CITATION: Stadaline Pty Ltd H& N Latter Family Trust v Hassani [2013] QCAT 400
PARTIES: Stadaline Pty Ltd H& N Latter Family Trust
(Applicant)
v
Mehdi Hassani
(Respondent)
APPLICATION NUMBER: BDL080-13
MATTER TYPE: Building matters
HEARING DATE: 25 July 2013
HEARD AT: Brisbane
DECISION OF: Sandra G Deane, Member
DELIVERED ON: 2 August 2013
DELIVERED AT: Brisbane
ORDERS MADE: 1. Stadaline Pty Ltd H& N Latter Family Trust is to pay Mehdi Hassani damages and interest in the sum of $1,871.87 upon receipt of this order.
2. Stadaline Pty Ltd H& N Latter Family Trust is to pay Mehdi Hassani interest at the rate of $0.50 per day on and from 3 August 2013 until and including the day the amount for damages and interest is paid.
CATCHWORDS: COMMERCIAL BUILDING DISPUTE – where head contract terminated by building owner for alleged breach by subcontractor – whether amounts paid pursuant to an adjudication under the Building and Construction Industry Payments Act 2004 should be repaid – whether the head contractor was entitled to terminate – whether the head contractor or subcontractor is entitled to damages and interest
Building and Construction Industry Payments Act 2004 (Qld) s 31;
Queensland Building Services Authority Act 1991 (Qld) s 77(c) Queensland Building Services Authority Regulation 2003, Regulation 34B
Nairn Constructions Pty Ltd v Industrial Roof Technology [2012] QCAT 501
APPEARANCES and REPRESENTATION (if any):
APPLICANT: Stadaline Pty Ltd H& N Latter Family Trust
represented by Mr H Latter, Managing Director
RESPONDENT: Mehdi Hassani (in person)
REASONS FOR DECISION
[1] Stadaline Pty Ltd is a painting contractor. In October 2012 Stadaline entered into a contract to paint a house for Mrs Palmer at Holland Park and subcontracted those works to Mr Hassani. The work to be performed was set out in Work Description Sheet no 21659. The work included washing the areas to be painted.
[2] Mrs Palmer alleged that the interior walls of the house had not been washed prior to having been painted and purported to terminate the head contract and has refused to pay the balance of the contract price. Mr Latter on behalf of Stadaline accepted the termination and consequently terminated the subcontract. A large part of the work had been completed at this time. Mr Hassani sought payment. Stadaline disputes Mr Hassani’s entitlement to payment and claims damages.
[3] Mr Hassani brought a successful adjudication under the Building and Construction Industry Payments Act 2004 (Qld) (BCIPA). Stadaline paid $3,000 pursuant to the adjudication but refused to pay the costs paid by Mr Hassani and awarded in the sum of $770 and refused to pay the amount of interest determined as payable in the sum of $68.97. Stadaline did not seek to have the adjudication set aside under BCIPA but rather commenced proceedings for a commercial building dispute in this Tribunal.
[4] The Tribunal has previously accepted that the parties are entitled to an interim determination (adjudication) but despite the apparent duplicity of process are also entitled to seek a final determination of any entitlements under the construction contract in this Tribunal or where appropriate the Courts.
[5] Stadaline seeks:
a) its loss of profit calculated by reference to the price payable under the head contract less deposit paid and less the subcontract price;
b) repayment of the $3,000 paid pursuant to the adjudication;
c) an order relieving it from paying costs and interests awarded by the adjudication;
d) costs in the sum of $275, being the filing fee.
[6] There is no dispute that the subcontract price was $5,182 nor that Mrs Palmer paid a deposit of $757. There is some conflicting evidence as to the price payable under the head contract. A copy of the invoice to Mrs Palmer was attached to the Response. It stated that the price was $7,909. However Exhibit 7 suggests the price should have been $7,579 and that the invoice was in error. The amount claimed for loss of profit in the Application was $1,451.80.
[7] Mr Latter was unable to explain the difference in the head contract price in the documents but accepted it was more likely that the invoice was overstated by $330. Mr Latter was unable to explain the difference between these amounts and the amount claimed in the Application but agreed to restrict Stadaline’s claim to the amount stated in the Application.
[8] Stadaline as applicant is required to establish that it is more likely than not that Mr Hassani was in breach of the subcontract and that breach entitled Stadaline to terminate it and claim damages.
[9] In order to establish an entitlement to damages it is necessary for Stadaline to demonstrate that Mr Hassani’s actions caused Stadaline to be in breach of the head contract and that entitled Mrs Palmer to terminate and to refuse to pay for the work performed.
[10] Not every breach of contract entitles the other party to terminate a contract. Only a breach of a fundamental term entitles the other party to terminate. Written contracts will usually distinguish between breaches that give rise to a right of termination and one which will not. If a breach is not a breach of a fundamental term then the party’s remedy is one of damages only to compensate it for not receiving what it contracted to receive.
[11] I am not satisfied that Stadaline has established, on the balance of probabilities, that it was entitled to terminate the subcontract and therefore I find that Stadaline has not established an entitlement to damages in the form of loss of profits.
[12] The subcontract was only in writing to the extent of the Work Description Sheet no 21659. Mr Latter gave evidence that there was a written head contract. However its terms were not in evidence before me.
[13] Mrs Palmer alleged Stadaline was in breach of the head contract because she contends that the walls were not washed prior to being painted. Mrs Palmer admits that she was not on site all the time. Mr Latter admits he was not on site all the time. He contends that there was insufficient time for the walls to be washed using a bucket and rag.
[14] Mrs Palmer’s and Mr Latter’s evidence is effectively that they didn’t see the walls being washed and they don’t believe they were washed. Mr Latter had no contemporaneous records such as a work diary to assist to corroborate the time lines he advanced. Mr Hassani denies Mr Latter’s version of events as to the number of times Mr Latter was on site, when he was on site and the conversations that occurred. There was also no independent expert evidence provided to the Tribunal.
[15] Against this Mr Hassani and Mr Bostani, one of Mr Hassani’s workers, gave evidence that the walls were washed prior to the walls being painted. Their evidence was that Mrs Palmer’s accountant attended site while they were washing the walls. It is unfortunate that neither party obtained a statement from the accountant or requested the Tribunal to issue a Notice to Attend the hearing.
[16] In the circumstances I prefer the direct evidence of 2 people who were on site at all relevant times that the walls were washed. Accordingly I find that there was no breach of either the head contract or subcontract as alleged.
[17] Even if I was persuaded that the walls had not been washed there is no evidence before me upon which I could find that this was a breach of a fundamental term entitling termination as distinct from damages.
[18] There is also no evidence that the painting was in some way defective e.g. the paint would not last as long or the finish was rough because dirt had been painted over and trapped beneath the surface. Mr Latter’s evidence was that he did not thoroughly inspect the work to determine if there were defects and that he accepted Mrs Palmer’s entitlement to terminate without having specific regard to the terms of the head contract and then proceeded to terminate the subcontract.
[19] A breach entitling termination of the head contract does not necessarily entitle termination of the subcontract unless the terms are “back to back”. There is no evidence that the terms were “back to back”. There is no evidence that such a breach, even if one occurred, gave rise to a right to terminate the head contract.
[20] In order to determine the other parts of Stadaline’s claim it is necessary to determine whether any amounts are payable to Mr Hassani in relation to the subcontract and in doing so to take account of the amount already paid pursuant to the adjudication.
[21] Mr Hassani seeks:
a) the balance of the contract sum, $2,182;
b) the amounts awarded by the adjudication but unpaid, $838.97.
[22] Mr Hassani conceded that at the time the subcontract was terminated the subcontract works were not complete.
[23] His right to payment under the subcontract merges with his entitlement to damages for having his subcontract wrongfully terminated. If the subcontract had not been wrongfully terminated he would have completed the works and expended money in doing so. His loss is the difference between the amount he would have received had the contract been performed i.e. the subcontract price and the amount he would have expended in completing the works less amounts received.
[24] Mr Hassani gave evidence that:
a) there was approximately 36 man hours of work to complete the work;
b) he paid his 2 workers at the rate of $30 per hour on a casual basis and that he did not pay them for the day and a half each which were not performed;
c) he needed to buy some additional paint to complete the work, which he estimated would have cost him between $300 and $500;
d) he had already bought paint and materials for the job at a cost of approximately $770.
[25] I accept Mr Hassani’s evidence as to the costs to complete. I find that additional paint would have cost approximately $400.
[26] I find that Mr Hassani’s loss as a result of Stadaline’s wrongful termination was $1,062 calculated as follows:
Subcontract Price $5,182
Less amount paid $3,000
Subtotal $2,182
Less amounts to be expended to complete
- 2 workers x $30/hour x 12 hours $ 720
- additional paint $ 400
Loss $1,062
[27] It is not appropriate to order that Stadaline be repaid the amount of $3000 paid under the adjudication.
[28] In addition Mr Hassani has suffered loss in that it was necessary for him to bring an adjudication application against Stadaline as it refused to pay any amount in respect of the work performed under the subcontract. This loss flows from Stadaline’s breach of the subcontract. Mr Hassani has paid fees in respect of the adjudication in the sum of $770.
[29] I find that Mr Hassani is entitled to be compensated for that loss. It is not appropriate to relieve Stadaline from the obligation of payment of these fees under the adjudication. This does not entitle Mr Hassani to receive such an amount more than once.
[30] Mr Hassani claims interest awarded by the adjudicator and unpaid. The Tribunal does not have jurisdiction to enforce the adjudication award. In view of the findings it is not appropriate to relieve Stadaline from the obligation of payment of this amount under the adjudication.
[31] The Tribunal does have discretionary power to award interest on damages. The Tribunal may award interest at the rate of 10% on the damages awarded on and from the day after the day that the amount became payable until and including the day the amount is paid.
[32] During the course of the hearing Mr Hassani gave evidence of the costs to complete. Prior to that time he was seeking the balance of the subcontract price. I therefore consider it appropriate to exercise my discretion to award interest at the rate of 10% as follows:
a) on the amount of $660 on and from 25 January 2013, calculated as $0.18 per day;
b) on the amount of $110 on and from 23 April 2013, calculated as $0.03 per day;
c) on the amount of $1,062 on and from 25 July 2013, calculated at $0.29 per day.
Summary
[33] Stadaline is to pay Mr Hassani the following amounts:
a) Damages in the sum of $1,832;
b) Interest on damages calculated as at 2 August 2013 in the sum of $39.87;
c) Interest at the rate of $0.50 per day on and from 3 August 2013 until and including the day the damages and interest is paid.