Alta Building & Developments Pty Ltd v Brendan Jay McAllery and Tracey Catherine Margaret McAllery - [2014] NSWCATCD 107 - NSWCATCD 2013 case summary — Zoe

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Alta Building & Developments Pty Ltd v Brendan Jay McAllery and Tracey Catherine Margaret McAllery

[2014] NSWCATCD 107

NCAT Consumer and Commercial|2013-08-30|Before: Mr J

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Source facts

Court

NCAT Consumer and Commercial

Decision date

2013-08-30

Before

Mr J

Source

Original judgment source is linked above.

Judgment (28 paragraphs)

[1]

reasons for decision 1These proceedings were commenced in August 2010 when the applicant sought the sum of $164,140.77 from the respondents being payments said to be due by the respondents under the terms of a building contract. 2In these reasons for decision, I will refer to the applicant as the builder and to the respondents as the owners. 3The owners have made a cross application against the builder which was heard simultaneously with these proceedings. 4The builder was self-represented in these proceedings and in the owners' cross application. 5The parties entered into an undated Cost Plus (Residential) building contract in a form prepared by the Master Builders Association (the 'contract'). The work to be carried out by the builder was described as 'New Gymnasium and Artists Studio'. The estimated cost of works pursuant to clause 30 of the contract was $297,819.50. The cost of the works exceeded $297,819.50. 6Part B of Schedule 1 to the contract provided that the owners would pay the builder a fee of $45,000.00 plus GST. 7The work was to be carried out at the owners property situate at 4 Emperor Place, Kenhurst. 8The work was in the nature of the construction of a new building at the residence which was to form part of the residence. 9There is no dispute that the Home Building Act 1989 applies to the work carried out by the builder and that I have jurisdiction pursuant to the Home Building Act to determine this application. 10On 24 November 2010 the builder filed and served points of claim in which it claimed a balance due under the contract of $54,199.97, the sum of $165.00 representing an amount paid by the builder to a hydraulic engineer, interest and costs. The builder's claim is set out in detail in annexures A and B to its points of claim. Annexure A sets out progress claims and calculates a balance due. Annexure B sets out calculations in support of an additional builder's fee. 11In short the builder claims $43,300.88 in connection with money claimed under the contract and not paid. It claims interest on that amount of $5,277.46 and ongoing interest. It then seeks to recalculate its building fee so to seek an additional $10,899.09. It also seeks to be reimbursed $165.00 for a plumbing invoice. This leads to a total of $43,300.88 + $10,899.09 +$165.00 = $54,364.97 plus interest claimed of $5,277.46 and accruing. 12At paragraph 7 of its points of claim the builder claims in the alternative a reasonable price for work done and materials supplied. There is no basis asserted by the builder in its points of claim or in its final submissions to justify a cause of action in quasi contract when it entered into an enforceable written contract

[2]

Quantum Meruit 13The issue of whether a party who has entered into a contract may make a claim in quantum meruit for work carried out under the contract was dealt with by Mason P., with whom Priestley and Handley JJA agreed, in Trimis & v Mina [1999] NSWCA 140 (18 May 1999) when he stated at paragraph 54: 'The starting point is a fundamental one in relation to restitutionary claims, especially claims for work done or goods supplied. No action can be brought for restitution while an inconsistent contractual promise subsists between the parties in relation to the subject matter of the claim. This is not a remnant of the now discarded implied contract theory of restitution. The proposition is not based on the inability to imply a contract, but on the fact that the benefit provided by the plaintiff to the defendant was rendered in the performance of a valid legal duty. Restitution respects the sanctity of the transaction, and the subsisting contractual regime chosen by the parties as the framework for settling disputes. This ensures that the law does not countenance two conflicting sets of legal obligations subsisting concurrently. As Deane J explained in the context of the quantum meruit claim in Pavey & Matthews (at 256), if there is a valid and enforceable agreement governing the claimant's right to payment, there is "neither occasion nor legal justification for the law to superimpose or impute an obligation or promise to pay a reasonable remuneration". See also Update Constructions at 275n; Ansett Transport Industries (Operations) Pty Ltd v Alenia Aeritalia & Selenia Spa (1991) 105 FLR 169; Brenner v First Artists Management Pty Ltd [1993] VicRp 71; [1993] 2 VR 221. This principle is applicable to other restitutionary claims (see, eg Foran v Wight [1989] HCA 51; (1989) 168 CLR 385 at 413, 432; Baltic Shipping Co v Dillon (The Mikhail Lermontov) [1993] HCA 4; (1993) 176 CLR 344 at 355-6, 385).' 14By reason of what was stated by Mason P. as quoted above, I dismiss the builder's alternative claim as pleaded in paragraph 7 of its points of claim. There is no legal basis for concurrent claims under a contract and on a restitutionary basis.

[3]

Progress claims 15The owners filed and served a defence to the points of claim on 25 January 2011 in which they stated that the builder's progress claims 9, 11 and 22 were properly valued at marginally less than the amount claimed. The differences between the parties in connection with these progress claims is ($848.25).The owners admit that that they did not pay progress claims 24 and 26 claimed by the builder in the amounts of $14,242.33 and $29,291.28 respectively, but deny that they were liable to pay those progress claims. In connection with progress claim 26, the owners deny ever having received that claim. 16The factual background to the builder's and the owners' claims was complex, requiring four days of hearing. Due to the complexity of the combined proceedings, I am left with the impression that the builder concentrated more on the defence of the cross application than the establishment of its claim in these proceedings. 17The builder instructed Mr Lloyd Austin of L.F. Austin Pty Limited to prepare expert reports which were tendered as part of the builder's case in these proceedings and in the cross application. 18Mr Austin's undated report prepared in August 2012 was exhibit 7 and his 3 June 2013 report was exhibit 8. I accept Mr Austin as an expert capable of giving expert opinion in the Tribunal. There was no challenge to his expert status. 19Mr Austin's report dated 3 June 2013 states in paragraph 2 that he has been instructed by the builder 'to provide a report in support of a claim for Quantum Meruit for building work at 4 Emperor Place, Kenhurst'. Mr Austin concludes that the total due to the builder is $54,020.79. 20I will not take Mr Austin's report dated 3 June 2013 into account since it seeks to quantify the builder's quantum meruit claim which I have dismissed for the reasons stated above. 21The first report to deal with quantum issues was the report prepared on behalf of the owners by Mr Michael George Sturgess dated 4 June 2012 which is exhibit H in the owners' case. In paragraph 2.5 of his report Mr Sturgess states 'By my calculation the monies claimed against the Builder's claims 1 to 25 totals $13,919.13, being the aggregate of Claims 24 and 25.' 22Mr Austin's undated report prepared in August 2012, exhibit 7, responds to Mr Sturgess's report. 23I will commence by considering Mr Sturgess's report. The first point to note is that Mr Sturgess has not considered the builder's progress claim 26 in the sum of $29,291.28. In Mr Sturgess's opinion, the owners do not owe the builder any money at all. Mr Sturgess has set out three methods of calculating amounts due by the builder to the owners. In his method 3 where the basis of his calculation is 'Against Builder's Invoiced Costs', Mr Sturgess states that the sum of $72,018.27 is due from the builder to the owners. This calculation method takes a contract scope, as varied and then deducts from that figure defects, direct payments by the owners and amounts paid by the owners to the builder. 24Defects are addressed in the owners cross application and are excluded from my consideration of the money, if any, owing by the owners to the builder. 25Based on Mr Sturgess's own figures for the contract scope as varied, $520,391.07 less direct payments by the owners $205,828.97 and amounts paid by the owners, $307,968.37, an amount of $6,593.73 will be owing to the builder ($520,391.07 - $205,828.97 - $307,968.37 = $6,593.73). In addition there is the question of whether the owners are liable for progress claim 26 in the sum of $29,291.28. 26Mr Austin's undated report, exhibit 7, provided in the main a response to the owners' allegations of defective work. Paragraphs 10, 11 and 12 of the report responds to Mr Sturgess's report tendered by the owners concerning the overall costing of the work. These paragraphs address a number of issues including the actual cost of the works, direct payments, variations and delays. 27Mr Austin comes to a conclusion that the total amount payable by the owners to the builder is $39,865.92. This amount is made up of the 'adjusted invoice amount on claim 24 less the cost of rectification'. Mr Austin values that amount at $13,919.13. He then allows a deduction for defects of $846.52 and adds to that amount the sum of $26,793.31 for an adjustment of the builder's fee which gives a total of $39,865.92 ($13,919.13 - $846.52 + $26,793.31 = $39,865.92). 28The experts have taken different approaches to the calculation of money allegedly payable by the owners to the builder. 29As stated above, I will not take the value of defective work into account in that calculation as that issue is considered and dealt with in my reasons for decision in HB 11/04507. 30There seems to be some common ground in connection with the builder's progress claim 24 which is in the sum of $14,242.33. The owners admit that they have not paid it. On that basis there should be an order in the builder's favour in the sum of $14,242.33. I will return to this progress claim and any adjustments that are to be made later in these reasons. 31The next issue is the question of the builder's progress claim 26 in the sum of $29,291.28 which the owners state they did not receive and which Mr Sturgess has not taken into account.

[4]

Extra Builder's fee 32I have had regard to Mr Sheppard's first statement and the annexures to it which are exhibits 1 and 2 respectively. Paragraph 208 refers to progress claim 26 as a calculation of extra fees. The builder's letter dated 21 December 2009 is Annexure 43 of Mr Sheppard's first statement. It is a letter of termination which concludes by making a claim for $29,291.28 for extra fees. 33Having regard to Paragraph 208 of Mr Sheppard's statement and the builder's letter dated 21 December 2009 I have formed the conclusion that progress claim 26 claim is not a claim for the cost of building work but is a claim for an additional building fee. Therefore both annexures A and B to the builder's points of claim contain a claim for an additional fee. This is confirmed in Annexure B to the builder's points of claim where there is a deduction of $29,291.28 in the re-calculation of the builder's fee. However I find that the best approach is to reject the builder's progress claim 26 in annexure A of its points of claim and to take its calculation of the additional fee to be $40,190.37, as stated in annexure B of its points of claim. 34The builder's case has two different calculations of the builder's fee. First, in the points of claim in the sum of $40,190.37. Secondly, in Mr Austin's statement in the sum of $26,793.31. 35Schedule 1 Part B of the contract provides for a lump sum fee of $45,000.00. Sub-paragraph (iii) states in connection with the fee 'if the construction period is extended pursuant to the provisions of the contract the fee payable will increase on a pro-rata or proportionate basis to reflect the increased construction period.' 36Clause 11 of the contract deals with Delays and extensions of time. I do not propose to set the clause out in detail. However, clause 11(a) identifies causes of delay which will entitle the builder to an extension of time to the construction period. Clause 11(b) provides for notices which are to be given in the event of delay. Importantly, clause 11(d) states 'Delay in notifying a failure to notify the Owner of a delay or matter causing delay will not of itself prohibit an extension of time being granted or allowed provided the cause of the delay is shown to cause delay to the works being carried out.' 37The builder will only be entitled to an increase in its fee of $45,000.00 'if the construction period is extended pursuant to the provisions of the contract'. 38The original construction period was for 218 days commencing on 25 July 2008. Mr Austin calculates this period expiring on 26 June 2009 allowing for public holidays and rostered days off. I accept his evidence in this regard. 39The period in issue is 27 June to 21 December 2009, 118 days excluding weekends, public holidays and rostered days off. 40The evidence discloses that the parties did not agree to extensions of time for this period. In annexure B of its points of claim, the builder claims 177 working days extensions of time. For 145 days the builder does not attribute a cause of delay. 32 days of delay have a cause attributed to them. 41In his expert report Mr Austin puts the claim on a different basis. He deals with the claim in clauses 11.7 - 11.13 of his report. He states that there have been delays to the work being carried out due to the owners not allowing work to proceed while they were not present on site. He also states that there were other delays such as raising of the floor height and variations to the structural design. 42Mr Austin has then calculated the additional fee at $206.42 per day (45,000.00/218 = $206.42). The 118 day delay that he refers to equates to the sum of $26,793.31 (118 x $206.42 = $24,357.56 + GST) 43While the discussion in the preceding paragraphs demonstrates that an increased fee is contemplated under the contract subject to the issues discussed, the owners have raised an issue which, if decided in their favour, will be a complete answer to the builder's claim for an additional fee. 44In their cross application HB 11/04507 the owners allege that there was a meeting on site between Mr McAllery and Mr Sheppard representing the builder on 25 August 2009. It is alleged by Mr McAllery that at this meeting certain matters were discussed and agreed in connection with the amounts that the builder would charge for the work remaining to be carried out. Mr McAllery's evidence is also that at this meeting it was agreed by Mr Sheppard on behalf of the builder that the original builder's fee of $45,000.00 would not be increased. 45The conversation between Mr McAllery and Mr Sheppard was heard by Mr Mclean who was working for Mr McAllery in the area of the premises where the conversation in issue took place. Mr McLean has provided a witness statement in these proceedings in which he corroborates Mr MacAllery's version of the agreements reached at the meeting. 46Mr McAllery and Mr Sheppard have also given evidence about this meeting and what was said. Mr Sheppard denies Mr McAllery's account of the meeting and the agreements that he says were reached. 47Mr Sheppard had the opportunity to cross-examine Mr Mclean. I was impressed by Mr Mclean being a careful and honest witness. I accept his evidence and that he has not prepared a statement and given evidence for the purpose of conferring a benefit on his employer. 48Mr Mclean in his evidence states that an element of the agreement reached at this meeting was that Mr Sheppard 'would complete his project manager's role without any increase in his original fee' and that if costs over-ran the estimates set out on a spreadsheet printed out at the meeting, those costs would be absorbed by the builder. 49I have accepted the owners' version of this meeting in cross application HB 11/04507. I also accept that version in these proceedings. It follows from my findings that the builder is, by virtue of the matters agreed at the meeting of 25 August 2009, prevented from increasing its fee under the contract. On that basis I dismiss that part of its application which seeks an increase of the fee of $45,000.00 as referred to in the contract.

[7]

Variation claims 59Although not pleaded, the builder's claim includes a claim for $145,099.08 for extra work that it alleges was carried out. A scott schedule was prepared and lodged in the Tribunal by the builder. A copy of the builder's scott schedule is annexure 36 to the first statement of Mr Sheppard lodged in the Tribunal on 2 August 2011. An expert's conclave was held in 2013, with little progress being achieved. 60The owners' expert has competed the builder's scott schedule and has agreed to work to the value of $9,354.80. 61The items claimed in the builder's scott schedule are set out below. Item No. Extra Work Amount claimed 1 Engineer's requirements wall and footings $29,294.00 2 Alterations to stair design $1,135.31 3 Larger footings for future sandstone wall $5,446.00 4 New structure for roof solar panels and clear ceiling space $39,184.43 5 New structure of walls to support new roof structure $9,139.23 6 New stormwater line to Creek line $3,205.40 7 Re-design of Breezeway roof $5,351.00 8 Re-design of main roof eaves at western end $9,917.62 9 French doors $7,772.00 10 More expensive columns $7,672.00 11 Stop work for Christmas $908.25 12 Stop work for holiday $4,541.24 13 Alterations to building level and concrete work to accommodate tennis court level $13,733.42 14 Plaster setting of jamb linings to windows in place of timber jamb linings $1,800.00 15 WC Portaloo hire $2,528.20 16 Steel round wire $2,562.73 17 Inclement weather $908.25 Total $145,099.08

[12]

New structure for roof solar panels and clear ceiling space - amount claimed $39,184.43 87The basis for this variation is found in annexure 36 to the first statement of Mr Sheppard lodged in the Tribunal on 2 August 2011 where it is stated that the structure was 'completely altered' so as to allow for the installation of a large solar array on the north face of the roof. 88The owners' expert Mr Sturgess has allowed $3,522.00 in connection with the strengthening of the roof for solar panels. Mr Sturgess's report concedes that this item was in his opinion a variation under the contract. Otherwise, Mr Sturgess points out that insofar as the builder refers to a cathedral ceiling, that was a requirement of the contract drawings. 89Mr Sturgess's allowance of $3,522.00 is not calculated by him, but is taken off a job costing from 'concrete slab to completion' under the carpentry trade and the heading 'Extra rafters to support solar panelling'. 90The dispute between the parties in connection with this item is therefore the calculation of the proper cost of the variation. 91Annexure 36 to the first statement of Mr Sheppard provides a detailed breakdown of the costs claimed by the builder. Costs are claimed for steel, scaffolding, crane hire, steel workers, labourer's costs, foreman's fees and builder's fees. 92I am not satisfied that Mr Sturgess's reliance upon a carpentry costing for 'Extra rafters to support solar panelling' is to be preferred to the builder's detailed breakdown of the costs involved in this work. Nor am I persuaded that the builder's breakdown of costs claimed as referred to in the preceding paragraph relates to its obligation to provide a cathedral ceiling. Mr Sturgess also raises doubts about the amount of $8,800.00 claimed in connection with scaffolding. Mr Sheppard does not address this issue in his Further statement. The owners have not sought the production of the invoice in question and on that basis I will make no finding adverse to the builder in connection with it. 93As with the preceding variation item, I prefer the valuation of the builder as it was more involved in the actual doing of the additional work and therefore in a better position to calculate the additional costs than Mr Sturgess. 94For these reasons, I will find for the builder in the amount claimed of $39,184.43.

[21]

Alterations to building level and concrete work to accommodate tennis court level - amount claimed $13,733.42 136The basis for this variation is found in paragraphs 74 - 97 of Mr Sheppard's first statement where he gives his account of the relevant facts. Annexure 36 of Mr Sheppard's first statement provides a breakdown of the amount claimed. 137Mr Sturgess on behalf of the owners offers no comments on the builder's valuation of this variation. 138Mr McAllery deals with the tennis court at paragraphs 31 - 40 of his statement. 139In addition, the owners rely on the evidence of Mr Barry Knipler whose statement is exhibit I. Mr Knipler whose evidence I accept stated that after the tennis court was completed, it was 120mm above the remainder of the building site. 140The basis for this variation is, as I understand it, that the tennis court was constructed above the slab level of the new building that the builder was constructing. The tennis court work was specifically excluded from the builder's contract. 141According to Mr McAllery it was agreed that the levels of the tennis court and the new building would be level. There is consensus on that. 142The difference in levels was brought to the owners' attention as stated by Mr Sheppard in paragraph 93 of his statement. Mr McAllery does not disagree with Mr Sheppard's account of the meeting except as to who used a particular expression, which in my view is irrelevant. 143In paragraphs 38 and 40 of his statement, Mr McAllery, in my view agrees that extra work was required to solve the issue which had been created by the tennis court having been constructed too high. 144In paragraph 35 (ii) of his statement Mr McAllery seems to suggest that the builder was responsible, at its own cost, for managing the different levels between the tennis court and the new building. 145In my view and I so find there was a need to increase the level of the new building as a result of the finished level of the tennis court being 120mm above the level of the new building. This in my view was a variation to the works being either the execution of additional work or the change in the levels of any part of the works, as provided for in clause 14 of the contract. 146The only evidence that there is of the value of the variation is in Annexure 36 of Mr Sheppard's first statement. This valuation of the variation is un-contradicted, except that Mr Sturgess says that it is unreasonable which I think applies to the claim, not the valuation. I will accept the builder's claim for a variation in the sum of $13,733.42.

[25]

Inclement weather - amount claimed $908.25 159The basis for this variation is inclement weather affecting completion. 160This strictly speaking is not a variation under the contract. 161Recovery by a builder for time related issues is properly an issue dealt with under clause 11 of the contract, not as a variation. 162For these reasons, this variation claim is dismissed 163Having regard to my findings above, the builder's variation claim may be summarized as follows: Item No. Extra Work Amount found 1 Engineer's requirements wall and footings $Nil 2 Alterations to stair design $Nil 3 Larger footings for future sandstone wall $5,446.00 4 New structure for roof solar panels and clear ceiling space $39,184.43 5 New structure of walls to support new roof structure $Nil 6 New stormwater line to Creek line $3,205.40 7 Re-design of Breezeway roof $Nil 8 Re-design of main roof eaves at western end $3,759.00 9 French doors $7,772.00 10 More expensive columns $Nil 11 Stop work for Christmas $Nil 12 Stop work for holiday $Nil 13 Alterations to building level and concrete work to accommodate tennis court level $13,733.42 14 Plaster setting of jamb linings to windows in place of timber jamb linings $184.16 15 WC Portaloo hire $Nil 16 Steel round wire $2,562.73 17 Inclement weather $Nil Total $75,847.14