DB Homes Australia Pty Limited v Kes

NCAT Appeal Panel|2019-07-29|Before: Armstrong J, Mr J

trative Tribunal Jurisdiction: Consumer and Commercial Division Citation: [2019] NSWCAT Date of Decision: 10 April 2019 Before: C Paul, Senior Member File Number(s): HB 16/55778; HB 17/31778

REASONS FOR DECISION

The appeal arises from a decision of the Tribunal involving a residential building dispute. In this decision, the appellant (DB Homes Australia Pty Ltd) is referred to as "the builder" and the respondents (Mr and Mrs Kes) as "the homeowners".
At the hearing in the Appeal Panel, the builder was represented by Mr T Rogers of Counsel and the homeowners were represented by Mr J Karacan, Solicitor.
In the Appeal Panel proceedings, the parties had provided copies of the documentary evidence before the Tribunal and a transcript of the hearing (the duration of which was 3 days).
The date of the decision of the Tribunal was 10 April 2019 and the appeal was filed on 7 May 2019.
On 21 May 2019, the Appeal Panel granted a stay of the orders of the Tribunal, subject to the builder depositing monies in the trust account of the builder's solicitors equivalent to the judgement amount until the appeal was determined.

BACKGROUND

The salient facts can be briefly summarised.
The parties entered into a written contract for the builder to perform residential building work dated 4 February 2014 for the amount of $441,100 subject to cost changes in respect of variations; provisional sum items; and prime cost items. The parties also entered into a separate agreement for payment of certain works in cash. There were a number of purported oral variations to the scope of works during the course of the build, outside the parameters of cl. 17 of the written contract (which provided the mechanism to vary the contract).
In July 2015, a dispute arose between the parties regarding progress claim 8 ('PC 8') under the contract issued by the builder. The homeowners refused to pay the progress claim, asserting that the stage was incomplete and the builder's work was defective. There were unsuccessful discussions between the parties to resolve the dispute, and the builder issued a notice of suspension of work (the first period of suspension).
There were further discussions between the parties and both parties engaged solicitors. On or about 16 February 2016, there was a private meeting between Mr Kes and Mr Basafacan (the director of the builder) without legal representatives being present. Agreement was reached that the builder would resume work upon payment of monies by the homeowners to the builder, less an agreed amount credited by the builder.
The builder asserted that the agreement in February 2016 included an agreement that the homeowners would pay the builder's legal costs in an amount of $2,540.
Building work recommenced towards the end of February 2016 and continued until April 2016. However, by May 2016, further disputes had arisen regarding payment and work performed. Work had ceased and been suspended by June 2016 (the second period of suspension).
In the period from June to September 2016, the builder asserted that there had been a meeting between the parties (without legal representatives being present) and the parties had agreed that the homeowners would pay monies owed under the building contract to Mr Sabuk, of Hisar Electrical Services, and he would pay monies to the builder if Mr Sabuk believed the work had been adequately performed and that monies were owed. Mr Sabuk was working on the site as a sub-contract to the builder, and was an acquaintance of both the homeowners and Mr Basafacan.
By letter dated 1 June 2016 the builder's solicitors sent the homeowners' (then) solicitor correspondence seeking payment of $15,665 within 7 days or legal action would be taken to recover such monies.
The letter asserts that the building work was "95% complete" and that once the homeowners had installed the kitchen (which did not fall within the scope of work under the contract, and was to be arranged separately by the homeowners) and the homeowners were "up to date" with monies owed, the builder would return to site and "complete the final touch ups". The letter identifies the amount of $15,665 as comprising of: 1. "Progress claim as per invoice 328 dated 30 July 2015 for $13,125; and 2. Legal costs as agreed at $2,540".
On 13 September 2016, the builder's solicitors sent a further letter to the homeowners, who were at this stage unrepresented.
The letter of 13 September 2016 stated that the dispute had been "far too prolonged" and that "…prior issues were resolved in February 2016 on the basis that you would make the contract progress payments together with our client's legal expenses". The letter further stated: "The total amount payable for the remainder of the contract is $90,346 consisting of: Invoice #001 $17,500 Invoices #240, #529 and #530 $44,346 Variations as follows: Electricals $17,160 Intercom $1,320 Sewer connections $3,080 Gas connections $2,420; and Legal costs of recovery as agreed at $2,540 TOTAL $90,346 We understand the arrangement is for this amount to be paid in full to the electrical contractor, Hisar Electrical to be held in escrow and paid to our client as works progress and payment claims are made. Accordingly, please arrange for this payment to be made immediately. We are instructed that the project is 95% complete. Once payment is made, our client will complete the final touch ups, but has instructed us to advise that they will not continue their works until such time as the electrician confirms that it is holding the complete amount. If the payment is not paid within 7 days of the date of this letter, our client has instructed us to commence proceedings in order to recover any unpaid monies under the contract and damages. Lastly, we confirm this agreement between the parties is also conditional upon you indemnifying our client for all future claims arising from this project, subject to any continuing warranties under the Home Building Act (sic) …"
On 28 November 2016, the (current) solicitors for the homeowners wrote to the builder's solicitors responding to the letter of 13 September 2016.
The letter stated that that the homeowners disputed that work under the final progress claim was complete, and a "building inspector" should be appointed to substantiate the final progress claim. The letter stated that if the builder did not agree to such an inspection, the solicitor would advise the homeowners to terminate the contract and appoint a new builder to complete the work.
On 2 December 2016, the solicitors for the builder wrote to the homeowners' solicitors. The letter relevantly states as follows: "… Provided you have in your possession the entirety of the correspondence, you would note then that your clients have continuously breached their obligations under the contract without cause or remedy. We refer to their delay in making payment earlier this year, which was resolved on the basis that payment would be brought up to date and our client's legal costs would be paid. The agreed terms of the resolution were not complied with. As such, in or around September, your client's agreed to pay a third party the balance of the contract price to evidence the fact that they would indeed make payment of the amounts owing and the future progress claims. We refer to our letter date 13 September 2016 which sets this out in detail. During this process, your client has had two independent inspectors attend the site, yet nothing has come from either inspection. Further, your client is still in breach of the contract and has never shown any intention of remedying its breach. Accordingly, our client can no longer engage in ultimately futile discussions in circumstances where your clients are continually in breach of the contract. Your clients have shown this to be an expensive and pointless exercise for your client and nothing more than a stalling tactic. By their conduct, your clients have clearly shown an unwillingness or inability to render substantial performance of the contract and has (sic) repudiated the building contract. That repudiation is accepted by our client and the building contract is terminated. …"
The builder's letter of 2 December 2016 went on to again demand payment of $90,346.
Neither party issued a notice of termination under cl. 33 of the written contract.
The homeowners then filed proceedings in the Tribunal and the builder filed its own proceedings as a cross application. The homeowners sought damages for the cost of: (a) rectifying defective work; (b) the increased cost of completing incomplete work; and (c) liquidated damages under the contract for delay. The total of the homeowners claim for damages was $75,000.
The builder's cross application sought: (a) compensation for work done pursuant to oral variations under the principle of quantum meruit; (b) damages for loss of profits; and (c) interest. The claim for damages for loss of profits was based on the builder's assertion that the homeowners had repudiated the contract. In this regard, the builder relied upon the letter of 2 December 2016 as evidence of the repudiatory conduct of the homeowners, and that the builder had accepted the repudiation.
At the hearing, Mr Kes, Mrs Kes, Mr Basafacan and Mr Sabuk all gave evidence, as well as various expert witnesses.

DECISION OF THE TRIBUNAL

The decision of the Tribunal comprises 27 pages (178 paras). The Senior Member found that the builder did not have any legal right to terminate the contract (para [154] of the decision).
The Senior Member awarded the homeowners damages of $30,825, comprised of: the increased cost of completing incomplete work ($27,614.40); and the cost of rectifying existing defective work by reason of the builder's breach of the statutory warranties under s 18B of the Home Building Act 1989 (NSW) ($3,211). The Senior Member dismissed the homeowners' claim for damages arising from delay. The Senior Member dismissed the builder's claim, for reasons including that the builder had failed to establish on the evidence the principles applicable to quantum meruit, and the builder could not claim for loss of profit because the builder repudiated the contract.

JURISDICTION-INTERNAL APPEALS

Under s 80 of the Civil and Administrative Tribunal Act 2013 (NSW) (the NCAT Act) a party may appeal to the Appeal Panel in an internal appeal from an error of law as a matter of right.
In respect of errors other than errors of law, the appellant must satisfy the Appeal Panel that leave to appeal should be granted under Sch 4, cl 12 of the NCAT Act on the basis that a "substantial miscarriage of justice" had occurred as: (a) the decision of the Tribunal under appeal was not fair and equitable; or (b) the decision of the Tribunal under appeal was against the weight of evidence; or (c) significant new evidence has arisen (being evidence that was not reasonably available at the time the proceedings under appeal were being dealt with).
The principles regarding whether or not leave to appeal should be granted under Sch 4, cl 12 of the NCAT Act were set out by the Appeal Panel in Collins v Urban [2014] NSWCATAP 17 at [76]-[84].
Under r 25(4)(c) of the Civil and Administrative Rules 2014 (NSW) (the NCAT Rules) the time period to file an internal appeal in the circumstances of this matter is 28 days from the date the appellant was notified of the decision or given reasons for the decision (whichever is the later).
The appeal in this matter has been filed within the limitation period under r 25(4)(c) of the NCAT Rules.

GROUNDS OF APPEAL

The builder filed and served Grounds of Appeal, which the builder sought to amend slightly in proposed Amended Grounds of Appeal annexed to the builder's written submissions in reply. The homeowners did not oppose leave being granted for the builder to rely upon the Amended Grounds of Appeal and we granted leave for the builder to do so.
The builder's grounds of appeal were as follows: Ground 1: The Tribunal erred in law by finding that the builder had not lawfully terminated the contract by the letter sent by the builder's solicitors on 2 December 2016. Ground 2: In respect of Ground 1, the Tribunal "erred in respect of certain antecedent questions of law" by: 1. Failing to determine the terms of an agreement between the homeowners in or about February 2016 and in turn whether the homeowners were in breach as at 2 December 2016. 2. Finding that a payment of $2,540 for legal fees that formed part of the said agreement "must necessarily have formed part of a credit" given to the homeowners by the builder, so that such monies were not owed to the builder as at 2 December 2016. 3. Failing to determine whether there had been an agreement between the parties that Mr Sabuk was appointed as "stakeholder" and whether the homeowners were in breach of that agreement as at 2 December 2016. Ground 3: The decision was not fair and equitable because the Tribunal did not consider "certain key arguments" of the builder; and was against the weight of evidence, as the Tribunal had not taken into account the homeowners' failure to respond to the letter sent by the builder's solicitors dated 1 June 2016.
In respect of the above, Ground 2 is a "particularisation" of Ground 1, and we are of the view that both grounds should be considered together. Grounds 1 and 2 involve alleged errors of law. Ground 3 is an alleged error other than an error of law, and leave to appeal is required.

CONSIDERATION

The builder's appeal is focussed upon the findings of the Tribunal regarding which party lawfully terminated the building contract.

Applicable Principles-Error of Law

When assessing reasons of the Tribunal, including the manner in which competing evidence is analysed and factual findings are made, reasons are not to be construed minutely and finely with an eye keenly attuned to the perception of error: Minister for Immigration and Ethnic Affairs v Wu Shan Liang [1996] HCA 6; (1996) 185 CLR 259 at 272; Small v K & R Fabrications (W'gong) Pty Ltd [2016] NSWCA 70 at [54]; Cahn v The Owners Strata Plan No 586 [2018] NSWCATAP 234 at [67].
It is not necessary for a decision maker to make a finding of fact on every fact that may be regarded as objectively material, but the decision maker must set out its findings on those questions of fact which it considered to be material to the decision it made and the reasons it had for reaching that decision: Minister for Immigration and Multicultural Affairs v Yusuf [2001] HCA 30; (2001) 206 CLR 323 at [68]; Buses & 4WD Hire Pty Limited v Richardson [2016] NSWCATAP 24 at [76] (Richardson).
Reasons are to be considered in their full context and not in isolation: O'Brien v Repatriation Commission [1984] FCA 95; (1984) 1 FCR 472; Richardson at [76]; Grills v Leighton Contractors Pty Limited [2015] NSWCA 72 (Grills). When considering reasons, it is not appropriate to take an isolated statement in a judgement out of context, and such an approach to arguments on appeals should be discouraged: Grills at [154].
In respect of findings of fact, it is an error of law to make a finding for which there is no evidence if that finding is a critical step in the Tribunal's ultimate conclusion (Richardson at [42]). However, if there is some evidence for a factual finding, any error is an error of fact not law: Fordham v Davies [2014] NSWCATAP 60 at [22] and the authorities cited therein.
If an error of law is established, the Appeal Panel must also consider whether the "inevitable result" would be the same outcome, if correct legal principles are applied. In such circumstances, the ordering of a new hearing would be a "futility": Stead v State Government Insurance Commission [1986] HCA 54; (1986) 161 CLR 141 at 145.

Grounds 1 and 2 of the Appeal

As discussed previously, neither party issued a valid notice of termination pursuant to the provisions of the written contract. However, a contract may still be terminated at common law irrespective of whether a party had issued a notice of termination in accordance with the provisions of the contract, and the written provisions do not constitute the sole exclusive method of terminating a contract: Dimitriopoulos v Capital Constructions Pty Ltd; Capital Constructions Pty Ltd v Dimitriopoulos [2018] NSWCATAP 100 at [60] and the authorities discussed therein.
Neither party asserted before the Tribunal at first instance that the contract was still on foot. Each party asserted that the other party had repudiated the contract and that it was the innocent party who had accepted the repudiation. The builder asserted the homeowners had repudiated by their conduct set out in the letter sent by the builder's solicitors on 2 December 2016. The homeowners asserted that they were not at fault, and the builder had repudiated by wrongfully asserting that the homeowners had repudiated, and refusing to complete the building works.
The salient issue before the Tribunal at first instance was which party had repudiated the contract. If the conduct of the homeowners constituted a repudiation, and the builder had accepted the repudiation by way of its letter of 2 December 2016, then the builder had lawfully terminated the contract and would have standing to claim damages for loss of profit (subject to providing sufficient evidentiary proof).
If the conduct of the builder was a repudiation of the contract and the homeowners had accepted the repudiation, then the homeowners had standing to claim damages for the increased cost of completing incomplete work; in addition to claiming damages for the cost of rectifying existing defective work: Deacon v National Strategic Constructions Pty Ltd; National Strategic Constructions Pty Ltd v Deacon [2017] NSWCATAP 185 at [62].
Repudiation of a contract occurs when a party breaches a fundamental or essential term of the contract; or there was a sufficiently serious breach of a non-essential term of the contract; or a party demonstrates an unwillingness or inability to render substantial performance of the contract and the innocent party elects to accept the repudiation and treat the contract as having ended: Koompahtoo Local Aboriginal Land Council & Anor v Sanpine Pty Ltd [2007] HCA 61; (2007) 233 CLR 115
As a general rule, wrongful termination of the performance of a contract, where a party has no legal right to do so, will constitute a repudiation of obligation because such an act indicates an absence of readiness or willingness on the part of the party who has wrongfully terminated to perform its obligations under the contract: Ogle v Comboyuro Investments Pty Ltd [1976] HCA 21; (1976) 136 CLR 444 at 453; Curnow Consulting Pty Ltd v JPD Media and Design Pty Ltd t/as Durie Design [2017] NSWSC 1171 at [344].
It is axiomatic that to terminate a contract based on repudiatory conduct, the first step is to identify the specific purported repudiatory conduct of the other party. The letter sent by the builder's solicitors letter on 2 December 2016 identifies the purported repudiatory conduct.
In the context of this matter, there was a written contract between the parties. The substance of the builder's argument was that the written contract was varied or supplemented by the incorporation of additional oral agreements in February 2016 and June (or sometime between June and September) 2016 that: 1. The homeowners would pay the builder's legal costs of $2,540; and 2. The homeowners would pay: progress payment monies; monies for legal costs; and monies owed for completion of work to Mr Sabuk as a "stakeholder".
In the appeal, the builder did not challenge the findings of the Senior Member regarding whether the homeowners owed monies to the builder for work performed. Rather, the builder focussed upon the findings in respect of the purported oral agreements regarding payment of legal fees, and Mr Sabuk acting as a "stakeholder".
In respect of such oral variations or additional terms which the builder relied upon as the basis for the allegedly repudiatory conduct of the homeowners, the task of the Tribunal was to consider whether or not it was satisfied on the balance of probabilities that the contract had been varied in the manner in which the builder asserted. It is clear that there was no variation of the contract in accordance with cl. 17 of the written contract.
Fundamentally, for the written contract to have been varied or supplemented by additional terms in the manner asserted by the builder, there needed to be a sufficiently clear agreement on the terms. Construction of the terms of a contract (including whether or not there has been an agreement; an intention to create legal relations; and whether the asserted terms can be construed with sufficient certainty) is to be assessed objectively.
The factual findings of the Senior Member that provide the basis for the finding that the builder, rather than the homeowners, had repudiated the contract, are contained in a number of parts of the decision, but particularly at paras [132]-[154]. At para [132], the Senior Member found: "For reasons I have also given, it is not possible on the confusing and sometimes contradictory invoices that the builder issued and his shifting position as to what exact money was owing at any one time, to find that he was entitled to the money he sought after the February 2016 agreement".
The "February 2016 agreement" which the Senior Member refers to is dealt with at paras [61]-[62] of the decision. The Senior Member found that it was not in dispute that on 16 February 2016 the parties met and there was an agreement to reduce invoice 217 by giving the homeowners a credit of $36,299, which resulted in progress claim 8 being reduced to $33,694. The homeowners paid this amount by cheque, and the builder resumed work.
The parties also agreed to a separate cash component of $13,125, which was paid by no later than September 2016 (the parties agreeing the amount had been paid, but diverging as to the date of payment). The Senior Member ultimately accepted the evidence of the homeowners that payment of $13,125 had been made on 17 February 2016 (para [121] of the decision).
The Senior Member at paras [138]-[154] of the decision considered the purported repudiatory conduct of the homeowners identified in the letter sent by the builder's solicitors on 2 December 2016.
The Senior Member found that Invoices 240 and 529 related to variations, and the builder had not been able to quantify the amounts that were purportedly owed. In respect of Invoice 530, the Senior Member found that it was for "final stage-practical completion" (PC 9) and that, as there was significant incomplete work, the builder was not entitled under the contract to demand payment of this amount. In respect of Invoice 001, the Senior Member found that it was not in evidence and she "cannot take the matter further".
From the findings made by the Senior Member at paras [146]-[150] it is clear the Senior Member rejected the argument of the builder that the homeowners were in breach of contract by not paying the invoices identified in the letter of 2 December 2016; and found that the builder had not established any legal entitlement regarding such claims.

The issue of the purported agreement the Homeowners would pay legal fees

The Senior Member dealt with the issue of the purported unpaid "legal fees" at paras [151]-[154] as follows: "Finally, the termination letter lists as owing, the builder's legal fees of $2540. This matter stems back to what is alleged to be part of the agreement the parties reached during the first suspension period. It is based on the builder's version of events and is directly contradicted by the homeowner's version of events. I have no reason to prefer the evidence of one party over the other. Further, it appears implausible that if, during the first suspension period, the parties agreed for the homeowners to pay the builder $2,540 legal fee, this would not have been reflected in the agreement to give the homeowners a $36,299 (credit), which brought the first suspension period to an end".
As discussed previously, if the builder was asserting that the written contract had been orally varied or additional terms entered into that the homeowners pay the builder's legal fees, it was for the builder to establish that there had been such an agreement. Assessing the reasons of the Senior Member fairly and in their full context, the Senior Member made a factual finding that she was not satisfied that, assessed objectively, the contract had been varied or an additional term had been entered into regarding payment of legal fees.
The Senior Member correctly stated that there had been diametrically opposed evidence at the hearing between the homeowners and the director of the builder, Mr Basafacan, on this issue.
The builder submits that the Senior Member failed to make factual findings regarding the purported "agreement" regarding legal fees. We do not accept that submission.
The Senior Member's findings at para [152], when assessed fairly and in their context, are findings of the following. The Senior Member was not satisfied that, because of the divergent oral evidence of the homeowners and Mr Basafacan, that assessed objectively, there was an agreement that homeowner's pay the builder's legal costs of $2,450 by a certain date, and accordingly the homeowners were not in breach.
We have considered the evidence orally given at the hearing, as set out in the transcript of evidence, and the documentary evidence of the parties that was adduced before the Tribunal.
In respect of the purported agreement on or about 16 February 2016 to pay the builder's legal fees in an agreed amount of $2,450, the evidence of Mrs Kes was that she was not present at the relevant meeting (T: 334). The evidence of Mr Kes was that he denied that he had agreed to pay the builder $2,450 and he asserted that the builder had never requested such a payment at the meeting, nor that payment of legal fees had ever been discussed. The evidence of Mr Kes was that the first time he became aware of a claim for legal expenses was when he received the letter sent by the builder's solicitors dated 1 June 2016 and he was adamant he had not made such an agreement (T: 392-394).
The evidence of Mr Basafacan regarding the purported agreement to pay legal fees was limited. In his affidavit dated 2 November 2017, Mr Basafacan's only reference to this issue is at paras [23]-[24] as follows: "After this meeting, it was agreed that the homeowners would pay us the sum of $13,125 for the outstanding variation invoice No. 328 and the sum of $2,540 on account of our legal expenses and costs. After this meeting, we recommenced work on site, however, after a few weeks the homeowners had still not paid to us the amounts agreed at the meeting so we suspended works and on 1 June 2016 I instructed my lawyers to write to the homeowners lawyers to demand payment…"
When Mr Basafacan was cross-examined about this issue, the following evidence was given (T:433-434): Homeowners' Counsel: Right. "After this meeting, it was agreed the homeowners would pay us the sum of $13,125 for the outstanding variations invoice 328". Do you see that? Mr Basafacan: That's right, yes. Homeowners' Counsel: You've already been paid that, hadn't you, in cash on 2 February? Mr Basafacan: No, no. We were, not that section, no. There was also-I remember Mr Kes came to our office and he promised to pay that and I said to him "You also need to pay the $2,540 for our solicitor's costs" and he said "Don't tell my wife. I'll pay you that separate" because I said to him "I will not return until I get that as well. Homeowners' Counsel: Well, now… Mr Basafacan: And his words were… Homeowners' Counsel: Just a minute Mr Basafacan: "I will pay that in cash as well but don't let my wife know". Homeowners' Counsel: The fact is you've not referred to that in your affidavit, have you? Mr Basafacan: What's to what? Homeowners' Counsel: To this, to the payment of some legal fees of $2,540? Mr Basafacan: Yes, that's what I said. Yeah. Homeowners' Counsel: You've not referred to that in your affidavit in conversation, have you? Mr Basafacan: No I haven't. Mr Basafacan: Was it ever put to him in cross examination? Homeowners' Counsel: Yes it was and he denied it. Mr Basafacan: He denied it? Homeowners' Counsel: Yeah. Homeowners' Counsel: And… Mr Basafacan: And I had, and said it in front of my staff. Homeowners' Counsel: And I'm suggesting to you sir that is something you have made up. Mr Basafacan: No, I suggest that he lied on oath when he was sitting here 'cause I, he said that in front of my staff members. There was three staff members present.
From the above evidence, the Senior Member was entitled to find at para [152] of the reasons that she was not satisfied on the evidence that there was an agreement between the parties to vary or supplement the terms of the contract by payment of the builder's legal fees, applying an objective test. There was diametrically opposed evidence by Mr Kes and Mr Basafacan.
Further, even if Mr Basafacan's evidence was accepted, Mrs Kes did not know about her husband speaking to Mr Basafacan; and Mr Basafacan said the builder would not resume work "until" the amount of $2,450 for legal fees was paid (in addition to the agreed amount for the progress payment claim).
However, the builder did resume work, despite the builder subsequently claiming that the homeowners were in breach of contract by not paying the legal fees amount of $2,450, which is inconsistent with the evidence of Mr Basafacan that the legal fee amount was to be paid before the builder resumed work. There was abundant ambiguity in the evidence before the Senior Member on whether or not there was an agreement by the homeowners to pay the builder $2,450 in respect of the builder's legal fees.
The builder is critical of the Senior Member's reasons at para [153], where the Senior Member referred to it being "implausible" that if the homeowners had agreed to pay the builder's legal fees of $2,540, such an amount would not have been reflected in the amount the builder agreed to credit the homeowners so that work could resume. The builder submits that the Senior Member made factual findings in error because "It was not open to the learned Senior Member to infer that the legal fees had, in effect, been paid when no party asserted that" (builder's written submissions on appeal para 8.7).
Such a criticism of the reasons and findings is unwarranted. The critical finding on the 'legal fees' issue is at para [152], where the Senior Member was not satisfied on the evidence that there had been agreement between the parties because the evidence regarding any oral agreement was diametrically opposed and she had "no reason to prefer the evidence of one party over the other".
The Senior Member's reasons at para [153] are not a finding that the homeowners had paid the builder the legal fees amount. Rather, they are a reference to the reasoning process of the Senior Member in making the factual finding at para [154] that the builder had failed to show that the homeowners were in breach of their obligations as claimed in the termination letter.
Para [153] when read fairly and in the full context of the reasons, simply records that the Senior Member referred to a further piece of evidence about whether to draw an inference that there had been no agreement between the parties that the homeowners would pay the builder the amount of $2,450 for legal fees, because the purported payment of legal fees had not been discussed by the parties in respect of the agreement of the builder to give the homeowners a credit of $36,299. There is no factual finding in para [153] that the homeowners had paid the builder's legal fees of $2,450 and that it had been included in the amount credited by the builder.
The builder submits that the Senior Member had failed to "grapple" with the evidence in respect of the builder's assertion that the contract had been varied or supplemented by terms of an agreement to pay the builder's legal costs in the sum of $2,450. Failure to "grapple with the evidence" in the context of a failure to adequately evaluate competing evidence in the course of making factual findings is an error of law, and it is not sufficient simply to set out the competing evidence and state without analysis that one body of evidence is preferred over another: Murray v Sheldon Commercial Interiors Pty Ltd [2016] NSWCA 77 at [60].
We are not satisfied that the reasons of the Senior Member demonstrate any failure to adequately evaluate competing evidence in the course of making factual findings. The reasons provided by the Senior Member for finding that the builder had not proved repudiatory conduct by the homeowners, including breach of the purported agreement to pay the builder's legal fees of $2,450, demonstrate a sufficient analysis of the evidence not to constitute an error of law.

The issue of the purported agreement that Mr Sabuk would be appointed as stakeholder

The builder submits that the Senior Member failed to make any findings on the issue of whether or not the parties had agreed to appoint Mr Sabuk as "stakeholder" and pay Mr Sabuk the balance of the monies the builder claimed were owed to the builder in the sum of $90,346, which Mr Sabuk would then disburse at his discretion upon completion of the work.
Further, the builder submits that neither Mr Basafacan nor Mr Sabuk were cross-examined on this issue. We accept that Mr Basafacan and Mr Sabuk were not cross-examined on this issue, but nor was Mr Kes clearly cross examined on the issue. However, in circumstances where the homeowners strongly denied that they owed the builder the monies the builder asserted were owed as set out in the letter of 2 December 2016, it is unsurprising that there was not any cross-examination of the homeowners regarding the purported agreement that monies would be paid to Mr Sabuk.
We agree that the Senior Member made no specific findings whether there was such an agreement in the context of paras [126]-[154] of the reasons, which deal with the issue of termination of the contract. However, the Senior Member did state as follows (at para [68]): "Matters remained in this suspended state until the electrician who worked on the site, also known personally to the homeowners, was suggested as a 'mediator'. This proved unsuccessful".
The Senior Member's reasons at para [68] indicate that the Senior Member had considered the involvement of Mr Sabuk. The builder submits that the Senior Member should have made more extensive factual findings regarding the involvement of Mr Sabuk.
However, the fundamental flaw in the builder's submission is that it fails to take into account the findings of the Senior Member regarding the builder's claim for payment of invoices and legal fees set out in the letter of 2 December 2016.
The Senior Member had found that the builder had no legal right to claim payment of the invoices (which constituted what the builder asserted was the total amount owed for past work and to complete the remaining incomplete work under the contract) and 'legal fees' set out in the letter of 2 December 2016. As discussed previously, there was no challenge to the findings of the Senior Member at paras [137]-[150] regarding the unpaid invoices, which the builder asserted in the letter of 2 December 2016 were owed (despite, as the Senior Member pointed out, the builder agreeing that the residential building work was incomplete). The Senior Member had previously found (at para [12]): "It must be said at the outset and indeed it is noted again below, that the builder's invoicing system, the inconsistency in his evidence and the difficulty in reconciling his documents to ascertain the money he claims he is still owed, what money he says was paid and when he says it was paid, did not serve him well".
In circumstances where the Senior Member had found that the homeowners did not owe the builder the amounts claimed in the letter of 2 December 2016, it was unnecessary to make any findings about whether or not the homeowners had agreed to pay such monies to Mr Sabuk. The monies were not owed, and accordingly there could be no repudiatory conduct by the homeowners by not paying the monies, whether to the builder or Mr Sabuk.
Accordingly, the failure of the Senior Member to make factual findings as to whether or not there had been an agreement between the parties that monies that the builder claimed were owed for past work, payment of monies for future work to complete the contract, and payment of legal fees, is immaterial and cannot constitute an error of law.
The Senior Member clearly found that the builder had repudiated the contract rather than the homeowners. Although the Senior Member did not make a further explicit finding that the homeowners had accepted the builder's repudiation, that finding must logically flow from the other findings of the Senior Member. In any event, no ground of appeal was raised that the Senior Member had made an error of law by not making a discrete finding that the homeowners had accepted the builder's repudiation, causing the contract to be terminated.

Conclusion - error of law

No error of law has been established in the decision of the Senior Member.

Has an error other than an error of law been established, and if so should the Appeal Panel grant leave?

Schedule 4, cl 12(1) of the NCAT Act provides that: (1) An Appeal Panel may grant leave to appeal from a decision in the Consumer and Commercial Division of the Tribunal only if the Appeal Panel is satisfied the appellant may have suffered a substantial miscarriage of justice because: (a) the decision of the Tribunal under appeal was not fair and equitable, or (b) the decision of the Tribunal under appeal was against the weight of evidence, or (c) significant new evidence has arisen (being evidence that was not reasonably available at the time the proceedings under appeal were being dealt with).
The principles relevant to the granting of leave for an appeal from a decision in the Consumer and Commercial Division are stated in Collins v Urban: 76 Accordingly, it should be accepted that a substantial miscarriage of justice may have been suffered because of any of the circumstances referred to in cl 12(1)(a), (b) or (c) 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. 77 As to the particular grounds in cl 12(1)(a) and (b), without seeking to be exhaustive in any way, the authorities establish that: (1) If there has been a denial of procedural fairness the decision under appeal can be said to have been "not fair and equitable" - Hutchings v CTTT [2008] NSWSC 717 at [35], Atkinson v Crowley [2011] NSWCA 194 at [12]. (2) The decision under appeal can be said to be "against the weight of evidence" (which is an expression also used to describe a ground upon which a jury verdict can be set aside) where the evidence in its totality preponderates so strongly against the conclusion found by the tribunal at first instance that it can be said that the conclusion was not one that a reasonable tribunal member could reach - Calin v The Greater Union Organisation Pty Ltd (1991) 173 CLR 33 at 41-42, Mainteck Services Pty Limited v Stein Heurtey SA [2013] NSWSC 266 at [153]. 78 If in either of those circumstances the appellant may have been deprived of a "significant possibility" or a "chance which was fairly open" that a different and more favourable result would have been achieved then the Appeal Panel may be satisfied that the appellant may have suffered a substantial miscarriage of justice because the decision was not fair and equitable or because the decision was against the weight of the evidence. 79 In order to show that a party has been deprived of a "significant possibility" or a "chance which was fairly open" of achieving a different and more favourable result because of one of the circumstances referred to in cl 12(1)(a), (b) or (c), it will be generally be necessary for the party to explain what its case would have been and show that it was fairly arguable. If the party fails to do this, even if there has been a denial of procedural fairness, the Appeal Panel may conclude that it is not satisfied that any substantial miscarriage of justice may have occurred - see the general discussion in Kyriakou v Long [2013] NSWSC 1890 at [32] ff concerning the corresponding provisions of s 68 of the CTTT Act and especially at [46] and [55].
In respect of Sch 4, cl 12 of the NCAT Act, the builder does not seek leave on the basis that significant new evidence has arisen since the hearing. The grounds upon which leave to appeal is sought is that: (a) the decision is not fair and equitable; and (b) the decision was substantially against the weight of evidence.
We have reviewed the evidence before the Senior Member. We are not satisfied that the builder has established that the evidence in its totality preponderates so strongly against the conclusion found by the Tribunal at first instance that it can be said that the conclusion was not one that a reasonable Tribunal member could reach. We are also not satisfied that the builder has established that the decision was not fair and equitable.
The Senior Member was faced with a home building dispute where the builder had not kept clear and accurate records regarding the work that had been performed, let alone adequately evidencing that there had been oral variations to the contract outside the contractual mechanism to vary under cl. 17 of the written contract. The Senior Member was also faced with significantly divergent oral evidence between the homeowners and the builder regarding the disputes that had arisen during the course of the building work, and the circumstances in which the contract was terminated. We are satisfied that the findings and reasons of the Senior Member are thorough and sound.

CONCLUSION

No error of law, nor any error other than an error of law for which leave to appeal should be granted, has been established. Accordingly, the appeal is dismissed.

THE ISSUE OF COSTS

Both parties were legally represented in the appeal. The builder failed in respect of all grounds of appeal. By virtue of r 38A of the NCAT Rules, the costs provisions at first instance are applicable on the appeal. Section 60(1) of the NCAT Act provides that each party is to pay its own costs, subject to "special circumstances" being established under s 60(2) of the NCAT Act.
However r 38 of the NCAT Rules provides that costs may be awarded in the Consumer and Commercial Division of the Tribunal if the amount claimed or in dispute in the proceedings exceeds $30,000. In an appeal arising from a Consumer and Commercial Division matter, the determinative factor in applying r 38(2)(b) of the NCAT Rules is the amount claimed or in dispute in the appeal, not the amount claimed or in dispute in the proceedings at first instance: Allen v Tricare (Hastings) Ltd [2017] NSWCATAP 25 at [43].
This appeal does not involve an interlocutory decision (see Wassef v Panagiotopoulos [2019] NSWCATAP 188). Accordingly, if the outcome of the appeal proceedings is likely to affect the wealth of the appealing party by more than $30,000, "special circumstances" do not have to be demonstrated to award costs.
The builder's appeal was in respect of the orders regarding damages for incomplete work and the Tribunal's rejection of the builder's claims for loss of profit and payment of "legal costs". The builder's grounds of appeal specifically set out the orders sought in the appeal proceedings, being that the amount of damages awarded to the homeowners be reduced from $30,825.40 to $3,211; and additionally that the builder be awarded the amounts of $3,675.83 and $2,450. The total value of the orders sought in the appeal by the builder is likely to affect the wealth of the appealing party by more than $30,000.
Accordingly, the principles applicable to costs in this appeal do not involve "special circumstances" being established under s 60 (2) of the NCAT Act and general principles pertaining to costs are applicable. The general rule is that costs follow the event, in that the successful party to proceedings is entitled to a costs order in its favour: Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 73.
In circumstances where both parties are legally represented in the appeal proceedings, and all grounds of appeal have been dismissed, the builder should pay the homeowners' costs of the appeal proceedings as agreed or assessed on the ordinary basis.
We acknowledge that neither party has been heard on the issue of costs. We are satisfied that the appropriate course of action is to make a costs order, and give either party the opportunity to apply in writing within 14 days of the date of this decision to have the costs order set aside or varied. If such an application is made, we will issue directions for the parties to file and serve submissions on the issue of costs and grant a stay of the costs order until any further costs application is determined. If no such application is made, the costs order will remain unaffected.

ORDERS

We make the following orders: 1. The stay of orders of the Tribunal made on 10 April 2019 in Matter HB 16/55778 and HB 17/31778 is lifted immediately. 2. The appeal is dismissed. 3. DB Homes Australia Pty Ltd is to pay Mehtap Kes and Mehmet Kes costs of the proceedings in Matter AP 19/21441 as agreed or assessed on the basis set out in the legal costs legislation (as defined in s 3A of the Legal Profession Uniform Law Application Act 2014 (NSW)). 4. If either party seeks to vary the costs order in order 3 above, the party is to write to the Tribunal and the other party by 14 days of the date of this decision to set out the alternative order(s) sought, and the Tribunal will make further orders and directions as appropriate.

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 August 2019

Civil and Administrative Rules 2014(NSW)

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (17 paragraphs)

Parties

Legislation Cited (4)

Cases Cited (31)

Cited By (11)