Bajimaya v Reward Homes Pty Ltd

Bajimaya v Reward Homes Pty Ltd - [2021] NSWCATAP 297 - NSWCATAP 2020 case summary — Zoe

[3]

Relevant contractual provisions

As stated earlier, on 7 February 2018 the appellants signed a "Build Contract Sales Advice" and paid $3,000 required under that document. The Advice document listed the address of the land sold, the introducing agent, the chosen house to be built being a copyrighted design of the respondent, and the total package price of $745,938 (said to be discounted by $13,000) comprising components "Land Price: $425,900" and "House Contract Value: $320,038". Just above the appellants' signature appeared the words: "The purchaser acknowledges that the $3,000 build contract deposit paid - will form part of the build deposit. If the purchaser does not proceed with the purchase, the $3,000 build contract deposit is held by [the respondent] - and it is non-refundable".
No one disputed that this document was contractually binding on the parties, at the least as an offer by the appellants accepted by the respondent's conduct in taking further steps including preparing and providing the Preliminary Agreement and Final Tender.
The Preliminary Agreement was stated to be "In connection with" the proposed home build and contained the following relevant provisions: "2. The owners and [the respondent] agree that [the respondent] will carry out the following works: [there followed seven items of work being arranging site inspection, survey, engineering design, building plans and specifications and home warranty insurance, submission of approval applications, and "arrange a full HIA building contract".] 3. The owners agree to pay [the respondent] the total price on the written request of [the respondent]. [The respondent] may require that the owner pay all or part of the total price on account of the costs of the works before the expense is incurred. … 6. If a Building Agreement is not entered into, the deposit price is non-refundable."
The Final Tender contained the following relevant provisions: "The following steps are required should this tender meet your requirements to enable us to proceed on your behalf: 10% deposit payable on signing of the final tender less $1,000 payable on signing of building contract; the above deposit forms part of your contract price and is non-refundable if you do not enter into a building agreement with [the respondent]. … Unregistered land After acceptance of the final tender the price will remain fixed for a period of 12 months. In the event that the subject land is unregistered when the tender is produced, all site costs are to be confirmed following receipt of a final contour survey, borehole soil test and location of services once registration has been received. The price is subject to review after final contours, site classification and engineering has been obtained. If construction has not commenced by this time due to land not being registered the tender price may be subject to review and a possible price increase. This increase is to cover an increase in build cost prices incurred by [the respondent] and will only be implemented if there is an increase in cost."
Below the signature box there was a "Payment Schedule" the first item in which was "Deposit Payable on contract signing 10%".
There was a footer and a reference next to the payment schedule with a general reservation of right to change prices which was clearly subordinated to express terms in the tender.
The Revised Final Tender altered these provisions but was not accepted by the appellants.

[4]

The Tribunal decision

The appellants' written and oral submissions at primary hearing, prepared by the current instructing solicitor on the appeal, indicated that part of the payments were for an allegedly undisclosed commission from the builder to the selling agent for the land, who was not a party to or a witness in the proceedings. The submissions claimed that the appellants were entitled to terminate the contract constituted by the Preliminary Agreement and the Final Tender and to obtain a full refund of the deposit for total failure of consideration or as damages for breach of contract or repudiation.
The respondent's submissions at the hearing said that deposits were not collected until the building contract was signed, as required by the HBA. They submitted that, when the land was unregistered under a land and building package, the respondent would ask the owner: "to sign a Preliminary Agreement and make a payment. The preliminary agreement is part of the building contract. That payment covers the costs of preparing plans, administration fees, contour surveys and related fees. This forms part of the purchase price IF they proceed but covers costs if the Buyer does not" [emphasis added].
The Tribunal found jurisdiction under the HBA. However, went on to say that the nature of the agreement was to enter into a building contract for the purposes of the HBA at a later time, with the tender being a quotation for the cost of work that would apply for the purposes of the intended building contract. As such, the presently-binding agreement between the parties was not a contract to undertake residential building work and was not required, for enforceability of rights by the builder, to comply with HBA s 7 or s 10 (eg, ss 8 or 92) contract requirements.
The Tribunal rejected the relevance of the secret commission allegations. It found that the respondent had made payments from the money paid by the appellants of $16,0001.90 to the real estate agent, surveyor fees of $935 and administration charges which exceeded the amount paid by the appellants.
The Tribunal found that the commitment to enter into a building contract, together with evidence that the respondent had incurred costs arising from the Preliminary Agreement and Final Tender, constituted sufficient consideration for the presently-binding agreement between the parties. It also found that the presently-binding agreement contained provisions entitling the respondent to raise the tender price after twelve months in the circumstances that it did.
Accordingly, the primary member dismissed the application. There was no application for or award of costs.

[7]

Procedural fairness

A failure to afford procedural fairness if established would amount to an error of law. Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 at [13]
We do not consider that there was any procedural unfairness of the type complained about or that, if there was, it affected the outcome of the primary hearing.
The Tribunal is not bound by the rules of evidence and its requirements of strict proof for witness statements or affidavits to support the documents tendered (see s38 CATA).
The respondent's material at primary hearing was comprised mainly of transactional documents, communications between the parties and the invoices and supporting documents for what it had disbursed from the deposit. That material significantly overlapped with the appellants' primary hearing material. The respondent's two "submissions" and its chronology repeated material in other documents and acknowledged that it could not respond to the allegations of misrepresentation by the agent because the respondent was not present at the conversations between the appellants and the agent.
The transcript of the recording of the Tribunal hearing shows that the appellants' solicitor, who represented the appellants by leave granted at the hearing, objected to the written submissions being treated as evidence. In regard to the documents that had been filed and served as evidence by the respondent, the solicitor's comments were more by way of submission as to weight than formal objection, and that with respect was an appropriate approach.
Section 38 of CATA deals with the procedure of the Tribunal generally and relevantly provides: (6) The Tribunal - (a) is to ensure that all relevant material is disclosed to the Tribunal so as to enable it to determine all of the relevant facts in issue in any proceedings, and (b) may require evidence or argument to be presented orally or in writing, and (c) in the case of a hearing - may require the presentation of the respective cases of the parties before it to be limited to the periods of time that it determines are reasonably necessary for the fair and adequate presentation of the cases.
There was no issue of procedural fairness raised by the Tribunal's reference to documents from either party. It would have been an error not to refer to the documents as the references were relevant to the findings and facts in issue and went no further than the documentary material plus the witness statements from the appellants.
The appellants' actual claim for relief was for return of the monies they had paid to the respondent. That was the only claim - there was no claim by the respondent for alleged damages for loss of bargain, for instance. The issues raised by the appellants' actual claim for relief centred on interpretation of the contractual documents in the light of statutory provisions and case law. The central documents and the facts from communications and other documents concerning what happened were largely common ground.
In those circumstances there was no procedural unfairness in the hearing that affected the outcome.

[8]

Alleged misrepresentation and non-disclosure

Even if the appellants' witness statements were considered uncontradicted, they did not support a case sought to be made by the appellants, and the Tribunal did not err in regarding the allegations as irrelevant to the outcome.
First, the alleged misrepresentation and non-disclosure was not clear; clarity is a paramount requirement for alleged oral misrepresentations or other alleged misleading conduct: Watson v Foxman (1995) 49 NSWLR 314 at 319. The case for the appellants appeared to be that the introducer agent said that the appellants ought to sign the agreement because the respondent was building many homes in the area and therefore was the best builder, and did not disclose that the agent was receiving from the respondent commission from the combined house and land package payment to the respondent by the appellants.
There was no attempt to show that the statements were made within the agent's actual or apparent authority from the respondent.
There was no statement by either appellant, or other evidence, that if the statements had not been made then the appellants would not have proceeded. The respondent referred in submissions to a submission to that effect which was not evidence and which related only to the alleged non-disclosure of commission.
There was no attempt to show that the statement about building many homes in the area was untrue. The balance of what the agent said reflected contract terms.
Further, there was no statement by either appellant, or other evidence, that if it had been disclosed that a commission was being paid by the respondent to the agent, then the appellants would not have proceeded. There was the disclosure of the introducing agency for a land and building package constituted by the "Build Contract Sales Advice" dated 7 February 2018 signed by both appellants. In those circumstances the Tribunal was correct not to find a misrepresentation and the alleged non-disclosure would not have impacted on the outcome.

[11]

Alleged entitlement to terminate; character of agreement; no-refund provision

We reject the appellants' contention, if it is pressed, that the right to increase prices after twelve months was dependent on contour surveys and matters other than an increase in prices that made up the contract price. That is inconsistent with the provisions of the Preliminary Agreement and Final Tender that we have set out earlier in these reasons. It is clear from those provisions that an increase in prices formed a separate basis for adjustment to the contract price if registration (entitling the builder to build) was not achieved within twelve months.
The appellants' primary ground for entitlement to terminate was based on their characterisation of the Preliminary Agreement and accepted Final Tender, both being signed by the appellants on 5 April 2018. Although that was not the appellants' reason for allegedly terminating the contract at the time of alleged termination, a person can rely upon objective facts available at the time of ending a contract (by acceptance of repudiation or termination for breach of condition or breach of a term with sufficiently serious effect) but not known to the person at the time the person ended the contract: Shepherd v Felt and Textiles of Aust Ltd (1931) 45 CLR 359 at 377-378; Concut PL v Worrell [2000] HCA 64 at [27]-[28], [42].
The appellants' characterisation of the Sales Advice and Preliminary Tender was clearly based on the decision of the NSW Court of Appeal in Grygiel v Baine [2005] NSWCA 218 that was extensively discussed and followed by the Appeal Panel in Syed Ahmad Shoaib Ali PL v Jandson PL [2018] NSWCATAP 228 at [272] et seq, esp [276]-[278].
Grygiel at [57]-[58] expressed obiter the view that "residential building work" as defined in HBA Sch 1 para 2 does not depend upon there being actual residential construction and extends to work of a preparatory nature.
As explained in Syed Ahmad at [265]-[269], this is narrower than the jurisdictional path in ss 48A and 48K (discussed in the preceding section of these reasons), where "residential building work" is extended by the phrase "for or in connection with the carrying out of"; that has a sufficient connection "because its purpose was to give rise to residential building work and it had a sufficient causal nexus with such work". At [62]-[63] the preferred construction on causal nexus in the latter situation was said to be that the services the subject of claim must specifically involve the terms of the contract between builder and owner; this conclusion forms part of the ratio of the decision. The observations in [62]-[63] were part of the grounds for decision, on the jurisdictional point, in Grygiel.
In Syed Ahmad at [270]-[280], the Appeal Panel disagreed with an earlier comment in Allcastle Homes PL v Wilkinson [2016] NSWCATAP 3 that what was said in Grygiel at [57]-[58] was not obiter, but proceeded to endorse it as the correct interpretation of the definition of "residential building work". The Appeal Panel was reinforced in that conclusion by the width of the phrase "involved in".
At [293] the Appeal Panel in Syed Ahmad summarised its conclusions on the scope of residential building work and building goods or services as defined as follows: "1. The construction of a dwelling refers to the building process itself (such as the laying of foundations and painting a building). 2. Work that is "involved in" (meaning included as a necessary or integral part, connected by association, associated with, connected with or concerned with) the construction of a dwelling is "residential building work". Thus, work of a preparatory nature (that which precedes construction) is "involved in" the construction of a dwelling if that work is included as a necessary or integral part of the construction, or associated with, connected with or concerned with the construction work. 3. The "carrying out of residential building work" is descriptive of (and not a factual pre-condition to) the goods or services with which a connection must be established. 4. Goods or services supplied could be said to be sufficiently "connected with" the carrying out of residential building work if: i. their purpose was to give rise to residential building work; and ii. they had a sufficient causal nexus with such work. 5. A building claim may "arise" from the supply of building goods or services under a contract if the claim specifically involves the terms of the contract between the homeowner and the builder."
If the Preliminary Agreement and Final Tender had been standalone documents then in our view the analysis in Grygiel and Syed Ahmad clearly applies to them and the work described in them would be "residential building work" as defined, contrary to the findings of the Tribunal. In the present case these documents were pursuant to and part of a contractual package of land sale and house build as previously described but the wording of the definition appears to be distributive and the same conclusion therefore is reached.
Accordingly, one must accept on present authority that the Sales Advice, Preliminary Agreement and Final Tender all came within the definition of "residential building work".
The respondent pointed in written submissions before us to the difficulties this caused in development circumstances such as the present, which the HIA had sought to address by developing precedent documents such as it had used, in the apparent belief that such staging would not attract the HBA regulatory requirements until the formal building contract and would give the purchaser the option of going forward or not, but compensating the builder for what it did in the interim as necessary to progress the project. Such matters were not in evidence before us. Even if they had been, it would be a matter for policy determination, not for us.
One must next analyse the provisions of the HBA said by the appellants not to be complied with to see if they were required, in the circumstances of this case, to be complied with and, if so, what the consequences were.
HBA s 6(1)(a) applies HBA s 7 requirements to "a contract under which the holder of a contractor licence undertakes: (a) to do, in person, or by others, any residential building work". On the documents the respondent was licensed but the nature of the licence was not in evidence.
The appellants at the primary hearing, on the material put before us on appeal, apparently did not establish that the respondent held a contractor licence or was required under HBA s 4(1) to hold a contractor licence if it did not do so.
If one does not rely on the preceding omission and also accepts that the fact that the then-existing contract documents formed a contract to do residential building work even if composite with a land sale, then HBA s 7 would apply to the limited scope of work to be done under the Preliminary Agreement including separate insurance (if such is even offered) under s 92 for that work. Under s 8 the $3,000 paid would be almost at the limit of the deposit that could be taken and, if one interpreted the $32,003.80 referred to in the Preliminary Agreement as the full contract price for that limited scope of work, being the same as the 10% deposit under the foreshadowed building contract (based on the Final Tender), that amount could only be paid in full on completion of the Preliminary Agreement work.
There is no express sanction, civil or criminal, for non-compliance with HBA s 7 within s 7 itself. There is a penalty within s 8(2). HBA s 10 provides for unenforceability by the builder in the circumstances there specified, to which we now turn.
Unenforceability is not a consequence of every non-compliance with s 7, only for contravention of s 4 and absence of writing or sufficient description of the contract work.
The contracts formed by the Sales Advice and the Preliminary Agreement with Final Tender have not been established to be unenforceable by the respondent as in contravention of s 4, as discussed earlier. The other unenforceability constraints in s 10 are also not established because both the Sales Advice and Preliminary Agreement with Final Tender were in writing and sufficiently specified the contract work for the particular contract. In any event, the respondent was not seeking damages or to enforce any other remedy in respect of a breach of the contract, which is the sanction under s 10.
Under HBA s 92(2) the respondent would not be entitled to demand or receive payment under a contract for residential building work (whether as a deposit or other payment and whether or not work under the contract has commenced) without insurance in place in relation to that work. Under s 94 the respondent would be denied entitlement to contractual or quantum meruit relief for the uninsured work unless it established that it was just and equitable to be allowed a quantum meruit. Under s 94(3) uninsured residential building work at the time the work was done ceases to be uninsured work for the purposes of s 94 if the required insurance is subsequently obtained.
In Nyunt v North Shore Homes PL [2020] NSWCATAP 143 at [88] et seq, esp at [127]-[130], [136], [146]-[152], [160[, [165]-[170], the Appeal Panel found that the owner was entitled to terminate for non-provision of insurance in the circumstances of the case. Those circumstances included delay then complete failure (when representing it had done) to rectify the absence of insurance in the context of numerous other breaches of the HBA.
The present case is very different from Nyunt. Here there is no evidence of any other breach of the HBA apart from claiming prematurely the entire amount for the preliminary work less the $3,238 (including the $3,000 that was part of the sales advice) that was 10% of the entire amount payable under the Preliminary Agreement with Final Tender. For the appellants to rely upon such a breach for termination, the appellants would have been required to establish, as was done in Nyunt, that HBA s 8 has contractual consequences beyond the penalty provided in the provision and is sufficiently serious or of such a nature as to justify a right to terminate for its breach in the context of any other found breaches. There is no analysis in the appellants' submissions before us or before the primary member to cover this ground.
Further, there is simply no evidence one way or the other as to whether or not insurance was taken out by the respondent. It was incumbent upon the appellants to bring forward such evidence if it was to be relied upon to justify a ground, or another ground, for termination. The sole reference to insurance in the appellants' submission is not evidence or based on evidence, all the more so when the appellants successfully objected to the respondent's submissions being in effect treated as witness statements.
In those circumstances the only breach established is that of HBA s 8 and the consequences of that breach alone have not been demonstrated to justify termination.
In our view the appellants did not make out their case for termination and the primary member's lack of express consideration of it, while potentially constituting an error of law, makes no difference to the outcome.
Further, the purported termination, and engagement of another builder, prevented the respondent from continuing to complete the preparatory work under the Preliminary Agreement when it was ready, willing and able to do so as clearly indicated by its continuing to affirm the Preliminary Agreement and even offering to compromise its rights (described earlier) to increase the price under the Preliminary Agreement.
In the foregoing circumstances the appellants have not established any basis for a claim in restitution or otherwise for return of the monies paid. Any monies sought to be refunded in any event would be minus $3,238 to which the respondent was clearly entitled.
Turning to the final alleged error of law, the foregoing analysis makes it clear that the no-refund provision in the Sales Advice is not per se invalid, unenforceable or inapplicable. It would be entitled to be enforced if the work in the Preliminary Agreement was completed or, as here, was prevented from being completed by the respondent's unjustified termination.
Accordingly, if the primary member erred in not considering this aspect, it made no difference to the outcome. At most, the respondent's enforcement of the no-refund provision at a time when the right to enforce had not arisen beyond $3,238 because contract work under the Preliminary Agreement had not been completed would be a breach of contract with consequences that were not relevant to be explored before us or the primary member. The respondent had received the entire deposit without having to enforce such a claim.
The initial compliance with the provision by the appellants was not as a result of attempted enforcement or insistence. If it constituted a breach, the appellants did not seek to rely upon it and continued to permit the contract to stay on foot and the respondent to perform under it.
The appellants' written submissions on appeal raised, apparently for the first time and without formal application for amendment of the appellants' case or earlier opportunity for the respondent to deal with it, the issue of the no-refund provision being a penalty. We can discern no submission on penalty developed before the primary member on the material before us, which makes it difficult to say that the primary member erred in law by not taking into account a submission not made to him.
Even if the submission was advanced in some form, in our view it fails to meet the requirements in Paciocco v ANZ Banking Group Ltd [2016] HCA 28 to be a penalty. There was no evidence that a legitimate interest was not protected by the provision. Indeed, the scope of work in the Preliminary Agreement suggested the opposite. There was no evidence to suggest that the amount was disproportionate to what was in that scope of work. This is the case before one gets to the prejudice to the respondent from the haphazard way in which it was raised.

[15]

Costs of appeal

Rule 38A of the Civil and Administrative Tribunal Rules 2014 (NSW) applies the same costs rules as applied in the Division when there is a departure under the Division rules (such as under Rule 38) from CATA s 60. Rule 38 applies when the amount claimed or in dispute in the proceedings exceeds $30,000.
The starting point for exercise of costs discretion on the usual principles is that costs follow the event. "The event" is usually the overall outcome of the proceedings - did the successful party have to go to the Tribunal (in this case) to get what it achieved, rather than being offered at least that relief. If there are distinct issues on which the party seeking relief did not succeed, that may be taken into account in the exercise of costs discretion.
Here the respondent has achieved success in defeating an appeal which always was based on a claim that exceeded $30,000. Our view is that the respondent is entitled to its costs of the appeal.
The respondent has also asked for its costs of the primary hearing. That should have been done before the primary member and we refuse that application. In any event, as said already the respondent was self-represented at the primary hearing and did not seek leave for legal representation in the primary proceedings.
In our view, costs should be ordered on the ordinary basis as agreed or assessed, unless the parties tender material and/or make submissions that justify an award of costs on the indemnity basis as agreed or assessed, in whole or part.
For an award of costs on other than the ordinary basis, a party's conduct of the proceedings themselves, or the nature of the proceedings themselves (for instance, misconceived), or an outcome less favourable than an offer, are considered. The principles are explored in Latoudis v Casey (1990) 170 CLR 534, Oshlack v Richmond River Council (1998) 193 CLR 72 and in this Tribunal in Thompson v Chapman [2016] NSWCATAP 6 and Bonita v Shen [2016] NSWCATAP 159, citing earlier consistent authority. The principles have resonance with at least some of the "special circumstances" in CATA s 63 that are required to justify a costs order when rule 38A does not apply.
Here, each party was entitled to test the other party's claims and did so fully and vigorously. There was no indication of significant misconduct in the proceedings by either party.
We shall give any party that wishes to raise a matter on costs the opportunity to do so. If no party does, then our expressed view will stand as the costs order.

At a glance

Court

Decision date

Source

Judgment (17 paragraphs)

Parties

Legislation Cited (4)

Cases Cited (16)

Cited By (1)