In the following reasons, we will refer to the appellant, Rockwell Constructions Pty Ltd as the Builder, and the respondents, Mr and Mrs Llamas, as the Homeowners.
This is an appeal in relation to matters HB 16/51356 and HB 17/04946. In matter HB 16/51356, the Homeowners brought a claim for defective and incomplete home building work arising out of home building by the Builder. Their claim was brought pursuant to a home building contract between the parties dated 19 May 2014 for a contract price of $435,000.00 (the Contract).
In matter HB 17/04946, the Builder claimed $30,039.39 for outstanding payments, loss of profits and liquidated damages as of the date of termination of the contract. For the reasons set out in the Tribunal's decision of 23 May 2018 (the Decision), the Tribunal allowed $15,000.00.
In the result, the Tribunal ordered the Builder to pay the Homeowners the sum of $105,402.82 immediately.
The Builder appeals from the Decision. For the following reasons, the appeal is allowed and the matter remitted to the Tribunal (constituted by a member other than the member who made the decision) for the redetermination.
[2]
Amended Notice of Appeal
The critical matter raised in this appeal is whether the Tribunal erred in its finding that the Contract was terminated by the Homeowners in November 2016.
The first reference to this in the reasons for Decision is at par [15]. Paragraphs [6] to [15] under the heading "Common Facts":
As a result of the disputes, there was a stand-off between the parties extending from April 2016 until about November 2016. The Contract was terminated by the Applicants in November 2016 and the Applicants retained independent tradespeople to complete the home in 2017.
It is not clear what the Tribunal had in mind when it referred to this as a "common fact". It was not an agreed fact. That is clear from the points of claim and points of defence filed by the parties in the proceedings before the Tribunal. Perhaps, although as we say it is not clear, the Tribunal was simply foreshadowing its ultimate finding. What is clear is that the Builder asserted that the Homeowners' purported termination of the Contract was an act of repudiation.
The next reference to termination of the Contract appears in in the section of the Decision headed "Termination", the critical finding appearing in par [37]. To make sense of this paragraph it is appropriate to set out the entirety of pars [34] to [40]:
Termination
34. This resulted in a sequence of events which had the effect of the Contract being terminated. The Respondent sought variations and therefore additional funds from the Applicants to meet item costs for the house which exceeded the allowances made in the Contract for both Timber Flooring and Kitchen. The Applicants' response was that they considered that they had agreed to a fixed price for these sums in the Contract and did not expect or propose to pay additional funds or agree to a variation on the Contract price of $435,000.00.
35. The disconnect between the Applicants and the Respondent about these two issues is evident in the flow of correspondence attached to the affidavit of the Applicant's solicitor dated 27 September 2017. The Respondent issues a variation of the Contract based on the over-allowance estimates for the Kitchen and Timber Flooring. The Applicants, whose funds were limited to the Contract price, refuse to pay saying these items were included in the Contract.
36. The Tribunal listened carefully to the evidence of Mr Mehcur for the Respondent and Mrs Llamas for the Applicants on this issue. The Tribunal considered the evidence of both parties was honest and true but that it merely represented their differing perspective of these issues in the Contract. Contrary to the written submissions made by the parties' lawyers, the Tribunal did not find either witness to lack honesty or to be misleading. The evidence given by the two proponents merely represented their view of a misunderstanding in the Contract which they failed to satisfactorily resolve with the other party before the Contract was terminated.
37. This proved unfortunate because the Tribunal considers that a mediation session at this point with both parties involved explaining the difference in interpretation of the Contract and seeking some middle ground would most likely have been successful in resolving this issue and permitting the Respondent to complete the outstanding work cost-effectively under the Contract. As it was an amount of about $10,000 was at stake at this point. As a result of that resolution failing to occur, the Applicants were required to terminate the Contract and retain third parties to complete the building work at greater expense, and for the Respondent to be deprived of the balance of proceeds of the Contract for not completing it.
38. The Applicants made bold written submissions about the effect of all this. First they said that in respect of the allowance for the Kitchen in the Contract, the Respondent decreased it without the Applicant's knowledge thereby repudiating the Contract for dishonest conduct (Kitchen - 25.vii). The same submission was made in respect of the Flooring (Timber Flooring - 25.vii). Similarly the Applicants talk of the Respondent's 'repudiation' of the Contract at (15) and (29) - a common law concept. The Tribunal declines to accept these submissions.
39. The Tribunal finds however that as a result of a failure to agree on amounts for the Kitchen and the Timber Flooring, the Contract was terminated prospectively by a process which began with the Notice of Default dated 11 May 2016 (HOE104) and was completed with the Notice of Termination dated 9 November 2016 (HOE 105-6). The Respondent did not dispute these notices but maintained some willingness at least in correspondence to complete the building works. For this reason, the Respondent claims that the Applicants' claim should be dismissed because it was always ready, willing and able to complete the outstanding work under the Contract. This analysis however must fail first, because the evidence confirmed that the Respondent would only agree to do further work if payments were made to it in advance and secondly, it did not address the outstanding defective home building work for which it had already been paid.
40. Relevantly the operative nature of Clause 25 of the Contract is prospective and distinct from the common law concept of repudiation as a result of some breach of a fundamental term of the Contract. Relevantly Clause 25 states that if the Contract is terminated due to the fault of the contractor - as occurred here - then …'if the reasonable cost of completion of the work exceeds that which would have otherwise been due under the Contract the difference will be a debt payable by Rockwall to the owner'. That is the circumstance here and the examination to which the Tribunal now turns.
(Our emphasis)
The Builder submits that the Tribunal fell into error in its reasoning in pars [34] to [40]. The Builder submits that the Tribunal ought to have held that the Homeowner's purported termination amounted to repudiation of the Contract. In particular, the Builder submits the Tribunal erred in holding that "as a result of that resolution failing to occur the [Homeowners were] required to terminate the contract…". The Builder submits that the Homeowners were not required to terminate the contract. It says the appropriate enquiry was whether the respondent's termination was permissible under the contract in the circumstances. It submits that the Homeowners were not so entitled, that the purported termination was invalid and that it constituted a repudiation. In the circumstances, the Builder submits that the Homeowners were not entitled to the damages that were awarded and that, further, the Tribunal should have upheld the Builder's claim for damages in whole.
In short, the Builder submits that the Tribunal was wrong in finding that the Homeowners were "required" to terminate.
In response, the Homeowners submit that the highlighted passage of par [37] cannot and should not be construed as a final determination of the rights between the parties. They submit the key findings are in fact set out in par [39] and based on the Builder's own evidence, namely that the Builder refused to pay back the sums overpaid by the Homeowners in respect of incomplete work, would only undertake further work if payments were made in advance (contrary to the terms of the Contract) and failed to address defective building work which had been the subject of written correspondence between the parties since at least November 2015.
The Homeowners submit that, in par [39] of the Decision, the Tribunal determined that:
1. the parties had failed to reach agreement with respect to amounts for the kitchen and timber flooring in excess of the allowances for those items;
2. the Homeowners had terminated the Contract by notice dated 9 November 2016, following a notice of default served in May 2016;
3. the Builder, by failing to answer or otherwise dispute those notices, accepted those notices as validly made and effective in accordance with their terms;
4. the Homeowners' termination of the contract was not a repudiation since the Builder's evidence was that it was unwilling to carry out its obligations under the Contract in respect of incomplete work and required payment in advance before further work was undertaken, in circumstances where it had been paid in accordance with the terms of the contract by way of progress payments and payments for two variations to the contract price;
5. the Builder failed to address the outstanding defective home building work for which payment had already been made.
The Homeowners further submit that while they agree that a proper question for determination on appeal was whether the termination of the Contract was permissible, they submit that the termination by notice was a valid exercise of their rights under the Contract. They say that, by at least 15 August 2016, the Builder had breached the Contract by:
1. failing to issue any notices of completion entitling the request for progress payments as required by clause 12 of the contract;
2. requiring payment of progress payments where it was established by joint expert evidence that the works had not reached the percentage completion on which such payments were to be made;
3. refusing to undertake any further work without payment in advance; and by declining to address defective building work which had been notified to it since November the previous year.
In summary, the Homeowners say that the position taken by the Builder's email of 15 August 2016, in refusing to repay monies and requiring payment in advance before any further works to be undertaken, meant that the Homeowners were in fact faced with no other choice but to terminate the Contract. They submit that they did not repudiate the contract; that they terminated the Contract for breach; and that this termination was accepted by the Builder which was neither ready, willing or able to complete the works pursuant to the Contract, including the remedying of the defective works.
[3]
Consideration
Shortly after the commencement of the hearing we raised with counsel for both parties whether the reasons given for the Tribunal's Decision were adequate.
The principles in this area are well known. They include the following:
1. the content and detail of the reasons for decisions will vary according to the nature of the jurisdiction which the body in question is exercising, as well as the consideration of the particular matter the subject of the decision: Wesfarmers General Insurance Ltd v Jameson [2016] NSWCATAP 136 at [39];
2. the reasons should explain how the decision maker arrived at his conclusion. This involves reference to the relevant evidence; the relevant facts being set out and the reasons for making the relevant findings of fact: Beale v GIO of NSW (1997) 48 NSWLR 430 at 443;
3. reasons for decision need not be highly detailed and they should not be examined with an overly critical eye: O'Brien v Twyman [2016] NSWCATAP 125 at [51];
4. it is essential to expose the reasoning on a point critical to the contest between the parties: Keith v Gal [2013] NSWCA 339 at [117];
5. a judge (here the Tribunal member) should provide reasons for making the relevant findings of fact (and conclusions) and reasons in applying the law to the facts found. Those reasons, or the process of reasoning, should be understandable and logical: Beale at 444;
6. there is a balancing act which needs to be undertaken in considering the sufficiency of a statement of reasons, which involves the adoption of, at the least, a minimum standard which places the parties in a position to understand why the decision was made sufficiently to allow them to exercise any right of appeal: Beale at 443.
Beale is also authority for the proposition that an appellate body (here, the Appeal Panel) will reserve any intervention for situations in which it is left with no choice: that is, where no reasons have been given in circumstances where there was an obligation to provide them, and in circumstances where a statement of reasons is so inadequate as to constitute a miscarriage of justice.
Applying these principles, we cannot be satisfied that the Tribunal has given adequate reason for its finding that the contract was validly terminated by the Homeowners. We accept the Builder's submission that the reasoning on this issue is limited to what appears in par [37], namely that the Homeowners were required to terminate by the failure of a mediation process. Save for the mooted mediation, there is no explanation as to how the Tribunal came to this conclusion.
We are not persuaded by the Homeowners' submission that the reasons for Decision otherwise support a finding that the termination by notice was a valid exercise of their rights under the Contract. To take but one example, there was a dispute about whether or not the Builder was ready, willing and able to complete the Contract. The Tribunal found at [39] that the Builders' claim must fail:
first, because the evidence confirmed that the Respondent would only agree to do further work if payments were made to it in advance and secondly, it did not address the outstanding defective home building work for which it had already been paid.
However, at the appeal, we were taken the following evidence which suggest that the Builder was ready, willing and able to perform its obligations under the Contract.
The first was an email of the Builder to the Homeowners' solicitor of 20 May 2016. This was sent 9 days after the notice of default of 11 May 2015. The Builder relevantly states:
. . .
Please advise your client that they may choose to have the following credits for the following items:
Kitchen $7500
Flooring $14,788.80…
Driveway $3960
TOTAL refund $26,248.80.
If they choose to have the refund then this amount will be deducted from the from the final progress payment…
Rockwell will then proceed with finalising the plumbing electrical built-in shower screens at no extra cost to the owner.
Rockwell agrees that this is the best outcome if they wish not to proceed with the variations for the kitchen flooring.
The second was the letter from the Builder of 6 June 2016, again to the Homeowners' solicitors, referring to a completion date of 10 July 2016 and noting that it was yet to receive a response to its email of 20 May 2016. The letter relevantly states:
COMPLETION DATE
10 July 2016
We are yet to receive a response to our email on the 20/5/2016 proposing that the owner either accept variation number 5 of the client. As a result the completion date must now be extended to 10 July 2016. We also propose that the owner may elect to have the item credited back to them however there has been no response to date regarding this proposal. As a result the variation has now expired and Rockwell will need to obtain new quotes if the owner is to proceed.
The third piece of evidence was a further letter from the Builder to the Homeowners' solicitors dated 21 June 2016 raising the same matters set out in previous correspondence.
There is no reference to any of this evidence in the Decision. It is not clear to us whether, or how, the Tribunal took this evidence into account. To this extent the reasons are deficient.
Finally, we consider the reasons are unsatisfactory in one further aspect. That is the Tribunal's treatment of the Builder's cross-claim. The cross-claim was for $30,039.39 - an amount which was referred to by the Tribunal at [71] as "problematic". The Tribunal concluded at [78] that "doing the best it can", as the Builder was given "dollar-for-dollar value" by the Homeowners, it would attribute a total value of $15,000 to the cross-claim, "a reduction of approximately 50%".
While we acknowledge that difficulty of assessment of damages is no bar to the assessment of damages Fink v Fink (1946) 74 CLR 127 at 143, we are not persuaded that that reasoning for the Tribunal's assessment is adequate.
For all these reasons, we consider that the reasoning of the Decision is inadequate. Inadequacy of reasons is an error of law (Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 at [13(1)]) and leave to appeal is not required: Civil and Administrative Tribunal Act 2013 (NSW), s 80(2)(b).
In the circumstances, the appeal should be allowed.
[4]
Conclusion
The Builder sought orders that, in the event that the appeal was allowed, the order of the Tribunal that it pay the Homeowners $105,402.82 be set aside, the Homeowners application be dismissed and that the Builder be awarded the sum of, as we understand it, $30,039.39.
We decline to make these orders. The appropriate course is for the matter to be remitted on all issues and redetermined by the Tribunal constituted by member other than the member who previously heard the matter.
The appellant has been successful. Prima facie, it is entitled to its costs as agreed or as assessed. If either party wishes to apply for some other costs order, it should file and serve written submissions within 14 days of publication of these reasons. The other party may file and serve its response within a further 14 days. If either party thinks otherwise, it should address that issue in its written submissions.
The Tribunal proposes to deal with any application for costs on the papers and without hearing.
[5]
Orders
1. Appeal allowed.
2. The orders of the Tribunal in matters HB 16/51356 and HB 17/04946 of 23 May 2018 set aside.
3. The matters are remitted to the Consumer and Commercial Division of the Tribunal constituted by a different member other than a member who determined the matter.
4. If either party wishes to apply for a costs order other than an order that the respondent pay the appellant's costs as agreed or assessed, that party is to file and serve written submissions by 20 November 2018.
5. The other party may file and serve submissions in response by 4 December 2018.
[6]
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: 06 November 2018