Coolican v Bokam (NQ) Pty Ltd [2008] QDC 248

DISTRICT COURT OF QUEENSLAND CITATION: Coolican v Bokam (NQ) Pty Ltd [2008] QDC 248 PARTIES: CARY ELLEN COOLICAN (Appellant) v BOKAM (NQ) PTY LTD Trading as OZONE TROPICAL DESIGNS & CONSTRUCTION (Respondent) FILE NO/S: 12 of 2008 DIVISION: Trial Division PROCEEDING: Appeal ORIGINATING COURT: Commercial and Consumer Tribunal DELIVERED ON: 10 October 2008 DELIVERED AT: Cairns HEARING DATE: 19 August 2008 JUDGE: Everson DCJ ORDER: 1. That the appeal be allowed in part; 2. That the case be remitted to the Tribunal for further hearing as to what set-off, if any, the appellant has pursuant to s 553C of the Corporations Act 2001 which arises pursuant to a cause of action for breach of contract in respect of the construction of the deck. CATCHWORDS: CONTRACTUAL ISSUE – CONSTRUCTION OF CONTRACT – BREACH OF CONTRACT - where an error of law was made by the Commercial and Consumer Tribunal when categorising a construction contract as a separate contract pursuant to s17A of the Domestic Building Contracts Act 2000 – where a further error of law regarding a potential set-off claim pursuant to s553C of the Corporations Act 2001. COUNSEL: R M Lilley Counsel for the Applicant/appellant M Jonsson Counsel for the Respondent SOLICITORS: Bottoms English Lawyers for the applicant/appellant Williams Graham & Carmen Solicitors for the Respondent -- 1 of 8 -- 2 Introduction [1] This is an appeal against part of the decision of the Commercial and Consumer Tribunal dated 19 December 2007 pursuant to which the appellant was ordered to pay the respondent $49,671 (“the decision”). [2] Pursuant to s 100 of the Commercial and Consumer Tribunal Act 2003 (“CCTA”) an appeal of this type may only be brought with the Court’s leave and only on the ground of either error of law or excess or want of jurisdiction. When the matter came before me I was informed that the Court’s leave had been obtained in a Consent Order filed on 28 March 2008. This order is headed “Consent to Judgment or Order of Registrar”. It purports to be made pursuant to R 666 of the Uniform Civil Procedure Rules 1999. R 666 states that the Registrar may give judgment or make another order if the parties consent in writing and the Registrar considers it appropriate. This procedure does not obtain the Court’s leave. Accordingly, the leave of the Court was never properly obtained for the bringing of this appeal. [3] On the hearing of this matter both parties were represented by experienced counsel, the appellant being represented by Senior Counsel. Some of the grounds of appeal do not appear to me to fall within the concept of either errors of law or excess or want of jurisdiction. One aspect of the appeal concerns a claim for $200 in respect of tiles which the appellant’s counsel concedes is de minimus. Had the question of leave expressly come before the Court, leave would in all likelihood have only been granted in limited terms. However, given the advanced state of the appeal and the resources expended by the parties prior to it coming before me, I will grant leave to the appellant to appeal to the extent set out in these reasons for judgment. Factual background to the dispute [4] The circumstances relating to the dispute are summarised in the first eight paragraphs of the decision. The respondent sued the appellant for money owing under a building contract pursuant to which it built a dwelling house for the appellant. Ultimately the appellant and her husband went into possession of the house before it was complete over the objections of the builder, but with his reluctant consent and only in exchange for a signed certificate of practical completion. The certificate cited five items agreed upon by the builder as minor defects or minor omissions and contained a promise to pay the final progress claim. This promise was also made verbally. The amount of the final progress claim was $31,400. The final progress payment was not made and over the next several weeks a number of lists of claimed defects were delivered to the respondent. One of them contained approximately 260 items. The dispute between the parties worsened with the appellant alleging delay or omission on the part of the respondent in finishing outstanding items and the respondent alleging difficulty or inability in obtaining access to the site to attend to outstanding complaints. The appellant did not fulfil her contractual obligation to pay the final progress payment within five days nor her promise contained in the certificate of practical completion to direct her lender to pay the balance payable under the contract immediately. [5] On 25 July the appellant wrote to the respondent informing it that she had decided to defer the final sum payable under the contract in order to protect her position. On 9 August 2005 she wrote to the respondent informing it that there were many matters outstanding regarding completion of the dwelling house and stating that she -- 2 of 8 -- 3 was terminating the contract. On 12 August 2005 the respondent wrote and informed the appellant that her purported termination was regarded as a repudiation, that the repudiation was accepted and that the contract was terminated. In the proceeding leading to the decision the respondent sued for the outstanding final progress payment of $31,400 together with extras derived from variations and interest on the outstanding monies. The appellant sought to set-off against these claims a number of sums based on allegations of defective or incomplete work such that the respondent’s claim would be extinguished. [6] The respondent subsequently went into liquidation. A decision of the Tribunal delivered on 16 July 2007 records that in January 2007 the respondent’s solicitor informed the Tribunal that the respondent had been in liquidation “for several months”.1 The issues in the appeal [7] It is not surprising that s 100 of the CCTA restricts appeals in these circumstances to those with the Court’s leave and only on the ground of error of law or excess or want of jurisdiction. [8] Many of the grounds agitated in the appellant’s Further Amended Notice of Appeal filed on 18 August 2008 do not come within the category of errors of law. Many factual matters which turned upon findings in respect of the evidence presented before the Tribunal are included. In this regard factual allegations relating to the manner of construction of the deck, the circumstances surrounding the construction of the retaining wall and the absence of the spoon-drain are all not proper matters for an appeal of this type. The same can be said of the claim for cracked tiles which, being de minimus in any event is otherwise not an appropriate matter for leave to appeal. In respect of the spoon-drain it is alleged by the appellant that she was entitled to be placed in the same position as if the contract had been properly performed, however this bland assertion ignores the finding of fact in the decision that the driveway as built is of no less value or utility than one constructed in accordance with the plan containing it. It is therefore not possible to say as a matter of law that she has not been placed in the same position as if the contract had been properly performed having regard to the findings of fact that were made. [9] The grounds which are properly the subject of an appeal are that the Tribunal allegedly erred in law in concluding that there was a contract for the construction of the deck which was separate from the design and construction of the house and that the Tribunal ought to have concluded that the appellant’s claims and the respondent’s claims arose from mutual dealings and that the appellant’s claims could properly be set-off against the respondent’s claims pursuant to s 553C of the Corporations Act 2001 (“the CA”). As a subsidiary issue it is alleged that a counterclaim was available to the appellant in respect of her claims concerning the defective construction of the deck as a result of the earlier decision of the Tribunal on 16 July 2007 which created an issue estoppel in this regard. By its Amended Notice of Contention filed on 5 June 2008 the respondent alleges that the appellant had no right to a set-off because of Clause 11.8 of the contract between the parties and that the appellant disentitled herself to any set-off by her wrongful repudiation of the contract. 1 Bokam (NQ) Pty Ltd (in liquidation) v Cary Ellen Coolican [2007] CCT BD 529-05 at para 3 -- 3 of 8 -- 4 [10] In the decision, the learned Tribunal Member held that the agreement to build the deck was treated by the parties as “something separate from the contract for the construction of the house” and that the respondent “does not sue for the price of the deck, or any part of the price, because it has been paid in full”.2 The learned Tribunal Member subsequently observed that “the deck was never part of the job and its cost never merged with the contract price”. 3 [11] Section 17A of the Domestic Building Contracts Act 2000 (“DBCA”) is in the following terms:- “(1) This section applies if a building contractor and building owner enter into 2 or more separate contracts that – (a) Could be the subject of a single contract for carrying out domestic building work; and (b) If they were the subject of a single contract would be a contract for carrying out domestic building work. (2) The separate contracts are taken to be a single contract for which the contract price is the sum of the contract prices for the separate contracts.” [12] It is uncontroversial that the deck comes within the definition of domestic building work in s 8 of the DBCA. It therefore follows that the conclusion that the deck was never part of the job and its costs never merged in the contract price was incorrect, having regard to s 17A and the appellant should be allowed to set-off amounts she claims for breach of contract in respect of the deck against the claim of the respondent. [13] In the decision the learned Member noted that the deck as built was 46 square metres whereas it was described as 64 square metres in the contract.4 He observed that the appellant “may well have a cause of action for damages for breach of contract.”5 The learned Member proceeded to conclude that an equitable set-off was not available to the appellant in the circumstances. In the earlier decision of the Tribunal, (which was differently constituted) delivered on 16 July 2007, the extent of the appellant’s rights in the context of the respondent’s liquidation were addressed. As with the hearing leading to the decision the appellant did not have legal representation. The Tribunal in its decision dated 16 July 2007 was determining the extent of the appellant’s right to her purported counterclaim. It concluded:- “However, the claims made in paragraphs M – R of the Defence and Counterclaim expressly seek only that the sums claimed be deducted from the applicant’s claim: that is, the respondent for that matter is only seeking to set-off those sums against the applicant’s claim. The respondent is not seeking an order that the applicant pay the respondent any sum. She must be taken to have abandoned any right to claim any excess from the applicant. As I understand the last paragraph of the respondent’s submissions, she confirms that this is the case. 2 Decision, para 45 3 Ibid para 46 4 Decision para 43 5 Ibid para 44 -- 4 of 8 -- 5 In the circumstances, the respondent does not need the leave of the court in order to proceed with her counterclaim.”6 [14] It is submitted on the appellant’s behalf that this ruling created an issue estoppel permitting the appellant to counterclaim in respect of defective construction of the deck. [15] In the decision the learned Member addressed this question in the following terms:- “Since the applicant builder is in liquidation, Mrs Coolican needs the leave of the Court to sue. This she does not have, so she has no right to sue the builder by counterclaim. While the contract was still on foot she had no right of set-off against progress payments – see Clause 11.8. However that clause only operates to defer her right of set-off while the contract is on foot. Once it was determined, any right of set-off revived… I hold that she has any right of set-off or defence the law permits.”7 [16] I am of the view that the decision of 16 July 2007 did not create a right to bring a counterclaim by reason of estoppel. The reference to the appellant’s counterclaim was in the context of what is correctly described as a set-off. The use of the term “counterclaim” in this decision is merely reflective of the terminology used by the then self-represented appellant in the description of her pleading. This is confirmed by a perusal of the book of supporting documents in this appeal.8 [17] The question remaining for determination is whether the learned Member made an error of law in holding that the appellant had any right of set-off the law permits in circumstances where he failed to consider s 553C of the CA. Section 553C is in the following terms:- “(1) Subject to subsection (2), where there have been mutual credits, mutual debts or other mutual dealings between an insolvent company that is being wound up and a person who wants to have a debt or claim admitted against the company: (a) an account is to be taken of what is due from one party to the other in respect of those mutual dealings; and (b) the sum due from the one party is to be set-off against any sum due form the other party; and (c) only the balance of the account is admissible to proof against the company, or is payable to the company, as the case may be. (2) A person is not entitled under this section to claim the benefit of a set-off if, at the time of giving credit to the company, or at the time of receiving credit from the company, the person had notice of the fact that the company was insolvent.” 6 Bokam (NQ) Pty Ltd (in liquidation) v Cary Ellen Coolican at paras 21 and 22 7 Decision paras 38-40 8 Document 28 -- 5 of 8 -- 6 [18] Section 553C is in almost identical terms to s 86 of the Bankruptcy Act 1966. This provision was the subject of the decision of the High Court in Gye v McIntyre9 . The High Court unanimously observed10 :- “In the context of s 86 “mutual” conveys the notion of reciprocity rather than that of correspondence. It does not mean “identical” or “the same”. So understood there are three aspects of the section’s requirement of mutuality. The first is that the credits, the debts, or claims arising from other dealings be between the same persons. The second is that the benefit or burden of them lie in the same interests. In determining whether credits, debts or claims arising from other dealings are between the same persons and in the same interests, it is the equitable or beneficial interests of the parties which must be conceded: see e.g., Hiley (52). The third requirement of mutuality is that the credits, debts or claims arising from the dealings must be commensurable for the purposes of set-off under the section. That means they must ultimately sound in money. The requirement that the credits, the debts or the claims arising from other dealings be commensurable does not mean that they must be vested, liquidated or enforceable at the decisive date, that is to say, at the time of the sequestration order or special resolution accepting the composition. Provided they exist as contingent at that date and are of a kind which will ultimately mature into pecuniary demands susceptible of a set-off, the requirement of the section may be satisfied in relation to them.” [19] The respondent attacks the appellant’s right to a set-off pursuant to s 553C in respect of a potential cause of action for breach of contract regarding the deck on a number of grounds. Firstly, it is alleged that there is a lack of mutuality in that the appellant is not the sole beneficial owner of the subject matter of the set-off as the property in question was the family residence not just her residence and the appellant’s husband was actively involved in the negotiations with the respondent and the prosecution of her case. This submission appears contrary to the concept of advancement in circumstances of married persons11 . In my view this submission does not demonstrate that there were not in existence mutual credits and mutual debts or other mutual dealings between the appellant and the respondent. [20] Secondly, it is contended that a set-off pursuant to s 553C was not agitated by the appellant in the Tribunal and that the failure is such that the Tribunal cannot be said to have erred in having failed to address an issue which was not presented by the appellant for determination. In support of this submission reference is made to comments of Keane JA in Multiplex Ltd v Qantas Airways Ltd12 where he observed:- “It is the function of this Court to correct errors which have occurred at first instance. It is no part of this Court’s function to exercise original jurisdiction to determine issues which have not been raised, much less determined, at first instance.” 9 (1991) 171 CLR 609 10 Ibid at 623-624 11 Calverley v Green (1984) 155 CLR 242 at 247 12 [2006] QCA 337 at [10] -- 6 of 8 -- 7 It is true that this issue was not expressly raised at first instance but that occurred in circumstances where the appellant was not legally represented. The true error of law was constituted by the learned Member stating that the appellant was entitled to any right of set-off the law permits and failing to have regard to s 553C after impliedly stating that it was a permissible basis for a set-off. [21] Thirdly, it is alleged that had the appellant expressly relied on s 553C the respondent may have sought disclosure or cross-examined her in relation to matters going to mutuality which were denied to the respondent in the circumstances and that it is procedurally unfair for reliance on s 553C to be permitted on appeal. In answer to this, there appears to be no merit in the mutuality argument and secondly, should this matter be remitted to the Tribunal for determination, this opportunity will no doubt be afforded by the Tribunal if it is sought by the respondent. [22] Fourthly, the respondent contends that the contract with respect to the deck was a separate contract and therefore outside the concept of a set-off under s 553C. Having regard to the application of s 17A of the DCBA noted above, this contention appears without merit. [23] Fifthly, the respondent alleges that there was no unconditionally accrued right to damages in respect of the construction of the deck as a consequence of the respondent’s act in terminating the contract on 12 August 2005. This submission appears contrary to what was said by Thomas J in Ownit Homes Pty Ltd v Batchelor13 where his Honour observed:- “I do not regard the builder’s rights under the present contract as “accrued due” in the sense that they can independently survive a subsequent rescission… It seems to me that when a rescission ensues, the right to claim such progress payment becomes merged in the right to recover damages for breach of the contract. Of course each case will depend upon the terms of the contract in issue. In the present case where the progress payments more closely resemble a right to payment on account rather than an accrued right to final payment, I have no doubt that the builder’s rights are measured by appropriate damages for breach of contract.”14 [24] There is nothing in the contract between the parties which materially changes the appropriateness of the observations set out above. [25] Sixthly, it is contended that the failure or refusal of the appellant to make the final progress payment when it fell due under the contract and cooperate with the respondent by providing it with the necessary site access to undertake remedial works, relieved the respondent from any liability in damages for any relevant breach of contract. In support of this submission a number of statements of principle from authorities relating to vendor and purchaser disputes are relied upon.15 Such an approach is, however, not applicable to building contracts and this was confirmed in Ownit Homes.16 13 [1983] 2 QdR 124 14 Ibid at pp 134-135 15 For example Segacious Pty Ltd v Fabrellas [1991] 1 QdR 471 and Jeppesons Road Pty Ltd v Di Domenico [2005] QCA 391 16 Ownit Homes Pty Ltd v Batchelor at 135 -- 7 of 8 -- 8 [26] Finally, it is submitted on behalf of the respondent that Clause 11.8 of the contract specifically disentitles the appellant to any set-off. Clause 11.8 is in the following terms:- “The Owner acknowledges that, subject to Clause 18.2, the Owner has no right of set-off under the Contract or otherwise, that is to deduct any amount from a progress payment due to the Builder under Clause 11.7 or to hold any retentions for defects or omissions.” [27] This type of contractual provision was considered by the Court of Appeal in Queensland University of Technology v Project Constructions (Aust) Pty Ltd (In liq)17 . In giving the judgment of the Court Holmes J observed:- “It does not seem to me inevitably to follow that, where the contract evidences an agreement that progress claims will not be the subject of deduction or set-off, that preclusion must extend to the event of termination… There seems no reason, either in general terms or on examination of the contract, that the parties’ respective entitlements should not be the subject of set-off on termination of contract.” 18 [28] In the circumstances, the decision in Queensland University of Technology appears to preclude s 11.8 continuing to operate following the determination of contract. Conclusion [29] I am therefore of the view that the decision contained an error of law in the failure to have regard to s 17A of the DBCA when categorising the contract for the construction of the deck as a separate contract. A further error of law occurred when the appellant was not given the opportunity to set-off a potential claim for damages for breach of contract in respect of the construction of the deck pursuant to s 553C of the CA. Order [30] I order that:- 1. the appeal be allowed in part; 2. the case be remitted to the Tribunal for further hearing as to what set-off, if any, the appellant has pursuant to s 553C of the Corporations Act 2001 which arises pursuant to a cause of action for breach of contract in respect of the construction of the deck. [31] I await submissions in respect of costs. 17 [2002] QCA 224 18 Ibid at [24] -- 8 of 8 --