Facts and background
In or around 2006, the owners entered into a domestic building contract with the builder for the construction of a single dwelling. The contract required the owners to make payments to the builder upon completion of certain defined stages including, inter alia, the 'frame stage' and the 'lock up stage'. The definitions of the stages in the contract mirrored those in Section 40 of the Domestic Building Contracts Act 1995 (VIC) ('the Act').
On 4 December 2006, the builder requested payment for the frame stage. At some point there arose a dispute between the parties about the roof trusses which formed part of the frame stage works. On 14 February 2007, the owners received a progress claim for the lock up stage, which they subsequently refused to pay. As a result, on 6 March 2007, the builder purported to suspend the works in accordance with the contract. On 26 April 2007, the owners' solicitors informed the builder's solicitors that the claim for the lock up stage was invalid as, amongst other things, the frame stage had not been reached.
The builder commenced proceedings in Victorian Civil and Administrative Tribunal ('VCAT') on 3 July 2007 for a summary judgment on the lock up stage claim.
VCAT decision
Deputy President McNamara decided the matter in favour of the builder. He acknowledged that the owners disputed the frame stage had been reached. However, he rejected the owners' submission that the lock up stage claim was not payable if the frame stage had not been completed. The Deputy President took the view that each stage was separate and that a progress claim for one stage might be payable notwithstanding an earlier stage had not been completed.
The owners further contended that the builder was not entitled to the lock up stage payment as the lock up stage had not been reached because the external wall cladding was not fixed. The Tribunal also rejected this contention, noting that the Act does not require a structure to be 'impregnable'.
Appeal to the Supreme Court
The owners appealed the decision to the Supreme Court.
Pagone J, who heard the appeal, rejected the owners' submissions in relation to the stage payments being sequential. His Honour agreed with Deputy President McNamara that completion of a stage did not depend on all of the earlier stages having been completed first. His Honour noted that although it seemed 'counter intuitive' that a claim for the lock up stage could be made even though the frame stage had not been properly completed, the stages are separately defined and there was no basis to imply such a condition precedent.
In relation to whether the works had in fact reached lock up stage, the owners contended that the proper construction of the lock up stage was that the house should be secure 'rather than impregnable'. His Honour, however, rejected that submission and instead found that lock up only required that works to be completed up to that stage as required under the relevant plans and specifications.
Conclusion
This decision is authority for the proposition that:
- Entitlement to claim for a particular stage of the works is not dependant on the works having been completed in sequence
- Lock up stage will be reached once the elements required in the contract plans and specifications for the completion of that stage have been satisfied and the extent to which the property is secured is irrelevant.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
