Ryan v Worthington [2015] QCA 201

APPEAL AND NEW TRIAL - CONTRACTS - BUILDING, ENGINEERING AND RELATED CONTRACTS - OTHER MATTERS - where the applicant wanted to relocate, extend and add to his house - where the applicant entered into a building contract with the respondent - where the applicant purported to terminate the contract as the works had not been completed within 1.5 times the initial contract period, allowing for delays - where the respondent submitted that the applicant breached the contract by terminating - where the respondent also purported to terminate the contract on the basis that there was an asserted failure to provide free and uninterrupted access, pay the last two progress claims, and that the applicant had taken back possession of the works without consent - where the respondent commenced proceedings with QCAT - where at first instances the respondent was successful - where the applicant appealed - where QCAT's Appeal Tribunal allowed the appeal, set aside the orders, and remitted the matter "for determination according to law" - where the applicant seeks leave to challenge the decision of the Appeal Tribunal - whether the Appeal Tribunal erred in its approach to the construction of the contract; the proper construction of clause 15.1 and 21.1 of the contract - whether leave to appeal should be granted - whether the Appeal Tribunal fell into error by finding that it had no alternative but to remit the matter

Queensland Civil and Administrative Tribunal Act 2009 (Qld), s 146, s 150

Hodges v Queensland Building Services Authority [2013] QCAT 576, overturned

Life Insurance Co of Australia Ltd v Phillips (1925) 36 CLR 60; [1925] HCA 18, cited

Mackay Sugar Ltd v Sugar Australia Pty Ltd [2013] QSC 233, cited

Pilgrim Shipping Co Ltd v State Trading Corporation of India Ltd (The Hadjitsakos) [1975] 1 Lloyd's Rep 356, cited

Pioneer Shipping Ltd v BTP Tioxide Ltd [1982] AC 724, cited

Re Multiplex Constructions Pty Ltd [1999] 1 Qd R 287; [1997] QCA 447, distinguished

Ryan v Worthington [2014] QCATA 277, related

Studorp Ltd v Robinson [2012] NSWCA 382, cited

Westport Insurance Corporation v Gordian Runoff Ltd (2011) 244 CLR 239; [2011] HCA 37, cited

Worthington v Ryan, unreported, Queensland Civil and Administrative Tribunal, 3 April 2013, related

Yu Feng Pty Ltd v Maroochy Shire Council [2000] 1 Qd R 306; [1996] QCA 226, cited

[1] MORRISON JA: Dr Ryan wanted to relocate, extend and add to his house. For that purpose he entered into a building contract with Mr Worthington on 13 January 2010. The contract was in the standard form Master Builders Residential Building Contract. The works started on 10 January 2010 and the date for practical completion was 24 December 2010.

[2] About 19 months later, on 12 August 2011, Dr Ryan purported to terminate the contract under clause 21.1(b). The basis for termination was that the works had not been completed within 1.5 times the initial contract period, including allowed delays.

[3] Mr Worthington said that Dr Ryan breached the contract by terminating. Mr Worthington also purported to terminate, on 29 August 2011. The basis for that was an asserted failure to provide free and uninterrupted access, and pay progress claims 17 and 18, and taking back possession of the works without written consent.

[4] Mr Worthington started proceedings in the Queensland Civil and Administrative Tribunal (QCAT) to recover $93,696.83 for monies outstanding from his final payment claim. Dr Ryan defended on the basis that Mr Worthington was only entitled to be paid a reasonable sum for the value of the works, and that had already been paid. He also counterclaimed for $54,727.76, being liquidated and other damages.

[5] At first instance in QCAT Mr Worthington succeeded, and was awarded $80,833.09 after setting off a small sum for Dr Ryan's losses.[1] Dr Ryan appealed. QCAT's Appeal Tribunal allowed the appeal, set aside the orders, and remitted the matter "for determination according to law".[2]

[6] The Appeal Tribunal made a number of findings that are relevant:

• (a) first, at first instance the Member made an error of law by awarding damages on a basis not claimed or pleaded, thereby denying procedural fairness; there is no challenge to this finding; the Appeal Tribunal decided that error was sufficient in itself to warrant remitting the matter for fresh determination;[3]
• (b) secondly, the Member erred in the calculation of the damages;[4] but for the decision to remit, the Appeal Tribunal would have reduced the damages figure by $17,844.38;

The Appeal Tribunal's approach to construction of a contract.

[9] The Appeal Tribunal commenced its examination of the construction arguments saying:[7]

"The Tribunal has previously observed that the construction of a contract is a matter of fact. Accordingly leave would be required unless the finding was one not open on the evidence before the Tribunal which would constitute an error of law."

[10] For that proposition the Appeal Tribunal cited only Hodges v Queensland Building Services Authority.[8] That was a single Member decision of QCAT which stated: "The construction of a contract is a matter of fact".[9] No authority was cited in Hodges to support that proposition.

[11] After examining the clauses of the contract and the Member's Reasons, the Appeal Tribunal stated its reasons for rejecting the challenge to the Member's construction of clause 15.1 and 21.1, in these terms:

"The learned Member's interpretation of the clause and her finding that the claim was made within a reasonable time was open on the evidence."[10]

"The learned Member's interpretation of the clause and her findings, that the reasons relied upon by Mr Worthington were causative of the delay and that the delays caused by the pool builder, the extent of variations to the scope of work and the extent of rain could not have been foreseen at the date of the contract, were matters of fact open on the evidence."[11]

[12] There is long standing authority that the proper construction of a contract is a question of law, not a question of fact.[12] The matter is not in doubt, and Counsel for Mr Worthington did not contend otherwise.[13] The proper construction of a contract is not a matter that is determined by reaching the conclusion that a particular construction is "open on the evidence". To say that is to treat the proper construction as a question of fact.

[13] Counsel for Mr Worthington attempted to demonstrate that, properly understood, the Appellate Reasons revealed no more than the Appeal Tribunal's discussion of factual findings which then enlivened the clauses in the contract.[14] I do not accept that submission. The Appeal Tribunal plainly proceeded on the basis that the construction of a contract was a question of fact.

[14] The Appeal Tribunal adopted an incorrect approach to that question and thereby failed to properly consider the issue agitated on the appeal to it, namely the correct construction of clauses 15.1 and 21.1.

[15] The need to ensure that QCAT proceeds on the correct legal basis when dealing with questions of construction of contract, warrants the grant of leave under s 150 of the QCAT Act.

[16] This ground succeeds.

[17] Clause 21.1 gives the owner a right to terminate the contract in particular circumstances under s 90 of the Domestic Building Contracts Act 2000 (Qld). It provides:

"21.1 Owner's right to terminate the Contract under Section 90 of the Act

The Owner may terminate this Contract in accordance with section 90 of the Act if:

(a) the Contract Price increases by 15% or more after the Contract is entered into because of the operation of a cost escalation clause (as that term is defined in section 11 of the Act); or

(b) the Works have not been completed within one-and-a-half times (1 1/2) the initial contract period, including allowed delays.

The Owner may only terminate the Contract under this Clause where the reason for the increased time or cost was something that could have been reasonably foreseen by the Builder on the date this Contract was entered into and, in the case of an increase in the Contract Price, the increase was not due to a delay for which the Owner or the Owner's Agent was responsible."

[18] Dr Ryan relied on clause 21.1(b) to terminate on 12 August 2011, i.e. that the contract works had not been completed in 1.5 times the contract period, including allowed delays. His entitlement to do so depends on establishing that the reason for the increased time was "something that could have been reasonably foreseen by the Builder on the date [the] Contract was entered into". That is, on 13 January 2010 could Mr Worthington have reasonably foreseen the reason for the actual delay that occurred?

[19] The reference in clause 21.1 to "allowed delays" is a clear reference to delays allowed under clause 15.1 which governed the builder's entitlement to extensions of time. It relevantly provided:

"15.1 Builder's entitlement to extensions of time

If the progress of the Works is delayed as a result of:

(e) inclement weather or any condition arising as a result of inclement weather;

(f) any act, default or omission on the part of the Owner, or the Owner's Agent, including any failure to consent to a variation under Clauses 13 or 14 or failure to sign a variation document;

(g) any suspension of the Works under this Contract; or

(h) any other cause beyond the reasonable control of the Builder;

the Builder may, within a reasonable time, claim a reasonable extension of the Date for Practical Completion Stage equal to the period of the delay."

[20] As at 12 August 2011 (the date of purported termination) Mr Worthington had not made a claim for an extension of time under clause 15.1.

[21] The member made a number of findings about the reasons for the delay. None of those findings were challenged on the appeal to QCAT or on this application. There were four reasons identified, as follows:[15]

• (a) the works were held up by delays caused by the pool construction, which started on 21 July 2010 and finished in August 2011; while it was under way access to the site was limited; pool construction delays were caused by rain and late payment of progress payments to the pool contractor, and that affected the balance of construction on the site; the pool contractor left the site to attend to other work; delay on the pool construction affected work by Mr Worthington, on retaining walls, major block walls, the tennis court and water tanks;
• (b) rain affected the access point for machinery, and it was difficult to get machinery on site until it dried out;
• (c) wet days caused 98 days delay to practical completion;
• (d) claimed variations caused delay of 107 additional days to practical completion;
• (e) delay was caused by Dr Ryan's input; for example the lack of timely decisions on joinery necessitated putting off carpenters, resulting in 30 days of delay.

[22] The Member found a total of 208 days of delay were caused by the variations and rain.[16]

[23] The impact of the pool construction delays requires a little elaboration. Originally the pool construction was in the contract works. The pool works were then excised from the contract by an agreed variation. The pool construction was let to a different builder over whom Mr Worthington had no control.

[24] Dr Ryan contends that clause 11.12 also has some impact on this question. It makes the owner "liable" to the builder for delay caused where the owner "obstructs, interferes with, or hinders the performance of the Works":

"11.12 Owner not to interfere with the carrying out of the Works

The Owner, must not obstruct, interfere with or hinder the carrying out of the Works. The Owner must take all reasonable steps to prevent all others from obstructing, interfering with or hindering the carrying out of the Works.

If the Owner or any person authorised by the Owner obstructs, interferes with, or hinders the performance of the Works, the Owner is liable to the Builder for any delay, and any additional costs incurred by the Builder, if the Builder gives the Owner a written notice advising of the delay or the additional cost within five (5) Days of the Builder becoming aware of the obstruction, interference or hindrance."

[25] Dr Ryan contends[17] that the way to construe clause 21.1 is by reference to clauses 15.1 and 11.12, so that clause 15.1 exhaustively sets out those reasons for delay that are reasonably foreseeable. That includes variations, inclement weather, acts on the part of the owner, and "any other cause beyond the reasonable control of the Builder".

[26] For a number of reasons I do not accept that contention.

[27] First, clause 15.1 simply deals with those causes of delay to the works which the parties agree can be the subject of an extension of time claim. Some are identified specifically, such as clauses 15.1(a), (e) and (f), which deal with variations, inclement weather, and acts or omissions on the part of the owner. Others are not, such as in clause 15.1(h) which refers to "any other cause beyond the reasonable control of the Builder". True it is that one can say that variations, wet weather, and owner's acts and omissions may be foreseeable, but that is not a necessary criterion for clause 15.1 to operate. Clause 15.1 says nothing about foreseeability, merely whether a particular category of delay can be claimed as an extension.

[28] Secondly, the construction advanced would produce odd results. Clause 15.1(a) refers to variations. Clause 12 deals with agreed variations. It was an agreed variation that excised the pool construction from Mr Worthington's contract. The direct result of that variation was that Dr Ryan let the pool construction to a different builder, who was not under Mr Worthington's control. The pool builder delayed the entire construction for reasons solely confined to the performance of that contract, including delay as a result of not being paid in a timely way, and leaving the site to attend to other work.

[29] Under the construction advanced that delay caused by that variation would be foreseeable because it comes within clause 15.1(a). Yet it takes only a moment to see that it was not possibly foreseeable.

[30] Thirdly, the contention runs into a logical difficulty when clause 21.1 is applied. Termination is only available under clause 21.1(b) where the reason for the delay was "something that could have been reasonably foreseen by the Builder on [the] date the Contract was entered into". There is no evidence that would support a conclusion that, at the date the contract with Mr Worthington was entered into, there was any reason to think that the pool construction might be excised by variation. How it could possibly be foreseeable is difficult to follow. Further, there is no challenge to the finding made by the member, that the "delays caused by the pool builder were not foreseeable at the time the contract was entered into". Counsel for Dr Ryan accepted that if the event was unforeseeable then clause 21.1 was not engaged.

[34] Clause 15.1 is set out in paragraph [19] above. This ground of the proposed appeal turns on the requirement in clause 15.1 that any claim for an extension be made "within a reasonable time". Dr Ryan's contention is that means within a reasonable time of the commencement of the event that causes delay, notwithstanding that the delay may be continuing, and the builder cannot wait until a period of delay is finally finished, or from the very last occurrence of the collective even[20] of delay.20

[35] The facts relevant to this contention are: Mr Worthington first purported to make an extension of time claim under clause 15.1 on 16 August 2011. That was eight months after the date for practical completion (24 December 2010) and after Dr Ryan purported to terminate on 12 August 2011.

[36] Dr Ryan relied upon the decision of this Court in Re Multiplex Constructions Pty Ltd.[21] That case concerned a clause which permitted an extension of time claim "within 28 days after the delay occurs". The Court held that phrase meant "after a time at which the contractor can say that it has been delayed notwithstanding that that delay may be continuing".[22]

[37] The full clause in Multiplex was different from clause 15.1 here:

"35.5 Extension of time for practical completion

1. When it becomes evident to the contractor that anything, including an act or omission of the principal, the superintendent or the principal's employees, consultants, other contractors or agents, may delay the work under the contract, the contractor shall promptly notify the superintendent in writing with details of the possible delay and the cause.
2. When it becomes evident to the principal that anything which the principal is obliged to do or provide under the contract may be delayed, the principal shall give notice to the superintendent who shall notify the contractor in writing of the extent of the likely delay.
3. If the contractor is or will be delayed in reaching practical completion by a cause described in the next paragraph and within 28 days after the delay occurs the contractor gives the superintendent a written claim for an extension of time for practical completion setting out the facts on which the claim is based, the contractor shall be entitled to an extension of time for practical completion."[23]

[38] Clause 35.5.3 is the analogue of clause 15.1 in the present case. There is no analogue to clause 35.5.1 in Multiplex. The fact that there was such a clause, obliging early notice to be given where it was evident that anything "may delay the work" was influential in the Court reaching the construction it did. The Court adopted the natural meaning of the phrase "after the delay occurs", and said:[24]

"In the first place, unlike the learned primary judge, we think that a natural meaning of the phrase "after the delay occurs" is after a time at which the contractor can say that it has been delayed notwithstanding that that delay may be continuing. Secondly the construction advanced by the respondent may lead to inconvenient and even unfair results in cases in which, like this one, the delay is substantial.

The purpose of the notice provision in the third paragraph, unlike the general warning notice of the possibility of delay required by the first paragraph, is to alert the superintendent to the need for investigation of the facts on which the claim is based in order to determine whether that justifies an extension of time for practical completion. The later any such notice is given after commencement of the delay, the later the superintendent may appreciate that need and the more difficult it may be for him to verify whether there has been delay and, if so, its cause. And where the delay and its cause continue for a very long while without any such notice being given the principal and the superintendent may be misled as to the likelihood of practical completion on the due date. Consequently, though it cannot be said that paragraphs 8 and 9 of cl. 35.5 require adoption of the appellant's construction, that construction leads to a result which is more convenient and fair.

It is equally important to the contractor to know, at an early stage after delay has commenced, whether it will be entitled to an extension of time in respect of that delay or whether it must commit extra resources or incur extra expenditure to make up the time lost. Yet if the delay is one which, for example, will continue until the date fixed for practical completion the contractor, on the respondent's approach, might not be able to make an effective claim under the third paragraph even though it knew, shortly after the delay commenced, that it would continue until the date of practical completion."

[39] Further there was an additional clause which influenced the construction in Multiplex. That was clause 36.1 which was described in these terms:[25]

"That clause related to the contractor's entitlement to damages for delay in completion of or disruption in the progress of work under the contract. It precluded any such entitlement unless three requirements were satisfied. The first was that an extension of time had been made or should properly have been allowed under cl. 35.5. The second was that any such damages had not been included in the value of any variation and were not payable under any other provision of the contract. And the third requirement was that the contractor should within 28 days "after the commencement of the delay" have given a notice in writing to the superintendent claiming damages in respect of that delay giving particulars."

[40] There is no analogue in this contract for clause 36.1 in Multiplex. The influence of that clause on the construction adopted is made clear in this passage:[26]

"Finally, whatever else may be said about cl. 36.1, there is no logical reason why the 28-day period in that clause should be any different from the 28-day period stated in the third paragraph of cl. 35.5. Absent any compelling reason they should, in our view, be given the same meaning. We would therefore give the same meaning to the phrase "after the commencement of the delay" in cl. 36.1 as that given to the phrase "after the delay occurs" in cl. 35.5."

[41] The particular provisions in Multiplex, and the fact that there are no analogues in the present case for clause 35.1 and 36.1, make Multiplex of limited assistance.

[42] In my view the ordinary words of clause 15.1 provide the answer to the construction of it. It permits the builder to claim an extension of time for practical completion if "the progress of the Works is delayed". The ordinary meaning of the word "progress" is: (i) to move forward, (ii) be carried on, and (iii) the advance or development of something.[27] Applied here it suggests that if the forward movement or advancement of the works is delayed, then a claim may be made within a reasonable time of that delay; that is, within a reasonable time of the impairment of the forward movement or advancement.

[43] That means that the builder cannot stand back and wait until the delay event comes to an end, or the delay is finalised. When the forward progress of the works is delayed, that starts the time running. The claim for an extension must be made within a reasonable time after the forward progress of the works is delayed, even if that delay, or the event which causes it, is not over.

[44] It is possible to conceive of delay events that commence but which do not cause immediate delay. For example, a strike in China which will impede the flow of materials for use in the works, where the strike is obvious, but the actual impediment has yet to occur. Or rain or industrial action where the actual impediment to forward movement or progress has yet to occur. In either case, the delay event may have started, but the actual delay to forward progress or forward movement of the works has not yet happened. In neither case would the right to claim an extension have arisen. That only occurs where the forward movement or progress is actually delayed.

[45] There are practical reasons why that approach satisfies the legitimate requirements of both the builder and the owner:

• (a) the making of such claims progressively means that the builder and owner know, at any time, the impact on the date for practical completion: see clause 15.3; that has implications for the obligation on the builder to insure under clause 6, and to get the works to practical completion under clause 8.3; and the obligations triggered by reaching practical completion, for example under clause 17, and during the defects liability period under clause 19;

[49] This ground contends that the Appeal Tribunal should have imposed its own decision on the questions raised rather than remit the matter for determination according to law.[31]

[50] The contention focuses on the words used by the Appeal Tribunal when it said it had "no alternative" but to remit the matter.[32] What is said is that the Appeal Tribunal thereby "failed to recognise that it was available to set aside the decision and substitute its own decision pursuant to s 146(b) of the QCAT Act".[33]

[51] In my view this contention can be quickly discounted. I do not consider that the Appeal Tribunal were saying that there was, in fact, no alternative to remitting the matter. Properly understood they were saying that in light of their findings the appropriate course was to remit.

[52] This ground fails.

[53] Dr Ryan's position is that he terminated in reliance on the fact that the works had not been completed within 1.5 times the initial contract period, including allowed delays. However that time was calculated on the basis that there were no claims for extensions of time. Whilst that is true, the calculation did not take account of the proper construction of clause 21.1, namely that termination was only available where the reason for the increased time was something that could have been reasonably foreseen by the builder.

[54] On its proper construction clause 21.1 did not, for the reason given above, catch the delays related the pool construction. Once the pool construction was excised from the contract it no longer formed part of Mr Worthington's contract or the works he had to perform. It was not foreseeable that the pool construction would be excised and put out to another builder, who would cause delays for reasons entirely to do with that builder and not Mr Worthington.

[55] Since Dr Ryan purported to terminate the contract a month or so after 1.5 times the initial contract period, his purported termination did not take into account the unforeseeable period of extensive delay due to the pool contract. Without taking that into account his termination was ineffective, as the Member found.

[56] The relevant orders made by the Appeal Tribunal were that:[34]

• the orders made by the Member were set aside;
• the "matter is remitted to the Tribunal for determination according to law"; and
• the proceeding was listed for directions.

[57] Even though Dr Ryan has succeeded in respect of challenging the Appeal Tribunal's approach to construction of the contract and clause 15.1, he has failed in his challenge to the construction of clause 21.1 and the relief granted by the Appeal Tribunal.

[58] It has been demonstrated that the Member at first instance and the Appeal Tribunal have proceeded on an erroneous basis. Notwithstanding the complaints by Dr Ryan that Mr Worthington had no properly formulated claim for damages before the Member, in my view that is a matter best dealt with by QCAT, especially given the nature of its jurisdiction to deal with claims with less formality than a court normally requires.

[59] Even though Dr Ryan has had a degree of success, I consider that the appropriate order is that made by the Appeal Tribunal, that is the matter should be remitted to the Member, for determination according to law and in the light of these reasons. Indeed Counsel for Dr Ryan conceded that it was open to the Appeal Tribunal to remit the matter given its finding that Dr Ryan had been denied procedural fairness by the Member.[35]

[60] For the reasons given above I would make the following orders:

1. The application for leave to appeal is granted.
2. The appeal is dismissed.
3. The parties have leave to make such submissions as they may be advised as to the costs of the application and appeal, to be filed and served within 14 days of today.

[61] PHILIPPIDES JA: I agree that the orders proposed by Morrison JA should be made for the reasons stated by his Honour.

[62] FLANAGAN J: I have had the advantage of reading the reasons for judgment of Morrison JA. I agree with those reasons and with the orders proposed by his Honour.

[1] Worthington v Ryan [2013] QCAT, 3 April 2013; Appeal Book (AB) 1219. Dr Ryan did not recover any liquidated damages; the only amount set off was a sum of $1,357.76 for his electricity charges: AB 1234.

[2] Ryan v Worthington [2014] QCATA 277, 23 September 2014; AB 1235. The appellate division reasons will be referred to as Appellate Reasons, and the Member's reasons as Member's Reasons.

[3] Appellate Reasons, paragraphs [5]-[19].

[4] Appellate Reasons, paragraphs [21]-[37].

[5] Appellate Reasons, paragraphs [37]-[38].

[6] Appellate Reasons, paragraphs [47]-[62].

[7] Appellate Reasons, paragraphs [49]. Internal footnotes omitted.

[8] [2013] QCAT 576. (Hodges)

[10] Appellate Reasons [55], dealing with clause 15.1.

[11] Appellate Reasons [62], dealing with clause 21.1.

[12] Life Insurance Co of Australia Ltd v Phillips [1925] HCA 18; (1925) 36 CLR 60 at 79; Westport Insurance Corporation v Gordian Runoff Ltd [2011] HCA 37; (2011) 244 CLR 239, [82]; Pioneer Shipping Ltd v BTP Tioxide Ltd [1982] AC 724, 736; Pilgrim Shipping Co Ltd v State Trading Corporation of India Ltd (The "Hadjitsakos") [1975] 1 Lloyd's Rep 356, 361 and 366; Yu Feng Pty Ltd v Maroochy Shire Council [2000] 1 Qd R 306, at 335; Mackay Sugar Ltd v Sugar Australia Pty Ltd [2013] QSC 233, [72]; Studorp Ltd v Robinson [2012] NSWCA 382, [16].

[13] Appeal transcript T 1-35 line 45 - T 1-36 line 1.

[14] Appeal transcript T 1-36 lines 2-5, T 1-38 lines 14-17.

[15] Member Reasons [12](f); AB 1222.

[16] Member Reasons [12](g); AB 1224.

[18] Member's Reasons at [17]; AB 1226.

[19] Appeal transcript T 1-10 lines18-30.

[21] [1999] 1 Qd R 287. (Multiplex)

[22] Multiplex at p 290, per Davies JA and Lee J, Pincus JA concurring.

[23] Appendix to the reasons in Multiplex.

[27] The Australian Concise Oxford Dictionary, 1st Australian ed, 1987.

[28] For example, Member's Reasons at [62]-[63].