Grace v Pepe [2016] NSWCATAP 157 | Case summary

Grace v Pepe [2016] NSWCATAP 157 | Case summary | Zoe

A limited appeal from the CTTT then lay to the District Court of NSW under s67 of the CTTT Act. Section 67 provided 67 Appeal against decision of Tribunal with respect to matter of law (1) If, in respect of any proceedings, the Tribunal decides a question with respect to a matter of law, a party in the proceedings who is dissatisfied with the decision may, subject to this section, appeal to the District Court against the decision. (2) An appeal is to be made in accordance with the rules of the District Court. The rules of the District Court may provide that an appeal (or such classes of appeal as may be specified in the rules) may be made only with the leave of the Court. (3) After deciding the question the subject of such an appeal, the District Court may, unless it affirms the decision of the Tribunal on the question: (a) make such order in relation to the proceedings in which the question arose as, in its opinion, should have been made by the Tribunal, or (b) remit its decision on the question to the Tribunal and order a rehearing of the proceedings by the Tribunal. (4) If such a rehearing is held, the Tribunal is not to proceed in a manner, or make an order or a decision, that is inconsistent with the decision of the District Court remitted to the Tribunal. (5) If a party has appealed to the District Court against a decision of the Tribunal on a question with respect to a matter of law, either the Tribunal or the District Court may suspend, until the appeal is determined, the operation of any order or decision made in respect of the proceedings. (6) If the Tribunal suspends the operation of an order or a decision, the Tribunal or the District Court may terminate the suspension or, where the District Court has suspended the operation of an order or a decision, the District Court may terminate the suspension. (7) If a rehearing is held, fresh evidence, or evidence in addition to or in substitution for the evidence on which the original decision was made, may be given on the rehearing. (8) A reference in this section to a matter of law includes a reference to a matter relating to the jurisdiction of the Tribunal. (9) The regulations may exclude the making of an appeal under this section in such classes or description of cases as may be prescribed.

The email and the documents and events which followed it were reproduced and dealt with by Judge Taylor as follows: 8. On Monday, 20 September 2010 the owners wrote to the builder by email in these terms: "Sam, All work will cease immidiately [sic] to ensure that a proper investigation by the office of fair trading and authorised personal [sic] can be carried out. You are not allowed to be on or near the site until this is done to ensure that any outstanding monies can be assessed without predjudice [sic]. You will be tresspassing [sic] if you or people on your behalf come on or near the site and neighbours have been notified to call the police to ensure that this happens. If in the event that there is money owed to you after the investigation then we will pay what is owed less any costs to fix damage and change any things that were nt [sic presumably 'not'] built to the original plan and that you continued without advising us or seeking permission. Obviously, this as stated will be going through the official process due to irrepairable [sic] problems. Unfortunately your threats have also been noted and reported and if necessary after a meeting with a solicitor tomorrow I will notify the police. It is very unfortunate that you have behaved in this manner not just in threats (which is not the first time) but your actions on this project. We have tried time and time again to deal with you but you have avoided all manner of communications that would have assisted in this projects completion. We believe that we have over paid up to this point but this will be veryfied [sic] when the house is assessed by multiple builders to veryify [sic] work outstanding and defects. We will of course be persuing [sic] damages caused to our property, personal belongings and of course rent that we have had to pay due to our property being accidently [sic] damaged by trades and of course damage caused by the weather and you negligent actions. We will be having several people coming through the property in the next 2 days so we can give this information to the fair trading to support our complaint and claim. Can you please clearly itemise all outstanding work and the price you have quoted for that work, this is to include mac render upstairs and render all areas downstairs as per drawings, gyprock, timber flooring etc. Can you also provide a list of all damages that will be taken into account like tiles, concrete etc and changes you have made without notifying us like timber posts that you changed after quoting. We are officially suspending work on site so a full evaluation of the work and damages can been assessed. It would be adviseable [sic] to allow assessments to be made so that we can all move forward without delay. Any futher [sic] delays will only mean there will be further damage claims due to not being allowed back in to the property due to health and safety issues and insurance claims. Your co operation would be appreciated in the expediant [sic] working out of work outstanding and monies owed and of course cancelation [sic] of this contract. Anthony".

In relation to grounds 4 and 5 Judge Taylor again held that they did not raise questions of law which he could decide: GROUND 4 "The learned Member in the Tribunal erred in law in that he failed to consider whether: d. The Notice to Rectify, issued to the plaintiff by the defendants on or about 24 December 2010, was issued in accordance with the Contract and, further, whether it was valid and effective at law; and e. The Notice of Termination, issued to the plaintiff by the defendants on about 8 February 2011 was issued in accordance with the Contract and, further, whether it was valid and effective at law." 49. This ground concerns matters that the Senior Member is asserted to have failed to consider. But an appeal under s 67 concerns matters that the Tribunal decides, not ones that it fails to consider. Failures to consider matters may potentially result in errors in other decisions made by the Tribunal but it is necessary to challenge those decisions, not the failures to consider matters. There was no suggestion that the matters in ground 4 were implied decisions of the Tribunal. 50. The Senior Member (at [18]) found that the owners were entitled to terminate the contract. That is, in substance, a finding that the notice of termination was valid. The question of whether the notice of termination or the notice to rectify was valid is a question with respect to a matter of law but, as I read ground 4, it is a question not raised by that ground. GROUND 5 "The learned Member in the Tribunal erred in law in that he either failed to consider or failed to determine whether the defendants' Notice of Termination was wrongful and otherwise amounted to a repudiation of the Contract by them." 51. This ground raises largely the same issue as raised by ground 4. There does not seem to me to be a material difference in the present case between whether the notice of termination was invalid and ineffective (under ground 4) or wrongful (under ground 5). The builder did not identify any material difference between them. Accordingly, the reasoning above in the previous ground applies also to this ground. 52. There is an additional assertion in ground 5 to the effect that the Senior Member failed to consider or determine whether the notice of termination was a repudiation. Again, for the reasons given in relation to ground 4, a failure by the Tribunal to decide a matter does not enliven the jurisdiction in this Court granted by s 67(1). Jurisdiction under this provision arises if the Tribunal decides a relevant matter.

However, His Honour proceeded to find that the Tribunal's reasons did not reveal any pre-September 2010 conduct by the builder sufficient to warrant termination. He went on to say: The question whether the owners may have had an entitlement to terminate by reason of the conduct of the builder after the owners' suspension on 20 September 2010, including any failure by the builder to comply with a valid notice to rectify, does not appear to be determined by the Senior Member. 82. It is apparent that the owners in issuing the notice of termination on 8 February relied principally on conduct after 20 September 2010, namely, the failure of the builder to comply with the notice to rectify. This raises a question as to whether I should consider and determine whether the termination by the owners was valid for reasons other than the reasons given by the Senior Member, including, in particular, whether there was a valid notice to rectify issued by the owners and whether that enlivened a right to terminate because of the builder's conduct after he received that notice. 83. There are matters in the notice to rectify that cause concern. It apparently includes, by reference to the annexed report, both defective and incomplete works. It calls on the builder to complete both the defective and incomplete works in 20 days, perhaps 20 calendar days, in circumstances where there may have been an entitlement in the builder by virtue of the definition of "days" in the contract (see cll 13 and 18) to have until about 6 February 2011 to complete defective works as a result of the notice. 84. The time at which the builder needed to complete the contract works does not seem to have been given any attention by the Senior Member and was not given any particular attention before me. It maybe that the suspension of work by the owners operated to postpone the date for the builder to complete the works. The validity of the owners' notice to rectify and the consequences of any failure by the builder to comply with it may also depend upon whether the notice operated as an express or implied lifting of the owners' suspension. 85. There may also be questions about whether the items referred to as "defects" are, in an executory building contract, properly defects or merely incomplete work. There may also be questions about whether the builder's conduct after the issue of the notice to rectify, whether valid or not, could constitute a fundamental breach or a repudiation.

Thereafter acknowledging that the matter needed to be referred back to the Tribunal for rehearing, Taylor DCJ gave guidance as to the matters requiring further consideration: 89. The question of whether the notice to rectify is valid will involve consideration of a number of matters, including cl 13 of the contract, the content of the notice both as to "stopping work" and as to failing to rectify "defective work" and the circumstances at the time of the issue of the notice, including such matters as whether there had been prior written notice given to the builder of defective materials in view of the definition of "notice" under the contract. 90. I do not propose to provide any final view in respect of these questions which involve not only matters of law but questions of fact that have not been considered by the Senior Member. 91. The Senior Member may need also to consider the question of termination for repudiation or fundamental or sufficiently serious breach under the common law which may possibly arise from the conduct of the builder in failing to do anything after, if it be the case, he was invited back to do work by the notice. 92 If the termination by the owners were valid, there would be no need to determine the question of damages since the Senior Member has already determined them. 93. However, if the Senior Member came to the view that the matters to which I have referred do not give rise to an entitlement in the owners to terminate, then the Senior Member may need to consider whether the contract has been abandoned, given that the owners, after 8 February 2011, treated the contract as at an end and the builder, by his apparent conduct in doing nothing after that time, also appeared to have treated the contract as at an end. 94. The builder, by not terminating in October 2010, appears to have elected not to end the contract by reason of any failure in the owners to comply with the builder's notice of suspension of work under cl 14. Although the Senior Member found that that notice was invalid by reason of the builder's reliance upon a failure to pay moneys under invalid invoices, the question of whether the notice would nevertheless have been valid because of the owners' invalid suspension has also not been considered. However, given that the builder did not act within a reasonable period after noncompliance with that notice but rather waited a further 14 months, it seems unlikely that any entitlement in the builder to terminate persisted. In any event, the builder's primary submission before me was that the contract was abandoned, rather than that it was terminated by him. 95. The builder has only claimed for unpaid invoices and is only entitled to those funds if he has done the work sufficient to warrant the issue of those invoices under cl 7. The Senior Member has decided, validly in my view, that that did not occur. Thus, in the event that the owners' termination was not valid, the question arises as to the proper assessment of the monetary entitlements of the parties. In that event, the builder is entitled to retain that proportion of the contract price that represented the proportion of the contract works that had been performed. 96. To give an example, invoice 10 claims an amount indicating that 91% of the contract works by value had been completed. The Senior Member concluded that those works had not been done. At that stage the builder had been paid approximately 71% of the contract value. Whether the builder was entitled to anything in addition to the amount already paid would depend upon a finding of the Senior Member as to what proportion of the work had been completed by the builder at the time he ceased work on 20 September 2010. 97. Additionally, if the Senior Member found an amount less than 71% the owners would have an entitlement to repayment of overpayments arising from excessive claims by the builder in invoice 8 and potentially earlier. Thus, if the owners have not validly determined the contract, it is necessary for the Senior Member to determine the percentage of the contract work completed by the builder. I leave aside the question of defects and the other amounts since the Senior Member has assessed them and they were not in dispute before me.

As indicated earlier the re-hearing occurred on 26 November 2015 by the Tribunal again constituted by Mr Meadows. Its decision was published on 31 December 2015. At the outset we reproduce clauses of the contract which we regard as relevant: 6 Commencement, purpose of and completion of work (a) (i) The Owner must give the Builder possession of such parts of the work site as is reasonably required to allow work to proceed. (ii) The proposed commencement date and the anticipated number of days required to do to the work are set out in Schedule 3. (iii) The Builder is to complete to work within the period identified in Schedule 3 as adjusted under the contract. This period is known as the construction period. The construction period will commence from the date of actual commencement of work. (b) The construction period is to be adjusted as set out below: (i) An extension of time for delays due to variations and other events or matters reasonably beyond the Builder's control must be allowed, Issues such as an inability to work due to weather or its consequences, site access issues including safety, an inability to obtain materials or trades people will affect the ability to do work. Such issues will justify extra time to do the contract work. (ii) The Builder is to notify the Owner, in writing, of such matters within a reasonable time of becoming aware of the same. (iii) The construction period will be adjusted accordingly. 13 Default by Builder If the Builder makes default by:- (i) wrongfully stopping work for an unreasonable period; (ii) failing to proceed with due expedition to enable completion by the due date after allowing for changes to the construction period; or (iii) failing to comply reasonably with written notice to replace defective work or improper materials so that the Builder can advise the Owner that he/she can Complete the work for the contract sum or within the contract period, as varied or extended. THEN the Owner by written notice is to advise the Builder of the matter or matters constituting the default and require the Builder to rectify the same within twenty (20) days. If the Builder fails to rectify the default within the period allowed, the Owner may by further written notice determine the Builder's employment. 14 Default by Owners:- (a) If the Owner (i) interferes with or prevents the Builder from carrying out the work; or (ii) fails to satisfy the requirements of clause 1(d); or (iii) fails to pay any sum or part sum of money due under the contract; or (iv) fails to provide written instructions as required by the contract, including confirming variation. then the Builder may suspend work until the default is rectified. (b) The Builder must advise the Owner in writing of the suspension as work under this clause and identify the reason for the suspension. (c) The completion date for the work will be extended by the same number of days as any suspension under this clause. (d) If the Owner does not correct the default within ten(10) days of receiving the suspension notice under this clause the Builder may by written notice determine this contract and the Owner is liable to the Builder for any money due to the Builder and by way of compensation any damage suffered by the Builder due to the Owner's default. 15 Notices (a) Any notice by one party to the other must be in writing and identify in sufficient detail, supported by relevant documents or reports, the purpose of and outcome required by the Notice. (b) Any notice or claim to be given by one party to the other is sufficiently given or served if given to the party to who it is addressed at the contract nominated address or personally delivered to the other party or successfully sent to the facsimile number identified in this contract. (c) However a notice or other document which require service can not [sic] be served by e-mail. (d) If a party's contact details change the party who's details have changed must notify the other party in writing. This must be done within a reasonable time of the change occurring.

The builder submits that par [83] and following of the Tribunal's reasons conflicted with rulings on matters of law given by Judge Taylor. Although the owners contest this, and there may be some doubt as to whether an express finding was made by Judge Taylor, it seems to us that the purported notice to rectify of 24 December 2010 did in law constitute an affirmation of the contract which precluded the owners from relying either contractually or at common law on pre-existing conduct known to them as constituting repudiation by the builder. We think that the following statement in Carter's Breach of Contract 3rd Edition 2011 correctly states the law: [524] - A promisee who is entitled to elect to terminate the performance of the contract for breach or repudiation loses the right to terminate if the promisee elects to continue with the performance of the contract; [533] - An election to continue with performance by a promisee entitled to terminate the performance of the contract for breach or repudiation is generally final and irrevocable. Thus, the usual result of such an election is permanent loss of the right to terminate. [534] - Where a promisee who is entitled to terminate the performance of the contract for breach or repudiation elects instead to continue with the performance of the contract the promisee loses any right to terminate to which the conduct is referable. Therefore, if the promisee enjoyed only one such right, any subsequent attempt by the promisee to terminate the contract will be ineffective. Where the promisee has elected to continue with the performance of the contract, the general principle is that election will extend to all rights of termination based on breaches within the promisee's knowledge. This principle operates whether the rights are concurrent or independent. [548] - Where a promisee who is entitled to terminate the performance of the contract for breach or repudiation by the promisor loses the right by election to continue with the performance of the contract,... Both parties remain bound to perform their respective contractual obligations.

Grace v Pepe

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Judgment (5 paragraphs)

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