New South Wales Supreme Court CITATION : Tanous -v- Zielinska [2000] NSWSC 789 CURRENT JURISDICTION: Equity Division Commercial List FILE NUMBER(S) : SC 50067/00 HEARING DATE(S) : 26.7.2000 JUDGMENT DATE : 26 July 2000 PARTIES : Gordy Tanous -v- Danula Zielinska JUDGMENT OF : Hunter J COUNSEL : Plaintiff: M F Galvin Defendant: T Moore SOLICITORS : Plaintiff: C R Fitzsimons Solicitor Defendant: Hovan & Co DECISION : The motion and summons are dismissed and I order the plaintiff to pay the defendant's costs of the proceedings and of the motion. THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST HUNTER J WEDNESDAY, 26 JULY 2000 050067/00 - GORDY TANOUS v DANULA ZIELINSKA REASONS FOR JUDGMENT 1 These proceedings were instituted by summons seeking the following relief: "1. An order pursuant to Section 61 of the Fair Trading Tribunal Act 1998 that the Notice of Order of the Fair Trading Tribunal dated 10 May 2000… be set aside. 2. Declaration that the said Notice of Order is void and of no effect. 3. A declaration that the said Notice of Order contains an error of law. 4. An order that the case be remitted to the Tribunal for further hearing. 5. An order staying the Notice of order and further conduct of the matter before the Fair Trading Tribunal." 2 In aid of paragraph 5 of the claims for relief the plaintiff moved by Notice of Motion of 31 May 2000 for the following order: "1. That the hearing of matter BU1999/1497 between the defendant as applicant and the plaintiff as respondent before the Fair Trading Tribunal of New South Wales be stayed until further order of this court." 3 On the return of that motion and of the summons the Court was informed that regardless of the outcome of these proceedings, that there were further outstanding disputes to be resolved before the Fair Trading Tribunal. 4 It was also apparent that the amount in issue was not so great as to make the incidence of costs of only passing importance. For those reasons, rather than dispose of the motion, I directed that the parties complete preparation for hearing and fixed the matter for hearing today. 5 The decision appealed against is that of Christine Paull of 10 May 2000 (the FTT decision). By that decision she found that the plaintiff (the respondent in the tribunal) had repudiated a building agreement of 22 October 1998 (the contract) made by him as builder with the defendant (the applicant in the tribunal) as proprietor. 6 The proceedings were conducted in the tribunal on documents and statements with no oral evidence adduced by either party. 7 There was a statement of agreed facts referred to in the FTT decision which is not before me but which accords with the agreed chronology which is part of the agreed bundle of documents, exhibit A. 8 The FTT decision noted an agreement of the parties that, as at 10 May 1999, that the proprietor had failed to "put into writing item 5 in variation number 6, being a prospective variation, and that her failure to do so triggered the (builder's) right to serve the Suspension Notice under clause 18 (f) of the Agreement". 9 Clause 11 of the contract provided as follows: "This Agreement and the Builder Works may only be varied in writing AND signed by the Contractor and the Owner. The Contractor is allowed to suspend the Building Work if the Owner verbally requests a variation BUT has not signed a variation form. The Contractor is not required to complete the variation until the Owner signs the variation form. The Contractor shall only be paid for those variations submitted to the Owner in writing and signed by the Owner prior to the variation being undertaken by the Contractor. The Contractor shall deduct the cost of all deletions from the Building Works from the Contract Price AND add the cost of all extra work to the Contract Price together with Builders margin, to be paid as follows:" 10 The "item 5 in variation number 6" was referred to in the document entitled "variation advice 6" dated 6 May 1999. That variation advice follows: " TO:- TTF Concepts (A) Please go ahead with the following variation at a cost of $ (B) The following variation has been approved at a cost of $ 1 Cut core holes to mid floor slab for plumbing penetrations. Penetrations could not be positioned prior to concrete pour due to lack of information of bathroom layout. Note The location of these plumbing penetrations do not have any resemblance to working drawings mark & cut out holes $ 1 800-00 for mid floor slab only. Note If electric wiring in slab is cut by core hole drilling, repair of these will incur extra costs. Price to be advised. 2 Construction of rear pergola townhouse 1 and 2 form tubes $190-00 Steel reinforcing $200-00 Labour $400-00 Concrete $400-00 Pump $400-00 Stripping & rubbish removal $100-00 Timber $1 200-00 abour $1 300-00 TOTAL $4 040-00 THIS VARIATION CONSTITUTES A CHANGE IN CONTRACT PRICE. 3 Enclose basement stair entries with bricks, installdoor ways and render to TH 2 and 3; install solid doors with closers to TH 1,2 and 3. (Tiles, handrails etc not included) $4 750-00 4 Cutting of sever lines to Queen Victoria Avenue. (see attached) $11 600-00 5 Construct gyprock bulk heads as set out an attached sketch. Materials & labour $15,300-00 6 Supply and install 3 letter boxes. Supply $490-00 Installation $70-00" 11 On the variation advice there is handwriting, by way of comments, on behalf of the proprietor which, it is accepted, are the comments of the proprietor's project manager as provided to the builder. In relation to item 5 the word "joke" appears and a question mark has been placed beside the amount claimed. 12 The facsimile of the project manager to the builder of 8 May 1999 elaborated on those comments as follows: "As discussed-is also unacceptable-I need 3 quotes -or will arrange or have it carried out myself". 13 It is not clear to me on what basis the matter of agreement of the parties, referred to in the FTT decision, as noted above, was made. So far as the evidence goes, there does not appear to be any evidence of an oral request by the proprietor for the performance of item 5 so as to trigger the requirement under clause 11 for the proprietor to sign a variation form. Moreover, the material I have referred to does not involve a dispute as to whether item 5 was a variation to the works as distinct from a dispute as to the reasonableness of the price submitted by the builder for the performance of that item. 14 In those circumstances I would have thought that the only consequence of the absence, if there had been an absence, of a variation in writing signed by the proprietor and the builder would be the entitlement of the builder, under clause 11, not to complete the subject variation until it was signed by the proprietor. 15 The provision for serving notice of suspension of the works is to be found in clause 18 (f) of the contract in the following terms: "The Contractor may end this Agreement, subject to the following, if the Owner: … (f) fails to execute a variation; ... THEN the Contractor may stop the Building Works AND serve a Notice of Suspension of Works upon the Owner: A. Specifying the default; B. Requiring it to be rectified; and C. Stating that this agreement may be terminated if the default is not rectified within ten (10) working days. At the end of ten (10) working days, if the Owners default has not been rectified, the Contractor may serve a Notice of Determination, ending the agreement and requiring the Owner to pay the following amounts within five (5) working days: (i) Cost of Building works to date not already paid and Builders Margin; and, (ii) Costs of quitting the Land." 16 It was found in the FTT decision that the builder had posted, by registered mail, a Suspension Notice to the proprietor on 10 May 1999. That notice was dated 8 May 1999 and was in the following terms: "As of today's date we still have not received signed variation advice notices and other correspondences faxed to your home office on 6 May 1999. We require these notices to be approved, signed and returned to us immediately and note that the building agreement may be terminated if we do not receive them within ten (10) working days." The suspension notice was received by the proprietor on 11 May 1999. 17 It was provided by clause 21 of the contract as follows: "Any notice required to be given under this Agreement is deemed to have been given should any of the following events have occurred: if the notice is delivered by hand to the other party; if the notice is posted by ordinary pre-paid mail; if the notice is sent by facsimile transmission to the parties address outlined in this Agreement OR the last known address of that party if the address has changed. Any notice is deemed to have been received on the date it was delivered by and OR the same day as it was faxed OR the day following the day it was posted." Accordingly, whether by operation of clause 21 or otherwise, the Notice of Suspension, it was agreed, was served on 11 May 2000. 18 It was further found in the FTT decision that the builder sent, by ordinary mail to the proprietor, a Notice of Determination dated 24 May 1999, which was in the following terms: "Default as noted on Notice of suspension of Works dated 8 May, 1999 has not been rectified. This Notice of Determination now ends our Agreement. The outstanding costs of building work and the cost of quitting the land will be sent to you shortly. You are required to pay these costs within 5 working days upon your receipt." The FTT decision noted that there was no dispute that the determination notice was received by the proprietor on 25 May 1999. 19 On those primary findings, the FTT decision concluded that the builder had failed to allow the expiration of 10 working days after the giving of the Notice of Suspension in serving his determination notice of 24 May. It was further found that the purported determination of the contract by the builder "amounted to repudiation at law": a conclusion with which both parties agreed, in the event that it be found that the giving of the Determination Notice had not complied with clause 18 of the contract. That consequence is not disputed before me. 20 Quite clearly, I think, on the findings as summarised above, the tribunal member was bound to reach the conclusion that the builder had not allowed the requisite period to elapse after giving a Notice of Suspension of the works so as to entitle him to determine the contract under clause 18 by his notice of 24 May. That view prevails even if one accepts that the Notice of Determination was not served until 25 May 1999. 21 The tribunal member was required to address a further case advanced on behalf of the builder, namely that he was entitled to determine the contract on the basis that the proprietor had evinced an intention not to be bound by the contract so as to entitle him to treat that conduct as a repudiation. 22 There are a number of bases for that contention advanced on behalf of the builder. One is that the proprietor, in requiring the builder to obtain three quotations for item 5 in variation advice 6 and, in default, threatening to perform the subject work herself, was guilty of a fundamental breach which amounted to repudiation. In respect of that contention the FTT decision contained the following findings: "49. Mr Galvin argued that by demanding that the respondent obtain other quotes and threatening to carry out certain work herself, when there are no such rights or obligations under the Agreement, the Applicant showed a clear intent not to be bound under the Agreement. 50. Ultimately, however, these matters also revolve around the dispute as to the cost of the Variations. 51. The linchpin therefore of the Respondent's case that the Applicant, by her conduct, repudiated the agreement, rests on starkly identified facts relating to the delayed approval and non-payment of specified variations. 52. Ultimately, I am not satisfied that these facts when viewed objectively, would convey to a reasonable person in the position of the respondent repudiation or disavowal either of the Agreement as a whole or of a fundamental obligation under it. 53. In coming to this conclusion I have considered everything before me and found the following to be of particular importance: a) The crux of the dispute between the parties was the cost of the relevant variations. It did not extend to such issues as whether the matters in dispute constituted variations or whether the applicant had agreed to the work included in the variations. b) Although this dispute had surfaced between March and April and the variations remained unpaid, the parties had moved closer towards agreement on cost at the time the Respondent issued the Determination Notice c) At the same time the Respondent continued to do the building work. d) Although he stopped the work, on or about 28 April, the Respondent issued the sixth progress payment to the applicant at a site meeting the following day, being on or about 29 April. The Applicant paid this progress payment some six days later. e) At around the same time and afterwards the parties were meeting and continuing communications. The last site meeting was held on or about 7 May 1999." 23 Clearly, in my view, on the basis of those findings, there is no reasonable ground for concluding that the FTT decision was erroneous in law. It has not been suggested that those findings of fact, as summarised in the above quotation from the FTT decision, were insupportable on the evidence. Indeed, the relevant evidence has been put into evidence, by consent, before me, and, although not necessary for my decision, I have no doubt that the tribunal member's decision was the correct one. 24 It was also submitted that in failing to pay one or other of the variations as claimed by the builder the proprietor had repudiated the contract. 25 The facts as found in the FTT decision in relation to that matter are set out at page 9 of the FTT decision. I think it is unnecessary to set out the detail of those findings. It is not suggested that any of those findings are insupportable on the evidence. Moreover, although not necessary for my decision, I have had the advantage of sighting the relevant documents which were before the tribunal member. Clearly, in my view, the findings of the tribunal member are fully supportable by that evidence. 26 I think it is equally clear that, on the basis of those findings, the conclusion of the tribunal member that the failure of the proprietor to pay for any variations as claimed by the builder did not amount to a repudiation does not reveal any error of law. 27 I think one could go further and say that on the evidence before the tribunal, in the absence of concessions, it would have been open to the tribunal member to conclude that she could not be satisfied that particular variations had been requested: nor that the subject matter of particular variation advices were in fact variations, as distinct from claims made by the builder from time to time. 28 In any event, I think it is quite clear from the documents before the tribunal that, for the most part, the dispute between the parties was in the pricing of the numerous items of claim. However, it is not necessary for me to travel into that area for the purpose of this judgment. 29 It was further contended on behalf of the builder that the proprietor had repudiated the contract by threatening to exclude the builder from the site. It is not clear from the findings in the FTT decision that this matter was directly addressed. The reason why that matter was not addressed by the tribunal member, it is conceded, was because the argument was advanced for the first time in these proceedings. In those circumstances it is difficult to see on what basis the FTT decision should be seen as erroneous in law. No point has been taken in these proceedings on behalf of the proprietor on the basis that this point was not taken before the tribunal. 30 The contention appears to be based upon a series of communications passing between the builder and the proprietor's project manager about the time of the giving of the subject notices. 31 It is probably sufficient to identify the nature of that material by reference to a facsimile of the project manager to the builder of 12 May 1999. It is entitled "Re Your Continued Default in the Terms & Conditions of Signed Contract and Abandonment of Site", referring to the fact that, as found in the FTT decision, the builder had left the site on 28 April 1999 and had not returned at any time thereafter. It is implicit in those findings that there had been no attempt on the part of the builder to re-enter the site. 32 In the facsimile of the project manager the builder was informed that his conduct represented a "continuing breach of Contract" and it was noted that his continued absence from the site was "despite Progress Claim No. 7 ... having being [paid] to your A/C Wed 5/5/99". 33 After referring to a brief history of the exchanges between the parties as to the disputed variations, the facsimile concluded as follows: "You are therefore advised that unless work is recommenced by 7am Thursday 13/5/99 your contract will be terminated and you will be held liable for all losses, defects, and costs to complete in excess of the contract price and holding costs as a result". 34 In a further facsimile of the project manager to the builder of 12 May 1999 the project manager noted the earlier statement of the builder that he did not intend to restart the works and was going to consult his position. 35 I think the evidence to which I have referred and that which is summarised in the FTT decision strongly supports a position where the builder had taken a stand that could be described as an abandonment of the site, to use the phrase of the project manager, and, in those circumstances, one could readily see a justification for a demand that the builder return to the site to resume work, in pain of suffering a termination of his contract for failure to do so. 36 I think in those circumstances, and having regard to the manner in which the matter was conducted before the tribunal, there is no ground, certainly, in my view, no sufficient ground for holding that the FTT decision was erroneous in law in finding that the proprietor's conduct did not amount to repudiation of the contract. 37 In those circumstances, the motion and summons are dismissed and I order the plaintiff to pay the defendant's costs of the proceedings and of the motion. *********** Last Modified: 09/27/2000 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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