Grandview Pty Ltd v Bacon

NCAT Appeal Panel|2021-01-25

REASONS FOR DECISION

This is an appeal by a building company (Grandview) and its director (Mr Szatow) from orders that they were jointly and severally liable, together with Mr Reading (another builder), for the costs of rectification of deficient building work done at the first respondent's (Dr Bacon's) residence.
The Tribunal found there were two building contracts entered into by Dr Bacon: one with the appellants (referred to as the "First Contract" by the Tribunal); and a subsequent one entered into at the appellant's request with Mr Reading (referred to as the Second Contract).
It appears that the appellants, disentitled from entering into such a building contract because of licensing and insurance restrictions, attempted to circumvent those restrictions by holding themselves out to Dr Bacon as builders able to enter into such contracts, and taking a financial benefit therefrom, but then having a second, licensed builder enter into a contract on the same terms with the home owner whilst having private arrangements between the appellants and the subsequent builder for the sharing of costs and profit.
In summary, the appellants argued that the Tribunal erred in finding that Mr Szatow was a party to the First Contract, that the First Contract was for more than mere building consultancy services, erred in assessing quantum of the costs of rectification, and that that between themselves and Mr Reading, erred in holding them liable for two thirds of the costs of rectification and two thirds of the cost of certain unpaid variations.
For the reasons that follow we are of the opinion that the appeal should be dismissed.

Grounds of Appeal

The appellant raised the following five grounds of appeal: 1. The Tribunal erred in finding that Mr Szatow was a party to the First Contract. 2. The Tribunal erred in finding that the First Contract was for the whole of the works rather than for (lesser) building consultancy services. 3. The Tribunal erred in calculating quantum by failing to take into account betterment. 4. The Tribunal erred in finding the appellants should each bear one third of the liability, as between them and Mr Reading, to Dr Bacon. 5. The Tribunal erred in finding the appellants liable to Mr Reading for two thirds the value of work and materials supplied by Mr Reading for certain variations.

Ground 1

In oral submissions the appellants submitted that there was no evidence to support the fining that Mr Szatow was a party to the First Contract.
We do not accept this submission. There was evidence which supported the finding. The evidence in favour of that finding appears in the Tribunal's reasons at [82] and [83 (set out above at [12]). Once there is some (credible) evidence in support of a finding of fact a "no evidence" point such as this must fail.
In its Further Amended Notice of Appeal the appellant made a different submission. They contended that the Tribunal had ignored four documents on this issue, each of which bore Mr Szatow's name over a title block bearing Grandview's name. The submission was that those documents supported the submission that Mr Szatow was, at all times, acting in his capacity as director of Grandview and not in a personal capacity.
This point is, in substance, an adequacy of reasons point and picks up what was said by McColl JA, with whom Ipp JA and Bryson AJA agreed, in Pollard v RRR Corporation Pty Ltd [2009] NSWCA 110. In that case her Honour said: "[62] In Beale (at 443) Meagher JA referred to the requirement that a judge should refer to evidence which is important or critical to the proper determination of the matter as the first of the three fundamental elements of a statement of reasons. While his Honour explained that it was unnecessary to refer to the relevant evidence in detail, especially in circumstances where it is clear that the evidence has been considered, he added that where such evidence was not referred to by the trial judge, an appellate court may infer that the trial judge overlooked the evidence or failed to give consideration to it, referring to North Sydney Council v Ligon 302; see also TCN Channel Nine Pty Ltd v Anning [2002] NSWCA 82; (2002) 54 NSWLR 333 at [150] per Spigelman CJ (Mason P and Grove J agreeing). Meagher JA added that '[w]here conflicting evidence of a significant nature is given, the existence of both sets of evidence should be referred to.' [63] Where, as in the present case, there is documentary material arguably supporting a party's case, that material must be considered in the judge's reasons in a satisfactory way: State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in liq) [1999] HCA 3; (1999) 73 ALJR 306 (at [94]) per Kirby J."
In our view the evidence identified was not important or critical evidence. Other documents bearing Mr Szatow's name over a title block bearing Grandview's name were in evidence and were expressly referred to in the Tribunal's reasons (see at [8] above). Thus, the Tribunal was aware of the general fact that Mr Szatow's name appeared on various business documents over a title block bearing Grandview's name.
However, the documents identified are simply more examples of that general fact and more evidence of why Grandview was a contracting party. The Tribunal was not required, per Pollard, to refer to all of the evidence, especially where the evidence identified was simply more evidence of the same general fact.
The critical evidence relevant to this ground of appeal was not documents bearing both Mr Szatow's and Grandview's names, but evidence relevant to whether Mr Szatow was contracting on his own behalf. In this case that evidence consisted of documentary evidence bearing Mr Szatow's name without any reference to Grandview (referred to in the Tribunal's reasons in (5)-(7) set out at [8] above), together with critical conversations in which Grandview was not mentioned (referred to in the Tribunal's reasons at [83]-[84] set out at [12] above).
Therefore, we do not accept that the identified evidence was overlooked, was critical or important to the issue at hand, nor indeed relevant to it. We therefire do not accept the appellant's submission.
For completeness, the appellant also submitted that there was only one document "without a Grandview notation". This is factually incorrect. There were two critical and important documents, each of which was apparently given to Dr Bacon on separate occasions (see (5)-(7) set out at [8] above and paragraphs 11 and 12 of Dr Bacon's affidavit affirmed on 19 June 2019).
In oral submissions the appellant also contended for the proposition that the Tribunal erred in making this finding of fact because no reasonable Tribunal could have made that finding.
We are doubtful whether the error alleged is an error of law outside of an administrative law context. We appreciate the Tribunal is an administrative body but part of its function is judicial (although it is not a court and its members are not judicial officers). Be that as it may, we are not persuaded that no reasonable Tribunal would have made the same finding of fact. The Tribunal was persuaded by what appears to us to be important evidence including the fact that the two documents specifically identified by the Tribunal were tilted "Project Scope" (which then set out, in short terms, the building work required) and "Payment Schedule" which set out what amounts would need to be paid by Dr Bacon on the happening of the specified events. The scope and cost of building works are critical matters to be agreed between parties, and it was those two documents which bore Mr Szatow's name alone.
We reject Ground 1.

Ground 2

In oral submissions the appellants submitted that the Tribunal erred in finding that the First Contract was for the whole of the works rather than for (lesser) building consultancy services.
However, no error of law was identified in either written or oral submissions in relation to that finding. The appellants made reference to various facts and assertions which, they submitted, supported a contrary finding. For example, the appellants drew attention to the fact that neither Grandview nor Mr Szatow were able to enter into a building contract such as the one at hand because of certain licence and insurance restrictions.
Those submissions would be relevant at a hearing but were not relevant to an appeal on a question of law. The submissions simply amount to an attempt to re-argue a question of fact which was argued before the Tribunal, rather than seeking to identify an error made by the Tribunal in reaching its finding of fact.
In the appellants' written submissions, the appellants submitted that the First Contract had been novated to the Second Contract.
We are not satisfied that novation was raised by the appellants below, and so should not be considered for the first time on appeal. But in any event we do not agree that novation took place. There was no evidence to support a finding that the parties agreed to substitute the Second Contract for the First, nor that the parties agreed that the discharge of the First Contract was the consideration for entering into the Second Contract. Both are matters that the appellants would have needed to prove before the Tribunal, as the passage from Halsbury's quoted by the appellants in their written submissions confirms.
We reject Ground 2.

Ground 3

The appellants contended that the Tribunal erred in failing to account for betterment in the calculation of quantum.
At [110] of its reasons the Tribunal said of the now appellants' written submissions provided to the Tribunal: "The First and Second Respondents' Written Submissions dated 29 June 2020 at [64] - [66] are not supported by any substantial evidence. A case relying on the qualification of "reasonableness" was not advanced properly, or at all, during the hearing. For instance, there was no cross examination of Dr Bacon suggesting that she was using a technical breach of contract to secure a profit which was not covenanted. Nor did they contend, supported by appropriate evidence, that any damages awarded should be discounted to allow for betterment."
The paragraphs of the submissions referred to in the quote above advanced a submission that the reasonable costs of constructing a replacement deck (to replace the deficient one) could be ascertained by applying a square metre rate for like structures. However, as the Tribunal pointed out, there was no substantial evidence establishing those facts.
Of greater importance are the Tribunal's observations that the appellants did not contend at the hearing that there should be any allowance for betterment, and nor was there any appropriate evidence by which such an allowance could be made.
The appellants submitted that, although the word "betterment" was not used, it was an argument raised by them before the Tribunal.
We disagree.
The concept of betterment does not appear in the appellants' Points of Defence, nor does it appear in their written submissions to the Tribunal. In those written submissions the appellants took three points. First, that the decision to rectify the defective work by removing and replacing it was "unreasonable". Second, if reasonable, the methodology used to quantify the cost of removing and replacing the deck was in error. Third, that the cost of the work should have been assessed in accordance with the work that was built to specification and in accordance with the Development Approval. None of those submissions include the concept of betterment. Nor were we taken to a transcript or a portion of the sound recording where it was said the argument of betterment was raised.
As betterment was not raised before the Tribunal it should not be allowed to be raised for the first time on appeal. Had it been raised it would necessarily have been the subject of evidence. As the appellant's quoted passage on betterment from Halsbury's points out, a contractor is not entitled to a reduction in rectification costs unless the contractor proves that the betterment is the result of a voluntary choice by Dr Bacon, that Dr Bacon had failed to mitigate her loss and that the cost of rectification was out of all proportion to the loss caused by the breach of contract. The first two of those factors required evidence, and required certain factual propositions to have been put to Dr Bacon in cross-examination. We were not taken to any evidence on the point, nor is any apparent to us. Further, none of the required propositions of fact were put to Dr Bacon.
In written submissions the appellants submitted that the Tribunal erred in failing to find that the rectification work undertaken by Dr Bacon was unreasonable. The alleged error of law was the Tribunal's alleged failure to correctly apply legal principle, namely the test for reasonable repairs laid down by the High Court in Bellgrove v Eldridge (1954) 90 CLR 613.
As we understood the submission as put to us, this was simply another way of raising betterment and we would reject it for the reasons given earlier.
Insofar as the submission may have picked up the "reasonableness" submission put to the Tribunal (see [42] above), we can find no error in the Tribunal's application of the law. It is clear from the terms and content of the matters referred to by the Tribunal its reasons at [61], [109], [116] and [118] that the question of reasonableness was firmly in the Tribunal's mind and we can see no error in the Tribunal's findings or application of legal principle.
We reject Ground 3.

Ground 4

The appellants contended that the Tribunal erred in finding, as between themselves and Mr Reading, that each should bear one third liability for the costs of rectification.
The appellants submitted in their oral submissions that the Tribunal's finding at [126] of its reasons in relation to "principal contractor" was in conflict with its finding that each should be one third liability.
At [126] the Tribunal said: "For the foregoing reasons, I do not accept that Mr Szatow and Grandview were the principal contractors with Dr Bacon and as such, that they must indemnify Mr Reading from any liability to Dr Bacon under the Second Contract." (Emphasis ours)
We do not see how the Tribunal's rejection of the submission by Mr Reading that the appellants were the "principal contractors" is inconsistent with the Tribunal's finding that each should bear one third liability. On the contrary, the rejection of that submission is consistent with the ultimate finding.
In their written submissions the appellants submitted the Tribunal apportioned the liability based upon a pro rata division of money received from Dr Bacon (they both received amounts from Dr Bacon at various times). This submission is incorrect. The one third each liability finding was simply based on the fact that three contractors had each agreed to perform the same work, and each had breached their contract.
We reject Ground 4.

Ground 5

The appellants' final ground of appeal was that the Tribunal erred in finding that they were liable to Mr Reading for a proportion of the cost of work and materials incurred in certain variations.
In relation to variations the Tribunal said: "[133] Mr Reading puts a claim in an amount of $8,692.00 on account of variations which he says were substantially completed at Mr Szatow's direction and which remain unpaid. He submits that the first and second respondents are liable to him in that amount irrespective of the outcome of Dr Bacon's claim in the primary proceedings (HB 19/09424): see Third Respondent's Submissions in reply on Cross Claim HB 20/05909 dated 7 July 2020 at [12c]. I disagree. Variations 516A, 516B, 516C and 516D all relate to work done. and materials supplied in respect of the residential building work on Dr Bacon's Property. As I have found that work to be defective, I do not accept that an entitlement to payment arises independently of the obligations incumbent on Mr Reading, Grandview and Mr Swatow under the First and Second Contracts. [134] No evidence was led, nor orders sought, as to a taking of accounts between the parties to the joint contractual venture or enterprise. Mr Reading's claim in respect of the four (4) variations he had invoiced to Grandview during December 2017 goes to one aspect only of the parties' dealings. I can reasonably infer in all of the circumstances that an essential reason why the 4 variations remained unpaid is because Dr Bacon had stopped progress payments, having identified issues of defective and incomplete works in the performance of the First and Second Contracts by Mr Szatow, Grandview and Mr Reading. In that context, there is no reason why the claim for unpaid variations should be treated as having no connection to the primary proceedings (HB 19/09424). I find that the responsibility of Grandview and Mr Szatow for payment of Variations 516A, 5168, 516C and 516D is in an amount commensurate with two thirds only of the sum total of the Variations as invoiced by Mr Reading to Grandview. [135] Accordingly, my finding is to allow Mr Reading an amount of $5,794.66 on his claim for the unpaid variations."
The appellants submitted that the Tribunal's findings on this point were in error because neither Grandview nor Mr Szatow received any benefit by the variations, and that they were to the order of and benefit of Dr Bacon. We do not accept these submissions.
As the Tribunal found, Mr Reading did work and supplied materials for the variations which were a cost to him. They were done pursuant to the contractual arrangements in place including the arrangements between the appellants and Mr Reading.
In relation to those arrangements (see (8) set out at [6] above) the Tribunal found that, in or about late May 2017, Mr Szatow entered into an arrangement with Mr Reading whereby, amongst other things, Mr Reading agreed to provide labour and Mr Szatow agreed to supply materials for the building work. There is no appeal from that finding.
Therefore, and taking into account that Mr Reading had also entered into the Second Contract with Dr Bacon to perform the same work as was the subject of the First Contract, the appellants were liable to reimburse Mr Reading for two thirds of the cost of that work and materials expended by him.
A further submission was made challenging the division into thirds, and again it was based upon an erroneous view that that apportionment was arrived at by the Tribunal by examining the pro rata payments of money. As that is not how the Tribunal reasoned, this submission cannot be accepted.
We reject Ground 5.

Orders

We make the following orders: 1. The appeal is dismissed. 2. If any party desires to make an application for costs of the appeal: 1. that party is to so inform the other parties within 14 days of the date of these reasons; 2. the applicant for costs is to lodge with the Appeal Panel and serve on the respondent to the costs application any written submissions of no more than five pages on or before 14 days from the date of these reasons; 3. the respondent to any costs application is to lodge with the Appeal Panel and serve on the applicant for costs any written submissions of no more than five pages on or before 28 days from the date of these reasons; 4. any reply submissions limited to three pages are to be lodged with the Appeal Panel and served on the other party within 35 days of the date of these reasons; 5. the parties are to indicate in their submissions whether they consent to an order dispensing with an oral hearing of the costs application, and if they do not consent, submissions of no more than one page as to why an oral hearing should be conducted rather than the application being determined on the papers.

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 07 April 2021

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