Berger v Boulder Projects Pty Ltd

NCAT Appeal Panel|2015-10-19

Solicitors: CCS Legal (Appellant) Brendan Pigott (Respondent) File Number(s): AP 15/47497 Decision under appeal Court or tribunal: Civil and Administrative Tribunal Jurisdiction: Consumer and Commercial Division Date of Decision: 15 July 2015 Before: J Smith, Senior Member File Number(s): HB 14/33903

Introduction

Mrs Berger, a homeowner, has appealed against a decision of the Consumer and Commercial Division of the Tribunal dismissing her building claim against Boulder Projects Pty Ltd. The claim, which was made under s 48K of the Home Building Act 2009 (NSW), sought $148,463.54 in compensation for defective and incomplete residential building work. Boulder Project's defence was that it did not carry out any of the work. The Tribunal dismissed the claim on the basis that Boulder Projects had established its defence. The Tribunal concluded at [27] that: It was never intended by either party to the contract that the contract entered into by them on 12 November 2012 was to be a contract for performance of the work by the respondent. The building contract was nothing more than a sham calculated to deceive the Westpac bank into believing that the work was being performed by a licensed builder and to advance payments on that basis.

First instance hearing and the Tribunal's decision

The Tribunal found that it had jurisdiction to hear and determine the building claim pursuant to Part 3 of Civil and Administrative Tribunal Act 2013 (NSW) (NCAT Act) and s 48K of the Home Building Act 1989 (NSW). Implicitly, the Tribunal found that Mrs Berger had made a "building claim" in which the amount claimed does not exceed $500,000: Home Building Act, s 48A.
Mrs Berger's claim was for the supply of specified services, that is, to rectify defective work or to complete work which had not been done: Home Building Act, s 48A. It is necessary for a building claim to be founded on a legal entitlement such as a breach of contract: Maconachie v Kullenberg [2005] NSWCA 294 at [55]. Mrs Berger's claim was founded on a breach of the contract between her and Boulder Projects dated 12 November 2012 and/or a breach of statutory warranties.
In its reasons at [13], the Tribunal described Boulder Projects' defence as being "that the defective and incomplete work complained of by the applicant was not performed by or on behalf of the respondent." That summary was derived from the circumstances outlined below.
Boulder Projects alleged in its defence that "the works were not carried out by or on behalf of the Respondent" and "that the contract dated 12 November 2012 was entered into by the Respondent on the basis of express misrepresentations by Kade Hancock as agent for the applicant."
Boulder Projects did not allege or plead fraud on the part of Mrs Berger. However, during the first instance hearing, the Tribunal Member asked Boulder Projects' solicitor, Mr Pigott, whether or not he was alleging fraud. He answered, "It is an allegation of fraud." When the Tribunal Member asked whether he had commenced proceedings in any other jurisdiction, Mr Pigott replied that he had no instructions to do that.
The Tribunal Member then asked Mr Pigott to clarify whether the defence included an allegation of misleading or deceptive conduct. Mr Pigott said that it did. The following further exchange occurred between the Tribunal Member and Mr Pigott in an attempt to clarify the nature of the defence: Tribunal Member: Given the fact situation that you allege, what is the nature of the legal defence? What is the law that you rely on as defence to the statutory warranties? Mr Pigott: That the misrepresentations by the applicant through her agents goes to the operation of the contract and that there was a breach of the contract by the applicant through her agents in relation to the operation of the contract. In particular how the funds were disbursed. Tribunal Member: But that alleged breach would go to the respondent's right to pay under the contract and would establish in actual effect, would establish a breach that would entitle the respondent to damages that ought to be paid pursuant to the contract. There is no claim before the Tribunal seeking fraud to that alleged breach. Mr Pigott: That is correct. I suppose the respondent is saying that the way the contract operated was completely different to what was agreed. What happened was the applicant, by her agents, took over the job. Boulder Projects, to the extent that it was put forward, was really an agent of the applicant at all times.
Later, the Member asked whether it would be necessary to file submissions. Mr Pigott replied that he would prefer to file written submissions. The Member then said: I don't have a problem with this Mr Pigott. In view of the nature of the defence, that it is based on the comment of the applicants and others, rather than the alleged defects and the quantum of defect, it seems to be appropriate for the respondent to rely on a written submission in relation to the defence and then a short opportunity to reply to it.
Mr Allen, a director of Boulder Projects, gave evidence that his company was not required to do any of the work described in the contract. It was agreed that that he would receive 5% of the project cost if he facilitated the project by permitting the payments by Westpac Banking Corporation to be paid into Boulder Projects' bank account. That was necessary because Westpac required a licensed builder to receive the payments. Mrs Berger, Mr Allen and the Boulder Projects entered into a deed to give effect to the parties' intention. Boulder Projects submitted that the contract was invalid, void for illegality or was a breach of public policy.
Neither Mr Hancock nor Mrs Berger's husband, Mr Victor Berger, gave evidence. The Tribunal found that Mrs Berger's evidence, in so far as it related to the arrangement that had been made with the Boulder Projects, was consistent with Mr Allen's evidence. The Tribunal noted at [22] that: The applicant admitted under cross-examination that she was aware that Westpac would not make continuing payments of the loan money except to a licensed builder. Mrs Berger also gave evidence that she was aware that Kade Hancock was made bankrupt in March 2012 and that he was not licensed to carry out the work.
The Tribunal found that Mr Hancock was Mrs Berger's agent with express authority to make the arrangements with Boulder Projects. The Tribunal went on to hold that even if that finding was incorrect, and Mr Hancock did not have authority to represent Mrs Berger, Mr Hancock acted with the ostensible authority of Mrs and Mr Berger. Both were aware of the agreement. The Tribunal added that Mrs Berger "took no steps to disabuse (Boulder Projects) in any way that the arrangement between the parties was not made with her approval." (Words in brackets added.)
The Tribunal concluded at [26] that the building contract was an arrangement designed by Mr Berger and Mr Hancock, in collaboration with Mrs Berger and with her full knowledge, to facilitate the payment of the funds from Westpac to a licenced entity. The critical finding was made at [28] and [29]: The building contract was, objectively considered on the basis of the parties' actions, not intended to be a binding contract for residential building work. The parties themselves clearly demonstrated the rejection of the contractual obligations expressed in the contract by the failure of the respondent to carry out the work and the failure of the applicant to pay the respondent for its performance. I am satisfied that there was no intention by the parties to enter into legal relations whereby the respondent was contracted to perform for the applicant the residential building works described in the contract.

Grounds of appeal

Ms Berger identified five grounds of appeal in the Notice of Appeal. However, it was agreed at the hearing that the only two grounds on which she relied were that the Tribunal had breached the fair hearing and the bias rules of procedural fairness. These are both grounds of appeals on questions of law. Mrs Berger has the right to appeal on such questions: Civil and Administrative Tribunal Act 2013 (NSW) (NCAT Act), s 80(1)(b).

The fair hearing rule

The Tribunal is required to comply with the rules of procedural fairness which are sometimes called the rules of natural justice: NCAT Act, s 38(2). Those rules require that a person be given a fair hearing before decisions are taken which affect their interests: Re Refugee Tribunal; ex parte Aala [2000] HCA 57; (2000) 204 CLR 82 at [101]; Aronson, Dyer and Groves, Judicial Review of Administrative Action, (5th ed 2013 LawBook Co) at 397.
A person who might be affected by a finding should be given the opportunity to adduce evidence and make submissions rebutting the potential adverse finding: Mahon v Air New Zealand Ltd [1983] UKPC 29; [1984] AC 808 at 820-821. This principle is embodied in s 38(5)(c) of the NCAT Act which requires the Tribunal to " … take such measures as are reasonably practicable to ensure that the parties have a reasonable opportunity to be heard or otherwise have their submissions considered in the proceedings."
The Appeal Panel will not set aside a decision made in breach of the rules of procedural fairness if the breach would have made no difference to the outcome of the case: Stead v State Government Insurance Commission [1986] HCA 54; 161 CLR 141 at 145. In Warkworth Mining Limited v Bulga Milbrodale Progress Association Inc [2014] NSWCA 105 the Court of Appeal held at [42]-[43]. 42 An appellate court will not order a new trial where the inevitable result would be that the same order would be made on a retrial. Or, as McHugh J observed in Muin v Refugee Review Tribunal, stating the obverse of this principle, an appellate court should not refuse relief unless it is confident that the breach could not have affected the outcome of the case. 43. In Ucar v Nylex Industrial Products Ltd [2007] VSCA 181, Redlich JA, at [75], identified a further circumstance where relief would be refused, namely, where there is an incontrovertible fact or point of law which provides a discrete basis for the decision which cannot be affected by the procedural unfairness.
In Frost v Kourouche [2014] NSWCA 39 at [41], the Court of Appeal emphasised that the content of the obligation to accord procedural fairness is one of "practical justice."

Factual findings

At the end of the hearing the Tribunal directed Boulder Projects to provide any written submissions by 12 June 2015 and for the homeowner, Mrs Berger, to file and serve written submissions by 3 July 2015. The Member explained the reason for directing that Boulder Projects file its written submissions first by saying, "And I have done them in that order because of the particular nature of the defence raised in these proceedings."
On 25 June 2015 Boulder Projects' solicitor, Mr Pigott, emailed the Tribunal and the homeowner's solicitor advising that he was ill and unable to comply with the timetable. He requested an extension of time. The homeowner did not oppose that application and the Tribunal acknowledged the request. On 8 July 2015, Mr Pigott sought a further extension of time to 10 July 2015 because he was still ill. On 13 July 2015 Mr Pigott emailed a copy of his submission to the homeowner's solicitor.
The homeowner objected to the third request for an extension of time in an email to the Tribunal dated 8 July 2015. The Tribunal did not make a decision about the application for extension of time until it refused that application in the reasons for decision. At the same time, the Tribunal decided to determine the matter in the absence of written submissions from Mrs Berger because the time for her to file written submissions had expired. The Tribunal set out its reasoning at [3] and [4] of the decision: A request was made by the respondent to extend time for filing its submissions from 12 June 2015 to 15 June 2015, subsequently amended to 6 July 2015 and then to 10 July 2015. No submission was in fact filed by the respondent until after completion of this decision on 13 July 2013. No submission was filed by the applicant by 3 July 2015 or at all. Accordingly the request for an extension of time is refused and the matter has been considered on the basis of the evidence provided and submissions made at the hearing on 11 May.
Both parties agree that no oral submissions were made at the end of the hearing.

Consideration

Although the time for Mrs Berger to make her submissions had passed when the Tribunal handed down its decision, she was waiting for the Tribunal to rule on Boulder Projects' application for an extension of time. Because the Tribunal did not refuse that application until it handed down its decision, Mrs Berger was not given a reasonable opportunity to make submissions: Mayes v Mayes [1971] 1 WLR 679; Annetts v McCann (1990) 170 CLR 596; R v Windridge, Ex parte Pacific Coal Pty Ltd [1992] 2 Qd R 180 at 191; Dobbie v Department of Social Security [1995] FCA 1191. It cannot be said that Mrs Berger did not make proper use of her opportunity to file and serve submissions: Jamal v Director of Public Prosecutions [2013] NSWCA 355 at [39].
However, in this case, we have decided not to set aside the Tribunal's decision because it is inevitable that the result will be the same regardless of any submissions Mrs Berger may make. Mrs Berger did not appeal on any ground relating to the factual or legal basis for the Tribunal's decision. The basis of Mrs Berger's appeal on the ground of procedural fairness was that either the Tribunal had made a finding of fraud against her or that Boulder Projects would elaborate on their allegation of fraud in their written submissions. Either way, Mrs Berger said that she was not given a reasonable opportunity to respond to those allegations.
Whether Mrs Berger made a fraudulent misrepresentation or otherwise acted in a fraudulent manner was not an issue in the proceedings. Boulder Projects did not plead fraud as part of its defence. The general rule is that allegations of fraud cannot be proved at a hearing unless they are pleaded and they must be pleaded with particularity: Ritter v North Side Enterprises Pty Ltd (1975) 132 CLR 301 at 304. Even though Mr Pigott told the Tribunal Member at the hearing that he was alleging fraud, it is clear from the Member's response that his view was that he would have to commence proceedings in relation to fraud in another jurisdiction.
It follows that any submissions Mrs Berger may have made about an allegation of fraud could not have affected the outcome.

Bias rule

We understand Mrs Berger to be alleging apprehended, rather than actual, bias. The two-step test for apprehended bias was explained by the High Court in Ebner v Official Trustee in Bankruptcy [2000] HCA 63 at [6]: Where, in the absence of any suggestion of actual bias , a question arises as to the independence or impartiality of a judge (or other judicial officer or juror), as here, the governing principle is that, subject to qualifications relating to waiver (which is not presently relevant) or necessity (which may be relevant to the second appeal), a judge is disqualified if a fair-minded lay observer might reasonably apprehend that the judge might not bring an impartial mind to the resolution of the question the judge is required to decide. That principle gives effect to the requirement that justice should both be done and be seen to be done, a requirement which reflects the fundamental importance of the principle that a tribunal be independent and impartial.

Factual findings on first intervention

The bias or prejudgement ground of appeal is based on two interventions the Tribunal Member made during the hearing at first instance. The first was that the Tribunal Member allegedly conducted some research on behalf Boulder Projects during the morning tea break and advised Mr Pigott of the names of certain cases. The relevant parts of the transcript are reproduced below: Mr Pigott: May I enquire the name of the case Member? Member: I will see if I can look it up. Court of Appeal decision, I think, this year on that issue and I think there is also an older decision in the Court of Appeal. The basis of the appeal, I will see if I can find it for you. (Break) Member: I promised to try to find some references before the break. I don't guarantee that they're 100% relevant but there is some relevance in them. There is a matter called Pollock v Hicks [2015] NSWCA 122 and that goes to the issue of whether a person who is alleged to be guilty of unconscionable conduct, whether that person was involved at a sufficient level, knew that that conduct itself would result in a misrepresentation. It is the degree of involvement of the people who may be on the periphery of the unconscionable conduct. That is the case that may have relevance here. You can talk to me about that later on. There is another matter called Product Development Solutions v Parametric Technology [2012] NSWCA 211 and another one of the Supreme Court, Geoffrey Rixon v Perpetual Trustees Victoria Ltd [2012] NSWSC 106. There is also a decision that I am reminded of, a High Court decision, called Crabtree Vickers v Australian Direct Mail that may be relevant. It is probably not my job to do your legal research. Mr George: You've done a very good job so far. Member: These are cases that I'm aware of that I think may have some relevance to the outcome of this matter. Crabtree v Vickers [1975] HCA and that is one of the leading cases on agency of ostensible authority. See how we go with those. Now, Mr George are you ready to proceed? (Page 6 - 7of the transcript).

Consideration

The Tribunal must be independent and impartial. Both parties in this case were represented by lawyers so no question of the Tribunal's duty to self-represented parties arises.
In relation to the first intervention, the Tribunal Member did not express a view about the merits of any submission either party had made. The Tribunal merely brought to the parties' attention the names of cases that he considered relevant to a particular issue which was apparently in dispute. These circumstances do not satisfy the test in Ebner v Official Trustee in Bankruptcy [2000] HCA 63. It is not the case that a fair minded lay observer might reasonably apprehend that the Member might not bring an impartial mind to the resolution of the question the Member is required to decide.

Factual findings on second intervention

The second intervention relates to a question the Tribunal Member asked of Mrs Berger and to which her lawyer objected because he said the question was not based on the evidence. The question was: Member: And the contract with Boulder and the deed that we have seen in exhibit A, were an arrangement that was set up with your knowledge and the knowledge of your husband, to overcome the difficulty of Westpac not paying to an unlicensed builder?
The context in which this question was asked and the objection Mr George made are contained in the transcript at p 38-39: Member: Thank you. Just a couple of supplementary questions for you Mrs Berger, before we go to you Mr George. The $10,000 that was paid to Mr Hancock that was paid by you, as I understand it, that money was paid out of the Boulder account by Mr Hancock to himself as it was money that came from Westpac. There was no provision in the contract for that was there? Ms Berger: There was. I have seen it. He was paying himself project management fees. Member: Do you regard Kade Hancock as being employed by you or employed by Boulder? Ms Berger: By Boulder because he was not licensed. Member: so you knew that Westpac wouldn't pay the money out to a person who was not licensed to builder? Ms Berger: Absolutely Member: And the contract with Boulder and the deed that we have seen in exhibit A, were an arrangement that was set up with your knowledge and the knowledge of your husband, to overcome the difficulty of Westpac not paying to an unlicensed builder? Mr George: I object to this. Firstly, I have a question with your line of questioning and secondly, it indicates that you have prejudged the matter. Member: Not at all I am trying to understand. Mr George: The proposition that you have just put to the witness is in an improper form. That she couldn't get the money from Westpac and therefore she was using Boulder as a licenced builder only which is not on the evidence put before you. Member: The defence in this matter depends on Ms Berger's involvement and her level of knowledge of the circumstances surrounding the transactions. Mr George: Yes I agree with that. Member: I think it is a legitimate question to put to Mrs Berger whether she was personally involved in the contracting with Boulder and the deed of the other parties in order to avoid the difficulty that she had that Westpac would not pay out to anybody but a licensed builder. It does not suggest that I have prejudged the issue. It does go to the issue of Mrs Berger's knowledge why the transactions were done. They weren't done in a vacuum. The evidence so far is that Mrs Berger contracted with Boulder Projects and had no further dealings with them. She didn't pay them any money. The bank paid the money. The arrangement was that the money was to be whipped out of Boulder and paid back to the people who were doing the work. She obviously considered that Boulder weren't doing the work because no payments were made to Boulder. Mr George: Again that conclusion is inconsistent with the evidence and that again leads to the conclusion that you have prejudged the matter. You just said that she obviously knew that the money wasn't being paid to Boulder. That is not the evidence. The evidence is that the money came from Westpac. The evidence is that it went to a company account in the name of Boulder. Member: Perhaps I have been careless with my language for which I apologise. Mrs Berger has told us that she knew the money was being paid by Westpac to Boulder and all of the money was being transferred away from Boulder to her husband's trust account so that Boulder received no benefit from the transaction. Mr George: The last part of what you said is not the evidence. The evidence is that the money was being transferred to the husband's trust account to ensure the money and Boulder was. . . I made some notes. . . She said that the money went into the Boulder account and Kade Hancock referred payments. She was asked if she ever received any bank statements and she said, 'No, that is not our account it is Boulders." She then said that the . . . Member: In fairness Mr George, as it is an objection to my own question, I won't ask the question. Thank you. Mr George: Member, I still need to explain that still indicates prejudgement unless we can clarify the position that has been held up. Member: I think there is no prejudgement. I haven't made any pronouncements whatsoever about my view of the evidence at all.
As the Member withdrew the question, Mr George's only point is that the Member asked a question which had no basis in the evidence and that demonstrates that the Member had pre-judged the matter. The Member denied that he had pre-judged the issue saying that he had not expressed a view on any of the evidence.
Mr Pigott pointed to parts of the transcript (page 12 and 20 and 23) where Mrs Berger acknowledges that she understood the effect of the arrangement between her husband, Mr Allen, a director of Boulder Projects, and Mr Hancock the person who carried out the work.
The following evidence was given a page 12 of the transcript: Mr Pigott: So you could draw down on the facility whenever you wanted to? Mrs Berger: No we never drew down anything. The bank insisted on paying the builder. So the money went straight into the Boulder account. Mr Pigott: No I'm talking about before Boulder was involved Mrs Berger; No, same situation. So it went straight to the builder. …
At page 20 and 21 of the transcript the following exchange took place; Mr Pigott: Are you aware that the monies advanced by Westpac to Boulder Projects were transferred by inter-banking out of the Boulder Projects Account? Ms Berger: No, yes, I beg your pardon they were they were transferred to the trust account. Mr Pigott: Not all the monies were transferred to trust account Ms Berger: well it was supposed to be, but (indecipherable) Kade Hancock . Mr Pigott: So all the money was supposed to be transferred to your husband's solicitor's trust account? Ms Berger: Yes, that's correct. …
Finally, at 23 of the transcript, the following evidence was given: Mr Pigott: But what about the monies transferred to Sarah Berkeith? Ms Berger: We didn't transfer any money (indecipherable) it proves my husband had special money (indecipherable) he had no access to Boulder account. He was not a signatory to transfer money on the Boulder account.

Consideration

The Tribunal has the power to "examine or cross-examine any witness to such extent as the Tribunal thinks proper in order to elicit information relevant to the exercise of the functions of the Tribunal in any proceedings": NCAT Act, s 46(1)(c). The question the Tribunal put to Mrs Berger was that she knew that the arrangement was set up to overcome the difficulty of Westpac not paying to an unlicensed builder. Mrs Berger had not made that admission prior to that question being put.
This is not a case of excessive intervention on the part of the Tribunal Member: The Council of the Municipality of Burwood v Harvey, Unreported judgement of the Supreme Court of New South Wales Court of Appeal (BC 95 04421) Kirby P, Mahoney and Coal JJA. The objection is to a single question asked of a witness by way of cross-examination. The question, although asked in a leading way, was directed to eliciting information relevant to issues which were relevant to the determination of the proceeding. The NCAT Act expressly permits the Tribunal to cross-examine a witness. In some circumstances the nature or extent of the cross-examination may suggest that the Member is, or might be perceived to be biased. This is not such a case.

Costs

On the assumption that the Appeal Panel would allow the appeal, Mrs Berger applied for costs. We have not allowed the appeal so it follows that the application is dismissed. Nevertheless, we make the following short but important point.
The costs application was made on the basis that it was through no fault of Mrs Berger or Boulder Projects that the Tribunal did not afford the parties procedural fairness. In those circumstances it was submitted that the costs should come from the Suitors Fund.
The Suitors' Fund Act 1951 (NSW) does not apply to internal appeals heard by NCAT. Section 6 makes it clear that that legislation only applies to appeals to the Supreme Court, the High Court, the Industrial Relations Commission of New South Wales, the District Court of New South Wales or the Land and Environment Court: Gaynor v Burns [2015] NSWCATAP 150 at [61].
Boulder Projects also submitted that in view of the fact that any breach of procedural fairness was not its fault, it should also receive its costs from the Suitors Fund. As the Suitors' Fund Act does not apply to appeals heard by NCAT, the respondent's application for costs is refused.

Orders 1. The appeal is dismissed. 2. The appellant's application for costs is refused. 3. The respondent's application for costs is refused.

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: 17 December 2015

Home Building Act 2009(NSW)

Suitors' Fund Act 1951(NSW)

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