Nu-Stone Building Pty Ltd v McInerney; McInerney v Nu-Stone Building Pty Ltd

NCAT Appeal Panel|2023-10-20

Immigration and Multicultural Affairs [2003] HCA 26; (2003) 77 ALJR 1088 House v The King (1936) 55 CLR 499 Kork v Merheb [2021] NSWCATAP 349 New South Wales Land and Housing Corporation v Orr (2019) 100 NSWLR 578; [2019] NSWCA 231 Nu-Stone Building Pty Ltd v McInerney [2022] NSWCATAP 285 Nu-Stone Building Pty Ltd v McInerney [2023] NSWSC 940 Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 Robinson v Harman (1848) 1 Exch 850; 154 ER 363 White v Overland [2001] FCA 1333 Category: Principal judgment Parties: Proceedings 2022/00037784 Nu-Stone Building Pty Ltd (Appellant) Garry McInerney (First Respondent) Gladys McInerney (Second Respondent)

Proceedings 2022/00053249 Garry McInerney (First Appellant) Gladys McInerney (Second Appellant) Nu-Stone Building Pty Ltd (Respondent) Representation: Counsel: F Corsaro SC / M Klooster (Nu-Stone Building Pty Ltd) M Galvin (G and G McInerney)

REASONS FOR DECISION

The proceedings the subject of these appeals have a long history. It is necessary to recite some of that history to explain the circumstances in which the Appeal Panel as presently constituted came to be seized of the appeals.
In December 2018, Garry and Gladys McInerney (the homeowners) and Nu-Stone Building Pty Ltd (the builder) entered into a fixed price contract for the carrying out of building works on the homeowners' property in Enmore.
In April 2020, the builder commenced proceedings in the Tribunal against the homeowners seeking: 1. Payments claimed to be due under the building contract between the parties, specified in the application as: 1. The progress claim due in respect of stage 5 of the contract works; 2. Amounts due for variations; and 3. Adjustments to prime cost items and provisional sums; 1. In the alternative payment equivalent to the value of work carried out by the builder on a quantum meruit basis; and 2. Compensation for loss of profits sustained by reason of the homeowners' alleged repudiation of the contract.
In August 2020, the homeowners lodged their own proceedings in the Tribunal seeking: 1. The cost of rectification of allegedly defective work; 2. The cost of completing the contract works in excess of the unpaid balance of the contract price.
The hearing of both proceedings took place on 24 and 25 August 2021 and the Tribunal's decision was delivered on 19 January 2022.
The Tribunal determined (at [48]) that the builder repudiated the contract and that the owners accepted the repudiation and elected to terminate the contract effective from 18 March 2020.
The Tribunal found (at [49] - [67]) that the homeowners were entitled to damages in respect of defective work carried out by the builder in the sum of $84,034.
The Tribunal considered (at [68] - [85]) the homeowners' claim for the additional cost to complete the contract works. The Tribunal relied upon evidence given by Mr Nguyen, an expert quantity surveyor retained by the builder, of the value of the work completed by the builder and the likely cost to complete the remaining works. The Tribunal rejected the evidence of those matters given by Mr Redfern, an expert builder retained by the homeowners, for reasons which were set out. However, the Tribunal adjusted the margins applied by Mr Nguyen to the trade costs of each element of the calculation.
The Tribunal assessed the value of completed works at $629,461.70 ($547,358 plus an additional 5% margin plus GST) and the cost to complete at $437,376.28 ($345,752 plus 15% margin plus GST). The sum of those figures is $1,066,838, although the Tribunal calculated it as $1,066,825.20 due to an error in addition. The difference is trivial and not relevant to the issues on the appeal.
The Tribunal deducted the contract price ($995,852) from the amount it calculated. The Tribunal held that the difference, $70,973.20, represented the additional amount over the contract price that it would cost the owners to complete the contract works.
The Tribunal assessed the builder's claim for "payment for variations on a quantum meruit basis" (at [86] - [96]) and held that the amount payable in respect of three variations: 1. Variation 1 - Earthworks and underpinning; 2. Variation 2 - The OSD & Detention Tank; and 3. Variation 3 - Additional Steel Works, had been agreed between the parties and paid by the homeowners.
The amounts agreed and paid were: 1. Variation 1 - $38,862.30; 2. Variation 2 - $16,703, further reduced by an agreed credit "in respect of underpinning" to $14,937.99; [1] and 3. Variation 3 - $2,044.90 - satisfied by a credit of $1,800 given by the builder "for a quantity surveyor's report after request from the owners", with the balance waived by the builder.
The Tribunal found that the builder's claim in respect of Variation 4 relating to Skylights could not be maintained as the owners had paid the supplier directly.
The Tribunal allowed the builder payment of $28,606.06 in respect of Variation 5 on the basis that the homeowners had conceded liability for that amount. The claim involved the adjustment of the prime cost allowances for windows and doors. It is thus not strictly a variation, but it was so referred to in the decision of the Tribunal and it is convenient to adopt the same form of reference.
The Tribunal rejected the builder's claim in respect of Variation 6 - Additional Carpentry and Steel Work on the basis that the builder had not satisfied its onus of proof of establishing the necessary elements to claim payment on a quantum meruit basis.
The Tribunal (at [96] - [100]) considered the builder's claim for payment for "underpayment". The builder alleged that it had been underpaid by $119,032.25 for works carried out under the contract and variations.
The Tribunal set out the builder's calculation: "Value of contract works $575,733.81 Value of variations $107,188.28 Less agreed total amount paid on account only being $497,926 for contract works and $65,783.84 variations $563,889.84 Balance payable to builder $119,032.25."
The Tribunal had noted, at [70] that the parties had agreed that the amount paid by the homeowners in respect of variations was $65,783.84.
The Tribunal held: 99 For the reasons set out above, the builder was unsuccessful on his variations claim. The builder is not entitled to any further payment for variations, either on a contract basis, or on a restitution or quantum meruit basis. The contract reconciliation thus is the value of the contract works (as per the builder's evidence) $575,733.81 less an amount paid to the builder $563,889.84 (as agreed between the parties), the difference being $11,843.97. 100 I award $11,843.97 to the builder for this head of damage, being an amount owed under the contract."
The "value of contract works" incorporated into that calculation differs from the figure utilised by the Tribunal in the calculation of the cost to complete (refer [9] above). The explanation of the difference is contained in the builder's submissions at first instance, paras [5.4] - [5.6]. The "value of contract works" was the result after making "appropriate deductions [from the costings provided by Mr Nguyen] in light of the status of works" outlined in section 4 of the builder's submissions. The "appropriate deductions" from Mr Nguyen's calculated trade costs for each element of the works amounted to $21,784.92. The margin applied to the trade costs in the builder's submissions was the 10% applied by Mr Nguyen rather than the 15% applied by the Tribunal in calculating the cost to complete.
The Tribunal ordered the builder to pay the homeowners $114,557.17. That sum was calculated as follows: 1. Cost of rectification of defective works $84,034 2. Additional cost to complete $70,973.20 Total $155,007.20 1. Less agreed amount for variation 5 $28,606.06 2. Less amount allowed on builder's "underpayment" claim $11,843.97 Total $114,557.17
The Tribunal made the order for payment in proceedings HB 20/36393, that is the homeowners' application, and dismissed the builder's application (HB 20/15757).
The Tribunal ordered the builder to pay the homeowners' costs of both applications on the ordinary basis as agreed or assessed. The Tribunal made provision for either party to apply for different costs orders. No application was made.
The builder filed a Notice of Appeal against the decision on 7 February 2022. The homeowners filed their own Notice of Appeal against the decision on 23 February 2022. The homeowners' Notice of Appeal was filed seven days outside the time fixed by rule 25(4)(c) of the Civil and Administrative Tribunal Rules for the lodgement of an appeal. The homeowners sought an extension of time, in part on the basis that the appeal was filed in response to the builder's filing of an appeal.
The builder did not oppose the grant of an extension of time for the lodgement of the homeowners' appeal.
The appeals were heard by an Appeal Panel of the Tribunal on 24 May 2022 and, by a decision published on 31 August 2022 (Nu-Stone Building Pty Ltd v McInerney [2022] NSWCATAP 285), the Appeal Panel: 1. Extended time for the filing of the homeowners' appeal; 2. Indicated that it proposed to uphold the appeals, or at least the homeowners' appeal; and 3. Directed the parties to file draft orders and submissions in support.
On 14 November 2022, the Appeal Panel published orders: 1. Allowing both appeals; 2. Setting aside the order for payment made by the Tribunal and substituting an order that the builder pay the homeowners a greater amount.
The builder appealed from that decision to the Supreme Court and on 11 August 2023 Wright J delivered judgment (Nu-Stone Building Pty Ltd v McInerney [2023] NSWSC 940): 1. Granting the builder leave to appeal; 2. Setting aside the decision of the Appeal Panel made on 14 November 2022; 3. Remitting "the matter … to the Appeal Panel of the Tribunal to be heard and decided again"; and 4. Ordering the homeowners to pay the builder's costs of the appeal.
The basis upon which Wright J granted leave to appeal, and upheld the appeal was that "the Appeal Panel's reasons failed to provide any, or any adequate, statement of the reasoning processes that led the Appeal Panel to its conclusions in respect of the builder's appeal and the homeowners' appeal".
The remitted appeals were listed for hearing before the Appeal Panel, differently constituted, on 20 October 2023. Mr Corsaro SC appeared with Mr Klooster for the builder. Mr Galvin appeared for the homeowners.
Although, the original Appeal Panel having granted the homeowners an extension of time to bring their appeal by order made on 31 August 2022 which order was not explicitly set aside by Wright J, it may not strictly be necessary that we again extend time for the filing of the homeowners' appeal we nevertheless will do so out of an abundance of caution. The delay was only seven days and the builder did not oppose an extension of time.

Grounds of Appeal

The grounds of appeal set out in attachments to the parties' respective Notices of Appeal failed to state concisely the questions of law said to arise. The two grounds relied upon by the builder [2] and the first two of three grounds relied upon by the homeowners were summarised by Wright J at [34] and [35] respectively, adopting statements of the substance of the grounds expressed by the first Appeal Panel at [60] and [47] respectively.
The builder's grounds of appeal, as summarised by Wright J, were that the Tribunal erred: "(1) in concluding that the homeowners were entitled to $70,973.20 (at … [80]-[82]) as a result of applying a wrong principle of law in calculating "completion costs"; (2) applied a wrong principle of law by failing to account for variations that were found by the Tribunal to have been agreed between the parties."
The homeowners' first two grounds of appeal, as summarised by the first Appeal Panel, which summary was adopted by Wright J, were: "1. the Tribunal erred in law by adopting the evidence in the Nguyen Report as to the estimate of costs of works completed set out in section 3.1 of the report; 2. the Tribunal failed to take into account relevant considerations and failed make findings in circumstances where the relevant considerations and findings ought to have been made in relation to: a. the value of incomplete works and works paid for by the Homeowners; b. determining that the work completed was $575,733.81 whereas the uncontroverted evidence was that items of the works that were not undertaken by the Builder, or items of the works that were paid for by the Homeowners reduced the quantum merit value ascribed in section 3 of Mr Nguyen's Report to $445,781.71; c. regardless of the error referred to in ground 1 above, in the event that it is determined that ground 1 is not made out, the Tribunal erred at law by failing to take into account and make relevant findings which reduced the value of works completed and increased the value of work to be completed in the circumstances where work was not completed and payments were made by the Homeowners to subcontractors as referred to in Ground 2 (b)."
The homeowners' third ground of appeal was that the Tribunal: "[E]rred in law by denial of procedural fairness to the [homeowners] by the rejection [of] evidence contained in a tender bundle "Homeowners Tender Bundle Not Agreed by Builder" and referred to by the [homeowners'] expert as fair and reasonable in his report of April 2021 such evidence that consisted of invoices and receipts that supported spreadsheets prepared by the [homeowners] in circumstances where: a. the documents were made available for inspection; b. the documents were produced pursuant to a Summons to Produce dated 4 June 2021 and served by the [builder]; c. the spreadsheets prepared by the [homeowners] itemised the receipts; d. the spreadsheets and the documents comprised the [homeowners'] documents in support of the costs by them to complete the works consequent upon the repudiation of the Contract by the [builder] and termination of the Contract; and e. to the extent necessary the [homeowners] seek leave 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 above."
The builder sought that the orders of the Tribunal be set aside and that instead orders be made that the homeowners pay the builder the sum of $32,758.05 and that the homeowners pay the builder's costs.
The homeowners sought an order for payment by the builder of $132,510.22 or, alternatively, $115,749.51. The homeowners did not seek to disturb the Tribunal's costs order.
Both parties sought the costs of the appeal.

Scope and Nature of Internal Appeals

Internal appeals against decisions of the Tribunal, other than interlocutory decisions, may be made as of right on a question of law, and otherwise with leave (that is, the permission) of the Appeal Panel: Civil and Administrative Tribunal Act 2013 (NSW) (NCAT Act) s 80(2).
In Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 the Appeal Panel set out at [13] a non-exclusive list of questions of law: 1. Whether there has been a failure to provide proper reasons where they are required; 2. Whether the Tribunal identified the wrong issue or asked the wrong question; 3. Whether a wrong principle of law had been applied; 4. Whether there was a failure to afford procedural fairness; 5. Whether the Tribunal failed to take into account relevant (i.e., mandatory) considerations; 6. Whether the Tribunal took into account an irrelevant consideration; 7. Whether there was no evidence to support a finding of fact; and 8. Whether the decision is so unreasonable that no reasonable decision-maker would make it.
The circumstances in which the Appeal Panel may grant leave to appeal from decisions made in the Consumer and Commercial Division are limited by cl 12(1) of Sch 4 to the NCAT Act. In such cases, the Appeal Panel must first be satisfied that the appellant may have suffered a substantial miscarriage of justice on the basis that: 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).
In Collins v Urban [2014] NSWCATAP 17, the Appeal Panel stated at [76] that a substantial miscarriage of justice for the purposes of cl 12(1) in Sch 4 may have been suffered where: " … there was a "significant possibility" or a "chance which was fairly open" that a different and more favourable result would have been achieved for the appellant had the relevant circumstance in para (a) or (b) not occurred or if the fresh evidence under para (c) had been before the Tribunal at first instance."
Even if an appellant from a decision of the Consumer and Commercial Division has satisfied the requirements of cl 12(1) of Sch 4, the Appeal Panel must still consider whether it should exercise its discretion to grant leave to appeal under s 80(2)(b).
In Collins v Urban, the Appeal Panel stated at [84] that: "(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, … [and] (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."

Submissions

The parties each filed submissions in relation to each appeal in advance of the initial hearing before the first Appeal Panel in May 2022. The parties continued to rely upon those submissions before us and, additionally, each filed further submissions in relation to the remitted hearing.
Accordingly, the Appeal Panel has received, and taken into consideration, the submissions filed by the builder on 17 May 2022, 21 May 2022 and 18 October 2023 and the submissions filed by the homeowners on 17 May 2022, 20 May 2022 and 13 October 2023.
The parties also provided an appeal bundle in five lever arch folders, which included the evidence before the Tribunal at first instance and a transcript of the hearing at first instance.
It is convenient to consider the builder's appeal, before turning to the homeowners' appeal.

The builder's appeal

The homeowners did not dispute that the Tribunal had incorrectly calculated both the homeowners' claim in respect of additional costs to complete and the builder's "underpayment" claim.
The homeowners submitted that, by reason of the matters raised in the homeowners' appeal in respect of progress payment 4, also referred to as "Invoice NU0421", notwithstanding the errors in the Tribunal's method of calculation, a balance remained payable to the homeowners by the builder.
The errors in the Tribunal's calculations are plain and, notwithstanding that we are not persuaded that they necessarily raise a question of law, we would grant the builder leave to appeal in respect of those errors.
The Tribunal's calculation of the additional amount over the contract price which it would cost the homeowners to complete the contract works was erroneous because the value of the completed works is not directly relevant to that calculation.
The builder is also correct in submitting that the Tribunal's calculation of the builder's "underpayment" claim failed to take account of the value of variations, both those agreed to and paid by the homeowners and variation 5 for which the homeowners accepted liability and which had yet to be paid.
In our view the Tribunal also erred in calculating independently the cost to complete and the amount by which the builder had been underpaid, because any further payment to the builder in respect of works required under the contract must be brought to account in determining the amount which the homeowners have paid (or will have paid) in respect of the work performed by the builder.
The extent to which the homeowners have any liability to the builder (whether under the contract or on a quantum meruit) must be incorporated into the calculation of the homeowners' entitlement to compensation for breach of contract.
The measure of compensation for breach of contract is the amount necessary to put the innocent party in the position it would have been if the contract had been performed: Robinson v Harman (1848) 1 Exch 850 at 855; 154 ER 363 at 365; Cessnock City Council v 123 259 932 Pty Ltd [2024] HCA 17 at [6], [48], [60], [190].
The appropriate measure of such loss in a case where a builder has failed to complete the work required under a building contract is to add to the amount the homeowners have paid to the builder the amount the homeowners will have to pay to complete the work, including rectifying any defects, and deduct from that amount the contract price and the value of any variations or other adjustments to the contract price.
The correct method of calculation is set out in the judgment of Ball J in Barber v Oracle (NSW) Pty Ltd [2019] NSWSC 1370, at [20]: 20 … In my opinion, the simplest way to take account of the amount overpaid by the plaintiffs in this case is to add the total amount they have paid the defendant to the total amount they have paid, or will be required to pay, to complete the work and rectify defects and deduct the contract sum from that total. The difference represents the additional amount the plaintiffs will have to pay to obtain a dwelling which the defendant contracted to build for them for $3.1 million plus the costs of variations.
His Honour set out the relevant calculation at [21]. Inserting the figures found by the Tribunal in this case into the calculation set out by his Honour produces the following: Costs to complete $437,376.28 Costs to rectify defects $84,034.00 Amount paid to the builder $563,889.84 (including the amount paid for variations) Total $1,085,300.12 Less contract price $995,852.00 Subtotal $89,448.12 Less cost of variations $94,389.90 Amount owing to the builder $4,941.78

The cost of variations is the amount which the parties agreed the homeowners had paid for variations ($65,783.84) plus the amount allowed in respect of Variation 5 ($28,606.06). Variation 3 was satisfied by a credit and therefore should be excluded from this calculation.
In other words, on the correct application of the findings of the Tribunal, the amount it will cost the homeowners to complete the work, including the rectification of defects, is $4,941.78 less than the unpaid balance of the contract price, adjusted to include the value of variations.
The calculation of the amount of $4,941.78 incorporates the builder's entitlement to the value of variation 5, which the homeowners acknowledge.
The builder's final submissions on the appeal, dated 18 October 2023, at 7.8 include a similar calculation which suggests the amount owing to the builder is $7,003.13.
There are two reasons why that figure differs from the correct calculation, set out above.
The first reason is that the submissions incorrectly interpret the outcome of the calculation ($7,003.13) as an amount due to the builder rather than the amount by which the cost to complete exceeds the contract price and the value of variations. That is, it is an amount which the builder should pay the homeowners.
The second reason why the amount calculated by the builder differs from the correct amount set out above is that the builder has, against its own interests, taken as the value of variations only variations 1, 2 and 5 in the amounts assessed by the Tribunal. Variations 1 and 2, totalling $53,800.29 had been paid by the homeowners. Variation 5, in the amount of $28,606.06 remains unpaid. As noted above, the amount which the parties agreed that the homeowners had paid in respect of variations was $65,783.84. The difference of $11,983.55 (between $65,783.84 and $53,800.29) is the reason why the builder's calculation was $7,003.13 in favour of the homeowners rather than $4,941.78 in favour of the builder.
Putting aside the issues concerning the assessment of the cost to complete raised by the homeowners, the outcome of the builder's appeal would therefore be the substitution of an order that the homeowners pay the builder the sum of $4,941.78 for the order that the builder pay the homeowners $114,557.17.
That would involve dismissing the homeowners' application and making an order in the builder's application.
The builder's final submissions dated 18 October 2023 conclude (at 11.3) with a table setting out a calculation purportedly justifying an order that the homeowners pay the builder $10,252.32. That calculation is based upon the finding by the Tribunal concerning the value of the works carried out by the builder, to which the builder added the value of variations 1, 2 and 5 and deducted the cost of rectification of defects and the amount paid by the homeowners.
That calculation is fallacious because it fails to recognise that any payment to which the builder might be entitled in respect of works within the contract scope of works, whether under the contract or on a quantum meruit, must be brought to account in the calculation of the loss sustained by the homeowners by reason of the builder's breach of the contract. Any additional amounts paid to the builder would increase the third line of that calculation and thereby increase the homeowners' loss by an equivalent amount.

The homeowners' appeal

We turn to consider the homeowners' appeal, noting that the issues raised by the homeowners in their appeal are also relied upon by the homeowners in answer to the builder's appeal.

Homeowners' ground 3

It is convenient to deal first with the homeowners' third ground. We have set out the third ground at [35] above.
The homeowners submitted in their submissions filed on 17 May 2022: "51 The Senior Member erred in law in failing to admit evidence relevant to the proceedings. 52. Mrs McInerney adduced evidence of the actual payments made, and a summary of the costs associated by reference to receipts. 53. 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. 54. 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. 55. Notwithstanding that the evidence of Gladys McInerney was before the Senior Member and the evidence of Mr Redfern in his report number 129227 confirmed the fair and reasonable costs, the Senior Member disallowed the tender of the receipts which underpinned that evidence. 56. 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. 57. 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. 58. Further, 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. These facts were the subject of argument on admissibility before the Senior Member below. 59. The very documents the subject of the Summons were produced to the Tribunal for the Builder and were the documents sought to be tendered. 60. No reasons were provided in the Reasons for Decision, notwithstanding the agitation of the matter such failure which constitutes an error of law and a denial of procedural fairness by the ruling as to admission of the documents."
The builder submitted: "6.1. This error challenges a discretionary decision by the learned Senior Member to exclude evidence that was served about a week before the final hearing. 6.2. As the decision to refuse to admit the evidence was a discretionary decision relating to practice and procedure, the Owners must demonstrate that in making its decision to refuse to admit the material because of its late service the Tribunal did one (or more) of five things: (a) it made an error of legal principle; (b) it made a material error of fact; (c) it took into account some irrelevant matter; (d) it failed to take into account or gave insufficient weight to, some relevant matter; or (e) it 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. 6.3. The Owners have not identified, articulated or demonstrated a House v King type error. 6.4. Any contention that there has been a denial of procedural fairness cannot succeed as the owners were given ample time to adduce the evidence and simply elected, for reasons unknown and not explained, to do so. 6.5. It is immediately apparent from the exchange with the learned Senior Member that: (a) The material should have been adduced in chief; (b) The material was available by the very latest 16 March 2021; and (c) No satisfactory explanation was provided to the learned Senior Member, or to this appeal panel, as to why the material was not served in accordance with orders made on 2 October 2020."
The relevant exchanges between counsel for the parties and the Tribunal occurred towards the conclusion of the first day of hearing.
Mr Galvin for the homeowners sought to tender a folder identified as "Homeowners Tender Bundle Not Agreed by Builder". Mr Klooster on behalf of the builder objected to the tender. Mr Galvin submitted: "Well, I get it in because it's referred to in the evidence of Mr Redfern in his report, which is at 2.6.2, at page 2. And it says "Not included in Appendix C is individual receipts which align with the spreadsheet supplied by the homeowner". So these are documents which he's seen and relied upon, and the homeowner has provided spreadsheets which are the breakdown of the costs which were incurred, and they've also provided the evidence which goes to the expenditure for various accounts. And at 4.4 we see there additionally, "Although the individual receipts have not been attached to any previous report, they have been included in this report due to the logistics of the scanning of a large volume of documents of multiple sizes, some of which are over A4 in length, I have been instructed that these documents will be available for review at Walker Hedges Forestville offices upon appointment if required". These documents were also the subject of the Summons to Produce, and were produced to my friend's solicitor. So they're not documents that should come by surprise. They're documents which have always been contemplated."
Mr Galvin referred to appendix C to Mr Redfern's report which was a spreadsheet of expenses which Mr Galvin submitted was a summary of what was contained in the folder. The Tribunal asked when the homeowners had informed the builder that they wished to tender the folder. Mr Galvin responded: "About a week or so ago, when we wanted it included in the tender bundle, and they refused to do so. Yes, in the joint tender bundle. I could stand corrected - I think it was about a week ago, thereabouts."
The Tribunal stated: "But Mr Galvin, I'm obviously thinking about it from a procedural fairness point of view. Mr Nguyen, whom you were critical of in cross-examination, for not having availed themselves of this material, that cross-examination or that question of cross-examination was objected to, because Mr Klooster said, "Well hang on a second. That spreadsheet was provided in April 2021. That at best can be evidence in reply". Your evidence in chief was with the other reports ending in other numbers, Mr Nguyen responded thereto, and then you were critical of him for not having responded to something that was not tendered, and not referred to in evidence in chief. The point I'm getting to is that what you really have deprived the other side of doing is tendering this in chief, as it should have been, so that Mr Nguyen, the expert, had an opportunity to traverse it. And then indeed, you would have been able to be critical of him, had he not done that. But this is evidence in reply, is it not?"
Mr Galvin maintained that the folder was in fact evidence in chief in the nature of supplementation of the homeowners' earlier evidence.
The Tribunal responded: "I don't see how you can say that the invoices are evidence in reply. They should have been led in chief. So if you are now telling me that all of these invoices came into being after Mr Redfern finished his evidence in chief, it would still, in my view, be evidence in chief, because it's not about the timeline in this case, it's about how you prosecute your claim. So you would have proven with your evidence in chief that these invoices were reasonably required to bring the work into conformity with the contract."
The Tribunal noted that the work was completed in March 2021.
Mr Klooster submitted: "Orders were made by Senior Member Charles on the 2nd of October 2020, which clearly directed the parties to serve on each other in person or by post a copy of all documents they intended to rely on. At no point in time have these documents been served formally. The highest it goes is the cryptic reference in the very last report of Mr Redfern … My client would have conducted its case on a different basis had these documents been served in a timely fashion. … There's no reasonable explanation provided as to why these documents were only formally produced or served one way or the other last week. And we say there's some standard procedural unfairness in the event the homeowner is entitled to rely on these reports, not only for the reason that we haven't had a chance for my expert to consider them, but it's unfair on me, having to cross-examine these witnesses tomorrow, to be expected to trawl through an entire folder of receipts and invoices, and put the propositions to the witnesses as to whether these costs were reasonably incurred. My friend is perfectly entitled to rely on actual costs. But he needs to do so in a fair manner. And the manner in which these documents have come to light, and still to this day have not been formally served, it causes my client some standing procedural unfairness. … We've conducted our case on a specific basis, on the assumption that these documents weren't in evidence, and weren't going to be relied on."
Mr Galvin made submissions in reply.
The Senior Member stated that she would consider the submissions overnight and give a ruling in the morning.
The following morning the Tribunal ruled: "Mr Galvin, I'm going to exclude the material, and I will publish my reasons in my judgment. … I've had the opportunity to consider your submissions and those of Mr Klooster, and I've also had opportunity to look at the material overnight, and it stays out. I will publish reasons in my judgment."
The Tribunal did not include reasons for the exclusion of the folder in its written decision.

Homeowners' ground 3 - Consideration

As the builder submitted, the decision to reject the tender of the folder of receipts was a discretionary decision and, as such, the Appeal Panel could only intervene if the decision was affected by an error of the kind identified in House v The King (1936) 55 CLR 499 at 504-505.
We see no basis upon which it could be said that the homeowners were denied procedural fairness in not being able to rely upon documents not served in accordance with the directions of the Tribunal and only tendered after the cross-examination of critical witnesses had concluded. The fact that the receipts were referred to in Mr Redfern's report was not sufficient notification of the homeowners' intention to tender them in evidence.
As Allsop J stated in White v Overland [2001] FCA 1333 at [4]: "… Any practice of quietly leaving footprints in correspondence or directions hearings to be uncovered some time later in an attempt to reveal that a matter was always in issue should be discouraged firmly. Even if something has been said, where it is evident, or indeed suspected, that the other side is proceeding on the basis of a misconception or has not appreciated something, as a general rule, efficiency, common sense and an appreciation of the costs and resources (both public and private) likely to be wasted by confusion in litigation will mandate that a party through his or her representative ensure that the other is not proceeding on a misconception or that the other does appreciate something that has been said."
Whatever the extent of any requirement for the Tribunal to give reasons for interlocutory decisions, [3] the decision of the Court of Appeal in New South Wales Land and Housing Corporation v Orr (2019) 100 NSWLR 578; [2019] NSWCA 231 (at [68] - [70] and [114]) indicates that relatively sparse reasons will suffice.
We are satisfied that, notwithstanding the expressed intention of the Tribunal to publish written reasons as part of the ultimate determination of the case, the Tribunal's reasons for the decision to reject the tender of the folder were sufficiently expressed in the course of submissions concerning the tender at the end of the first day of hearing.
No error of principle in the decision to reject the tender of the folder of receipts has been identified by the homeowners. Nor can it be said that the decision to reject the tender was so unreasonable or unjust as to indicate that an error of principle must have occurred, even though the error in question did not explicitly appear on the face of the reasoning: Kork v Merheb [2021] NSWCATAP 349 at [39].

Homeowners' grounds 1 and 2

The homeowners' first two grounds of appeal, superficially, appear to relate to the value of work completed. For the reasons outlined above, in the circumstances of this case, the cost of works completed by the builder does not have any direct bearing on the assessment of the amounts owing between the parties.
The homeowners' first ground of appeal, as framed, cannot succeed. However, it is apparent from the homeowners' submissions that the homeowners seek to raise as part of their first ground a broader argument, which is also raised by ground 2.
As appears, albeit not with clarity, from paragraph (c) of the homeowners' ground 2 and from the homeowners' written submissions, the homeowners really take issue with the Tribunal's findings concerning the cost to complete the contract works.
The homeowners' first ground of appeal is that the Tribunal erred in law by adopting the evidence of Mr Nguyen in relation to the cost of works completed by the builder. The homeowners focused on the assumption made by Mr Nguyen (expressed in the executive summary on page 3 and in the letter of instruction from the homeowners' solicitors appended to the report, at paragraph 4.5) that the builder had completed, or "substantially completed" the work the subject of progress payment 4 (and claimed in invoice NU041) "Lock-up, Plumbing and Electrical Rough-in Complete".
The homeowners maintained that that assumption was false and that therefore Mr Nguyen's opinion concerning the value of the work completed could not be accepted.
We observe that the Tribunal noted (at [73]) that Mr Nguyen had "assumed that the contract works had reached lock-up stage".
Paragraphs 19 - 21 of the homeowners' submissions on the appeal dated 17 May 2022 were as follows: 19. The Homeowners' case propounded below was that the costs incurred to complete the Building Works under the Contract was adduced in the evidence of Mrs Gladys McInerney in her statement of 26 April 2021. That statement annexed the Homeowners' bank statements proving payments made to complete the building works. A spreadsheet in relation to the bank statements and receipts relating to completion of the building works was also annexed. 20. The expert for the Homeowners, Mr Redfern, formed a view on his investigation of the receipts and the excel spreadsheet annexed to the statement of Gladys McInerney that the expenses incurred were fair and reasonable. He calculated those expenses to be in the sum of $558,247.75 (inclusive of GST). His original estimate of costs to complete was $564,677.00. 21. The Senior Member below wrongly and in error rejected the evidence of actual cost. It was wrongly ruled below that the tender of the receipts supporting the evidence of payments was inadmissible (this is the subject of Ground 3). No reason was ultimately given by the Senior Member for excluding the material. In addition to that denial of procedural fairness in the context of the ruling as to admissibility, the Senior Member below erred in law by failing to provide reasons for excluding the evidence."
At 33 - 35 the homeowners submitted: 33. However, Mr Nguyen Report was based on the wrong legal premise. Mr Nguyen was asked to provide an opinion on the likely costs of works completed described under stage 5 Progress Payment Schedule (noting that he proceeded on the basis of the first Rescinded Contract which had different stages itemised when the correct next Payment Claim was Payment Claim 4) and to provide a likely cost to complete the remaining of the building works. His estimate was based on a schedule of quantities prepared by him. He had no regard to the Contract. He gave no consideration to the stages of work that were purportedly finished and paid for under the Contract. His estimate was based on the assumption that the "Lock-up Plumbing and Rough in Complete" stage relating to Progress Payment 4 had in actual fact been completed. 34. The Senior Member below determined that Stage 4 had not been completed as she was not satisfied that the work was substantially complete but conversely acknowledged that the basis of the Nguyen Report was the assumption that "lock up stage" had been reached. The Senior Member accepted a quantum meruit claim calculated on the basis of work completed to and including the work the subject of Progress Payment 4 when the correct application of the law required the Senior Member to take into account payments made for completion of works including the deposit and progress payments 1,2 and 3. 35. There was simply no evidence for the Senior Member to conclude that any sum of money was due at all for Progress Claim 4. The decision was reached in an absence of evidence to support it and that absence constitutes an error of law as an absence of evidence is an error of law."
It is thus apparent that the homeowners complain that the Tribunal erred by: 1. Relying upon Mr Nguyen's evidence of the cost to complete the contract works rather than the evidence given by Ms McInerney; and 2. Failing to take account of the fact that Mr Nguyen had assumed that stage 4 "Lock-up Plumbing and Electrical Rough-in Complete" had been substantially completed, notwithstanding that the Tribunal found (at [104]) that it was not satisfied that stage 4 had been substantially completed.
The logic of the homeowners' second argument, albeit not articulated clearly, is that Mr Nguyen's approach to the calculation of the cost to complete the contract works proceeded on the basis that all the work required to complete stage 4 had been carried out and that, since the Tribunal had found that stage 4 had not been substantially completed, Mr Nguyen's calculation of the cost to complete was insufficient because it failed to include the costs to complete the stage 4 works.
The builder submitted in response that the homeowners' grounds of appeal raise no error of law. The builder submitted, in its submissions in the homeowners' appeal filed on 21 May 2022: "5.5. In short, a failure to take into account evidence is not an error of law. The complaints raised by the Owners are entirely evidentiary and cannot establish an error of law. The table of figures propounded by the Owners in paragraph 40 of their submissions do not assist the appeal panel in circumstances where no error of law is identified. The alleged failure to take into account the incomplete work forming part of PC4 does not arise in circumstances where: (a) Each party deployed an expert that used a different methodology: (i) The Builder relied on Mr Nguyen who performed an independent assessment on the assumption that all works had been carried out up to the completion of PC4, (ii) The Owners relied on Mr Redfern who did not carry out any independent costings but relied on a 2018 QS report and then made adjustments to that document taking into account his view as to the amount of work completed. (b) The Owners' complaint to this appeal panel is the same argument that was put to the learned Senior Member (i.e. Mr Nguyen did not take into account works forming part of PC4 that had not been completed). (c) This challenge was directly addressed by both parties in written submissions: (i) The Builder proposed one method of calculating the value of works (i.e. using Mr Nguyen's costing, which were accepted by the Tribunal) and making adjustments for the works forming part of PC4 that had not been completed. This resulted in a value of $575,733.81, being a few thousand dollars more than the finding made by the Tribunal of $572,237.90. (ii) The Owners made extensive submissions in reply, however they propounded the 2018 QS report costings (which were rejected by the Tribunal) and then made allowances for incomplete work forming part of PC4, which resulted in a total amount of $445,781.71.11 (d) The learned Senior Member rejected both submissions and used a third method of taking Mr Nguyen's costings and making other appropriate allowances (by using Mr Redfern's margin applied to Mr Nguyen's figures), the effect of which resulted in figure of value of works complete that came very close to that propounded by the Builder. 5.6. As the costings and methodology of Mr Redfern were ultimately rejected by the Tribunal and the value of works, as found by the learned Senior Member, effectively aligned with Mr Nguyen's figures after taking into account adjustments for incomplete work forming part of PC4, the finding was open on the material before the Tribunal and no error has been demonstrated. 5.7. The Owners' attempt to make the very same submissions that were made to the Senior Member below attempting to seek deductions for incomplete works forming part of PC4 from the finding as to the value of works being $572,237.90, cannot assist this appeal panel in circumstances where: (a) This is not a rehearing, (b) The argument was already put and expressly rejected by the learned Senior Member, presumably on the basis that the submission relied on the unreliable figures contained in the 2018 QS report, and (c) No error of law arises."
There is a glaring error of arithmetic in paragraph 5.5(c)(i) of those submissions. The value of works completed propounded by the builder ($575,733.81), which was adopted by the Tribunal in the decision at [99], includes GST. The "finding made by the Tribunal of $572,237.90" (incorporated into the Tribunal's calculations at [80]) excluded GST.
The value propounded by the builder was in fact $53,727.87 less than the finding made by the Tribunal [at 80]. For that reason, the submission at 5.6 that "the value of the works, as found by the learned Senior Member, effectively aligned with Mr Nguyen's figures after taking into account adjustments for incomplete work forming part of PC4" is simply wrong.
In its final submissions, dated 18 October 2023, the builder submitted: 9.4. The factual finding at [99] that the value of the works complete was $575,733.81 was derived from the Builder's closing submissions which: (a) Accepted that Mr Nguyen's costings included all works up to and including stage 5 (lock up). (b) Set out in detail the actual works that were completed by reference to the lay evidence in section 4. Those works included, in part, some of the works forming part of stage 5 (lock up). (c) Allowed for deductions for each Item of work that was not complete, using the factual matters set out in section 4 and the values contained in Mr Nguyen's report. which resulted in the figure of $575,733.81 being the value of all works carried out. 9.5 The central complaint raised by the Owners regarding value of works complete is that the value ascribed by Mr Nguyen assumed that the works forming part of PP4 had been substantially complete, when a factual finding was made that they had not. Whilst this certainly casts doubt as to the finding made by the Tribunal at [80] (when considering completion costs), it has no bearing on the factual finding made by the Tribunal at [99] (when considering cost of works complete). 9.6 The factual finding at [99] is consistent with: (a) The Owners' expert, Mr Redfern, agreed at first instance that the works forming part of stage 5 (PP4) were "substantially incomplete" but not entirely incomplete. This is reflected in Mr Redfern's opinion that: (i) Some works forming part of PP4 (lock up) were complete; (ii) The value of all PP4 works (lock up) was $136,943.00 plus GST or $150,637.30 inclusive of GST; (iii) The value of the incomplete works forming part of PP4 (lock up) was $71,094.00 plus GST or $78,203.40 inclusive of GST, resulting in a net value of the works performed being $72,433.90, which is close to the Tribunal's implied finding that the value of works forming part of PP4 (lock up) was $77,807.81. 9.7 The Owners must demonstrate something more than that the Tribunal was arguably wrong, they have failed to do so.
The "Tribunal's implied finding that the value of works forming part of PP4 (lock-up) was $77,807.81", referred to in the builder's final submissions at 9.6, is calculated in paragraph 8.7 of those submissions. It involves the deduction of the deposit and the three progress payments made by the homeowners from the value of works completed (as propounded by the builder in its submissions at first instance and adopted by the Tribunal at [99]).
However calculated, the proposition that the value of works carried out towards progress claim 4 was barely more than 50% of the value of the whole of the works required to achieve completion of stage 4 suggests that any calculation of the cost to complete the contract works which is based upon an assumption that stage 4 was complete must be erroneous and substantially less than the correct calculation.

Homeowners' grounds 1 and 2 - consideration

The cost to complete work which a builder has failed to complete may be established by reference to the costs actually incurred by the homeowners, where the work has been completed and evidence of the costs incurred is available (always subject to questions of mitigation and whether particular costs are challenged as either not necessary or involving a higher standard of finish than required under the contract).
Alternatively, the cost to complete may be assessed on the basis of the evidence of experts calculating the reasonable costs likely to be charged by an alternative builder.
The homeowners maintained in their submissions on the appeal that the Tribunal should have utilised the actual cost to complete as proved by evidence.
The evidence of actual costs to complete which the homeowners submitted the Tribunal should have accepted consisted of: 1. A statement by Ms McInerney dated 26 April 2021 which annexed a bundle of bank statements and the spreadsheet which was appendix C to Mr Redfern's supplementary report dated April 2021. Ms McInerney's evidence concerning the spreadsheet was: "Based upon our Westpac bank account and receipts, my daughter and I went through both and we compiled an Excel spreadsheet listing all the costs associated with completing the building works. By doing this we were able to ensure all costs associated with the building works (including those that we did not have a receipt for) were accounted for." 1. Mr Redfern's supplementary report dated April 2021, to which the spreadsheet was attached as appendix C. Mr Redfern stated that the spreadsheet was supplied by the owner and that: "4.4 [A]lthough the individual receipts have not been attached to any previous report, they have not been included in this report due to the logistics of scanning a large volume of documents of multiple size, some of which are over A4 in length, I have been instructed that these documents will be available for review at Walker Hedges Forestville offices, upon appointment if required." Mr Redfern concluded: "Based on my investigation of the receipts and Excel spreadsheet supplied by the homeowner, it is my assessment that the expenses incurred by the homeowner is a fair and reasonable account of their costs to date". At 8.1.1 Mr Redfern identified the homeowners' expenses as $558,247.57 inclusive of GST. At 8.4.3.2 Mr Redfern expressed the opinion that: "Total value of completed works by the homeowners = $558,247.75 ex GST." In appendix B to the report, under the heading "Table B3 Review of Homeowners Costs" Mr Redfern stated: "It is my expert opinion after reviewing a sample of the supplied receipts and comparing it with the Excel spreadsheet provided, that the total claim by the Homeowner is an accurate and reasonable account of their expenses."
The total amount recorded on the spreadsheet is $608,825.76 plus insurance in the amount of $7,246.51. Those two amounts equal $614,072.33, which is $558,247.57 plus GST.
Clearly, without the supporting receipts, the weight of that evidence is diminished. Moreover, there are other questions which arise on the face of the spreadsheet.
The spreadsheet includes $24,540 recorded as "Garry McInerney painting". There is no entry in the bank statements reflecting any such payment. We infer that Mr McInerney undertook the painting himself. Mr McInerney's evidence (in his statement dated 26 April 2021) was that he had been made redundant due to the COVID-19 pandemic and that he had been "trying to build a house myself".
There are also further amounts recorded on the spreadsheet, of $700, said to have been a cash payment, and $500, $8,450 and $4,000, recorded as "unpaid".
Nevertheless, the spreadsheet in conjunction with the bank statements, Ms McInerney's evidence of how the spreadsheet was prepared and Mr Redfern's evidence that he had undertaken some checking of the spreadsheet against the receipts and considered the amount identified reasonable, constituted some evidence that the homeowners had incurred expenses of $575,882.33 inclusive of GST in completing the contract work, even if the amounts recorded for painting and the unpaid and cash sums were excluded.
If that evidence were accepted, the cost to complete included in the calculation at [59] above would be increased by $148,506.05 ($575,882.33- $437,376.28) and the outcome of the proceedings would be that the builder should be ordered to pay the homeowners the sum of $143,564.27.
Contrary to paragraph 19 of the homeowners' submissions on the appeal, the homeowners' written submissions at first instance did not rely upon Ms McInerney's evidence or the spreadsheet or Mr Redfern's endorsement of the spreadsheet. Rather, the written submissions relied upon different reports prepared by Mr Redfern (dated 31 March 2021 and 2 October 2020). Those reports relied upon a report (the 2018 QS report) from a quantity surveyor who did not give evidence before the Tribunal. The Tribunal, at [74], noted the builder's criticisms of Mr Redfern's report of October 2020 including: "(2) There is nothing to suggest that Mr Redfern conducted any measurements of any kind or carried out his own independent assessment of the value of the works completed. (3) The 2018 QS report is not a contract document, it is not based on surrounding circumstances known to both parties as it was not provided to the owners until May 2021. The author has not been called to give evidence, the material and information it was based on is not known, the content and scope of the quotes referred to in the 2018 QS report which totalled $224,268 are unknown … It is inherently unreliable or irrelevant."
The builder's written submissions at first instance specifically addressed the spreadsheet annexed to Ms McInerney's statement: "10.2. The underlying invoices upon which the spreadsheet relies are not in evidence. There is little weight, if any that can be afforded to the spreadsheet in circumstances where: (a) Some of the entries on their face are embarrassing. The clearest example being the $24,540.00 charge for painting carried out by Garry McInerney. (b) There is no way for this tribunal to ascertain whether the completion costs were like for like without the underlying primary documents. (c) Some of the charges purportedly incurred, such as the $50,000.00 to Trident Design and $71,008.56 for Design Carpentry would require fulsome written contracts that comply with the requirements of Part 2 Division 1 of the Act and insurance under Part 6 of the Act. None of these underlying documents that are crucial to determine the proper completion costs are before the Tribunal. (d) The Owners were under a contractual obligation pursuant clause 30.3 to keep proper records and provide all receipts and tax invoices to the Builder within 5 business days of the works reaching practical completion. The absence of such documents to support the figures in the spreadsheet is telling. 10.3 The opinion of Mr Redfern as to provisional sum and PC item adjustments should be given no weight on the basis that the underlying facts upon which those opinions are based are not supported by the evidence (i.e. the primary invoices and receipt upon which the spreadsheet relies). No further adjustments need be made in this respect."
The homeowners' reply submissions dealt with those submissions by repeating their submissions in chief but also submitting: "52 … notwithstanding that the evidence of the receipts evidencing actual costs was disallowed, the spreadsheet does in fact provide support for the sums claimed by [the homeowners] for completion costs."
The Tribunal did not provide any reasons for not accepting the homeowners' evidence as establishing the actual costs incurred by the homeowners in completing the contract works.
As Gummow and Callinan JJ held in Dranichnikov v Minister for Immigration and Multicultural Affairs [2003] HCA 26; (2003) 77 ALJR 1088 at [24] - [25], a failure to make a finding on "… a substantial, clearly articulated argument relying upon established facts" can amount to a failure to accord procedural fairness and a constructive failure to exercise jurisdiction.
We do not consider that the Tribunal's failure to address the proposition, that the evidence of Ms McInerney and Mr Redfern in respect of the bank statements and spreadsheet established the actual costs incurred by the homeowners in completing the contract works, constituted a denial of procedural fairness or a constructive failure to exercise jurisdiction in that sense.
The submission that there was evidence of the actual costs incurred was only made in reply and, even then, only faintly. The argument cannot to be said to have been clearly articulated by the homeowners. Nor was it founded upon "established facts". The validity and accuracy of the spreadsheet was clearly disputed.
Accordingly, we do not find there was an error with respect to a question of law in the Tribunal's treatment of the evidence of actual costs.
Nor do we consider that the homeowners may have suffered a substantial miscarriage of justice in relation to the treatment of that evidence, so as to warrant the grant of leave to appeal.
However, we are persuaded that the Tribunal erred in accepting the evidence of Mr Nguyen as to the completion costs without acknowledging that, as the Tribunal held at [104], the work the subject of progress payment 4 had not been completed.
The homeowners' submissions appeared, at least in some respects, to proceed on the basis that, once it was recognised that Mr Nguyen had assumed that the work required for progress payment 4 had been completed, and it was established on the evidence that that work had not been completed, the Tribunal was required to conclude that none of the work had been completed, so that the cost of completion should be increased by the whole amount of progress claim 4.
That submission fails to recognise that the onus of proof of the homeowners' loss arising from the builder's breach of contract lay upon the homeowners. If the homeowners failed to establish that the cost of completion of the contract works exceeded the unpaid balance of the contract price (allowing for prime cost and provisional sum claims and variations), the homeowners could not recover damages from the builder in respect of the excess cost to complete.
Nevertheless, the builder's own submissions acknowledge that Mr Nguyen's calculation of the value of work completed does not make allowance for incomplete works. As we have noted at [20] above, the builder's own submissions acknowledge that the trade costs, that is costs before builder's margin and GST, of work completed were overstated in Mr Nguyen's report by $21,784.92. Logically, if work required under the contract, valued by Mr Nguyen at $21,784.92 and included in his calculation of the cost of work completed, was not in fact completed, then Mr Nguyen's calculation of the cost to complete the contract works must be adjusted by an equivalent amount.
Mr Nguyen's calculation of the cost to complete before margin and GST was $345,752. Increasing that sum by $21,785, gives an adjusted trade cost to complete of $367,537.
Adding the margin applied by the Tribunal (15% = $55,130.57) and GST ($42,266.77) gives an adjusted cost of completion of $464,934.43.
If that adjusted cost of completion is incorporated into the calculation we have set out at [59], above, the calculation is as follows: Costs to complete $464,934.43 Costs to rectify defects $84,034.00 Amount paid to the builder $563,889.84 (including the amount paid for variations) Total $1,112,858.27 Less contract price $995,852.00 Subtotal $117,006.27 Less cost of variations $94,389.90 Amount owing to the homeowners $22,616.37

Thus, the builder is liable to the homeowners for the sum of $22,616.37.
We note that the homeowners' submissions suggested that the correct adjustment to Mr Nguyen's calculated trade cost to complete should be $108,810, not $21,785. The basis upon which the homeowners suggest that figure is justified is not clearly explained. In the absence of expert evidence to support the homeowners' calculation, or a concession from the builder, we do not consider there is any basis to accept the homeowners' figures.
Although we do not consider that the Tribunal made an error with respect to a question of law in relation to the calculation of the cost to complete, we are satisfied that the homeowners will suffer a substantial miscarriage of justice if the adjustment conceded by the builder is not made. Accordingly, the result of the appeals will be that leave to appeal should be granted to the appellant in each appeal, that order 1 made by the Tribunal on 19 January 2022 is set aside, and, in lieu, an order be made that the builder is to pay the homeowners the sum of $22,616.37.

Costs

As the outcome of the proceedings has been altered only by the reduction of the amount the builder is to pay the homeowners, there is, presumptively, no reason to interfere with the costs order made by the Tribunal. Against the possibility that there is reason why a different order might be justified, we will give the builder an opportunity to file submissions in that regard, and the homeowners an opportunity to respond.
We will also make provision for the parties to make submissions concerning the costs of the appeals.

ORDERS

Our orders are: 1. The time for filing the notice of appeal in matter number 2022/00053249 is extended to 23 February 2022. 2. Leave to appeal is granted in both appeals. 3. The appeals are upheld. 4. Order 1 made by the Tribunal in proceedings HB 20/36393 on 19 January 2022 is set aside and in lieu thereof order that Nu-Stone Building Pty Ltd (the builder) is to pay $22,616.37 to Garry and Gladys McInerney (the homeowners) immediately. 5. Order 2 made by the Tribunal in proceedings HB 20/15757 on 19 January 2022 is affirmed. 6. In the event that the builder applies for a different costs order to Order 3 made by the Tribunal in proceedings HB 20/36393 and HB 20/15757 on 19 January 2022, in accordance with Order (7) below, Order 3 made on 19 January 2022 shall cease to have effect. 7. The builder may file, and serve upon the homeowners, submissions of no more than five pages, and evidence in support, seeking a different costs order to Order 3 made by the Tribunal in proceedings HB 20/36393 and HB 20/15757 on 19 January 2022 within 14 days of the publication of these orders. 8. If the builder files and serves submissions pursuant to Order (7) above, the homeowners may file, and serve upon the builder, submissions, and evidence in support, in response to the builder's submissions within a further 14 days. 9. The builder may file submissions in reply of no more than three pages within a further 7 days. 10. If either party seeks an order in relation to the costs of the appeals, or either of the appeals, (including costs incurred in relation to the appeal hearing on 24 May 2022) they may file, and serve upon the other party, submissions of no more than five pages, with any evidence in support, within 14 days of the publication of these orders. 11. If a party files and serves submissions pursuant to Order (10) above, the other party may file and serve submissions in response of no more than five pages, with any evidence in support, within a further 14 days. 12. Submissions in reply to submissions filed and served pursuant to Order (11) above, of no more than three pages, may be filed and served within a further 7 days. 13. Any submissions filed pursuant to Orders (7), (8), (10) or (11) above must include submissions concerning whether an order should be made pursuant to s 50 of the Civil and Administrative Tribunal Act 2013 (NSW) dispensing with a hearing of the relevant application. 14. If any submissions are filed pursuant to Orders (7) to (12) above, the parties are to prepare and provide to the Appeal Panel three copies of an indexed, tabbed and paginated bundle containing all submissions and evidence filed pursuant to those orders within 42 days of the publication of these orders.

Endnotes

The Tribunal's decision at [89] also quotes Mr Younan, the director of the builder, as stating that the homeowners paid $14,973.99. The difference is not material to our decision. However, we note that the builder's submissions adopt the larger figure, the homeowners' submissions adopt the smaller figure.
A third ground seeking leave to appeal was not pressed by the builder.
We note that s 62(2A) of the NCAT Act, which provides that the Tribunal cannot be required to give reasons in writing for certain interlocutory decisions, had not been enacted at the time of the hearing at first instance. 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: 20 May 2024

(2019) 100 NSWLR 578

At a glance

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Decision date

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Judgment (18 paragraphs)

Legislation Cited (1)

Cases Cited (13)

Cited By (1)