ltd v BP Aust Pty Ltd [2005] HCA 71. -- 5 of 6 -- 6 withheld in accordance with the terms of the contract subject to final adjudication. There is then no entitlement to interest. [26] The Tribunal orders that Vaughan Mills and Justine Mills must pay the amount of $16,200 to A2Z Sheetmetal Pty Ltd within 14 days of the date of this order. -- 6 of 6 --