Mock v Cai & Anor

CATCHWORDS : Appeal decision of CTTT - repudiation

LEGISLATION CITED : Consumer Trader & Tenancy Tribunal Act 2001 (NSW) - ss 27(3), 28(1) & (2), 33, 35, 36(1), 39(1), 50, 51, 53, 54, 67(1)

Chapman v Taylor & Ors; Vero Insurance Ltd v Taylor & Ors [2004] NSWCA 456 Cassidy v Engwirda Construction Company (No 2) [1968] 2 Qd R 159 CASES CITED : Kalokerinos & Anor v HIA Insurance Services P/L & Anor [2004] NSWCA 312 Swain v Waverley Municipal Council [2005] HCA 4

Kum Sing William Mock (Plaintiff)

Guo Quang Cao PARTIES : (First Defendant)

Consumer, Trader and Tenancy Tribunal (Second Defendant)

Mr S Goldstein (Plaintiff) COUNSEL : Mr M Galvin (First Defendant)

Ms Helen Sin, Helen Sin Legal Pty Ltd (Plaintiff)

SOLICITORS : Mr Donaldson, Creagh & Creagh

Submitting Appearance (Second Defendant)

LOWER COURT JURISDICTION : Consumer Trader and Tenancy Tribunal of NSW

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION ADMINISTRATIVE LAW LIST

30094/2004 - KUM SING WILLIAM MOCK v GUO QUANG CAI & ANOR

JUDGMENT (Appeal decision of CTTT - repudiation) 1 MASTER: By amended summons filed 31 January 2005 the plaintiff seeks firstly an order that the decision of Member Dr Briggs handed down on 26 August 2004 and revised on 26 October 2004 (the decision) in the Consumer, Trader and Tenancy Tribunal (CTTT) on matter number HB01/79360 (the proceedings) be quashed pursuant to s 67(1) of the Consumer Trader and Tenancy Tribunal Act 2001 (NSW) (the Act); secondly, an order pursuant to s 67(3)(a) of the Act, quashing the decision of the CTTT that the plaintiff repudiated the contract and entering in place of the decision by the CTTT an order that the first defendant repudiated the contract; thirdly, an order pursuant to s 65(3)(b) of the Act that the decision in relation to quantum meruit be quashed on the grounds that the plaintiff was denied procedural fairness; fourthly, an order pursuant to s 67(3)(a) of the Act quashing the decision that the specification did not form part of the contract, upon the grounds that the CTTT erred on a question of law; fifthly, an order pursuant to s 67(3)(a) of the Act quashing the decision as to the reasonable cost of rectifying defects, upon the basis that the CTTT erred on a question or questions of law; and sixthly, further, and/or in the alternative, an order remitting the proceedings to the CTTT pursuant to s 67(3)(b) of the Act, to be dealt with according to law. 2 The plaintiff is Kum Sing William Mock (the owner). The first defendant is Guo Quang Cai (the builder). The second defendant is the CTTT who has filed a submitting appearance. The plaintiff relied on two affidavits of Helen Sin sworn 26 November 2004 and 18 April 2005.

The appeal 3 Section 67 of the Act allows for an appeal to be made to this court on a question with respect to a matter of law. A reference to a matter of law includes a reference to a matter relating to the jurisdiction of the Tribunal. The onus lies on the plaintiff to demonstrate that there has been an error with respect to a matter of law. 4 The width of s 67 was discussed in Chapman v Taylor & Ors; Vero Insurance Ltd v Taylor & Ors [2004] NSWCA 456. Hodgson JA (with whom Beazley and Tobias JJA agreed) stated succinctly [at para 33]: "… in my opinion, to establish an error of law by the Senior Member, it was necessary to show that he applied a wrong principle of law. That could be shown either from what he said, or because the ultimate result, associated with the facts that he expressly or impliedly found, indicates that he must have applied the wrong principle of law." 5 See also Kalokerinos & Anor v HIA Insurance Services P/L & Anor [2004] NSWCA 312 at paras [39], [40], [41], [47] and [59]. 6 Section 67(3) of the Act provides that, after deciding the question of the subject of an appeal, the court may affirm the decision of the Tribunal or it may make an order in relation to the proceedings in which the question arose as, in its opinion, should have been made by the Tribunal, or it may remit its decision on the question to the Tribunal and order a rehearing of the proceedings before the Tribunal. 7 Recently in Swain v Waverley Municipal Council [2005] HCA 4 the Chief Justice at [2] reiterated that in the common law system of civil justice, the issues between the parties are determined by the trial process. The system does not regard the trial as merely the first round in a contest destined to work its way through the judicial hierarchy until the litigants have exhausted either their resources or their possibilities of further appeal.

The Tribunal generally 8 The functions of the Tribunal are to adjudicate disputes between consumers and commercial disputes between landlords and tenants. The Tribunal is not constrained by the rigour of the courtroom. Its objects are to ensure that the Tribunal is accessible, its proceedings are efficient and effective, its decisions are fair and to enable proceedings before the Tribunal to be determined in an informal, expeditious and inexpensive manner. The Tribunal is to act with as little formality as the circumstances of the case permit and according to equity, good conscience and the substantial merits of the case without regard to technicalities or legal forms (s 27(3)). 9 Evidence must be given on oath or statutory declaration (s 39(1)) but the Tribunal is not bound by the rules or practice of evidence and the Tribunal may inform itself on any matter in such manner as it considers appropriate (s 28(2)). The Tribunal must conform to the rules of natural justice, but broadly speaking, has control of and responsibility for its own procedures (s 28(1) and (2)). Its business is conducted in public (s 33). Section 35 provides that the Tribunal must ensure that each party in any proceedings is given a reasonable opportunity to call or give evidence and otherwise present the party's case (whether at a hearing or otherwise); and to make submissions in relation to the issues in the proceedings. Normally, a party to the proceedings has carriage of his or her own case and is not entitled to be legally represented (s 36(1)). The Tribunal has the power to award costs (s 53), but usually each party bears its own costs. Pursuant to s 54 of the Act, the Tribunal is obliged to use its best endeavours to bring the parties to a settlement before making an order. The Tribunal has a power to correct its decision (s 50) and the Registrar can issue a certificate, which operates as a judgment (s 51).

Grounds of appeal 10 The main grounds of appeal challenge the Tribunal Member's decision in relation to repudiation. The other issues that were challenged are quantum meruit, whether the specification formed part of the contract and whether the reduction factor, GST and contingency should have been applied. I shall start with the repudiation as some of the other grounds of appeal depend on the outcome of that issue. 11 On 26 August 2004 the Tribunal Member delivered his judgment. This is a well written judgment with much attention to detail. On 26 October 2004 pursuant to s 50 of the Act the Tribunal Member vacated those orders and in lieu thereof substituted the following orders: "1. Mr Guo Quang Cai to pay to Mr William Mock the sum of $26,977.59 in full and final settlement of all matters between the parties in relation to disputes and differences arising out of the contract for the erection by Mr Cai of Mr Mock's house at … Killarney Heights. 2. Payment to be made on or before 1 November 2004. 3. Any certification relating to the works in the possession of Mr Cai to be released to Mr Mock forthwith. 4. Costs are reserved as previously ordered."

Repudiation 12 The owner submitted that the Tribunal Member erred in finding that he (the owner) in failing to pay a progress claim for $42,750.00 breached a fundamental term of the contract. Or alternatively, that the Tribunal Member erred in finding that because of the owner's refusal to pay following a mediation and his requirement that the builder enter into a new or novated contract agreement with onerous penalty provisions, the owner evinced an intention not to be bound by the terms of the contract. 13 The owner further submitted that the Tribunal Member erred in law in that firstly, the finding was inconsistent with the further finding by the Tribunal Member that the builder owed the owner the sum of $26,977.59; secondly, the Tribunal Member did not determine the builder's entitlement to be paid progress payments in accordance with the terms of the contract; thirdly, the Tribunal Member did not have regard to the evidence, which disclosed that the builder had been overpaid and that as a result was not entitled to be paid any of the amount claimed; and fourthly, the builder had repudiated the contract when he abandoned the site. 14 The owner further submitted that the Tribunal Member's alternative finding that he (the owner) evinced an intention to no longer be bound by the contract because of his refusal to pay following a mediation, and his requirement that the builder enter into a new or novated contract with onerous penalty provisions, erred in law as firstly, the inference cannot be drawn from the unsigned agreement; secondly, the inference cannot be drawn from the owner's evidence as he was not asked any questions about his alleged insistence following the mediation that the builder enter into a new or novated contract agreement; thirdly, the inference cannot be drawn from the builder's evidence, as there was no evidence and no submission to the effect that the owner had insisted that the builder enter into a new or novated contract; and fourthly, the builder had already repudiated the contract when he abandoned the site. 15 The Tribunal Member's reasoning in relation to repudiation is at [37] to [54] of his reasons for decision. It was common ground between the parties that the builder's claim for $42,750.00 dated 30 June 2001 had not been met. The owner had formed the view that the builder had been overpaid to the extent of about $50,000.00 by July 2001. Mr Mills (who was the owner's project manager) provided a "rough estimation" that Mr Mock would have appeared to have overpaid him (the builder) by about $50,000.00 [J 38]. 16 The Tribunal Member reproduced clause 13 of the contract, which sets out the procedure to be followed when a written claim for a progress payment is served. The owner must pay the contractor within 15 working days of receipt of the claim. If the owner disagrees that the contractor is entitled to be paid a progress claim, the owner must notify the contractor in writing within 5 working days of receiving the claim setting out the reasons for that disagreement. If there is any dispute between the parties relating to a payment under the contract it must be resolved according to the dispute resolution procedure set out in clause 26. No payment was made in relation to the written progress claim. No notice by the owner setting out reasons for the disagreement were given to the builder. 17 At [46] and [47] the Tribunal Member held: "46. In the light of the above I find that the basis upon which claims were made was unchanged and that by failing to meet the claim presented in accordance with the established regime that the contract was breached in its fundamental term by Mr Mock.

47. I find that Mr Cai attempted to follow the contractual regime, although neither party followed the requirement for the issue of notices as set out in the contract. Mr Cai, through the agency of Mr Wu arranged for a mediation meeting at North Rocks RSL Club in August 2001 in an attempt to resolve the dispute and recommence the work after obtaining some further payment to allow him to complete the works." 18 In relation to the attempted "mediation" the Tribunal Member stated: "52. … As a form of conduct viewed objectively it may be seen that Mr Mock exhibited an inclination not to be bound by the terms of the contract but it is equally clear, except in the matter of non payment that Mr Cai was prepared, for his own reasons to accept the transgressions and waive his rights under the Contract.

53. Even if I am wrong in respect of the above, following the mediation, Mr Mock's refusal to pay and his requirement that Mr Cai enter into a new or novated contract agreement with onerous penalty provisions (Ex R5 unsigned agreement) evinces an attitude on the part of Mr Mock not to be bound by the terms of the contract.

54. I find that even though Mr Cai did not follow the agreed procedure for written notification of the ending of the contract, (clause 25) it was nevertheless clear that Mr Mock, by failing to meet a claim and by subsequently seeking to vary the terms of the contract no longer intended to be bound and that Mr Cai accepted the repudiation and withdrew from the site." 19 The owner referred to Cassidy v Engwirda Construction Company (No 2) [1968] 2 Qd R 159 where the Full Court of the Supreme Court of Queensland considered a matter in which a sub-contractor claimed that a builder had repudiated the contract for non-payment of a progress claim, whilst in turn the builder claimed that the sub-contractor had repudiated the contract when it abandoned the site. Although the sub-contractor had been successful at first instance, the Full Court unanimously overturned that decision. At page 175 Hart J quoted from Hudson's Building and Engineering Contracts, 9th ed (1965), at 244 and 245 which relevantly stated:

"The tendency has been to hold that mere non-payment of an instalment due in respect of goods does not constitute a repudiation, Mersey Steel & Iron Co. v Naylor Benzon & Co . (1884) 9 App. Cas. 434, while a general refusal to pay instalments on the due date will do so. Withers v Reynolds (1831) 1 L.J.K.B. 30 …'

These principles clearly apply, it is submitted, to building contracts. A employer who, on the advice of his architect or engineer or for any other reason, honestly contends that the contractor has not earned and refuses to pay the sums claimed for interim payment will not, even if he is in the wrong, thereby be held to repudiate the contract, particularly since under the arbitration clauses in both the R.I.B.A. and I.C.E. forms of contract claims by the contractor of this kind can be arbitrated before the end of the contract." 20 The owner also referred to a passage from Hudson's Building and Engineering Contracts 11th ed (1995) at 622 [4.221] where the learned author stated: "Mere breach of a payment obligation does not constitute a common law repudiation. The principle is to consider whether the circumstances of the non-payment show an intention not to be bound: 'The principle to be applied in these cases is whether the non-delivery or the non-payment amounts to an abandonment of the contract or a refusal to perform it on the part of the person making the default.' Freeth v Burr (1874) LR 9 CP 208, per Lord Coleridge LJ." 21 The Tribunal Member made a finding, namely, that the owner showed an intention not to be bound by the contract. The Tribunal Member found that the owner by his conduct no longer intended to be bound by the contract and it was not merely a refusal to make one non-payment of an instalment due. It was open to the Tribunal Member to make this decision. There is no error of law.

Quantum Meruit claim 22 At [57] to [59] The Tribunal Member stated: "57. It was argued on behalf of the owner that the builder had not pleaded in quantum meruit and that the owner was therefore put at a disadvantage in responding to the claim. It was submitted at the hearing that because the builder had not made its election to sue on contract or quantum meruit clear by its pleadings the expert report supporting the quantum meruit should be rejected. In reply the builder submitted that its points of defence do not indicate the nature of the cross claim, but in any case the Tribunal is not a Court of Pleadings and the quantum meruit claim had been filed and served since 20th June 2002.

58. I have been referred to Renard Constructions (ME) Pty Ltd v Minister for Public Works [1992] 26 NSWLR 234 at 277 E (per Meagher JA) 'The law is clear enough that an innocent party that accepts the defaulting party's repudiation of a contract has the option of suing for damages for breach of contract or suing on a quantum meruit for work done.' I refer to 'Brooking On Building Contracts' (Second Edition) 1980 at [13.3] 'The contractor may sue in the alternative for damages and on a quantum meruit, but he will have to determine his election when he seeks judgment.'

59. I find that the owner has been on notice that the builder has elected to sue in quantum meruit since June 2002 and I have therefore determined to consider the claim in quantum meruit." 23 The owner submitted that the Tribunal Member erred firstly, in finding that the builder had elected to sue on a quantum meruit when he filed and served an expert report as the builder had already elected to sue for damages for breach of the contract in his pleading; secondly, further and/or in the alternative, the Tribunal Member denied the owner natural justice when he found that the builder was entitled to recover on a quantum meruit when the matter had not been pleaded by the builder; thirdly, that the owner was denied natural justice when the Tribunal Member admitted the expert report on quantum meruit into evidence against the objections of the owner; and fourthly, further and/or in the alternative, when the Tribunal Member refused to reject the expert report in its entirety even though the Member found that many parts of that report were unsupported by any evidence. 24 There were two ways the builder could recover damages either under contract or in relation to quantum meruit. When a quantum meruit claim was served on 20 June 2000 the owner should have been aware that it would be relied on in the Tribunal. The Tribunal is not a court of strict pleading. The Tribunal Member was correct. There was no denial of natural justice. It was open to the Tribunal Member to allow an expert report into evidence.

The specification document 25 The owner contended that a specification document dated March 2000 prepared by him and provided to the builder in May 2000, formed part of the contract. However the builder's evidence which was accepted by the Tribunal Member was that he (the builder) had not been provided with a copy of the specification and that it did not form part of the contract.

Reduction factor and costs of rectifying defects (except defect 27) 26 The owner submitted that the Tribunal Member erred in law in applying a reduction factor of 10.97% to the reasonable costs of rectifying defects. As I understand it, if the Tribunal Member was correct in his decision in relation to the repudiation of the contract, he was entitled to decide damages in relation to the builder's quantification (see paras [59] and [60] owner's submissions). There is no error.

Defect 27 - Boundary fence not constructed to a reasonable standard 27 The parties' experts had specifically agreed that if the boundary fence did not need to be demolished and rebuilt then certain agreed remedial work needed to be undertaken [Ex A8.15]. The parties' experts also agreed that the cost of rectifying this defect was $2,000.00 [Ex A15.17]. 28 The owner submitted that notwithstanding these agreements between the parties' experts, the Tribunal Member found that "there was no evidence to support the need to do anything to the wall and for that reason I find that the claim in respect of the wall fails …" [J 30 [131]]. 29 The owner submitted that the Member Tribunal erred in law as that finding was not only unsupported by any evidence, but was contrary to the express agreement of the parties' experts. The experts did agree that the cost of rectifying the defect was $2,000.00. The Tribunal Member did misdirect himself in relation to this item. There is an error with item 27 and it should be corrected. The owner should have been awarded $2,000.00.

Contingency 30 The owner submitted that the Tribunal Member should have allowed a general contingency of 10% of the cost of rectifying the 39 identified defects. The builder submitted that there should not be any allowance for a general contingency. The Tribunal Member found that it was not appropriate to make any contingency allowance in respect of any of the defects [82]. It was open to the Tribunal Member to decide that a general contingency should not apply. 31 The result is that the appeal is upheld. The decision of Tribunal Member Dr Briggs dated 26 October 2004 is affirmed except insofar as it relates to defect item 27. The result is that order (1) of the Tribunal Member's decision is to be amended to read that Mr Guo Quan Cai is to pay to Mr Kum Sing William Mock the sum of $28,977.59 in full and final settlement of all matters between the parties in relation to disputes and differences arising out of the contract for the erection by Mr Cai of Mr Mock's house at Killarney Heights. Costs are reserved.

(2) The decision of Tribunal Member Dr Briggs dated 26 October 2004 is affirmed except insofar as it relates to defect item 27.

(3) Order (1) of the Tribunal Member's decision is to be amended to read that Mr Guo Quang Cai is to pay to Mr William Mock the sum of $28,977.59 in full and final settlement of all matters between the parties in relation to disputes and differences arising out of the contract for the erection by Mr Cai of Mr Mock's house at Killarney Heights.

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.