Day v Quince's Quality Building Services Pty Ltd

Day v Quince's Quality Building Services Pty Ltd - [2021] NSWCATAP 296 - NSWCATAP 2021 case summary — Zoe

[9]

Appellants' submissions

In summary, the appellants make the following submissions.
The Tribunal erred in its construction of cl14(f), in that in each of the three instances that formed the subject matter of the appellants' claim (namely hydraulics, external cladding and painting), the "works" were "decreased", or were "omissions" from those works.
Clause 14 dealt expressly with such circumstances, and cl 14(f) directed attention to "the cost of the work not now required", which was to be "deducted from the contract price". The appellants say that cost means the "actual cost of labour, subcontractors or material saved by the respondent because the work was now not required to be done."
In this respect, the appellants note that "works" is defined in the Contract to mean the work that the respondent was required to carry out and complete under the Contract, and includes variations, rectification, and the provision of materials required to be supplied by the respondent.
In respect of the hydraulic works, there was evidence, accepted by the Tribunal that:

the respondent had originally contracted to supply and place two underground rainwater tanks and two "Atlantis Flo" detention systems under the decks;
the respondent had allowed $56,500 for the costs of those works;
instead of those original works, the respondent installed an above-ground rainwater tank at the side of the building; and
the cost of the works actually carried out was $40,480.

The appellant Mr Day gave unchallenged evidence that this "variation" was suggested by the respondent and had the effect of removing from the "works" the excavation of an area of 15 square metres, the purchase and installation of the Atlantis Flo detention systems, and the materials and labour that would otherwise be associated with that work.
The Tribunal determined, in effect, that the appellants had contracted for the supply of a rainwater system, they were provided with a rainwater system, albeit a system that was materially different to what was formed part of the "works", and the respondent was entitled to retain the difference in the costs between what was contracted for and what was in fact provided.
The Tribunal erred in that approach, and in its construction of the Contract. Instead, it ought to have directed its attention to whether the works had decreased, or whether there were omissions from the works, such that there was "work not now required" to be done.
The plain language of the clause directs attention to those matters, and such a construction makes commercial sense in the context of a building contract in which the parties have agreed that the scope of the "works" may be varied.
In the case of the hydraulics "works",there clearly had been omissions and the respondent's works had decreased, there no longer being any requirement for the excavation and the associated costs of installing the Atlantis Flo systems.
In those circumstances, cl 14(f) required the cost of the work "not now required" to be deducted from the Contract price."
The Tribunal committed the same error in its determinations of the appellants' claims for the "omitted" or "decreased" works in respect of the cladding works and the painting works.
In respect of the cladding, the "works" that were omitted were the supply and installation of hardwood timber cladding, which was substituted with a different James Hardie product that in turn required less labour to install. Mr Day gave unchallenged evidence, which was accepted by the Tribunal, of the "cost of the work not now required", which he estimated at $16,570.40.
In respect of the painting "works", the changes to the original cladding "works" and the use of powder-coated aluminium screens on the sides of the building greatly "decreased" the painting works under the contract. Again, Mr Day gave unchallenged evidence, which was accepted by the Tribunal, of the "cost of the work not now required", which he estimated at $16,247.60.

[13]

Approach to interpretation of cl 14

It was common ground that the Contract was a commercial contract. As the Appeal Panel stated in Nadarasa v Vansan Construction Pty Limited [2018] NSWCATAP 270: [28] We note that this is a commercial contract. As to the question of construction of a commercial contract, reference should be made to the judgment of Gleeson CJ in International Air Transport Association v Ansett Australia Holdings Ltd (2008) 234 CLR 151; [2008] HCA 3 at [8] where his Honour stated: [8] In giving a commercial contract a businesslike interpretation, it is necessary to consider the language used by the parties, the circumstances addressed by the contract, and the objects which it is intended to secure. An appreciation of the commercial purpose of a contract calls for an understanding of the genesis of the transaction, the background, and the market. This is a case in which the Court's general understanding of background and purpose is supplemented by specific information as to the genesis of the transaction. The Agreement has a history; and that history is part of the context in which the contract takes its meaning. Before considering that history, it is necessary to explain, by reference to the text, how the issue of construction arises. [Footnotes omitted.] [29] In Johnson v America Home Assurance Co (1998) 192 CLR 266; [1998] HCA 14 at [19], Kirby J (in dissent) stated, "the primary duty of a court is to discern from the language, structure and apparent purpose of the document what it means". [30] Commercial contracts should be given a businesslike interpretation. In McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579; [2000] HCA 65 at [22], Gaudron J observed: "[i]nterpreting a commercial document requires attention to the language used by the parties, the commercial circumstances which the document addresses, and the objects which it is intended to secure". … [32] Commercial agreements should be given where possible an interpretation which makes commercial sense: Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310 at 313 - 314; Westpac Banking Corporation v Tanzone Pty Limited [2000] NSWCA 25 [20] and [21].
To those principles might be added the following observations: 1. a court or tribunal will apply a presumption that the parties did not intend its terms to operate unreasonably: L Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235; 2. where a particular construction would achieve an unreasonable result a court or tribunal should be reluctant to accept that that was what was meant by the parties: TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130 at 146; 3. a commonsense approach must be taken, particularly in commercial contracts which are expressed in imperfectly construct a document. If "detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts commonsense, it must yield to business commonsense": Anataios Compania Naviera SA v Salen Rederoerna AB [1985] AC 191 at 201.

[14]

Conclusion

We consider that there is substance in the appellants' submissions. In our view, cl 14 has to be read as a whole, in particular cll 14(f), (g), (h) and (i) which provide: f) Where the works are decreased or omissions from the works are made the cost of the work now not required is to be deducted from the contract price. Cost in this case means the actual cost of labour, subcontractors or materials saved by the Builder because the work is now not required to be done. No other deduction is required by reason of the work aspect of work being decreased or omitted. g) Where the work to be done is increased, the cost of the extra work is to be added to the contract price. The Builder can choose when and how often to claim payment for variation work and is not required to wait until the next stage claim. h) Where price has not been previously agreed for variation work and the price to be paid for the work will be the cost as calculated in accordance with Sub-Clause (i) below, together with the allowance specified in ltem 1 of Schedule 2 for overhead and profit. i) The cost referred to in Sub-Clause (h) above, unless otherwise agreed, will be calculated as follows: … (emphasis as in original)
Thus cl 14(f) provides for the situation where the works are decreased or omissions from the works are made. In that case, the cost of the work now not required is to be deducted from the contract price. Clause 14(g) on the other hand provides for the situation where the work to be done is increased. There the cost of the extra work is to be added to the contract price.
In either case, where price of the variation has not been previously agreed, the of the work (that is the decreased or omitted work, and the increased work) is to be the cost as calculated in accordance cl 14(i): cl 15(h).
If the interpretation for which the respondent contends is correct, we do not see cll 14 (h) and (i) as having work to do at all. Moreover, if that interpretation was correct, no party would ever agree on a variation price, as on the respondent's argument, there would be windfall gains to a builder if the costs of the works decreased, and windfall gains to the homeowner if the costs increased.
That we consider is an unreasonable result. The interpretation we prefer, being that contended for by the appellants, makes commercial sense in the context of a building contract in which the parties have agreed that the scope of the "works" may be varied.
There is, in our view, a material distinction between the financial consequences of rises or falls in the actual cost of work done pursuant to, and in accordance with, a building contract, which are borne by the parties to the contract in the manner described by the Tribunal at [83], and the financial consequenes of "works" being "decreased or omissions being made" which reduce the actual cost of the work (cl 14(f)) or "increased", resulting in extra cost (cl 14(g)). We perceive that the distinction involves no tension between the relevant provisions of the Contract, and is consistent with established principles of interpretation of commercial contract.
It follows that we consider that the Tribunal misinterpreted cl 14 and erred in its conclusion in par [83]. What the Tribunal should have done, as the appellants submit, is to have directed its attention to whether the works had decreased, or whether there were omissions from the works, such that there was "work not now required" to be done. Whether the error involves constructive failure to exercise jurisdiction (Resource Pacific Pty Ltd v Wilkinson (2013) NSWCA 33), or simply an error of law is of no practical moment.
For the above reasons, we consider that the appeal should be allowed on this ground. Our view is that, by upholding this ground alone, the matter should be remitted to the Tribunal for a redetermination of all issues. However, we allowed the parties to make submissions on this point. To assist the parties, we will also briefly consider the remaining grounds of appeal.

[16]

Ground Three

This Ground relates to the Tribunal's treatment of determining whether it was just and equitable that the respondent be remunerated on a quantum meruit basis and in his approach to calculation of any amount to be paid to the respondent. The appellants' various complaints are set out at 12 above. The appellants submit that the Tribunal did not turn its mind to the question of the reasonableness of the amounts claimed by the respondent, and failed to determine that the contract rates provide the ceiling upon reasonable remuneration on the quantum merit basis in circumstances where the parties did not sign written details of the variations as required by cll 2A and 14(d)(i) of the Contract.
In particular, the appellants rely on the decision of the Supreme Court of New South Wales in Paraiso v CBS Build Pty Ltd [2020] NSWSC 190. This was a decision which also considered the same cl 14. Fagan J, after considering the decision of the High Court of Australia in Mann v Paterson Constructions Pty Ltd [2019] HCA 32, stated: [102] Gaegler, Nettle, Gordon and Edelman JJ have held that contract rates are a ceiling upon reasonable remuneration where a builder's non-contractual quantum meruit claim arises from termination of a contract through fault of the owner. It must follow in logic and in principle that contract rates will similarly be an upper limit on a quantum meruit claim that has arisen because the two parties did not sign written details of each variation, as required by cll 2A(b) and 14(d)(i) of the present contract. That circumstance may be viewed as equally the fault of both parties, or the fault of neither, or the fault of the defendant himself. The defendant should not have proceeded with any variation work without, for example, placing his signature on amended post-contract drawings and securing the plaintiff's signature, with a notation that execution of the altered work was agreed. [103] It is apparent from the Senior Member's reasons that he did not compare the amounts that he assessed as reasonable, for any of the variations, against the upper limit of a calculation in accordance with cl 14(h) and (i). For each variation under which additional work was carried out by the defendant's employees, the Senior Member should have determined what price would be arrived at by applying the labour and other rates listed in item 2 of Sch 2 of the contract and applying the 15% builder's margin in item 1. For each variation under which additional work was performed by sub-contractors, the Senior Member should have verified the amount of the sub-contractor's tax invoice and added the 15% margin to that. [104] The High Court's decision in Mann v Paterson Constructions Pty Ltd was handed down on 9 October 2019. The Senior Member and the Appeal Panel cannot be criticised for not having applied the principle that emerges from the decision, limiting the assessment of a quantum meruit in the present case. Nevertheless, the law having been declared in Mann v Paterson Constructions Pty Ltd and there being a clear logical extension of it to the assessment of a quantum meruit in a case such as the present, leave to appeal on grounds 5(i) and 6 should be granted and the grounds should be upheld. The upholding of these grounds contributes to the necessity for the matter to be remitted to the Tribunal for re-determination at first instance. (emphasis added)
In summary, the respondent submitted that the Decision needed to be read in context, and that there was no reason to believe that the Tribunal did not take into account extent if the expensive this before it including that the amounts claimed were reasonable and a proper reference point should be allowed on a quantum merit basis. The respondent submits that, in light of the evidence, any failure by the Tribunal to explicitly state say in the Decision that did not do so it's not a basis for upholding the appeal.
Finally, the respondent submits that, to the extent that these matters were not specifically dealt with in the Decision, it may be taken that the Tribunal would have considered these matters appropriately. To the extent that the tribunal may be regarded as not having done so, the respondent submits that, had it done so, the Tribunal would have reached the same conclusion and any failure to do so was ultimately not material to the correctness of the Decision.
We think that there is substance in this ground of appeal. We note that in Paraiso, Fagan J concluded that it was apparent from the Tribunal's reasons that it did not compare the amounts that it assessed as reasonable, for any of the variations, against the upper limit of a calculation in accordance with cll 14 (h) and (i). His Honour said that for each variation under which additional work was carried out by the builder, the Senior Member should have determined what price would be arrived at by applying the labour another rights listed in item 2 of Sch 2 of the contract and applying the 15% builders margin in item 1.
As the Senior Member had failed to do so, the Court concluded that the upholding of that ground contributed to the necessity for the matter to be remitted to the Tribunal for re-determination at first instance.
His Honour's analysis is applicable to this appeal. Accordingly, in relation to this ground the appeal should also be allowed

[17]

Ground Four

The final ground of appeal was that the appellants were denied procedural fairness.
The primary submission in this respect was that the Tribunal failed to allow the appellants to cross-examine the respondent's witnesses, or to afford them a proper opportunity to do so. In summary, the appellants submit: 47. In the circumstances of this case, there was a denial of procedural fairness when the appellants were not afforded the opportunity to test the builder's evidence by cross examining its witnesses, in particular that of Darren Quince, who provided two affidavits and who the Tribunal found (at [94]) to be "most persuasive": … 48. In the contested hearing before the Tribunal, the appellants were required to be afforded a reasonable opportunity to present their case, which included having a reasonable opportunity to test the opponent's evidence by cross-examination. Here, cross examination of Mr Quince may have yielded a very different result, including as to the Tribunal's determination of the date of practical completion. Yet the appellants, who the Tribunal accepted were "rookies" when it came to litigation and the processes of the Tribunal,19 were not afforded the opportunity to achieve that outcome. That was an error of law.
The respondent submits this ground has no merit. It submits that a reading of the transcript or show that the appellant received a "very fair" hearing. The respondent submits that at no time were the appellants told they could not cross-examine witnesses rather, they simply chose not to.
The respondent further submits that the fairness to the appellant is underlined by the fact that, contrary to the accepted means of giving evidence, the Tribunal appears to have accepted as evidence what were in fact simply unverified allegations and submissions. As submitted by the respondent, albeit faintly, if anyone could have complained about the Tribunal's approach, it was the respondent.
As is readily apparent from the transcript of the hearing, the appellants were "afforded" the opportunity to cross-examine the respondent's witnesses. They elected not to take up the opportunity to do so. The Tribunal raised the question of cross-examination with the male appellant, who appeared for both appellants early in the proceedings (transcript p 6.239ff). In our view, the Tribunal's explanation of the implications of cross-examining or not cross-examining to an unrepresented litigant, from transcript line 239 to 266, was balanced, accurate and adequate. Mr Day's submissions which followed (transcript lines 270 to 345) amply revealed his grasp of the case, and the critical issues for determination.
Whether the appellants wished to cross-examine the respondent's witnesses was revisited at transcript 430. There, and in the discussion which ensued, learned Counsel for the respondent fairly raised the issue. The Tribunal explained (transcript lines 438 to 481), in our view, accurately, adequately and fairly, to Mr Day the potential implications of cross-examing or not cross-examining opposing witnesses. Put bluntly, short of advising Mr Day whether or not to cross-examine, we struggle to see what more the Tribunal could permissibly have said, and observe that nothing submitted to us identified what more was suggested to have been required of the Tribunal.
We consider that appellants did receive a fair hearing. In our view, the transcript demonstrates an appropriate explanation by an experienced Senior Member of the law and the procedural rules to unrepresented litigants who appear to have conducted their application very competently.
We reject this ground of appeal.

[20]

Extract of Residential Building (BC4) Contract 14. Variations-How to Deal with Changes to the Work a) The works may be varied by such things as: i) execution of additional work; ii) decreases in or omissions from the works; il) changes in the character or quality of any material or work such as may be necessary due to the existence of a latent condition; iv) changes in the levels, lines, positions or dimensions of any part of the works. b) For the sake of clarity a variation is established by: i) written instructions from the Owner or the Owner's representative; and or ii) the supply to the Builder of post contract details such as drawings; and or iii) the discovery of an otherwise unknown or latent condition; and or iv) an instruction issued by a relevant authority under clause 12 which alters the work done, the work to be done or requires adjustments to an existing situation or the work which was otherwise expected to be done. Accordingly a variation may, for example, result from such things as a request from the Owner, a choice made by the Owner, dealing with latent conditions and complying with the requirements of an Authority. d) i) If the Builder agrees to undertake a variation requested or required by the Owner, the variation is to be detailed in writing and signed by the Owner (or the Owner's agent) and the Builder. Documents detailing the variation, including as appropriate, amended drawings or specifications, become contract documents. ii) The Builder may require, prior to the execution of any variation that the Owner produce evidence, satisfactory to the Builder, of the Owner's capacity to pay for the variation. Builder to Advise Value of Variations e) The Builder, within a reasonable time of receipt of instructions to execute a variation (i.e. an Instruction signed by the Owner or Owner's agent), is to notify the Owner, in writing, of the value of the variation. Less Work due to a variation f) Where the works are decreased or omissions from the works are made the cost of the work now not required is to be deducted from the contract price. Cost in this case means the actual cost of labour, subcontractors or materials save by the Builder because the work is now not required to be done. No other deduction is required by reason of the work aspect of work being decreased or omitted. g) Where the work to be done is increased, the cost of the extra work is to be added to the contract price. The Builder can choose when and how often to claim payment for variation work and is not required to wait until the next stage claim. h) Where price has not been previously agreed for variation work and the price to be paid for the work will be the cost as calculated in accordance with Sub-Clause (i) below, together with the allowance specified in ltem 1 of Schedule 2 for overhead and profit. i) The cost referred to in Sub-Clause (h) above, unless otherwise agreed, will be calculated as follows: i) for work by the Builder's employees, the rates for such labour are those set out in ltem 2 of Schedule 2. If no rates are shown, then the rates to be used are the rates published by the Master Builders Association of NSW current at the time the variation is made; ii) where the work or some part of it is executed by a sub-contractor, the cost to be paid under Sub-Clause (h) above is the amount properly paid or payable to the sub-contractor which will be established by provision of a proper tax Invoice from the sub-contractor engaged to do the extra work. iii) the price for materials is the cost of the materials to the Builder. The Builder is not entitled to any discount other than a discount for prompt or cash payment. All Directions Concerning Work are to be Given to the Builder j) Neither the Owner nor any duly appointed representative will give or are entitled to give at any time directions to the Builder's workers or sub-contractors concerning the works or any part thereof. All instructions are to be given to the Builder and are to be in writing. (bolding, underlining and italicisation as in original) I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 30 September 2021

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Judgment (20 paragraphs)

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Cases Cited (12)

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