Jason Field & Kim Field v Craig John Dettman

The Contractual Relationship 9The appellants claimed that they contracted with the respondent to construct their house for $460,000 by accepting a quotation that he provided to them on about 12 June 2006. 10The respondent told the Tribunal that he informed Mr Field that he was unable to assist the appellants in the construction of their house because he had no home warranty insurance. He said Mr Field proposed to him that, in order to keep down costs, the appellants would build the house as owner/builders. The respondent agreed to help them on that basis. 11He claimed that he agreed with Mrs Field to carry out his work for $37 per hour plus Goods and Services Tax for each man on the job and invoiced cost plus 10% for items that he organised and paid for. He said he prepared a document pricing the cost of the house at $460,000 in response to a request from Mrs Field in order to meet the requirements of her bank. He said he reached an agreement with Mrs Field to deposit moneys into his cheque account because the appellants did not have their own cheque account. Payments were made from this account for materials, services and for the work of other trades. 12The respondent said that towards the end of the works Mrs Field told him that there was no further money for tradespersons and that work would have to stop. He accounted to the appellants for the balance of the funds remaining in his cheque account and paid them that sum together with a further sum that arose from an unrelated transaction. 13The result of this evidence was that there were two alternative conclusions available to the Tribunal Member: (1) The respondent provided a quotation of $460,000 to construct the appellants' house, that they accepted the quotation and entered into an oral contract with him to carry out residential building work in accordance with the quotation. (2) The appellants engaged the respondent to carry out carpentry and joinery work for which he was to be paid on an hourly basis. Further, by mutual arrangement payments for goods, materials, contract work and services were paid for through the deposit of moneys into the respondent's bank account for which he was paid a surcharge of 10%. 14The Tribunal Member adopted the second of these alternatives. 15The only evidence to suggest that the document in the form of a quotation was accepted came from Mrs Field. Her evidence was to be dealt with having regard to other objective material that indicated that what actually happened during the course of the construction of the appellant's dwelling was distinctly different from a standard home owner/builder arrangement. 16Firstly, the appellants secured an owner/builder's licence. This would have been unnecessary if the respondent was contracted to construct the dwelling. Their obtaining of the licence supported the respondent's claim that he told Mr Field that he did not hold a licence to do the work. 17Secondly, rather than making payments in response to progress claims, money was paid into the respondent's cheque account to pay, not only for his remuneration but also some, but not all, of the cost of the work of other tradespersons and materials. This evidence supported the respondent's claim that this arrangement was arrived at to meet the convenience of the appellants who did not have access to their own cheque account. 18Thirdly, Mr Field himself was extensively engaged in the building work. Mr Field was a roofing tradesman, specialising in metal roofing. He worked on site daily providing labouring assistance as required from time to time. At the same time he lived with the respondent at the respondent's home. He did not claim that he received remuneration from the respondent for performing part of the work that, on the appellants' version of the contract, the respondent was bound to perform. 19In addition to paying moneys into the respondent's cheque account the appellants made direct payments to contractors and for the purchase of building materials and PC items. Mr Field carried out the roofing work and entered into a bartering arrangement with a bricklayer as a trade off for work that Mr Field provided. 20This material alone was sufficient to allow the Tribunal Member to reject the appellants' claim that their arrangement with the respondent was through an orthodox home owner/builder contract to construct their house for $460,000. 21Further, Mrs Field's statement of 2 March 2009 supported the respondent's claims concerning his proposed charges. In paragraph 13 of that statement she set out a conversation that took place between the appellants and the respondent in which he told them that he could: ... do the job for $37.00 per hour - my work plus 10% for materials used from your Mitre 10 Account. She said the respondent told the appellants that on this basis the cost of construction would be less than $320,000 and that it was on this basis that they agreed that he should do the work. Mrs Field claimed that she asked for a quotation in order to be certain of the cost to which the appellants would be exposed. She said nothing in this statement of the considerable discrepancy between the claim allegedly made by the respondent that the dwelling could be built for less than $320,000 and the sum of $460,000 that the appellants alleged they accepted without question. 22The respondent's affidavit of 11 November 2008 set out details of on site conversations with Mr Field and of the manner in which building work proceeded. Mr Field provided no statement or affidavit nor did he give evidence before the Tribunal at the preliminary hearing on the issue of the contractual relationship. The respondent was cross examined during the course of the hearing on the preliminary issue but no questions were put to him that challenged his evidence on these matters. Mrs Field did not claim that she heard any of the conversations of which the respondent gave evidence. She agreed that she was not on site while the work was in progress. 23There was therefore nothing before the Tribunal Member that challenged or contradicted the respondent's evidence concerning those conversations or the way in which work proceeded. 24In his reasons the Tribunal Member noted on a number of occasions that Mr Field did not give evidence. He noted that he did not contradict the evidence of the respondent that: (1) he was told that the respondent was unable to help because he had no home warranty insurance; (2) he asked the respondent to help in order to keep costs down; (3) the appellants would build the house as owner/builders and Mr Field would do the roofing work; (4) the respondent organised PC items and other trades including the electrician, plumber and bricklayer. 25The Tribunal Member therefore relied on the authority of Insurance Commissioner v Joyce (1948) 77 CLR 39 to conclude that, in the absence of challenge, he was more readily able to accept the evidence of the respondent concerning the nature of his contractual relationship with the appellants than that of Mrs Field. Taken into context with all of the evidence, documentary and oral, this was a course properly available to him. 26The appellants' complaint, so far as I could understand it, was that the Tribunal Member drew inferences adverse to Mr Field concerning his knowledge of the respondent's unlicensed and uninsured status. 27In submissions on the appeal the appellants claimed: 53. So, the Tribunal's findings were that by reason of Mr Field being unavailable for cross examination on 20 July 2009 and 21 July 2009, the plaintiffs were aware the defendant was unlicensed and uninsured and thereby didn't perform the unlicensed works as asserted by them in the preliminary finding, however, did perform these unlicensed works as asserted by the defendant works [sic] in the Repayment determination. 28This paragraph was not easy to understand but, doing the best I can, I interpreted it to mean that the Tribunal Member in the preliminary hearing made findings concerning the nature of the contractual relationship between the parties and that in the subsequent determination of their claim for repayment of moneys paid to the respondent, the Tribunal Member made inconsistent findings concerning the work that was in fact carried out by the respondent. 29When I read with care the preliminary findings of the Tribunal Member of 14 September 2009 it became apparent that he was concerned at that stage only with the nature of the contractual relationship between the parties. His finding was that the appellants contracted with the respondent to carry out work as a licensed carpenter/joiner. He also accepted the respondent's claim that the parties agreed to establish an account for the payment of contractors and for materials and the appellants called on the respondent for advice and assistance from time to time. He noted that these findings were reinforced by the: ... undisputed evidence of the accounting which took place after Mr Dettman left the job. 30There could be no suggestion that these findings were made because Mr Field was not available for cross examination. It was not put to the respondent in cross examination that his evidence was wrong or false and thus it was not open to the appellants to call evidence to contradict him. Mr Field put forward no evidence on the issues of whether the respondent told him that he was unlicensed and uninsured upon which he might be cross examined. It was the absence of evidence of that nature that persuaded the Tribunal Member that he could and should accept the unchallenged evidence of the respondent. 31The Tribunal Member's findings involved no inference adverse to Mr Field in the sense that he was found to have been dishonest. There simply was no evidence on this topic from him. There was no inference adverse to Mrs Field concerning the conversations that took place between the respondent and Mr Field because she was not a party to them. 32It would be most unusual to reject a person's evidence in such circumstances. 33This ground of appeal was therefore rejected. 34I noted that in arguing this ground of appeal the appellants' solicitor referred from time to time to a denial of procedural fairness. This Court has no jurisdiction to deal with a complaint of this nature. The appellants' rights in this regard are provided for in s 65 of the Act and require application to be made to the Supreme Court. I therefore dealt with this ground of appeal on the basis that the Tribunal Member's findings were unsupported by or contrary to the evidence. However, from my analysis of what occurred during the preliminary hearing, I did not consider that there was any failure on the part of the Tribunal Member to accord procedural fairness.

Restitution 35The basis for the appellants' claim and that which was set out in the points of claim presented to the Tribunal was: (1)The respondent contracted to undertake residential building works for $460,000; (2)s s 7 and 10 of the Home Building Act required the contract to be in writing; (3)s 92 of the Act required the works to be insured; (4)The appellants paid the respondent $320,971; (5)Work performed by the respondent was defective; (6)The appellants claimed: (a)reimbursement of all moneys paid to the respondent; and (b)damages and compensation. 36The parties agreed to consent orders providing for the payment to the appellants of $10,000 as compensation for defective building work. 37There were two issues involved in deciding whether there was to be any reimbursement of moneys said to have been paid by the appellants. The first was whether they were in fact mistaken about the respondent's licence and insurance position. The second was whether, even if they were aware of the respondent's licence and insurance status, the provisions of the Home Building Act prevented the respondent from retaining payments made to him for the performance of building work on behalf of the appellants.

Mistake 38The Tribunal Member found that the appellants made no mistake of fact concerning the respondent's licence and insurance status. This finding resulted from the respondent's uncontradicted and unchallenged evidence of his conversations with Mr Field. I have already rejected the claim that Mr Field was in some way unfairly denied the opportunity to respond to this evidence. 39There was, however, other evidence that supported the Tribunal Member's finding. The respondent and Mr Field were personal friends for many years. Mr Field himself was licensed as a roofing contractor and would thus have some working knowledge of the requirements of the Act. The appellants took out an owner/builder's permit, a fact that in itself indicated that they accepted the responsibilities that came with that permit. 40The appellants claimed to be mistaken in their belief that they were under a legal obligation to pay the respondent or that the respondent was legally entitled to payment. They relied on the authority of Davids Securities Pty Ltd v Commonwealth Bank of Australia (1992) CLR 353 to support the claim that this mistake required restitution of the moneys paid to the respondent. 41I did not accept that there was any mistake on the part of the appellants concerning their obligation of payment to the respondent. 42In Davids Securities , the majority said at [39]: In referring to monies paid under a mistake of law we intend to refer to circumstances where the Plaintiff pays money to a recipient who is not legally entitled to receive them. 43This was not a case where, as in Davids Securities, the obligation under which payment was made to the Bank rendered the transaction absolutely void . It was not a case in which the respondent had no entitlement to payment. While he was constrained by the provisions of the Act from enforcing the contract, the respondent remained entitled to a reasonable sum for the work that he performed.

Reimbursement 44The appellants contended that, regardless of their level of knowledge of the respondent's license and insurance status, the Act itself mandated that moneys that they paid to him should be reimbursed. They pointed to the provisions of ss 10, 92 and 94 of the Act to support this part of their claim. Those provisions variously provide that a builder who performs work under a contract that is not in writing, or when unlicensed or uninsured may not claim damages, enforce remedies in respect of breaches of the contract committed by the other party (s 10); must not demand or receive payment under the contract (s 92); and is not entitled to damages or to enforce any other remedy in respect of a breach of contract by any other party to the contract (s94). 45S 94 also provides that the contractor: (b) is not entitled to recover money in respect of that work under any other right of action (including a quantum meruit). unless a court or tribunal considers it just and equitable that, notwithstanding the absence of the required contract of insurance, the contractor recover money on a quantum meruit basis. 46In my view, this part of the appellants claim was misconceived. The Act provides for the consequences to a builder who breaches its terms. It does not provide that the building contract involved is a nullity or is void. 47The constraints in ss 10 and 92 on recovery of money for work do not preclude a claim on a quantum meruit basis; s 94 permits recovery on that basis if it would be just and equitable to allow it. Nowhere in the Act is it provided that money paid by a home owner to a builder must be repaid in circumstances where the contract is not enforceable by the builder or the builder is not entitled to recover it. 48The decision of the High Court in Pavey & Matthews Pty Limited v Paul (1987) 162 CLR 221 addressed specifically the situation that arose when a home owner secured the benefit of building work, the contract price of which could not be recovered by the builder because the contract was not in writing. The decision recognised the injustice to the builder of allowing the home owner to retain the benefit of the contract for no payment while the builder was left without remuneration for his or her labour. This was a consequence that the High Court was not prepared to countenance. The principle of unjust enrichment was applied to permit the builder to recover on a quantum meruit. 49The appellants once more attempted to rely on Davids Securities to support their argument for reimbursement of moneys paid to the respondent. Again, their argument misconstrued the principles established in that decision. The decision in Davids Securities represented a shift in the law to allow for recovery of moneys paid under a mistake of law. It was clear that the shift was the result of the development of the law of restitution based on the concept of unjust enrichment. 50The High Court described a prima facie entitlement to recover moneys paid under a mistake of law. None of the judgments of the Court suggested that proof of a mistake on the part of a person making payment would automatically result in an order for restitution of money paid. They said that the recipient of the money might resist a claim for restitution in a number of ways. 51The majority placed the onus on a defendant to establish that there were circumstances that the law recognised would make an order for restitution unjust and said at [47]: There can be no restitution in such circumstances because the law will not provide for recovery except when the enrichment is unjust. It follows that the recipient of a payment, which is sought to be recovered on the ground of unjust enrichment, is entitled to raise by way of answer any matter or circumstance which shows that his or her receipt (or retention) of the payment is not unjust. 52Justice Brennan stated the principle at [13] as follows: It is a defence to a claim for restitution of money paid or property transferred under a mistake of law that the defendant honestly believed, when he learnt of the payment or transfer, that he was entitled to receive and retain the money or property. 53The appellants offered no basis, aside from relying on the provisions of the Act to which I have referred, for suggesting that these principles did not apply in the current case. The injustice of their claim is demonstrably more acute in this case where of the sum paid to the respondent, approximately $250,000 was paid for the work of other tradespersons or for materials and services provided by others and that all of the moneys paid were applied to their benefit in the construction of their house. 54This ground of appeal is rejected.

Quantum Meruit 55Although he rejected the contention that all of the money the appellants paid to the respondent should be reimbursed because it was paid under a mistake, the Tribunal Member proceeded to deal with the issue of whether and, if so, to what extent the respondent was entitled to retain the money paid to him as a fair and reasonable payment for the work he carried out on behalf of the appellants. 56The Tribunal Member decided that the evidence indicated that the respondent received an amount that was fair and reasonable and that nothing was to be reimbursed. 57The appellants challenged this conclusion as follows: (1) The amount that the appellants were obliged to pay the respondent was limited to: (a) $12,000 because of restrictions placed on his licence; (b) on the basis of the preliminary finding that the respondent was engaged as a carpenter/joiner, a fair and reasonable amount for the work he performed in that capacity only; (c) $37 per hour for carpentry work only. (2) The Tribunal Member determined the value of the quantum meruit claim by reference to the value to the appellants of the buildings works and not the cost of the works to the respondent. (3) In assessing the evidence of the experts, the Tribunal Member should have preferred the evidence of Mr Shepherd to that of Mr Satchell. 58The Tribunal Member disagreed that the amount payable to the respondent was restricted in the manner contended by the appellants. 59He was provided with a copy of the respondent's licence and noted that its terms imposed no restriction on the value of the work that could be carried out by the respondent. The only effect of a $12,000 limit was to require that home warranty insurance be provided if the contract value of the work exceeded that sum. 60The appellants pointed out that ss 4, 12 and 13 of the Act imposed penalties on persons who performed residential building work for which qualifications were required if they were not licensed to perform that work. I did not consider that this assisted their argument. The fact that a contractor may be liable to prosecution for breaches of the Act does not render the contract itself illegal. That which becomes unlawful is the conduct of the person who breaches the provisions of the Act. 61Further, the argument was contrary to the many authorities referred to in the parties' submissions and the Tribunal Members reasons, including: Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 Kalokerinos v HIA Insurance Services Pty Ltd [2004] NSWCA 312 Brodyn Pty Ltd t/a Time Cost and Quality v Davenport [2004] NSWCA 394 Alexander & Anor v Gregoriou & Ors [2010] NSWDC 15 62I already noted that the Tribunal Member found that the agreement between the parties involved more than that the respondent was retained as a carpenter/joiner. They also agreed to the establishment of the account for payment of contractors and for materials and they also received advice and assistance from the respondent from time to time. There was therefore nothing inconsistent in the Tribunal Member's acceptance that the respondent was entitled to payment on a quantum meruit basis for all of the work that he performed. 63The decision in Pavey & Matthews made it clear that the payment terms of an unenforceable contract may be referred to in deciding the extent to which remuneration was fair and reasonable. The Court may also have regard to the evidence of experts. It is not bound to adopt the opinions of any expert, those opinions having been provided for the guidance of the court only. It must also be remembered that the respondent himself did not seek to enforce payment or claim more than had been paid by the appellants. 64The Tribunal Member was critical of Mr Shepherd's method of calculating the cost of construction of the appellants' house because he did not adopt recognised methods to arrive at his assessment. He adopted hourly rates for labour that he agreed were considerably lower than industry rates for the work of a carpenter/joiner or of unqualified persons. 65He allowed $37 per hour for carpentry work because this was the rate to which Mrs Field agreed. For labouring or work for which the respondent was not qualified he allowed $25 per hour. His reasoning was that the respondent should be paid less than $37 for work that did not require qualification or was not within his area of qualification. 66There were two problems with this approach. The first was that Mr Shepherd was unable to point to any authoritative source for the rates he selected. He conceded that the rate of $25 was arbitrary , it was not the rate actually paid and in the Scott Schedule he costed the rectification of defects at considerably higher rates because they were the rates that were normally applied. The second problem was that the agreement reached between the respondent and Mrs Field was that he would be paid $37 per hour for both the carpentry work and for the work of his employees for which no qualification was required. 67Mr Shepherd's method of assessing a quantum meruit resulted in a figure of $240,790. This did not accord with any of what the parties expected the building work to cost. The respondent was alleged to have told the appellants that he thought that the building works could be done for less than the $320,000 quoted by another builder. Mrs Field alleged that the appellants accepted a quotation of $460,000. 68From his figure Mr Shepherd assessed the work performed by the respondent at $16,366.50 for labour and $49,288.88 for materials. 69There were many other discrepancies and omissions in Mr Shepherd's assessment that, coupled with the unrealistic labour rates that he applied, rendered it of so little assistance to the Tribunal Member that, in my view, he was justified in rejecting it. 70Mr Satchell assessed the value of the works to the appellants in total at $731,779, of which $117,354 represented the value of the labour component of the work undertaken by the respondent or his employees and $584,298 the value of work supervised by the respondent. 71Mr Satchell followed recognised quantity surveying methods in arriving at a value of the works greatly in excess of their cost to the appellants. He adopted the more traditional method of quantity assessment by providing rates for items of work that were inclusive of labour and materials. He named various sources to which he referred before decided upon the rates to be adopted, among them Cordell Constructions - Commercial & Industrial Cost Guide , Vol. 37, Issue 3 and 2006 Rawlinson - Australian Construction Handbook . These were reference sources that Mr Shepherd agreed were generally used by quantity surveyors although he did not refer to them. 72The appellants took issue with the reference to the commercial and industrial guide published by Cordells rather than the guide to residential building costs but there was no evidence of differences, if any, between them that were relevant to Mr Satchell's opinion. Further, the Cordells guide was but one of the recognised sources to which Mr Satchell made reference. 73It was apparent that Mr Satchell's opinion provided more assistance to the Tribunal Member than that of Mr Shepherd. However, the Tribunal Member did not in fact adopt the figures provided by Mr Satchell. He referred to them and used them as a guide to his determination that the amount paid to the respondent for all of the work he performed was fair and reasonable and that therefore no part of it was to be reimbursed to the appellants. 74His reasoning in arriving at this conclusion was clear and logical. It was based on available evidence and accorded with principle. I found no error of law in the conclusion that he reached. 75This ground of appeal is rejected.

ORDERS 76The appeal is dismissed 77The appellants are to pay the respondent's costs of the appeal. This order is suspended for seven days to allow the parties within that period to relist the matter for argument on the issue of costs. 78The exhibits are returned. 79My reasons are published.

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: 12 September 2011