Ashworth Investments (Qld) Pty Ltd v Karloo Constructions Pty Ltd [2010] QCAT 177

CITATION: PARTIES: Ashworth Investments (Qld) Pty Ltd v Karloo Constructions Pty Ltd [2010] QCAT 177 Ashworth Investments (Qld) Pty Ltd v Karloo Constructions Pty Ltd APPLICATION NUMBER: BN069-09 MATTER TYPE: Building matters HEARING DATE: 11 March 2010 HEARD AT: BRISBANE DECISION OF: R Oliver DELIVERED ON: 12 May 2010 DELIVERED AT: BRISBANE ORDERS MADE: The Respondent pay to the Applicant the sum of $33,047.00 CATCHWORDS : Defective building work; failure by respondent builder to attend to rectification; assessment of damages APPEARANCES and REPRESENTATION (if any): APPLICANT : Ashworth Investments Pty Ltd represented by Mr Wessling –Smith of Counsel, instructed by Shultz Toomey O’Brien Lawyers for the Applicant RESPONDENT: Karloo Constructions Pty Ltd represented by Mr Topp of Counsel instructed by Greenhalgh Pickford Solicitors -- 1 of 7 -- BN069-09 / Page 2 of 7 REASONS FOR DECISION Introduction 1. In late 2003 the applicant purchased Lot 42 Kawana Junction Industrial Pard at Kawana on the Sunshine Coast. The reason for the purchase of this parcel of land was to construct an industrial style building and then to lease out the building. 2. Between November 2003 and March 2005 the applicant sought tenders for the construction of the building and on 7 March 2005 a contract was entered into between the applicant and the respondent for the construction of the building. 3. After some delays the building was completed in September 2005. Subsequent to its completion, it was discovered that rainwater was entering the building predominately through the glazing in the front of the building. 4. Complaints were made to the respondent and various attempts were made to rectify the problem, however, the water penetration problems remained unresolved and the applicant then commenced proceedings in the Commercial and Consumer Tribunal claiming damages to rectify the defective building work to prevent water penetration. Background 5. After the water penetration was noticed in September 2005 the applicant immediately contacted Mr Ian Hartland of the respondent. Mr Hartland tried on many occasions to rectify the problems and this included engaging tradesman to apply silicon and sika-flex around the window frames to try and seal the areas where water was coming into the building. 6. Mr Hartland, with his employees and subcontractors returned to the building on many occasions in a fifteen (15) month period but, despite their efforts, water continued to penetrate the building. 7. Other attempts were made to rectify the problem by removing aluminium framework and drilling holes to assist in the drainage of water from the window frames. 8. The applicant’s representative Mr Phillip Ashworth particularises further attempts to rectify the water penetration in his statement of evidence and these include removal and replacing of FC sheeting, removing and replacing flashing as well as the fixing of sealants.1 9. As these problems continued, the applicant then became proactive and asked the respondent to provide a detailed report as to how the water penetration was going to be remedied. There was also a request as to whether or not warranties, provided by the supplier would continue and for what period. In response to this request, Sunstate Glass, is the supplier and installed the windows confirmed that the warranty period for the project was to be five (5) years from installation. 1 Paragraphs 32-35 in statement of Phillip Ashworth. -- 2 of 7 -- BN069-09 / Page 3 of 7 10. On 5 January 2004 Sunstate Glass provided a report subsequent to an inspection at the building wherein they confirmed that they inspected all windows on the ground level and the first floor level. They went on to say:- “The windows were washed down with the fire hose almost all windows leaked with this high volume of water. There were typical problems with most of the windows that contributed to the water leaks 1: No drain holes in sill beads. Allows water to pool and collect under the bead rather drain to the external face of the window. 2: Sub head & main frame head junction not sealed. This allows water from the hose to be forced into the back of the main frame head which again becomes trapped and drains out where ever it can. 3: Inadequate silicone seal between internal trim angles and main frame jambs. 4: FC sheet eves board that lies on top of the window frames does not appear to have been sealed to head of the windows. This allows water to be forced over the top of the sub head section leaks over the top of the window. 5: Sub sill drain holes do not cope the volume of water from the fire hose. This allows water in sub sill to pool up and leak inside at floor level. We will carry out the following remedial work to improve the current situation. 1: Remove sill beads; seal transom section to jamb join drill drain holes in bead replace glazing gaskets 2: Seal all sub-head to main frame junctions 3: Seal all internal trim angle – frame jamb junctions 4: Seal FC sheet eaves board to sub-head junctions. 5: Drill additional drain holes in sub-sills of narrow windows facing street, which only have one drainage slot. This remedial work can be started immediately and completed by January 31.”2 11. Before the applicant was prepared to embark on this rectification method as suggested by Sunstate Glass, it was decided at a meeting held in February 2008 between Mr Ashworth, Mr Hartland and Bruce Hitchins of Sunstate Glass that they would trial the method by removing and refitting a selected window and window frame. 12. In early June 2008 a window was removed as well as the frame, refitted and then tested and despite undertaking this work twice, the window still leaked. 2 Statement of Phillip Ashworth – Exhibit “PA 17” -- 3 of 7 -- BN069-09 / Page 4 of 7 13. A further attempt was made by removing the window frame, reusing the glass but replacing the frame with the new frame and again, the test failed and the window continued to leak. 14. Thereafter, Sunstate’s involvement in attempting to remedy the problem ceased and the respondent put forward a quote from AQF Windows and Doors to refit and reseal the windows on the top floor for $4,500.00. 15. The applicant expressed its dissatisfaction at this new proposal because, in particular, it was envisaged that twenty-three (23) windows on the top floor level could be replaced over a five (5) day period whereas with the experiment undertaken by Sunstate Glass to remove and replace one (1) window took two (2) days. There was also query as to why the quote only made reference to the top floor when it was clear that the bottom floor windows leaked as well. 16. The applicant rejected the quotation provided by the respondent on the following basis:- “We rejected the quotation as we did not think contractor (sic) would be able to address the problem. We were also of the opinion that the contractor could possibly compound the problem further, given the limited work he was going to undertake. The window that was removed and replaced was one (1) window only which was situated in a position that was somewhat hidden. That window to date is still not fixed, the trim around the window is not completed and the paint work is also damaged. The look of that window is unprofessional and undesirable. We thought that it was a possibility the whole front of the building could look like the window that was attempted to be repaired, unsuccessfully.” 17. The applicant wrote to the respondent expressing their concerns subsequent to the response of the respondent’s proposal, further negotiations between the parties ensured, which are referred to in the applicant’s affidavit with a further quote from AQF Windows and Doors in a similar vain to that already supplied. 18. Again the applicants expressed their dissatisfaction and in a subsequent telephone call it was proposed by the applicant that further specification of the method of rectification was required. The proposal put forward by Philip Ashworth was accepted by Mr Hartland of the respondent.3 Subsequent to this exchange, the applicant contacted the BCA Group to obtain a specialist building inspection report detailing the work that would be required to rectify the water penetration problem. That report was prepared by Mr Wayne Dyer a building consultant, and identifies areas of water penetration, and damage as a consequence thereof. The report also identifies the causes of the water penetration and provides specification as to how the rectification work would be carried out. 19. That report was provided to the respondent and on 9 June 2009. The respondent provided a further “specification” as to how the problem could be 3 Affidavit of Phillip Ashworth exhibit “PA 31” -- 4 of 7 -- BN069-09 / Page 5 of 7 fixed4. In response to that scope of work the applicant expressed dissatisfaction at the lack of detail and required further clarification before the work progressed. This was set out in an email to the respondent on 11 June 2009. 20. Negotiations at that point stopped and the applicant then received a letter of demand for retention monies held by the applicant. These retention monies are not in dispute and relate to the building contract and are in the sum of $24,725.005. 21. Mr Hartland, a director of the respondent has filed a statement which sets out a history of the construction and accepts that the applicant did raise issues with respect to water penetration to the top floor. Mr Hartland does not go in to any detail to challenge the chronology of events as asserted by Mr Ashworth safe to say that the water penetration, he asserts, is confined to the top floor windows with water running down to the bottom windows. He contends that he did provide the quotation referred to from AQF Windows and Doors whereby the cost of rectification ought be limited to $4,500.00. 22. In paragraphs 21 – 28 of his statement he contends on behalf of the respondent that it will honour the guarantee with respect to the windows and installed by Sunstate Glass but confines any liability for rectification to the cost of $4,500.00 and reiterates his contention that it only relates to the top floor. Cost of rectification 23. To quantify the cost of rectification, the applicant provided the BCA specification to Simon Mountford a director of James Trowse Constructions Pty Ltd (“James Trowuse”). James Trowse was asked to provide a costing in accordance with the specification, by way of tender for the rectification work. BCA Group provided a “quote sheet” which set out the detailed costings required and are an annexure “A” to Mr Mountford’s statement. The total cost of rectification was $67,971.20. 24. Mr Topp, Counsel for the respondent, objected to the receipt of this evidence in the hearing on the basis the quote provided by James Trowse did not particularise, in any meaningful way, a costing of the work required. However, the quote must be read in conjunction with the documents given to James Trowse that is, the specification for remedial building works prepared by the BCA Group. 6 On the basis of that specification, a break down in prices was given in accordance with the request of the BCA on their quote sheet. 25. The Tribunal ruled that the evidence was admissible because it was based on the BCA report. Neither Mr Mountford, nor Mr Traowses were required for cross examination. 26. The respondent’s position remains that the reasonable cost of rectification is $4,500.00. 4 Affidavit of Phillip Ashworth exhibit “PA 35” 5 Statement of Ian Hartlind exhibit “IDH 5” 6 Exhibit A to the affidavit of Wayne Dyer -- 5 of 7 -- BN069-09 / Page 6 of 7 Submissions 27. Both parties have filed written submissions and spoke to those submissions at the conclusion of the hearing. 28. The respondent relies on the fact that the applicant did not notify the respondent of the defect, being water penetration, under the “defects liability period of the contract”. In addition the respondent relies on clause 26(2) of the contract which provides that payment of the final claim is ”conclusive evidence of releasing discharge of (the respondent’s) obligation in connection with, or rising out of, the contract.7 29. However, these submissions although well articulated, do not address the clear acceptance by the respondent that there is a defect with respect to the windows, at least to the first floor for which the respondent is prepared to either rectify, or pay a third party to rectify. 30. As is pointed out by the applicant, and a statement with which I agree that: “The defects liability clause does not relieve the respondent from breaches identified after the defects liability period but merely impose as a obligation to rectify if notified within that period. The respondent will still be liable for damages for breach of contract8”. 31. The above statement is consistent with a common law in that, a builder is liable for defective work for many years after the completion of that work. Clearly once there is an acceptance by the builder, respondent, that the work is defective and clearly here there is, then the respondent remains liable for the rectification of the defective building work by carrying it out himself or the cost of carrying out the defective work by a third party provided, it is within reason. 32. The respondent submits that it is entitled to a payment of the retention sum together with interest and clearly, that is correct however if the cost of rectification, by way of assessment of damages, exceeds the amount of retention then the retention monies can be offset against that assessment of damages. Again in my view, this is not contentious and seems to be conceded by the parties. Assessment of damages 33. In my opinion, the applicant has given the respondent ample opportunity to formulate a proper and practical means of attending to the rectification of the leaking windows. 34. I reject the proposition that the rectification work relates only to the top floor windows because very early in the discussions, Mr Hartland conceded by virtue of the letter of Sunstate Glass that all windows when washed down with the fire hose “almost all leaked with this high volume of water.” If there is any doubt about this contention, I accept the evidence of Mr Ashworth that the windows on the lower floor leak. Mr Hartland did not concede in cross examination that the downstairs windows leaked but did say that a 7 Respondent’s written submissions paragraph 10 8 Bourke v Sana Painting (2004) CCT N557-03 -- 6 of 7 -- BN069-09 / Page 7 of 7 determination of what windows did leak was a “process of elimination”. He said that he last saw water coming down from the upstairs. 35. It is interesting to note that throughout all of the correspondence passing between the applicant and the respondent there was never any positive assertion by the respondent that there were no defects with respect to the downstairs window. 36. The BCA Group report and specification also supports the notion that the downstairs windows leak as well and given that there was no serious challenge to this report, the Tribunal has no alternative but to accept it. The work necessary to rectify the leaking problem is extensive and again, no serious challenge has been made to this scope of works. The only evidence of the cost of rectification in accordance with the BCA Group, is that of James Trowse and again this evidence was not directly challenged. 37. In the circumstances the Tribunal has little choice but to accept the evidence of James Trowse being the cost of rectification in the sum of $67,971.20. 38. The balance of the retention monies was due and payable by 2 March 2006 and has been retained by the applicant since that time. The respondent claims not only the return of the retention money, but also interest on that sum pursuant to clause 14(e) of the contract which is 2.5% over the six (6) month retention period, and default interest of 10%. The interest rate of 10% is consistent with regulation 34B of the Queensland Building Services Authority Regulations. 39. Therefore, the interest on $24,725 for six (6) months at 2.5% is $309. For the balance period from 2 March 2006 to the present at a rate of 10%, interest is calculated at $9,890.00 resulting in a total interest accumulation of $10,199.00. 40. Of the assessed damages in the sum of $67,971.20 less the retention monies and interest, results in a damages award to the applicant in the sum of $33,047.00 41. Therefore the Tribunal will direct that the respondent pay the applicant the sum of $33,047.00 -- 7 of 7 --