Tiwari v Champion Homes Sales Pty Ltd

Background

1. In 2012 the homeowners began negotiations for the construction of a home on land owned by them. On 6 July 2012 the builder issued a tender which was subsequently amended, to build a house to agreed plans and specifications. The homeowners accepted the tender and signed a contract for a total price of $269,437. Practical completion took place in November 2013. The homeowners paid the total price but then made several claims for defective and incomplete work. After receiving these claims the builder invoiced the homeowners for the sum of $10,013 by way of a contract price adjustment. That figure was 3.75% of the contract price.

Case management and application for adjournment

1. On 10 March 2015 the Tribunal made directions for the lodging and service of the parties' evidence and submissions. In support of the builder's claim an affidavit of Mr Malesev sworn 28 April 2015 was filed. The homeowners were directed to provide the builder with all evidence on which they relied in response. The matter was set down for hearing for four hours on 22 June 2015.
2. The homeowners made the following written submission: When looking for builder to build house, Champion Homes offered us a free no obligation tender just like few other builders. While shortlisting and finalising a builder, we selected Champion Homes as our preferred builder and were ready to sign the home building contract with them which we signed on 12 January 2013. By this time the tender period as stated in the tender (although it was a no obligation tender) had lapsed. Please note, the tender amount was the agreed total amount at this time of signing of the contract with Champion Homes and price increase was never mentioned.
3. The homeowners did not file any evidence prior to the hearing in relation to the builder's claim for the contract price adjustment.
4. At the hearing the homeowners made the following statement: In December the guy from the sales team in Bunya, was off on his vacations so on 12 January we signed a contract. No one told me if there is going to be a price increase.
5. On two occasions during the hearing the homeowners mentioned that he could not be represented by a solicitor today but that he would like an extra date. At the 11th minute from the start of the hearing the homeowners said: Homeowner: … Spoke to the solicitor, I couldn't get the date today that he is happy to put my case. Member: today's the day. All hours of the tribunal's time is devoted today. The homeowner: solicitors said to me if I can get extra date.
6. At the 27th minute of the hearing the homeowners said: I have not done those fancy affidavits and everything . . . The solicitor gave me a few points.
7. At the 52nd minute of the hearing the homeowner said: Homeowner: I had a baby with the operation, my wife's stitches were open, she has to go back a second time in the hospital due to that I couldn't see a lawyer. Can I get some time to see the lawyer? Member: this is an application of adjournment. I don't think it is appropriate at this time.
8. At the 53rd minute the homeowner said: I can get my solicitor to do that or fancy affidavits.

Tribunal's decision

1. The Tribunal ordered the homeowners to pay the builder $17,942.71. In relation to the claim for the contract price adjustment the Tribunal wrote at [12] that: The only thing the respondents put to me with respect to the builder's claim was that the contract might be an "unfair contract". Nothing was cited in support of the assertion and it was not clear to me what was unfair about the arrangement. It looked like an ordinary commercial arrangement. It did seem a pity that the "headline" contract amount was not necessarily the final contract price. However this is frequently the case with building contracts where prime cost items, provisional allowances and variations are common.
2. At [29] and [30] the Tribunal returned to the question of whether the contract was unfair: A final word about the homeowner's contention that the contract is "unfair". Although it was not raised by the homeowners, it crossed my mind that the 3.75% might amount to a penalty. The failure to commence the works within 140 days was said by the builder to be due to delays which were in no way attributable to it and this was not gainsaid by the respondent/cross applicant. No doubt there were some extra costs to the builder in the delay in starting construction, in this case amounting to some eight months. Prices do go up and there is some inconvenience to the builder in scheduling a works program. It appears therefore that the further payment was not related to any breach of contract by the homeowners and was properly understood as a variation in cost consequent on a delay in commencement. As a result, the homeowners have not been able to satisfy me that the charges levied by the builder are not properly payable.

Grounds of appeal

1. The homeowners' grounds of appeal are governed by cl 12 to Schedule 4 of the NCAT Act; 12 Limitations on internal appeals against Division decisions (1) An Appeal Panel may grant leave under section 80 (2) (b) of this Act for an internal appeal against a Division decision only if the Appeal Panel is satisfied the appellant may have suffered a substantial miscarriage of justice because: (a) the decision of the Tribunal under appeal was not fair and equitable, or (b) the decision of the Tribunal under appeal was against the weight of evidence, or (c) significant new evidence has arisen (being evidence that was not reasonably available at the time the proceedings under appeal were being dealt with). Note : Under section 80 of this Act, a party to proceedings in which a Division decision that is an internally appealable decision is made may appeal against the decision on a question of law as of right. The leave of the Appeal Panel is required for an internal appeal on any other grounds.
2. This provision has been interpreted by the appeal panel in Collins v Urban [2014] NSWCATAP 17 at [76] - [79]. Those principles are directly relevant to this case. 76. Accordingly, it should be accepted that a substantial miscarriage of justice may have been suffered because of any of the circumstances referred to in cl 12(1)(a), (b) or (c) where there was a "significant possibility" or a "chance which was fairly open" that a different and more favourable result would have been achieved for the appellant had the relevant circumstance in para (a) or (b) not occurred or if the fresh evidence under para (c) had been before the Tribunal at first instance. 77. As to the particular grounds in cl 12(1)(a) and (b), without seeking to be exhaustive in any way, the authorities establish that: (1) If there has been a denial of procedural fairness the decision under appeal can be said to have been "not fair and equitable" - Hutchings v CTTT [2008] NSWSC 717 at [35], Atkinson v Crowley [2011] NSWCA 194 at [12]. (2) The decision under appeal can be said to be "against the weight of evidence" (which is an expression also used to describe a ground upon which a jury verdict can be set aside) where the evidence in its totality preponderates so strongly against the conclusion found by the tribunal at first instance that it can be said that the conclusion was not one that a reasonable tribunal member could reach - Calin v The Greater Union Organisation Pty Ltd [1991] HCA 23; (1991) 173 CLR 33 at 41-42, Mainteck Services Pty Limited v Stein Heurtey SA [2013] NSWSC 266 at [153]. 78. If in either of those circumstances the appellant may have been deprived of a "significant possibility" or a "chance which was fairly open" that a different and more favourable result would have been achieved then the Appeal Panel may be satisfied that the appellant may have suffered a substantial miscarriage of justice because the decision was not fair and equitable or because the decision was against the weight of the evidence. 79. In order to show that a party has been deprived of a "significant possibility" or a "chance which was fairly open" of achieving a different and more favourable result because of one of the circumstances referred to in cl 12(1)(a), (b) or (c), it will be generally be necessary for the party to explain what its case would have been and show that it was fairly arguable. If the party fails to do this, even if there has been a denial of procedural fairness, the Appeal Panel may conclude that it is not satisfied that any substantial miscarriage of justice may have occurred - see the general discussion in Kyriakou v Long [2013] NSWSC 1890 at [32] ff concerning the corresponding provisions of s 68 of the CTTT Act and especially at [46] and [55].
3. The homeowners' representative clarified the grounds of appeal at the hearing. Our understanding of those grounds is that the homeowners may have suffered a substantial miscarriage of justice because: 1. the decision of the Tribunal under appeal was not fair and equitable, or 2. the decision of the Tribunal under appeal was against the weight of evidence.
4. None of the homeowners' grounds of appeal, as set out in the notice of appeal, related to cl 12(1)(c), that "significant new evidence has arisen (being evidence that was not reasonably available at the time the proceedings under appeal were being dealt with)". However, at the hearing of the appeal the homeowners sought to tender additional evidence that was not made available to the Tribunal at first instance. This will be addressed further below in these reasons.
5. The appellants also state in their notice of appeal that the decision of the Tribunal was said not to be fair and equitable because: 1. the Tribunal refused the homeowners' application for an adjournment; and 2. if the Tribunal had granted an adjournment, the homeowners would have put the following submissions to the Tribunal: 1. the contract is unfair under the Contracts Review Act; and 2. the builder is estopped from claiming the contract adjustment price because of representations made to the homeowners.

Adjournment application

1. Dealing firstly with the adjournment application, a decision maker should offer an adjournment where appropriate, even if none is sought. In Italiano v Carbone [2005] NSWCA 177 Mr Carbone, the defendant, had filed a cross-claim against Mr Italiano's company seeking to join Mr Italiano personally as a co-cross defendant. On the day of the hearing the advocate for Mr Italiano requested an adjournment because he did not realise that the case was being reheard on the merits. The Consumer Trader and Tenancy Tribunal refused that application. The advocate did not apply for an adjournment to allow Mr Italiano more time to present the defence to the cross-claim in his personal capacity. Ultimately the Tribunal ordered that Mr Italiano pay $74,500 without ever having joined him to the proceedings.
2. On appeal the Court of Appeal held at [105] that ensuring that each party is given "a reasonable opportunity" to present its case includes offering a party an adjournment. In the present case the homeowners were not taken by surprise in relation to the claim against them and they had a reasonable opportunity to present their case. Although they mentioned that their solicitor was not available and they would like the matter to be adjourned, the Tribunal did not deny the homeowners procedural fairness. If the parties wished to be legally represented, they should have applied for leave and, if that leave was granted, organise for a solicitor to represent them on the day. There was no basis on which the Tribunal was required to offer an adjournment.

Findings against the weight of evidence

1. The finding of the Tribunal at [29] and [30], said to be against the weight of evidence, was that the contract price adjustment clause did not constitute a penalty clause. Neither the Tribunal at first instance, nor either of the parties on appeal, explained the legal principle relating to penalty clauses. Agreed penalty clauses are sometimes inserted into contracts to provide the parties with some certainty as to their rights and obligations in the event of a default or breach. However, where the sums stipulated by a liquidated damages claim are penal in nature and go beyond a justifiable pre-estimated loss likely to result from a breach, the clause may be characterised as a penalty clause and thus become unenforceable.
2. The contract price adjustment clause in this case appears at cl 44.4 of the contract: If the time allowed in the tender for building works to commence expires before all the clauses and all the special conditions of this contract governing the commencement of building works are satisfied, the builder shall be entitled to vary the contract price by way of a contract price adjustment of 3.75% of the price shown in schedule 1.
3. This clause does not specify an amount of damages that must be paid if the contract is breached. Rather, it is a term of the contract which applies in the event that the work does not commence within 140 days of the tender date. The Tribunal came to the same view at [59]. It follows that it does not matter who was responsible for the delay as the 3.75% price adjustment will be applied regardless. No evidence was necessary for the Tribunal to reach the conclusion that clause 44.4 was not a penalty clause. The homeowners cannot have suffered a substantial miscarriage of justice because of the failure of the Tribunal to consider any evidence of delay caused by the builder. It is irrelevant to the issues in dispute between the parties.

Decision not fair and equitable

1. The remaining grounds of appeal relate to legal submissions which would have been put by the homeowners' lawyer if the homeowners had been granted an adjournment. As we have decided that the Tribunal did not breach the rules of procedural fairness by failing to offer or grant an adjournment, these grounds no longer require our consideration. Nevertheless we need to determine whether the homeowners may have suffered a substantial miscarriage of justice because the decision was not fair and equitable. That will be the case if there was a significant possibility that a more favourable result would have been achieved. We gave the homeowners' representative an opportunity to explain what his clients' case would have been.
2. The homeowners pointed to s 7 of the Contracts Review Act 1980 (NSW) which provides that a court may refuse to enforce any provisions of a contract if it finds the contract to be unjust in the circumstances relating to the contract at the time it was made. The homeowners suggested that there was a material inequality of bargaining power between themselves and the builder: Contracts Review Act, s 9(2)(a). When asked to identify any evidence of such inequality, the homeowners' representative stated that his clients were ordinary homeowners who had no experience of such a complex and voluminous building contracts whereas the builder was a large corporation. The homeowners also submitted that they were never advised to take legal advice before signing the contract.
3. At [12] the Tribunal dealt with the homeowners' general submission that the contract was unfair. The Tribunal made the observation that, "It looked like an ordinary commercial arrangement".
4. We accept the builder's submission that there is virtually no possibility that a more favourable result would have been achieved if the homeowners had argued this point in more detail at first instance. No evidence was provided as to any of the matters put. It is not in dispute that the terms of the building contract were the subject of extensive negotiation and adjustment.
5. The homeowners' representative also said that if an adjournment had been granted he would have submitted that the builder was estopped from charging the contract price adjustment. The builder was estopped from making a claim under clause 44.1 because it had made representations to the homeowners on 26 November 2013 stating that the revised building price including GST was $278,716.
6. The Tribunal addressed this issue indirectly, as it was not raised at first instance, at [12]: It did seem a pity that the "headline" contract amount was not necessarily the final contract price. However this is frequently the case with building contracts where prime cost items, provisional allowances and variations are common.
7. Next, the homeowners submitted that it was only when they raised issues about defects and made a complaint to Fair Trading that the builder relied on clause 44.4. Evidence of that fact was said to be in an undated email from Steve Malesev to the homeowners. Whether or not the builder levied the invoice in retaliation for the homeowners making a defects claim is irrelevant. The liability of the homeowners to pay that amount is a contractual issue.
8. The homeowners put several other matters to the Appeal Panel that it said it would have raised before the Tribunal at first instance if an adjournment had been granted. None has merit. In any case, a party is not permitted to agitate a point not taken in the Tribunal below: Hampton v Court Ltd v Crooks (1957) 97 CLR 36; Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589.

Fresh evidence

1. The 26 August 2015 affidavit is fresh evidence purporting to 'give a complete picture of the case'. Significantly, Ms Tiwari alleged that in a telephone call with her husband in July 2013, Mr Steve Malesev "pressured us to reconsider and withdraw the issues raised in their claim" otherwise "he will raise the invoice for $10,000". The second significant fresh evidence that Ms Tiwari sought to adduce was that a Mr Barry made representations that the contract price was fixed until completion. That claim formed the basis of the Contracts Review Act claim.
2. The homeowners submit that the fresh affidavit is supportive of the fact that no further moneys were payable under any circumstances. This, for the reasons set out above, is inconsistent with clause 44.1 of the contract. The contract signed by the homeowners clearly allowed for an additional 3.75% in the event of a delay of more than 140 days. The contract speaks for itself and was signed and dated by the parties. The fresh evidence concerning Mr Barry's oral representation does not affect the operation of clause 44. Further it was not evidence that was "not reasonably available at the time of the completed hearing". No explanation was offered as to why the 26 August 2015 affidavit could not have been tendered at the hearing. On these grounds the fresh evidence should not be admitted.

Conclusion

1. In conclusion the Appeal Panel is not satisfied that the homeowners have demonstrated that they may have suffered a substantial miscarriage of justice and accordingly leave is refused for the appeal to proceed and the appeal is dismissed.

Orders 1. Leave to appeal on grounds other than a question of law is refused. 2. The appeal is dismissed.

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: 31 March 2016