Dellagiacomo v Strauss and Dragh

The hearing of 3 September 2015

1. At the hearing the applicant appeared in person, as did the second respondent Mr Dragh. Mr Strauss was not present. The Tribunal was informed that the respondent Mr Strauss now lives overseas.

Preliminary matters

1. There are a number of preliminary matters to note.

Removal of Mr Strauss as a respondent

1. The first issue is that, prior to the hearing, in a letter to the Registry of 23 July 2015, the applicant sought to remove Mr Strauss "as a plaintiff". In her letter she states that Mr Strauss had ceased to be a necessary party as, relevantly, the contracts were between her and Mr Dragh.
2. The applicant states that Mr Strauss was ordered to complete the works at the Lalor Park property, but that he had not done so. The applicant said that he had effectively abandoned the works and that there is little chance of him resuming the work as he is now travelling to the Czech Republic for an extended period.
3. As the Tribunal indicated at the hearing, it declined to make the order sought. Mr Strauss had agreed to consent orders on 4 May 2015, and the Tribunal made orders against him as a respondent, and the applicant had taken steps to enforce that order through the Local Court of NSW by having a s 78 certificate issued to her. In those circumstances, it is not appropriate to now remove Mr Strauss as a party to the proceedings.

The claim in relation to the Blacktown property

1. The second issue is the status of the applicant's claim in relation to the Blacktown property. The Tribunal has set out the procedural history of the matter in relation to the Blacktown property; the Tribunal making consent orders on 4 May 2015 ordering the respondents to pay the applicant $35,000, being the return of her deposit, for works that did not proceed.
2. The Tribunal explained to the applicant that it might be thought that in circumstances where no work whatever were commenced, and she had accepted the return of her deposit in relation to that contract, and consent orders made giving effect to that agreement, her claim had therefore been resolved.
3. The applicant indicated that the consent order did not finalise her claim, as she had still suffered loss in the form of the interest that she was paying on the loan that she had taken out to fund the work on the Blacktown property. She also indicated that she had never been paid the $35,000 as ordered.
4. Then, perhaps surprisingly, Mr Dragh, produced a cheque $35,000 which he provided to the applicant.
5. It is in those circumstances that the Tribunal comes to consider what the applicant claims are her losses in respect of the Blacktown property.

Summary of Claims

1. At the hearing of the appeal the applicant indicated that she relied on her written submissions. The losses for which she seeks compensation in respect of the Lalor Park property can be summarised as: Head of damage Detail $ Cost of delay in completing works "maintenance of untenanted" 220 Loss of use of money Interest charged on loans for works with no rental income 8,106 Loss of rental income Granny flat 15,120 Main dwelling 9,000 Fencing 2,240

1. The losses for which she seeks compensation for the Bankstown property can be summarised as: Head of damage Detail $ Loss of use of money Loss of opportunity to earn interest on the deposit 3,019 Redraw from savings account 57 Loss of rental income 15,750

1. In addition, the applicant also seeks compensation for what are the described as "the costs of taking legal action", being a postage ($28), the filing fee ($295) and photocopying ($25), a total of $348.
2. Finally, the applicant also seeks leave to amend her application so as to claim: 1. Completion costs. 2. Costs to reinspect and report on compliance of the dwelling 3. Cots of rectification of any building defects arising from that inspection. 4. The costs of any further and as yet undiscovered breaches of statutory warranty in respect of the Lalor Park property.

The applicant's evidence

1. The applicant filed a bundle of documents on 22 May 2015, together with 10 pages of written submissions. Attached to the submissions are 117 pages of documents relating to these damages sought, save for pages 78 to 106. These pages are an unsigned and undated "home building contract for work over $5,000", in the form issued by NSW Fair Trading.
2. The Tribunal notes that, in particular, there was no statement from the applicant setting out her version of events, nor a copy of either of the contracts. In particular, there is no explanation of what amounts she paid pursuant to either contract, whether the contracts had been varied, what was the state of completion of the works and whether the contracts were terminated or abandoned. There were however proof of her payment of various amounts to the respondents.
3. The role of the Tribunal in the Consumer and Commercial Division is not inquisitorial, that is to say, it is not incumbent on, and it may be thought inappropriate for, the Tribunal to actively seek out evidence. While the Tribunal must be cognisant of the difficulties faced by self-represented litigants in conducting applications such as the present one, there are limits to the role that the Tribunal can exercise in this regard. However, as there was sufficient time in which to do so, the Tribunal invited the applicant to be sworn and to give oral evidence, and the applicant gave the following evidence.
4. In summary, the applicant told the Tribunal, and the Tribunal accepts, that some years ago she bought the two properties in Lalor Park and Blacktown. A mortgage broker suggested she build second dwellings on them. He recommended Mr Strauss as the builder. The applicant later found out that he was not a licensed builder and, in her words, "needed to be supervised".
5. The applicant said that she met Mr Strauss a number of times. She said that he told her that he knew someone in Canberra with a pre-fabricated house which could be sold to her. The applicant said that she negotiated with Mr Strauss to install the pre-fabricated house at the Blacktown property. At the same time they negotiated that the conversion of the garage at Lalor Park into a granny flat. Part of the discussions were that, because the applicant worked fulltime, Mr Strauss would manage the work. The applicant said that Mr Strauss said that he would look after everything. He told that her that he did not have a builder's license and that Mr Dragh would sign the contracts.
6. The Tribunal accepts this evidence of the applicant.

Lalor Park property

1. In relation to the contract for the Lalor Park the applicant gave oral evidence to the Tribunal that, and the Tribunal finds the following facts: 1. The contract, being a "home building contract work over $5000" published in the standard form by New South Wales Fair Trading, was signed by the applicant sometime in August 2013. 2. The contract price was $78,500.00. 3. The contract did not provide for progress payments; the applicant was provided with invoices from time to time which she paid. 4. The applicant made progress payments in a total of $75,000.00, $22,500.00 of which was paid to Mr Dragh; and the balance paid to Mr Strauss. 5. The nature of the work was the conversion of a single garage to a granny flat. 6. The work was to commence within 15 days of signing the contract. 7. The work was to be completed within 15 weeks from the date of signing. 8. There were no special conditions. 9. There were no plans or specifications attached to the contract. 10. There were two adjustments or variations made to the contract: 1. some plumbing work needed to be done. This was an increase of $6,000.00 to the contract price. 2. the easement to connected to the plumbing for drainage: This was an increase of $1,000.00 to the contract price. 1. The work commenced about 8 November 2013. 2. The Lalor Park property was completed to lock up stage. 3. What remains to be completed are the internal walls, kitchen, flooring, ceiling, plumbing, electrics, and back deck or stairs. 4. The applicant does not consider the contract to still be on foot. She considers that it was effectively abandoned by the actions of Mr Strauss. She seeks compensation for the items referred to above,
2. The Tribunal feels comfortable in making the above findings. Some of the dates stated by the applicant and the money amounts are corroborated by other documents referred to in the folder of documents filed by the applicant. The Tribunal notes that in addition to those explicit findings of the terms of the contract, the applicant submits and Tribunal accepts that the balance of the terms of the contract are as appears in the "home building contract work over $5000" published in the standard form by New South Wales Fair Trading.
3. It is to be noted that the contract does not contain a liquidated damages clause relating to delay.

Who was the other party to the Lalor Park property?

1. That said, it is not clear, on the applicant's own evidence, who was the other party to the contract. After signing the contract she says that she sent it to Mr Strauss, who was to provide it to Mr Dragh.
2. Mr Dragh, who appeared at the hearing, told the Tribunal that he could not recall if he ever saw the contract, and could not recall whether or not Mr Strauss provided him with the contract. However, he conceded that he may have. He said "I saw him several times. I don't know whether I signed it or not".
3. There were invoices from Mr Dragh's company, Pierre Dragh Consulting Engineers Pty Ltd, included in the materials. The applicant informed the Tribunal, and the Tribunal accepts and finds on the basis of the corroborative material in the form of correspondence and bank statements before it, that the applicant made a number of payments to Mr Dragh's account, while other payments were paid to Mr Strauss, who would then, she assumed, pass them on to Mr Dragh. Mr Dragh agreed that he had received some payments from the applicant. In this respect the Tribunal refers to Mr Dragh's evidence, summarised below, set out in his statement of 2 September 2015.
4. In those circumstances, on the balance of probabilities, the Tribunal finds that Mr Dragh was a party to the Lalor Park property.

Blacktown Park property

1. It is common ground that work on the Blacktown property never commenced, that the applicant paid a total deposit of $35,000.00 to Mr Dragh, and that that deposit has now been returned.
2. In relation to the contract for the Lalor Park the applicant informed the Tribunal, and the Tribunal accepts and finds that: 1. The contract was signed by her sometime in August 2013. 2. The contract price was $92,000.00. 3. The contract did not provide for progress payments. 4. The applicant paid a total of $35,000.00 to Mr Dragh. This was admitted by Mr Dragh in his undated statement filed on 2 September 2015. 5. The work to commence within 15 days of signing the contract. 6. The work was to be completed within 15 weeks from the date of signing. 7. There were no special conditions. 8. There were no plans or specifications attached to the contract.
3. As Mr Dragh accepts that the applicant paid him the $35,000.00 deposit, the Tribunal is satisfied that Mr Dragh was a party to this contact.

The respondents' evidence

1. As noted only the respondent Mr Dragh appeared the hearing. This was the first time he had met the applicant.
2. Mr Strauss did not file any documents in accordance with directions.
3. Mr Dragh forwarded an unsigned statement to the Registry on 2 September 2015. In summary, he states that: 1. He recalls that the applicant was interested in him and Mr Strauss undertaking renovations at both properties. He does not recall whether he signed either contract. He recalls that the contract price for the Lalor Park property was to be $78,500.00. 2. He says that Mr Strauss handled "much" of the day to day work in relation to the Lalor Park property. 3. He expects but cannot confirm that Mr Strauss is suffering from some personal mental health difficulties. He does not know why he would not have completed the works at Lalor Park as ordered. 4. He confirms that he received a total of $57,500.00 from the applicant in relation to both properties. This amount comprises $22,500.00 in respect of the Lalor Park property, $25,000.00 for the Blacktown property, and $10,000.00 what he describes as "Dec 2013 payment". 5. Of the $57,500.00 paid to him by the applicant, he has paid at least $31,000.00 to Mr Strauss. He suspects, but cannot confirm, that he paid a further $10,000.00 to Mr Strauss. 6. "Having now paid the applicant $35,000" (a reference to the cheque for $35,000.00 that was to hand to the applicant at the hearing the following day), he has experienced a deficit of $24,500.00, which he intends to seek payment of from Mr Strauss. He asks the Tribunal to make that order. 7. He accepts that the applicant paid Mr Strauss directly for certain services a total of $48,000.00 in relation to the Lalor Park property. 8. He submits that in relation to the Lalor Park property, the applicant has paid $48,000.00 to Mr Strauss, $25,500.00 to him, therefore being $5,000.00 short of the agreed amount of $78,500.00.
4. In relation to the Lalor Park property Mr Dragh resists the applicant's claim and submits that: 1. The applicant received the benefit of the expenses claimed. 2. In relation to the loss of rent, that he had no notice of the alleged loss, did not commit to finishing the work within a specified period, and relied on Mr Strauss to complete the works. 3. Says that on a quantum meruit basis the applicant has received a benefit which exceeds the amount the applicant paid him ($22,500.00) and which exceeds the total amount paid ($73,500.00).
5. More generally, Mr Dragh submits that he was informed by Mr Strauss that there were planning issues which delayed the building of the granny flat at the Lalor Park property. He does not know how long this delay was. He also says that there was an easement issue requiring consent of a neighbour.
6. The Tribunal has noted above what Mr Dragh said about signing the contracts. He does not recall, but nor does he exclude, the possibility that he signed them. The Tribunal also notes that there was evidence before the Tribunal (namely an email from Mr Dragh dated 16 December 2014, forwarded to the applicant that day), which indicates that Mr Strauss normally gave Mr Dragh an update every two weeks in relation to the works on both properties.
7. Mr Dragh submitted at the hearing that that the building plans had never been approved by Council. He drew the Tribunal's attention to p 42 of the applicant's documents, which was an email to the applicant dated 10 February 2015 from the Blacktown City Council indicating that "there were some matters outstanding and as such no Complying Development Certificates have been issued as yet".
8. In relation to the Lalor Park property he also drew the Tribunal's attention to p 50 of the applicant's documents. That document is a letter from Council to Mr Strauss referring to the recent application for a Complying Development Certificate. The letter states upon request of certain fees and payments the application would be assessed with a view to issuing a Complying Development Certificate.
9. Mr Dragh's point was that no Complying Development Certificate had ever been issued for either property. He also submitted that as the easement referred to in 32(b) had never been approved, "the building could not have been built. It's as simple as that". The Tribunal does not consider that bald proposition can be accepted. It does appear that, for reasons known only to the parties, the work commenced, at least in relation to the Lalor Park property, before council approval had been obtained.

Principles relating to the assessment of damages

1. It is appropriate before considering the applicant's claims of loss to set out the following relevant principles. 1. The fundamental principle governing the award of damages for breach of contract is that the damages are compensatory: Contract Law in Australia, Third Ed., at [2103]. 2. Where a party sustains a loss by reason of a breach of contract, they are, so far as money can do it, to be placed in the same position, with respect to damages, as if the contract had been performed: Robinson v Harman (1848) 1 Ex 850; Commonwealth v Amann Aviation Pty Ltd (1992) 166 CLR 351. 3. The object is to place the plaintiff (here the applicant) in the same position they would have occupied had the defendant (here the respondent) performed the obligation breached: Contract Law in Australia, Third Ed., at [2104]. 4. Where a plaintiff (here the applicant) claims to have suffered loss or damage by reason of the defendant (here the respondent)'s breach, the onus of proving the extent of the loss or damage rests on the plaintiff (here the applicant): Contract Law in Australia, Third Ed., at [2105]. 5. It must be established that the loss or damage was caused by the defendant (here the respondent)'s breach, and that the loss or damage was not too remote: Contract Law in Australia, Third Ed., at [2105]. 6. The basic rule governing the law of remoteness of damage in contract appears in Hadley v Baxendale (1854) 9 Ex 341 at 354; 156 ER 145 at 151: Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, ie according to the usual course of things, from such breach of contract itself OR such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it.

Interest charged - Loss of opportunity to earn interest

1. As noted above, the object of an award of damages is to place the plaintiff (here the applicant) in the same position they would have occupied had the defendant (here the respondent) performed the obligation breached: Contract Law in Australia, Third Ed., at [2104].
2. In Hungerfords the appellants were accountants. The respondents carried on business selling, hiring and servicing television sets and other electronic goods. The appellants were engaged to prepare the partnership and individual income tax returns for the respondents. The partnership paid the income tax of each partner out of its trading account and the amount was debited to the personal account of each partner in the books of the partnership. In the partnership return for the year ended 30 June 1975, the appellants made an error in calculating the amount of depreciation allowable as a deduction. The error was carried through in the returns in succeeding years and it resulted in an overpayment of tax. Consequently, the appellants' calculation of the respondents' taxable income was significantly greater than the correct amount and the respondents paid more tax than was necessary. This error was repeated each year until discovered by another accountant. The respondents sued the appellants for the loss of the amount of the income tax overpaid. As an alternative to the claims for interest, the respondents claimed damages at the trial for loss of the use of the money overpaid in these years by way of tax and paid by way of additional provisional tax. They alleged negligence and breach of contract.
3. It was in that context the High Court stated at [25]: . . . the plaintiff is entitled to full compensation for the loss which he sustains in consequence of the defendant's wrong, subject to the rules as to remoteness of damage and to the plaintiff's duty to mitigate his loss. In principle he should be awarded the compensation which would restore him to the position he would have been in but for the defendant's breach of contract or negligence. (emphasis added)
4. The applicant relies Hungerfords to support her submission that she is entitled to damages in respect of the interest she paid on loans she obtained to carry out the developments on the two properties in the period March 2014 to May 2015. While in certain circumstances such a loss can be claimed, any loss has to be caused by the breach of the contract. In making this claim, the applicant, not unreasonably, has allowed some five months for the works to be completed, works which were contracted to be completed within 15 weeks. However, had the works been completed when accepted as due, then, at the point, the applicant would have been receiving rental income (which she also claims) which presumably would have been directed towards paying that interest. In other words, the position the applicant would have been in would have been that she would be paying the interest on the relevant loans. There was no evidence to the contrary. Accordingly, the Tribunal's view is that the loss claimed by the applicant is not a loss arising from the breach of contract. She is, however, entitled to the claimed loss of rental income.
5. In not allowing the claim for this head of damage, it follows that the $57 claimed for a redraw from applicant's savings account in respect of the Lalor Park Property is also not allowed.

Loss of rental income

1. The Tribunal accepts in principle a party is entitled to compensation for loss of rental income. Here, the applicant submits that the elements of Hadley v Baxendale are satisfied. She submits that she made it clear to Mr Strauss that the granny flats were to be rental properties, that Mr Strauss was Mr Dragh's agent, and therefore Mr Dragh knew "or ought to have known" about the use of the properties.
2. The Tribunal accepts this submission, and notes that, once the work had commenced Mr Dragh received updates from Mr Strauss on a fortnightly basis (see p 36 of the documents).
3. In making this claim the applicant, not unreasonably, has allowed a further five months for the works to be completed, works which were contracted to be completed within 15 weeks.
4. The applicant relies on written evidence of a Blacktown real estate agent to support her submissions as the quantum of the claims made, namely a total of $30,870.00.
5. This component of the claim may be described by what is often described as a "loss of a chance". The Court of Appeal stated in Donnellan v Woodland [2012] NSWCA 433: 236. The proper basis for the assessment of damages in the case of a lost opportunity was considered by the High Court in Malec v JC Hutton Pty Ltd [1990] HCA 20; 169 CLR 638 i. . . [where] the plurality (Deane, Gaudron and McHugh JJ) noted, at 643, that: "The future may be predicted and the hypothetical may be conjectured. But questions as to the future or hypothetical effect of physical injury or degeneration are not commonly susceptible of scientific demonstration or proof. If the law is to take account of future or hypothetical events in assessing damages, it can only do so in terms of the degree of probability of those events occurring. The probability may be very high - 99.9 per cent - or very low - 0.1 per cent. But unless the chance is so low as to be regarded as speculative - say less than 1 per cent - or so high as to be practically certain - say over 99 per cent - the court will take that chance into account in assessing the damages. Where proof is necessarily unattainable, it would be unfair to treat as certain a prediction which has a 51 per cent probability of occurring, but to ignore altogether a prediction which has a 49 per cent probability of occurring. Thus, the court assesses the degree of probability that an event would have occurred, or might occur, and adjusts its award of damages to reflect the degree of probability. The adjustment may increase or decrease the amount of damages otherwise to be awarded. See Mallett v. McMonagle (1970) AC 166, at p 174; Davies v. Taylor (1974) AC 207, at pp 212, 219; McIntosh v. Williams (1979) 2 NSWLR 543, at pp 550-551. The approach is the same whether it is alleged that the event would have occurred before or might occur after the assessment of damages takes place." 237. In Sellars v Adelaide Petroleum, the Court (Mason CJ, Dawson, Toohey and Gaudron JJ), at 355, held that the approach in Malec v Hutton was not to be confined to any particular kind of case: "Notwithstanding the observations of this Court in Norwest, we consider that acceptance of the principle enunciated in Malec requires that damages for deprivation of a commercial opportunity, whether the deprivation occurred by reason of breach of contract, tort or contravention of s.52(1), should be ascertained by reference to the court's assessment of the prospects of success of that opportunity had it been pursued. The principle recognized in Malec was based on a consideration of the peculiar difficulties associated with the proof and evaluation of future possibilities and past hypothetical fact situations, as contrasted with proof of historical facts. Once that is accepted, there is no secure foundation for confining the principle to cases of any particular kind. On the other hand, the general standard of proof in civil actions will ordinarily govern the issue of causation and the issue whether the applicant has sustained loss or damage. Hence the applicant must prove on the balance of probabilities that he or she has sustained some loss or damage. However, in a case such as the present, the applicant shows some loss or damage was sustained by demonstrating that the contravening conduct caused the loss of a commercial opportunity which had some value (not being a negligible value), the value being ascertained by reference to the degree of probabilities or possibilities. It is no answer to that way of viewing an applicant's case to say that the commercial opportunity was valueless on the balance of probabilities because to say that is to value the commercial opportunity by reference to a standard of proof which is inapplicable."
6. Here, the only evidence provided by the applicant in relation to to each property was a letter of a real estate agent opining that the properties could be expected to be rented for a particular amount. There was no other evidence about the likelihood that the properties could be rented for those amounts, less still, for the entire period claimed. The Tribunal considers that there must be some discount applied to reflect the uncertainties of the granny flats being tenanted throughout the entire period as claimed, and rent being paid at the price indicated. The Tribunal will deduct one half of the amount sought to allow for these contingencies and uncertainties.
7. In her submissions the applicant also seeks leave to amend the claim so as to claim "rent to be payable until the property is ready to rent". Leave is refused. The claim is entirely unquantifiable.

Additional claim re Lalor Park

1. The applicant also submits that she has suffered the loss of the rental income from the main dwelling at Lalor Park. Put simply, the applicant's property manager found that the main property was unsafe because of unfenced excavations. She says that despite numerous requests to Mr Strauss to fence the works, he did not do so. She says that Mr Strauss personally offered to pay rent on the main building until the works were completed. She says, and the Tribunal accepts, that she paid $2,240.00 to have the works fenced, and that she should be compensated for this amount.
2. The Tribunal does not accept that loss claimed for the lost rental income from the main dwelling at Lalor Park falls within the principles of Hadley v Baxendale, the Tribunal considers that this loss is too remote. There was no evidence from the about this matter, and the Tribunal does not accept or find that it was within the reasonable contemplation of the parties. The claim for $220.00 being lawn mowing and rubbish removal also fall into this category and no compensation is allowed.

Other

1. As to the applicant's application to amend the claim to also seek completion costs, the costs to reinspect and report on compliance of the dwelling, the costs of rectification of any building defects arising from that inspection and the costs of any further and as yet undiscovered breaches of statutory warranty in respect of the Lalor Park property, the application is dismissed. Any claim must be determined at the hearing and they are all indeterminate and unquantifiable claims.
2. The day before the hearing he sought an order that Mr Strauss be ordered to pay him $24,500.00. That claim must be dismissed. No formal application was filed and, more importantly, no evidence was filed to support the claim.

Costs

1. The applicant also seeks an order that the respondents pay her costs. The relevant rule is contained in reg 38 of the Civil and Administrative Tribunal Rules. That regulation relevantly states that despite s 60 of the Civil and Administrative Tribunal Act 2013, the Tribunal may award costs in proceedings to which this rule applies even in the absence of special circumstances warranting such an award if the amount claimed or in dispute in the proceedings is more than $30,000.00.
2. The purpose of making a costs order is to provide compensation to the party in whose favour the order is made for the expense the party has been put to in prosecuting or defending legal proceedings. In general terms, a party who is successful is entitled to an order for costs in its favour, subject to certain limited exceptions generally involving misconduct on the part of that party.
3. The Tribunal proposes to order the second respondent Mr Dragh to pay Ms Dellagiacomo's costs. However, not having heard full argument on this issue, Mr Dragh is to provide any written submissions on costs within 14 days. Ms Dellagiacomo may respond if she wishes within a further 14 days. Each party must provide their submissions to both the Registry and the other party. This aspect of the claim will be determined on the papers.

Summary

1. The second respondent Mr Dragh is to pay the applicant $17,665.00 as follows: 1. In relation to the Lalor Park Property, $7,560.00 being compensation for loss of rental income; $2,240.00 being compensation for the cost of the fencing. 2. In relation to the Blacktown Property, $7,865.00 being compensation for loss of rental income.

Orders

1. The Tribunal orders the second respondent Mr Dragh is to pay the applicant Ms Dellagiacomo the sum of $17,665.00. R C Titterton Tribunal Member Civil and Administrative Tribunal of NSW 1 December 2015 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: 14 January 2016