Mikhail v JJ Built This Pty Ltd

Background

1. The Tribunal summarised the background to the parties' disputes, and what they were claiming in the Tribunal, as follows: "2. The parties' disputes in both proceedings relate to building construction works (specifically, the development of a 60 square 'Granny Flat' on the Home Owner's property at Kogarah NSW) under a NSW Fair Trading Home Building Contract for work over $20,000.00 bearing date 16 July 2019 (Contract). The Contract price was $146,400.00. The scope of works for the Contract was referrable to plans for the design of the 'Granny Flat' drawn up by architect, Jack Tannous, who had been appointed the architect in or about April 2019. 3. In the Home Owner's application, the Home Owner seeks payment by the Builder of a sum of money; originally, as stated in the application filed 2 June 2020, in an amount of $89,441.81, but amended, as stated in the Home Owner's documents for the hearing and then confirmed in the Home Owner's oral evidence during the hearing, to $39,191.53. The Home Owner relied upon an expert report dated 6 May 2020 of Mr Paul O'Donnell of Canberra Sydney Inspections (the O'Donnell report) to support his case that the Builder carried out works under the Contract "unsatisfactorily", and further that the value of the works completed by the Builder amount to 40% only of the Contract price. The O'Connell report contains a Scott Schedule with 23 items of defective and incomplete works, and an item claimed (in the amount of $6,600.00) for delays said to have been occasioned by the Builder's "abandonment" of the Contract works. 4. In the Builder's application, the Builder seeks an award of damages for breach of the Contract in the amount of $51,100.00. The Contract price was $146,400.00 payable over nine (9) Progress Payments: see clause 12 of the Contract. It is not disputed that the Builder received payments from the Home Owner in the period from 28 February 2019 to 4 December 2019 comprising a $14,600 (the deposit amount), and then Progress Payments 2, 3, 4 and 5, and a part of Progress Payment 6, all totalling the sum of $95,300.00. The amount now sought in the Builder's claim against the Home Owner is the unpaid balance of the Contract which includes an invoice dated 19 December 2019 in the amount of $14,600.00 (the December 2019 invoice) and further damages up to the unpaid Contract price for loss of bargain arising from the Home Owner's breach of Contract. 5. The Builder denies the Home Owner's allegation that it "abandoned" the Contract works; rather, it says that it suspended works under the Contract by serving a Notice pursuant to clause 24 of the Contract, because the Home Owner had not paid the December 2019 invoice in the amount of $14,600.00. Thereafter, because the Home Owner failed to pay the December 2019 invoice and did not comply with the Notice of Suspension of the Contract, the Builder on 25 May 2020 served upon the Home Owner a Notice of Termination and final contract payment invoice of $36,600.00, pursuant to clause 26 of the Contract which is also unpaid. An assumption that the Builder "abandoned" the Contract works is made in the O'Donnell report and it is a key part of the Home Owner's case to establish a factual and legal basis for his claim against the Builder and for his denial of the Home Owner's claim against him. On the other hand, the Builder's case is that at all material times it has been ready willing and able to complete the Contract works but for the Home Owner's actions in breach of the Contract including non-payment of the December 2019 invoice and denying access to the building site."
2. There may be some misdescription in [4] of the Tribunal's reasons. The unpaid invoice dated 19 December 2019 in the sum of $14,600 (which relates to Payment 6 under cl 12 of the Contract) is, as we understand it, for work already done by the respondent. If that is correct, the claim is one for a debt, not damages. The distinction is important because damages are assessed differently to debt as we shall later explain.
3. The balance of the amount found owing, referred to at [5] of the Tribunal's reasons, was $36,600 being for what the Tribunal referred to (at [4]) as "further damages up to the unpaid Contract price for loss of bargain arising from the Home Owner's breach of Contract."
4. That latter amount was said to be payable as damages to the respondent because the Tribunal found that the appellant had repudiated the Contract. In relation to repudiation and termination, and after referring to various leading authorities, the Tribunal held: "21. Applying those principles, I am satisfied on all of the available evidence that the Home Owner from in or about December 2019 evinced an intention no longer to be bound by the Contract or an intention to fulfil the Contract only in a manner which was substantially inconsistent with his obligations under the Contract, including not to pay the December 2019 invoice and not to allow the Builder access to the building site to carry out the works required under the Contract. I accept the evidence of Mr Nav of the Builder in this regard. This is also substantiated in the Home Owner's own correspondence to the Builder dated 24 April 2020 (SN 11 to Mr Nav's affidavit sworn 8 December 2020 at page 4), where Mr Mikhail stated: 'In response to your requests for the outstanding balance of our contract price of $36,500, it's unreasonable for you to ask for money that you don't deserve and unfinished work. Until completion of the work, the contractor will not be entitled to any further payments under this contract. Therefore you being given 10 working days to complete all the unfinished work including all the extra jobs that I paid for. Otherwise I will terminate the contract.' 23. I accept that the Builder was entitled to serve the Notice of Suspension dated 28 April 2020 which referred expressly to the Home Owner's substantial breaches of the Contract including denial of access by the Home Owner and otherwise preventing the Builder from carrying out works on the site in accordance with the Contract, and the Home Owner's failure to pay the accounts of the Builder within a reasonable time. I also do not accept the Home Owner's argument that the deposit paid by him to the Builder on 26 February 2019 was not deducted from the first progress payment. I accept Mr Nav's evidence that the construction works commenced on 2 October 2019 which was shortly after the local council issued development approval (i.e. on 16 September 2019). I find that in accordance with clause 12 of the Contract the deposit paid ($14,600.00) constituted Progress Payment 1 and that the next payment made ($9,000.00) on 22 October 2019 constituted Progress Payment 2: see paragraph 14 of the affidavit of Mr Nav sworn 11 September 2020. As the Builder received no satisfactory response to its Notice of Termination, including payment of its outstanding amounts under the Contract, I find that in the events which occurred, the Builder accepted the Home Owner's repudiation of the Contract and that the Builder lawfully terminated the Contract by the Builder's Notice of Termination dated 25 May 2020."
5. On this appeal the appellant submitted that the Tribunal erred in finding that he had denied access to the respondent (Ground 1) and denied that he had refused to pay the balance owing for Payment 6 because there had been an agreed variation to the Progress Payments (Ground 2).

Ground 1

1. The appellant submitted he never denied access to the respondent, or at least not permanently. He directed us to his text message dated 5 September 2020 in which he requested the respondent to return to the site.
2. The chronology of events is that the appellant sent the email dated 24 April 2020 which the Tribunal quoted at [21] of its decision and which is set out at [13] above.
3. Four days later the respondent sent its Notice of Suspension which referred to the appellant's prior breaches of contract, and the Contract was terminated a little over a month later on 25 May 2020.
4. On 2 June 2020 the appellant commenced his proceedings against the respondent, and on 20 July 2020 the respondent commenced its proceedings against the appellant.
5. The text message relied on by the appellant is dated 5 September 2020, some three and half months after the Contract was terminated, some three months after the appellant commenced his proceedings and one and half months after the respondent commenced his proceedings.
6. Put shortly, the text was ineffective when sent after the Contract had been terminated. Once the Contract was terminated it was too late for the appellant to say that he would now allow the respondent access to the site under the (now terminated) Contract.
7. The denial of access by the appellant was a breach of contract. That breach occurred before termination. Once termination of the Contract had occurred then the Contract was at an end and both parties were released from future performance of their obligations under the Contract. A subsequent offer (in the text message of 5 September 2020) could not undo what the appellant had already done.
8. Notwithstanding the text message post-dated the termination of the Contract, and was therefore necessarily ineffective, the Tribunal found that the appellant continued to deny access to the respondent after the date of that text message, or at least access without conditions imposed by the appellant which were unacceptable to the respondent.
9. The Tribunal referred to this text message in its decision and said: "24. … There is no evidence that before he commenced the Tribunal proceeding against the Builder on 2 June 2020, the Home Owner moved away from the position he had taken in the email correspondence dated 24 April 2020 (referred to above) by asking the Builder to return to the building site to finish the work. However, at page 62 of the Home Owner's bundle of documents, the Home Owner submitted that the Builder continued to, in effect, "abandon" the work by refusing to come back when he sent a text message to Mr Nav of the Builder on 5 September 2020, which had stated, relevantly: 'But now I realise it's according to the council regulation. So I accept that and move on with my life and my family. So I urge you to come back and finish your job. However you see fit.' 25. I accept Mr Nav's oral and written evidence that he was prepared to go back and finish the job when he received the text message on 5 September 2020, but that the Home Owner continued to refuse payment of outstanding accounts and continued to assert matters of defective and incomplete works (e.g. installation of a rainwater tank) which were not within the Contract's scope of works, although some of these matters such as the rainwater tank may have given rise to a variation in favour of the Builder had the Contract not been terminated. I further take into account the fact that Mr Mikhail in his sworn oral evidence for the hearing also said words to this effect: that he wanted the Builder to finish the job, but that he also wanted the job done the way he (the Home Owner) wanted it done.
10. There is no appeal from the finding that the appellant continued to deny unconditional access to the site after the date of the text message.
11. For those reasons we dismiss Ground 1.

Ground 2

1. The appellant submitted that he could not have owed money for Payment 6 because the payment schedule had been varied by agreement.
2. The Tribunal said (at [4] of its decision) that it was not disputed that the respondent received payments from the appellant in the period from 28 February 2019 to 4 December 2019 comprising a $14,600 (the deposit amount), and then Progress Payments 2, 3, 4 and 5, and a part of Progress Payment 6, all totalling the sum of $95,300.00. That is in accordance with cl 12 found on page 13 of the Contract.
3. Remaining to be paid under the Contract in the future (if the Contract was performed) were payments 7, 8 and 9 totalling $36,500 (there is a typographical error in the Tribunal's reasons at [4] where it refers to $36,600).
4. The appellant's submissions were as follows: "To prove to you that there was no breach of the contract on my part for unpaid progress payment (6) for the amount of $14.600 as the builder agreed to deduct the initial deposit which is 10% of the full price of the contract which was $14.600. So this $14.600 was not part of progress payment as the builder declared. It was the 10% deposit which should be deducted from the first progress payments according to his contract CLAUSE 12 Progress payment (See page 2) It says any deposit paid is deducted from the first progress payment which the builders didn't do, so I asked him if he can deduct that $14.600 from the $20.000 for completion of the brickwork in the meantime I showed them CLAUSE 12 progress payment. You should all see their expressions on their faces and then the salesman said OH. We didn't realise that. Then he said okay sorry we can change that and deduct the $14,600 from completion of the brickwork. Then he made those changes and we all signed this piece of important paper on the spot. I paid $5,400 on that day 4th of December 2019 so they all left my house, seemed to be happy as you can see the new progress payment Page (3) So you see you're honourable judges. There's no breach of contract or repudiation that Mr D Charles based his decision accordingly. I urge the court to consider my evidence and dismiss the builder's case because this is what this case is all about the $14,600 which has already been deducted by the builders to pay for brickwork."
5. The document to which the appellant refers, was dated 4 December 2019. This document was in the following form:
6. According to the appellant's submissions (as we understood them) this document arose out of the conversation the appellant had with the respondent referred to in the submission we have quoted at [29] above.
7. That conversation could only make logical sense (in terms of having a favourable outcome for the appellant) if it amounted to an assertion that two lots of $14,600 were paid by the appellant, once as the deposit and once again as Payment 1.
8. Clause 12 of the Contract required any deposit to be deducted from Payment 1, but the appellant said that it had not been deducted from that payment. Logically it follows that the appellant was saying he had paid the sum of $14,600 twice, once as deposit and once again for Payment 1.
9. According to the appellant he therefore agreed with the respondent that the deposit he paid of $14,600 (which had not been deducted or credited as against Payment 1) be deducted from (or credited against) Payment 6. That explains, he says, why he paid $5,400 for Payment 6 (which was for a total of $20,000). Therefore, on the appellant's version, he had in fact paid Payment 6 in full.
10. However, the Tribunal did not find that two lots of $14,600 were paid. The Tribunal rejected the appellant's submission that his deposit was not deducted from (or credited against) Payment 1. The Tribunal said at [23]: "I also do not accept the Home Owner's argument that the deposit paid by him to the Builder on 26 February 2019 was not deducted from the first progress payment. … I find that in accordance with clause 12 of the Contract the deposit paid ($14,600.00) constituted Progress Payment 1 …"
11. The appellant has not demonstrated any error in that conclusion.
12. We must add that the appellant did not provide the Appeal Panel with any evidence he gave to the Tribunal to the effect that he had paid two lots of $14,600 and the Tribunal does not refer to any such evidence in its reasons for decision.
13. Therefore, in the absence of any of that material we cannot see any error in the Tribunal's decision.
14. The document dated 4 December 2019 relied upon by the appellant as evidence of the double payment might be some evidence of an altered payment arrangement (possibly including variations), but it does not, in our view, corroborate the appellant's version of paying two lots of $14,600.
15. The text message which followed (in the appellant's appeal materials) was the following:
16. That document is reasonably contemporaneous with the invoice for Payment 6, and so we infer the "invoice" referred to in that message is the invoice for Payment 6. In that text message the author makes clear that once the invoice for Payment 6 was made (being a balance of $14,600) then (and only then) would the parties move on to the "next stage". That didn't happen because the balance wasn't paid, and the Contract was terminated.
17. Therefore, rather than supporting the appellant's case that he had paid $14,600 twice, and that the respondent had therefore agreed that the second payment of $14,600 could be deducted from (or credited against) Payment 6 (with the result that nothing further was owed for Payment 6), the text message says the opposite.
18. It says that "once (the invoice for Payment 6 was) paid" the parties could move on to the next stage, which must be the work referred to in the document we have copied at [30] above and which was attached to the text message referred to at [40] above.
19. Therefore, we do not agree with the appellant's submissions that the documents referred to support his case and demonstrate error by the Tribunal.
20. For all of those reasons we dismiss Ground 2.

Damages

1. We have already referred to the Tribunal's findings that the Contract had been repudiated by the appellant, that repudiation had been accepted by the respondent and the Contract terminated.
2. In such circumstances the respondent is entitled to damages for his loss of bargain, a fact correctly recognised by the Tribunal. But the Tribunal erred in assessing that loss of bargain.
3. The Tribunal said at [26]: "Having weighed all of the available evidence, I am satisfied that the Builder has established its case for loss of bargain damages in an amount of $51,100.00 being the balance of the Contract price …"
4. The balance of the Contract price was not equal to damages for the loss of bargain because, as the Contract had been terminated and the respondent would no longer perform the balance of the work required under the Contract, the respondent would not incur the costs of completing that work.
5. That is, the respondent was entitled to expectation damages, being the profit he expected to make had the Contract been performed, not the total Contract price he expected to receive.
6. As was said by Mason CJ and Dawson J in Commonwealth of Australia v Amman Aviation (1991) 174 CLR 64; [1991] HCA 54: "The general rule at common law, as stated by Parke B in Robinson v Harman (1848) 1 Ex 850 at 855; 154 ER 363 at 365, is: 'that where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed.' … The award of damages for breach of contract protects a plaintiff's expectation of receiving the defendant's performance. That expectation arises out of or is created by the contract. Hence, damages for breach of contract are often described as 'expectation damages'. The onus of proving damages sustained lies on a plaintiff and the amount of damages awarded will be commensurate with the plaintiff's expectation, objectively determined, rather than subjectively ascertained. That is to say, a plaintiff must prove, on the balance of probabilities, that his or her expectation of a certain outcome, as a result of performance of the contract, had a likelihood of attainment rather than being mere expectation. In the ordinary course of commercial dealings, a party supplying goods or rendering services will enter into a contract with a view to securing a profit, that is to say, that party will expect a certain margin of gain to be achieved in addition to the recouping of any expenses reasonably incurred by it in the discharge of its contractual obligations. It is for this reason that expectation damages are often described as damages for loss of profits. Damages recoverable as lost profits are constituted by the combination of expenses justifiably incurred by a plaintiff in the discharge of contractual obligations and any amount by which gross receipts would have exceeded those expenses. This second amount is the net profit."
7. Halsbury's Laws of Australia, online edition, says at [65-2155] (citations omitted): "Where the proprietor has wrongfully determined the contract prior to its completion, the contractor who treats this as a repudiation of the contract and determines the contract by accepting it, has the choice of one of two alternative remedies: (1) to recover the value of the work performed before determination; or (2) to recover damages. The measure of damages, in accordance with the compensation principle, is the benefit which the contractor would have received under the contract including profit, less any savings to the contractor as the result of not having to complete the work. Alternatively, the measure may be the costs incurred by the contractor in performing the work before determination plus profit on the whole of the work. In each case, allowance must be made for benefits received." (Emphasis ours)
8. We interpolate here that the Tribunal said at [26] that the sum of $51,100 was "the balance of the Contract price". What the Tribunal meant by that was that $14,600 was owed by the appellant for the balance of Payment 6 which remained unpaid (the Tribunal had found at [22(b)] that the work required under the Contract for Payment 6 had been done), and $36,500 was for (the total of) Payments 7, 8 and 9 under cl 12 of the Contract (the work for which had not yet been done by the respondent).
9. But $36,500 was not the profit the respondent expected to have made if the Contract had been performed, but the total of what the respondent would have been paid had the Contract not been terminated and that work been done. What the respondent would have been paid, in a case such as this, was not the correct measure of damages on the authorities to which we have referred.
10. The result is that the Tribunal erred and overcompensated the respondent. The respondent was entitled to the full $14,600 for the balance of Payment 6 because the work for that Payment had, the Tribunal found, been done. For the balance of the work to be done to which Payments 7, 8 and 9 related (or, put another way, the balance of the work to be done under the Contract but which was not done because of the appellant's repudiation) the respondent was entitled to the profit it would have received had it performed that work.
11. In those circumstances the appeal in proceedings HB 20/309824 should be returned to the Tribunal for the determination of the respondent's damages in accordance with these reasons, and on such evidence as was previously before the Tribunal or such further evidence as the Tribunal allows.
12. For the avoidance of doubt, the only matter remitted to the Tribunal is the assessment of the respondent's damages. All other findings of the Tribunal remain undisturbed.
13. We should mention that the appellant's appeal was out of time by nine days and the appellant did not appeal on the only ground on which we have upheld his appeal in proceedings HB 20/309824.
14. However, it is accepted in the Tribunal that we must examine the material provided to determine whether there are appeal grounds not identified by unrepresented parties.
15. In Cominos v Di Rico [2016] NSWCATAP 5 the Appeal Panel said: It may be difficult for self-represented appellants to clearly express their grounds of appeal. In such circumstances and having regard to the guiding principle, it is appropriate for the Appeal Panel to review an appellant's stated grounds of appeal, the material provided, and the decision of the Tribunal at first instance to examine whether it is possible to discern grounds that may either raise a question of law or a basis for leave to appeal. The Appeal Panel has taken such an approach in a number of cases, for instance, Khan v Kang [2014] NSWCATAP 48 and Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69. However, this must be balanced against the obligation to act fairly and impartially (Bauskis v Liew [2013] NSWCA 297 at [68] citing Hamod v State of New South Wales [2011] NSWCA 367 at [309]-[316]). Relevantly, s 38(2) provides that that Tribunal "may inquire into and inform itself on any matter in such manner as it thinks fit, subject to the rules of natural justice."
16. Of course, such an examination has limits as the Appeal Panel recognised at both [13] and [63] of its reasons. As McCallum JA (with whom Basten and Leeming JJA agreed) also recently observed, a court is not required to undertake a partisan analysis of lengthy, unstructured assertions and misconceptions with a view to ensuring that a self-represented litigant has not missed some arguable point: see Mendonca v Legal Services Commissioner [2020] NSWCA 84 at [21].
17. Having said that, the error made by the Tribunal in the assessment of the respondent's damages was clear and would result in a plain injustice if the Tribunal's order was not set aside. In those circumstances we would extend time to appeal.

Costs

1. Whilst this decision was reserved, we received an application for costs by the respondent. We shall include in these reasons some directions for the determination of costs issues.

Orders

1. We make the following orders: 1. Appeal in proceedings HB 20/23978 dismissed. 2. Time to appeal from the orders made in proceedings HB 20/309824 extended up to and including 3 March 2021. 3. Appeal in proceedings HB 20/309824 upheld. 4. Proceedings HB 20/309824 are remitted to the original Tribunal to be heard on the single issue of the proper assessment of the respondent's damages and in accordance with these reasons. 5. The remitted proceedings are to be determined on the evidence adduced by the parties at the original hearing, together with such further evidence as the Tribunal may allow. 6. If any party desires to make an application for costs of the appeal: 1. that party is to so inform the other parties within 14 days of the date of these reasons (we note the respondent has already done so); 2. the applicant for costs is to lodge with the Appeal Panel and serve on the respondent to the costs application any written submissions of no more than five pages on or before 14 days from the date of these reasons (the respondent is to comply with this direction in relation to any further submissions it wishes to make in light of our reasons for decision and is to comply with direction (e) below); 3. the respondent to any costs application is to lodge with the Appeal Panel and serve on the applicant for costs any written submissions of no more than five pages on or before 28 days from the date of these reasons; 4. any reply submissions limited to three pages are to be lodged with the Appeal Panel and served on the other party within 35 days of the date of these reasons; 5. the parties are to indicate in their submissions whether they consent to an order dispensing with an oral hearing of the costs application, and if they do not consent, submissions of no more than one page as to why an oral hearing should be conducted rather than the application being determined on the papers.

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: 31 May 2021