Nu-Stone Building Pty Ltd v McInerney

Nu-Stone Building Pty Ltd v McInerney - [2022] NSWCATAP 285 - NSWCATAP 2022 case summary — Zoe

[7]

The third issue

The third issue was, having found that the Homeowners had lawfully terminated the contract, what were the reasonable and necessary completion costs.
The Builder's expert was Mr Dzung Nguyen of AUBC Consulting Pty Ltd. Mr Nguyen is a quantity surveyor. He prepared a report dated 20 February 2021 (Nguyen Report).
The Homeowners relied on four reports of Mr Craig Redfern of Tyrells Property Inspections Pty Ltd. He prepared reports dated 26 October 2020, 17 August 2020 and "April 2020", together with a report dated 31 March 2021 in reply to the Nguyen Report. Mr Redfern is a licensed building contractor.
The Tribunal preferred the expert opinion of Mr Nguyen for the following reasons appearing at [75]: Overall, in view of the deficiencies in Mr Redfern's report, I am not satisfied that the owners have discharged the onus of establishing that Mr Redfern's figures should be accepted over and above those of Mr Nguyen. In particular I am persuaded by Mr Redfern's concession under cross examination that he did not carry out his own independent quantity assessment but instead relied entirely on the 2018 QS report that the Redfern opinion is unreliable. I find that the report of Mr Redfern does not provide an expert opinion but merely accepts and adopts the opinions of a QS who was not called to give evidence. The underlying assumptions that form the basis of Mr Redfern's opinion in relation to the value of the works have therefore not been made out and the opinion should be afforded little weight.
However, the Tribunal found that Mr Redfern's reply report of 2 October 2020 provided "significant and relevant critiques" of the Nguyen Report that required adjustments to be made to Mr Nguyen's figures (at [76]).
The Tribunal's conclusions were: 80 Adding the unified builder's margins to the Nguyen estimated costs brings the new and overall assessment of contract works to: Completed works $547,358 Additional 5% builders margin $24,879.90 Remaining works $345,752 Additional 15% builders margin $51,861.30 Subtotal exclusive GST $969,841.20 GST 10% $96,984 Total contract of works cost $1,066,825.20 81 The contract price is $995,852. I am satisfied that the total contract cost, as estimated by Mr Nguyen (but adjusted with consistent margins), adds $70,973.20 to the cost to complete over and above the adjusted contract price. 82 In conclusion I find that the owners are entitled to damages for defective work in the sum of $84,034. 83 Adding both figures together, [2] I find that the builder is liable to the owner in the sum of $155,007.20 for defective and incomplete work. 84 The owners concede that from this sum there must be deducted $28,606.06 to account for PC cost adjustments for windows. 85 Accordingly I make a finding and order that the builder pay to the owners the sum of $126,401.14.
The fourth issue was costs.

[12]

The fourth issue

The fourth issue was whether the Builder was entitled to payment for interest.
The heading "Interest" appears immediately after [100] of the Decision. However, what the Tribunal states at [101] to [104] is: 101 Paragraph 8 of the builder's submissions poses the following question: Were the works forming part of [Payment Claim] 4 substantially complete? This is a question of fact. The only life issue the turn on this finding is whether the builder is entitled to interest on and from 27 March 2020 (five business days after the invoice issued) until final orders are made. 102 It is submitted that by the builder that if work is 90% completed then that would constitute a "substantial completion" (Simmonds v Rust; Rust v Simmonds [2018] NSWCATCD 75). It is the builder's submission that more than 90% of the Corden metal cladding was complete; more than 90% of the timber stud work was completed; the internal plumbing works must have been more than 90% complete with only $750 being paid by the owners to complete this task; at least 70% of the electrical roughing was complete on the owner's own evidence; more than 90% of the concreting work overall was complete; all doors and windows had been delivered to site. 103 The builder concludes that the "factual findings" referred to support the conclusion that the works for PP4 had reached substantial completion. And the builder should be awarded an additional amount of at least $14,802.67 for interest in this regard. 104 I have not been taken to any evidence that suggests the works were 90% complete. The issue was hotly contested and during cross-examination the builder conceded that among other incomplete work, there was no roof on the garage at the time he issued PP4. Mr Redfern in his report of 31 March 2021 129412) states that lock up was substantially incomplete (10.2.3). The builder bears the onus of proof and other than the submissions set out above I was not referred to the evidence bundle to support these contentions. In the absence of being referred to any specific evidence I am not satisfied, on balance, that the work was "substantially complete" and decline to make an award.
It appears therefore that the Tribunal did not consider the question of interest. No party complains about this in the Appeals.
However, the work the subject of Payment Claim 4 was the subject of discussion at [101] to [104] did feature in the Homeowners' Appeal.

[19]

Leave to appeal

Clause 12 of Sch 4 of the NCAT Act provides that, in an appeal from a decision of the Consumer and Commercial Division of the Tribunal, an Appeal Panel may grant leave to appeal only if satisfied that the appellant may have suffered a substantial miscarriage of justice because: 1. the decision of the Tribunal under appeal was not fair and equitable; or 2. the decision of the Tribunal under appeal was against the weight of evidence; or 3. significant new evidence has arisen (being evidence that was not reasonably available at the time the proceedings under appeal were being dealt with).
The principles to be applied by an Appeal Panel in determining whether or not leave to appeal should be granted are well settled. In Collins v Urban [2014] NSWCATAP 17 the Appeal Panel conducted a review of the relevant cases at [65]-[79] and concluded at [84(2)] that: 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.
Even if an appellant establishes that the appellant may have suffered a substantial miscarriage of justice in the sense explained above, the Appeal Panel retains a discretion whether to grant leave under s 80(2) of the Act. An appellant must demonstrate something more than that the Tribunal was arguably wrong: Pholi v Wearne [2014] NSWCATAP 78 at [32].

[25]

Consideration

Both grounds of the Builder's grounds of appeal relate to the Tribunal's calculation of the net monies one party was to pay the other. Both agree, in essence, that in undertaking what both described as a contract reconciliation the Tribunal:

erred in calculating the completion costs;
failed to take into account variations (1), (2) and (5).

The Tribunal found that the net amount to be paid by the Builder to the Homeowners was $126,4101.14, being $155,007.20 ($84,034 for defective works and $70,973.20 "to the cost to complete over and above the adjusted contract price"), less the agreed $28,606 to account for "PC cost adjustments for windows".
The Builder says the Tribunal erred in two ways. First, the Tribunal applied the wrong principle of law when calculating the completion costs, and secondly it failed to account for variations.
The Homeowners says the Tribunal erred because it included a sum for completion of the works the subject of Payment Claim 4.
The Tribunal found at [80] that the completion costs were $345,752 plus an additional Builder's margin of $51,861.30, a total of $397,613.30.
The Builder submits that the Homeowners are entitled to the damages payable for completion costs, calculated by deducting the costs to complete from the balance payable under the contract. The Builder submits that: The balance of the contract price is $514,584.51, calculated as follows: Finding at [1] as to contract price (excluding variations), $995.852.00 Less finding at [97] as to amount paid for contract works (excluding variations), $497,926.00 Balance payable to complete works (excluding variations) $514,584.51.
We consider that that submission and that calculation should be rejected as: 1. first, the Tribunal's calculation of the contract price was not the $995.852.00 found at [1], but the $1,066,825.20 found by the Tribunal at [80] and [81]; 2. secondly, while the Tribunal's calculation as to amount paid for contract works (excluding variations) was $497,926.00, the Tribunal should have found that the amount paid for contract works including variations was $572,333.05.
Therefore, adjusting the Builder's calculation, the amount paid for contract works (including variations), was: contract price (including variations), $1,066,825.20. less find the amount paid for contract works (including variations), $572,333.05. balance payable to complete works $494,492.15.
Nevertheless, the Builder's argument remains the same, the costs to complete the contract, being $457,255.295 ($397,613.30 plus 15% margin) is less than the balance payable under the contract (being $494,492.15), and therefore that the award for completion costs should be NIL.
However, for the reasons submitted by the Homeowners and the calculations set out in their submissions, we do not accept that proposition.
The substance of the Homeowners' response to the Builder's Appeal, and forming part of their own appeal (Ground 1), is that the value of Invoice number NU0421 which was issued on 18 March 2021 for Payment Claim 4 should have been deducted from the value that was assigned by Mr Nguyen to the completed work.
We accept that proposition. We agree that the Tribunal erred in failing to exclude Payment Claim 4 in its calculation of the contract price.
In addition, we also accept the submissions of both parties that the Tribunal erred in failing to take into account the variations when calculating the contract price.

[33]

Homeowners' submissions

The third error submitted by the Homeowners is that the Tribunal erred in rejecting the tender of the actual costs to be found in the Rejected Tender Bundle.
The Homeowners submit that the Tribunal erred in law by denying procedural fairness to the Homeowners by the rejection of evidence contained in the Rejected Bundle which was referred to by the Builder's expert as fair and reasonable in his report of April 2021 such evidence that consisting of invoices and receipts that supported spreadsheets prepared by the Homeowners in circumstances where: 1. the documents were made available for inspection; 2. the documents were produced pursuant to a Summons to Produce dated 4 June 2021 and served by the Respondent; 3. the spreadsheets prepared by the appellant's itemised the receipts; and 4. the spreadsheets and the documents comprised the Appellant's documents in support of the costs by them to complete the works consequent upon the repudiation of the contract by the Respondent and termination of the contract.
If necessary the Homeowners also seek leave to appeal in relation to this ground on the basis that it is not fair and equitable that they be deprived of the opportunity to prove their costs to complete in excess of the contract sum in circumstances where the Builder's director Mr Younan initially denied fraudulent conduct, propounded a case that the Contract was a sham and that an earlier contract applied and only withdrew the allegation at hearing, and propounded a case based on the wrong legal principle as referred to in grounds 1 and 2.
In summary, the Homeowners submit that: 1. Mrs Mclnerney adduced evidence of the actual payments made, and a summary of the costs associated by reference to receipts; 2. Mr Redfern in his report of April 2021 made reference to the spreadsheet of expenses and indicated that individual receipts (underpinning the spreadsheets) were supplied by the Homeowner but stated that they were not included in the report due to the logistics of scanning a large volume of documents of multiple sizes. It was stated that the documents would be available for review at the office of the solicitor for the Homeowners if required; 3. Mr Redfern detailed the expenses to complete including GST incurred by the Homeowners to total $558.247.57 to complete the work. He concluded that the costs in completing the works the subject of the spreadsheets and the invoices were fair and reasonable. His conclusion was based on the fact that his original estimate to calculate the costs of the work was $564,677.00 which was within 1% of the Homeowner's actual costs; 4. notwithstanding that the evidence of Mrs Mclnerney was before the Tribunal and the evidence of Mr Redfern in his report number 12922740 confirmed the fair and reasonable costs, Tribunal disallowed the tender of the receipts which underpinned that evidence; 5. the actual cost of the completion provided for sound evidence of the reasonable costs of rectification and damages. Whilst the actual costs are not necessarily to be preferred over theoretical costs as a rule the evidence of those costs ought to have been allowed: see Hyder Consulting (Australia) Pty Ltd v Wih Wihelmsen Agency Pty Ltd [2001] NSWCA 313 at [99]; 6. this was in circumstances where the receipts were made available for inspection and were specifically referred to in evidence served in accordance with the orders of the Tribunal; 7. the specific receipts were the subject of a Summons to Produce issued on 4 June 2021 which was responded to by the Homeowners and produced to the Tribunal; 8. the very documents the subject of the Summons were produced to the Tribunal for the Builder and were the documents sought to be tendered; 9. no reasons were provided in the Reasons for Decision, notwithstanding the agitation of the matter such failure constituting an error of law and a denial of procedural fairness by the ruling as to admission of the documents: Prendergast at [14] and [17]; Leone v Green Solar Pty Ltd [2022] NSWCATAP 78.

[35]

Consideration

It is to be noted that the application to tender the Rejected Tender Bundle came at the conclusion of the first day of the hearing after the cross-examinations of both Mr Nguyen and Mr Redfern had been completed.
The Tribunal allowed Mr Galvin the opportunity to make a lengthy oral submissions to tender the materials in reply. Mr Galvin emphasised that: 1. the documents had been referred to by Mr Redfern in his report, 2. the documents had been produced by the Builder under a Summons to Produce; 3. the Homeowners had informed the Builder they wished to rely on the materials, albeit "[a] About a week or so ago.
During the course of this dialogue the Tribunal comment that it was difficult to understand that the invoices wished to be relied on were evidence in reply and that they should have been led in chief.
Mr Klooster responded opposing the tender. In summary, he submitted that: 1. orders had been made by the Tribunal requiring the parties to serve on each other all documents they intended to rely on; 2. the Builder would have conducted its case in a different basis had the documents been served in a timely fashion; 3. the Builder was not in a position to deal with the documents.
Mr Galvin then made brief submissions in reply.
It is common ground that the Tribunal did not provide oral reasons for its decision, announced at the commencement of the second day of the hearing that the tender was rejected, and the Tribunal did not provide written reasons in the Decision as indicated at the hearing.
However, when hearing the application the Tribunal clearly indicated its concerns by:

enquiring when the Homeowners first informed the Builder they wished to rely on the documents ("[a]bout a week or so ago");
stating that the Homeowners, by seeking to tender the material in reply, had deprived the Builder the opportunity to traverse the material in cross-examination, which may have been a denial of procedural fairness;
stating that the materials should have been led in chief.

We may not have come to the same conclusion as the Tribunal. But we understand why it had concerns about admitting the materials, as they had not been served in accordance with directions and particularly when the application to tender the materials was made after the cross-examinations of both Mr Nguyen and Mr Redfern had been completed.
While we accept that no reasons where provided, in circumstances where the Tribunal's concerns can be adduced from an examination of the transcript, we are not persuaded that the Tribunal arrived at a result so unreasonable or unjust as to suggest that one of the foregoing categories of error had occurred, even though the error in question did not explicitly appear on the face of the reasoning: Kork at [39] or otherwise made an error of the type referred to in House v The King.
This ground of appeal is rejected. Nor would we grant leave to appeal on this issue.

At a glance

Court

Decision date

Source

Judgment (38 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (14)

Cited By (3)