DeMarco v Macey [2025] NSWCATAP 131 | Case summary

This is an internal appeal from a decision of the Tribunal made on 29 August 2024 in the Consumer and Commercial Division.
On 22 September 2016, the respondents to the appeal ("the Homeowners") made a contract ("the Contract") with the appellant ("the Builder") to perform residential building work, in the form of renovations and additions to the Homeowners' dwelling. On 26 February 2019, the Homeowners terminated the Contract with the Builder for the Builder's delay in completing the works the subject of the Contract. The Homeowners then made a contract with another builder and completed the works the subject of the Contract. The other builder also performed some additional residential building work for the Homeowners that had not been the subject of the Contract.
On 15 February 2019 the Homeowners commenced proceedings in the Tribunal against the Builder. The Home Building Act 1989 (NSW) provided the Tribunal with jurisdiction to determine the Homeowners' claim.
On 8 July 2020, a Senior Member of the Tribunal awarded $317,919.00 in damages to the Homeowners for breach of contract.
The Builder appealed against the Tribunal's decision. On 21 September 2021, the Appeal Panel dismissed the Builder's Appeal but varied the award of damages payable to the Homeowners by increasing the award to $389,184.00.
The Builder appealed to the Supreme Court of New South Wales against the Appeal Panel decision. On 5 September 2022, the Supreme Court allowed the Builder's appeal. The basis of the Court's decision was that the Tribunal at first instance had conducted the hearing in a manner that was procedurally unfair to the Builder, in that the Senior Member who had conducted the hearing engaged in conduct that constituted apprehended bias.
The Supreme Court remitted the dispute between the Homeowners and the Builder to the Tribunal. The dispute was heard by the Tribunal on 16 and 17 October 2023, with written submissions filed afterwards. The Senior Member who conducted the hearing was not the same Senior Member who had made the orders on 8 July 2020 that are referred to above in these reasons. On 29 August 2024, the Tribunal ordered the Builder to pay the Homeowners $416,508.40 and to pay the costs of the respondents. It is this decision of the Tribunal that is the subject of this appeal.
By notice of appeal filed on 25 September 2024, the Builder seeks to set aside the orders of the Tribunal made on 29 August 2024. The Builder seeks an order that the appellant pay the respondents $102,609.00, in lieu of the order that it pay the respondents $416,508.40. The Builder seeks an order that the Homeowners pay its costs of the appeal proceedings.
The three principal issues considered in this appeal were whether:
the Tribunal had erred when ascertaining the Homeowner's damages by not applying clause 25 in the Contract. Clause 25 dealt with termination of the Contract by the Homeowner due to the fault of the Builder. The proper application of clause 25 in the Contract, and the words therein "that which would otherwise have been due under the contract" contained in clause 25 in the Contract, required, so the appellant submitted, the adjustment of the contract price in the Contract, not only to allow for variations, but also to allow for provisional sum and prime cost items including such items supplied and installed by the other builder who completed the works the subject of the Contract following the Contract's termination;
there was an error of arithmetic in the Tribunal's calculation of the damages claim which overstated the award of damages by $34,522.90; and
the Tribunal had erred in rejecting the Builder's quantum meruit claim on the basis that there was no evidence in support of said claim when in truth, so the appellant submitted, the Homeowners had agreed and accepted parts of the Builder's quantum meruit claim.
Amongst those three issues, the issue as to how prime cost items and provisional sums should be treated, when determining damages for breach of contract, was the issue that absorbed most of the Appeal Panel's time during the hearing before it.
For the reasons that are set out below in this decision, we have allowed the appeal in part as we have accepted the Builder's submissions relating to the arithmetic error and the quantum meruit claim. We have rejected the Builder's submission about how prime cost items and provisional sums should be treated, when assessing the amount of the money order payable by the Builder to the Homeowners.

In conducting the appeal, we have followed the following approach:

(1) we have decided the threshold question of whether the appeal is on one or more questions of law;

(2) to the extent that the appeal is on one or more questions of law, we have decided whether the Tribunal either answered that question or proceeded on an assumption concerning that answer, whether its answer or assumption was correct or incorrect, and whether that answer or assumption was material to the outcome, in the sense that it could have affected the outcome: Bimson, Roads & Maritime Services v Damorange Pty Ltd [2014] NSWSC 734 (Bimson, Roads & Maritime) at [41] (Beech-Jones J) citing Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321; [1990] HCA 33 at 353 (Mason CJ); cited with approval together with other authorities in Wan v Chief Commissioner of State Revenue [2025] NSWCATAP 54 at [53]- [54];

(3) to the extent necessary, we have decided whether leave to appeal should be granted in accordance with the principles in Collins v Urban [2014] NSWCATAP 17 (Collins) at [76]-[84], and if so whether any relief should be granted in respect of any material error;

(4) we have set out our conclusions;

(5) we have then decided the costs of the appeal;

(6) we have conducted the appeal as a rehearing on the materials before the Tribunal to determine whether the orders that are the subject of the appeal are the result of some legal, factual or discretionary error: Yuen v Thom [2016] NSWCATAP 243 at [14]- [22].

Part 6 Division 2 (ss 80-81) contains provisions dealing with internal appeals. An appeal against an internally appealable decision may be made in the case of any kind of decision (including an ancillary decision) other than an interlocutory decision as of right "on any question of law", or with the leave of the Appeal Panel, on any other grounds: s 80(1) and (2)(b) of the NCAT Act.
The circumstances in which the Appeal Panel may grant leave to appeal from decisions made in the Consumer and Commercial Division are where it is satisfied that the appellant may have suffered a substantial miscarriage of justice because the decision of the Tribunal under appeal was not fair and equitable, or the decision of the Tribunal under appeal was against the weight of evidence, or significant new evidence has arisen (being evidence that was not reasonably available at the time the proceedings under appeal were being dealt with): cl 12(1)(a), (b) and (c) of Sch 4 of the NCAT Act.
The Appeal Panel may make such orders as it considers appropriate in light of its decision on the appeal, including but not limited to any one or more of orders that the appeal is to be allowed or dismissed, and the decision under appeal is to be set aside and for another decision to be substituted for it: s 81(1)(a) and (d) of the NCAT Act.

Question of law within s 80(2)(b) of the NCAT Act

In Unique Commercial Group Pty Ltd v Cusumano [2024] NSWCATAP 204 (Unique Commercial Group) at [25]-[40], the Appeal Panel considered the nature of a question of law within s 80(2)(b) of the NCAT Act.
Errors in the exercise of a discretion identified are capable also of being agitated on appeal restricted to a question of law. Thus, if it was apparent that the court or tribunal had acted on a "wrong principle", then the question of law would be whether that principle was wrong or correct and, if wrong, whether the trial judge acted on that principle and whether that materially affected the outcome. The position is less straightforward if it is only demonstrated that the lower court or tribunal failed to take into account some material consideration, or allowed extraneous or irrelevant material to guide it. In such a case the reviewing court or appeal panel would have to consider whether it could be inferred from that circumstance that the lower court or tribunal acted on an incorrect principle: Bimson, Roads & Maritime at [48]-[49].

In Collins, the Appeal Panel at [76] stated that a substantial miscarriage of justice for the purposes of cl 12(1) of Sch 4 of the NCAT Act may have been suffered where:

"... there was a 'significant possibility' or a 'chance which was fairly open' that a different and more favourable result would have been achieved for the appellant had the relevant circumstance in para (a) or (b) not occurred or if the fresh evidence under para (c) had been before the Tribunal at first instance." (emphasis in original)

Even if an appellant from a decision of the Consumer and Commercial Division has satisfied the requirements of cl 12(1) of Sch 4 of the NCAT Act, the Appeal Panel must still consider whether it should exercise its discretion to grant leave to appeal under s 80(2)(b) of the NCAT Act.
In Collins, the Appeal Panel at [84] set out the general principles which govern the granting of leave to appeal. These general principles were recently summarised by the New South Wales Court of Appeal in Maclean v Brylewski [2023] NSWCA 173 (Maclean) at [24] (Ward P and Simpson AJA):

"[24] It is not disputed that leave to appeal is necessary. In determining whether leave to appeal should be granted, something more must be demonstrated than that the primary judge's decision was arguably wrong. What is ordinarily required to be demonstrated is that the matter involves a question of principle or of public importance or an injustice which is reasonably clear in the sense of going beyond what is merely arguable. Moreover, where, as here, the decision the subject of the application for leave to appeal involves an exercise of discretion, what is required to be demonstrated is error in the House v The King sense." (citations omitted)

We note that Appeal Panels have taken a range of approaches to the interpretation and application of s 80(2)(b) and cl 12 of Sch 4 of the NCAT Act. In some cases, the reasons for leave to appeal within cl 12 were treated as the grounds, and in other cases, they were treated as hurdles for leave to appeal on the grounds already identified by the appellant in the notice of appeal: Impala Kitchens Pty Ltd v O'Donoghue [2025] NSWCATAP 49 (Impala Kitchens) at [67].

The factual background against which the appeal arises is as follows:
On 22 September 2016, the Homeowners entered into the Contract with the Builder for him to perform residential building work at the Homeowners' property situated at Blakehurst, New South Wales. The Contract was written. It was in the standard form recommended by NSW Fair Trading for home building work valued at over $20,000.00. The Contract consisted of clauses 1 - 30 and the specifications, plans and other documents identified in clause 1 of the Contract also formed part of the Contract.
The Contract price, was identified on page 2 of the Contract as $770,000.00 ("the contract price"). The "price details" were part of the Contract (clause 1) and clause 12 of the Contract identified $770,000.00 as the "contract sum." The contract price was subject to certain adjustments in accordance with certain provisions in the Contract. The work under the Contract was to be commenced within 5 days of the signing of the Contract and was to be completed within 26 weeks (clauses 5 and 6, but subject to certain extensions of time as permitted under clause 7 of the Contract).
Clause 10 in the Contract dealt with "Provisional Sums." The clause included a provisional sums schedule. Items of work were recorded - written by hand - in the schedule and the provisional sum for each item of work was indicated in the schedule. No total was included in the schedule. The printed form of clause 10 in the Contract provided "(If space is insufficient, attach a sheet referring to this schedule)." Immediately under that text, handwritten words appear "As per attached list." If the actual cost to the Builder of a provisional sum item was greater than the cost allowed for the item, the clause envisaged that a contractor's margin might be added on the excess. However, no amount for a contractor's margin was identified in clause 10. If the actual cost to the Builder of a provisional sum item was greater than the cost allowed for the item, the clause provided for the excess amount and GST to be added to the "contract price". The clause also dealt with the situation where the actual cost to the Builder of a provisional sum item was less than the cost allowed for the item.
Clause 11 in the Contract dealt with "Prime cost items schedule." The clause permitted there to be an amount added to the "contract price" or reduced from the "contract price", depending on whether or not the actual cost to the contractor was greater or less than the amount allowed for each prime cost item. If the actual cost to the Builder of a prime cost item was greater than the cost allowed for the item, the clause envisaged that a contractor's margin might be added on the excess. However, no amount for a contractor's margin was identified in clause 11. If the actual cost to the Builder of a prime cost item was greater than the cost allowed for the item, the clause provided for the excess amount and GST to be added to the "contract price". The clause also dealt with the situation where the actual cost to the Builder of a prime cost item was less than the cost allowed for the item.
Clause 11 included a prime cost items schedule. Seven items were recorded - written by hand - in the schedule and the prime cost amount for each item was indicated in the schedule. A total was included in the schedule.
Clause 11 also included the text: "The contractor must provide a copy of any relevant invoice, receipt or other document evidencing the actual cost of the work included in the provisional sums schedule at the time payment is requested."
The Court Book ("CB") used during the appeal includes a document (see CB at p. 189) headed "Schedule of PS & PS [sic] items all inclusive of GST" and "updated 1/9/2016." The schedule lists a number of items. The schedule identifies which of these items are to be 'supplied' and which of the items are to be 'supplied and fixed'. Numerical amounts are identified for each item and the item is identified as either a "PS" item or a "PC" item. We note that the "Schedule of PS & PS [sic] items all inclusive of GST" contains provisional sum items which were not listed in the schedule which appears within clause 10 in the Contract. The "Schedule of PS & PS [sic] items all inclusive of GST" records $200,950.00 as the total cost of PS items inclusive of GST. The schedule records $48,000.00 as the total cost of PC items inclusive of GST. The total of the PS and PC items was $248,950.00.
Clause 13 in the Contract dealt with the procedure for making variations to the Contract and how variations could be deleted from, or added to the Contract price, as the case may be. The clause also dealt with the right to terminate the Contract arising from some types of variations.
Clause 25 in the Contract dealt with termination of the Contract by the Homeowner due to the fault of the Homeowner. One of the paragraphs within clause 25 provided:

"If the reasonable cost of completion of the work exceeds that which would have otherwise been due under the contract the difference will be a debt payable by the contractor to the owner. Should the reasonable cost of completion be less than otherwise due under the contract the difference will be a debt payable to the contractor."

Clause 30 in the Contract provided that in the general conditions of the Contract "[t]he rights, powers and remedies provided in this contract are cumulative with, and are not exclusive of, the rights."
As to the performance of the Contract, the Builder commenced work under the Contract but in about August 2017, the Builder stopped performing work under the Contract. The Builder did not complete the works required by the Contract.
There were three variations to the Contract which were agreed by the Homeowner and the Builder. The Appeal Panel understands that these variations were variations of the Contract that complied with clause 13 in the Contract. The total value of the variations was $41,124.88, according to the Builder's appeal submissions. The submissions for the Homeowners (at [40.c]) suggest that $37,672.90 was paid by them for the variations.
In addition to the variations referred to in the preceding paragraph of these reasons for decision, the Builder claimed that there were additional building works provided by him to the Homeowners on a "quantum meruit" basis. The Builder claimed that the total of these "quantum meruit" works was $42,967.00, including builder's margin and GST.
The Homeowners paid the Builder $714,672.00, according to the Builder's submissions, or $714,764.00, according to the Homeowners' submissions.
On 5 February 2019, the solicitors for the Homeowners wrote to the Builder. The letter outlined the Homeowners' complaints about the Builder's performance of the Contract. One of the paragraphs in the letter stated:

"Pursuant to clause 25 of the Building Contract our client is entitled to terminate the Contract on the basis that you are unable or unwilling to complete the work or have abandoned the work. Also, that you have suspended the work before completion without reasonable cause and that you have breached your obligations under the Contract in that you have failed to complete the work or act reasonably or responsibly so as to complete the work."

On 26 February 2019, the Homeowners terminated the Contract. There was a letter from the Homeowners' solicitor to the Builder. The letter referred to the letter dated 5 February 2019 and to clause 25 in the Contract. The letter dated 26 February 2019 further stated:

"You are also notified that you will be liable to pay our clients damages pursuant to your breach of the Building Contract which will include the cost of engaging another builder to complete the Works in accordance with the Building Contract entered into by you together with other heads of damage set out in items 2-7 inclusive of the Notice to Rectify."

The letter dated 26 February 2019 attached a two page document headed "Notice of Termination of Building Contract." The notice of termination of building contract advised "TAKE NOTICE that [the Homeowners] of ... Blakehurst NSW ... hereby give formal notice of termination of Building Contract entered on 22 September 2016 pursuant to provisions of clause 25 thereof on the following grounds ..." The notice of termination of building contract then advised "FURTHER TAKE NOTICE that Macey will exercise their rights to institute legal proceedings against you for the reasonable cost of completion of the building works together with the additional heads of compensation set out below as a debt payable by you as contractor to Macey as owner: ...".
On 2 May 2019 David Swingler Building and Carpentry ("Swingler") provided the Homeowners with a quotation for building works relating to the Homeowners' dwelling. The quotation quoted a price of $489,337.00 for the works identified in it. The quotation refers to a scope of works dated 29 April 2019 and prepared by Swingler.
On 15 May 2019, the Homeowners made a contract with Swingler ("the Swingler contract"). The Swingler contract was written. It was in the standard form recommended by NSW Fair Trading for home building work valued at over $20,000.00. The contract price was $489,337.00, subject to variations and adjustments made in accordance with the contract's terms. The Swingler contract (at clause 1) identified, amongst other things, (a) the scope of works dated 29 April 2019, (b) the quotation dated 2 May 2019, and (c) a three page "Schedule of finishes/items provided by Owner", as parts of the Swingler contract.
Clause 10 in the Swingler contract dealt with provisional sums. The provisional sums schedule, contained in clause 10, recorded "as per attached quote." The 2 May 2019 quotation identified provisional sum allowances for five categories of items, the prices for each category, and a provisional sum total of $26,997.00.
Clause 10 in the Swingler contract provided that if the actual cost to the contractor is greater than the provisional sum allowed, the excess amount together with the contractor's margin of 10% on the excess shall be added to the contract price, along with the additional GST. The clause also deals with what happens if the actual cost to the contractor is less than the provisional sum allowed.
Clause 11 in the Swingler contract dealt with prime cost items. The prime cost items schedule, contained in clause 11, recorded "see attached quote." The 2 May 2019 quotation, under the heading "Quotes provided by the Owner included in the contract" identified nine items, the price for each and a total of $137,703.12. The "Schedule of finishes/items provided by Owner" then provides further details about the nine items, including which of the items has been supplied by the Homeowners or "included in Fixed Price Contract."
Clause 11 in the Swingler contract provided that if the actual cost to the contractor is greater than the prime cost amount allowed, the excess amount together with the contractor's margin of 10% on the excess shall be added to the contract price, along with the additional GST. The clause also deals with what happens if the actual cost to the contractor is less than the prime cost amount allowed.
The scope of works undertaken under the Swingler contract included "Remedial work - Complete rectification works as listed in the quote." The 2 May 2019 quotation identified an "allowance of $12,685.00" for rectification work and identified eight items of work under the heading "rectification allowances."
The scope of works undertaken under the Swingler contract also included work that was outside the scope of the Contract. The Builder's expert witness, Mr. Jamison, valued these additional works at $42,873.00.
Swingler completed the works the subject of the Swingler contract.
There was no evidence before the Tribunal of the actual cost of the amounts that had been the subject of: (a) the provisional sum estimates in the Swingler contract, and (b) the PC items in the Swingler contract. There was evidence of quotations for both the provisional sum and PC items in the Swingler contract.
The Homeowners paid Swingler $471,511.50. The evidence, as we understand it, was that the lender of the funds for the Homeowners' building project had imposed a restriction which meant that no more than $471,511.50 could be paid by the Homeowners to Swingler pursuant to the Swingler contract. The Homeowners themselves then also paid a further $34,531.90 for work which fell within both the Contract and the Swingler contract.
The Homeowners incurred storage costs of $19,719.00 because the Contract was not completed by the time stipulated in the Contract.
The Homeowners also submit that they paid $2,605.90 for a painting invoice. They submit that the invoice had been issued to the Builder but was paid by the Homeowners.

The hearing before the Tribunal following the remittal from the Supreme Court

The Homeowners sought damages of $416,508.40 at the hearing before the Tribunal on 16 and 17 October 2023. The Homeowners were represented by Mr. Hyde of counsel. The Homeowners relied on three affidavits from David Macey, who is one of the Homeowners: see [48] in the Tribunal's decision dated 29 August 2024.
In one of Mr. Macey's affidavits, being the affidavit affirmed on 5 May 2023, he stated that he had prepared the affidavit "in response to the Respondent's Bundle comprising Contract Reconciliation, quantum meruit claim; and Betterment claim as comprised in the Respondent's Court Book Volume 1." In paragraph 6 of the affidavit he explains that he conducted a review of the Builder's submission and evidence. He said "In doing so, I have reviewed each item listed in the Quantum Meruit Variation Schedule ... In each case I have designated either agreement with the item and sum claimed; agreement with the item claimed but with a variation to the agreed amount giving reasons as to why that amount should be varied; my disagreement with the item as being a valid claim providing my reasons supporting that agreement."
In paragraph 7 of his affidavit Mr. Macey says he has compromised some of the amounts "in order to settle ... as contemplated in the Directions Hearing before the Deputy President of the Tribunal held on 5 April 2023 and Order 3 made in the Tribunal on 5 April 2023."
In paragraph 8 of his affidavit, Mr. Macey gives further evidence about his review and then states "As a consequence of this review I have arrived at the following result which in summarised form is as follows:

Summary Amounts Claimed by Respondent v Agreed Amounts

Paragraph 9 in the affidavit then provides: "Annexed hereto and marked with the letter "A" is a spreadsheet setting out at section A) Further Quantum Meruit Variations Claimed by Respondent and my comments and response thereon."
Annexure A to the affidavit is a document headed "Further Quantum Meruit Variations Claimed by Respondent." The annexure is a table. The first column identifies items "QM1" through to "QM12." The next column gives a page reference. The third column gives a brief description of each item. The next column is headed "Agree Amount Claimed". The next column is "Disagree Amount Claimed" and the final column is "Comment/Reason for Disagreement." At the foot of the table, there is another small table headed "Quantum Meruit Variations Claimed and then two columns, one headed "Agree" and one "Disagree." The table records that $13,858.00 of the "quantum meruit variations claimed" are agreed and that there is disagreement over $20,816.00 of these claims.
Annexure C to the affidavit is a reconciliation schedule. The first row in the schedule records "Description: total value of Respondent's Quantum Meruit Claims Agreed Value: $13,858 Claimed Value: $34,675 Comment/Reason for disagreement: Quantum Meruit claims are reviewed above Part (A) returning a lower value of the Accepted Claims: $13858 (incl 10% margin)."
The Homeowners also relied upon an affidavit from a building consultant, who prepared a report and a Scott Schedule. The building consultant gave opinion evidence stating that there was defective building work which would cost $181,738.70 to rectify and there was incomplete building work which would cost $285,008.30 to complete.
The Builder was self-represented before the Tribunal at the hearing on 16 and 17 October 2023.
The evidence for the Builder comprised first, an undated affidavit from the Builder filed on 26 September 2023 which attached a bundle of documents and did not set out factual events. The Builder relied upon an affidavit and report from a building consultant, Mr. Hickey. The Builder relied upon an affidavit and report from a quantity surveyor, Mr. Jameison.
There was no cross-examination of either party's expert witnesses. The Builder's application to cross-examine the Homeowners' building consultant was rejected on the basis that he had not given appropriate written notice, as required by the Tribunal's pre-trial directions, for the attendance of the witness for cross-examination. The Homeowners' request for the Builder's building consultant to attend for cross-examination had not been made in accordance with the Tribunal's pre-trial directions and so he too was not cross-examined.
Mr. Bolger of counsel prepared written submissions on behalf of the Builder, pursuant to the submission timetable made by the Tribunal on 17 October 2023 after the hearing had concluded and the evidence from the parties had been adduced.

On 29 August 2024, the Tribunal published written reasons for its decision and ordered the Builder to pay the Homeowners $416,508.40. The Tribunal also made a costs order against the Builder.
In the 29 August 2024 decision, the Tribunal set out the procedural history of the dispute between the Builder and the Homeowners, explained the course of the hearing before the Tribunal, recorded the evidence relied upon by the parties, recorded the principal submissions of the parties and gave reasons for its orders.
The Tribunal found that there was "no doubt" that the Builder had repudiated the contract with the Homeowners as the Builder's works were significantly delayed. The Homeowners were justified in terminating the contract. The Tribunal found (at [132]) that the Homeowners lawfully terminated the contract, either by issuing a valid notice under the contract for the Builder's failure to complete the works within the contractually-stipulated time period or alternatively, by accepting the Builder's repudiation of the contract.
The Tribunal stated (at [133]):

"In circumstances where a residential building works contract is repudiated by a builder, the type of damages relevantly involve:

(1) The reasonable cost of rectifying existing defects;

(2) The increased cost of completing incomplete work.

(3) Any other loss caused by breach of contract, provided that loss is caused by the breach and not too remote from the breach, applying principles of remoteness in Hadley v Baxendale (1854) 9 Exch 341 at 354; 156 ER 145 at 151."

The Tribunal cited cases for the "well-established" legal principles to be applied when calculating damages for breach of contract.
At [137] in the decision, the Tribunal referred to quantum meruit principles.
The Tribunal stated that the Builder's documents that it had submitted failed to provide evidence sufficient to establish a quantum meruit claim (at [138]). The Tribunal identified that it could not take into account works provided under the Swingler contract that fell outside the scope of the contract between the Builder and the Homeowners (at [139] and [142]). The Tribunal identified that it had to take into account the three variations agreed to and paid to the Builder (at [142(2)].
The Tribunal stated (at [141]):

"The Tribunal is satisfied that the submissions of the applicant accurately reflect the documentary evidence in respect of what payments were made; when they were made; the amount paid; and what they were paid. The applicant provided supporting evidence, relevantly including the accounts, invoices and records provided by the applicant. The Tribunal accepts that evidence and its factual findings are the findings sought by the applicant. The respondent has failed to provide his own evidence of works done and payments made to him sufficient to cause the Tribunal not to accept the evidence of the applicant."

The Tribunal identified (at [144]) five methodological flaws in the Builder's approach to the assessment of the money payable by it to the Homeowners. The third flaw was described by the Tribunal as follows:

"(3) The calculation of 'adjustments for provisional sum and prime cost items' of $128,121.40 is not clearly explained and based on the evidence. In essence, the respondent submits that this is the amount that would have been adjusted for provisional sums and prime costs items in favour of the builder had the contract been completed. The evidence does not show that such an adjustment would have bene made in favour of the respondent."

The Tribunal found (at [146]) that the cost of rectification of defects and the increased cost of completing the work that the Builder would have performed if the contract were complied with was $396,789.40. The Tribunal found that the storage costs claimed by the Homeowners was a loss flowing naturally from the Builder's breach of the contract and was satisfied that the quantum of this head of loss was $19,719.00. Accordingly, the Tribunal was satisfied (at [148]) that the Builder should pay the Homeowners damages in the amount of $416,508.40.
The Tribunal ordered the Builder to pay the Homeowners' legal costs, having provided reasons for that order and making provision for any party to apply for a variation of the costs order.

At the appeal, the Builder relied upon an eighty-four paragraph written submission prepared by his counsel and counsel's oral submissions made at the appeal.
The Builder submits that the Homeowners' submissions at the trial stage before the Tribunal involved an error in arithmetic and that the Tribunal, in its reliance on the Homeowners' submissions, had repeated that error in arithmetic. The damages ordered by the Tribunal should be reduced by the amount of the error, being $24,193.60.
The Builder submits secondly that the Tribunal made an error in not referring to clause 25 in the contract: see ground 1 in the notice of appeal.
The Tribunal's statement as to the test for incomplete work in [133(2)] of its reasons - cited above at [68] in these reasons - was incorrect and at odds with clause 25 in the contract. By incorrectly assessing damages on the basis of the "increased cost of completing incomplete work", the Tribunal made an error of law by adopting a wrong principle of law and not applying clause 25 in the contract.
In applying clause 25, what the Tribunal should have done, so the Builder submits, was:
Calculate the 'reasonable cost to complete', being the amount required to complete the Building Works (incomplete work) if the Builder had performed the contract;
Calculate the amount "otherwise due" under the Contract being:
The adjusted contract sum (allowing for variations and any adjustment for PC or PS items),
Less the payment made; and
Reconciliation of the 'reasonable cost to complete' and the amount 'otherwise due.'
Thirdly, the Builder submits that the Tribunal erred in calculating the price for the building works undertaken by the Builder in that the Tribunal failed to adjust properly the prime cost and provisional sum items when calculating the price for the building works agreed to be undertaken by the Builder and/or the loss suffered by the Homeowners: see grounds 2 and 3 in the notice of appeal.
In developing this submission, the Builder refers to clauses 10 and 11 in the Swingler contract. The Builder submits that the items need to be adjusted to include the 10% builder's margin. The Builder submits that one must first deduct GST ($12,518.47), add builder's margin ($12,518.47), which comes to $137,703.12, and then add GST ($13,770.31) to provide a total of $151,473.43.
The Builder includes at [57] in its written submissions a schedule or table. This schedule or table had been included in the Builder's closing submissions relied upon previously at the trial stage. The table is constituted by six columns. The first column in the table, under the heading "Description" identifies items of work (a) through to (s). The items of work include, for example, "electrical", "power pole & underground mains" or "plumbing." The second column in the table, under the heading "building contract allowance", identifies the cost paid by the Homeowners to the Builder against each of the items of work identified in the first column.
The third column should have been headed, (as explained in the oral submissions on the appeal), 'cost paid by the Homeowners to the Builder'. A dollar amount is included in the column against eight of the items of work.
The fourth column is headed "quote from applicants to complete." In respect of eleven of the items, a dollar amount (or amounts) is included in the column against the relevant item of work. In respect of another three of the items, included in the column is the statement "Respondent completed." For another three of the items, included in the column is the statement "cost to complete not known."
The fifth column is headed "Difference from Building Contract" and indicates that the table consists of a dollar figure recorded against each of the items of work. The dollar figure has been calculated by adding the figure in the third column ('cost paid by the Homeowners to the Builder') to the figure in the fourth column "quote from applicants to complete") and then subtracting the figure in the first column ("building contract allowance"). The sixth column in the table sets out references relied upon by the Builder when inserting figures into the table.
The table includes at its foot various totals. The table states that the total of the figures that appear in the second column ("building contract allowance") is $248,950. The table states that the total of the figures that appear in the third column ('cost paid by the Homeowners to the Builder') is $122,013.39. There is no total for the fourth column. The table states that the total of the figures that appears in the fifth column ('difference from building contract') is $116,474. To that figure is added $11,647.40, which is stated in the table to be "Plus BM (10%) but not GST as already included." That leads to a final total in the "Difference from Building Contract" column of $128,121.40.
The Builder submits:

"The Respondents did not engage in this exercise which was essential for determining any loss or damage under the Building Contract as required by clause 25. The Tribunal recognised at [138] and [142(3)] of the Decision that it was required to engage in this task but it failed to do so. The tribunal merely adopted the Respondents methodology and calculation of damages which was flawed ... The failure was an error of law. ... The Tribunal ... criticises the Appellant's calculation of 'adjustments for provisional sum and prime cost items' finding they are not clearly explained and based on the evidence. Even if that was so, it does not excuse the Tribunal from engaging in the exercise."

The Builder submits (see ground 4 in the notice of appeal) that the Tribunal was wrong in finding that the Builder did not take account of the variations to the Contract when the Builder contended for the same amount (being $714,672) as the total amount paid by the Homeowners to the Builder quotations as contended for by the Homeowners. The Builder submits too that the criticisms by the Tribunal of the Builder's approach to the amount allowed in the damages calculation for rectification work was unfounded.
The Builder submits that the Tribunal's approach to the quantum meruit amount or claim by the Builder was wrong in circumstances where "the majority of the Appellant's Quantum Meruit claim was agreed or admitted by the Respondents in evidence": see ground 5 in the notice of appeal.
The Builder submits (see grounds 6, 7 and 8 in the notice of appeal) that, applying clause 25 in the Contract, the proper approach to calculating the amount due to the Homeowners, is to be derived as follows, first:

Plus adjustments for provisional sum and prime costs items

The Builder submits that the amount "otherwise due" under the Contract is:

The Builder then submits that the reasonable cost to complete should be $370,150, based on the Jamieson report. Subtracting $267,541 from $370,150 produces $102,609.00. That is the amount which the Builder states in its notice of appeal, as mentioned above, and submits, is the amount which the Tribunal should have ordered him to pay the Homeowners.
Ground 9 in the notice of appeal involves a submission that the Tribunal had failed to give adequate reasons to support its findings that the Homeowners had sustained a significantly greater loss than $102,609 and that the cost of rectifying defects and the increased cost of completing the work was $396,789.40.
The Builder submitted that if there were not errors of law in the Tribunal's decision, as contended for by him in his submissions, then leave to appeal should be granted.

The Homeowners relied upon the written outline of submissions prepared by their counsel and his oral submissions before the Appeal Panel.
The Homeowners accept (see [3] in the written submissions) that there was an error of arithmetic in its submissions at trial with respect to the damages they claimed. That error appears to have been repeated in the Tribunal's calculation of damages. The Homeowners accept that the money order made by the Tribunal in their favour should have been $392,314.80, rather than $416,508.40.
The Homeowners submit that the Tribunal correctly rejected the Builder's claim in quantum meruit. They say "there was no claim made by the Builder for quantum meruit and nor could there be in the circumstances of this case." They submit that the quantum meruit claim was based on a document, described as "R1" which was a document submitted at a previous hearing before the Tribunal. They say the majority of the quantum meruit claim was not admitted by them and that Mr. Macey, the Homeowners' witness who included in his evidence a calculation of the quantum meruit claim and what part of this claim was agreed or disputed, did not have expertise relevant to this issue.
As to the Tribunal's calculation of damages, the Homeowners make the following submissions. They accept that the Tribunal did not refer to clause 25 in the Contract but they submit that the Builder does not explain in his submissions how [133(2)] in the Tribunal's decision is incorrect and differs from clause 25 in the Contract. The Builder submits that the Tribunal's approach to the calculation of damages was "entirely orthodox and consistent with well-established legal principles." The Builder failed at the evidentiary level to establish that "he undertook or incurred the work referred to in the provisional sum and provisional [sic] cost schedule to the [Contract]."
Accepting the arithmetic error in the Tribunal's decision, the Homeowners submitted that the Tribunal otherwise correctly calculated the loss and damage suffered by the Homeowners as follows:

Reasonable cost to complete work under DeMarco Contract

Amount paid to Mr. Swingler under the Swingler Contract (being $471,511.50) less $16,285 (being the cost to fix defective work) less $42,873 (being the betterment value in the Swingler Contract as determined by the Appellant's expert Mr Jamison) see [22.g] above

Amount paid directly to contractors for work outside of the Swingler Contract but within the original contract scope

Contract sum of $770,000 less what had been paid $677,000 (other than amounts paid for agreed variations) see [40] above

The Homeowners submit that there was no error of law in the Tribunal's decision. Alternatively most of the grounds of appeal relied upon by the Builder involve mixed questions of fact and law and there is no basis for leave to appeal to be granted in this case.
In the submissions in reply from the Builder, the Builder made submissions clarifying how the grounds of appeal related to each other and submitting that the Homeowners' submissions had failed to engage, in any meaningful way, with the Builder's submissions.

The notice of appeal was lodged on 26 September 2024. The notice of appeal states the Builder received the decision under appeal on 28 August 2024.
The reply to appeal states that the Homeowners accept that the appeal was lodged within time.
Under cl 25(4)(c) of the Civil and Administrative Tribunal Rules 2014 the application should have been lodged within 28 days of the Builder receiving the Tribunal's decision. The notice of appeal was therefore lodged in time.

As mentioned above, the Homeowners accept that there was an error of arithmetic in the order made by the Tribunal, such that the money order in their favour should have been $392,314.80, rather than $416,508.40.
It is clear beyond argument that the Tribunal's arithmetic in the 29 August 2024 decision involved a factual error that was mistaken and against the weight of the evidence, such that there has been a miscarriage of justice in this respect, and in turn warranting a grant of leave to appeal in respect of this issue. We will make an order varying the amount of the money order made by the Tribunal against the Builder: ss. 80(2)(b) and 81(1)(b) and cl. 12(1)(b) of Sch 4 of the Civil and Administrative Tribunal Act 2013.

The common law action by which a claimant could recover a quantum meruit for services performed has a long history: Warbrook v Griffin [1609] EngR 38; (1609) 123 ER 927 and Rogers v Head (1610) 79 ER 226. The claim arises in the law of restitution and does not depend on the existence of a contractual promise: Pavey and Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221 at 266 per Dawson J.
Quantum meruit claims can pose difficult legal issues and evidentiary issues when they arise in the context of a claim in the Tribunal that has been made under the Home Building Act 1989 (NSW), particularly in cases where a homeowner has repudiated its contract with a builder: Mann v Paterson Constructions Pty Ltd [2019] HCA 32. But those types of issues did not arise for determination given the procedural history of these proceedings and the course of the evidence in this case. The affidavit affirmed on 5 May 2023 by one of the Homeowners, David Macey, was plainly, and expressly, made in response to the Builder's claim for quantum meruit: see [2] in the affidavit. The affidavit, at [8] and [9] therein and in the two tables that comprise annexures A and C to the affidavit, expressly agreed to $13,858.00 of the Builder's $34,675 claim in quantum meruit. Further, as was made clear by [7] in the affidavit, the Homeowners were agreeing to compromise part of the Builder's quantum meruit claim in response to the directions hearing on 5 April 2023 presided over by the Deputy President of the Tribunal and in response to order 3 of the Tribunal made on that occasion.
In our view, the Homeowners made an admission, in Mr. Macey's affidavit, that $13,858.00 of the Builder's quantum meruit claim was accepted. We further observe that the admission was made at a time when the Homeowners were legally represented. Moreover, the admission was made against the background of the Homeowners having the affidavit of Mr. Greg O'Mara, building consultant, dated 11 September 2019, that annexed an expert building report dated 10 August 2019 and a Scott Schedule dated 24 April 2019: see [49] in the Tribunal's decision dated 29 August 2024.
The Tribunal's finding (at (144(2)]) that the Builder "has not established any quantum meruit amount" involved an error of law (see State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in liq) [1999] HCA 3; (1999) 160 ALR 588 at [62] per Gaudron, Gummow and Hayne JJ). The finding failed to give attention to the Homeowner's evidence in Mr. Macey's affidavit admitting $13,858.00 of the Builder's $34,675 claim in quantum meruit.
We will make an order varying the amount of the money order made by the Tribunal against the Builder to account for the part of the quantum meruit claim admitted by the Homeowners. As for the balance of this claim, we agree that the Builder's evidence did not establish his claim for the balance.

The claim in contract - termination under the Contract or at common law?

It is often important, when assessing the consequences of a party terminating a building contract, to determine whether the termination of the contract was pursuant to a contractual power or was effected at common law. The position of the parties to the contract following a termination of the contract pursuant to a contractual power, may sometimes be the same as the position of the parties to the contract following a termination at common law, but may sometimes be divergent from the position of the parties to the contract following a termination at common law.
It is true, as confirmed by reading the Tribunal's decision dated 29 August 2024, as submitted by the Builder and accepted by the Homeowners, that the Tribunal's decision did not refer to the part of clause 25 in the Contract that the Builder submits should govern how the Homeowners' damages should be assessed. However, the submission does not take into account the Tribunal's finding (at [132]) that the Homeowners terminated the Contract, "either by way of the issue of a valid notice to terminate under the provisions of the contract ... or alternatively, by reason of the respondent repudiating the contract and the applicant accepting the repudiation and terminating the contract (DB Homes Australia Pty Ltd v Kes [2019] NSWCATAP 221 at [43]- [46])."
The Tribunal's finding at [132], including the references to DB Homes Australia Pty Ltd v Kes [2019] NSWCATAP 221 at [43]- [46], indicates that the Tribunal was of the view that the Homeowners had an entitlement lawfully to terminate the Contract, either pursuant to the Contract's own terms or at common law.
The reference by the Tribunal at [133] to 'contract is repudiated' and to Hadley v Baxendale (1854) 9 Exch 341 at 354; 156 ER 145 at 151, suggest that the Tribunal then proceeded to determine the Homeowners' contract claim on the basis that they had lawfully terminated the Contract at common law, and that common law principles were to be relied upon when assessing the Homeowners' damages.
Why that approach, (that is, to rely only upon common law principles when assessing the Homeowners' damages), was taken by the Tribunal was not explained in the decision, but it is clear that the Builder did not, in his notice of appeal, challenge the underlying finding made by the Tribunal at [132] that the Homeowners had lawfully terminated the Contract either pursuant to the Contract's own terms or at common law.
As for the evidence that was before the Tribunal, although the 5 February 2019 and the 26 February 2019 letters from the Homeowners' solicitors (including the notice of termination of building contract attached to the 26 February 2019 letter), did expressly cite and rely upon clause 25 in the Contract, in our view, the Homeowners did not confine themselves to termination pursuant to clause 25 of the Contract and rights only available under express terms of the Contract.
First, in the case of the letter dated 5 February 2019, the language and sentence structure of that letter suggests that the Homeowners were relying not just on express rights pursuant to the Contract but also rights at common law:

"Pursuant to clause 25 of the Building Contract our client is entitled to terminate the Contract on the basis that you are unable or unwilling to complete the work or have abandoned the work. Also, that you have suspended the work before completion without reasonable cause and that you have breached your obligations under the Contract in that you have failed to complete the work or act reasonably or responsibly so as to complete the work." (Emphasis added).

Secondly, in the case of the letter dated 26 February 2019, having made reference to clause 25, the Homeowners' solicitor then states:

"You are also notified that you will be liable to pay our clients damages pursuant to your breach of the Building Contract which will include the cost of engaging another builder to complete the Works in accordance with the Building Contract entered into by you together with other heads of damage set out in items 2-7 inclusive of the Notice to Rectify." (Emphasis added).

The structure and language of the notice of termination of building contract attached to the 26 February 2019 letter further supports that view. Having at first told the Builder to "TAKE NOTICE" of termination of the Contract pursuant to clause 25 in the Contract, the notice then tells the Builder "FURTHER TAKE NOTICE" that the Homeowners "will exercise their rights to initiate legal proceedings against you for the reasonable cost of completion of the building works together with the additional heads of compensation set out below ..." (Emphasis added).
It was open to the Homeowners to rely on clause 25 in the Contract but also upon their rights at common law, following a repudiation of the Contract, because clause 30 in the Contract provided that in the general conditions of the Contract "[t]he rights, powers and remedies provided in this contract are cumulative with, and are not exclusive of, the rights." The Contract therefore did not provide that the clause 25 in the Contract was the exclusive remedy for the Homeowners in the event of termination of the Contract for the Builder's breach. The Contract did not exclude the Homeowners from remedies available at common law following an act of repudiation.
Thus, the Tribunal's failure in the 29 August 2024 decision to refer to clause 25 in its reasons for decision does not necessarily involve an error of law on its part. The Tribunal had found that the Homeowners had a legal entitlement to terminate the Contract at common law. The evidence suggests that in terminating the Contract, the Homeowners did not confine themselves to their remedies available under the Contract. Accordingly, it was open to the Tribunal to determine the Homeowners' damages claim on the basis of common law principles applicable to the assessment of damages.
The question that then arises is whether or not the Homeowners' position with respect to the amount of any money order in their favour would be different if the amount of their claim was assessed under clause 25 of the Contract or at common law. If the position is different, the Appeal Panel can then assess whether the Tribunal's assumption that common law principles applicable to the assessment of damages should apply was material to the outcome, in the sense that the assumption could have affected the outcome: Bimson, Roads & Maritime Services v Damorange Pty Ltd [2014] NSWSC 734 (Bimson, Roads & Maritime) at [41] (Beech-Jones J).
Deciding this question brings into focus the Builder's submissions about how adjustments should have been made to the "contract price" to take account of prime cost items and provisional sums, when assessing the amount of the money order in favour of the Homeowners.

The contract - prime cost items and provisional sum items

It is often important, when assessing the consequences of a party terminating a building contract, to distinguish between, on the one hand, rights and liabilities of the parties which have accrued unconditionally at the time the termination took effect, and on the other hand, the consequences of termination for the parties' executory rights and obligations.
When a party to a contract (excluding certain types of contracts such as contracts for the sale of land), upon a breach by the other party of a condition of the contract, elects to treat the contract as no longer binding upon him or her, the contract is not rescinded from the beginning. Both parties are discharged from the further performance of the contract but rights are not divested or discharged which have already been unconditionally acquired. The contract is determined only insofar as it is executory: McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457; [1933] HCA 25 at 476-477 per Dixon J. For example, a claim that arises for breach of a warranty provided for in the contract, that arose under the contract and has been unconditionally acquired prior to the termination of the contract or has accrued at the time the contract is terminated, is a claim that subsists following termination. Such a claim can be relied upon after the contract is terminated, even if the holder of that claim was the party which repudiated the contract and the other party accepted the repudiation.
Rights to damages which exist at the time of termination of the contract and entitlements to recover as debts payments due under the contract which exist at the time of termination of the contract, can still be enforced: Heydon on Contract [24.490] and [24.500].
We consider first the 'prime costs' aspect of the Builder's submissions.
Building contracts traditionally allow the builder to be paid the 'prime cost', that is, the cost to it, of supplying certain items. However, there is no settled meaning of "prime cost" items and the meaning of the phrase must always be measured against the meaning attributed to it by the parties in their contract: see for example the approach taken in Gianacopoulos v DJJ Promotions Pty Ltd [2021] VSC 203.
Prime cost items were provided for in the Contract, as mentioned above, in clause 11. The terms of clause 11 to the Contract make it clear that the "contract price" is to be added to or reduced, as the case may be, only if the actual cost to the Builder is greater than or is less than the amount allowed in the prime cost schedule. Clause 11 in the Contract, by means of the prime costs schedule contained in clause 11, identified seven prime cost items. The schedule, generally speaking, is lacking in specifics. For instance, the first item is simply "windows" and the prime cost amount for the windows is given as "$37,000.00."
If it were the case that, at the time the Contract was terminated upon the Homeowners' acceptance of the Builder's repudiation, (a) the Builder had supplied to the Homeowners items that were contemplated by the prime costs schedule in item 11 in the Contract, and (b) the actual cost to the Builder was greater than the prime cost amount allowed for in the Contract, one can readily see how the Builder could make an argument - having regard to clause 11 of the Contract - that there should be an addition to the "contract price". That scenario, in turn, would have clear implications for an assessment of what debt is due under clause 25 of the Contract. That is because of the phrase "that which would have otherwise been due under the contract" that appears in the part of clause 25 that is the subject of the Builder's submissions on the appeal.
In the schedule or table that appears at [57] in the written submissions of the Builder, items (e), (j), (k), (m) and (p) appear to correspond to the prime cost items referred to in clause 11 in the Contract. The schedule or table that appears at [57] in the written submissions of the Builder, as we read it, accepts that the Builder did not supply any of items (j), (k), (m) and (p) in the schedule or table, that is because no figure appears against each of those relevant items in column 3 in the schedule or table. Indeed, the schedule or table suggests that either Swingler provided those items under the Swingler contract, or in the case of item (j), the bath was an item identified in the Swingler contract as an item to be supplied by the Homeowners themselves, we infer, as one of the "bathroom fittings" supplied by the Homeowners.
For prime cost items not supplied by the Builder, there is no basis for there to have been any adjustment to the "contract price" for the purposes of clause 11 and 25 in the Contract. Once the Contract was terminated, either under clause 25 of the Contract or at common law for the Builder's repudiation of the Contract that was accepted by the Homeowners, both parties were discharged from further performance of the Contract. Where the Builder did not supply a prime cost item prior to the termination of the Contract, he thereby had no accrued right to make any claim in respect of a prime cost item not supplied by him.
Following the termination of the Contract, the Contract did not provide any right to the Builder to claim that the "contract price" in the Contract would be adjusted, if and when the Homeowners ever entered into another contract with another builder, to complete the works left incomplete when the Contract was terminated, to the extent of any "excess amount" for the cost of prime cost items supplied by the new builder to the Homeowners.
Prime cost items that Swingler supplied to the Homeowners under the Swingler contract and any 10% builder's margin that Swingler was permitted to claim from the Homeowners in certain circumstances under clause 11 of the Swingler contract, were not amounts, for the purposes of clause 25 in the Contract, "which would have otherwise been due under the [C]ontract."
If the Homeowners, following termination of the Contract, did retain a new builder to complete the works the subject of the contract, and the completing works did involve the supply of prime cost items, then it may have been open to the Builder to submit that some or all of the prime cost items supplied after termination by the new builder involved an unreasonable or wanton expenditure by the Homeowners, that was not consistent with the Homeowners' so-called "duty" to mitigate their loss. However, no case of that nature was put by the Builder before the Tribunal at trial.
The Builder's schedule or table that appears at [57] in the written submissions, where it points to an increased cost in a prime cost item supplied by Swingler (because, in this case, the cost quoted in the relevant quotation was assumed to coincide with the actual cost of the relevant item, as we understand it) when compared to the item's cost in the Contract, is not accompanied by any evidence, or submission, that the cost of any of those prime cost items was in any way unreasonable or has been incurred by the Homeowners unreasonably.
As for the remaining item, item (e) in the schedule or table that appears at [57] in the written submissions of the Builder, the Builder's case is that he supplied this prime cost item. The schedule or table suggests that "windows/doors" ended up costing $51,396.00, rather than the $37,000.00 for "windows" estimated in clause 11 in the Contract. Thus, the one prime cost item that the Builder could potentially rely upon to argue for an amount to be added to the "contract price", for the purposes of clause 11 and 25 in the Contract, is the "windows" item.
We have had regard to the evidence relied upon by the Builder in support of item (e) in the schedule or table that appears at [57] in the written submissions of the Builder. The evidence includes the two invoices appearing at pp. 735 - 738 in the CB, and p. 42 from the affidavit of the Builder's building consultant, Mr. Hickey (see p. 699 in the CB). The invoices are for $45,358.99 and $2,362.00 and both include GST. The first invoice is dated 5 December 2016 and the second invoice is dated 3 August 2017. The second invoice is for a frame and angles. The invoices total $47,720.99. That total exceeds the $37,000.00 in the prime costs schedule for "windows" by $10,720.99. We note that the Builder is not entitled to charge any margin on the amount of any excess over the amount allowed for the prime cost item because clause 11 in the Contract did not identify any amount of contractor's margin payable by the Homeowners to the Builder.
We do not discern any error of law in the Tribunal's approach to the "windows" prime cost item. The Tribunal's broad conclusion at [144] that the prime costs adjustment claim was not clearly explained and based on the evidence was open to the Tribunal, in our view. We have limited confidence that the second invoice relates to the "windows" prime cost item referred to in the schedule in clause 11 in the Contract. We also have limited confidence that the first invoice relates to the "windows" prime cost item referred to in the schedule in clause 11 in the Contract, as there seems to be some suggestion by the building consultant Mr. Hickey that there was a variation to the windows that had been specified in the Contract. In any event, Mr. Hickey provided expert opinion evidence to the Tribunal. His expert report does not establish the underlying facts pertaining to what prime cost items were supplied by the Builder to the Homeowner for the purposes of clause 11 in the Contract.
The Tribunal's broad approach (see [144(3)] in the decision) to the Builder's calculation of adjustments for prime cost items, might, at its highest, involve a factual error by the Tribunal when considering the "windows" prime cost item, in that the evidence showed the Builder was entitled to claim $10,720.99 from the Homeowners in respect of this item, as an excess amount due to him under the Contract and an excess amount that should be added to the "contract price". If there were an error by the Tribunal when considering the "windows" prime cost item, it is not an error that in our view falls within cl 12(1)(a), (b) and (c) of Sch 4 of the Civil and Administrative Act. For the reasons explained in the preceding paragraph of these reasons, the prime costs adjustment claim was not clearly explained and based on the evidence. We are therefore not satisfied that the Builder suffered a substantial miscarriage of justice. We are not satisfied that the Tribunal's rejection of any adjustment to the damages claim based on this item was either not fair and equitable, nor against the weight of evidence.
Hence analysis of the Builder's claim for an adjustment of the "contract price" in the Contract, in the context of the prime cost items supplied by him, does not suggest that the Tribunal failed to reach, but should have reached, an alternative conclusion on the adjusted "contract price" that would have been more favourable to the Builder.
Prime costs items supplied by Swingler under the Swingler contract, together with the margin that Swingler was permitted to charge in certain cases, are not amounts "which would have otherwise been due under the contract" for the purposes of cl. 25 in the Contract. With respect to the prime cost items, the Builder has not established that the Tribunal, applying cl. 25 of the Contract, would have reached a different assessment of damages to the assessment it reached applying common law principles: Bimson, supra, at [41].
We consider next the 'provisional sums' aspect of the Builder's submissions.
"Provisional sums" have been described by May LJ in Midland Expressway Ltd v Carrillion Construction Ltd (2006) 107 Con LR 235 as follows:

"The term 'provisional sum' is generally well understood in the construction industry. It is used in pricing construction contracts to refer either to work which is truly provisional, in the sense that it may or may not be carried out at all, or to work whose content is undefined, so that the parties decide not to try and price it accurately when they enter into their contract. A provisional sum is usually included as a round figure guess. It is included mathematically in the original contract price but the parties do not expect the initial round figure to be paid without adjustment. The contract usually provides expressly how it is to be dealt with. ... In this general sense, the term 'provisional sum' is close to a term of art but its precise meaning and effect depends on the terms of the individual contract."

As we understand the schedule or table reproduced from the trial and appearing at [57] in the Builder's submissions, items (a), (b), (c), (d), (f), (g), (h), (i), (l), (n), (o), (q), (r) and (s) are submitted by the Builder to be provisional sum items which should lead to an adjustment of the "contract price".
Now for some of these items, as we understand the schedule or table, the Builder did not supply and install all of these items. The items in the schedule or table that constitute this category are: items (i), (l), (n), (o), (p), (q), (r) and (s). Accordingly, for the purposes of clause 10 in the Contract, the Builder did not incur any "actual cost" in relation to the items in this category, which could in turn have led to any adjustment of the "contract price", either by way of addition or subtraction from the "contract price". Even if it were the case that the Tribunal did not engage with the schedule or table appearing at [57] in the Builder's submissions in relation to these items, that lack of engagement had no impact on the Tribunal's damages calculation. That is because, as the schedule itself accepts, the Builder did not incur any "actual cost" in relation to provisional sum items (i), (l), (n), (o), (p), (q), (r) and (s).
As for the remaining items in the schedule or table appearing at [57] in the Builder's submissions, first, in the case of items (a), (c), (f), (g) and (h), the table suggests that the Builder did some work supplying and installing these provisional sum items, but the table itself suggest that the Builder accepts the "actual cost" to the Builder, for each of these provisional sum items, was less than the amount that had been allowed in the Contract for each of these provisional sums. Thus, in relation to these provisional sum items, the Builder's case does not establish, for the purposes of clause 10 in the Contract, that the "actual cost" to the Builder of these items was greater than the provisional sum allowed. There is therefore no "excess amount", with respect to these provisional sum items, which could cause an addition to the "contract price" when applying clause 10 in the Contract. The total of the items in respect of which the Builder's actual cost of supplying these provisional sum items, was less than the provisional sum allowed in the Contract for these items, comes to $52,379.13: comprising $1,400 (item (a) $10,000 - $8,600); $1,779.28 (item (c) $30,000 - $28,220.72); $27,775 (item (f) $31,500 - $3,725); $624.85 (item (g) $15,000.00 - $14,375.15); and $20,800 (item (h) $22,000 - $1,200).
Secondly, the schedule or table appearing at [57] in the Builder's submissions suggests that for two of the provisional sum items, being items (b) and (d), the actual cost to the Builder was greater than the provisional sum by $4,320.67 in the case of item (b) ($9,320.67 - $5,000.00) and by $4,551 in the case of item (d) ($19,551 - $15,000).
Thus, when we engage with the Builder's schedule or table, in the context of provisional sum items supplied by the Builder, the exercise tends to suggest that the "contract price" should be reduced, rather than increased.
Hence analysis of the Builder's claim for an adjustment of the "contract price" in the Contract, in the context of the provisional sum items supplied by him, does not suggest that the Tribunal failed to reach, but should have reached, an alternative conclusion on the adjusted "contract price" that would have been more favourable to the Builder.
In circumstances where the Homeowners, following termination of the Contract, retained a new builder to complete the works the subject of the contract, and the completing works did involve the supply, or further supply, of provisional sum items, then it may have been open to the Builder to submit that some or all of the provisional sum items supplied after termination by the new builder involved an unreasonable or wanton expenditure by the Homeowners, that was not consistent with the Homeowners' so-called "duty" to mitigate their loss. However, no case of that nature was put by the Builder before the Tribunal at trial.
The Builder's schedule or table that appears at [57] in the written submissions, where it points to an increased cost in a provisional sum item supplied and installed by Swingler, or supplied and installed in part by Swingler, was not accompanied by any evidence, or submission, that the cost (that is, in this case, the cost equated to the cost quoted in the relevant quotation) of any of those provisional sum items, when compared to the relevant amount allowed in the Contract, is in any way unreasonable or has been incurred by the Homeowners unreasonably.
Provisional sum items supplied by Swingler under the Swingler contract, together with the margin that Swingler was permitted to charge in certain cases, are not amounts "which would have otherwise been due under the contract" for the purposes of cl. 25 in the Contract. With respect to the provisional sum items, the Builder has not established that the Tribunal, applying cl. 25 of the Contract, would have reached a different assessment of damages to the assessment it reached applying common law principles: Bimson, supra, at [41].
In our view, therefore, the Builder's evidence failed to establish that had the Tribunal considered and applied clause 25, that that would have resulted in the Tribunal finding that the Builder should be obliged to pay the Homeowners only $102,609.00 in damages or an amount different to the amount of damages ordered by the Tribunal.

Conclusion and calculation comparing contract damages at common law with cl. 25 of the Contract

We will now set out our calculation of the amount due to the Homeowners arising from the Builder's breach of the Contract. We consider the position first, at common law.
In doing so, we remind ourselves of the principle that in an action for breach of contract brought by a homeowner against a builder, the proper measure of damages is the cost, in excess of any amount of the contract price unpaid, of reasonable and necessary work to make the building conform to the contract, together with any consequential losses served by the breach: Wabbits Pty Limited v Godfrey [2009] NSWSC 1299 at [101], citing Bellgrove v Eldridge (1954) 90 CLR 613; [1954] HCA 36 at 617-618. Thus, account must be made for any amount of the contract price that remains unpaid to the builder: see Wabbits, supra, at [109], citing Woodward Pty Ltd v Kelleher [1989] NSWCA 82.
Further, where work has been carried out and the actual cost is known, this provides sound evidence of the reasonable cost of the work to make the building conform to the contract and should ordinarily provide the basis for damages: Wabbits, supra, at [106] citing Hyder Consulting (Australia) Pty Limited v Wilh Wilhelmsen Agency Pty Ltd (2002) 18 BCL 122 at 140 [99] per Giles JA, with whom Sheller JA agreed.
We note that the Builder had submitted that, based on Mr. Jamieson's assessment of the cost of completion of the works the subject of the Contract, that the reasonable cost to complete the works should be $370,150.00. We do not find that submission compelling, when measured against the authorities such as Hyder Consulting (Australia) Pty Ltd, supra. There was no submission at trial, as we understand it, that it was not reasonable for the Homeowners to have procured Swingler to complete the works that had been the subject of the Contract, or that Swingler conducted his work in an unreasonable fashion. As to the Tribunal's approach to this issue, as set out in the Tribunal's 29 August 2024 decision (see [144(5)] and [145] therein) with respect to this part of the damages assessment, it does not disclose any error of law, in our view.
Applying those principles, and the explanation we provided above of the difference between the accrued rights and the executory rights of counterparties when a contract is terminated, our calculation of the amount owed by the Builder to the Homeowners is as follows:

Add the reasonable cost of the work to make the building conform to the Contract

(The Swingler contract amount of $471,511.50 minus $42,873.00 for work that was done by Swingler outside the scope of the Contract minus $16,285.00 already counted above for Swingler's rectification of existing defects plus $34,531.90 paid by the Homeowners which could not be paid by the Homeowners to Swingler under the Swingler contract but which the Homeowners themselves paid).

("contract price" = $770,000 in the Contract plus $41,124.88 for variations in accordance with the Contract. Subtract total of the amount paid: $714,762.90 for the amount paid by the Homeowners, consisting of a deposit of $77,000 plus seven progress payments totalling $600,000 plus $37,672.90 paid for variations)

In reaching that conclusion, two of the variables in the calculation have given rise to some uncertainty. As we read the Tribunal's decision dated 29 August 2024, we cannot identify what conclusion the Tribunal reached on the total of the variations, the amount of them paid by the Homeowners and how any conclusion on these matters were reached by the Tribunal. We also note that the Homeowners have claimed $2,605.90 for a painting invoice, said to be, in the Homeowners' submissions on the appeal (at [22.i]), an invoice "which had been issued to the Appellant but the Respondents paid directly." But again, as we read the Tribunal's decision dated 29 August 2024, we cannot identify what conclusion the Tribunal reached on this issue and how the conclusion was reached.
We are mindful that when sitting as the Appeal Panel, we are permitted to conduct the appeal on the materials before the Tribunal. When we follow the evidentiary references at [17] in the Builder's submissions, we understand the basis for the Builder's submissions that the variations came to a total of $41,124.88. It is unclear to us why the Homeowners do not accept that total (assuming that they don't). It is clear from the Homeowners' submissions ([40.b]) that they accept that $37,672.90 was paid for the total of the variations. Accordingly, we have applied those figures in the calculation set out above.
As for the painting invoice referred to at [22(i)] in the Homeowners' submissions, we have looked at the paragraphs from the Tribunal's decision that have been cited at the conclusion of [22] in the Homeowners' submissions, but they do not include any findings by the Tribunal relating to this invoice. We are also unsure how or if this item relates to the "Painting Int/Ext" items that appeared in the "Schedule of PS and PS Items all inclusive of GST." We have decided not to allow for this invoice in the calculation since we are not satisfied that the Homeowners have discharged their onus of proof with respect to this item.
Turning then to consider the position under cl. 25 of the Contract, the evidence establishes that the reasonable cost to complete the work the subject of the Contract was $446,885.40, for the reasons explained above and set out above in the table which contains our calculations, but to that must be added back the cost of rectifying defects ($16,285.00) arising by reason of the Builder's breach of warranties implied into the Contract. That cost ($463,170.40) exceeds "that which would have otherwise been due under the contract" ($96,451.98) based on the findings we reached with respect to the Builder's prime costs adjustment claim and provisional sum adjustment claim, and for the reasons explained above and set out above in the table which contains our calculations. The difference of $366,718.42 is claimable by the Homeowners as a debt, pursuant to cl. 25 in the Contract. The storage costs of $19,719.00 is also claimable by the Homeowners as damages. That is because, as already explained above, even though consequential losses are not referred to in cl. 25 of the Contract, by reason of cl. 30 in the Contract, and that the fact that cl. 25 does not suggest it is the exclusive source of remedies available to the Homeowners in the event of a repudiation by the Builder of the Contract, in our view the evidence and the law supported the Tribunal's view in the 29 August 2024 decision that this head of damages was available to the Homeowners. This involves applying common law principles and recognising thereupon, that consequential losses served by the breach are recoverable: Wabbits Pty Limited v Godfrey [2009] NSWSC 1299 at [101], citing Bellgrove v Eldridge (1954) 90 CLR 613; [1954] HCA 36 at 617-618.
Thus, assessing the amount of any money order against the Builder, either, on the one hand, applying the common law approach to the assessment of damages or, on the other hand, applying cl. 25 of the Contract, together with the common law basis for the Homeowners to claim for consequential loss, we find that there would have been no difference to the calculation of the amount owed to the Homeowners. Thus, while the Tribunal did not apply cl. 25 of the Contract, that assumption was not material to the outcome in the sense that it could have affected the outcome.

Conclusion on the amount of the money order - contract and restitution

As found above, the Builder is entitled to $13,858.00, representing the admitted part of his quantum meruit claim. This amount should be subtracted from the amount payable by the Builder to the Homeowners under contract (either cl. 25 debt plus consequential losses, or applying only common law principles as to the assessment of damages in contract). The total then reached is $372,579.42.

At the conclusion of the hearing, we discussed with the parties the issue of costs, including whether we should determine the costs of the appeal or make procedural directions permitting the parties to apply to vary the costs order or determine the costs of the appeal separately after our decision. A specific focus of the submissions was whether any costs order should be made in the event that the appeal panel only allowed the appeal in part to reflect the arithmetic error in the calculation of damages. In our view the most efficient course, particularly in the light of the long history of the dispute between the Homeowners and the Builder, is for us to determine the issue of costs but make procedural directions permitting the parties to apply to vary the costs order.
Section 60 of the NCAT Act deals with costs, and relevantly provides:

60 Costs

(1) Each party to proceedings in the Tribunal is to pay the party's own costs.

(2) The Tribunal may award costs in relation to proceedings before it only if it is satisfied that there are special circumstances warranting an award of costs.

(3) In determining whether there are special circumstances warranting an award of costs, the Tribunal may have regard to the following -

(a) whether a party has conducted the proceedings in a way that unnecessarily disadvantaged another party to the proceedings,

(b) whether a party has been responsible for prolonging unreasonably the time taken to complete the proceedings,

(c) the relative strengths of the claims made by each of the parties, including whether a party has made a claim that has no tenable basis in fact or law,

(d) the nature and complexity of the proceedings,

(e) whether the proceedings were frivolous or vexatious or otherwise misconceived or lacking in substance,

(f) whether a party has refused or failed to comply with the duty imposed by section 36(3),

(g) any other matter that the Tribunal considers relevant.

(4) If costs are to be awarded by the Tribunal, the Tribunal may -

(a) determine by whom and to what extent costs are to be paid, and

(b) order costs to be assessed on the basis set out in the legal costs legislation (as defined in section 3A of the Legal Profession Uniform Law Application Act 2014) or on any other basis.

costs includes -

(a) ...

(b) the costs of, or incidental to, the proceedings giving rise to the application or appeal, as well as the costs of or incidental to the application or appeal.

Rule 38 of the Civil and Administrative Tribunal Rules 2014 (NSW) (NCAT Rules) deals with costs in the Consumer and Commercial Division of the Tribunal, and relevantly provides:

38 Costs in Consumer and Commercial Division of the Tribunal

(1) This rule applies to proceedings for the exercise of functions of the Tribunal that are allocated to the Consumer and Commercial Division of the Tribunal.

(2) Despite section 60 of the Act, the Tribunal may award costs in proceedings to which this rule applies even in the absence of special circumstances warranting such an award if -

...

(b) the amount claimed or in dispute in the proceedings is more than $30,000.

Rule 38A of the NCAT Rules deals with costs in internal appeals, and relevantly provides:

38A Costs in internal appeals

...

(2) Despite section 60 of the Act, the Appeal Panel for an internal appeal to which this rule applies must apply the first instance costs provisions when deciding whether to award costs in relation to the internal appeal.

For the purpose of r 38A of the NCAT Rules the amount claimed or in dispute is the amount in dispute on appeal, not the amount in dispute in the proceedings at first instance: Allen v TriCare (Hastings) Ltd [2017] NSWCATAP 25 at [57].
We are satisfied that r 38A(2) of the NCAT Rules is applicable to this appeal because the amount in dispute in the appeal is more than $30,000.
The general principles concerning the awarding of costs under r 38 of the NCAT Rules were considered by the Appeal Panel in Vella v Mir (No 3) [2020] NSWCATAP 17 (Vella (No 3)) at [28]-[33]:

"[28] Clause 38 gives the Tribunal a wide discretion to make an order for costs. It does not specify the factors the Tribunal must take into account in exercising the discretion, although the discretion to make such an order must be exercised judicially: see, for example, Ruddock v Vadarlis [2001] FCA 1865 at [9].

[29] Where an application has been heard and determined on the merits and Clause 38 applies, the appropriate starting point for the exercise of the discretion is not that the parties are to pay their own costs. Rather, it is the well-established position at common law; that is, that 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, this means that a party who is successful is entitled to an order for costs in its favour, subject to exceptions generally involving misconduct on the part of that party: Latoudis v Casey [1990] HCA 59; [1990] 170 CLR 534; Oshlak v Richmond River Council [1998] HCA 11.

[30] In BNT Constructions Pty Ltd v Allen [2017] NSWCATAP 186 the Appeal Panel, having set aside a costs order made in the Consumer and Commercial Division, decided to re-exercise the costs discretion. Clause 38 was the applicable costs provision in that case. At [67] the Appeal Panel noted the following principles relevant to the exercise of the discretion:

(1) the starting point is that a successful party should be entitled to an order for costs in his favour;

(2) an award of costs is by way of an indemnity and not as punishment;

(3) there is no absolute rule that, absent disentitling conduct, a successful party is to be compensated by the unsuccessful party;

(4) the factors to be considered are not to be confined as to do so would constrain the general discretion;

(5) the relative success of the parties on different issues and the time taken to determine them may be relevant;

(6) the nature of the proceedings is relevant;

(7) the proper exercise of the discretion requires a decision maker to do justice between the parties and to exercise the discretion having regard to relevant considerations and in a manner which is not arbitrary and capricious.

[31] Generally, costs are awarded in favour of the successful party based on the outcome of the proceedings as a whole, without differentiating between particular issues on which the party may not have been successful. That said, a different costs order may be made if the losing party succeeds on significant issues: James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [31]- [36]; Sydney Ferries v Morton (No 2) [2010] NSWCA 238 at [10]-[12]. The dollar amount of a particular claim does not determine its dominance in the proceedings. Rather, regard must be had to all of the work involved in prosecuting and defending the parties' various claims, including but not limited to the time taken up at the hearing.

[32] In Tomanovic v Global Mortgage Equity Corporation Pty Ltd (No 2) [2011] NSWCA 256; (2011) 288 ALR 385, Campbell JA (with Macfarlan JA and Young JA agreeing) held at [107] that an issue or group of issues is "clearly dominant" when it is clearly dominant in the proceedings as a whole. In that case, the approach by counsel to analysing the percentage of costs between the parties - counting the proportion of paragraphs and pages devoted to each factual topic - was held at [84] to be "a highly artificial way of proceeding" which gave "a false air of mathematical precision".

[33] In relation to separable issues, a successful party's entitlement to the whole of the costs of the proceedings should not be discounted to allow for another party's success in a separate issue that played a very minor part in the proceedings as a whole: Macourt v Clark (No 2) [2012] NSWCA 411 at [7]. Further, in Hawkesbury District Health Service Ltd v Chaker (No 2) [2011] NSWCA 30 at [14], the Court of Appeal held that the severability of one issue on which the successful party failed is not, without more, sufficient to warrant departure from the general approach. The exercise of discretion will often depend upon matters of impression and evaluation: Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373 at [11]."

In exercising our discretion on the costs, we recognise that the appeal gave rise to different issues:

(1) whether the Tribunal had erred when ascertaining the Homeowner's damages by not applying clause 25 in the Contract;

(2) whether the Tribunal had erred in rejecting the Builder's quantum meruit claim on the basis that there was no evidence in support of said claim when the Homeowners had agreed and accepted parts of the Builder's quantum meruit claim.

Counsel for the Builder did not suggest, in his oral submissions, that the error of arithmetic, as referred to above in these reasons for decision, gave rise to a separable issue for the purposes of determining costs. We agree.
Having regard to the principles in Vella (No 3) at [28]-[33], we are satisfied that the Homeowners were the successful party based on the outcome of the proceedings as a whole. However, taking into account the Builder's success on part of the quantum meruit claim, and being mindful that the dollar amount of particular claims is not the dominant consideration but rather, regard must be had to all of the work involved in prosecuting and defending the parties' various claims, we consider that a costs order that requires the Builder to pay 90% of the Homeowners' costs of the appeal, reflects the relative success of the parties on the issues in the proceedings before us.
We are satisfied that the Builder should pay 90% of the Homeowners' costs of the appeal pursuant to rr 38(1) and (2)(b) and 38A(2) of the NCAT Rules.
We will grant leave to the parties to make application to vary the costs order.
We make the following orders:

(1) The appeal is allowed in part.

(2) The date and amount of order 1 made on 29 August 2024 are varied such that:

The appellant (Godfrey DeMarco) is to pay the respondents (David and Debbie Macey) the sum of $372,579.42 immediately.

(4) The appellant is to pay 90% of the respondents' costs of the appeal, on the ordinary basis, as agreed or assessed.

(5) If any party wishes to make an application to vary order (4) above (the costs application):

(a) the applicant is to lodge and serve the costs application, submissions limited to three pages and any evidence in support within seven days of this decision;

(b) the respondent to the costs application is to lodge and serve any submissions limited to three pages and any evidence in response within 14 days of this decision;

(c) the applicant is to lodge and serve any submissions in reply limited to two pages within 21 days of this decision;

(d) the parties are to indicate in their submissions whether they consent to an order dispensing with an oral hearing of the costs application, and if they do not consent submissions of no more than one page as to why an oral hearing should be conducted rather than the costs application being determined on the papers. If a hearing is not dispensed with, the parties will be advised of a date for the hearing of the costs application.

I hereby certify that this is a true and accurate record of the reasons for decision of the New South Wales Civil and Administrative Tribunal.

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.

Administrative Tribunal Act 2013

Profession Uniform Law Application Act 2014

Administrative Tribunal Rules 2014

DeMarco v Macey

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (110 paragraphs)

Parties

Legislation Cited (4)

Cases Cited (6)

Cited By (2)