Woodward v Warwick Green Building Pty Ltd

Woodward v Warwick Green Building Pty Ltd - [2021] NSWCATAP 210 - NSWCATAP 2020 case summary — Zoe

[3]

The Decision

The Tribunal calculated the amount to which the builder was entitled on a quantum meruit basis by reference to the value of the work, the subject of the unpaid invoices. In so doing the Tribunal rejected the submission of the owner that the builder was required to establish that the value of the entirety of the work carried out by the builder exceeded the amount of $635,981 which the owner had already paid either directly to third party contractors and suppliers or to the builder in respect of invoices submitted by the builder.
The Tribunal rejected the owner's argument on three bases: First, that the owner and her partner had been vigilant in relation to invoices received from the builder, suggesting they were closely scrutinised and that the invoices that were paid "not only reflected the prior agreement between [the parties] but also were reasonable"; Secondly, that the contract between the owner and the builder was one under which the builder would carry out the work on a "do-and-charge basis", that is where "the builder does work and the owner pays for that work" (see Decision at [105]) so that it was not necessary to assess the value of the entirety of the work and compare that to the amount paid; and Thirdly, that authority supported the approach of only considering the unpaid invoices. The Tribunal referred to Alexander v Gregorian [2010] NSWDC 15; Field v Dettman [2011] NSWDC 125; Field v Dettman (2013) NSWCA 147; and David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 at 379-381.
The Tribunal accepted that the rates agreed between the parties for labour, supervision and builder's margin were reasonable.
The Tribunal dismissed a submission by the owner, that it had not been established that the owner had obtained a benefit which she should not be permitted to enjoy without paying for it. The Tribunal rejected the submission (Decision at [110]) because the builder, having suspended work for non-payment, had returned to work at the request of the owner's partner who had told the builder that, if he did not resume the building work, then no further payments would be made. Although further payments in respect of the invoices then outstanding amounting to about $103,000 were made, the invoices submitted by the builder after the recommencement of work were not paid.
The Tribunal rejected the expert evidence called by both parties concerning the value of the work performed.
The evidence of Mr Haslem, the expert retained by the builder, was rejected because: his estimates were excessive; he included materials that should not have been included; some amounts included in his assessment were divorced from the reality of the building work; and he inappropriately used rates applicable to commercial construction work rather than residential construction work.
The Tribunal rejected the evidence of Mr Cork, called by the owner, on the bases: that Mr Cork "appears to have assessed the estimated cost, not a reasonable amount for the work done and materials supplied"; that his calculation contained arithmetic errors; that his "process was flawed in that he deducted the actual amount paid by the owner from his assessment of a reasonable amount for all the work in order to arrive at what he suggested was a reasonable amount for the work done by the builder"; and that he had made an assessment of the entire work and had not sought to value the work the subject of the unpaid invoices.
The Tribunal concluded that the fact that the parties had agreed on hourly rates for labour and supervision indicated that they considered those rates reasonable. In light of evidence before the Tribunal that the margin customarily added to the cost of materials and sub-contractors was more than 5%, the Tribunal applied the margin of 5% agreed between the parties as a ceiling. That margin was only applied to the purchase of materials and the amounts paid to sub-contractors.
Having regard to issues raised by the owner relating to the efficiency of the management of the project by the builder and the possibility that the builder was charging for the travelling time of employees getting to site to start work, the Tribunal made an allowance for those matters by reducing the hours claimed by the builder for supervision by 24 hours, or approximately half the amount claimed, and the amount allowed for labour by 200 hours out of 1,014 claimed.
The Tribunal assessed the reasonable amount to be awarded in respect of the builder's quantum meruit claim at $152,579.65. The Tribunal noted that that involved a discount of the amount claimed by about 10% and observed that "in a situation where precision is not possible, the Tribunal is satisfied that such a discount appropriately caters for the matters raised during the hearing in relation to the work done and the materials supplied".
The Tribunal recognised that the payment of an additional $152,000 would increase the amount which the owner had paid for the work to just over $788,000, which was substantially more than an estimate provided by the builder before the work had commenced. The Tribunal observed (at [139]): However, it is commonly the case that work done on a do-and-charge basis exceeds the original estimate. In the present case, the builder was requested to change the work and the owner agreed, that included replacing a tiled roof with Colorbond, a stormwater draining alteration, a slab being built outside an al fresco dining area, changes to the eaves in the existing house, changes to windows and doors, a polished suspended slab on the deck, the height of that deck being increased, and an increase in the length and height of the retaining wall.
The Tribunal further noted the evidence of Mr Green, the director of the builder, that when there was a request made to raise the height of the upper level floor he was not requested to indicate the expected cost consequences. The Tribunal also referred to what it described as the "uncontested evidence" from a plasterer, Mr Fitzhenry, who said that the owner requested that he use a more expensive method. We note that the evidence of Mr Fitzhenry was not read in the proceedings. The owner raised the Tribunal's reference to Mr Fitzhenry's evidence as a ground of appeal. We will deal with this issue in due course.

[4]

The scope and nature of internal appeals

By virtue of s 80(2) of the Civil and Administrative Tribunal Act 2013 (NSW) (NCAT Act), internal appeals from decisions of the Tribunal may be made as of right on a question of law, and otherwise with leave of the Appeal Panel.
In Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 the Appeal Panel set out at [13] a non-exclusive list of questions of law: 1. Whether there has been a failure to provide proper reasons; 2. Whether the Tribunal identified the wrong issue or asked the wrong question. 3. Whether a wrong principle of law had been applied; 4. Whether there was a failure to afford procedural fairness; 5. Whether the Tribunal failed to take into account relevant (i.e., mandatory) considerations; 6. Whether the Tribunal took into account an irrelevant consideration; 7. Whether there was no evidence to support a finding of fact; and 8. Whether the decision is so unreasonable that no reasonable decision-maker would make it.
The circumstances in which the Appeal Panel may grant leave to appeal from decisions made in the Consumer and Commercial Division are limited to those set out in cl 12(1) of Schedule 4 of the NCAT Act. In such cases, the Appeal Panel must be satisfied that the appellant 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; or 3. Significant new evidence has arisen (being evidence that was not reasonably available at the time the proceedings under appeal were being dealt with).
In Collins v Urban [2014] NSWCATAP 17, the Appeal Panel stated at [76] that a substantial miscarriage of justice for the purposes of cl 12(1) of Schedule 4 may have been suffered 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.
Even if an appellant from a decision of the Consumer and Commercial Division has satisfied the requirements of cl 12(1) of Schedule 4, the Appeal Panel must still consider whether it should exercise its discretion to grant leave to appeal under s 80(2)(b).
In Collins v Urban, the Appeal Panel stated at [84] that ordinarily it is appropriate to grant leave to appeal only in matters that involve: 1. issues of principle; 2. questions of public importance or matters of administration or policy which might have general application; or 3. an injustice which is reasonably clear, in the sense of going beyond merely what is arguable, or an error that is plain and readily apparent which is central to the Tribunal's decision and not merely peripheral, so that it would be unjust to allow the finding to stand; 4. a factual error that was unreasonably arrived at and clearly mistaken; or 5. the Tribunal having gone about the fact finding process in such an unorthodox manner or in such a way that it was likely to produce an unfair result so that it would be in the interests of justice for it to be reviewed.

[5]

Grounds of Appeal

The owner's Notice of Appeal contained ten grounds of appeal as follows: 1. The Tribunal erred in law in failing to determine whether the Owner had received the benefit of goods or services for which she has not paid in circumstances where: (a) the building contract was not divisible by reference to any stage or portion of the works; (b) the Builder had estimated the cost of the building works to be "between $475,000 and $500,000"; and (c) the Owner had already paid $635,981 for the building works. 2. The Tribunal erred in law in confining itself to a valuation of the work which was the subject of unpaid invoices in circumstances where the building contract constituted an entire obligation for work and labour and was not divisible by reference to any stage or portion of the works. 3. The Tribunal denied procedural fairness to the Owner in assessing the Builder's quantum meruit claim by reference to the unpaid invoices in circumstances where this basis for the Builder's quantum meruit claim was not advanced in the Builder's closing submissions dated 15 May 2020. 4. The Tribunal denied procedural fairness to the Owner in assessing the Builder's quantum meruit claim by reference to the unpaid invoices and without expert evidence as to the reasonableness of the hours claimed in the unpaid invoices in circumstances where the Owner was not informed that such method of assessment was being considered by the Tribunal. 5. The Tribunal erred in law in paragraph 137 in determining that the hours claimed by the Builder in the unpaid invoices were reasonable subject to a reduction of 200 hours without any evidentiary basis for doing so. 6. The Tribunal erred in law in paragraph 132 in determining that $90 per hour for supervision was reasonable without any evidentiary basis for doing so. 7. The Tribunal erred in law in referring to and applying the principle that "it must do the best it can on the basis of the evidence that is available" without regard to the settled qualifications to that principle, namely that the evidentiary difficulty did not arise from the fact that the applicant had not produced evidence of loss or damage, or because the Tribunal had rejected the evidence of loss or damage put forward by the applicant as recognised by the Appeal Panel in Gallagher v Masters Installation Pty Ltd [2017] NSWCATAP 117 at [51]. 8. The Tribunal erred in law in failing to have regard to the Builder's estimate of the cost of the building works of "between $475,000 and $500,000" as evidence of the reasonable value of the building works. 9. The Tribunal erred in paragraph 139 in considering that the only estimate provided by the Builder was "before the work commenced". 10. The Tribunal erred in considering the evidence of Mr Fitzhenry in circumstances where the Builder did not read the evidence of Mr Fitzhenry and the Owner was denied the opportunity of cross-examining Mr Fitzhenry.
The builder also sought leave to appeal on the basis that the decision was not fair and equitable and was against the weight of evidence.
The matters raised in the Notice of Appeal as the bases upon which the decision was not fair and equitable and/or against the weight of evidence do not appear to add anything to the matters raised as grounds of appeal and were not separately addressed by Mr Moujalli, Counsel for the owner, in either his written or oral submissions.
As Mr Moujalli acknowledged in his written and oral submissions, a number of the grounds of appeal raise the same issue. It is convenient to address the grounds of appeal in turn, dealing together with those grounds which raise the same issue.

[7]

Owner's submissions

The owner's submissions in relation to Grounds 1 and 2 referred to the High Court decision in Mann v Patterson Constructions Pty Ltd [2019] HCA 32; 267 CLR 560 and in particular the statement of Nettle, Gordon and Edelman JJ at [176]: Generally speaking, a construction contract which is divided into stages, and under which the total contract price is apportioned between the stages by means of specified progress payments payable at the completion of each stage, is viewed as containing divisible obligations of performance.
As their Honours noted in the footnote to that passage, citing GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 128 FCR 1 at [704]-[705], "in each case the question is one of construction".
The owner submitted that: On any view the contract in the present circumstances did not contain divisible obligations by reference to any stages or portions of the work. It contained an entire obligation to deliver the works identified in the development approval and the construction certificate.
In oral submissions Mr Moujalli submitted that, in construing the contract, it was permissible to have regard to the subsequent conduct of the parties.
The owner submitted that the builder had not advanced a case before the Tribunal that the contract was not an entire contract and further submitted that there was no basis for dispute that the contract was an entire contract because: 1. There had been no discussion or agreement between the parties before commencement of the works that the works would be divided into separate stages or separate portions. 2. Neither the development approval, the construction certificate or a letter signed by the parties on 16 October 2017 made reference to the works being divided into stages or separate portions. 3. The builder had provided the owner with a draft building contract which made no reference to the works being divided into stages or separate portions and the only estimates of building costs provided by the builder were for the entire works and not any separate stage or portion.
The owner relied upon a further statement of Nettle, Gordon and Edelman JJ in Mann v Patterson at [215]: The amount of restitution recoverable as upon a quantum meruit by the plaintiff for work performed as part of the entire obligation (or as part of the entire divisible stage of the contract) should prima facie not exceed a fair value calculated in accordance with the contract price or appropriate part of the contract price.
The owner submitted that the Tribunal made an error of law in valuing only the work the subject of unpaid invoices and not the entirety of the work carried out by the builder under the contract which he was not able to enforce.
The owner submitted that a further reason why the reasonable value of the entire works needed to be assessed in order to determine whether the owner would be unjustly enriched was that the builder had provided the owner with an estimate of the building cost for the entire works of between $450,000 and $500,000 and had identified the contract price as $475,000 in the application for Home Owners Warranty insurance, which the builder had lodged in respect of the work.
The owner submitted that the requirements of good conscience and justice which underpinned the principles of restitution and unjust enrichment "demanded that the reasonable value of the entire works be assessed to determine whether the owner had been unjustly enriched".
The owner submitted that the approach taken by the Tribunal: Provides an incentive to builders to evade the mandatory statutory requirements in relation to contracting for residential building work. It allows builders who have not complied with the statutory requirements to issue invoices and receive payment for them and then claim in quantum meruit for any unpaid invoices safe in the knowledge that the reasonableness of payments already made will be protected from scrutiny.

[8]

Builder's submissions

The builder's submissions referred to Brooking on Building Contracts, 4th ed at [8.1]: An entire contract is one in which the Builder's promise to complete the work is an essential term, there being no entitlement to payment should the Builder fail to complete the work. An entire contract, or perhaps more accurately, an entire obligation is one in which the consideration of payment of money or for the rendering of some other counter performance is entire and indivisible. Whether a contract is entire depends upon its proper construction, the question being whether completion is a condition precedent to the right of the Builder to be paid the price.
The builder submitted that, as there was no written contract, the terms of the contract must be found in the words and conduct of the parties.
The builder submitted that two major aspects of the contract show that the agreement was not an entire contract: the nature of the works; and the payment arrangements.
The builder submitted that the works were for renovation and extension of the owner's house and that: By their very nature the scope of those works was uncertain. There were plans for the work but they do not provide the scope of all the works. For example, the finishing of the internal works. Further, the works were subject to significant variation both in prospect and in practice.
The builder submitted that the owner excluded parts of the work from the builder's responsibilities as she saw fit. By way of example, the builder referred to the fact that the owner, through her partner, Mr Crampton, had taken control of the concreting and arranged and paid the concrete suppliers and concreters directly.
The builder submitted that the work was not for a fixed price, it was conducted on a do-and-charge basis under which the builder levied periodic invoices for the works. On occasions the parties re-negotiated the payment terms during the course of the works.
The builder further submitted that the owner's submissions in relation to Grounds 1 and 2 relied upon the evidence of the expert called by the owner, namely Mr Cork, to establish the value of the work performed by the builder. The builder noted that the Tribunal had rejected Mr Cork's evidence.
The builder also submitted that the owner's submission, that the amount she had paid for the work performed by the builder was greater than the reasonable value of that work, depended upon the proposition that the amounts paid to third parties reflected the reasonable value of the work performed by those third parties, which was a matter that the owner's evidence had not sought to address.
In oral submissions Mr McCall, Counsel for the builder, submitted that the argument that the contract was an entire contract was not articulated in the owner's Points of Defence to the builder's claim and that, contrary to the owner's submissions, that argument had not been set out in the owner's Outline of Submissions to the Tribunal.
The builder also submitted that the owner's submissions are contrary to the decision of the Court of Appeal in Field v Dettman [2013] NSWCA 147 where Preston CJ of LEC (with whom Beazley P and Meagher JA agreed) held at [54]: [54] The District Court was therefore correct in determining that Mr and Mrs Field's claim, that the Home Building Act mandated that monies they paid to Mr Dettman should be reimbursed, was misconceived (at [44]-[46]). The Tribunal was also not in error in following the decision in Alexander v Gregoriou [2010] NSWDC 15 where Acting Judge Hungerford found at [94] that "the legislative scheme itself of the Home Building Act does not entitle" recoupment of monies paid in contravention of provisions of the Home Building Act (at pp 21-22 of the Tribunal's decision of 20 October 2010).

[10]

Grounds 1 and 2 - Consideration

As we have noted above, the question whether a contract is an entire contract, or more precisely whether a party's obligation under a contract is an entire obligation in respect of which they have no entitlement to payment unless the entire obligation is fulfilled, is a matter of construction of the contract.
As the contract in this case was not in writing, in determining the meaning of the contract it is appropriate to have regard to the surrounding circumstances. It is also permissible to take into account the subsequent conduct of the parties to the extent that that indicates the parties' understanding of what they had agreed and therefore throws light on that agreement (County Securities Pty Ltd v Challenger Group Holdings Ltd [2008] NSWCA 193 at [21]-[27] and [45]; Masterton Homes Pty Ltd v Palm Assets Pty Ltd [2009] NSWCA 234 at [114]; Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603 at [325]; Lym International Pty Ltd v Marcolongo [2011] NSWCA 303 at [122]-[124]), or if it constitutes an admission by a party (Tomko v Palasty [2007] NSWCA 258 at [13]-[14]; Lym International v Marcolongo at [139]-[145]).
It was not in contest on the appeal that the contract between the owner and the builder in this case was a do-and-charge contract, that is a contract under which the builder was entitled to be paid by the owner the cost of materials and sub-contractors plus a margin, and an agreed rate for labour and supervision.
Although there is no general rule, in our view it would be an unusual case where a do-and-charge contract was an entire contract. The very nature of a do-and-charge contract suggests that the builder is entitled to payment for work done even if, for any reason, the contract is not completed. There is no reason in our view why a do-and-charge contract should be construed as one where the builder's obligation is "entire and indivisible".
As Finn J held in GEC Marconi Systems at [706]: If a contract or obligation is to be found to be entire notwithstanding that the contract or obligation provides for payment by instalments, the contract on its proper construction must indicate that the instalments are nonetheless conditional upon complete performance of the contract or obligation, that is, that they are refundable if this does not occur because of the default of the party that is to render the performance
We also accept the builder's submission that there was no specific agreement on the extent of the builder's obligations. Even the owner's evidence suggested that the contract was entered into at a time before the plans were finalised.
Furthermore, to the extent that it is permissible to take subsequent conduct into account, the subsequent conduct of the parties is not consistent with a belief on their part that the builder's obligation under the contract was an entire obligation and confirms our conclusion that the contract was not an entire contract.
The owner's response upon receipt of invoices was to review the invoices, negotiate any issues arising and then pay the invoice.
On at least one occasion, the owner adjusted the scope of works which the builder was required to carry out, through undertaking responsibility for the payment of concreting sub-contractors and in declining to pay any builder's margin in respect of that work.
The parties exchanged emails in October 2017 which are not consistent with a belief on either part that the contract was an entire contract. In particular, on 16 October 2017 the builder forwarded to the owner a letter setting out "Discussion points from the meeting carried out today" which specifically noted agreements: that the builder would continue to invoice the owner each Wednesday and continue to supply copies of tax invoices and "supporting documents of labour hours"; that the terms of payment would be 7 days from date of invoice; and that any disputes or questions regarding the invoice would be communicated to the builder by the following Monday.
The letter also recorded agreement: that the builder's margin would be 5% on all invoices billed through the builder; that the project management fee would be 6 hours a week at $90 an hour; that Brendan, a labourer employed by the builder, would be billed at $60 an hour; and that the completion date would be 30 November 2017 and liquidated damages would be payable at $250 per day after that day.
Finally, the letter stated that the builder would return to site on 17 October, on the proviso that a sum of $60,000 was paid by close of business on 16 October and $43,447.52 was paid the following morning. That letter was countersigned by Mr Crompton and the owner did not dispute that the letter reflected an agreement reached between the parties.
The content of the letter is not suggestive that the builder's obligation to the owner was an entire obligation.
Accordingly, as the contract was not an entire contract, in our view the Tribunal's approach to the amounts paid by the owner was correct. Those payments were made in respect of work that the builder had carried out, and were not open to reassessment in ascertaining the reasonable value of the work performed by the builder for which it had not been paid.
The appropriate question in considering the builder's quantum meruit claim was: what was the value of the benefit received by the owner in respect of the work the subject of the invoices issued by the builder which the owner had not paid. That was the approach adopted by the Tribunal, and we find no error in that approach.
That conclusion is sufficient to deal with Grounds 1 and 2 of the Notice of Appeal which must be rejected.

[12]

Grounds 3 and 4 - procedural fairness

The owner's submissions in respect of Grounds 3 and 4 argued that the builder had based its quantum meruit claim on the expert evidence of Mr Haslem, which the Tribunal had rejected, and had not made any claim to payment of a quantum meruit founded upon the invoices, but that the Tribunal, having rejected the evidence of Mr Haslem, had nevertheless determined the reasonable value of the work carried out by the builder by reference to the unpaid invoices and the rates agreed by the parties as recorded in the letter of 16 October 2017.
The owner submitted that the Tribunal's approach denied the owner procedural fairness, by failing to alert her to the possibility that the Tribunal might assess the builder's quantum meruit claim by reference to the unpaid invoices, and thereby failing to provide the owner with a fair and reasonable opportunity to respond to such an approach.
The builder responded that: 1. The builder's outline of submissions provided at the commencement of the hearing did advance an alternative quantum meruit claim based upon the unpaid invoices; and 2. The Tribunal had explicitly sought submissions from the parties on 12 May 2020.
The background to the latter response is as follows. On 12 May 2020, after the Tribunal had reserved its decision after the third day of hearing on 11 May 2020, the Tribunal emailed the parties asking that "both Counsel…include in their submissions what they suggest should be the approach of the Tribunal in relation to the quantum meruit claim" in the event the Tribunal accepted both the submission of the owner that the evidence of Mr Haslem should not be accepted, and the submission of the builder that the evidence of Mr Cork should not be accepted.
Clearly the Tribunal recognised that there might be a denial of procedural fairness if it determined the proceedings on a basis which had not been the subject of submissions from either party.
The builder filed written submissions on 15 May 2020. In those submissions the builder relied upon Mr Haslem's assessment of the cost of the "Unpaid Work" which was the work the subject of the unpaid invoices. The builder submitted that the High Court decision in Mann v Patterson Constructions did not require that the Tribunal regard the amount which the builder was entitled under the contractual arrangements as a cap on the value of the work performed.
Mr Haslem's second report applied the rates agreed in the contract, albeit that he assessed the value of the unpaid work at a higher level than the amount invoiced by the builder. Nevertheless it is clear from the builder's submissions and its reliance upon Mr Haslem's report, that the builder was asserting that the appropriate method of assessment of the value of the unpaid work was to apply the contractual rates.
In its submissions on the appeal the builder acknowledged that it had not responded directly to the Tribunal's email, apparently because its solicitor had overlooked the email. However, the builder submitted that "the owner's opportunity to make submissions was not dependent on the builder making submissions first."
The owner filed submissions on 31 May 2020. In those submissions the owner submitted that Mr Cork's evidence should be accepted and also noted (Owner's submissions paragraph 6.6) "there is long-standing authority that the agreement between the parties provides evidence of the value that the parties themselves put on the services performed" (citing Brenner v First Artists' Management Pty Ltd [1993] 2 VR 221 at [263]).
Under the heading "The Lay Evidence", the owner submitted that "this is a case where the Tribunal should give considerable weight to the evidence of the parties as to the value which they themselves put on the building services performed at the Property".
The owner then submitted that "at no stage did the parties contemplate that the value of the building services to be performed at the property would exceed $500,000" and referred to the estimates provided by the builder, the amount identified as the contract budget in the Home Owners Warranty insurance application submitted by the builder, and a draft contract provided to the owner by the builder in October 2017 which incorporated an estimated contract price of between $475,000 and $500,000.
The owner acknowledged in her submissions on the appeal that the builder's amended outline of submissions provided at the commencement of the hearing on 11 March 2020 included submissions regarding an alternative quantum meruit claim based upon the unpaid invoices. However, the owner submitted that there was no argument or analysis provided to advance this alternative claim. The owner further submitted that the builder's alternative claim was not pressed in any real way at the hearing or in the closing submissions.
However, in the owner's final written submissions to the Tribunal filed on 31 May 2020, the owner referred to the builder's submission that an order for the payment of a quantum meruit could be justified by reference to the invoices issued by the builder and "addressed that submission briefly for abundant caution". The owner submitted: 1. That the mere fact than an amount has been claimed by a builder does not of itself justify the conclusion that the claimed amount is fair and reasonable remuneration; and 2. That there was evidence indicating that the works were not managed properly and that therefore the amounts claimed by the builder for labour and project management could not be accepted at face value.

[13]

Grounds 3 and 4 - consideration

In our view, the Tribunal having specifically raised the question and invited submissions in relation to what approach the Tribunal should adopt if it did not accept the evidence of either Mr Cork or Mr Haslem, the owner cannot maintain a submission that she was not given an opportunity to deal with that issue.
As the builder submitted, a party who has been given an opportunity to be heard on an issue and has not taken that opportunity cannot complain that she has been denied procedural fairness. As Kirby J held in Allesh v Maunz (2003) 203 CLR 172 at [185]: Affording the opportunity is all that the law and principle require, the principle being that 'that a decision-maker, at least one exercising public power, must ordinarily afford a person whose interests may be adversely affected by a decision, an opportunity to present material information and submissions relevant to such a decision before it is made.
The builder also referred to Commissioner of Fire Brigades v Lavery [2003] NSWADTAP 60 (at [48]) where the Appeal Panel of the Administrative Decisins Tribunal held, (referring to the judgment of Kirby J in Allesh v Maunz): A party who has been given an opportunity to be heard on an issue and has failed to avail him or herself of that opportunity cannot complain that he or she has been denied natural justice.
In assessing the fair and reasonable value of the unpaid work performed by the builder, the Tribunal took into account the owner's submission that the work had not been properly managed and at least in part by reference to that submission, substantially reduced the builder's claims in respect of labour and supervision costs.
It cannot be said that the owner did not have an opportunity to address the issue or that the owner was unfairly taken by surprise by the Tribunal's reference to the content of the unpaid invoices in assessing the value of the work that the builder had not been paid for.
For these reasons Grounds 3 and 4 must be dismissed.

[14]

Grounds 5, 6 and 7 - the builder's challenge to the Tribunal's assessment of reasonable value

The owner acknowledged that the evidence before the Tribunal included time sheets recording the hours of labour charged in the unpaid invoices.
However, the owner submitted that there was "no material before the Tribunal which had any probative value to establish the reasonableness of the amount of labour hours for which the Tribunal awarded payment".
The owner further submitted that there was no material of probative value before the Tribunal to indicate that the reduction of 200 hours made by the Tribunal was any more appropriate than a reduction of 400 or 600 or 800 hours. The owner submitted that "the Tribunal was engaging in guesswork rather than any rational or principled decision-making process".
The owner also submitted that the Tribunal erred in adopting the approach of "doing the best it could" in circumstances where "the fair and reasonable value of labour services which the owner received the benefit of was not inherently uncertain or incapable of reasonably precise calculation". In particular the owner noted that the builder had sought to establish the value through the evidence of Mr Haslem which had been rejected.
The owner relied upon the comments of the Appeal Panel in Gallagher v Masters Installation Pty Ltd [2017] NSWCATAP 117 at [51]: In Amann, Mason CJ and Dawson J at page 83 stated: The settled rule, both here and in England, is that mere difficulty in estimating damages does not relieve a court from the responsibility of estimating them as best it can. Indeed, in Jones v Schiffmann Menzies J. went so far as to say that the 'assessment of damages … does sometimes, of necessity involve what is guess work rather than estimation." Where precise evidence is not available the court must do the best it can. And uncertainty as to profits to be derived from a business by reason of contingencies is not a reason for a court refusing to assess damages. The settled rule is subject to the proviso that the difficulty must not arise from the fact that the plaintiff has produced no evidence of loss or damage, or because the court has rejected the evidence which was put forward on loss caused by the breach. In either case the plaintiff will be restricted to a nominal sum (Carter on Contract [41-180]). The settled rule only applies where the facts and circumstances which the court is considering make it difficult for the court to estimate the damages suffered by a particular litigant. It does not apply where the party who has the onus of proof does not call evidence which is readily available to be placed before the Court, but the party does not do so (see Gerrard v Slamar [2004] WASCA 253 at [32] and [33]). In that case Heenan J with whom Steytler and Le Miere JJ agreed said at [33] - "To my mind, this is not a case where evidence attempting to quantify the loss from the vehicle being unavailable for that three month period was impossible to obtain nor inherently uncertain or incapable of reasonably precise calculation … ." At [34] his Honour continued: "In those circumstances I consider that this is a case where the respondent has failed to establish damages and that the court cannot estimate or guess in an endeavour to make good that omission.".
The builder responded that there was evidence to support the reasonableness of the Tribunal's assessment of the reasonable value of the labour provided by the builder. As the builder submitted, the Tribunal had a signed agreement as to the rates to be applied for further work, constituted by the letter of October 2017. The builder had provided by sworn evidence copies of the detailed invoices behind the claims in the unpaid invoices in respect of materials and other trades, and a detailed contemporaneous record of the time incurred in performing the work.
The builder further submitted that Mr Green had also by sworn evidence provided "a description of the underlying work for each of the unpaid invoices".
The builder acknowledged that the Tribunal had made a deduction from the hours claimed by the builder by reference to issues raised by the owner, that deduction being approximately 20% of the total hours claimed. The builder submitted that the Tribunal was more than fair to the owner in discounting the labour costs claimed by the builder by 20%.
The owner relied upon the decision of the Appeal Panel in Suecha Pty Ltd v VSD Glass & Timber Pty Ltd [2020] NSWCATAP 170. In that case an Appeal Panel upheld the award of a quantum meruit in respect of the provision of kitchens and other items, where the evidence before the Tribunal included invoices which recorded the number of items provided and a quote provided by the builder which was evidence of the agreed value of those items. The Appeal Panel overturned the award of a quantum meruit in respect of other items because, although there were invoices recording the number of items provided, there was no evidence of any agreed contract price which might provide evidence of the value of those items.
The owner submitted by reference to that decision that the Tribunal should have rejected the builder's claim to a quantum meruit at least in respect of the claim for labour and supervision costs.
The owner also referred to the statement of a Senior Member of the Tribunal in Masterglass Facades Pty Ltd v Pollack [2017] NSWCATCD 45 at [138] that "the approach often taken by contractors in seeking to prove a quantum meruit valuation, based on a box of invoices and an adding machine is misconceived".
As the builder submitted, that is not a fair description of the evidence before the Tribunal in this case.
We are not persuaded that the Tribunal erred in awarding a quantum meruit based upon the time recorded in the invoices (which was supported by time sheets) and the agreed rate for that time.
Once there is evidence to establish that a specific number of hours of labour has been provided in relation to a job, and that the parties have agreed an hourly rate for the provision of labour, there is, prima facie, sufficient evidence of the reasonable value of the work performed. We do not accept that there is automatically an onus on a builder to lead additional evidence that the number of hours incurred was a reasonable number of hours to carry out the work for which a reasonable value is claimed.
There may be circumstances on which such evidence would be necessary. Each case must depend on its facts.
In circumstances such as this, where there is evidence which might be thought to suggest that there has been inefficient management of the work or inappropriate inclusion of travelling time resulting in unwarranted or excessive labour charges, it is not inappropriate for the Tribunal to do the best it can to assess the extent to which the labour cost claimed exceeds what would have been reasonable. It is not inevitable in such circumstances that a claim to a quantum meruit must fail unless supported by evidence from a quantity surveyor or other independent expert to prove that the number of hours for which payment is sought was a reasonable number of hours for the work, the subject of the claim.
It cannot be said that the Tribunal made an error of law in assessing the reasonable value of the work in the way that it did. Nor are we persuaded that the Tribunal's conclusions in this regard were not fair and equitable or were against the weight of evidence.
Accordingly, Grounds 5, 6 and 7 must be rejected.

[15]

Ground 10 - the evidence of Mr Fitzhenry

The owner submitted that the Tribunal "erred in taking into account the evidence of Mr Fitzhenry as indicated in paragraph 140 of the reasons for the decision".
It is not disputed that the evidence of Mr Fitzhenry was not read.
At paragraphs [139] and [140] of the Decision, the Tribunal addressed the fact that the outcome of the Tribunal's decision was that the total cost to the owner of the building work would come to just over $788,000, which is substantially more than the estimate which had been provided by Mr Green.
The Tribunal noted at [139] "it is commonly the case that work done on a do-and-charge basis exceeds the original estimate". The Tribunal then referred to a number of issues which might have increased the cost: that the builder replaced a tiled roof with Colorbond, a stormwater draining alteration, a slab being built outside an al fresco dining area, changes to the eaves on the existing house, changes to windows and doors, a polished suspended slab on the deck, and an increase in the length and height of the retaining wall.
Paragraph [140] is as follows: The evidence of Mr Green should also be noted that when the request was made to raise the height of the upper level floor, he was not requested to indicate the expected cost consequences. Further, there was uncontested evidence from Mr Fitzhenry, a plasterer, who said the owner requested that he use a more expensive method.
In our view, it is clear on the face of the Decision, that the reference to the evidence of Mr Fitzhenry was inconsequential and not material to the Decision.
The Appeal Panel was informed that Mr Fitzhenry was a builder, who it was intended would carry out rectification work. The evidence from Mr Fitzhenry was irrelevant to the decision which the Tribunal reached which was that the fair value of the work, the subject of the unpaid invoices, was $152,579.65. The reference to Mr Fitzhenry's evidence was an addendum, following comments by the Tribunal which were directed only to recording that the overall outcome of the proceedings was not unexpected or so far out of the ordinary that it must be questioned. It did not constitute part of the Tribunal's reasoning which led it to the orders which it made.
It is clear in our view that, although the Tribunal does appear to have referred to evidence which was not before it, that error had no effect on the outcome of the proceedings, and for that reason Ground 10 must be rejected.

[16]

Conclusion and orders

Accordingly, all grounds of appeal having failed, the appeal must be dismissed.
We note that we have addressed above the matters relied upon by the owner as warranting a grant of leave to appeal. Each such matter has been rejected.
Accordingly, there is no basis for the grant of leave to appeal.
The appeal having been dismissed, the original decision will stand and there is no basis for challenge to the decision concerning the costs of the proceedings at first instance. Accordingly, the appeal in respect of the costs decision is also dismissed.
The parties agreed that the question of costs of the appeal should be the subject of submissions.
The amount in issue in the proceedings exceeded $30,000. Accordingly, rules 38 and 38A of the Civil and Administrative Rules 2014 (NSW) have effect in relation to the appeal and we do not need to find special circumstances before making an order as to costs. As the respondent is the successful party on the appeal, we find that the respondent is entitled to a costs order. We have therefore ordered the appellant to pay the respondent's costs as agreed or assessed.
However, the costs order will cease to have effect if either party makes an application for a different costs order, Any such application is to be made , within 14 days of the date of publication of these reasons.
The orders will be: 1. Leave to appeal refused. 2. Appeal dismissed. 3. The appellant is to pay the respondent's costs of the appeal as agreed or assessed. 4. If either party seeks a different costs order, order 3 above ceases to have effect and the following orders apply: 1. Any application for a different costs order, with evidence and submissions in support of the application is to be filed and served within 14 days of the date of these orders. 2. Any evidence and submissions in response to an application for a different costs order are to be filed and served within a further 14 days. 3. Any submissions filed in accordance with orders 4(a)) and 4(b) must address whether the question of costs can be determined on the papers and without a further hearing.

At a glance

Court

Decision date

Source

Judgment (17 paragraphs)

Parties

Legislation Cited (3)

Cases Cited (18)

Cited By (6)