CITATION:	H K Developments Pty Ltd v Carter [2015] QCAT 297	

PARTIES:	H K Developments Pty Ltd
(Applicant)	
	v	
	Nathan Carter
(Respondent)	

APPLICATION NUMBER:	BDL056-11	

MATTER TYPE:	Building matters	

HEARING DATE:	21 July 2015	

HEARD AT:	Brisbane	

DECISION OF:	Member Gardiner	

DELIVERED ON:	4 August 2015	

DELIVERED AT:	Brisbane	

ORDERS MADE:	1.	H K Developments Pty Ltd pay Nathan Carter the sum of $52,278.07 in full and final satisfaction of this matter by 20 August 2015.
2.	Nathan Carter file in the Tribunal two copies and give to H K Developments Pty Ltd one copy of any application with any written submissions and supporting documentation in relation to costs by 28 August 2015.
3.	H K Developments Pty Ltd file in the Tribunal two copies and give one copy to Nathan Carter of any submissions and supporting documentation in response to any application for costs by 18 September 2015.
4.	Nathan Carter file in the Tribunal two copies and give to H K Developments Pty Ltd one copy of any submissions in reply by 2 October 2015.
5.	The application for costs be determined by the Tribunal on the papers without an oral hearing not before 2 October 2015.	

CATCHWORDS:	BUILDING – where the builder issued a progress claim for payment – where owner failed to pay the progress claim – where builder suspended the works – where owner terminated the contract – where the builder seeks final payment for completed building work and variations – where owner alleged practical completion not reached

Domestic Building Contracts Act 2000 (Qld), s 67, s 80, s 84
Queensland Building and Construction Commission Act 1991 (Qld), s 77

Smyth (Ross T) & Co Ltd v Bailey, Son & Co [1940] All ER 60
Larratt v Bankers and Traders Insurance Co Ltd (1941) 41 SR (NSW) 215; followed
Bellgrove v Eldridge (1954) 90 CLR 613
Johnson v Perez (1988) 166 CLR 351
Gilbert-Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd [1974] AC 689; followed
Nguyen v Luxury Design Homes Pty Ltd (2005) 21 BCL 46; referred
QLine Interiors Pty Ltd v Jezer Construction Group Pty Ltd & Ors [2002] QSC 088
Chelbrooke Homes Pty Ltd v Russell & Anor [2011] QCAT 278; followed

Cremean, D.J, M.H Whitten and M F Sharkey Brooking on Building Contracts (LexisNexis Butterworths Australia, 5th ed, 2014); referred	

APPEARANCES:

APPLICANT:	No appearance	

RESPONDENT:	Nathan Carter	

REASONS FOR DECISION

[1]	H K Developments filed an application in March 2011 seeking final payment in a building contract between itself and Nathan Carter for a home built at Springfield. 
[2]	This matter was heard over five days between September 2013 and April 2014. A decision was handed down on 14 July 2014.
[3]	The matter went on appeal and it was returned for rehearing. The Appeal Tribunal ordered that H K Developments pay into the Trust Account of QCAT by 4:00pm on 30 April 2015 the sum of $79,841.45 pending the rehearing. I am informed that no such payment has been received by the due date or thereafter. 
[4]	The re-hearing took place on 21 July 2015. The applicant, H K Developments did not appear. This non-appearance was addressed by me as a preliminary matter at the commencement of the hearing and I determined that the matter should proceed in H K Developments’ absence.
[5]	These reasons should be read in conjunction with the reasons previously published on 14 July 2014. 
[6]	The Appeal Tribunal identified four questions to be further determined. They are whether:
a)	the giving of the notice to suspend work by H K Developments was a repudiation of the contract; 
b)	Mr Carter lawfully terminated the contract on 16 February 2011;
c)	Mr Carter is entitled to damages to be assessed for a breach of contract by H K Developments;
d)	H K Developments is entitled to a quantum meruit for the value of work it has performed subject to progress payments already made and the Mr Carter’s damages claim.
[7]	Each of these questions will now be addressed. 
Was the giving of the notice to suspend work by H K Developments a repudiation of the contract?
[8]	The Appeal Tribunal found that H K Developments did not lawfully suspend the building contract between the parties on 4 February 2011.
[9]	It was satisfied there was no proper variation for the purpose of the contract that might ground a notice of suspension. As I had been satisfied that the contract had not reached practical completion for the reasons given in the earlier decision, Mr Carter was not in breach of the contract as there was no obligation to pay valid variations.
[10]	The Appeal Tribunal concluded that there was no basis in law for H K Developments to issue the notice to suspend works, as such a notice to suspend could not issue in circumstances where there was not a proper claim under the contract for variations. 
[11]	Arising from this, the observation of the Appeal Tribunal (with the party’s names inserted for easier reading in these reasons) was as follows:
It may well be that H K Developments’ demand for a payment that was not properly due under the contract, was itself unlawful. It may amount to a breach of a contract entitling Mr Carter to accept the repudiation and provide a notice of intention to terminate as was done.
Thus the position with respect to termination of the contract and the consequences which flow from that could be entirely reversed from the position as held by the learned Member at first instance. 
[12]	The H K Developments notice dated 4 February 2011, sought to suspend the works under clause 16 of the contract because:
a)	Progress claims had not been made under clause 11.7 of the contract; and 
b)	Variations under clause 12.5 of the contract had not been paid for. 
[13]	The progress claims were not identified in the notice. In the first hearing I was not satisfied that the notice sufficiently identified which progress payment H K Developments alleged has not been made by Mr Carter. I found Mr Carter must be able to identify the breach alleged by H K Developments in order to remedy the breach under clause 16.3 of the contract and that the first ground of H K Developments’ suspension notice did not sufficiently particularise the alleged substantial breach. H K Developments did not appeal this finding and this was not overturned in the course of Mr Carter’s appeal. 
[14]	The Appeal Tribunal found no proper variation for the purpose of the contract and not one such that the failure to pay might ground a valid notice, as discussed above. 
[15]	As these two grounds are the only basis for the suspension notice, the inevitable conclusion – as found by the Appeal Tribunal, is that there was no basis in law to issue the notice to suspend works.
[16]	Is this a repudiation of the contract by H K Developments?
[17]	As discussed in the earlier reasons, repudiation of a contract ‘is a serious matter and should not be found lightly or inferred’ and the whole of the circumstances are to be considered.
[18]	I was satisfied at the first hearing of this matter that H K Developments was relying on the contract to suspend the works, although now this has been found to be unlawful. 
[19]	Mr Carter then took possession of the works on the day he issued the Notice to Terminate – 16 February 2011. I was also satisfied on the last occasion that H K Developments then appeared to be willing to complete the contract if possible, subject to any contractual remedy. 
[20]	I have no further evidence before me to change this finding and I am therefore satisfied that the giving of the notice to suspend work by H K Developments was not a repudiation by it of the contract.
Did Mr Carter lawfully terminate the contract on 16 February 2011? 
[21]	The short answer to this is yes.
[22]	Mr Carter issued a Notice of Intention to Terminate dated 5 February 2011 disagreeing that practical completion had been reached or that there were no monies owing under variations. He gave a further Notice to Terminate the contract on 16 February 2011 denying he was in breach in the same terms as the first notice and on the basis of clause 20.1(b) of the contract saying H K Developments:
•	was failing to proceed with the works with due diligence or in a competent manner;
•	Refused or neglected to remove or remedy defective work or improper materials;
•	Was unwilling to complete tasks;
•	Was in substantial breach of the contract. 
[23]	I am satisfied that both these notices were valid under clause 20 of the building contract between the parties.
[24]	Based on my earlier findings and those of the later Appeal Tribunal, H K Developments is in breach of the contract as the original suspension notice is invalid. Mr Carter’s termination notice was therefore lawful.
Is Mr Carter entitled to damages to be assessed for a breach of contract by H K Developments? 
And
Is H K Developments entitled to a quantum meruit for the value of work it has performed subject to progress payments already made and the Mr Carter’s damages claim?
[25]	Generally under a building contract, damages are assessed as the difference between the contract price for the build and the cost of finishing the reasonable and necessary work required under the contract, This assessment must be reasonable in the circumstances and Mr Carter can not claim damages which could have been avoided by his taking reasonable steps to mitigate any loss. Generally, damages are assessed when the cause of action arises but this general rule is displaced to fairly compensate for any loss suffered.
[26]	Mr Carter urges me to undertake a different method of assessment in the circumstances of this matter and provided a method of assessing the monetary outcome based on this different assessment. For ease of reference, this was identified as the ‘entire contract’ method.
[27]	Mr Carter conceded if he was not successful using this principle, then the more traditional method of assessing any damages as outlined above would also be available. In this event, Mr Carter provided a further method of assessing the monetary outcome based on this more traditional calculation.
[28]	In the absence of H K Developments, Mr Carter submitted it was not for him to provide an assessment of the value of any work performed by H K Developments under this contract. I accept this submission and must therefore decide this matter on the evidence before me.
[29]	A building contract has been described as an entire contract for the sale of goods and work and labour for a lump sum price payable by instalments as the goods are delivered and the work done. The NSW Court of Appeal commented
The reason building contracts are construed as being entire, even when there is no such express undertaking to that effect, is plain. It is the essence of such a contract that the consideration for the payment of the contract sum is “entire and indivisible”. A partially completed building is of little use to the owner of the land upon which it is constructed.
[30]	However, historically a building contract was considered a ‘simple contract’ rather than one for the sale of goods and until statutory intervention, were not required to be in a particular form. These building contracts were considered to be contracts to supply work and labour rather than for the sale of goods which generally required some form of written, signed contract.
[31]	Mr Carter’s first submission under these two questions is that this contract should be interpreted as an ‘entire contract’. Mr Carter specifically relies on s 67 of the Domestic Building Contracts Act 2000 (Qld) (DBC Act), in force at that time. He submits that this section reflects this ‘entire contract’ approach. 
[32]	Section 67 is a penalty provision under the DBC Act. Reliance on it does not assist the interpretation of this civil contract. To rely on this construction, I must first look to see if the contract contains an ‘entire contract’ clause which is said in general to bind the parties in accordance with its terms, properly construed.
[33]	An examination of the contract discloses no such clause. Indeed there is a competing construction disclosed in clauses 20.5 and 21.3 which allows, if the contract is ended by the owner’s termination or statutory rights, the contractor is entitled to a ‘reasonable amount for the value of the Works carried out under the Contract to the date the Contract is ended’. 
[34]	Under this ‘entire contract’ approach, Mr Carter seeks to be relieved any final contractual payment outstanding to H K Developments. In return, he proposes he would not seek any of his costs for defective or incomplete work undertaken by him to complete the build. 
[35]	Using this approach, Mr Carter only seeks liquidated damages under the contract. 
[36]	The method by which I am bound in this matter is not the ‘entire contract’ method submitted by Mr Carter but the general rule enunciated by the High Court in Bellgrove v Eldridge. The Court restated the rule that for a simple contract, the measure of damages was the difference between the contract price for the work contracted for and the reasonable costs of making the work conform to the contract plus any other damages. The High Court contrasted a Sale of Goods contract specifically upholding the general method of assessing damages discussed above.
[37]	I am satisfied Mr Carter is entitled to damages to be assessed for a breach of contract by H K Developments. On the authorities listed above, the appropriate method to be adopted is the method of assessing damages for a simple contract. 
Damages Assessment
[38]	Mr Carter’s original application sought damages of $113,024.80 plus liquidated damages of $12,900.00, interest and costs. 
[39]	At the rehearing of this matter, and in the absence of any evidence from H K Developments of the value of the work it has performed under the contract, Mr Carter submitted his calculation for the assessment of damages as follows: 
Contract Price		$670,000.00
Minus costs of defective and incomplete work		$ 35,961.00
	Subtotal	$634,039.00
Minus progress payments made to H.K 		$603,000.00
	Balance to builder	$ 31,039.00
[40]	I accept Mr Carter’s assessment on the evidence available before me.
Liquidated Damages
[41]	Mr Carter seeks liquidated damages under clause 18 of the contract for the failure of H K Developments to bring the works to the Practical Completion stage on the date contemplated by the contract.
[42]	Although the contract is dated 10 February 2010, Mr Carter gave evidence that the works commenced on 16 March 2010. Clause 10 allows 208 days to Practical Completion stage under the contract – 10 October 2010. Mr Carter gave evidence that no extensions of time were agreed by the parties so that the number of days from Practical Completion stage to termination of the contract (16 February 2011) is submitted by Mr Carter as 128 days.
[43]	I accept this submission. At the liquidated damages rate under the contract of $100 per day, this amount is set at $12,800.00.
[44]	The final figure to be paid to H K Developments is therefore:
		$ 31,039.00
	Minus	$ 12,800.00 
	Sub- Total 	$ 18,239.00
Interest
[45]	Under s 77(2)(c) of the Queensland Building and Construction Commission Act 1991 (Qld), I may award interest as prescribed by regulation from the date an amount becomes payable until it is paid. If the parties entered into a contract, interest awarded is payable at the rate specified in the contract. Clause 19 of the contract schedule sets this amount at 15%. 
[46]	I am satisfied the fair date to calculate interest is the date the contract was validly terminated by Mr Carter - 16 February 2011 and that the concluding date for the calculation of interest should be the date of the previous decision under which monies were paid to H K Developments. Interest is still payable to H K Developments on overdue payments under this clause of the contract between the parties.
Conclusion 
[47]	The amounts owing under the contract are as follows:
Contract Price		$670,000.00
Minus costs of defective and incomplete work		$ 35,961.00
	Subtotal 	$634,039.00
Minus progress payments made to H.K 		$603,000.00
	Balance to builder	$ 31,039.00
Minus liquidated damages		$ 12,800.00 
	Sub-Total 	$ 18,239.00
Plus Interest at 15% payable to builder 
(1244 days excluding date of decision) 		$ 9,324.38
Total 		 $ 27,563.38
[48]	H K Developments was paid $79,841.45 by Mr Carter under the previous order. The amount that must now be returned to Mr Carter is the difference between the two amounts - $52,278.07. 
[49]	The final amount payable to Mr Carter in full and final settlement of this matter is $52,278.07.
Costs of the parties
[50]	Mr Carter has applied orally for his costs. Directions will be made for the filing of submissions in support of this application.