Phan Building Services Pty Ltd v Dang

NCAT Appeal Panel|2015-11-06

Solicitors: Gavel and Page Property and Construction Lawyers - Appellant Borak & Co Solicitors - Respondent File Number(s): AP15/46574 Decision under appeal Court or tribunal: Civil and Administrative Tribunal Jurisdiction: Consumer and Commercial Division Date of Decision: 8 July 2015 and 2 October 2015 Before: C Paull, Senior Member File Number(s): HB 13/43932

Introduction

The appellant ("Phan") appeals the decision made in the Consumer and Commercial Division of the Tribunal, which was published on 8 July 2015.
The Tribunal dismissed Phan's application seeking damages for allegedly unpaid work, for wrongful determination of a contract made between Phan and the respondent ("Dang") and an alternative claim under quantum meruit.
On 2 October 2015, the Tribunal made a decision in respect of the costs of the proceedings ("the costs decision"). The Tribunal ordered Phan to pay Dang's costs. The costs decision has also been dealt with in this appeal, both parties having made submissions in respect of the issue.

Scope and nature of appeal

A party may appeal against an "internally appealable decision" of the Tribunal as of right on any question of law, or with the leave of the Appeal Panel on any other ground: s 80(2)(b) of the Civil and Administrative Tribunal Act 2013 (the NCAT Act).
Where, as in this case, the decision under appeal is a decision of the Consumer and Commercial Division of the Tribunal, the Appeal Panel may only grant leave to appeal where the appellant may have suffered a "substantial miscarriage of justice" because the decision under appeal was not fair and equitable, against the weight of evidence, or significant new evidence has arisen: cl 12(1) of Schedule 4 to the NCAT Act.

Background to dispute and Tribunal's principal decision

On 16 October 2012 Phan, as builder, entered into a contract with Dang who was the owner of land in Bankstown, for the erection of a residence at a fixed price of $875,000. The Tribunal found that Mr Doan acted at all times as agent for Dang and signed the contract on her behalf with her authority.
Subsequently, by agreement between the parties, the fixed price contract was varied and substituted by an agreement that Phan was to be paid on a cost plus basis, namely that he would receive 9% as his fee for constructing the residence in addition to the actual costs incurred. Such variation could have been made under clause 13 of the written agreement. Pursuant to this procedure, Phan was to provide Dang with a written notice describing "the work and price to be varied". The parties did not follow this procedure and the new agreement was not reduced to writing.
The Tribunal found that the parties agreed that Phan was to be paid on a cost plus basis described above as a result of the oral variation to the written contract.
At some unspecified stage, Mr Doan took out home owners warranty insurance. On or about 13 June 2013 the contract was terminated by Mr Doan. The residence was then completed either by Mr Doan or his contractors.
Accordingly, Phan sued to recover 9% of the total value of the completed building work, either for damages for breach of contract, or on the basis of quantum meruit.
Mr Sims, Phan's expert witness, provided an expert valuation of the completed building work. The value of the completed building was estimated to cost $1.7m.
The Tribunal found that the parties had agreed that Phan would be paid 9% of the total cost of construction and that there was no stipulation that such 9% was limited to the actual cost of construction Phan performed. However, the Tribunal, referring to the authority of Xu v Jinhong Design & Construction Pty Ltd (2011) NSWCA 277 found that Phan was precluded under the Home Building Act 1989 (NSW) from recovering the 9% payment by way of contract since the variation was not reduced to writing.
The Tribunal then considered whether Phan was entitled to recover on the basis of a quantum meruit. The Tribunal stated (at [63]: The difficulty applicant faces is that Mr Sims' evidence clear, detailed and uncontradicted costing is based on the total cost of all construction, either as at completion or up to June 2013, when the applicant ceased to work on site.
At [64] the Tribunal said: Mr Sims' evidence may have assisted the applicant if it was able to enforce the oral 9% cost plus the payment variation. It does not assist the applicant to establish the cost of the building work the applicant actually performed.
At [65] the Tribunal said: I have also considered the applicant's invoices which are in evidence; the parties competing submissions as to the applicant's entitlement to payment for supervision and Mr Sims' assessment of the reasonable hourly rate of a cost of such supervision.
The Tribunal concluded (at [66]): Ultimately, however, I accept the respondent's submission that it is the applicant who bears the onus of proof and in considering the applicant's case for quantum meruit, I find that he has not discharged that onus.
The Tribunal, in summary, took the view that the applicant had failed to establish the value of his claim for applying the quantum meruit.

Notice of Appeal

In summary, Phan submits that the Tribunal erred on a question of law by: 1. Finding that it had not discharged its onus of proving its case in quantum meruit, and/or 2. Finding that Phan's entitlement on quantum meruit was 9% the cost the building work Phan had actually performed (to the extent that was different to 9% of the total cost of construction) rather than 9% of the total cost of construction and 3. Failing to take into account, or giving inadequate reasons for rejecting, the evidence of the expenses of $5,856.77 incurred by Phan as set out in invoice R13 dated 18 July 2013.
Phan seeks leave to appeal on the basis that the decision was not fair and equitable in that the Tribunal's claimed are: 1. Errors on an issue of principle, which are plain, readily apparent and central to the Tribunal's decision; 2. Errors which were unreasonably arrived at, found in an unorthodox manner, and clearly mistaken, leading to clear injustice in the deprivation of the appellant of a monetary award he was entitled to at law.

Appellant's submissions

Phan submits that the Tribunal has misdirected itself. Phan points to the fact that the parties (as found by the Tribunal) had agreed that Phan was to be paid 9% of the total cost of construction; that the construction work was performed by Phan until approximately 13 June 2013 and that there was no dispute as to such fact; that Mr Sims gave evidence of a total costs of construction up to June 2013.
Phan maintains that the Tribunal failed to take such evidence and findings into account. Further, it submits that the Tribunal misdirected itself as to a matter of law in failing to characterise the basis of a quantum meruit as payment of 9% of the total cost of construction until June 2013. Phan claims that the Tribunal misdirected itself in finding that Phan's entitlement on quantum meruit was the cost of the building work which it actually performed.
Phan maintains that the Tribunal failed to give adequate reasons for rejecting the evidence of expenses of $5,856.77 incurred by Phan as set out in Invoice R13 dated 18 July 2013.
In summary, Phan submits that the Tribunal failed to award it the amount to which it was entitled at law on a quantum meruit, namely $50,428.80 being 9% of the costs of construction to June 2013. Such figure is claimed at $61,358.70 less $16,786.67 already paid, plus the $5,856.77 expenses. Phan maintains that the decision was unreasonably arrived at and was found in an unorthodox manner and clearly mistaken.

Consideration of the appeal in respect of the principal decision

For the reasons provided hereunder, the Appeal Panel considers that the Tribunal made no error, as alleged, in determining that a quantum meruit could not be awarded to Phan.
In Sopov & Anor v Kane Constructions Pty Ltd (No 2) (2009) 257 ALR 182 the Supreme Court of Victoria, Court of Appeal, said: The proper approach to assessment of a quantum meruit claim is, as the trial judge said, to ascertain the fair and reasonable value of the work performed. Axiomatically, the measure of the restitutionary remedy is the value of the benefit conferred on the party which received it. Once it is accepted that the quantum meruit claim is available independently of the contract, then it follows - as Meagher JA said in Renard - that it would be extremely anomalous if the defaulting party could involve the contract which it has repudiated to impose a ceiling on the amounts recoverable.
Their Honours (Maxwell P, Kellam JA and Whelan AJA) made such observation having adopted the observations of Blue J in Design Joinery & Doors Pty Ltd v Ipower Pty Ltd & Anor [2015] SASC 93 where his Honour said: 104. The amount recoverable in quantum valebat and quantum meruit is the fair and reasonable value of the goods supplied or work performed. While the question to be determined is the value of the benefit conferred on the defendant, often the best measure of the value will be the cost to the plaintiff of procuring the goods or performing the work together with a a reasonable margin for overhead and profit.
In Gray (Constructions) Pty Ltd v Hogan (NSWCA) CA40365/98, the Court of Appeal (Mason P, Sheller JA and Heydon JA) held that quantum meruit was not to be assessed only by reference to the value to the recipient of the work performed. Mason P said, inter alia, at [10]: The parties before us agree that his Honour was in error. There will be cases where such an approach is called for, but not in relation to the valuation of a claim made 'on a quantum meruit' for goods and services freely accepted under an arrangement such as the present one in which an intended underlying contract is rendered unenforceable by statute. The appellants submits and the respondent accepts that the correct approach is to determine a reasonable remuneration for the builder, including remuneration which includes a reasonable profit element (see Renard Constructions (MT) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 at 276; Brenner v First Artists Management Pty Ltd [1993] VR 221 at 262-3).
The basis for a payment to be made by way of a quantum meruit was considered in Iezzi Constructions Pty Ltd v Watkins Pacific (Qld) Pty Ltd (1994) 2 QdR 350. At 357 Fitzgerald P referred to the observations of Deane J in Pavey and Matthews v Paul (1987) 162 CLR 221. At 357 Fitzgerald, referring to the extract of Deane J in Pavey at 257 said: In a category of case where the law recognises an obligation to pay a reasonable remuneration or compensation for a benefit actually or constructively accepted, the general concept of restitution or unjust enrichment is, as is pointed out subsequently in this judgment, also relevant, in a more direct sense, to the identification of the proper basis upon which the quantum of remuneration or compensation should be ascertained in that particular category of case.
At 358 Fitzgerald P said: Ordinarily, that will correspond to the fair value of the benefit provided (eg remuneration calculated at a reasonable rate for work actually done or the fair market value of materials supplied). In some categories of case, however, it would be to affront rather than satisfy the requirements of good conscience and justice which inspire the concepts or principle of restitution or unjust enrichment to determine what constitutes fair and just compensation for a benefit accepted by reference only to what would represent a fair remuneration for the work involved or a fair market value of materials supplied.
McPherson JA said at 362: Once the contract is gone, it is the law that must determine whether payment should be made for the work done, and not the terms of an agreement that the parties have by their words and conduct finally put aside and discarded.
These principles establish that Phan, in view of the inability to enforce the original contract, is entitled to be remunerated for the reasonable cost of the work he has done and for money which he has expended: see Meagher JA in Reynard Constructions at [8]. Further, the moneys which may have been payable to the appellant under the contract should be disregarded: see above extract of McPherson JA in Iezzi. The contract has no "continuing influence" when the value of the work is being assessed on a quantum meruit: see Sopov at [21].
Phan's quantum meruit claim included a percentage charged at 9% on the whole of the works done on Dang's building site, from the time of commencement up to and including the date of termination. That claim included: 1. The materials supplied by Phan; 2. Work done on the site by Phan; 3. Work of subcontractors on the site who had been organised by Mr Doan.
The Tribunal rejected the submission that the last mentioned category of work, namely work organised by Mr Doan on the site, was work performed by the appellant. For this reason the Tribunal found that it was impossible to value the work Phan had performed since it included work done by Doan. The whole value of the work done on the site was claimed by Phan to attract 9%.
The purpose of the quantum meruit is to recompense the builder for value of work performed for the respondent and materials provided. If the other party had known that the claimant expected to be paid, and if it had a reasonable opportunity to reject the goods or services and did not do so, the claimant is entitled to say that the other party's failure to do so is the foundation for the claim: see The Law of Restitution Goff and Jones, 6th ed at 1-057.
However, the work must be performed by the claimant (the builder), or the builder must have provided materials and/or services. The essence of entitlement to payment under quantum meruit by way of restitution, the work or services must be performed by the claimant: the established principle is succinctly stated as follows: Where one party has absolutely refused to perform, or has rendered himself incapable of performing, his part of the contract, he puts it in the power of the other party either to sue for a breach of it, or to rescind the contract and sue on a quantum meruit basis for the work actually done [emphasis added]; De Bernardy v Harding (1853) 8 Exch 822 at 824 per Alderson B. See also Luxor (Eastbourne) Ltd v Cooper [1941] AC 108 at 140-141, [1941] 1 All ER 33 at 55, HL, per Lord Wright.
Phan claims that because it had control of the site up to the date of termination of the contract and that it was necessary to give access to the site by the subcontractors engaged on Mr Doan and, to secure the site on completion of their works, therefore Phan is entitled to charge a percentage of that work.
The Appeal Panel rejects such contention. Phan did not arrange for the subcontractors to perform such works, nor did Phan take part involved in any such works. The evidence does not support a conclusion that Phan supervised the subcontractors. In these circumstances there is no basis for the submission that because the works performed by subcontractors organised by Mr Doan were works on the site, this factor of itself entitles a percentage of such works to be included.
Accordingly the Appeal Panel rejects the submission that the percentage can be charged on all work on the site performed prior to the termination of the contract.
We accordingly conclude that Phan's claim for quantum meruit should be rejected, on the same basis as that found by the Tribunal member, as Phan had not provided evidence of the value of the work it had undertaken, as opposed to the total value of construction. Without evidence of the value of the work it had undertaken, Phan could not establish a case in quantum meruit. We are not satisfied that the Tribunal's erred in law in respect of its findings on the quantum meruit issue, or that the Tribunal's decision was not fair and equitable.
One further issue remains, namely the status of an invoice identified as invoice R13 as referred to earlier in this decision. Before the Appeal Panel, Phan referred to the several items contained in the final invoice. Phan submits that invoice R13, being the last invoice rendered by Phan to Dang included claims which were clearly those incurred by Phan which had not been taken into consideration.
While it is the case that the Tribunal's reasons for decision make no specific reference to invoice R13, it is by no means apparent that this was specifically raised before the Tribunal as a separate claim. However, as noted at [16] above, in [65] of the principal decision the Tribunal identifies that all of Phan's invoices which were in evidence were considered.
The Appeal Panel is not satisfied that the Tribunal erred in not specifically referring to invoice R13, when it is clear that the Tribunal stated that it had considered all invoices in evidence. Furthermore, we are not satisfied that the Phan has established that the circumstances giving rise to invoice R13 would justify any additional payment by way of quantum meruit, beyond the payment Phan had received. For this reason the Appeal Panel is not satisfied that any error has been established in respect of invoice R13.
The Appeal Panel has accordingly refused leave to appeal and dismissed the appeal in respect of the principal decision.

Appeal on costs

Phan submitted that the Appeal Panel should exercise its jurisdiction under s32(2)(a) of the NCAT Act to vary the costs order made in the proceedings below.
Phan makes such submission, asserting that the costs decision is ancillary to the principal decision. Accordingly, it seeks leave of the Appeal Panel to challenge the costs order.
Dang acknowledges that an award of costs is an ancillary proceeding: s4 of the NCAT Act. Accordingly leave is required to appeal the costs order unless a question of law is involved: s80(2)(b) of the NCAT Act.
As noted above, since this appeal is from a decision of the Consumer and Commercial Division, the issue of leave is provided for in cl.12 of Sch 4 of the NCAT Act, The Appeal Panel notes the Submissions in Reply on Costs filed by Phan, which submits that, despite the requirements of cl 12 of sch 4, the Appeal Panel retains a residual discretion to award costs as described in Collins v Urban [2014] NSWCATAP 17 at [8]; and as referred to in Wilair Building Supplies v Brereton [2015] NSWCATAP 3 at [13].
However, as is apparent from such decisions, the residual discretion exists to grant leave once a substantial miscarriage of justice has been established. Neither Wilair nor Collins suggest that the discretion referred to arises in the absence of any substantial miscarriage of justice.
Phan submits that it was "required to fight a case on a raft of issues, on the Member's own analysis, it was substantially successful on, save for one narrow and discrete point". Phan submits that it should not be liable for the costs of the matters upon which it was successful, and such costs order, as was made, constitutes a substantial miscarriage of justice.

Findings in relation to the costs decision

The Appeal Panel has considered the costs decision delivered on 2 October 2015 which followed upon the delivery of the principal decision delivered on 8 July 2015. It is apparent that the Tribunal fully considered the submissions of both parties, and that its costs decision was based primarily upon the fact that Phan was placed on notice on 28 October 2014 that there was a fundamental obstacle to a successful recovery action because the variation to the building contract was not in writing as required by the Home Building Act 1989, and was therefore unenforceable.
That warning was repeated at the commencement of the hearing on 23 February 2015. Phan chose to ignore the warning and proceeded with litigation which was doomed to fail.
The Tribunal considered Phan's submissions that it had been successful on several issues, but was unsuccessful only because of the unenforceability of the written variation. Nevertheless, the Tribunal concluded that Phan had "persisted in prosecuting the matter". It was this fact which resulted in the costs order.
The Appeal Panel is unable to determine any error in the costs decision, and there is no basis for submitting that the discretion to award costs has miscarried, in the sense discussed in House v The King.
Accordingly, leave to appeal the costs decision is refused.
The Appeal Panel orders: 1. Leave to appeal is refused and the appeal is dismissed, both in respect of the principal decision and the costs decision. 2. Should either party seek costs of the appeal, an application and supporting submissions are to be filed within 14 days of the publication of this decision; any submissions in reply are to be filed within 14 days thereafter and, subject to the parties' submissions, the costs decision will be made on the papers.

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: 23 February 2016

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