J Redfern PSM, Senior MemberN Kennedy, Senior Member
Catchwords
APPEAL – Home Building Act – whether questions of law raised
– adequacy of reasons – whether the owner validly
terminated the
contract and breached the contract by failing to pay a progress payment –
Source
Original judgment source is linked above.
Catchwords
APPEAL – Home Building Act – whether questions of law raised– adequacy of reasons – whether the owner validlyterminated thecontract and breached the contract by failing to pay a progress payment –competing evidence about defectivework – the weighing of evidence
Judgment (50 paragraphs)
[1]
For the reasons outlined above, the "new" evidence sought to be tendered by Mr Kratochvil (save for the invoice) is evidence that was reasonably available at the time of the hearing. Further, the only evidence that could be characterised as "significant" is the evidence about the payment Mr Kratochvil says he made as this had the potential to impact the order made by the Tribunal in favour of Cutting Choice. The balance of the "new" evidence sought to be tendered by Mr Kratochvil is either peripheral or of little probative value and carries no weight.
We therefore refused to admit these documents as evidence in the appeal.
Insofar as Mr Kratochvil's affidavits contain submissions, we have had regard to those submissions and note that Mr Kratochvil also made oral submissions consistent with many of the written submissions in his affidavits. The effect of these submissions was that, Mr Kratochvil claimed the decision was against the weight of the evidence because the Tribunal accepted misleading evidence by Cutting Choice or did not give sufficient weight to his evidence. Mr Kratochvil also submitted that the decision of the Tribunal was not fair and equitable for this reason.
Insofar as Mr Kratochvil's affidavits contain evidence about factual matters, those parts of his affidavit are not admissible as evidence of the truth of the matters asserted. We have therefore not taken into account any new evidence sought to be raised by Mr Kratochvil in these affidavits.
In relation to the evidence sought to be tendered by Cutting Choice, we note this evidence was also available at the time of the hearing and if Cutting Choice wanted to rely on this evidence, which would have supported its claim, Cutting Choice should have provided the evidence to the Tribunal first instance. The builder did not do so and as such, this evidence is also rejected for the same reasons that we have rejected the new evidence sought to be relied on by Mr Kratochvil.
[2]
The grounds of appeal specified in the Notice of Appeal are that the builder "misled" the Tribunal in stating that all frameworks have been passed by Central Coast Certifier. Termination was in line with the contract. The owner was treated unfairly and relies on Jim's Building Inspection Report which was unfairly rejected by the Senior Member at [27] of his decision. The builder was unwilling to comply with a request from Mr Kratochvil by email dated 8 July 2023 to rectify the defects and unfairly suspended the work for non-payment of an invoice in respect of incomplete work. In this regard, Mr Kratochvil notes with the findings of the Tribunal made at [54] and [61] of the decision. Mr Kratochvil submits that [55] of the decision was wrong given the findings at [54] and [61] in relation to the incomplete work. He submits that he was justified to terminate the contract.
Mr Kratochvil further specified the grounds on which he sought leave to appeal in his Grounds of Appeal as follows:
[3]
(1) Mr Kratochvil believes the Tribunal made his decision on untrue information by the builder. The member was therefore compromised in his decision at [26], [48], [50] and [51]. The builder was using photos of a lower roof above the kitchen and not related to the building inspection report referred to at [46]. The Tribunal erred in relation to the defects referred to at [50] because [51] relates to the roof above the kitchen and not to the defects are set out in the ISCOPE report.
(2) Termination of the contract was justified given the email sent to the builder on 8 July 2023 to rectify the defects as per the building inspection report of 5 July 2025 at page 5.
(3) The claim for the fourth progress payment, and the claims by the builder that 90% of the building works had been completed, was incorrect as per the findings of the Tribunal at [54] and [61]. The builder was not entitled to claim payment because the stage 4 works were incomplete.
(4) The contract was validly terminated on 27 July 2023 as per clause 25 and clause 12.
[4]
In Cominos v Di Rico[2016] NSWCATAP 5, the Appeal Panel stated at [13]:
[5]
It may be difficult for self-represented appellants to clearly express their grounds of appeal. In such circumstances and having regard to the guiding principle, it is appropriate for the Appeal Panel to review an appellant's stated grounds of appeal, the material provided, and the decision of the Tribunal at first instance to examine whether it is possible to discern grounds that may either raise a question of law or a basis for leave to appeal. The Appeal Panel has taken such an approach in a number of cases, for instance, Khan v Kang[2014] NSWCATAP 48 and Prendergast v Western Murray Irrigation Ltd[2014] NSWCATAP 69. However, this must be balanced against the obligation to act fairly and impartially (Bauskis v Liew[2013] NSWCA 297 at [68] citing Hamod v State of New South Wales[2011] NSWCA 367 at [309]- [316]). Relevantly, s 38(2) provides that that Tribunal "may inquire into and inform itself on any matter in such manner as it thinks fit, subject to the rules of natural justice.
[6]
In Unique, the Appeal Panel noted that what constitutes a question of law "is vexed and context dependent in the sense that the distinction between matters of fact and of law may turn on the circumstances in which the question arises" (Unique at [37]). It was also noted that, when dealing with self-represented parties, the Appeal Panel may consider for itself whether a question of law is raised. As such, if the material and submissions raise a question of law in substance, a more generous approach is warranted as an aspect of ensuring procedural fairness, even though the ground has not been raised expressly or with precision: Unique at [27]-[28] citing Wollondilly and Kudrynski.
[7]
We have examined the grounds of appeal and submissions to discern whether Mr Kratochvil raises questions of law. Having regard to the particulars provided by Mr Kratochvil, we have identified the following grounds:
[8]
(1) Ground 1: The Tribunal erred in finding that Mr Kratochvil did not validly terminate the contract under clause 25.
(2) Ground 2: The Tribunal erred in finding that Mr Kratochvil breached clause 12 of the contract by failing to pay the fourth progress payment claim.
(3) Ground 3: The Tribunal failed to take into account the Building Inspection report of 5 July 2023, being the evidence Mr Kratochvil relied on to terminate the contract.
(4) Ground 4: The Tribunal erred in finding that there were no defects that required rectification and these defects justified the issue of his notice of termination.
(5) Ground 5: The Tribunal erred in finding that Cutting Choice was entitled to payment for the fourth progress payment, as the works were incomplete.
[9]
Mr Kratochvil submits, in his opening statement, that his appeal raises a question of law about the interpretation of the contract and whether he validly terminated the contract on 27 July 2023. Mr Kratochvil also contends that the appeal raises questions about whether there had been a breach of clause 12. We have identified these grounds as Grounds 1 and 2 above.
The findings of the Tribunal about termination and breach of clause 12 are set out in the decision at [25]-[33]. The grounds of appeal raise concerns about the evidence and the findings of the Tribunal, not about the interpretation of these clauses of the contract. As such, the complaint that Mr Kratochvil raises about the findings on termination raise questions of fact and, at best questions of mixed fact and law. This is not a question of law (Bimson, Roads & Maritime Services v Damorange Pty Ltd).
We have, however, identified a potential question of law in relation to Grounds 1 and 2.
The Tribunal found that the defects alleged by Mr Kratochvil were not proven. The defects alleged by Mr Kratochvil in his email of 8 July 2023 formed the basis for the notice requiring rectification by Cutting Choice. This finding, and whether Mr Kratochvil was entitled to terminate on this basis, raises questions of fact about the Tribunal's findings in respect of the defects alleged.
The Tribunal further found that, even if there were defects, clause 25 did not give Mr Kratochvil the right to terminate until 10 days after notice of the defects were given to Cutting Choice to give the builder the opportunity to rectify those defects. Mr Kratochvil terminated the contract before the 10 days had elapsed. The Tribunal found Mr Kratochvil had no right to terminate on 27 July 2023. Whether Mr Kratochvil had the right to terminate the contract for defects that were notified but not rectified within the prescribed period is also a question of fact. There is no dispute that clause 25 provides for termination where the builder is notified of defects and fails to remedy those defects or remove faulty or unsuitable materials as required.
Mr Kratochvil did not raise in his notice of termination the ground that Cutting Choice had suspended the work on 9 July 2023 without reasonable cause, although the Tribunal accepted that this was the case, noting that clause 12 provided for payment within 5 business days, namely on or before 12 July 2023. Cutting Choice suspended work on 9 July 2023. The Tribunal found that Cutting Choice was not entitled to suspend work until 12 July 2023 but also found that Mr Kratochvil was not entitled to refuse to pay the progress payment for stage 4. The Tribunal found at [30] that "while clause 12 does permit a lesser amount to be paid, there was no compliance by the owner with the requirements set out in that clause". The Tribunal further found that Mr Kratochvil had breached clause 12 by failing to pay the progress payment and this was the case by the time he gave the notice of termination. The Tribunal refers to this at [30]-[32] of the decision, stating that the contract was not validly terminated by Mr Kratochvil for two reasons, the first being that at the time Mr Kratochvil purported to rely on clause 25 when he was in breach of clause 12.
However, it is not entirely clear from the reasons why this is the case. The failure to provide adequate reasons on a material issue in dispute may disclose the failure to consider a material claim, and thereby exercise jurisdiction, or may give rise to concerns that the Tribunal has adopted the wrong legal principles or interpretation, in this case, of the contract. These errors, if made out, raise questions of law.
Arguably the second reason why the Tribunal found the contract was not validly terminated, namely because the Tribunal did not accept there was defective works alleged by the owner, would have been sufficient to determine the question of whether Mr Kratochvil was entitled to issue the termination notice on 27 July 2023. This is a question of fact. However, because Mr Kratochvil raises concerns about the construction and operation of clauses 25 and 12 but has not articulated a question of law with precision, it is convenient to consider this issue in the context of determining Grounds 1 and 2, leaving open the question for later determination, on whether this ground raises a question of law and if so, has there been error.
Also relevant to Ground 1, is the contention by Mr Kratochvil that the Tribunal incorrectly referred to an email created more than year after the events in question at [27] of the decision. Mr Kratochvil contends that he relied on the report of Jim's Building Inspection dated 5 July 2023, which was included in the evidence bundle. He further contends that Senior Member Ellis SC based his decision on the incorrect piece of information. We have identified this as Ground 3. Insofar as Mr Kratochvil contends that the Tribunal did not take account of material relevant evidence submitted by him, this potentially raises a question of law about procedural fairness or possibly a failure to exercise jurisdiction. Grounds 1 and 3 are therefore related.
Mr Kratochvil contends that the assertion made by Cutting Choice in the proceedings at first instance that the building work had been cleared by a certifier was in error. He disputes the findings in [48]-[49] of the decision based on the evidence of Cutting Choice referred to at [26]. Mr Kratochvil also disputes the finding at [32] that the Tribunal did not accept there was defective work. We have identified this as Ground 4.
This ground raises questions of fact relating to how the Tribunal assessed the evidence. There is some overlap with Ground 3 because Mr Kratochvil also relies on the report of Jim's Building Inspections dated 5 July 2023 in support of this claim. Other than the potential claim that the Tribunal has failed to have regard to relevant evidence, this ground does not raise a question of law. If Ground 3 is rejected, Mr Kratochvil needs leave to appeal on this ground.
Ground 5 also raises questions of fact about the evidence and does not raise a question of law. Leave to appeal is required.
[10]
As outlined above, a number of the grounds of appeal are related. Grounds 1, 2 and 3 appear to raise questions of law.
[11]
Grounds 1 and 2: Termination of the contract and breach of clause 12
[12]
The Tribunal made findings that the contract was not validly terminated, also finding that Mr Kratochvil was in breach of clause 12 of the contract (at [31]-[32]). This was a material finding yet the reasoning is brief.
An appeal is against orders and not reasons (AZC20 v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs[2023] HCA 26 at [34]) although reasons that are not adequately expressed to expose the basis for the finding on a dispositive issue may ultimately raise questions of law. The adequacy of reasons in the context of determining questions of law raised on appeal was considered at length by the Court of Appeal in Alexandra Landfill, where two of the principal issues in the appeal were whether the primary judge constructively failed to exercise his jurisdiction and whether the reasons for his findings were inadequate.
Basten JA observed at [22] and [23]:
[13]
22. .....In a case where a court has set out the competing material (thus engaging with an issue) and decides in favour of a particular result, without explaining why, the reasons will fail to meet the criterion of transparency required of judicial decision-makers. Where some reasons are given, expressly or implicitly the element of transparency may well be met, even if an appellate court considering an appeal by way of rehearing would find the reasons flawed.
[14]
23. To the extent that the appellant is not able to demonstrate that the trial judge failed to consider any essential element of the claim for compensation, a separate question will arise as to whether the reasons given for the outcome were sufficient in law.
[15]
29. Where the process of fact finding is unreviewable except to the extent that it reveals an error of law, the reasons required must be sufficient to demonstrate that the legal limits of the process have not been contravened. Having regard to the purpose of giving reasons, the standard is properly identified negatively: it must be shown that the decision has not been reached capriciously or arbitrarily, but rationally. The reasons must thus reveal that all material factors have been identified and addressed, and that no prohibited considerations have been operative. If there is an available process of reasoning from the evidence to the outcome which has been adopted, either expressly or by implication, the appellate court should be slow to reach the conclusion that the function of the trial court has not been exercised according to law.
[16]
Whilst it cannot be doubted that, in general, courts have an obligation to give reasons for their conclusions, the extent of the obligation in a particular case is very much dependent on the context in which the question arises for consideration.
[17]
His Honour agreed, at [313], with the observations made by Bell P in New South Wales Land and Housing Corporation v Orr[2019] NSWCA 231 that the adequacy of reasons is not about the optimal level of detail required for reasons but the minimum acceptable standard, which is "not one of perfection".
In our view the issues raised in relation to Grounds 1 and 2 are not about the adequacy of the reasons but rather about whether the Tribunal properly and lawfully determined the question of whether Mr Kratochvil validly terminated the contract in the context of his alleged breach of clause 12. This finding had a number of important consequences in relation to the various disputes between the parties. The reasons on this issue, while brief, were adequately expressed so as to be able to determine the basis for the finding.
Mr Kratochvil relied on clause 25 to terminate the contract and, in particular, as disclosed in his email of 27 July 2025, Mr Kratochvil relied on the failure of Cutting Choice to remedy defective work or remove faulty or unsuitable materials, the failure to comply with an order and directions from council in relation to the Blueboard and the claim that Cutting Choice was unable or unwilling to complete the work or had abandoned the work. Mr Kratochvil did not raise the ground that Cutting Choice had suspended work before completion without reasonable cause.
Mr Kratochvil contends that the Tribunal erred in making the findings at [28]-[33]. These findings relate to whether clause 25 was satisfied but also whether there had been a breach by Mr Kratochvil of clause 12 of the contract by failing to pay the fourth progress payment. These findings were based on the evidence before the Tribunal. Mr Kratochvil contends that the finding he was not entitled to terminate based on defective work was in error. Mr Kratochvil also contends that the finding he was required to pay the progress payment for the fourth stage in the circumstances was in error.
As noted above, the Tribunal found that Mr Kratochvil was in breach of clause 12 for non-payment of the fourth progress payment and this was one of the reasons that the contract was said not to have been validly terminated. In finding that Mr Kratochvil breached clause 12, the Tribunal noted at [30] that the fourth progress payment was not paid within 5 days and Mr Kratochvil did not comply "with the requirements in that clause". The Tribunal does not identify "the requirements" although notes that clause 12 "does permit a lesser amount to be paid". What the Tribunal is referring to is the effect of the provisions set out in clause 12, which provide as follows:
[18]
The owner must pay the contract price by progress payments within 5 business days of the completion of the stages of the work nominated in the schedule of the progress payments. The contractor must notify the owner in writing when a stage of the work has reached completion. A stage of work has reached completion when it has been finished in accordance with the contract documents and any variations agreed to and there are no omissions or defects that prevent that stage of the work from being reasonably capable of being used for its intended purpose.
[19]
The schedule of progress payments lists the various stages of the building work. Relevantly, invoice 361 issued by Cutting Choice dated 5 July 2023, was for stage 4 being for the fit-out, bathroom tiles and gyprock.
Clause 12 further provides:
[20]
If there is any bona fide dispute in relation to the value or quality of work done, the dispute must be dealt with in accordance with the dispute resolution procedure set out in clause 27. In those circumstances, the parties agree as follows:
[21]
(a) the owner may withhold from the progress payment, an amount estimated by the owner, acting reasonably, equal to the owner's estimate of the value of the disputed item
[22]
(b) The contractor must continue to carry out its obligations under this contract pending resolution of the dispute.
[23]
As such, if an invoice for a progress payment is issued it must be paid within 5 business days unless if there is a bona fide dispute. If there is a dispute, the dispute must be dealt with in accordance with the dispute resolution procedure set out in clause 27. Clause 12 also provides that the owner may withhold payment of an amount estimated, acting reasonably, equal to the owner's estimate of the value of the disputed item.
The Tribunal further explained its reasoning at [104]-[105] when dealing with Cutting Choice's claim for variations. Relevantly, the Tribunal found that Mr Kratochvil had failed to provide any explanation for why, in view of his handwritten notes made on the invoices, he had only paid $4,290 towards the invoice. The Tribunal noted the provisions of clause 12 and, in emphasising that payment could only be withheld by the owner "acting reasonably", found at [105]:
[24]
It defies belief that an owner could be said to be acting reasonably when he only pays $4,290 (1) when his own handwriting recognises that $16,204.53 was due, and (2) when he only pays $2100 for the tiler and $800.00 for the plasterboard, which appear to relate to the builder's sub-contractors, but nothing for the builder.
[25]
While the Tribunal's reasoning about why Mr Kratochvil was in breach of clause 12 at the time of his purported termination is somewhat abridged in the early part of the decision, when this explanation is read in conjunction with the Tribunal's reasoning at [104] and [105], it is clear that this is what the Tribunal intended. Relevantly, the Tribunal observed at [104] that the owner's failure to provide any explanation for why he had only paid $4, 290.00,
[26]
...is the primary reason why the Tribunal found that the owner failed to comply with cl 12 of the contract (A167).
[27]
In the events that happened, and there is no dispute about this as these details are referred to in the decision and in the material provided to the Appeal Panel, Cutting Choice issued an invoice due for payment by 12 July 2023, Mr Kratochvil disputed the invoice by email dated 8 July 2023, Cutting Choice responded to the disputed claim by lengthy email dated 9 July 2023 but neither party referred the dispute to a third party, although Cutting Choice does refer to the dispute being referred to Fair Trading. In the meantime, and again there is no dispute about this, Mr Kratochvil only paid $4,260 of the $22,268.40 claimed. It therefore appears that the parties did not follow the procedure set out in clause 27. Nor is it apparent that Mr Kratochvil complied with clause 12 by paying that part of the progress payment which was not disputed. As noted in the evidence outlined above, the email of 8 July 2023 identifies particular items that were disputed for the "forced variations" and raises concerns about the eaves but does not provide any estimate of how Mr Kratochvil arrives at the part of the claim paid.
The Tribunal was correct in identifying that there were "requirements" that need to be followed by the owner, in this case Mr Kratochvil, before the owner could be justified in failing to make a progress payment. It is not entirely clear why the Tribunal considered this to be a material finding in relation to termination at [32] as Mr Kratochvil did not terminate on this ground in any event. However, the finding made by the Tribunal that Mr Kratochvil had breached clause 12 by the time the termination notice was issued was a finding that was available on the basis of the material before the Tribunal and was consistent with the relevant provisions of the contract. There was no error.
In summary, we are not satisfied that the Tribunal made any errors of law or fact in its findings at [28]-[33] in relation to termination and breach of clause 12. We reject these grounds of appeal and, insofar as leave is required, we refuse leave to appeal.
We are not satisfied that Mr Kratochvil has suffered a substantial miscarriage of justice because of the specified reasons in cl 12. The Tribunal made findings about clauses 25 and 12 that were available on the evidence and consistent with the provisions of the contract. There were comprehensive prehearing directions made about the evidence. These directions were recorded in the reasons of the Tribunal dated 16 August 2024. We are not satisfied that the decision was not fair and equitable or that the findings were against the weight of the evidence.
Furthermore, adopting the approach identified in the authorities referred to in Collins v Urban and summarised at [84], we are not satisfied that there "an injustice which is reasonably clear, in the sense of going beyond merely what is arguable" or that there was a "factual error that was unreasonably arrived at and clearly mistaken".
Grounds 1 and 2 are rejected.
[28]
Ground 3: The Tribunal failed to take into account relevant evidence
[29]
Mr Kratochvil submits that the Tribunal did not take into account the Jim's Building Inspection report dated 5 July 2023, as evidenced in [27] of the decision, and this evidence was material to his claim. He contends that the Tribunal referred to an email dated 26 August 2024 as being the evidence relied on by Mr Kratochvil to support his contention about defects entitling him to terminate. Mr Kratochvil contends this was in error. We infer from this that Mr Kratochvil either contends that Senior Member Ellis SC misunderstood his submission or looked at the wrong exhibit. The raises a question of law because it raises either constructive failure to exercise jurisdiction or procedural fairness.
The dispositive finding made by the Tribunal on termination is at [31]. The Tribunal states, after outlining the parties' arguments at [25] and [26], as follows:
[30]
27 In reply, the owner contended that his termination was based on a building inspector's report. However, the page he referred to (A126) was an email dated 26 August 2024, an email dated more than a year after the events in question.
[31]
28 For the reasons set out below, when considering the alleged defects, the Tribunal is not satisfied that the matters set out in that email had been established as defective work attributable to the work of the builder.
[32]
29 Even if there were defects, as alleged by the owner in his 8 July 2023 email, clause 25 of the contract did not give him a right to terminate the contract until 10 business days after that date, which gave the builder until 21 July 2023 to remedy any defects.
[33]
The Appeal Panel was provided with a complete copy of the Jim's Building Inspection report dated 5 July 2023. The Building Inspection report is referred to in the email from Mr Kratochvil to Cutting Choice dated 8 July 2023 setting out what Mr Kratochvil alleged were the defects requiring rectification. The report identified: defects in the eaves (missing supporting timber and gaps between the eave joints); suspected defective wall frames (it was observed that the wall frames were defective as a deviation from a vertical or straight plumb line); carpentry work on external areas that was said to be incomplete and substandard, defects relating to the roof (roof capping installation said to be substandard) and the roof sheeting on the exterior, which was said to be not adequately secured, and defects in relation to bedroom four (incomplete floor and internal walls which were described as having suspected insufficient blocking). The report also identified incomplete works, including cleaning of the sliding doors another incomplete works relating to the roof.
However, as outlined above, we are unable to form a view about whether this report was included in the evidence bundle as Exhibit A because Mr Kratochvil has not provided the Appeal Panel with a complete copy of Exhibit A, there is no specific reference to this report in the decision and we have not been provided with a transcript of the hearing referencing Mr Kratochvil's submissions to demonstrate there was an error.
The second issue is whether the failure to consider this report, if this was in fact the case, was material to Mr Kratochvil's claim.
The Tribunal considered the emails of 8, 9 and 27 July 2023 and other correspondence between the parties and evidence about alleged defects are referred to in the decision by reference to the Exhibit numbers at [34]-[90]. These defects go to the heart of the dispute between the parties that gave rise to the termination notice issued by Mr Kratochvil on 27 July 2023.
The 8 July 2023 email refers to the defects in the eaves but does not otherwise refer the defects and incomplete work referred to in the 5 July 2023 report. The key focus of the email is to dispute the fourth stage progress payment invoice 361. This email is critical as it is the basis for the termination email dated 27 July 2023. Mr Kratochvil disputes the claim for "forced variations" for the hire of scaffolding, the claim made by Cutting Choice to install timber to match the swimming pool, changing the mixer and claims relating to the scraping back of waterproofing to eaves done said to have been done by Mr Kratochvil without permission. He also raises concerns about the installation of Blueboard and the wall near the swimming pool.
Relevantly, the email dated 8 July 2023 states as follows:
[34]
Matt, we are emailing you a copy for the building report from 05/07/2023 the latest. It clearly states the framing on the eave is not as per standards required and has to be replaced/corrected.
[35]
Matt if you are too busy or not willing to proceed with the eaves by 12/07/2023 or 13/07/2023 we will have to engage with an outside Carpenter to correct the frame and install new eve sheeting ready for the painters.
[36]
Matt you must understand that the cost will be deducted from your invoice if you choose not to proceed. You do not want to pay for more scaffolding past that deadline.
[37]
Cutting Choice disputed Mr Kratochvil's refusal to pay the invoice in an email of 9 July 2023 and the ongoing disputes for "not using correct materials". Mr Cox stated:
[38]
You have decided to pay $4260 of the total amount payable. I have completed approximately 90% of all contracted works and only being paid 60%, I will not be able to carry on with other works until this is resolved by Fair Trading.
[39]
Mr Cox gave a detailed response to the complaint about the eaves and this response is extracted in the Tribunal decision at [42]. He also gave a detailed response about the Blueboard, the internal frame blocking, the plumbing, the scaffolding and the flashings.
When the report dated 5 July 2023 is examined together with the emails of 8, 9 and 27 July 2023, it is apparent that the critical issue relied on in that report, referred to in the emails by Mr Kratochvil, is the issue in relation to the eaves. It is also apparent that this issue was the subject of previous dispute between the parties and was the subject of correspondence and evidence as referred to in the decision at [36]-[44]. The Tribunal referred to various photographs that were relied on and noted at [38] that, in the absence of any witness statement, statutory declaration or affidavit, it was necessary to consider contemporaneous documents. The Tribunal then referred to emails between the parties dated 7 June 2023 and 8 and 9 July 2023 and made findings about the alleged defect at [43].
In essence, the Tribunal found that the alleged defect in relation to the eaves was not proven by Mr Kratochvil and set out the reasons for this finding based on the evidence of the three emails and photographs, at [44]. The issue in relation to the eaves was resolved by the Tribunal by reference to the contemporaneous correspondence between the parties dealing with this issue. While the report of 5 July 2023 refers to the open joints and the lack of timber supports in the eaves, it is the emails between the parties and the photographs that the Tribunal relied on to make the findings. Relevantly, the Tribunal found that this evidence supported a finding that Mr Kratochvil had carried out work on the eaves after work was done by Cutting Choice. As such, the Tribunal was not satisfied that any defects in relation to the eaves were attributable to Cutting Choice. In other words, the report of 5 July 2023 was not material to the resolution of the dispute between the parties.
For the reasons outlined above, we are not satisfied that the report of 5 July 2023 was before the Tribunal at first instance but even if it was, the report was not material to the resolution of the dispute between the parties in relation to the claims made by Mr Kratochvil about termination or about the alleged defects. We therefore reject this ground.
Insofar as leave is sought in relation to this ground, leave is refused. For the reasons outlined above, we are not satisfied there was a substantial miscarriage of justice. The finding in the decision was not against the evidence, nor are we satisfied this aspect of the decision was not fair and equitable. The Tribunal made findings of fact that were open on the evidence and explained these findings.
[40]
Ground 4: The Tribunal erred in finding that there were no defects that required rectification
[41]
Mr Kratochvil contends that there was evidence available to prove the defects. He relies on the evidence from ISCOPE Consultants. He further relies on new evidence, being the quotation from Above All Metal Roofing referred to above.
For the reasons already outlined, we have rejected the tender of the quotation from Above All Metal Roofing. The quotation does not contain probative, cogent evidence about the roof defects and water leaks and whether those defects and water leaks identified are attributable to Cutting Choices.
The evidence from ISCOPE Consultants is referred to in the decision at [46]. This evidence comprises an email from Chris Stephen of ISCOPE Consultants dated 28 August 2024, together with five photographs of the roof attached to the email. The Tribunal weighed this evidence against the competing evidence put forward by Cutting Choice at [50]-[51] of the decision. The Tribunal was not persuaded by the evidence of Chris Stephens and found that the alleged defect for the roof had not been proven: [52]
The Tribunal considered the other alleged defects in relation to the plaster, the render, the eaves and the water leak. The Tribunal's findings in relation to these defects, including the evidence considered, is set out at [35]- [44] in respect of the eaves, at [53]-[55] in respect of the plaster, at [56]-[62] in relation to the render and at [63]-72] in relation to the water leak. The Tribunal's findings are lengthy and the reasoning and how the Tribunal weighed the evidence on these matters is set out in more detail above. We will not repeat these findings.
Having regard to the material before the Tribunal, we are not satisfied that Mr Kratochvil has suffered a substantial miscarriage of justice by reason of the matters specified in cl 12 of Sch 4 to the NCAT Act. The Tribunal made findings about each of the alleged defects and these findings were clearly open on the evidence. The Tribunal adjourned the proceedings when the matter first came before the Tribunal for hearing on 16 August 2024. As already noted, the Tribunal made comprehensive directions about the evidence and foreshadowed the importance of the parties proving their claims. Both parties were given ample opportunity to present their case. We are not satisfied that the decision was not fair and equitable, nor are we satisfied that the findings were against the weight of the evidence.
Leave to appeal is refused and this ground of appeal is otherwise dismissed.
[42]
Ground 5: The Tribunal erred in finding that Cutting Choice was entitled to payment for the fourth progress payment
[43]
Mr Kratochvil contends that the Tribunal erred in making an order that Mr Kratochvil pay the fourth progress payment claim. The assertion by the Cutting Choice that 90% of the building works had been completed was incorrect. The Tribunal accepted this in its findings at [54] and [61]. Cutting Choice was therefore not entitled to claim payment because the stage 4 works were incomplete.
Cutting Choice submits that at the time of invoicing Mr Kratochvil for the fourth stage, 90% of the work had been completed. This was supported by the evidence provided to the Tribunal, which was also set out in the Scott Schedule. It is further submitted that Mr Kratochvil wrongfully terminated the contract and if the project had reached practical completion stage, there would have been a walkthrough to highlight any items that may be classified as defective or incomplete and a timetable would have been set to finalise this work. The issue raised in relation to bedroom 4 would have been resolved.
This ground does not raise a question of law and Mr Kratochvil requires leave. The thrust of his submission is that the findings made by the Tribunal were against the weight of the evidence, giving as an example the concession made by Cutting Choice in item 6 of the Scott Schedule about bedroom 4 and the finding made by the Tribunal at [54].
Cutting Choice rejects this contention and submits that the Tribunal made detailed findings about these matters in its decision. We accept this submission.
The Tribunal dealt with Cutting Choice's claims at [92]-[110] of the decision. The Tribunal rejected the builder's claims for the majority of the variations claimed and Cutting Choice's claim for the final progress payment. However, the Tribunal accepted the claimed variation for $1,360 on the basis that Mr Kratochvil had acknowledged he would pay this amount: [101]
The Tribunal considered the provisions of clause 12, also relevant to Grounds 1 and 2, and stated as follows at [95]:
[44]
While the owner asserted that the work the subject of that claim was incomplete, he did not follow the procedure set out by clause 12 (A167) and his evidence did not substantiate that he should only be obliged to pay a lesser amount. In those circumstances, the builder is entitled to recover $19,368.40 from the owner.
[45]
As already noted, the Tribunal stated that this was the "primary reason why" it had earlier found that Mr Kratochvil fail to comply with clause 12 the contract.
The Tribunal considered the each of the claims made by Cutting Choice and made findings about these matters. The Tribunal's findings are lengthy and the reasoning on how the Tribunal weighed the evidence on these matters is referred to in the decision. Because the claims in relation to the fourth progress payment overlapped with the Tribunal's findings in relation to defects, the Tribunal considered the concession made by the owner in relation to the incomplete gyprock in bedroom 4. The Tribunal noted at 55 as follows:
[46]
Work that is not complete does not constitute a defect. The builder's obligation to complete that work came to an end following the owner's attempt to terminate the contract which gave the builder a right to treat the contractors having come to an end. Hence this alleged defect is rejected.
[47]
The Tribunal also noted at [61] that the photographs relied upon by Mr Kratochvil in relation to, relevantly, gyprock (and plastering), was consistent with work that is either incomplete or defective. The Tribunal further found that the Cutting Choice suspended work prior to 20 July 2023 when these photographs were taken, and that the plasterer's work was incomplete at the time when the Cutting Choice suspended the work.
It is clear from the Tribunal's reasoning at [55] and [61] that the Tribunal found that the fact some of the gyprock was incomplete in bedroom 4 at the time the fourth progress payment claim was made, did not preclude Cutting Choice from making the claim or from being paid for this claim by Mr Kratochvil. As otherwise noted by the Tribunal, if Mr Kratochvil wished to withhold any payment for the fourth progress payment claim, he needed to follow the procedure set out in clause 12, which would have required him making an estimate of the amount payable "acting reasonably". There is no evidence Mr Kratochvil undertook such a process or that he provided any justification for only paying $4,260 towards the progress claim.
As such, we are not satisfied that the findings made by the Tribunal were against the weight of evidence. On the contrary the findings are consistent with and were clearly available on the evidence. Further, there is nothing before us to suggest that the decision made in this regard was not fair or equitable.
We are therefore not satisfied that Mr Kratochvil has suffered a substantial miscarriage of justice by reason of the matters specified in cl 12 Sch 4 to the NCAT Act. Nor are we satisfied that the decision discloses "an injustice which is reasonably clear, in the sense of going beyond merely what is arguable" or that there was a "factual error that was unreasonably arrived at and clearly mistaken".
[48]
For the reasons outlined about we reject each of the grounds of appeal raised.
[49]
(1) Leave to appeal is refused.
(2) The appeal is dismissed.
[50]
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.
The Tribunal considered several authorities in relation to s 48MA of the HBA, noting that the section provided for a preferred outcome, not a mandatory outcome and that it was a question of balancing various factors.
The Tribunal summarised the relevant legal principles at [13]-[22] and further observed that, when a party was not able to make a claim based on a contract, the party may be able to recover a reasonable amount for work done and material supplied on a quantum meruit basis (Pavey & Matthews Pty Ltd v Paul[1987] HCA 5). The Tribunal noted that when a contract is validly terminated a party terminating is entitled to claim damages, commonly being any additional cost of completion. A party cannot validly terminate a contract when the party is the cause of the breached alleged to give rise to the right of termination. In other words, a party who has repudiated a contract cannot at the same time allege that the other party failed to comply with the contract. The Tribunal further noted that if a contract is not validly terminated, the other party may elect to treat the contract as remaining on foot or can opt to treat the contract as being repudiated, which gives the other party a right to validly terminate the contract and claim damages. The Tribunal noted that claims based on entitlements which accrued prior to termination could be recovered, and this principle applied equally to claims made by the owner and by the builder.
On the issue of expert evidence, the Tribunal referred to the often quoted decision of Makita (Australia) Pty Ltd v Sprowles[2001] NSWCA 305 (Makita), noting that this decision made it clear that for expert evidence to be accepted the expert's opinion must clearly indicate the facts upon which it is based, those facts must be proved so there is a factual basis for the opinion, the reasons for the process of reasoning for the opinion must be disclosed and any opinion must fall within the qualifications and experience of the expert.
A number of these principles were later applied by the Tribunal in its determination of the issues in dispute. It is not submitted, nor did we discern, any error in this summary of these general legal principles.
The Tribunal referred to the documentary evidence filed by the parties, which comprised 241 pages for the owner and 68 pages for the builder. The Tribunal stated at [24] as follows:
In John Prendergast & Vanessa Prendergast v Western Murray Irrigation Ltd[2014] NSWCATAP 69 (Prendergast) the Appeal Panel considered what constitutes a question of law and formulated a non-exhaustive list of those matters.
The issue of what constitutes a question of law was revisited by the Appeal Panel in the light of recent Court authorities in Unique Commercial Group Pty Ltd v Cusumano[2024] NSWCATAP 204 (Unique) and applied in Commissioner of Police, NSW Police Force v White[2025] NSWCATAP 30 (White) where the Appeal Panel said at [22]:
"(1) Absent leave to appeal, the question of law is the subject matter of the appeal: Ferella v Chief Commissioner of State Revenue[2014] NSWCA 378 at [22], Medical Council of New South Wales v Mooney[2024] NSWCA 180 (Mooney) at [97].
(3) A question of law means a pure question of law: Wilson v Chan & Naylor Parramatta Ltd atf Chan & Naylor Paramatta Trust[2020] NSWCA 62 at [4] and [11].
(4) A "pure question of law" does not depend on facts not found: Orr v Cobar Management Pty Ltd[2020] NSWCCA 2020 at [48] and [109].
(5) A mixed question of fact and law is not a question of law: Bimson, Roads & Maritime Services v Damorange Pty Ltd[2014] NSWCA 734 at [39].
(6) An appeal is "on" any question of law: s 80(2) of the NCAT Act. The question of law must not be hypothetical or arid_: Liu v Director of Public Prosecutions (NSW)_ [2024] NSWSC 382 at [90]; Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 at 353-354; [1990] HCA 33.
(7) An appeal is against orders and not reasons: AZC20 v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs[2023] HCA 26 at [34], Property Investors Alliance Pty Ltd v C88 Project Pty Ltd (in liq)[2023] NSWCA 291 at [217], Kramer v Stone[2023] NSWCA 270 at [259]. Therefore, the question of law must be capable of affecting the orders the subject of the appeal."
(1) Denial of procedural fairness (Prendergast at [13](4)); FVA v Commissioner for Police, NSW Police Force[2024] NSWCATAP 127 at [83]- [84]).
(2) A failure to exercise jurisdiction, which includes the failure to consider and address a material issue raised by a party in the proceedings that is within the jurisdiction of the Tribunal to determine (Dranichnikov v Minister for Immigration and Migration Affairs[2003] HCA 26; Alexandria Landfill Pty Ltd v Transport for NSW(2020) 103 NSWLR 479; [2020] NSWCA 165 (Alexandria Landfill) at [8]-[12] and [413]). This category of error may also constitute a failure to accord procedural fairness and may emerge from the failure to provide adequate reasons, as explained in Alexandra Landfill.
(3) Applying the wrong legal principle which materially affected the outcome (Bimson, Roads & Maritime Services v Damorange Pty Ltd[2014] NSWSC 734 at [38]- [53]).
The principles governing an application for leave to appeal under the NCAT Act are well‑established and have been repeated in many decisions of the Appeal Panel, often quoting Collins v Urban[2014] NSWCATAP 17 at [84].
Where there is an appeal from a decision of the Consumer and Commercial Division, the NCAT Act provides a gateway to the exercise of discretion to give leave. The circumstances in which Appeal Panel may grant leave to appeal are limited to those set out in cl 12(1) of Sch 4 to the NCAT Act. In such cases, the Appeal Panel must be satisfied that the appellant may have suffered a substantial miscarriage of justice on the basis that:
These are the same principles applied by the courts in exercising the discretion to grant leave to appeal. As observed by Gleeson JA (on behalf of the bench) in Secretary, Department of Family and Community Services v Smith(2017) 95 NSWLR 597; [2017] NSWCA 206 at [28]:
These principles were also applied in Hungry Jack's Pty Ltd v Fourtounas[2020] NSWCA 325 at [9] where Basten JA (White JA agreeing) that "more is required than identification of error on the part of the trial judge, even if it can be said that the error is reasonably clear".
The new evidence sought to be relied on by Mr Kratochvil are: two affidavits of Mr Kratochvil, an extract from an undated document from Design Harmony headed "general housing specification", an invoice from Above All Metal Roofing dated 28 March 2025 for $200 for an emergency call out in relation to water entering the fourth bedroom, a quotation from Above All Metal Roofing dated 30 March 2025 for building works proposed in relation to a leak in the sum of $25,850, a statutory declaration from Mr Kratochvil declared on 8 April 2025 stating that he believed he gave Mr Cox $2,250 around Easter 2023 and an email addressed to Mr Cox dated 6 May 2024 stating that he had contacted roofers who had offered to replace damage roofing sheets for $5,000 cash. Mr Cox was requested to deposit this money into his account.
The affidavit of February 2025 substantially comprises submissions made by Mr Kratochvil in support of his appeal. The affidavit either refers to or attaches documents that were provided to the Tribunal at first instance. However, the affidavit of April 2025 seeks to rely on new evidence, either through relying on the additional documents referred to above or by providing evidence about factual matters in response to submissions made by Cutting Choice in its opening submissions.
Cutting Choice seeks leave to rely on the inspection report from Central Coast certifiers dated 28 June 2023.
The relevance of the document from Design Harmony to the appeal is unclear, although it seems that the Design Harmony document was available at the time of the hearing before the Tribunal at first instance because it was a part of a document referred to in the contract.
The invoice from Above All Metal Roofing relating to the emergency call out for leaks in the bedroom is new evidence because it came into existence after the hearing but is of little value as it does not establish that there was defective work performed by Cutting Choice. The invoice simply establishes that there was a leak in Mr Kratochvil's home that was fixed by Above All Metal Roofing for a fee of $200. This invoice does not establish the source of the water leak and, importantly, whether the leak can be attributed to defective work undertaken by Cutting Choice.
The quotation from Above All Metal Roofing was obtained on 30 March 2025. It is new evidence in the sense that Mr Kratochvil had not obtained this quotation at the time of the hearing. The Tribunal provided directions about the evidence to be provided in its reasons of 16 August 2024 and made it clear to both parties that all evidence sought to be relied on should be provided before the second hearing. If Mr Kratochvil wanted to rely on evidence about the alleged defects to the roof or water leaks, this quotation should have been provided to the Tribunal at first instance. In other words, this is not "new" evidence that was not reasonably available at the time of the hearing.
(2020) 103 NSWLR 479
(2010) 241 CLR 390
(2017) 95 NSWLR 597
(1990) 170 CLR 321
However, there is a more fundamental problem with this quotation. The quotation makes statements about whether the batten spacings in the roof are in accordance with Australian standards and purportedly identifies other issues relating to the alleged defects in the roof and causes for the leaks. This quotation, even if allowed, carries no weight because it does not contain probative or cogent evidence about the alleged defective roof. The quotation lists various matters that Above All Metal Roofing states need to be rectified. There is no detail to establish the basis on which these statements are made. This is particularly problematic given that there is evidence that Mr Kratochvil used other contractors to work on his premises after Cutting Choice left the work site in July 2023. It is plausible, and indeed this was the finding made by the Tribunal in respect of a number of the defects claimed, that there is insufficient evidence that defects were attributable to Cutting Choices as opposed to some other contractor.
Similarly, the statutory declaration about an alleged payment made, if relevant, should have been provided to the Tribunal at first instance. It relates to a period well prior to the hearing in January 2025, namely Easter 2023. If Mr Kratochvil asserts that he paid $2,250 to Mr Cox this is a matter that should been raised before the Tribunal first instance. The same applies to the email sent to Mr Cox dated May 2024. If this evidence was relevant to the issues in dispute, it should have been made available to the Tribunal at first instance. As such, none of the documents sought to be relied on, with the exception of the invoice from Above All Metal Roofing, constitute "new" evidence.
To establish the gateway for leave to appeal, the new evidence sought to be relied on would have to be evidence that falls within cl 12(1)(c) of Sch 4 to the NCAT Act. Relevantly, the evidence would need to be "significant new evidence that has arisen (being evidence that was not reasonably available at the time the proceedings under appeal were being dealt with)". As observed by the Appeal Panel in Al-Daouk v Mr Pine Pty Ltd t/as Furnco Bankstown [2015] NSWCATAP 111 at [23] that: