Nadarasa v Vansan Construction Pty Limited

NCAT Appeal Panel|2018-10-12

Introduction

This is an appeal involving a home building claim. The Appellant is referred to as "the Owner" and the Respondent is referred to as "the Builder". The Owner's claim is for damages against the Builder for breach of a building contract between the parties that was entered into on 21 August 2014 providing for the construction of a single double-storey residence of the Owner's land at 45 Garmarada Avenue, Bungarribee, an outer western suburb of Sydney ("the Contract").
The Tribunal handed down its Decision in proceedings HB 16/42329 (the Owner's claim against the Builder) and HB 16/51340 (the Builder's claim against the Owner) on 6 March 2018 in a judgment comprising 131 paragraphs ("the Decision"). A reference to a "paragraph" refers to that paragraph in the Decision. The appeal essentially involves the interpretation and application of a clause in a standard building contract - cl 17(a) of the BC4 Residential Building Contract (May 2012).
Under the Home Building Act 1989 (HBA) it is the duty of the builder to provide to the owner, prior to the receipt of money, a copy of the home warranty insurance certificate where the value of the works exceeds $20,000. Clause 17 (a) deals with the rights of the builder to cancel the contract "without penalty" if a building contract is signed before such insurance is available. The Owner contends that the Tribunal wrongly interpreted this clause when it held that the Builder had lawfully terminated the Contract.

Background

A brief chronology of the relevant events in these proceedings is as follows: 1. 21/8/2014: Parties enter into the Contract. 2. 29/8/2014: The Owner completes his purchase of the land on which the building is to be constructed. 3. 4/11/2014: Date for commencement of building work as provided for by the Contract. 4. 8/5/2015: Construction Certificate from Blacktown Council was issued. 5. 4/11/2015: Date for completion of building works prescribed by the Contract. 6. 25/11/2015: Builder's letter purporting to terminate the Contract. 7. 18/12/2015: Builder receives Certificate of Eligibility for Home Owner's Warranty Insurance from QBE Insurance.
It was the Owner's position that the Builder repudiated the Contract when it purported to terminate the Contract in its letter of 25 November 2015 as the Builder had no entitlement to so terminate the Contract.

Summary of the Decision

The Tribunal identified a key issue in the proceedings to be whether or not the Builder lawfully terminated the Contract, by reason of the operation of clause 17(a) of the Contract by its letter dated 25 November 2015: Decision, [104]. Clause 17 of the Contract relevantly states (see Decision, [107]): "17. Insurance Responsibilities Home warranty cover (builder) (a) Under the Home Building Act 1989 it is the duty of the Builder to provide to the Owner, prior to receipt of money, a copy of the Home Warranty Insurance Certificate for the works where the value of the works, at the time of contracting, is $20,000 or more. (b) If the Contract is signed before such insurance is available, then it is signed subject to the home warranty cover being made available to the Builder. If the Builder cannot get warranty cover on terms acceptable to the Builder, then the Builder may cancel the Contract without penalty and without claim by the Owner. … (g) Period and Currency of Insurance (i) The insurances referred to in this Clause are to be effected before the works are commenced and maintained effectively in respect of the works until Practical Completion or occupation or use of the works or any portion by the Owner and in respect of Public Liability and of Workers Compensation until the end of the Defects Liability Period. (ii) The party responsible for effecting and maintaining insurances must produce evidence of currency and insurance upon request by the other party. (iii) If a party fails to insure, the other party may take out the insurance and the premium is to be added to or deducted from contract sum as the case may require."
The Tribunal concluded that to find that the Builder cannot rely on cl 17(a), the Tribunal would have to imply into the Contract a stipulation that the Builder must attempt to obtain home warranty insurance within a reasonable period of time, either by way of the common law principles of implying terms into a contract, or by statute. It noted that no submission was made by the Owner in written submissions that the Tribunal should imply such a construction into cl 17(a): Decision, [109]. The Tribunal below at [109] stated that: "However, there is nothing in clause 17(a) of the Contract that the Builder cannot rely on the clause if it has not obtained home warranty insurance within a reasonable period of time. For the Tribunal to find that the Builder cannot rely on clause 17(a) the Tribunal would have to imply into the Contract a stipulation that the Builder must attempt to obtain home warranty insurance within a reasonable period of time, either by way of the common law principles of implying terms into a contract, or by statute."
It expressed the view that it was not necessary to give business efficacy to the Contract; nor is it so obvious that it goes without saying; and to do so would be inconsistent with the provision of the clause that home warranty insurance is to be "on terms acceptable to the Builder": Decision, [110].
In such circumstances, irrespective of the delay in the Builder seeking and obtaining a certificate of home warranty insurance, the Tribunal was satisfied that the Builder was able to rely on cl 17(a) of the Contract and terminate the Contract on 25 November 2015: Decision, [111].
The Tribunal further concluded as follows: "115. As the Tribunal is satisfied the Builder lawfully terminated the Contract on 25 November 2015, the Home Owner is not entitled to damages for the increased cost of engaging another builder; nor the cost of rented accommodation; nor any loss of a rebate under the Contract with Landcom. Accordingly, it is unnecessary to explore the issue of whether or not the Builder has demonstrated the Home Owner failed to take reasonable measures to avoid loss, or the issue of remoteness of damage. 116. However, the Tribunal is satisfied that the Home Owner is entitled to damages for the $18,500 paid to the Builder that has not been reimbursed. This payment, comprising of three instalments, was referred to by both parties as a "deposit". As discussed previously, the further amount of $30,000 that was paid by the Home Owner to the Builder has been repaid, so no loss arises in respect of that amount. 117. Both under the Contract and pursuant to s.92 of the HBA, the Builder cannot perform residential building work, nor demand or receive any payment (whether a deposit or not) without a certificate of home warranty insurance being obtained by the Builder and provided to the Home Owner. The Builder clearly sought and accepted payment without home warranty insurance being taken out. This is a breach of the contract that occurred prior to its lawful termination by the Builder. The breach caused the Home Owner to suffer loss, because he was not liable to make any payments to the Builder until home warranty insurance was obtained. The loss arises naturally from the breach, it is not too remote. Accordingly, unless the Builder can prove an entitlement to moneys paid under the principle of quantum meruit, the Home Owner is entitled to damages for the payments totalling $18,500 to the Builder."
The Tribunal dismissed the Builder's claim against the Owner in proceedings HB 16/51340 under the principle of quantum meruit. The Builder has not sought to appeal this decision. The Tribunal noted that there was a dispute on the evidence between the witnesses as to whether or not representatives of the Builder told the Owner that the Builder had all necessary licences and insurances already in place. The Owner claimed that such a representation had been made, but this was denied by the representatives of the Builder. The Tribunal concluded at [114]: "The Home Owner's Points of Claim and written submissions do not plead or submit that any representations of Kams or Shan created an estoppel preventing the builder from relying on cl 17(a) under the principles of Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387 and accordingly the Tribunal cannot consider whether the Builder was estopped from relying upon cl 17(a)."

Grounds 1-6 and 10 of the Amended Notice of Appeal

The above grounds of appeal all centre upon challenging the conclusion of the Tribunal as to the proper application and interpretation of cl 17(a) of the Contract in the circumstances of this case.
At [119] of the Decision, the Tribunal dismisses the Owner's claim except to the extent of $18,500, being the deposit paid by the Owner to the Builder under the Contract. The Owner had claimed the following: 1. The rebates the Owner would have obtained from Landcom (the Vendor of the land to the Owner) had the Builder completed the construction of the home in accordance with the Contract. 2. The difference between the construction cost provided for under the Contract of the cost to him as indicated by the two quotations obtained by him subsequent to 25 November 2015. 3. The rental paid by the owner from the date prescribed for the Contract for the commencement of building works up until hearing of the application.
The Owner in his submissions focused upon the words of cl 17(a) whereby the Builder was entitled to terminate the Contract where the Builder "can not get home warranty cover". The Owner noted that it was not in dispute that as at 25 November 2015 the Builder had not obtained home warranty insurance. The error identified by the Owner on appeal, however, was that the Tribunal appeared to have equated the fact of lack of cover with the facts required by cl 17(a) to exist before the Builder could terminate the Contract pursuant to that clause, namely that the Builder could not obtain home warranty insurance.
According to the Owner, in the absence of evidence that the Builder attempted to obtain the insurance, the Builder would not be able to establish that it was unable to do so. It was the Owner's submission that the Builder was only entitled to give notice under cl 17(a) if it could establish that it was unable to obtain the insurance.
According to the Owner, there is scant evidence led by the Builder in its case as to the Builder's attempts (if any) to obtain home warranty insurance. The Owner points out that on 18 December 2015 (less than 3 weeks after the purported termination of the Contract) the Builder had obtained an Eligibility Certificate for home warranty insurance in New South Wales. The Owner submitted that this evidence suggests that the Builder at all times had the capacity to obtain the relevant insurance.
In conclusion, the Owner submitted that the Tribunal was left with no evidence as to whether the Builder had been unable to obtain home warranty insurance, and, hence, the Builder had not established its entitlement to terminate the Contract under cl 17(a). Accordingly, the Builder's letter of 25 November 2015 was a repudiation entitling the Owner to damages under the three heads identified above.
The Builder in its submissions contended that the whole of cl 17(a) needs to be considered and the words "cannot get home warranty cover" needs to be seen in its context, in particular in the context of the paragraph as a whole as follows: "If the Contract is signed before such insurance is available then it is signed subject to the home warranty cover being made available to the Builder. If the Builder can not get home warranty cover on terms acceptable to the Builder, then the Builder may cancel the contract without penalty and without claim by the Owner."
The Builder contended that the fact that the Contract was subject to the home warranty cover being made available and the requirement that such cover be on terms acceptable to the Builder supported the Tribunal's treatment of the clause and the validity of the termination by the Builder.

Consideration

We note that the Contract was signed "subject to the home warranty cover being made available to the Builder". It would seem to us that these words have the effect that a contract executed without home warranty insurance cannot proceed by the terms of the HBA and the Builder is unable to receive funds pursuant to any such contract. This would support giving a broad interpretation to the rights of the Builder to terminate under clause 17 (a).
On the other hand there is force in the submission that it would not be enough or sufficient for the Builder to sit on its hands for 15 months doing nothing and then turn around and claim that it could not get home warranty cover on terms acceptable to the Builder, and thereby trigger a right to cancel the Contract without penalty. However, we do not need to explore these issues further because we have come to the view that the evidence does sufficiently disclose that the Builder had applied for home warranty insurance in early February 2015 but by 25 November 2015 it could not get such cover on terms acceptable to it within the meaning of cl 17 (a) of the Contract.
At paragraph 10 of the statement of Sutharasan Shanmugalingam ("Shan") of 21 November 2016, he states: "In early February 2015, Vansan applied for home owners warranty insurance eligibility - tab 3." In our opinion, this statement establishes that there was an application made for home owner's warranty insurance in February 2015. This is corroborated by the fact that an Eligibility Certificate for such insurance issued in December 2015.
The Owner, however, points to the fact that tab 3 comprises two emails from Vansan's insurance brokers both dated 9 February 2015 requesting documents and raising a query which it said was required in order to be able to proceed with the application. In our opinion, however, in the absence of any submission put to us as to how this matter was explored in cross-examination, the absence of any direct documentary evidence of the application does not detract from the otherwise clear statement in evidence, which was received, as to the application being made "in early February 2015".
The Owner then points to the absence, he contends, of any evidence as to the outcome of such application or when it was given. However, paragraph 23 of Shan's statement includes the following - "[a]lso, at this time, Vansan had still not been issued with its home warranty insurance eligibility. As a result of that failure, and the Respondent's continuous insisting to start building work, Vansan terminated the Contract on 25 November 2015 with the Respondent." Paragraph 10 of Shan's statement of 7 March 2017 also includes the statement that he complained to the Owner that "the home warranty insurance is taking too long". Thereafter, the letter of termination issued.
The Owner, however, seeks to found its case upon the proposition that at no stage does the Builder assert that it was unable to obtain the insurance and that the evidence as a whole, including the issuing of an Eligibility Certificate on 18 December 2015, suggests that the Builder at all times had the capacity to obtain the relevant insurance.
The letter of termination issued some 15 months after the original contract was signed. This is a significant period of time. Further, it was a significant period of time from February 2015 through to the 25 November 2015 letter of termination. The ultimate issue is whether or not, in circumstances where home warranty insurance has been applied for but has not been obtained for this period, this meant the Builder " cannot get warranty cover on terms acceptable to the Builder" within the meaning of cl 17 (a).
We note that this is a commercial contract. As to the question of construction of a commercial contract, reference should be made to the judgment of Gleeson CJ in International Air Transport Association v Ansett Australia Holdings Ltd (2008) 234 CLR 151; [2008] HCA 3 at [8] where his Honour stated: [8] In giving a commercial contract a businesslike interpretation, it is necessary to consider the language used by the parties, the circumstances addressed by the contract, and the objects which it is intended to secure. An appreciation of the commercial purpose of a contract calls for an understanding of the genesis of the transaction, the background, and the market. This is a case in which the Court's general understanding of background and purpose is supplemented by specific information as to the genesis of the transaction. The Agreement has a history; and that history is part of the context in which the contract takes its meaning. Before considering that history, it is necessary to explain, by reference to the text, how the issue of construction arises. [Footnotes omitted.]
In Johnson v America Home Assurance Co (1998) 192 CLR 266; [1998] HCA 14 at [19], Kirby J (in dissent) stated, "the primary duty of a court is to discern from the language, structure and apparent purpose of the document what it means".
Commercial contracts should be given a businesslike interpretation. In McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579; [2000] HCA 65 at [22], Gaudron J observed: "[i]nterpreting a commercial document requires attention to the language used by the parties, the commercial circumstances which the document addresses, and the objects which it is intended to secure".
Under the HBA it is the duty of the builder to provide to the owner, prior to the receipt of money, a copy of the home warranty insurance certificate where the value of the works exceeds $20,000. The evident purpose of clause 17 (a) is that it deals with the rights of the builder to cancel the contract "without penalty" if a building contract is signed before such insurance is available.
Commercial agreements should be given where possible an interpretation which makes commercial sense: Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310 at 313 - 314; Westpac Banking Corporation v Tanzone Pty Limited [2000] NSWCA 25 [20] and [21].
We note that the contract as a whole cannot proceed until the home warranty insurance is obtained. In our opinion, cl 17(a) does not require the Builder to wait indefinitely for the relevant insurance to issue. This would not be consistent with giving the contract a businesslike interpretation. The Builder should be entitled to know where it stands in respect of the Contract so that it can manage its commercial operations and affairs.
In our view, it makes more commercial sense to allow the Builder to terminate the Contract if the insurance does not issue within a reasonable time after application has been made. The evidence establishes that this was the case here. Given the commercial context between the parties, in our view, this enlivens the Builder's right to declare under clause 17 (a) that it " cannot get home warranty cover on terms acceptable to it".
Accordingly, we reject these grounds of appeal.

Grounds 7-9

These grounds are in the following terms: "7. That the Member was in error in not finding that the Builder was by its conduct estopped from relying upon the provisions of clause 17 to cancel the Contract. 8. That the Member was in error in failing to determine whether on the evidence the Builder prior to entering into the Building Contract had represented to the Home Owner that it had home owner's warranty insurance for the project. 9. That the Member was in error in failing to give consideration to the Home Owner's entitlement to damages under the Australian Consumer Law should the Member have accepted that the Builder had represented to the Home Owner that it had home owners warranty insurance as at the date of the Building Contract."
The Owner submitted that it was incumbent upon the Tribunal to determine whether the Builder had made the false representations asserted by the Owner, namely that the Builder had home warranty insurance at the time that it entered into the Contract and as to whether it is estopped from denying that fact. It contended that this amounted to a false representation contrary to the provisions of the Australian Consumer Law. It conceded that no claim under the Australian Consumer Law was made before the Tribunal.

Consideration

The Owner did not dispute the statement of the Tribunal below at [114] of the Decision that the Owner did not in its Points of Claim or written submissions plead or submit that any representations of the Builder's representatives created an estoppel preventing the Builder from relying on cl 17(a) under the principles of Walton's Stores (Interstate) Ltd v Maher (1988) 164 CLR 387. Accordingly, all of the matters raised under these grounds of appeal involve issues that were not made below. The relevant principle was stated by the High Court in Coulton v Holcombe (1986) 162 CLR 1 at [9] per Gibbs CJ, Wilson, Brennan and Dawson JJ as follows: "In a case where, had the issue been raised in the Court below, evidence could have been given which by any possibility could have prevented the point from succeeding, this Court has firmly maintained the principle that the point cannot be taken afterwards."
In our opinion, these grounds of appeal come within this principle and, accordingly, the point cannot be taken on appeal. Accordingly, we reject these grounds of appeal.
That disposes of all grounds of appeal raised in the Amended Notice of Appeal.

Costs

The amount claimed or in dispute in the proceedings below was above $30,000, and the Tribunal applied rule 38 of the Civil and Administrative Tribunal Rules 2014 in making a costs order in the proceedings HB 16/42329 and HB 16/51340. Rule 38A of the NCAT Rules applies in this appeal. The Builder is successful on the appeal and the appeal is dismissed. We see no reason why the usual rule in relation to costs should be displaced either in whole or in part. Accordingly, we find that the discretion to make an order for costs should be exercised in favour of the Builder.

Orders

The Appeal Panel makes the following orders: 1. Appeal AP18/16031 is dismissed. 2. The appellant is to pay the costs of the respondent, such costs to be agreed or assessed on an ordinary basis. 3. If either party seeks a different costs order to that in order 2, the following directions apply: 1. The applicant for costs ("costs applicant") must file and serve any costs application, including submissions and any evidence in support, within 7 days of the date of these orders. 2. The respondent to the costs application is to file and serve any submissions and evidence in reply within 14 days from the date of these orders. 3. The costs applicant is to file any submissions in reply within 21 days from the date of these orders. 4. Any submissions are to include submissions on the issue of whether an order should be made pursuant to s 50(2) of the Civil and Administrative Tribunal Act 2013 (NSW), dispensing with a hearing of the costs application. 1. In the event an application is made pursuant to order 3, order 2 shall cease to have effect.

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: 16 November 2018

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