Intelligent Building Pty Ltd v Ibrahim

NCAT Appeal Panel|2023-03-24

Sabouni v Revelop Building and Developments Pty Ltd [2021] NSWSC 31 Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272 Volkswagen Group Australia Pty Ltd v Saad [2022] NSWCATAP 133 Walker Group Constructions Pty Ltd v Tzaneros Investments Pty Ltd [2017] NSWCA 27 Texts Cited: None Category: Principal judgment Parties: Intelligent Building Pty Ltd (Appellant) Samwaiel Ibrahim and Martina George (First Respondents) Talaat Nasralla (Second Respondent) Representation: A Hanna (Agent)(Appellant) First Respondents (Self-represented) Second Respondent (No appearance) File Number(s): 2023/00054663 Publication restriction: None Decision under appeal Court or tribunal: Civil and Administrative Tribunal Jurisdiction: Consumer and Commercial Division Citation: N/A Date of Decision: 6 February 2023 Before: Dr P Briggs, General Member File Number(s): HB 22/42389 HB 22/54881

Background

This is an internal appeal from decisions of the Consumer and Commercial Division of the Tribunal (the CCD) made in writing on 6 February 2023, concerning claims relating to the construction of a granny flat by Intelligent Building Pty Ltd (the builder) on a residential block owned by Samwaiel Ibrahim and Martina George (the owners), in accordance with a written contract. The owners engaged Talaat Nasralla (the supervisor) to act as their contract administrator/supervisor in relation to the building works.

Internal appeals

Internal appeals may be made as of right on a question of law, and otherwise with leave (that is, the permission) of the Appeal Panel: s 80(2) of the Civil and Administrative Tribunal Act 2013 (NSW) (the NCAT Act). They involve consideration of whether there has been any error on a question of law; or whether there is any error, other than an error of law, sufficient to grant leave to appeal under Cl. 12 of Sch. 4 of the NCAT Act. An appeal is not simply an opportunity for a dissatisfied or aggrieved party to re-argue the case they put at first instance: Ryan v BKB Motor Vehicle Repairs Pty Ltd [2017] NSWCATAP 39 at [10].
In Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 ('Prendergast') the Appeal Panel set out at [13] a non-exclusive list of questions of law: 1. whether there has been a failure to provide proper reasons; 2. whether the Tribunal identified the wrong issue or asked the wrong question; 3. whether a wrong principle of law had been applied; 4. whether there was a failure to afford procedural fairness; 5. whether the Tribunal failed to take into account relevant (i.e., mandatory) considerations; 6. whether the Tribunal took into account an irrelevant consideration; 7. whether there was no evidence to support a finding of fact; and 8. whether the decision is so unreasonable that no reasonable decision-maker would make it.
In respect of a self-represented, non-legally trained appellant, grounds of appeal should be considered generally (subject to procedural fairness considerations) to determine whether a question of law has been raised: Prendergast at [12]; Cominos v Di Rico [2016] NSWCATAP 5 at [13]. In this case we consider that the appeal raises a number of questions of law, namely: 1. whether the Tribunal's reasons for decision are adequate; 2. whether the Tribunal applied the correct principle of law: 1. when assessing damages and finding that the owners were entitled to recover "$10,000 overpaid" due to "incomplete work"; and, 2. when finding that the builder was not entitled to recover $885.00 due as part of the progress payments for stage 1 of the works, because of an oral variation to the contract with respect to who would engage and pay for a surveyor.
In addition to being able to appeal questions of law as of right, appellants may seek the appeal panel's leave to appeal, under s 80(2) and Cl 12 0f Sch. 4 of the NCAT Act, on the grounds that they may have suffered a substantial miscarriage of justice because: 1. the decision under appeal was not fair and equitable; or 2. the decision under appeal was against the weight of evidence; or 3. significant new evidence has arisen (being evidence that was not reasonably available at the time the proceedings under appeal were heard).
The operation of those provisions was explained in Collins v Urban [2014] NSWCATAP 17 at [82] - [84] and the many cases which have followed it.
In this case the builder did seek leave to appeal. However, given the conclusions we have reached with respect to a number of questions of law, it is not necessary for us to consider those issues.
We add that had it been necessary for us to determine whether leave to admit new evidence should be granted to both parties, leave would have been refused because the new evidence they relied on was reasonably available at the time the proceedings under appeal were heard.

Consideration

It is convenient to consider the questions of law with respect to applications separately.

The decision to award the owners damages of "$10,000 overpaid" due to "incomplete work" on their claim.

Adequacy of reasons.

The Tribunal's reasons with respect to this decision are short: "10. The Applicants were directed to provide expert evidence of their claim complete with a Scott Schedule. They found that the cost of compliance with this direction would be $11,000.00 and were unable to afford to obtain the evidence in that form. Instead they provided more than 300pages of material much of which was in the form of photographs taken by the Inspector from the office of Fair Trading. 11. There is no accompanying Report but the Applicants have relied upon the evidence both oral and written from Mr Nasralla, their supervisor and their own evidence taken under oath dealing with their experience of the work of Intelligent Building Pty Ltd. 12. The Applicants are seeking order (sic) that the building work be completed by the Respondent, they maintained they are able to for (sic) the completion of the contract work including rectification of defects repair of damage caused by the builder or resulting from the builder's failure to adequately secure the premises, complete cleaning waterproofing colouring of brickwork in accordance with oral agreement reported by Mr Nasralla. 13. The Tribunal is required to consider the "preferred outcome" that a work order be made for the builder to return to the site and rectify any defects. As previously noted, there is no expert report so it is not possible to prepare a meaningful scope of rectification works. 14 I must therefore fall back on the alternative order for money. Although there is no costed scope of works Mr Nasralla had been able to assess that 75% of the work was satisfactorily complete. He said that his estimate was based on his 48 years' experience in the building industry and as a supervisor and certifier. Based upon his estimate of the work satisfactorily complete I have calculated the value at $90,000.00 (75% of $120 ,000.00 ) I conclude from that there has been an overpayment to the builder of $10,000.00. 15. In defending the Applicant's claim the Respondent referred to the certification of claims 1-5 and part of claim 6 and the adjudicators determination of the value of work completed which he equated with the sum paid by the Applicants. 16 I noted during the course of the hearing that the Respondent was selective in quoting the contract . In respect of the payments made, it is his assertion that certification and adjudication is the final authoritative determination of the value of work completed in accordance with its interpretation of Clause 12 of the contract. 17. the (sic) Respondent relied on the first paragraph of clause 12 "The owner must pay the contract price by progress payments within 5 business days of the completion of stages od (sic) the work nominated in the schedule of progress payments." 18. A disputed payment of $7000.00 ultimately led to the determination of the contract by the builder principally for the applicant's failure to meet a progress payment within the time period specified, but was ultimately met by the Applicant on receipt of the adjudicators assessment. 19. Reading down Clause 12 is the additional consideration that: "Payment of a progress payment is not to be regarded as acceptance by the owner that the work has been completed is satisfactorily or in accordance with the contract documents. If there is a bona fide dispute in relation to the value or quality of work, the dispute must be deal with in accordance with the dispute resolution procedure set out in clause 27. In those circumstances the parties agree as follows..." 20. This casts doubt on the validity of the Respondent's termination of the contract but this has not been an issue raised by the Applicant. 21. In the absence of that Issue I find that the Respondent has terminated the building contract and becomes liable for the defective and incomplete work within the definition of the various stages in common law. 22. The best, and indeed the only evidence of the defective and incomplete work up to stage 6 is that provided by Mr Nasralla and referred to in paragraph 14. I find that the Respondent has been overpaid in the sum of $10,000.00 and must refund that sum to the Applicants. 23. The Applicants have raised various claims for damage to the surroundings and to finishes that have been installed by the builder. Mr Nasralla has not seen this damage and is therefore not able to offer any estimate of its value. I am satisfied that there is additional damage but the Applicants have provided no evidence to support a claim for it. Quotes for various parts of the work put forward by the Applicants have insufficient description of the damage and have not been provided to the Respondent. Reluctantly, I am unable to include these items in this determination due to the failure of the Applicants to provide evidence in a suitable form or in a reasonable time.
In New South Wales Land and Housing Corporation v Orr [2019] NSWCA 231 the Court of Appeal considered whether the Tribunal's reasons were adequate with respect to decision made in proceedings in the CCD under the Residential Tenancies Act 2010 (NSW). Bell P, with whom Ward JA and McCallum JA agreed (on the adequacy of reasons question) explained, at [71]: "71. … even in the less formal setting of a tribunal which has significant powers the exercise of which is capable of affecting the lives of citizens in profound ways, there are certain minimum characteristics that a Tribunal's reasons must possess. These are really supplied, in relation to the Tribunal, by s 62(3) of the CAT Act which, as noted at [52] above, requires there to be set out in reasons (when requested by a party): (a) the findings on material questions of fact, referring to the evidence or other material on which those findings were based, (b) the Tribunal's understanding of the applicable law, and (c) the reasoning processes that lead the Tribunal to the conclusions it made. 72. Whilst s 62(3) provides a useful starting point, it still leaves for consideration the question as to the quality and detail of the reasoning process that must be exposed."
The full reasoning of the Court of Appeal in Orr is conveniently summarised in Volkswagen Group Australia Pty Ltd v Saad [2022] NSWCATAP 133 at [58]. Reasons provided by the Tribunal must be sufficient to understand what evidence has been considered; what legal principles have been applied; and, the reasoning process that has led to the decision. The reasons do not have to be extensive but they must be sufficient.
In the present case the reasons do not clearly identify what law the Tribunal was applying when ordering the builder to pay the owners "$10,000 overpaid" due to "incomplete work". Two possibilities suggest themselves from the reasons: first, that the Tribunal was awarding the owner damages for incomplete and defective work done under the contract; or, secondly, that there had been an overpayment which the owners were entitled to recover as a matter of law. The reasons do not indicate which. Nor do they contain an explanation, however brief, of the law Tribunal's understanding of the applicable law. They do not reveal the legal reasoning that led the Tribunal to reach the conclusions it did. The Tribunal's legal understanding and resultant reasoning is not exposed in the decision.
The reasons are inadequate, which is itself an error of law.

The assessment of the owner's damages

No one took issue with the Tribunal's finding that the Respondent had terminated the contract. There was no dispute that this occurred as a consequence of a termination notice given by the builder to the owners pursuant to cl 26 of the contract, headed, "Termination of contract by contractor". Cl 26 contained the following provision that applies when a contractor terminates the contract: "If the contractor terminates the contract under this clause, the contractor may remove from the sight and retain all unfixed materials . fittings and equipment supplied by the contractor and will be entitled to recover all losses and expenses arising from the termination of the contract or to offset such amounts from any amount due to the owner."
At common law, the owners in such circumstances have no right of action with respect to uncompleted works due to be done after the contract was lawfully terminated by the builder. They may seek to recover the costs of rectifying defective work already done, or of completing incomplete work that has been paid for at the time of termination, so long as the work is necessary and reasonable: see Bellgrove v Eldridge (1954) 90 CLR 613 (Bellgrove) and Metricon Homes Pty Ltd v Softley [2016] VSCA 60 at [178]-[202]; Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272; [2009] HCA 8 at [15]; Walker Group Constructions Pty Ltd v Tzaneros Investments Pty Ltd [2017] NSWCA 27 at 186.
In Bellgrove, the High Court (Dixon CJ, Webb and Taylor JJ) considered whether the owners measure of loss was the difference in value of the works between its current value and what it would have been if the contract had been complied with. The Court said: "It is true that a difference in the values indicated may, in one sense, represent the respondent's financial loss. But it is not in any real sense so represented. In assessing damages in cases which are concerned with the sale of goods the measure, prima facie, to be applied where defective goods have been tendered and accepted, is the difference between the value of the goods at the time of delivery and the value they would have had if they had conformed to the contract. But in such cases the plaintiff sues for damages for a breach of warranty with respect to marketable commodities and this is in no real sense the position in cases such as the present. In the present case, the respondent was entitled to have a building erected upon her land in accordance with the contract and the plans and specifications which formed part of it, and her damage is the loss which she has sustained by the failure of the appellant to perform his obligation to her. This loss cannot be measured by comparing the value of the building which has been erected with the value it would have borne if erected in accordance with the contract; her loss can, prima facie, be measured only by ascertaining the amount required to rectify the defects complained of and so give to her the equivalent of a building of her land which is substantially in accordance with the contract."
That quotation is apposite in the present case. The measure of damages available to the owners was the cost of rectifying the defects and bringing uncompleted works into compliance with the contract as at the termination date. Despite being given the opportunity to do so, the owners did not adduce evidence which enabled the Tribunal to specify the rectification work required with sufficient particularity to enable it to make a rectification order. Nor did they prove what those rectification costs would be if undertaken by someone other than the builder.
Despite these difficulties, the Tribunal crafted a remedy for the owners by discerning an "overpayment," based on the supervisor's assessment of the work done (75% of that contracted for valued at by the Tribunal at $90,000) contrasted with the amount actually paid to the builder, in order to conclude that the owners had overpaid the builder $10,000. There was no finding in the reasons of the amount actually paid by the owners to the builder, although one can conclude form Tribunal's findings that it considered $100,000 had been paid. The Tribunal found the $10,000 overpaid to related to incomplete work by the builder for which it had been paid. The Tribunal dismissed the owners' claim for what it found was "additional damage," relating to rectifying defective works, because the owners had not provided evidence of it, "in a suitable form in a reasonable time."
In SDL Project Solutions Pty Ltd v Kim; Kim v SDL Project Solutions Pty Ltd [2022] NSWCATCD 10 at [464]-[471] (SDL) the Tribunal reviewed the law relating to overpayments in the context of a homebuilding contract, where the owner claimed there had been an overpayment under the principles in David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353. The owner relied on the general restitutory principles discussed by the High Court in Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 22. The Tribunal in SDL observed - "471 The mere payment of money to a builder under a contract, even in circumstances where the builder has not complied with the terms of the contract such as issuing a variation in accordance with the contract prior to performing work, is not sufficient to constitute a mistake. More must be established for the Tribunal to be satisfied that a mistake of fact or law has occurred. Otherwise, any payment to a builder for building works could be retrospectively set aside on the basis of mistake because the homeowner retrospectively asserts that the payment should not have been made. The principles of unjust enrichment do not automatically extend to the retrospective revaluation of building works under a contract."
In Equuscorp Pty Ltd v Haxton; Equuscorp Pty Ltd v Bassat; Equuscorp Pty Ltd v Cunningham's Warehouse Sales Pty Ltd [2012] HCA 7; 246 CLR 498 French CJ, Crennan and Keifel JJ explained at [30]: "In David Securities Pty Ltd v Commonwealth Bank of Australia, this Court explained the part played by unjust enrichment in a claim for money had and received (in that case for recovery of a payment made under mistake of law). That explanation may be expressed, at a fairly high level of abstraction, as an approach to determining such claims. In summary: recovery depends upon enrichment of the defendant by reason of one or more recognised classes of "qualifying or vitiating" factors; the category of case must involve a qualifying or vitiating factor such as mistake, duress, illegality or failure of consideration, by reason of which the enrichment of the defendant is treated by the law as unjust; unjust enrichment so identified gives rise to a prima facie obligation to make restitution; the prima facie liability can be displaced by circumstances which the law recognises would make an order for restitution unjust. … [31] Failure of consideration is one of the factors that makes retention of a benefit prima facie unjust. It was recognised by Lord Mansfield as a ground for a claim for money had and received. It was a criterion of recoverability which survived the rejection in the United Kingdom and Australia of the implied contract theory. This Court has, on more than one occasion, described failure of consideration in terms set out by the late Professor Birks: "Failure of the consideration for a payment ... means that the state of affairs contemplated as the basis or reason for the payment has failed to materialise or, if it did exist, has failed to sustain itself."
We are unable to discern from the material before us on appeal and from the Tribunal's reasons how as matter of law the Tribunal concluded that the owners were entitled to recover $10,000 as an overpayment. There was no vitiating factor affecting the contract or the payments made under it. There was no failure of consideration. The contract was terminated by the builder as a result of the owners' breaches.
The overpayment is not an assessment or estimation of the costs of completing incomplete works, and does not reflect the measure of damages recoverable by the owners in the circumstance. Further, there was no factual finding that the owners had paid the builder in advance for works that were not performed. The Tribunal therefore misapplied the principles in Bellgrove and the principles of unjust enrichment.
The appeal against the decision on the owner's claim must also be allowed on this basis.

The decision with respect to the variation to the contract on the builder's cross-application

In its reasons for dismissing the builder's claim for $885.00 underpaid with respect to stage 1 of the works, the Tribunal said: "4. The Applicants in HB2242389 engaged Mr Talaat Nasralla as contract administrator/supervisor with the consent of the Respondent company represented by Mr John Hanna. Mr John Hanna was not present at the hearing but the Company was represented by Mr Andrew Hanna, John Hanna's son. 5. Mr John Hannah and Mr Nasralla were known to each other having worked together previously and on the evidence of Mr Nasralla they agreed certain matters orally, in relation to the conduct of the works. Mr Nasralla did not necessarily appraise the Applicants of the details of some matters agreed with Mr Hanna contemporaneously. 6. … 7. In relation to the assessment of Progress payments Mr Nasralla, said that when he received a progress claim, he inspected the works and issued a certificate which the Applicant's say they paid either on the day it was received by them or within the following day. 8. The initial payments were made apparently in accordance with the scope of works and were signed off and certified to the Applicants by Mr Nasarella. That is, except for the first claim. In relation to that, the parties are in dispute. The issue between them revolves around the appointment of a surveyor by Mr Nasarella acting as agent for the Applicants. Mr Nasarella's evidence was that he agreed with Mr John Hanna to arrange a surveyor for Mr Hanna because the surveyor normally used by Mr Hanna was unable to undertake the work of setting out the granny flat in time for Mr Hanna to commence setting out the footings by an agreed start date. 7.(sic) Mr Andrew Hanna raised technical objections to the evidence in relation to the approvals required before the work could commence. These are not issues of significance in relation to the real issues in dispute between the parties. Mr Hanna on behalf of the company claimed that there was no agreement that the cost of the surveyor was to be offset against the first progress payment. There is certification by Mr Nasralla for the Applicants to pay Mark Castelletti Surveying the sum of $770.00 incl GST and deduct that payment from the first progress claim - "as agreed by John due to his surveyor was not available to do this survey works to start works. " signed and dated by Talaat Nasralla Determination (sic) of the Cross Application. 8. (sic) Mr Nasarella's evidence is to be preferred because it deals with conversations between himself and Mr Hanna (snr). It is supported by and (sic) invoice from the surveyor with a notation to the Applicants to pay the sum invoiced and deduct it from the builder's first progress payment. Mr Hanna (jnr) rejected the evidence and said that no oral agreements were entered into. He was not present and has not provided (sic) any evidence in a suitable form from his father to refute the claim. 9. I find that the application for payment of $855.00 is the same payment in issue notwithstanding that there is a difference in quantum. I find that the Cross Applicant's claim for $855.00 is dismissed."
In submissions the builder argued that: "It is unjustified why [the Member] has preferred technical arguments from the contract not permitting changes to the contract sum without written notice and acceptance by all parties."
In making that decision the Tribunal found and enforced an oral variation to the contract; one involving a deletion from the agreed scope of works, rather than an addition to it. In doing so, the Tribunal noted that the supervisor had endorsed the surveyor's invoice to the effect a deduction was, "as agreed by John due to his surveyor was not available to do this survey works to start works." There was no evidence that this change to the stage 1 works was put into writing. Such a variation was denied by the builder. Mr John Hanna, who was said by the owners to have agreed to the arrangement with the supervisor, was not called to give evidence. As a consequence, the Tribunal accepted the sworn evidence of the supervisor with respect to the variation.
In so doing the Tribunal found and enforced an oral variation of the contract. Aside from referring to "technical arguments" relied on by the builder, the Tribunal made no reference to the terms of the contract, both actual and implied, with respect to variations.
Clause 13 of the contract, Variations, relevantly provided: "The work to be done or materials used under this contract may be varied: • at the request of the owner; or • at the request of the contactor. If the necessity for the variation is due to the fault of the contractor the owner will not be liable for any increase in the contract price, or • due to such other matters that could not reasonably be expected to be by an experienced, competent and skilled contractor-for the completion of the work at the date of the contract, or • due to a requirement of a council or other statutory authority relating to the work, if at the date of this contract such requirement could not reasonably have been foreseen by tie contractor. Procedure for variations Before commencing work on a variation, the contractor must provide to the owner a notice in writing containing a description of the work and the price (including separate disclosure of the GST and the component of the price attributable to any consequential increase in the cost of the building cover contract entered into by the in respect of the work to be done under this contract). If not otherwise specified the price will be taken to include the contractors margin for overheads, Supervision and profit. The notice must then be signed and dated by both parties to constitute acceptance. If the time for completion will be delayed by the variation the contractor must include in the notice an estimate of the additional time required. Any extension of time must be dealt with in accordance with Clause 7. … Variations shall be subject to the overall conditions of this contract. Adjustment of contract price The contract price may be adjusted as a consequence of: (a) variations to work or materials agreed in accordance with this Clause 13; and (b) any variation to the cost of the building cover contract entered into by the contractor in respect of the work to be done under this contract. The cost of deletions from the contract will be deducted from the contract price. The price of any variation specified in the notice signed and dated by both parties will be added to the contract price. … Any adjustment to the contract price will be taken into account at the time of the next progress payment or paid as agreed by the parties. …
In addition Section 7E of the Home Building Act 1989 (NSW) (the HBA) relevantly provides: (1) A contract must include (and is taken to include) each of the terms set out in Part 1 of Schedule 2. A contract that contains a term that is inconsistent with a term set out in Part 1 of Schedule 2 is unenforceable to the extent of the inconsistency. (2) The regulations may make provision for or with respect to - (a) terms or other matter that must be included in a contract or a class of contracts, or (b) terms or other matter that must not be included in a contract or a class of contracts. …
Schedule 2 Part 1 cl 1 of the HBA then provides: Schedule 2 Terms to be included in certain contracts. Part 1 Contracts to do residential building work. 1 Plans and specifications (1) All plans and specifications for work to be done under this contract, including any variations to those plans and specifications, are taken to form part of this contract. (2) Any agreement to vary this contract, or to vary the plans and specifications for work to be done under this contract, must be in writing signed by or on behalf of each party to this contract.
The terms implied by Schedule 2, Part 1, cl 1 of the HBA were implied by law into the contract between the owners and the builder.
The Tribunal did not refer to any of these provisions in its reasons for decision. It, therefore, did not consider both the statute law requiring variations to the contract to be in writing and signed by the parties, the conditions regarding variations implied into the contract, or the provisions Cl 13 of the contract itself, which we note does not carry the certitude of the implied condition.
The Tribunal accepted that there was an oral variation agreed between the supervisor and Mr John Hanna, from the builder. It did not ask itself whether this was sufficient to establish a variation in the circumstances. In Paraiso v CBS Build Pty Ltd [2020] NSWSC 190 Fagan J, in the context of a different contract where the builder was seeking to enforce oral variations, explained at [40]: "… if there is no written detail signed by the owner there will be no variation capable of being contractually binding and enforceable. Hence there will be no contractual variation to which agreement as to an amount payable could attach as a term."
The Tribunal did not turn its attention to whether, in the absence of a written variation removing the surveying work from that to be completed in stage 1, the owners could resist the builder's claim for the costs of the surveying work. The builder maintained the surveying had been done in accordance with the contract. Instead, the Member dismissed what he described as the builder's "technical objections to the evidence in relation to the approvals required before the work could commence" and accepted the supervisor's evidence.
In doing so the Tribunal failed to apply the relevant law. This was an error of law.

How should the appeals be concluded?

When determining an appeal we may exercise all of the functions conferred on the Tribunal at first instance (s 81(2)), and may make orders of the type specified in s 81(1) of the NCAT Act which provides: "(1) In determining an internal appeal, the Appeal Panel may make such orders as it considers appropriate in light of its decision on the appeal, including (but not limited to) orders that provide for any one or more of the following - (a) the appeal to be allowed or dismissed, (b) the decision under appeal to be confirmed, affirmed or varied, (c) the decision under appeal to be quashed or set aside, (d) the decision under appeal to be quashed or set aside and for another decision to be substituted for it, (e) the whole or any part of the case to be reconsidered by the Tribunal, either with or without further evidence, in accordance with the directions of the Appeal Panel."
We have determined that we should allow the builder's appeal with respect the Tribunal's decision on both applications, set aside the orders made on each, and substitute our own decisions for both.

Our decision with respect to the Owners' claim.

The problem which confronted the Tribunal below and us on appeal is that the owners were unable to "provide evidence of their claim complete with a Scott Schedule." Instead they provided "more than 300 pages of material much of which was in the form of photographs taken by the Inspector from the office of Fair Trading" to the Tribunal, but not to the Appeal Panel, despite being directed to so. They relied on their own and the supervisor's sworn evidence before the Tribunal, which, despite being directed to do so, they have not provided a transcript or recording of to the Appeal Panel.
At first instance and on appeal, the lack of evidence as to the owners' loss makes the task of assessing their damages in accordance with the principles in Bellgrove difficult, if not impossible. That lack of evidence led the Tribunal conclude that it was not in a position to: 1. prepare a meaningful scope of rectification works; 2. assess claims for damage to the surroundings and to finishes that have been installed by the builder.
The lack of evidence and details concerning the owners' loss led the Tribunal to assess it by reference to the overpayment, which we have found does not reflect the proper measure of damages.
In Sabouni v Revelop Building and Developments Pty Ltd [2021] NSWSC 31 (Sabouni) at [41]-[42] Black J discussed the difficulties which can confront a Court (and Tribunal) when assessing damages for breach of contract. His Honour said: "The damages to which RBD is entitled, in respect of Mr Sabouni's breach of or repudiation of the Contract is the monetary sum which, so far as money can, represents "fair and adequate compensation for the loss or injury" which it sustained by reason of that breach or repudiation: Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 116 per Deane J. The Court must do the best it can to make a reliable assessment of damages, where damages are difficult to assess, including where a party has failed to lead the best evidence of damages: Commonwealth of Australia v Amann Aviation Pty Ltd above at 83, per Mason CJ and Dawson J, 125 per Deane J, 153 per Gaudron J. In Uszok v Henley Properties (NSW) Pty Ltd [2007] NSWCA 31 at [135], Beazley JA observed that: "Where there has been an actual loss of some sort, the common law does not permit difficulties of estimating the loss in money to defeat the only remedy it provides for breach of contract, an award of damages … . Such damages should not be nominal only, notwithstanding that the award may be difficult to assess. …" (Citations omitted) On the other hand, the case law also recognises that damages must be proved with a degree of precision which reflects the proof that is reasonably available to the parties: State of New South Wales v Moss (2000) 54 NSWLR 536 at [72]; Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd (2003) 77 ALJR 768 at [38]. In Schindler Lifts Australia Pty Ltd v Debelak (1989) 89 ALR 275 at 319, Pincus J noted that "if the evidence called on behalf of [the plaintiff] fails to provide any rational foundation for a proper estimate of damages, the Court should simply decline to make one". That approach was approved by Brooking J in JLW (Vic) Pty Ltd v Tsiloglou [1994] 1 VR 237 at 243 and by the Court of Appeal in Troulis v Vamvoukakis [1998] NSWCA 237 where Gleeson CJ observed that, where damages were susceptible of evidentiary proof, but there was an absence of raw material to which good sense may be applied, "[j]ustice does not dictate that … a figure should be plucked out of the air". That decision has been approved in subsequent cases, including McCrohan v Harith [2010] NSWCA 67 at [128], where McColl JA (with whom Campbell JA and Handley AJA agreed) held that an estimate of damages, in the nature of a "guess", should not be made where precise evidence of the damages suffered could have been adduced, but was not. I followed that decision in Re Hair Industrie Penrith Pty Ltd, Hair Industrie Merrylands Pty Ltd [2015] NSWSC 1578 at [20], on which I have drawn for the summary which appears above.
Sabouni was recently followed by the Appeal Panel in Jamaican Coffee Kitchen Pty Ltd trading as Dushan & Shelby Trust v M20 Pty Ltd [2022] NSWCATAP 203.
In the present case the evidence, as it did at first instance, does not enable us to specify what work that the owners have paid for is incomplete or defective for the purpose of making a rectification order. It does not contain sufficient information to allow us to make a proper estimate of the costs of rectifying that work, so as to put the owners in the position they would have been had the builder satisfactorily completed each of the stages they paid for. We cannot 'pluck a figure from the air'.
It would not be fair, just or efficient to remit the application for rehearing with fresh evidence allowed. This would also allow the owners, who are the respondents to this appeal, an opportunity to run their case again. Were we to remit the owners' application for rehearing without fresh or additional evidence, that rehearing would face the same dearth of evidence which confronts us now. This too would not be fair, just or efficient.
In those circumstances we have decided to redetermine the owners' application ourselves. The builder submitted that in that event we should dismiss the owners' claim, whereas the owner supported the order made by the Tribunal.
We think it clear that there is insufficient evidence of the necessary rectification work and its cost to enable us to make any reasonable or rational estimate of the owners' loss. Sufficiently precise evidence of loss could have been adduced, but was not. In those circumstances, we are unable to assess the owners' damages and will order that their claim be dismissed.

Our decision with respect to the Builder's cross-application.

The $885 which is the subject of this claim was deducted by the owners from the stage 1 payment on the basis that there was an oral variation to the contract authorising the owners to arrange and pay for the surveying work, rather than having the work performed by the builder in accordance with the scope of works for stage 1.
The contract between the parties, both expressly and by implication, provides that variations are to be in writing and signed by the parties. This variation was not.
Both the builder and the supervisor (who was acting as agent for the owners) are licensees under the HBA and should have been cognizant of the requirement that variations be in writing and signed. Despite this, the supervisor's sworn evidence, in the face of the builder's denials, was that the oral variation was agreed and that the owners engaged and paid for a surveyor to do the necessary work.
It was open to the Tribunal to accept the supervisors evidence.
In Parasio Fagan J said, with respect to a contractual requirement that variations be detailed in writing that, at [39]: "… with respect to the requirement that the variation be "detailed in writing", the clear purpose of this is to avert disputes about what extra work the owner requires to be performed, for which the builder may require the owner to pay. I conclude that the absence of a detailed written description of the variation is intended to protect both parties equally. If this requirement is not met then either party may invoke the omission to deny that the putative variation has altered contractual obligations, with respect to what is to be built in the case the builder and with respect to what is to be paid for in the case of the owner. If the instructed variation of the works is not "detailed in writing" then the contract scope of works is not varied."
In the present case cl 13 of the contract required that variation be in writing "containing a description of the work and the price". This requirement is similar to that discussed in Parasio and the same consequences, as those discussed by Fagan J, flow if the variation does not comply with the requirements: the contracted scope of the works is not varied. Both the builder and the supervisor, as holders of licences under the HBA, should have been aware of this. So too should the owners as it was a written term of the contract. The contract was not varied in accordance with its terms.
In those circumstances the builder is entitled to recover the $885.00 unpaid with respect to stage 1 in accordance with the terms of the contract.

Costs

With respect to costs of the appeal our preliminary view is that there should be no order as to costs with a view to each party bearing their own costs in accordance with s 60 of NCAT Act as the amount claimed or in dispute in the appeal does not exceed $30,000 (r 38A Civil and Administrative Tribunal Rules 2014 (NSW). We note that neither party is legally represented. Any application for a costs order contrary to our preliminary view should be made in accordance with the orders below.

Orders

The appeal panel makes the following orders: 1. Appeal allowed. 2. The order numbered 1, with respect to the owners application in HB 22/42389 made on 6 February 2023, is set aside and, in its place, the following order is made: "The claim is dismissed." 1. The order numbered 2, with respect to the builder's cross-application in HB 22/54881 made on 6 February 2023, is set aside and, in its place, the following order is made: "The respondents shall pay the applicant $885.00 within 30 days of these reasons." 1. If any party seeks 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(s) for costs is to lodge with the Appeal Panel and serve on the respondent(s) to the costs application any written submissions of no more than 2000 words on or before 14 days from the date of these reasons; 3. the respondent(s) to any costs application is to lodge with the Appeal Panel and serve on the applicant(s) for costs any written submissions of no more than 2000 words on or before 28 days from the date of these reasons; 4. any reply submissions limited to 1000 words are to be lodged with the Appeal Panel and served 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, make submissions as to why an oral hearing should be conducted rather than costs 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: 26 June 2023

Building and Construction Industry Security Of Payments Act 1999(NSW)

Building and Construction Industry Security of Payments Act 1999(NSW)

At a glance

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Judgment (13 paragraphs)

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Legislation Cited (6)

Cases Cited (28)

Cited By (2)