Markunsky v Zammit t/a Zammit Quality Constructions

Background to the appeal

1. In May 2011, the Owners sought a quotation from the Builders, a licensed building firm, for renovations to the bathroom of their family home (the residence). Subsequently, the parties either varied the original agreement or entered further agreements for works to be carried out in respect of flooring, electrical work, extensions to and renovations of the kitchen, gyprocking of areas of the property, works to an ensuite area, replacement of architraves, removal of a staircase, construction of a walk-in wardrobe, alterations to a rumpus room, study, lounge room, powder room, laundry and various other lesser works.
2. The Builders commenced work on the premises in August 2011. Between September 2011 and March 2012 they issued a number invoices in respect of the Works, the first being issued in the sum of $15,000 on 13 September 2011. The Owners paid that sum the following day.
3. In April 2012, the Owners notified the Builders that they would not permit them to perform any further works on the grounds that some of the work was defective. The Builders stopped work. In September 2012, the Builders issued their final invoice in the sum of $41,531 for work performed. The Owners refused to pay, asserting that much of the Work was defective. An impasse was reached, and subsequently each party lodged an application in the CTTT for the determination of their respective "building claims".
4. A live issue in the proceedings was whether there was one or several contracts between the parties (Reasons at [13]-[18]). The Tribunal decided it was not necessary to decide this issue because, despite the requirements of s 92 of the Home Building Act 1989 (NSW) (the Act), the Builders had not obtained Home Owners Warranty Insurance (HOWI) in respect of the work they carried out on the residence (the Work) (Reasons at [16]). As a consequence, by the operation of s 94(1) of the Act, the Builders were unable to bring an action for damages for breach of contract to recover their fees and their only remedy was a claim for a quantum meruit: s 94(1) of the Act. Moneys could only be recovered on a quantum meruit basis, if the Tribunal considered it just and equitable that, despite the absence of HOWI, that the Builders were entitled to recover money in respect of the Work on that basis: s 94(1A) of the Act.
5. The Tribunal exercised its discretionary power to permit the Builders to recover money on a quantum meruit, finding that their failure to take out insurance was the result of an oversight "rather than wilful or deliberate contravention of the provisions on the Act": Reasons (at [3]).
6. Expert evidence was given on behalf of each party about the value of the Work. Mr Craig Nisbett prepared a report at the request of the Builders, outlining his estimate of the value of the work undertaken. At the request of the Owners, Mr Anthony Grieve prepared a report responding to Mr Nisbett's report. Mr Nisbett estimated the value of the Work to be $123,857; Mr Grieve arrived at a slightly lower figure, $103,454.
7. The Tribunal approached the task of determining the respective applications by assessing the value of the work performed by the Builders on a quantum meruit basis then determining whether, as claimed by the Owners, some of the Work was defective. The Tribunal found the value of the Work to be $121,497, some of the Work to be defective and the cost to rectify the defective work, $39,507. The Tribunal deducted the latter figure, together with the amount already paid by the Owners to the Builders ($64,500), from its quantum meruit assessment and ordered the Owners to pay the Builders the balance, namely $17,489 ($121,497 - $104, 007 ($39, 507 + $64,500)).

Scope and nature of the appeal

1. A party may appeal against an "internally appealable decision" of NCAT as of right on any question of law, or with the leave of the Appeal Panel, on any other ground: s 80(2)(b) of the Civil and Administrative Tribunal Act 2013 (NSW) (the NCAT Act).
2. Where, as in this case, the decision under appeal is a decision of the Consumer and Commercial Division of NCAT, the Appeal Panel may only grant leave to appeal where the appellant may have suffered a "substantial miscarriage of justice" because the decision under appeal was not fair and equitable, against the weight of evidence, or significant new evidence has arisen: cl 12(1) of Schedule 4 to the NCAT Act.

Grounds of appeal

1. In their amended Notice of Appeal, the Owners rely on the following grounds, said to raise question of law. They contend the Tribunal erred, by: 1. Failing to give proper reasons for its decision to prefer the opinion of the Builders' expert over that of their expert, in respect to the estimate of the value of the Work; 2. Preferring the opinion of the Builders' expert, in circumstances where there was "no evidence" for the central factual assumption that underpinned that decision; 3. Failing as required by s 94(1C) of the Act to take into account the uncontested evidence that the value of the Residence had diminished by $25,000 due to the Builders' failure to insure the Work; 4. Failing to award damages in the sum of $25,000 for the Builders' failure to insure the Work; 5. Off-setting the value of the defects found against the quantum meruit to enter judgment in a single sum in circumstances where there were two separate set of proceedings.
2. In addition, the Owners seek leave to appeal on the grounds that the Tribunal's decision to: 1. prefer the opinion of the Builders' expert about the value of the Work over that of their expert was not fair and equitable and against the weight of evidence; 2. enter a single judgement in circumstances where there were two separate NCAT proceedings, which they contend resulted in a substantial miscarriage of justice.

Ground 1: Failure to give adequate reasons

1. The Owners assert that the Tribunal failed to give adequate reasons for accepting the opinion of the Builders' expert over that of their expert in relation to the quantum meruit assessment. The Builders disagree and contend that the Reasons, while succinct, disclose how the Tribunal arrived at its decision.
2. The Owners argue that the only exposure of the Tribunal's decision-making process in relation to its decision was the "bald statement" (at [69]) of the Reasons: Overall, I prefer Mr Nisbett's valuation because generally speaking it provided a more detailed breakdown of activities and costs. I will find that the valuation of the work carried out on a quantum meruit basis is $121,497.00.
3. The Owners submit that this statement is both inadequate and not supported by the evidence and, as a result, is neither understandable nor logical. Developing that argument, they assert that the methodology used by Mr Grieve was "precisely the same" as that used by Mr Nisbett and therefore the proposition that "generally speaking [Mr Nisbett's valuation] provided a more detailed breakdown of activities and costs", was wrong and unsupported by evidence.
4. It is not disputed that the Tribunal was required to give reasons exposing its reasoning process: see generally Wainohu v New South Wales [2011] HCA 24, (2011) 243 CLR 181; Beale v GIO (1997) 48 NSWLR 430 (Beale); Collins v Urban [2014] NSWCATAP 17. The issue here is whether the reasons given were adequate.
5. While not required to give "lengthy or elaborate reasons", the Tribunal was nonetheless required to articulate the "essential ground or grounds upon which the decision rests": Collins v Urban at [54] citing Sydney Supermarkets Pty Limited v Xu [2009] NSWADTAP 28 at [60] and Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 per McHugh JA at 280. The length of reasons for decisions, does not determine their adequacy. As Meagher JA put it in Beale (at 443), "[R]easons need not necessarily be lengthy or elaborate ... Accordingly, the content of the obligation is not the same for every judicial decision. No mechanical formula can be given in determining what reasons are required."
6. In Beale, Meagher JA outlined (at 443-444) the three essential elements of an adequate statement of reasons. First, a judge must refer to the relevant evidence, and, in particular, must identify conflicts in evidence that are significant in the ultimate resolution of the fact-finding process. Second, a judge must set out any material findings of fact and any conclusions or ultimate findings of fact reached. Where one set of evidence is accepted over a conflicting set of significant evidence, judges must expose how they came to accept the one over the other. His Honour was of the view, however, that it is unnecessary for a judge to make explicit findings on each disputed piece of evidence, especially if the inference as to what is found is appropriately clear. Third, a judge must provide intelligible reasons for making the relevant findings of fact (and conclusions) and demonstrate how the law was applied to the facts found.
7. In essence, in the reasons given for the decision, a decision-maker must engage with the cases presented by the parties and demonstrate that he or she has done so. Meagher JA's method in Beale has been considered and applied many times over as the classical conventional approach.
8. More recent decisions have elaborated on those principles. For example, in Ainger v Coffs Harbour City Council [2005] NSWCA 424 (at [48]), the Court of Appeal said: The primary judge was not obliged to spell out every detail of his process of reasoning… however he was obliged to expose his reasons for resolving a point critical to the contest between the parties. … This obligation lay upon him to enable the parties to identify the basis of his decision and the extent to which their arguments had been understood and accepted… As Santow JA (with whom Meagher and Beazley JJA agreed) explained in Jones v Bradley [2003] NSWCA 81 at [129] it was necessary that the primary judge " 'enter into' the issues canvassed and explain why one case was preferred over another".
9. Sometimes, to reach the minimum acceptable standard, a chain of reasoning may have to be exposed. Thus in Goodrich Aerospace Pty Ltd v Arsic [2006] NSWCA 187, Ipp JA (with whom Mason P and Tobias JA agreed) noted at [29]: Often important issues of credibility involve sub-issues. Often, objective facts, or facts that are probable, are capable of having significant bearing on the sub-issues. In cases of this kind, it is incumbent upon trial judges to resolve the sub-issues and to explain, by reference to the relevant facts, the conclusions to which they have come. This having been done, they should then turn to the ultimate facts in issue and explain how their decisions on the sub-issues have assisted them in forming a conclusion on the ultimate issue. It is only when adequate reasons of this kind are given that an unsuccessful party will be able to understand why the judge has believed his or her successful opponent.
10. Particular difficulties may also arise in respect of expert evidence. That conflicting expert evidence can provide a major fact-finding challenge for decision-makers is well-known. Building cases that raise large numbers of relatively small factual issues, each of which the tribunal must determine, may be prime examples of this phenomenon. In many instances the fact-finding exercise may turn on small differences of opinion and a delicate balance of probabilities. In such cases, the balance may fall one way or the other because of relatively small but significant differences in the evidence. Nonetheless, even where the evidence is finely balanced the decision-maker's duty is to make a decision and to give reasons for it.
11. With greater or lesser degrees of success, and more or less sympathy for the task required to be undertaken by decision-makers in such cases, courts of appeal have struggled with the problems of adequacy of reasons and of conflicting expert evidence. So, for example, in Housing Commission of New South Wales v Tatmar Pastoral Co Pty Ltd [1983] 3 NSWLR 378 Hutley JA (at 381) took the approach that: A court must not nullify rights of appeal by giving no or nominal reasons, but there is no duty to expound reasons so as to facilitate appeals. This applies particularly to the situation where a judge has to decide between conflicting witnesses, including experts. The choice between conflicting experts may have to be a matter of judgment, not of detailed reasoning.
12. Since that time, the NSW Court of Appeal has continually developed its jurisprudence in this area. In Hadid v Redpath [2001] NSWCA 416, for example, the Court of Appeal held that it was an error of law for a trial judge not to have given reasons for preferring one witness to another. The task is not completed merely by finding reasons to criticise one witness. As Heydon JA said (at [56]), … To "prefer" one item over another is to reach a comparative conclusion after weighing the merits and demerits of each. An evaluation of the merits of a conclusion of preference depends on what reasons it rested on.
13. When considering arguments concerning adequacy of reasons, the nature and roles of appellate bodies must be distinguished from the role of courts and tribunals at first instance. In Resource Pacific Pty Ltd v Wilkinson [2013] NSWCA 33 (at [48]) Basten JA wrote: When an appellate court is invited to find that a trial judge provided inadequate reasons, it is important to understand the nature of the function being invoked. It is not the function of an appellate court to set standards as to the optimal, or even desirable, level of detail required to be revealed in reasons for judgment. Rather it is to determine whether the reasons provided have reached a minimum acceptable level to constitute a proper exercise of judicial power. Transparency in decision-making is an important value, but it is not cost free, and may involve separate parameters of quantity and quality. (emphasis added)
14. See also Khan v Kang [2014] NSWCATAP 48 at [57].
15. Regard must also be had to the principle that appeal courts and tribunals may not usurp or override the fact-finding function of courts and tribunals at first instance unless that court or tribunal has clearly failed to carry out its primary function as a fact-finder: see, for example, Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89 at [99]; Devries v Australian National Railways Commission [1993] HCA 78; (1993) 177 CLR 472 at 479; State Rail Authority of New South Wales v Earthline Constructions Pty Limited (in liq) [1999] HCA 3; (1999) 160 ALR 588.
16. In the present case the personal credit of either expert witness was not in contest. Neither expert was implausible, much less incapable of being believed or accepted. The methods each used were similar and the Tribunal had no criticisms of either in terms of demeanour, competence, honesty or, indeed, general reliability. The evidence outlined in the Tribunal's decisions and in the appeal book suggests that there was little to choose between the two experts. That did not relieve the Tribunal from its duty to apply the appropriate standard of proof to the evidence (as best it could on the available material), to make a finding(s) of fact and to explain why it "preferred" the opinion of one witness over that of another. Finely balanced decisions, such as this, are inherently difficult and sometimes may turn on one distinguishing factor.
17. Despite the implication in the Owners' submissions, the Tribunal did not adopt the opinion of Mr Nisbett in its entirety. The Reasons (at [61]-[64]) set out three examples of disagreement between the experts concerning the time certain works are likely to take to complete (and therefore cost), and concluded (at [64]), that the valuation of Mr Grieve in respect of these three items should be preferred.
18. The Tribunal wrote (at [59]) "the overall difference between the expert's assessment is $20,403.00 which is not substantial". The Tribunal noted in its Reasons the similarities and differences between the methodologies employed by the two experts (see [56]-[59]) but found that although their approaches were largely uniform there were differences that ultimately prevented convergence of views in respect of some items in contest.
19. The Owners argue that the finding "generally speaking [Mr Nesbitt's report] provided a more detailed breakdown of activities and costs" was simply wrong and failed to reveal how the Tribunal arrived at that finding. Developing this argument, the Owners contend that because the methodologies employed by the experts in arriving at their respective estimates were "identical" and as found by the Tribunal, Mr Nesbitt's report was prepared on an "exception basis", it could not be said that "Mr Nesbitt's report "provided a more detailed breakdown of activities and costs".
20. The Builders dispute the contention that the methodologies employed by the experts were identical, and detail in their written submissions what they contend are material differences between their respective approaches.
21. Succinct as [69] is, it provides a basis for the parties and this Appeal Panel to understand how and why the Tribunal made its decision to largely accept the assessment provided by Mr Nesbitt.
22. In any event it is incorrect, in our view, to characterise [69], as the Owners do, as the totality of the exposure of the Tribunal's reasoning process. The Tribunal in its Reason (at [45]-[69]) appears to have carefully dealt with the evidence, expert reports and the arguments put by both parties in respect of the value of the work undertaken. Further as we noted, the Tribunal did not accept Mr Nisbett's valuation and opinions uncritically (see [51]-[53]) but nor did it uncritically accept all the Owners' criticisms of his opinion (see [55]).
23. Although it would have been preferable for more elaborate and detailed reasons to be given, in our opinion the Reasons reveal how the Tribunal arrived at its finding to largely accept the opinion given by Mr Nesbitt about the estimated value of the Work. They conform with the classical model established in Beale. The contention that the reasons given for the decision in relation to the quantum meruit assessment were inadequate is not made out. It follows no error of law is disclosed.

Ground 2: No evidence

1. The Owners assert that there was "no evidence" for the decision made by the Tribunal to largely prefer Mr Nesbitt's opinion about the valuation of the cost of the work over that given by Mr Grieve. They contend that that finding was not open to the Tribunal because it was based on the "erroneous basis" that "generally speaking [Mr Nesbitt's valuation] provides a more detailed break-down of activities and costs".
2. A Tribunal that decides a question of fact where there is no evidence to support that finding makes an error of law: see Kostas v HIA Insurance Services Pty Ltd [2010] HCA 32; (2010) 241 CLR 390 at [91]; Khan v Kang [2014] NSWCATAP 48 at [25].
3. In determining the value of the Work the Tribunal was required to make an evaluative judgement about competing expert evidence. Plainly there was probative evidence for its ultimate finding to largely prefer the opinion of Mr Nesbitt. Among other things, the Tribunal had before it the reports prepared by each experts, together their oral evidence. That evidence also provided the basis for the intermediate finding that Mr Nesbitt's report provided "a more detailed breakdown of activities and costs".
4. The "no evidence" ground is misconceived and, in truth, is an argument about the weight given to competing evidence, and is dealt with below. No error of law is demonstrated.

Ground 3: Decision against the weight of evidence/not fair and equitable

1. The Owners seek leave to appeal on the ground that the decision made by the Tribunal to largely prefer Mr Nesbitt's valuation over that given by Mr Grieve, was "against the weight of evidence" and "not fair and equitable". To grant leave on either ground we must be satisfied that the Owners may have suffered a substantial miscarriage of justice because the decision was against the weight of evidence and/or was not fair and equitable: cl 12(1)(a),(b) of Sch 4 to the Act.

Against the weight of evidence

1. In support of the contention that the finding made by the Tribunal about the value of the Work was against the weight of evidence, the Owners point out: 1. In respect of three items the Tribunal accepted that Mr Nesbitt had overestimated the time required to carry out certain works (Reasons at [60] - [64]). 2. Mr Grieve's estimate of the value of the Work was closer to the contract sum and consistent with the following passage from the decision of Barrett J in Eddy Lau Constructions Pty Ltd v Transdevelopment Enterprise Pty Ltd [2004] NSWSC 273 (Eddy Lau) at [70] and therefore should have been given greater weight: [T]he price or rate provided for in the terminated and no longer operative contract does not limit the quantum meruit sum but forms part of the evidentiary base to which regard may properly be had in fixing or arriving at that sum. 1. During cross-examination it was revealed, that Mr Nisbett's estimate of the value of the Work was not, as claimed, based on the scope of work undertaken but the scope of work contracted for.
2. With respect to the first contention it does not follow that, because the Tribunal accepted Mr Grieve's opinion in part, its ultimate finding to prefer the balance of Mr Nesbitt's opinion was against the weight of evidence. If anything it demonstrates that the Tribunal gave careful consideration to the opinion of each expert. If it is suggested that the Tribunal was bound to take and "all or nothing" approach when confronted with competing expert evidence, we cannot agree.
3. Nor do we accept the Owners' second argument that, because Mr Grieve's assessment of the value of the Work was purportedly closer to the value of the contract fee, the decision was against the weight of evidence. Different factors may apply in assessing a quantum meruit than in assessing damage for breach of contract. It is a misreading of Eddy Lau to suggest that it is authority for the proposition that in assessing a quantum meruit where there are competing opinions about the value of the work, the one closer to the Contract fee should be preferred. Barrett J in Eddy Lau said nothing more than a decision maker may take into the contract fee in arriving at the quantum meruit sum.
4. In their third argument the Owners contend that, given the concession made by Mr Nesbitt in cross-examination that he based his estimate of the value of the work on the work contracted for, it was not open to the Tribunal to accept the statement he made in his report that he based his assessment on the value of the Work undertaken. That inconsistency, obviously, raised a question of weight and reliability but it did not nullify Mr Nesbitt's evidence in its entirety as is implied by this argument. The Tribunal dealt with the submission made by the Owners in some detail at [55] of its Reasons. At paragraph 52 of their 4 November 2014 submissions, the owners set out a passage from the transcript where Mr Nisbett states that he has assessed the reasonable value of the work contracted for. The implication is that Mr Nisbett has not given an opinion of the work actually carried out. While that implication may reasonably be drawn from the transcript, the fact is that in his report Mr Nisbett has clearly stated that he has estimated the cost of the completed work by the builder and that he was instructed to do that. I note that the scope of the work performed by the builder and referred to in section 10 of Mr Nisbett's report was provided to him by the builders' solicitor's letter dated 24 April 2013, as referred to in Annexure D to his report. I do not accept this criticism of Mr Nisbett's valuation.
5. The Tribunal was required to consider and make a finding about the internal consistency in Mr Nesbitt's evidence. In approaching that task the Tribunal took into account Mr Nesbitt's report, his letters of instruction together his oral evidence. The Tribunal was alive to the discrepancy identified by the Owners but nonetheless went on to the find that, as stated in his report, Mr Nesbitt had based his assessment on the work undertaken. That finding was open to the Tribunal and in our opinion cannot be characterised as being against the weight of evidence.
6. With respect to the ultimate finding made by the Tribunal, we note that the experts were not far apart in their respective estimate of the value of the work. The assessments they were required to undertake were not exercises in empirical science but estimates based on a number of factors, including expertise gained by long and personal experience in the construction industry. Because of this, disagreements between two reasonable and honest experts are common and probably inevitable. This was not a case where the Tribunal found that the estimates provided by the experts were based on false or unreliable premises or the misapplication of some aspect of the relevant methodology. Therefore, if, in the view of the Tribunal, one expert provided a sturdier foundation for his opinion by offering what the Tribunal considers to be "a more detailed breakdown of activities and costs" than the other expert, this provides a reasonable basis for distinguishing the two opinions. It is not to the point that others may not have formed the same impression of the strength of the evidence. It was reasonably open to the Tribunal to form the view it did because there was an evidentiary basis, although a slim one, for it.
7. For these reasons we do accept the proposition that the decision of the Tribunal to largely prefer the opinion of Mr Greives was against the weight of evidence.

Not fair and equitable

1. The Owners have not clearly articulated the basis on which they contend this part of the decision is not fair and equitable. Their submissions on this point are in effect a challenge to the Tribunal's evaluation of competing evidence and have been dealt with above.

Substantial miscarriage of justice

1. We are not satisfied that the decision is either against the weight of evidence or not fair and equitable. It is therefore unnecessary to consider the second limb of cl 12(1) of Sch 4 to the Act, namely, whether the Owners may have suffered a substantial miscarriage of justice. It follows that the power to grant leave to appeal on these grounds cannot be exercised.

Ground 4: diminution in value of residence

1. The Owners raise a number of grounds that are convenient to deal with together. They argue that the Tribunal erred by (i) failing, despite the requirements of s 94 of the Act, to take into account the diminished value of their property as a result of the Builders' failure to insure the Work, in its quantification of the quantum meruit sum, (ii) taking into account an irrelevant consideration, namely whether the diminution in value was permanent; and (iii) failing to award damages for the diminished value of the property as a consequence of the Builders' failure to insure the Work.
2. In the proceedings before the Tribunal the Owners tendered a report prepared by a valuation expert which stated that at the time the report was prepared, the market value of the property had reduced by $25,000 as a consequence of the Builders' failure to insure the Work. That opinion was un-contradicted and accepted by the Tribunal (unreported Reasons at [37]).

(i) Failure to have regard to the impact of the diminution in the value of the premises in the calculation of the quantum meruit claim

1. The Owners contend that s 94(IC) of the Act required the Tribunal to take into account the evidence of the diminution in the value of the premises and the Tribunal's failure to have regard to this "mandatory consideration" constitutes an error of law. The Builders disagree and argue that the Owners' argument rests on a misconstruction of s 94. They contend that s 94(IC) is directed solely at the threshold question of whether a builder is entitled to recover money on a quantum meruit basis.
2. As the Owners point out, the Tribunal did not take into account the evidence of the diminished value of the Work in quantifying the quantum meruit claim. However, the Tribunal had regard to that evidence in considering whether to exercise the discretionary power to permit the Builders to recover on a quantum meruit basis: Reasons (at [41]).
3. Whether, as the Owners contend, the Tribunal was bound to have regard to the evidence of the diminished value of the property in quantifying the quantum meruit, turns on the proper construction of s 94 of the Act, which provides: 94 Effect of failure to insure residential building work (1) If a contract of insurance required by section 92 is not in force, in the name of the person who contracted to do the work, in relation to any residential building work done under a contract (the uninsured work), the contractor who did the work: (a) is not entitled to damages, or to enforce any other remedy in respect of a breach of the contract committed by any other party to the contract, in relation to that work, and (b) is not entitled to recover money in respect of that work under any other right of action (including a quantum meruit). (1A) Despite section 92(2) and subsection (1), if a court or tribunal considers it just and equitable, the contractor, despite the absence of the required contract of insurance, is entitled to recover money in respect of that work on a quantum meruit basis. ... (1C) Without limiting the factors that a court or tribunal may consider in deciding what is just and equitable under subsection (1A): (a) in relation to any contract - the court or tribunal may have regard to the impact on the resale price of the property if no contract of insurance is provided, and …
4. The Owners contend that use of the phrase "what is just equitable (emphasis added)" in s 94(1C), indicates that the provision is not directed at the threshold question of whether it is "just and equitable" for a builder otherwise barred from recovering money in respect of uninsured work, to be permitted to recover money on a quantum meruit but rather the quantification of the sum to be awarded on a quantum meruit. Further, the Owners argue that the words "in deciding" in s 94(1C) indicate that the provision is directed at the circumstances where the threshold question of whether to permit the Builder to recover on a quantum meruit has already been determined.
5. The Owners concede that there is no authority for this proposition and that it is at odds with the approach taken by Barrett J in Eddy Lau at [49]: … The inquiry directed by the statute is therefore, in effect, whether the surrounding circumstances are such as to justify the creation of a right and an obligation as to the payment of the sum separately determined to represent fair remuneration. The Act, as I see it, does not attempt to control quantification. That is left to the general principle imported by the expression "quantum meruit". The Act is concerned with factors influencing a decision whether, in the particular circumstances in which the court finds the parties, it is fair that one receive the quantum meruit sum and the other pay it. It is to those circumstances that I now turn. (emphasis added)
6. They argue that His Honour's comments were obiter dicta and in any event not binding on a specialist Tribunal.
7. As the High Court emphasised in Project Blue Sky v Australian Broadcasting Authority [1998] HCA 28; (1997) 194 CLR 355 the proper approach to statutory interpretation is contextual rather than strictly literal. The starting point in section 94(1) is that a builder is not entitled to damages, or to recover money, including on a quantum meruit basis in respect of work that was not insured as required by s 92(1) of the Act. Section 94(1A) of the Act provides that nonetheless if a court or tribunal considers it "just and equitable", the builder will be entitled to recover money in respect of any uninsured work on a quantum meruit basis.
8. The opening words of s 94(1C): "Without limiting the factors that a court or tribunal may consider in deciding what is just and equitable under subsection 94(1A)" (emphasis added) makes abundantly clear that the provision relates to the task required to be undertaken by s 94(1A), namely to consider whether it is "just and equitable that [the builder] is entitled to recover money in respect of [the uninsured] work on a quantum meruit basis". We cannot accept the proposition that the use of the word "what" in s 94(1C), can be interpreted to mean that the provision is concerned with quantification rather that the threshold question of whether recovery ought be permitted at all. To construe s 94(1C) in this way would require its opening words to be ignored - "Without limiting the factors that a court or tribunal may consider in deciding what is just and equitable under subsection (1A) - an approach at odds with the principles of statutory construction.
9. It follows that the Tribunal was not bound to have regard to the impact of the Builders' failure to insure on the value of the residence in quantifying the quantum meruit claim.

(ii) Having regard to whether the diminution in the value of the residence was permanent

1. The Owners submit that the Tribunal misconstrued s 94(1C)(a) by importing into it the criteria that any diminution in the value must "attach permanently" to the Residence.
2. This ground fails for the reasons discussed above. In determining the quantum meruit the Tribunal was not required to apply s 94(1C)(a) of the Act, and therefore did not offend that provision by having regard to whether any loss to the property was permanent.

(iii) Failing to award damages for breach of statutory obligation

1. One of the difficulties raised by this grounds of appeal is that these points were not pleaded in the Owners' Further Amended Points of Claim (FAPOC) filed in July 2013. Those points of claims constituted a claim for damages for breaches of statutory warranties (see [9]-[79] and [91] of the FAPOC); negligence (see [80] - [82] and [91(b)]; and restitution (see [83] - [89] and [91(c)] of the FAPOC). Although the Owners raised the issue of diminution in the value of the property (90 of the FAPOC], a plain reading of their points of claim suggests that this head of damage was alleged only in respect of the negligent or defective work done by the Builders. The question of diminution in value consequent upon the Builders' failure to insure appears to have been raised as an afterthought only.
2. Nevertheless, once the issue was raised, the Tribunal sought to deal with it but, we infer from the Reasons and transcript, with only limited assistance from the parties: see unreported Reasons (at [28] - [44]). Noting that "the legal basis for the claim has not been identified', the Tribunal nonetheless "tentatively accept[ed] that the owners will be entitled to claim damages for breach of a statutory obligation, such claim being based in tort": unreported Reasons (at [33]). The Tribunal determined the issue on the basis that the Owners had not demonstrated that the Builders' failure to insure the Work "caused them to sustain damage, or is likely to cause them to sustain loss or damage": unreported Reasons (at [41] - [43]).
3. In dealing with this claim, although it did not express them in terms as follows, it can be seen that the Tribunal had a number of problems. First, how to conceptualise this claim in some known form of action that could result, if the Owners were successful, in relief for them. Secondly, if such an action was available, identifying its relevant elements, especially whether those elements include loss or damage consequent upon some action by the Builders. Thirdly, deciding whether a loss had in fact been incurred. Fourthly, if a loss had been incurred, determining the nature and monetary value of that loss.
4. Assuming for argument's sake that a cause of action the remedy for which is damages was available to the Owners, the key issue, with the Owners bearing the onus of proof, was the question of whether they had suffered loss or damage as a result of the Builders' failure to obtain insurance.
5. Over objection, the Tribunal admitted and accepted un-contradicted evidence from an expert called by the Owners that, as a result of the Builders' failure to obtain HOWI, the value of the property had been diminished, as at the time of the expert's report, by an amount of approximately $25,000. This meant that the expert had estimated that the property, if placed on the market at that time and the purchaser was aware of the lack of insurance, would have fetched about that amount less than if the works carried out by the Builders had been insured as required by the Act.
6. As a matter of common sense it can be seen that, because at the time the contract was entered into, the statutory warranty period was seven years, the diminution in value of the property, such as it is, gradually abates over time as the probability of some otherwise insurable event occurring within that seven year period also reduces over time. That is, as time progresses, the yet-to-crystallise future loss (if there was in fact such a loss) initially caused by the Builders' failure to insure is gradually recovered due to the fact that their risk of exposure to a damaging event attributable to the builder gradually diminishes at the same rate.
7. Moreover, the loss was at most a speculative paper loss unless the Owners sold the property during the relevant period. The uninsured works were completed in April 2012 when the Builders were expelled from the property. When the Tribunal made its decision in February 2015 almost three of the seven year statutory warranty period had expired. The Owners did not sell and there was apparently no evidence that they intended to do so.
8. For these reasons, and because of the speculative nature and the multiple qualifications that had to be placed on the opinion evidence for it to have any evidentiary value, it is questionable whether the Owners' report ought to have been admitted in the first place.
9. But, in any event, the Tribunal ultimately was not satisfied on the balance of probabilities that the Owners had in fact sustained loss or damage as a result of the Builders' default. The Tribunal accepted, correctly in our view, the Builders' argument that once the statutory period had expired, so had any temporary diminution in the value of the residence due to a lack of insurance.
10. For this reason and others given above, it follows that the Tribunal did not err in law in rejecting the Owners' claim for damages.

Ground 4: The single judgment point

1. The Owners submit that the Tribunal adopted an "impermissible approach" by setting-off the value of their defects claim against the quantum meruit to make a single order that the Owners pay the Builders the sum of $17,000. They contend that this approach was impermissible in circumstances where the Tribunal was required to determine applications made by each and there were two separate proceedings. In the alternative they seek leave to appeal on the basis that the adoption of that approach meant the decision was "not fair and equitable" and may have resulted in a substantial miscarriage of justice.

(i) Adopting an impermissible approach

1. In our view, the approach taken by the Tribunal at first instance was appropriate for a number of reasons and this ground of appeal will be rejected.
2. First, the procedures of the Tribunal are guided by principles set out in the NCAT Act. Section 38 of that Act provides that the Tribunal may determine its own procedure in relation to any matter for which this Act or the procedural rules do not otherwise make provision. Section 38 provides: 36 Guiding principle to be applied to practice and procedure (1) The guiding principle for this Act and the procedural rules, in their application to proceedings in the Tribunal, is to facilitate the just, quick and cheap resolution of the real issues in the proceedings. (2) The Tribunal must seek to give effect to the guiding principle when it: (a) exercises any power given to it by this Act or the procedural rules, or (b) interprets any provision of this Act or the procedural rules. (3) Each of the following persons is under a duty to co-operate with the Tribunal to give effect to the guiding principle and, for that purpose, to participate in the processes of the Tribunal and to comply with directions and orders of the Tribunal: (a) a party to proceedings in the Tribunal, (b) an Australian legal practitioner or other person who is representing a party in proceedings in the Tribunal. (4) In addition, the practice and procedure of the Tribunal should be implemented so as to facilitate the resolution of the issues between the parties in such a way that the cost to the parties and the Tribunal is proportionate to the importance and complexity of the subject-matter of the proceedings. (5) However, nothing in this section requires or permits the Tribunal to exercise any functions that are conferred or imposed on it under enabling legislation in a manner that is inconsistent with the objects or principles for which that legislation provides in relation to the exercise of those functions.
3. Second, neither the enabling Act, the Home Building Act, the NCAT Act, the regulations made under each Act, nor NCAT's procedural rules, prohibit the approach adopted by the Tribunal.
4. Third, set-off is a standard practice in the civil jurisdiction of NSW courts. Section 90 of the Civil Procedure Act 2005 (NSW) provides: (1) The court is, at or after trial or otherwise as the nature of the case requires, to give such judgment or make such order as the nature of the case requires. (2) If there is a claim by a plaintiff and a cross-claim by a defendant, the court: (a) may give judgment for the balance only of the sums of money awarded on the respective claims, or (b) may give judgment in respect of each claim, and may give judgment similarly where several claims arise between plaintiffs, defendants and other parties.
5. Section 96 of the Civil Procedure Act deals more specifically with set-off of judgments. It provides: (1) This section applies if, in relation to any two or more judgments of the same court, the judgment creditor and judgment debtor under one or more of the judgments are the judgment debtor and judgment creditor, respectively, under the other judgments. (2) The judgment debtor under any such judgment (the first judgment) may apply to the court for an order that the judgment be set off against any other such judgment (the second judgment) in respect of which he or she is the judgment creditor. (3) An order under this section has the following effect: (a) if the amount of the first judgment is less than the amount of the second judgment, the first judgment is taken to have been satisfied and the amount of the second judgment is taken to have been reduced by the amount of the first judgment, (b) if the amount of the first judgment is equal to the amount of the second judgment, both judgments are taken to have been satisfied, (c) if the amount of the first judgment is greater than the amount of the second judgment, the second judgment is taken to have been satisfied and the amount of the first judgment is taken to have been reduced by the amount of the second judgment. (4) (Repealed) (5) This section does not apply to judgments of the Supreme Court.
6. The commentary on s 96 in the NSW Civil Procedure Handbook (2015) [1] notes that s 96 is based on the practice of the NSW Local and District Courts which differs from that of the Supreme Court. For self-evident reasons, especially the principle that the Tribunal's proceedings should be conducted to resolve the issues as justly, quickly and efficiently as is reasonable in the circumstances, it is more appropriate in our view to follow the practice of the Local and District Courts (insofar as they are useful guides to practice) than the more complex procedures of the Supreme Court which are designed to manage the more labyrinthine litigation dealt with in that jurisdiction.
7. Further, the commentators remark (at p 77): "Section 90(2)(b) provides that within the one case the court may give separate judgments in respect of respective claims. This will be relatively rare and would normally only happen if there has been a separate hearing of a cross-claim: in these circumstances an application pursuant to this section might be appropriate.
8. The Tribunal had broad power to determine its own procedure and it applied a procedure similar to the usual and recommended practice of civil courts in NSW. This was consistent with the principle of just and efficient resolution of the issues. While the Tribunal was not required to adopt that approach, nor was it barred from doing so. The Owners have not demonstrated that that approach was impermissible. No error of law is disclosed.

(ii) Not fair and equitable

1. Two of the arguments in support of this ground rest on the assumption that the approach adopted by the Tribunal was impermissible, which has been dealt with above.
2. A third argument advanced by the Owners is that the decision was not fair and equitable because they were not notified of the Tribunal's intention to make a single order and, as a consequence, were denied procedural fairness. This, they contend may have resulted in a substantial miscarriage of justice because as a result they were deprived of the opportunity of achieving a different or more favourable result, particularly in relation to the subsequent costs decision.
3. In our view the argument that the Owners were denied procedural fairness cannot be sustained. The Tribunal was not obliged to notify the parties of its intention to make a single order in circumstances where there was no requirement that separate orders be entered in relation to the two applications.
4. The Owners also argue that in circumstances where a large part of the three day hearing was devoted to their claim in respect of the Builders' defective work, in which they were largely successful, it is unfair that as a consequence of the making of a single order they are now liable for the Builders' costs.
5. Insofar as there are any implications in terms of costs, they can be dealt with separately. The power to award costs in this class of matters is contained in Rule 38 of the Civil and Administrative Tribunal Rules 2014. The usual rule of costs following the event is not inflexible and the Tribunal has a discretion to vary that approach in appropriate circumstances: Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72 at [134].
6. This ground is essentially a challenge to the subsequent decision made by the Tribunal ordering the Owners to pay the costs of the substantive proceedings. That decision was handed down shortly before the hearing of this appeal: Jason Zammit and Michelle Zammit Trading as Zammit's Quality Constructions v Saul Markunsky and Shereen Markunsky NSWCATCD [2015] (unreported, SM Goldstein), 28 May 2015, unrep.
7. At the hearing of the appeal, by consent it was agreed that the appeal against the costs decision would be determined on the papers after the determination of this appeal.
8. We do not agree that the decision was not fair and equitable because of the approach taken by the Tribunal in relation to the form of orders made. Leave to appeal is refused.

Orders 1. Leave to appeal refused. 2. Appeal dismissed.

Endnote

1. Hamilton, JP, Lindsay G, Morahan M and Webster, C NSW Civil Procedure Handbook 2015 Sydney: Lawbook Co 2015 p 77 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

Amendments 23 February 2016 - Coversheet: corrected date of decision. 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: 23 February 2016