The Craftsmen Restoration & Renovations Pty Ltd v Boland

Court of Appeal (NSW)|2011-05-17|Before: Allsop P, Basten JA, Howie J

Introduction The present appeal arises from a dispute between the owners of land (the respondents) and their builder (the appellant) in relation to residential building work which commenced in September 2001, with an intended completion date in May 2002. Attempts to resolve the dispute continued through the second half of 2002. Settlement proposals continued to be exchanged during the first half of 2003. 7On 6 August 2003 the owners commenced proceedings in the District Court, seeking damages for breach of contract. On 12 August 2003 the builder commenced proceedings in the Consumer, Trader and Tenancy Tribunal ("the Tribunal") seeking payment of unpaid moneys under the contract. Both proceedings were dealt with in the Tribunal, pursuant to s 48L of the Home Building Act 1989 (NSW). 8On 28 August 2006, approximately two months after the completion of submissions in what had been a lengthy and interrupted set of proceedings before the Tribunal, involving 12 hearing days, Senior Member Ms C Paull handed down her decision and extensive reasons therefor: The Craftsmen Restoration & Renovations Pty Ltd v Boland [2006] NSWCTTT 478. 9The proceedings in the Tribunal included a conclave of experts and the giving of joint evidence by experts. The proceedings were undoubtedly hard fought and commenced with extensive objections to evidence: Tribunal Reasons, p 7. Despite the difficulties which faced the Tribunal, the reasons were comprehensive and well-structured. An appeal was brought on numerous grounds, but ultimately error has been established in only one respect, though the error has consequential effects. 10The procedural history following the decision of the Tribunal is not a happy one. An appeal from the Tribunal was taken to the Common Law Division of this Court, judgments being delivered on 1 July 2008 and 2 March 2009: The Craftsmen Restoration & Renovations Pty Ltd v Boland [2008] NSWSC 660 and [2009] NSWSC 82 (Howie J). Apart from the correct identification of legal error in the reasons of the Tribunal in one respect, the matter miscarried in the Common Law Division. A significant level of responsibility for that outcome must lie with the parties, which, in the tentative view of the Court, should bear their own costs before the primary judge. It is most unfortunate that the matter must now return to the Tribunal, though for a limited purpose.

Background 11The building work commenced on 10 September 2001 at Riverview, in Sydney. The circumstances of the dispute may be identified by reference to the summary of conclusions and findings of the Tribunal (Reasons, p 90-92): "1. The date fixed for practical completion of the works under the contract was 15 May 2002. 2. Sometime shortly thereafter, the problems with the builder's work, principally the windows and the air conditioner, began to feature prominently. 3. The builder continued to work on the site and on 19 June 2002 the builder issued progress claim 8. 4. On 24 June 2002 the architect certified progress claim 8 (progress certificate 8). 5. On 3 July 2002 the owners wrote out a cheque for payment of progress certificate 8. 6. By 4 July 2002 the owners were obliged under the contract to have paid the builder progress certificate 8. 7. The owners' failure to pay progress certificate 8 by that date put them in breach of the contract. 8. This breach gave the builder the right to issue the suspension notice on 8 July 2002 under clause 12.7.1 of the contract. 9. The builder's failure to have reached practical completion by 15 May 2002 did not prevent the builder from exercising his right to issue that suspension notice. 10. From the time that the builder suspended the works on 8 July 2002 both parties made genuine and constant attempts to reach some agreement. 11. The parties met in an attempt to reach some resolution from 21 August 2002 to 4 December 2002. 12. It was not reasonable for the builder to continue to rely on the suspension notice after the meeting in December 2002 and the builder must be taken to have waived his rights under the suspension notice after that meeting. 13. On 16 July 2003 the owners issued a default notice pursuant to clause 12.2 of the contract. 14. On 3 August 2003 the owners purported to end the contract pursuant to clause 12.3 of the contract. 15. At the time that the owners initiated this action in August 2003, a number of defective items for which I have found the builder liable, still persisted. 16. Principal among these were the windows and the air conditioner which had been the subject of dispute between the parties for over 12 months. 17. The windows alone were of such magnitude and had been in the arena for such a considerable period of time without the builder having been able to rectify them, that (subject to the caveat mentioned below) they gave rise to the owners' entitlement to end the contract under clause 12.3. 18. That caveat is that clause 12.3 specifically provides that the owners' determination notice is deemed to be void and of no effect if, at the time the owners issued the notice, they themselves were 'in breach' of the contract. 19. The owners' failure to pay progress certificate 8 in July 2002 was not a 'breach' as contemplated under clause 12.3 so as to preclude them from exercising their right to end the contract under clause 12.3 in August 2003. 20. The owners are entitled to the reasonable cost of rectification of the work for which I have found the builder liable being $92,137.08. 21. The owners are also entitled to damages of $6,767.20 for storage costs and $1,677.80 for telephone charges. 22. The total of the owners' damages is $100,582.08. 23. The builder is entitled to the payment of progress certificate 8 in the sum of $21,662.39 and interest pursuant to the contract. The builder is also entitled to the retention sum of $11,705.90 and interest pursuant to the contract." 12In these circumstances, it is imperative to clarify at the outset the nature of the proceedings in the Common Law Division and, on appeal, in this Court.

Appeal from Tribunal 13The right of appeal from the Tribunal is constrained by the terms of s 67 of the Consumer, Trader and Tenancy Tribunal Act 2001 (NSW) ("the CTTT Act") which, at the relevant time, provided: " 67 Appeal against decision of Tribunal with respect to matter of law (1) If, in respect of any proceedings, the Tribunal decides a question with respect to a matter of law, a party in the proceedings who is dissatisfied with the decision may, subject to this section, appeal to the Supreme Court against the decision. ... (3) After deciding the question the subject of such an appeal, the Supreme Court may, unless it affirms the decision of the Tribunal on the question: (a) make such order in relation to the proceedings in which the question arose as, in its opinion, should have been made by the Tribunal, or (b) remit its decision on the question to the Tribunal and order a rehearing of the proceedings by the Tribunal. ... (7) If a rehearing is held, fresh evidence, or evidence in addition to or in substitution for the evidence on which the original decision was made, may be given on the rehearing. (8) A reference in this section to a matter of law includes a reference to a matter relating to the jurisdiction of the Tribunal." 14Section 67 was amended, with effect from 1 September 2008, to substitute the District Court for the Supreme Court. The transitional provisions stated that an appeal which had been made to the Supreme Court "for which a hearing date had been allocated" before the amendment took effect, "is to be determined as if [the amending] Act had not been enacted": CTTT Act, Sch 6, Pt 4, cl 17. Although final orders were not made in the Common Law Division until 2 March 2009, the hearing commenced in October 2007. Accordingly, the jurisdiction of the Supreme Court to hear and determine the appeal was preserved. 15It is convenient to set out the orders made by the Tribunal, which were in the following terms: "1. I find Thomas Boland & Caroline Boland (the owners) liable to pay The Craftsmen Restoration & Renovations Pty Ltd (the builder) $21,662.39 for progress certificate 8 plus interest from 4 July 2002 to the date of these orders, and $11,705.90 for retention money plus interest from 26 June 2002 to the date of these orders pursuant to the contract in matter HB 03/32685. 2. I find the builder liable to pay the owners $100,582.08 in matter HB 03/41455. 3. In offsetting (1) against (2) I order the builder to pay the owners $100,582.08 less the sum of $33,368.29 plus the calculation of interest in accordance with (1) above within 28 days of the date of these orders. 4. I order the owners to return to the builder the Trend doors the subject of these proceedings within 28 days of the date of these orders. 5. The parties are given leave to make a costs application and any application if there is dispute as to the calculation of interest in relation to (1) above within 28 days of the date of these orders. 6. The parties are given leave to be heard by telephone on any costs application or application relating to a dispute as to interest provided that they advise the Registry in writing of their telephone contact number at least 48 hours before the date on which the costs application is listed." 16The first order was made in the claim brought by the builder before the Tribunal; the second order was made in the claim brought by the owners. Although each of orders 3, 4 and 5 required steps to be taken within 28 days from 28 August 2006, no steps have been taken to the present time. Despite no such applications having been made to the Tribunal, the parties in the Common Law Division actively sought orders in respect of the costs in the Tribunal and in respect of the calculation of interest. 17Both parties brought appeals to the Common Law Division, pursuant to s 67 of the CTTT Act. The owners' appeal was brought from the orders made by the Tribunal, which were sought to be quashed. Further, although there were 14 paragraphs setting out grounds of appeal, most of which started with an allegation that the Tribunal "erred in law", none unequivocally identified any legal error. The builder's appeal sought orders "replacing" each of the orders made by the Tribunal, with the exception of order 4. The document also sought "declarations" outlined in 12 detailed paragraphs, several with sub-paragraphs, purportedly pursuant s 65(1)(b) and s 67(3)(a) of the CTTT Act. Section 65 of the CTTT Act provides no power to grant relief, but rather excludes the jurisdiction of courts to grant relief, including by way of declaratory judgment or order, "in respect of any matter that has been heard and determined ... by the Tribunal in accordance with this Act or in respect of any ruling, order or other proceeding relating to such a matter": s 65(1). There are exceptions, but they do not appear to cover the subject-matter of the declarations sought by the builder. 18The inappropriateness of the builder's summons was adverted to by the primary judge: at [19] of his first judgment. There is an implied criticism of the owners' summons on the basis that the grounds "extend to the minutiae of the Tribunal's decision": at [21]. His Honour also described the conduct of the parties in his Court in terms which need not be set out in full, but conclude that the "incessant bickering between the parties and their legal representatives has continued even after this Court reserved its decision": at [5]. 19Despite at various time reminding himself of the scope and nature of the proceedings before him, it is clear that ultimately the resolution of the appeals miscarried in a number of respects and his Honour was led, in some cases inadvertently, but on other occasions by a desire to bring an end to the litigation, to expand the scope of the proceedings beyond their legal limits. 20After noting the statutory provision, pursuant to which the proceedings, originally commenced by the owners in the District Court, had been transferred to the Tribunal, he referred to "the belief of the legislature ... that the matter would be more appropriately dealt with in the Tribunal than in the District Court in order to obtain an inexpensive and expeditious resolution of the dispute": at [8]. His Honour noted that "[t]he conduct of these proceedings shows how misguided that belief has proved to be". 21The reference to "these proceedings" is ambiguous: if it referred to the proceedings in the Tribunal, it is somewhat out of character with other comments made by his Honour which were entirely respectful of the manner in which the Tribunal had dealt with the matter. If it referred to the conduct of the proceedings in his Court, by the parties to the appeal before him, it was a matter which should have been appropriately controlled and, as will appear, was not. Further, a danger lies in judicial criticism of legislative policy, based on experience in one, or even a handful, of cases. Appellate courts should be wary of making such pronouncements. Especially is that so where they have taken an expansive view of their own powers, thus inadvertently encouraging a higher level of appellate review, thus undermining the legislative policy, to which the courts should give effect.

Proceedings in this Court 22Under the current statutory regime, whereby appeals from the Tribunal go to the District Court, challenges to a judgment in the District Court come to this Court in its supervisory jurisdiction, pursuant to s 69 of the Supreme Court Act 1970 (NSW). However, in this case, an appeal lay from the judgment in the Common Law Division, pursuant to s 101 of the Supreme Court Act . Such an appeal is governed by the provisions of s 75A, providing a rehearing, subject to the limitations of the jurisdiction being exercised in the Common Law Division. 23On 2 March 2009 orders were made by the primary judge in the two appeals before him. The builder's appeal was dismissed with costs, but the owners' appeal was allowed in part, the substantive orders being: "2. The defendant (the builder) is to pay the plaintiffs' (the owners) damages in the sum of $113,947.25 together with interest in accordance with the Uniform Civil Procedure Act from 6 October 2003 until payment. 3. The plaintiffs are to make the 'trend Windows' available for collection by Trend Windows and Doors Pty Ltd." 24The builder was also order to pay the costs of the plaintiffs' appeal. Separately, his Honour heard evidence of an offer of compromise made before the Tribunal by the builder, which the owners did not better in the Tribunal, nor as a result of an improvement in their position through the orders in the Supreme Court. Accordingly, his Honour made an order (in both appeals) that the owners pay the builder's costs of the proceedings before the Tribunal, on an indemnity basis from 17 December 2004. 25No order was made setting aside the orders made by the Tribunal, nor was there any expectation of a rehearing before the Tribunal, his Honour having sought to dispose of all outstanding issues. 26Although order 3 was made in favour of Trend Windows, that company was not a party to the proceedings in the Tribunal or before the primary judge.

Issues 27At the heart of the appeal was a dispute as to how the contract terminated. Three possibilities emerged in the course of the proceedings below. First, the owners purported to terminate the contract by issuing a notice in accordance with cl 12.3 of the contract. The second possibility, adopted by the builder, was that the owners, having failed to pay a progress payment, were in default and were not entitled to serve such a notice. The notice, so it was said, therefore constituted a repudiation of the contract by the owners which was accepted by the builder in its points of claim in the Tribunal. A third position was adopted by the primary judge, holding that both parties had abandoned the contract by August 2003, when the notice of determination was served by the owners on the builder. 28The second issue, consequent upon the first, involved the assessment of damages suffered by the owners in respect of defective works requiring rectification. The owners' position before the Tribunal was that they were entitled to recoup the reasonable costs of the rectification works, which were to be assessed at the amount paid by them for the work, which had been carried out. The Tribunal did not accept that proposition and preferred to rely on evidence of the experts as to the reasonable costs of rectification. The builder accepted that result so far as it went, but complained that the experts had included a 30% builder's margin in their assessments. This figure, which might reasonably have been charged to the owners, would not have been a cost incurred by the builder had it been allowed to carry out the rectification works. Its submission was, accordingly, that by repudiating the contract, the owners had prevented it undertaking rectification works and should not be entitled to recover damages resulting from their own wrongful conduct. 29There were other subsidiary issues, arising from findings of the primary judge as to: (a) the owners' entitlement to recover fees paid to consultants in an amount of $6,247.50; (b) the owners' entitlement to recover the cost of storing furniture, and (c) the basis of calculation of interest on the amount retained under the contract, but payable to the builder according to the orders of the Tribunal. 30At the commencement of the hearing of the appeal, the owners sought to file and rely upon a notice of cross-appeal which proposed to raise two issues. The first concerned the orders made by the primary judge that the owners pay the builder's costs in the Tribunal on an indemnity basis from 17 December 2004; the second complained of the failure of the primary judge to make an order setting off the owners' liability to make payment to the builder against the builder's liability to them. The owners required leave to cross-appeal and an extension of time within which to seek such leave. 31The Court permitted the owners to rely upon the document, and agreed to hear argument on the extension of time, the question of leave to cross-appeal and the proposed grounds of cross-appeal: Tcpt, 17/05/11, p 28. The outcome of the appeal undermines the purpose of the cross-appeal and the extension of time should be refused. 32A final preliminary issue arises from the fact that the builder's proceedings in this Court were commenced by a notice of appeal, filed without leave. On the builder's own case, it appeared that the amount in issue was significantly less than $100,000. (The precise amount was not readily discerned because the neither the Tribunal nor the primary judge gave judgment for one party against the other in a specific amount.) In these circumstances, the rules require that an affidavit be filed demonstrating that the amount in issue exceeds the figure specified in s 101(2)(r) of the Supreme Court Act , identifying those appeals from a judge in a Division which are available only pursuant to a grant of leave: Uniform Civil Procedure Rules 2005, r 51.22. For reasons which will be explained below, the builder's appeal should be upheld and the matter remitted to the Tribunal for further hearing. The approach of the primary judge involved an error of principle relating to the limits of his Honour's powers on an appeal under s 67 of the CTTT Act. Accordingly, it would have been appropriate to grant leave in any event. A further consequence of this outcome is that the amount in dispute can still not be identified with any precision.

Termination of contract 33The critical finding of the Tribunal for present purposes was finding 19, set out at [11] above. Pursuant to clause 12.2 of the contract, the owners were entitled to give written notice to the builder specifying a default, including failure by the builder to proceed diligently with the works. Continued default for a period of 10 days after receipt of such a notice entitled the owners to give a further notice determining the employment of the builder: clause 12.3, subject to the following qualification: "If the Proprietor at the time of such notice is in breach of this Agreement, then the said notice of determination of the employment of the Builder shall be determined to void and of no effect." 34Clause 12 also gave rights to the builder to determine the contract. In particular, where the owners had failed to make a payment due under the contract, within five days of it becoming due, the builder was entitled to issue a notice immediately suspending the carrying out of the works: clause 12.7. Failure to remedy the default within five days of receipt of the notice entitled the builder to give a further notice determining the contract. 35The Tribunal found that the builder validly suspended the works by notice given on 8 July 2002: finding 8. The Tribunal also found that the builder "must be taken to have waived his right under the suspension notice" from early December 2002: finding 12. That was because, the Tribunal concluded, the suspension "could only operate for a reasonable time": Reasons, p 71. The underlying principle appears to have been that if the owners did not promptly remedy their default the builder would be forced either to terminate the contract or continue to carry out its contractual obligations (presumably without payment). That analysis may not be self-evidently correct, but it is not necessary to pursue the issue in the present case. That is because, even if the builder fell into default because the suspension of the works ceased to operate, and it was therefore obliged to continue to carry out the works, there was a separate obstacle in the path of the owners in their attempt to terminate the contract in August 2003. Assuming default on the part of the builder and assuming a valid notice under clause 12.2, they remained in default by failing to pay the overdue progress payment. 36Having held that the owners were in default through failure to pay progress payment 8, the Tribunal nevertheless held that they were not "in breach of this Agreement" for the purposes of clause 12.3. Accordingly, their notice was valid and the contract was effectively terminated for breach on the part of the builder. 37On appeal, the primary judge held that the Tribunal's construction of the qualification on the rights of the owners under clause 12.3 was incorrect in law; whilst they continued to be in breach of their obligation of payment under the contract, they were unable to give a valid notice of determination. 38If the owners could not validly terminate under clause 12.3, it no longer mattered whether the builder's suspension notice continued to operate so as to prevent it being in breach of its obligation to proceed diligently with the works. (The builder never sought to exercise its right to terminate based on the failure of the owners to remedy their default.) However, the issue which arose, consequential upon the finding that the owners had not validly terminated, was the correctness of the builder's characterisation of their invalid notice as a repudiation of the contract, a position which the builder had foreshadowed on 16 July 2003, some 18 days before the clause 12.3 notice was given by the owners. A month later, on 8 September 2003, the builder purported to accept the repudiation (Points of Claim, par 22). 39The invalidity of the owners' notice of termination did not inexorably result in the notice constituting a repudiation of the contract. Whether or not it did (when considered in the light of surrounding circumstances) was a mixed question of fact and law, which the Tribunal did not determine. Whether, if the Tribunal had proceeded to consider that issue, against the possibility that it might have been in error in its first finding, its conclusion would constitute a "decision" for the purposes of s 67 of the CTTT Act need not be considered. Furthermore, the primary judge did not consider whether it was necessary to remit the matter to the Tribunal for it to reach a decision in respect of the question of repudiation. Rather, having found error in the Tribunal's conclusion with respect to the owners' notice of termination, the primary judge simply stated (at [64]): "In effect the parties had abandoned the contract by August 2003." 40His Honour continued at [65]: "Whether this error makes any substantial difference to the orders that should have been made by the Tribunal will be considered later." 41His Honour turned to a consideration of "building defects" and an allegation of "bias": at [67]-[97] and [98]-[100] respectively. He then commenced a further heading entitled "Damages", being the final sub-heading of his determination (other than a setting out of the orders). He commenced that part with the following statement: "Senior Counsel appearing for the builder eschewed during the hearing before this Court any reliance upon a claim for quantum meruit. There is no claim by the builder for compensation by reason of the termination of the contract other than for monies owed. Although the owners repudiated the contract by giving notice terminating the builder's employment in breach of the contract, it simply meant that the contract was then at an end. If the builder had not already abandoned its contractual rights and obligations by the time of the owners' repudiation, as the Senior Member found, the builder certainly accepted the repudiation. But, of course, it does not follow that rights and obligations accrued under the contract that had not been abandoned thereupon ceased to exist. The owners were entitled to rely upon statutory warranties and the terms of the contract up until the time it was terminated." 42The precise import of this last paragraph is open to doubt. First, his Honour appears to have made a finding that the owners repudiated the contract by giving notice of termination. Secondly, he appears to have left open the question of abandonment by the builder. Thirdly, his Honour he appears to have found that the builder accepted the repudiation. Fourthly, it is not clear what rights and obligations he considered had survived the contract if it were abandoned. Finally and most importantly, a degree of looseness of terminology obscures the real question that needed to be addressed, namely the extent to which the assessment of damages turned on the circumstances of termination. As will be explained in more detail below, the builder's principal assertion in respect of damages was that the owners could not recoup losses which resulted from their own breach and valid suspension of the contract whilst the breach continued. 43As his Honour recognised, the builder's claim was limited to recovery of amounts payable under the contract. The owners' claims arose from the builder's breach, and in particular, the failure to rectify defective work. His Honour stated at [102]: "Clearly the builder was entitled to the eighth progress payment and interest on that amount from the date it was due. In accordance with the Senior Member's findings as to defective work carried out by the builder, the owners were entitled to reasonable costs for rectification of those defects. None of this is in dispute. The issue litigated before the Tribunal and again before this Court is the amount of work that needed to be rectified and the costs of the rectification. These are clearly matters of fact." 44Having concluded that the quantification exercise involved matters of fact, his Honour rejected each of the builder's complaints on the basis that there was no error in respect of a question of law. In other cases, that exercise was not undertaken. The specific heads of damage as quantified by the primary judge which are now under challenge will be considered below. 45Before undertaking that exercise, it is necessary to consider whether, if a finding of repudiation by the owners was relevant, his Honour was entitled to make it himself. The alternative course was to return the matter for a further hearing in the Tribunal, to be undertaken consistently with the decision of the Court with respect to the question of law. 46There was no challenge in this Court to the conclusion of the primary judge that the Tribunal had been in error in upholding the validity of the notice of termination issued by the owners. The primary position of the owners was that responsibility for termination of the contract made no difference to the assessment of damages. His Honour's finding of abandonment was either appropriate, or irrelevant, or both. However, this submission cannot be accepted. It involves the proposition that the assessment of the owners' loss did not depend upon whether or not they repudiated the agreement. The builder contended that their repudiation prevented it from rectifying defective building work. Accordingly, so the builder argued, the costs incurred by the owners in order to rectify the defective work was the result of their own repudiation of the agreement. The builder's submission, put in a more muted form, was that if the owners were entitled to recover the costs rectifying defective work, they were not entitled to a 30% margin on top of the reasonable cost of such work. 47The builder's submission as to the relevance of the issue of repudiation should be accepted. However, the builder also submitted that his Honour's apparent finding of repudiation should be accepted, carrying with it the consequence that the builder had validly accepted the repudiation, thus terminating the agreement. This further submission is problematic for a number of reasons. 48First, the fact that the notice was not a valid notice under clause 12.3 of the contract does not necessarily entail the conclusion that it constituted repudiation of the contract. Secondly, if it did constitute repudiatory conduct on the part of the owners, it did not necessarily follow that the builder was entitled to accept it. 49As explained in DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; 138 CLR 423, in the joint judgment of Stephen, Mason and Jacobs JJ at 431, the question is whether the conduct of the party in breach demonstrates an intention on its part to repudiate the contract, "or more precisely whether such an intention is to be inferred from those events". Their Honours continued at 432: "No doubt there are cases in which a party, by insisting on an incorrect interpretation of a contract, evinces an intention that he will not perform the contract according to its terms. But there are other cases in which a party, though asserting a wrong view of a contract because he believes it to be correct, is willing to perform the contract according to its tenor. He may be willing to recognize his heresy once the true doctrine is enunciated or he may be willing to accept an authoritative exposition of the correct interpretation. In either event an intention to repudiate the contract could not be attributed to him." 50The builder contended that there was no evidence which would allow the owners to establish that they fell into the latter category: accordingly, the only available inference was an intention to repudiate and the matter did not need to return to the Tribunal for that inference to be drawn. On the one hand, it may well be true that, given the history of disputation between the parties, the position adopted by the builder may be right. On the other hand, it involves an inference to be drawn from the facts, which this Court is not in a position to draw, even if it had the power to do so (which it does not). There is no finding of primary facts by the Tribunal, nor is there agreement from the owners, who wish to assert that the defective work constituted breach of an essential condition entitling them to rescind "under the common law". 51There is a second question which may arise, namely the entitlement of the respondent to accept the repudiatory conduct of the owners, assuming that element is made out. It does not seem to be in dispute that part of the building work was defective and that, accordingly, the builder was in breach of its contractual obligations. Whether that would prevent the builder accepting repudiatory conduct of the owners may be doubtful, but it cannot be said that only one answer is available. In Sharjade Pty Ltd v The Commonwealth [2009] NSWCA 373 at [166] Sackville AJA (with whom Young JA agreed) relied upon a passage from the judgment of Kerr LJ in State Trading Corporation of India Ltd v Golodetz Ltd [1989] 2 Lloyds Rep 279 at 286, to which reference had been made, with apparent approval, by this Court in Roadshow Entertainment Pty Ltd v (ACN 053 006 269) Pty Ltd (1997) 42 NSWLR 462 at 481 (Gleeson CJ, Handley JA and Brownie AJA). The passage from Golodetz read as follows: "The fact that in the present case both parties committed breaches before one of them elected to treat the contract as repudiated appears to me to make no difference whatever; nor the fact that (assumedly) both had been breaches of conditions. If A is entitled to treat B as having wrongfully repudiated the contract between them and does so, then it does not avail B to point to A's past breaches of contract, whatever their nature. A breach by A would only assist B if it was still continuing when A purported to treat B as having repudiated the contract and if the effect of A's subsisting breach was such as to preclude A from claiming that B had committed a repudiatory breach. In other words, B would have to show that A, being in breach of an obligation in the nature of a condition precedent, was therefore not entitled to rely on B's breach as a repudiation." 52It seems unlikely that the defective work undertaken by the builder would preclude the builder accepting repudiatory conduct if, in purported reliance upon such unsatisfactory work and a failure to rectify it, the owners attempted (unsuccessfully) to terminate the contract. Nevertheless, these principles clearly give rise to issues having a factual component which need to be addressed in the proper place, namely the Tribunal. 53This case originally ran through 12 hearing days in the Tribunal and for three hearing days (over five months) in the Common Law Division. The amount ultimately in dispute between the parties is likely to be significantly less than $100,000 and possibly less than $50,000. The possibility of there being a further hearing, with further evidence being proffered, is unattractive. (This Court is unaware of the scope and subject-matter of the evidence already given.) Nevertheless, a rehearing is necessary in order to determine the answers to the questions which have now been identified. Whether the Tribunal would allow the parties to reopen their cases to present more evidence is a matter for the Tribunal. It would appear that the issues now requiring determination should reasonably have been foreseen before the first determination of the Tribunal.

Calculation of owners' loss 54The Tribunal assessed damages payable by the builder to the owners, on account of the cost of rectification of defective building work and consequential loss, at $100,582.08. The primary judge increased that figure by an amount of $13,365. In this Court, the builder seeks an order that that amount be reduced to either $77,216.32, or $75,719.27. (It is not necessary to consider the minor discrepancies in these calculations.) The largest amount of the reduction flows from the assumption that the owners wrongfully terminated the contract and thus prevented the builder making good the defective work at its own cost, pursuant to clause 6.8 of the contract. If the builder failed in that obligation, then, but only then, it contended, were the owners entitled to recover the reasonable costs of rectification, pursuant to clause 5.5. The builder did not argue with the baseline costs accepted by the Tribunal: its complaint was that the owners had recovered a 30% builder's margin, which would not have been applicable if it had done the work. 55There are two difficulties in accepting this submission in its terms. First, the logic of the distinction being drawn is not obvious. Either the owners were entitled to recover the reasonable cost of correcting the defective work, or they were not. The cost is not to be measured by the effective loss to the builder. Secondly, the argument depends upon whether or not the owners did repudiate the contract. For reasons given above, that question must be determined by the Tribunal. 56The builder also complained that the Tribunal had awarded an amount of $6,767.20, being the cost to the owners for storage of goods for the period February 2002 to March 2004. That cost had been challenged before the primary judge, and the challenge in this Court addressed his Honour's failure to reduce the damages on the basis that, contrary to finding made by the Tribunal, the owners had not been entitled to end the contract in August 2003. The ultimate fate of the claim for storage costs must also depend upon the findings with respect to termination, to be made by the Tribunal, if not agreed. 57There was a third set of items for which the primary judge allowed a builder's margin of 30%, in addition to the amounts allowed by the Tribunal. These amounts fall into the same category as the first amount discussed above. 58There remains a separate question with respect to an allowance denied by the Tribunal, but allowed by the primary judge, in favour of the owners on account of fees charged by consultants and experts retained for the purpose of completing the works after the termination of the contract. The Tribunal was concerned that "the invoices provided ... do not adequately identify the amount charged by the relevant persons in identifying and rectifying the damage alleged from the amounts that could be classified as disbursements in the litigation": Reasons, p 83. The Member sought to draw a distinction, not challenged as erroneous in law, between the costs associated with rectification or completion of the building work and the costs associated with the litigation. If the evidence failed to satisfy the Senior Member as to the proper quantification of those which were recoverable as damages, her rejection of that item of the claim was based on an assessment of facts. 59The primary judge set out the relevant part of the Tribunal's reasons at [128]. The supposed legal error was referred to at [130] in the following terms: "It is submitted that the failure to award damages under this claim amounted to an error of law because the Senior Member failed to apply 'the correct principle' to her finding of facts. The principle that she failed to apply is not identified and yet it is clear that the Senior Member understood that the owner could claim damages for fees paid to experts in the course of rectifying the work of the builder. She clearly knew that there was a distinction to be drawn between costs incurred in rectification and costs incurred in litigation." 60It would appear from that passage that the challenge would fail. However, his Honour diverted into a discussion of well-known authorities in this Court concerning the sufficiency of reasons, with the implication that the failure to deal with "evidence critical to an issue in the case" constituted an error of law: at [131]. His Honour then considered three payments of fees, which had not been expressly identified by name in the Tribunal's reasons, and found as fact that each related to rectification work and not to the litigation. 61Assuming that the Tribunal had made no finding in relation to these invoices, the matter should have been sent back for the relevant factual findings to be made. However the assumption is itself doubtful; despite the general statement in relation to "the invoices provided" in the passage from the Tribunal's reasons set out above, the inference has been drawn that the only invoices to which the Senior Member paid regard were those she identified in the following six sub-paragraphs. The inference that they were merely examples, was equally available. Because, on any view, the exercise in fact-finding should not have been pursued, it is not necessary to determine the correctness of the assumption, or its implicit characterization as an erroneous decision with respect to a question of law. 62In respect of the basic amount payable by the builder to the owners on account of defective work, the variation accepted by the primary judge, in favour of the owners, in an amount of approximately $13,365 should not have been allowed. On the other hand, the reduction sought by the builder of approximately $25,000 also relies on factual assumptions, which are findings required to be made by the Tribunal. 63It is then necessary to consider the challenge to the finding of liability on the part of the owners, in favour of the builder. The Tribunal made an order in this respect with two components. The first component was the builder's entitlement to progress payment 8 under the contract, being an amount of $21,662.39, together with interest from 4 July 2002 to the date of the orders made by the Tribunal (on 28 August 2006), with interest running at an annual rate "1.25 times the higher of any applicable Commonwealth Bank Bankcard rate [sic]" and compounding monthly (Appendix to contract, item L). The interest component was likely to be considerable. Unfortunately, it was not calculated by the Tribunal. It should have been, in order to permit an order imposing liability on one party for a net amount. However, that aspect of the matter did not give rise to any challenge before this Court. The issue in dispute arose in respect of interest on the second sum, being the retention sum under the contract. The retention fund was required to be held by the owners and the builder in a joint account: clause 10.14. The amount in question was $11,705.90. In respect of this amount, the Tribunal ordered payment by the owners to the builder "plus interest from 26 June 2002 to the date of these orders". (The order has been set out in full above at [15].) A question arose as to the interest rate to be applied, on the basis that interest was to be calculated at the appropriate rate "pursuant to the contract". 64There was no reference to this issue in the owners' appeal, nor does it appear to have been raised by the builder's appeal in the Court below. There was no reference to it as an issue in the principal judgment of the primary judge. However, it appears to have arisen as a matter in dispute prior to the second judgment in the Court below, when the parties attempted to calculate the financial consequences of the orders as proposed in the principal judgment: second judgment at [13]. The builder claimed interest at the rate identified in item L of the appendix to the contract; the owners asserted that interest was to be paid in accordance with the amount of interest earned on the joint account in which the retention money was held. His Honour acknowledged that this was not a matter which came within the terms of the appeals: at [15]. His Honour then stated that "in order to try to bring some finality to this litigation" he should indicate his view that the owners' argument was correct. 65The desire to resolve outstanding issues as expeditiously as possible, in relation to a dispute which might ultimately turn out to be worth a relatively small sum in favour of either party, was entirely understandable. Further, the fact that the retention moneys may have been payable to the owners on account of the builder's liability, pursuant to clause 10.16, may support the owners submission. However, the question involved the construction of the orders of the Tribunal which, if in doubt, should properly have been resolved by the Tribunal. As the matter will have to go back in any event, it is desirable that the Tribunal be at liberty to address all of the outstanding circumstances, in the event that the parties remain incapable of settling a dispute where the costs must now far exceed any net contractual liability.

Proposed cross-appeal 66The first issue sought to be raised by the owners cross-appeal concerned the indemnity costs order made against the owners with respect to the costs of part of the proceedings in the Tribunal. That order was consequential upon a conclusion being reached as to the amount payable to the owners in settlement of their claims. Since that amount has not yet been resolved, the costs order must be seen as premature and must be set aside. It is unnecessary, therefore, to consider whether his Honour had power to make such an order and whether it was, in all the circumstances, including the Calderbank offers, the appropriate order. (In particular, his Honour accepted only the second offer as appropriate, rather than an earlier offer, which may yet prove to be relevant.) 67The second aspect sought to be addressed on the cross-appeal was the failure of the primary judge to make an order setting off one set of payments against the other. Such an order, made in the Tribunal, had not, the owners' contended, been challenged on appeal. Because the orders which might give rise to a set-off must themselves be set aside, further consideration of this issue becomes unnecessary. 68In these circumstances, the appropriate course is to refuse the application (never formalised by way of a notice of motion) for an extension of time within which to seek leave to cross-appeal. It seems unlikely that additional costs were incurred by the builder in respect of that matter, but if they were, they should be the builder's costs in the appeal.

Costs 69The time and expense involved in litigation, both in this Court and the Common Law Division, must have outweighed anything which might reasonably be expected, given the limited nature of the rights of appeal. However, because each party's summons in the Common Law Division paid scant regard to the limitations of the available relief, neither can complain as to the quantum of costs incurred. 70Two issues arise with respect to the costs orders in the Court below. 71The proceedings below should have turned upon one issue, being that relating to the termination of the contract. That point having been determined in favour of the builder, for the reasons set out above, the whole of the matter should have been remitted to the Tribunal with the Court's answer in respect of that decision with respect to the identified question of law. Of the items raised by the owners' appeal in respect of which the owners were successful in the Court below, there were two, relating to the failure of the Tribunal to allow interest on the plaintiff's claim and the claim in respect of expert and consultant costs, which might have stood apart from the reassessment required on remittal. The error with respect to interest was said to lie in a misconstruction of s 100 of the Civil Procedure Act 2005 (NSW). As the Tribunal made clear in a passage set out by his Honour at [137], the claim for interest was made under the Civil Procedure Act . His Honour did not uphold the alleged error of law, but did hold that interest was payable in accordance with principles of the "common law". There is no challenge to that ruling in this Court, and it may be accepted that the owners succeeded, albeit on a ground upon which they did not rely. With respect to the other item on which they were successful, namely an allowance on account of experts and consultants fees, the finding has been set aside. 72The order of the primary judge that the builder should pay the owners' costs of their appeal, should be set aside. The orders dismissing the builder's appeal and ordering it to pay the owners' costs of that proceeding should also be set aside. The appeal should be upheld, on the limited ground noted above, which was not in dispute, but the matter otherwise remitted to the Tribunal. Because neither party fully appreciated or complied with the limits of the jurisdiction of the Supreme Court, each party should bear their or its own costs of the respective appeals in the Common Law Division. However, the Court has not received submissions as to those costs based on the outcome of the appeal and if either party wishes to contend for different orders there should be an opportunity to do so. 73In this Court, the builder has been successful in having set aside all of the adverse orders made in the Common Law Division which it challenged. It should have its costs in this Court. Again, the parties should have an opportunity to seek a different order. 74The following orders should be made: (1) To the extent necessary, grant the builder leave to appeal from the judgments and orders of Howie J in the Common Law Division. (2) In respect of both appeals brought to the Common Law Division, set aside the orders of Howie J made on 2 March 2009 and in place thereof: (a) answer the question of law raised by the builder's appeal in respect of the termination of the contract as follows: "According to the proper construction of the contract, in the circumstances found by the Tribunal, namely that the owners were, in August 2003, in breach of their obligation to pay progress payment No. 8, the notice given by them under clause 12.3 of the contract, purporting to terminate the contract, was not a valid notice"; (b) set aside order (2), and to the extent that it determines the amount referred in order (3), order (3), made by the Tribunal on 28 August 2006; (c) remit to the Tribunal the answer at (a) above and order a further hearing by the Tribunal to determine the outstanding issues in the dispute between the parties consistently with the answer given to the question of law, and (d) order each party to bear its own costs of the proceedings in the Common Law Division. (3) Refuse the owners' application for an extension of time within which to seek leave to file a notice of cross-appeal. (4) Direct that the builder's costs in respect of the application referred to in (3) above be its costs in the appeal. (5) Order the owners to pay the builder's costs of the proceedings in this Court. (6) Grant the owners a certificate under the Suitors' Fund Act 1951 (NSW) in respect of the costs of the appeal in this Court. (7) Grant leave to the parties to seek a variation of orders (2)(d) and (5) by: (a) within 14 days of the date of this judgment providing to the Registrar (with a copy to the Associate to each Judge and to the other party), a document setting out the order sought, any supporting material and reasons for such order; (b) the other party shall, within 14 days of receiving such material, respond in like manner. (8) The Registrar is directed: (a) not to enter orders (2)(d) and (5) for 14 days; (b) if no document is received within 14 days in accordance with order (7)(a), to enter those orders, or (c) otherwise, to enter such order as the Court shall direct. 75SACKVILLE AJA : Subject to one comment, I agree with the orders proposed by Basten JA and with His Honour's reasons. 76I do not read the primary Judge's reasons as criticising the legislative policy underlying s 48L of the Home Building Act 1989 (NSW) and s 67 of the Consumer, Trader and Tenancy Tribunal Act 2001 (NSW) (" CTTT Act "). Rather I understand his Honour to have been expressing frustration that the parties chose to litigate their claims in a manner that may have been permissible (even if not to be encouraged) in a court, but was not appropriate to relatively small claims in a Tribunal designed " to enable proceedings to be determined in an informal, expeditious and inexpensive manner ": CTTT Act , s 3(c); cf Grygiel v Baine [2005] NSWCA 218, at [19], per Basten JA (cited by the primary Judge at [7]). 77I do agree that care must be taken by courts hearing appeals to confine themselves to the limits imposed by Parliament on the scope of those appeals. A well-intentioned judicial desire to bring protracted and expensive proceedings to a conclusion can actually prolong the proceedings, where the means chosen to achieve the objective transgress statutory limits. If parties attempt to conduct litigation in an inappropriately adversarial or wasteful manner, the main remedies are to be found in firm case management using the powers conferred by Parliament (see, for example, CTTT Act, ss 28-30, 34, 36; Civil Procedure Act 2005 (NSW), Part 6, Div 1) and in the making of costs orders that reflect responsibility for unnecessarily prolonging or increasing the costs of the litigation.

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: 08 June 2011

Suitors' Fund Act 1951(NSW)

Consumer, Trader and Tenancy Tribunal Act 2001(NSW)

CONTRACT - building - termination - repudiation - whether invalid notice under the clause of the contract constituted repudiation of the contract - whether builder could accept the repudiation. Legislation Cited: Civil Procedure Act 2005 (NSW), s 100; Pt 6, Div 1 Consumer, Trader and Tenancy Tribunal Act 2001 (NSW), ss 3, 28, 29, 30, 34, 36, 65, 67 Home Building Act 1989 (NSW), s 48L Supreme Court Act 1970 (NSW), ss 69, 75A Cases Cited: B & L Linings Pty Ltd v Chief Commissioner of State Revenue [2008] NSWCA 187; 74 NSWLR 481 The Craftsmen Restoration & Renovations Pty Ltd v Boland [2006] NSWCTTT 478 DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; 138 CLR 423 Grygiel v Baine [2005] NSWCA 218 HIA Insurance Services Pty Ltd v Kostas [2009] NSWCA 292 Kostas v HIA Insurance Services Pty Ltd [2010] HCA 32; 241 CLR 390 Roadshow Entertainment Pty Ltd v (ACN 053 006 269) Pty Ltd (1997) 42 NSWLR 462 Sharjade Pty Ltd v The Commonwealth [2009] NSWCA 373 State Trading Corporation of India Ltd v Golodetz Ltd [1989] 2 Lloyds Rep 279 Category: Principal judgment Parties: The Craftsmen Restoration & Renovations Pty Ltd (Appellant) Thomas Boland (First Respondent) Caroline Boland (Second Respondent) The Consumer, Trader and Tenancy Tribunal (Third Respondent) Representation: Counsel: J C Kelly SC/R V Zikmann (Appellant) J T Svehla/J-J Loofs (First and Second Respondents) Submitting appearance (Third Respondent) Solicitors: Gerald Aronstan (Appellant) Snelgroves (First and Second Respondents) I V Knight, Crown Solicitor (Third Respondent) File Number(s): CA 2008/290214 Decision under appeal Citation: The Craftsmen Restoration & Renovations v Thomas Boland; Thomas Boland v The Craftsmen Restoration & Renovations [2008] NSWSC 660 Date of Decision: 2009-07-01 00:00:00 Before: Howie J File Number(s): SC 2006/030128

HEADNOTE [This headnote is not to be read as part of the judgment] A dispute arose between the owners of land (the respondents) and their builder (the appellant) in relation to residential building work which commenced in September 2001 with an intended completion date in May 2002. The owners declined to pay the eighth progress payment when it fell due on 4 July 2002 and were thus in breach of the obligations under the contract. On 3 August 2003, the owners purported to give notice of termination. On 6 August 2003 the owners commenced proceedings in the District Court seeking damages for breach of contract. On 12 August 2003 the builder commenced proceedings in the Consumer, Trader and Tenancy Tribunal ("the Tribunal") seeking payment of unpaid moneys under the contract. On 28 August 2006, Senior Member Paull handed down a decision: The Craftsmen Restoration & Renovations Pty Ltd v Boland [2006] NSWCTTT 478. The Tribunal held that the owners were, despite non-payment of eighth progress payment, entitled to terminate the contract. An appeal from the Tribunal was taken to the Common Law Division of the Supreme Court, two judgments being delivered by Howie J: The Craftsmen Restoration & Renovations Pty Ltd v Boland [2008] NSWSC 660 and [2009] NSWSC 82. The primary judge held that the Tribunal erred in law in finding that the owners validly terminated the contract. He proceeded to deal with specific challenges to the Tribunal's findings in respect of damages. The builder appealed. The issues for determination on appeal were: (i) how the contract was terminated; and (ii) how damages suffered by the owners were to be assessed. The Court held, allowing the appeal: (per Basten JA, Allsop P and Sackville AJA agreeing): In relation to (i)

The fact that the owners' notice was not a valid notice under clause 12.3 of the contract did not necessarily entail the conclusion that it constituted repudiation of the contract. If such notice did constitute repudiatory contact on the part of the owners, it did not necessarily follow that the builder was entitled to accept it. The question is whether the conduct of the party in breach demonstrates an intention on its part to repudiate the contract, "or more precisely whether such an intention is to be inferred from those events": [47]-[48]. DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; 138 CLR 423; Sharjade Pty Ltd v The Commonwealth [2009] NSWCA 373 applied.
It seems unlikely that the defective work undertaken by the builder would preclude the builder accepting repudiatory conduct if, in purported reliance upon such unsatisfactory work and a failure to rectify it, the owners attempted (unsuccessfully) to terminate the contract. Nevertheless, these principles clearly give rise to issues involving a factual component which need to be addressed in the Tribunal. A rehearing is necessary in order to determine the answers to the questions which have now been identified: [51]-[52]. In relation to (ii)

Judgment 1ALLSOP P : I have read the reasons in draft of Basten JA. I agree with them and with the orders that his Honour proposes. I would only wish to make the following additional comments. 2First, the reasons of the Tribunal (Ms Paull) in structure and terms were clear, comprehensive, yet succinct, notwithstanding that one legal error was made. 3Secondly, this appeal is not the appropriate vehicle in which to express a view about the proper construction of the Consumer, Trader and Tenancy Tribunal Act 2001 (NSW), s 67. This case can be resolved in the manner suggested by Basten JA without a discussion of s 67 beyond saying that there is no basis to conclude that the primary judge was entitled to approach the matter as he did, unless one takes the view that the finding of an error of law in the Tribunal's reasons opened up for legitimate reconsideration any aspect of the controversy. To the extent that there may be passages in the reasons of French CJ in Kostas v HIA Insurance Services Pty Ltd [2010] HCA 32; 241 CLR 390 that may support that approach they are not binding on this Court and do not persuade me that the approach adopted in the numerous cases in this Court and discussed in B & L Linings Pty Ltd v Chief Commissioner of State Revenue [2008] NSWCA 187; 74 NSWLR 481 and HIA Insurance Services Pty Ltd v Kostas [2009] NSWCA 292 should not be the framework of analysis for the resolution of this appeal. Whether or not the reasons of the plurality in the High Court in Kostas permit or suggest a reconsideration of those cases need not be decided for the resolution of this case. 4Thirdly, the reviewing court under s 67 (now the District Court) should bear in mind its role as dealing with a decision on a question with respect to a matter of law. To say as much is trite. But if, as here, a distinct error can be identified, the remitter to the Tribunal under s 67(3)(b) may be the quickest and most cost effective way to deal with the matter. This is especially so if the appeal can be brought to court promptly and if, as here, the Tribunal decision is on its face comprehensive and clear. The reviewing court should be astute not to assume that it is always better to try to resolve everything through s 67(3)(a). It may be. Given, however, the necessary limitations on fact finding by the reviewing court, such an assumption may often, as it did here, lead to tasks being undertaken for which there is no authority. 5Fourthly, in relation to repudiation, in addition to the reference made by Basten JA in his reasons to Sharjade Pty Ltd v The Commonwealth [2009] NSWCA 373, see also Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service [2010] NSWCA 268 at [27] and [162] ff. 6BASTEN JA :

At a glance

Court

Decision date

Before

Source

Judgment (10 paragraphs)

Parties

Legislation Cited (5)

Cases Cited (11)