Rice v JR & SD Farmer t/a Urban Bespoke Homes

nn v Paterson Constructions Pty Ltd [2019] HCA 32 Michael Wilson & Partners v Nicholls (2011) 244 CLR 427; [2011] HCA 48 Minister for Immigration and Multicultural Affairs v Jia Legeng [2001] HCA 17; 205 CLR 507 Murlan Consulting v Ku-ring-gai Municipal Council [2009] NSWCA 300 Nakad v Commissioner of Police, NSW Police Force [2014] NSWCATAP 10 Paraiso v CBS Pty Ltd [2020] NSWSC 190 Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 Re JRL; Ex parte CJL [1986] HCA 39; 161 CLR 342 Thompson v Chapman [2016] NSWCATAP 6 Watkins v Woolworths Limited [2017] NSWCATAP 125 Xu v Jinhong Design & Constructions Pty Ltd [2011] NSWCA 277 ZFJ v ZEY [2018] NSWCATAP 76 Texts Cited: JW Carter, Carter on Contract, (Lexis Advance) Category: Principal judgment Parties: Spencer Rice (First Appellant) Elisha Rice (Second Appellant) JR & SD Farmer t/a Urban Bespoke Homes (Respondent) Representation: Solicitors: Whitehead Cooper Williams (Appellants) Respondents (Self Represented) File Number(s): AP 19/57670 Publication restriction: None Decision under appeal Court or tribunal: Civil and Administrative Tribunal Jurisdiction: Consumer and Commercial Division Citation: N/A Date of Decision: 13 December 2019 Before: S F Smith File Number(s): HB19/09932 and HB 19/19180

Background

1. Spencer and Elisha Rice (the homeowners) have lodged an internal appeal against a decision made in the Consumer and Commercial Division (the CCD) of the Tribunal on 13 December 2019 in which the Tribunal ordered that: Homeowner to pay builders $26,083.35.
2. The order related to a claim made against them by J R and S D Farmer trading as Urban Bespoke Homes (the builders) for the balance owing under a completed contract for renovations and extensions to the homeowners' home plus: 1. a provisional allowance adjustment of $13,697.05; and 2. variations totalling $4,433.85.
3. The proceedings also related to a cross-application made by the homeowners against the builders for compensation. The cross-application was essentially a defence and denial of the builders' claims.
4. Both applications were heard by the Tribunal on 28 October 2019. The builders were self-represented, and the homeowners were represented by Mr Williams, a solicitor. At the conclusion of the hearing the Member reserved his decision and made orders for the making of final submissions.
5. The Member provided written reasons for decision determining the dispute on 13 December 2019. While in his reasons, at [87], the Member said he was not upholding any of the homeowners' claims, he made no order dismissing their application.
6. The homeowners have now paid the builders the total amount owing under the order.

The appeal

1. The homeowners' notice of internal appeal was lodged within time on 24 December 2019. They sought to rely on errors of law and sought leave to appeal under clause 12 of Schedule 4 of the Civil and Administrative Tribunal Act 2013 (NSW) (the NCAT Act). Leave was sought on the grounds that the homeowners may have suffered a substantial injustice because the Member's decision was not fair and equitable and was against the weight of the evidence.
2. The appeal was first listed for hearing by phone on 27 April 2020 but was adjourned because of difficulties communicating with the homeowners' solicitor, Mr Williams. During that hearing we noted that an issue in the appeal was whether the Member had erred when he allowed the builders to recover for variations which were not in writing, which the homeowners claimed was contrary to the recent decision of the High Court of Australia in Mann v Paterson Constructions Pty Ltd [2019] HCA 32 (Mann v Paterson). This is a decision concerning a domestic building contract in Victoria. We advised the parties that the effect the decision in Mann v Paterson in NSW had recently been considered in the Supreme Court of NSW, by Fagan J, in Paraiso v CBS Pty Ltd [2020] NSWSC 190 (Paraiso). We sought submissions from the parties with respect to this appeal in the light of the decision in Paraiso.
3. The appeal was next listed for hearing by phone on 15 May 2020, when the appeal was heard.

Applicable legal principles - internal appeals

1. Section 80(2)(b) of the NCAT Act states: Any internal appeal may be made: (a) in the case of an interlocutory decision of the Tribunal at first instance - with the leave of the Appeal Panel, and (b) in the case of any other kind of decision (including an ancillary decision) of the Tribunal at first instance - as of right on any question of law, or with the leave of the Appeal Panel, on any other grounds.
2. Clause 12 of Schedule 4 to the NCAT Act states with respect to decisions made in the CCD that: An Appeal Panel may grant leave under section 80 (2) (b) of this Act for an internal appeal against a Division decision only if the Appeal Panel is satisfied the appellant may have suffered a substantial miscarriage of justice because: (a) the decision of the Tribunal under appeal was not fair and equitable, or (b) the decision of the Tribunal under appeal was against the weight of evidence, or (c) significant new evidence has arisen (being evidence that was not reasonably available at the time the proceedings under appeal were being dealt with).
3. In the present appeal the homeowners relied on errors of law and sought leave to appeal on the ground that the decision was not fair and equitable and was against the weight of the evidence.
4. In Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 at [13], the Appeal Panel said that the following are errors of law: 1. whether the Tribunal provided adequate reasons, which explain the Tribunal's findings of fact and how the Tribunal's ultimate conclusion is based on those findings of fact and relevant legal principle; 2. whether the Tribunal identified the wrong issue or asked the wrong question; 3. whether it applied a wrong principle of law; 4. whether there was a failure to afford procedural fairness; 5. whether the Tribunal failed to take into account a relevant (that is, a mandatory) consideration; 6. whether it took into account an irrelevant consideration; 7. whether there was no evidence to support a finding of fact; and 8. whether the decision was legally unreasonable.
5. The categories of errors of law that give rise to an appeal as of right, as discussed in Prendergast, are not closed.
6. The principles regarding whether leave to appeal should be granted under Cl 12, Sch 4 of the NCAT Act were set out by the Appeal Panel in Collins v Urban [2014] NSWCATAP 17 at [76]-[84]. …, it should be accepted that a substantial miscarriage of justice may have been suffered because of any of the circumstances referred to in cl 12(1)(a), (b) or (c) 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. As to the particular grounds in cl 12(1)(a) and (b), without seeking to be exhaustive in any way, the authorities establish that: (1) If there has been a denial of procedural fairness the decision under appeal can be said to have been "not fair and equitable" - Hutchings v CTTT [2008] NSWSC 717 at [35], Atkinson v Crowley [2011] NSWCA 14 at [12]. (2) The decision under appeal can be said to be "against the weight of evidence" (which is an expression also used to describe a ground upon which a jury verdict can be set aside) where the evidence in its totality preponderates so strongly against the conclusion found by the tribunal at first instance that it can be said that the conclusion was not one that a reasonable tribunal member could reach - Calin v The Greater Union Organisation Pty Ltd (1991) 173 CLR 33 at 41-42, Mainteck Services Pty Limited v Stein Heurtey SA [2013] NSWSC 266 at [153]. If in either of those circumstances the appellant may have been deprived of a "significant possibility" or a "chance which was fairly open" that a different and more favourable result would have been achieved then the Appeal Panel may be satisfied that the appellant may have suffered a substantial miscarriage of justice because the decision was not fair and equitable or because the decision was against the weight of the evidence. In order to show that a party has been deprived of a "significant possibility" or a "chance which was fairly open" of achieving a different and more favourable result because of one of the circumstances referred to in cl 12(1)(a), (b) or (c), it will be generally be necessary for the party to explain what its case would have been and show that it was fairly arguable. If the party fails to do this, even if there has been a denial of procedural fairness, the Appeal Panel may conclude that it is not satisfied that any substantial miscarriage of justice may have occurred - see the general discussion in Kyriakou v Long [2013] NSWSC 1890 at [32] ff concerning the corresponding provisions of s 68 of the CTTT Act and especially at [46] and [55].

The Tribunal's decision

1. The Tribunal heard sworn evidence from Mr Farmer and from both homeowners, as well as from the plumber and electrician engaged in the works.
2. In his reasons for decision the Member wrote: 21 The first thing to note is that there seems to have been at some stage a "variations book" in which variations were itemised and signed as the work progressed. 22 This document seems to have been mislaid during construction and the home owners attribute responsibility to the builders. Indeed, Mr Williams for the Rices wanted me to draw a sort Jones v Dunkel adverse inference against the builders as a result of the disappearance. 23 The claim by the builders for variations amounted to $4,433.85. In the absence of the book already referred to, none was in writing, costed and signed by the parties. The effect of that is that the builders cannot sue on the contract for the amounts claimed. 24 The principal document in evidence on this issue was a statement of variations which was presented by the builders to the Rices for their consideration late in the works. Having perused it they seem to have agreed to some but others were annotated and queried. The result is that these contentious variations were before me …
3. The Member then went onto consider and assess the amounts claimed for four variations. They were: 1. Gyprock to exterior ceilings instead of Hardiflex. 2. Vanity area walls. 3. Fire place TV wall. 4. Materials handling charge.
4. The Member then continued: 36 The homeowners have disputed the contested variations as not being in writing as required by the contract. Before me and in his submissions Mr Williams asserted that it would be inappropriate to allow the builders to claim a quantum meruit in the circumstances of the case. 37 His submission was that the contractual requirement of writing had in effect displaced the discretionary quantum meruit remedy which might otherwise be available. I am unable to agree. 38 I put it to Mr Williams that the modern view of this remedy addresses unjust enrichment. So to deny a quantum meruit to the builders would have the unfair effect of giving the homeowner the benefit of the builders's (sic) work and materials for nothing. 39 The remedy is firmly established. Its presence in building cases is somewhere between common and ubiquitous. It is widely applied and the principles are dealt with by the High Court of Australia in Pavey & Matthews v Paul. 40 In a final submission Mr Williams directed me to a recent High Court case of Mann v Patterson Constructions. He said the case stood for the proposition that quantum meruit was not available. 41 On my reading the decision does not effect the revolution in building and construction law that Mr Williams claims for it. 42 The High Court decided that recovery on a quantum meruit was not available where the builders had a remedy under the contract. That is not the case here. To the extent that the variations were not in writing the builders could not recover under the contract. Quantum meruit was, and remains, his only avenue for recovery.

Issues on appeal

1. At the commencement of the appeal hearing on 15 May 2020 the issues on appeal were refined. In summary, they raised the following questions for decision. 1. Whether the Tribunal erred in law by refusing to allow the homeowners during the hearing to tender and rely on a statement from Mr Long; 2. Whether the homeowners may have suffered a substantial injustice because the Member's decision not to admit Mr Long's evidence was not fair and equitable and/or was against the weight of the evidence; 3. Whether the Tribunal erred in law in allowing the builders to recover on a quantum meruit basis for variations which were not signed for and accepted by the homeowners; and, 4. If so, whether the Tribunal erred by requiring the owners to establish that the cost of variations was not fair and reasonable; 5. Whether the Tribunal erred in allowing the builders to recover for sums additional to the provisional allowances stated in the contract for plumbing and electrical works ; and, 6. Whether the Tribunal was biased (apprehended or actual).
2. It is convenient to deal with issues relating to the Tribunal's refusal to consider Mr Long's written statement first.

The Tribunal rejection of Mr Long's statement

1. During the hearing, the homeowners sought to rely on the evidence of Mr Long, a sub-contract carpenter who had worked on the extension and renovation for the builders. Mr Long's statement, dated 15 May 2019, contained evidence germane to issues such as whether variations were requested by the homeowners, why the plumbing works cost more, and whether additional sums for provisional allowances were reasonably and necessarily incurred. It also provided evidence as to what had happened to the variations book that went missing.
2. In his reasons for decision the Member explained why the homeowners had not been allowed to rely on the statement of Mr Long. This appears to be because it had not been served in accordance with the timetable, and because the builders would be denied the ability to consider and cross examine Mr Long, if the statement were admitted.
3. The transcript of the proceedings before the Member contains no reference to the statement of Mr Long not being served in time. Indeed, before us, both parties agreed that the statement had been served in time, and that there was no complaint about short service made to the Member. Rather, the transcript (with which the parties agree) shows that there was an objection to the form of Mr Long's statement made by Mr Farmer, which the Tribunal upheld. This occurred early in the proceedings. before a short break was taken to enable the parties to discuss settlement. The transcript reads - Williams: Member, may I ask that during that 10-minute break, you have a read of Mr Stuart Long's statement only because it may clarify some matters you raised - TM: Who is Stuart Long? Farmer: Stuart Long used to work for me. He now has a relationship with - Williams: He was the leading hand. Farmer. He wasn't the leading hand; he was a carpenter that worked for me on the job. He was never a leading hand. When we came to the last directions hearing, Mr Blim said that all our evidence should be taken back, all the statements that were made by our witnesses had to be in the form of an affidavit or a stat dec so we went and got all our witnesses get stat decs and affidavits including Danny our plumber, ok. We did not receive a stat dec or an affidavit from Mr Long and he is not here today to back it up. Itself not a sworn statement. Mrs Farmer: It should be thrown out. TM: Well, if they were the orders that were made - Farmer: We have a sound recording of the - we paid the $44 and we got a sound recording of that. TM: Ok. Williams: May I hand you a copy of Mr Long's statement? TM: Well I don't know whether I want to see it? If it is the case - Williams: It is part of the respondent's case. TM: Well it hasn't gone into evidence yet and the question is whether it should get admitted into evidence if an order has been made that all witness statements be made on oath, and it isn't. Isn't that the end of it. Farmer: We went to extraordinary lengths to make sure that our ones - our stuff was on oath. I don't - TM: Generally speaking, this tribunal is not bound by the strict rules of evidence and so on, but if an order has been made to that effect - I mean if I did take it into evidence, what weight would it have? Not much. I think we will have to cross later in the morning. This case is listed for 4 hours. I can't see it finishing in 4 hours. Ok? Now give it your best shot to settle if you wouldn't mind and we see how we are going.

The building contract and the Home Building Act 1989

1. The building contract between the parties is a Master Builders Association NSW Residential Building Contract (BC4). The contract is dated 22 June 2018 and is for the construction of an extension to, and renovations to, the homeowners' home for the contract price of $282,150.00. This is "residential building work" within the meaning of the Home Building Act 1989 (NSW) (the HBA): see cl 2 of Sch 1 of the Act.
2. The builders have a building contractor license under Pt 3 of the HBA.
3. The contract price exceeded the amount of $20,000 prescribed by cl 5(1)(a) of the Home Building Regulation 2014 (NSW), made under the HBA. Accordingly, by force of ss 6 and 7(1A), ss 7-7E applied to the contract and required, among other things, that the contract and variations be in writing.
4. Relevant parts of those sections in force at the date of contract provided: 7 Form of contracts (other than small jobs) (1) A contract must be in writing and be dated and signed by or on behalf of each of the parties to it. … (4) If the contract price is known, it must be stated in a prominent position on the first page of the contract. (5) If the contract price […] may be varied under the contract, the contract must contain a warning to that effect and an explanation of the effect of the provision allowing variation of the price. The warning and explanation must be placed next to the price if the price is known. 7A Offence A person must not contract to do work under a contract unless the requirements of sections 7, 7AAA and 7E in relation to the contract are complied with. Maximum penalty: 80 penalty units in the case of a corporation and 40 penalty units in any other case. 7E Terms of contracts (1) A contract must include (and is taken to include) each of the terms set out in Part 1 of Schedule 2. A contract that contains a term that is inconsistent with a term set out in Part 1 of Schedule 2 is unenforceable to the extent of the inconsistency. 10 Enforceability of contracts and other rights (1) A person who contracts to do any residential building work, or any specialist work, and who so contracts: (b) under a contract to which the requirements of section 7 apply that is not in writing or that does not have sufficient description of the work to which it relates (not being a contract entered into in the circumstances described in section 6 (2)), or (c) in contravention of any other provision of this Act or the regulations that is prescribed for the purposes of this paragraph, is not entitled to damages or to enforce any other remedy in respect of a breach of the contract committed by any other party to the contract, and the contract is unenforceable by the person who contracted to do the work. However, the person is liable for damages and subject to any other remedy in respect of a breach of the contract committed by the person.

In what circumstances can the builders recover for variations under the contract?

1. The special conditions in clauses (f), (g) and (i) of Schedule 4 are concerned with variations and increases in the cost of prime cost items. Clause (f) imposes an obligation on the builder to acknowledge verbal instructions to carry out work by text or email and for the homeowners to respond in a like manner. Clause (g) requires the homeowners to provide replies to the builders' request for instructions within 48 hours. Clause (i) requires the owner to confirm, by email or text, when the scope of works changes because of instructions given by the owner or matters outside the builder's control.
2. These special conditions do not fit comfortably with general condition 14 of the contract, relating to variations, and general condition 15, which is concerned with prime costs items and provisional sums. Cl 14 sets out how variations may occur and sets out specific and clear obligations on the parties with respect to how they are to be documented. Clause 15 contains similar provisions with respect to prime cost and provisional sums.
3. When seeking to reconcile these provisions one should construe the provisions under consideration in the context of contract as a whole and seek to give a common sense and ordinary meaning to the contractual provisions. These should not be unduly burdensome or impose unreasonable requirements on the parties: see the discussion in JW Carter, Carter on Contract, (Lexis Advance) at [12-030] to [12-050]. In the present case there is an issue, not addressed in submissions before us, as to whether the special conditions in clauses (f), (g) and (i) introduce obligations on the parties additional to those provided in the general conditions of contract, or whether the special conditions should be read as impliedly amending or in any way changing the obligations placed on the parties by general conditions 14 and 15. This is matter the Tribunal will need to consider on remittal.
4. In Paraiso Fagan J considered a question of interpretation with respect to an HBA (BC-4) contract, in which clause 14 of the contract, relating to variations, was in exactly the same form as clause 14 in the present contract.
5. That case was an appeal from an Appeal Panel of this Tribunal.
6. His Honour spent some time construing clause 14 in the light of the of the provisions of the HBA. Among other things, he found that: 1. A variation is established under clause 14(b) by: 1. express written instructions from the owner; or 2. the supply of post-contractual details such as drawings or specifications which alter or adjust the work. A variation may also be established by the discovery of an unknown condition or an instruction from a relevant authority (Paraiso at [33]). 1. The builders' consent to a variation is required for the parties to be contractually bound under cl 14 (c) (Paraiso at [34]), subject to the exception discussed below. 2. Clause 14(d) requires that the variation "be detailed in writing and signed by both parties." (Paraiso at [35 - 36]). 3. If both parties sign a variation which is detailed in writing, but are unable to agree the applicable amount, there is nonetheless a binding variation because cl 14 (f), (h) and (i) provide a means of calculation of the amount involved (Paraiso at [37]).

The decision with respect to whether there were enforceable variations

1. In the present case at par [23] of the decision, having discussed the missing variation book, the Member concluded that variations amounting to $4,433.85 were not "in writing, costed and signed by the parties". The builders, therefore, "cannot sue on the contract for the amounts claimed." The Member did not specify what those variations were.
2. Yet the Member then turned his attention to a document he described as the "statement of variations", which is a list of variations. This is a document dated 31 October 2018 which was signed by the homeowners and the builders. Mrs Rice claimed in her evidence that the homeowners were under duress when they did so, with the builders threatening to stop work if the list of variations was not signed: a matter the Tribunal did not refer to in its decision.
3. The statement is a typed list of fourteen changes to the works, some of which have values allocated to them, some of which have no costs, and two in which the cost is, "to be advised". In his decision the Member dealt with four contested variations: three of which were in the signed list of variations. They were (Italicized text was coloured red): 1. Provide gyprock with plastered joints in lieu of hardiflex with plastic joining strips to all outdoor and verandah ceilings including extra battens for fixing plasterboard to. Cost plus materials and builders margin.To be advised on final account 4. Reposition walls in vanity as per owners instructions and build shelf wall at WC. Total cost $450.00 8. Build wall to incorporate fireplace and TV. Costs plus materials and builders margin. To be advised on final account. The Member also dealt with a materials handling charge of $745.80, made by a supplier whose truck could not get on site as a variation. He allowed that claim plus the builders' margin as a variation.
4. Given that the nature of the work done, as specified in the list of variations, was not in issue and that both the builders and the homeowners had signed the variation list, the three items in contention from the list were clearly variations. Where the cost of the variation was agreed (as was the case with item 4) then the builders were entitled to recover the agreed amount.
5. Where the cost of the variation was not agreed, the builders were entitled to recover the cost calculated in accordance with clause 14(h) of the contract. This was the case with items 1 and 8 on the signed list of variations. In finding these variations payable, the Member did not consider whether the amounts claimed were calculated in accordance with clause 14(h) of the contract.

Provisional sums

1. The contract made provision for three provisional sums, inclusive of GST: ▫ Rendering $10,000,00 ▫ Plumbing and Drainage $4,500.00 ▫ Electrical $5,500.00
2. In the event, the rendering was undertaken for $10,000 by a contractor engaged by the homeowners, when the builders were unable to find a sub-contractor able to do the work at that price. The plumbing and drainage sum claimed by the builders on completion was $12,262, and $9,131 was invoiced for electrical works. Both were significantly above the provisional sums.
3. A difficulty when considering the provisional sums under this contract is that the there are no details describing what is included within the descriptions of "plumbing and drainage" and "electrical". While some details can be gleaned from a consideration of the plans, they do not assist in providing clear details and what was included in the scope of the provisional allowances.
4. There was a contest between the parties during the hearing with respect to the increase in plumbing and drainage charges. The original plan had been to hook up with the sewer line under the existing house. The builders' evidence was that, because of insufficient fall, another route was required. This required a longer pipe run. In addition, rock was struck during that pipe run, and mechanical excavation became necessary. This resulted in the increase in the provisional sum for plumbing and drainage.
5. The builders also gave evidence of the homeowners requesting other works and fittings that resulted in an increase in the provisional sums for plumbing and drainage, and for the electrical works.
6. In Paraiso Fagan J cautioned, at [146,] that when considering claims for provisional sums, if the claims are not within the original scope of works, then the issue of whether there is a binding variation changing the scope of the works to include that now claimed for, must be considered first. His Honour said; 146 If, contrary to my understanding, any of the plumbing items claimed by the defendant are for work beyond the original contract scope to which the provisional sum applied, the Tribunal on rehearing also would have to go through the steps listed at [43] above for each such claim.
7. The Member did not expressly consider whether the increases in the provisional sums were due to variations to the scope of works under the contract, and, if so, whether the variation had been made in accordance with clause 14 of the contract.

Recovery on a quantum meruit

1. In Goncalves v Bora Developments Pty Ltd [2020] NSWCATAP 9 the Appeal Panel considered the effect of the High Courts' decision in Mann v Paterson Constructions Pty Ltd [2019] HCA 32 (Mann v Patterson). The Panel said: 127 Since the hearing before us the High Court of Australia has published its judgment in Mann v Paterson Constructions Pty Ltd [2019] HCA 32, in which the Court considered the law with respect to the assessment of damages on a quantum meruit claim. While there is no simple majority emerging from the various judgments in that case, it is authority for the proposition that the amount owing under a building contract constitutes a ceiling on the amount recoverable by a builders in a quantum meruit claim relating to work performed under a contract.
2. In Paraiso, Fagan J considered the effect of the decision in Mann v Patterson in some detail, noting that the contract was one to which the Domestic Building Contracts Act 1996 (Vic) applies rather than the HBA. That Act contains requirements with respect to written contracts and variations that are not found in the NSW legislation. His Honour, nonetheless, found that the decision had some application in NSW and considered its interaction with the HBA.
3. At para 102 His Honour explained with respect to quantum meruit claims: 102 Gaegler, Nettle, Gordon and Edelman JJ have held [in Mann v Patterson] that contract rates are a ceiling upon reasonable remuneration where a builders' non-contractual quantum meruit claim arises from termination of a contract through fault of the owner. 103 It must follow in logic and in principle that contract rates will similarly be an upper limit on a quantum meruit claim that has arisen because the two parties did not sign written details of each variation, as required by cl 2A(b) and 14(d)(i) of the present contract. That circumstance may be viewed as equally the fault of both parties, or the fault of neither, or the fault of the defendant himself. The defendant should not have proceeded with any variation work without, for example, placing his signature on amended post-contract drawings and securing the plaintiff's signature, with a notation that execution of the altered work was agreed. 104 It is apparent from the Senior Member's reasons that he did not compare the amounts that he assessed as reasonable, for any of the variations, against the upper limit of a calculation in accordance with cl 14(h) and (i). For each variation under which additional work was carried out by the defendant's employees, the Senior Member should have determined what price would be arrived at by applying the labour and other rates listed in item 2 of Sch 2 of the contract and applying the 15% builders's margin in item 1. For each variation under which additional work was performed by sub-contractors, the Senior Member should have verified the amount of the sub-contractor's tax invoice and added the 15% margin to that.

Bias

1. In support of their initial grounds of appeal the homeowners claimed that the Tribunal's decision was affected by "prejudgment bias". … Tribunal Member Smith … made it abundantly clear in the first few minutes of the Hearing, with his statement referred to at 4 above and other similar statements, that he was well versed in the building industry, as someone who had a prior career in it, and that he intended to consider any claims made by the builders as prima facie valid irrespective of the breaches by the builders of the Contract terms, unless the homeowners could prove, to his satisfaction, otherwise. The Reasons for Decision are littered with references to what the builders asserted, but few if any references to either the homeowners' assertions or statements during the hearing, and none to their written material on file, on record, prior to the hearing, all of which contradicted the builders' assertions Had Mr Long been permitted to give his evidence, as a former employee of the builders and independent witness, the balance of the evidence had to favour the homeowners on every contentious point. And the record shows, as does his Reasons for Decision, that Tribunal Member Smith proceeded to hear the matter and make his decision based on that "quantum meruit'' approach and we submit that in doing so he expressed clear and unequivocal bias in favour of the builders throughout.
2. At the appeal hearing we sought clarification from the homeowners' solicitor about what was meant by prejudgment bias: apprehended or actual bias based on pre-judgment? The answer was both.
3. In ZFJ v ZEY [2018] NSWCATAP 76 the Appeal Panel considered the law with respect to actual bias: The principles to be applied in determining whether a decision maker demonstrates actual bias are explained by Gleeson JA in the NSW Court of Appeal's decision in Reid v Commercial Club (Albury) [2014] NSWCA 98. His Honour set out the relevant principles as follows: A finding of actual bias is a grave matter: Sun v Minister for Immigration and Ethnic Affairs (1997) (Sun v Minister) 81 FCR 71 at 127 per Burchett J. Authority requires that an allegation of actual bias must be distinctly made and clearly proved; that such a finding should not be made lightly; and that cogent evidence is required: South Western Sydney Area Health Services v Edmonds [2007] NSWCA 16 at [97] and the authorities there cited. Where the issue is actual bias in the form of prejudgment, the appellant had to establish that the primary judge was "so committed to a conclusion already formed as to be incapable of alteration, whatever evidence or arguments may be presented": Minister for Immigration and Multicultural Affairs v Jia Legeng [2001] HCA 17; 205 CLR 507 at [72] per Gleeson CJ and Gummow J (Hayne J agreeing at [176]). See also Kirby J at [127]. As Gleeson CJ and Gummow J observed in that case at [71]: "The question is not whether a decision-maker's mind is blank; it is whether it is open to persuasion." In the same case, Hayne J noted at [185] the several distinct elements underlying the assertion that a decision-maker has prejudged or will prejudge an issue, or the assertion that there is a real likelihood that a reasonable observer might reach that conclusion. The first is the contention that the decision-maker has an opinion on a relevant aspect of the matter in issue in the particular case. The second is the contention that the decision-maker will apply that opinion to the matter in issue. The third is the contention that a decision-maker will do so without giving the matter fresh consideration in light of whatever may be the facts and arguments relevant to the particular case. His Honour observed at [186] that allegations of actual bias through prejudgment often fail at the third step he had identified. This was because notwithstanding whatever expression of preconceived opinions by the decision-maker, it does not follow that the evidence will be disregarded. The test of actual bias in the form of prejudgment requires an assessment of the state of mind of the judge in question: Michael Wilson & Partners Limited v Nicholls & Others [2011] HCA 48; 244 CLR 427 at 437 [33]. However, actual bias need not be confined to an intentional state of mind. Bias may be subconscious, provided it is real: Bilgin v Minister for Immigration and Multicultural Affairs (Bilgin v Minister) [1997] FCA 1022; (1997) 149 ALR 281 at 289-290 per Finkelstein J; Sun v Minister at 127 per Burchett J and 135 per North J. As Finkelstein J said in Bilgin v Minister at 290: "The wrong involved is the failure to decide a case impartially. Whether that failure was deliberate or not should be beside the point insofar as the validity of the decision is concerned." The circumstances in which actual bias can be demonstrated solely from the published reasons for decision must be considered to be rare and exceptional: SCAA v Minister for Immigration and Multicultural and Indigenous Affairs [2000] FCA 668 at [38] per von Doussa J, who explained: "... Reasons for decision reflect conclusions reached at the end of the decision making process, and if the decision is against the party complaining, the expression of adverse findings on credit and fact are an inevitable part of the expression of the reasons. The mere fact of adverse findings at the end of the matter give rise to no inference as to the state of mind of the decision maker before and whilst the matter was under consideration, nor of prejudgment of the issues that fell for decision. Even where it is possible to show that the adverse findings or some of them are contrary to the evidence or unreasonable, or that the reasoning process is hopelessly flawed, that without more is unlikely to demonstrate that the decision maker had embarked on the case with a closed mind, not open to persuasion. However, where the party alleging actual bias can point not only to an adverse judgment containing demonstrable error but also to conduct by the decision maker antithetical to that party's interests such as a hostile attitude throughout the hearing or ... an inference of actual bias by prejudgment might then be more readily drawn. But even then the circumstances are likely to be rare and exceptional that the combination of factors and circumstances will clearly prove actual bias ." [Citations omitted.]

Conclusion

1. Having decided to allow the appeal we will: 1. set aside the decision on appeal; and 2. remit the applications to the CCD for reconsideration in full before a differently constituted Tribunal with such further evidence as the Tribunal may allow.

Costs

1. In this case, as the amount in dispute on appeal is less that $30,000 (see rule 38 and 38A of the Civil and Administrative Tribunal Rules 2013 (NSW)), each party is to bear their own costs, unless the Tribunal finds that special circumstances exist: see s 60 of the NCAT Act.
2. Any application for costs should be made in accordance with the orders set out below.

Order

1. The Appeal Panel makes the following orders: 1. Leave is granted to the appellants to appeal the decision made in the Commercial and Consumer Division of the Tribunal on 13 December 2018 with respect to the applications bearing the file numbers HB19/09932 and HB 19/19180. 2. Appeal allowed. 3. The decision made by the Tribunal on 13 December 2018 is set aside. 4. The applications are remitted to the Commercial and Consumer Division for reconsideration in full before a differently constituted Tribunal with such further evidence as the Tribunal may allow. 5. If any party seeks to make an application for costs of the appeal: 1. that party is to so inform the other parties within 14 days of the date of these reasons; 2. the applicant for costs is to lodge with the Appeal Panel and served on the respondent to the costs application any written submissions of no more than five pages on or before 14 days from the date of these reasons; 3. the respondent to any costs application is to lodge with the Appeal Panel and serve on the applicant for costs any written submissions of no more than five pages on or before 28 days from the date of these reasons; 4. any reply submissions limited to three pages are to be lodged with the Appeal Panel and served on the other party within 35 days of the date of these reasons; 5. the parties are to indicate in their submissions whether they consent to an order dispensing with an oral hearing of the costs application, and if they do not consent, submissions of no more than one page as to why an oral hearing should be conducted rather than the application being determined 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: 13 October 2020