Rudas and Andrassy v Eid

NCAT Appeal Panel|2020-11-25

Jurisdiction: Consumer and Commercial Division Citation: N/A Date of Decision: 28 May 2020 Before: G Blake, AO QC, Senior Member File Number(s): HB19/17018; HB19/28231

Introduction

This is an internal appeal pursuant to s.80(2) of the Civil and Administrative Tribunal Act 2013 (NSW) (NCAT Act) in respect of the decision of the Tribunal of 28 May 2020 (the Decision).
The appellants (the owners) entered into a contract (the building contract) to do renovations (the building works) at their property at 40 Ilford Road, Frenchs Forest NSW 2086 (the property) with the Respondent as builder (the builder).
The Tribunal found that the builder abandoned the site before completing the building works and thereby repudiated the building contract. The owners made a claim against the builder under the Home Building Act 1989 (NSW) (HB Act) including for costs to complete the building works by other contractors consequent upon their acceptance of the builder's repudiation of the building contract and its termination by them.

Background

The following background is taken from the uncontroversial aspects of the Decision.
The builder at all relevant times has been a licensed contractor under the HB Act. On 28 October 2016, the owners and the builder entered into the building contract.
On 10 November 2016, Dr Rudas notified the builder that a construction certificate for the building works had been issued by Northern Beaches Council. In February 2018, the builder ceased carrying out the building works at the property. He abandoned the site and did not return. The owners did not seek to have the builder return to complete the outstanding building works at the property.
On 11 April 2019, the owners, as the applicants, filed an Application in proceedings HB19/17018 against the builder, as the respondent, claiming $460,933.00, being the total of $408,202.00 for incomplete work and $52,731.00 for defective work. On 17 May 2019, procedural directions were made including that the owners and the builder provide to the Tribunal and each other their Points of Claim and Points of Defence respectively.
On 19 June 2019, the builder, as the applicant, filed an Application in proceedings HB19/28231 against the owners, as the respondents, claiming $102,855.00 inclusive of GST, being the total of $45,000 owing under the building contract and $59,505.00 for additional works, plus GST for each amount.
On 28 May 2019, the owners filed their Amended Points of Claim which relevantly at [23] stated that the owners had terminated the building contract and accepted its repudiation by the builder by their conduct of engaging other builders to perform the building works. As stated previously, the Points of Claim also claimed $408,202.42 as damages for the cost to complete incomplete building works.
The builder did not provide to the Tribunal and the owners any Points of Defence.
The hearing before the Tribunal took place on 25 May 2020 by telephone. Mr Langenheim of counsel appeared for the owners. The builder appeared in person. The owners tendered the following evidence: 1. the witness statement of Dr Rudas dated 25 July 2019 (Ex A1); 2. the witness statement of Ms Andrassy dated 29 July 2019 (Ex A2); 3. the witness statement of Kenneth Whyte (Mr Whyte), a quantity surveyor, dated 16 July 2020 (Ex A3) which contains the following reports: 1. a costs to complete report dated 16 October 2018 (the costs to complete report); 2. a defects report dated 16 October 2018 (the defects report); 1. the witness statement of Dr Rudas dated 1 October 2019 (Ex A4); 2. the undated witness statement of Jozef Schwarczer (Ex A5); 3. the witness statement of Neil Shackleford dated 31 August 2019 (Ex A6).
The builder did not adduce any evidence. There was no oral evidence. The owners made oral submissions. The builder made no submissions.
At the conclusion of the hearing, counsel for the owners requested an opportunity to provide written submissions on the question of termination of the building contract. The Tribunal made a direction that the owners could file and serve written submissions not to exceed 3 pages limited to the issue of whether the owners had terminated the building contract in the manner claimed in their Amended Points of Claim by 3.00pm on 27 May 2020.
The Tribunal noted that the written submissions of the owners filed on 27 May 2020 did not address the issue of whether they terminated the building contract "in the manner claimed in their Amended Points of Claim", instead they dealt with a range of other issues including an application by the owners to amend their Amended Points of Claim, "if the Tribunal is minded not to accept the Repudiation argument": at [21]. The Tribunal indicated that it had considered the written submissions notwithstanding the failure of the owners to conform with the terms of the direction made at the conclusion of the hearing: at [22].
The Tribunal refused the owners' application to amend their Amended Points of Claim. Whilst the owners sought to challenge this decision, we do not need to determine the issue given our view on the other grounds of appeal.

The Building Contract

The building contract, which is comprised by documents including the NSW Fair Trading standard form home building contract for work over $20,000, contains the following terms: 1. All work done under the building contract will comply with the Building Code of Australia and all other relevant codes (cl 2.1). 2. The builder will comply with the statutory warranties in s.18B of the HB Act and all relevant Australian Standards (cl 3(a)). 3. The builder "must diligently proceed and complete" the building works in 12 calendar weeks from the latest of specified events, including the date of written notification of the local council for the work (cl 6 when read with cl 5). 4. The building works will be complete when relevantly the builder has finished them in accordance with the building contract documents and any variations, and there are no omissions or defects that prevent them from being reasonably capable of being used for their intended purpose (cl 8). 5. The owners must pay the contract price of $175,500.00 within 5 business days of the completion of the 9 stages of the work nominated in the schedule of progress payments as follows: Stages of work 1 Preliminaries $17,500.00 2 Part Excavation works, footings stage one for deck $25,000.00 3 Plumbing Excavation, Electrical roughing-in $25,000.00 4 Excavation, Footings stage 2, LVL, Redi-walls $20,000.00 5 Roughing-in pipes and electrical, Scyon flooring $20,000.00 6 Internal stud walls, Garage suspended Slab $20,000.00 7 Footings stage 3, garage wall and Roof frame $20,000.00 8 Blockwall to fence, lining of garage, roof cover $20,000.00 9 Render blockwall, Driveway, Tiling $80,000.00

Payment of a progress payment is not to be regarded as acceptance by the owners that the building works have been completed satisfactorily or in accordance with the contract documents (cl 12). 2. The builder must rectify omissions and defects in the building works which become apparent within the period of 13 weeks from the date they have been completed (cl 13).

The Decision of the Tribunal

The Tribunal at [27] accepted the following evidence of Dr Rudas: 1. By February 2018 he and the builder were having regular heated arguments. During one of the final arguments in March 2018 the builder said he could not engage "tradies" as he did not have the money, and he would do the building works "whenever and however I can". Dr Rudas replied "This is unacceptable". 2. On 28 March 2018, the builder removed all his tools and any materials he felt he could use from the property. 3. On 31 May 2018, the builder sent him a letter containing a proposal in which he stated that there was an agreement that he would "step aside" and come back with "a proposal of money refunded based on all my executed works as well as services completed with a dollar value that has not been payed [sic]". 4. From May and June 2018, the owners found a couple of reliable builders who undertook the large majority of the outstanding building works. 5. At no point since 28 March 2018 did the builder provide any further communication to the owners, request additional information or request access to the property.
The Tribunal was satisfied that the builder had repudiated the building contract by removing all his tools and any materials he felt he could use from the property on 28 March 2018: at [28].
Alternatively, the Tribunal found that the builder repudiated the building contract by breaching cl 5, which was found to be an intermediate term, by removing all his tools and any materials he felt he could use from the property on 28 March 2018. This breach we found to go to the root of the building contract: at [29].
The Tribunal then considered the question of whether or not the owners had terminated the building contract by accepting the repudiation of the builder as follows: "[33] The principles that determine whether the innocent party to a contract has accepted the other party's repudiation and thereby terminated the contract were summarised by Lord Steyn, with whom all other members of the House of Lords agreed, in Vitol SA v Norelf Ltd [1996] AC 800; 3 All ER 193, at 200 and cited with approval in Cooper v Kinsella [2011] NSWCA 45 at [70]: "(1) Where a party has repudiated a contract the aggrieved party has an election to accept the repudiation or to affirm the contract; … (2) An act of acceptance of a repudiation requires no particular form: a communication does not have to be couched in the language of acceptance. It is sufficient that the communication or conduct clearly and unequivocally conveys to the repudiating party that that aggrieved party is treating the contract as at an end. (3) … the aggrieved party need not personally, or by an agent, notify the repudiating party of his election to treat the contract as at an end. It is sufficient that the fact of election comes to the repudiating party's attention, for example notification by an unauthorised broker or other intermediary may be sufficient…" (citations omitted) [34] The owners made the following written submissions as to the applicable legal principles: "Repudiation/Termination of the contract 9. A contract can be repudiated by a party and the innocent party has a right to either terminate or affirm the contract. The innocent party must communicate such acceptance of repudiation and subsequent termination. 10. A contract can be terminated by express written notification but it can also be terminated by conduct. The test is whether a reasonable person in the position of the Respondent would be left in any doubt that the contract had been terminated. 11. Any words or conduct are sufficient if they make the election manifest to the relevant party. 12. The table below contains examples of cases where termination has been held to have taken place, despite the absence of any direct notice to the relevant party. Case Paragraph "The actual commencement of the hearing of lengthy and expensive litigation, directed to a final resolution of the parties' rights, was conducted by both parties manifesting an intention wholly Brewarrina Shire Council v Beckhaus Civil Pty Ltd [2005] NSWCA 248 75 A maintenance provider was held to have accepted the other party's repudiation by executing an agreement transferring its assets and employees to a third party although the transfer agreement did not purport to exercise any right to terminate Wallace-Smith v Thiess Infraco (Swanston) Pty Ltd [2005] FCAFC 49 103 and 152 Service of an appropriate pleading can be unequivocal election to terminate a contract. Janos v Chama Motors Pty Ltd [2011] NSWCA 238 23 The commencement of an action claiming relief on the basis of termination for breach normally amounts to an election to terminate the contract if such an election has not already been made. Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537 A seller of land who on expiry of a notice to complete proceeded to advertise and sell the land was held to have manifested an election to treat the contract as terminated. Holland v Wiltshire (1954) 90 CLR 409 416 and 424 The closing down of a business and vacating a premises was held to be sufficient communication of the termination of the lease. Karacominakis v Big Country Developments Pty Ltd [2000] NSWCA 313 155

Alternatively, a Contract can be terminated by a breach of an essential term entitling the innocent party to damages [Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115]. [35] The authorities relied on by the owners in paragraphs 9 to 13 of their written submissions are not relevant to the owners' claim as set out in their amended points of claim at [23]. While it may be accepted that conduct such as commencing proceedings may "clearly and unequivocally convey to the repudiating party that that aggrieved party is treating the contract as at an end", the conduct relied on by the owners was "(their) conduct (of) engaging other builders to perform the (building) works." I have already found that the builder repudiated the building contract by breaching cl 5 on the basis that this is to be characterised as an intermediate term, rather than an essential term. [36] The owners made the following written submissions as to the evidence of termination of the building contract by conduct: "The evidence of termination by conduct 14. It is submitted that the following evidence supports a finding of termination. Dr Rudas gives evidence about a conversation with the Respondent: Mar 18 Respondent: "I will do it [work] whenever and however I can. You can either take it or leave it." Rudas: "That is unacceptable." 28 Mar 18 Witness Statement - Dr Rudas - dated 25/7/19 - Exhibit A1 The Respondent collects tools and leaves the site. Paragraph 59 Witness Statement - Dr Rudas - dated 1/10/19 - Exhibit A4 Dr Rudas sends an email to Respondent 4 Apr 18 p.52-54 "I need to have a proposal for compensation for the above incomplete works. If we agree, we can get the lawyers to draw up a legally binding agreement and payment schedule over 6 to 12 months. If we cannot agree we can leave it to the Tribunal to decide and enforce, depending on their findings. I also need this sorted out by 13 April. Bottom of page 55 I do not really want to waste much more time on this. If either of the above points we cannot sort in a satisfactory manner by the 13th of April I will presume we cannot come to an agreement and will escalate the matter to the appropriate authorities. I am in the process of acquiring quotes for the remaining works, but already we are in the vicinity of $150,000." 31 May 18 Witness Statement - Dr Rudas - dated 01/10/19 - Exhibit A4 In this letter from the Respondent to Rudas, the Respondent offers to pay back the money for variations completed. Pp 55-60 He also mentions: "if you would like to take this matter further, please advise so my barrister can be made aware to start proceedings" (paragraph 2 on page 59) No further communication is entered into until a letter of demand dated 28 June 2018 is sent by GP Legal to the Respondent. 28 June 18 This letter of demand is attached to this submission. It was not responded to. This letter seeks damages for incomplete and defective works. It is not part of the evidence but letters of demand are not usually included in evidence. 19 April 19 The Applicants serves [sic] an NCAT application against the Respondent. 14 June 19 The Respondent files and serves an NCAT application against the Applicants. 12 July 19 The Applicants file and serves [sic] Points of Claim seeking damages for incomplete and defective works. 25 Nov 19 The Applicants file and serve an amended Points of Claim seeking damages for incomplete and defective works which clearly notes the Applicants' acceptance of the Respondent's repudiation.

It is submitted that this conduct clearly represents that the Applicants have accepted the Respondent's repudiation and have terminated the Contract. The Respondent cannot possibly claim that he was unaware of acceptance of repudiation and termination of the Contract. 16. It is noted that the Respondent has filed an application in this matter (the NCAT Reference number is HB 19/28231). Thus, by application of paragraph 73 of Brewarrina as cited above (amongst other cases), the Contract cannot be possibly on foot. 17. It is submitted that the date of termination was: a. 13 April 18, when no agreement was reached; b. alternatively, 28 June 18 when the letter of demand was sent; c. alternatively, 19 April 19, when the NCAT application was filed and served by the Applicant Home Owners on the Respondent Builder; d. alternatively, 14 June 19, when the NCAT application was filed and served by the Respondent Builder on the Applicant Home Owners; e. alternatively, 12 July 19, when the Points of Claim was filed and served; f. alternatively, 25 November 19, when the Amended Points of Claim was filed and served." [37] The evidence relied on by the owners in paragraphs 14 to 17 of their written submissions is not relevant to the owners' claim as set out in their amended points of claim at [23]. The conduct relied upon by the owners was "(their) conduct (of) engaging other builders to perform the (building) works", and not any of the conduct specified in paragraphs 14 to 17 of their written submissions. [38] I am not satisfied that the owners accepted its repudiation by the builder by their conduct of engaging other builders to perform the building works. There was no evidence adduced by the owners that the builder knew of this conduct after 28 March 2018. Accordingly, I find that the owners have not established that they terminated the building contract as set out in their amended points of claim at [23]. … [43] As the owners have not established that they terminated the building contract, this issue [damages for incomplete building works] must necessarily be determined on the basis that the building contract remains on foot."
The Tribunal then considered the question of whether or not the owners were entitled to damages for incomplete building works where the contract remains on-foot: see [46]-[47]. Citing Clements v Murphy [2018] NSWCATAP 152 at [25], the Tribunal stated at [48]: "I am satisfied that an item of work can be incomplete, and accordingly there will be a breach of contract by the builder, when it has been paid for by a progress payment but has not been completed. Conversely, an item of work cannot be incomplete, and accordingly there will be no breach of a building contract by the builder, where having regard to the completed stages of the building contract it is yet to be undertaken."
The Tribunal then went on to determine damages on the basis of the above principle. The Tribunal felt that it was unable to determine whether the claim for items of incomplete building works were encompassed by progress claims 1-7, or were to be encompassed by progress claims 8 and 9, in respect of which the owners had not yet paid the builder, except in respect of some works which it determined related to progress claims 8 and 9 and so were not incomplete works: see [59]-[60].
The Tribunal concluded that as the owners had not satisfied the onus of establishing that the builder breached the building contract by reason of incomplete building works, it concluded that the owners had not suffered any loss: at [61].
In the result, the Tribunal ordered that the builder pay the owners $34,954.80 made up of $11,882.80 for overpayments for variations and $23,070.00 inclusive of GST for defective building works.
In respect of the builder's application, proceedings HB19/17018, the Tribunal dismissed the proceedings pursuant to s.55(1)(b) of the NCAT Act as the builder adduced no evidence in support of his claim. There is no appeal against this order which will remain.
The Tribunal at [73] dealt with costs in proceedings HB19/17018 as follows: "I consider that there were four separable issues in proceedings HB 19/17018, being the claims for damages for incomplete building works, for defective building works, for overpayments, and for storage costs, additional interest costs, loss of income and distress. The owners substantially succeeded on their claims for damages for defective building works, and for overpayments, but failed on their other claims. Having regard to these matters together with the fact that the claim for incomplete building works was for $408,202.42, I find that the builder should pay 25% of the owners' costs of proceedings HB 19/17018 on the ordinary basis."

Appeal Proceedings

The owners filed a Notice of Appeal appealing the orders of the Tribunal in proceedings HB19/17018, including as one of the grounds of appeal that the Tribunal erred in finding that the building contract had not been terminated and remained on-foot. The owners sought alternative orders for a money judgment for incomplete works and defective works and an alternative order for costs.
On 7 August the owners filed an Amended Notice of Appeal. By their Amended Notice of Appeal the owners sought to challenge the finding that there was no evidence adduced by the owners that the builder knew of the conduct of the owners engaging other builders to perform the building works after 28 March 2018. It sought leave to challenge this finding.
At the hearing, Mr Zikmann appeared as counsel for the owners instructed by Ms Pitt of GP Legal. There was no appearance by the builder.
The owners put before the Appeal Panel all of the evidence led before the Tribunal, the directions and orders made in the proceedings at first instance, the relevant Applications and Points of Claim, the parties' written submissions below and the transcript of the hearing below. The owners also relied upon their previous written submissions.
The builder did not file and serve any written submissions, nor did he put any material before the Appeal Panel.
The owners also sought to put before the Appeal Panel new evidence being correspondence from the builder's original solicitors, including a letter from the builder's solicitor dated 13 June 2019, which in the second paragraph appeared to acknowledge and refer to the termination of the contract by the owners in February 2018. In the result, it is not necessary for us to determine whether or not the owners should have leave to tender this additional material. We have not needed to consider this material in reaching our view on the relief sought by the owners with respect to the finding as to whether or not the building contract had been terminated.

Did the Tribunal err in determining damages on the basis that the building contract remains on-foot?

There is no real issue as to the legal principles applicable to determine whether an innocent party to a contract has accepted the other party's repudiation and thereby terminated the contract. First, any communication or conduct which clearly and unequivocally conveys to the repudiating party that the aggrieved party is treating the contract as at an end is sufficient: see Vitol SA v Norelf Ltd [1996] AC 800; 3 All ER 193 at 200 per Lord Steyn, and cited with approval in Cooper v Kinsella [2011] NSWCA 45 at [70].
Secondly, where the innocent party has by conduct elected to treat the contract as at an end, it is sufficient that the fact of election comes to the repudiating party's attention.
Thirdly, the commencement of proceedings and/or the service of an appropriate pleading, claiming relief on the basis of termination for breach or otherwise clearly conveying in such pleading that the aggrieved party is treating the contract as at an end can be regarded as communication of the innocent party's acceptance of repudiation and subsequent termination: Brewarrina Shire Council v Beckhaus Civil Pty Ltd [2005] NSWCA 248 at [73]; Janos v Chama Motors Pty Ltd [2011] NSWCA 238 at [23]; Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537.
The commencement of proceedings and/or the service of an appropriate pleading can act as either the election to treat the contract as at an end, or the communication that the innocent party has by previous conduct elected to treat the contract as at an end.
The Amended Points of Claim included the following paragraphs: "Repudiation and Termination of the Contract 21. The Respondent failed to complete the Renovations within the 12 week period, namely, by 18 February 2017, and on or about 28 March 2018, the Respondent abandoned the site and repudiated the Contract. … 23. The Applicants accepted the Respondent's repudiation and terminated the contract by conduct by engaging other builders to perform the works."
It is not contested on Appeal that the builder repudiated the contract on 28 March 2018 by taking his tools and abandoning the site. It is clear that the conduct of engaging other builders to perform the building work amounts to conduct which clearly and unequivocally conveys that the owners had elected to treat the contract as at an end. In Holland v Wiltshire (1954) 90 CLR 409, a case of repudiation by a purchaser of a contract to sell land by failing to complete, Dixon CJ stated at 416: "His election to treat the contract as discharged by the purchasers' breach was sufficiently manifested by his proceeding to advertise the property for sale, and by his selling it. By that time, the purchasers were in actual breach and that breach was accompanied by an intention clearly evinced of setting the contract at nought. It is hard to see why this should not enable the vendor to treat the whole contract as discharged by the purchasers' breach or in other words to treat the contract as no longer binding upon him."
One can apply this principle to the facts here - namely, after the builder had abandoned the site and manifested an intention of setting the building contract "at naught", the owners were entitled to elect to treat the contract as discharged by the builder's breach by engaging other builders to complete the works. In our view, this was the substance of what was alleged at paragraphs 21 and 23 of the Amended Points of Claim.
There does not seem to be any dispute as to the factual proposition that the owners did engage other builders to complete the works. The evidence of Dr Rudas in his statement was that in May and June 2018 the owners "found a couple of reliable builders who undertook the large majority of the outstanding building works": see 28 of the Decision. There can be little doubt that this conduct amounted to an election to treat the building contract as terminated consequent upon the builder's repudiation of the building contract.
Termination of the contract will thereafter occur when the builder becomes aware of the owners' election to terminate the contract. It appears from the evidence that the builder was well aware of the owners' election to terminate following 28 March 2018. In a contemporaneous email sent by the builder on 31 May 2018 he acknowledged the legal relationship between the parties was at an end when he wrote "you insisted the works be completed at a faster rate this conversation escalated to an argument and ended with an agreeance that I step aside and come back to you with a proposal of money refunded based on my executed works": page 662 of Appeal Bundle of Documents.
Also, in his own cross claim (page 112 of Appeal Bundle of Documents) the builder described the contract as terminated by the owners.
The builder had served upon him the statement from Dr Rudas that he had in fact begun to engage other builders from May and June 2018 to substantially complete the work. At paragraphs 21-26 of the affidavit of Dr Rudas he describes the extent of work carried out by other builders. There was also evidence from Dr Rudas which included invoices and the costs which had been incurred rectifying the defects and completing the building works with other builders. Finally, there was evidence from Mr Schwarczer (a builder) in his witness statement that he had been engaged by the owners to perform works rectifying defects and completing some of the incomplete works. This occurred between 3 April and 1 June 2018.
From the time the above witness statements were served on the builder he would have been aware that the building works were being completed by other builders which amounts to an election to treat the contract as terminated. The builder attended the Tribunal hearing when this evidence was tendered. Hence, it was clear that the builder knew of the engagement of other builders after 28 March 2018.
Finnaly, the commencement of the proceedings by the owners claiming damages based upon the cost to complete the works will act as the communication of the prior election to treat the building contract as terminated, if this had not previously occurred. Indeed, the owners could have simply claimed damages on the basis of the contract coming to an end without more.
Further, and in any event, service of the Amended Points of Claim clearly communicates to the builder that the owners accepted the builder's repudiation when they engaged other builders to complete the work and have thereby elected to terminate the contract. The builder did not need to have knowledge of the conduct beyond what was stated in the Amended Points of Claim. For example, communication of acceptance of the repudiation could have been completed by a notice or letter to the builder indicating that the owners had elected to treat the contract as at an end when they engaged other builders to perform the building works. This would have brought the contract to an end without more. Similarly, service of the Amended Points of Claim, indicating that that had occurred, also serves as communication or awareness of the acceptance of the builder's repudiation by engaging other builders and brings the contract to an end.
We agree with the owners' submission to the Tribunal below that the builder "cannot possibly claim that he was unaware of acceptance of repudiation and termination of the building contract".
Accordingly, we are of the view that the Tribunal erred when it stated that it was not "satisfied that the owners accepted its repudiation by the builder by their conduct of engaging other builders to perform the building works". The Tribunal stated this was because "[t]here was no evidence adduced by the owners that the builder knew of this conduct after 28 March 2018" (at [38]).
To the extent that this involves an error of fact rather than an error of law, we would be minded to grant leave to appeal. In the case of an application for leave to appeal from a decision of the Consumer and Commercial Division, under cl 12(1) of Schedule 4 of the NCAT Act, the Appeal Panel's discretion to grant leave is only enlivened if the Panel is satisfied that the appellant may have suffered a substantial miscarriage of justice because: 1. the decision of the Tribunal under appeal was not fair and equitable; or 2. the decision of the Tribunal under appeal was against the weight of evidence; or 3. significant new evidence has arisen (the evidence that was not reasonably available at the time the proceedings under appeal were being dealt with).
The requirements for a grant of leave were dealt with in the decision of Collins v Urban [2014] NSWCATAP 17 at [80]-[84].
In our view, the matters arising from the Tribunal's decision fall within the criteria for the grant of leave which were identified in paragraph 84 and (5) of Collins v Urban as they involve: "3. An injustice which is reasonably clear, in a sense 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. … 5. The Tribunal had 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."
In our view, the Tribunal's finding that "[t]here was no evidence adduced by the owners that the builder knew of this conduct after 28 March 2018" (at [38]) was against the weight of the evidence and not fair and equitable. There would be significant prejudice and the error appears to be clearly made out.
Accordingly, we uphold this ground of appeal and find that the owners did establish at the hearing that they had elected to terminate the building contract by their engagement of other builders to complete the works as set out in their Amended Points of Claim at [23] and that the builder was made aware of this election.
We note that the Tribunal's reasoning in treating the contract as still being on foot appears to be based on its interpretation of the Amended Points of Claim. It needs to be pointed out that the Tribunal is not a body of strict pleading. It is to act with as little formality as the circumstances of the case permit and according to equity, good conscience and the substantial merits of the case without regard to technicalities or legal forms: s38(4) NCAT Act.
Frequently, hearings at the Tribunal will occur without legal representation and without any pleadings. In such circumstances, the Tribunal must discern and act upon the substance of what is being alleged. Even where the parties are legally represented, subject to any claims of prejudice, the Tribunal should act upon the substance of what is being alleged in a Points of Claim and the substantial merits of the case without regard to technicalities or legal forms.
In this instance, there was no defence filed nor was there any submission put, which denied that the contract had been terminated. Accordingly, the Tribunal should have acted on the substantial merits of the case in respect of this issue.

What should the quantum of damages be?

In the event we found that the contract was terminated, the owners submitted that we should not remit the matter but decide the question of damages ourselves. Given that the evidence that was before the Tribunal below is before us and there was no cross-examination or other oral evidence or any submissions by the builder below or on appeal, we think it is consistent with the guiding principle of ensuring the just, quick and cheap resolution of the real issues in the proceedings that we determine the question of damages, rather than remit the matter for further hearing.
Dr Rudas gave evidence that he had incurred costs in the amount of $216,382 engaging other builders. He described this as his "estimate". He indicated that he did not have a complete set of invoices for these works but a number had been included and were annexed to his statement. These works covered both rectifying defects and completing the building works. By an annexure to his statement, Dr Rudas indicated that he tried to reconcile the works completed by the owners with the items listed as incomplete or defective in the report prepared by Mr Whyte.
This table revealed the following: 1. As to the cost to complete the incomplete building works, he paid a total of $201,887.24 inclusive of GST, of which as to $27,166.00 there are no invoices and as to $2,515.00 the item does not appear in the cost to complete report. 2. As to the cost to rectify the building works, he paid a total of $14,495.00 inclusive of GST, of which as to $2,960.00 the item does not appear in the defects report, whereas Mr Whyte's estimate is $17,332.75 exclusive of GST.
Dr Rudas gave evidence that subsequent to the defects identified by Mr Whyte, there was a new defect involving a cracked concrete footing which cost $2,960 to rectify. He also gave evidence that based on quotes and the report of Mr Whyte, he estimated that the cost of the remaining works was around $62,109
The Tribunal dealt with this evidence at [53] as follows: "I have placed no reliance on Dr Rudas' evidence as to the cost to complete the incomplete building works for which there are no invoices, and for which there is no corresponding item in the cost to complete report. There was no explanation for the missing invoices. Further, I am not satisfied that an item not appearing in the cost to complete report constitutes incomplete building works."
We substantially agree with this approach and we are only satisfied that the costs incurred to complete the incomplete building works was in the amount of $201,887.24 less $27,166.00 and $2,515.00, being $172,206.24.
In respect of the defective building works, the Tribunal stated at [82]: "I am not satisfied that the cracked concrete footing is defective building works in the absence of any expert evidence."
We agree with this conclusion and would not allow the sum of $2,960.00.
The above figures need to be compared with that of the expert Mr Whyte, who relevantly gave the following evidence: 1. The trade cost to complete the incomplete building works is $243,532.47 exclusive of GST, to which together with preliminaries of $56,561.85 he applied a builder's margin of 15%. 2. The trade cost to rectify the building works is $34,247.85 exclusive of GST to which he applied a builder's margin of 15%.
The Tribunal was not satisfied that it was appropriate to allow the builder's margin of 15% on the basis that the owners were not engaging a single builder but were engaging individual contractors. In our view, the evidence of Mr Whyte allows us to be satisfied that the actual costs incurred as set out in Dr Rudas' statement, subject to the deductions we have indicated above, are fair and reasonable and should form the basis of the quantum of damages up to that point in time.
The owners in submissions to us sought to claim damages on the basis of the expert report and its higher figures compared with that set out in Dr Rudas' statement. When it was pointed out that this would result in overcompensation to award damages beyond the actual costs incurred, the owners submitted that this was fair and reasonable given the time spent by the owners doing work themselves and supervising the work of contractors. This also resulted in lost income for Dr Rudas.
Such a proposition appears to be inconsistent with the concession made that the owners were not pressing their claim for damages for storage costs, additional interest costs, loss of income and distress: at [25] of the Decision. In our view, it would not be appropriate to award damages beyond the actual costs incurred. Damages for alleged stress or time spent performing the work themselves should be the subject of their own claim and head of damages rather than seeking costs based upon an expert's estimate of costs ahead of the actual costs incurred in this regard.
That then leaves the costs to complete the outstanding works and the estimate of the owners. The Tribunal at [54] stated that it was not satisfied by Dr Rudas' estimate of the remaining costs to complete. However, it was evidence before the Tribunal and before us and indicated an amount less than the expert's estimate of the reasonable price for such works. In that sense, it was an admission by the owners that they could and would likely perform the outstanding works at a cost to them which was less than that regarded as reasonable by the only expert evidence before the Tribunal.
In such circumstances, again to avoid overcompensation, we are satisfied that we should accept Dr Rudas' estimate and add that to the quantum of damages for this head.
The Tribunal at [68] was satisfied that there was an overpayment of $11,882.80 by the owners for variations. This finding was not in dispute before us and this will be added to the quantum of compensation that the owners are entitled to be awarded from the builder. From this total the outstanding amount under the contract to complete the works, being $35,500.00, must be deducted.
We note the builder has already paid $34,954.80. Accordingly, this amount should be deducted from the total damages otherwise payable.
Accordingly, we find that the builder is to pay the owners damages as follows: 1. $172,208.24 for costs incurred to complete the incomplete building works: see [65] of our reasons above, plus 2. $11,535.00 for costs incurred rectifying defective building works being $14,495.00 less $2,960.00; [66]-[71] of our reasons above, plus 3. $62,109.00, being the cost to perform the remaining works under the building contract: see [72],[73] of our reasons above; minus 4. $35,500.00, being the outstanding amount payable under the building contract, plus 5. $11,882.80 for the overpayment by the owners for variations; minus 6. $34,954.80 already paid by the builder.
This yields a total amount for damages of $ 187,280.24 owed by the builder to the owners.

What should be the appropriate costs order for the proceedings at first instance?

The Tribunal ordered the builder to pay 25% of the owners' costs of the proceedings. The Tribunal did so on the basis that there were four severable issues in the proceedings, being the claim for damages for incomplete building works, for defective building works, for overpayments, and for storage costs, initial interest costs, loss of income and stress: at [73]. The Tribunal concluded that the owners substantially succeeded on their claims for damages for defective building works, and for overpayments, but failed on their other claims: at [73].
In the result, we have found that the owners should succeed substantially on their claim for damages for incomplete building works as well.
There is no dispute that s.35 of the NCAT Act and rule 38(2)(b) of the Civil and Administrative Tribunal Rules 2015 (NSW) (NCAT Rules) is applicable to the proceedings. Accordingly, costs may be awarded without the requirement to show special circumstances. Further, pursuant to rule 38A of the NCAT Rules, this costs provision also applies to the determination of costs on appeal.
In such circumstances, the general rule is that costs should follow the event: see Rekrut & Scott v Champion Homes Sales Pty Ltd; Champion Home Sales Pty Ltd v Rekrut & Scott [2018] NSWCATAP 97 at [21]-[24].
In our view, given our finding on damages and our finding on the termination of the contract, there are no sufficiently relevant factors which would militate against the owners being awarded all of their ordinary costs of the proceedings.
Accordingly, we will order that the builder pay the owners' costs of the proceedings before the Tribunal below on the ordinary basis, as agreed or assessed.

Costs of the Appeal

As stated above, costs of the appeal may be awarded without the requirement to show special circumstances. In our view costs should follow the event and subject to any claims for a different costs order, we will order that the builder pay the owners' costs of the appeal.

ORDERS 1. (1) Leave to appeal is granted. (2) Appeal is upheld. (3) The orders of the Tribunal of 28 May 2020 in proceedings HB19/17018 are set aside and in lieu thereof the Appeal Panel of the Tribunal makes the following orders: 1. Order that the Respondent is to pay $187,280.24 to the Applicants immediately. 2. Order that the Respondent is to pay the costs of the Applicants on the ordinary basis as agreed or assessed. (4) Subject to order (6) below, the Respondent is to pay the Appellants' costs of the appeal on the ordinary basis. (5) If any party seeks a different costs order to that in order (4), the following directions apply: 1. The applicant for costs ("costs applicant") must file and serve any costs application, including submissions and any evidence in support, within 14 days of receipt of these orders. 2. The respondent to the costs application ("costs respondent") is to file and serve any submissions and evidence in response within 14 days thereafter. 3. The costs applicant is to file and serve any submissions in reply within 7 days thereafter. 4. Any submissions are to include submissions on the issue of whether an order should be made pursuant to s.50(2) of the Civil and Administrative Tribunal Act 2013 (NSW) dispensing with a hearing of the costs application. (6) In the event an application is made pursuant to order (5), order (4) shall cease to have effect. 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

Amendments 15 March 2021 - Order 3 (1) 15 March 2021 - coversheet 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: 15 March 2021

Civil and Administrative Tribunal Rules 2015(NSW)

At a glance

Court

Decision date

Catchwords

Source

Catchwords

Judgment (15 paragraphs)

Parties

Legislation Cited (3)

Cases Cited (11)

Cited By (2)