DSA Building Pty Ltd v Geronikos; Geronikos v DSA Building Pty Ltd [2016] NSWCATAP 187 | Case summary

Appellant's submissions

The appellant's submissions in support of the application for stay can be summarised as follows: 1. If a stay is not granted there will be an immediate financial impact upon the appellant. The applicant is not able to pay the amount of the award; 2. The applicant currently employs approximately eight contractors and if it is obliged to pay the judgement in full, it will be unable to meet its obligations to those contractors; 3. The orders, while not complied with have a "negative impact on the (appellant's) Home Warranty Insurance" because the appellant has received notice from its insurance brokers regarding the potential suspension of the insurance by reason of the suspension of the contractor licence pursuant to a notice issued under s 42A of the Home Building Act, 1989 (HB Act) by New South Wales Fair Trading dated 6 July 2016 proposing a suspension of the licence on or from 13 July 2016; 4. The appellant has a reasonably arguable grounds of appeal; 5. There is a cross appeal filed by the respondents and there is "a risk that the cross appeal… will prove abortive if the builder succeeds and a stay is not granted"; and 6. All orders should be stayed and the balance of convenience favours the grant of such a stay in the circumstance.
The evidence relied upon in support of the application for stay consists of the letter from New South Wales Fair Trading referred to above together with various financial information found in the folder marked "Appellant's Stay Application Bundle" and various evidence in the appellant's appeal bundle relating to factual matters which are the subject of this substantive appeal.
It should be noted in connection with the financial documents provided, that the accounts for the appellant only relate to the year ending 30 June 2015, as do the business activity statements. No accounts are provided for the year ending 30 June 2016 nor for the financial position of the company as at the date of this application. In relation to more recent financial information, all that is provided is a bank statement at 30 June 2016 for one of the bank accounts shown in the balance sheet of the appellant together with various invoices that are said to be payable by the appellant ranging in date from 5 February 2016 until 29 June 2016.
In relation to the documents provided in support of the substantive appeal, these documents include the expert reports which, in part, are relied upon by the appellants to demonstrate that the Tribunal was in error in calculating the award for damages found in par 84 of the Decision.

Consideration

The principles applicable to the grant of a stay pending appeal were considered by Wright J, the President of the Tribunal in Bentran Pty Ltd v Sabbarton [2014] NSWCATAP 37.
In that case His Honour referred to s 43(3) of the NCAT Act which provides that the Tribunal may make an "make such (whether with or without conditions) staying or otherwise affecting the operation of a decision to which a pending general application or appeal relates as it considers appropriate to secure the effectiveness of the determination of the application or appeal".
In relation to the principles applicable in deciding whether or not to grant the stay, His Honour said at [9]: 9. As a result of the use of "may" in s 43(3) of the Act, the Tribunal has a discretion whether or not to grant a stay. That discretion must be exercised judicially and general principles which apply in relation to the exercise of that discretion can be derived from the terms of s 43(3) itself. Additional guidance can be obtained from the considerations applied by the Courts in deciding whether or not to grant a stay pending an appeal. The applicable principles can be summarised as follows: (1) Generally a successful party is entitled to the benefit of the decision or orders that the party has obtained at first instance, but a stay may be granted where the appellant has demonstrated an appropriate case to warrant the exercise of discretion in its favour - s 43(2) and (3) of the Act, Kalafair Pty Limited v Digitec (Australia) Pty Limited (2002) 55 NSWLR 737 at [28], Mushroom Composters Pty Ltd v IS & DE Robertson Pty Ltd [2014] NSWCA 231 at [7]. (2) In practical effect the onus is on an applicant for a stay to make out a case that it is appropriate for the court to make such an order - Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685 at 694, Vaughan v Dawson [2008] NSWCA 169 at 16. (3) The mere lodgement of the notice of appeal is insufficient, of itself, to demonstrate that it is an appropriate case to warrant the granting of a stay - s 43(2) and (3) of the Act, Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685 at 694, Mushroom Composters Pty Ltd v IS & DE Robertson Pty Ltd [2014] NSWCA 231 at [7]. (4) An order staying the operation of a decision or orders will generally be appropriate where such an order is reasonably necessary to secure the effectiveness of the appeal - s 43(3) of the Act. This is similar to, if not the same as, the considerations applied by the Courts that where there is a risk that an appeal will prove abortive if the appellant succeeds and a stay is not granted or where unless a stay is granted an appeal will be rendered nugatory, the discretion should generally be exercised in favour of granting a stay - Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685 at 695. (5) The Tribunal may also take into account the strength or otherwise of the case of the party seeking the stay. This consideration may be particularly relevant when it is plain that an appeal, which does not require leave, has been lodged without any real prospects of success and simply in the hope of gaining a respite against immediate execution of the decision - Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685 at 695. (6) The Tribunal's power to grant a stay includes a power to make such an order subject to such conditions as the Tribunal specifies - ss 43(3) and 58 of the Act. (7) In exercising the discretion the Tribunal will also weigh the balance of convenience and the competing rights of the parties and may impose appropriate conditions so as to achieve a result that is fair to all parties - Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685 at 694, Mushroom Composters Pty Ltd v IS & DE Robertson Pty Ltd [2014] NSWCA 231 at [21] and [22]. (8) Finally, the overriding principle in an application for a stay is to ask what the interests of justice require - New South Wales Bar Association v Stevens [2003] NSWCA 95 at [83] and Penrith Whitewater Stadium Ltd v Lesvos Pty Ltd [2007] NSWCA 103 at [18].
As indicated above, the grounds of appeal raise issues concerning: 1. The calculation of damages awarded in the Decision at par 84; 2. The appellant being denied an opportunity to present evidence concerning the award made for liquidated damages; and 3. The decision of the Tribunal being against the weight of evidence.
The appellant has provided an outline of submissions on appeal dated 25 July 2016. In those submissions the appellant contends the Tribunal should make the following orders: 1. Appeal Allowed 2. That orders made on 11 May 2016 in HB 15/49223 and notified to the Appellant on 17 May 2016, be set aside 3. Judgment for the appellant in these proceedings (appeal) with the maximum award for the respondent being $13,340.40 that includes a nominal sum for liquidated damages, or in the alternative 4. That the proceedings be remitted for rehearing and determined according to law; 5. The respondents to pay the costs of the appeal; and 6. Such further or other order as the Tribunal deems fit.
As can be seen from these orders, the appellant says that the maximum amount of the respondents award should be $13,340.40 which includes "a nominal sum for liquidated damages" or that the proceedings be remitted for rehearing and determination according to law.
As stated at par 47 of the appellant's submission in support of the appeal, the amount of $13,340.40 constitutes an adjustment to the award in par 84 of the Decision from $36,841.36 to a corrected amount of $16,340.40 (as calculated in par 45 of the submissions), less an amount of $3,000.00 in respect of item D3 - water entering garage, an amount that was not allowed having regard to the reasons at par 85 of the Decision.
In effect, the appellant's submissions is that the "correct award" of the Tribunal was for $13,340.40 only, with no allowance for item D3 - water entering the garage and no allowance for liquidated damages.
In relation to the liquidated damages claim, the appellant's submissions in support of the appeal refer to the various evidence before the Tribunal and make submissions concerning the Tribunal's failure to take account of this evidence in determining what, if any, liability the appellant had for liquidated damages under the contract in the circumstances which occurred.
It is in this context that the Appeal Panel must consider the application for stay.
The appellant is seeking relief from an obligation to pay any amount of money to the respondents although it appears to concede that an amount of $13,340.40 is payable in any event. The question is whether, in the present case, a stay in the form proposed should be granted or some alternative order made.
It seems reasonably clear having regard to the orders sought by the appellant on appeal that there is no basis to delay the payment of an amount of $13,340.40 being that part of an award made in favour of the respondents which the appellant concedes is payable. The question is whether or not the difference between this sum and the amount of $36,841.86 as found by the Tribunal in par 84 of the Decision should be paid.
The second question is whether or not the amount of $41,000.00 for liquidated damages should also be paid pending a determination of the appeal on the basis that it will be repayable if the appeal is successful.
A review of the evidence reveals the following:
The appellant has not provided any up to date financial accounts including profits and loss statements or balance sheets for the company. The financial accounts provided in connection with the years ending June 2014 and June 2015 shows that the company has incurred substantial losses in each of these years. Despite these losses there is no explanation as to how the company has been able to fund its ongoing business activities and, more particularly, how the company has been able to fund its business activities from 1 July 2015 onwards. However, what is clear is that the company has been able to do so. In the absence of adequate explanation as to the company's financial position the Appeal Panel is unable to be satisfied that a requirement to pay the amount of the award would mean that in the absence of the stay the appellant would be unable to pay its debts as and when they fell due, insolvent and/or unable to prosecute its appeal.
While it is common ground in the appeal that the respondents will have the benefit of homeowners warranty insurance, and therefore might be protected in the event of insolvency, the absence of a demonstrated incapacity to pay the amount of the award pending a determination of the appeal is a matter which counts against the appellant in the grant of a stay. In reaching this conclusion the Appeal Panel has considered the Westpac account as at 30 June 2016 which records a closing balance of $13,709.72 (see Appellant's Stay Application Bundle Tab 2C). The Appeal Panel has also had regard to the various invoices set out behind Tab 2 of that bundle. The bank statements and invoices show that some at least some of those creditors who are providing services to the appellant continue to be paid amounts due to them: see for example Tab 2K - B- Seal Joint-Sealing and waterproofing specialist. This evidence suggests that not only can these accounts be paid on a timely basis but also there is cash from which the present award could be paid (at least in part).
There are several matters which count in favour of the grant of a stay.
Firstly, the evidence contained in Appellant's Appeal Bundle, being the expert evidence of the respondents provided at the original hearing, suggests that the award of $36,841.86 in par 84 of the Decision is incorrect. This is because that award includes an amount for item D2 - plain concrete steps left side of boundary in an amount of $16,470.00 whereas the document identified as the respondents' Scott Schedule in respect of Item 2 - plain concrete steps to left hand side of boundary (Appellant's Appeal Bundle page 528) suggests that the actual amount to rectify the defect claimed by the respondents was only $3,779.82.
In the stay application, the respondents did not address this issue, having made the submission that the question of prospects of success on the appeal did not arise having regard to the failure of the appellant to properly support its stay application with relevant evidence.
Based on the material available to the Appeal Panel for the purposes of determine the stay application, the evidence to which we have been referred suggests there are strong prospects of success on appeal and that an error has been made in par 84 of the Decision in determining damages for defective work, the consequence of which would mean that award for defective work is substantial overstated.
Secondly, the respondents said in submissions that they require the amount of the award in order to carry out repairs to the premises and that the premises are suffering ongoing degradation by reason of water ingress, particularly in the area of the garage. This submission suggests that, without payment of the award the respondents are unable to affect these repairs. This submission also suggests that if the monies are paid pending a determination of the appeal they will not be able to be repaid, having been spent on repairs.
In relation to the repairs identified by the respondents as requiring urgent rectification, these appear to be in respect of water entering the garage. The problem for the respondents is that the claim in respect of water entering the garage was a claim rejected by the Tribunal at par 85 of the Decision. That is the award made by the Tribunal does not include an allowance for the cost of rectifying this defect.
While the respondents' cross appeal may lead to a different award in respect of this item, a matter not presently necessary for the Appeal Panel to determine for the purpose of this application, the fact that the monies, if paid, may be unrecoverable or only repayable after an appropriate enforcement proceedings are taken is a matter which counts in favour of the grant of a stay.
The next matter to consider is the claim for liquidated damages. An award was made for $41,000.00, significantly less than the amount claimed by the respondents. However, the appellant says that no award should have been made because the delays which did occur arose from the conduct of the respondents and are not matters properly attributable to the appellant for which it is liable under the contract. It should be remembered that in making this submission it would appear from the Decision that the project was approximately twelve months late at the time of termination of the contract.
While the appellant may have an arguable case in relation to the question of which party was the cause of the delay, having regard to the Appeal Panel's determination concerning the financial capacity of the appellant, this fact alone does not warrant the grant of a stay of that part of the award relating to liquidated damages. On the other hand, the Appeal Panel is satisfied that if this part of the award is paid to the respondents, it might well be spent on carrying out repairs to the premises and, if the appeal is successful, the appellant may be placed in a position of having to take further recovery proceedings because the respondents might be otherwise unable to repair the amount of liquidated damages to the appellant if it is successful in its appeal.
The final matter to consider is the fact of the cross appeal. Neither party made any submissions concerning the substance of the cross appeal as opposed to the fact that it had been lodged. Sometimes it is appropriate where both parties seek to appeal a decision that a stay be granted of the original orders. In the present case the "cross appeal" of the respondents seeks to increase the amount of the award in their favour. On the other hand, the appellant appears to concede by the orders sought in the present appeal that at least some monies are payable to the respondents arising from the appellant's breach of contract or breach of statutory warranties in connection with residential building work.
In these circumstances, the fact of the cross appeal neither favours nor counts against the grant of a stay.
As indicated in Bentran Pty Ltd v Sabbarton, the ultimate question is to determine what the interests of justice require.
This is a difficult question where, prima facie, an error in the Tribunal's award at par 84 has been demonstrated and where, if all monies are paid to the respondents there is a risk that they will not be repaid in the event that the Tribunal's award is set aside, and varied to the amount propounded in the orders sought on appeal.
Weighing up the matters to which the Appeal Panel has referred to above, the Appeal Panel is satisfied that a stay should be granted to a limited extent and on conditions. The effect of the orders should be that the respondents should be entitled to be immediately paid the sum of $13,340.40 being the amount which the appellant concedes as the "correct award", that the amount of $41,000.00 for liquidated damages being that part of the award made for liquidated damages as found in par [90] of the Decision should be paid into the trust account for the respondents lawyers to be held pending a determination of this appeal and that the award made by the Tribunal should otherwise be stayed pending a determination of the appeal.

DSA Building Pty Ltd v Geronikos; Geronikos v DSA Building Pty Ltd

At a glance

Court

Decision date

Source

Judgment (8 paragraphs)

Cases Cited (7)