Chang v Azari

The Tribunal's decision

1. The Tribunal heard the matter on 30 January 2020 and issued a written decision on 25 February 2020.
2. There had been a contract between the parties for the respondent to install floorboards and skirting boards at the appellant's residential premises. The value of the works under the contract was less than $5,000. The Tribunal had jurisdiction under Part 6A of the Fair Trading Act 1987 (NSW).
3. The Tribunal found that the consumer guarantees in s 60 of the ACL (services will be rendered with due care and skill) and s 61 of the ACL (services will be reasonably fit for purpose) had been breached by the respondent in circumstances where the installation work had contributed to buckling of the floorboards and staining of the finish by a glue residue.
4. This was in a context where the appellant had supplied the floorboards, which had been a gift to Mr Chang, and, according to the Tribunal, the appellant had taken responsibility for floor preparation.
5. The Tribunal concluded that the failure to comply with these guarantees was a "major failure "within the meaning of s 267 (3) of the ACL and that the goods associated with the installation had to be replaced and reinstalled.
6. In assessing the amount to be paid, the Tribunal referred to s267 (3) (b) and (4) of the ACL, which provide: (3) If the failure to comply with the guarantee cannot be remedied or is a major failure, the consumer may: ... (b) by action against the supplier, recover compensation for any reduction in the value of the services below the price paid or payable by the consumer for the services. (4) The consumer may, by action against the supplier, recover damages for any loss or damage suffered by the consumer because of the failure to comply with the guarantee if it was reasonably foreseeable that the consumer would suffer such loss or damage as a result of such a failure.
7. The Tribunal concluded that the appellant should be repaid the contract price of $3,795.20. In addition, it concluded that there were additional damages resulting from the need to replace and reinstall the floorboards. It found that these consisted of a resupply of skirting and of ends and transitions, which together made up the balance of the total amount awarded.
8. Controversially, so far as this appeal is concerned, the Tribunal also concluded that the compensation did not extend to the cost of new floorboards "as the contract required the applicant [appellant] to do this for the original job": at [22].
9. In this regard, the Tribunal also said that it did not accept the claimed loss that was "so far beyond the contract price", in part, because Mr Chang "suffered no loss as he supplied the goods to be laid and these were a gift": at [16].
10. Earlier in the reasons, the Tribunal had referred to quotes (plural) for the cost of reinstalling the floor provided to the Tribunal by Mr Chang. The Tribunal referred to one of these quotes (Exhibit A2) in the sum of $20,983.72, which included as a significant component the re-supply of new flooring and taking up of the defective floor, which the Tribunal said "…the respondent was not required to do under the contract".

The appeal

1. On appeal, Mr Chang complained that the sum ordered to be paid failed to include two items costing, in total, $11,720.67, namely a cost of $9,521.67 to replace Coastal Blackbutt floorboards and $2,199.00 for the cost of an REGUPOL underlay.
2. Both of these items appear on a quote from DecoRug dated 2 December 2019 attached to the Notice of Appeal (Exhibit A2 in the proceedings at first instance). Mr Chang contended that the Tribunal erred by taking into account that these items were not part of the supply under the contract and were part of a claim that exceeded the contract price. It was contended that this approach was contrary to the terms of s 267 (4) of the ACL.
3. In his Reply to the appeal, Mr Azari supported the order made by the Tribunal. He made a number of allegations, including that Mr Chang had refused to accept any cheaper quotes, the quotes for new flooring were heavily exaggerated, Mr Chang had refused replacement of floorboards and installation when he was financially in a position to do such work and he could not now afford to pay any sum, even the amount ordered to be paid.
4. In accordance with directions for the appeal, Mr Chang provided written submissions. In those submissions, he sought a different amount in relation to the underlay to the amount referred to in the Notice of Appeal and also sought and amount in respect of glue, which had not been referred to in the Notice of Appeal.
5. Mr Azari provided no such submissions even though he was directed to do so.
6. The directions for the appeal made on 24 March 2020 noted that the parties had agreed that the appeal could be dealt with on the papers and a hearing dispensed with. An order was made that the appeal was to be decided on the papers without an oral hearing unless the Tribunal decided not to dispense with a hearing of the appeal.
7. By letter from the Tribunal to Mr Azari dated 12 May 2020, Mr Azari was informed that while submissions on the appeal had been received from the appellant no such submissions had been received from him and the appeal would be referred to the Appeal Panel for determination.

Consideration

1. In these circumstances, and in view of what we see as a clear error by the Tribunal in its approach to the assessment of damages leading to the need for a redetermination by the Tribunal as to any additional damages payable, we see no reason to decide not to dispense with the oral hearing of the appeal and we do not think it is appropriate that we do so.
2. Whilst we have not received any submissions from Mr Azari (apart from what he indicated in his Reply to the appeal), he has been provided with a reasonable opportunity to provide such submissions.
3. We are satisfied that the Tribunal erred by not applying the test for recovery of damages set out in s 267 (4) to the claim made for damages exceeding the contract price that was paid. Whilst some smaller items in respect of the cost of replacing the flooring were awarded pursuant to this provision, the Tribunal made an error of law in restricting the application of this test by reference to the terms of the supply contract. It was unjustified in doing so.
4. It found that the breaches of the guarantee resulted in the need to replace the flooring. It should have proceeded to determine the cost to the appellant of carrying out such replacement work regardless of the fact that the floorboards damaged by the method of installation had been provided by the appellant and at no cost to the appellant.
5. It was reasonably foreseeable that such breaches would result in the need to replace the flooring and it was also reasonably foreseeable that the appellant would suffer the cost of carrying out such replacement work, despite the fact that the original floorboards had been a gift to the appellant.
6. Whilst the test for recovery of loss is set out in s 267 (4); the situation is analogous to the awarding damages for the cost of rectification due to breach of contract by the performance of defective residential building work where the appropriate test is to assess damages for the work reasonable and necessary to produce conformity with the contract, along with any consequential losses by reason of the breach : Bellgrove v Eldridge (1954) 90 CLR 613. It will only be in "fairly exceptional circumstances" that proposed rectification work (provided it is necessary to produce conformity with the contract) is regarded as unreasonable: Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272.
7. The value of the contract does not determine the cost of rectification. Rather, the focus is upon the loss caused by the breach, being here the cost to rectify.
8. Furthermore, we see no reason in principle why the cost of replacing the flooring should not extend to the cost of preparing the floor for installation of the new floorboards and to the cost of an underlay, should Mr Chang be able to satisfy the Tribunal that such work was reasonably required as part of replacing the flooring.
9. In his written submissions, Mr Chang contended that the Tribunal had erred in concluding that floor preparation was not part of the contract and that Mr Chang had conceded at the hearing that this was not the case. In those submissions Mr Chang set out some passages from the transcript of the hearing (we were not supplied with the transcript itself) which supported his contention that he did not make such a concession and that the Tribunal had misunderstood the contractual position concerning floor preparation.
10. We need not determine whether Mr Chang is correct about these submissions concerning floor preparation because Mr Chang does not seek any sum in respect of such floor preparation as additional damages and the findings the Tribunal made about who was responsible for floor preparation are irrelevant to the question whether Mr Chang is entitled to the additional costs he claims.
11. We are not in a satisfactory position to decide what additional costs Mr Chang is entitled to. The Tribunal did not make any specific findings about these additional costs and we have not been presented with all of the evidence that was before the Tribunal.
12. On the redetermination the Tribunal will need to make findings about various matters, including the cost of replacement floorboards, having regard to the quotes in evidence, whether replacement of the underlay is justified and whether the cost of glue is recoverable.
13. The redetermination should be based upon the evidence that was presented to the Tribunal at first instance. The parties have had their opportunity to present their evidence at the first hearing and we see no reason why either party should now be given a "second go" to present further evidence on the remaining issues about damages.

Orders

1. For the above reasons we make the following orders: 1. Allow the appeal. 2. Remit part of the proceedings to the Tribunal at first instance for re-determination, without further evidence, of the question whether, in addition to the amount of $5,323.40 the Tribunal, on 25 February 2020, ordered the respondent to pay the appellant, the respondent is to pay additional damages to the Appellant pursuant to s267 (4) of the Australian Consumer Law (NSW) in respect of the cost of new floorboards, new underlay and glue.
2. As is apparent from these orders, the existing order to pay the appellant $5,323.40 on or before 24 March 2020 remains undisturbed by these orders. The issue to be determined will be whether any additional damages are awarded.

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: 27 July 2020