Ingate v Andrews

Grounds of Appeal

1. The appeal has been conducted by the first Appellant, Mr Ingate. Though he is a practising lawyer, the grounds of appeal were not presented in a way that clearly identified questions of law. The statement of grounds is a narrative more in the nature of a set of submissions. The Respondent objected to consideration of large parts of the notice of appeal on the basis that no grounds of law were clearly identified. In our view, this objection was soundly made.
2. We have isolated the following points, and will deal with them on the basis that they purport to raise questions of law in relation to which the Tribunal erred. (1) The Tribunal has erred in its interpretation of the contractual allocation of risk between the parties. (2) The Tribunal has erred in finding that the joint venture agreement was one 'subsumed' into the building contract, at [18]. (3) The Tribunal has erred in its application of the law of restitution. (4) The Tribunal has erred in relation to the concessions made by Mr Andrews before the Tribunal ($3,367.76).

Grounds (1) and (2)

1. To understand Grounds (1) and (2), it is necessary to give the following factual background.
2. On 16 June 2012, the Appellants entered into a joint venture agreement (JVA) with Jennifer Andrews and her husband, the Respondent, Dixon Andrews, under which Mrs Ingate agreed to subdivide a parcel of land she owned. They would transfer one of the blocks (subject to some realignments) to the Andrews in return for the demolition of their existing house and the building of a new house on the block they retained.
3. The JVA declared that it was the 'primary agreement and shall take precedence over the Land Option, the Land Contract'.
4. On 16 May 2013 the Appellants and the Andrews entered into a residential building contract. The contract provided for extras and variations. Clause 6.6 permitted the Principal at any time prior to practical completion to direct the Contractor in writing to carry out a Variation which is within the general scope of the Works. Clause 10.4 provided for valuation of variations.
5. The concern reflected in what we have described as Grounds (1) and (2) go to the extent to which the terms of the JVA as distinct from the terms of the Building Contract should be taken into account in resolving the dispute. The Building Contract adopted the standard form template of the Decon 2, 2005 Version, Design and Construct Contract issued by Building Australia. The template has 41 pages with 17 principal sections and 10 schedules. The standard form template was the subject of a number of agreed exclusions and amendments. They are clearly indicated. One of the unchanged standard form clauses addressed the subject of variations: 6.6 Variations At any time prior to the date for Practical Completion the Principal may direct the Contractor in writing to carry out a Variation which is within the general scope of the works.
6. In our view, it was open to the Tribunal to form the view it did that the appropriate reference document for the determination of the scope of the building works was the building contract. A joint venture agreement is a commercial agreement between parties who have decided to engage in a common project. It is not unusual for a joint venture agreement to give rise in turn to a more specific contract or contracts. This was a major building project involving the demolition of an existing dwelling and the building of a new one with high level inclusions and finishes. In our view, the Tribunal proceeded in an orthodox manner in dealing with the claims made as ones brought under the building contract.
7. These grounds are dismissed.

Ground (3)

1. This Ground raises the central issue in the appeal - whether the Tribunal correctly understood the law relating to restitution and quantum meruit, and properly applied it to the second set of variations.
2. The Appellants relied on the following summary of the law found in Goodacre v Trinder Alpine Constructions Pty Ltd [2013] NSWCCT 124 (approved and adopted by the Appeal Panel in the recent case of Nayak v Rockwall Constructions Pty Ltd [2017] NSWCATAP 18 at [30]): The required elements [for a successful quantum meruit claim] are as submitted by both parties, the conditions set out in Liebe [i.e. Liebe v Molloy (1906) 4 CLR 347], subject to proof of 'fair value' or the 'quantum meruit value' of the work done by the builder. They are therefore, once Charbel dicta is considered [Charbel v Tanne (Home Building) [2010] NSWCTTT 453], the five components that must be complied with by the builder ... before it can recover with respect to its long-delayed variation claim: (a) the subject building work fell outside the requirements of the contract, specifications, and other included documents (b) the owner had actual knowledge of the variations as they were being done (c) that the owner knew that they were outside the contract (d) the owner knew that the builder expected to be paid for the work as a variation to the contract; and further (e) the builder had provided evidence that the amount claimed was fair value for the non-compliant work.
3. We note that the Appellants written submissions to the Tribunal Member did not refer to the decision in Goodacre v Trinder Alpine Constructions Pty Ltd.
4. There is no dispute between the parties as to criterion (a). As to criterion (b) Mr Ingate acknowledged at the appeal hearing that in general terms he was aware that the works set out in the second set of variations had been done prior to practical completion.
5. As to whether the Appellants knew that this work claimed was outside the scope of the contract (criterion (c)), he said that at the time he had thought some of the work was in fact within the scope of the contract and therefore covered by the primary consideration for the contract (the transfer of title to block 2), but he now accepted the Tribunal's conclusion that all the works under notice were outside the scope of the contract. (We note that this is not a precisely accurate statement: the Tribunal did find that V29 was not a variation because it fell within the scope of the contract, V31 similarly, V50 similarly.)
6. As to criterion (e), there is no dispute. He accepts the evidence as tendered as to quantum and the Tribunal's rulings as to fair value.
7. His dispute with the Tribunal's reasons relates to, what he sees as, the Tribunal's failure to address criterion (d). He submits that the Tribunal failed to address the question of whether the builder had proven that the owner knew that the builder expected to be paid for the work as a variation to the contract.
8. Mr Freeman, of counsel, appeared for the Respondent. He did not dispute the above analysis of the legal principles relevant to quantum meruit. He submitted, however, that the Tribunal adequately addressed each of the matters in its reasoning, and reached a fair conclusion.

Tribunal's Approach

1. The Tribunal gave the following account of the law it was called on to apply.
2. At [76] it stated that 'Mr Andrews claim must have its foundation in the principles articulated in Pavey & Mathews v Paul (1987) 162 CLR and Lumbers v W Cook Builders Pty Ltd [2008] HCA 27; 232 CLR 636 at [83]-[84]'.
3. At [77] it described the principles as: (1) the principal must have been enriched by receipt of the benefit (2) the benefit must have been obtained at the contractor's expense (3) it would be 'unjust' in the circumstances to allow the principal to retain the benefit.
4. It will be seen that the Tribunal's summary does not include a specific reference to criterion (d) as set out in Goodacre, i.e. (d) the owner knew that the builder expected to be paid for the work as a variation to the contract;
5. But the Tribunal did allude to the issue of knowledge at a number of points when considering the variation claims.
6. The first two items that fell for consideration were V26 (Modwood screen to North Side at front) and V27 (bathroom fittings to tank room). The Tribunal said: V26 & V27 are both considered to be variations to the contract works because they were not shown in the contract plans or specifications in the form that they were delivered on the site. Moreover Mr and Mrs Ingate were aware of the work, they were aware it was different from the work specified but anticipated that the builder would provide the work and materials as a gift. The issue could easily have been the subject of enquiry to Mr Andrews rather than allow it to proceed and take issue with it after it was executed. I find V26 &V27 satisfy the test for variations.
7. In relation to V28 (Main Electrical Connection, amount claimed, $8,772.70) the Tribunal found this to be a variation that was of benefit to both parties, and split the costs equally between them. It noted that: [T]his is a substantial variation claim which Mr and Mrs Ingate acknowledge was the subject of discussion and awareness that the work was being done.
8. The next variations to be allowed were V32-V40. The Tribunal stated as to them: Mr and Mrs Ingate were aware of the work being carried out but did not anticipate that should attract any additional costs. I find that the work is minor but satisfies the test for variations.
9. In relation to the V41, V41(2) and V42 (changes to architectural documentation) the Tribunal made some observations on the usual division of responsibilities between a builder and an architect, but noted the different context of this case where the builder was also the architect. There was a dispute in the case as to whether these variations involved design work the subject of the joint venture agreement and ought not to be treated as variations. The Member did not expressly address the issues of the owner's state of awareness of the changed documentation, and related actions. He simply concluded: 'I find this work to satisfy the test for variations to the building contract'.
10. It dealt in a similar summary way with the variations the subject of V43, V44-46, V49, V50.

Consideration

1. In Australia since 1987 it has been the law 'that the true foundation of the right to recover on a quantum meruit does not depend on the existence of an implied contract': Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221 per Mason, Wilson JJ at [10].
2. At [12] their Honours continued: 12. If the effect of bringing an action on a quantum meruit was simply to enforce the oral contract in some circumstances only, though not in all the circumstances in which an action on the contract would succeed, it might be persuasively contended that the action on a quantum meruit was an indirect means of enforcing the oral contract. So, if all the plaintiff had to prove was that he had fully executed the contract on his part and that he had not been paid the contract price, there would be some force in the suggestion that the proceeding amounted to an indirect enforcement of the contractual cause of action. However, when success in a quantum meruit depends, not only on the plaintiff proving that he did the work, but also on the defendant's acceptance of the work without paying the agreed remuneration, it is evident that the court is enforcing against the defendant an obligation that differs in character from the contractual obligation had it been enforceable.
3. Deane J observed at [13] of his judgment: The quasi-contractual obligation to pay fair and just compensation for a benefit which has been accepted will only arise in a case where there is no applicable genuine agreement or where such an agreement is frustrated, avoided or unenforceable. In such a case, it is the very fact that there is no genuine agreement or that the genuine agreement is frustrated, avoided or unenforceable that provides the occasion for (and part of the circumstances giving rise to) the imposition by the law of the obligation to make restitution.
4. It will be seen that in both these explanations of the basis for quantum meruit the judges emphasise 'acceptance' as the ultimate critical issue.
5. 'Acceptance', in the sense explained, was clearly in the mind of the Member in dealing with the early variations in the list. It is plain from his analysis of V26 and V27 that he is looking at the practical workings of the relationship between the Appellants (Mr Ingate in particular) and the Respondent. This was a project of a special nature, one that was unusually personal in character, and founded as we understand the background in close friendships.
6. The evidence before the Tribunal indicates that Mr Ingate had an active relationship to the project and the works undertaken. The Member took note of his level of awareness of the works being done as they unfolded, and the lack of intervention by the Appellants in those works. They may have had a view that the works were covered by the primary consideration and/or were not variations, but Mr Ingate acknowledged at the appeal hearing that he did not regard all of them as within the scope of the original contract.
7. In another leading case, Brenner v First Artists' Management Pty Ltd [1993] VicRp 71; [1993] 2 VR 221 Byrne J said that it was necessary to focus attention on the position of the party from whom payment was sought. The enlivening principle of the entitlement to payment was "the injustice of the enrichment to that party". He said: In my opinion the appropriate inquiry is whether the recipient of the services, as a reasonable person, should have realised that a person in the position of the provider of the services would expect to be paid for them and did not take a reasonable opportunity to reject those services.
8. See further, BBB Constructions v Aldi Foods [2010] NSWSC 1352 (McDougall J). There after reviewing leading Australian authorities on quantum meruit since the decision in Pavey, his Honour observed at [363]: 363 It seems to me to follow from the approach of Gummow J [in Roxborough v Rothmans of Pall Mall Australia Limited (2001) 208 CLR 516] that, as Doyle CJ (with whom Duggan and Nyland JJ agreed) had said in Angelopoulos v Sabatino [1995] SASC 5230; (1995) 65 SASR 1 at 9, the decision in Pavey & Matthews did not seek to overturn the existing case law dealing with the situations in which restitution would be ordered. On the contrary, there was a "need to integrate the decision in Pavey 's case into the existing case law while at the same time giving proper force to the emphasis placed upon the notion of acceptance".
9. A fair reading of the Member's reasons as they relate to V26-V27, V28 and V32-40 indicates that the Member focussed in all instances on 'the notion of acceptance'. He looked at the degree to which the Appellants had a contemporary awareness of the work when it was being planned or done, whether the Appellants had or had not intervened in having it proceed, and whether they had accepted the benefit of the work. A fair reading indicates, we think, that the Member concluded that the Appellants had 'accepted' the work in the way alluded to in the statements to which we have referred from Pavey and therefore should pay a fair value for it. In our view that is a sufficient analysis to justify an order for restitution, in a case where no other factors are in dispute.
10. In our view, the criteria set down in Goodacre are, in a consideration of the notion of acceptance, not definitive of the approach that should be taken in a case of the present kind.
11. There will, we accept, be cases where a variation claim comes as a complete surprise to an owner. The owner may not have had an active day to day involvement with the project and has trusted the builder to inform him or her actively of any work that the builder might see as an extra or variation outside the scope of the agreed specifications. It may be that the work now discovered cannot practically be undone. It may be unfair to affix the owner with the cost of the works. In such a case the builder may be seen not to have dealt with the owner in the transparent way that he or she should have. It may be that the owner could not fairly be said to have agreed to the additional work in advance, or have 'accepted' it. Charbel v Tanne [2010] NSWCTTT 453 was a case of that kind. But this is a case of a very different kind.
12. At our hearing for example, Mr Ingate acknowledged a general awareness of the works now under notice as they unfolded. The Tribunal in the passages to which we have referred looked closely at the issue of contemporary awareness.
13. In the final group of variations that were allowed, V41, V41(2) and V42, V43, V44-46, V49, V50, the Tribunal did not make specific findings on the issue of acceptance. In our view, it can reasonably be inferred from the reasons read as a whole that it was satisfied as to the matter of 'acceptance'. It had applied a correct understanding, as we see it, to the analysis of the earlier variations, and its reference to the variation 'satisfying the test for variations' should be read in that way. 'Acceptance' was the live issue in the case.
14. In Lumbers v W Cook Builders Pty Ltd (in liq) Gleeson CJ noted that: 53. The concept of 'free acceptance' ..., whatever its exact scope, is commonly related to a defendant who "did not take a reasonable opportunity open to him to reject the proffered services" [citing a passage from Goff and Jones, The Law of Restitution (7th ed)]
15. The plurality (Gummow, Hayne, Crennan and Kiefel JJ) added the following in relation to the concept of 'free acceptance' at footnote 27 to para [75] of their reasons: The word "free" has been used in this context to direct attention to whether the recipient of a benefit had an opportunity to accept or reject the benefit. … Writing in successive editions of Chitty, Beatson suggested that English law "appears hostile to claims for services rendered or work done in the absence of a contract (express or implied) between the parties [and that] [t]he mere receipt of a benefit, when the defendant had no real option to accept or reject it, does not justify a claim for quantum meruit" (footnotes omitted). …
16. In our view, the Member did turn his mind to the issue of whether the Appellants had a real option to accept or reject the benefit. They were not variations of a kind that were foisted on the Appellants.
17. The Appellants' submissions gave a good deal of emphasis to the decision in Lumbers. The High Court upheld the owners' appeal against the orders for restitution made against them. The Court considered that the failure of the contractor to undertake the works and give the job to another builder (albeit one with family links to the contractor) deprived the builder's quantum meruit claim of a proper foundation in the circumstances of the case. The Court was not satisfied that there had ever been any relationship between the owners and the builder known and understood by them, or one about which it could properly be held that an implied request could have been said to have passed between the owners and the builder to undertake works and variations, and to accept responsibility for the cost of variations. The owners' relationship had at all times been with the contractor, not the builder who physically did the work. This is not a case of that kind.
18. The ground is dismissed.

Ground 4

1. This ground has its origin in the Appellants' application no 16/30612. The Tribunal dealt with this application at [97] of its reasons. The Notice of Appeal simply asserts a number of factual mistakes by the Tribunal in its treatment of set off claims. They related to the air conditioning unit claim, the louvre claim, the locks on windows claim, the solid core doors issue, the alarm pad claim and the paint claim.
2. The Notice of Appeal as we have noted already, and as emphasised by the Respondent in his submissions, was not in the usual form. We are not able to identify readily from the material what precisely were the errors of the Member. It is not enough to assert, as the submissions do, that the Appellants drew concessions made in evidence or in written statements below to the attention of the Tribunal and they were not taken into account by the Tribunal. The Tribunal had a wide range of material before it. The Notice of Appeal needs to take us point by point to specific passages. The Respondent needed that level of clarity to reply effectively.
3. The ground is dismissed.

Costs

1. The general principle in the Tribunal is that each party bears their own costs unless the Tribunal is satisfied that there are special circumstances justifying an order for costs (NCAT Act, s 60). In proceedings in the Consumer and Commercial Division the Tribunal may make an award of costs in the absence of special circumstances in disputes where the amount claimed is more than $30,000 or in claims between $10,000 and $30,000 where the Tribunal is satisfied that a party had conducted its case in an unreasonable way (see Civil and Administrative Tribunal Rules 2014, cl 38 (and NCAT Act Sch 4, cl 10(2)).
2. As noted, the Tribunal gave an order for submissions to be filed on the issue of costs (Order 4). The Respondent's submissions are attached to the Respondent's Reply to the Appeal. The submissions are dated 19 and 29 September 2017. The Respondent has applied for costs. The Respondent provides evidence in his costs submission of costs incurred of approximately $40,000 in relation to the proceedings at first instance. We assume from the terms of the Appellants' notice of appeal that the Appellants have filed a costs submission at first instance, as directed, though it was not before us in the appeal papers we had.
3. In our view, the appropriate course is for the Tribunal at first instance to deal with the rival submissions.
4. In the notice of appeal the Appellants did 'not seek any order for costs at this stage'. There is no response to that indication in the Respondent's reply. The issue was not pressed at the appeal hearing.
5. In these circumstances we think it best for the Tribunal at first instance to make a final order, and thereby finalise the proceedings at that level.
6. The parties are given liberty to apply to the Appeal Panel for consideration of the issue of the costs of this appeal once that order is made. It can be dealt with either alone or in conjunction with any appeal that may flow from the costs decision.

Order 1. Appeal dismissed. 2. The parties are granted liberty to apply in connection with the costs of the appeal.

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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: 27 April 2018