Bullfrog Constructions Pty Ltd v Crowther [2014] QCAT 189

CITATION: Bullfrog Constructions Pty Ltd v Crowther [2014] QCAT 189 PARTIES: Bullfrog Constructions Pty Ltd (Applicant) v Ronald Crowther Gwendoline Crowther (Respondents) APPLICATION NUMBER: BDL008-13 MATTER TYPE: Building matters HEARING DATE: 18, 19 September 2014 HEARD AT: Brisbane DECISION OF: Member McLean Williams DELIVERED ON: 15 May 2014 DELIVERED AT: Brisbane ORDERS MADE: The Tribunal Orders: (a) The respondents are to pay the applicant the sum of $96,214.02, together with interest in the amount of $26,294.10 within 28 days of the date of these orders; (b) The applicant is to arrange rectification of the defective building works specified in paragraphs [65] and [66] of the Tribunal’s reasons (‘the rectification works’), within four (4) months of the date of these orders, or such longer period, as may be agreed; (c) The rectification works are to be at the expense of the applicant, and are to be performed by sub-contractors arranged by the applicant; (d) Mr Nathan Parker is not permitted to attend the site at 259-265 Ney Road at Capalaba during the rectification works; (e) All necessary communication between the applicant and the respondent regarding the rectification works is to be in writing, and is to be exchanged by e- mail between the applicant and the -- 1 of 25 -- 2 respondent’s solicitor, or other nominee; (f) Any dispute regarding the standard of any rectification works is to be determined by a building inspector appointed by the Queensland Building and Construction Commission, whose view on the issue in contention is to be determinative. The costs of any such inspection are to be born equally by the applicant and the respondent. (g) The applicant is to provide the respondents with any outstanding construction certificates or other contract documentation within 28 days of the date of these orders. (h) The parties are given leave to make written submissions within 14 days on the question of the appropriate orders regarding the costs of these proceedings, and that matter will be determined by the Tribunal on the papers. CATCHWORDS: Residential building dispute – Where applicant builder seeks payment of outstanding sums pursuant to written contract, plus undocumented variations – Where respondent owners allege the written contract to be a sham, and the agreement to be an unlawful antecedent oral “cost plus” agreement – Effect of Parol evidence rule – evidence necessary to overcome presumptive effect of the written agreement – Inferences to be drawn from consequential conduct several months after date of alleged agreement – Whether family relationship between building owners and wife of builder sufficient to constitute an “exceptional circumstance” within s 84(4)(a)(i) of the Domestic Building Contracts Act 2000 – Factors giving rise to appropriate circumstances for the making of rectification orders pursuant to s 77(2)(g) of the Queensland Building and Construction Commission Act 1991. Domestic Building Contracts Act 2000 (Qld) s 84 Queensland Building and Construction Commission Act 1991 (Qld) s 77(2) Queensland Building Services Authority v McGrath Corporation Pty Ltd (unreported, QBT, -- 2 of 25 -- 3 13 April 1994) KD Properties Pty Ltd v Leda Design & Construction (Qld) Pty Ltd [2003] QCCTB 26; Rainbow v Nelson [2009] QCCTB 264; Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337; Allaro Homes Pty Ltd v O’Reilly & Anor [2012] QCA 286; Weier v Pugh [2008] CCT BD486-06 APPEARANCES and REPRESENTATION (If any): APPLICANT: Mr Simon Taylor of counsel, instructed by Crouch & Lyndon Lawyers RESPONDENT: Mr Timothy Mitchell, Solicitor, Hemming & Hart Lawyers. REASONS FOR DECISION [1] The applicant in this matter is a residential construction company, Bullfrog Constructions Pty Ltd (ABN 801 581 725 51), (“the applicant”). Mr Nathan Parker is the sole director of Bullfrog Constructions. The applicant conducts operations from an office in a converted double car garage at Mr Parker’s home, at Ormiston. [2] The respondents are Mr Ronald Victor Crowther, and Mrs Gwendoline Dale Crowther (“the owners”). It is relevant to record that the owners are the aunt and uncle of Mr Parker’s wife, and came to use the applicant as their builder as a result of that family connection. [3] The dispute relates to the construction of a new home by the applicant at 420 Mt Cotton Road, Capalaba. Although that was the address specified on the building contract signed by the parties on 24th November 2011, the property has since undergone a subdivision, and it is now known as 259- 265 Ney Road, Capalaba. In these reasons the house construction will be referred to via its current Ney Road address. [4] This matter was heard over 2 days on 18 and 19 September 2013. Because the time allowed for the hearing of the matter proved to be inadequate, the parties were directed to provide extensive written submissions. The last of these (the applicant’s submissions given in reply to those of the respondent) were not filed until 4 November 2013. The Applicant’s Case: [5] By an application filed before QCAT on 14 January 2013, the applicant seeks the sum of $104,699.20, which the applicant says remains outstanding, together with interest and costs. -- 3 of 25 -- 4 [6] The applicant says that Bullfrog Constructions and the owners entered into a Queensland Master Builders contract (August 2010 edition) on 24th November 2011 for the construction of a low-set residential dwelling, for the amount of $297,300.00 (inclusive of GST). Pursuant to that contract, the applicant says that the owners were required to pay for the construction in accordance with the following stage payments: CONTRACT STAGE CONTRACT AMOUNT Deposit $ 14,865 Slab $ 29,730 Frame $ 59,460 Enclosed stage $104,055 Fixing stage $ 59,460 Practical completion $ 29,730 Total: $297,300 [7] Expressed in the simplest terms, the applicant’s case is that Bullfrog Constructions brought the house all the way to practical completion, and then delivered the finished house to the owners; such that any sums still outstanding under the contract are due and owing. [8] In relation to practical completion and the process of effectuating handover, the applicant says that Mr Parker, together with one of his staff and the owners, undertook a practical completion inspection (as required by Clause 17 of the general conditions of the contract), on 27th June 2012. The parties were unable to agree in relation to all of the defects. Despite this, 15 items were still recorded in a defects document, and the parties signed that document, after that inspection as comprising ‘the’ list of defects. [9] The applicant contends that it has since rectified 10 of the 15 listed defect items and says that the respondents took complete possession of their property (by moving into it), on 4th July 2012. In the premises, the applicant says that the contracted works are deemed to have attained practical completion, in accordance with Clause 17.9 of the contract. [10] Although the contract made provision for several prime cost and provisional sum items, the applicant says that the owners did not use up all of their allowances in that regard; such that the applicant acknowledges that it is required to give the owners a credit (a negative variation), in the sum of $9,349.12. By agreement between the parties, the applicant also did not undertake some of the building works that were meant to be performed by the builder; such that a further sum, $11,858.04, also needs to be given back to the owners, in the form of another negative variation. In total therefore, the applicant says that it gave credits of $21,557.16 back to the owners, against the original contract price, as negative variations. [11] Because Mr Parker was broadly aware that an amount for credits was going to have to be paid to the owners at the end of the project, he paid the sum of $15,000.00 to Mr and Mrs Crowther, even before a final -- 4 of 25 -- 5 accounting of expenditures on the project had been undertaken. Because of this advance payment, the applicant says that the net credit required to be given back to the owners was only for $6,207.16. Deducting this sum from the contract price, so the applicant says, results in the amended contract price becoming $291,092.84. [12] In addition to these negative variations, the applicant also says that there were a number of positive variations, in the manner of extra matters beyond the original scope of works that were also agreed between the parties during the course of the construction. These are specified by the builder to be as follows: No VARIATION DESCRIPTION COST 1 Site cut $929.28 2 Bored piers to under slab $5,762.40 3 Additional underground cabling $1,881.00 4 Provision of a full set of working drawings $1,512.00 5 Upgrade of site classification, from ‘M’ to ‘P’ $3,600.00 6 Supply and install slab for owners’ shed $6,000.00 7 Alteration to plans regarding rumpus room $600.00 8 Upgrade of entry door furniture $90.00 9 Upgrade of windows (tint) $1,365.60 10 Electrical upgrades $6,978.67 11 Upgrade of cornice (square set) $300.00 12 Upgrade of cabinetry $9,236.04 13 Upgrade of shower screens $703.64 14 Upgrade of bathroom $1,227.59 15 Rectification of owners’ rendering $144.00 19 Upgrade of roof sisalation $1,036.14 TOTAL: $41,365.76 [13] Although the applicant says that there were these positive variations, it admits that not all of these were reduced into writing and signed by the owners, in the manner required by Part 7 of the Domestic Buildings Contract Act 2000 (Qld) (‘the DBCA’). In point of fact, only the first three variations were documented in writing and then agreed by the owners, by means of their signature on a variation document. [14] The Applicant says that written variations were generated for all of the variations, and those for which signatures from the owners were not obtained had been placed by the builder inside a plastic sleeve that had been affixed to the inside wall of the on-site toilet (for use as an on-site document exchange), for collection by the owners. However, Mr and Mrs Crowther strongly deny that any written variation documents were ever left for them in a plastic sleeve inside the site toilet. Although Mr Parker is equally adamant that written variation documents were left for the owners in the manner described, Mr Parker does however concede that he was totally remiss in not then following up with Mr and Mrs Crowther in order to ensure that these variation documents were returned to him, signed by the owners. Mr Parker’s explanation for this oversight was that he approached this construction job in a more informal -- 5 of 25 -- 6 manner than would be the case had this been an ordinary, “arms length” business transaction. In this instance things were different because he was dealing with members of his wife’s immediate family, and he trusted that they would be good for the money, because they were family. [15] Because of the fact of these unwritten variations, the applicant applies pursuant to s 84 of the Domestic Buildings Contract Act 2000 (Qld) for the approval of this Tribunal for it to be paid for the variations. In the final wash up, the applicant says that it is owed monies by the owners in accordance with the following: Amended contract price $291,092.84 Plus variations: $41,365.76 Final contract sum: $332,459.20 Less payments already made by the owners to date: ($228,110.00) Outstanding amount: $104,699.20 [16] The applicant also claims an entitlement to interest at the rate of 15% per annum, pursuant to Item 19 of the contract. The applicant says that the owners were required to make payment of the full contract price by no later than 13th July 2012, such that the applicant claims interest at 15% from 14th July 2012 until the date of its filing of this application (14th January 2013),1 and accruing thereafter on a daily basis. The Owner’s Case: [17] As indicated at the commencement of these reasons, Ronald and Gwendoline Crowther are the uncle and aunt of Mr Parker’s wife. The owners give a radically different account of the agreement between themselves and their niece’s husband. [18] Although Mr and Mrs Crowther readily admit to their having signed the building contract, as well as the builder’s written quote at the office of Bullfrog Constructions at Ormiston on 24th November 2011, it is their case that these documents do not represent the true arrangement between themselves and their builder. Indeed, the owners say that the written contract is a complete sham, designed to do no more than afford a veneer of respectability to their real agreement: which they say was an unlawful (and now unenforceable) “cost plus” agreement. The owners say that the arrangement was one by which Bullfrog Constructions had agreed to build their home for the cost of construction, plus a fixed fee to the builder of $20,000. [19] Mr and Mrs Crowther say that they were initially introduced to Bullfrog Constructions by Mr Crowther’s brother, who had assured them that his son-in-law could build their intended house at a price that was considerably below the sum that Mr and Mrs Crowther had already been 1 185 days. -- 6 of 25 -- 7 quoted, by another building company. As a consequence of that assurance the owners arranged to meet with Mr Parker, at Ormiston, on 20 October 2011. During that initial meeting Mr and Mrs Parker produced some sketch diagrams showing a house that they wished to construct with a gross floor area of approximately 247 square metres.2 [20] The owners claim that when Mr Parker was shown this sketch they were assured that such a house could be had for a build cost of somewhere between $180,000 and $210,000, and the price would be based on a ‘cost plus’ agreement, where they would merely pay Bullfrog Constructions for the actual costs of the construction (whatever these ultimately worked out to be), “plus a $20,000 fee”; and that Bullfrog Constructions oftentimes priced jobs in this manner. The owners say that an oral agreement was struck between themselves and Mr Parker that day, and on that basis; with Mr Parker also clearly understanding that their total budget for the construction could not exceed $220,000, as that was all that Mr and Mrs Crowther could afford. [21] Subsequently, the owners admit that on 20th October 2011, they entered into a preliminary (written) agreement with Bullfrog Constructions to enable the applicant to undertake a soil test. They also admit that they were sent by Mr Parker to see the applicant’s preferred draftsman, so that detailed plans could be drawn up for the intended construction. [22] During the process of preparing detailed working drawings, Mr and Mrs Crowther gave the draftsman instructions for - and obviously approved - a final design for a significantly larger house than the sketch first shown to Mr Parker – one of approximately 320 square metres. Given that the house had increased in size, the applicant says that he sent to Mr and Mrs Parker a written quote for $297,300.00 (based on the enlarged drawings), together with a set of detailed building specifications. [23] On 24th November 2011 Mr and Mrs Crowther went back to Ormiston to see Mr Parker. The owners admit that on this occasion they also signed a written contract in the amount of $297,300, inclusive of GST, as well as a copy of the quotation document referred to in paragraph [22], above. [24] Although it is the case that the owners admit to having signed both the contract and the quotation, they say that they were assured by Mr Parker at the time of their signing the documentation that these were only being signed so as to give their antecedent oral agreement (that made on 20th November 2011) an appearance of complying with the requirements of the Domestic Buildings Contract Act 2000 (Qld), and so that insurance could be obtained under the statutory home warranty scheme. They also claim that Mr Parker told them on 24th November 2011 that their oral agreement would still govern the relationship between themselves and Bullfrog Constructions. 2 Yet only 207 square meters, according to the builder. At the end of it, nothing really turns on this conflict in the evidence. -- 7 of 25 -- 8 [25] The owners also admit that a defects inspection was undertaken on 27th June 2012, yet they say that the inspection on that day was only ever a partial inspection, as it was cut short when Mr Parker had to leave, quite suddenly. Although some defects had been noted by the parties before Mr Parker’s sudden departure, and were also signed off by them, Mr and Mrs Crowther say that there was no agreement regarding the extent of the defects and those that were signed were only signed on an express understanding that Mr Parker would be returning, to complete the inspection on a later occasion. Clearly therefore it is the owners’ case that the list of defects is far more extensive than simply those matters recorded and signed by the parties, on 27th June 2012. [26] There is also a dispute in relation to credits that the owners say they should receive from the builder for prime cost and provisional sum items. The owners say that the total deduction (in the form of a credit to them) for prime cost and provisional sum items should be more in the order of $10,915.00, and that the value of the works omitted (for which they should also receive a credit) should be $17,974.00, rather than the $11,858.04 allowed by the applicant. [27] In addition, the owners contend that there were still other omitted works, for which they should receive further credit. These additional items include: ITEM DESCRIPTION VALUE OF FURTHER WORKS NOT CONDUCTED Clothesline Standard wall-mounted included $150.00 Shelving Custom wood included as per drawings $2,500.00 Insect screens Standard insect screens included to aluminium windows $3,500.00 Blinds (window dressings) Vertical blinds from standard builder’s range to all aluminium windows and doors, venetians to bathrooms/wc/ensuite/wc $5,500.00 Ceiling fans 8 included (one in each bedroom, two to dining/family, two to patio. $2,550.00 Telecom: pre- wire 2 points $80.00 Exhaust fans Standard 3-light tactics to bathroom and ensuite $280.00 Downpipe PVC 90ml $50.00 -- 8 of 25 -- 9 ITEM DESCRIPTION VALUE OF FURTHER WORKS NOT CONDUCTED Rubbish removal 3 x rubbish removal $1,450.00 Site clean 1 x site clean $675.00 House clean Final house clean done by respondent $650.00 Range hood ducting Supply and fit $400.00 TOTAL: $17,785.00 [28] Although the owners also agree that in September 2012 the applicant paid to them $15,000.00, they deny that this was ever paid by the builder as an advance on the credits for negative variations owed to them at practical completion, as has been contended by the builder. Instead, Mr and Mrs Crowther say that the refund of $15,000 is merely consistent with their oral agreement wherein they were only required to pay Bullfrog Constructions on a ‘cost plus’ $20,000 basis, as they had, by that stage, already paid too much to the builder, and Mr Parker was acknowledging this fact, by making a refund. Indeed, they say that at the time of making the $15,000 payment Mr Parker also informed them that they would be receiving another refund, of $4,902.45, to be paid to them by 14th September 2012, at the latest. [29] In relation to the applicant’s claimed variations, the owners say that all of these are a sham, as well. Although they agree that they received and signed the first three written variation documents, they deny that the builder produced any more variation documents; or that these were then left for their collection, in a plastic sleeve, inside the on-site toilet. [30] In relation to written variations 1 – 3 (which were signed as having been agreed by the owners), Mr Crowther says that he queried Mr Parker at the time as to why these were now being produced for his signature. He says that he was told by Mr Parker at that time that these were being created in order to provide at least some evidence of compliance with the requirements of the Domestic Buildings Contract Act 2000 (Qld), just in case Bullfrog Constructions were ever audited. The owners say that no other written variations were produced (and indeed none were necessary given the nature of their agreement), and the notion that variation documents were produced and then left for their collection in the plastic sleeve inside the site toilet is just an elaborate fiction. [31] Rather than their owing $41,366.36 to the builder as contended by the applicant, the respondents say that they do not owe the builder anything, as they have already paid the builder for everything done by it, including any variations. -- 9 of 25 -- 10 [32] Pursuant to their oral agreement, the owners say that they were required to make stage payments to the applicant (which they did) in accordance with the following: PAYMENT DATE RATIONALE FOR PAYMENT AMOUNT 20.10.11 Soil test $400.00 29.11.11 Deposit $14,865.00 19.2.12 Slab stage $29,730.00 2.3.12 Site cut $929.28 2.3.12 Bored piers to under slab $5,762.40 2.3.12 Underground cabling $1,881.00 4.3.12 Frame stage $59,460.00 26.4.12 Enclosed stage $104,055.00 17.5.12 Fixing stage $20,000.00 Sub-total $237,082.68 Less, refund in September 2012 -$15,000.00 TOTAL: $222,082.68 [33] Although the fixing stage in the written contract appeared to require that they pay to the builder the sum of $59,460.00, the owners say that they were told by Mr Parker to only pay Bullfrog Constructions the sum of $20,000; and in fact they never received a written fixing stage invoice from the builder, at least not until after the commencement of these QCAT proceedings. The Crowthers say that they only paid $20,000 because Mr Parker had told them at the fixing stage that $20,000 would be more than enough to cover any outstanding sum still owing under their oral agreement, given that the agreement was that they would only be paying ‘cost plus’ a fixed fee of $20,000 for the entire job. The owners say that the whole arrangement and the amount ultimately paid by them ($222,082.68) is consistent with the fact that they had advised Mr Parker that they only had a maximum of $220,000 to spend on the construction project, although it is also their case that the Applicant still now owes to them further refunds and compensation for defective building works. [34] The owners say that on or about 11th October 2012, and completely out of the blue, Mr Parker reneged on their cost plus agreement, and demanded an additional payment, of $33,162. When they asked Mr Parker to substantiate why it was that he was now claiming that they owed that sum, they received what they regarded as being an unsatisfactory answer. Mr Parker is alleged to have informed them he had made a mistake on his MYOB accounts, which had only just been detected. At that time Mr Parker is said to have refused to provide them with invoices and receipts substantiating the claim, and instead merely showed to them a copy of his computer spreadsheet, which purported to set out the builder’s costs for the project. When they refused to pay this sum, the owners say that Mr Parker only then indicated that he would take steps to enforce the -- 10 of 25 -- 11 ‘sham’ written agreement, which they say he now has, by commencing these QCAT proceedings. [35] As well as contending that no further sums are owed to the applicant, the owners contend that the builder is liable for the costs of rectifying various defective works. For these purposes the owners have produced a list of defects that is far more extensive than those listed in the defects document signed by them and the builder on 27th June 2012. [36] Mr and Mrs Crowther also say that the builder has changed various aspects of the construction without their prior approval, and this has resulted in their home having been devalued by an estimated $100,000. Because of delays in the construction, they also say that they have been caused additional expenses (additional rent, and so on), of about $9,000. In relation to the alleged devaluation, the owners have however produced no evidence. The Applicant’s response to the Owners’ claims: [37] The builder agrees that there had been an initial meeting in mid-October 2011, and at that time the owners had indicated that they wished to build a home with a gross floor area of what Mr Parker says was about 207 square metres, based on a sketch diagram brought to the meeting by Mr and Mrs Crowther. Mr Parker says that as part of that, there had been discussion about the ‘ballpark’ construction costs for a home of about that size. However, beyond this, the builder says that no agreement was reached with the owners at that time, other than for the Crowther’s to indicate that they did wish to proceed and have their house built by Bullfrog Constructions. Mr Parker says that this is the reason that the owners agreed to sign the preliminary agreement on that day (20th October 2011) that enabled him to get a soil test done on the house site. [38] Once the owners had been sent by Mr Parker to see his draftsman, Mr Parker says that the owners enlarged their proposed house, to one now of approximately 320 square metres, and it was this fully detailed (and obviously much larger) plan that formed the basis of the builder’s subsequent written quote to the owners. [39] On 24th November 2011 Mr Parker says that Mr & Mrs Crowther accepted his written quote to construct their proposed home for $297,300.00 in accordance with the detailed plans and the specifications that comprised part of his written quote. The applicant completely denies that the quote and the written agreement were put in place only in order to afford a “veneer of respectability” to an oral agreement, and says that the contract signed by him and the owners on 24th November 2011 embodies their entire agreement. In this regard, the applicant points to the evidence given before the Tribunal by Mr John Rutter, an employee of the applicant, who happened to be present in the same room when the contract was signed by the parties, on 24th November 2011. Mr Rutter’s evidence suggests that the written document was the only agreement within the contemplation of the parties at the time when it was signed. -- 11 of 25 -- 12 [40] The applicant also says that the list of defects containing the 15 items is the only list of defects in existence, and that although it is the case that the owners disputed many items, this list was nonetheless still signed by them. Moreover, at no time on 27th June 2012 did Mr Parker ever suggest to the owners that he would be returning on the next day (or on any other day) so as to complete the defects inspection; and nor did the owners ever say that they were only signing the list of defects he had presented to them on the basis that Mr Parker would be returning to do another defects inspection, later. [41] Although the owners contend that some $17,785 of items were not supplied by the applicant, the builder says that upon perusal of the new list of items presented by the owners that only $3,998 of these items (principally the insect screens and the window dressings) might be legitimately claimed by the owners, as additional items that were not supplied by the applicant, yet that should have been. [42] In relation to the owner’s key contention that the applicant only required a payment of $20,000 at the fixing stage, in lieu of the contract sum of $59,460, the applicant says that this is simply untrue. The applicant says that he received $20,000 from the owners against the $59,460 specified in the invoice at the time that payment was required for the fixing stage, yet he did not pursue the owners for the full outstanding sum at that time, because the owners were relatives by marriage, and Mr Parker felt somewhat awkward about raising the matter. He also chose not to raise the issue because he did not have any cash flow difficulties at that point, and instead merely assumed – naively as it has turned out - that the owners would not forget to honour their obligation to pay the remainder of the fixing stage invoice. Mr Parker also says that he arranged for the applicant to refund $15,000 to Mr and Mrs Crowther earlier than the practical completion stage as an act of good faith (even notwithstanding that a greater sum than that was already owed by the owners to the applicant), because he was conscious that there were certain prime costs and provisional sum items that the owners had not used and for which they would eventually be entitled to a credit, because he wished to repay this sum as an expedient means by which to keep a “neat ledger”. [43] The applicant also denies demanding an additional $33,162 on 11th October 2012. Mr Parker says that the parties were, by now, in open dispute about outstanding payments, and this was causing him a great deal of difficulty and stress at home, because of the family connection between his own wife, and the owners. Mr Parker says that at that time he offered to resolve the dispute on the basis of a payment to the applicant of only $33,162; yet this is not the same as concluding that the applicant was only therefore owed that sum. Issues for Determination [44] By the end of the hearing, the parties were in general agreement regarding the matters that need to be determined by QCAT: -- 12 of 25 -- 13 (i) The Nature of the Contract: Is the agreement embodied in the signed contract dated 24th November 2011, or is this an (unlawful) oral ‘cost plus’ agreement? (ii) Related to (i), above, is the written contract dated 24th November 2011 a sham agreement, or did the applicant otherwise misrepresent the nature of the contractual arrangement in order to induce the owners to sign that document? (iii) In the absence of variations agreed in writing, is the builder entitled to payment of an amount for variations, pursuant to s 84(4) of the DBCA? (iv) What are the items of defective building work, and what is the most appropriate order for their rectification? (v) Quantum meruit: in the event of my finding the agreement to be an unenforceable contract, what then is the reasonable value of the building works? [45] Ultimately, and for reasons that will be further elaborated, it becomes unnecessary for me to make any quantum meruit assessment (item (v), above). (i) The Nature of the Contract: [46] Although the owners admit that they signed the written contract on 24th November 2011, it is their case that, in reality, the agreement between the parties is an antecedent verbal agreement made on 20th October 2012. The owners also state that when they signed the written contract, Mr Parker had assured them that it would not be enforced, and that Bullfrog Constructions would carry out all of the building works in accordance with the oral agreement. Accordingly, it is the respondent’s case that the parties never intended to be bound by the written document, as its purpose was never to record their agreement. The respondents say that the written contract is a “sham”, as that concept has come to be understood in cases such as Queensland Building Services Authority v McGrath Corporation Pty Ltd,3 and Rainbow v Nelson.4 [47] One obvious hurdle for the owners is the very fact of the signed agreement. The prospect for successfully vaulting that hurdle becomes all the more challenging when the fact of it is coupled with the eyewitness evidence of Mr Rutter, who was present when the contract was signed, by both the owners and Mr Parker. Mr Rutter’s evidence was that the owners gave every appearance of understanding the document that they were signing, and that no reference was made by any of the signatories at that time to any antecedent oral arrangement as the “real” agreement. That evidence is obviously quite at odds with that given by Mr and Mrs Crowther. Mr Rutter’s credibility was not impugned during cross- examination. In the final analysis nothing said by Mr Rutter lends any 3 Unreported QBT, 13 April 1994; see also KD Properties Pty Ltd v Leda Design & Construction (Qld) Pty Ltd, [2003] QCCTB 26 (28 August 2003). 4 Rainbow v Nelson [2009] QCCTB 264 (16 September 2009). -- 13 of 25 -- 14 benefit to the case theory that the owners now seek to advance before the Tribunal. [48] Ordinarily, given the operation of the Parol evidence rule, the very fact that the parties have recorded an agreement in writing excludes evidence of antecedent negotiations for the purposes of adding to, varying, or otherwise contradicting the language of the written agreement.5 By their final written submissions the owner’s solicitor concedes as much,6 yet goes on to submit that other evidence heard by the Tribunal – that being evidence in relation to events between the contracting parties from 17 May 20127 onwards - is enough to enable the Tribunal to discern the real truth of their arrangement. The submission is developed that if the correct interpretation is placed by the Tribunal on this evidence then that will suffice to so comprehensively impugn the credibility of Mr Parker that the evidence of Mr and Mrs Crowther will be seen to be the more preferable. [49] The evidence relied upon by the owners in support of their contention is:  Primarily, of course, the testimonial and statement evidence of Mr and Mrs Crowther, as regards the oral agreement made on 20 November 2011, and their evidence regarding the further assurances allegedly given to them by Mr Parker when they signed the contract on 24 November 2011;  A submission8 that the applicant had sufficient motive to create the artifice of the sham contract, in order to appear not to be in breach of s 55 of the DBCA, that prohibits cost plus contracts; and  Various events since 17 May 2012 that are said to reveal the true nature of the sham. Specifically, these things are claimed to be: - When paid only $20,000 against the fixing stage invoice of $59,460 (17 May 2012), the applicant did not bother to pursue the owners for the balance owing under that invoice, despite already claiming to be owed $11,873.59 for variations 4 – 11 by that point in time; - The delivery of a gift basket by the builder to the owners on 24 June 2012 to mark the occasion of Mr and Mrs Crowther moving into their new home, despite the builder being owed, by that date, a much more substantial sum; - The builder being owed (on its own case) $100,803.54 by the date of delivery of the practical completion invoice (4 July 2012), yet there still being no evidence of any demand for payment emanating from the builder; 5 See: Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 347. 6 Respondent’s submissions, filed on 28 October 2013, at [21]. 7 The date of the fixing stage invoice. 8 That is, a bare submission, rather than evidence, per se. As the Applicant correctly submits in its reply submissions, these matters were never put to Mr Parker during his cross-examination. -- 14 of 25 -- 15 - The builder then refunding the sum of $15,000 on 5 September 2012 for negative variations (rather than deducting this from the balance claimed to be owing), and also promising that a further refund, of $4,902.45 would be made by no later than 14 September 2012; - Mr Parker telling Mr Crowther in a telephone call on 11 October 2012 that a payment of only $33,000 would see the builder “break even”. [50] At the end of it, the Respondent’s case theory is analogous to a house of cards. I am entirely unpersuaded by the evidence that the respondent submits might enable a finding that the written contract was a sham, and the agreement between the parties was, in reality, an oral one reached on 20th October 2011. Not by any stretch does the owners’ assembly9 of evidence enable that. Critical to a finding in favour of the Respondents must be a finding that Mr and Mrs Crowther are creditable witnesses and that Mr Parker’s evidence was untruthful. However I am not persuaded to draw that conclusion. Indeed, quite to the contrary, I do not accept the testimony or other evidence of Mr Crowther insofar as it is conflicts with that of Mr Parker. Having observed Mr Crowther’s demeanour during his testimony and the responses given by him under cross-examination, I conclude his evidence to be unreliable, and I do not accept his version of events. Nor do I accept the accuracy of any of the allegedly contemporaneous notes that have been made by Mr Crowther in an effort to self-corroborate. [51] I am left similarly unpersuaded by any of the evidence given by Mrs Crowther. Mrs Crowther was a generally poor historian, who had no useful recollection of any of the matters now under examination. Her primary statement of evidence is hardly illuminating, given that she does no more than adopt that of her husband. Her adoption of evidence that has already been assessed by as unreliable does not serve to make it any more compelling. [52] In contrast, Mr Nathan Parker gave better evidence and was, on the whole I think, a far more creditable witness as regards the competing factual claims. Mr Parker’s explanation for making the $15,000.00 refund is an acceptable one. His explanation was that he desired to keep a neat ledger, and in that regard he elected to quickly refund sums that he knew would need to be eventually credited to the home owners, notwithstanding that greater sums than those refunded were, by that stage, already owed to the builder. Given the family relationship, I do not regard this approach to bookkeeping as unusual. In respect of the lack of demand by Bullfrog Constructions for timely payment of amounts outstanding, Mr Parker’s evidence was equally plausible. He informed the Tribunal that, initially, he did not have any cash flow pressure, and thus felt little imperative to raise the outstanding payments with Mr and Mrs Crowther, and then later, when their non-payment had become more of an issue for the builder, the prospect of raising the issue was still complicated by the fact of that same 9 See paragraph [49]. -- 15 of 25 -- 16 close family connection. I accept the submission in reply by Counsel for the applicant: that the lack of demand for outstanding monies does not afford evidence of the sham contract alleged by the respondents, particularly in circumstances where other, more benign interpretations, are open on that same body of evidence. Here, the conclusion I am asked to draw by the respondents in relation to these pieces of evidence requires an enormous leap in logic - from benign to sinister – yet is one that cannot reasonably be made on this evidence. It follows that I am satisfied that the only agreement between the parties is that which is reflected in the written contract, that dated 24th November 2011. (ii) Is the written contract dated 24th November 2001 a sham agreement? Did the Builder misrepresent the nature of the contract, in order to induce the owners to sign it? [53] In consequence to (i) above, the contract dated 24th November 2011 is not a sham. Mr Rutter’s evidence, which I have indicated already that I accept, was that Mr and Mrs Crowther gave every indication of understanding the nature of that agreement, when they signed it. In my view there is just no acceptable evidence that the builder ever misrepresented the nature of the contract to the owners. (iii) Is the builder entitled to payment for variations pursuant to s 84(4) of the DBCA? [54] Given that there are variations that do not, on the builder’s own admission, comply with the requirements of Part 7 of the DBCA, the applicant’s right to recover an amount for any of those variations is a matter that is subject to s 84 of the DBCA, which provides: 84 Right of building contractor to recover amount for variation (1) This section applies if- (a) the building contractor under a regulated contract gives effect to a variation of the contract; and (b) the variation consists of – (i) an addition to the subject work; or (ii) an omission from the subject work that results in the building contractor incurring additional costs. (2) If the variation was originally sought by the building owner, the building contractor may recover an amount for the variation – (a) only if the building contractor has complied with sections 79, 80, 82 and 83; or (b) only with the tribunal’s approval given on an application made, as provided under the QCAT Act, to the tribunal by the building contractor. (3) If the variation is not a variation that was originally sought by the building owner, the building contractor may recover an amount for the variation – -- 16 of 25 -- 17 (a) only if – (i) the building contractor has complied with sections 79, 80, 82 and 83; and (ii) the ground of unforeseen circumstances applies; or (b) only with the tribunal’s approval given on an application made, as provided under the QVAT Act, to the tribunal by the building contractor. (4) The tribunal may approve the recovery of an amount by a building contractor for a variation only if the tribunal is satisfied that- (a) either of the following applies – (i) there are exceptional circumstances to warrant the conferring of an entitlement on the building contractor for recovery of an amount for the variation; (ii) the building contractor would suffer unreasonable hardship by the operation of subsection (2)(a) or 3(a); and (b) it would not be unfair to the building owner for the building contractor to recover an amount. (5) For subsection (3)(a)(ii), the ground of unforeseen circumstances applies if the variation became necessary because of circumstances that could not have been reasonably foreseen by the building contractor when the contract was entered into. (6) If the building contractor is entitled to recover an amount for the variation of a fixed price contract, the amount is – (a) the increase in the contract price stated, or worked out in the way stated, in the appropriate variation document for the variation; or (b) if paragraph (a) does not apply – the most of carrying out the variation plus a reasonable profit. (7) If the building contractor is entitled to recover an amount for the variation of a cost plus contract, the amount is the amount worked out in the way stated in the contract. [emphasis has been included here] [55] The applicant seeks to rely on the fact of an “exceptional circumstances” under s 84(4)(a)(i) of the DBCA, contending that one arises because of the family relationship between the applicant and the respondents that resulted in a level of trust, communication and cooperation between the parties that led to a departure from conformity with the strict requirements of Part 7 of the Act. The applicant also says that it would “not be unfair to the building owners” (per s 84(4)(b)), for the builder to recover an amount as: (i) the owners requested all the variations and knew that these were being undertaken; (ii) some of the variations provide for the owner to receive a credit on the contract price; -- 17 of 25 -- 18 (iii) the builder has expended money and/or has incurred a cost in completing the variations as requested; (iv) the owners knew (even on their own case), they were liable to pay the cost of the variations; and (v) in the premises of each of the above, the only reasonable expectation for the homeowners could be that the builder will be paid a reasonable amount for the variations. [56] The respondents submit that a family relationship between the builder and the owners is insufficient to justify departure from the requirements of Part 7 of the Act, and cite Allaro Homes Pty Ltd v O’Reilly & Anor10 as authority for that proposition. Yet, it would not appear to me that the question whether a family relationship might enliven s 84(4)(a)(i) of the DBCA was even considered by the Court of Appeal in that case. [57] In contrast, in Weier v Pugh11, the predecessor of this Tribunal, the Commercial and Consumer Tribunal held that a personal relationship between the builder and the home owner was a factor that could give rise to an exceptional circumstance within the meaning of s 84 of the Act. In that case it was said, in part: [64] “Another feature of this case is the personal friendship of the applicant and his wife with Mr Neville’s parents. This personal element had a clear bearing on the relationship between the applicant and the respondents. At all times the parties did not comply with the strict terms of the contract as there was this close family connection. The applicant maintained that he could have terminated the contract in May 2005 following the late payment of the progress claimed [sic], at a time when he was concerned about the ability of the respondents to pay for the works, but did not terminate the contract because of the personal relationship between himself and Mr Neville’s parents. Furthermore, the failure to comply with the requirements in Clause 20.1 [of the contract] was also influenced by this personal relationship…. …/ [66] Taking all these matters into account, I am satisfied that these circumstances are exceptional … “. [58] The applicant submits that in light of Weier v Pugh the fact that the Crowther’s’ are the aunt and uncle of Mr Parker’s wife – is sufficient to establish an exceptional circumstance within the meaning in s 84(4). Each case falls to be determined on its own unique circumstances. Yet, in light of what has happened here I do concur with that submission. Equally, I am satisfied that it would not now be unfair to the building owner for the building contractor to recover an amount for each of the claimed variations, particularly in circumstances where these variations have been requested by the owners, or they have otherwise received the benefit of them. 10 [2012] QCA 286. 11 [2008] CCT BD 486-06. -- 18 of 25 -- 19 [59] The question next pertains as to what amount the applicant builder should be allowed to recover for the variations12 [60] Before proceeding I pause to note that I accept Mr Parker’s evidence that written variation documents were left for the owners’ collection in the plastic sleeve affixed inside the site toilet. Having now also examined the invoices that underpin each of the positive variations I am satisfied that the builder should be entitled to payment of an amount for each unsigned variation. [61] The contract dated 24th November 2011 notes builder’s margin is payable on variations at the rate of 20%. Although that is a rate that is amply consistent with industry practice and is in the written agreement, I here allow only 10% for builder’s margin on variations, given that the right to recover any amount is now only in consequence of relief pursuant to s 84(4) of the DBCA. Accordingly, I allow the applicant the sum of $37,229.18 for the positive variations, in lieu of the claimed amount ($41,365.76). [62] Pursuant to the contract the amount to be paid by the owners is assessed by me pursuant to s 77(2) of the Queensland Building and Construction Commission Act 1991 (Qld) as follows: Amended contract price: $291,092.84 Additional negative variations conceded by the applicant: ($3,998.00) s 84(4) allowance for variations: $37,229.18 Sub-total: $324,324.02 Less payments already made under the contract (228,110) Sum outstanding $96,214.02 (iv) The Defective Building Works [63] There are a number of items of defective building works, yet also considerable disagreement in relation to the extent of any defects. The relationship between the builder and the owners ended acrimoniously, and that acrimony prevented even minor defects (of the type usually arising at the end of any construction project), being addressed by the builder, within the six-month post construction defect rectification period. [64] Now, the most objective framework within which to assess the defects is that provided by the QBSA report, prepared by Mr Geoffrey Barrett. However the applicant submits that Mr Barrett’s report must be approached with caution, because Mr Barrett had little regard for the terms of the contract (particularly any variations); did not inspect some important elements of the house (for example the dip in the roof); and in some 12 Variations 1, 2 & 3 conform to the requirements of the Act. Here the inquiry turns to variations 4 – 25, some of which are negative variations in favour of the owners. -- 19 of 25 -- 20 instances did not refer to the relevant Australian Building Standards, before pronouncing that an element was defective. I accept that submission, yet still regard Mr Barrett’s report as affording the best evidence available to the Tribunal on the issue of defects. [65] Having heard evidence from those witnesses called in the proceedings in relation to the defects, and in particular light of exhibit 5, only the following items from those listed in Mr Barrett’s report dated 2 September 2013 are now found by me to constitute defects requiring amelioration by an order of this Tribunal, pursuant to s 77(2): 2 The window has been positioned against the RHS of room, not centred, as per Council Approved Plan 3 Privacy latch does not disengage by handle from inside room 4 Wall between architrave and corner has not been painted 5 The striker plate required adjusting to stop door rattling 6 The strike plate required adjusting to stop door from rattling 7 Poor finish to paint near shower where waterproofing was not sanded 8 The exhaust fan vents straight to roof cavity. Not meeting Australian Building Codes 9 Gap between architrave and vanity requires sealing 10 panel - right side of vanity left unpainted and un-sanded 12 Rumpus Room – Manufacturing fault in cornice 13 Rumpus Room – Scratches in paint on sliding door, does not slide in cavity properly 17 Family Room – Large sliding door RHS has been installed out of level and as a result the bottom rail bows 7-10mm making the door hard to slide in certain positions 19 Family Room – There is poor finish to paintwork around the 4 top windows and above sliding doors 20 Family Room – There is poor finish to paintwork around the 4 top windows and above sliding doors 22 Family Room – Painting and sanding of skirting between the sliding doors has not been completed 23 Family Room – Cracks in wall between the room and kitchen require expansion joints to be fitted 24 Kitchen – Sanding and painting around range hood has not been completed 25 Kitchen – There is a crack in cornice where cabinetry meets wall above refrigerator 26 Kitchen – Ceiling requires sanding finish coat over nails are pronounced -- 20 of 25 -- 21 27 Bedroom 3 – There is a manufacturing fault in cornice 28 Bedroom 3 – There are cracks in architraves at corners of both windows 29 Bedroom 2 – There are cracks in architraves at corners of both windows 30 Southern Hallway – Dent in wall approximately 200mm from light switch 31 Southern Hallway – Crack in architrave top left side of sliding door 33 Broom closet – Poor finish on door (needs re-painting) 34 Broom closet – Door edge requires planning back has rough finish 35 Study – Crack in architrave and door jamb 37 Bedroom 1 – Poor finish on gloss paint RHS of door 39 Bedroom 1 – There is a crack in skirting north side of room 41 Ensuite – Exhaust fan vents straight to roof cavity. Not meeting Australian Building Codes. 43 Ensuite – Towel rail is loose 47 Garage – Deadbolt has been installed upside down 52 South Elevation – Roof over entry is easily moved and can be heard thumping in windy conditions 53 North Elevation – Wall northern side of fixed panel in sliding door is out of square 54 North Elevation – Joins in alfresco ceiling have been poorly finished. Gyprock joins visible as they have not been sanded properly. 55 North elevation – Flashing N/W corner is loose and requires resealing 61 Exterior west – Soffit is not level 65 Toilet roll holder is loose. [66] In addition to those matters drawn from Mr Barrett’s report, the owner’s have prepared an additional list of defects (matters not addressed by Mr Barrett), now appearing as ‘Schedule B’ to the owner’s final submissions, dated 28th October 2013. In relation to that supplementary list, it is my determination that the following items also constitute defective building works: 2 Outside Front – Gap in wall 3 Outside Entry Soffit out of level in entry doorway 8 Entry – Feature wall bowed/poor finish gyprock seam visible 16 Rumpus- 2 holes behind air-conditioner (still not fixed) -- 21 of 25 -- 22 17 Rumpus – Crack in skirting board near window/join visible 21 Kitchen – Crack in cornice where cabinetry meets pantry 24 Bed 1 – Back of feature wall gyprock seam visible (not painted properly). Allowance to repaint inside walls, architraves and skirtings, as there is too many areas to patch up. Will not be able to match paint. 25 Ensuite – Poor paint finish near shower (fibreglass not sanded) 27 Laundry door – Laundry door is binding on the sill 28 Garage – Fault in gyprock cornice 31 Garage – Door seals missing (not refitted) [67] How the rectifications are to be undertaken, and the likely cost of these works is another contentious issue. On the one hand the Applicant submits that the most appropriate order is for the Tribunal to order that the builder rectify these defects via its sub-contractors. The applicant notes that because it was precluded from the site when the relationship with the owners became acrimonious it was not afforded its contractual right to rectify minor works within the six-month period provided under the contract. Equally, the builder says that damages are not an appropriate remedy: because the quantum of the owners’ loss has not crystallised, because the defects have not yet been rectified. The builder says that in these circumstances it becomes more practical and cost effective to order that the builder rectify the defective works, particularly given that the sub- contractors who performed most of these works are contractually obligated to the builder to rectify, in all events. The applicant also makes the point that rectification performed by these same sub-contractors is likely to be the most expedient means for fixing the outstanding problems. [68] Meanwhile, the owners submit that the most appropriate order for rectification is to award a sum of money as damages to the owners (or to offset that amount against any sum owing by the owners to the applicants). The respondents submit that it is not appropriate to make an order under s 77(2)(g) of the Queensland Building and Construction Commission Act 1991 (Qld) because of: (a) The level of animosity between the parties; (b) The fact that the respondents do not wish to have any further involvement with the applicants; (c) The respondents objecting to the making of any order under s 77(2)(g); and (d) The risk that such an order is unlikely to achieve a final resolution of this dispute. [69] Determining whether to award damages or to order rectification is confounded by the enormous disparity in the competing evidence -- 22 of 25 -- 23 regarding the likely cost of rectification. In yachting parlance, there is “blue water” between the estimates provided by the owners, and those submitted by the applicant. [70] In the final analysis, I do not accept the estimates for the cost of rectification provided by Mr Morris of Goodwood Building and Carpentry,13 prepared on behalf the owners. These appear to be implausibly high. Much of the inaccuracy in those estimates appears to have arisen because Mr Morris has quoted on the basis of applying a call out fee to each rectification task – thus taking no account that the majority of these are very minor and several remediation tasks could easily be performed during one site visit by a competent tradesman. Equally, Mr Morris conceded during his cross-examination that some items could be rectified in far less time than he has estimated. The rectification estimates obtained by the owners from Alliance Builders14 also seem implausibly high, such that I reject them, as well.15 [71] The Applicant relies on evidence from its own sub-contractors, Messrs Ahern, Levers and Rasmussen, to formulate the applicant’s far lower estimated costs for rectification and submits that the most appropriate order as regards any defects found by the Tribunal is one pursuant to s 77(2)(g) of the Queensland Building and Construction Commission Act 1991 (Qld), requiring the applicant to return to site and rectify the defects. [72] The owners submit that the evidence from Messrs Ahern, Levers and Rasmussen should be rejected because of their business relationship with the applicant, and submit that, in the event that the Tribunal is dissatisfied with the quality of the evidence on the costs of rectification presently available to the Tribunal (and I am dissatisfied) then the matter should be set down for another hearing, in order for the Tribunal to determine the costs of rectification. In my view, far too much shot and powder has been expended, already. For the sake of finality and the avoidance of further legal costs, I will not be ordering another hearing. [73] Ultimately, it is my determination that the most appropriate order is one pursuant to s 77(2)(g) of the Queensland Building and Construction Commission Act 1991 (Qld). I do not accept the submission regarding the applicant’s sub-contractors lacking impartiality. Even if these gentleman have worked for Bullfrog Constructions before (or will do so again in the future), this affords no useful basis for any complaint about their estimates of the costs of rectification, particularly when the owners’ primary interest is best served by having these defects rectified, at no cost to them. If these gentlemen can achieve rectification at that price, then all the better. 13 Exhibit RC-20 to the supplementary statement of Mr Crowther dated 13 September 2013. 14 Exhibit RC-21 to Mr Crowther’s supplementary statement. 15 The owners’ final submissions concede difficulties with Mr Morris’ approach to estimation, at [159], yet my assessment is that even a 50% reduction, as proposed by the Respondent results in an estimated cost for rectification that remains too high. -- 23 of 25 -- 24 [74] The applicant will be required to arrange for rectification of the defects specified in paragraphs [65] and [66] of these reasons in a proper and tradesman-like manner, at its own expense. Given prior acrimony between Mr Crowther and Mr Parker, it is a term of the Tribunal’s order that Mr Parker not be permitted to attend the Ney Road property personally and all rectification works are to be performed by sub- contractors, arranged by the applicant. Any necessary liaison between the applicant and the owners is to be communicated by e-mail between the applicant and the owner’s solicitor, or other nominee. Rectification works are to be completed within 4 months of the date of these reasons, or any longer period, as may come to be agreed by the parties. Any dispute that arises regarding the standard of workmanship in any of the rectification works required by these orders is to be determined by an inspector appointed by the Queensland Building and Construction Commission, whose assessment is to be determinative of the issue. If such an inspection becomes necessary, then the costs of it are to be borne equally by the parties. [75] The Applicant seeks interest on the outstanding sums ordered by the Tribunal, assessed at 15%. The Respondents are ordered to pay interest at that rate on the judgement sum of $96,214.02 from 14 July 2012 until 9 May 2014 (665 days). [76] In conclusion, I order: (a) The respondents are to pay the applicant the sum of $96,214.02, together with interest in the amount of $26,294.10 within 28 days of the date of these orders; (b) The applicant is to arrange rectification of the defective building works specified in paragraphs [65] and [66] of these reasons, within 4 months of the date of these orders (“rectification works”); (c) The rectification works are to be at the expense of the applicant, and are to be performed by sub-contractors arranged by the applicant; (d) Mr Nathan Parker is not permitted to attend 259-265 Ney Road at Capalaba during the rectification of the defective works; (e) All necessary communication between the applicant and the respondent regarding the rectification of the defective works is to be in writing, exchanged by e-mail between the applicant and the respondent’s solicitor, or other nominee; (f) Any dispute regarding the standard of any rectification works is to be determined by a building inspector appointed by the Queensland Building and Construction Commission, whose view on the issue in contention is to be determinative. The costs of any such inspection are to be born equally by the applicant and the respondent. (g) The applicant is to provide to the respondents any outstanding construction certificates or other contract documentation within 28 days of the date of these orders. -- 24 of 25 -- 25 (h) The parties are given leave to make written submissions within 14 days on the question of the appropriate orders regarding the costs of these proceedings, and that matter will be determined by the Tribunal on the papers. -- 25 of 25 --