Merheb v Hilal & Anor

Supreme Court of NSW|2004-05-13

Background 3 The dispute between the plaintiff and the first defendant arose after the first defendant engaged the plaintiff to cement render the inside and outside of the house she was building. In the CTTT proceedings, the first defendant (applicant in the CTTT proceedings) claimed damages of $33,000. The plaintiff's (respondent in the CTTT proceedings) cross-claim sought payment of outstanding fees of $23,880.57. The CTTT found that the plaintiff builder had contracted to perform residential building work without taking out the insurance cover required by s92 of the HBA and had thereby, under s 94(1) of the HBA, forfeited his right to recover any monies for the work he had performed. 4 On 6 November 2003, the CTTT made the following orders: "In relation to HB 03/09482 I order:-

no further monies are due or owning by Mrs. Nouage Hilal to Mr Abie Merheb in relation to a contract for cement rendering which was entered by the said parties on or about 12 September 2002.

5 No order was made as to costs as both the claim and the cross-claim before the CTTT failed.

6 The plaintiff's appeal is brought pursuant to s67(1) of the Consumer Trader and Tenancy Act 2001 (NSW) (CTTA) against only that part of the CTTT decision that relates to the plaintiff's cross-claim in proceeding No. HB 03/37498. The cross-claim was heard together with the first defendant's claim HB 03/09482. The plaintiff appeals against the whole of the decision in HB 03/37498. The plaintiff's grounds of appeal are that the Tribunal erred firstly, in that it misconceived and therefore misapplied the discretion vested in it by s94(1A) of the HBA; secondly, in failing to, upon its own findings of fact, exercise its section 94(1A) discretion in favour of the plaintiff by allowing his cross-claim against the first defendant for a sum determined on a quantum meruit basis; thirdly, by its failure to determine the amount of money payable by the first defendant to the plaintiff on a quantum meruit basis; fourthly, by its failure to make an order for costs under s53(3)(b) of the CTTA in favour of the plaintiff.

Extension of time in which to bring this appeal 7 The plaintiff seeks leave to appeal on the grounds that he was misinformed by his counsel as to the deadline for the filing of his appeal summons. The plaintiff was informed that the deadline was 10 January 2004 when in fact the deadline was 10 December 2003. The plaintiff's counsel confirmed that the error was due to a typographical error on his part. The appeal was filed on 6 January 2004, a delay of about three weeks. The defendant took no point in relation to the time of the institution of the appeal. It is my view that in these circumstances the plaintiff should be granted leave to extend the time for the filing of this appeal. 8 The main issue in this appeal is whether the Magistrate erred in considering the plaintiff's quantum meruit claim. The Tribunal Proceedings

9 In the member's reasons for decision the six main issues of most concern (of which issues 5 and 6 were the most important) were recorded [at page 2]. The member noted that in light of an examination of the legislation the other issues raised became insignificant. At the hearing before the CTTT the parties agreed to dispense with the taking of a transcript. While the plaintiff's counsel disputed that he made the concession referred to in point 3 in the quote below, without evidence from the parties on this point, I cannot take it any further. "It was conceded by the respondent that:

His quoted measurement of the external area to be rendered was greater then the area as subsequently estimated by his own expert, Mr Howard Ryan. In theory, Mrs Hilal is entitled to some reimbursement. 2. There were some defects in his work that he was prepared to either rectify himself or alternatively pay another tradesman to rectify to an extent of $3800-00, as assessed by Mr Ryan. 3. Some works were performed, allegedly at the request of Mr Hilal, which were outside the scope of his tradesman's licence. In my opinion, such work would contravene the provisions of the Home Building Act, 1989. 4. A simple mathematical error of $1000.00, occurred in the addition of invoice 408 which with GST added amounted to an extra $1100.00 5. Contrary to the provisions of the Home Building Act the respondent did not arrange Home Warranty Insurance at the time of contracting to do this work nor since that time. 6. Contrary to the provisions of the Home Building Act the contract that these parties entered was not in writing."

"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.

(1B) A contractor who applies to a court or tribunal for a remedy under this section, or who is awarded money under this section, is not guilty of an offence under section 92 (2) by virtue only of that fact.

(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

(b) in relation only to a contract entered into before 30 July 1999 - the court or tribunal is not to be limited by the fact that the required contract of insurance was not obtained until after the date of the contract." 11 The member then continued [at pages 4-5]: "I have perused all the cases that Mr. Whitelaw submitted and I have considered his submissions in relation to the exercise of my discretion. I have some sympathy with those submissions and I concede that they are attractive as a possible resolution of this dispute. However I do not believe that Mr Merheb's overall conduct as recorded in points 1 to 6 above, particularly points 5 and 6, merit the exercise of that discretion in his favour.

The legislation gives a very minimal guide to the exercise of the discretion and then it is left to the court or tribunal to exercise its own judgement. In my opinion Parliament clearly intended that there would be certainty in all the relevant details of the contract by reducing them to writing and that the owner would be protected by insurance. Mr. Merheb has defeated those intentions and exposed the owner to a possible very great disadvantage/prejudice. What protection or remedy would the owner have if, for example, Mr. Merhab became bankrupt or insolvent during the warranty period?

It is my finding that Mr. Merhab's global conduct had disentitled him from the benefit of any discretion that I might have exercised in his favour. Accordingly, under the other provisions recorded above Mr.Merheb has no cause of action and in relation to the insurance issue this includes a claim in quantum meruit. Therefore, I will order that no further monies are due or owing by Mrs Hilal to Mr. Merheb in relation to a contract that the parties entered on or about 12 September 2002.

Without accurately calculating all the various claims I am aware that my order involves a considerable discount to Mrs Hilal. Originally, Mrs Hilal claimed damages of $33,000 but the evidence given before me did not justify anything remotely approaching that figure. I was far more convinced by the assessment of damages given by the respondent's expert than I was with the evidence given for the Applicant. In addition, there would be some compensation for the original over estimation of the work to be done and also some compensation for the work to be completed.

In concluding this matter it is my opinion that the benefit Mrs Hilal has received by my order far outweighs any damages she may have suffered, from defective work, mathematical error or over estimation. The claim for damages is dismissed and Mrs Hilal may apply the considerable discount that she has received to rectifying any defects and completing the project. For the same reasons as given above Mr Merheb's claim is dismissed."

12 In his submissions, counsel for the plaintiff relied on the recent decision of Barrett J in Eddy Lau Constructions Pty Ltd v Transdevelopment Enterprise Pty Ltd [2004] NSWSC 273 (7 April 2004). It was submitted that the circumstances of this case are not that far removed from Eddy Lau Constructions. According to the plaintiff, the Tribunal Member took into account irrelevant considerations in reaching its decision to not exercise the discretion in the plaintiff's favour. 13 In Eddy Lau Constructions His Honour addressed stated [at paragraph 44] that: "44 It is not possible to approach this aspect in any fully informed way without first coming to a view as to the meaning of 'just and equitable' in the particular statutory context which, as already noted, involves s.94(1A)"

14 After discussing the usage of 'just and equitable' criterion His Honour concluded: " Conclusion on the 'just and equitable' question 62 The policy behind s.94(1A) is, clearly enough, that the statutory disentitlement under s.94(1) to sue for damages under or otherwise to enforce the contract made in contravention of s.92(1) may be offset by the court's allowing recovery on a quantum meruit basis, provided that it is satisfied, according to the "just and equitable" criteria, that the builder is deserving of such recovery.

63 Having regard to the whole of the considerations I have mentioned as relevant to that question in this particular case, I consider the most telling factor to be that, if the plaintiff is not granted relief under s.94(1A), the defendant will have the benefit of the work without having to pay for it. In the absence of conduct of the plaintiff (over and above the default that gave rise to the contravention of s.92) operating in a relevant way to the detriment of the defendant, the plaintiff should not be denied the quantum meruit recovery. The only additional criticism levelled at the plaintiff is that it did not act with sufficient diligence in attempting to remedy the insurance default. I do not consider that criticism to be sufficient to deny recovery upon the quantum meruit. I would add that there is no apparent reason why the defendant, if it was as concerned as it professed to be about obtaining the relevant insurance protection, should not have made attempts of its own, in consultation with the plaintiff and at the plaintiff's cost, to negotiate an appropriate contract with an insurer. It seems that the defendant was more interested in bringing the contract to an end than it was in working with the plaintiff to address the insurance deficiency.

64 I am satisfied that the conduct of the plaintiff, viewed in the whole of the surrounding circumstances, did not exhibit blameworthiness such as to make it inappropriate to provide a reasonable reward for work actually done by it and that it is therefore just and equitable for the plaintiff to recover a quantum meruit sum for that work under s.94(1A)." 15 In deciding whether it was just and equitable to allow the plaintiff's quantum merit claim the Tribunal Member considered the overall conduct as recorded in paragraph 1 to 6. The Tribunal Member put particular weight on points 5 and 6, namely that there was no insurance and there was no written contract entered into. The Tribunal Member also considered that the builder's global conduct disentitled him to the exercise of discretion in his favour. There is a wide discretion open to the Tribunal Member when deciding whether it is just and equitable that the builder is entitled to recover monies on a quantum meruit basis. The Tribunal Member decided that in the circumstances it was not. It is my view that the decision was open to the Tribunal Member. There is no error of law. 16 The decision and orders made by the CTTT on 6 November 2003 are affirmed. The appeal is dismissed. The plaintiff's summons filed 6 January 2004 is dismissed. 17 Costs are discretionary. Costs usually follow the event. The plaintiff is to pay the defendant's costs as agreed or assessed.

(1) The decision and orders made by the CTTT on 6 November 2003 are affirmed.

(3) The plaintiff's summons filed 6 January 2004 is dismissed.

(4) The plaintiff is to pay the defendant's costs as agreed or assessed. **********

Last Modified: 05/26/2004 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.

Consumer Trader and Tenancy Act 2001(NSW)

CITATION : Merheb v Hilal & Anor [2004] NSWSC 425 HEARING DATE(S) : 13 May 2004 JUDGMENT DATE : 24 May 2004 JURISDICTION: Common Law - Administrative Law List JUDGMENT OF : Master Harrison DECISION : (1) The decision and orders made by the CTTT on 6 November 2003 are affirmed; (2) The appeal is dismissed; (3) The plaintiff's summons filed 6 January 2004 is dismissed; (4) The plaintiff is to pay the defendant's costs as agreed or assessed.

CATCHWORDS : Appeal from decision of CTTT - s 94 Home Building Act LEGISLATION CITED : Consumer Trader and Tenancy Act 2001 (NSW) - s 67 Home Building Act 1989 (NSW) - s 94 CASES CITED : Eddy Lau Constructions Pty Ltd v Transdevelopment Enterprises Pty Ltd [2004] NSWSC 273 (7 April 2004) Abie Merheb t/as Abie Cement Rendering (Plaintiff)

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