Marks trading as Ministry of Design v Emdek Pty Ltd trading as Safety Glasses Online

NCAT Appeal Panel|2024-03-15

Introduction

In April 2022, the Respondent engaged the Appellant to create a website. The proposal was that the project would take 8-12 weeks approximately and would be at a cost of $22,000 excluding the optional extra of "virtually try on". The process involved a number of stages: planning, design, development, content and launch.
After the Respondent had paid $18,375 to the Appellant for the project, the Respondent on 21 March 2023 sent notice to the Appellant requiring completion of the website within 10 working days.
The Appellant forwarded the website on 31 March 2023, which was rejected by the Respondent, who heavily criticised the work.
The Respondent at that point considered that the Appellant was unable or unwilling to produce what had been agreed and cancelled the project. The Respondent at first instance claimed she had received no benefit at all from the work undertaken and sought a refund of the amount paid of $18,375.
The Tribunal, on 10 November 2023 (the Decision), found that the contract had been lawfully terminated and that the Respondent had received no benefit at all under the contract and that accordingly, the Respondent was entitled to a refund of the amounts that had been paid under the contract.
The Appellant appeals from this Decision essentially on two grounds: 1. The Appellant was denied procedural fairness by the Tribunal by having to deal with the Respondent's documents tendered at the hearing without prior notice; and 2. The Tribunal was wrong to conclude that the Respondent had received no benefit at all under the contract and sought to introduce material it would have wished to introduce at the first hearing to make good this proposition.
We have decided, including on the basis of all the additional material the parties have placed before the Appeal Panel, that the orders made below should not be disturbed, including on the basis of a re-hearing of the new material by the Appeal Panel.

The evidence and submissions at first instance

The Tribunal summarised the parties' evidence and submissions at [7]-[16]: "[7] The applicant's evidence and submissions included the following. [8] The applicant engaged the respondent in April 2022 to create a website. The proposal included that the project would take approximately 8-12 weeks, 'assuming that all project deliverables, content such as text, images and videos, client milestones, payments and feedback are received on time', and would be at a cost of $22,000 excluding the optional extra of 'virtual try on'. The process involved a number of stages: planning, design, development, content and launch. [9] The respondent issued, and the applicant paid, two invoices: one in April 2022 for $12,250, and the second in November 2022 for $6,125 (apparently paid December 2022). [10] After some earlier correspondence, the applicant was informed on 9 May 2022 that the respondent was working on 'the initial steps of planning and design preparation for your project'. On 20 May 2022, the respondent advised 'we're currently in the process of completing your home page design. This work is nearing completion and will be with you shortly.' After follow-up by the applicant, the respondent advised on 3 June 2022: 'We are so close in having it ready... will send it over as soon as it's ready'. The homepage was provided and the applicant provided feedback on a number of occasions from 14 June 2022 to 1 July 2022. No further update was provided by the respondent until 12 August 2023. Further feedback was provided by the applicant, and the respondent foreshadowed a further update for 26 August 2022, and a big reveal of the website in September 2022, but that did not occur. A further version of the homepage was provided in November 2022, and the applicant noted many of its previous requested changes were not incorporated. There was further 'back and forth' between the parties, and in late December 2022 the applicant approved the design. This completed the design stage, and the applicant was invoiced, which it paid. The project then moved to the development stage. [11] The applicant queried about progress in February 2023, and requested an extra feature, which was agreed to be included at an additional cost. On 16 February 2023, the respondent stated 'you'll receive a full update tomorrow, expecting first look to be ready within 7-10 days max.' The respondent subsequently advised the website would be ready for review on 3 March 2023, but it was not provided. [12] On 21 March 2023, the applicant sent notice to the respondent requiring completion of the website within 10 working days. The respondent forwarded the website on 31 March 2023 which was rejected by the applicant as 'it appears to be a couple of crap pages that don't even match the adobe files sent previously. It could not even begin to be called a website nor functional at all.' [13] The applicant considered the respondent was unable or unwilling to provide what had been agreed. [14] The applicant claims it had received no benefit at all from the work undertaken by the respondent, and seeks refund of the amount paid to the respondent, being $18,375. It also seeks compensation because it will cost it money to now have created the website that the respondent was to create, and because the delay has resulted in it losing 'first-mover advantage'. Respondent's case [15] The respondent's evidence and submissions included the following. [16] The respondent has carried out considerable work. The applicant was content with the work that was being done, demonstrated by payment of the progress invoices. The benefit to the applicant would be received at the end of the project, when the website went live. The applicant has provided comments of the latest version of the website and it can be completed. The agreement was never that the work would be completed within 12 weeks. The respondent's terms and conditions specify that delays may occur, especially if there are variations or additions to work needed, which occurred here."

The reasoning of the Tribunal

The Tribunal's consideration and conclusion was set out at [17]-[22] as follows: "[17] I am satisfied this is a consumer claim and the Tribunal has jurisdiction to hear and determine it. [18] I am satisfied, on the balance of probabilities, of the following matters. [19] I am satisfied that there was an agreement between the parties for the creation by the respondent of a website for the applicant. I accept the respondent's contention that it was not an essential term of the contract that the work be complete within twelve weeks. However, I accept that the work was to be completed within a reasonable time, and that the respondent was in breach of that obligation at least by March 2023. I am satisfied of that based on the evidence as to the communications between the parties in the evidence before me, and the lack of expected progress by that date noting that the respondent's estimate in April 2022 was that the work would take approximately 8 to 12 weeks. I am not satisfied that any material delay was caused by the applicant. [20] On 21 March 2023, the applicant gave the respondent a notice to complete. I am satisfied that the respondent was in breach at that date, and that the notice specified a period that was reasonable for completion, noting the indications by the respondent as to the stage things were at. [21] The respondent failed to comply with the notice to complete, and did not complete any time subsequently, and I am satisfied the applicant was entitled to terminate the contract. I am also satisfied that the respondent had, by its conduct, indicated it was unable or unwilling to perform within a reasonable time. I am satisfied that the applicant has received no benefit at all under the contract, and it follows that it is entitled to refund of the amounts it had paid under the contract. [22] I am not satisfied the applicant is entitled to any additional amounts. The amount it has to pay to a third party to create the website is because that third party is providing services, and not because of the respondent's breach. Any loss to the applicant of 'first mover advantage' is mere speculation and not substantiated on the evidence before me."

Material filed on appeal

The Appellant put before the Appeal Panel a bundle of documents consisting of what it described as the following: 1. Project proposal; 2. Project contract; 3. Project quote; 4. Payment receipt for project starting deposit; 5. Discussion of home page design; 6. Full website design supplied to Emdek; 7. Discussion of website design; 8. Payment receipt for project progress - design completed; 9. Audio full transcription meeting; 10. Final resolution attempt; 11. Written submissions in support of appeal.
The reference to "discussion" is a reference to text communications and other communications between the parties. The reference to "audio full transcription meeting" is a reference to a transcript of the audio of the hearing at first instance.
Amongst the Appellant's material was additional evidence described as follows: 1. Copy of the contract: at pages 22-27 of the Appellant's bundle; 2. Communication between the parties and documentation regarding the Respondent receiving benefit under the contract; and 3. Attempts by the Appellant to resolve the dispute over the website which allegedly was not responded to by the Respondent: at pages 74-76 of the Appellant's bundle.
The Respondent put before the Appeal Panel its own bundle of documents of 121 pages consisting of the following: 1. Documents and material tendered at first instance; 2. Transcript of the hearing at first instance; 3. New evidence, including: 1. Orders of the Tribunal at first instance on appeal; 2. Email correspondence between the Appellant and the Tribunal's registry; 3. Statement from Acura Multimedia dated 20 February 2024; 4. Statement from Brent Irvine of Grafix Garages Pty Ltd; 5. Statement of costs incurred by the Respondent in the appeal in the nature of hours of work, photocopying, postage, sound recording and transcription charges including invoices for transcription charges; 1. Written submissions on appeal.

The Notice and grounds of appeal

The Notice of Appeal before us has a date stamp on it "8 Dec 2023". It also has hand-written "REC 12/12/23" and underneath that handwriting there is a stamp stating "NCAT NEWCASTLE COUNTER". The Appellant in the Notice of Appeal states it received notice of the Decision on 10 November 2023.
The Respondent in its reply to appeal objected to the appeal being lodged "29 days after the original order was lodged". Otherwise, no further submissions were advanced by the Respondent in its written submissions or oral addresses.
Based upon the material before us we find that it was more likely than not that the appeal was lodged on 8 December 2023 and passed on to the Newcastle registry on 12 December 2023. Accordingly, the appeal was lodged within the 28-day appeal period: see Civil and Administrative Tribunal Rules 2014 r 25(4).
Both parties were self-represented before us. Ms E Richards was an authorised officer of the Respondent who was granted leave to appear before us.
In substance, the Appellant put forward two grounds of appeal as follows: 1. The Appellant was denied procedural fairness in having been forced to deal with the Respondent's documents without prior notice at the hearing; and 2. The Tribunal erred in finding that the Respondent received no benefit from the work performed and delivered by the Appellant under the contract.
The Appellant sought to raise errors of law in this regard and also sought leave to appeal on the basis that the Decision was not fair and equitable and against the weight of the evidence resulting in the Appellant suffering a substantial miscarriage of justice.
Further, the Appellant sought to rely upon what it described as "significant new evidence now available that was not reasonably available at the time of the hearing". This last submission largely flows on from the first point as to denial of procedural fairness.
To succeed in an appeal, the Appellant must demonstrate either an error on a question of law, which may be argued as of right; or that permission (that is "leave") to appeal should be granted to bring the appeal: see s 80(2) of the Civil and Administrative Tribunal Act 2013 (NSW) (NCAT Act). General principles in relation to granting leave to appeal were considered in Collins v Urban [2014] NSWCATAP 17 at [80]-[84].
Further, in the case of an appeal from the Consumer and Commercial Division, such as in this case, where leave is required, clause 12, Schedule 4 of the NCAT Act states that leave can only be granted if the Appeal Panel is satisfied that the Appellant may have suffered a substantial miscarriage of justice because: 1. The decision was not fair and equitable; 2. The decision was against the weight of the evidence; or 3. Significant new evidence has arisen (that was not reasonably available at the time of the original hearing).

Appellant's submissions

Prior to the hearing in November 2023, the Tribunal made directions for the Respondent to file its material, evidence and submissions, and for the Appellant to file its material, evidence and submissions all prior to the hearing date.
The Appellant submits that at the hearing on 10 November 2023, he was handed over 80 pages of documents which contained the Respondent's evidence. The Appellant contends he had no prior notice of this bundle of documents. The Appellant says he requested an adjournment to read, absorb and collate a response, along with his own documentary of evidence. However, the Tribunal refused an adjournment, and gave the Appellant 18 minutes to read the material, then proceeded with the hearing unrepresented and without any documents of the Appellant.
The Appellant contends that it was not fair and equitable to ask the Appellant, who was unrepresented, to consume and deal with about 80 pages of evidence within an 18 minute timeframe and without the opportunity to put documents in reply. The Appellant also submits that in the absence of material being provided by the Respondent in accordance with the timetable, the Appellant assumed the hearing would not be to take evidence but only to further attempt to conciliate and settle the matter.
The Appellant submits that if he had been given a reasonable opportunity to present his case, he would have added to the evidence provided at the hearing and thereby was denied a significant possibility of the Tribunal coming to a different result.

Respondent's submissions

The Respondent submits that its documentary material was posted to the Appellant's postal address but had been returned. It was then posted a second time.
The Respondent also submits that the Appellant did not in fact request an adjournment but indicated to the Tribunal that the Appellant was in a position to proceed with the hearing on the day.

Consideration

Pursuant to s 38(2) of the NCAT Act, while the Tribunal is not bound by the rules and evidence and may enquire into and inform itself on any matter in such manner as it thinks fit, its procedures are expressly subject to the "rules of natural justice".
We accept that whether or not the Appellant was afforded natural justice or was denied procedural fairness raises a question of law: Kudrynski v Orange City Council [2024] NSWCA 33 at [52]; Haritos v Commissioner of Taxation (2015) 233 FCR 315; [2015] FCAFC 92 at [202]. We accept that one of the "rules of natural justice" is that a party should be afforded a reasonable opportunity to deal with material that is put against it.
We are prepared to accept the Appellant's submission that he did not receive any of the material and that this was not his fault which is consistent with what he indicated to the Tribunal at first instance. This was plainly accepted by the Tribunal, who gave the Appellant some (albeit very brief) time to read the materials.
The transcript reveals that 84 pages of material were relied upon by the Respondent in a bundle of documents before the Tribunal and that the Appellant made it clear that he had not seen that material before. The transcript also reveals that the Member asked if the Appellant had any documents upon which he relied upon, to which the Appellant replied he was not expecting to be required to do so at the hearing in November 2023.
We accept that the Appellant genuinely believed that the hearing in November 2023 was not the occasion for him to produce documents and that this belief was in part engendered by the fact that he had not received any evidence or material from the Respondent (the then applicant) before the hearing at first instance.
We note that the Appellant explained this to the Tribunal and the Tribunal then stated, "this needs to be dealt with", referring to the case before it. The Appellant then stated, "I guess my problem right now is, there is an 88 page document in front of you that I have not sighted yet".
The exchange between the Tribunal and the Appellant proceeded as follows: Tribunal: "It is not difficult. It's emails between both of you and your proposition. So it's not going to take you long to get across that. But why haven't you provided any documents if you dispute refunding the amount she is seeking? Appellant: Because right now this is the first I have heard of it. Tribunal: OK. Well, I'll let you have a look through these. So we'll take a short break. If I give you about 15 minutes, and then if you need longer, come back and let me know. But we'll take a break until 2.45pm. But what I would encourage you to do is perhaps consider whether you might be able to refund the amount that she's seeking. And if you want to talk to her about how that might be able to be done, well, that's a positive way that it can be resolved. But without any documentary evidence from you what benefits she's had from any of this work, it's kind of hard to imagine. Appellant: Well, I guess that's the problem, isn't it? I haven't had the opportunity to provide that. Tribunal: Well, you kind of had directions been made a long time ago. Anyway, I am going to give you these and give you 15 minutes to read through. So, Ms Richards, you can either stay on that time if you wish, or you can leave and rejoin at 2.45pm."

After a short break, the hearing resumed and the exchange between the Appellant and the Tribunal proceeded as follows: Tribunal: "OK, it's the Tribunal here again. I can hear you there, Ms Richards. So, Mr Marks, you get a chance to read through? Appellant: I did, thank you. Tribunal: OK, and are you ready to proceed with the hearing now? Appellant: Yes. Tribunal: OK, Ms Richards are you ready to proceed? Respondent: Sure"

The Appellant contends that in light of being unrepresented and unfamiliar with the procedures of the Tribunal and in light of the comments made by the Tribunal before the break, he was under the view that he was not really in a position to press further for an adjournment beyond that hearing day in order to reply to the evidence of the Respondent with his own evidence.
In our view, having read the transcript, including the transcript as a whole, and bearing in mind the Appellant being unrepresented and unfamiliar with the procedures of the Tribunal, we accept the Appellant's position that he, reasonably, did not believe he could press the question of an adjournment further after he was given a short break to read the documents in light of the exchange which had happened before between the Tribunal and the Appellant.
Whilst perhaps a borderline case, in our view, particularly bearing in mind that the Appellant had no documentary evidence of his own at the hearing and the Tribunal had already indicated that his position was weak without any documents or evidence, coupled to his reasonable belief an adjournment was not possible, we are satisfied that the Appellant was denied procedural fairness in having to deal with the hearing on the basis of the Respondent's documents without any documents of his own and without a great period of time to digest and review the documents being relied upon by the Respondent.
Further, we accept the position of the Appellant that he was denied a possibility of a different outcome if he had been given the opportunity to put forward his own documentary material.
Accordingly, we uphold this ground of appeal.
The issue then is whether or not we should remit the matter or embark on a rehearing of the issues.
In our view, it would be consistent with the guiding principle under s 36 of the NCAT Act to facilitate the "just, quick and cheap resolution of the real issues in the proceedings" to embark upon a rehearing of the matter based upon all of the additional evidence brought forward by both of the parties as well as the transcript of the evidence below and the evidence tendered at first instance pursuant to s 80(2) of the NCAT Act.
We note, no party sought a remittal of the hearing and did not submit that the Appeal Panel itself should not decide the matter.

Did the Respondent receive any benefit under the contract?

We note that the basic chronology as outlined by the Tribunal was not put in dispute by the Appellant. In particular, the Appellant did not dispute the entitlement of the Respondent to terminate the agreement for the lack of performance in a timely manner of the contract by the Appellant. The only issue in dispute between the parties was whether or not there should be a refund of all of the money paid by the Respondent on the basis that the Respondent received no benefit under the contract.

Appellant's submissions

The essential thrust of the Appellant's case was that under the contract the delivery of the project was always to be in stages. The Appellant submits that under the contract as tendered in the new evidence before us, the Respondent was invoiced for two stages for the initial work as outlined in the invoices which work had been delivered, accepted and paid for by the Respondent.
The Appellant contends that this initial design work and delivery of a home page for the website did afford benefit and value to the Respondent. The Appellant also relies upon the communications between the parties to show the work performed by the Appellant and the delivery of such work by the Appellant.
The Appellant contends that the Respondent received benefit by way of receiving the home page design which was delivered as part of stage 1 of the project proposal and further by receiving what he described as the "full website and prototype being stage 2 of the project proposal".
The Appellant referred to the contract agreement which he tendered on appeal to demonstrate the stage-based process to which both parties formally agreed to. The Appellant in this regard referred to answers by Ms Richards at the hearing at first instance where she acknowledged that there was a contract between the parties.
The Appellant referred to the communication between the parties and the documentation passing between them. In this regard there was communication between the parties where the parties discussed updates to the stages of the project. The Appellant relied upon the fact that the Respondent had paid for progress payments and had received the benefits of the work outlined in the two invoices.

Respondent's submissions

The Respondent submits that the contract as tendered by the Appellant at pages 22-27 of the Appellant's bundle had never been seen by the Respondent before. The Respondent states that the alleged contract of the Appellant was not provided to her nor was it available on the website of the Appellant as contended by the Appellant.
The Respondent disputes that over 1.5 years after the original signed contract that it could be demonstrated that the documents put forward by the Appellant were ever on the website and available to the Respondent to view as alleged by the Appellant.
The Respondent states that it received a home page design that was never created into a website. The Respondent states it received only a two-page site that certainly was not functional, after threatening legal action. The Respondent in this regard referred to her previous evidence that two web designers had looked at the "website" supplied and found that it lacked any functionality and was not appropriate.
The Respondent tendered two letters from web designers on appeal before us which was received by us without objection. The Respondent submits that it had sent a list of rectifications of the many problems that were needed to fix the home page design, but these were never actioned and after many lengthy delays, the Respondent went to Fair Trading who recommended commencing proceedings in the Tribunal.
The Respondent contends that whilst the invoices were paid what was supplied was not in accordance with those invoices.
In respect of the contention that a full website was delivered, the Respondent submits that such website did not match the Adobe files sent over previously.
Further, the Respondent refers to pages 76-80 of the Respondent's bundle where a list of defects with the two pages emailed over was forwarded to the Appellant. The Respondent submits that the alleged defects are corroborated by the letters from the two web designers.

Consideration

We do not think it is necessary to make any findings in respect of the nature of the contract between the parties. The key issue for our consideration is whether or not the Respondent received any real benefit from the work performed by the Appellant. As previously stated, it has not been put in dispute by the Appellant that the Respondent lawfully terminated the contract for the Appellant's failure to deliver the contracted project in a reasonably timely manner.
In respect of the question of whether or not the Respondent received any benefit, the letters from the two web designers is of particular significance. First, there is the letter of Ms Lucy Pallandre of Acura Multimedia of 20 February 2024, which states as follows: "On March 31, 2023, I examined the website that was supplied to Safety Glasses Online. It did not match the home page image provided. Upon testing its functionality, it was evident that the website was completely non-functional and only comprised two pages."
Nextly, there is the letter of Brent Irvine of Grafix Garages Pty Ltd which states as follows: "My name is Brent Irvine and my background is in developing websites for the past 20 years. I have been working with Emma to review and consult on the development of the Safety Glasses Online website that was constructed by Ministry of Design. After reviewing the provided designs and website development URL I can only conclude that this site is far from ready to go live as claimed by Doogie in his email initially on Apr 6, 2023, then again on Oct 6, 2023 after additional development time. From my experience in web development it is clear and should be clear to anyone viewing the website there are significant issues not only with the desktop view of the site but how it appears on mobile devices and is far from a standard that would be expected for a development quoted for a total cost of $22,000. The initial design that was provided to Emma is misrepresentative of the quality of the build as the completed website while there are similarities has significant differences. Had Ministry of Design initially provided designs that resembled the completed website Emma wouldn't have proceeded with the development of the website to begin with. In the proposal, Ministry of Design claims they do multi-device and cross browser testing. Due to the numerous flaws in the completed website development, particularly with how it appears on mobile devices, I can only conclude that this process wasn't done to a standard which they claim to be world-class. We have not been able to assess the virtual try-on option as Ministry of Design has not provided any way to view this part of the development."
Where the main issue is the level to which the delivered work of the Appellant was functional and of any benefit to the Respondent, the letters from the independent witnesses must carry significant weight. Whilst we note that these letters critique the work done as if it was a finished product whereas the Appellant maintains it was never proffered as a finished product but as a design prototype, we read the material to support the Respondent's submission that the design was irreparably flawed. The Appellant did not object to the letters being received by us and made no submissions as to the contents of the letters we have referred to above.
Further in this regard, we note that the Respondent's evidence was that it had to retain Acura Multimedia to perform the work that was otherwise to be performed by the Appellant. Such work was set forth in a quotation which was tendered by the Respondent for working, redesigning and redevelopment of the website at a cost of $54,000.
The Appellant made no submissions as to whether or not such quotation was excessive or unreasonable given the amount of work already performed by the Appellant. The Respondent placed weight upon this quotation as indicating that for the Respondent to have the work performed for it by another supplier would cost the Respondent at least the amount of the total contract price between the Appellant and the Respondent. We accept this submission.
Accordingly, we find on the totality of the evidence, which includes the evidence of the Respondent in her contemporaneous communications to the Appellant complaining about the nature of the delivered product, that the delivered product had many technical issues with it relating to its functionality and that it contained numerous flaws so as to render it valueless to the Respondent going forward.
Accordingly, we find, consistent with the orders of the Tribunal below, that the Respondent is entitled to a refund of the fees paid to the Appellant consequent upon its lawful termination of the contract. We note that the Respondent did not seek on appeal to obtain any further amounts by way of damages for the termination of the contract.
In the result, the appeal will be dismissed.

Costs

The Respondent sought its costs of the appeal.
Pursuant to s 60(2) of the NCAT Act, each party is to pay their own costs unless we are satisfied special circumstances exist which warrant an award of costs. This is the case even though this matter is an appeal from the Consumer and Commercial Division, as the amount in dispute is less than $30,000: rr 38 and 38A of the Civil and Administrative Tribunal Rules 2013 (NSW).
The Respondent did not in its submissions put forward any special circumstances said to exist. Even though the Respondent was successful on the appeal, we are not satisfied any special circumstances exist which would warrant an award in favour of the Respondent for the costs of the appeal.
Accordingly, we make no order as to costs of the appeal.

Disposition

The orders of the Appeal Panel are: 1. Appeal dismissed. 2. No order as to costs of the appeal. ********** 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: 12 April 2024

Civil and Administrative Tribunal Rules 2013(NSW)

At a glance

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Decision date

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Judgment (16 paragraphs)

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Legislation Cited (2)

Cases Cited (4)