Moody v M K Building Services Group Pty Ltd

The Tribunal's Decision

1. The Tribunal noted, at [1] of its decision, that the homeowners claim was for the sum of $4,500.00 "in refund of a deposit paid" to the builder (as distinct from a claim for damages for breach of contract).
2. The Tribunal said that the homeowners: "… advised the Tribunal that they have arranged for the installation of the beam and new door from an alternate supplier. It is noted that there is no evidence before the Tribunal as to the costs paid to the new supplier."
3. The Tribunal then reasoned as follows: "16. I make the following findings of fact: a. A component of the contract between the parties was for the removal of the window, door and wall between the window and the door and further that this component of the contract was fulfilled by the respondent. b. A further component of the contract was for the installation of 2 LVL beams to support to roof load. I find the respondent breached the terms of the contract by failing to provide and install LVL beams. c. The final component of the contract was for the supply and installation of a new sliding stacker door. I find the respondent had arranged for the supply of the new sliding stacker door however due to the contract being repudiated by the applicants, was unable to fulfil the installation component of the contract. 17. The respondent has breached the terms of the contract by failing to provide beams which were not LVL beams. However, the applicants have not provided any evidence of the loss which has occurred from the respondent's breach of contract. 18. There is evidence before the Tribunal that the costs involved in the components of the contract completed by the respondent, namely the removal of the window, door and wall between, together with the supply for the new sliding stacking door amounted to a sum higher than the deposit paid. It is noted the respondent has not filed a cross application for monies. 19. The applicants have failed to meet their burden of proof in establishing loss for the breach of contract and I therefore dismiss the applicants' claim."
4. We note that the reference in [16(c)] of the Tribunal's reasons to the appellants repudiating the contract must be an innocent error of language. Clearly it was the respondent who had repudiated the contract, and so we think the Tribunal meant that the appellants "terminated" the contract rather than "repudiated" the contract.

The Appeal

1. The homeowners appealed on a number of grounds, none of which have, without any disrespect to the homeowners who are not legally trained or represented, any legal merit.
2. We need not discuss those grounds because the alleged errors, even if they did exist, did not affect the result of the case and we are only concerned with errors that affect the results of cases.
3. Having said that, we will briefly mention one ground raised by the appellants namely the assertion that the Tribunal erred in holding that the homeowners were required to provide evidence of damages at the hearing before the Tribunal. The appellants said that they were entitled to wait and see whether the Tribunal ruled in their favour on breach of contract, and then prove damages subsequently.
4. Suffice to say that if the homeowners were pursuing a claim for damages then they were required to provide evidence of loss at the hearing before the Tribunal and were not entitled to provided that evidence subsequently. Generally speaking, Tribunal cases are once and for all matters, and parties are required to tender all of their evidence on all of the issues (including damages) at the hearing.
5. In relation to their grounds of appeal the Appeal Panel recognises that it is difficult for self-represented appellants to discern and express available grounds of appeal (and for respondents to respond appropriately). It would be unrealistic in practice, and contrary to the guiding principle set out in s 36 of the Civil and Administrative Tribunal Act 2013 (NSW), and s 38(2) relating to the authority granted to the Tribunal to inquire into and inform itself on any matter in such manner as it thinks fit, subject to the rules of natural justice, for Appeal Panels to expect that non-legally trained litigants, in a foreign and sometimes intimidating environment, would have the skills and knowledge of trained lawyers when conducting their appeals and to have the skills and knowledge to draft appropriate grounds of appeal.
6. Accordingly, as has been said many times, it is appropriate for an Appeal Panel to review an appellant's stated grounds of appeal, the material provided, and the decision of the Tribunal at first instance to see whether grounds of appeal exist which are not mentioned by appellants - Cominos v Di Rico [2016] NSWCATAP 5 at [13]; Khan v Kang [2014] NSWCATAP 48 and Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69.
7. There is a limit to this requirement. An Appeal Panel must act fairly and impartially and not adopt the role of advocating for one party or the other - Bauskis v Liew [2013] NSWCA 297 at [68] citing Hamod v State of New South Wales [2011] NSWCA 367 at [309]-[316].
8. Appeal Panels are also not required to undertake a partisan analysis of a self-represented litigant's material with a view to ensuring that the litigant has not missed some arguable point, especially where, as often happens and with no disrespect to the non-legally trained, the materials are lengthy, and contain unstructured assertions and misconceptions - Mendonca v Legal Services Commissioner [2020] NSWCA 84 at [21].
9. Having read the material provided on the appeal it is apparent to us that the Tribunal erred in two respects. We shall refer to them as grounds one and two.

Ground One - A Fundamental Misunderstanding of the Appellants' Case

1. The Tribunal treated the homeowners' claim as being for damages for breach of contract. It was not.
2. The homeowner sought a refund of their deposit, not damages. In legal language the claim for a refund was a claim in restitution for moneys had and received where money had been paid for a consideration which had failed. In layman's language, the claim was a return of the deposit where the appellants had not received what they were promised.
3. This claim was not considered by the Tribunal because the Tribunal misunderstood the appellants' claim and thus the Tribunal erred. This error raises a question of law in respect of which the appellants had a right of appeal.
4. Where there is such a fundamental misunderstanding of the case brought by a party (either as to the facts, the law, or reasoning to a conclusion) that the Tribunal has failed to address and determine the issues before it, it has constructively failed to exercise its jurisdiction - Goodwin v Commissioner of Police [2012] NSWCA 379 per Basten JA, with whom Allsop P and Young AJA agreed, at [18] - [25]; State Super SAS Trustee Corporation v Comes [2013] NSWCA 257 per Basten JA, with whom McColl JA and Preston CJ at LEC agreed, at [11] - [12].
5. Put simply, the homeowners brought a claim for restitution (their money back) and the Tribunal did not consider that case.
6. Having said that, the Tribunal was correct (for much the same reasons we have expressed at [21]-[24] above) to also consider whether the homeowners had a claim for damages for breach of contract as that was a clearly available case. We also should note that the Tribunal was correct to dismiss that case because the appellants had failed to prove any damage.
7. A claim in restitution for moneys had and received where money had been paid for a consideration which had failed (often referred to as a total failure of consideration) is available where a contract is terminated for breach.
8. The question in this case concerns the requirement that the failure of the consideration should be total. What does total mean in this context? And what does it mean for this case where the builder had done some work i.e. demolishing the pre-existing window and surrounds to make way for the new beams and sliding stacker door?
9. In Luo v Zhai [2015] FCA 350 Perram J was concerned with a dispute over a share acquisition agreement. Following negotiations between Mr Luo and a Ms Zhai, Mr Luo agreed to buy from Ms Zhai a 40% stake in Jantom Furniture Pty Ltd for $800,000. The agreement was embodied in a share acquisition agreement. Mr Luo paid the $800,000 but did not receive the shares.
10. Mr Luo sued on three bases. He sued for breach of the agreement, for money had and received following a total failure of consideration and for misleading conduct. His Honour found in Mr Luo's favour on the first two bases (but not so as to allow Mr Luo to recover twice), but not the third.
11. When his Honour came to consider the restitutionary claim, and the question of total failure of consideration, his Honour said at [38] that this posed the question as one of substantiality. His Honour said that the receipt by Mr Luo of any substantial benefit under the agreement would deny him restitutionary relief, but the question then became what was substantial.
12. The respondents argued that there had been partial performance of the agreement in that the agreement required Ms Zhai to furnish Mr Luo with copies of profit and loss statements and financial statements for the preceding three years and had done so. In other words, they argued Mr Luo had received some benefit, and thus the failure of consideration was not total.
13. His Honour said, at [36], that that fact would defeat Mr Luo's claim for moneys had and received unless one of two matters was established. The first was if the benefit received was trivial or de minimis. The second was if it could be shown that that consideration was severable. His Honour went on to find that the receipt of the financial statements was trivial, or alternatively severable, and thus the consideration had totally failed.
14. In Australia and New Zealand Banking Group Limited v Londish [2013] NSWSC 1423 Hall J noted at [25] that the High Court in David Securities Pty Limited v Commonwealth Bank of Australia (1992) 175 CLR 353 made clear that in some cases it may not be necessary to show a total failure of consideration for restitution to operate, particularly where consideration can be apportioned or where counter-restitution is relatively simple. His Honour noted that in Rover International Ltd v Cannon Film Ltd [1989] 1 WLR 912, cited with approval by the High Court in David Securities, the plaintiff succeeded in its claim for restitution of payments made to the defendant even though the defendant had performed some of its obligations under the contract.
15. In Rover Kerr LJ, with whom Nicholls LJ agreed, said at p 923.G: "The question whether there has been a total failure of consideration is not answered by considering whether there was any consideration sufficient to support a contract or purported contract. The test is whether or not the party claiming total failure of consideration has in fact received any part of the benefit bargained for under the contract or purported contract."
16. Kerr LJ went on to say at p 923.H: "The relevant principles are set out in Chitty on Contracts, 25th ed. (1983), vol. 1, pp. 1091-1092, para. 1964 and the authorities there cited, to which we understand the judge was not referred. It is convenient to quote the following passages from the text: 'Where money has been paid under a transaction that is or becomes ineffective the payer may recover the money provided that the consideration for the payment has totally failed. Although the principle is not confined to contracts most of the cases are concerned with ineffective contracts. In that context failure of consideration occurs where the payer has not enjoyed the benefit of any part of what he bargained for. Thus, the failure is judged from the payer's point of view and 'when one is considering the law of failure of consideration and of the quasi-contractual right to recover money on that ground, it is generally speaking, not the promise which is referred to as the consideration, but the performance of the promise.' The failure has to be total. ... Thus, any performance of the actual thing promised, as determined by the contract, is fatal to recovery under this heading. "The role of the contractual specification means that it is not true to say that there can be a total failure of consideration only where the payer received no benefit at all in return for the payment. The concept of total failure of consideration can ignore real benefits received by the payer if they are not the benefit bargained for .... " (Our emphasis)
17. Thus, in this case, there was a total failure of consideration if the benefit received was trivial (keeping in mind the question of benefit is judged from the position of the innocent party and in terms of the benefit bargained for) or the contract is severable, consideration can be apportioned or where counter-restitution is relatively simple.
18. In this case part of the contract involved the demolition of the existing window (to make way for a load bearing beam and sliding doors). This demolition was undertaken by the respondent but in our view was a minimal part of the total job contracted for. It was a simple demolition of one non-load bearing window in one wall and would not have taken much time to accomplish. The much greater work was the preparation of the wall for installation of the beam, the actual installation of the beam and the subsequent installation of the sliding door and making good the surrounds of all of that work. None of that was done by the respondent except for some preparation of the wall for installation of the beam, but this was of no benefit to the appellants because the respondent prepared the wall for the wrong beam.
19. It follows, in our view, that there was a total failure of consideration and therefore the appellants are entitled to be repaid the deposit of $4,500 from the builder.
20. In layman's language, the appellants paid the respondent $4,500 and received nothing in return other than the trivial benefit of the demolition of the original window. In those circumstances the law says that they are entitled to the return of the $4,500.

Ground 2 - Failure to Consider Making a Work Order

1. The Tribunal also erred in failing to consider making a work order instead of ordering the payment of damages.
2. The Tribunal erred in not considering making a work order because the HBA requires the Tribunal to consider making such an order.
3. Section 48MA of the HBA says: 48MA Rectification of defective work is preferred outcome in proceedings A court or tribunal determining a building claim involving an allegation of defective residential building work or specialist work by a party to the proceedings (the responsible party) is to have regard to the principle that rectification of the defective work by the responsible party is the preferred outcome. 49 The failure to consider making a work order raises a question of law. As was noted in John McDonald Building Services Pty Ltd v Gusa [2022] NSWCATAP 60 at [69]: "The requirement of s 48MA that the Tribunal have regard to the "principle" that a work order is the "preferred outcome" creates a mandatory relevant consideration (Minister for Aboriginal Affairs v Peko-Wallsend Ltd(1986) 162 CLR 24; [1986] HCA 40) failure to have regard to which is an error of law."
4. To the same effect were the decisions in Galdona v Peacock [2017] NSWCATAP 64 at [50] and [65] and Leung v Alexakis [2018] NSWCATAP 11 at [139].
5. The actual making of a work order is not mandatory, but it is mandatory to consider whether a work order should be made. In this case, where the appellants had not proved any damages, we cannot see how a work order would not have been made.
6. But for the success of Ground 1, we would have made a work order. But as the appellants sought restitution, and that claim succeeds, we need not make a work order.

Orders

1. We make the following orders: 1. Appeal upheld. 2. The orders of the Tribunal dated 25 February 2022 are set aside. 3. In lieu thereof the respondent is ordered to pay the appellants $4,500 immediately.

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: 29 June 2022