Under a NSW Residential Building Contract for Renovations and Additions dated 1 July 2015 (the "Nutek Contract") the appellant contracted with the respondent for the respondent to construct three residential units on a site in Balgowlah, Sydney for the fixed sum of $1.65m incl GST.
The due date for practical completion of the work was 56 weeks after 1 July 2015.
After construction commenced various disputes arose between the parties. The respondent repudiated the Nutek Contract, the appellant accepted that repudiation and terminated the Contract. At the date of termination the construction was about 25% complete.
The respondent commenced two proceedings in the Tribunal, the first on 25 May 2016 (HB 16/25001) and the second on 7 February 2017 (HB 17/06469). They were heard together. In short, the respondent was seeking payment for work it had done on a quantum meruit basis and for which it had not been paid.
On 28 February 2017 the appellant commenced proceedings against the respondent and others in the Supreme Court of NSW (no. 2017/63361) claiming damages for, amongst other things, the cost to complete the building and allegedly defective construction work. It was asserted in those proceedings that the appellant's damages totalled $1,146,059. The claimed damages exceeded the Tribunal's jurisdictional limit of $500,000 for such claims as set out in s 48K(1) of the Home Building Act 1989 (NSW) ("HBA").
The appellant applied to the Tribunal to transfer the two Tribunal proceedings to the Supreme Court so that they could be heard with the Supreme Court proceedings. The respondent opposed that application.
The transfer application was heard and refused on 19 April 2017.
In considering the transfer application the Tribunal was asked to decide, amongst other issues, the ability of the Tribunal to hear what was called an "offsetting claim" as a defence by way of equitable set-off. This "off-setting claim" seems to be, in substance, the same claim as was the subject of the Supreme Court proceedings, namely a claim for damages by the appellant against the respondent caused by the respondent's repudiation of the Nutek Contract. It appears, somewhat opaquely from the material provided to us, that the appellant had indicated to the respondent she would seek to prosecute this off-setting claim in the Tribunal should the respondent's proceedings remain in the Tribunal.
In deciding to refuse the transfer application the Tribunal referred to Steak Plains Olive Farm Pty Ltd v Australian Executor Trustees Limited [2015] NSWSC 289, a decision of White J (and not Hammerschlag J as the Tribunal said).
Steak Plains involved a dispute between commercial lessor and a commercial lessee in relation to farming land the subject of an agricultural lease. Put simply, and so far as is relevant, the lessor sought possession of the land, and the lessee sought relief by way of relief against forfeiture, an equitable defence with an associated equitable remedy if granted.
White J held that the Tribunal, by reason of ss 6 and 7 of the Law Reform (Law and Equity) Act 1972 (NSW), was required to and could hear the claim for relief against forfeiture, but could not grant any equitable remedy if the defence was made out (subject to what is said at [15] below).
Sections 6 and 7 say:
6 Defence in inferior court
Every inferior court shall in every proceeding before it give such and the like effect to every ground of defence, equitable or legal, in as full and ample a manner as might and ought to be done in the like case by the Supreme Court under the Supreme Court Act 1970.
7 Jurisdiction as to relief not enlarged
This Act does not enlarge the jurisdiction of any court as regards the nature or extent of the relief available in that court, but any court may, for the purpose of giving effect to sections 5 and 6, postpone the grant of any relief, or grant relief subject to such terms and conditions as the nature of the case requires.
His Honour said:
"[75] In my view, irrespective of the extent of the Tribunal's power to grant statutory remedies, it has jurisdiction under s 6 of the Law Reform (Law and Equity) Act and would be required to consider a defence to the owner's claim for possession that the lessee was entitled to relief in equity against forfeiture. Section 6 was drafted so as to apply to all courts, including those that did not have jurisdiction to grant equitable remedies. What is a "defence" for the purpose of s 6 does not depend on the power of the court in which the defence was raised to grant positive equitable relief. That that was the legislative intention appears clearly from the Minister's Second Reading Speech and the Report of the Law Reform Commission that led to the Act. Regard can be had to that extrinsic material in order to determine the meaning of the expression "… every ground of defence, equitable or legal, …" where that expression is ambiguous (Interpretation Act 1987 (NSW) s 34(1)(b)(i)).
[76] Relief against forfeiture operates both as a positive claim and as a defence to the owner's claim for possession. The availability of the defence by way of relief against forfeiture is analogous to the availability of a defence to a claim at law for possession that the tenant is entitled to possession by way of specific performance of an agreement for lease. Sections 6 and 7 of the Law Reform (Law and Equity) Act were drafted to permit such a defence to be raised in the inferior court even though the inferior court might not have jurisdiction to grant the appropriate equitable remedy to give effect to that defence, but could postpone the grant of relief to which the owner having the legal right to possession would otherwise have been entitled to permit the lessee to obtain the appropriate remedies in a court of equitable jurisdiction so as to give effect to the equitable defence."
In relation to relief, and assuming the Tribunal had no other source of power to grant the relief sought, his Honour said:
"[78] Accordingly, the Tribunal would have jurisdiction to determine the availability of a defence to the landlord's claim for possession that the tenant was entitled to relief against forfeiture even if its power to grant statutory remedies did not extend to granting appropriate relief to give effect to that determination. If an entitlement to relief against forfeiture were established, it should stay the proceeding to allow the tenant to pursue appropriate relief in the Supreme Court."
Thus, in his Honour's view, the Tribunal had jurisdiction to hear the equitable defence (and was required to do so), but could not grant equitable relief. Put another way, his Honour held that if an equitable defence was raised the Tribunal should determine that defence but then, if the Tribunal considered the equitable claim should succeed, the Tribunal should stay the applicant's proceedings to allow the respondent to approach the Supreme Court to seek orders for the relief sought based upon the Tribunal's findings. However, in that case the court found that the Agricultural Tenancies Act 1990 (NSW) gave an express power to the Tribunal to grant relief in the nature of relief against forfeiture - see at [83].
Thus, the Tribunal has jurisdiction to hear and determine equitable defences such as equitable set-offs.
Therefore, the Tribunal said that it would refuse the appellant's application to transfer the proceedings to the Supreme Court "for the reasons submitted by the respondent" on the basis of the decision in Steak Plains.
The Tribunal set out the respondent's submissions but little insight into its reasons for decision. Amongst the respondent's submissions were submissions that the appellant had not commenced her own application in the Tribunal, the then current applications were within the Tribunal's jurisdiction, the set-off defence did not warrant a transfer, no relief sought from the Tribunal could not be ordered by the Tribunal and there was no evidence to suggest the quantum of any cross-application would exceed the Tribunal's jurisdiction.
The transfer application having been refused on 19 April 2017, the appellant then commenced proceedings against the respondent in the Tribunal on 6 June 2017 (HB 17/26021).
In substance, the application commenced by the appellant seemed to be the same as that commenced in the Supreme Court. Included in the application was the statement that if the damages awarded to the applicant (the appellant before us) were above the jurisdictional limit then an order would be sought to transfer those proceedings to the Supreme Court. Presumably this statement sought to take up the Steak Plains point we have quoted at [14] above, namely that the Tribunal could hear the proceedings and make findings, but if the relief to be granted was beyond the jurisdictional limit then the proceedings could be transferred to the Supreme Court which would not be subject to that limit.
The appellant's application was dismissed by the Tribunal on 10 July 2017 on the basis that the Tribunal had no jurisdiction. The Tribunal reasoned as follows:
"The current applicant is the or a respondent in two associated matters in this Tribunal, being HB 16/25001 and HB 17/06469. The applicant maintains she has a claim of her own in the sum of more than $1.3 million. In fact, the applicant has filed proceedings in relation to that claim in the Supreme Court. It appears that those proceedings have been stayed until September this year, pending the outcome of the proceedings in this Tribunal.
The applicant's solicitor candidly advises that the issues in the Supreme Court proceedings are the same as in the current application, which was filed after the Supreme Court proceedings.
As counsel for the respondent in these proceedings submits, by virtue of Clause 5(7) of Schedule 4 of the Civil and Administrative Tribunal Act 2013, the fact that there are issues these proceedings are also the subject of dispute in the pending proceedings in the Supreme Court means this Tribunal does not have jurisdiction from the moment it becomes aware of those overlapping issues. There is no answer to that submission.
In addition, the amount in issue greatly exceeds the jurisdictional monetary limit in s 48K of the Home Building Act. The applicant seeks to deal with that issue by submitting that the Tribunal make findings of fact in these proceedings in this Tribunal without proceeding to a decision in relation to quantum, the latter decision instead being transferred to the Supreme Court.
In my opinion that is not an appropriate procedure in any case, but in fact it is not possible to do so under Clause 5(7) of Schedule 4 to the NCAT Act."
It is of note that the respondent gave as one reason for refusing the transfer application that the appellant had not commenced proceedings in the Tribunal, and yet was now submitting (after the appellant had commenced proceedings in the Tribunal) that such proceedings should be dismissed. Such inconsistent positions by litigants is to be discouraged.
Thus, the Tribunal decided it did not have jurisdiction for two reasons. The first was because of the terms of cl 5(7) of Schedule 4 of the Civil and Administrative Tribunal Act 2013 (NSW) (the "NCAT Act") and the second was that the amount claimed by the appellant was greater than the amount set out in s 48K(1) of the HBA.
As for the first reason, cl 5(7) of Schedule 4 of the NCAT Act says:
Effect of pending court proceedings on Tribunal If, at the time when an application is made to the Tribunal for the exercise of a Division function, an issue arising under the application was the subject of a dispute in proceedings pending before a court, the Tribunal, on becoming aware of those proceedings, ceases to have jurisdiction to hear or determine the issue.
Not mentioned in the Tribunal's reasons is s 48K of the HBA. Sections 48K(1) and (9) of the HBA say:
48K Jurisdiction of Tribunal in relation to building claims
(1) The Tribunal has jurisdiction to hear and determine any building claim brought before it in accordance with this Part in which the amount claimed does not exceed $500,000 (or any other higher or lower figure prescribed by the regulations).
…
(9) This section has effect despite clause 5 (Relationship between Tribunal and courts and other bodies in connection with Division functions) of Schedule 4 to the Civil and Administrative Tribunal Act 2013.
That is, s 48K(9) says that s 48K(1) has effect despite cl 5(7) of Schedule 4 of the NCAT Act. Section 48K(9) has the effect that the Tribunal continues to have jurisdiction to hear and determine claims that fall within s 48K(1) notwithstanding cl 5(7) of Schedule 4 of the NCAT Act. We need to return to this point and do so at [58] below.
As for the second reason, the "amount claimed" by the appellant was greater than $500,000. "Amount claimed" is an expression also used in r 38 of the Civil and Administrative Tribunal Rules 2014 and has been interpreted to mean that one determines the "amount claimed" by considering what orders the proponent seeks - Allen v TriCare (Hastings) Ltd [2017] NSWCATAP 25 at [43].
We see no warrant for giving a different interpretation to the same expression in s 48K(1). The only other possible meaning would be the amount awarded in any final decision, but that would leave the question of jurisdiction open until that final decision and involves the real possibility of the Tribunal hearing a case where it had no jurisdiction to do so.
Therefore, the Tribunal was correct in holding the Tribunal had no jurisdiction over the proceedings commenced by the appellant in the Tribunal because she had claimed - was seeking orders for - a sum greater than that referred to in s 48K(1).
Following the dismissal of the application commenced by the appellant, the two applications commenced by the respondent were heard together by the Tribunal in August and November 2017.
The Tribunal delivered its reasons on 2 May 2018. The end result was that the Tribunal ordered the appellant to pay the respondent the sum of $36,500. The reasons for that decision are not relevant to this appeal and need not be recited here.
Both parties appealed from that decision.
The decision on those appeals was given on 28 June 2019 - Slotwinski v Nutek Constructions; Nutek Constructions Pty Ltd v Slotwinski [2019] NSWCATAP 158.
In its decision the Appeal Panel held that, putting aside all other complications, it had to decide four issues. The only issue decided which is of present relevance was whether the appellant was able to raise a defence by way of set-off, the set-off being described as:
"… any damages awarded to her by the Supreme Court in the (Supreme Court) proceedings …"
Following Steak Plains (and repeating the error of the Tribunal that that decision had been made by Hammerschlag J rather than White J), the Appeal Panel decided that even though the appellant's claims may ultimately fall to be determined in the Supreme Court proceedings, and even though the value of those claims may exceed the Tribunal's jurisdictional limit of $500,000 set by s 48K(1) of the HBA, nevertheless the Tribunal should determine whether any amounts awarded in favour of the appellant could be set off against amounts payable by the appellant to the respondent under any award against the appellant in the Tribunal proceedings.
Amongst other orders, the Tribunal remitted the proceedings to the Tribunal for further determination of the respondent's quantum meruit claim and the appellant's defence by way of set-off.
The remitted proceedings were heard on 12 November 2019 (the transcript wrongly says they were heard on 11 December 2019) and decided on 13 November 2019.
There were a number of agreements between the parties as to matters in issue in that hearing. They were:
1. It was an agreed fact that the respondent had repudiated the Nutek Contract on 13 May 2016 and at a stage when the work contracted for was incomplete.
2. It was an agreed fact that the appellant accepted that repudiation and terminated the Nutek Contract on 13 May 2016.
3. It was an agreed fact that the respondent had been required, but failed, to take out homeowner's warranty insurance as required by s 92 of the HBA. The consequence was that, per s 94 of the HBA, the respondent was not entitled to damages, or to enforce any other remedy in respect of a breach of the Nutek Contract committed by the appellant in relation to that work.
4. The respondent also agreed that the Tribunal could, and should, give effect to such of the appellant's defences that she may establish pursuant to ss 6 and 7 of the Law Reform (Law and Equity) Act 1972 (NSW).
The defence raised by the appellant which is relevant to this appeal was her defence by way of equitable set-off. The set-off claimed was the cost to complete the building arising from the respondent's wrongful repudiation of the Nutek Contract before the building was completed.
At the hearing the learned Tribunal Member sought submissions from the parties as to whether this defence was available. The decision of the Court of Appeal in Hawes v Dean [2014] NSWCA 380 was cited.
Hawes involved a series of claims and counter claims between the parties. One party accepted that no statutory set-off was available but that there should be an equitable set-off of the amounts it was found owing against the amount another party was found owing. The primary judge, now Brereton JA, held that an equitable set-off was available and that: [1]
"For those reasons the judgment in favour of Hawes Investments in respect of the Gallwey Deed and that in favour of Mr Dean in respect of the Clydesdale fee should be set off one against the other. The result is a net judgment in favour of Mr Dean against Mr Hawes and Glenside for the sum of $32,801.99 (inclusive of interest to 14 August 2013)."
That finding was one of the matters challenged on appeal.
Barratt JA, with whom Bathurst CJ and McColl JA agreed, said that in relation to whether an equitable set-off was available (as a defence) the "impeachment of title" test remained the test in Australia. His Honour cited the earlier Court of Appeal decision of HP Mercantile Pty Ltd v Dierickx [2013] NSWCA 479 in which Emmett JA delivered a judgment with which Beazley P and Meagher JA agreed. Of that decision Barratt JA said in Hawes:
"[64] Emmett JA gave three examples of situations in which relevant impeachment will exist. The first is where a mortgage is granted to a solicitor as security for costs and the mortgagor client has a cross-claim against the solicitor for faulty work (the lien of a solicitor was referred to as "well known" in this connection in Simpson v Lamb (1857) 7 E & B 84 ; 139 ER 1179 at 1181). The second is where a builder has a claim for money due under a building contract and there is an unliquidated claim against the builder for damages for breach of that contract. The third case is where a lender fails to provide promised further advances for a development project and the borrower is unable to complete the development project and repay the advances actually made.
[65] In all the hypothetical cases to which Emmett JA referred, two wrongs or defaults are so closely connected that a net position or result ought in equity to prevail between the parties because it would be unconscionable to allow one of them to insist on its legal right without first accommodating the other's countervailing legal right. It is the existence of that unconscionability that causes the first party's claim to be "impeached" (that is, undermined and defeated) by the second party's claim."
As the transcript reveals, before the Tribunal at first instance the respondent accepted that there was a relevant connection (see [65] in Hawes) between the appellant's and respondent's claims, and thus a defence by way of equitable set-off was available to the appellant. The Tribunal appears to have accepted that concession as being legally correct.
The Tribunal decided a number of issues, but the issues decided by the Tribunal which are relevant to this appeal were:
1. What amount was the respondent entitled to recover on a quantum merit basis?
2. What amount was the appellant entitled to set off against the amount owing to the respondent for the additional cost to complete the building?
3. Which of the respondent and the appellant was entitled to an order and for what amount?
After referring to various matters the Tribunal said at [37], in relation to jurisdiction:
"I am satisfied that each of the (respondent) and the (appellant) is making a claim against the other for the payment of a specified sum of money that arises from the supply of "building goods or services" under the (Nutek Contract), within s 48A(1) of the (HBA). The (Nutek Contract) involved the carrying out of residential building work within cl 2(1)(a) of Sch 1 of the (HBA). Accordingly, in (the remitted proceedings) each of the (respondent) and the (appellant) is making a "building claim" against the other within s 48I(1) of the (HBA), which the Tribunal has jurisdiction to hear and determine pursuant to s 48K(1) of the (HBA)."
That last statement must be read as limited to considering the appellant's claims as a defence to the respondent's claims, and not a counter claim for damages. That is because she claimed more than the Tribunal's jurisdictional limit in her claim for damages against the respondent, and thus put that claim outside the Tribunal's jurisdiction. The Tribunal only had jurisdiction to decide the equitable set-off as a defence.
What that meant in practical terms was that if the appellant successfully argued in the Tribunal that she had an actionable right to damages against the respondent for its repudiation of the Nutek Contract (no claim can amount to an equitable set-off unless it, if it stood alone, would constitute an actionable right - Meagher, Gummow & Lehane's Equity Doctrines & Remedies, 4th ed., LexisNexis Butterworths, 2002 at [37-060), such a claim could only defeat the respondents claim in the Tribunal, in part or in full. Should her claim exceed the claim of the respondent, the appellant could not, in the Tribunal, receive an order in her favour for that excess.
That is because a defence of equitable set-off is distinctly different from a counter-claim (or cross-claim), and the defence of equitable set-off (if established) absolves the appellant, wholly or partially, from liability to the respondent (Meagher, Gummow & Lehane at [37-005]). Or, as the authors say in Young, Croft and Smith, On Equity, LawBook Co, 2009 at [15.430] put it:
"Substantive equitable set-off, in this sense, does not operate by providing a balance of cross-claims; rather, it has the effect of extinguishing and eliminating the basis of the claim against which it is raised."
At the hearing, the respondent did not take the point that it had taken on the application for dismissal of the appellant's proceedings commenced on 6 June 2017, namely that by virtue of cl 5(7) of Sch 4 of the NCAT Act the Tribunal may not have had jurisdiction to hear the equitable defence of set-off, nor was any such point taken on this appeal. Indeed, the respondent's written submissions on appeal proceeded on the basis there the Tribunal did have jurisdiction (see [51]-[54] of the respondent's submissions dated 17 March 2020). Nevertheless, despite that position we must be satisfied that we have, and the Tribunal at first instance had, jurisdiction to determine the matter.
We are satisfied that we have, and the Tribunal at first instance had, jurisdiction to determine the appellant's equitable set-off defence. We so hold for three reasons.
First, cl 5(7) deprives the Tribunal of jurisdiction to hear and determine an "issue" (as distinct from proceedings) if an issue arising under the application in the Tribunal was the subject of a dispute in proceedings pending before a court.
The only authority our researches have uncovered on the point is Advance Earthmovers Pty Ltd v Fubew Pty Ltd [2009] NSWCA 337 which considered the predecessor to cl 5(3) [which uses the word "issue" in a similar context to cl 5(7)], namely s 22 of the Consumer, Trader and Tenancy Tribunal Act 2001 (NSW) (the "CTTT Act"), now repealed. Section 22 said:
"If, at the time when an application was made to the Tribunal in accordance with this Act, no issue arising under the application was the subject of a dispute in proceedings pending before a court, a court has no jurisdiction to hear or determine such an issue."
Young JA, with whom Tobias JA agreed said:
"[38] The key point is what is the meaning of "issue" in s 22(3) of the CTTT Act?
[39] The word "issue" derives from the Latin verb "to go" and an issue occurs where two or more people are going meet (sic) at a point.
[40] "Issue" in litigation means a point in dispute between parties as in the pre-Judicature pleadings where in due course issue was joined by formulating a question to which a jury could answer "Yes" or "No"."
Therefore, it seems to us that "issue" does not included every disputed fact that a court or tribunal would need to resolve in order to decide the ultimate issue between the parties, but means the ultimate issue in the case. In this case the issue, or ultimate issue, was whether the appellant was wholly or partially absolved of liability to the respondent on the respondent's claim (and to the extent of that liability) whereas in the Supreme Court the ultimate issue is whether the appellant is entitled to an award of damages (not limited to the amount of the respondent's claim) for the respondent's repudiation.
The facts here are somewhat analogous to those in Advance Earthmovers. In that case the respondent had commenced proceedings in the CTTT for alleged overcharging by the appellant under a construction contract. A few days later the appellant commenced proceedings in the District Court of NSW for, inter alia, interim payment under s 15 of the Building and Construction Industry Security of Payment Act 1999 NSW ("SOPA"). Young JA described the appellant's submission (which was accepted) at [36]:
"The submission may be summarised by saying that the CTTT alone had jurisdiction to decide whether in the ultimate the respondent must pay the applicant's demand. That was the issue before the CTTT. However, the issue before the District Court was merely whether the applicant was entitled, in the interim, to be paid the amount of its demand in accordance with the SOPA."
His Honour held that the issues were different.
Second, s 48K(9) of the HBA effectively neuters the operation of cl 5(7) of Sch 4 of the NCAT Act in relation to claims falling with s 48K of the HBA with the result that cl 5(7) does not deprive the Tribunal of jurisdiction in such matters. Sackville JA, with whom Tobias JA agreed, thought so in Advance Earthmovers Pty Ltd v Fubew Pty Ltd [2009] NSWCA 337 [2] at [86] where his Honour said, in relation to s 22 of the CTTT Act:
"Section 48K has effect despite s 22 of the CTTT Act: s 48K(9)."
Third, cl 5(7) refers to issues arising "under the application". We think the better view is that that expression refers to the issues raised on the applicant's cause of action rather than defences which may be raised by the respondent. That interpretation allows cl 5(7) to work harmoniously with ss 6 and 7 of the Law Reform (Law and Equity) Act.
[2]
The Tribunal's Decision
Having accepted that a defence of equitable set-off was available to the appellant (see [44] above) the Tribunal proceeded to determine the other issues including the issues relevant to this appeal and which are set out at [45] above.
The Tribunal decided that the respondent was entitled to an order that the appellant pay it $242,045 for its unpaid work assessed on a quantum meruit basis. The Tribunal decided that the appellant was entitled to an order that the respondent pay her $186,487 for damages for breach of contract (being the costs to complete the building work under the Nutek Contract which the respondent had repudiated).
The Tribunal then set-off the latter against the former and ordered the appellant to pay the respondent the sum of $55,558.
The appellant appeals from that decision.
[3]
Ground of Appeal
In substance the appellant advances two grounds of appeal.
The first is a procedural fairness ground (in her proposed amended grounds of appeal) and the other, put in different ways in multiple grounds of appeal (whether as originally advanced or in the proposed amended grounds of appeal) is that the Tribunal erred in assessing the quantum of damages suffered by the appellant.
There is no substance to the procedural fairness ground. The appellant complains that it was procedurally unfair for the Tribunal to have refused her application to put on further written submissions on the question of quantum after the hearing had concluded. It was submitted that that opportunity should have been given because the hearing was the first occasion that the respondent had explained its method of calculation of cost to complete damages.
There are two answers to this submission. First, it was incumbent on the appellant to put forward its own calculation of damages. In general terms, she who asserts must prove, and it was the appellant asserting she was entitled to damages and asserting that the damages were of a certain amount, thus it was her obligation to prove her damages and to explain to the Tribunal what she said was the correct method to calculate those damages.
Second, the methodology adopted by the Tribunal was correct (and the appellant does not now submit otherwise). Where the Tribunal fell into error, as we explain below, was in applying that methodology.
In that respect we note that the Tribunal did not obtain the assistance from the appellant's representative that one would wish for because what is now argued on appeal was never submitted to the Tribunal, and the respondent makes that point on appeal. Despite that fact, it remains the case that there was an error in assessing damages, and the error must be corrected.
Therefore, there was no procedural unfairness occasioned to the appellant.
The second ground of appeal is to the effect that the Tribunal erred in assessing the appellant's damages. The error was in failing to properly construe the provisions of the relevant construction contracts. If established, such is an error of law - Re R [2000] NSWSC 886 at [25], cited with approval in C v W [2015] NSWSC 1774 at [48].
[4]
The Tribunal's Assessment of the Damages
We uphold the appellant's second ground of appeal for the following reasons.
The appellant's damages case as put to the Tribunal was that her damages were equal to the cost to her to complete the building the Respondent had contracted to build.
The contract price under the Nutek Contract was for the fixed sum of $1.65m incl GST.
After the respondent repudiated the Nutek Contract the appellant entered into a contract with Cutting Edge Building Pty Ltd for the completion of the building for a contract price of $1,398,600 incl GST (the "Cutting Edge Contract") on 22 July 2016.
The appellant submitted that her damages were equal to the Cutting Edge contract sum ($1,398,600) less the total of the amounts paid to or on behalf of the respondent ($518,511) leaving a balance owing to her of $880,089.
The respondent submitted that the appropriate calculation was to add the Cutting Edge contract sum ($1,398,600) to the total of the amounts paid to or on behalf of the respondent ($437,887) and then deduct the Nutek Contract sum ($1.65m) leaving a balance owing to the appellant of $186,487.
The Tribunal found that the total amount paid to or on behalf of the respondent was as submitted by the respondent, namely $437,887 and not the sum submitted by the appellant ($518,511).
The Tribunal held that the correct methodology to calculate the costs to complete for the appellant was as proposed by the respondent.
We pause to note that the expression "cost to complete" does not precisely capture the measure of the appellant's damages, but the Tribunal applied the correct method of assessment on the case advanced by the appellant and so it is appropriate to use the same expression as used by the Tribunal for ease of reference.
It was common ground that the respondent had repudiated the Nutek Contract. The appellant's damages were therefore the sum of money that would place her into the position she would have been in had the respondent performed its obligations under the Nutek Contract, i.e. a completed building for the cost of $1.65m incl GST.
Overlooked by the parties and the Tribunal was the fact that the Nutek Contract price was $13,000 higher than that stated in the Nutek Contract because the appellant had approved one variation for that sum being for additional groundworks needed to reinforce the foundations (report of Mr Lee at p.5). Thus, the proper Nutek Contract price to consider for the purpose of the damages calculation was $1.663m and not $1.65m.
On the Tribunal's findings, the appellant had already paid (under the Nutek Contract) $437,887. She was required to pay a further $1,398,600 to Cutting Edge to achieve a completed building (making a total of $1,836,487). She would have had to have paid $1.663m to Nutek had it performed its obligations and so that sum is deducted from $1,836,487 to arrive at $173,487 as the appellant's damages. Expressed another way, if the respondent paid the appellant that sum ($173,487), then the net amount paid out by the appellant (to Nutek and Cutting Edge) to achieve a completed building would have been $1.663m, which is the sum she had contracted to pay Nutek for the completed works (with the added variation).
However, in that calculation was an implied assumption that the Nutek and Cutting Edge Contracts were relevantly identical (allowing for the work done for which the appellant had paid $437,887) and the appellant's point on appeal is that they were not. The appellant submits that the Cutting Edge Contract did not contain all of the work contained in the Nutek Contract but which was required to be done to achieve the completed work. She submitted these further works (all being PC items except for one) were paid by her separately from, and not to or on behalf of, Cutting Edge.
She submitted that those further works were the lift, plumbing fixtures, electrical fittings, floor and wall tiling supply, carpet supply, door furniture, bathroom accessories and appliances.
We agree with the appellant's submissions.
The Nutek Contract was in the form of the March 2015 version of the Housing Industry Association's standard form NSW Residential Building Contract for Renovations and Additions. It contained a number of Schedules. The contract price (amongst other matters) is contained in Schedule 1, progress payments are dealt with in Schedule 2, excluded items in Schedule 3, description of work in Schedule 4, "Other Contract Documents" are identified in Schedule 5, warranty insurance in Schedule 6 and prime cost and provisional sum items in Schedule 7.
One of the "Other Contract Documents" referred to in Schedule 5 is Attachment 1. Attachment 1 is a table listing 54 separate items, identifying whether an item was a PC item, the budget for each item (totalling $1.65m incl GST for the 54 items, being the contract price excluding the variation), payments made and the balance owing for each item.
Included in Attachment 1 are the following items together with the budgeted cost for each item: a lift ($65,000), plumbing fixtures ($15,000), electrical fittings ($20,000), floor and wall tiling supply ($20,000), carpet supply ($15,000), door furniture ($3,000), bathroom accessories ($3,000) and appliances ($15,000). All of those items other than the lift are identified as PC items.
The Cutting Edge Contract was in the form of the August 2012 version of the Housing Industry Association's standard form NSW Residential Building Contract for Renovations and Additions. It was similar in form to the Nutek Contract but not identical.
The contract price (amongst other matters) is contained in Schedule 1, progress payments are dealt with in Schedule 2, excluded items in Schedule 3, description of work in Schedule 4, warranty insurance in Schedule 5 and prime cost and provisional sum items in Schedule 6. There is no "Other Contract Documents" schedule in this contract.
Amongst the Excluded items in Schedule 3 of the Cutting Edge Contract are lift supply, all tiles, electrical fittings and all PC items.
Schedule 3 references cl 18.1 of the Cutting Edge Contract which says:
"The owner and the builder agree that the items set out in Schedule 3 are excluded from this contract."
(Emphasis original)
Schedule 6 had the notation "See attached". What was attached was a list headed "PC ITEMS / PROVISIONAL SUMS". That list included the lift, plumbing fixtures, electrical fittings, tiling supply, carpet, door furniture, bathroom accessories and appliances. Next to each of those items was a notation "BY OWNER SUPPLY".
Therefore, on the evidence, we are satisfied that the items identified above were included in the Nutek Contract and excluded from the Cutting Edge Contract.
The respondent submits that these various items were, for various reasons, not a payment by the appellant to Nutek for work completed, the Nutek works did not reach the stage for these items and that the "deducted amounts" did not form part of the Nutek Contract. It was further submitted that the fact the appellant chose to exclude these items from the Cutting Edge Contract "does not mean that they amount to payments to" the respondent.
These submissions are, with respect, misplaced. They do not address the correct method of calculating the appellant's damages. The fact is, as we have explained above, those items were included in the Nutek Contract (and the respondent obtains the benefit of that inclusion in the calculation) and were not included in the Cutting Edge Contract. The result of that is that they must be accounted for in order to place the appellant in the position she would have been in had the respondent not repudiated the Nutek Contract.
The appellant submits that the value or cost of those items was as quantified by Thomas Lee, an expert called by the appellant to value the building works. Mr Lee's evidence was accepted by the Tribunal (in preference to the evidence given by the respondent's expert).
Mr Lee valued the items we have identified at pp. 39 and 41-45 of his report. He valued them as follows: lift $60,000, plumbing fixtures $15,000, electrical fittings $20,000, floor and wall tiling supply $20,000, carpet supply $15,000, door furniture $3,000, bathroom accessories $3,000 and appliances $15,000. There was evidence that the appellant had actually paid $58,733 for the lift and not Mr Lee's estimated cost of $60,000 and so the actual figure should be preferred to the estimate.
Therefore, the cost of those further items totalled $149,733.
It follows, when those items are accounted for and the proper Nutek Contract price used, the appellant's damages were the Cutting Edge contract sum ($1,398,600), plus the total of the amounts paid to or on behalf of the respondent ($437,887), plus the cost of the further items ($149,733) less the Nutek Contract sum ($1.663m) leaving a balance owing to the appellant of $323,220.
As the appellants loss is $323220 the respondent has no claim in quantum meruit because the amount paid by the appellant and the amount of appellants loss exceeds the value of the quantum meruit.
For completeness, we should note that Mr Lee's report also opines on the reasonable cost of rectifying alleged defective work performed by the respondent. Mr Lee opined that the costs for such rectification was $79,358. However, that claim seems not to have been advanced at the hearing.
As we have explained at [47]-[49] above, the effect of success of the equitable set-off defence is to absolve the appellant, wholly or partially, from liability to the respondent. As her damages exceed the amount payable to the respondent she is wholly absolved from that liability. It follows that the respondent's application should be dismissed.
It will be recalled that the appellant had commenced proceedings in the Tribunal on 6 June 2017 seeking such an order for damages against the respondent for repudiation of the Nutek Contract, but those proceedings were dismissed by the Tribunal on 10 July 2017 (see [21] above). At that time the Tribunal was correct in observing that the amount "claimed" by the appellant exceeded the Tribunal's jurisdictional limit.
During the hearing of the appeal we raised with the parties the possibility of the appeal being successful and the quantum of that success being within the Tribunal's jurisdictional limit. We raised that matter because, in the absence of proceedings having been commenced by the appellant and should her damages be found to exceed the amount found owing by her to the respondent, we would be unable to make an order awarding her that excess amount. We raised the possibility of granting leave to the appellant to commence proceedings in the Tribunal, and joining those proceedings to this appeal so that, should the appellant's damages exceed the amount owed to the respondent, the appellant could receive an order in her favour.
Absent such leave being granted the appellant's only remedy to obtain that excess amount would be to re-enliven the Supreme Court proceedings which seemed to us to involve unnecessary cost to the parties, unnecessary use of their time and the valuable time of the Supreme Court.
The respondent objected to that course at the hearing of the appeal and its solicitors made some written submissions to the same effect subsequent to the hearing of the appeal.
In light of that opposition we do not believe we should take the course identified.
However, we note those matters against the event it is relevant to the question of costs in the Supreme Court proceedings assuming the appellant wishes to pursue what, on our findings, she is owed.
[5]
Orders
We make the following orders:
1. Appeal upheld.
2. Set aside Order 1 of the Tribunal dated 13 November 2019 and in lieu thereof order that the respondent's proceedings be dismissed.
3. If any party desires to make an application for costs of the appeal:
1. that party is to so inform the other party within 14 days of the date of these reasons;
2. the applicant for costs is to lodge with the Appeal Panel and serve on the respondent to the costs application any written submissions of no more than five pages on or before 14 days from the date of these reasons;
3. the respondent to any costs application is to lodge with the Appeal Panel and serve on the applicant for costs any written submissions of no more than five pages on or before 28 days from the date of these reasons;
4. any reply submissions limited to three pages are to be lodged with the Appeal Panel and served on the other party within 35 days of the date of these reasons;
5. the parties are to indicate in their submissions whether they consent to an order dispensing with an oral hearing of the costs application, and if they do not consent, submissions of no more than one page as to why an oral hearing should be conducted rather than the application being determined on the papers.
[6]
Endnotes
Hawes v Dean [2013] NSWSC 1246 at [22].
Our researches reveal no other authority on the point.
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: 20 October 2020
Parties
Applicant/Plaintiff:
Slotwinski
Respondent/Defendant:
Nutek Constructions Pty Ltd
Legislation Cited (6)
Consumer, Trader and Tenancy Tribunal Act 2001(NSW)