Burns v Hogg Constructions Pty Ltd

The Contract

1. The contract between the parties, as noted, was a standard form Master Builders' Association Cost Plus contract. The contract included "Contract General Conditions" and a number of schedules. A number of provisions of the Contract General Conditions are significant to the Tribunal's decision.
2. Clause 1 of the Contract General Conditions provides: 1. Responsibilities of Builder and Results of Construction (a) the Builder will, subject to these Conditions and the contract work details in Schedule 3, execute and complete the works required by the contract. … Plans and Specifications (c) (i) All plans and specifications for work to be done under this Contract, including any variations to those plans and specifications, are taken to form part of this Contract. (ii) Any agreement to vary this Contract, or to vary the plans and specifications for work to be done under this Contract, must be in writing signed by or on behalf of each party to this Contract. (iii) This clause only applies to a contract to which section 7AA (Consumer Information) of the Home Building Act 1989 applies. … Budget Reports to be Provided (e) The Builder will regularly provide to the Owner a written report on the cost of the works. This will be known as the budget report. If no specific period is agreed by the parties then a budget report will be done once per calendar month. See Schedule 1 Part E where a date for providing the Budget report can be agreed. The budget report is to be provided no later than five (5) days after this date. (f) The budget report will include: (i) details of the work done, costs known and moneys paid or payable as at the date identified in the budget report (ii) a summary of work being performed and still to be performed; (iii) details of work about which the Owner needs to provide instructions in order to allow the works to proceed; and (iv) a revised estimated total cost of works. The estimate above will be based on the Builder's knowledge at the time the budget report is done. The Builder is to use reasonable care in preparing the budget report. However the revised estimated total cost of works provided in the budget report is not a lump sum or guaranteed amount and is subject to the impact of the costs and the fees payable or incurred under the contract. Refer to Clause 30 also.
3. Clause 2A of the Contract General Conditions provides: 2A. Joint Responsibilities of the Builder and Owner (a) The Parties acknowledge the fact that: (i) the amount payable by the Owner under this contract is not as at the date of the contract known. (ii) the total amount payable under the contract will not necessarily be ascertainable during the course of the contract; and (iii) the amount to be paid by the Owner is the result of the costs incurred by the Builder, the Builder's fee or return and the impact of the GST on the work done. (b) The parties agree in order to manage this situation that they will conduct regular meetings in order to: (i) review the work done and costs incurred; (ii) review the work to be done and the costs thought to be payable for such work; and (iii) make decisions and choices regarding work under the contract so that the work to be paid for by the Owner is consistent with the Owner's capacity to pay. (c) they will, in the event that there is a conflict between the costs of the work as set out in the budget report and the Owner's capacity to pay, adjust the work to be done so that the conflict is eliminated and as such the work to be done is worn for which the Owner has the capacity to pay. The adjustment to the work is to be recorded in writing and signed by both parties and treated as a variation under Clause 14. (d) they will act co-operatively and in a manner which progresses the works. (e) either party may require a meeting to be held within five (5) days of a written request for a meeting. Both parties must attend such a meeting. The party calling the meeting will identify issues to be covered at the meeting. The Builder will provide a report on the matters raised at the meeting within a reasonable time but no later than ten (10) business days after the meeting. (f) for the purpose of improved certainty the scope of work to be completed by the Builder is limited to that work for which the Owner has made or can make and does make payment. Consequently any work which is not able to be paid for by the Owner will be eliminated from the work to be carried out by the Builder. …
4. Clause 17 of the Contract General Conditions provides: 17. Payment (a) The Owner must pay to the Builder the Cost of Works as set out in Schedule 1 Part A when completed except for minor defects and omissions; and (i) the fee set out in Schedule 1 Part B; (ii) the percentage referred to in Schedule 1 Part B based on: (1) the Cost of Works as set out in Schedule 1 Part A; (2) the cost of any goods and/or materials purchased by the Owner if those goods and/or materials are to be installed by the Builder; and (3) the cost of any subcontractor engaged by the Owner if the Builder is requested and/or agrees to supervise that subcontractor. For the purposes of (2) and (3) above, the Owner is to supply the Builder with copies of all invoices for that subcontractor and/or supplier. (iii) GST, Refer to Clause 18. (b) The above amounts must be paid to the Builder in accordance with the timetable set out in Schedule 1 Part B. (c) A claim for payment by the Builder is to identify - (i) the period during which work was carried out and the work for which payment is required; (ii) the Cost of Works for works performed in this period; (iii) a brief description of any variations relative to the initial scope of work under the contract; (iv) the fees payable under Schedule 1 Part B; and (v) GST. The Cost of Works determined by the above is to be a figure initially exclusive of any GST component. The amount determined by the above processes will be subject to GST pursuant to Clause 18. (This is to avoid compounding the GST or to ensure the GST is only charged once on the aspects or components used to establish the cost of the work and the Builder's fee). (d) All claims for payment of Costs of Works should be evidenced as far as possible by supporting copies of documents such as clean copies of invoices, receipts and account documents. (e) Payment is to be made within the period stated in Schedule 1 Part C item (b). If no period is stated, then the payment must be made within five (5) days of the date the claim was submitted to the Owner. (f) Should the Builder not receive from the Owner payment of or any part of a payment by the due date, the Builder will be entitled to interest on the overdue amount at the rate specified at Schedule 2 point (e). The Builder may also suspend further work pursuant to Clause 19, if the Owner fails to pay for work under this contract. …
5. Clause 19 of the Contract General Conditions provides: 19. Suspension of Work (a) Should the Owner:- (i) fail to pay or cause to be paid any payment or any part thereof including an amount for GST within the time required by Schedule 1 Part C item (b); (ii) fail to confirm in writing instructions regarding an Owner requested variation or a necessary variation to the works; (iii) fail to provide written instructions in a manner and time so as to reasonably avoid delay to the progress of works; (iv) fail to comply provide evidence of their capacity to pay for the works satisfactory to the Builder as required by Clause 2(a) or 2(b); (v) or the Owner's agent access the site and/or cause independent sub-contractors to attend the site address without the Builder's written consent; THEN the Builder may, without prejudice to its right to determine this Contract, suspend the works. Suspension pursuant to this clause will act as a bar to any claim for damages, compensation or offset by the Owner against the Builder which relates to the period of suspension or consequence of such suspension. (b) The Builder is to give notice in writing of any suspension under this clause to the Owner. (c) Should the Owner direct the Builder to not proceed with the works then, without prejudice to the Builder's right to terminate this Contract or to claim delay costs pursuant to Clause 11, the Contract is automatically suspended. (d) The parties must in relation to a dispute as to payment or otherwise conduct a meeting pursuant to clause 24. (e) The builder must recommence the works within twenty (20) days of default in sub-clauses (a) or (c) being rectified or in the case of sub-clause (a) (v) the owner providing a written undertaking to not repeat that breach. (f) Any period of suspension will automatically and as of right extend the construction period and by consequence the date for Practical Completion."
6. Clause 24 of the Contract General Conditions relates to dispute resolution and provides that if any dispute or difference concerning the agreement or work arises between the owner and builder then the party saying there is a dispute must give the other written notice of the dispute. The clause provides that within 10 business days after the giving of such a notice the parties must confer at least once to attempt to resolve the dispute.
7. Clause 24(e) provides: (e) In the absence of such a meeting a party is not entitled to terminate the contract whether pursuant to clauses 26 or 27 or otherwise. However, if a party refuses to attend the meeting the other party can rely on its willingness to attend as satisfying the holding of the meeting and thereby proceed pursuant to clauses 26 or 27 as appropriate. Notification of any meeting under this clause must allow the other party a reasonable chance to attend.
8. Clause 26 of the Contract General Conditions provides: 26. Termination by the Owner (a) Subject to compliance with clause 24, if The Builder is in default in any of the following respects, namely: (i) … commits an act of insolvency; or (ii) fails to proceed with the works with due diligence or in a competent manner with regard to the circumstances of the contract works; (iii) without reasonable cause he wrongfully suspends the carrying out of the works before Practical Completion; or (iv) refused or persistently neglects - (a) to comply with the requirements of Clause 12 of these conditions; or (b) to remove or remedy defective work or improper materials, so that by the refusal or persistent neglect the works are materially affected; or (v) states that is unable or unwilling to complete the works or abandons the Contract; AND if, In the case of any default that is capable of remedy, the default continues for twenty five (25) days after notice in writing has been given to the Builder specifying the default and stating the Owner's intention of terminating this Contract, THEN the Owner may, without prejudice to any other rights or remedies, by notice served as allowed by Clause 29 terminate this Contract. (b) The Owner may terminate this Contract in the circumstances provided by the general law however this does not prevent the Owner and Builder from agreeing to additional circumstances in which the contract may be terminated. (c) In the event that the Owner terminates this Contract in accordance with Sub-Clause 26(a) of this clause, the Owner may engage another Builder to carry out the works.
9. Clause 27 of the Contract General Conditions provides: Termination by the Builder Subject to compliance with clause 24 if the owner is in default in any of the following respects, namely: (a) Refuses the builder access to the site at any time after commencement of the works; … (c) Fails to provide evidence of his capacity to pay the contract sum satisfactorily of the builder as required by clause 2 within 10 days of the execution of this contract; or (d) Fails to pay the builder any payment within 10 days of a written request or within the period stated in Schedule C Item (b), whichever is the later … (g) Fails to remedy the matter, thing or event which has allowed the builder to suspend the work under Clause 19 And if in the case of any such default that is capable of remedy, the default continues for 10 days after notice in writing specifying the same and stating the builder's intention to terminate the contract Then the builder may without prejudice to any other rights or remedies by notice serve pursuant to clause 29 terminate this contract.
10. Clause 30 of the Contract General Conditions provides: 30. Estimate for Owner If an estimation of the total amount that will become payable by the Owner under this Contract is or has been made either before or after the date of the Contract THEN such estimation will be or will have been made on the basis of the information, as to the detailed and complete nature and extent of the works, then available to the Builder. However the estimation will not be of any contractual significance whatever between the parties or deemed to be a representation innocent or otherwise as to the amount or approximate amount that will become payable by the Owner. This clause also applies to the budget report referred to in Clause 1(e).

The Decision

1. In dealing with the builder's claim, the Tribunal referred to the provisions of clause 17 and found that Progress Claim No 4 had been sent to the owner on 3 April 2019, that payment had been requested by 10 April 2019, and that it was not in dispute that the progress claim had not been paid.
2. To the extent the owner relied upon the provisions of clauses 2A(ii) and (b) to (c), the Tribunal held, at [17]: "I find that these clauses properly construed do not operate to relieve the owner from the obligation to pay imposed by clauses 17(a) and 17(b)." The Tribunal emphasised the use of the words "must" in both clauses 17(a) and 17(b). The Tribunal held, at [19]: "I reject the owner's submissions that clauses 1(e), 1(f), 2A(iii) and 2A(b) to (c) of the contract in any way modify or restrict the owner's obligation to pay the builder the costs of the works as claimed. I find that the owner's obligation to pay is mandatory as shown by the use of the word 'must' pay. The owner's obligation to pay progress claims is not stated to be subject to compliance with clauses 1(e), (f), 2A(iii) and 2A(b) to (c) of the contract. If the owner was of the view that the builder breached clauses 1(e), (f), 2A(iii) and 2A(b) to (c) he had the right to claim damages for such breaches of contract. No such claim has been made."
3. Having found that the owner was therefore liable to pay the builder the amount claimed in progress claim no 4, the Tribunal awarded the builder interest on that amount pursuant to clause 17(f) of the contract at the rate stated in the contract. The Tribunal calculated the interest payable on Progress Claim No 4 at $15,216.11.
4. The Tribunal also calculated a small amount of interest payable in respect of Progress Claim no 3. Although the award of that interest was originally the subject of a ground of appeal, that ground was not pressed at the hearing.
5. The Tribunal then addressed the owner's claim and affirmative defences. The owner's evidence was that, at a meeting on 22 November 2018, he told the builder that his budget was $200,000 based on a set of plans for which he had received development approval and which he had provided to the builder three days earlier. The owner asserted that the builder had made statements to the effect of each of the "builder's representations" at that meeting.
6. The builder's evidence was that there were discussions to the effect that, because of a lack of detail about the proposed building work, the builder could not give a lump sum price and that if a lump sum price were to be given, the builder would have to build contingencies into the lump sum price which could then end up higher than the actual cost of the works. The builder asserted that in that context he suggested that a cost plus contract would also have the added benefit of allowing the works to start while giving the owner time to work out details.
7. The Tribunal found that there were two sets of plans sent by the owner to the builder on 19 November 2018, the first of which was a site plan with some handwriting on it showing the location of the proposed granny flat. The second plan depicted elevations for proposed floor plans and a section. The Tribunal found that "the details on the second plan were not comprehensive and almost non-existent as regards the interior fit out of the granny flat."
8. The Tribunal accepted the builder's evidence that there was a lack of detail about the proposed building work and that there was not enough information available for the builder to provide a lump sum price unless contingencies were included to allow for the lack of information. In those circumstances the Tribunal found that it was more probable that the builder did not make statements to the owner as alleged in the owner's evidence.
9. The Tribunal preferred the builder's account of what had been said at the meeting on 22 November 2018, and in particular found that the builder did not represent that the cost of the building works would be less than $200,000.
10. The Tribunal found that the builder referred the owner to a cost plus contract "in the context of avoiding the inclusion of contingencies to account for unknown areas of work, in addition as a way to commence work promptly while allowing the owner to work out the details of his requirements."
11. The Tribunal concluded that the "builder's representations" (2) and (3) as alleged in the owner's Points of Defence (and set out at [7] above) had not been "made out", that is proved to have been made.
12. The Tribunal noted that additional documents had been provided to the builder after the meeting of 22 November 2018, which provided details for the building including engineer's details for slab and footings, DA approved drawings and a schedule of finishes for the proposed granny flat. The Tribunal found that those documents could not be relevant to the representations alleged by the owner as they had been made after the date on which the representations were alleged to have been made.
13. The Tribunal considered that the implied term alleged by the owner, that the builder would use its best endeavours to carry out the building works within the estimate, was not necessary to give business efficacy to the contract, was not so obvious that it went without saying, and would to some degree contradict express terms of the contract. The Tribunal noted that the estimated building cost of $200,000 stated in the contract was followed by a warning: "The amount to be paid by the owner is and will be determined by reference to the contract and the work done by the builder and the cost incurred by the builder. This will be influenced by and subject to adjustment by reason of such things as …" with fourteen ways in which the estimate might be affected listed following that warning.
14. The Tribunal held that the second implied term alleged by the owner, that is that the builder's cost of works and fees would be fair and reasonable in the circumstances, was not incorporated within the contract. The Tribunal stated: "To imply a term which requires fairness is to introduce subjective notions regarding the cost of building works that would, in my view, be difficult to implement, and which would not be necessary to give business efficacy to the contract, and not so obvious that it went without saying.
15. Consistently with the decision in McAllery v Alta Building & Developments Pty Ltd [2014] NSWCATCD 106 at [105] (which was upheld on appeal in Alta Building & Developments Pty Ltd v McAllery [2015] NSWCATAP 14 at [73]-[75] and which followed the decision of Debelle J in One Steel Manufacturing Pty Ltd v United KG Pty Ltd [2006] SASC 119), the Tribunal held that the contract did contain an implied term that "only direct actual costs that had been reasonably and properly incurred may be recovered by the builder."
16. In relation to the question which party had terminated the contract, the Tribunal noted that each party claimed that it had terminated the contract. The Tribunal canvassed the course of events, which commenced with a meeting on 15 March 2019. Both parties suggested that in that meeting the owner had made statements directing the builder to leave the site and the builder had left the site.
17. On 18 March 2019 the owner emailed the builder confirming that the builder's services had been terminated on 15 March 2019 for reasons including that the builder had provided a budget report indicating that the cost of building works would be in excess of $320,000 and that the builder had failed to provide copies of documentation required to enable the owner to consider and approve sub-contractor pricing.
18. On 23 March 2019 each party communicated with the other expressing the proposition that the contract had not been terminated.
19. On 6 June 2019 the builder provided notice under clause 19 of the contract that it had suspended work and calling for a meeting in accordance with clause 24(c) of the contract.
20. On 11 June 2019 the owner's solicitor sent a Notice of Dispute to the builder under clause 24 of the contract.
21. On 19 July 2019 the owner sent a Notice of Default to the builder under clause 26 of the contract.
22. On 31 July 2019 the builder served a Notice of Default upon the owner.
23. On 7 August 2019 each party communicated with the other rejecting the proposition that they were in default.
24. On 20 August 2019 the builder gave written notice to the owner that he continued to be in default and that the builder terminated the contract pursuant to clause 27 of the contract. In the alternative the builder asserted that he treated the owner's conduct as a repudiation and was terminating the contract at common law.
25. The owner's solicitors served a Notice of Termination on the builder on 21 August 2019 asserting that the builder had failed to remedy the defaults referred to in the owner's Notice of Default.
26. The Tribunal identified that the builder's Notice of Default provided three instances of default: 1. Refusal of access; 2. Failure to pay Progress Claim 4; and 3. Failure to remedy the non-payment of the Progress Claim which had entitled the builder to suspend work.
27. The Tribunal found that, although the owner had stated to the builder that he had terminated the contract, he "did not take positive steps to exclude the builder from the site". The Tribunal held that the builder had taken its own steps to demobilise from the site and found that the owner's instructions to the builder on 15 March 2019 was not a default. The Tribunal held, nevertheless, that the owner's failure to pay Progress Claim No 4 was a default under clause 27(d) of the contract, which entitled the builder to issue a Notice of Default and that the owner's failure to remedy that default entitled the builder to terminate the contract.
28. The Tribunal also held that the owner's failure to pay Progress Claim 4 entitled the builder to suspend the works and that the failure to remedy the non-payment was a further default under clause 27(g) of the contract, which, not having been remedied by the owner, also entitled the builder to terminate the contract.
29. The Tribunal also held that: "When the owner told the builder on 15 March 2019 that he was terminating the contract, or that the builder could finish up, the owner had no proper reason or cause for doing so and that by making those statements he evinced an intention to no longer to be bound by the contract which amounted to a repudiation."
30. The Tribunal held that the owner's reasoning for telling the builder to finish up, being his unhappiness with the budget report, was not a justification for the owner's conduct. The Tribunal held: "The fact that the budget report showed an increase in the cost of the building works was not in any way a breach of contract that would have entitled the owner to terminate. The contract was cost plus and clause 3(i) stated that the owner understood, among other things, that the total cost of the works was not known or ascertainable as at the date of the contract. There was no guarantee or warranty that the cost would not increase."
31. To the extent the owner also relied upon the builder's failure to provide documentation, the Tribunal found: "If the builder was in fact failing to provide the necessary documents to the owner, in breach of clause 2A(b), I find that such breach did not rise to the level of a breach of an essential term of the contract which would have justified an immediate termination of the contract by the owner. I find such breach ought to have been referred to the dispute resolution provisions of clause 24."
32. The Tribunal considered that if the terms of clause 24 of the contract had been followed, a breach by the builder of the requirement to provide documentation "would have been a breach of sufficient seriousness to justify termination."
33. The Tribunal assessed the damages sustained by the builder by reason of the owner's breach of contract which resulted in the termination of the contract in accordance with the principle stated in Robinson v Harman (1848) 1 Exch 850; 154 ER 363 that "where a party sustains a loss by reason of breach of contract, he is, so far as money can do it, to be placed in the same situation with respect to damages, as if the contract had been performed."
34. The Tribunal noted that the damages claimed by the builder was effectively the loss of margin or profit foregone on the value of the building works that it was deprived of the opportunity of completing. The Tribunal also noted that there were difficulties in calculating that figure with a cost plus contract.
35. However, the builder relied upon evidence of the amount of money paid by the owner to third parties to complete the work that the builder would have carried out, had the contract remained on foot. That amount of money was $136,936. The builder claimed its 15% margin on that amount, less an amount already claimed in Progress Claim No 4, which the owner had paid directly to the bricklayer and carpenter previously engaged by the builder.
36. The Tribunal accordingly awarded the builder $19,700 as damages arising on the termination of the contract due to the owner's default.
37. In relation to the owner's allegation that the builder had breached the statutory warranties implied into the contract pursuant to s 18B(1) of the Home Building Act, the Tribunal addressed the expert evidence led by the parties. The Tribunal noted that Mr Redfern, one of the experts retained by the owner, had prepared a report which did not refer to the NCAT Procedural Direction 3 because his report was prepared for the purposes of discussion and negotiation. Mr Najjar, the other expert relied upon by the owner, had relied to some degree on Mr Redfern's work.
38. The builder had called expert evidence from Mr Jamieson.
39. The experts had provided a joint report in which Mr Najjar calculated the cost of rectification of defects as $9,185.41, while Mr Jamieson calculated the cost of rectification of defects as $5,234. Mr Jamieson asserted that the reason for the difference was the cost of rectification of defective brickwork, which Mr Jamieson suggested should be the responsibility of the bricklayer who the owner had paid directly.
40. The Tribunal determined that the bricklayer had done a minimal amount of work for the builder before the builder left the site and that it was more probable than not that effectively all of the brickwork was carried out by the bricklayer for the owner. On that basis the Tribunal accepted that the responsibility for rectification of defects in the brickwork lay with the bricklayer, not the builder, as the work had not been done under the contract with the builder. The Tribunal therefore accepted Mr Jamieson's valuation of the cost of rectifying defective work at $5,234 and allowed that amount in reduction of the builder's claim.
41. In relation to the owner's reliance on clauses 1(e), 1(f) and 2A of the contract, the Tribunal found: 104 The owner's Points of Defence raise failures to comply with clauses 1(e), 1(f) and 2A of the contract. No amount is claimed in connection with these alleged breaches of contract. There is no set off claimed in relation to these items. In addition, these issues are not pressed by the owner in his final submissions in the sense that it is said that these provisions of the contract have been breached with the result that the owner is entitled to damages in an ascertainable amount. Nor has it been explained how these provisions if breached affect the builder's right to recover the amounts claimed by it. 105 To the extent that it is necessary, I find that clauses 1(e) and 1(f) had no formal application because Part E of Schedule 1 of the contract had not been ticked to indicate that budget reports were required. 106 In addition I have dealt with clauses 1(e), (f) and 2A of the contract at [17]-[19] of these reasons. [See [27] above]
42. In relation to the owner's claim to reimbursement of overpayments, the Tribunal noted that that aspect of the owner's claim was raised in both the Points of Defence and in the owner's own cross application and that the amount claimed was $42,782.54. The Tribunal noted "the owner has not articulated or identified any legal principle which entitles it [sic] to revalue the work that has been carried out by the builder".
43. The Tribunal analysed the owner's calculations, noting that the most significant figure in the calculation was the sum of $95,020 which is stated to represent the value of the builder's work. The Tribunal noted that the owner stated that that figure was derived from clause 7.1 of the joint report. The Tribunal recorded that there was no support for that figure in that clause of the joint report and identified that the only figure in the experts' evidence which equated to the sum of $95,020 was "Mr Najjar's quantum meruit value of the works completed by the builder as referred to in section 5.1 of the joint expert report".
44. The Tribunal noted that in section 5.2 of the joint expert report Mr Jamieson stated that, in his opinion, the quantum meruit value of the works completed was $140,665.
45. The Tribunal held at [112]: "I find that the use of the figure of $95,020 … is unacceptable since the footnote reference to it is incorrect and the correct reference to this figure has been omitted. The use of the quantum meruit assessment has not been explained. Nor does it appear to me to be justified since there is no basis for departing from the contractual regime for charging for the work performed."
46. The Tribunal recorded that it had found that it was an implied term of the contract that the builder, so far as direct costs were concerned, was only entitled to payment of direct actual costs that have been reasonably and properly incurred. However, the Tribunal noted that the implication of such a term does not entitle the owner to carry out a revaluation of the contract.
47. The Tribunal referred to the statement in McAllery v Alta Building & Developments Pty Ltd at [110] that: "To establish that a builder under a cost plus contract has claimed costs that were not reasonable and proper will in my view require an owner to identify the item of work for which the builder has claimed the cost of, and further to identify the respects in which the costs claimed by the builder were not reasonable and proper".
48. The Tribunal noted that Mr Najjar's report was complicated. The Tribunal set out an explanation of the mechanism by which Mr Najjar calculated the owner's overpayment claim, noting that Mr Najjar had used a figure of $96,620 "as his estimate of the cost of the work completed by the builder". The Tribunal held: "The use of Mr Najjar's own assessment of the cost of the work completely ignores the fact that the parties entered a cost plus contract and the builder has claimed and is entitled to be paid the actual costs incurred, not the costs Mr Najjar considers, with the benefit of hindsight, to be appropriate."
49. The Tribunal considered that Mr Najjar had estimated the sum of $96,620 "in a way and for a purpose that had not been explained in his report" and determined that there was no justification for the use of that figure in his calculations.
50. The Tribunal held at [120]: 120 I find that the calculation of the sum of $42,782.54 as the owner's overpayment claim is not based on breaches of the implied term that I have found. The owner's case has not proceeded on the basis of the identification of an item of work for which the builder has claimed the cost of, and a further identification of the respects in which the costs claimed by the builder were not reasonable and proper. This would allow an assessment of the amount by which the owner had been charged or had paid an amount in excess of a reasonable and proper amount for a specific item.
51. The Tribunal rejected the owner's claim for $42,782.54 and dismissed the owner's application.
52. The owner's claim for misleading and deceptive conduct, set out in his Points of Defence, relied upon the three alleged representations at [7] above. As we have noted, the Tribunal determined that the representations identified as (2) and (3) had not been made.
53. The representation identified as (1), that is that "the builder nominated an amount of $200,000 inclusive of GST as the cost of building works", was incorporated within the contract. The owner submitted that clause 30 of the contract (set out at [25] above) could not operate to exclude the operation of s 18 of the Australian Consumer Law, which prohibits misleading and deceptive conduct in trade and commerce.
54. The Tribunal determined that the representational consequences of the statement of the estimated cost of the works cannot be looked at in isolation. As the Tribunal noted "the issue is whether the estimate was likely to mislead or deceive". The Tribunal noted "there were numerous references in the contract which pointed to the fact that the cost of the building work could increase".
55. The Tribunal also referred to clause 3(i) and (iii) of the agreement which stated: (i) The Owner acknowledges and understands that the total cost of the works, including the fee payable to the Builder and the GST payable on the works is not known or ascertainable as at the date of this contract. … (iii) The Owner has read and understood the warning as to Cost Plus Contracts which appears at the front of this document.
56. The Tribunal held that the estimate in the contract was to be understood in the context of the provisions of a contract which made it clear that the estimate was no more than an estimate based upon information available at the time and that the owner had not established that the representation so understood was misleading or deceptive.
57. The Tribunal accordingly awarded the builder the sum of $73,609.73, against which the Tribunal offset the sum of $5,234, being the cost of rectification of defective work, and ordered the owner to pay the builder the sum of $68,375.73.

The scope and nature of internal appeals

1. By virtue of s 80(2) of the Civil and Administrative Tribunal Act 2013 (NSW) (NCAT Act), internal appeals from decisions of the Tribunal may be made as of right on a question of law, and otherwise with leave of the Appeal Panel.
2. In Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 the Appeal Panel set out at [13] a non-exclusive list of questions of law: 1. Whether there has been a failure to provide proper reasons; 2. Whether the Tribunal identified the wrong issue or asked the wrong question. 3. Whether a wrong principle of law had been applied; 4. Whether there was a failure to afford procedural fairness; 5. Whether the Tribunal failed to take into account relevant (i.e., mandatory) considerations; 6. Whether the Tribunal took into account an irrelevant consideration; 7. Whether there was no evidence to support a finding of fact; and 8. Whether the decision is so unreasonable that no reasonable decision-maker would make it.
3. The circumstances in which the Appeal Panel may grant leave to appeal from decisions made in the Consumer and Commercial Division are limited to those set out in cl 12(1) of Schedule 4 of the NCAT Act. In such cases, the Appeal Panel must be satisfied that the appellant may have suffered a substantial miscarriage of justice because: 1. The decision of the Tribunal under appeal was not fair and equitable; or 2. The decision of the Tribunal under appeal was against the weight of evidence; or 3. Significant new evidence has arisen (being evidence that was not reasonably available at the time the proceedings under appeal were being dealt with).
4. In Collins v Urban [2014] NSWCATAP 17, the Appeal Panel stated at [76] that a substantial miscarriage of justice for the purposes of cl 12(1) of Schedule 4 may have been suffered 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 para (a) or (b) not occurred or if the fresh evidence under para (c) had been before the Tribunal at first instance.
5. Even if an appellant from a decision of the Consumer and Commercial Division has satisfied the requirements of cl 12(1) of Schedule 4, the Appeal Panel must still consider whether it should exercise its discretion to grant leave to appeal under s 80(2)(b).
6. In Collins v Urban, the Appeal Panel stated at [84(2)] that ordinarily it is appropriate to grant leave to appeal only in matters that involve: (a) issues of principle; (b) questions of public importance or matters of administration or policy which might have general application; or (c) an injustice which is reasonably clear, in the sense of going beyond merely what is arguable, or an error that is plain and readily apparent which is central to the Tribunal's decision and not merely peripheral, so that it would be unjust to allow the finding to stand; (d) a factual error that was unreasonably arrived at and clearly mistaken; or (e) the Tribunal having gone about the fact finding process in such an unorthodox manner or in such a way that it was likely to produce an unfair result so that it would be in the interests of justice for it to be reviewed.

Grounds of Appeal

1. The owner attached to his Notice of Appeal an eight page document setting out 32 "appeal grounds". There was substantial duplication in those appeal grounds. In oral submissions at the hearing of the appeal Mr Gooley of counsel, who appeared for the owner, accepted that many of the "appeal grounds" were challenges to findings of fact in respect of which the owner required leave to appeal.
2. In the course of his oral submissions, Mr Gooley accepted that there were effectively five grounds of appeal asserting questions of law. Those grounds of appeal were: 1. That the Tribunal erred in finding that clauses 2A(iii) and 2A(b) and (c) of the contract did not operate to relieve the owner from the obligation to pay imposed by clause 17. (This ground was identified in the document attached to the Notice of Appeal as appeal ground 2 - there was no ground 1). 2. That the Tribunal erred in awarding expectation damages by reference to the builder's margin assessed by reference to the work that the builder would have carried out if the contract had remained on foot. The owner submitted in particular that the Tribunal had failed to take account of the provisions of clause 2A in assessing the work that the builder would have carried out if the contract had remained on foot. (This ground was set out in the document attached to the Notice of Appeal as appeal ground 24 - but it was also repeated in ground 25). 3. That the Tribunal erred in failing to find that the contract contained the implied terms alleged by the owner. (This ground of appeal was stated in various ways in appeal grounds 12 -15 in the document attached to the Notice of Appeal). 4. That the Tribunal erred in finding that clauses 1(e) and 1(f) had no formal application because Part E of Schedule 1 of the contract had not been ticked to indicate that budget reports were required. (This ground is appeal ground 28 in the document attached to the Notice of Appeal). 5. That the Tribunal erred in finding that the builder did not engage in misleading and deceptive conduct. (This ground was stated in a number of ways in appeal grounds 9-11 and 33 in the document attached to the Notice of Appeal).
3. The owner also identified a number of the grounds of appeal as a basis for leave to appeal on the grounds that the Tribunal's conclusions were not fair and equitable or against the weight of evidence.
4. Essentially those grounds relate to: 1. The findings that the builder did not make the representations and did not engage in misleading and deceptive conduct. 2. The Tribunal's findings in relation to the reports of Mr Redfern and Mr Najjar.
5. We will address the grounds of appeal identified at [90] above by reference to the numbers by which they are there referred to.

Ground (1) - The operation of clause 2A

1. The owner submitted that clause 2A "operates to qualify what is set out in the payment provisions of the building contract, particularly clauses 17(a) and 17(b)". The owner submitted that "if it doesn't have that qualifying effect then the question of capacity to pay is rendered otiose and will have no bearing on the payment obligations of the owner".
2. The owner submitted that: "a correct interpretation would have found that clauses 2A(iii) and 2A(b) to (c): (a) qualified the obligation imposed on the owner to pay the builder; (b) created a procedure for managing the amount to be paid by the owner with such procedure to include: (i) a review of the work done and the costs incurred; (ii) a review of the work to be done and the costs thought to be payable for such work; and (iii) the need to make decisions and choices regarding work under the building contract so that the work to be paid for by the owner is consistent with the owner's capacity to pay; (c) required an adjustment to the work to be done taking into account the owner's capacity to pay; (d) were not complied with by the builder; (e) disentitled the builder to any further payment until those clauses had been complied with which they were not.
3. The builder submitted that the Tribunal did not err in rejecting the contention that the owner's obligation to the pay the builder was dependent upon the owner's capacity to pay. The builder submitted: 9. Clause 2A deals with the peculiar circumstances of a costs-plus contract, and requires the builder and home owner to manage the contract and to conduct regular meetings "in order to…make decisions and choices regarding work under the contract so that the work to be paid for by the owner is consistent with the Owner's capacity to pay". 10. Clause 2A does not provide that the owner's obligation to pay the builder under clause 17 is conditioned by the Owner's "capacity" to pay. Rather, it provides a mechanism for the working out of an uncertain scope of work for an uncertain price during the performance of the contract on a costs-plus basis. 11. Here, the builder contracted to do the work. It did the work. It was entitled to be paid for the work. The construction of clause 2A contended for by the appellant would not achieve the commercial purpose of the costs-plus construction contract. 12. Further, the appellant appears to conflate his "capacity to pay" with his "willingness to pay". The evidence demonstrated that the owner had "capacity" to pay the builder, even within his "budget" for the project.
4. After the oral hearing of the appeal, the Appeal Panel drew the parties' attention to the Appeal Panel decision in Allen v Wallace [2019] NSWCATAP 58 and directed the parties to provide further written submissions addressing paragraphs [62] to [78] of that decision.
5. The contract between the parties in Allen v Wallace included a clause 2A in relevantly identical terms, the only difference between the clauses arising from the slightly different numbering of sub-paragraphs. Relevantly, clause 2A(e), the subject of the decision in Allen v Wallace, was the equivalent of clause 2A(f) of the contract, the subject of these proceedings.
6. At [62]-[78] the Appeal Panel held: 62. Clause 2A(e) … is clearly a provision included in the contract to assist in managing the cost plus nature of the contract. Clause 2A, read as a whole, is clearly intended to operate in circumstances where the parties maintain, in the course of the contract, close supervision over the costs being incurred as work proceeds. 63. Sub-clause (e) is in our view included in order to enable the builder to cease to carry out work if it becomes apparent that the owner is not in a position to meet the costs of further work. The clause assumes that the cost of work carried out by the builder will not advance beyond the owner's capacity to pay without the parties being aware of that fact. 64. In this case the owner was seeking and not receiving updates concerning the progress of the work during the period from July to October 2015. However, even at 16 October 2015, the anticipated total cost of the build as identified by the builders was not beyond the owner's capacity to pay, as recorded in the contract which identified that the owner had $580,000 cash and $100,000 to be advanced on mortgage by a lending institution. As noted above, as at 16 October 2015, the anticipated total cost of the build was $695,000, only marginally above the identified available funds. 65. The reason for the rapid increase in anticipated final costs between 16 October 2015 and 15 January 2016 was not explored in the Tribunal's reasoning or in any evidence brought to the attention of the Appeal Panel. 66. In dealing with the owner's reliance on clause 2A(e) the Senior Member recorded the owner's submission that clause 2A(e) limited the totality of claims which could be made against the builder to $680,000 or less. The Senior Member then (at [93]) recorded the builders' submission that the owner's position was a misapplication of the contractual term and that the builders' position was that: 1. The owner had represented she could obtain $680,000 for the works; 2. She also represented that she could borrow additional funds to purchase floor coverings and window furnishings, but that this was not the case as "the owner needed an additional loan to accommodate the revisions to the scope of works which she had effected and well before the expenditure of the amount that she professed to possess", with the result that the builders were required to provide information to the owner's bank in support of an approval for a loan to continue with the building works; 3. The builder had an expectation that funds of $680,000 were still available. That cost had not been reached when the builders were assured by the owner that finance would be forthcoming to take into account the revised budget; and finally 4. "The higher completion amount was caused by the owner's extensive and continued additions and revision of the works as they progressed". 67. The Senior Member then held (at [112]): "The Tribunal finds that at all times the works undertaken for the owner by the builder were 'underpinned' by the original contractual assurances for $680,000 and then subsequently the additional loan by the builder's revised estimates for completion". 68. It is not entirely clear what the Senior Member meant by the finding that the builders' contractual estimates were "underpinned" by the original contractual assurances and subsequently the additional loan, as the Senior Member did not identify what additional loan he was referring to or whether that loan had been obtained. It is apparent that this paragraph repeats a proposition included in the builders' written submissions to the Tribunal. 69. The owner submits that: "What the owner suffered here is exactly the circumstance clause 2A(e) is designed to protect against. She was misled as to the total costs of the works throughout the project when costs were being incurred, she was given no informed opportunity to minimise or limit those costs, and then, near the end of the project, she is suddenly advised the estimate she has been given is dramatically wrong and demand is made on her well in excess of her capacity to pay". 70. The owner submitted that there was no evidence supporting the finding at [112] and that "in fact the evidence supported the contrary conclusion that the owner did not have the capacity to pay for work done beyond about $695,000". The owner submitted that therefore the additional work was beyond the scope of the contract. 71. The builders submitted in response that the evidence disclosed that Mr Wallace had been told by the owner, prior to entry into the contract, that "I have $680,000 available and I can get more if necessary". The builders submitted that by October 2016, at which time the builders were aware that the owner was seeking further finance, the builders' "expectation that funds were still available under the original agreement at a total of $680,000 which had not yet been reached, was then supplanted by the assurance that finance was forthcoming which would take account of the new budget". 72. The builders submitted that "the new finance approval linked to Mr Wallace's revised estimates for completion gave Mr Wallace no reason to doubt [the owner's] ability to pay following loan approval". 73. We do not consider that, on its true interpretation, clause 2A(e) would have the effect of capping the owner's potential liability under the contract at $680,000 or at that amount plus any loan which the owner was able to obtain. 74. Clause 2A(e) would come into operation when it became apparent that an owner did not have the financial resources to meet further costs and would provide the builder with the opportunity to cease to carry out further work at that point. Clauses 2A(a)-(d) are intended to ensure that as far as possible the parties jointly monitor the costs of the work as it proceeds and adjust the work to avoid a situation where clause 2A(e) becomes operative. 75. However the inclusion of clause 2A in the contract (and clause 2A(e) in particular) does suggest greater significance for the provisions of clause 1 which require the builders to provide regular reports. Clause 2A is not only for the benefit of the builders. It also permits the owner to terminate the building works and instruct the builder to cease work in circumstances where the owner could not obtain sufficient funds to meet ongoing building costs. 76. If that opportunity was not to be illusory it was important that the builder provide reliable and timely estimates of ongoing building costs and cost to complete. Even if, as the builder submitted, the dramatic and rapid escalation in estimated completion cost after November 2015 was "a result of [the owner's] extensive and continued additions and revisions" the contract contemplated that the owner would be in a position to call a halt to works at any time when she realised that continued construction would exceed her capacity to pay. 77. There was on the evidence a factual dispute concerning what the owner said to the builders concerning her ongoing capacity to pay. The Senior Member did not make any findings concerning that conflict in the evidence. Nor did the Senior Member make findings concerning the operation of clause 2(b) in that context. Clause 2(b) provides that the owner must provide to the builders upon request reasonable evidence of the owner's capacity to pay for the works and that a failure to do so may allow the builders to suspend work. 78. For those reasons the Senior Member's reasoning concerning the operation of clause 2A(e) is insufficient. The Senior Member did not err in failing to find that clause 2A(e) limited the owner's liability but he did err in failing to address the question whether the builders by their conduct had denied the owner the opportunity to exercise her entitlement under clause 2A(a) -(d) to monitor the cost and adjust the work as it proceeded, and her entitlement under clause 2A(e) to bring works to a halt when she was unable to meet the cost. We would not uphold Ground 2 but we consider the failure to address this question is a further manifestation of the inadequacy of the Senior Member's reasons for decision which we have addressed in respect of Ground 1.
7. Both parties filed further submissions. The owner submitted that the builder had failed to provide reliable and timely estimates of his ongoing building costs and cost to complete. The owner submitted that: "The respondent failed to do this here and was seemingly content to undertake work, present several tax invoices totalling around $160,000 and, within one month of commencement of the building works, to give a further estimate of costs which was approximately 60% greater than the original estimate with no significant changes to the specification. That meant that the appellant was denied an opportunity to terminate the building works and instruct the respondent to cease work at a point earlier than when he did".
8. The owner submitted that the expression "capacity to pay" in clause 2A "should be seen in the circumstances as the amount that the owner regarded as his budget". The owner submitted that "it would be a nonsense if 'capacity' meant ability to borrow any amount on any terms including on any undisclosed rate of interest in circumstances where the appellant had made known what his 'budget' was for the works and that the costs were coming from his savings only".
9. The owner submitted that, like the position in Allen v Wallace, the Tribunal had erred "in failing to address the question whether the respondent had denied the appellant the opportunity to exercise his entitlement under clause 2A(a) to (d) to monitor the cost and adjust the work as it proceeded and his entitlement under clause 2A(e) to bring works to a halt when he was unable to meet the cost".
10. The builder submitted that the statement in Allen v Wallace that the relevant clause of the cost plus contract permitted the owner to "terminate the building works and to instruct the builder to cease work in circumstances where the owner could not obtain sufficient funds to meet ongoing building costs" was obiter dicta. The builder submitted: "The respondent understands the Appeal Panel's reference in Allen v Wallace to terminating 'the building works' as meaning to 'terminate the contract'. It is respectively submitted that such a construction of that term of the contract is not its proper construction and the Appeal Panel in Allen v Wallace was clearly wrong in its approach."
11. The builder submitted: "Rather, the plain words of the relevant sub-clause provide that to the extent the owner is not able to pay for certain works - a matter that the owner is required to discuss with the builder in meetings to be held during the course of the project - then those works will be 'eliminated' from the scope of works to be carried out by the builder".
12. The builder further submitted: Such a construction of the subclause is consistent clause 2A and the terms of the contract as a whole, which required the owner to work cooperatively with the builder to make decisions and choices about the work under the contract, and to meet with the builder when a conflict between the likely cost of the works and the owner's capacity to pay arose or became apparent (see Schedule 1, Part E and subclauses 2A(c) and (d) of the contract). Such a construction would also be consistent with the very commercial purpose to be achieved by a costs-plus contract in circumstances where the full scope of works was not known at the outset of the contract.
13. The builder referred to clause 26, which entitled the owner to terminate the contract in the circumstances set out in that clause. The builder pointed out that those circumstances did not include circumstances where the owner "was, or would be, unable to make payment for works that were required to be the subject of co-operative discussions between the parties".
14. The builder submitted in the alternative that, if clause 2A did confer an entitlement upon the owner to terminate the contract or terminate the building works because of inability to obtain sufficient funds to meet ongoing building costs, it is a condition precedent that the owner satisfy his obligations to work co-operatively with the builder and make decisions about the scope of works that would bring that scope within his capacity to pay.
15. The builder pointed out that the owner's evidence was that he had not read clause 2A until after he had ordered the builder to leave the site.
16. The builder submitted "on any construction, sub-clause 2A(f) did not entitle the owner to refuse to pay the builder for costs that had been reasonably and properly incurred by it".
17. The builder also submitted that there was no evidence before the Tribunal of the owner's alleged inability to pay for any work within the meaning of sub-clause 2A(f). The builder submitted that the owner's evidence was that he had in fact spent more than the budget amount in having the works completed by others.

Ground 1 - Consideration

1. We are not persuaded that the statement at paragraph [75] in Allen v Wallace was clearly wrong.
2. However, we do not consider that the relevant passage should be understood in the manner suggested by the builder. Sub-clause 2A(f) does not purport to permit either the owner or the builder to terminate the contract in circumstances where the costs of the works exceeds or is likely to exceed the owner's capacity to pay. What that clause provides is that where the cost of the work has reached or exceeded the owner's capacity to pay, the builder may cease work or the owner may require the builder to cease further work.
3. It is, in our view, consistent with the commercial purpose of a cost plus contract, that if, contrary to expectations, the work should prove to be more expensive than the owner can afford, the owner is not bound to permit the builder to continue carrying out work at the owner's cost.
4. However, nothing in the decision in Allen v Wallace suggests that the Tribunal was incorrect to find that the provisions of clause 2A did not operate to relieve the owner from the obligation to pay for work that the builder had carried out.
5. In contrast to the decision in Allen v Wallace, the Tribunal in the present case noted that the owner had not maintained a case that he had sustained loss by reason of the builder's failure to comply with its reporting obligations under clauses 1 and 2A. Unlike the homeowner in Allen v Wallace, the owner in the present proceedings did not suggest that any failure by the builder to provide regular reports had caused the owner to incur costs he would not otherwise have incurred (cf Allen v Wallace at [49]).
6. The owner's first ground of appeal must be rejected.

Ground 2 - The award of expectation damages

1. The owner submitted that the Tribunal erred in assessing the loss sustained by the builder by reason of the owner's wrongful termination of the contract on the basis that, if the contract had not been terminated, the builder would have completed the contract work and received its 15% margin on the work which it had yet to carry out.
2. The owner relied upon clause 2A and submitted that the Tribunal's finding "proceeds on the basis that clause 2A does not impact on the amount to be paid under the building contract". The owner submitted that the work in respect of which the Tribunal awarded the builder its 15% margin was not work which had been agreed with the owner pursuant to the mechanism and procedures set out in clause 2A of the building contract.
3. The builder submitted that, properly understood, the owner's challenge to the award of expectation damages was merely a restatement of earlier grounds relating to the application of clause 2A.

Ground 2 - Consideration

1. We do not accept that the issues raised by the owner in relation to the award of expectation damages are simply a restatement of the owner's first ground of appeal. As we have noted above, the Tribunal determined that the measure of damages was the amount required to place the builder in the position it would have been if the contract had been complied with.
2. In our view clause 2A is potentially relevant in that context. In circumstances where a homeowner does genuinely reach the limit of their capacity to pay for further work, the operation of clause 2A may have the result that work on a building project may be brought to a halt and the builder would have no capacity to recover compensation for loss of profits in respect of the work that is not completed. That might be the case even where the contract is terminated by the builder for breach by the owner.
3. However, that was not the situation in this case. The owner did not terminate or bring the building works to a halt pursuant to the provisions of clause 2A. In fact, as the builder pointed out, the owner utilised other builders to complete the works after requiring the builder to leave the site. In those circumstances, the owner could not say that he had suspended or terminated the building works by reason of his lack of capacity to pay for further works.
4. Clause 2A should not be construed so as to permit an owner to terminate work under the building contract and retain another builder.
5. The second ground of appeal must fail.

Ground 3 - Implied terms

1. The owner submitted that the Tribunal's conclusion that the asserted implied term, that the builder must use best endeavours to carry out building works within the estimate, was not necessary to give business efficacy to the contract, "does not deal with the impact of clause 2A and … and assumes that the builder's representations had not been made".
2. The owner further submitted: "Importantly, the finding overlooks the fact that an implied term need not be absolutely necessary in the sense that, without it, the contract would be ineffective. Rather, this element requires that the alleged implied term must be necessary for the reasonable or effective operation of the contract in the circumstances of the case".
3. The owner further submitted that the first implied term was so obvious that it goes without saying. In making that submission the owner relied upon the proposition that the Tribunal had erred in finding that the builder's representations had not been made.
4. The owner also submitted that, in finding that the first implied term contradicted the express terms of the contract, the Tribunal had attached no significance to the "unequivocal wording of clause 2A(b) to (f) which operated to limit the amount payable by the owner to his capacity to pay and to the knowledge of the builder that the owner's budget was $200,000 inclusive of GST".
5. In relation to the second implied term, that the builder could only charge the cost of works that was fair and reasonable in the circumstances, the owner repeated its submissions in respect of the first implied term.
6. The builder submitted that the first implied term was inconsistent with the express terms of clause 30(1)(f) and with clause 3(d) which provided: "Apart from any terms implied by statute, the whole of the terms, conditions and warranties of this contract are set out in the contract, drawings and specification … and will not and are not in any way varied or effected by reference to any prior negotiations, stipulations or agreement, whether written or verbal."
7. The builder further submitted: "the essence of a cost plus contract is that the final price of the works is not known (and cannot be known), because the scope of the works is not certain and it may change during the performance of the project."
8. The builder submitted that it was not necessary to imply the second implied term to give business efficacy to a cost plus contract and that it was not so obvious that it went without saying.

Ground 3 - Consideration

1. To the extent that the owner's submissions concerning implied terms rely upon the proposition that the Tribunal should have found that the builder's representations had been made, unless the owner succeeds in his appeal in relation to the builder's representations, the foundation for the owner's submissions must fall away.
2. As, for reasons we set out below, we do not uphold the owner's appeal in relation to the "builder's representations" and will not grant the owner leave to appeal in relation to the Tribunal's findings concerning the builder's representations, the owner's appeal in respect of the implied terms cannot succeed.
3. In any event, the owner's submissions also seek to rely upon a construction of clause 2A which we do not accept. The building contract does not require that the owner's obligation to pay the builder is inextricably linked to the owner's capacity to pay. As we have noted above, the owner's obligation to pay extended to all work carried out by the builder. The owner's capacity to pay only came into play insofar as it enabled the owner to require the termination or suspension of work if the owner's capacity to pay would be exceeded.
4. The Tribunal accepted that the builder was only entitled to recover costs that had been reasonably and properly incurred. There is no reason to imply a further term that the builder should use best endeavours to carry out the building works within the estimate or only charge "the cost of works that was fair and reasonable in the circumstances". We find no error in the Tribunal's findings concerning the implied terms relied upon by the owner.

Ground 4 - The application of clauses 1(e) and 1(f)

1. The owner submitted that, on a proper construction of the building contract, the fact that Part E of Schedule 1 of the building contract had not been ticked did not mean that budget reports were not required to be provided in accordance with clause 1(e) of the Contract General Conditions.
2. The builder submitted that the Tribunal did not err in construing the contract and that, if Part E of Schedule 1 was not ticked, then a budget report was not required.

Ground 4 - Consideration

1. Clause 1(e) of the Contract General Conditions is set out at [17] above. That provision does not suggest that the provision of a budget report was optional. Clause 1(e) provides that: "if no specific period is agreed by the parties, then a budget report will be done once per calendar month".
2. Clause 1(e) refers to Schedule 1 Part E as being the place where "a date for providing the budget report can be agreed". There is no suggestion that the failure to identify a date for providing the budget report will have the result that a budget report is not required.
3. Schedule 1 Part E is headed "Budget report to be provided". Next to the heading there is a square box next to which are the words "Tick if to be provided". The balance of Schedule 1 Part E provides: "Pursuant to clause 1(e) and 1(f) of the contract the builder is to provide a budget report. The budget report should be provided on the: (i) day of the calendar month, or if left blank, then (ii) When requested by the owner but not more than once per fortnight/month. Please refer to clause 1(e) and 1(f) of the contract. Note: this is to make the parties to the contract aware of the impact that: (i) The work done; (ii) The choices made; and (iii) Things discovered or addressed during the construction works have on the amount to be paid by the owner. See also clause 2A which requires the parties to meet when a conflict between the cost of the work (being the work done plus the work still to be done) and the capacity to pay arises or becomes apparent."
4. Although clause 4 of the Contract General Conditions, headed "Discrepancies and Ambiguities" provides an order of precedence in the case of any discrepancy or ambiguity in the contract documents, that clause does not provide any order of precedence between the Contract General Conditions and the schedules.
5. The general principle applicable to the interpretation of contracts is that "the court will be reluctant to hold that parts of the contract are inconsistent with each other, and will give effect to any reasonable construction which harmonises such clauses": Lewison, The Interpretation of Contracts in Australia, [9.13]. As Higgins J held in Hume Steel Ltd v Attorney General (Vic) (1927) 39 CLR 455 at 465: "There are certain rules, more or less artificial, which are treated as applicable where one part of an instrument contradicts another part. But such rules are only to be applied as a matter of last resort, when the words used cannot be fairly reconciled; and it is our duty to find whether the words are not capable of reconciliation, so as to give to each set of words full and equal weight, and yet give a consistent effect to the instrument as a whole."
6. In our view it cannot be sensibly said that Schedule 1 Part E contradicts clauses 1(e) and 1(f). The only part of the schedule which might be said to be contradictory is the unticked box and the words next to the box, "Tick if to be provided". Part E itself does not indicate that the builder is only to provide a budget report if the parties so elect, and clause 1(e) and (f) (particularly in light of the provisions of clause 2A) make it plain that the provision of budget reports is an integral part of the procedural obligations of the parties under the cost plus contract.
7. In our view the absence of a tick in the box next to the heading of Schedule 1 Part E did not have the effect that the builder was not required to provide budget reports. Pursuant to clause 1(e) the builder was required to provide a budget report once a month unless a different period or date was set out in Schedule 1 Part E.
8. Accordingly, we are of the view that the Tribunal did err on a question of law in concluding, at [105] of the decision, that clauses 1(e) and 1(f) had no formal application because Part E of Schedule 1 had not been ticked to indicate that budget reports were required.
9. However, that conclusion does not throw any doubt upon the correctness of the Tribunal's decision. The Tribunal's finding at [105] was only made "to the extent that it was necessary". The Tribunal had determined that the owner had not sufficiently raised any allegations of breach of contract by the builder in complying with clauses 1(e) and 1(f), and the conclusion that monthly budget reports were required does not alter that conclusion.

Ground 5 - The builder's representations

1. The owner did not identify any error of law in the Tribunal's conclusions regarding the builder's representations other than the proposition (at paragraph [63] of the owner's written submissions) that there is "no real disclosed reasoning that explains why the Tribunal member preferred the builder's account of what was stated at the meeting on 22 November 2018". This may be understood as constituting a submission that the Tribunal's reasons for dismissing the owner's case reliant upon the "builder's representations" were inadequate.
2. Otherwise, the owner must obtain leave to appeal against the Tribunal's findings concerning the builder's representations on the basis that the Tribunal's conclusions were not fair and equitable or against the weight of evidence.
3. The owner's submissions centred upon the proposition that the Tribunal had focussed on the meeting on 22 November 2018 and discounted documents provided subsequently to that meeting but before the execution of the contract, on the basis that those documents were not relevant to the alleged builder's representations because they were provided after 22 November 2018.
4. The owner submitted that he had not limited his case regarding the builder's representations to the meeting on 22 November. The owner pointed out that he had pleaded that the parties "had meetings and exchanged correspondence by which the builder reviewed the plans and other documents regarding the building works" and had further pleaded that "during and arising from" those meetings and correspondence "the owner advised the builder that the budget available to undertake the building works was $200,000" and the builder made the builder's representations.
5. The owner also submitted that the finding that the builder did not make the representations was inconsistent with other evidence and findings made by the Tribunal including: 1. The finding that the owner had informed the builder his budget was $200,000; 2. The fact that Mr Hogg, the director of the builder, admitted that the $200,000 figure was an estimate of the cost of works and fees; 3. An email dated 22 March 2019 in which the builder stated that the $200,000 estimate was based on a calculation that was "centred on 'the most basic of finishes and no details have been provided'." 4. The fact that Mr Hogg could not recall saying to the owner that utilising a cost plus contract could mean that the job would come in cheaper than $200.00; 5. Mr Hogg's evidence that he informed the owner that the building could be completed more quickly by using a cost plus contract because "we could start building the structure while he selected the finishes, or confirmed the finishes to me". 6. The builder gave "no evidence of attempts made to manage or modify the building work against the owner's capacity to pay"; and 7. There was no evidence of any changes to the scope of works offered by the builder.
6. The builder responded: that the finding that the builder did not make the representations alleged was open on the evidence before the Tribunal and was not against the weight of evidence; and that the Tribunal plainly set out its reasoning on this issue at paragraphs [33] to [47] of the Reasons for Decision.

Ground 5 - Consideration

1. The owner's evidence before the Tribunal relating to the making of the alleged representations was that they were made by Mr Hogg on behalf of the builder at the meeting on 22 November 2018. In those circumstances the Tribunal was quite justified in considering the state of the documentation which had been provided to the builder at that stage. That documentation, as the Tribunal determined, did not include sufficiently detailed plans to enable a precise assessment of the likely cost of the building contract.
2. In those circumstances the Tribunal was entitled to conclude that the alleged representations were inconsistent with the objective evidence surrounding the relevant meeting and to conclude that on the balance of probabilities the representations were not made at that time.
3. The owner did not put forward evidence suggesting that the representations had been made at any other time.
4. The Tribunal was correct to conclude that the documentation provided by the owner after the meeting of 22 November 2018 could not affect the assessment of the likelihood that the representations alleged to have been made by the builder on 22 November were in fact made.
5. The Tribunal set out its reasoning to the foregoing effect at paragraphs [33] to [45] of the Decision. The Tribunal's reasoning in those paragraphs is, in our view, clear. It certainly cannot be suggested that the reasoning was so inadequate as to amount to an error of law.

Leave to Appeal

1. For the reasons set out above in relation to Ground 5, we are not persuaded that the Tribunal's findings concerning the "builder's representations" were not fair and equitable or were against the weight of evidence.
2. The second basis upon which the builder sought leave to appeal related to the Tribunal's findings in relation to the reports of Mr Redfern and Mr Najjar. The issues raised by the owner in relation to Mr Redfern's and Mr Najjar's evidence were: 1. The Tribunal not according Mr Redfern's report any significant weight (Ground 26 in the attachment to the Notice of Appeal). 2. The Tribunal's finding that Mr Najjar's evidence was adversely affected because of a reliance on Mr Redfern's report (Ground 27 in the attachment to the Notice of Appeal). 3. The rejection by the Tribunal of the figure of $95,020 as being the "quantum meruit value of the works completed by the builder" (Ground 29 in the attachment to the Notice of Appeal). 4. An objection to a comment by the Tribunal at [113] that "the use of the lowest number available at [116(i)] of the owner's submissions suggests that numbers are whatever a party wants them to be" on the ground that there was no basis for it (Ground 30 in the attachment to the Notice of Appeal). 5. The Tribunal's finding at [120] that the amount claimed as an overpayment by the owner was not based on breaches of the term that the Tribunal found had been implied into the contract (Ground 31 in the attachment to the Notice of Appeal). 6. The Tribunal's finding at [121] that Mr Najjar's report cannot be relied upon in support of the owner's overpayment claim of $42,783 (Ground 32 in the attachment to the Notice of Appeal).
3. The owner's submissions did not substantially elaborate upon these bases for seeking leave to appeal. As the builder pointed out in its written submissions, "the Tribunal correctly identified that the owner's claim was not put, and did not proceed at hearing, on the basis of identifying those respects in which the owner said that the costs claimed by the builder had not been reasonably or properly incurred."
4. The owner did not seek by expert or other evidence to establish that the builder had charged for work it had not carried out or had charged an unreasonable amount in respect of any particular items of work. The owner's claim was founded entirely upon the proposition that the owner should only have been required to pay to the builder the amount assessed by Mr Najjar as being the "quantum meruit value" of the work carried out by the builder.
5. As the Tribunal noted (at [115]), the implication of a term that the builder was only entitled to payment of direct actual costs that had been reasonably and properly incurred did not "entitle the owner to carry out a re-valuation of the contract".
6. Ultimately, the only element of the expert evidence upon which the Tribunal relied, in determining the amounts owing between the parties, was the evidence concerning the cost of rectification of defects. In that respect the difference between Mr Najjar for the owner and Mr Jamieson for the builder was the inclusion in Mr Najjar's estimate of the cost of the rectification of brickwork.
7. The Tribunal determined that the brickwork had not been carried out under the contract with the builder, but had been carried out by the bricklayers after the builder had left the site under a separate contract by which the owner paid the bricklayer directly.
8. In those circumstances, the Tribunal's assessment of the reliability of the evidence of the experts had no impact upon the Tribunal's ultimate determination. For that reason the owner's objections to the Tribunal's assessment of the experts called by the owner, even if justified, would not warrant the grant of leave to appeal. It cannot be suggested that the owner has suffered a substantial miscarriage of justice by reason of the Tribunal's assessment of the expert evidence called by the owner. Nor, for the reasons we have outlined, can it be said that the owner has suffered a substantial miscarriage of justice by reason of the Tribunal's conclusions regarding the owner's overpayment claim.
9. Accordingly, leave to appeal will be refused and the appeal will be dismissed.

Costs

1. The parties did not, in their submissions, address the question of costs.
2. The amount in issue on the appeal was the amount of $68,375.73 which the owner had been ordered to pay the builder and also the sum of $42,782.54 which the owner claimed was the overpayment made by the owner to the builder.
3. Clearly the amount in issue, both at first instance and on the appeal exceeded $30,000. In those circumstances, Rules 38 and 38A of the Civil and Administrative Tribunal Rules (2014) (NSW) are applicable and we do not need to find special circumstances before making an order in respect of the costs of the appeal.
4. As the appeal has been dismissed, the builder is the successful party and would in the usual case be entitled to an order for its costs.
5. We will order that the appellant pay the respondent's costs of the appeal as agreed or assessed but will give both the parties leave to file submissions seeking a different order.

ORDERS

1. Accordingly, our orders will be: 1. Application for leave to appeal refused. 2. Appeal dismissed. 3. Unless either party files further submissions in accordance with Order 4 the appellant is to pay the respondent's costs of the appeal as agreed or assessed. 4. Within 14 days of the date of publication of this Decision either party may file submissions seeking a different order in relation to the costs of the appeal. 5. If a party files submissions pursuant to Order 4 the other party may within a further 14 days file submissions in response. 6. Any submissions filed in accordance with Orders 4 and 5 shall address the question whether the issue of costs can be determined on the basis of the written submissions and without a further hearing.

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: 23 December 2021