Sleiman t/as Perfect Kitchens v Dempsey

The Decision under appeal

1. By the decision under appeal, published on 2 August 2019, the Tribunal ordered the builders to the pay the owner $14,941 and dismissed the builders' claim.
2. The Tribunal found that the work performed by the builders had been defective (implicitly in breach of the statutory warranties in s 18B of the HBA) and accepted evidence that the owner had incurred costs of $9,448 paid to a builder, Caesar Development Pty Ltd, for replacement of cupboards and the supply and installation of a bench top; $880 paid in cash to a plasterer for re-rendering a wall after the removal of defective joinery; and $884 for a sink to replace one which the Tribunal found the builders had removed for measurement and declined to return. The Tribunal rejected the owner's claim in respect of the shadow line and other minor items. The Tribunal also found that the owner had established that she had sustained a loss of rent in the amount of $8,288 as a consequence of the builders' breach of contract in performing defective work and failing to acknowledge the defects and rectify them. The Tribunal determined that the builder was liable to the owner for breach of contract in the amount of $19,500.
3. The Tribunal found that the work done for the owner was "largely done in conformity with the oral agreement" (with the exception of the defects identified in respect of the back wall) but that by operation of the HBA the builders were not entitled to recover under the agreement.
4. The Tribunal referred to s 94(1A) of the Home Building Act and held that the builders had established that it was just and equitable that the builders be compensated in respect of expenses which the builders had established they had incurred through the tender of invoices. The Tribunal held that the builders were not entitled to payment of a quantum meruit in respect of labour costs as the builders had not established the fair and reasonable value of the labour provided by the builders.
5. The Tribunal accepted that the builders were entitled to payment of an amount of $12,059.
6. The Tribunal deducted the $7,500 deposit and made an award in favour of the builders of $4,559. The Tribunal then deducted that amount from the $19,500 awarded in favour of the owner and made the final order in favour of the owner in the amount of $14,941.
7. The Tribunal directed the parties to file submissions in relation to costs and, by a decision dated 18 September 2019, ordered the builders to pay the owner the sum of $8,618 in respect of the costs of the applications.

The Appeal

1. The builders' Notice of Appeal was filed on 30 August 2019, within the time prescribed by rule 25(4)(c) of the Civil and Administrative Tribunal Rules 2014 (NSW).
2. The builders' rights of appeal are limited by s 80(2)(b) of the Civil and Administrative Tribunal Act 2013 (NSW) ("the NCAT Act"), which provides that an appeal against a decision other than an interlocutory decision of the Tribunal may be made: As of right on any question of law, or with the leave of the Appeal Panel, on any other ground.
3. As this appeal is brought from a decision of the Consumer and Commercial Division of the Tribunal, by virtue of cl 12(1) of sch 4 of the NCAT Act, leave may only be granted under s 80(2)(b): 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).
4. In Collins v Urban [2014] NSWCATAP 17 the meaning of "substantial miscarriage of justice" was summarized at [71] and [79] as follows: [71] [I]t can be seen that the concept of a substantial miscarriage of justice refers to a failure in the way a matter was conducted or decided which deprived the appellant of a chance that was fairly open of achieving a better outcome than occurred… [79] 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 . . . 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."

Grounds of appeal

1. The builders' grounds of appeal set out in the Notice of Appeal are as follows: The findings of the Senior Member was unreasonable: (a) The learned Senior Member erred in finding that the work was defective. (b) The learned Senior Member gave consideration to evidence which had been excluded. (c) The learned Senior Member erred in placing reliance on evidence that was excluded in the way of invoices. (d) The learned Senior Member erred in finding that the cabinets were defective when on 29 March 2019 the learned Senior Member found that there cannot be a claim for cabinets that had been replaced. (e) The learned Senior Member erred in placing reliance on the expert report of the owner in circumstances where the cabinets had been removed and the expert prepared his report based on his instructions as opposed to his observations. (f) It was a denial of procedural fairness to allow the home owner to rely on documents that were previously excluded by the Senior Member and subsequently allowed into evidence at the trial. (g) The learned Senior Member erred and exceeded its jurisdiction by drawing an adverse inference against the Appellant that invoices purportedly received from Perfect Kitchens Pty Limited were not recoverable. (h) The learned Senior Member denied the Appellants procedural fairness by failing to allow them to respond to allegations or obtain evidence in rebuttal.
2. The builders sought leave to appeal on the basis that the decision was not fair and equitable. The builders' statement of the reasons why they asserted the decision was not fair and equitable repeated each of the grounds of appeal.
3. The builders also sought leave to appeal on the ground that the decision was against the weight of evidence. In this respect the builders stated: The Tribunal should have given more weight to the Appellant's evidence in particular noting that work had been performed for the invoices rendered. The Tribunal should have not placed any weight on the home owners expert report on the basis that the expert could not inspect the work carried out by the contractor as the cabinets were no longer in situ. The Tribunal relied on the word of the home owner in determining what the loss of rent was, bearing in mind that the expert report relied upon by the home owner was rejected by the Tribunal. The Appellant was not given the opportunity to respond.
4. In the builders' outline of submissions for the appeal, which was handed up at the hearing and served by email upon the owner (who was appearing at the hearing by telephone) at about the same time, and in oral submissions at the hearing, the builders limited and refined their grounds of appeal.
5. By their outline of submissions the builders identified six grounds of appeal under two headings: "Procedural Unfairness" and "No evidence for findings". Those grounds of appeal were: (a) Procedural Unfairness (i) The learned Senior Member erred in having regard to evidence that she had excluded in the interlocutory hearing on 29 March 2019 namely an invoice in the sum of $15,057 (incl GST) dated 13 July 2018 and the document prepared by G Stilo ... (ii) The learned Senior Member erred in having regard to evidence that had not been served upon the builder and which was handed up to the Senior Member in the owner's reply, namely a photograph ... (iii) The learned Senior Member erred in mistaking the builders' status as the original applicant and the owner's status as respondent and cross claimant thereby denying the builder procedural fairness by failing to allow him the opportunity to advance his case fulsomely and respond to the defence ... (b) No evidence for findings (i) The learned Senior Member erred in finding that the work was defective when she made a finding about the internal dimensions of the cabinetry that was not available on the evidence ... (ii) The learned Senior member erred in admitting (or alternatively, placing undue weight upon) the expert report of Mr Bornelis insofar as the opinions expressed in his report were based on instructions that he received from the owner as opposed to his own observations ... (iii) The learned Senior Member erred in admitting (or alternatively, placing undue weight upon) the expert report of Mr Stilo in circumstances where he had not read or agreed to be bound by the Expert Code of Conduct, where she had previously found that the document he had prepared was not an expert report, and insofar as the opinions expressed in his report were based on instructions that he received from the owner as opposed to his own observations.
6. As the builders' outline of submissions was only provided to the owner at the time of the hearing, the Appeal Panel granted the owner leave to file written submissions in response. The Appeal Panel also directed the parties to file submissions concerning the costs decision.
7. The owner filed submissions in response to the builders' outline and submissions in respect of the costs decision.
8. The builders also filed submissions in respect of the costs decision.
9. We have read and considered the owner's submissions and the parties' submissions on costs.
10. We understand the builders' outline of submissions handed up at the hearing to reflect the grounds of appeal which the builders seek to maintain and we will address the builders' appeal by reference to that document on the basis that it is a complete statement of the grounds relied upon.
11. It is convenient to consider each of the grounds referred to in the builders' outline before turning to a further issue which the Appeal Panel identified at the hearing of the appeal.

A Procedural Unfairness 1. Denial of procedural fairness in having regard to documents excluded by the direction of 29 March 2019

1. The documents which the builders identified as documents excluded by the directions of 29 March 2019 but relied upon by the Tribunal were an invoice from Caesar Developments Pty Ltd and drawings produced by Mr G Stilo, a builder.
2. In oral submissions in reply, Ms Wong, of counsel, who appeared for the builders, clarified that the issue in respect of Mr Stilo's drawings was not that they were evidence which had been excluded on 29 March 2019, but that they did not constitute an expert report. That proposition was the subject of Ground (b)(iii) in the outline and we will address it in that context.
3. The issue with the invoice from Caesar Developments Pty Ltd appeared to be that the owner's initial evidence had included an invoice from Caesar Developments Pty Ltd in which an amount of $5,000 (exclusive of GST) was deducted from the total due.
4. The invoice included in the bundle of documents which had been excluded did not have that sum deducted.
5. The total payable on the initial invoice was $9,557 inclusive of GST. The total payable on the invoice in the excluded evidence was $15,057 inclusive of GST.
6. Apart from the line recording a deduction of $5,000, the invoices were otherwise identical.
7. The invoices included a number of items unrelated to the kitchen. The items which the owner relied upon as rectification of the builders' work amounted to $9,448 inclusive of GST.
8. The Tribunal awarded that amount in respect of the invoice.
9. Ms Wong submitted that the Tribunal denied the builders procedural fairness by relying upon the excluded invoice rather than the invoice included in the initial evidence.
10. A denial of procedural fairness would constitute an error of law: Prendergast v Western Murray Irrigation [2014] NSWCATAP 69 at [13(4)].
11. However we are not persuaded that the builders were denied procedural fairness. It is not clear to us that the Tribunal did rely upon the excluded invoice. The invoice included in the owner's initial evidence included four costed items which together amounted to $8,680 excluding GST or $9,448 inclusive of GST.
12. The builders suggested that the $5,000 deduction in the first invoice reflected a discount which the owner had received and which should be deducted from the amount which the owner could claim by way of compensation for rectification costs.
13. This issue was not canvassed in the Tribunal's decision but it was the subject of discussion in the course of the hearing: at page 509 of the builders' Appeal Bundle. The Senior Member asked the owner: "Did you pay them [Caesar Developments Pty Ltd] $15,000 or did you get a discount because you paid cash?" The owner replied: "No, I paid them $15,000".
14. Later in the course of the hearing, the Tribunal gave Mr Sleiman the opportunity to ask the owner any questions: at page 529 of the builders' Appeal Bundle. Mr Sleiman did not do so.
15. It is apparent from the transcript of the hearing provided by the builders, that the question whether the owner paid the full amount invoiced by Caesar Developments Pty Ltd for items relating to the kitchen was raised in the course of the hearing. The owner gave evidence that she did pay the full amount and Mr Sleiman did not seek to challenge that evidence by cross examination.

ii. Denial of procedural fairness in having regard to a photograph which had not been served

1. This issue was not addressed in the course of the hearing. The Tribunal's decision does not suggest that any photograph handed up by the owner was taken into account in the resolution of any relevant issue.
2. We take it that the allegation of failure to accord procedural fairness through reliance on a photograph is not pressed.

iii Denial of procedural fairness through failing to allow the builder the opportunity to advance his case and respond to the defence

1. The builders' written submissions concerning this issue referred to a page of the transcript (page 539 of the builders' Appeal Bundle) in which Mr Sleiman said "And it was us that came to NCAT not Gail [the owner]", to which the Senior Member responded "Oh, you went first?"
2. It is not clear to us how the builders suggest that this demonstrates a failure to accord procedural fairness. The Tribunal's procedures do not make provision for the filing of cross claims, rather a respondent to an application in the Tribunal who seeks to bring their own claim against the applicant may, if the Tribunal has jurisdiction over that claim (as it frequently will in home building cases), file their own application.
3. The Tribunal will then, generally, ensure that both applications are dealt with together. When cross applications between the same parties are heard together in the Consumer and Commercial Division, it is a matter for the Member presiding how the hearing is managed. There is no rule that requires the first application filed to be dealt with first.
4. We have reviewed the transcript of the hearing which the builders included in their Appeal Bundle and see no indication that the builders were denied an opportunity to put their case and to respond to all matters raised by the owner.
5. The hearing proceeded without undue formality, consistently with the guiding principle laid down in s 36 of the NCAT Act "to facilitate the just, quick and cheap resolution of the real issues in the proceedings" and the requirement of s 38(4) of the NCAT Act that "the Tribunal 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".
6. Nevertheless, it is clear from the transcript that the Senior Member gave each of the owner and Mr Sleiman an opportunity to put their respective cases. The Senior Member then gave the owner a "right of reply" (commencing at page 551 of the builders' Appeal Bundle) and then permitted Mr Sleiman to respond in relation to the builders' quantum meruit claim (commencing at page 565 of the builders' Appeal Bundle).
7. This ground of appeal cannot succeed.

B Grounds based on no evidence (i) (ii) and (iii)

1. Each of the issues raised under the heading "No evidence for findings" relates to the Tribunal's finding (at [24]) that the cabinetry installed by the builders was defective in that: "The cabinetry on the kitchen back wall was clearly not built to plan as the internal as built dimensions of 515mm do not conform with the plans and specifications. I accept the opinions of Messrs Bornelis and G Stilo to this effect, insofar as it is necessary to rely on expert opinion, as the plans speak for themselves."
2. The making of a finding without evidence is an error of law: Prendergast v Western Murray Irrigation at [13(7)].
3. Of the issues listed by the builders under the heading "No evidence for findings", only Item (b)(i) (concerning the internal dimensions of the cabinetry) could arguably involve a finding made without evidence.
4. The Senior Member's finding concerning the internal dimensions of the cabinetry was based upon the Member's own reading of the approved plans. Ms Wong sought, by reference to those plans, to demonstrate that the plans, correctly read, do not support the Senior Member's finding.
5. In our view it clearly cannot be said that there was no evidence to support the Senior Member's findings. The approved plans themselves constitute evidence from which the required internal dimensions can be identified. The owner's specific complaint was that the plans showed that the cabinet in which the hot water service was to be installed was to be 575mm wide but that it was instead 515mm wide.
6. We accept that the plans do not specify precisely how wide the space allowed for the hot water service was to be, in that there was no specification of the width of the internal wall dividing that space from the space to its right. Nevertheless, the Senior Member's finding that the cabinet as constructed did not conform to the plans was available on the evidence. The plans cannot reasonably be construed as permitting the cabinet for the hot water service to be only 515mm wide.
7. As noted above, grounds (b)(ii) and (iii) do not raise a question of law. The builders do not suggest there was no evidence to support relevant findings, but rather that the evidence should not have been admitted or should have been given less weight.
8. Subject to the requirements of procedural fairness, the Tribunal was not bound by the rules of evidence: s 38(2) of the NCAT Act. The admission of the evidence to which the builders object could not have constituted an error of law. The weight accorded to evidence is not a question of law.

Leave to Appeal

1. Insofar as the builders seek leave to appeal in respect of the findings concerning the cabinetry, we are not persuaded that the builders may have suffered a substantial miscarriage of justice.
2. The Senior Member stated, as set out above, that she considered that the plans spoke for themselves and that she did not need to rely upon the opinions of Mr Bornelis or Mr Stilo.
3. Nevertheless, we find no error in the Senior Member accepting and giving weight to those opinions. The President's Procedural Direction 3, concerning expert evidence, applies in claims under the HBA where the amount claimed or in dispute is more than $30,000. That would include the owners' claim in these proceedings. However paragraph 7 of the direction explicitly states that: A failure to comply with the code of conduct does not render any expert report or evidence inadmissible but it may, depending on the circumstances, adversely affect the weight to be attributed to that report or evidence.
4. The Tribunal did not err in giving weight to the opinions of Messrs Bornelis and Stilo.
5. Leave to appeal on these grounds should be refused.

A further issue identified by the Appeal Panel

1. At the commencement of the appeal hearing the Appeal Panel pointed out to the parties that there was an apparent problem with the Tribunal's assessment of the quantum of compensation payable to the owner.
2. The owner sought compensation for breach of contract. The measurement of damages for breach of contract is the amount necessary to put the owner in the same position as if the contract had been performed. In circumstances where a home owner has not paid the full contract price, the assessment of damages for breach of contract - whether the cost of rectification of defects or consequential loss such as loss of rent by reason of undue delay - must take account of the extent to which the home owner has not paid the full contract price. The Senior Member acknowledged this requirement in the course of the hearing: see p 502 of the builders' Appeal Bundle.
3. In this case the Tribunal did not determine the agreed contract price. However, even on the owner's assertion that the contract price was $25,050, the owner had not paid $17,550 of the contract price. Before the owner could establish that she had suffered loss by reason of the builders' breach of contract, the owner needed to establish losses in excess of that $17,550. To the extent the owner was required to make a payment to the builder by way of quantum meruit in respect of the work performed, that amount ($12,059) should be deducted from the amount outstanding, leaving $5,491.
4. The Tribunal having determined that the owner had incurred rectification costs of $11,212 and sustained consequential losses in the amount of $8,288, the builders would be liable to the owner for an amount of $14,009 (that is $11,212 plus $8,288 minus $5,491). The amount payable to the builder by way of quantum meruit should be set off against that figure, leaving a net amount payable to the owner of $1,950 (that is $14,009 minus $12,059).
5. An alternative way of calculating the appropriate outcome, propounded by the builders in their submissions in respect of the costs decision, is to compare the contract price to the amount by which the owner is out of pocket, by paying the deposit, paying the cost of rectification and through loss of rent. That calculation: $7,500 + $11,212 + $8,288 = $27,000 - $25,050 = $1,950, leads to the same result.
6. However, the Tribunal did not make a finding as to whether the agreed contract price was $25,050 as stated in the Points of Claim, $28,020 as asserted in the owner's email of 7 June 2018 (and as recorded in the decision as the contract price contended for by the owner), or $32,300 as asserted by the builders. In our view the owner has not adduced sufficient evidence to enable a finding to be made that the contract price was less than $27000. Indeed, the weight of the evidence points to the contract price being greater than $27,000. Accordingly the unpaid balance of the contract price exceeds the damages sustained by the owner. On that basis the owner has not established any loss arising from the builders' breach of contract.
7. Contrary to what appears to be the builders' submission, the fact that, as we have found, the unpaid balance of the agreed contract price exceeds the damages sustained by the owner, does not have the consequence that the builders will be entitled to payment of the difference. The builders are not entitled to enforce the contract. They are not entitled to the unpaid balance of the purchase price. The builders' only entitlement to payment in respect of the kitchen installed in the owner's apartment is on the basis of quantum meruit pursuant to s 94(1A) of the HBA. It is clear that, regardless of the agreed contract price, the builders could not recover from the owner any amount by way of quantum meruit as, on the findings of the Tribunal, the reasonable value of the work performed by the builders for the benefit of the owner (taking into account the costs of rectification of defects in that work) would amount to less than $1,000 (that is $12,059 minus $11,212), which is less than the builder has already been paid.
8. It follows that the appeal should be upheld and the orders made at first instance set aside.

Costs

1. The costs decision of 18 September 2019 was based upon the decision of 2 August 2019 by which the builders were ordered to pay the owner $14,941.
2. As the result of the decision to uphold the appeal, the costs decision should be set aside and the issue of costs determined afresh.
3. Section 60 of the NCAT Act provides that the Tribunal may award costs in proceedings only if there are special circumstances warranting an award of costs. Rule 38 of the Civil and Administrative Tribunal Rules provides that, in proceedings in the Consumer and Commercial Division of the Tribunal, special circumstances are not necessary before the Tribunal may award costs, if the amount claimed or in dispute in the proceedings is more than $30,000.
4. Notwithstanding that the builders brought a claim for less than $30,000 and the owner later brought a claim for more than $30,000, we do not consider that it is appropriate to consider the question of costs in respect of the owner's claim separately from the question of costs in respect of the builders' claim. The two claims were dealt with together and much of the evidence, in particular the evidence relating to defective work, was relevant to both claims.
5. Ultimately, both parties have been unsuccessful in their applications. The builders failed to establish that the fair value of the work performed for the owner (after allowance for the cost of rectifying defects in that work) exceeded the amount they had been paid. The owner failed to establish losses flowing from the builders' breach of contract in excess of the unpaid balance of the agreed contract price.
6. We note that the owner made a Calderbank offer to the builders offering to settle all proceedings between the parties for $550. The owner has not been successful in exceeding that figure and the offer is therefore not relevant to the determination of the costs issue.
7. In submitting that the builders should receive their costs of the proceedings, the builders' costs submissions referred to the decision of Ward CJ in Eq in Galati v Deans (No 3) [2018] NSWSC 1861 where her Honour stated at [18] - [19], 18 Where there are a number of issues in the proceedings (on which there have been varying degrees of success) it will not always be easy to determine the relevant event … 19 As I have noted in other cases, a helpful approach to that question is that which was suggested by the English Court of Appeal in Roache v News Group Newspapers Ltd [1998] E.M.L.R. 161 at 168-169. There, the question as to who was to be seen as the successful party "in the event" was posed as being a question as to "who, as a matter of substance and reality, has won? Has the plaintiff won anything of value which he could not have won without fighting the action through to a finish? Has the defendant substantially denied the plaintiff the prize which the plaintiff fought the action to win?" See also Kapeller v BH Australia Constructions Pty Ltd [2019] NSWCATAP 104.
8. In this case it cannot be said that either party has been more successful than the other. As neither party has been successful in their application, it would not be appropriate to make any order in relation to costs.
9. We note that the parties were given leave to be legally represented on the appeal on the condition that neither party made any application for the costs of the appeal. Accordingly we do not need to consider any question of costs relating to the appeal.
10. Our orders will be: 1. Appeal allowed. 2. Set aside the decision of 2 August 2019 and the costs decision of 18 September 2019. 3. Applications HB 18/49798 and HB 18/40912 are both dismissed with no order as to costs. 4. Each party is to bear their own costs of the appeal.

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: 26 February 2020