Torbey Investments Corporated Pty Ltd v Ferrara

Court of Appeal (NSW)|2016-11-23|Before: McColl JA, Basten JA, Simpson JA, Mr J

Background

The background to the proceedings may be briefly stated. The dispute arose out of a building contract entered into on 28 June 2005, pursuant to which the applicant undertook building and construction work on a residential property in Maroubra owned by the respondents. (It will be convenient on occasion to refer to the applicant as "the builder" and the respondents as "the owners", in keeping with the nomenclature adopted below.) The contract anticipated that the building work would be completed in early 2006. However, completion was delayed for a number of reasons, which included variations proposed by the owners and "stop work" orders issued to the builder by Randwick Council for non-compliance with the development consent. The builder did not make claims for extensions of time, as was permitted under the contract. It did, however, complain that payments had not been made for the variations.
By January 2007 the work was incomplete but little was done after that date. In May 2007 an officer from the Office of Fair Trading undertook an inspection and convened a meeting between the builder and the owners. The builder agreed to provide an itemised list of variations and agreed to finish the work by 30 June 2007. A list of variations was prepared, dated 21 June 2007. The work was not complete as at 30 June and the Office of Fair Trading issued a rectification order on 3 July 2007. No further work was carried out and the builder was fined for failure to comply with the order.
On 9 July the owners sought to invoke cl 33 of the contract which involved the service of a notice identifying substantial breaches of the contract, which, if not rectified within 10 working days, would provide a basis for termination of the contract. On 23 July 2007 the builder replied to the notice under cl 33 stating that it wished to remedy any breaches of the contract and not end the contract. No further work was done before 3 August 2007, when the owners sent a further letter terminating the contract.
On 24 June 2009 the builder commenced proceedings in the Tribunal seeking payment of an amount of $170,114, said to be a final progress claim under the contract, including variations, together with interest in an amount of $34,302 calculated on unpaid variations. On 18 August 2009 the owners filed a cross-claim seeking the cost of rectification of defective and incomplete building works.

(a) issues

The summons in this Court contained 12 grounds of review. As developed in the course of the hearing, there were five separate issues which were said to give rise to either jurisdictional errors or errors of law on the face of the record.
The first involved a challenge to the finding of the Tribunal (upheld in the District Court) that the owners had validly terminated the contract in accordance with cl 33 (grounds 1 and 2).
The second issue concerned the entitlement of the owners to recover the costs of completing the works and the requirement to comply with the terms of cl 36 of the contract (ground 3).
The third issue was said to involve a failure by the judge to consider "whether the Tribunal overlooked critical relevant evidence on the issue of extent of the completion of the works at the time of the purported termination" (ground 4). The ground contained five particulars; it was by no means clear from the summons that any error of law was raised.
Fourthly, there was a challenge to the finding by the judge that the amount to complete the contract, which should have been part of the amount payable by the owners, was the sum of $12,500 (the actual sum was $12,215), which was said not to have been agreed, or to have been the subject of a finding by the Tribunal (grounds 6 and 7).
Fifthly, there was a challenge to the manner in which the judge had calculated the interest payable by the builder (grounds 9-12).
Two further grounds listed in the summons (grounds 5 and 8) were abandoned in the course of the hearing. [5]
It is convenient to note one curiosity of the contractual arrangements, which was not referred to in the Tribunal or on the appeal, but which affected the legal obligations under the contract. The builder named in the contract was the applicant, a corporation. The principal of the company was Mr Salim Torbey. The building work was carried out by an employed licensed builder, Mr Carl Paton. Although Mr Paton treated himself in correspondence as the proper recipient of notices given under the contract to "the builder" that was technically not correct: notices were required to be sent to the corporation named in the contract, and that was the course taken by the owners from time to time.

(b) termination - clause 33

Clause 33 of the contract provided: "Clause 33. Ending the Contract - Breach 33.1 A substantial breach of this contract by the builder includes but is not limited to if the builder: (a) has its licence cancelled; (b) suspends the carrying out of the building works other than under Clause 32. 33.2 A substantial breach of this contract by the owner includes but is not limited to if the owner: (a) fails to pay any amount by the due date; (b) fails to give evidence of ability to pay as requested; (c) fails to establish and maintain a security account if requested; (d) interferes with or obstructs the progress of the building works; (e) fails to give or interferes with the builder's possession of the site; (f) fails to give an instruction or direction required within the time specified. 33.3 If a party is in substantial breach of this contract the other party may give the party in breach a written notice stating: (a) details of the breach; and (b) that, if the breach is not remedied within 10 working days, that party is entitled to end this contract. 33.4 If 10 working days have passed since the notice of default is given and the breach is not remedied then the party giving the notice of default may end this contract by giving a further written notice to that effect. 33.5 All notices to be given under this Clause must be given by certified mail or personally."
By letter dated 9 July 2007, addressed to the applicant and apparently copied to Mr Paton, the owners wrote: "In view of the negligence and substantial breach of contract on the part of Torbey Investments Corporation Pty Ltd, we the owners of the above-mentioned property are hereby enforcing clause 33 of the contract. Details of the breach include, but are not limited to the following; [seven matters were listed]. Torbey Investments Corporation's failure to remedy the above breaches within the timeframe set in the rectification order (4959) issued by the Department of Fair Trading on the 3rd July 2007, details as per attached document 6, will result in this matter being referred to the Building Investigations Branch for assessment and possible disciplinary action against Torbey Investments Corporation. Following the above action … the owners will exercise clause 36, sub-clause 36.4, which states; that the owners must complete the building works and keep records of the cost incurred. If the costs incurred by the owners are; (a) more than the unpaid balance of the contract price, the builder must pay the difference to the owner within 7 working days of receiving the notice from the owner; or (b) less than the unpaid balance of the contract price the owner must pay the difference when giving the notice as a debt due and payable."
In the Tribunal, the applicant asserted that the notice did not comply with cl 33.3 and was not given by certified mail or personally.
Relevant to this issue, on the basis of records made by an officer from the Office of Fair Trading following a site inspection in response to a complaint by the owners, the Tribunal found that: [6] "(a) the work was incomplete as at 29 May 2007. (b) although the builder agreed to complete the work by 30 June 2007, it failed to do so and as at 3 August 2007, practical completion was not reached. (c) on 29 May 2007, the builder also agreed to prepare written variations."
In setting out the issues for determination, [7] the Tribunal identified the first issue as the entitlement of the builder to be paid for the variations claimed. The second issue was the question, "Were the homeowners entitled to terminate the contract?" The Tribunal noted that "the homeowners purported to end the contract pursuant to clause 33." [8] The Tribunal then set out its findings, including the following: [9] "d. On 9 July 2007 the homeowners wrote to the builder (R7) putting it on notice of their intent to enforce cl 33 of the contract and outlining the alleged breaches. e. On 3 August 2007 (by which time the OFT had issued a rectification order dated 3 July [2007] requiring completion by 27 July 2007, with which the builder failed to comply) they wrote terminating the contract. f. At this time the value of the incomplete and defective work (as set out below) was considerable. I therefore find that the homeowners were entitled to and did terminate the contract under clause 33."
The Tribunal continued: [10] "In view of the concern I have expressed as to Mr Torbey's credibility I have difficulty in accepting that the builder was not on notice of the homeowners' correspondence of 9 July 2007 and 3 August 2007. Indeed, as the homeowners submit, the builder's letters of 23 July 2007 and 7 August 2007 suggest to the contrary. I also agree that the reason for prescribing registered post is to ensure service and as stated above, I am satisfied the builder was on notice of the homeowners' proposal to terminate."
The grounds of appeal in the District Court were numerous, but ground 3 alleged that the Tribunal "erred in law by finding or concluding that the Defendant lawfully terminated the Contract." Depending on how the matter was argued, that ground might or might not have identified a decision of the Tribunal with respect to a matter of law. According to the appeal judge, senior counsel for the builder had identified the errors in the following terms: [11] "(a) The owners' letter of 9 July did not refer to 10 days' notice to rectify the default, and (b) There was no evidence that it was sent by registered post, both of which were mandatory requirements."
The appeal judge considered the materials set out above and addressed a number of authorities to determine whether the ordinary postal service used rendered the notice of 9 July 2007 ineffective. The judge's conclusions were set out in the following passage: "[95] The builder's submissions before the Tribunal raised this point but did so in one sentence and without analysis or any reference to authority. [96] The entirety of the Tribunal's reasoning on the matter is to be found in paragraph 76, quoted above. She said: 'I also agree that the reason for prescribing registered post is to ensure service and as stated above I am satisfied that the builder was on notice of the home-owners proposal to terminate.' It must be inferred that she took the view that the proper interpretation of clause 33.5 was that it was facultative and not obligatory. [97] In the absence of binding authority on the matter, the Senior Member was entitled to construe it as facultative, particularly as its overt purpose had been effected. Although I think the matter is not free from doubt, on balance I do not think that an error of law is disclosed."
The grounds of review in this Court, as articulated by the applicant in its written submissions, raised three issues: 1. the judge failed to deal with the specific allegation of non-compliance with cl 33.3; 2. the notice was "incapable of being a document in accordance with cl 33.3", and 3. there was an error of law in determining that the method of service was facultative rather than mandatory.
The first question is whether the judge did in fact deal with the complaint that the letter did not state that, if the breach were not remedied within 10 working days, the owners would be entitled to end the contract, as required by cl 33.3(b). The correctness of that proposition is by no means self-evident. After setting out the issues identified by counsel for the builder, [12] the judge continued: [13] "No authority was cited which directly supports the contention that failure to comply with these requirements is fatal to the owners' case."
It is tolerably clear from this passage that the judge, at that stage, was dealing with both alleged omissions together, in considering whether the requirement as to the means of giving notice was indeed mandatory. In the course of considering the authorities, her thinking may well have been diverted so as to focus on the issue of service, rather than the content of the notice. That may explain why her conclusion at [96] referred only to cl 33.5, dealing with service. However, there is no reason to suppose that the conclusion was not intended to apply equally to the requirements of cl 33.3.
With respect to the first complaint (failure to deal with the alleged non-compliance with cl 33.3), even if the judge failed to address the complaint expressly, it is in any event by no means clear that cl 33.3(b) was not satisfied: if there were no demonstrated breach of that provision, relief could be refused on discretionary grounds, even if it were to be established that the judge failed to address the issue. After specifying the details of the alleged breaches, the letter said that the builder's failure to remedy the breaches "within the timeframe set in the rectification order", which was attached, would have consequences for the builder. Further, the statement that the owners would exercise their powers under cl 36, which prescribed what would happen if the owner ended the contract under cl 33, is a sufficient statement as to the owners' entitlement (and intention) to end the contract. The timeframe specified in the attachment, namely 27 July 2007, was more than 10 working days from the date of the letter.
In considering what precisely such a notice should include, a construction should be given to the clause, consistent with its purpose and context. First, the right to give a notice under cl 33.3 applies to breaches by either builder or owner and breaches potentially wide ranging in nature and effects. Further, the straightforward language is apt to conceal a variety of potential problems. In particular, what is required to remedy a breach will depend upon the nature of the breach; the notice is not required to state what must be done. In this case a substantial breach was delay: what action would have been sufficient to rectify the breach? Secondly, a literal reading would result in failure to comply with par (b) if the party giving the notice were, for example, to allow 14 working days within which to remedy the breach. Thirdly, the clause is silent as to the date from which the 10 working days will run. Even cl 40.1, which identifies how a notice is deemed to be given does not specify when it is deemed to be given, although cl 40.1(b) may have been intended to specify a time, namely the day following the day it was posted by ordinary mail.
Other clauses in mandatory terms raise similar difficulties: see the discussion of cl 36 below. In these circumstances, there is much to be said for adopting a flexible construction of the language, so as to give effect to its commercial purpose. That was the approach adopted by the Tribunal and accepted by the District Court as giving rise to no error of law. Thus, in circumstances where it was established that the relevant information had in fact been received, and a purpose of the mandatory language had been achieved, any formal non-compliance should not be seen as rendering the notice ineffective under the contract.
In dealing with a contractual provision in similar (though not identical) terms, Collins J in Eriksson v Whalley stated: [14] "The provision of this method of service no doubt was intended for the purpose of avoiding subsidiary disputes between the parties to the contract as to whether the notice was given or received. Compliance with its provisions eliminates to a very large extent such disputes, as it provides for a mode of service and receipt of the required notice which can be corroborated from an independent and official source. Further … the receipt of a registered notice imports a certain solemnity or importance to the giving of the notice which a more informal method of service may not convey."
Collins J held that the failure to send the notice by registered post meant that service of the notice was "invalid" and the provisions of the relevant clause in the contract were not complied with.
The first purpose, namely providing an independent source of corroboration for the giving of a notice, is not readily engaged in the present case, which permits the notice to be "given personally". Secondly, there is probably a lesser degree of "solemnity" accompanying receipt of a letter sent by certified mail and there is certainly no solemnity attaching to the handing over a copy of the notice. So far as purpose is concerned, there is therefore little to be said for the proposition that an otherwise valid notice, of which receipt and comprehension is duly acknowledged, will not have been validly given.
In Spectra Pty Ltd v Pindari Pty Ltd [15] Wootten J considered the effect of a notice in writing given by a lessee to a lessor in exercise of an option to renew the lease. The lease required that the notice should be sent "by prepaid registered mail" to the lessor's last known place of residence. Such notices have particular conveyancing significance. [16] Nevertheless, Wootten J observed that the notice had in fact been sent to the defendant at an appropriate time and had been received in the normal course of the post. He identified the question as being whether the stipulation of pre-paid registered mail was "not merely a sufficient method of giving notice, but the sole and essential method of doing so." [17] He continued: "If the latter is the construction, it means that the clause is saying that the notice would not be validly given if it were taken to the registered office of the company and placed in the hands of its secretary. This seems a highly unlikely stipulation for parties to adopt, as it places an absurd premium on a particular form which can be of no benefit to anybody. The provision can be seen in perspective, if it is remembered that normally an offer is not accepted until the acceptance is communicated to the offeror. … Viewed in this light the provision for notice by prepaid registered mail operates, on the one hand, to deny the sufficiency of merely placing a notice in the ordinary post with no guarantee that it will reach the offeror, but, on the other hand, relieves the offeree from having to ensure that the notice actually reaches the offeror provided that he uses the medium of registered post. But, in the absence of a very clear indication of a contrary intention, it would not be reasonable to construe a provision for service by registered mail as excluding the giving of notice by other equally expeditious means which do in fact result in the actual receipt of the notice by the offeror …."
In Kennedy v Collings Construction Co Pty Ltd [18] the reasoning of Wootten J in Spectra was applied with respect to a building contract requiring a notice of termination to be given by registered post, where the notice was sent by ordinary post. In a passage cited by the judge in the District Court, [19] Giles J stated: [20] "It is true that determination provisions … are strictly construed, because of their serious consequences. But I see no reason to give cl 13 a construction, under the name of strictness, which would lead to the unreal result that undisputed receipt of the notice would be ineffective because the medium of registered post had not been used. The reference therein to registered post is adequately explained in the light of cl 25: its function is to make service by ordinary post, which would otherwise be sufficient, insufficient. That is quite understandable, and reflects the importance of a notice determining employment, but as I have said it is a different thing again to say that notice served by registered post is not only sufficient but also necessary - not only permissible, but also obligatory."
The Tribunal accepted, as was noted by the appeal judge, that each of the letter giving notice of default and a letter of termination sent on 3 August 2007 was the subject of a response from the building contractor. The responses effectively acknowledged receipt and an understanding that what was being proposed was termination of the contract.
Although, as noted by Giles J in Kennedy, each contract must be construed according to its own terms, the approach adopted by Wootten J and Giles J should be applied to the terms of the present contract. Consistently with the operation of cl 36 discussed below, the effect of cl 33.5 is to provide a mandatory result if its conditions are followed, but not to invalidate a notice which is non-compliant. The result is that accepted by the judge below, namely that both notices were validly given for the purposes of the contract.
Finally, the applicant raised a separate issue in relation to the date on which the "purported clause 33 notice was served". The submission accepted an implicit finding by the Tribunal at par 76 of its decision that the first notice was received "on or before 23 July 2007 and responded to by the builder on that day." If that were correct, the applicant submitted, then the letter of termination dated 3 August 2007 allowed only nine working days and not 10.
There were a number of problems with that submission. First, it contained an inherent inconsistency in that it assumed that the first, cl 33.3, notice was given on the day that it was received; the termination letter, however, was assumed to be given on the day that it was sent. If reliance were to be placed on the accuracy of the statement by the licenced contractor, Carl Paton, as it was with respect to the cl 33.3 notice, then presumably the fact-finder would also have accepted his statement as to receipt of the notice of termination, which he stated, in his letter to the owners dated 7 August 2007, had been received on 6 August 2007. It follows that the Tribunal's implicit factual finding as to the period of notice was not incorrect.
Secondly, there was the legal difficulty that any such finding by the Tribunal was a finding of fact and was not subject to appeal to the District Court. Thirdly, there was the procedural difficulty that there was no attempt to appeal on such a ground and hence no basis for this Court to review what happened in the District Court in relation to this point.
The challenge based on grounds 1 and 2 was not made out.

Ground 3 alleged legal error on the part of the appeal judge in failing to deal with "a clearly articulated argument" that the owners were not entitled to the costs of completing the work, except in accordance with cl 36 of the contract.
The applicant's argument was that cl 36 provided an exclusive mechanism for the owner to recover the costs of completing the building work in circumstances where the owner had terminated the contract under cl 33. Clause 36 was in the following terms: "Clause 36. Effect of the Owner Ending the Contract 36.1 If the owner ends this contract under Clause 33 the owner must complete the building works and keep records of the cost incurred. 36.2 The owner must take all reasonable steps to minimise the cost of completing the building works. 36.3 The owner must, within 5 working days of the building works reaching practical completion, give the builder a written detailed statement of the costs incurred (including copies of all invoices and receipts) and notice of the date when practical completion was reached. 36.4 If the costs incurred by the owner are: (a) more than the unpaid balance of the contract price the builder must pay the difference to the owner within 7 working days of receiving the notice from the owner; or (b) less than the unpaid balance of the contract price the owner must pay the difference when giving the notice as a debt due and payable."
Clause 36 is illustrative of the care which must be taken in construing stipulations in the contract which used mandatory terms, such as "shall" and "must". There are many difficulties with the operation of cl 36 if it is read in literal terms. For example, it would be absurd to say the owners were in any legal sense obliged to complete the contract, although cl 36.1 said they "must" do so. Nor would it be sensible to conclude that the failure of the owner to comply within five days of practical completion with the obligation imposed by cl 36.3 would prevent recovery of the expense. Without considering other problems which might arise (such as the ability of the builder to challenge the claimed amount) the substantive purpose of the clause might be understood in the following terms: If the owner has terminated the contract under clause 33, and if the owner completes the building works and keeps records of the costs incurred, which records, together with a statement of the costs, are in fact supplied to the builder within 5 working days of practical completion, the owner is entitled to claim and be paid any excess over the unpaid balance of the contract price.
The contract also gives the builder a right to be paid the balance if the unpaid balance exceeds the costs expended by the owner. It would be surprising if the owner were not required to pay the amount calculated under cl 36.4(b), if the owner had failed to supply the statement to the builder (with all invoices and receipts) within five working days of practical completion. Clearly further adjustments are needed to the language of the clause in order to make it work in a practical and commercially sensible way.
For the purpose of the present submission, the applicant assumed that the contract had been properly terminated under cl 33. It then submitted that the only way in which the owners could recover the reasonable costs of completing the work was if they strictly complied with cl 36. In other words, effective termination under cl 33 would remove any general contractual entitlement to recover the costs of completion of the works. Neither the Tribunal [21] nor the District Court [22] accepted that cl 36 had that effect; rather, both accepted that the failure of the owners to comply with the requirements of cl 36 prevented the owners enjoying the benefits of entitlement to payment for the precise amount within seven working days, pursuant to cl 36.4.
No relevant error was raised by this ground.

(d) overlooking critical evidence

Ground 4 alleged that the judge erred by failing to consider whether the Tribunal "overlooked critical relevant evidence on the issue of the extent of the completion of the works" at the time of termination. The ground included five particulars, the first three of which identified express references by the Tribunal to the evidence; the fourth particular identified the paragraph in which the Tribunal made the relevant finding of fact. The fifth particular merely referred to a passage in the judgment in the District Court referring to other evidence relevant to the extent of completion of the works.
These particulars provided an unpromising basis for asserting an error of law on the part of the Tribunal. While it is not true that a decision-maker cannot err in law in considering factual issues, the manner in which such an error can arise requires careful analysis. To acknowledge that it may be difficult to characterise the errors on which appellate jurisdiction depends in particular circumstances is not to deny the necessity of the exercise. There will be cases in which errors of law are not readily distinguished from errors of fact. What is important in the present case is to recognise that an error of law may be identified (a) in an ultimate finding, (b) in the process by which the finding was reached, or (c) in the written statement of reasons explaining how the finding was reached. However the error is said to have occurred, the starting point must be to identify the issue, in the determination of which the error is said to have arisen. Neither the particulars in the ground, nor the submissions for the applicant, engaged adequately with this exercise.
The particulars identified two sources of so-called "critical evidence" which was said to have been overlooked. However, it was all evidence expressly adverted to by the Tribunal. The first such evidence was the file of the Office of Fair Trading, identified as Ex T13 and described as "the complete set of documents emanating from the Fair Trading Office." [23] The first finding based on this material was that the work was incomplete as at 29 May 2007 and had not reached practical completion by 3 August 2007.
That was by no means all the evidence before the Tribunal as to the state of completion of the works. The Tribunal had before it expert evidence from the owners' architect (Mr Parsons) and a quantity surveyor (Mr Davies) engaged by the owners for the purpose of the proceedings. [24] In a passage noted in the third particular, the Tribunal accepted the evidence of Mr Parsons "as to the state of completion of the work when the contract ended." [25]
The Tribunal then turned to evidence as to the cost of the uncompleted works and the cost of rectification of defective works. The Tribunal noted that it had evidence before it from two experts and, where there was disparity between them, generally preferred the evidence of the quantity surveyor, Mr Davies. [26] Inconsistent evidence given by the owners was rejected as "too imprecise and unreliable." [27]
All of this discussion of the evidence was set out by the Tribunal by way of "Background" before identifying the issues for determination. The relevant issues for present purposes were identified in the following terms: [28] "3. What was the state of completion of the works at the time the contract was terminated? 4. Are the homeowners entitled to the damage they seek for completion costs? 5. Are the homeowners entitled to the damages they seek for rectification costs?"
There was no challenge to the appropriateness of these formulations of the relevant issues. None of these issues required the identification of a percentage of the works which had been completed at the date of termination of the contract. As the judge noted, evidence of the state of completion came from the owners (50%), [29] the owners' quantity surveyor, Mr Davies (42%), [30] the Office of Fair Trading report (85%) [31] and the evidence of the bank, which approved payments under the contract (90%). [32] The applicant was critical of the judge for speculating as to why there might have been such disparities in these estimates. [33] The speculation was little more than the application of common sense to the circumstances, but legally it was of no consequence.
The first step in the applicant's case was that the disparities in the percentages had to be resolved and could not be resolved by overlooking or disregarding parts of the evidence. That reasoning is fallacious on a number of bases.
First, the issue before the Tribunal was not the percentage of the contract works (with or without the variations) which had been completed, but was rather which works under the contract had not been completed and their value. That exercise was undertaken with specific reference to the evidence relied upon for each item. [34] The total amount was $115,055. No doubt that figure could be specified as a percentage of the total contract price, but that exercise was not a necessary part of the Tribunal's function, nor was it part of the actual reasoning adopted by the Tribunal, as revealed in the written reasons. The reasoning of the Tribunal in reaching its conclusion was, as the primary judge stated, set out with clarity. The evidence itself was summarised at pars 23-57. The Tribunal accepted the state of the building site at the date of termination as described by the owners' architect, Mr Parsons. Mr Parsons inspected the site one week after the builder left and he took photographs. The building contractor, Mr Paton, agreed that the photographs represented the state of the building works when he was last on site. That evidence was preferred to evidence of other witnesses who did not attend the site until much later, and after much of the work had been completed. With respect to the value of the uncompleted works, the Tribunal accepted the evidence of Mr Davies, who was the only quantity surveyor to give evidence.
It may thus be seen that the findings made by the Tribunal on the issue to be determined, correctly identified by the Tribunal in its reasons, were fully supported by evidence and the process of reasoning was fully revealed. That which the applicant alleged was overlooked was not critical but peripheral to the issue properly identified.
The next problem in the applicant's case revolved around the legal significance of overlooking critical evidence. To support the submission that this was, in some sense generically, a ground of review for error of law, and indeed jurisdictional error, the applicant relied upon the reasoning of Robertson J in the Federal Court decision, Minister for Immigration and Citizenship v SZRKT, [35] the statement of principles from which was adopted and applied by a Full Court of the Federal Court in Minister for Immigration and Border Protection v SZSRS. [36]
The statement of principle articulated in SZRKT involved three elements. The first is sometimes described as a constructive failure to exercise jurisdiction, which occurs when the tribunal misapprehends the full extent of, or limitations on, its functions under the law. That involves an exercise in statutory construction in order to determine the scope of the functions. However, that cannot be an end of the matter. If the function of the Tribunal is to determine an application validly before it, an assessment must be made of whether that exercise has been undertaken. As explained by Gummow and Callinan JJ in Dranichnikov v Minister for Immigration and Multicultural Affairs [37] "[t]o fail to respond to a substantial, clearly articulated argument relying upon established facts" can amount to a constructive failure to exercise jurisdiction.
The second proposition concerns the means by which the failure may be established. For example, if it could be shown that an amended application, containing a fresh ground with real prospects of success, was not before the Tribunal because it had been misplaced in the Registry, that might be sufficient. An alternative approach might be to look at the reasons of the Tribunal. Accepting that, in accordance with the statutory mandate to give reasons, the reasons will disclose the actual reasoning process adopted by the Tribunal, it may become apparent that the process was flawed because a substantial clearly articulated claim was not addressed in any form.
The third proposition, which is critical for the present case, is that there may be no bright line distinction between a claim made by the applicant and evidence in support of the claim. In other words, to ignore or overlook apparently credible and relevant information, which might support an essential step in the reasoning process if the claim were to be upheld, may itself constitute a constructive failure to exercise the function conferred on the Tribunal. This point was made by Selway J in SHKB v Minister for Immigration and Multicultural and Indigenous Affairs [38] in a passage extracted and adopted by Robertson J in SZRKT. [39]
Without departing from that reasoning, it is appropriate to strike a note of caution. A tribunal, like a court, is not obliged to refer to all the material before it which may be thought by a party, or even by the reviewing court, to constitute relevant evidence. Evidence is often repetitive and will be of variable reliability. Hundreds of pages of evidence may need to be reduced to a clear and succinct statement of written reasons. Comprehensiveness is a relative concept and must be balanced against other relevant values.
This principle is in substance a development of the requirement that a tribunal take into account all relevant considerations. The term "considerations" is itself, perhaps, unfortunate, because it is imprecise. However, in legal parlance it refers to those matters which the statute expressly or by implication obliges the tribunal to consider. Thus the statement in Dranichnikov can be understood as a point of statutory construction: namely that the Migration Act (being the relevant statute in that case) in conferring jurisdiction on the tribunal implicitly required that it address the matters identified by the applicant as the basis of his or her application. A similar concept underlay the language adopted by Gummow J in Khan v Minister for Immigration and Ethnic Affairs, [40] that the decision-maker was required to "give proper, genuine and realistic consideration to the merits of the case". However, as the High Court accepted in Minister for Immigration and Citizenship v SZJSS, [41] this language is "apt to encourage a slide into impermissible merit review". [42]
In short, although one can describe the overlooking of critical evidence as an error of law, it is important to understand the purpose and context of such a description. In this case, it is patent that the Tribunal did not ignore the material identified in the particulars: indeed, the particulars identified the material by reference to the reasons of the Tribunal and the appeal judgment. The complaint is merely that, for reasons she gave, the Tribunal member preferred other evidence. This ground did not establish an error of law on the part of the Tribunal, nor on the part of the District Court which correctly rejected it.

(e) fact-finding on appeal

The primary judge accepted submissions on the appeal that the Tribunal had made an error in calculating the amount owing under the contract to the builder (ground 5).
The Tribunal dealt with this issue by considering what variations were undertaken by the builder, for which it was not paid. The Tribunal had identified those variations which it had allowed and those which it did not. [43] The total amount of the variations allowed was $33,221. The Tribunal then considered three further variations identified by the builder's expert, Mr Short. Of these, one was allowed in an amount of $4,950.40. As a result, the amount allowed on the builder's application was $38,171.40. It is clear that that amount was purely for variations and did not include any amount owing under the contract, such as an unpaid progress payment. In the notice of appeal to the District Court, the builder claimed an error by the Tribunal "in calculating the award of damages for the Defendant [the owners] by failing to deduct the unpaid portion of the Contract Price of $31,080 from the sum of $115,055." [44]
This ground did not, in its terms, identify any error of law. Nor, in its terms, did it seek adjustment to that part of the Tribunal's order which related to the award in favour of the builder. The judge accepted that, as a matter of contractual entitlement and as a matter of principle in assessing common law damages, the owners could not recover from the builder an amount required to complete particular works, even though they had to pay a third party for those works, if they had not paid the builder that amount in advance of completion. No complaint was made about that reasoning. Rather, the applicant complained that, on an appeal on a question of law, it was not open to the appeal judge to make the reduction which should have been made by the Tribunal absent agreement by the parties as to its quantum. That, it was submitted, involved an exercise in fact-finding, which should have been remitted to the Tribunal.
As a matter of legal principle, there is merit in that challenge, although there may be different views as to the precise limits of the powers of the Court, having identified error, under s 67(3) of the Tribunal Act. [45] Assuming that there was error on the part of the trial judge in seeking to resolve a factual dispute, there is a further question as to whether, in the circumstances of the case, this Court should intervene.
There are three reasons for thinking that the Court should not intervene. First, by identifying the proper deduction in its notice of appeal, the builder was expressly inviting the appeal judge to make a finding as to the final amount payable.
Secondly, the difference between the amount claimed by the builder before the appeal judge (without supporting evidence) and the amount awarded by the judge (on the basis of the evidence before the Tribunal) is a fraction under $20,000. There is much to be said for the view that, in circumstances where there may in fact be no change to the ultimate result, it would not serve the ends of justice for the Court to set aside the finding and order the District Court to remit this issue to the Tribunal for determination.
Thirdly, this issue was not resolved by the first judgment in the District Court. Rather, the appeal judge expressly desisted from making final orders stating, "I hope, given the amount involved, that agreement can be reached between the parties as to quantum." [46]
As the appeal judge explained in her second judgment, not only did the parties not reach agreement as to the outstanding contract sum, but the builder apparently raised its claim to some $68,000, calculated, not simply by reference to the contract, but by reference to a number of variations, which had otherwise been rejected both by the Tribunal and on appeal. [47] The matter was complicated by the builder filing a notice of motion seeking, in effect, to vary the orders already made. The fact that orders did not appear to have been made at that stage, but rather foreshadowed, did not deter a further expansive exchange of submissions and a further hearing.
In declining to reopen the first judgment, the appeal judge said at [38]: "These proceedings must come to an end. They have been on foot now for close to five years. They involve about $150,000. The costs to both parties must have outweighed this sum by a considerable amount."
The judge then addressed the question of the outstanding amount in the following terms at [41]: "The amount outstanding [for] which the owner had not accounted to the builder was the sum of $12,215. The variations were dealt with by the Tribunal Member and noted as either having been agreed and paid, not agreed, or agreed and unpaid. There is simply no reason for the contract sum to be reconsidered in the context of the variations."
It is clear from the discussion of the submissions in the second judgment that, following delivery of the first judgment, the builder continued on the course it had adopted in its notice of appeal, namely to invite the appeal judge to determine the amount of the appropriate deduction. The builder comes to this Court because it does not like the result. In fact, the builder did not dispute the figure adopted by the appeal judge as the only amount outstanding under the contract. It adopted different figures by reference to a different calculation, including variations. That, as the appeal judge correctly pointed out, was not the exercise for which leave had been granted. The written submissions in this Court stated that the appeal judge had noted, at [36] in her first judgment, that "the male Owner himself conceded that he owed over $24,000 to the Applicant." That submission was misleading. When the judge came to deal with the issue, she explained that figure in the following terms: [48] "The evidence of Mr Ferrara was that all but one of the contractual progress payments had been made. He also said that the builder had been paid 'all but $24,430 of the contract price and approved variations'."
To put that figure forward on appeal as demonstrating error on the part of the trial judge was unjustifiable. Its purpose in the reasoning was to put it to one side, because no differentiation had been made as between the amount of the progress payment under the contract and that amount which related to approved variations. Rather than undertake the exercise which the judge had expressly identified as the relevant one, the builder continued, in this Court, to pursue a different basis of calculation. That approach warrants this Court declining to intervene, as a matter of discretion, whether or not the appeal judge was justified in making the deduction herself.

(f) payment of interest

The last four grounds seeking intervention by this Court related to amounts of interest payable on the outstanding awards made by the Tribunal in favour of each party. The Tribunal awarded no pre-determination interest. The builder appealed on the basis that interest had been sought in its application to the Tribunal, but none had been awarded. Indeed, the Tribunal had not addressed the issue.
The appeal judge dealt with this matter somewhat inconclusively in the following three paragraphs in her first judgment: "194. The builder argued that it was entitled to interest on the value of the variations owed to it. I do not consider that this constitutes an error of law by the Tribunal, but it can readily be dealt with now. 195. If the builder is owed interest, then so are the owners for the completion costs they incurred. 196. Since the amount owed to the owners outweighs the amount owed by them, it seems to me that any claim for interest would be on the net sum in favour of the owners. If the parties wish the court to make orders with respect to interest, I will invite them to bring in a short minute to that effect."
Each of these statements was unfortunate. If there were no error of law, it was not appropriate for the District Court to make any order other than to disallow the appeal on that ground. If the builder were owed interest, it was not true that the owners were so entitled: there was no appeal by the owners. Further, if there had been, the failure to award interest to them would no doubt also not have been an error of law. Finally, how the interest was to be calculated and whether it was to be calculated on a net sum, depended on the power of the Tribunal to award interest.
Unsurprisingly in the context of this litigation, no short minutes were filed; rather, lengthy submissions and further disputed hearings followed.
When the matter came to this Court, an issue was raised by the Court as to whether the Tribunal had power to award pre-determination interest. If it did not, that would not only explain the absence of any such award, but would demonstrate why there had not only been no error of law, but why there could be no entitlement to an award by the District Court.
Following the hearing in this Court, both parties filed submissions with respect to the question of interest. It was common ground that the power of the Tribunal to award interest was governed by cl 49 of the Consumer, Trader and Tenancy Tribunal Regulation 2009 (NSW) (now repealed). That clause provided: 49 Interest on judgment debt (1) Interest is payable on the outstanding balance for the time being of money adjudged by the Tribunal to be payable and which, being due, remains unpaid. (2) Such interest is payable at a rate equal to the rate for the time being prescribed for the purposes of section 101 of the Civil Procedure Act 2005.
Section 101 of the Civil Procedure Act 2005 (NSW) deals with interest on an unpaid judgment debt. It is clear that that is the purpose and scope of cl 49. Accordingly, there was no power in the Tribunal to award pre-determination interest. (Post-determination or post-judgment interest is not, of course, awarded in the determination or judgment; it accrues by virtue of the statute where the amount adjudged payable is unpaid after a specified time.)
Somewhat obscurely, counsel for the owners nevertheless submitted that "it was open to the court to award interest pursuant to the common law principle of interest damages". Calculations were provided as to how the relevant amount should be calculated. The short answer to this proposition was that the Tribunal is not a court and does not have whatever (limited) powers a court may have under the general law to award pre-judgment interest.
The respondents then argued that there was a judgment of the District Court entitling them to interest. Again, there was a simple answer to the proposition. There was no claim, and could be no claim, before the District Court on an appeal from a decision of the Tribunal on a question of law.
In its reply, the applicant drew attention to the written submissions it had filed in the District Court in support of its appeal. That document was 68 pages long. The final paragraph stated that the claim for interest was a claim for interest "under the contract." Reference was made to cl 16 of the contract. Nothing further was said in elucidation of the claim.
Clause 16 was in the following terms: "The builder may charge the owner interest at the rate stated in Item 10 of Schedule 1 from the day on which an amount falls due to be paid to the builder up to and including the day that amount is paid." Item 10 in schedule 1 provided for "interest on late payments". The progress payments schedule was found in schedule 2.
There are several difficulties in alleging error on the part of the Tribunal in this respect (except that it should have identified its reasons for not granting interest). First, the application to the Tribunal claimed interest only on amounts due for variations. As there were no written variations agreed to by the owners, it is by no means clear that cl 16 of the contract applied to them. Secondly, nothing in the application would have allowed the Tribunal to award interest on variations, had it considered that they fell within the contract. This Court was referred to no evidence (had there been any) which would have allowed the Tribunal to find that, on the particular variations it allowed, there was agreement as to when payments should be made and as to whether, and if so when, any payments were made.
Both parties have acted opportunistically during this litigation, in pursuing claims to which they had no obvious entitlement. The appeal judge was correct to conclude that there was no error of law on the part of the Tribunal in not awarding interest to the builder. It follows that the order with respect to interest, made in favour of the owners who had not sought interest, and were not entitled to it, should not have been made.

Orders

The judgment of 30 April 2015 did not purport to make orders in final form. Orders were made, however, on 18 December 2015 and have presumably been entered, although no copy of entered orders was before this Court. The first two orders dismissed a notice of motion filed by the builder on 17 July 2015. There is no reason to interfere with those orders. The following orders were made with respect to the appeal: 1. The appeal is upheld. 2. Judgment in favour of the Defendants (owners) in the sum of $171,255.26 inclusive of interest. 3. The plaintiff will pay the defendants' costs as agreed or assessed.
It is clear that the second order must be set aside. The question is what order should be made in its place and whether the first order was correct.
On one view, the proper outcome would be to allow the application for review in so far as it seeks to strip out the amounts of interest improperly included by the appeal judge in the District Court. The result would be an order that the builder pay the owners an amount of $104,365.60 which was the amount ordered by the Tribunal reduced, in accordance with the decision in the District Court, by the outstanding amount due under the contract, namely $12,215.
This is the practical consequence of the foregoing reasoning, but the question is whether the Court has power to do more than set aside the orders in the District Court and remit the matter for that Court to make further orders, with a possible further remittal to the Tribunal (now NCAT). As the District Court is a party to the proceedings in this Court and would in any event be bound to follow the direction of this Court, on one view remittal would be a futility involving extra costs but no advantage. The question is then whether in the exercise of the Court's supervisory jurisdiction with respect to another court in the judicial hierarchy, the Court is limited to granting under s 69 of the Supreme Court Act only that kind of relief which might have been available under the prerogative writs.
In Solution 6 Holdings Ltd v Industrial Relations Commission (NSW), [49] Spigelman CJ noted that there might be features of the old prerogative writs which no longer applied to the statutory relief. [50] Although at least in some respects that must be so (the statutory intention being to free the jurisdiction from the procedural constraints which afflicted the writs), Handley JA declined to join in any suggestion that there had been an alteration to "the substantive law governing judicial review". [51] The extent of that reservation was unclear; the Chief Justice was dealing with the scope of the discretion to refuse relief.
The issue as to the scope of the available relief arose in Wende v Horwath (NSW) Pty Ltd. [52] In dealing with an application to review a judgment of the District Court on an appeal from a costs assessment, I said at [101]: "In the present case, setting aside the judgment of the District Court will not give effect to the legal conclusion upon which this judgment is based, namely that the certificates of assessment were invalid. Without suggesting that this court has power to make orders in substitution for those made in the District Court otherwise than in circumstances where the orders to be made are necessary in law, that qualification is satisfied in the present case. Accordingly, this court can and therefore should make the orders which should have been made in the District Court, in exercise of the statutory powers referred to above."
The other member of the majority, Beazley P, agreed with the orders I had proposed. [53] A similar course was identified in SAS Trustee Corporation v Woollard [54] and in Wang v Farkas (No 3). [55] However, in Wende v Horwath (No 2), [56] Beazley ACJ stated that "on reflection, not only does that question remain open, I consider the better view is that this court does not have power to make substantive orders on an application brought pursuant to s 69."
Despite those misgivings, the authority of this Court supports the view that the Court can make an order in its supervisory jurisdiction not merely quashing the determination of the court below, but making in its place the only order available in law, consistent with the reasoning of the Court. That course involves only a notional interference with the authority of the court below, and does not involve the exercise of any discretionary power on the part of this Court.
One consequence of taking that course is that the final judgment sum will be in the order of this Court, rather than in an order of the District Court. Nevertheless, nothing seems to flow from that consequence. It will be made on a different date from the date on which it would be made in the District Court, but courts can specify the dates from which a judgment will operate. To deny this Court the power to limit administrative costs (and costs to the parties) in this way is to defy the statutory mandate of Pt 6, Div 1 of the Civil Procedure Act, setting out guiding principles for the exercise of the Court's civil jurisdiction. Of course, if the Court does not have the necessary power, it does not have power; but there is no authority requiring that conclusion and sound reasons for the contrary view. The Court should give effect to the conclusions reached above in its orders.
So far as the costs of the proceedings are concerned, there is no reason to interfere with the order made in the District Court, namely that the plaintiff (builder) pay the costs of the defendants (the owners) in respect of the appeal.
So far as the proceedings in this Court are concerned, the applicant has had one element of success in that the judgment against it has been reduced to remove the element of interest awarded in the District Court. There is some irony in that result, because the question of interest only arose because the applicant raised it on its appeal. On the other hand, the owners somewhat opportunistically embraced the suggestion by the appeal judge that, if the builder were entitled to interest they were also, and sought to maintain that part of the judgment in this Court. In those circumstances there must be some allowance in the costs which are otherwise payable by the applicant, it having been otherwise unsuccessful. These considerations would be appropriately reflected in an order that the applicant pay 85% of the respondents' costs in this Court.
Accordingly, the Court should make the following orders: 1. Set aside orders 1 and 2 made by the District Court on 18 December 2015 on the applicant's appeal. 2. In place thereof, make the following orders: 1. allow the appeal and vary the orders made by the Consumer, Trader and Tenancy Tribunal on 17 May 2013 in the following respects: 1. in order 1, vary the amount the respondent homeowners are liable to pay to the applicant builder to $50,386.40, in lieu of $38,171.40; 2. consequentially, vary order 3 to an order that the applicant builder pay to the respondent homeowners the sum of $104,365.60. 1. no variation of the costs order in the District Court. 1. Order that the applicant pay 85% of the respondents' costs in this Court.
SIMPSON JA: I agree with the orders proposed by Basten JA and his Honour's reasons therefor.

Endnotes

Torbey Investments Corporated Pty Ltd v Ferrara (unrep, 30 April 2015) ("Torbey").
Torbey at [209].
Torbey at [210].
Torbey Investments Corporated Pty Ltd v Ferrara (unrep, 18 December 2015) ("second judgment").
Tcpt, 28/11/16, p 28(30) and (38).
Reasons, 17 May 2013, par 26.
Reasons, par 58.
Reasons, par 74.
Reasons, par 75.
Reasons, par 76.
Torbey at [72].
See at [27] above.
Torbey at [73].
[1971] 1 NSWLR 397 at 400-401.
[1974] 2 NSWLR 617.
See Comdox v Robins [2009] NSWSC 367 at [23] (Bryson AJ).
Spectra at 622E.
(1991) 7 BCL 25.
Torbey at [90].
Kennedy at 37
Reasons, par 84.
Torbey at [145], although it is by no means clear that the submissions before the judge were the same as those put before this Court.
Reasons, par 25.
Reasons, par 33.
Reasons, par 38.
Reasons, par 41.
Reasons, par 58.
Reasons, par 68.
Torbey at [164].
Torbey at [169].
Torbey at [164].
Torbey at [167].
Torbey at [166]-[167].
Reasons, par 80.
(2013) 212 FCR 99; [2013] FCA 317.
[2014] FCAFC 16; 309 ALR 67 (Katzmann, Griffiths and Wigney JJ).
[2003] HCA 26; 77 ALJR 1088 at [24]-[25].
[2004] FCA 545 at [24].
SZRKT at [69] and [111].
(1987) 14 ALD 291 at 292.
(2010) 243 CLR 164; [2010] HCA 48 at [30].
See also Swift v SAS Trustee Corporation [2010] NSWCA 182 at [45].
Reasons, par 66.
Notice of appeal, ground 15.
See at [9] above.
Torbey at [187].
Second judgment at [18].
Torbey at [182].
(2004) 60 NSWLR 558; [2004] NSWCA 200.
Solution 6 at [133]-[135].
Solution 6 at [184]; Mason P shared that reservation, at [160].
(2014) 86 NSWLR 674; [2014] NSWCA 170.
Wende at [14].
(2014) 86 NSWLR 367; [2014] NSWCA 75 at [108].
[2014] NSWCA 111 at [10].
(2015) 91 NSWLR 588; [2015] NSWCA 416 at [19]. 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: 07 February 2017

Consumer, Trader and Tenancy Tribunal Act 2001(NSW)

Consumer, Trader and Tenancy Tribunal Regulation 2009(NSW)cl 49

Wende v Horwath (NSW) Pty Ltd (2014) 86 NSWLR 674; [2014] NSWCA 170 Wende v Horwath (No 2) (2015) 91 NSWLR 588; [2015] NSWCA 416 Category: Principal judgment Parties: Torbey Investments Corporated Pty Ltd (Applicant) Vito Ferrara (First Respondent) Maria Ferrara (Second Respondent) Representation: Counsel: Mr J R Young/Mr E Georges (Applicant) Mr D P O'Dowd (Respondents)

HEADNOTE [This headnote is not to be read as part of the judgment] On 28 June 2005, Torbey Investments Corporated Pty Ltd ("the builder") entered into a building contract with Vito and Maria Ferrara ("the owners"), pursuant to which the builder undertook building and construction work on the owners' residential property in Maroubra. The work was expected to be completed by early 2006. However, completion was delayed for several reasons. On 9 July 2007, the owners served a notice on the builder identifying substantial breaches of the contract, which, if not rectified within 10 working days, would provide a basis for termination under clause 33. On 23 July 2007 the builder replied to the notice, indicating that it wished to remedy the breaches rather than terminate the contract. However, no further work had been completed as at 3 August 2007, at which time the owners served a second notice on the builder terminating the contract. On 24 June 2009, the builder commenced proceedings in the Consumer, Trader and Tenancy Tribunal ("the Tribunal"), seeking an amount said to be a final progress payment under the contract, including variations and unpaid interest. The owners filed a cross-claim seeking the costs of rectification of defective and incomplete work. On 17 May 2013, a senior Tribunal member made orders that each party owed a specific amount to the other, which, after the amounts were offset, resulted in the builder being required to pay the owners $116,580.60. On 14 June 2013, the builder filed an appeal in the District Court. On 30 April 2015, subject to a minor variation in the calculation of the sum payable, the District Court judge dismissed the appeal, holding that the Tribunal had not made any error of law in its determination of the matter, except as to the manner in which it dealt with an unpaid sum under the contract. Following a further hearing on costs and interest, the appeal judge ordered that the builder pay the owners $171,255.26 (inclusive of interest charges), and their costs. On 15 January 2016, the builder issued a summons seeking a review under s 69 of the Supreme Court Act 1970 (NSW), which allows the Court to set aside a judgment on the ground of jurisdictional error or error of law on the face of the record. The issues for determination were: (1) whether the appeal judge had erred in: (i) finding that the owners had validly terminated the contract; (ii) finding that the owners were entitled to recover the cost of completing the work; (iii) failing to find that the Tribunal overlooked critical relevant evidence on the extent of the works completed; (iv) the final amount payable by the owners under the contract was the sum of $12,215; (v) finding that interest was payable by the builder. (2) as to relief, the power of the Court to substitute an award for that made in the District Court, where only one result was available at law. The Court (per Basten JA; McColl and Simpson JJA agreeing) dismissed the application, except with respect to one issue: In relation to (1)(i)

The appeal judge did not fail to deal with the specific allegation of non-compliance with cl 33.3. The judge dealt with alleged omissions relating to cll 33.3 and 33.5 together. Although the judge's reasons referred only to cl 33.5, they were intended to apply equally to cl 33.3: [31].

At a glance

Court

Decision date

Before

Source

Judgment (9 paragraphs)

Parties

Legislation Cited (4)

Cases Cited (18)