Nayak v Rockwall Constructions Pty Ltd

Nayak v Rockwall Constructions Pty Ltd - [2017] NSWCATAP 18 - NSWCATAP 2016 case summary — Zoe

[4]

commencement of the hearing and thereafter

The hearing of the contractor's claim commenced in the Tribunal on 8 October 2015. As soon as the hearing commenced, counsel for the contractor produced to the Tribunal Member a six page outline of the contractor's argument. On page 4 of the document it was stated that although the contract provided in clause 13 that written notice of a variation must be signed by the parties before commencement of the variation works, the procedure in fact adopted by the contractor was to invoice for variations on completion.
The document then went on to detail evidence to be relied upon and submitted that in those circumstances an equitable estoppel arose and it would be unconscionable to deny the contractor recovery of the invoiced variations under the contract. On page 6 of the document, an alternative submission was made that if the Tribunal found there was no equitable estoppel, the contractor was entitled to look to the law of unjust enrichment i.e. quantum meruit, in pursuing any claim for recovery of the disputed variations. The document concluded with a claim for costs.
A transcript of part of the hearing before the Tribunal Member has been prepared. There are some blanks in the transcript and some errors. However it can be seen that on the whole, the document records what was said during part of the hearing.
The first mention of estoppel or quantum meruit appears at page 10 of the transcript in the recorded discussion which took place between counsel for the contractor and the Tribunal Member. On pages 10 and 11 quantum meruit is mentioned on five occasions and it is made clear by counsel for the contractor that the contractor was making a claim for quantum meruit if the Tribunal did not accept the contractor's other submissions (or submission).
Counsel for the owners was then called upon by the Tribunal Member. The Tribunal Member had earlier indicated that he would like to hear a brief outline of the owners' case.
Counsel for the owners said that there were two key issues that the Tribunal needed to determine. The first was whether the variations or purported variations numbered one to five excluding number two, were valid variations. The second key issue was whether the contract had been repudiated "and that termination (sic) was accepted."
At page 15 counsel for the contractor confirmed that the only amounts in dispute were for payment of variations and made clear that the amount in dispute was the $90,809.53. At page 16 counsel for the owners confirmed that essentially it was the variations that were in dispute.
At page 16 the transcript records counsel for the owners saying the following: Just one more thing is that effectively my friend's [unintelligible 00:42:00] as to quantum meruit, I will take you through that process, but I don't believe that has been pleaded and nor can it actually get there in respect of whether you find the variations to account to quantum meruit [unintelligible 00:42:13] contractual basis, [unintelligible 00:42:15].
After counsel for the owners confirmed that estoppel was not included in the contractor's points of claim, counsel for the contractor stated that the Tribunal was not a court of strict pleading. The Tribunal Member stated that he understood that but pleadings did have a beneficial effect that everybody knew what they had to deal with. The Member stated that he did not want Mr O'Connor (counsel for the owners) to be taken by surprise. The Member stated that all he was really interested in was that no one "here" says that they are taken by surprise and they have been denied procedural fairness. "So I'm putting it on the table right now that Mr O'Connor, you can expect an estoppel claim or case to be made out in submissions based on the evidence …". Mr O'Connor said that they would reject that. The Tribunal Member responded that he was not really interested in whether Mr O'Connor agreed to it or whether he rejected it. He was only interested that Mr O'Connor was aware that it was coming. He also said that secondly a quantum meruit claim was foreshadowed as well. He told Mr O'Connor he should be expecting that to come. At page 18 of the transcript the Member was recorded as saying: But all I'm really wanting to get bedded down right now is that there'll be procedural fairness, and that Counsel will understand what is being agitated before them. So no one can say "I'm being taken by surprise". So if anyone is taken by surprise by anything, you'd better say so fairly quickly. Very well, I think we best get on with the first witness.
No statement was made then or any later time during the hearing that Mr O'Connor was not in a position to deal with the case to be propounded by the contractor based on estoppel or quantum meruit. Furthermore he did not seek an adjournment.
At the conclusion of the hearing directions were given for written submissions to be filed by the contractor by 6 November 2015. The owners were to respond by 25 November and submissions in reply were to be filed by 12 December 2015.

[10]

quantum meruit - variation 1 work

In his reasons for decision, the Tribunal Member considered other matters which are not relevant to the appeal and then considered whether the contractor could succeed in relation to variation 1 based upon a quantum meruit claim.
The Tribunal Member referred to [106] of Xu where Macfarlan JA held that notwithstanding a contractor had no claim in contract against an owner in respect of oral variations to building work, nevertheless the contractor was likely to have a quantum meruit claim to recover the value of the work done in pursuance of the oral variations.
The Tribunal Member accepted the components referred to by Senior Member Buckley at pars 69 and 70 of the decision in Goodacre v Trinder Alpine Constructions Pty Ltd [2013] NSWCCT 124, which were stated by Senior Member Buckley as the required elements for a successful quantum meruit claim, namely that: The required elements are as submitted by both parties, the conditions set out in Leibe, subject to proof of the "fair value" or the "quantum meruit value´ of the work performed by the builder. There are therefore, once Charbel dicta is considered, five components that must be complied with by the builder, in circumstances such as exist in this case, before it can recover with respect to its long-delayed variation claim: a. the subject building work fell outside the requirements of the contract, specifications, and other included contract documents; b. the owner had actual knowledge of the variation as they were being done; c. that the owner knew that they were outside the contract; d. the owner knew that the builder expected to be paid for the work as a variation to the contract; and further e. the builder had provided evidence that the amount claimed was fair value for the non-compliant variation work.
The Tribunal Member made findings that each of those five components were satisfied (see par 50 of the Member's reasons).
In considering the quantum meruit claim, he said that he should adopt the approach stated by Dixon and McTiernan JJ in Fink v Fink [1946] HCA 54; (1946) 74 CLR 127 at 143: "Where there has been an actual loss of some sort, the common law does not permit difficulties of estimating the loss in money to defeat the only remedy it provided for breach of contract, an award of damages" (see pars 58 and 60 of the Member's reasons).
The Tribunal Member made findings that there was evidence before the Tribunal of the money expended by the contractor in carrying out variation 1 and that the contractor had provided full details of the excavation work carried out, having supplied the owners with invoices received from the excavation subcontractor (see par 57 of the Member's reasons).
The Tribunal Member also made a finding that the evidence called by the contractor did not fail to provide any rational foundation for a proper estimate of the cost of variation 1. As a result he accepted the contractor's calculation of the valuation of variation 1 in the sum of $71,658.54 as claimed in the amended points of claim and made an order in its favour in that amount (see pars 61 and 62 of the Member's reasons).

[13]

grounds of appeal

The owners filed an amended notice of appeal which set out a number of grounds of appeal. For present purposes they may be summarised as follows: 1. The quantum meruit claim must be rejected for six specified reasons which in different ways were based on the fact that quantum meruit was not claimed in the contractor's amended points of claim and was raised for the first time at the time of the hearing. 2. The owners were denied procedural fairness including in circumstances where if the owners had been afforded the opportunity to test the quantum meruit claim, it should have failed. 3. Alternatively, in relation to variation 1, the Tribunal Member erred: 1. In properly applying the principles of quantum meruit; 2. In finding that evidence was before the Tribunal of "fair value": 1. In circumstances where there was insufficient evidence before the Tribunal to find the contractor had expended money for quantum meruit to apply and 2. In the other circumstances listed in the amended grounds of appeal which included that the Tribunal Member had erred in applying a margin to the quantum meruit claim. 1. The Tribunal Member erred in applying Fink v Fink. 2. In relation to variation 3, the Tribunal Member erred for the reasons set out in (1) - (4) above. 3. In relation to variation 4, the Tribunal Member erred for the reasons set out in (1) - (4) above. 4. The decision was not fair and equitable because the Tribunal Member erred in finding that quantum meruit was a valid claim. 5. The decision was against the weight of evidence. 6. A 9th ground was not pressed at the hearing of the appeal.
The owners' rights of appeal are limited by s80(2) of the Civil and Administrative Tribunal Act 2013 (NSW) (the Act) which provides: "(2) Any internal appeal may be made: (a) in the case of an interlocutory decision of the Tribunal at first instance - with the leave of the Appeal Panel, and (b) in the case of any other kind of decision (including an ancillary decision) of the Tribunal at first instance - as of right on any question of law, or with the leave of the Appeal Panel, on any other grounds.
As this appeal is brought from a decision of the Consumer and Commercial Division of the Tribunal, by virtue of clause 12(1) of Schedule 4 to the Act, leave to appeal may only be granted under s80(2)(b): If the Appeal Panel is satisfied the appellant may have suffered a substantial miscarriage of justice because: (a) the decision of the Tribunal under appeal was not fair and equitable, or (b) the decision of the Tribunal under appeal was against the weight of evidence, or (c) significant new evidence has arisen (being evidence that was not reasonably available at the time the proceedings under appeal were being dealt with).
In Collins v Urban [2014] NSWCATAP 17 the meaning of "substantial miscarriage of justice" was summarized at [71] and [79] as follows: "[71]. . . [I]t can be seen that the concept of a substantial miscarriage of justice refers to a failure in the way a matter was conducted or decided which deprived the appellant of a chance that was fairly open of achieving a better outcome than occurred. . . . [79] In order to show that a party has been deprived of a "significant possibility" or a "chance which was fairly open" of achieving a different and more favourable result . . . it will be generally be necessary for the party to explain what its case would have been and show that it was fairly arguable. If the party fails to do this, even if there has been a denial of procedural fairness, the Appeal Panel may conclude that it is not satisfied that any substantial miscarriage of justice may have occurred."
The principles to be applied by an Appeal Panel in determining whether or not leave to appeal should be granted are set out in the decision of the Appeal Panel in Collins v Urban at [84]: "The general principles derived from these cases can be summarised as follows: (1) In order to be granted leave to appeal, the applicant must demonstrate something more than that the primary decision maker was arguably wrong in the conclusion arrived at or that there was a bona fide challenge to an issue of fact: BHP Billiton Ltd v Dunning [2013] NSWCA 421 at [19] and the authorities cited there, Nakad v Commissioner of Police, NSW Police Force [2014] NSWCATAP 10 at [45]; (2) Ordinarily it is appropriate to grant leave to appeal only in matters that involve: (a) issues of principle; (b) questions of public importance or matters of administration or policy which might have general application; or (c) an injustice which is reasonably clear, in the sense of going beyond merely what is arguable, or an error that is plain and readily apparent which is central to the Tribunal's decision and not merely peripheral, so that it would be unjust to allow the finding to stand; (d) a factual error that was unreasonably arrived at and clearly mistaken; or (e) the Tribunal having gone about the fact finding process in such an unorthodox manner or in such a way that it was likely to produce an unfair result so that it would be in the interests of justice for it to be reviewed."
The question whether there has been a denial of procedural fairness is a question of law (Clements v Independent Indigenous Advisory Committee (2003) 131 FCR 28 at [8]; Italiano v Carbone [2005] NSWCA 177 at [5]; Prendergast v Western Murray Irrigation [2014] NSWCATAP 69 at 13. The question whether there was no evidence to support a finding of fact is also a question of law: Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 at 355-6; The Australian Gas Light Company v Valuer-General (1940) 40 SR (NSW) 126 at 138; Prendergast at 13.
Grounds of appeal (1) to (6) involve questions of law. Grounds (7) and (8) do not. The owners will require the leave of the Appeal Panel to rely upon those grounds.

[14]

Grounds of appeal (1) and (2)

The submissions refer to the facts that the quantum meruit claim had not been included in the amended points of claim of the contractor and that on the day of the hearing the contractor sought to canvas a relief for quantum meruit. It was stated that the owners objected to the relief being sought on the day of the hearing.
It was submitted that the Tribunal Member erred: in allowing the contractor to pursue its relief for quantum meruit; not making a decision with reasons to grant leave to the contractor to rely on quantum meruit; and not affording the owners the opportunity to properly test the evidence adduced by the contractor as to quantum meruit. It was submitted that the Tribunal Member did not articulate the basis for allowing the contractor to pursue this relief in submissions.
The submissions made reference to Aon Risk Services Australia Limited v Australian National University [2009] HCA 27; [2009] 239 CLR 129 and set out what it was submitted the High Court had held in that case were the relevant principles applicable when deciding whether a party should have leave to amend its claim. It was submitted that the Tribunal Member gave no regard to those principles. It was therefore submitted that the Tribunal Member erred by permitting quantum meruit as a claim to be canvassed by way of submissions on the day of the hearing. It was submitted that the Tribunal Member made findings of such relief in his decision and that the owners were denied procedural fairness in circumstances where the relief being sought was entirely different to the relief pleaded and where the owners had prepared their case based on the pleadings. The owners also relied upon their later submissions concerning the grounds set out under par 6B (iii) of the amended grounds for appeal.
The Appeal Panel is of the view that these submissions should be rejected. Page 10 of the transcript shows that counsel for the contractor stated that the contractor was relying upon estoppel and quantum meruit. Counsel for the owners did not seek an adjournment of the hearing. He did not state that he was not in a position to answer a claim made on quantum meruit. The Tribunal Member invited him to state whether he was taken by surprise by anything. Counsel for the owners did not state that he was taken by surprise and he did not object to the hearing proceeding with the calling of the first witness nor did he object at any other time to the hearing continuing.
In our view the High Court decision in Aon has no application to what occurred in this matter at the hearing on 8 October 2015. In Aon, on the third day of a four week trial, the University sought an adjournment of the trial of its claim against Aon and foreshadowed an application for leave to amend that claim to allege a substantially different case. Both applications were opposed by Aon.
Here the amendment of the contractor's claim was not opposed. There was no application made by either party for an adjournment. Adjournment of the Aon case and its effect upon other litigants and concerns of case management were matters considered by the High Court. None of those matters were relevant in this case. They simply did not arise and were not argued.
As there was no opposition to the contractor proceeding with its claim on this new ground, in our view there was no need for the Tribunal Member to expressly grant leave to the contractor to proceed on this new basis and there was no need for the Tribunal Member to give any reasons as to why he was allowing the contractor to proceed with a claim of quantum meruit. At no later time during the day of hearing did counsel for the owners seek an adjournment based upon a submission that he was unable to properly deal with the quantum meruit claim. Furthermore in the owners' submissions dated 25 November 2015 which were prepared pursuant to the directions of the Tribunal Member made on the day of hearing, no submission was made that the owners were not in a position to deal with the quantum meruit claim. No submission was made that they wanted to call further evidence to answer the quantum meruit claim. No submission was made that they wanted the hearing to be reopened so they could call evidence on this claim. No submission was made that the hearing should have been adjourned on 8 October 2015. No submission was made that they were denied procedural fairness. All that was said in the submissions about the fact that the contractor had failed to plead in the points of claim the quantum meruit claim was the following: The Applicant failed to plead in the Points of Claim for quantum meruit and/or restitution and (sic) was taken by surprise at the hearing of this matter that the Applicant sought to agitate this relief. The Respondent opposes leave to rely upon the relief.
Those submissions dated 25 November 2015 did not include a submission that the owners were not in a position to deal with the quantum meruit claims or that they were prejudiced by the quantum meruit claims being litigated against them.
In our view what is stated in pars 49 - 53 above shows that the owners were not denied procedural fairness.
In our view, for the reasons set out above, the submissions made by the owners in support of grounds of appeal (1) and (2), should be rejected.

[15]

Variation 1

The owners submitted that the Tribunal, in making an order for $71,658.54 in favour of the contractor for the variation 1 claim, erred by not applying the correct test to establish fair value of quantum meruit. It was submitted that Sopov v Kane Constructions Pty Ltd (No 2) (2009) 24 VR 510; [2009] VSCA 142 at [29] required the contractor to establish the total costs incurred and the payments made in carrying out the works associated with variation 1. It was submitted that there were no documents to support evidence of costs incurred to the value of $71,658.54.
Part of the evidence included eight variation documents. They were signed only by Mr Nayak. They are a form apparently issued by the HIA. They were not dated nor signed by the contractor. They are part of exhibit A to the affidavit of Mr Mehcer dated 1 July 2015. Each of the documents gives a brief description of the details of the work or material and a price which includes GST. Set out below are the details which appear on the documents: 1. Removal of soil minus allowance 23 loads at $550 per load total price including GST $13,915. 2. Waterproofing of basement wall & installation of core flue on walls total price including GST $1,790. 3. Concreting for extension of basement total price including GST $12,500. 4. Laying of blocks & bricks in the basement as per clients request total price including GST $6,398.20. 5. Extra bricks required for the basement's retaining wall total price including GST $4,853. 6. Adding a spa to the pool total price including GST $7,500. 7. Changing the straight parapets to angled parapets as per clients request labour & material total price including GST $5,000. 8. Choosing the colour precious silver pearl as a special colour & not in standard colours of Walco total price including GST $4,400.
Each of those documents included an option A, involving a fixed price, and an option B, being cost to the builder plus 20% margin and GST. It appears clear that the form has been prepared by HIA upon the basis that one of the options will be crossed out. That did not occur in this case.
On 4 November 2013 the contractor forwarded to the owners a Variation Schedule No 1 for signature. That document was headed "Contract Variation." It referred to the eight "variations" referred to in par 58 above. It also referred to the variation service fee and the 20% margin. After giving a credit for payment received of $12,500, the total amount shown as owing was $58,938.27.
On 22 November 2013 Mr Nayak sent an email to the contractor. The email was a two-page document. It commenced: "Following is the response from us for the plumbing, electrical, civil works and variations. We will pay the variations with 50% in advance in order to maintain construction progress and avoid any further delays". At the bottom of the second page there was a heading "CIVIL VARIATIONS". There was then set out a table. The civil works were described in such a way as to make it clear that the eight items referred to in the list are the eight "variations" referred to above in par 58. There were some variations in the amounts. The amounts in the list did not include GST for items (1) and (8) referred to in par 58 above. The amount in the civil list for item (5) was $4,395.The amount shown for brick labour omitted the 20 cents.

[16]

Excavation soil removal

On 2 October 2013 the contractor emailed to Mr Nayak and forwarded to him the excavation invoices and dockets. The email went on to say "Sort out the rest of the variations with Norm as you have made the agreement with him." We take this to be a reference to Mr Norm Haddad, a director of the contractor.
In par 18 of the owners' submissions dated 17 November 2015 it was conceded in relation to the excavation soil removal claim that "for quantum meruit purposes the test in Sopov is met to the amount of $11,165 incl GST by reference to pages 187 - 197 of Exh A excluding page 190 for the reasons referred to at paragraph 14 (e) of the Applicants' submissions dated 25 November 2015."
The amounts payable by the contractor on the three invoices sent by CNL Haulage Pty Ltd to the contractor were $1,210, $3,025 (invoice 3011) and $12,705 totalling $16,940. The building contract allowed for the removal of five loads but the number of removals carried out was 28. Thus after allowing a credit for the 5 loads, the total payable for this extra work was $13,915 inclusive of GST.
The owners dispute liability for the $3,025 in respect of invoice 3011 because it was submitted that Mr Mehcur, the project manager of the contractor, was unable to confirm and substantiate this invoice to a driver's docket. However that invoice was treated by the contractor as relating to the owners' premises and as being payable by the owners. The amount of the invoice was included in Variation Schedule No 1. One of the eight variation documents signed by Mr Nayak which referred to "removal of soil minus allowance 23 loads at $550 per load", included the amount of this invoice in the total price on the variation document of $13,915. The three invoices for this work were issued by CNL Haulage Pty Ltd to the contractor. The owners' address was in Bella Vista. Two of the invoices showed that suburb as the job address. The third invoice showed the name of the street of the premises. The disputed invoice showed the job address as Bella Vista. In those circumstances the Appeal Panel is of the view that this was evidence from which it could readily be concluded by the Tribunal Member that the disputed invoice related to removal of soil from the owners' premises. In those circumstances the submissions made by the owners are rejected.

[18]

Concreting

The contractor relies upon the variation document signed by Mr Nayak, which shows a total price, including GST, of $12,500 for "Concreting of extension of basement."
The contractor treated this as a variation in the Variation Schedule No 1. The entry in that schedule was "Concreting and Extended basement - labour and materials $12,500." There was no separate charge for GST.
The owners treated this as a variation. It is listed in the civil variations list in Mr Nayak's email dated 22 November 2013. That list also shows that the amount charged of $12,500 had been paid.
The owners' submissions dated 17 November 2016 submit that the contractor has failed to "demonstrate documents to support the principles in Sopov".
In par 16 of their submissions dated 6 June 2016, the owners made the following submission: The proper approach to assessment of quantum meruit is to ascertain the fair and reasonable value of the work performed: … ("Sopov"), [25]. The value of the restitutionary liability is independent of contract: Sopov, [28]. In the case of a construction the contractor (defendant) is required to prove: a. the total costs incurred and payments made by the contractor in carrying out the works, and b. that the amounts in question were fair and reasonable in the circumstances: Sopov [29]. If the costs were fair and reasonable then this is a sensible measure of the value of the benefit conferred on the owner: Sopov [30].
If that submission was intended to indicate that what was said there was the only way in which a quantum meruit claim could be proved in a case of building construction, the Appeal Panel respectfully disagrees. The Appeal Panel is of the view that what was stated in [29] of Sopov, was no more than an illustration of one method by which a quantum meruit claim could be proved.
At [21] the Court in Sopov also stated: "…it is true that the contract price is relevant on a quantum meruit, but not because of any 'continuing influence' of the contract. The price is merely a piece of evidence, showing what value the parties attributed - - at a particular time - - to the work which the builder was agreeing to perform."
At [23] the Court in Sopov made reference to Trimis v Mina [1999] NSWCA 140, a case which the Sopov Court said was quite different from the Sopov matter. In Trimis the trial judge allowed the variations as restitutionary claims. The finding was overturned by the NSW Court of Appeal. The Court in Sopov stated at [23]: Even then, Mason P did not deny that a restitutionary claim might have been available, but held that in the case at hand the restitutionary claim could not succeed because the trial judge had not made the findings which would have been necessary to support such a claim. The necessary findings were that the owners had agreed to pay extra for the variations: that the variations were costlier to the builder than contractual performance; and that the owners received benefit additional in value to that contracted for.
The Appeal Panel is of the view that it was open to the Tribunal Member to conclude from the evidence that the owners had agreed to pay extra for the "variations" namely the amounts shown in the eight variation documents; that those "variations" were costlier to the builder than contractual performance and that the owners received benefit additional in value to that contracted for.
It was thus open on the evidence for the Tribunal Member to conclude that restitutionary claims were available and for him to make findings as to what was the fair and reasonable value of the work performed by the contractor which is referred to in each of the eight variation documents. In Sopov at [25], the Court stated that the proper approach to the assessment of a quantum meruit claim is to ascertain the fair and reasonable value of the work performed.

[19]

Bricklaying and bricks and blocks

It is clear from the above that the contractor treated the bricklaying (labour) and the bricks and blocks as variations for labour and materials for the extended basement referred to in the Variation Schedule No 1 (see pars 58 and 60 above). The amounts claimed, including GST, were $6,398 and GST of $639.80 for labour and $4,395.54 and GST of $439.55 for bricks and blocks.
In the bill of quantities the allowance for bricks and labour was $45,089.80. The amounts paid by the contractor to subcontractors for labour totalled $38,820 ($7,011, $11,407, $16,227, $3,300 and $875). The amounts paid by the contractor to subcontractors for bricks and blocks totalled $16,588.44 ($2,741.20, $2,741.20, $1,370.60, $2,477.20, $1,238.60, $1,238.60, $1,238.60, $1,354.64, $2,741.20 and $685.30). The additional cost for labour and bricks and blocks was therefore $10,318.94 (see the third page of the contractor's submissions dated 2 November 2016 and the paid invoices at pages 454 - 463 of exhibit A referred to - the document at page 502 of Exhibit A which the contractor's submissions also rely upon is a duplicate of the document at page 461).
In reply to the contractor's submissions dated 2 November 2016, the owners filed written submissions dated 17 November 2016. Paragraphs 26 - 30 of those submissions related to the contractor's claims for bricklaying and bricks and blocks and were as follows: 26. The Bill of Quantities at page 34 of Exh A is an estimate as to costs that forms the basis of the works to be carried out under the HIA Contract. It is not actual costs of works done. The actual costs of those works, whether higher or lower, are caught within the fixed price sum under the HIA Contract. 27. The documents at pages 454 - 463, 502, 437 - 438, 441 - 442, 450 of Exh A are documents to support the costs of works under the HIA Contract. If those costs are higher than estimated, the Respondent is liable. If those costs are lower than estimated the Respondent gains. 28. However, the documents at pages 454 - 463, 502, 437 - 438, 441 - 442, 450 at Exh A do not distinguish clearly and articulately the actual costs for quantum meruit to prevail that are distinct from costs, whether higher or lower, under the HIA Contract. 29. For the above reasons, the Respondent has failed to demonstrate that pages 454 - 463, 502, 437 - 438, 441 - 442, 450 of Exh A are works carried out, in part or whole, that are distinguished from works carried out under the HIA Contract. 30. These documents do not evidence quantum meruit outside the HIA Contract to support the purported variation #1.
However those submissions overlook the facts that while the contract was being carried out, both parties proceeded on the basis that the claims made by the contractor for bricklaying labour and for bricks and blocks in Variation Schedule No. 1 dated 4 November 2013 were in respect of work and materials which were in addition to what was provided for in the building contract. There is no dispute between the parties that there was extensive additional work and materials to convert the storage room into a home office. Furthermore the Variation Schedule No 1 dated 4 November 2013 clearly shows that the work and materials disclosed in it are claimed by the contractor as contract variations. In addition, the variation documents for the brickwork labour and materials were signed by Mr Nayak and his email of 22 November 2013 at page 322 of exhibit A, refers to civil variations. The list of those civil variations includes references to "Bricks" and "Bricks Labour" in the same amounts as stated in the 4 November 2013 Variation Schedule except that the GST amounts in the Variation Schedule were not included. The civil variations list included an amount ($6,398) that appeared in the variation document for bricklaying ($6,398.20). That list also included an amount ($4,395) that was slightly less than the amount ($4,853) which appeared in the variation document for bricks.
In those circumstances the only conclusion open on the evidence is that this work and these materials were not included in the building contract.
The Appeal Panel therefore rejects the submissions made by the owners which are set out in par 83 above. All of the documents referred to in the quoted submissions relate to bricklaying or bricks or blocks.

[20]

Pool variation

The contractor's written submissions dated 2 November 2016 included the following concerning the pool variation: This ($7,500) was a very fair price for the addition of a spa to the pool. The relevant evidence is found at Exhibit A, pages 259, 374, 465, 471, 472, 428 demonstrates the various invoices paid by the Respondent totalling $7,470. The quotation for the pool is at page 12 for $31,900 and the total paid towards the pool by the Respondent was $32,153.
The Appeal Panel does not agree that the pages referred to in the second sentence of the above quotation demonstrate invoices paid by the contractor totalling $7,470. The document at page 259 is one of the eight variation documents referred to above. It is not an invoice. The document at page 374 is a statement of account issued by the contractor to the owners dated 21 July 2014. The document at page 465 is a quotation for $14,000 "to supply internal plumbing to pool and spa out of pool and spa". There is a notation on it that $10,000 was paid on 14 February 2014. There is nothing on the document to indicate how much of the $10,000, if anything, related to the spa. The document at page 471 is in handwriting which is difficult to read. It appears to be an invoice to the contractor for $2,970 for "form and steel pool and spa" and it appears to include excavation of the pool and walls. It is not possible to tell from the document how much of the charge relates to the spa and how much relates to the pool. Page 472 appears to be an invoice for "remove steel from pool and wall digging" for $1,300. There is no reference to the spa in the document. The document at page 428 is an invoice which includes the word "spa" and a charge opposite that word of $850. There are other items in the invoice all of which appear to relate to the pool - not the spa. There is a separate charge for GST. The total for the work including GST was $13,783. There is a notation on the document that payment was made of $3,783. The document at page 12 is a quotation dated 27 October 2012 for $31.900. There is nothing in the document to indicate that it refers to a spa.
Paragraphs 31 - 37 of the owners' submissions dated 17 November 2016 dispute the contractor's claim for this pool variation and submitted that pages 259 and 374 are not documents "to support Sopov".
In par 37 the owners concluded their submissions on the pool variation and submitted that the contractor had failed to demonstrate that the works carried out were not part of the contract sum pursuant to the HIA contract.
However that concluding submission fails to take account of the facts that while the contract was being carried out both parties proceeded on the basis that the claim made by the contractor for the spa (which was the pool variation) was in respect of work which was in addition to what was provided in the contract. The Variation Schedule No 1 refers to "Variation to pool spa addition". The variation document at page 259 which was signed by Mr Nayak gives details of the work as "adding a spa to the pool" for $7,500 including GST. Mr Nayak's email dated 22 November 2013 includes "Pool Spa" for $7,500 as a civil variation. At page 374 in the statement of account issued by the contractor to the owners dated 21 July 2014 it records a payment of $7,500 in relation to spa variation. In par 29 of the owners' submissions dated 25 November 2015 it is conceded that $7,500 was paid for the pool spa and that the pool spa was one of five "HIA variations" listed in that paragraph.
In the above circumstances, the only conclusion open on the evidence is that the spa was not included in the building contract price.

[22]

Windows upgrade colour

The submission made by the contractor in its submissions dated 2 November 2016 was: In relation to windows: Windows were upgraded according to the email in Exhibit A, page 246 for a price of $4,400.
In their submissions dated 17 November 2016, the owners submitted that the document at page 246 was not a document evidencing work done or actual costing incurred per Sopov. It was also submitted that the contractor had failed to demonstrate works done or actual costs incurred per Sopov.
The contractor treated the work as a "variation" (see page 246 of exhibit A and the Variation Schedule No 1 where it is described as "Windows - upgrade colour to precious Silver pearl"; the price is shown as $4,000 plus GST of $400; see also the invoice received by the contractor at page 446 which gives a description of the job "All job as per floor plan. Pre silver pearl"; entries have been written on the invoice showing payments of $45,000; the invoice amount was $66,450).
The owners also treated this work as a variation. Mr Nayak signed a variation document which described the work as "Choosing the colour precious silver Pearl as a special colour & not in standard colours of Walco." The price in that document was $4,400 inclusive of GST. Mr Nayak also included the work in the civil variations list in his email dated 22 November 2013. The amount shown in that list was $4,000.
For the reasons set out in pars 77 - 80 above the Appeal Panel is of the view that the submissions of the owners in par 98 above are no answer to the quantum meruit windows upgrade claim. Furthermore, if those submissions of the owners are intended to mean that it had not been demonstrated by the contractor that the work had been carried out, then the Appeal Panel rejects that submission for another reason. The hearing before the Tribunal Member was conducted on the basis that the relevant work was carried out by the contractor (see par 23 above). The owners cannot in those circumstances, raise a new argument on appeal that the work was not carried out (Coulton v Holcombe (1986) 162 CLR 1 at 8).

[23]

Contractor's margin

As part of variation 1 the contractor claimed a builder's margin of 20%.
The owners' submissions dated 6 June 2016 included a submission that to the extent the quantum meruit was upheld, the contractor's margin of 20% was not fair value for quantum meruit and the owners submitted that 10% should be applied. In their submissions dated 17 November 2016, the owners made an additional submission namely that Sopov required evidence of actual costs of work done to be demonstrated and because the contractor had failed to do so, the contractor's margin must be rejected.
In the contractor's submissions dated 2 November 2016 it was submitted that the Tribunal Member, having heard all of the extensive cross examination of the contractor's witnesses, was entitled to hold that the value claimed was a fair market value for the works which the oral evidence established had been completed.
At [35] in Sopov, the Court held that the existence of the entitlement to a profit margin seemed entirely consistent with the restitutionary objective of measuring the value of the benefit conferred; the inclusion of a margin for profit and overhead meant that the calculation approximates the replacement cost of the works; it is an appropriate index of value to ascertain what it would have cost the principal to have had the works carried out by another builder in comparable circumstances; and the answer to that question must necessarily include that other builder's margin.
Clause 11 of the building contract makes provision for a 15% contractor's margin to be added to the contract price to cover overheads, supervision and profit if the actual cost to the contractor is greater than the prime cost amount allowed. Clause 13 also allows for a margin of 15% for profit, supervision and overhead on the cost of the work and materials and GST payable if the contract has been terminated in the circumstances referred to in clause 13.
In those circumstances and having regard to what the Court said in Sopov, the Appeal Panel is of the view that if the contractor has carried out work and/or supplied materials, additional to that covered by the building contract, then in determining what was the fair and reasonable value of the work performed, the Tribunal Member was entitled to include a contractor's margin calculated at 15%.

[29]

Ground of appeal (4)

The fourth ground of appeal is in the following terms: Senior Member erred in applying Fink v Fink [1946] HCA 54; (1946) 74 CLR 127 to the basis of quantum meruit where: a. This case has no relevant principle to be applied to quantum meruit; b. If estimating damages for breach of contract cannot be made out, damages or the specificity of damages, cannot be cross-collaterised and used to estimate quantum meruit; c. If there is insufficient evidence from the Applicant to prove quantum meruit, the Tribunal must not embark on estimating findings - the Applicant's claim must be dismissed.
In pars 46 - 62 of the Tribunal Member's reasons for decision, he dealt with the quantum meruit claim in respect of variation 1. At par 58 he quoted two passages from the judgment of Brooking J in JLW (Vic) v Tsiloglou [1994] 1 VR 237. In the second of those passages there was the following quotation from a decision of Dixon and McTiernan JJ in Fink v Fink [1946] HCA 54; (1946) 74 CLR 127, at 143: "Where there has been an actual loss of some sort, the common law does not permit difficulties of estimating the loss in money to defeat the only remedy it provided for breach of contract, an award of damages." In Fink v Fink the plaintiff sued the defendant claiming damages for breach of contract.
The other passage quoted from the JLW decision referred to a decision of Pincus J in Schindler Lifts Australia Pty Ltd v Debelak [1989] FCA 311; (1989) 89 ALR 275 at 319.
In par 59 of his reasons, the Tribunal Member quoted the following passage which appeared at page 319 of the judgment of Pincus J: It may be that if the evidence called on behalf of the applicants fails to provide any rational foundation for a proper estimate of damages, the Court should simply decline to make one.
In Schindler the applicant made claims of misleading and deceptive conduct under the Trade Practices Act; for defamation and other torts for breach of a constructive trust and other claims. There was no claim for quantum meruit.
At par 60 of his reasons, the Tribunal Member stated he was conscious that the decisions JLW and Schindler were not concerned with an assessment of an amount claimed in quantum meruit. Nevertheless he had decided that he should adopt the approach stated by Dixon and McTiernan JJ in Fink at page 143, which is quoted in par 113 above.
In par 61 of his reasons, the Tribunal Member stated: In this case the evidence called by the contractor does not fail to provide any rational foundation for a proper estimate of the cost of variation 1.
In par 62 of his reasons, the Tribunal Member stated that as a result he would accept the contractor's calculation of the value of variation 1 in the sum of $71,658.54.
To determine what is the fair value of work, requires a value judgment to be made. It may be a difficult exercise. It appears to the Appeal Panel that the conclusion to be drawn from the Tribunal Member's reference to the above three cases is that he was recording that notwithstanding that there may be difficulties involved in deciding what is the fair value of the work carried out by the contractor, he should do so if he was satisfied that the evidence before him provided a rational foundation for the determination of that value.
So viewed, all that the statement in that par 61 does is reveal that the Tribunal Member used a process of reasoning which any Tribunal of fact could use when it is making a decision as to whether evidence proves a particular fact. We are therefore of the view that the owners' submissions based upon the Tribunal Member's reference to Fink, should be rejected.

[30]

Variation 3

This ground of appeal is in the following terms: In respect of variation 3, Senior Member erred by the grounds referred to in paragraphs 1 to 4 above.
The Tribunal Member stated that this variation was described as an electrical variation.
Variation Schedule No 3 dated 3 March 2014, was sent by the contractor to the owners for signature. The amount of the variation was $40,700. The amount claimed is $18,590.
In their submissions dated 6 June 2016, the owners submitted that the amount of $18,590 was not based on invoices rendered to the contractor; that it was impossible to determine whether the actual costs incurred were reasonably incurred in the circumstances; that it was impossible to determine the fair value of the works performed and that there was no evidence from the contractor to prove actual costs or fair value to substantiate the claim for quantum meruit of $18,590 (see pars 55 - 58 and 59 (d) of those submissions).
The contractor's case is that the $18,590 was the final balance for payment of works completed, the owners having made payments towards electricals of $9,000 at the date of termination (see the last sentence of the submission dealing with direction 3 on the fifth page of the contractor's supplementary submissions dated 2 November 2016). In other words all of the variation 3 work was not carried out and the amount claimed to be owing for the work carried out was $18,590.
The Tribunal Member reasoned that fair value was proved because the owners had agreed to pay the amount of $25,000 for the variation, which was greater than the amount claimed in the proceedings.
With respect, the Appeal Panel is of the view that the Tribunal Member fell into error in that reasoning process. The fact that the contractor charged less than the agreed amount does not prove that the amount claimed was fair value for the work carried out. For example the contractor may have only carried out work having a fair value of $10,000 but charged $18,590.
No evidence has been brought to our attention as to what that work comprised. No evidence has been brought to our attention that the owners agreed as to the price of that work. No evidence has been brought to our attention of the costs incurred in carrying out this work. No evidence has been brought to our attention that proved the fair and reasonable value of the work performed.
We are therefore of the view that the owners' appeal must succeed in relation to the entitlement to an order in favour of the contractor in the amount of $18,590 (see par 164 of the Tribunal Member's reasons for decision).

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