Area Square Pty Ltd v Hill-Douglas & Anor [2010] QCAT 8

1 CITATION: Area Square Pty Ltd v Hill-Douglas & Anor [2010] QCAT 8 PARTIES: Area Square Pty Ltd v Sholto Hill-Douglas and Louise Hill- Douglas APPLICATION NUMBER: BD017-08 MATTER TYPE: Building Matter HEARING DATE: 10 and 11 December 2009 HEARD AT: Brisbane DECISION OF: Richard Oliver, Senior Member DELIVERED ON: 20 January 2010 DELIVERED AT: Brisbane ORDERS MADE: The Applicant pay to the Respondents the sum of $5,944.31 by 4 pm on 26 February 2010. CATCHWORDS: Contractual building dispute, claim for money due pursuant to signed variations, where variations signed under duress; counterclaim for damages for rectification to leaking swimming pool. APPEARANCES and REPRESENTATION (if any): Mr Thomson of counsel for the applicant Ms Hatten, solicitor, for the respondents. -- 1 of 12 -- Introduction 1. The applicant is a registered builder. Its directors are Matthew Campbell and Michelle Gunn. The respondents are the owners of land at 9 Herbert St Toowong. 2. In the early part of 2006 the Applicant, through Mr Campbell, and the respondents commenced negotiations with a view of entering into a contract for the construction of house on the land in accordance with plans prepared by Brenton Rasheed, Architect. An initial quote for the construction was provided in February 2006 with a further quote provided in May 2006. On 11 May 2009 the parties entered into a building contract1 to construct the house generally in accordance with the plans provided. The contract price was $629,000.00 inclusive of GST. A deposit was paid of $31,450.00. 3. All that remained for the project to proceed was a Development Approval (“DA”) from the Brisbane City Council (Council”). This was the responsibility of the respondents. Problems arose with the DA, essentially the Council maintained that the project was Character Code Assessable because of the area in Toowong in which the land was located. To accommodate the Council and obtain the DA the respondents had to change the plans. 4. Finally a DA was issued by the Council on 30 August 2006.the applicant was prevented from commencing work until the approval issued. This according to Mr Campbell put the applicant in a very difficult situation. Quite obviously given the size of the project, he could not take on other work whilst waiting for the approval but at the same time, had to keep his sub trades in work if possible. 5. As the approval had not issued within the time prescribed by the contract Mr Campbell informed the respondents that it was his intention to cancel the contract to enable the applicant to take on other work. He indicated to Mr Hill- Douglas that he would be happy to consider the job again when the approval came through, which impliedly necessitated preparing a further quote, and presumably if accepted, entering into new contract. 6. These matters are deposed to in the statement of Mr Campbell2. Mr Hill- Douglas does not challenge this evidence in any direct or meaningful way other than to say that he disagrees, and that no such conversations occurred. 7. Mr Campbell goes further and says that the respondents were anxious to keep the contract on foot and offered to reimburse the applicant for any loss incurred as a consequence of the delay. There was discussion, according to Mr Campbell, about an increase in the contract price of some 6%-7%. Also access to the building site was becoming an increasing concern due to construction 1 Ex 3 “MC1” 2 Exhibit 3 para 21-22 2 -- 2 of 12 -- starting on the block of land in front of the respondents land. Access to the respondent’s land is by an access easement up the right hand side of the block in front. Again the respondents disagree with this evidence about access. 8. As a consequence of the delay and these discussions the applicant agreed to continue with the contract and produced a variation which, was to reflect the applicant’s agreement not to terminate the contract, the increase cost of construction, and associated difficulties with access. 9. Variation 2 dated 7 September 2006 is in the following terms: “ Alteration to plans as per DA requirements. Increase cost due to time delay with DA.” 10. The variation notes that the extra amount payable is $40,689.00 inclusive of GST and was payable at the frame stage. The document was signed by the respondents without demur, and work commenced soon thereafter. The Dispute 11. On 30 October 2007 the applicant issued Invoice 46 for $44,575.33 which was the final invoice for practical completion3. This invoice was not paid and as a consequence an application was filed in the Commercial and Consumer Tribunal. A defence and counterclaim followed, and subsequently the pleadings have attracted various amendments where the amounts claimed in both the claim and counterclaim have escalated. 12. The application was set for hearing to commence on 7 December 2009 but due to a late change of solicitors at the last minute an adjournment of the application was sought by the applicant. Rather than adjourn the hearing, the parties agreed to attempt to resolve their issues and a compulsory conference was convened on the first day of the hearing. 13. Many of the matters in dispute were resolved at the compulsory conference however a small number still required determination at a hearing. 14. By an Order made by the Tribunal on 8 December 2009 the following issues were identified: (a) The applicant’s claim for $10,459.00 being the cost of the driveway as pleaded in paragraph 16 to 22 of the amended statement of claim dated 28 January 2009; (b) The applicants rendering claim for pleaded in paragraphs 23 to 25 of the amended statement of claim for between $8,071.00 and $9,353.00; 3 Exhibit 3 “MC 15” 3 -- 3 of 12 -- (c) The respondent’s claim for rectification of the “cornices” (decorative brick band) or diminution of the value of the building as claimed in paragraph 5(a) of the amended counterclaim; (d) The respondent’s claim for rectification of the swimming pool as pleaded in paragraph 5(u) of the amended counterclaim; (e) The respondent’s claim for the cost of rectification of the air conditioning system as pleaded in paragraph 5(t) of the amended counterclaim; (f) The respondent’s claim for reimbursement of $40,689.00 paid pursuant to variation 2. The Driveway Claim 15. The Master Builders Contract was signed by the parties after lengthy negotiations between the parties, and after two formal quotes were provided by the applicant. In both quotes4 a driveway to the residence was included and in particular under the heading “External Works” provision is made for “Driveway and titled pathway”. No specific sum is allocated for this work. 16. The building contract however, specifically excludes the driveway by reference to the Appendix Part E. So, it is immediately apparent that there is an inconsistency between the contract and the quotes referred to above. 17. Mr Campbell does not address this inconsistency in his statement of evidence. Mr Hill-Douglas’ evidence is also silent on whether the driveway was included in the contract price although the submissions made by the respondents at the conclusion of the hearing clearly support a contention that it was to be included in the contract price and reliance is placed on, and reference is made to the quotations. Further support for this contention is found, according to the submission, in the cross examination of Mr Campbell where he concedes that the contract price was not reduced to reflex the exclusion of the driveway from the quote. 18. One then comes to Variations 5 and 6. 19. Variation 5 is for the construction of the rear and side retaining walls for a cost of $10,010.00 which, according to the applicant was not included in the contract price. There is however dispute about this issue. The respondents point to the contract and the engineering drawings to contend that as the applicant put in the footing for the retaining wall as part of the contract works and it was the applicant’s responsibility to construct it. Although the variation was signed Mr Hill-Douglas, he says he did so under duress because unless the variation was signed the applicant would not proceed with the construction of the wall. He asserts, with some justification, that the retaining wall was an integral part of the overall house design and included in the plans5. 4 Ex 29 “SHD 1” and “SHD 2” 5 In particular refer to paragraph 144 of Ex 29. 4 -- 4 of 12 -- 20. As a consequence of this position taken, the respondents have refused to pay the cost of this variation. This takes on a significance when one then moves to consider Variation 6. It further addresses the issue of the retaining wall and provides: “1. Variation 5 is to be paid from unspent tile supply PC allowance. 2. Concrete driveway as per plan to be constructed.” 21. No cost is attributed to this variation. Despite signing this variation the respondents continued to refuse the pay for the retaining wall with the credit allowed for the tiling. In addition there was an expectation on their part that the driveway would be constructed by the applicant. 22. Mr Campbell explains the basis for the generation of Variation 6 as follows: “On 22 May 2007, when only the footings had been done, an email was sent the Respondents. It said that as they did not want to pay for the variation we would not proceed with the works and accordingly not charge them for the works done so far on the footings. The Respondents maintained that they wanted the retaining walls built, although without any payment forthcoming we did not proceed. On 22 August 2007, the Respondents signed Variation 6, which was a compromise whereby we agreed as a courtesy to provide a driveway if the Respondents agreed that Variation 5 could be paid from unspent tile Supply PC allowance. There was an amount that was due to be rebated to the client and this rebate was made on Invoice 46” 23. As I have indicated, although the respondents dispute that the retaining walls were included in the contract, they really don’t address the assertions made by the applicant referred to above about the coming into existence of Variation 6. If there was any duress or coercion in respect of Variation 5 on 20 march 2006, one can only wonder why the respondents signed Variation 6 unless there was a discussion along the lines contended for by the applicant. 24. As matters transpired the respondents have refused to allow the applicant the benefit of the tile allowance but on the strength of the promise made the applicant has installed the driveway. It also seems to me that as the parties saw fit to include the driveway as a variation in the circumstances of the events around the retaining wall, there must have been an acceptance by the respondents that it was not included in the original contract. 25. In the end I accept the submissions of the applicant, that it is entitled to some recompense for the driveway. The respondent submits that this was taken up in invoice 46 but this does not seem right because this invoice makes no reference to Variation 6 or 7. Therefore as the applicant has not be paid for either the retaining wall or the driveway and the respondents have the benefit of the tile credit, to properly give effect to Variation 5 and 6 the applicant is entitled to an amount of at least $10,010.00 to reflect the agreement reached. 5 -- 5 of 12 -- 26. However the parties have proceeded on the basis that if any allowance is to be made for the driveway it is either $13,671.00 if Mr Haskard’s evidence is accepted or $10,459.00 if Mr Breakwell is accepted. 27. It is very difficult to discern whose costings in this situation, is more accurate. Mr Haskard worked off the plans whereas Mr Breakwell inspected and measured the driveway. I take the view that if an allowance of $12,000.00 was made this would sit comfortably with both estimates. Rendering 28. There was a change to the external finish of the brickwork by agreement between the parties. The applicant submits as follows: “Mr Campbell says at paragraph 146 of Exhibit 3 that whilst a saving was made by not light bagging, it added to the painting costs, and the fine rendering added significant cost also. Mr Campbell then says that “however, in aid of maintaining harmony between the parties, this extra cost was absorbed by the applicant”. That is, Mr Campbell concedes that no claim was made for this variation” 29. Although I accept that this did add additional cost it is difficult to estimate the actual cost to the applicant because of it being taken up in the general works. By this I mean, for example, the painting would have been included in the overall painting works. The experts say that the cost was between $8,000.00 and $9,353.00. 6 30. The difficulty the applicant has with this claim is threefold. Firstly, it is not included in Invoice 46 and therefore there was no agreement about cost. Secondly, Mr Campbell concedes he did not expect to be paid for this work, not did he claim for it and thirdly, there is no signed variation contrary to the provisions section 84 of the Domestic Building Contracts Act. I am of the opinion that this claim does not fall within the exceptions and therefore it will be disallowed. Variation 2 31. The uncontested facts are that after the contract was signed the commencement of the works were delayed due to problems with obtaining the development approval. I am inclined to accept the evidence of Mr Campbell about the discussions between himself and the respondents which gave rise to the agreement reflected in variation 2. It is difficult to accept that there were no discussions at all about the delay as suggested by Mr Hill-Douglas. 32. Further Mr Hill-Douglas does not, in his evidence, contend that there was any protest or dispute about the extra cost claimed by the applicant firstly, 6 Mr Haskard (Ex 7 )= $9,353 and Mr Brakewell (Ex 26) = $8,071 6 -- 6 of 12 -- as a consequence of the delay, and secondly to keep the contract, which I accept was voidable at the option of the applicant, on foot. 33. It was only after the parties fell into dispute about the final payment did the respondents then contend that the payment of variation 2 was unjustified and claimed a refund. 34. The respondents now contend that the applicant has not, by reference to the items particularized in Mr Campbell’s supplementary statement,7 been able to justify the increase in cost of the project by reason of the delay and the conditions to the development approval. It is submitted that: ‘With the exception of the claim for access (which claim is baseless), this particularization does not include items that result from any delay and is based on recollection, estimates and is not sufficiently substantiated. As a result of the Applicant’s representation, the Respondents have suffered detriment as they paid the Applicant for the variation in circumstances where the amount was not payable.” 35. This submission, however, ignores that findings of fact made above with respect to the discussions had between the Mr Campbell and Mr Hill-Douglas and the specific agreement reached to ensure that the applicant continued with the project. I accept that the matters taken into account when arriving at the figure were, in the submission of the applicant, “little more than estimates.” I also accept the applicants submission that: “What does matter is that there were things of substance which Mr Campbell had in mind, being the applicant’s right of termination, and the potential costs to which he adverts in Exhibit 5; these were the things which he was prepared to bargain away by means of variation 2. The practical benefit to the respondents was in having the Applicant proceed with the works. That the parties used a “variation” document to record this agreement makes no difference. This was probably the most practical and sensible way of dealing with the situation. An alternative would have been to enter into a completely new contract, which might have involved revisiting issues of QBSA insurance, approvals and so on.” 36. The variation was agreed to in an arms length transaction between the parties and there is now no reason to revisit the bargain which the parties made in relation to Variation 2.8 Air Conditioning 37. Complaints have been made by the respondents about the efficiency of the ducted air conditioning system installed by the applicant through the subcontractor John Kilpatrick from Quality Air. He has provided two 7 Exhibit 5, paragraph 28 8 Applicants final submissions para 68 7 -- 7 of 12 -- statements9 and was available to give evidence at the hearing. He is a man of considerable experience in air conditioning and also a qualified electrician. His knowledge and experience is impressive and I have no difficulty in accepting his evidence about, not only the quality of the system installed, but also its adequacy to deliver the performance required of it in this multi storied building. 38. The respondents relied on the evidence of Mr Warren Brown of Climatrol Air Conditioning. He has been in the air conditioning business for some 20 years subsequent to spending about 7 years with Carrier Air Conditioning as a Senior Manager and Project Manager. Although this indicates significant experience his report does not necessarily address any inadequacies in the system installed by Mr Kilpatrick but goes more to the lack of consultation with the owners and the fact that system “had not been correctly designed and installed to meet the Owner’s needs”.10 39. To overcome these problems he makes certain recommendations about the repositioning registrars (the vents that disperse the air into the room) and installing dampers. In reliance on the report of Gray Robinson & Cottrell the cost to rectify the air conditioning is $5,856.40. 40. The question for determination is whether in fact rectification of the air conditioning is necessary. Mr Kilpatrick, in his most recent report, confirms he attended the house on 21 October 2009 and checked the system. He found it was “unbalanced” and made adjustments. He took photos of the dampers, which allegedly were not installed according to Mr Brown. This seemed to have satisfied Mrs Hill-Douglas. He also provided an explanation of why the registrars were positioned where they were. I am satisfied with his explanation as to his rationale of how the system was installed and conclude that no further rectification is necessary. 41. I am further supported in this conclusion by reason of the email from Mr Brown to Mr Fritz that “the Actron air-conditioning equipment appears to be installed correctly, and is operating to manufacturer’s specification”. Swimming Pool 42. The swimming pool leaks. It seems on all of the evidence that this leak is coming from around the tile line, so much is conceded by the applicant. There is also consensus of the experts but they differ as to the exact location of the leak and its cause. 43. In the joint expert report11 both Mr Fritz and Mr Dyer make the following observations: Mr Fritz: “relies on his Report in that he believes the water leak is at the concrete and masonry wall joint” 9 Exhibits 10 and 11 p10 Exhibit 24 paragra h 5 11 Exhibit 18 item 4.1 8 -- 8 of 12 -- Mr Dyer: “relies on his report in that the water leak occurs once the water is raised above the pebblecrete, which is approx 200mm below the underside of slab and masonry wall joint a total of 400mm below the coping tiles, and maintains the leak is a result of no waterproofing membrane applied prior to tiling.” 44. Mr Fritz’s comment require some amplification. He is suggesting that the blockwork for the pool walls should have been laid to the top of the pool with the concrete slab abutting the block wall. The concrete and the coping should all have been poured at the same time to avoid a cold joint. It is this joint that is the problem and the only remedy now is to line the pool with a synthetic liner. He says that the inside face of the block work allows water to escape. The way the concrete was poured allows for movement between the two intersecting surfaces. 45. His explanation by reference to the engineering drawings12is plausible and establishes a reasonable explanation for the leak particularly when one has regard to the evidence of Mr Adam Metcalfe. 46. Mr Metcalfe was the tiler who was contracted by the applicant to lay the tile line at the top inside face of the pool of the pool as depicted in the photographs attached to Mr Fritz’s statement. Essentially what he is says is that he received a call from Mr Campbell to ask whether he would be interested in doing the tiling work. He agreed to do it after some assurance about payment which in fact was to come directly from Mr Hill-Douglas. 47. He attended the site on a Saturday to inspect the work but had to prepare the surface of the wall for the tiles because of residual concrete from the pour. He ground the surface back so there was a smooth finish and made it ready for the skim coat which was applied by the applicant. There is contention about whether a skim coat was applied to the area to be tiled but Mr Metcalfe was adamant that he was not able to apply the tiles directly to the concrete block surface substrate or the slab edge. There had to be a skim coat applied before he could fix the tiles. I accept his evidence on this point. 48. Photographs have been produced13 of Mr Metcalfe in the pool shell doing the grinding of the surface. I can say I was impressed with Mr Metcalfe’s evidence and the manner in which it was given. I accept that the surface was skim coated before he applied the tiles. 49. It is accepted by Mr Campbell, and the experts for that matter, that the skim coat does provide a waterproof membrane. Once this is accepted then there can be no complaint that Mr Metcalfe failed to ensure there was a membrane in place before he fixed the tiles. Therefore, the cause of the leak could not be as suggested by Mr Dyer and as I said this gives credence to the conclusions arrived at by Mr Fritz. 12 Exhibit 29 “SHD40” drawing Q05-392-04 13 Exhibit 19 9 -- 9 of 12 -- 50. In fact, during the final submissions Mr Thomson, counsel for the applicant, all but conceded that if the Tribunal accepted Mr Metcalfe’s evidence, then responsibility for the pool leak rested with the applicant save for the contention that the contract for the fixing of the tile band was between the respondents and Mr Metcalfe. 51. In respect of this latter issue, it was the applicant who engaged Mr Metcalfe, it was the applicant who effectively directed the work to be undertaken. I therefore conclude that the relevant contract for the tiling work was with the applicant and not the respondents. 52. In so far as rectification is concerned, having made these findings it follows that Mr Fritz’s method of rectification is preferable. 53. The applicant submits that rectification can be achieved by the method suggested by Mr Constanzo and the Tribunal should adopt his costings as set out in his report.14 However this does not involve a liner and it is doubtful whether this will effectively address the cause of the leak identified by Mr Fritz. 54. On the other hand Mr Breakwell did cost the rectification method using a liner and this will most certainly stop the leak. I consider this is the preferable course and I accept the costings as set out in the report of Mr Breakwell from Gray Robinson & Cottrell.15This cost is $17,944.31 as submitted by Ms Hatten for the respondents. The respondents are entitled to be compensated for this cost. Cornices 55. The plans for the brickwork cladding on the lower and upper levels call for a band of bricks, described as cornices, which are stepped out so as to protrude from the face of the brick wall to give a decorative effect. This banding is noted on the plans but it appears the plans are not consistent in precisely locating the positioning of the banding. The banding was not part of the original concept but was introduced as a development condition associated with the approval of the project by the Brisbane City Council. 56. The applicant contends that he attempted to follow the plans as best he could given the inconsistency and/or confusion and this seems to be accepted by the experts for both parties. In particular Mr Fritz and Mr Dyer addressed this in the Joint Experts Report. They respectively note as follows: Mr Fritz: on review of drawings there are discrepancies in the positioning of the banding with varying dimensions……..the builder would have to work brick gauge from ground to eaves drop-off and could impact on positioning of banding to suit gauge 14 Exhibit 11 15 Exhibit 27 10 -- 10 of 12 -- Mr Dyer: drawings date 12 Sept 06, detail conflicting locations in relation to the brick banding (external cornice)…….construction drawing WD 2.02 shows brick band above 1st floor balcony. Construction drawings CD 2.03 and WD2.06 showing the brick band below the balcony, with varying dimensions in the finished floor levels…………..the drawings provide no consistent dimensions to location of banding and brickwork must work to a gauge from ground to eaves and banding has been positioned accordingly to suit gauge and approximate positioning shown on drawings. 57. This evidence in particular establishes without doubt that the drawings are misleading and this is also evident from an examination of them. Perhaps it would have been prudent for the applicant to confer with the respondent’s architect Mr Rasheed as is suggested by the respondents, but Mr Campbell says he was told that Mr Rasheed was no longer involved in the project. I tend to accept Mr Campbell’s evidence on this point, mainly because there were problems with the DA and this, no doubt led to increase costs. If Mr Campbell did consult with the architect he could have reasonably expected that fees would have been incurred and passed onto the respondents. I accept Mr Rasheed’s evidence that he would have given advice, probably gratitutiously but Mr Campbell was not to know this, particularly in view of the direction given to him by Mr Hill-Douglas. 58. Even if the applicant was at fault, by simply not using common sense and centering the bands as it is suggested he should have, or by talking to Mr Rasheed, I accept the submissions of counsel for the applicant that this defect, if it can be described as that should not sound in damages. I agree it would result in damages for rectification of alleged defects which would be both unreasonable and unnecessary to ensure substantial compliance with the contract.16 59. Has there been a diminution of value in the property because of the incorrect positioning of the cornices? The respondents contend that the property has been devalued to the extent of some $50,000. Reliance is placed on the evidence of Mr Rowland and experienced licenced real estate agent. He opines that he property has a market value between $2,000,000.00 and $2,100,000.00 and with the cornices as they are there would be buyer resistance resulting is a discount of about $50,000.00 60. This opinion was of course challenged by Mr Thomson on the basis that given the range in Mr Rowland’s appraisal and market forces generally, it would be extremely difficult to discern what the value one could put on buyer resistance, if any. Mr Rowland equivocated somewhat on the value of buyer resistance but was firm in saying it would not be nil. 61. This evidence must be contrasted with that of Mr Adrian Thompson another experienced licenced real estate agent who said: 16 Belgrove v Eldridge (1954) 90 CLR 613 11 -- 11 of 12 -- The corbel decoration irregularities are best viewed from street side as the impact of these irregularities is best discerned from a distance as opposed to a direct viewing. It is mildly apparent that the levels of the corbel decoration differ over each level. There is no precedence for the styling in the area and therefore any variation to a perceived theme is non-existent. It is also important to note that the residence is set back from the street side and is accessible by way of easement driveway. My overall opinion is that the corbel decoration irregularities make no difference whatsoever to the value of the Property.” 62. In my view Mr Thompson has given thoughtful consideration to effect of the irregularities and their impact on a potential buyer. He has also taken into account the position of the house, which does not directly fronting the street which is obviously an important consideration from an aesthetic perspective. 63. Another interesting feature of the cornices is that they are painted white against the darker coloured paint on the brickwork. This certainly highlights the cornices as a feature of the house and one could reasonably suppose if the respondents were truly concerned about the positioning of the cornices they would not be painted a colour that draws attention to them. This is merely and observation on my part which does give some support for Mr Thompsons opinions and the overall impact on the value of the property. 64. Consistent with the submissions of Mr Thomson, and having preferred the evidence of Mr Thompson I do not propose to make any allowance in favour of the respondents for diminution of value by reason of the placement of the cornices Summary 65. Of the applicant’s claims it succeeds on the cost of the driveway in the sum of $12,000.00. 66. On the respondents’ counter claims they succeed on the claim for rectification of the swimming pool in the sum of $17,944.31. 67. Therefore, the order of the Tribunal on the disputed claims will be that the applicant shall pay to the respondents the sum of $5,944.30 12 -- 12 of 12 --