Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Rice v JR & SD Farmer t/a Urban Bespoke Homes [2020] NSWCATAP 208 Hearing dates: 27 April 2020 and 15 May 2020 Date of orders: 13 October 2020 Decision date: 13 October 2020 Jurisdiction: Appeal Panel Before: T Simon, Principal Member P H Molony, Senior Member Decision: (1) Leave is granted to the appellants to appeal the decision made in the Commercial and Consumer Division of the Tribunal on 13 December 2018 with respect to the applications bearing the file numbers HB19/09932 and HB 19/19180. (2) Appeal allowed. (3) The decision made by the Tribunal on 13 December 2018 is set aside. (4) The applications are remitted to the Commercial and Consumer Division for reconsideration in full before a differently constituted Tribunal with such further evidence as the Tribunal may allow. (5) If any party seeks to make an application for costs of the appeal: (a) that party is to so inform the other parties within 14 days of the date of these reasons; (b) the applicant for costs is to lodge with the Appeal Panel and served on the respondent to the costs application any written submissions of no more than five pages on or before 14 days from the date of these reasons; (c) the respondent to any costs application is to lodge with the Appeal Panel and serve on the applicant for costs any written submissions of no more than five pages on or before 28 days from the date of these reasons; (d) any reply submissions limited to three pages are to be lodged with the Appeal Panel and served on the other party within 35 days of the date of these reasons; (e) the parties are to indicate in their submissions whether they consent to an order dispensing with an oral hearing of the costs application, and if they do not consent, submissions of no more than one page as to why an oral hearing should be conducted rather than the application being determined on the papers. Catchwords: APPEAL– discretion regarding admission evidence – Tribunal decision based on a mistaken view of relevant facts – refusal to admit evidence did not facilitate the just, quick and cheap resolution of the real issues in the proceedings – Tribunal decision to refuse admission of evidence due to improper form - s 36 and 38(4) Civil and Administrative Tribunal Act 2013 – appeal allowed. APPEAL- Building and Construction – home building - requirement for variations to be in writing and signed – variation not in writing not enforceable in contract – recovery for unenforceable variation on a quantum meruit – cost of variation calculated in accordance with the contract constitutes cap on what may be recovered as fair and reasonable cost of work. ADMINISTRATIVE LAW – appeal on a question of law – bias – actual bias – apprehended bias – decision not affected by actual or apprehended bias. Legislation Cited: Civil and Administrative Tribunal Act 2013 Civil and Administrative Tribunal Rules 2013 Home Building Act 1989 Cases Cited: BHP Billiton Ltd v Dunning [2013] NSWCA 421 Collins v Urban [2014] NSWCATAP 17 Ebner v Official Trustee in Bankruptcy [2000] HCA 63; 205 CLR 337 Goncalves v Bora Developments Pty Ltd [2020] NSWCATAP 9 Hannaford v Commonwealth Bank of Australia [2014] NSWCA 297 House v R [1936] HCA 40; (1936) 55 CLR 499 Li v Minister for Immigration and Multicultural Affairs [2000] FCA 19 Mann v Paterson Constructions Pty Ltd [2019] HCA 32 Michael Wilson & Partners v Nicholls (2011) 244 CLR 427; [2011] HCA 48 Minister for Immigration and Multicultural Affairs v Jia Legeng [2001] HCA 17; 205 CLR 507 Murlan Consulting v Ku-ring-gai Municipal Council [2009] NSWCA 300 Nakad v Commissioner of Police, NSW Police Force [2014] NSWCATAP 10 Paraiso v CBS Pty Ltd [2020] NSWSC 190 Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 Re JRL; Ex parte CJL [1986] HCA 39; 161 CLR 342 Thompson v Chapman [2016] NSWCATAP 6 Watkins v Woolworths Limited [2017] NSWCATAP 125 Xu v Jinhong Design & Constructions Pty Ltd [2011] NSWCA 277 ZFJ v ZEY [2018] NSWCATAP 76 Texts Cited: JW Carter, Carter on Contract, (Lexis Advance) Category: Principal judgment Parties: Spencer Rice (First Appellant) Elisha Rice (Second Appellant) JR & SD Farmer t/a Urban Bespoke Homes (Respondent) Representation: Solicitors: Whitehead Cooper Williams (Appellants) Respondents (Self Represented) File Number(s): AP 19/57670 Publication restriction: None Decision under appeal Court or tribunal: Civil and Administrative Tribunal Jurisdiction: Consumer and Commercial Division Citation: N/A Date of Decision: 13 December 2019 Before: S F Smith File Number(s): HB19/09932 and HB 19/19180 REASONS FOR DECISION Background 1. Spencer and Elisha Rice (the homeowners) have lodged an internal appeal against a decision made in the Consumer and Commercial Division (the CCD) of the Tribunal on 13 December 2019 in which the Tribunal ordered that: Homeowner to pay builders $26,083.35. 1. The order related to a claim made against them by J R and S D Farmer trading as Urban Bespoke Homes (the builders) for the balance owing under a completed contract for renovations and extensions to the homeowners' home plus: 1. a provisional allowance adjustment of $13,697.05; and 2. variations totalling $4,433.85. 1. The proceedings also related to a cross-application made by the homeowners against the builders for compensation. The cross-application was essentially a defence and denial of the builders' claims. 2. Both applications were heard by the Tribunal on 28 October 2019. The builders were self-represented, and the homeowners were represented by Mr Williams, a solicitor. At the conclusion of the hearing the Member reserved his decision and made orders for the making of final submissions. 3. The Member provided written reasons for decision determining the dispute on 13 December 2019. While in his reasons, at [87], the Member said he was not upholding any of the homeowners' claims, he made no order dismissing their application. 4. The homeowners have now paid the builders the total amount owing under the order. The appeal 1. The homeowners' notice of internal appeal was lodged within time on 24 December 2019. They sought to rely on errors of law and sought leave to appeal under clause 12 of Schedule 4 of the Civil and Administrative Tribunal Act 2013 (NSW) (the NCAT Act). Leave was sought on the grounds that the homeowners may have suffered a substantial injustice because the Member's decision was not fair and equitable and was against the weight of the evidence. 2. The appeal was first listed for hearing by phone on 27 April 2020 but was adjourned because of difficulties communicating with the homeowners' solicitor, Mr Williams. During that hearing we noted that an issue in the appeal was whether the Member had erred when he allowed the builders to recover for variations which were not in writing, which the homeowners claimed was contrary to the recent decision of the High Court of Australia in Mann v Paterson Constructions Pty Ltd [2019] HCA 32 (Mann v Paterson). This is a decision concerning a domestic building contract in Victoria. We advised the parties that the effect the decision in Mann v Paterson in NSW had recently been considered in the Supreme Court of NSW, by Fagan J, in Paraiso v CBS Pty Ltd [2020] NSWSC 190 (Paraiso). We sought submissions from the parties with respect to this appeal in the light of the decision in Paraiso. 3. The appeal was next listed for hearing by phone on 15 May 2020, when the appeal was heard. Applicable legal principles – internal appeals 1. Section 80(2)(b) of the NCAT Act states: Any internal appeal may be made: (a) in the case of an interlocutory decision of the Tribunal at first instance—with the leave of the Appeal Panel, and (b) in the case of any other kind of decision (including an ancillary decision) of the Tribunal at first instance—as of right on any question of law, or with the leave of the Appeal Panel, on any other grounds. 1. Clause 12 of Schedule 4 to the NCAT Act states with respect to decisions made in the CCD that: An Appeal Panel may grant leave under section 80 (2) (b) of this Act for an internal appeal against a Division decision only if the Appeal Panel is satisfied the appellant may have suffered a substantial miscarriage of justice because: (a) the decision of the Tribunal under appeal was not fair and equitable, or (b) the decision of the Tribunal under appeal was against the weight of evidence, or (c) significant new evidence has arisen (being evidence that was not reasonably available at the time the proceedings under appeal were being dealt with). 1. In the present appeal the homeowners relied on errors of law and sought leave to appeal on the ground that the decision was not fair and equitable and was against the weight of the evidence. 2. In Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 at [13], the Appeal Panel said that the following are errors of law: 1. whether the Tribunal provided adequate reasons, which explain the Tribunal's findings of fact and how the Tribunal's ultimate conclusion is based on those findings of fact and relevant legal principle; 2. whether the Tribunal identified the wrong issue or asked the wrong question; 3. whether it applied a wrong principle of law; 4. whether there was a failure to afford procedural fairness; 5. whether the Tribunal failed to take into account a relevant (that is, a mandatory) consideration; 6. whether it took into account an irrelevant consideration; 7. whether there was no evidence to support a finding of fact; and 8. whether the decision was legally unreasonable. 1. The categories of errors of law that give rise to an appeal as of right, as discussed in Prendergast, are not closed. 2. The principles regarding whether leave to appeal should be granted under Cl 12, Sch 4 of the NCAT Act were set out by the Appeal Panel in Collins v Urban [2014] NSWCATAP 17 at [76]-[84]. …, it should be accepted that a substantial miscarriage of justice may have been suffered because of any of the circumstances referred to in cl 12(1)(a), (b) or (c) where there was a "significant possibility" or a "chance which was fairly open" that a different and more favourable result would have been achieved for the appellant had the relevant circumstance in para (a) or (b) not occurred or if the fresh evidence under para (c) had been before the Tribunal at first instance. As to the particular grounds in cl 12(1)(a) and (b), without seeking to be exhaustive in any way, the authorities establish that: (1) If there has been a denial of procedural fairness the decision under appeal can be said to have been "not fair and equitable" - Hutchings v CTTT [2008] NSWSC 717 at [35], Atkinson v Crowley [2011] NSWCA 14 at [12]. (2) The decision under appeal can be said to be "against the weight of evidence" (which is an expression also used to describe a ground upon which a jury verdict can be set aside) where the evidence in its totality preponderates so strongly against the conclusion found by the tribunal at first instance that it can be said that the conclusion was not one that a reasonable tribunal member could reach - Calin v The Greater Union Organisation Pty Ltd (1991) 173 CLR 33 at 41-42, Mainteck Services Pty Limited v Stein Heurtey SA [2013] NSWSC 266 at [153]. If in either of those circumstances the appellant may have been deprived of a "significant possibility" or a "chance which was fairly open" that a different and more favourable result would have been achieved then the Appeal Panel may be satisfied that the appellant may have suffered a substantial miscarriage of justice because the decision was not fair and equitable or because the decision was against the weight of the evidence. In order to show that a party has been deprived of a "significant possibility" or a "chance which was fairly open" of achieving a different and more favourable result because of one of the circumstances referred to in cl 12(1)(a), (b) or (c), it will be generally be necessary for the party to explain what its case would have been and show that it was fairly arguable. If the party fails to do this, even if there has been a denial of procedural fairness, the Appeal Panel may conclude that it is not satisfied that any substantial miscarriage of justice may have occurred - see the general discussion in Kyriakou v Long [2013] NSWSC 1890 at [32] ff concerning the corresponding provisions of s 68 of the CTTT Act and especially at [46] and [55]. 1. If we are satisfied that the appellant has made out one or more of the grounds for granting leave to appeal in clause 12 of Schedule 4, we must then consider whether we should exercise the discretion to grant leave to appeal under s 80(2)(b). In Collins v Urban the Appeal Panel considered several decisions concerning the granting of leave to appeal and summarised them as follows, at [84] – (1) In order to be granted leave to appeal, the applicant must demonstrate something more than that the primary decision maker was arguably wrong in the conclusion arrived at or that there was a bona fide challenge to an issue of fact: BHP Billiton Ltd v Dunning [2013] NSWCA 421 at [19] and the authorities cited there, Nakad v Commissioner of Police, NSW Police Force [2014] NSWCATAP 10 at [45]; (2) Ordinarily it is appropriate to grant leave to appeal only in matters that involve: (a) issues of principle; (b) questions of public importance or matters of administration or policy which might have general application; or (c) 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; (d) a factual error that was unreasonably arrived at and clearly mistaken; or (e) 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, BHP Billiton Ltd v Dunning [2013] NSWCA 421 at [20] and the authorities cited there, SAB v SEM [2013] NSWSC 253 at [8] and [9] and the authorities cited there, Nakad v Commissioner of Police, NSW Police Force [2014] NSWCATAP 10 at [45]; (3) In relation to an application for leave to appeal relating to a question of practice and procedure, the application is to be approached with the restraint applied by an appellate court when reviewing such decisions, especially if the application is made during the course of a hearing: BHP Billiton Ltd v Dunning [2013] NSWCA 421 at [21] and the authorities cited there. The Tribunal's decision 1. The Tribunal heard sworn evidence from Mr Farmer and from both homeowners, as well as from the plumber and electrician engaged in the works. 2. In his reasons for decision the Member wrote: 21 The first thing to note is that there seems to have been at some stage a "variations book" in which variations were itemised and signed as the work progressed. 22 This document seems to have been mislaid during construction and the home owners attribute responsibility to the builders. Indeed, Mr Williams for the Rices wanted me to draw a sort Jones v Dunkel adverse inference against the builders as a result of the disappearance. 23 The claim by the builders for variations amounted to $4,433.85. In the absence of the book already referred to, none was in writing, costed and signed by the parties. The effect of that is that the builders cannot sue on the contract for the amounts claimed. 24 The principal document in evidence on this issue was a statement of variations which was presented by the builders to the Rices for their consideration late in the works. Having perused it they seem to have agreed to some but others were annotated and queried. The result is that these contentious variations were before me … 1. The Member then went onto consider and assess the amounts claimed for four variations. They were: 1. Gyprock to exterior ceilings instead of Hardiflex. 2. Vanity area walls. 3. Fire place TV wall. 4. Materials handling charge. 1. The Member then continued: 36 The homeowners have disputed the contested variations as not being in writing as required by the contract. Before me and in his submissions Mr Williams asserted that it would be inappropriate to allow the builders to claim a quantum meruit in the circumstances of the case. 37 His submission was that the contractual requirement of writing had in effect displaced the discretionary quantum meruit remedy which might otherwise be available. I am unable to agree. 38 I put it to Mr Williams that the modern view of this remedy addresses unjust enrichment. So to deny a quantum meruit to the builders would have the unfair effect of giving the homeowner the benefit of the builders's (sic) work and materials for nothing. 39 The remedy is firmly established. Its presence in building cases is somewhere between common and ubiquitous. It is widely applied and the principles are dealt with by the High Court of Australia in Pavey & Matthews v Paul. 40 In a final submission Mr Williams directed me to a recent High Court case of Mann v Patterson Constructions. He said the case stood for the proposition that quantum meruit was not available. 41 On my reading the decision does not effect the revolution in building and construction law that Mr Williams claims for it. 42 The High Court decided that recovery on a quantum meruit was not available where the builders had a remedy under the contract. That is not the case here. To the extent that the variations were not in writing the builders could not recover under the contract. Quantum meruit was, and remains, his only avenue for recovery. 1. The Member then addressed the issue of whether the builders were entitled to recover provisional allowances for plumbing and electrical work, in sums significantly greater than those specified in the contract. The provisional allowance for plumbing was $4,500, but $12,262 was charged. That for electrical work was $5,500, but $9,131 was charged. Relevantly, the Member wrote: 43 The Exhibit 1 document [the statement of variations] informing Mr and Mrs Rice of the variations also addressed the provisional allowances. 44 … 46 No doubt it is irritating for a homeowner to be confronted with an invoice for a sum greatly exceeding the contractual estimate. 47 However the problem is that prima facie the work charged for has been done at a cost to the builders and the homeowner has received the benefit of it. So some valid reason must be asserted to resist payment. 48 In his search for reasons Mr Williams both from the bar table and in his written submissions was as inventive as he was brave. "mere guesses" 49 Mr Williams has dismissed the provisional sums in the quotation as merely guesses based on Mr Farmer's experience building new dwellings on greenfield sites. 50 It was put that they should have been based on formal quotes from subcontractors. If that were the case, they would not be provisional allowances but firm prices subject only [to] alteration if, for example, the scope of the work changed. 51 It is true that in the witness box Mr Farmer stated that his provisional allowance figures were based on proportions gained from his other building experience. 52 However the plumber retained on the project, Mr Danny Hopkins, gave oral evidence. I assessed him as an unsophisticated but truthful witness. Nothing in his evidence or demeanour suggested to me that he was bending his evidence to favour of a client builders (sic), a factor which Mr Williams urged me to take into account. 53 I asked Mr Hopkins what he thought of the estimate of $4500 in the allowance Mr Farmer made in his quote. His reply was to the effect that it was realistic for a normal job. The charge here was approaching 3 times the allowance but this seems to be because of extra work to which I will refer below. Loss of opportunity 54 At the hearing Mr Williams put to me that the loss suffered by Mr and Mrs Rice where provisional allowances are low is the loss of the opportunity to have the work done by others at a cheaper rate. 55 That is of little assistance to the homeowners if the loss cannot be quantified by the tribunal of fact from evidence. A claim for loss of opportunity must be supported by formal evidence. It is not sufficient to refer to the possibility of a cheaper price and thus a loss to the homeowner. Documenting charges 56 At several points it was put to me that the builders had failed to substantiate the charges he had made in particular as they related to provisional allowances and variations. 57 As against this Mr Farmer was adamant that his documentation set out every invoice, receipt etc supporting all invoices rendered by him. 58 It seems that Mr Williams found this inadequate. He did not put it this way but I inferred that he thought the builders should explain in detail why each charge rendered was fair and reasonable. 59 I think this is setting the bar too high. Once the subcontractor has done the work and raised an invoice, prima facie, it is payable. The party challenging it must show that the work has not been done or the charge is excessive or otherwise wrongful. A quantum meruit claim requires the charges to be fair and reasonable, consistent with the usual charges in the relevant trade for the work involved. 60 Nothing was put to me challenging the hourly rates charged nor the price of materials. 1. The Tribunal then considered the homeowners' submission that the builders, by failing to call meetings to discuss the variations, their cost, and the escalation in provisional allowances, as required by clause 2A of the contract, deprived the homeowners of their right to consider the variations and to have additional works done by others. The Tribunal found that while it "seemed" that there were no such meetings, it also "seemed" there was regular contact between the builders and the homeowners. The Member considered that the fact that meetings were not held under clause 2A pointed to a failure by both homeowners and builders. 2. Commencing at [65], the Member wrote: 65 No doubt Mr Williams would hold the view that no such meetings were requested by the Rices because, no relevant invoices having been issued, they did not appreciate that the project cost was well in excess of the headline contract price. 66 I note that the obligation to hold meetings binds both parties. So in not requesting the site meetings the Rices are as guilty of a breach of clause 2A as Mr Farmer. The meetings are suggested so that rude shocks as experienced by the Rices are avoided. So a prudent homeowner would request them even if all appeared to be sailing well. 67 If a breach is assumed then there is the question of loss. This matter has arisen with respect to variations and provisional allowances. 68 All that Mr Williams could put to me was that Mr and Mrs Rice had lost the opportunity to have the works outside the scope done by others at a cheaper price. … 70 It was implicit in the case put for the homeowners that the builders was … deliberately underquoting and engaging in conduct which amounted to price gouging. 1. Under the heading. "Extra Work, Variations and Provisional Allowances" the Member explained that the builders maintained that the increase in the contract price was because of choices made by the homeowners and unanticipated extra work. 77 It was put to me by Mr Williams but strenuously challenged by Mr Farmer that extra drainage works were required because the builders (sic) was disinclined to work under the existing dwelling and chose to re-route the pipe work. 78 In reply Mr Farmer stated (largely corroborated by Mr Hopkins) that there was insufficient fall to the sewer main to connect under the house as originally intended and another route was required. This was not only a longer pipe run but rock was struck and mechanical excavation became necessary. 79 Mr Farmer's evidence was that an excavator was used on site for two days to remove sufficient rock to lay the pipes. It can be seen that if that is the case costs would rise substantially. There is, for example, a machine hire invoice on file for a sum exceeding $2000. It is normal in building contracts, including this one, to note rock excavation as a chargeable extra. 80 It was open to the homeowners to fortify their case by showing that there was sufficient fall but no such evidence was put before the tribunal. 81 The builders put to me in evidence that there were other instances in the plumbing allowance and also in the electrical allowance where the owners had requested works or fittings over and above the original scope. Many of these were not contested. These works were charged for, from what I could see, at normal rates and. supported by invoices from subcontractors. 1. Before concluding his decision, the Member explained why he had refused to accept the statement of Mr Stuart Long in evidence: 82 At the hearing the solicitor for the homeowners sought to tender a statement of a Mr Long who had been a tradesman on site during construction. 83 I have only glanced at the document but surmise that it makes statements adverse to the builders. 84 Directions were made on 30 May 2019 requiring all documents to be relied on in the proceedings to be filed and served well before the hearing date. Directions such as this are made to ensure that the parties arrive at the hearing with complete knowledge of the case for the other party. 85 As a result I took the view that it was inconsistent with the interests of justice to allow the statement into evidence. 86 There is also the point that if Mr Long's statement were accepted into evidence at that late stage it would deprive the builders of the opportunity to give notice that Mr Long would be required for cross examination. This point was also specifically addressed in the directions made by the learned member on 30 May. 1. In summing up the Member said, among other things that – 88 So far as the builders's claim is concerned I am satisfied that all work charged for was done, that work outside the original scope was either specifically requested by the homeowners or reasonably necessary, was of benefit to them and the charges appeared to be fair and reasonable. Issues on appeal 1. At the commencement of the appeal hearing on 15 May 2020 the issues on appeal were refined. In summary, they raised the following questions for decision. 1. Whether the Tribunal erred in law by refusing to allow the homeowners during the hearing to tender and rely on a statement from Mr Long; 2. Whether the homeowners may have suffered a substantial injustice because the Member's decision not to admit Mr Long's evidence was not fair and equitable and/or was against the weight of the evidence; 3. Whether the Tribunal erred in law in allowing the builders to recover on a quantum meruit basis for variations which were not signed for and accepted by the homeowners; and, 4. If so, whether the Tribunal erred by requiring the owners to establish that the cost of variations was not fair and reasonable; 5. Whether the Tribunal erred in allowing the builders to recover for sums additional to the provisional allowances stated in the contract for plumbing and electrical works ; and, 6. Whether the Tribunal was biased (apprehended or actual). 1. It is convenient to deal with issues relating to the Tribunal's refusal to consider Mr Long's written statement first. The Tribunal rejection of Mr Long's statement 1. During the hearing, the homeowners sought to rely on the evidence of Mr Long, a sub-contract carpenter who had worked on the extension and renovation for the builders. Mr Long's statement, dated 15 May 2019, contained evidence germane to issues such as whether variations were requested by the homeowners, why the plumbing works cost more, and whether additional sums for provisional allowances were reasonably and necessarily incurred. It also provided evidence as to what had happened to the variations book that went missing. 2. In his reasons for decision the Member explained why the homeowners had not been allowed to rely on the statement of Mr Long. This appears to be because it had not been served in accordance with the timetable, and because the builders would be denied the ability to consider and cross examine Mr Long, if the statement were admitted. 3. The transcript of the proceedings before the Member contains no reference to the statement of Mr Long not being served in time. Indeed, before us, both parties agreed that the statement had been served in time, and that there was no complaint about short service made to the Member. Rather, the transcript (with which the parties agree) shows that there was an objection to the form of Mr Long's statement made by Mr Farmer, which the Tribunal upheld. This occurred early in the proceedings. before a short break was taken to enable the parties to discuss settlement. The transcript reads – Williams: Member, may I ask that during that 10-minute break, you have a read of Mr Stuart Long's statement only because it may clarify some matters you raised - TM: Who is Stuart Long? Farmer: Stuart Long used to work for me. He now has a relationship with – Williams: He was the leading hand. Farmer. He wasn't the leading hand; he was a carpenter that worked for me on the job. He was never a leading hand. When we came to the last directions hearing, Mr Blim said that all our evidence should be taken back, all the statements that were made by our witnesses had to be in the form of an affidavit or a stat dec so we went and got all our witnesses get stat decs and affidavits including Danny our plumber, ok. We did not receive a stat dec or an affidavit from Mr Long and he is not here today to back it up. Itself not a sworn statement. Mrs Farmer: It should be thrown out. TM: Well, if they were the orders that were made - Farmer: We have a sound recording of the - we paid the $44 and we got a sound recording of that. TM: Ok. Williams: May I hand you a copy of Mr Long's statement? TM: Well I don't know whether I want to see it? If it is the case – Williams: It is part of the respondent's case. TM: Well it hasn't gone into evidence yet and the question is whether it should get admitted into evidence if an order has been made that all witness statements be made on oath, and it isn't. Isn't that the end of it. Farmer: We went to extraordinary lengths to make sure that our ones - our stuff was on oath. I don't - TM: Generally speaking, this tribunal is not bound by the strict rules of evidence and so on, but if an order has been made to that effect - I mean if I did take it into evidence, what weight would it have? Not much. I think we will have to cross later in the morning. This case is listed for 4 hours. I can't see it finishing in 4 hours. Ok? Now give it your best shot to settle if you wouldn't mind and we see how we are going. 1. Later in the transcript of the hearing, at page 62, the following interchange occurred after the homeowners' evidence: Williams: We are relying on Mr Stuart Long's evidence. Member: Well, I have read it , and I am not sure that it helps all that much because it is – he says some things and Mr Hopkins has given sworn evidence which in part contradicts what the gentleman has said, Farmer: There are orders saying that they should be in stat dec of affidavit formation. Member: Well I don't think that any of Mr Williams' evidence has been in the form of a statutory declaration. Farmer: No, nothing. Williams: So, I don't intend to lead any more evidence. 1. We note that the builders maintain Mr Long was not available to be cross-examined when the Member refused to admit his statement, whereas the homeowner' solicitor insists he was. This is not a matter we are able to determine. 2. A review of the materials relied on by the builders shows that a statement (unsworn) from Mr Farmer, rebutting Mr Long's statement, was filed with the Tribunal on 29 May 2019, approximately five months before the hearing. 3. The reference to Mr Blim in the transcript, is a reference to General Member Blim, who made a series of directions on 30 May 2019 in the proceedings after Mr Long's statement was made and filed, and after Mr Farmer filed his statement in reply. The directions Mr Blim made did not state that all evidence had to be in the form of a statutory declaration or affidavit. In saying that, we accept that it is not unusual for members, when explaining what is necessary to unrepresented parties, to include that requirement. 4. On appeal, the homeowners submitted that the Member's rejection of Mr Long's statement resulted in evidence, vital to their case, not being considered by the Tribunal. This, they argued, was an error of law and also resulted in them suffering a substantial injustice because the Member's decision, not to admit Mr Long's evidence, was not fair and equitable and was against the weight of the evidence regarding the statement. 5. We agree with both of those propositions, regardless of whether the decision is viewed as one based on a failure to file and serve Mr Long's statement in time (as stated in the reasons for decision) or because the statement was in the wrong form (as appears to have been the case from the transcript). The decision resulted in Mr Long's evidence, which was relevant to the issues in dispute, not being considered by the Member in his reasons for decision. If Mr Long's statement had been admitted, and his evidence been accepted in preference to the builders' evidence, it would have likely resulted in a substantial reduction in the amount the homeowners were ordered to pay. 6. The rejection of Mr Long's statement because it had not been filed and served in accordance with Mr Blim's directions made on 30 May 2019 (as explained in the Member's reasons) was based on a misapprehension of the facts. This is so because the statement was filed before General Member Blim's directions, and five months before the hearing. There was no failure to file in time, and the builders was not taken by surprise as is evidenced by Mr Farmer's statement in reply filed 25 May 2019. 7. Further, if the rejection of Mr Long's statement was based on a defect in form (not being sworn) as appears to be the case from the transcript, it is similarly without merit. General Member Blim's written orders did not specify what form statements should take. Assuming, for the present, that Mr Blim did advise the parties that sworn evidence was required, we do not think the Member should have refused to accept the statement into evidence (as the transcript indicates) based on an error of form. This is so for several reasons: 1. Mr Long's statement was made some two weeks before the Mr Blim made his directions. Those directions, on their face, did not have retrospective effect and did not apply to Mr Long's statement. 2. The builders were aware of its contents. 3. s 36 of the NCAT Act makes it clear that the Tribunal is to eschew technicalities and matters of form, and is to ensure that it has necessary evidence before it, so that it can determine the real issues in dispute justly, quickly and cheaply. Section 36 relevantly provides: (1) The guiding principle for this Act and the procedural rules, in their application to proceedings in the Tribunal, is to facilitate the just, quick and cheap resolution of the real issues in the proceedings. (2) The Tribunal must seek to give effect to the guiding principle when it— (a) exercises any power given to it by this Act or the procedural rules, or (b) interprets any provision of this Act or the procedural rules. (3) Each of the following persons is under a duty to co-operate with the Tribunal to give effect to the guiding principle and, for that purpose, to participate in the processes of the Tribunal and to comply with directions and orders of the Tribunal— (a) a party to proceedings in the Tribunal, (b) an Australian legal practitioner or other person who is representing a party in proceedings in the Tribunal. (4) In addition, the practice and procedure of the Tribunal should be implemented so as to facilitate the resolution of the issues between the parties in such a way that the cost to the parties and the Tribunal is proportionate to the importance and complexity of the subject-matter of the proceedings. (5) … 1. s 38 instructs: (1) The Tribunal may determine its own procedure in relation to any matter for which this Act or the procedural rules do not otherwise make provision. (2) ... (4) The Tribunal is to act with as little formality as the circumstances of the case permit and according to equity, good conscience and the substantial merits of the case without regard to technicalities or legal forms. (5) … (6) The Tribunal— (a) is to ensure that all relevant material is disclosed to the Tribunal so as to enable it to determine all of the relevant facts in issue in any proceedings, and (b) … 1. In deciding whether to admit evidence or not the Tribunal is exercising a procedural discretion. The provisions of s 36 and 39 should guide the Tribunal in making such decisions, as should considerations such as the need to ensure procedural fairness and to require the parties to comply with Tribunal directions. In this case, there was no breach of the Tribunal's written directions and no injustice to the builders by allowing Mr Long's statement into evidence. The Member's decision to not allow Mr Long's statement into evidence (whether it be because the statement was in the wrong form or was not filed and served in time) was based on material errors of fact assumed by the Member, and was plainly unjust to the homeowners. 2. In House v R [1936] HCA 40; (1936) 55 CLR 499 Dixon, Evatt and McTiernan JJ explained - If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. See also Hannaford v Commonwealth Bank of Australia [2014] NSWCA 297 at [14] and Thompson v Chapman [2016] NSWCATAP 6 1. The Member's refusal to admit Mr Long's statement into evidence is, in the circumstances, an error of law. 2. The Tribunal's failure to consider Mr Long's evidence, to weigh and balance it, and to reach conclusions of fact having regard to it, require that decision of the Tribunal be set aside and that original applications be reconsidered in the CCD. Those are not issues properly addressed on appeal. 3. While that alone would be sufficient to allow us the determine the appeal, we think it important that we address the other issues raised by the appeal. 4. Having reached that conclusion with respect to error of law, it is not necessary for us to further consider whether leave to appeal should be granted with respect to the issues relating to Mr Long's statement. The building contract and the Home Building Act 1989 1. The building contract between the parties is a Master Builders Association NSW Residential Building Contract (BC4). The contract is dated 22 June 2018 and is for the construction of an extension to, and renovations to, the homeowners' home for the contract price of $282,150.00. This is "residential building work" within the meaning of the Home Building Act 1989 (NSW) (the HBA): see cl 2 of Sch 1 of the Act. 2. The builders have a building contractor license under Pt 3 of the HBA. 3. The contract price exceeded the amount of $20,000 prescribed by cl 5(1)(a) of the Home Building Regulation 2014 (NSW), made under the HBA. Accordingly, by force of ss 6 and 7(1A), ss 7-7E applied to the contract and required, among other things, that the contract and variations be in writing. 4. Relevant parts of those sections in force at the date of contract provided: 7 Form of contracts (other than small jobs) (1) A contract must be in writing and be dated and signed by or on behalf of each of the parties to it. … (4) If the contract price is known, it must be stated in a prominent position on the first page of the contract. (5) If the contract price […] may be varied under the contract, the contract must contain a warning to that effect and an explanation of the effect of the provision allowing variation of the price. The warning and explanation must be placed next to the price if the price is known. 7A Offence A person must not contract to do work under a contract unless the requirements of sections 7, 7AAA and 7E in relation to the contract are complied with. Maximum penalty: 80 penalty units in the case of a corporation and 40 penalty units in any other case. 7E Terms of contracts (1) A contract must include (and is taken to include) each of the terms set out in Part 1 of Schedule 2. A contract that contains a term that is inconsistent with a term set out in Part 1 of Schedule 2 is unenforceable to the extent of the inconsistency. 10 Enforceability of contracts and other rights (1) A person who contracts to do any residential building work, or any specialist work, and who so contracts: (b) under a contract to which the requirements of section 7 apply that is not in writing or that does not have sufficient description of the work to which it relates (not being a contract entered into in the circumstances described in section 6 (2)), or (c) in contravention of any other provision of this Act or the regulations that is prescribed for the purposes of this paragraph, is not entitled to damages or to enforce any other remedy in respect of a breach of the contract committed by any other party to the contract, and the contract is unenforceable by the person who contracted to do the work. However, the person is liable for damages and subject to any other remedy in respect of a breach of the contract committed by the person. 1. Clause 1 of Schedule 2 of the HBA requires that the following terms be included in a contract to which s 7 apples 1 Plans and specifications (1) All plans and specifications for work to be done under this contract, including any variations to those plans and specifications, are taken to form part of this contract. (2) Any agreement to vary this contract, or to vary the plans and specifications for work to be done under this contract, must be in writing signed by or on behalf of each party to this contract. 1. To properly understand some of the issues in dispute in this appeal it will be necessary to refer to the contract in some detail. It contains detailed provisions regarding the parties' obligations, including with respect to variations and provisional allowances. It sets out in Schedule 2.2 the labour rates for various trades for variations and fixes the percentage to be allowed for overheads and profits on variations at 20% (the builders' margin). 2. Schedule 2.4 makes provisions for the payments of eight differing progress payments at various stages of construction, commencing with a deposit of $28,125.00 and ending with a Final Payment of $14,107.50. 3. Prime Costs and Provisional Sums are dealt with in Schedule 2.11 of the contract which refers to an attached quotation dated 28 May 2018. The quotation includes the following provisional allowances – including GST: ▫ Rendering $10,000,00 ▫ Plumbing and Drainage $4,500.00 ▫ Electrical $5,500.00 1. Schedule 2.12 provides for a builders' margin for prime cost or provisional sums greater than the amount allowed of 20%. 2. Schedule 4 contains special conditions which include the following: (f) If an instruction to carry out work is verbally given by the owner we will confirm via email or text to which the owner must respond via email or text or work will cease or proceed as per the terms of the original contract whichever the builders deems appropriate. (g) !f the Builders asks the owner for an instruction or selection of a product it must be decided within 48 hours so as not to disrupt the flow of work. (h) From time to time decisions regarding the works may be required by the owner for work to continue if the owner for whatever reason is unable to make the decision the builders will make the decision based on knowledge arid experience for the best outcome. (i) The Scope of Works may change due to circumstances outside of the builder's control or verbal instructions given by the owner. The owner must at their earliest convenience confirm this by email or text for the work to be carried out. 1. Clause 2A of the Conditions of Contract provides: 2A. Joint Responsibilities of the Builders and Owner The Parties acknowledge the fact that the amount payable by the Owner under this contract and the time taken to carry out the work is subject to change for various reasons. As at the date of the contract the work detailed in Schedule 3 is work which can be carried out for the contract sum. The contract sum will be affected by the impact of choices made and work done under the provisional sum and prime cost allowances as well as the various other matters listed on the page 1 warning as to matters which may change the contract price. The Parties agree that: (a) they will conduct regular meetings in order to: (i) review the work done and money paid under the contract; (ii) review the work to be done and the amount payable for such work; and (iii) make decisions and choices regarding work under the contract covered by "allowances ' (see Schedule 2 point 11) and required by variations (see Clause 14) so that the work to be paid for by the Owner is consistent with the Owner's capacity to pay. (b) any adjustments to the work to be done under the contract are to be recorded in writing and signed by both parties. If such adjustment comprises a variation under Clause 14, the variation should be valued under that clause and the contract price adjusted accordingly. (c) they will act co-operatively and in a manner which progresses the works. (d) either party may require a meeting to be held within five (5) days of a written request for a meeting. Both parties must attend such a meeting. The party calling the meeting will identify issues to be covered at the meeting. The Builders will provide a report on the matters raised at the meeting within a reasonable time but no later then ten (10) business days after the meeting. 1. Clause 2(d) is concerned with the Owner's obligation to provide written notices under the contract to the builders. It provides that the Owner must: (d) provide written instructions to the Builders, where required, in a timely and proper manner so as to avoid delay to the works. This specifically relates to variations, directions and instructions in relation to work under the contract. If more than one Owner then any may provide the instructions required to the Builders on behalf of all. 1. Clause 14 of the contract is headed Variations – How to Deal with Changes to the Work. It provides: 14. Variations – How to Deal with Changes to the Work (a) The works may be varied by such things as: (i) execution of additional work; (ii) decreases in or omissions from the Works; (iii) changes in the character or quality of any material or work such as may be necessary due to the existence of a latent condition; (iv) changes in the levels, lines, positions or dimensions of any part of the works. (b) For the sake of clarity a variation is established by: (i) written instructions from the Owner or the Owner's representative; and/or (ii) the supply to the Builders of post contract details such as drawings; and/or (iii) the discovery of an otherwise unknown or latent condition; and/or (iv) an instruction issued by a relevant authority under clause 12 which alters the work done, the work to be done or requires adjustments to an existing situation or the work which was otherwise expected to be done. Accordingly a variation may, for example, result from such things as a request from the Owner, the choice made by the Owner dealing with latent conditions and complying with the requirements of an Authority (c) The Builders is not obliged to vary the Contract works or carry out any extra work unless the Builders consents. Such consent will not be unreasonably withheld. (d) (i) if the Builders agrees to undertake a variation requested or required by the Owner, the variation is to be detailed in writing and signed by the Owner (or the Owner's agent) and the Builders. Documents detailing the variation, including as appropriate, amended drawings or specifications, become contract documents. Builders to Advise Value of Variations (e) The Builders, within a reasonable time of receipt of instructions to execute a variation (ie an instruction signed by the Owner or Owners agent), is to notify the Owner, in writing, of the value of the variation. Less work due to a variation (f) Where the works are decreased or omissions from the works are made the cost of the work not now required is to be deducted from the contract price. Cost in this case means the actual expense or amount saved by the Builders because the work is now not required to be done. […]. Additional work due to a variation. (g) Where the work to be done is increased, the cost of the extra work is to be added to the contract price. The Builders can choose when and how often to claim payment for variation work and is not required to wait until the next progress claim. (h) Where the price has not been previously agreed to the extra work, the Builders may proceed with the variation work and the price to be paid for the work will be the cost as calculated in accordance with Sub-Clause (i) below, together with the allowance specified in item 1 of Schedule 2 for supervision, overhead and profit. (i) The cost referred to in Sub-clause (h) above, unless otherwise agreed, will be calculated as follows: (i) for work by the Builders' employees, the rates for such labour are those set out in item 2 of Schedule 2. … (ii) where the work or some part of it is executed by a sub-contractor, the cost to be paid under Clause (h) above is the amount properly paid or payable to the sub-contractor which will be established by provision of a proper tax invoice from the sub-contractor engaged to do the extra work; (iii) the price for materials is the cost of the materials to the Builders. … 1. Clause 15 of the conditions of contract deals with prime costs and provisional sums. It relevantly provides: 15. Prime Cost Items and Provisional Sum Work (a) … (b) Where prime cost or provisional sum items are included in the contract price and works, the Owner must furnish to the Builders written directions regarding the selection and supply of the work and or goods represented by such sums in sufficient time to ensure that no delay is occasioned in the progress of the works. The Builders should make any request for information about such work or goods in reasonable time and in writing. Actual amount spent in total Is different to the total amount allowed (c) If any part of each prime cost or provisional sum item is not expended then that amount is to be deducted from the contract price. The amount to be deducted is the difference between the amount allowed, excluding the builders' margin, and the amount actually spent or incurred to have the work done or item supplied. (d) in the event that the amount expended in respect of each prime cost or provisional sum item exceeds the amount allowed in Item 11 of Schedule 2 the Contract Price, the excess amount exclusive of GST, together with the percentage on the excess specified in Item 12 of Schedule 2. is to be added to the contract price. The price adjustment arising is to be properly adjusted to ensure that the correct amount of GST is paid by the Owner. (e) Normal trade discounts are to be allowed in favour of the Owner . However any cash discounts or discounts for prompt payment are to be allowed in favour of the Builders. In what circumstances can the builders recover for variations under the contract? 1. The special conditions in clauses (f), (g) and (i) of Schedule 4 are concerned with variations and increases in the cost of prime cost items. Clause (f) imposes an obligation on the builder to acknowledge verbal instructions to carry out work by text or email and for the homeowners to respond in a like manner. Clause (g) requires the homeowners to provide replies to the builders' request for instructions within 48 hours. Clause (i) requires the owner to confirm, by email or text, when the scope of works changes because of instructions given by the owner or matters outside the builder's control. 2. These special conditions do not fit comfortably with general condition 14 of the contract, relating to variations, and general condition 15, which is concerned with prime costs items and provisional sums. Cl 14 sets out how variations may occur and sets out specific and clear obligations on the parties with respect to how they are to be documented. Clause 15 contains similar provisions with respect to prime cost and provisional sums. 3. When seeking to reconcile these provisions one should construe the provisions under consideration in the context of contract as a whole and seek to give a common sense and ordinary meaning to the contractual provisions. These should not be unduly burdensome or impose unreasonable requirements on the parties: see the discussion in JW Carter, Carter on Contract, (Lexis Advance) at [12-030] to [12-050]. In the present case there is an issue, not addressed in submissions before us, as to whether the special conditions in clauses (f), (g) and (i) introduce obligations on the parties additional to those provided in the general conditions of contract, or whether the special conditions should be read as impliedly amending or in any way changing the obligations placed on the parties by general conditions 14 and 15. This is matter the Tribunal will need to consider on remittal. 4. In Paraiso Fagan J considered a question of interpretation with respect to an HBA (BC-4) contract, in which clause 14 of the contract, relating to variations, was in exactly the same form as clause 14 in the present contract. 5. That case was an appeal from an Appeal Panel of this Tribunal. 6. His Honour spent some time construing clause 14 in the light of the of the provisions of the HBA. Among other things, he found that: 1. A variation is established under clause 14(b) by: 1. express written instructions from the owner; or 2. the supply of post-contractual details such as drawings or specifications which alter or adjust the work. A variation may also be established by the discovery of an unknown condition or an instruction from a relevant authority (Paraiso at [33]). 1. The builders' consent to a variation is required for the parties to be contractually bound under cl 14 (c) (Paraiso at [34]), subject to the exception discussed below. 2. Clause 14(d) requires that the variation "be detailed in writing and signed by both parties." (Paraiso at [35 - 36]). 3. If both parties sign a variation which is detailed in writing, but are unable to agree the applicable amount, there is nonetheless a binding variation because cl 14 (f), (h) and (i) provide a means of calculation of the amount involved (Paraiso at [37]). 1. If the variation is not detailed in writing as required by cl 14(d) the "scope of works is not varied" (Paraiso at [39]). 2. To be enforceable against a homeowner a variation must be signed by or on behalf of the homeowner. Similarly, with respect to enforcement against a builder, the builder's signature is required. With respect to whether the builder's signature is required to enforce a variation against a homeowner Fagan J said in Paraiso at [40-41]: 40 … It would be an unreasonable and capricious construction to treat cl 14(d)(i) as having the effect that a sufficiently detailed written variation signed by the owner would not be contractually enforceable by the builders for payment where the work has been done, merely for lack of the builder's signature. ... 41 If a putative variation is detailed in writing and signed at least by the owner or owner's representative, the variation will have contractual effect under cl 14 and be enforceable as to payment, if the builders has performed the varied work. The parties may reach agreement on the sum payable for such a variation pursuant to cl 14 (h) or (i). The agreed amount will then be contractually enforceable. … 1. His Honour then emphasised the need for a written detailed variation to be signed by the homeowner to be enforceable, at [40]. But if there is no written detail signed by the owner there will be no variation capable of being contractually binding and enforceable. Hence there will be no contractual variation to which agreement as to an amount payable could attach as a term. In that situation the builders's only recourse would be a claim in restitution for a quantum meruit, provided that the owner's request for the additional work, although not detailed in writing or signed, is clear and has been acted on by the builders and provided that other prerequisites for a restitution reclaim are satisfied: Xu v Jinhong Design & Constructions Pty Ltd [2011] NSWCA 277 at [106] (Macfarlan JA, Basten JA agreeing). 1. His Honour then said that the task confronting a member of the Tribunal considering variations at first instance, was to ask the following questions: (1) Were the prerequisites in cl 14, particularly details in writing signed by the owner as required by sub-cl (d)(i), satisfied so as to give rise to a contractual variation for which the defendant could enforce payment? (2) For each variation found to have been contractually effective, was the price agreed under sub-cl (h) or (i) and if so in what amount? (3) For each contractually effective variation where a price was not agreed, to what amount is the defendant entitled upon application of the rates in item 2 of Sch 2 and the 15% margin in item 1? (4) For each claimed variation that was not contractually effective by reason of the prerequisites in cl 14 not having been satisfied, did the defendant carry out work additional to or different from that required under the contract and did this occur in circumstances that entitle the builders to restitution of a quantum meruit? (5) For each claimed variation that was not contractually effective but for which the builders is entitled to a quantum meruit, what is a reasonable payment for the varied or additional work, subject to a cap calculated at the rates and 15% margin in Sch 2, as discussed at [97]-[104] below? 1. Thus, if a purported variation is not effective, the builders cannot enforce the variation under the contract. The builders may, however, be able to claim for restitution of the benefit conferred on the homeowners by way of unjust enrichment, on a quantum meruit claim, if the elements of that claim are established: see Xu v Jinhong Design & Constructions Pty Ltd [2011] NSWCA 277. The decision with respect to whether there were enforceable variations 1. In the present case at par [23] of the decision, having discussed the missing variation book, the Member concluded that variations amounting to $4,433.85 were not "in writing, costed and signed by the parties". The builders, therefore, "cannot sue on the contract for the amounts claimed." The Member did not specify what those variations were. 2. Yet the Member then turned his attention to a document he described as the "statement of variations", which is a list of variations. This is a document dated 31 October 2018 which was signed by the homeowners and the builders. Mrs Rice claimed in her evidence that the homeowners were under duress when they did so, with the builders threatening to stop work if the list of variations was not signed: a matter the Tribunal did not refer to in its decision. 3. The statement is a typed list of fourteen changes to the works, some of which have values allocated to them, some of which have no costs, and two in which the cost is, "to be advised". In his decision the Member dealt with four contested variations: three of which were in the signed list of variations. They were (Italicized text was coloured red): 1. Provide gyprock with plastered joints in lieu of hardiflex with plastic joining strips to all outdoor and verandah ceilings including extra battens for fixing plasterboard to. Cost plus materials and builders margin.To be advised on final account 4. Reposition walls in vanity as per owners instructions and build shelf wall at WC. Total cost $450.00 8. Build wall to incorporate fireplace and TV. Costs plus materials and builders margin. To be advised on final account. The Member also dealt with a materials handling charge of $745.80, made by a supplier whose truck could not get on site as a variation. He allowed that claim plus the builders' margin as a variation. 1. Given that the nature of the work done, as specified in the list of variations, was not in issue and that both the builders and the homeowners had signed the variation list, the three items in contention from the list were clearly variations. Where the cost of the variation was agreed (as was the case with item 4) then the builders were entitled to recover the agreed amount. 2. Where the cost of the variation was not agreed, the builders were entitled to recover the cost calculated in accordance with clause 14(h) of the contract. This was the case with items 1 and 8 on the signed list of variations. In finding these variations payable, the Member did not consider whether the amounts claimed were calculated in accordance with clause 14(h) of the contract. 3. Instead, with respect to the vanity walls the Member found that the homeowners could not dispute the charge, "without evidence of unreasonableness." This not only applied the wrong test but put the burden of proving that the charge was unreasonable on the homeowners. What was required was that the builders demonstrate that the charge for each variation was (a) fair and reasonable, and (b) did not exceed the amount chargeable under the contract, calculated in accordance with clause 14(h). This required a calculation of the costs of the work done under clause 14(h)(1) and (2), plus the cost of materials, and then the application of the builders' margin. The failure to consider these matters was an error of law on the Tribunal's part. 4. With respect to the fireplace variation, the builders gave evidence that this was to the result of extra work required by the fire place installer. The builders claimed $1,316.66 for this additional work, and the homeowners argued that it was only worth $400.00. The Member's reasons indicate that there was a disagreement as to the scope of work initially required before the variation and found that the work finally done was necessary. In the absence of other evidence, the Member allowed the amount claimed by the builders. The Member did not consider: 1. whether the details of the variation were sufficient? 2. whether the amount claimed by the builders exceeded the amount recoverable under the contract, calculated in accordance with clause 14(h). 1. The Tribunal also considered the additional materials handling charge as a variation. This charge was not included in the signed list of variations. There was no evidence before the Tribunal that the homeowners had at any time agreed in writing to it as a variation. 2. Moreover, the builders had twice made it clear during the hearing before the Tribunal (at page 12 and 34 of the transcript) that they were abandoning the materials handling claim and did not wish to pursue it. The Tribunal was not required to consider it and determined a matter that was not before it. Provisional sums 1. The contract made provision for three provisional sums, inclusive of GST: ▫ Rendering $10,000,00 ▫ Plumbing and Drainage $4,500.00 ▫ Electrical $5,500.00 1. In the event, the rendering was undertaken for $10,000 by a contractor engaged by the homeowners, when the builders were unable to find a sub-contractor able to do the work at that price. The plumbing and drainage sum claimed by the builders on completion was $12,262, and $9,131 was invoiced for electrical works. Both were significantly above the provisional sums. 2. A difficulty when considering the provisional sums under this contract is that the there are no details describing what is included within the descriptions of "plumbing and drainage" and "electrical". While some details can be gleaned from a consideration of the plans, they do not assist in providing clear details and what was included in the scope of the provisional allowances. 3. There was a contest between the parties during the hearing with respect to the increase in plumbing and drainage charges. The original plan had been to hook up with the sewer line under the existing house. The builders' evidence was that, because of insufficient fall, another route was required. This required a longer pipe run. In addition, rock was struck during that pipe run, and mechanical excavation became necessary. This resulted in the increase in the provisional sum for plumbing and drainage. 4. The builders also gave evidence of the homeowners requesting other works and fittings that resulted in an increase in the provisional sums for plumbing and drainage, and for the electrical works. 5. In Paraiso Fagan J cautioned, at [146,] that when considering claims for provisional sums, if the claims are not within the original scope of works, then the issue of whether there is a binding variation changing the scope of the works to include that now claimed for, must be considered first. His Honour said; 146 If, contrary to my understanding, any of the plumbing items claimed by the defendant are for work beyond the original contract scope to which the provisional sum applied, the Tribunal on rehearing also would have to go through the steps listed at [43] above for each such claim. 1. The Member did not expressly consider whether the increases in the provisional sums were due to variations to the scope of works under the contract, and, if so, whether the variation had been made in accordance with clause 14 of the contract. 2. That the increased prices were due to variations is the logical conclusion from the evidence. 3. It is also clear that there were several changes to the scope of works which should have been implemented as variations, including the changes in the sewage line. The Tribunal's failure to consider whether the escalation in the provisional sums was a variation in the scope of the works is, in the light of the contractual provisions, an error of law. 4. The Member, without expressly saying so, appears to have treated these claims as not being made under the contract and, instead, determined that they could be recovered on a quantum meruit basis. The Member wrote: 88 So far as the builder's claim is concerned I am satisfied that all work charged for was done, that work outside the original scope was either specifically requested by the homeowners or reasonably necessary, was of benefit to them and the charges appeared to be fair and reasonable. 1. The Member did not say on what basis he reached those conclusions or outline the evidence upon which he relied. He did not consider whether variations in accordance with the contract had been made. Because the builders' right to recover the provisional sums was at the heart of the dispute before him, and the subject of evidence (to which he did not refer) and submissions from the homeowners regarding a failure to consult, the Member's failure to discuss the basis on which he reached these material conclusions, was an error. Recovery on a quantum meruit 1. In Goncalves v Bora Developments Pty Ltd [2020] NSWCATAP 9 the Appeal Panel considered the effect of the High Courts' decision in Mann v Paterson Constructions Pty Ltd [2019] HCA 32 (Mann v Patterson). The Panel said: 127 Since the hearing before us the High Court of Australia has published its judgment in Mann v Paterson Constructions Pty Ltd [2019] HCA 32, in which the Court considered the law with respect to the assessment of damages on a quantum meruit claim. While there is no simple majority emerging from the various judgments in that case, it is authority for the proposition that the amount owing under a building contract constitutes a ceiling on the amount recoverable by a builders in a quantum meruit claim relating to work performed under a contract. 1. In Paraiso, Fagan J considered the effect of the decision in Mann v Patterson in some detail, noting that the contract was one to which the Domestic Building Contracts Act 1996 (Vic) applies rather than the HBA. That Act contains requirements with respect to written contracts and variations that are not found in the NSW legislation. His Honour, nonetheless, found that the decision had some application in NSW and considered its interaction with the HBA. 2. At para 102 His Honour explained with respect to quantum meruit claims: 102 Gaegler, Nettle, Gordon and Edelman JJ have held [in Mann v Patterson] that contract rates are a ceiling upon reasonable remuneration where a builders' non-contractual quantum meruit claim arises from termination of a contract through fault of the owner. 103 It must follow in logic and in principle that contract rates will similarly be an upper limit on a quantum meruit claim that has arisen because the two parties did not sign written details of each variation, as required by cl 2A(b) and 14(d)(i) of the present contract. That circumstance may be viewed as equally the fault of both parties, or the fault of neither, or the fault of the defendant himself. The defendant should not have proceeded with any variation work without, for example, placing his signature on amended post-contract drawings and securing the plaintiff's signature, with a notation that execution of the altered work was agreed. 104 It is apparent from the Senior Member's reasons that he did not compare the amounts that he assessed as reasonable, for any of the variations, against the upper limit of a calculation in accordance with cl 14(h) and (i). For each variation under which additional work was carried out by the defendant's employees, the Senior Member should have determined what price would be arrived at by applying the labour and other rates listed in item 2 of Sch 2 of the contract and applying the 15% builders's margin in item 1. For each variation under which additional work was performed by sub-contractors, the Senior Member should have verified the amount of the sub-contractor's tax invoice and added the 15% margin to that. 1. In submissions, the builders argued that Mann v Patterson has no application in the present case because it is not a case where the contract was terminated through the fault of the homeowners. That argument must fail in the light of the Court's finding in Paraiso that a "similar limit" applies to claims arising from unsigned variations. 2. In the present case, the Tribunal appears to have found that the builders were entitled to recover for unsigned variations (including those relating to provisional sums) by means of a quantum meruit claim. On rehearing, the Tribunal will have to consider whether, in the light of the evidence then before it, an entitlement to recover on a quantum meruit basis is established. 3. In assessing the builders' entitlements to recover, the Member found that the charges made by the builders with respect to variations and additional provisional sums were "fair and reasonable". Following Mann v Patterson, the amount that the builders could recover on a quantum meruit is not simply what is fair and reasonable. There is a ceiling on what can be recovered, which is to be calculated in accordance with the pricing structure for additional work specified in clause 14 of the contract. The builders may claim less but cannot claim more than that amount. 4. In his written decision the Member noted that the homeowners had submitted that Mann v Patterson operated to prevent the builders recovering for unsigned variations, whether under the contact or in restitution. The Member correctly rejected that submission and found that, because variations not in writing could not be recovered by the builders in contract, "Quantum meruit was, and remains, his only avenue for recovery." 5. The Member, however, did not, when assessing the amount of restitution, have regard to whether the amount claimed by the by the builders exceeded the ceiling on the amount recoverable, which amount could be established by resort to the contract. 6. What the Member was required to do was to calculate the costs of the work claimed on a quantum meruit basis in accordance with clause 14(1)(h) of the contract. This would then be the ceiling on the amount recoverable by the builders. If the amount claimed by the builders was less than the ceiling, then the builders could claim that amount by way of restitution. If the amount claimed was more than the ceiling, the amount recoverable was limited to the ceiling. 7. By failing to ask itself these question the Tribunal fell into error and applied the wrong law. 8. On remittal, the Tribunal, if satisfied that the builders can claim on a quantum meruit basis for any variation and/or provisional sum, will have to consider those issues. That decision will require a consideration of all the evidence (including that of Mr Long) and a fresh consideration (in the light of the findings of fact) of the homeowners' submissions regard the builders failure to consult under clause 2A regarding some of the variations and of their not having the opportunity to procure other contractors as a result. 9. It would seem inevitable, following Mann v Patterson, that a builder seeking to recover for work done on a restitutionary basis will have to present evidence of the costs of the work and material involved, calculated in accordance with the applicable building contract. Bias 1. In support of their initial grounds of appeal the homeowners claimed that the Tribunal's decision was affected by "prejudgment bias". … Tribunal Member Smith … made it abundantly clear in the first few minutes of the Hearing, with his statement referred to at 4 above and other similar statements, that he was well versed in the building industry, as someone who had a prior career in it, and that he intended to consider any claims made by the builders as prima facie valid irrespective of the breaches by the builders of the Contract terms, unless the homeowners could prove, to his satisfaction, otherwise. The Reasons for Decision are littered with references to what the builders asserted, but few if any references to either the homeowners' assertions or statements during the hearing, and none to their written material on file, on record, prior to the hearing, all of which contradicted the builders' assertions Had Mr Long been permitted to give his evidence, as a former employee of the builders and independent witness, the balance of the evidence had to favour the homeowners on every contentious point. And the record shows, as does his Reasons for Decision, that Tribunal Member Smith proceeded to hear the matter and make his decision based on that "quantum meruit'' approach and we submit that in doing so he expressed clear and unequivocal bias in favour of the builders throughout. 1. At the appeal hearing we sought clarification from the homeowners' solicitor about what was meant by prejudgment bias: apprehended or actual bias based on pre-judgment? The answer was both. 2. In ZFJ v ZEY [2018] NSWCATAP 76 the Appeal Panel considered the law with respect to actual bias: The principles to be applied in determining whether a decision maker demonstrates actual bias are explained by Gleeson JA in the NSW Court of Appeal's decision in Reid v Commercial Club (Albury) [2014] NSWCA 98. His Honour set out the relevant principles as follows: A finding of actual bias is a grave matter: Sun v Minister for Immigration and Ethnic Affairs (1997) (Sun v Minister) 81 FCR 71 at 127 per Burchett J. Authority requires that an allegation of actual bias must be distinctly made and clearly proved; that such a finding should not be made lightly; and that cogent evidence is required: South Western Sydney Area Health Services v Edmonds [2007] NSWCA 16 at [97] and the authorities there cited. Where the issue is actual bias in the form of prejudgment, the appellant had to establish that the primary judge was "so committed to a conclusion already formed as to be incapable of alteration, whatever evidence or arguments may be presented": Minister for Immigration and Multicultural Affairs v Jia Legeng [2001] HCA 17; 205 CLR 507 at [72] per Gleeson CJ and Gummow J (Hayne J agreeing at [176]). See also Kirby J at [127]. As Gleeson CJ and Gummow J observed in that case at [71]: "The question is not whether a decision-maker's mind is blank; it is whether it is open to persuasion." In the same case, Hayne J noted at [185] the several distinct elements underlying the assertion that a decision-maker has prejudged or will prejudge an issue, or the assertion that there is a real likelihood that a reasonable observer might reach that conclusion. The first is the contention that the decision-maker has an opinion on a relevant aspect of the matter in issue in the particular case. The second is the contention that the decision-maker will apply that opinion to the matter in issue. The third is the contention that a decision-maker will do so without giving the matter fresh consideration in light of whatever may be the facts and arguments relevant to the particular case. His Honour observed at [186] that allegations of actual bias through prejudgment often fail at the third step he had identified. This was because notwithstanding whatever expression of preconceived opinions by the decision-maker, it does not follow that the evidence will be disregarded. The test of actual bias in the form of prejudgment requires an assessment of the state of mind of the judge in question: Michael Wilson & Partners Limited v Nicholls & Others [2011] HCA 48; 244 CLR 427 at 437 [33]. However, actual bias need not be confined to an intentional state of mind. Bias may be subconscious, provided it is real: Bilgin v Minister for Immigration and Multicultural Affairs (Bilgin v Minister) [1997] FCA 1022; (1997) 149 ALR 281 at 289-290 per Finkelstein J; Sun v Minister at 127 per Burchett J and 135 per North J. As Finkelstein J said in Bilgin v Minister at 290: "The wrong involved is the failure to decide a case impartially. Whether that failure was deliberate or not should be beside the point insofar as the validity of the decision is concerned." The circumstances in which actual bias can be demonstrated solely from the published reasons for decision must be considered to be rare and exceptional: SCAA v Minister for Immigration and Multicultural and Indigenous Affairs [2000] FCA 668 at [38] per von Doussa J, who explained: "... Reasons for decision reflect conclusions reached at the end of the decision making process, and if the decision is against the party complaining, the expression of adverse findings on credit and fact are an inevitable part of the expression of the reasons. The mere fact of adverse findings at the end of the matter give rise to no inference as to the state of mind of the decision maker before and whilst the matter was under consideration, nor of prejudgment of the issues that fell for decision. Even where it is possible to show that the adverse findings or some of them are contrary to the evidence or unreasonable, or that the reasoning process is hopelessly flawed, that without more is unlikely to demonstrate that the decision maker had embarked on the case with a closed mind, not open to persuasion. However, where the party alleging actual bias can point not only to an adverse judgment containing demonstrable error but also to conduct by the decision maker antithetical to that party's interests such as a hostile attitude throughout the hearing or ... an inference of actual bias by prejudgment might then be more readily drawn. But even then the circumstances are likely to be rare and exceptional that the combination of factors and circumstances will clearly prove actual bias ." [Citations omitted.] 1. In Li v Minister for Immigration and Multicultural Affairs [2000] FCA 19; (2000) 96 FCR 125, Drummond J at [42] said the following regarding actual bias: (a) Actual bias exists where the decision-maker has prejudged the case against the applicant, or has acted with such partisanship or hostility as to show that the decision-maker had a mind made up against the applicant and was not open to persuasion in favour of the applicant. (b) The emphasis is upon the state of mind which affects the decision-making rather than elements of the process of decision-making taken in isolation. (c) Proof of an intentional state of mind adverse to the party is not the only way of proving actual bias. Such bias may be subconscious, provided it is real. (d) It is not sufficient proof of actual bias to show that the decision-maker has expressed views adverse to the party's position at an early stage of the proceedings unless there is also proof that those views were incapable of being changed in the course of the proceedings. Though relevant to proof of actual bias, displays of irritation or impatience and the use of sarcasm by the decision-maker during the hearing are not, without more, generally sufficient to establish such bias, proof of which requires a finding on a question of fact, having regard to all the circumstances of the case (citations omitted). 1. The test as to whether there is a reasonable apprehension of bias is whether a fair-minded lay observer might reasonably apprehend that the decision-maker might not bring an impartial mind to the exercise of the power being exercised: Ebner v Official Trustee in Bankruptcy [2000] HCA 63; 205 CLR 337; Laws v Australian Broadcasting Tribunal [1990] HCA 31; 170 CLR 70; Minister for Immigration and Multicultural Affairs v Jia Legeng [2001] HCA 17; 205 CLR 507; Re JRL; Ex parte CJL [1986] HCA 39; 161 CLR 342; Michael Wilson & Partners v Nicholls (2011) 244 CLR 427; [2011] HCA 48 at [31]; and Watkins v Woolworths Limited [2017] NSWCATAP 125. 2. The test requires two steps: Ebner v Official Trustee in Bankruptcy [2000] HCA 63 at [8]; "First, it requires the identification of what it is said might lead a judge (or juror) to decide a case other than on its legal and factual merits. The second step is no less important. There must be an articulation of the logical connection between the matter and the feared deviation from the course of deciding the case on its merits." 1. See also Murlan Consulting v Ku-ring-gai Municipal Council [2009] NSWCA 300 at [43]. 2. We have read the transcript of the proceedings in this matter on 28 October 2019 carefully. We do not accept that the homeowners' view that the Member made it clear, "that he intended to consider any claims made by the builders as prima facie valid irrespective of the breaches by the builders of the contract terms, unless the homeowners could prove, to his satisfaction, otherwise." 3. It is clear from our reading that during the hearing the Member made a series of comments and rulings adverse to the homeowners. Principal among these were the decision to refuse to admit Mr Long's statement, and the Member's persistent comments that, if the builders could not recover for work done for the homeowners under the contract, then a quantum meruit claim could provide a means of recovery. 4. The disparity between the members oral and written reasons for refusing to admit Mr Long's statement into evidence is the cause of some confusion. While we have found that decision to be in error, it was not made in a hostile or antagonistic fashion, but appears to be a perfectly ordinary (if incorrect) decision made during the case. 5. It is important to note that the decision in Mann v Patterson was published only 19 days before the hearing, on 9 October 2019. There is nothing in the transcript that indicates that anyone involved in the hearing was, at the time of hearing, aware of that decision, or of its relevance to the proceedings. Therefore, the discussion of a builders' right to recover on a quantum meruit, when unable to do so in contract, reflected the Member's understanding of the law before Mann v Patterson was published. A regular theme of the Member's comments with respect to that issue was that the builders, on a quantum meruit, could claim the fair and reasonable cost of work. While, following the decision in Mann v Patterson, the contract price constitutes a ceiling on what is fair and reasonable, the Member's statements dealing with the builders' ability to claim on a quantum meruit, reflect the general understanding of the law before Mann v Patterson. The Member was, however, wrong when he indicated that the burden was on the homeowners to show that the additional charges were unreasonable. It was for the builder to prove that his charges were fair and reasonable. 6. The Member's comments regarding the builders' right to claim on a quantum meruit were also made in the context of proceedings in which the builders were not legally represented, and in which the Tribunal was bound to ensure that, "the parties to the proceedings before it understand the nature of the proceedings": (s 38(5)(a) NCAT Act). The Member's initial comments with respect to quantum meruit claims were made when pointing out the vulnerabilities of the homeowner's case, while trying to persuade the parties to settle. The Tribunal has an obligation to assist the parties to resolve the issues in dispute: see s 37 NCAT Act. 7. We are not persuaded that Member's comments with respect to recovery on a quantum meruit, or his decision not to admit Mr Long's statement demonstrate actual bias. Further, we are not persuaded in the context, that the Tribunal Member's conduct might cause a lay observer to conclude that the Member might not bring an impartial mind to his determination of the claims. 8. Similarly, we are not persuaded that that the Tribunal's subsequent rejection of the homeowners' submissions with respect to the effect of Mann v Patterson, in the reasons for decision, demonstrated actual or apprehended bias. The conclusion urged in those submissions, namely that the builders were prevented from recovering on a quantum meruit as a matter of law, was wrong in law and was rightly rejected by the Tribunal. We have already found that Member's failure to find that Mann v Patterson decided that there is a ceiling on what a builder may recover as being fair and reasonable on a quantum meruit was an error of law. 9. We are not persuaded that the Member's conduct evidenced actual or apprehended bias, or that the decision might give rise to an apprehension that the Member might not bring an impartial mind of his decision making. 10. It follows that that we are not satisfied that the homeowner's submissions with respect to actual and apprehended bias are made out. Conclusion 1. Having decided to allow the appeal we will: 1. set aside the decision on appeal; and 2. remit the applications to the CCD for reconsideration in full before a differently constituted Tribunal with such further evidence as the Tribunal may allow. Costs 1. In this case, as the amount in dispute on appeal is less that $30,000 (see rule 38 and 38A of the Civil and Administrative Tribunal Rules 2013 (NSW)), each party is to bear their own costs, unless the Tribunal finds that special circumstances exist: see s 60 of the NCAT Act. 2. Any application for costs should be made in accordance with the orders set out below. Order 1. The Appeal Panel makes the following orders: 1. Leave is granted to the appellants to appeal the decision made in the Commercial and Consumer Division of the Tribunal on 13 December 2018 with respect to the applications bearing the file numbers HB19/09932 and HB 19/19180. 2. Appeal allowed. 3. The decision made by the Tribunal on 13 December 2018 is set aside. 4. The applications are remitted to the Commercial and Consumer Division for reconsideration in full before a differently constituted Tribunal with such further evidence as the Tribunal may allow. 5. If any party seeks to make an application for costs of the appeal: 1. that party is to so inform the other parties within 14 days of the date of these reasons; 2. the applicant for costs is to lodge with the Appeal Panel and served on the respondent to the costs application any written submissions of no more than five pages on or before 14 days from the date of these reasons; 3. the respondent to any costs application is to lodge with the Appeal Panel and serve on the applicant for costs any written submissions of no more than five pages on or before 28 days from the date of these reasons; 4. any reply submissions limited to three pages are to be lodged with the Appeal Panel and served on the other party within 35 days of the date of these reasons; 5. the parties are to indicate in their submissions whether they consent to an order dispensing with an oral hearing of the costs application, and if they do not consent, submissions of no more than one page as to why an oral hearing should be conducted rather than the application being determined on the papers. ********** I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 13 October 2020