Fraser v Sperling [2017] VSCA 53

CONTRACT - Building contract - Standard form contract - Subsequent agreement between applicants, respondents and third party company - Company undertook obligation to complete construction under 'existing building contract arrangements' - Whether agreement varied building contract - Whether agreement confined obligations of respondents to supervisory role.

JUDICIAL REVIEW - Tribunal made findings in alternative as to causation - Whether findings vitiated by error - Tribunal erred in identifying obligations of respondents under building contract - Error in identifying obligations necessarily affected causation analysis - Appeal allowed - Proceeding remitted to Tribunal.

JUDICIAL REVIEW - Nature of appeal under Victorian Civil and Administrative Tribunal Act 1998 s 148 - Identification of questions of law - Notice of appeal not to be construed strictly - Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771, 783 [48], 805 [165], applied.

1 This application for leave to appeal concerns the liability of a registered building practitioner for non-completion of domestic building works which the owners alleged that the practitioner had undertaken to complete. The practitioner denied having agreed to complete the works and contended that, in any event, the loss of the owners when the works were not completed resulted from a failure by the owners to abide by an arrangement for the payment of subcontractors which the parties had entered into. The owners brought a claim under the Domestic Building Contracts Act 1995 ('the Act') in the Victorian Civil and Administrative Tribunal ('the Tribunal'). The Tribunal rejected the claim and an associate judge dismissed an appeal from that decision.

2 As explained below, a threshold question arose before the associate judge as to the scope of the appeal. Having decided that question adversely to the owners, the associate judge dismissed the appeal. However, she went on to address the substantive issues in case she was in error as to the threshold issue. In that regard, she would have found in the owners' favour and remitted the matter to the Tribunal for further hearing. For the reasons that follow, we consider that the associate judge was correct in her treatment of the substantive issues and the relief that would have flowed from her conclusions. However, we have taken a different view as to the scope of the appeal that was before her. In order to uphold her conclusions on the substantive issues, the appeal to this Court should be allowed.

3 The applicants, Maureen and Desmond Fraser, were registered proprietors of a property known as Lot S2, Roney Mac's Twist, Dinner Plain ('Lot S2'). They sought to undertake a development of Lot S2 with the assistance of Mrs Fraser's son, Michael Atwell, and a company that he controlled, Snowy Corner Pty Ltd ('Snowy'). Mr Atwell was a real estate agent. Snowy was at the same time undertaking developments of two neighbouring properties.

4 In late 2010, Mr Atwell met John Demetriou of Modern 1 Design Pty Ltd ('Modern'). Mr Atwell and Mr Demetriou agreed that Modern would build two homes on Lot S2, and one on each of the two neighbouring properties. Unbeknownst to Mr Atwell, neither Modern nor Mr Demetriou was a registered building practitioner under the Building Act 1993.

5 Section 29 of the Act prohibits an unregistered builder from entering into a 'major domestic building contract'[1] unless, relevantly, that builder is in partnership with a registered builder. Mr Demetriou approached the first respondent, Guntram Sperling, who was a registered building practitioner. Mr Sperling traded in partnership with the second respondent, his wife Dr Heidi Kastner, as The Alpine Woodpecker ('Alpine Woodpecker'). The respondents agreed to be party to the building contracts for the three lots and, on or about 2 December 2010, Mr Demetriou on behalf of Modern and Mr Sperling on behalf of Alpine Woodpecker signed standard form building contracts that named Snowy as owner, and Modern and the respondents as builder. The contract in respect of Lot S2 did not mention the Frasers. However, Mr Atwell gave evidence that he signed the contract on behalf of both Snowy and the Frasers. The respondents did not receive a copy of the contract signed on behalf of Snowy (or the Frasers). In the Tribunal, there was controversy about the signing of the contract on the part of Snowy or the Frasers. There was also a dispute as to the nature of the obligations the respondents had agreed to undertake.

6 After Mr Sperling and Mr Demetriou signed the contracts, the respondents and Mr Demetriou engaged in discussions about how they would work together. As a result of those discussions, they agreed on 8 December 2010 that Modern would complete the homes and receive the builder's profit under the contracts and that Alpine Woodpecker would be paid $10,000 for each completed home, in return for performing a limited supervisory function. A written agreement to that effect was subsequently prepared, including Snowy as a party, but it is not clear whether it was executed by any party. The Frasers, and perhaps Snowy, were not informed of the arrangement between Mr Sperling and Mr Demetriou. Before the Tribunal, Mr Atwell denied knowledge of it.

7 The Lot S2 building contract was the subject of extended examination in the reasons of both the Tribunal and the associate judge. It will be necessary to return to that examination later in these reasons. It was not in contest that the Lot S2 building contract was in the form of the Housing Industry Association's standard form building contract. Clause 11.0 of the contract relevantly provided:

To the extent required by the Domestic Building Contracts Act the Builder warrants that:

• the Building Works will be carried out with reasonable care and skill and will be completed by the end of the Building Period;

8 The reference to the Act in cl 11.0 is explained by s 8(d) of the Act, which provides that the following warranty is part of every domestic building contract:

the builder warrants that the work will be carried out with reasonable care and skill and will be completed by the date (or within the period) specified by the contract.

9 In December 2010 Mr Sperling applied for and received a builder's warranty insurance certificate in respect of the works. On 12 January 2011 building permits were issued to the Frasers, with Alpine Woodpecker named as the builder and Mr Sperling as the designated registered building practitioner.

10 Works soon began and continued until March 2011, when a dispute arose between Mr Atwell and Mr Demetriou. Modern abandoned the works and left several subcontractors unpaid. Mrs Fraser telephoned Mr Sperling and asked him what he was going to do about the project. He gave evidence in the Tribunal that he did not know who Mrs Fraser was at this time.

11 On 1 April 2011, Mr Atwell's solicitors sent Mr Sperling an email identifying the Frasers as the owners of the land and asserting that Mr Sperling was responsible for completing the works.

12 At this point David Winchester, a director of Fingal Holdings Pty Ltd ('Fingal'), became involved in the development. Mr Winchester was developing another adjacent block, which he had acquired through Mr Atwell. He had discovered that his land was surrounded by security fencing and littered with debris from the Modern building works following their abandonment. Following discussions, an agreement was executed on 12 April 2011 by Mr Atwell on behalf of Snowy, Mr Sperling on behalf of the respondents and Mr Winchester on behalf of Fingal. The Frasers were not listed as a party to the agreement, but the document did specify '(Owner Fraser)' in respect of Lot S2. In evidence before the Tribunal Mrs Fraser stated that Mr Atwell signed the agreement both on behalf of Snowy and as agent for the applicants.

13 After reciting the status of payments to the builder and payments to subcontractors in respect of the three lots under the building contracts with Modern, the agreement continued:

1. [Fingal] (David Winchester) takes on the obligations of [Modern] to complete the construction of Lots 5 & 6 and Lot S2. This will be done under the framework of the existing building contract arrangements with Guntram Sperling.

2. [Fingal] does not take on any obligation [Modern] has to any subcontractor prior to its (Fingal) commencement on site.

3. [Snowy] (Atwell) place $50,000 in the Trust account of Burke & Associates to assist payment of the outstanding creditors as per above. Payments to be made from these funds on the authorisation of Guntram Sperling, David Winchester and Michael Atwell.

4. From the payment of the Lock Up Stage claim for S2 of $196,700 an amount of $72,000 to be paid into the Trust account of Burke Associates to assist payment of the outstanding creditors as per above. Payments to be made from these funds on the authorisation of Guntram Sperling, David Winchester and Michael Atwell.

5. Progress Claims for Building Works to be made on the invoice of [Fingal]. The claim is to be supported by photographic evidence that works to that stage have been completed. The Progress Claim is to be paid directly by the NAB to Fingal other than for the $72,000 referred to above which is to be paid to Burke & Associates.

6. David Winchester to take on the plumbing compliance obligations for all plumbing works on each of the 4 buildings.

14 The funds were never paid into trust as required by the agreement. The $50,000 referred to in cl 3, which related to Lots 5 and 6, was at Mr Winchester's request paid by Snowy directly to Fingal, and the $72,000 referred to in cl 4 and relating to Lot S2 was not paid to the trust account either. The Frasers instead made payment for the lock up stage claim, and what were described as 'advance payments' in respect of the later fixing stage, directly to Fingal. Accordingly, the subcontractors were never paid out of the trust account in the manner provided for by the agreement.

15 The respondents were not made aware of the course that had been taken. The evidence showed that Mr Atwell and Mr Winchester decided not to employ the trust account of Burke & Associates, who were Mr Atwell's solicitors, after Mr Anthony Burke expressed the opinion that the April 2011 agreement was unsatisfactory in various respects. Mr Atwell and Mr Winchester did not want the matter to get 'bogged down in legal byplay', and decided that payments should be made to a different trust account. As it happened, the Frasers made the relevant payments directly to Fingal, bypassing the trust arrangement altogether. On 27 April 2011 Mr Atwell instructed Mr Burke to cease communications with him. Although Mr Atwell asked Mr Winchester to 'keep [Mr Sperling] informed', it does not appear that this happened.

16 Fingal did not apply the payments it received after the signing of the April 2011 agreement to the payment of subcontractors. It also did not refund any of the 'advance payments' made by the Frasers. In late August 2011, Fingal ceased carrying out works on Lot S2. The subcontractors declined to continue with the works, as they had not been paid.

17 On 22 December 2011, Snowy commenced a proceeding in the Tribunal against Modern, Fingal and Mr Sperling and Dr Kastner (the present respondents). Fingal filed a counterclaim against Snowy and the Frasers (the present applicants). As explained below, these matters did not proceed.

18 Before the matter came on for hearing, in February 2013, National Australia Bank Ltd, which was the mortgagee of Lot S2, took possession of Lot S2 and sold the two incomplete homes. In addition, it took possession of and sold the Frasers' residential home. The sale proceeds were applied to the debt owed by the Frasers to the bank. As at June 2013, the residual debt was $524,012.

19 The Frasers then commenced a crossclaim against Modern, Fingal and Mr Sperling and Dr Kastner on 12 July 2013. The cross-claim alleged that those parties had abandoned the works on Lot S2 and had thereby caused the Frasers loss and damage consisting of:

(a) $58,000, being lost profit on the two homes on Lot S2;

(b) $250,000, being the value of their residential home; and

(c) $524,012, being the residual debt owing to the bank.

20 Snowy was placed into liquidation, and Modern and Fingal were deregistered. Therefore, by the time of the trial, the present applicants and respondents were the only parties still contesting the litigation and the live claim was the applicants' cross-claim against the respondents. After a six-day trial, the Tribunal dismissed the cross-claim.[2]

21 The Tribunal said the following with respect to the Lot S2 building contract:

Mr Atwell says he signed the three building contracts in his capacity as director of Snowy. He says also that, in respect of the contract for the building works to be carried out to lot S2 ('the lot S2 building contract'), Snowy executed the contract as agent of Mr and Mrs Fraser. Mr Atwell says that, about a week or two after he signed the lot S2 building contract, he amended the contract so that it recorded Mr and Mrs Fraser as the 'owners' in place of Snowy, and he then arranged for Mr and Mrs Fraser to sign the amended contract. As discussed below, the amended contract was not produced in this proceeding until the fourth day of the hearing.

Mr Atwell and Mrs Fraser gave evidence as to the signing of the lot S2 building contract by Mr and Mrs Fraser. The evidence is confusing and unconvincing. The confusion is due largely to the fact that Mr Atwell, who assisted his parents in obtaining the NAB finance, had prepared an alternative lot S2 building contract for presentation to the NAB. The alternative contract identifies a higher contract price of $635,000. Mr Atwell apparently considered it acceptable to produce a false contract document for the limited purpose of obtaining bank finance. It is understandable, if not excusable, that Mr and Mrs Fraser went along with the ruse because they trusted Mr Atwell to manage their affairs in respect of the lot S2 building contract.

I heard much evidence from Mrs Fraser and Mr Atwell as to the circumstances surrounding their signing of the lot S2 building contract, both the 'real' contract and the 'alternative' contract presented to the NAB. Their evidence was materially different in some respects.

Quite remarkably, Mr Atwell announced on the fourth morning of the hearing that he had, just that morning, found the [real] original lot S2 building contract as amended and signed by Mr and Mrs Fraser. Having regard to the fact that the proceeding commenced in December 2011, and during the interlocutory stages of the proceeding a number of orders had been directed at the production of building contracts, it is very surprising that it took until the fourth morning of the hearing for Mr Atwell to discover the original contract.

Although I have reservations as to reliability of Mrs Fraser's and Mr Atwell's evidence as to the signing of the lot S2 building contract, I do not dwell on the issue because, in the end, it is not a determinative factor in my decision.[3]

22 The building contract signed by the applicants was not admitted into evidence in the Tribunal. However, an affidavit of their solicitor filed in the proceeding before the associate judge incorrectly stated to the contrary, exhibiting the document as exhibit JG-6.

23 A principal issue in the Tribunal was whether the applicants were parties to the building contract. The Tribunal stated that 'it [was] open to find that Mr and Mrs Fraser were, through the agency of Snowy, parties to the Lot S2 building contract'.[4] The applicants submitted in this Court that this amounted to a finding to that effect. The Tribunal explained the suggested finding on the basis that the agency of Snowy had been undisclosed when Mr Sperling signed the building contract but that it was known, or ought to have been known, to the respondents when Mr Sperling signed the April 2011 agreement, which the Tribunal said 'subsumed' the earlier contract.[5]

24 However, the Tribunal found that the respondents were not liable for the loss and damage claimed 'because they [had] not caused that loss'.[6] The Tribunal noted that moneys were not paid into the trust account as required by the April 2011 agreement and that the respondents did not authorise direct payment to Fingal.[7] The failure to pay money into the trust account, which would have ensured payment of the subcontractors, was a significant factor in the collapse of the development project. The applicants were involved in that failure, but the respondents were not.[8]

25 Moreover, to the extent that the inability of the applicants to access funds to complete the works was a factor in the cessation of works, the respondents again played no role in that circumstance.[9]

26 The Tribunal also noted that there was little evidence as to the role Alpine Woodpecker performed in respect of the works. The Tribunal found that the sole reason for Alpine Woodpecker's introduction into the project was the fact that Mr Sperling, unlike Mr Demetriou, was a registered building practitioner.[10] On Mr Sperling's evidence, he provided occasional technical advice and site inspections, but the works were managed by Fingal. The Tribunal stated that it was Fingal who bore a great deal of responsibility for the cessation of the works, and it was Fingal, rather than the respondents, who had abandoned the works. There was no evidence that Mr Sperling was unwilling to continue in his technical advisory role.[11]

27 The Tribunal concluded that, on the evidence, it was not satisfied that the respondents had 'breached any contractual responsibility to Mr and Mrs Fraser, or that their actions [had] caused the loss and damage claimed'.[12] It will be noticed that this statement expands upon the conclusion quoted above, which recorded only that the applicants' claim failed on causation.[13]

28 On the appeal to the associate judge, brought on questions of law under s 148 of the Victorian Civil and Administrative Tribunal Act 1998 ('VCAT Act'), the applicants relied on a notice of appeal setting out the following questions of law and grounds of appeal:[14]

1. Were the Respondents bound by the building contracted [sic] dated 24 November 2010 (Exhibit JG-6 to the affidavit of James Gray affirmed on 13 February 2015) (Building Contract) as Builder (as defined in the Building Contract)?
2. Was the Building Contract discharged by entry into the agreement of 12 April 2011 (set out in paragraph [42] of the Tribunal's reasons ...) (April 2011 Agreement)?
3. Did the Respondents breach:

1. The Tribunal erred in holding that, although named as a Builder under the Building Contract, the Respondents were not responsible under the Building Contract, as Builder.
2. The Tribunal erred in holding that the April 2011 Agreement 'subsumed' the Building Contract ([Tribunal Reasons], [65]).
3. The Tribunal erred in failing to assess the damages alleged by the appellants in the light of breaches by the Respondents of contractual terms that subsisted between the parties following the execution of the April 2011 Agreement, in particular clause 10 of the Building Contract.

29 The associate judge held that the Tribunal did not make a finding that the applicants and the respondents were parties to any building contract because it was unnecessary to do so in light of the Tribunal's views as to causation.[15] The 'Lot S2 building contract' referred to in the Tribunal's reasons[16] was not the same as exhibit JG-6, referred to in the notice of appeal. The document described in the Tribunal's reasons was not, in her Honour's view, the same as exhibit JG-6.[17] Moreover, it appeared that the Tribunal did not accept the document into evidence.[18]

30 Ultimately, the associate judge dismissed the appeal on this basis:

I am not satisfied that the document relied upon by the Frasers for the purposes of this appeal as being the building contract by which Alpine Woodpecker was bound was even in evidence at the VCAT hearing, let alone the subject of any findings on the part of the Senior Member. In effect, the [applicants] are, in their Notice of Appeal, asking me to make a finding that Alpine Woodpecker is bound by a document which was not, at least on the evidence before me, an exhibit before the Senior Member, in circumstances where the Senior Member had serious doubts regarding the provenance of another version of the building contract referring to the [applicants] as parties to a building contract with Alpine Woodpecker, and indeed rejected an application by the Frasers to amend their points of claim based upon that version of the building contract. The clearly erroneous description of exhibit 'JG-6' in Mr Gray's affidavit of 13 February 2015 serves to underscore my view that the existence of several different versions of the building contract should not simply be glossed over.[19]

31 In the view of the associate judge, the Frasers had made a 'deliberate forensic choice' to rely on a particular version of the building contract as the factual foundation for their appeal.[20] The position might have been different had there been evidence of the provenance of exhibit JG-6.[21]

32 Her Honour observed that the actual signing of the building contract on behalf of Snowy or the Frasers was not merely a question of semantics, because s 31(2) of the Act provided that a major domestic building contract is 'of no effect unless it is signed by the builder and the building owner (or their authorised agents)'. This issue had been canvassed at the hearing before the Tribunal in the course of the oral submissions for the applicants, but was not referred to in the Tribunal's reasons.

33 The associate judge went on to state that, if her conclusion was held to be 'unduly pedantic'[22] and it were the case that the applicants and the respondents entered into a building contract in the same terms as exhibit JG-6, then she would make the following findings with respect to the questions of law identified in the notice of appeal:

(a) at the time of executing the building contract, Alpine Woodpecker assumed the obligations of the builder under the building contract, including the obligation to complete the works for the price of $562,000;

(b) the building contract was not terminated, discharged, or 'subsumed' by the April 2011 agreement; and

(c) the proceeding ought to be remitted to VCAT for rehearing and determination according to law.[23]

34 The associate judge would have made those findings on the basis that the Tribunal had not addressed the obligations and liabilities of the respondents under the building contract, and the Tribunal had impermissibly accepted parol evidence regarding Mr Sperling's actual role once work started in order to construe the building contract and to inform its determination of the question of causation.[24]

35 The associate judge finally would have held that the April 2011 agreement did not 'subsume' the building contract, but rather varied it, and that the respondents were still required to perform the works under that contract.[25] So much was clear from cl 1 of the agreement.[26]

36 It is apparent from her Honour's reasons that causation would have been for the Tribunal to determine on remittal. In explaining why she would have declined to make orders (in the alternative) remitting the proceeding to the Tribunal for an assessment of damages only, she noted among other things that there were 'real issues concerning causation'.[27] In addition, the respondents had advanced an estoppel argument, which the Tribunal had not addressed as a result of its conclusion as to causation.

The proposed appeal and the notice of contention

37 The applicants now seek leave to appeal on four grounds:

1. The learned Associate Judge erred in failing to allow the appeal in circumstances where her Honour concluded that the Tribunal:

(a) erred on a question of law ([Reasons], [42]-[43]);

(b) had not made any finding of fact as to the entry into the building contract ([Reasons], [24]).

1. The learned Associate Judge erred in holding that the Tribunal had not made any finding of fact as to the entry into a building contract between the applicants and the respondents ([Reasons], [24]), whereas the Tribunal proceeded on the factual basis that the parties were privy to a building contract ([Tribunal Reasons], [65]).
2. The learned Associate Judge erred in determining the appeal before her on a question of fact, namely whether or not the applicants had proved before the Tribunal that they had entered into a contract with the Respondents.
3. The learned Associate Judge erred in failing to allow the appeal before her, on the grounds that:

(a) the Tribunal erred in holding that, although named as a Builder under the Building Contract, the Respondents were not responsible under the Building Contract, as Builder;

(b) the Tribunal erred in holding that the April 2011 Agreement 'subsumed' the Building Contract ([Tribunal Reasons], [65]); and

(c) the Tribunal erred in failing to assess the damages alleged by the appellants in the light of breaches by the Respondents of contractual terms that subsisted between the parties following the execution of the April 2011 Agreement, in particular clause [11.0] of the Building Contract.

38 The application for leave to appeal seeks orders allowing the appeal, setting aside the orders of the associate judge, ordering instead that the Tribunal's orders be set aside and declaring that the respondents were bound by the building contract to complete the building works, and remitting the matter to the Tribunal for assessment of damages (alternatively, ordering that the whole matter be remitted to the Tribunal for rehearing).

39 In addition, the respondents filed a notice of contention identifying four further grounds on which they contended that the associate judge was correct to dismiss the appeal:

1. There was an undisturbed and unchallenged finding of fact in the Tribunal below that the respondents did not cause any loss and damage to the applicants.
2. There was no finding below that the applicants and the respondents entered into a building contract.
3. There was an insufficient record of the evidence in the Tribunal before the Court for Her Honour to make alternative findings that:

(a) at the time the building contract was executed, Alpine Woodpecker assumed the obligations of the builder under the building contract;

(b) the April 2011 agreement varied, but did not of itself discharge or subsume the building contract.

1. There was no building contract signed by the builder and the building owner (or their authorised agent) in evidence before the Tribunal.

40 It can be seen that, while it seeks to uphold the associate judge's ultimate decision, the notice of contention joins issue with the approach which her Honour indicated she would have taken in the alternative, had she found that a building contract between the parties existed. In large part, the applicants had already put that approach in issue by their fourth proposed ground of appeal, which sought to sustain the associate judge's alternative approach.[28]

41 Further, in light of the fact that the respondents were unrepresented before the Tribunal, and because both parties wished to have recourse to the transcript of that hearing, the Court made arrangements for that transcript to be provided and for supplementary written submissions to be filed as to causation and the relevance of the Act to the interpretation of the April 2011 agreement, a matter that had not been canvassed extensively below and whose wider relevance only emerged at the hearing of the appeal.

42 Although the points taken can be seen to be quite extensive, the appeal can be approached by considering the following issues in turn:

(a) Did the associate judge err in dismissing the appeal on the basis that the Tribunal had not found that on or about 24 November 2000 the applicants and the respondents had entered into the building contract in exhibit JG-6 (proposed grounds of appeal 1-3; notice of contention grounds 2 and 4)?

(b) If so, was the associate judge correct to hold, in the alternative, that:

(i) the respondents had assumed under a building contract in the same terms as that contract the obligations of the builder, including to complete the works (proposed ground of appeal 4(a); notice of contention ground 3(a));

(ii) that building contract was not 'subsumed' by the April 2011 agreement and did not change the respondents' obligation to complete the works (proposed ground of appeal 4(b); notice of contention ground 3(b));

(iii) the matter should be remitted to the Tribunal for further hearing and determination, including as to causation and damages (proposed ground of appeal 4(c); notice of contention ground 1)?

43 For the reasons that follow, the application for leave to appeal should be granted and the appeal should be allowed. The issues above should be resolved as follows:

(a) The associate judge erred in dismissing the appeal on the basis that the Tribunal had not found that on or about 24 November 2000 the applicants and the respondents had entered into the building contract in exhibit JG-6. Although the questions of law upon which the appeal to the associate judge depended were framed in terms of the contract in exhibit JG-6, as a matter of substance the appeal concerned the existence of a contract in the terms of that exhibit, rather than the document itself.

(b) As to the alternative findings of the associate judge:

(i) the Tribunal properly proceeded on the basis that there was a contract in the terms of the one in exhibit JG-6. That contract satisfied the requirements of s 31(2) of the Act. The respondents had assumed under the contract the obligations of the builder, including to complete the works, consistently with s 8(d) of the Act;

(ii) the building contract was not 'subsumed' by the April 2011 agreement, nor did it alter or confine the respondents' obligation as builder to complete the works;

(iii) the proceeding (including the questions of causation and damages, if any) should be remitted to the Tribunal for further hearing and determination.

44 Before turning to the resolution of these issues, it is necessary to set out the relevant provisions of the Act.

45 The main purposes of the Act are set out in s 1. They include 'to regulate contracts for the carrying out of domestic building work' and 'to require builders carrying out domestic building work to be covered by insurance in relation to that work'.[29] One of the objects in s 4 of the Act is 'to enable building owners to have access to insurance funds if domestic building work under a major domestic building contract is incomplete or defective'.[30]

46 The expression 'domestic building work' is defined in s 3(1) to mean any work referred to in s 5 that is not excluded by s 6. Section 5 contains an extensive list of 'work' to which the Act applies, including the erection or construction of a 'home', relevantly defined in turn as any residential premises.[31]

47 Section 8 contains 'warranties about the work to be carried out under a domestic building contract' that 'are part of every domestic building contract'. They include that 'the builder warrants that the work will be carried out with reasonable care and skill and will be completed by the date (or within the period) specified by the contract'.[32] Section 10 renders void provisions purporting to restrict or remove the right of a person to take proceedings for a breach of any of the warranties in s 8 (except breaches already known to exist or which ought reasonably to have been known to exist).

48 Section 29 relevantly requires a builder not to enter into a 'major domestic building contract'[33] unless registered as a builder under the Building Act 1993 or in partnership with such a builder. By this means, the obligation of builders registered under that legislation to have insurance[34] is attracted to major domestic building contracts.

49 Section 31(1) requires a builder not to enter into a major domestic building contract unless the contract meets a list of formal requirements, including that it be in writing, set out in full all the terms of the contract, have a detailed description of the work to be carried out under the contract, set out details of the required insurance under the Building Act 1993 that applies to that work and sets out the warranties implied by s 8. Section 31(2) provides that a major domestic building contract is of no effect unless it is signed by the builder and the owner (or their authorised agents).

50 By s 132(1), any term in a domestic building contract that is contrary to the Act, or purports to annul, vary or exclude any provision of the Act or to exclude, modify or restrict any right conferred by the Act in relation to a domestic building contract is void.

Was the appeal correctly dismissed by reference to exhibit JG-6?

51 The applicants contended that the associate judge was too 'pernickety'[35] in her treatment of the Tribunal's reasons regarding exhibit JG-6. It was never in issue that Snowy and the respondents signed a standard form building contract in respect of Lot S2. The only issue was whether Mr Atwell, in executing the document on behalf of Snowy, did so as the applicants' agent. The statement by the Tribunal that it was 'open to find' that the applicants were parties to the Lot S2 building contract was sufficiently clear.[36] The terms of that contract were not in issue.

52 The respondents submitted that the first question of law in the notice of appeal made explicit reference to exhibit JG-6 as the relevant building contract between, inter alia, the applicants and respondents. The applicants having made the forensic choice to confine the appeal in that way, the associate judge was correct to begin by considering whether exhibit JG-6 had been accepted as the Lot S2 building contract by the Tribunal. It was not in doubt that it had not been in evidence. The respondents drew the Court's attention to the several different building contracts that were before the Tribunal in support of the submission that the Tribunal could not have been satisfied that there was a particular building contract that Snowy (on behalf of the applicants) and the respondents had signed. In that context, the associate judge was well entitled to question the provenance of exhibit JG-6 and to dismiss the appeal once it was clear that its essential foundation had not been established.

53 The respondents submitted that there was a live issue before the Tribunal as to whether Snowy had signed the building contract. The respondents could have relied on s 31(2) of the Act if Snowy had not been a signatory. The onus in the Tribunal lay on the applicants to prove a contract, and the status of exhibit JG-6 was fundamental to their appeal.

54 As explained above, the associate judge dismissed the appeal on the basis that the applicants had not established that the document they relied on as the building contract for the purposes of the appeal had been in evidence. She described the applicants' reliance on the contract in exhibit JG-6 as a 'deliberate forensic choice'.[37] Earlier, the associate judge stated that it was 'clear from the terms of the first question of law' that the applicants relied on exhibit JG-6 as the building contract which they contended bound the respondents.[38]

55 Her Honour was correct to rely on the questions of law as defining the scope of the appeal. Section 148(1) of the VCAT Act provides that a party to a proceeding in the Tribunal 'may appeal on a question of law from an order of the Tribunal in the proceeding'. The existence of a question of law both founds the jurisdiction of the Court and constitutes the subject matter of the appeal itself.[39] For that reason, the question or questions of law that are raised must be clearly stated, and not merely ascertained by reference to the grounds of appeal.[40]

56 It does not follow, however, that a question of law articulated in a notice of appeal under s 148(1) is to be construed strictly or literally. Fairness dictates to the contrary.[41] Accordingly, the Court will not read a notice of appeal narrowly, and will address questions of law that are identified in the notice of appeal as a whole and perhaps also from surrounding circumstances.[42]

57 The questions of law and the grounds of appeal in the present case proceed by reference to the defined expression 'Building Contract', which relies on exhibit JG-6. The associate judge records that this approach was adopted at the suggestion of the associate judge who granted leave for the appeal to proceed.[43] Plainly, the appeal was founded on that form of the contract. At the same time, however, the questions of law, and especially the grounds of appeal, made it clear that the applicants were challenging the conclusions reached by the Tribunal in relation to the 'Building Contract'. There is an immediate difficulty, as the associate judge found, because the Tribunal did not find that the 'Building Contract' as defined had been executed.

58 In the circumstances, the proper approach was to read the questions of law, and the grounds of appeal, by reference to the Tribunal's reasons and, in particular, the contract upon which both those reasons and the criticisms made of the reasons in the notice of appeal proceeded. As a matter of substance, the questions of law were directed to that contract. Its terms, including as to price and the construction period,[44] were the same as those in exhibit JG-6, albeit that the execution of that document had not been proved in the Tribunal. Read in context and with an eye to the challenges sought to be made to the Tribunal's findings, the questions of law related not to the particular contract in exhibit JG-6 but to the contractual provisions which it embodied and which, the applicants contended, the Tribunal had found to be binding.

59 For that reason, in our opinion the associate judge erred in dismissing the appeal on the basis that it was essential for the applicants to establish the execution of the building contract in exhibit JG-6.

60 Without more, that would suffice to require the present appeal to be allowed. However, the notice of contention and the fourth ground of appeal then raise for consideration whether the associate judge was correct in concluding, in the alternative, that the Tribunal erred and the matter should be remitted to it for further hearing. If not, the respondents contend, the associate judge's decision dismissing the appeal should be upheld, albeit on different grounds. The applicants contend that the associate judge's alternative approach was correct and that she ought to have proceeded to allow the appeal on that basis.

Was there a building contract between the applicants and the respondents?

61 The first issue that then arises is whether the applicants had established in the Tribunal that there was a contract between them and the respondents. It will be recalled that the associate judge held that the Tribunal had not made a positive finding that the applicants and the respondents were parties to any building contract at all.[45] The respondents contended that the associate judge did not supply the omission by determining whether the applicants and the respondents entered into a building contract on the same terms as exhibit JG-6. Her findings that Alpine Woodpecker assumed the obligations of the builder under the Lot S2 building contract and that the April 2011 agreement varied that contract,[46] considered below, were contingent on the existence of such a contract. In its absence, those findings were shown to be erroneous.

62 The applicants submitted that the respondents' reliance on the absence of a factual finding by the associate judge misconceived the role of the associate judge in an appeal confined to questions of law. The applicants did not need to persuade the associate judge of their case before the Tribunal because the terms of the building contract considered by the Tribunal were uncontroversial. Even if it were incumbent on the applicants to put all the evidence before the associate judge, the evidence available to her was sufficient for their appeal to succeed.

63 It is true that the Tribunal expressed its decision in tentative language, stating only that it was 'open to find' that the applicants were, through the agency of Snowy, parties to 'the lot S2 building contract'.[47] This was a reference back to the building contract which Mr Atwell had given evidence of having signed. As the associate judge pointed out, the Tribunal had 'reservations' as to the reliability of Mrs Fraser's and Mr Atwell's evidence but held that this was not a determinative factor in its decision.[48]

64 However, as the associate judge also observed, the respondents did not deny having signed a building contract. They denied only that the contract was made with the applicants, rather than Snowy.[49] In that regard, it is significant that, after stating that it was 'open to find' that the applicants were parties to the building contract through the agency of Snowy, the Tribunal continued:

At the time Mr Sperling signed the contract on behalf of the Alpine Woodpecker partnership, the agency of Snowy was undisclosed. However, at the time Mr Sperling signed the April 2001 agreement, an agreement which subsumed the lot S2 contract, the agency of Snowy was, or ought to have been, apparent to Mr Sperling and Dr Kastner. That Mr and Mrs Fraser were the owners of lot S2 was made clear in the email of 1 April 2011 from Burke & Associates lawyers to Mr Sperling.[50]

65 The Tribunal then proceeded to address the issues of causation and loss. In our opinion, the passage in the Tribunal's reasons set out above reveals clear findings that Mr Atwell signed the building contract for Snowy and did so on behalf of the applicants. There were alternative grounds for those findings, which were consistent with Mr Atwell's evidence. The first was that the applicants were bound as the undisclosed principals of Snowy.[51] The second was that their ownership of Lot S2 was disclosed in the course of negotiations which 'subsumed' the contract. The latter conclusion is challenged, in part because the April 2011 agreement did not involve all the parties to the building contract. But the core finding that the applicants' ownership of the land was revealed to the respondents at that time is demonstrably correct. Even if that were not the case, however, the fact that the applicants owned the land and Snowy entered into the contract on their behalf (albeit originally without the knowledge of the respondents) was also plainly established. That sufficed to bind the applicants as the undisclosed principals of Snowy. No issue as to s 31(2) of the Act arises, because it is not in doubt that both the builder and the owners signed the building contract, in the case of the applicants, through their authorised agent Mr Atwell.

66 For these reasons, the appeal before the associate judge ought to have proceeded, as the present application must also, on the basis that the applicants had established that they had entered into a building contract with the respondents on the terms of that found in exhibit JG-6, albeit not executed in the same manner as that document.

Were the respondents obliged under the building contract to complete the works?

67 The next issue concerns the extent of the respondents' obligations under the contract. In that regard, the respondents sought to establish that they had had only a 'technical' or supervisory function under the contract and that the associate judge had erred in holding that they were obliged to complete the works.

68 The respondents submitted that, although s 8 of the Act implied certain warranties into every domestic building contract, it did not follow that, where there are multiple parties performing work under such a contract, each party warrants the other builder's work. The respondents submitted that the Act did not require a builder to provide warranties for work that it had not, under the building contract, agreed to perform. In the present case, it was said that the respondents' contention before the Tribunal was that they were not liable for Fingal's failure to complete the works on Lot S2 because the April 2011 agreement did not require them to do that work. Any warranties implied by reason of s 8 applied only to their supervisory role, which role they had performed.[52]

69 The applicants contended that it was open to find that the respondents and Modern were partners under the building contract and the April 2011 agreement. That matter had not been addressed by the Tribunal, which found only that the first respondent had signed the April 2011 agreement on behalf of himself and the second respondent.[53] The applicants submitted that the Tribunal should have found that the first respondent signed also on behalf of Modern because those two parties had signed the building contract as builder, and s 29(b) of the Act prohibited partnerships from entering into a major domestic building contract unless at least one partner was a registered builder.

70 Finally, the applicants submitted that the respondents' contention that the warranties only applied to the respondents in their capacity as supervisors ought to have been the subject of a notice of contention, either before the associate judge or in this Court. There was no explanation by the Tribunal as to how the obligations which the respondents took on as builder under the building contract could be escaped by reason of the respondents' supposedly limited role. Even if they did only contract to supervise the works, the promise to supervise had to include a guarantee of timely completion of the work.

71 The starting point in identifying the obligations accepted by the respondents under the building contract must be s 8 of the Act. That provision sets out warranties about the work to be carried out under a domestic building contract that 'are part' of every such contract, relevantly including that 'the builder' warrants that 'the work' will be carried out with reasonable care and skill and will be completed by the date (or within the period) specified by the contract.[54] It is not in doubt that the contract was a 'domestic building contract' and a 'major domestic building contract' under ss 3(1) and 5 of the Act.

72 Section 3(1) of the Act defines 'builder' as a person who, or a partnership which, carries out domestic building work, manages or arranges the carrying out of domestic building work or intends to do so. Again, it is not in issue that the respondents, trading as Alpine Woodpecker, were a builder within this definition. However, the respondents submit that they were a builder for the purposes of the present contract only in so far as they were supervising the carrying out of the domestic building work. They point to the decision in Mrocki v Mountview Prestige Homes Pty Ltd,[55] in which a builder was found to have obligations only to 'manage' the carrying out of domestic building work.

73 In Mrocki, the question was whether a company which had entered into a contract with developers concerning the construction of an apartment building had done so as a builder or only as a contract manager. The contract that was used was a standard form Housing Industry Association cost plus domestic building contract, modified in an attempt to reflect discussions in which the parties had agreed that the developers would pay for materials and labour and the company would supervise construction for a fixed fee. The developers subsequently engaged suppliers and contractors directly, the project was completed and the company was paid its fee. An issue arose regarding defective works, for which the developers alleged the company was liable by virtue of warranties regarding the building works that were set out in the contract and which reflected those in s 8 of the Act.

74 It was held, both at first instance and on appeal, that the work which the company had undertaken to carry out was the provision of contract management services, and therefore the warranties in the contract applied only to the provision of those services. In the circumstances, no breach of the warranties had been demonstrated. The warranties were to be read in the light of other provisions making it clear that the company was not responsible for completing the works.

75 At first instance, Dixon J went further and rejected a submission that the obligations undertaken by the company were not 'work' under the Act, noting that 'builder' includes a person who manages or arranges the carrying out of domestic building work.[56] He held that it was not necessary to decide the point, in light of his earlier holding that no breach of the warranties had been established. By implication, he considered that the statutory warranties, as well as the contractual provisions, were in this case confined in their operation to the managing or arranging of building work. The Court of Appeal did not address the statutory warranties.

76 It can be seen that Mrocki does not decide the question how s 8 applies in circumstances where a builder has undertaken only to manage or arrange the carrying out of building works. Moreover, Mrocki concerned a contract containing unusual terms, together with significant pre-contractual discussions which bore on the question of construction.[57] To that extent, it depends on its own facts.

77 The present building contract makes no reference to either of the parties who are named as the 'builder' having any obligation merely to 'manage or arrange' (still less only to supervise) the carrying out of the building work. Together with Modern, Alpine Woodpecker was named as builder. The 'builder' warranted that 'the building works' would be completed by the time specified, and 'the building works' were defined as the works 'to be carried out and completed by' the builder as shown in the contractual documents. Whereas in Mrocki the contract specified that the owner would directly engage contractors, here the contract treated the respondents and Modern indistinguishably as the builder and made no provision for any other party to engage subcontractors. The present contract provides none of the foundation upon which the Court relied in Mrocki for holding that the company in that case had an obligation only to manage the building work.

78 In any event, the respondents' argument went beyond the finding in Mrocki that the builder in that case only managed the building works, within the scope of the definition of 'builder' in the Act. The argument here was that the respondents did not even manage or arrange the work, their role being only 'supervisory'. There is no support in the Act for a merely supervisory function constituting a person a 'builder' as defined. Therefore, if the obligation adopted by the respondents was only to supervise the work, this would amount to an impermissible and ineffective attempt to contract out of the statutory warranty in s 8(d). Such a result would be contrary to the Act, both because of the requirements in s 8(d) and because it would defeat the object of the Act to ensure that building work under a major domestic building contract is carried out by builders with the required insurance. It would also be contrary to the evidence of Mr Atwell that the respondents became party to the contract (in partnership with Modern) in order to satisfy s 29 of the Act, which prevented Modern entering the building contract as builder in its own right, since it was not registered as a builder.

79 The words of cl 11.0 are consistent with s 8(d). Read with the definition of 'builder', they make it clear that the 'builder', namely Modern and Alpine Woodpecker, was obliged to carry out and complete the works by the date specified. It follows that both Modern and the respondents were bound by the obligation to complete the building works by that date, and each of them warranted under the contract that this would be done.

Was the building contract relevantly varied by the April 2011 agreement?

80 The applicants contended that the April 2011 agreement constituted a variation of the building contract by which Fingal consented to becoming a party to that contract and to adopting the obligations of the builder, together with the respondents. The applicants submitted that, by virtue of the partnership between the respondents and Modern as required by s 29 of the Act, the signature of Mr Sperling on the April 2011 agreement operated to bind Modern also. As such, the April 2011 agreement was effective to vary the building contract and to substitute Fingal for Modern. Alternatively, the April 2011 agreement incorporated the terms of the building contract, at least by identifying the work required of each party. In either event, the s 8 warranties continued to apply to the April 2011 agreement.

81 The applicants submitted that Fingal expressly took on the obligation of Modern 'to complete the construction ... under the framework of the existing building contract arrangements with Guntram Sperling', effecting no change in the respondents' obligations. Mr Sperling had accepted in his evidence before the Tribunal that the respondents were obligated to complete the works on Lot S2 by reason of the building contract. The obligation of Alpine Woodpecker to complete the works remained on foot.

82 The respondents submitted that the April 2011 agreement did not expressly place any obligations on the respondents to complete the building works on Lot S2. Clause 1, which stated that '[Fingal] (David Winchester) takes on the obligations of [Modern] to complete the construction of Lots 5 & 6 and Lot S2' was the only aspect of the April 2011 agreement that addressed this matter. It was entirely unrealistic to suggest that Mr Sperling entered into the April 2011 agreement on behalf of Modern, who had abandoned the project. The respondents contended that the reference to the 'framework of the existing building contract' was ambiguous and that the evidence before the Tribunal, consistently with the respondents' pleadings, demonstrated that the respondents had only ever performed a supervisory role. Fingal, not the respondents, took on the obligation to complete construction. The questions which led the first respondent to give evidence to the contrary were rightly said by the Tribunal to be 'loaded', and the first respondent's evidence had to be understood in that light. Moreover, the first respondent gave evidence that he felt obligated, as the registered builder, to the applicants and also to the subcontractors; he and the second respondent were 'not [the] kind of people' who would simply walk away from the project.

83 There is some force in the argument that the April 2011 agreement varied the building contract in the manner submitted by the applicants. There is nothing inherently implausible in Mr Sperling acting on behalf of Alpine Woodpecker and its former partner Modern to reconstitute the existing arrangement with Fingal taking Modern's place. Alternatively, the document incorporated the earlier contract by reference and stood together with that instrument as an independent domestic building contract. In either event, the April 2011 agreement was effective to substitute Fingal for Modern as the respondents' partner in the building contract.

84 But it is not necessary to decide whether the April 2011 agreement varied or replaced the building contract. The more important question for present purposes is whether, assuming it did either of those things, it served to alter and confine the obligations of the respondents. It should be mentioned that the applicants objected to the respondents raising this argument, on the basis that a notice of contention ought to have been filed before the associate judge or in this Court. The applicants submitted that the Tribunal failed to explain how it was that the respondents' role was only a 'technical advisory' one.[58] However, the parties have in our opinion sufficiently raised the question of the correctness of her Honour's alternative approach, which identified an obligation on the part of the respondents to complete the works, for this issue properly to be decided on the appeal.

85 The associate judge held that the April 2011 agreement expressly continued the respondents' existing obligations under the building contract and that the Tribunal had erred in relying on the fact that the respondents in fact performed only a technical supervisory role as evidence of what they were obliged to do under the contract.[59] The respondents relied on Mrocki in support of their argument that their obligation was a limited one. However, for the reasons already given, that argument cannot be accepted.

86 Further, the respondents' contention that external circumstances could be relied on to ascertain what was meant by the reference in cl 1 of the April 2011 agreement to the 'framework of the existing building contract arrangements' must also be rejected. In the first place, as explained above, that argument seeks to bring about a result that attempts to contract out of the statutory warranty in s 8(d) and defeat the object of the Act that building work under a major domestic building contract is carried out by a registered builder. Secondly, and in any event, evidence that Mr Sperling's role, both before and after the April 2011 agreement, was in practice confined to a supervisory function as contemplated in his discussions with Mr Demetriou, does not assist in construing the April 2011 agreement so as to show that it effected a change in the contractual arrangements between the respondents and the appellants. Beyond such general evidence, the respondents did not seek to sustain the Tribunal's finding, which the associate judge rejected, by reference to specific evidence of extrinsic circumstances that might resolve any ambiguity in the expression of the April 2011 agreement, or a legal analysis of such evidence. The only evidence which the respondents relied on in this respect was evidence of Mr Atwell to the effect that 'for the sake of speed' Fingal 'relied on Gunter [sic] Sperling's building licence and the existing contract', and that Mr Winchester had said that he would 'be able to build the rest of the buildings based on what's in the building contract'. That evidence did nothing to establish a departure from the existing building contract - on one view, it appeared to reinforce the obligation in the original contract.

87 For the reasons already given, the arrangement between Modern and the respondents did not have the effect of confining the respondents' contractual obligations to the applicants. Nor does a different result obtain after the execution of the April 2011 agreement. In the circumstances, there is no basis for disturbing the approach of the associate judge. The appeal must proceed therefore on the basis that the respondents were at all times bound by their warranty to the applicants to complete the building works by the specified date.

Should the Tribunal's finding as to causation be disturbed?

88 The applicants submitted that the Tribunal's finding that the respondents did not cause the applicants' loss was an aspect of the Tribunal's error of engaging primarily in a causation analysis. The Tribunal ought first to have dealt with the question of breach before considering causation. Its failure to do so constituted an error of law. Because the Tribunal had wrongly identified the respondents' obligation under the contract, it must have asked the wrong question as to causation. The obligation to complete the works was unequivocal and derived from statute. It could not be excluded by reference to evidence of surrounding circumstances.

89 The applicants contended that the matter should therefore be remitted to the Tribunal. It could not be said that remittal would be futile, as the Tribunal might have come to a different conclusion as to causation if it had properly considered the breach. Other options for the performance of the work should have been explored before concluding that the failure to follow the agreed payment arrangements had caused the work not to be completed. For example, Mr Sperling was a registered building practitioner and there was no reason to suppose that he could not himself have worked on building the homes, notwithstanding the fact that the existing subcontractors were unwilling to continue with the work.

90 The applicants further submitted that the respondents waived any breach of the April 2011 agreement because work continued from May to late August 2011 without apparent difficulty, the respondents did not complain about the form of payment, there was evidence from the first respondent that he was told by Mr Winchester that the kitchens - the final major installation - were awaiting collection from Bunnings and the first respondent said he could have completed the works himself.

91 Turning to what they described as the 'factual context', the applicants contended that their failure to pay money into trust was not, contrary to the Tribunal's view, a break in the chain of causation. There were several reasons for this:

(a) the applicants made payments to Fingal of $320,000 between May 2011 and 29 August 2011.[60] During that period, work continued on Lot S2 from frame stage to 95 per cent completion. The works stopped at the end of August 2011. The April 2011 agreement itself recognised that there were issues with respect to the payment of subcontractors, and it was not clear to what extent the subcontractors' claims related to Lot S2, as opposed to Lots 5 and 6. As the applicants put it, 'the rot had already set in'. While the payments into trust may have provided a partial solution to that difficulty, the failure to make such payments could not, on a common sense view, be taken to be a cause of the loss, nor did it cause work to be abandoned;

(b) there was no complaint from the respondents or Fingal about the failure to make payments into trust, either in 2011 or before the Tribunal, nor had the respondents suggested before the Tribunal that the failure to make payment into trust had caused any difficulty; and

(c) at all times, the respondents retained the obligation to complete the works. Whether they did so themselves or with the assistance of others was irrelevant, provided that the works were completed in a timely manner.

92 The applicants submitted that, in light of these matters, attributing the applicants' losses to their non-compliance with the April 2011 agreement rather than the respondents' 'fundamental obligation to do the work' offended common sense. Put differently, the failure to pay the money into trust did not break the chain of causation flowing from the respondents' financial mismanagement and breach of contract.

93 Lastly, the applicants contended that there was no allegation before the Tribunal that the applicants' failure to pay the money into the solicitors' trust account caused their losses. Causation was only put in issue to the extent that the respondents pleaded that any loss and damage suffered by the applicants was not caused by any breach of the April 2011 agreement by the respondents. The failure to make payment into trust was not explored in evidence or submissions. There was no evidence that the respondents sought payment into trust as contemplated by the April 2011 agreement. They had therefore effectively waived their right to insist on compliance with the obligation to make payment into trust. In this respect, evidence that it was difficult to retain subcontractors in the Dinner Plain area was of no moment to the issue of causation. The respondents had offered to assist Mr Winchester with the work themselves, but he refused. Had the respondents completed the work, the applicants would have been able to access funds to pay for that work.

94 In response on the question of causation, the respondents submitted that the Tribunal was right to attribute the applicants' losses to their failure to pay the amounts owing into trust rather than direct to Fingal. The first respondent had given evidence that one of the main subcontractors stopped work in late August because he wasn't paid. Mr Winchester and the second respondent gave evidence to like effect. Payment into the trust account was designed to ensure payments could be made to subcontractors. Whatever the reason for the subcontractors not being paid by Fingal, the mechanism of payment into trust was intended to prevent precisely what had transpired.

95 The respondents submitted that the matters raised by the applicants did not break the chain of causation. The payments were made to Fingal, rather than the trust account, in breach of the April 2011 agreement. Those payments included advance payments. None of this was approved by the respondents, who were unaware of it. It was Fingal who stopped work in late August, not the respondents. Contrary to the applicants' submissions, the respondents did make complaint about the payments to Fingal, and there was evidence that these payments created difficulties with completing the work. The financial difficulties facing the project were not of the respondents' making; rather, they were due to Modern, Mr Atwell, Mr Winchester and the applicants themselves.

96 The respondents submitted that causation was clearly in issue by reason of their defence, such that it could not be said that the Tribunal had decided the issue of causation inconsistently with the respondents' case. Moreover, Mr Atwell and Mr Winchester were cross-examined on the failure to make payment into trust, and the Tribunal, through its participation in the examination of Mr Atwell and Mr Winchester, put the applicants on notice of the significance of the nonpayment into trust. The suggestion that the respondents 'waived' the right to insist on payment into trust and were not concerned about payments to subcontractors was inconsistent with the evidence.

97 The respondents relied on evidence from Mr Atwell that finding subcontractors in the Dinner Plain area was difficult. Dinner Plain is an alpine area, and at the time of the April 2011 agreement the ski season was approaching. Tradespeople were essential to completion of the works. There was initially a cross-claim by a company related to Mr Atwell for unpaid rent from Mr Winchester; the rent was for accommodation of tradespeople. These matters showed the logistical difficulties of sourcing subcontractors for the works. This was also supported by evidence given by Mr Atwell and Mr Winchester. The respondents' offer to help Fingal to complete the works had fallen on deaf ears; Mr Winchester ignored them and gave conflicting information. Further, the respondents did not have access to the building as Fingal had the key. Nor could they complete all of the works themselves, as they said in their evidence.

98 The associate judge held that there were 'real issues' concerning causation and the question of damages generally.[61] In particular, the Tribunal failed to address the obligations and liabilities of the respondents under the building contract.[62] It is evident that the Tribunal's conclusion on causation was bound up with its finding as to the limited nature of the respondents' obligations under the contract. Apart from anything else, the applicants are correct to submit that the question what loss was caused by the breach depends, logically, on first identifying that breach. For the reasons given, in our opinion, the Tribunal erred in its identification of the respondents' obligation and necessarily was also incorrect in its view of the breach. The issue is whether this Court is now in a position to decide the question of causation for itself.

99 In our opinion, it is not. It is certainly plausible, as the Tribunal held, that the fact that the applicants made payments directly to Fingal rather than into the nominated trust account played a critical role in the failure of the respondents to complete the building works. However, the applicants complained that the Tribunal's finding had not been the subject of pleadings or submissions. The parties' submissions demonstrate that the determination on causation must depend on a detailed analysis of the facts, including the resolution of differences between some witnesses in respect of whom the Court has not had the advantage of seeing the evidence being given. Much may depend on the financial circumstances of the relevant parties, the times and amounts of the various payments that were due and made and the parties' knowledge of those payments. Moreover, as the associate judge observed, there are other related issues, including an argument as to estoppel raised by the respondents, which need to be dealt with by the Tribunal in any event.[63]

100 In the circumstances, the associate judge was correct in her alternative findings to conclude that the matter ought to be remitted to the Tribunal. Her Honour would have remitted the matter for 'rehearing and determination according to law' but made it clear that she was not presupposing that the 'rehearing' would be before a differently constituted Tribunal.[64] That was appropriate. It should be a matter for the Tribunal, after hearing submissions if necessary, how it ought to be constituted.

101 The application for leave to appeal should be granted and the appeal allowed. The orders of the associate judge and of the Tribunal should be set aside and the proceeding should be remitted to the Tribunal for rehearing and determination in accordance with this Court's reasons.

[1] Section 3(1) defines a 'major domestic building contract' as a domestic building contract 'in which the contract price for the carrying out of domestic building work is more than $5000'.

[2] Snowy Corner Pty Ltd (in liq) v Sperling [2014] VCAT 1292 ('Tribunal Reasons').

[13] See [22] above, quoting Tribunal Reasons [66].

[14] The notice of appeal went through several iterations: see Fraser v Sperling [2015] VSC 698 [14]-[22] ('Reasons').

[18] Ibid [30], quoting Tribunal Reasons [26]-[29].

[24] Ibid [43], citing Tribunal Reasons [73]-[74].

[26] See [13] above.

[28] The issue of causation, raised in ground 1 of the notice of contention, had not been raised expressly by the applicants' proposed grounds, but was the subject of the third question of law before the associate judge and is implicit in proposed ground of appeal 4(c).

[34] See Building Act 1993 ss 135, 137A.

[35] Roncevich v Repatriation Commission [2005] HCA 40; (2005) 222 CLR 115, 136 [64] (Kirby J).

[39] Osland v Secretary, Department of Justice [No 2] [2010] HCA 24; (2010) 241 CLR 320, 333 [21] (French CJ, Gummow and Bell JJ) ('Osland'), citing TNT Skypak International (Aust) Pty Ltd v Federal Commissioner of Taxation (1988) 82 ALR 175, 178 (Gummow J).

[40] Osland [2010] HCA 24; (2010) 241 CLR 320, 333 [21] (French CJ, Gummow and Bell JJ).

[41] Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771, 805 [165] (Whelan JA; Santamaria JA agreeing); see also at 783 [48] (Warren CJ) ('Cosmopolitan Hotel'). The Court of Appeal's decision was reversed on other grounds: Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2016] HCA 26; (2016) 90 ALJR 770.

[42] Cosmopolitan Hotel (2014) 45 VR 771, 805 [165]-[166] (Whelan JA; Santamaria JA agreeing); see also at 783 [48] (Warren CJ). See also Haritos v Federal Commissioner of Taxation [2015] FCAFC 92; (2015) 233 FCR 315, 353-4 [104]-[105] (Allsop CJ, Kenny, Besanko, Robertson and Mortimer JJ), quoting Avetmiss Easy Pty Ltd v Australian Skills Qualification Authority [2014] FCA 314 [75]-[77] (Mortimer J).

[44] Tribunal Reasons [23(e)], [42], [55]. The provisions for payment instalments in the document in exhibit JG-6 also match those set out in the April 2011 agreement.

[48] Reasons [30], quoting Tribunal Reasons [29].

[51] See generally Teheran-Europe Co Ltd v S T Belton (Tractors) Ltd [1968] 2 QB 545, 552 (Lord Denning MR), 555 (Diplock LJ); Maynegrain Pty Ltd v Compafina Bank [1982] 2 NSWLR 141, 149-50 (Hope JA).

[54] Section 8(d).

[55] [2010] VSC 624, affd [2012] VSCA 74 ('Mrocki').

[56] [2010] VSC 624 [114].

[57] See Mrocki [2012] VSCA 74 [28]-[30] (Buchanan JA; Hansen JA and Hollingworth AJA agreeing).

[59] Reasons [43]-[46], citing Lumbers v W Cook Builders Pty Ltd (in liq) [2008] HCA 27; (2008) 232 CLR 635, 670 [107] (Gummow, Hayne, Crennan and Kiefel JJ).

[60] The applicants contended that by 30 May 2011 they had paid more than $364,000 in respect of the building contract, of which almost $200,000 went to Fingal.