Antworks Pty Ltd and Brendon Chhong Lee v Shixin

The appealed decision

1. In its reasons for decision the Tribunal outlined the claims made by each party at paragraphs 18 to 20. In summary the home owner was claiming $30,650.60 from the appellants, and the appellants were claiming $14,468.73 from the home owner. The parties did not agree on most of the factors that went into the calculation of those amounts, such as the amount of progress payments made, credits to be allowed to home owner for materials paid for by her, the costs of variations, and the costs of rectification of defects /incomplete works.
2. The Tribunal found that the first contract for the construction of a granny flat at the rear of the home owner's residence (the first contract) was between Antworks and the home owner (paragraph 3) and was entered into on 30 June 2012 (paragraph 4). The contract consisted of a quote, with a large number of handwritten additions over five pages, and was signed by the parties (paragraph 4). The Tribunal found that the contract did not fully comply with the requirements of the Home Building Act 1989 (the HB Act) (paragraph 4). The agreed price for this work was $100,713.80 (paragraph 13).
3. Following a dispute concerning whether work had been done for which progress payments had been made, the "next stage payment was not made and the builder decided not to continue with the work until payment was made (paragraph 6)." On 17 October 2012 a second, handwritten contract "designed to enable the contract to be completed" was made between Mr Lee and the home owner varying the works (paragraphs 7 and 38) by providing that some of the work would be the responsibility of the home owner (see paragraph 64) and providing for the completion of the construction. The parties treated this as a separate contract, not a variation, and the Tribunal accepted that characterization (see paragraph 127). This second contract would have been more correctly described as one designed to enable construction, rather than the contract, to be completed
4. Having reviewed the highly conflicting evidence relating to each of those issues the Tribunal determined with respect to the home owner's claims - 1. That the home owner made progress payments totalling $78,893.70 (see paragraphs 21 to 53). 2. That a refund was due to the home owner for materials included in the contract, but which she actually paid for, of $4,953.67 (see paragraphs 57 to 61). 3. That the reasonable costs of remedying defects and incomplete works was $10,062.23, which sum was allowed on the home owner's claim. (see paragraphs 70 to 108). 4. As a consequence the total allowed on the home owners claim against the appellants was $15, 015.90 (see paragraph 109).
5. The Tribunal then found - 1. That the second contract between Mr Lee and the home owner "manifestly did not comply with the requirements" of section 7 of the HB Act. 2. That the initial contract between Antworks and the home owner did not comply with the requirements of s 7 of the HB Act in that (paragraph 116 to 121) : 1. It did not include the statutory warranties applicable to the work; 2. It did not include any statements concerning the requirements for variations; 3. It did not comply with the requirements of the regulation with respect to contracts. 4. It did not properly define the work to be done under the contract. 1. That as a consequence s 10 of the HB Act provided that the builder was unable to enforce the initial contract (paragraph 122). 2. That given the evidence relied on by the builder, the builder could not establish any entitlement to recover for work done under the initial contract on a quantum meruit basis (paragraphs 123 to 124).
6. With respect to what the tribunal characterized as the builders' claims for variations on the second contract the Tribunal found (paragraphs 126 to 129) - 1. That variations in relation to the a retaining wall at the rear and a awning at the front of the premises were not recoverable because; 1. The second contract and variations did not comply with the form requirements of s 7 of the HB Act was therefore unenforceable; and 2. The Tribunal was not satisfied on the evidence that the retaining wall had been built by the builder. 1. That the builder should be entitled to recover for the value of the front awning work (on a quantum meruit basis) the sum of $600.00. 2. That there was agreement that the third variation, being a rear awning, had been constructed by the builder and claimed for in a written invoice for $3,430.40. The Tribunal allowed the builder to recover for this (again on a quantum meruit basis) the sum of $2500.00 (paragraph 130 to 131) 3. The total allowed to the builder for variations was $3,100.00 (paragraph 133).

The appellants' submissions on appeal

1. The appellants grounds for appeal are described as follows in the Notice of Appeal: "1. The Member erred at law including but not limited to the Member's interpretations of ss7 & 10 of the Home Building Act, 1989 and Regulation 12 thereof and determination of the Respondent, Antworks Pty Ltd entitlement pursuant to quantum meruit.
2. The Member wrongly interpreted the parties legally bound contract.
3. The Member wrongly interpreted s7 of the Act in relation to sufficient particulars in the Contracts.
4. The Member erred in determining that the Applicant Shixin Zhang was entitled to the payment of money from the Respondents.
5. The Member erred in determining that the Respondent, Antworks Pty Ltd had not carried out the roofing works which is against the evidence and had not carried out the roofing works which is against the evidence and thereby erred by taking into account matters not in disputed and not in evidence".
6. At the appeal hearing counsel for the appellants argued that the decision contained a number of errors of law.
7. The first error identified was that the order requiring the two appellants to pay the home owner $15,015.90 should not have included Mr Lee. This was because that sum was an amount found to be due under the first contract, to which Mr Lee was not a party.
8. The second error concerned the finding that Antworks had failed to complete part of the works under the first contract, and had completed some parts of those works defectively. The decision contains separate findings with respect to a list of such works. Antworks submitted that the home owner would be entitled to be indemnified for her losses arising by reason of such findings only if she had paid for the work the subject of the finding that it was incomplete or defective. The submission was that if the home owner had not paid for such work then she had suffered no loss. Antworks representative took the Appeal Panel to a number of paragraphs of the Tribunal's decision relevant to this submission: 1. The first concerned a rain water tank which the Tribunal found, at paragraph 80, was on site, but had not been installed. The Tribunal assessed the cost "of repair" at $2,798.36 and at paragraph 81 said - "This is an allowable defect / incomplete work, and the builder is liable for $2798.36". 1. At paragraph 95 and 96 there are findings with respect to the TV antenna and clothesline. These say -
9. 9.21 TV Antenna: the builder's expert agrees with the installation being the builder's responsibility, and he accepts the lower quote of $480.00, which the Tribunal finds is also due.
10. 9.22 Clothesline: the builder's expert agrees that the builder was required to purchase and install the clothesline, and his estimate of $324.00 is accepted, for the same reasons as previously. 1. At paragraph 99 there is a finding that the drain pipe to the vanity was not properly installed and an amount was awarded in favour of the home owner for that item.
11. The effect of the submission on behalf of Antworks was that as the home owner had not paid for the these works she did not suffer any loss as a result of the defective or incomplete works, and should not have been awarded the amounts found to be due.
12. The next ground of appeal concerned the construction of a retaining wall. This was found to be part of the scope of works in the second contract (paragraph 126). However the Tribunal found that the retaining wall was never constructed by the builder and that no amount should therefore be paid to the builder. In paragraph 129 the Member added that should the retaining wall have been built he would have allowed $1800 based in part on the cost of materials given in oral evidence by the builder.
13. The builder's representative submitted that there was ambiguity in the finding by the Member in that it was not clear whether the he found that the retaining wall was not built at all or merely that the retaining wall was not built by the builder. If the finding was that the retaining wall was not built at all then the builder submitted that the decision erred. He tendered a photograph which was said to establish the existence of the wall (Exhibit A). On the other hand, the home owner contended that the wall was constructed, but not by the builder.
14. The third submission concerned the findings on variations to the second contract. The Tribunal made an assessment of amounts found to be due by the home owner in favour of the builder on a quantum meruit basis. The submission was that there had been an error in the Tribunal's approach to the calculation of amounts due on a quantum meruit basis, by reason of a failure to include the cost of labour and a builder's margin. For example, in paragraph 129 which concerned the retaining wall the amount which the Tribunal would have allowed had the retaining wall been built would have been $1800 "based in part on the cost of materials." Similarly in paragraph 130 an award is made in respect of a front awning "based on the likely cost of materials." In paragraph 131 an award is made with respect to the construction of a rear awning and the amount awarded is the amount contained in the builders invoice. The home owners reply
15. The home owner contended that Mr Lee should be jointly responsible for any amounts due under the first contract on the basis that Antworks and Mr Lee are a "one man band" and that Mr Lee signed invoices himself. The home owner acknowledged at the appeal hearing that the amount ordered to be paid by Antworks and Mr Lee of $15,015 was an amount only in relation to the first contract.
16. The home owner said that the decision below was correct in finding that the retaining wall was constructed but not by either Antworks or Mr Lee.
17. In response to a question from the Appeal Panel the home owner acknowledged that the amounts awarded by quantum meruit basis for the various variations did not include an amount for labour.
18. In response to a further question from the Appeal Panel as to whether the variations discussed in paragraph 129 of the decision below and following relate only to the second contract the home owner agreed that those variations related only to the second contract. Submissions in reply
19. The representative for Antworks and Mr Lee submitted that there was an inconsistency in the home owner's position in so far as her assertion that she had paid all amounts due under the contracts with Antworks and Mr Lee. In paragraph 16 of the application filed by the home owner on 25 February 2014 the applicant there requests an order that she does not have to pay the amount of $7050. Mr Darvall (the representative for Antworks & Mr Lee) contended that constituted an admission that she had not paid the contract price. Leave to appeal
20. The third submission agitated by the appellants in oral submissions, relating to the rear retaining wall, does not raise an error of law for consideration, but argues that the decision of the Tribunal with respect to "the builder" not erecting the retaining wall was against the weight of the evidence before it. Leave to appeal is required for the appellants to rely on this ground.
21. Section 80 of the NCAT Act is concerned with internal appeals. It provides- (1) An appeal against an internally appealable decision may be made to an Appeal Panel by a party to the proceedings in which the decision is made. Note. Internal appeals are required to be heard by the Tribunal constituted as an Appeal Panel. See section 27 (1). (2) Any internal appeal may be made: (a) in the case of an interlocutory decision of the Tribunal at first instance - with the leave of the Appeal Panel, and (b) in the case of any other kind of decision (including an ancillary decision) of the Tribunal at first instance - as of right on any question of law, or with the leave of the Appeal Panel, on any other grounds. (3) The Appeal Panel may: (a) decide to deal with the internal appeal by way of a new hearing if it considers that the grounds for the appeal warrant a new hearing, and (b) permit such fresh evidence, or evidence in addition to or in substitution for the evidence received by the Tribunal at first instance, to be given in the new hearing as it considers appropriate in the circumstances.
22. In cases where leave to appeal is sought with respect to the decisions of the Consumer and Commercial Division of the Tribunal clause 12 of Schedule 4 of the NCAT Act relevantly provides that - (1) An Appeal Panel may grant leave under section 80 (2) (b) of this Act for an internal appeal against a Division decision only if the Appeal Panel is satisfied the appellant may have suffered a substantial miscarriage of justice because: (a) the decision of the Tribunal under appeal was not fair and equitable, or (b) the decision of the Tribunal under appeal was against the weight of evidence, or (c) significant new evidence has arisen (being evidence that was not reasonably available at the time the proceedings under appeal were being dealt with). Note. Under section 80 of this Act, a party to proceedings in which a Division decision that is an internally appealable decision is made may appeal against the decision on a question of law as of right. The leave of the Appeal Panel is required for an internal appeal on any other grounds. (2) Despite section 80 (2) (b) of this Act, an internal appeal against a Division decision may only be made on a question of law (as of right) and not on any other grounds (even with leave) if: (a) the appellant is a corporation and the appeal relates to a dispute in respect of which the Tribunal at first instance had jurisdiction because of the operation of Schedule 3 to the Credit (Commonwealth Powers) Act 2010, or (b) the appeal is an appeal against an order of the Tribunal for the termination of a tenancy under the Residential Tenancies Act 2010 and a warrant of possession has been executed in relation to that order.
23. This provision was discussed in detail by the Appeal Panel in Collins v Urban [2014] NSWCATAP 17 in which the Appeal Panel concluded that - Accordingly, it should be accepted that a substantial miscarriage of justice may have been suffered because of any of the circumstances referred to in cl 12(1)(a), (b) or (c) where there was a "significant possibility" or a "chance which was fairly open" that a different and more favourable result would have been achieved for the appellant had the relevant circumstance in paragraph (a) or (b) not occurred or if the fresh evidence under paragraph (c) had been before the Tribunal at first instance. As to the particular grounds in cl 12(1)(a) and (b), without seeking to be exhaustive in any way, the authorities establish that: If there has been a denial of procedural fairness the decision under appeal can be said to have been "not fair and equitable" - Hutchings v CTTT [2008] NSWSC 717 at [35], Atkinson v Crowley [2011] NSWCA 194 at [12]. The decision under appeal can be said to be "against the weight of evidence" (which is an expression also used to describe a ground upon which a jury verdict can be set aside) where the evidence in its totality preponderates so strongly against the conclusion found by the tribunal at first instance that it can be said that the conclusion was not one that a reasonable tribunal member could reach - Calin v The Greater Union Organisation Pty Ltd (1991) 173 CLR 33 at 41-42, Mainteck Services Pty Limited v Stein Heurtey SA [2013] NSWSC 266 at [153]. If in either of those circumstances the appellant may have been deprived of a "significant possibility" or a "chance which was fairly open" that a different and more favourable result would have been achieved then the Appeal Panel may be satisfied that the appellant may have suffered a substantial miscarriage of justice because the decision was not fair and equitable or because the decision was against the weight of the evidence. In order to show that a party has been deprived of a "significant possibility" or a "chance which was fairly open" of achieving a different and more favourable result because of one of the circumstances referred to in cl 12(1)(a), (b) or (c), it will be generally be necessary for the party to explain what its case would have been and show that it was fairly arguable. If the party fails to do this, even if there has been a denial of procedural fairness, the Appeal Panel may conclude that it is not satisfied that any substantial miscarriage of justice may have occurred - see the general discussion in Kyriakou v Long [2013] NSWSC 1890 at [32] ff concerning the corresponding provisions of s 68 of the CTTT Act and especially at [46] and [55].
24. Paragraphs 128 and 129 of the Tribunal's reasons for decision provide the basis for this ground of appeal - There is however a further problem with the builder's claim for the costs of the retaining wall, aside from the above. The homeowner claimed that this retaining wall had not in fact been built by the builder. The builder acknowledged that he had no proof of its actually being built, and, as noted, had a distinct paucity in production of supporting receipts for materials sector, including none supporting this claim (other than an invoice noted below). The Tribunal notes that the builder's invoice for the retaining wall was issued on 6 August 2012. It could not have possibly been built by that time, as it was part of the second contract entered into on 17 October 2012. Further, as submitted by the homeowner, none of the experts in their inspections referred to any retaining wall. The Tribunal is satisfied that it was never constructed by the builder, and thus no amount should be allowed for that "variation". Should it have been built, the Tribunal would have allowed $1,800.00, based in part on the cost of materials given in oral evidence by the builder.
25. The appellants submit that these paragraphs are ambiguous as to whether the Tribunal found that the retaining wall was (a) not ever built, or (b) not built by "the builder." The appellants relied on a photograph from an expert report to demonstrate that the wall exists, and contented that the finding that the wall was never built was against the weight of the evidence. That photograph was to be found in the evidence before the Member.
26. In the Panel's view this submission is bound to fail. It is clear from the Member's decision that the home owner took issue with the claim with respect to the rear retaining wall on the basis that, "this retaining wall had not in fact been built by the builder:" not that it had not been built at all. The member had regard to all the evidence and concluded that the wall was "never constructed by the builder." While the language used by the Member can be criticized as lacking a degree of certainty, in the context of the reasons as a whole, there is no ambiguity about what the member was decided; i.e. the wall was not built by the builder. That decision in our view was reasonably open to the Member on the evidence before him, for the reasons he gave.
27. As a consequence we are satisfied that the conclusion that "the builder" did not build the rear retaining wall was one which was reasonably open to the Tribunal and was not against the weight of evidence. Leave to appeal on the ground that the appellants may have suffered a substantial injustice because the decision is against the weight of the evidence is refused.
28. That leaves for consideration the error of law grounds which the appellants may appeal as of right. Concerning the payment order in decisions 1
29. Order 1 required that both appellants pay the home owner $15,015.90. This is the amount that the Tribunal found was due to the home owner on account defects and incomplete works under the first contract, and as a refund for materials purchased by the home owner and used in the residential building works relating to the first contract.
30. Given that the Tribunal found that the first contract was between Antworks and the home owner, and that Mr Lee was not a party to it, the order in decision 1 should have been directed to Antworks alone. It should not have been directed to Antworks and Mr Lee jointly. Because he was not a party to the first contract Mr Lee had no liability under it. We agree that this is an error of law on the Tribunal's part.
31. We note that the Tribunal turned its attention to the question of whether Mr Lee should have remained a party to the proceedings at paragraph 55 and 56 of the decision where the Member wrote - The Tribunal has considered whether Mr Brandon Lee, who is a director of the respondent corporation, should be removed as a respondent. The evidence is clear that the respondent corporation, Antworks Pty Ltd, holds a valid licence for the work which was carried out, and holds a valid insurance certificate for that work. The advice which was apparently provided to the home owner by the Office of Fair Trading misunderstood the restriction on "Only for contracts not requiring home warranty insurance", which only extended from 16 December 2010 to 31 December 2011. By the time of this contract the corporation clearly had no such restriction. Mr Lee on his separate licence still has such a restriction. Whilst his calculations on the second contract take into account the payments to the builder, Antworks Pty Ltd, he has clearly specified this contract as being between himself and Ms Zhang. In those circumstances he should remain as a respondent.
32. In our opinion, given its findings, the Tribunal should have removed Mr Lee as a party the home owners claim against Antworks and him, he not being a party to the first contract, and there being no other lawful basis advanced by which legal liability for breaches of the first contract could attach to him. At the same time the Tribunal should have turned its attention, and that of the parties, to the question of whether it had the correct parties before it with respect to the claim relating the second contract.
33. Given the findings made by the Tribunal with respect to there being two contracts, each involving a different entity as builder, the Tribunal's failure to distinguish between which builder it was referring to (and its frequent use of the word "builders"), throughout its decision, is a source of confusion which would better have been avoided. An example of the difficulties this can lead to, which is not a point of appeal before us, is that the Tribunal's order 2, which is made in favour of Antworks rather than Mr Lee, enforces a quantum meruit claim with respect to unenforceable variations of the second contract which was between the home owner and Mr Lee, to which Antworks was not a party. The home owner's claim for defective and incomplete works from the first contract
34. The Tribunal made an order in favour of the home owner with respect to incomplete and defective works under the first contract.
35. Generally, where residential building works are incomplete, but not paid for, then there should be no award in favour of the home owner unless the home owner can adduce evidence that the cost of completing the incomplete works is greater than the amount that was payable to the builder. On the other hand, where the residential building works in question are defective, the position is that the cost of rectification is payable by the builder to the home owner, except to the extent of any amounts unpaid under the contract which are set off against those costs.
36. In the present case the Tribunal's decision does not contain any analysis of the extent to which amounts assessed for incomplete works or defective works under the first contract should be set off against amounts owing by the home owner, if, as the Member's reasons suggest, the home owner had not fully paid the amounts due under the first contract.
37. The Tribunal, at paragraphs 30 to 54, did undertake a relatively detailed analysis of the conflict in evidence concerning what progress payments had been made, but in doing so did not distinguish between which contract they were made under, or identify which part of the residential building work they related to. That conflict was considerable, with the home owner maintaining that she had made all progress payments due under the contract and had paid for 93% of the work, whereas the appellants maintained that she had paid considerably less. The Tribunal ultimately found that the home owner had made progress payments totalling $78,893.70 to "the builder," but did not make any findings as to which contracts those payments were made under, or what work they related to.
38. In the circumstances of this case, where the extent of payments made by the home owner under the first contract was a live issue and the home owner was claiming for defective and incomplete works under that contract, it was necessary to determine what the home owner had actually paid (and was obliged to pay in the light of the formation of the second contract) under that contract. Having done so the Tribunal could then determine whether or not the home owner had paid for the incomplete works, and make a determination as to the home owner's entitlement to damages for incomplete works accordingly. It could also determine what damages, if any, were payable for defective works that the home owner had not paid for. The failure of the Tribunal to embark on this process of reasoning constitutes an error of law.

The Tribunal's quantum meruit determination

1. It is not disputed that because the home owner had the benefit of residential building work performed under variations to the second contract, which variations are unenforceable due to non-compliance with provisions of the HB Act, the appellants cannot recover for those variations under the contract. However, the reasonable cost of that work, which the home owner now enjoys the benefit of, can be recovered on a quantum meruit basis: Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221; [1987] HCA 5. In assessing the value of the benefit obtained by the home owner, the reasonable cost of the work is an appropriate measure. This includes the costs of materials, labour, and an allowance for profit (a builder's margin) see: Edwards v Sydney Building Group Pty Ltd [2011] NSWCA 154.
2. In the present case when the Tribunal was assessing the quantum meruit claims with respect to the work done under variations to the second contract, it only made an allowance for materials. It made no allowance for the cost of labour or for a builder's margin. This is an error of law.

Conclusion

1. It follows from the above that the Tribunal's decision is affected by errors of law. We have reluctantly come to the conclusion that in allowing this appeal we should quash the decision of the CCD and remit both matters to that division for reconsideration in full, with further evidence.
2. Due to circumstances beyond anyone's control we are unable to remit the matter for reconsideration by the member who originally determined it, which would be the most efficient and effective method of bringing the matters to a conclusion. Instead it will be necessary for the matters to be considered afresh by a differently constituted tribunal. The complex facts and circumstances in issue are such that we do not think a new Member, hearing the application for the first time, would be able decide the issues requiring determination consequent on this appeal, without traversing all the evidence. As a result we consider that the interest of justice would best be served if the entire matter was heard and determined afresh.
3. In doing so we envisage that the Member and the parties will have to turn their attention to the issues we have highlighted concerning who are the correct parties to the proceedings. It is because of this that we have provided that further evidence be allowed on reconsideration, as there may be a need for further evidence concerning those issues.
4. The Appeal Panel makes the flowing orders: 1. Appeal allowed. 2. The decision of the Tribunal made on 13 May 2014 on file numbers HB13/11440 and HB13/29435 is quashed. 3. The applications on file numbers HB13/11440 and HB13/29435 are remitted for rehearing in full by a differently constituted Tribunal, with further evidence allowed.

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 30 March 2015