Arguments and disposition
31The applicants submitted that as a matter of legal characterisation the payment in late June of 2006 of $26,329.60 could only be "under the contract" and the Tribunal was correct to conclude accordingly. This characterisation arose, it was submitted, from the facts as found by the Tribunal and those that were uncontested, set against the background of the HB Act. The HB Act made the claim unenforceable by s 10 and the purported making of the variation without compliance with s 7 an offence under s 7A. The facts disclose no arrangement made by the parties for the execution of and payment for the soil work other than by and through the contract. The work was styled as a variation in the documents supporting the third progress claim in August and October 2006. Though, it should be said that the invoice for the sum of $26,329.60 was not described as a variation, only as an invoice.
32It was further submitted for the applicants that the sum paid could prima facie be recovered as money paid under a mistake of fact or law, such mistake being that the sum was due and enforceable under the contract. It is to be recalled, however, that the Tribunal made no express finding of the relevant mental states of the parties as to what they thought they were doing; nevertheless, as I earlier said, there was no evidence whatsoever of any attempt to set up any other regime of legal responsibility for execution of, or payment for, the soil work. Leaving aside the difficulty of the absence of a relevant finding of mistake, the fact that such a vitiating factor exists may be necessary, but is not sufficient, for the making out of a claim for restitution. It is the injustice of the retention that founds the claim: Ford (by his tutor Watkinson) v Perpetual Trustees Victoria Ltd [2009] NSWCA 186; 75 NSWLR 42 at 69 [121] and 73 [134]; Perpetual Trustees Australia Ltd v Heperu Pty Ltd [2009] NSWCA 84; 76 NSWLR 195 at 221-222 [127]-[128] and 229 [161]; and Heperu Pty Ltd v Belle [2009] NSWCA 252; 76 NSWLR 230 at 264-265 [145]-[151], 269 [179] and 270 [180].
33An important factual consideration against which to analyse the legal consequences of what occurred is that it was common ground before the Tribunal and the District Court that the owners (the applicants in this Court) were liable for the (proper) cost of the soil work in restitution. Mr Leeming SC, who, with Mr Gruzman, appeared for the owners, drew back from any concession that such sum was represented by the precise sum claimed by the builder for the soil work. In any event and even in the absence of a concession as to the precise sum, the proposition that the sum was refundable in an action in restitution in circumstances where the builder had an enforceable claim of right in restitution for the very work concerned is not self-evident. Thus, the claim for recovery would be founded on questions of mistake and the justice of retention, about which there have been no findings.
34The applicants further submitted that the words of the letter dated 30 June 2006 signed by Mr Edwards that the payment was made "in good faith" and that asked for a checking of the underlying claim revealed that the money was paid generally on account of the contract and not for this specific work.
35The builder, on the other hand, submitted that the payment in late June 2006 was for the soil work, by reason of the substance of the invoice and by the terms of the payment. Whether or not the parties intended, or believed, that it be, or was, a contractual claim, it was a claim (supportable, as it turned out, upon restitutionary not contractual principles) that was lawful and enforceable. In these circumstances, it was submitted that the payment had been appropriated by the parties, being the creditor and the debtor to payment of the claim for the soil work. It was submitted, that in circumstances where the contractual foundation for making the claim was absent, the payment remained appropriated to payment for the soil work, and that that was a legal conclusion.
36The problem of allocation of payments to the accounts between builder and owner when part of the builder's claim is in some fashion defective or unlawful is not new, in particular in relation to extra work or variations: N Dennys, M Raeside and A Clay (eds), Hudson's Building and Engineering Contracts (Sweet & Maxwell, 12 th Ed, 2010) at 845-848 [5-075]-[5-076]; S Furst and V Ramsey, Keating on Construction Contracts (Sweet & Maxwell, 8 th Ed, 2006) at 133 [4-055].
37In Lamprell v The Guardians of the Poor of the Billericay Union, in the County of Essex (1849) 3 Ex 283; 154 ER 850, sums were paid by a corporation on account of a building contract without distinguishing the work for which the payments were made. Extras were ordered by a document not under seal. The corporation could only be liable for the extra work if the variation order was under seal. Given that there had been no specific appropriation of the payments, the builder, as receiver of the payments and creditor, sought to appropriate the payments that had been made, to the extras in full before the balance due under the otherwise enforceable contract. The Court refused to permit the builder to do so. Central to the reasoning in the judgment of the Court delivered by Rolfe B were a number of considerations. First, there was the fact that the payments were advanced to be treated as sums paid on account of whatever the plaintiff might eventually be entitled to recover under the contract (3 Ex at 305; 154 ER at 861). Secondly, there was no second contract or legal relationship that the corporation was capable of entering to support the payment for extras. Various cases were referred to: The Mayor, Alderman, and Burgesses of the Borough of Ludlow v Charlton, Esq (1840) 6 M & W 815; 151 ER 642 in the Court of Exchequer; Arnold v The Mayor, Alderman, and Burgesses of the Borough of Poole (1842) 4 Man & G 860; 134 ER 354 in the Court of Common Pleas; and Paine v The Guardians of the Poor of the Strand Union (1846) 8 QB 326; 115 ER 899 in the Court of Queen's Bench to support the following proposition expressed at 306; 861: "[t]he principle of those cases clearly exempts the present defendants from all liability as to the matters in question, except such as arose by instrument under their seal." No question arose of restitutionary liability. Rolfe B recognised, however, that in the case of an individual the absence of an order under seal may not have prevented another contract arising that bound the individual and if the moneys paid were not allocated or appropriated by the debtor (payer) they might be able to be allocated by the creditor (receiver) to such debt as he chose. Essential, however, to the reasoning in deciding the case before the Court was the fact that there could be no appropriation to a claim that had no legal or equitable foundation (including no restitutionary foundation).
38In A Smith & Son (Bognor Regis) Ltd v Walker [1952] 2 QB 319 the Court of Appeal was concerned with the circumstances of work done under a contract that provided for payment of instalments from time to time generally on account of the contract. The builders carried out demolition work before any licence for the work had been issued. The relevant regulation provided: "the carrying out ... of any work ... or of any maintenance work on a building or on any such works [in a Schedule] shall be unlawful except in so far as there is in force in respect thereof a licence granted by the Minister ...". The licence was later obtained, but had not been issued when the initial demolition work was done. The defendant made two payments generally under the contract. A receipt issued by the builder was expressed to be "for demolition of faulty structure" and "on account of work carried out at the above". Morris LJ, sitting at first instance, found that by reason of the builder's receipt the owner could not claim that the payments were referable to licensed work. The Court of Appeal reversed this decision. It is to be understood that the case proceeded on the basis that the demolition work was unlawful and there could be no recovery on any basis for it: see the reasons of Somervell LJ at 324. Somervell LJ concluded (at 327) that the payments were made "under the contract". By this his Lordship can be taken as reflecting the evidence that they reflected general payments of the amounts provided for as lump sum payments (each of 500) made pursuant to the contract. He said at 326:
"It seems to me that as a matter of law the nature of these payments must be sought in the contract under which they were made. The fact that words are put in the receipt which might indicate an intention to appropriate, does not seem to me to be enough to deprive the payment of the character it had derived from the contract, unless, of course, there had been some oral or written agreement between the parties to that effect - and that is not suggested here. The mere fact that the defendant did not object to the words on the receipt does not seem to me to be enough."
39The reasons of the Court were extempore. In argument Somervell LJ had said at 323:
"If there had been a specific appropriation with the consent of the defendant, that would be sufficient for the plaintiffs. But the judge relied on the receipts. I am not sure he was right."
40Denning LJ clearly based his analysis on how the payments had been made. If there was a contract and the payments were made "generally on account of the work" (328) (by which his Lordship plainly meant all the contractual work) allocation must be made to the lawful part of the work; but, he said:
"... if the owner himself specifically appropriates a particular payment to the unlawful part, then it remains where it is. He cannot turn round afterwards and appropriate it to the lawful part. Just as the builder cannot recover the balance due to him for the unlawful part, so, also, the owner cannot recover any payments he has made specifically on account of it. He cannot do it directly by action, nor can he do it indirectly by altering his appropriation from the unlawful to the lawful part."
41Romer LJ agreed with both Somervell and Denning LJJ.
42Subject to the submissions in this Court that are dealt with in the final section of these reasons, there has never been any contest about the liability of the owners for the cost of the soil work. That fact critically distinguishes the facts here from both Lamprell and Smith. Further, the sum paid here was not an amount for a general contractual obligation for payment provided for in the contract; it was on the face of the invoice and the letter of 29 June 2006 a payment specifically for the claim for the soil work, and nothing else. That was the subject described in the invoice and it was the subject to which the payment was specifically directed in the letter under which payment was made. In fact, it was a claim not enforceable as a contractual claim, but it was a claim enforceable in law - under the law of restitution. Both bases for recovery - contract and restitution - depended upon the claim being for a sum honestly and reasonably arrived at. Though the 10 per cent builder's margin claimed may not have been contractually due, its assessment as reasonable would be part of the assessment of the reasonableness of the charge.
43In the circumstances disclosed by the material before the Tribunal, there was, by the debtor and the creditor, clear appropriation of a payment to a claim, that was otherwise enforceable, if not under the contract. This conclusion accords with the reasoning of Denning LJ in Smith . It also accords with the reasoning of Somervell LJ whose reasons should be understood as directed to circumstances where there was no specific appropriation with the consent of the owner but rather the payment of sums contemplated by the terms of the contract to be payable on account and where there was a legal regime under which the claim was unlawful and irrecoverable.
44The conclusion of appropriation was a legal one from the uncontested facts. Whether or not appropriation had taken place was a question with respect to a matter of law.
The question of legality and the HB Act
45Before the Tribunal there was no issue raised that the claim for the soil work was unlawful (whether by reason of the HB Act, s 7A or otherwise) and thus irrecoverable. What was accepted before the Tribunal was that the HB Act, s 10 applied and the contract was unenforceable.
46The same position obtained before the District Court. No submission was put that the primary judge committed a legal error by approaching a matter on a legal basis conforming to how the parties argued the matter. This is not an error on the face of the record.
47The question of the possible operation of the HB Act (ss 7AA, 7A and 7B) was only raised in written submissions filed after the appeal was heard. This was done pursuant to leave and after the matter was touched on in argument.
48Sections 7AA, 7A and 7B of the HB Act are in the following terms:
"7AA Consumer information
(1) A holder of a contractor licence must, before entering into a contract that the holder is authorised by this Act to enter, give to the other party to the contract information, in a form approved by the Director-General, that explains the operation of this Act and the procedure for the resolution of disputes under the contract and for the resolution of disputes relating to insurance.
Maximum penalty: 40 penalty units in the case of a corporation and 20 penalty units in any other case.
(2) This section does not apply to contracts of a class prescribed by the regulations.
7A Offence
A person must not contract to do work under a contract unless the requirements of section 7 in relation to the contract are complied with.
Maximum penalty: 80 penalty units in the case of a corporation and 40 penalty units in any other case.
7B Copy of contract
A holder of a contractor licence must, not later than 5 clear business days after entering into a contract, give the other party to the contract a signed copy of the contract in the form in which it was made.
Maximum penalty: 80 penalty units in the case of a corporation and 40 penalty units in any other case."
49The appellants did not squarely submit that the claim was irrecoverable on any basis by reason of illegality. But they did submit that the fact of making the variation was a breach of s 7A or an attempt to do so for s 7B and the failure to provide a disclosure was an offence under s 7AA.
50It may be that the commission of an offence under ss 7AA, s 7A and 7B requires a mental element. That question has not been the subject of investigation. There may be regulatory offences not requiring a relevant mental element, but for which a defence of honest and reasonable mistake is available. In any event, factual questions would arise whether as to the elements of the offences or possible defences which have not been ventilated.
51It may be (and I do not need to consider it) that there can be an error on the face of the record notwithstanding the adoption of the approach agreed on by the parties: cf Kuswardana v Minister for Immigration and Ethnic Affairs (1981) 35 ALR 186. No fundamental question of the kind dealt with in Kuswardana arises here. It has not been demonstrated, and there are no findings, that any offence has been committed. It is not clear that there has been any illegality. The correctness of the judicial review of the Tribunal's decision by the District Court (as an assessment of the legitimacy of the latter's approach by reference to s 69) should, in these circumstances, be made having regard to the manner in which the case was conducted in the District Court.
52For these reasons, I would only be prepared to approach the invocation of power under the Supreme Court Act , s 69 to make an order in the nature of certiorari in respect of the District Court orders on the basis of analysing the primary judge's reasons in the framework of the arguments put to him. For the reasons earlier given, the primary judge was correct to conclude that the Tribunal decided a question with respect to a matter of law and erred in that decision.