Issa v K & K Quality Constructions Pty Ltd

NCAT Appeal Panel|2020-02-03|Before: Dr J

Background

This is an internal appeal pursuant to s 80(2) of the Civil and Administrative Tribunal Act 2013 (NSW) ("NCAT Act") against a decision made in the Consumer and Commercial Division of the Tribunal on 5 November 2019.
A builder did some preparatory work relating to the construction of a granny flat at the appellant's property, in the absence of a contract. The Tribunal ordered the homeowner to pay the builder for the costs it had incurred in obtaining a survey and some plans, on a quantum meruit basis.
For the reasons set out below, we have decided to allow the appeal.

Notice of Appeal

The Notice of Appeal was lodged on 14 November 2019, which is within the 28-day time period specified in cl 25(4) of the Civil and Administrative Tribunal Rules 2014 ("the Rules").

Grounds of Appeal

The grounds of appeal are not expressed in a succinct way in the Notice of Appeal. At the hearing, Mr Issa agreed that his grounds could be expressed as follows: 1. The Tribunal erred in making a money order in favour of the builder, in circumstances where there was no contract between the parties; and 2. The Tribunal made factual findings which were against the weight of evidence and not fair and equitable.
The first ground raises a question of law and Mr Issa may bring the appeal on this ground as of right (NCAT Act, s 80(2)(b)). The second ground does not raise a question of law and he requires the Appeal Panel's leave to appeal on this ground (NCAT Act, s 80(2)(b)).
During the hearing, the Appeal Panel raised with the parties whether there had been a denial of procedural fairness. Given that we have upheld the first ground of appeal, we do not need to consider this.

Was there a proper basis in law for the money orders?

Mr Issa contends that the Tribunal was not entitled to order him to pay the builder for work done in the absence of a contract. This requires consideration of whether the Tribunal was correct to order payment on a quantum meruit basis.
In determining the issue of quantum meruit, the Tribunal relied upon the decision in Jason and Michelle Zammit trading as Zammit's Quality Constructions v Saul Markunsky and Shereen Markunsky [2015] NSWCATCD 21. This decision considered the effect of ss 92 and 94 of the Home Building Act. However, the Tribunal did not otherwise consider whether these provisions applied in the circumstances of this case. It simply assumed that they applied, then considered whether it was "just and equitable" that the builder recover money on a quantum meruit basis, within s 94(1A).

Tribunal's jurisdiction under the Home Building Act

The starting point is whether the Home Building Act 1989 (NSW) applies to the claim. If it does not, then the Tribunal may nevertheless have jurisdiction to determine the claim under different legislation, but would not need to consider ss 92 and 94 of the Home Building Act.
The Tribunal found that it had jurisdiction to consider the builder's claim under s 48K of the Home Building Act 1989 (NSW), even though no physical work had commenced. Section 48K confers jurisdiction on the Tribunal to hear and determine a "building claim" below a certain monetary figure. A "building claim" is defined to include, relevantly, a claim for the payment of a specified sum of money "that arises from a supply of building goods or services whether under a contract or not" (Home Building Act, s 48A(1)). The term "building goods or services" is defined to mean, relevantly, "goods or services supplied for or in connection with the carrying out of residential building work or specialist work, being goods or services … supplied by the person who contracts to do, or otherwise does, that work" (Home Building Act, s 48A(1)).
The Tribunal relied upon the Appeal Panel's decision in Allcastle Homes Pty Ltd v Wilkinson [2016] NSWCATAP 3 to find that it had jurisdiction ("Allcastle Homes"). In Allcastle Homes, the Appeal Panel followed Basten JA's comments in Grygiel v Baine [2005] NSWCA 218 at [57]-[58], where his Honour commented (at [57]) that "[o]n one view, the definition of 'residential building work' [in the Home Building Act]] is not limited to activities, such as laying foundations and painting a building, on site, but extends to work of a preparatory nature." The Panel accepted the homeowners' submissions that "the definition of building claim should be 'read widely and generously'" (at [39]). It found that preparatory work under a tender agreement had the purpose of giving rise to contemplated residential building work and should therefore be characterised as a supply of building services (at [45]).
The Appeal Panel also considered the issue of whether preparatory work falls within the definition of "residential building work" in Syed Ahmad Shoaib Ali Pty Ltd v Jandson Pty Ltd [2018] NSWCATAP 228 (a case to which the Tribunal did not refer). Whilst not considering Basten JA's remarks in Grygiel v Baine to be binding, it nevertheless decided to follow them (at [262], [270]). It commented (at [280]) that "[t]he language and purpose of the provisions relating to insurance seem to us to favour an interpretation of residential building work as including the preparatory work which precedes construction." It thus concluded that the preliminary work done in that case, which consisted of obtaining structural engineering drawings, a BASIX report, a BAL certificate, a s 149 certificate, a pre-assessment for the CDC application and landscape architectural services, was "residential building work" (at [298]).
It may be accepted, following the decisions referred to above, that the preliminary work was "residential building work." However, the Tribunal did not consider the question of whether the preliminary services were services "supplied by the person who contracts to do, or otherwise does, that work" (within the definition of "building goods or services"). The builder did not contract to do the work in writing and did not itself complete the structural design, architectural design and stormwater plan; nor did it conduct the survey. These were services provided by third parties, and invoiced to the builder. The builder then sought to pass on the cost to Mr Issa. There is thus a real question as to whether it can properly be said that the builder contracted to do the work or otherwise did the work (within the definition of "building goods and services"). On the other hand, the persons providing the survey and plan "supplied" those services and also did the work. This is sufficient for the services to fall within the definition of "building goods and services."
For these reasons, and given that the point was not argued, we are prepared to accept that the services of providing a survey and plans were "building services" and that the builder's claim was a "building claim." Accordingly, we see no error in the Tribunal's conclusion that it had jurisdiction to determine the builder's claim under the Home Building Act.

Application of provisions concerning insurance requirements

Division 2 of Part 6 (ss 92 to 98) of the Home Building Act is entitled "Insurance requirements."
Section 92(1) prohibits a person from doing residential building work under a contract unless a complying contract of insurance is in force and a certificate of insurance, evidencing the contract of insurance, has been provided to the other party to the contract.
Section 92(2) prohibits a person from demanding or receiving a payment under a contract for residential building work unless a complying contract of insurance is in force and a certificate of insurance, evidencing the contract of insurance, has been provided to the other party to the contract.
Subsections 94(1) and (1A) of the Home Building Act provide as follows: 94 Effect of failure to insure residential building work (1) If a contract of insurance required by section 92 is not in force, in the name of the person who contracted to do the work, in relation to any residential building work done under a contract (the uninsured work), the contractor who did the work - (a) is not entitled to damages, or to enforce any other remedy in respect of a breach of the contract committed by any other party to the contract, in relation to that work, and (b) is not entitled to recover money in respect of that work under any other right of action (including a quantum meruit). (1A) Despite section 92(2) and subsection (1), if a court or tribunal considers it just and equitable, the contractor, despite the absence of the required contract of insurance, is entitled to recover money in respect of that work on a quantum meruit basis.
Where the contract price exceeds $20,000 (or, if the contract price is not known, the reasonable market cost of the labour and materials involved exceeds $20,000), a contract must be in writing and be dated and signed by or on behalf of each of the parties to it (Home Building Act, s 7(1A) and (2); Home Building Regulation 2014 (NSW), cl 5(1)). A person who contracts to do any residential building work under such a contract that is not in writing or that does not have sufficient description of the work to which it relates is not entitled to damages or to enforce any other remedy in respect of a breach of the contract committed by any other party to the contract, and the contract is unenforceable by the person who contracted to do the work (Home Building Act, s 10(1)(b)).
It was not in dispute that there was no contract of insurance in force. Nor was it in dispute that there was no signed, written contract between the parties. The Tribunal did not, however, make any finding as to whether there was an oral contract between the parties. Such a contract, if it existed, would be unenforceable by the builder, but could still have been enforced by the homeowner (Home Building Act, s 10(1)). It is encompassed by the term "contract" as used in the Home Building Act.
Without making a finding as to whether the parties had entered into an oral contract in relation to the work, the Tribunal was not in a position to determine whether ss 92 and 94 applied. Both of these provisions apply to work done "under a contract." Section 92(1A) applies to a "contractor" being a person required by s 92 to enter into a contract of insurance (Home Building Act, s 90(1)). Section 92(1) requires a person doing residential work "under a contract" to enter into a contract of insurance. We note that s 96(1) of the Home Building Act prohibits a person from doing residential building work "otherwise than under a contract" unless a contract of insurance that complies with the Home Building Act is in force in relation to that work.
The Tribunal erred in its consideration of whether the builder was entitled to recover compensation on a quantum meruit claim. An action on quantum meruit "rests, not on implied contract, but on a claim to restitution or one based on unjust enrichment": Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 at 227. In order for the builder to succeed, it would need to be shown that Mr Issa had received a "benefit" at the builder's expense which he accepted, and which it would be unconscionable for Mr Issa to retain without payment (Lumbers v W Cook Builders Pty Ltd (in liq) (2008) 232 CLR 635, Gummow, Hayne, Crennan and Kiefel JJ at [77]). Establishing the acceptance of a benefit, without a request, is not sufficient (Lumbers v W Cook Builders Pty Ltd (in liq) (2008) 232 CLR 635, Gummow, Hayne, Crennan and Kiefel JJ at [82]).
The Tribunal failed to consider whether it would be unconscionable for Mr Issa to retain the benefit of the survey and plans without payment (and whether they were, in fact, a benefit to Mr Issa, accepted by him) and considered only whether it would be just and equitable for the builder to recover money. Even in circumstances where s 94(1A) of the Home Building Act applies, it is not sufficient for the Tribunal to find that it is "just and equitable" for a contractor to recover money; the contractor must be able to do so "on a quantum meruit basis" (see s 94(1A)), applying the relevant principles (see, for example, Pender v Robwenphi Pty Ltd [2008] NSWSC 1144). The Tribunal failed to consider those principles and on that basis the appeal must succeed.

Conclusion

For the reasons given above, the first ground of appeal succeeds. In these circumstances, there is no need to consider the second ground or issues of procedural fairness. However, it should be noted that both parties were self-represented at the Tribunal hearing and appeal hearing and neither party had understood, at least prior to the Tribunal hearing, that the matter would proceed to be determined on a quantum meruit basis. Indeed, the Tribunal acknowledges at para [27] of the reasons for decision that the issue of quantum meruit had not even been raised by the applicant who was the one that was claiming the monies.
Mr Issa has placed into the Tribunal's trust account $6,270, pending the outcome of this appeal. That money should be returned to him.
The proceedings should be remitted to a differently-constituted Tribunal for redetermination in accordance with law.

Orders

In light of the above, the appropriate orders are: 1. The appeal is allowed. 2. The orders made by the Tribunal on 5 November 2019 are set aside. 3. The proceedings are remitted to be redetermined by a differently constituted Tribunal. 4. The registrar is directed to return to the appellant the amount of $6,270, held in the Tribunal's trust account.

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: 04 May 2020

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