Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Jandson Pty Ltd v James [2021] NSWCATAP 274 Hearing dates: 23 November 2020 Date of orders: 15 September 2021 Decision date: 15 September 2021 Jurisdiction: Appeal Panel Before: K Rosser, Principal Member D Robertson, Senior Member Decision: 1. To the extent necessary leave to appeal is granted. 2. The appeal is allowed. 3. Orders made in proceedings HB 19/04425 are set aside. 4. Proceedings HB 19/04425 are dismissed. 5. Brett Anthony James and Liza Michelle James are to pay Jandson Pty Ltd's costs of the Tribunal proceedings and the appeal, on the ordinary basis, as agreed or assessed. 6. If either party seeks a different costs order, order 5 ceases to have effect and the following orders apply: (a) Any application for a different costs order is to be filed and served, supported by evidence and submissions not exceeding five pages in length, within 14 days of the date of publication of these orders. (b) Any evidence and submissions in response to the application for a different costs order not exceeding five pages in length are to be filed and served within 28 days of the date of publication of these orders. (c) Any evidence and submissions in reply not exceeding three pages in length are to be filed and served within 35 days of the date of publication of these orders. (d) Subject to the parties' submissions in respect of this issue, the Tribunal proposes to determine any application for a different costs order on the basis of the evidence and submissions provided. Catchwords: BUILDING AND CONSTRUCTION – Home Building Act 1989 (NSW) – Statutory warranties - Application made outside statutory warranty period for original contract – Whether new contract entered into or original contract varied – Offer and acceptance – Consideration – Forbearance to sue – Completion date Legislation Cited: Civil and Administrative Tribunal Act 2013 (NSW) Civil and Administrative Tribunal Rules 2014 (NSW) Environmental Planning and Assessment Act 1979 (NSW) Home Building Act 1989 (NSW) Home Building Amendment Act 2011 (NSW) Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: Butler v Fairclough [1917] HCA 9; 23 CLR 78; 23 ALR 62 Chapman v. Taylor & Ors; Vero Insurance Ltd. v. Taylor & Ors. [2004] NSWCA 456 Collins v Urban [2014] NSWCATAP 17 Garofali v Moshkovich [2021] NSWCATAP 242 Haider v JP Morgan Holdings Aust Ltd t/as JP Morgan Operations Australia Ltd [2007] NSWCA 158 Haller v Ayre [2005] QCA 224 Hendriks v McGeoch [2008] NSWCA 53; (2008) Aust Torts Reports ¶81-942 Kostas v HIA Insurance Services Pty Ltd (2010) 241 CLR 390 at 418 Kriketos v Livschitz [2009] NSWCA 96 Latoudis v Casey [1990] 170 CLR 534 Magann v The Trustees of the Roman Catholic Church for the Diocese of Parramatta [2020] NSWCA 167 Miles v NZ Alford Estate Co (1886) 32 ChD 266 Ormwave v Smith [2007] NSWCA 210 Oshlack v Richmond River Council (1998) 193 CLR 72 Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 R v Clarke [1927] HCA 47, (1927) 40 CLR 227 S & G Homes Pty Ltd t/as Pavilion Homes v Owen [2015] NSWCATAP 190 Suncorp Metway Insurance v Owners Corporation SP 64487 [2009] NSWCA 223 The Australian Gas Light Company v Valuer-General (1940) 40 SR (NSW) 126 Toplace Pty Ltd v The Council of the City of Sydney [2020] NSWLEC 121 Wilson Pastoral International Pty Ltd v George Street Steel Pty Ltd [2020] SACFC 54 Texts Cited: N/A Category: Principal judgment Parties: Jandson Pty Ltd – Appellant Brett Anthony James and Liza Michelle James – Respondents Representation: Counsel: M Klooster – Appellant P Bambagiotti - Respondent Solicitors: Michael Atkinson & Associates – Appellant Makinson D'Apice Lawyers - Respondents File Number(s): AP 20/35342 (2020/370991) Publication restriction: N/A Decision under appeal Court or tribunal: Civil and Administrative Tribunal Jurisdiction: Consumer and Commercial Division Citation: N/A Date of Decision: 17 July 2020 Before: GK Burton SC, Senior Member File Number(s): HB 19/04425 reasons for decision Introduction 1. This is an internal appeal under s 80(2) of the Civil and Administrative Tribunal Act 2013 (the NCAT Act) against a decision made in the Consumer and Commercial Division of the Tribunal on 17 July 2020. 2. The application to the Tribunal was a building claim brought by the respondents (the owners), against the appellant (the builder) under the Home Building Act 1989 (the HB Act). 3. For the reasons set out below, we have decided to allow the appeal and dismiss the owners' application. Background 1. The parties entered into a contract in March 2009, pursuant to which the builder constructed a residential building on the owners' property. The builder undertook the building works between March 2009 and mid-2010. The certificate of practical completion was signed on 8 July 2010. The owners paid the builder's final invoice on 11 July 2010 and possession of the building works was given to the owners on 13 July 2010. 2. The construction and certification of retaining walls adjacent to the side boundaries and front entry steps had to be completed before the final occupation certificate (FOC) could be issued. This work was excluded from the contract. The FOC was issued on 20 October 2010. 3. Subsequently, the owners complained about alleged breaches of the statutory warranties set out in s 18B of the HB Act, being water penetration into the stairwell at the basement slab level, resulting in water damage to the internal wall and floor finishes and water penetration to the soffit lining above the garage entry and to the north elevation wall. The builder was on site for periods of time between 2010 and 2016 or 2017. During that period gyprock in the lower level of the building was replaced on several occasions. The water penetration persisted, but the owners did not commence proceedings. 4. On 19 July 2017, the owners' solicitors wrote to the builder alleging breaches of statutory warranties and proposing that the builder undertake the scope of work set out in the owners' expert's draft report. After an onsite meeting on 15 August 2017 between the owners' expert and representatives of the builder, the builder rejected the owners' proposed solution. In a letter dated 22 August 2017 sent by email to the owners' solicitor, Mr Wells, on 24 August 2017, the builder proposed an alternative scope of work to rectify the water penetration. According to the Tribunal's reasons for decision at [10], the builder regarded the proposal as recording what had been agreed at the onsite meeting. 5. The builder undertook some of its proposed scope of work, the owners having agreed to grant access to the builder on 18 August 2017. On or about 27 September 2017, one of the owners told the builder's workers not to paint over what he saw as a mould-affected wall without replacing the gyprock. The builder's workers left the site and did not return. Tribunal proceedings and decision 1. On 28 June 2018 the owners commenced proceedings against the builder in the Local Court. The proceedings were transferred to the Tribunal on 23 January 2019 and listed for final hearing on 2 December 2019. Submissions closed on 25 May 2020. Reasons for decision were initially published on 17 July 2020, with a corrected version of the reasons published on 20 July 2020. 2. The owners' claim was that the builder was in breach of the statutory warranties set out in s 18B of the HB Act. The owners claimed that the rectification work undertaken by the builder in 2017 was defective and incomplete in that it did not resolve the issues that were the subject of complaint. 3. The owners' argument was that the builder's letter, conveyed to their solicitor Mr Wells on 24 August 2021, comprised an offer and acceptance and so constituted a separate contract from the original contract. They argued that the parties entered into the separate contract to resolve the owners' claim and associated threat of proceedings for breach of statutory warranties under the original contract. The owners claimed that proceedings for breach of statutory warranty in respect of the original contract would have been in time as at the date of the builder's correspondence. The builder disputed that this was the case. 4. In the alternative, the owners claimed damages for alleged misleading conduct in respect of alleged representations in the builder's correspondence dated 24 August 2017. This claim was brought under s 18 of the Australian Consumer Law (ACL), which is incorporated into NSW law by s 28 of the Fair Trading Act 1987 (the FT Act). The Tribunal dismissed this aspect of the owners' claim. The owners have not challenged the Tribunal's decision in that regard either by a cross-appeal or by a contention in the appeal proceedings. 5. In the reasons for decision, the Tribunal identified the issues in dispute as follows: (1) Were the arrangements for the remedial work separately contractual, so as to attract the statutory warranties under that distinct contract being a compromise of threatened litigation. The owners said that the scope of works in the builder's letter had the objective intent of resolving the water ingress problems and didn't, because they were done defectively and were not completed. The owners alternatively said that the original contract, which had the former seven-year limitation period for statutory warranties, had the limitation period run from when the work under the original contract (as varied in scope by the builder's letter) was complete, which occurred only when the builder left the site on 27 September 2017. (2) If so, were the proceedings out of time under HBA s 18E. (3) Liability of the builder for any defective or incomplete work. (4) Form of remediation of any defective or incomplete work as found, including whether by work order or money order and, if the latter, the amount. (5) Did the owners rely upon the alleged representation in the builder's letter for the purposes of their claim under ACL s 18. The alleged representations were that the scope of works in the builder's letter was adequate to address the water ingress problems and that the builder's work would perform the scope adequately with the remedial outcome that the scope was represented to give. 1. The Tribunal relevantly found that: * As at the time of the builder's letter, a claim for breach of statutory warranty would have been within time, with time running from 20 October 2010, being the date of issue of the final occupation certificate (FOC): Reasons [19] * The exchange of correspondence constituting the builder's letter and the acceptance of the offer in that letter "satisfied the required elements of a separate, new contract which provided a promise to undertake a defined scope of works, less than the owners' claimed scope under the original contract as supported by their expert's report, in the context of compromising an arguable claim for that scope under that contract as within time and potential litigation in respect of that claim": Reasons [24]. * The agreed scope of works "stood alone from, but in its purpose and scope was informed by, the defects under the original contract". The scope was not as the builder submitted "merely a promise to do what the builder was obliged to do (if the demand was within time) in order to effect remediation under the original contract. Nor was it "a temporary regime of mutual forebearance [sic] to sue while the builder investigated and attempted its smaller scope of works": Reasons [25] * A claim in respect of alleged incomplete and defective work within the new scope of works is a building claim: Reasons [26]. * Legislative intent is not circumvented if the parties agree to compromise on a scope of building works. The performance of those works attracts the statutory warranties available at the time that the compromise scope of works was agreed: Reasons [26]. * In the alternative, the scope of works in the builder's letter varied the scope of works in the original contract with the intent of varying water entry issues. The variation occurred on or about 24 August 2017 by the owners' acceptance of the builder's letter. Carrying out the varied works to remedy defects "was within the time period before contract completion under the original contract as varied and within time, which ran from when the builder left the site on 27 September 2017": Reasons [28]. * Under cl 29.3 of the original contract, the builder had to rectify defects that were its responsibility that were notified during the defects liability period. Work under the original contract in respect of the notified defect "was not relevantly complete until the builder's obligations under cl 29.3 were satisfied": Reasons [30]. * Practical completion under the original contract was reached on 20 October 2010 when the Final Occupation Certificate (FOC) was issued. This is because the building works were defined in cl 1.1 of the original contract as "the building works to be carried out, completed and handed over to the owner in accordance with [the] contract as shown in the contract documents including variations". Schedule 1 of the contract was part of the contract. Paragraph 11 of Schedule 1 specified that the builder was to obtain and pay for all planning and building approvals. The FOC is a planning and building approval because "it approves lawful occupation on the basis of conformity of the physical structure with preceding approvals": Reasons [32]. * The physical works are of no use to the owner to possess, even if physical possession of them is given by giving of keys, unless they are legally approved for occupation by the owner: Reasons [33]. * If the Tribunal erred in its preference for the owners' argument concerning the date of practical completion, then it would accept "the thrust of the owners' submission on the meaning of 'completion' under the contract to the extent that the builder's obligation under the contract were not complete at least until the owners received the FOC as part of planning and building approvals. That provides the date that work is complete within the meaning of the original contract on the proper interpretation of the contract and within the meaning of s 3B(1) of the HB Act": Reasons [35]. * The same events found to constitute a new contract by the owners' acceptance of the builder's letter could be characterised as a variation of the original contract. Such a variation must have a different completion regime from the completion regime of the original contract to which the s 3B of the HB Act would apply in due course when the varied scope was practically complete or the varied scope embodied an agreed scope for compliance of the builder's obligations under cl 29.3 of the original contract: Reasons [39] and [40]. 1. The Tribunal relevantly ordered: 1. Order that the respondent builder on or before 15 September 2020 carry out, with due care and skill and in compliance with all applicable plans, specifications, warranties, laws, codes and standards, the works specified in the report of Mr Darryl Pickering dated 26 March 2019 paragraphs 86 to 106 (or such amendments to the works in those paragraphs as are specified by a consulting structural engineer pursuant to paragraphs 91 and 93), and paragraphs 129 to 133 and 135 to the extent not already done. 2. Order that order 1 is conditional on the applicant owners granting, on reasonable written notice (by email or other forms of writing), reasonable access to the respondent to undertake the works the subject of order 1. Scope and nature of internal appeals 1. Internal appeals may be made as of right on a question of law, and otherwise with leave of the Appeal Panel: s 80(2) NCAT Act. 2. 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. 1. 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 on the basis that: 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). 1. In Collins v Urban [2014] NSWCATAP 17 (Collins v Urban), 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. 1. 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). 2. 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: (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. Submissions and evidence 1. In deciding the appeal, we have had regard to the following: * The Amended Notice of Appeal dated 27 October 2020; * The Reply to Appeal lodged on 17 September 2020; * The appellant's written submissions dated 27 October 2020; * The respondent's written submissions dated 23 November 2020; * The Tribunal's reasons for decision dated 17 July 2020 (with amendments made on 20 July 2021 pursuant to s 63 of the NCAT Act); * The procedural directions made at callover; * The Statement of Claim filed in the Local Court of New South Wales, subsequently transferred to the Tribunal by order made on 24 January 2019; * The appellant's bundle filed on 17 November 2020; * Written submissions made by the parties in the Tribunal proceedings, filed subsequently to the hearing; and * The oral submissions made on behalf of the parties at the hearing. Notice of Appeal 1. The Notice of Appeal was lodged on 14 August 2020, which is within the 28 day time period specified in cl 25(4) of the Civil and Administrative Tribunal Rules 2014 (the Rules). Grounds of Appeal 1. The builder relied on an amended Notice of Appeal dated 27 October 2021, although leave to amend the Notice of Appeal had not been granted. The grounds of appeal in the Amended Notice of Appeal are: 1. The Tribunal erred in finding that the letter sent by the builder on 24 August 2017 recorded what had been agreed at the onsite meeting on 15 August 2017 when there was no evidence to support such a finding. 2. The Tribunal erred in finding that the letter sent by the builder on 24 August 2017 was accepted by the owner when there was no evidence to support such a finding. 3. The Tribunal applied a wrong principle of law: 1. In concluding that the owners communicated acceptance of the builder's offer conveyed on 24 August 2017 by conduct that took place on 18 August 2017; 2. In concluding that the owners communicated acceptance of the builder's offer conveyed on 24 August 2017, when the only conduct that occurred on or after that date was that of the builder; 3. In concluding that the exchange of correspondence on 19 July 2017 and 24 August 2017 formed the basis of a new contract or variation to the original contract, when the builder's letter communicated on 24 August 2017 was a counter offer. 1. The Tribunal applied the wrong principle of law in concluding that there was sufficient consideration to form the basis of a new contract or variation of the original contract. 2. The Tribunal failed to provide reasons, or adequate reasons, to explain: 1. Why the owners' letter of 19 July 2017 was not an offer to forebear to sue; 2. To the extent that the owners' letter of 19 July 2017 was an offer to forebear to sue, why the principles enunciated by the High Court in Butler v Fairclough [1917] HCA 9; 23 CLR 78; 23 ALR 62 (Butler v Fairclough) were not followed. 1. The Tribunal erred when construing the terms of the original written contract entered into between the parties: 1. In concluding that the building works under the original agreement included obtaining a final occupation certificate; 2. In concluding that the building works under the original agreement is the physical work; 3. In concluding that s 3B(2) and (3) of the HB Act had no work to do. 1. The builder seeks leave on the basis that: 1. To the extent that the finding that completion of the building works occurred on 20 October 2010 is a mixed question of fact and law, such a finding was against the weight of evidence. 2. To the extent that the finding that the parties entered into a compromise agreement is a mixed question of fact and law, such a finding was against the weight of evidence; 1. The owners objected to the way in which the appeal was cast, submitting that the basis for jurisdiction must be contained in the Notice of Appeal. The owners submitted that the elements of the appeal could not be properly discerned and that in respect of the application for leave to appeal, the findings of fact that were challenged and the alternative findings contended for were not clearly identified. The owners cited Magann v The Trustees of the Roman Catholic Church for the Diocese of Parramatta [2020] NSWCA 167 (Magann) at [51] to [56] in support of this submission. Consideration Amended grounds of appeal and leave to appeal 1. We note the owners' objection to the way in which the grounds of appeal and the basis for leave to appeal have been articulated, and in particular the owners' reliance on Magann in this regard. In Magann, Bell P referred to Uniform Civil Procedure Rules 2005 (UCPR) r 51.36(2), which provides: Submissions raising any challenges to findings of fact must include a statement in narrative form (not exceeding 2 pages) at the end of the submission setting out only the following – (a) the findings challenged and supporting references to the judgment of the court below, (b) the findings contended for and supporting references to the transcript and other evidence in the court below. 1. We do not take it that the owners contend that UCPR r 51.36(2) applies in Appeal Panel proceedings. It clearly does not. The guiding principle that applies to the Tribunal's practice and procedure - that is, to facilitate the just, quick and cheap resolution of the real issues in the proceedings – is set out in s 36(1) of the NCAT Act. The duty of parties and their representatives to co-operate with the Tribunal to give effect to the guiding principle is set out in s 36(3). Principles relevant to the Tribunal's procedure are set out in s 38 of the NCAT Act. Relevantly, s 38(1) states that the Tribunal determines its own procedure and s 38(3) provides that 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". These provisions are as relevant to the conduct of appeals as they are to the conduct of proceedings at first instance. In addition to these provisions, NCAT Guideline 1 provides guidance in relation to issues relevant to Internal Appeals. The guideline does not contain any provision similar to UCPR r 51.36(2). 2. That said, the Appeal Panel expects legally represented parties to clearly identify and articulate questions of law and to identify and articulate the distinction between questions of law and issues in relation to which leave to appeal is required. As the Appeal Panel recently stated in Garofali v Moshkovich [2021] NSWCATAP 242 at [53]: … The NSW Court of Appeal has been critical of practitioners who do not file and serve clearly articulated grounds of appeal and timely written submissions that engage with the grounds of appeal in Whyte v Broch (1998) 45 NSWLR 354 ('Whyte'); Lorbergs v State of New South Wales (1999) NSWCA 54 and Lake Macquarie City Council v McKellar [2002] NSWCA 90 at [88]-[94]. In Whyte, Spigelman CJ referred to a pervasive "climate of complacency" regarding the failure of practitioners to file and serve timely outlines of submissions that engage with clearly articulated grounds of appeal. 1. In our view, while there are deficiencies in the Notice of Appeal and in the Amended Notice of Appeal, the submissions made on behalf of the builder make the basis for the appeal sufficiently clear. Moreover, it is clear that the owners understood the basis of the appeal and had a sufficient opportunity to respond to the grounds of appeal and the bases for leave to appeal pressed by the builder. Indeed, the owners' counsel provided comprehensive and helpful written and oral submissions addressing the grounds of appeal pressed at the hearing. Accordingly, we conclude that it is consistent with the Tribunal's obligation under s 36(1) of the NCAT Act to allow the Notice of Appeal to be amended. 2. Ground 1 of the Amended Notice of Appeal was not pressed. The Amended Notice of Appeal makes it sufficiently clear that the issues to be considered in the appeal are: 1. Whether there was evidence on the basis of which the Tribunal could find that the owners accepted the builder's offer (Ground 2); 2. Whether the Tribunal erred in applying relevant principles relating to contract formation in respect of offer and acceptance (Ground 3), or alternatively, whether the Tribunal's finding that the parties entered into a compromise agreement was against the weight of evidence (Ground 8); 3. Whether the Tribunal erred in applying the relevant provisions in relation to contract formation in respect of consideration, in particular whether the Tribunal failed to apply Butler v Fairclough (Ground 4); 4. Whether the Tribunal gave adequate reasons for its findings in respect of consideration (Ground 5); 5. Whether the Tribunal correctly construed the contract in finding that the construction works were complete on 20 October 2010, when the Final Occupation Certificate was issued (Ground 6), or alternatively, whether this finding was against the weight of evidence (Ground 7). 1. For practical purposes the appeal grounds can conveniently be dealt with as follows: 1. Whether the Tribunal made an error of law in respect of its findings concerning contract formation (Grounds 2 and 3) or whether leave to appeal should be granted on the basis that the Tribunal's findings were against the weight of evidence (Ground 8); 2. Whether the Tribunal made an error of law in respect of its findings in respect of consideration (Grounds 4 and 5); 3. Whether the Tribunal made an error of law in respect of its finding that the completion date of the works undertaken pursuant to the parties' 2009 contract was 20 October 2010 or whether leave to appeal should be granted on the basis that the Tribunal's finding was against the weight of evidence. (Grounds 6 and 7). Grounds 2, 3 and 8 1. The issues relevant to Grounds 2 and 3 are: 1. Whether the Tribunal applied the relevant legal principles in respect of contract formation in concluding that there was a new contract between the parties or a variation of the original contract and 2. Whether there was evidence which allowed the Tribunal to conclude that the owners had accepted the builder's offer. Tribunal's finding 1. At [24] of the Reasons, the Tribunal found that: Turning to the facts, in my view the exchange of correspondence constituting the builder's letter and the acceptance of the offer in that letter satisfied the required elements of a separate, new contract which provided a promise to undertake a defined scope of works, less than the owners' claimed scope under the original contract as supported by their expert's report, in the context of compromising an arguable claim for that claimed scope under the original contract as within time, and potential litigation in respect of that claim. The scope or works modified the owners' proposal in an arms-length negotiation. 1. At [27] – [28] of the Reasons, the Tribunal found that: 27. Although the scope of works varied from what the owners' expert propounded, the subject matter of that scope in the context of the dispute that it compromised indicated that its objective purpose was to resolve the water entry issues into the dwelling. Even if the builder did not accept that it was responsible for the water entry since its cause was from something outside the contractual responsibility (such as landscaping or inadequate maintenance) its director accepted (as already said) that he knew the builder was facing a claim that it was responsible and the only purpose so far as the parties were objectively concerned could have been to resolve the issue giving rise to that claim by the method proposed being the scope of works in the builder's letter, in compromise of the claimed method of remediation in the owners' scope of works supported by their expert in their letter of 19 July 2017. 28. Variation of original agreement: the owners also succeed in my view on their alternative argument. The argument varied in its expression, but not in its basic thrust, over the course of the pleading, in opening and in opening and closing submissions. It was that the scope of works in the builder's letter was a varied scope of works to the original contract with the intention of remedying water entry issues, even if the agreed scope was less than what the owners originally propounded as the method of required remediation of those issues. Such variation occurred on about 24 August 2017 by the owners' acceptance of the builders letter. Carrying out such varied works to remedy defects was within the period before contract completion under the original contract as varied and within time, which ran from when the builder left the site on 27 September 2017 under HBA s 18E(1)(d)(ii). Conclusion in relation to Grounds 2 and 3 1. Making, or impliedly making, a finding of fact, for which there is no evidence, is an error of law: Kostas v HIA Insurance Services Pty Ltd (2010) 241 CLR 390 at 418 [90] – [91]; The Australian Gas Light Company v Valuer-General (1940) 40 SR (NSW) 126 at 138. 2. In Haider v JP Morgan Holdings Aust Ltd t/as JP Morgan Operations Australia Ltd [2007] NSWCA 158, Basten JA (McColl JA agreeing), stated at [33]: "… Broadly speaking, error of law will arise in circumstances where a fact is found where there is in truth no relevant and probative material capable of supporting it, or an inference is drawn from a particular fact, which is not reasonably capable of supporting the inference: see Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 at 367 (Deane J), referred to by Gleeson CJ in Minister for Immigration and Multicultural Affairs v Rajamanikkam (2002) 210 CLR 222 at [25] and see Bruce v Cole (1998) 45 NSWLR 163 at 187-189 (Spigelman CJ)." 1. Leave is not required in respect of this ground. 2. Whether parties have entered into a contract requires the application of the relevant legal principles to the facts of the case. A misapplication of those legal principles gives rise to a question of law. This can be demonstrated either from the Tribunal's findings as set out in the reasons for decision, or because the ultimate result, associated with the facts that are expressly or impliedly found by the Tribunal, indicates that the Tribunal must have applied the wrong principle of law: see Chapman v. Taylor & Ors; Vero Insurance Ltd. v. Taylor & Ors. [2004] NSWCA 456 at [33]. 3. Contract formation is generally analysed through the rules of offer and acceptance. This may be expressed as an offer made by one party (the "offeror") of a willingness to be bound on certain terms accompanied by a communication by the other party (the "offeree") to the offeror of an unqualified assent to that offer ("acceptance"): R v Clarke [1927] HCA 47, (1927) 40 CLR 227. 4. However, a contract may exist in the absence of formal offer and acceptance. As Giles JA stated in Hendriks v McGeoch [2008] NSWCA 53; (2008) Aust Torts Reports ¶81-942 at [10]: 10 A contract need not be made by formal offer and acceptance, or by an overt course of negotiation. Entry into a contract can be found in the conduct of the parties, in what they said and did towards each other. 1. In Ormwave v Smith [2007] NSWCA 210 from [68], the NSW Court of Appeal referred to various authorities in respect of contract formation outside the formal offer and acceptance analysis: 68 … It is not necessary, in determining whether a contract has been formed, to identify either a precise offer or a precise acceptance, nor a precise time at which an offer or acceptance could be identified. As Stephen J explained in MacRobertson Miller Airline Services v Commissioner of State Taxation (Western Australia) (1975) 133 CLR 125 at 136; [1975] HCA 55: "This doctrine, of the formation of contracts by offer and acceptance, encounters difficulties when sought to be applied, outside the realms of commerce and conveyancing, to the everyday contractual situations which are a feature of life in modern urban communities." 69 In Brambles Holdings Limited v Bathurst City Council (2001) 53 NSWLR 153; [2001] NSWCA 61 Heydon JA (as his Honour then was) also observed that "[o]ffer and acceptance analysis does not work well in various circumstances". He referred to the decision of MacRobertson Miller Airline Services v Commissioner of State Taxation (Western Australia) at 136-140 by way of example. Heydon JA then undertook a detailed analysis of the authorities: see [71]-[80] of his Honour's judgment. 70 It is not necessary for present purposes to review all the authorities to which his Honour referred. However, the comments of McHugh JA (Hope and Mahoney JJA concurring) in Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110 at 11,117-11,118, are particularly apt. His Honour said: "It is often difficult to fit a commercial arrangement into the common lawyers' analysis of a contractual arrangement. Commercial discussions are often too unrefined to fit easily into the slots of 'offer', 'acceptance', 'consideration' and 'intention to create a legal relationship' which are the benchmarks of the contract of classical theory. In classical theory, the typical contract is a bilateral one and consists of an exchange of promises by means of an offer and its acceptance together with an intention to create a binding legal relationship … it is an error 'to suppose that merely because something has been done then there is therefore some contract in existence which has thereby been executed'. Nevertheless, a contract may be inferred from the acts and conduct of parties as well as or in the absence of their words. The question in this class of case is whether the conduct of the parties viewed in the light of the surrounding circumstances shows a tacit understanding or agreement. The conduct of the parties, however, must be capable of proving all the essential elements of an express contract. … Moreover, in an ongoing relationship, it is not always easy to point to the precise moment when the legal criteria of a contract have been fulfilled. Agreements concerning terms and conditions which might be too uncertain or too illusory to enforce at a particular time in the relationship may by reason of the parties' subsequent conduct become sufficiently specific to give rise to legal rights and duties. In a dynamic commercial relationship new terms will be added or will supersede older terms. It is necessary therefore to look at the whole relationship and not only at what was said and done when the relationship was first formed." (Citations omitted) 1. See also Suncorp Metway Insurance v Owners Corporation SP 64487 [2009] NSWCA 223 at [54], in which Sackville AJA also cited McHugh JA in Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110 at 11,117-11,118. 2. In Kriketos v Livschitz [2009] NSWCA 96 the Court reviewed the principles to be applied in determining the formation of a contract in the absence of conventional offer and acceptance. That case, which involved a dispute between a company's shareholders, turned on whether an exchange of three letters constituted a legally binding contract. At first instance, the Supreme Court found that a contract had been formed by the exchange of letters. However, on appeal the Court of Appeal concluded that no contract had been formed, applying the following principles: 1. The essential question is whether the exchange of the three letters must be seen to have constituted the parties' mutual communication of their "respective assents to being legally bound by terms capable of having contractual effect": [113]; 2. The question whether such mutual assent was communicated turns on whether "viewed as a whole and objectively from the point of view of reasonable persons on both sides, the dealings show a concluded bargain" [114]. The parties' conduct must reveal that the parties both have the same understanding of the terms of the agreement. 3. Acceptance of an offer can be inferred from the subsequent acts and conduct of the parties, including by their silence. However, for conduct to amount to implied acceptance of an offer, it must be "of such a character as necessarily to lead to the inference that the offer has been accepted".[117] 1. The Court concluded that whether one assessed the three letters, or read the three letters in their context, or read the three letters in their context and considered all subsequent conduct, there was no contract formed between the parties. 2. We have examined the evidence before the Tribunal in order to determine whether it was open to the Tribunal to conclude that the owners accepted the builder's offer and whether the correspondence dated 19 July 2017 which the owners' solicitor sent to the builder and the email the builder sent to the owners' solicitor on 24 August 2017, enclosing correspondence dated 22 August 2017, meant that the parties had a concluded agreement, when seen in the context of the site meeting on 15 August 2021 and access to the site granted to the builder from 21 August 2017. 3. The letter dated 19 July 2017 from the owners' solicitor relevantly stated: Offer Our clients are keen to resolve this matter as soon as possible. By reason of this, our client is prepared to provide you with an opportunity to attend the Premises to carry out the Remedial Work [set out in a draft expert report from BWR Australia prepared by the owners' expert Mr Pickering]. The Offer is conditional upon your agreement to the following matters: 1.the Remedial Work and anything required to perform the Remedial Work, will be undertaken at no costs [sic] to our clients; 2.prior to you commencing the Remedial Work, you provide evidence that you have public liability insurances and workers compensation insurance in place; 3.the Remedial Work must be completed by 31 August 2017; 4. You agree that Mr Pickering will inspect the Remedial Work and will cooperate in providing access to the Remedial Work; and 5. That you pay $4,750.00 to our client on account of legal and expert costs. In the event Mr Pickering certifies the Remedial Work has been carried out in a proper and workmanlike manner, our clients are prepared to provide you with a release in respect of further claims concerning the defects (other than defects of which our clients are not aware of at this time). …… (the Offer) Further conduct and acceptance It is the preferred position of our client that resolution of this matter occurs without the need for our clients to commence proceedings against you. To that end, we look forward to receiving your acceptance of the Offer by 5.00 pm, Friday 28 July 2017. Should it become necessary to commence proceedings, we put you on notice that we intend to rely on this correspondence with respect to the issue of costs. 1. A site meeting was held on 15 August 2017, which was attended by the builder's director (Mr Matheson), the foreman (according to Mr Matheson's witness statement dated 18 July 2019 this was Mr Jerochim), the owner's expert Mr Pickering and Mr Donovan, a structural engineer. Subsequent to the meeting, Mr Pickering sent an email to the owners' solicitor, relevantly stating: Site visit went well with the Builder and his foreman. Agreement was reached to rectify item 3.02 of the report as per my scope. Items 2.01, 2.02, 2.03, and 3.01 are essentially the same item. Agreement was reached to rectify the defect by adjusting the scope I had proposed slightly, as follows: 1.Clean out the whole of the cavity from the stairwell all the way to the front of the garage; 2 .Re-route the downpipe at the front of the garage so that it does not block the cavity outlet; 3. Water test the base of the cavity to ensure it drains; 4. Install flashing to the outside of the wall above ground level as per scope; 5. Repair all the water damage to timber framing and plasterboard as per scope; 6. Repaint affected areas per scope. The adjusted repair scope will avoid the necessity to cut the garage slab to install a new drain pipe from the cavity. …. 1. On 18 August 2017, the owners' solicitor notified the builder's director by email that Mr Jones consented to the builder having access on the following Monday. The builder commenced work on 21 August 2017 and continued to have access until September 2017. 2. On 24 August 2017, the builder's director sent an email to the owners' solicitor stating: I refer to your letter of 19 July 2017 and enclosed report from BWR Australia. As you are aware we met with Daryl Pickering on 15 August 2017 and have now had a chance to review our documentation. We agree with much of BWR's findings but unfortunately it appears that they were not supplied some of the construction details and therefore have arrived at some incorrect findings. As detailed in the attached response it appears that the owners or there [sic] landscapers have substantially contributed to the moisture problem in the basement / garage. Therefore we reject the "Offer" contained in your letter. With regards to points 1 to 5 set out in your letter we comment: 1. Jandson will carry out the works set out in our response of 24 August 2017 (copy attached) at its cost. Note that the majority of the work required will be the responsibility of the owners. 2. Attached is a relevant certificate of currency for insurance. 3. Darryl Pickering was not available to meet on site until 15 August 2017, making a completion date of 31 August 2017 unrealistic. We have commenced work on-site and expect to be complete by 8 September 2017. 4. As Jandson will not be carrying out the concealed works Daryl Pickering can inspect works carried out by Jandson when inspecting the works carried out by the owner. 5. As the owners or their contractors have caused the problem Jandson will not contribute to their legal expenses. We also note that the owners have not met their obligations under the Home Building Act 1989 Sect 18BA(1), (2) & (3). 1. Attached to this email is a letter dated 22 August 2017 from the builder addressed to the owners' solicitor in which the builder sets out observations concerning the report prepared by Mr Pickering – including what the builder accepted and what it rejected – as well as the scope of work the builder was prepared to undertake. 2. In his affidavit dated 10 April 2019, Mr James relevantly stated: 22. Based on the outcome of the 15 August 2017 site inspection and the Respondent's request for access to complete rectification works, I understood that an agreement was in place whereby the defects would be rectified. For that reason, I did not take any action to commence legal proceedings against the Respondent. 1. Mr James' affidavit does not refer to the builder's email of 24 August 2017 or the letter attached to that email. There is nothing in Mr James' affidavit to suggest that the owners had accepted the counter offer made by the builder in the 22 August 2017 letter, or that they even knew about that offer in the period from the time it was made until the builder left the site on 27 September 2017. 2. At the hearing before the Tribunal, Mr James relevantly stated under cross-examination: 1. He could not recall when he had seen Mr Pickering's 15 August 2017 email sent to his solicitor (Transcript page 42 line 41-45); 2. He retained his solicitor prior to 17 November 2016 (Transcript page 43 line 37); 3. He had no independent recollection of when he first saw the builder's letter dated 22 August 2017 (Transcript page 44 line 23. We note that the document to which Mr James was being referred is not specifically identified in the transcript other than by its page number in the hearing bundle. However, it is clear from Transcript page 44 lines 35 to page 45 line 3 that the document Mr James was being referred to was the letter dated 22 August 2017); 4. He understood from the builder's response to Mr Pickering's report that the builder disagreed with part of Mr Pickering's proposed scope of work (Transcript page 46 line 39-41 and page 47 lines 15-24). 1. In his witness statement dated 18 July 2019 at [23] to [24], Mr Matheson denied that any agreement was reached with Mr Pickering at the site meeting on 15 August 2017 and stated that the only work the builder agreed to undertake was that set out in the builder's letter dated 22 August 2017. 2. When questioned by the Tribunal during the hearing, Mr Matheson indicated that, of the items listed in Mr Pickering's 15 August 2017 email, the only item he had agreed the builder would do was at point 2; that is, "[r]e-route the downpipe at the front of the garage so that it does not block the cavity outlet". (Transcript page 73 line 12-13). This was confirmed in re-examination. (Transcript page 75 lines 3-8). 3. Mr Pickering gave expert evidence, but no lay evidence in relation to the site meeting on 15 August 2017 or his email to the owners' solicitor of that date. 4. The owners' solicitor Mr Wells did not give evidence. 5. In our view, it was not open to the Tribunal to find as it did at [24] of the reasons that "the builder's letter and the acceptance of the offer in that letter satisfied the required elements of a separate, new contract which provided a promise to undertake a defined scope of works…". 6. First, while the letter dated 19 July 2017 from Mr Wells to the builder clearly constituted an offer, the evidence before the Tribunal was not that the builder's email of 24 August 2017 or the letter dated 22 August 2017 attached to the email constituted an acceptance of the offer. On the contrary, the builder clearly stated in the 22 August 2017 letter that the offer contained in the 19 July 2017 correspondence was rejected. We conclude that the builder's 22 August 2017 letter and 24 August 2017 constituted a counter offer to the offer made on 19 July 2017. The counter offer was that the builder would undertake the scope of work set out in the 22 August 2017 letter. 7. Second, the evidence before the Tribunal that an agreement had been reached at the 15 August 2017 site meeting that corresponded with the scope of work set out in Mr Pickering's email to the owners' solicitor of that date was equivocal. On the one hand, Mr James' affidavit (at [22]) indicates that he understood that there was an agreement to rectify defects based "on the outcome of the 15 August 2017 site inspection and the [builder's] request for access to complete rectification works". However, Mr Pickering gave no evidence concerning this issue and while at the hearing Mr Matheson agreed that his offer reflected what was agreed at the 15 August meeting, in his statement he said that the only item the builder agreed to do was that set out at point 2 of Mr Pickering's email. 8. Third, while it was appropriate for the builder to address his counter-offer to the owners' solicitor, as noted above, Mr James' affidavit did not refer to that correspondence and he stated in cross-examination that he had no independent recollection of when he first saw it. The Tribunal could therefore not have been satisfied that the owners were aware of the builder's counter offer during the period in which the builder was undertaking work during August – September 2017. 9. Fourth, the evidence before the Tribunal did not support a conclusion that even if Mr Wells was authorised to accept offers on behalf of the owners, he had in fact accepted the builder's counter offer. In the absence of evidence that the owners were aware of the builder's counter offer at the relevant time or that the owners' solicitor was either authorised to accept offers on behalf of the owners or had in fact done so, it was not open to the Tribunal to conclude that the exchange of correspondence constituted acceptance in the conventional sense. 10. The owners submitted that the authorities show that "attempts to straight-jacket analysis of the creation of contracts to traditional forms are misconceived". There is obvious force in this argument. In the reasons for decision, the Tribunal did not cite authorities concerning contract formation. Nor did the Tribunal conclude that a new contract could be inferred from the conduct of the parties, as opposed to finding that a contract existed on the basis of offer and acceptance. This does not of itself mean that the Tribunal erred in concluding that there was a new contract between the parties or a variation of the original contract. 11. As we are not satisfied that it was open to the Tribunal to conclude that a new contract was formed or that the original contract was varied in the conventional sense, we have considered whether a contract could be inferred from the evidence before the Tribunal. This involves considering whether the conduct of the parties viewed in the light of the surrounding circumstances showed a tacit understanding or agreement. 12. We are not satisfied that this is the case. 13. First, insofar as conduct is concerned, the builder was granted access to the premises on the basis of the correspondence dated 18 August 2021 and thereafter undertook work. However, as noted above, it is clear from Mr James' affidavit that he understood that the builder was undertaking work as a result of an agreement reached at the on-site meeting held on 15 August 2017. The owners could hardly have allowed access for the builder to do the work set out in the counter offer set out in the builder's letter of 22 August 2017 prior to the builder determining what scope of work it was prepared to do and the counter offer being communicated to the owners' solicitor. There is no evidence from the owners' solicitor as to what his understanding was of the work the builder was going to undertake. The only clear evidence of conduct following the counter offer is the builder undertaking work. In our view the builder's own conduct cannot be evidence of a tacit understanding or agreement with the owners. 14. Second, given the lack of evidence of when the owners became aware of the builder's counter offer and the absence of evidence from the owners' solicitor, the fact that access continued to be granted to the builder after 24 August 2017 cannot, in our view, be taken as evidence of a tacit understanding or agreement with the builder. 15. Third, the fact that the builder undertook some (or even all) of the work he proposed to undertake in his counter offer does not mean that a contract between the parties can be inferred. The builder's conduct alone cannot reasonably lead to an inference that the parties had reached an agreement. 16. Overall, we conclude that, when viewed objectively as a whole, the dealings between the parties do not demonstrate that they had a concluded agreement. The evidence before the Tribunal demonstrated that the parties did not have the same understanding of the work the builder would undertake. Rather, the evidence demonstrates that the owners understood that the builder was undertaking the scope of work proposed by Mr Pickering and the builder understood that the scope of work was the scope that proposed in its counter offer. The evidence does not support a conclusion that the owners accepted the builder's counter offer (either directly or through their solicitor) or that a contract between the parties could be inferred from the subsequent acts and conduct of the parties, including by the owners' conduct. 17. In relation to this, the only relevant conduct of the owners was that they did not refuse continued access to the builder. However, in circumstances where there is no evidence that the owners were actually made aware of the counter offer at the time it was made and the parties' understanding of the work that was to be undertaken differed, the owners' conduct does not necessarily lead to an inference that the builder's counter offer had been accepted. The unexplained absence of evidence from the owners' solicitor further militates against the drawing of any inference in the owners' favour. 18. We conclude that there was no evidence from which the Tribunal could reasonably find that the correspondence dated 19 July 2017 and 24 August 2017 (the latter enclosing the letter dated 22 August 2017) constituted offer and acceptance of a new contract to undertake residential building work or a variation of the original contract. This is so, even when considered in the context of the site meeting on 15 August 2021 and access to the site granted to the builder from 21 August 2017. Further, we conclude that, even though the Tribunal did not explicitly consider the relevant principles relating to inferring a contract from the parties' conduct, a new contract or a variation of the original contract could not be inferred from the evidence before the Tribunal. 19. Grounds 2 and 3 are established. 20. In the event that we are wrong in concluding that Grounds 2 and 3 raise a question of law, or if the Tribunal's findings can be more properly characterised as involving a mixed question of fact and law, we would grant leave to appeal on the basis that the Tribunal's findings in relation to the creation of a new contract or a variation of the original contract are against the weight of evidence. As noted above, the evidence before the Tribunal indicated that Mr James understood that the builder had accepted the 19 July 2017 offer put to the builder by the owners' solicitor and had no independent recollection of when he saw the builder's counter offer. Even had the owners' solicitor been empowered to accept the builder's counter offer on behalf of the owners, there was no evidence before the Tribunal to suggest that he had done so. Further, in these circumstances, the preponderance of evidence does not lead to a conclusion that a contract between the parties could be inferred. We consider that leave should be granted in respect of this ground for leave to appeal, as we consider that the Tribunal's finding that there was a new contract or a variation of the original contract gives rise to an injustice to the builder which is reasonably clear. 21. We do not imply by our conclusion in respect of the above grounds of appeal that an agreement between a builder and an owner that the builder will return to undertake work to rectify defects after the end of the statutory warranty period will never amount to a new contract. If there is an agreement between the parties as to the scope of work to be undertaken, as well as sufficient consideration, a new contract could come into existence either through the application of conventional principles of contract formation or by implication. However, as we have found above, we do not accept that the available evidence in this case established a contract either on the application of conventional legal principles or by implication from the surrounding circumstances. At most, the evidence established that the builder was prepared to return to undertake a scope of work proposed by the builder, not a scope of work agreed with the owner. Grounds 4 and 5 – Consideration 1. These grounds concern the Tribunal's conclusions in respect of consideration. Given our conclusion in relation to grounds 2 and 3, it is not strictly necessary for us to consider these grounds. We have nevertheless done so for the same of completeness. 2. The issues relevant to Grounds 4 and 5 are: 1. Whether the Tribunal applied the correct legal principle in concluding that sufficient consideration existed provided that the owners held a belief in good faith that they had an arguable claim; and 2. Whether the Tribunal failed to provide reasons or adequate reasons for its decision in that regard. Tribunal's finding 1. At [20] of the Reasons for Decision, the Tribunal found: 20 All the more so, there was an objectively-supported good faith belief in the position that there was an arguable basis for the same conclusion which (as authority pointed to by the builder said) was the relevant test, not whether the arguable basis succeeded (or didn't) when tested: Haller v Ayre [2005] QCA 224 at [46] et seq. In particular, at [55] in that decision Keane JA with the support of the other members of the Court cited (via citation in earlier authority) Bowen LJ in Miles v NZ Alford Estate Co (1886) 32 ChD 266 at 291: It seems to me that if an intending litigant bona fide forbears a right to litigate a question of law or fact which is not vexatious or frivolous to litigate, he does give up something of value. It is a mistake to suppose it is not an advantage, which a suitor is capable of appreciating, to be able to litigate his claim, even if he turns out to be wrong. It seems to me it is equally a mistake to suppose that it is not sometimes a disadvantage to a man to have to defend an action even if in the end he succeeds in his defence; and I think therefore that the reality of the claim which is given up must be measured, not by the state of the law as it is ultimately discovered to be, but by the state of the knowledge of the person who at the time has to judge and make the concession. 1. At [25], the Tribunal relevantly stated: [25] …. Nor was it, on the expression of the builder's letter, a temporary regime of mutual forbearance to sue while the builder investigated its smaller scope of works…. Conclusion on grounds 4 and 5 1. In relation to the first issue, the builder submits that the Tribunal erred in failing to acknowledge that the decision of Miles v NZ Alford Estate Co (1886) 32 ChD 266 at 291 referred to in Haller v Ayre [2005] QCA 224 (Haller) involved a promise not to sue at all, which is different from a promise to forbear temporarily. Butler v Fairclough [1917] HCA 9 - 23 CLR 78 is relied on in support of this proposition. 2. The builder submits that in Haller at [55] the Queensland Supreme Court of Appeal acknowledged the distinction between a promise not to sue and a promise to forbear temporarily, setting out the four propositions enunciated in Butler v Fairclough: [55] It would appear that Bowen LJ [in Miles v New Zealand Alford Estate Co (1886) 32 Ch D 266 at 291] was speaking of promising not to sue at all. That is different from promising only to forbear temporarily. As Isaacs J pointed out in Butler v Fairclough: [27] "It must not be assumed - as the appellant's argument undoubtedly assumed - that a promise to abstain from issuing a writ is always a valuable consideration. The position may, I think, be classified thus:- (1) A promise not to sue for a limited period, definite or indefinite, is a valuable consideration where the substantive claim is one for which the other party is liable (Longridge v Dorville (5 B & Ald 117); Fullerton v Provincial Bank of Ireland ((1903) AC 309)). (2) A promise not to sue at all, that is, an abandonment of a substantive claim, is a valuable consideration, if there be either liability or a bonâ fide belief of liability (Longridge v Dorville (5 B & Ald 117); Miles v New Zealand Alford Estate Co (32 Ch D 266 at 290 - 291)). (3) A promise to abandon a suit in whole or part already commenced is a valuable consideration where there is a bonâ fide claim (ibid). (4) Mere temporary forbearance to sue where there is no liability is no consideration (Jones v Ashburnham (4 East 455 at 464); In re Pilet ((1915) 3 KB 519 at 526); Longridge v Dorville (5 B & Ald 117); Graham v Johnson (LR 8 Eq 36 at 44)), even if the claim be disputed (Edwards v Baugh (11 M & W 641))." 1. The builder submits that if the statutory warranty period started to run on 13 July 2010 (which is the subject of appeal grounds 6 and 7 and is considered below) the Tribunal applied the wrong principle of law because evidence before the Tribunal went no higher than a forbearance to sue. This is because: 1. The terms of the owners' solicitor's letter of 19 July 2017 referred to the commencement of legal proceedings on three occasions; 2. The builder understood the letter of 19 July 2017 to contain a threat of legal proceedings; and 3. The Tribunal found that there was "an associated threat of proceedings for breach of warranties under the original contract". (Reasons for decision, [17] and [18]). 1. In respect of ground 5, the builder submits that to the extent that the Tribunal determined that the letter of 19 July 2017 comprised a promise not to sue at all, the Tribunal was obliged to give reasons for so finding and did not do so. 2. The owners relevantly submit that: 1. There was no argument, evidence or finding that the forbearance was to be temporary. 2. The lapse of time would make the forbearance permanent in any event. 3. The law applicable to the category of temporary forbearance has advanced since 1917. The owners referred to Wilson Pastoral International Pty Ltd v George Street Steel Pty Ltd [2020] SACFC 54 (19 June 2020) per Kourakis CJ in this regard. (Wilson Pastoral) 4. Evidence was clearly available to the Tribunal to conclude that the forbearance was adequate and sufficient consideration. 1. In Wilson Pastoral, Kourakis CJ commented on the four propositions identified by Isaac J in Butler v Fairclough. In relation to the fourth proposition, Kourakis CJ stated as follows (citations omitted): 15. The fourth proposition is, however, inconsistent with both the second and third proposition if it suggests that forbearance is not good consideration unless it is shown that there was an actual liability and not a mere honest belief in the soundness of the claim. As I have observed, it is difficult to see why a delay in bringing an honest claim is any less consideration than a final compromise of it. 16 The ratio of the decision of the Court of Exchequer in Edwards v Baugh, which Issacs J cites in support of the fourth proposition, is a narrow one. The case was decided on the face of the pleadings, which alleged only that there were 'certain disputes and controversies' pending between the plaintiff and the defendant. It was not pleaded that the plaintiff genuinely believed he had a claim. Nonetheless, I acknowledge that Lord Abinger C.B. went further, stating that for a forbearance to be good consideration the plaintiff must prove that at least some amount, about which there was a dispute, was owing, which resulted in a compromise for an amount certain. 17 The decision in Jones v Ashburnham (Jones) does not support the fourth proposition. In that case, it was plain that, as a matter of law, the plaintiff must have known that he did not have a valid claim. Its forbearance to sue was therefore no consideration at all. The result in Jones can be explained on the basis that there can be no genuine belief in the soundness of a claim which, on its face, is undisputedly bad in law. 18. The case of In re Pilet concerned a deed of arrangement for the benefit of creditors. Two of the persons named in the schedule to the deed as creditors claimed debts which, before the execution of the deed, had been discharged by the earlier bankruptcy of the assignor in which they had refrained from proving their debts. No fresh consideration was subsequently given. The Court held that the trustee was entitled to obtain a declaration that the persons in question were not in fact creditors of the assignor, even though the trustee was a party to the deed in which they were so described. It was held that the insertion of the creditors in the schedule by the debtor was not in any way a new consideration given by the debtor, or an estoppel operating either against the trust funds or the trustee. Horridge J held that the creditors 'must be taken to have known what is perfectly clear law, that their debt had been discharged; and an agreement to give [further] time for [payment of] a discharged debt is not a valid consideration'.] It follows that the decision in In re Pilet does not support the fourth proposition. 18. Accordingly, I would respectfully hold that the fourth proposition should now be qualified. A promise to defer bringing a claim which is honestly made, on reasonable grounds, is good consideration. In any event, this case falls within the first and second of the propositions for the reasons given by Tilmouth AJ. 1. As is clear from the last sentence of the extract cited above, Kourakis CJ's views concerning the fourth Butler v Fairclough proposition are obiter dicta. That said, the reasoning is persuasive. 2. However, we do not need to come to any definitive conclusion about the continued applicability of the fourth Butler v Fairclough proposition because we are not satisfied that it applied in this case in any event. This is because, the owners' offer as expressed in the 19 July 2017 letter was for the builder to return and undertake the scope of work proposed by the owners' expert witness. It is sufficiently clear from the letter that, had the builder agreed to undertake that scope of work, the owners would not have sued. Under those circumstances, it cannot be said that the promised forbearance to sue was temporary. 3. Accordingly, we are not satisfied that Ground 4 is established. In relation to Ground 5, the Tribunal was only obliged to make findings of fact and give reasons in respect of those issues it considered to be material. The Tribunal dealt with the 19 July 2017 letter as one part of a course of conduct (which included the builder's correspondence) that led the Tribunal to conclude that there was an agreement between the parties. Furthermore, we note that in its post-hearing submissions the builder did not specifically cite Butler v Fairclough. Rather, it cited Haller, which the Tribunal in turn cited at [20] of the Reasons. The Tribunal was not obliged to give any more detailed reasons than were provided. Grounds 6 and 7 - Completion date 1. The issues to be considered in respect of these grounds are whether the Tribunal made an error of law in finding that the completion date of the works undertaken pursuant to the parties' 2009 contract was 20 October 2010 (Ground 6). This ground involves the proper construction of the contract, which is a question of law. Leave to appeal is not required in respect of Ground 6. 2. The issue in Ground 7 is whether leave to appeal should be granted on the basis that the Tribunal's finding concerning the completion date was against the weight of evidence. Tribunal's finding 1. In relation to completion date, the Tribunal stated: 32 The owners argued that practical completion under the original contract took place on 20 October 2010 when the FOC issued. I agree respectfully with the thrust of the owners' submission in this respect. The "building works" as defined in cl 1.1 of the original contract meant "the building works to be carried out, completed and handed over to the owner in accordance with this contract as shown in the contract documents and including variations" (emphasis added), "contract documents" meant the general and special conditions and the plans, the specifications and other documents specified in Item 14 of Schedule 1, Sch 1 headed "Particulars of Contracts" was part of the contract, Sch 1 para 11 said that the builder was the person to obtain and pay for all planning and building approvals (which was the default position if a party was not, unlike here, expressly named), clause 7.1 said that the party named in item 11 must obtain and pay for all building and planning approvals, which necessarily included them in the contract price, the FOC is a planning and building approval because it approves lawful occupation on the basis of conformity of the physical structure with preceding approvals, and cll 26.2(c) to 26.7 with cl 15 required the final progress claim out of the contract price to be demanded and paid on, and only on, practical completion. 33 Moreover, as a further but not necessary supporting basis for the conclusion, the first emphasised words in the definition of "building works" indicate that the physical works are of no use to the owner to possess, even if physical possession of them is given by giving of keys, unless they are legally approved for occupation by the owner. This last point is reinforced by the definition in cl 1.1 of "practical completion" which focuses on completeness except for matters not preventing use for usual purpose; such use cannot be present without the approval to occupy. 34 Finally, and as a further but not necessary supporting argument, the second emphasised words in the definition of "building works" arguably cover the written variation to the original contract constituted by the terms of the builder's letter, although I note that I have not relied upon this basis because the terms of cl 17 of the original contract for variations were not precisely followed or, arguably, apposite in some aspects. 35 If I am wrong on my preference for the owners' argument on practical completion date - because, for instance, it is accepted that the ordinary meaning of building works within the contract definition and within the definition of "practical completion" is the physical work, this is reinforced by "handed over" and governs "completion", or it is said that the owners did not use the mechanism in cl 26.3 to defer practical completion until issue of the FOC - then I would accept the thrust of the owners' submission on the meaning of "completion" under the contract (as opposed to "practical completion") to the following extent. The builder's obligations under the contract (irrespective of the definition and meaning of "building works", "date of practical completion" and "practical completion") were not complete at least until the owners received the FOC as part of planning and building approvals under item 11 in Sch 1; that provides the date that work is complete within the meaning of the original contract (a date is not required, just a specified activity) on the proper interpretation of the contract and also within the meaning of HBA s 3B(1). Accordingly, s 3B(2) and (3) have no work to do because s 3B(2) operates when s 3B(1) is not operative and s 3B(3) is parasitic on s 3B(2) because it requires a context of practical completion for the presumption about practical completion to operate. Conclusion on grounds 6 and 7 1. In summary, the Tribunal's reasoning process in relation to completion date was: 1. The builder was responsible for obtaining the FOC; 2. The builder's obligation to provide the FOC fell within the definition of "building works" under the contract 3. Completion of the works occurred within the meaning of the contract and therefore for the purposes of s 3B(1) of the HB Act upon the owners' receipt of the Final Occupation Certificate (FOC); 1. The Tribunal's finding in this respect is relevant to its finding that there was consideration in respect of the new contract it found that the parties had entered into. Given our findings in respect of Grounds 2 and 3, it is not strictly necessary for us to consider this ground, but we do so for completeness. 2. We conclude that the Tribunal erred in its interpretation of relevant terms of the contract. 3. For this purpose we set out the relevant clauses of the contract, which is a standard form Housing Industry Association (HIA) contract. 4. Clause 1 of the contract defines "building works" as: The building works to be carried out, completed and handed over to the owner in accordance with this contract as shown in the contract documents and including variations. 1. In accordance with clause 1, "practical completion" means: When the building works are complete except for minor omissions and defects that do not prevent the building works from being reasonably capable of being used for their usual purpose. 1. Clause 7 of the contract is headed "Planning and Building Approvals". Clause 7.1states: 7.1 The party named in Item 11 of Schedule 1 must obtain and pay for all building and planning approvals. 1. Item 11 names the builder as the responsible party for the purposes of clause 7. 2. Clause 27 of the contract is headed "Final Certificate". It comes after clause 26 which is headed "Practical Completion". It states: 27.1 Unless stated elsewhere in this contract, the builder is not required to obtain any certificate of occupancy or final inspection certificate relating to the building works. 1. Clause 29 of the contract is headed "Defects Liability Period". It states: 29.1 The defects liability period is a period of 26 weeks commencing on and including the date of practical completion. [Note: The standard form contract provides for a 13 week period. In this contract "13" is struck through and "26" inserted. The amendment is initialled.] 29.2 The owner may, before the end of the defects liability period, give the builder a list of defects in the building works that appear after the date of practical completion. 29.3 The builder must rectify defects that are the builder's responsibility and which are notified to the builder during the defects liability period. 1. Clause 14 of Schedule 1 specifies that Tender No 2277 dated 22 January 2009 (the Tender) forms part of the contract. The Tender (at page 194 of the Hearing Bundle) specifies that the basic tender price includes the Council Development Application and Inspection Fees. The tender price does not include provision of the FOC. The Tender specifies the work to be completed by the owners prior to the issue of an occupation certificate: items 18, 19 and 20 which concern lighting and the installation of outdoor and indoor clothes lines. 2. We are of the view that the Tribunal misinterpreted the contract when it concluded that the builder was responsible for obtaining the FOC as part of the works to be carried out and that the works were therefore not complete until the FOC was provided to the owners 3. First, cl 27 clearly states that the builder is not responsible for obtaining the FOC. The contract (including the Tender) does not otherwise provide that the builder is responsible for doing so. This is so notwithstanding Item 11 of Schedule 1 of the contract. 4. Second, a FOC is not a building or planning approval. For the purposes of this decision, it is unnecessary to go into the statutory basis for the issue of a FOC set out in the Environmental Planning and Assessment Act 1979. Suffice to note that, as stated by Moore J in Toplace Pty Ltd v The Council of the City of Sydney [2020] NSWLEC 121 at [16]: A Final Occupation Certificate can be issued when all aspects of an approved development have been finalised and no further interaction between the developer and the consent authority is required concerning that development. 1. An FOC certifies that the completed building (or part of the building) is suitable for occupation or use. It is a certification of completed building works, not a part of the building works. This is supported by the wording of cl 27, which refers to a certificate "relating to the building works". A certificate that relates to building works cannot, in our view, be part of the building works. It is also supported by the definition of building works in cl 1; that is, the building works to carried out, completed and handed over to the owner. In this contract, the owners were required to undertake works prior to an occupation certificate being issued. The building works "handed over" to the owner could not, in such circumstances, include the provision of the FOC. 2. We conclude that the date of the FOC is not the date on which the building works were completed and from which the statutory warranty period ran. 3. Furthermore, we do not accept that the definition of building works includes the rectification of defects in the building works notified during the defects liability period. 4. First, such a conclusion does not accord with the definition of building works in cl 1 of the contract; that is, works that are "carried out, completed and handed over to the owner". Second, it does not accord with the definition of practical completion in cl 1, which is "when building works are complete except for minor omissions and defects that do not prevent the building works from being reasonably capable of being used for their usual purpose". Third, it does not accord with cl 29.1, which states that the defects liability period commences "on and including the date of practical completion" or with cl 29.2, which states that before the end of the defects liability period the owner may give the builder "one list of defects in the building works that appear after the date of practical completion". Together these clauses support a construction of the contract that differentiates between the building works, the completion of the building works and defect rectification which occurs after the building works are completed and handed over to the owner. 5. Section 48K(7) and 3B of the HB Act are also relevant to the date of completion of the works. 6. As at the date of the contract, s 48K(7) stated: (7) The Tribunal does not have jurisdiction in respect of a building claim arising from a breach of a statutory warranty implied under Part 2C if the date on which the claim was lodged is more than 7 years after: (a) the date on which the residential building work the subject of the claim was completed, or (b) if the work is not completed: (i) the date for completion of the work specified or determined in accordance with the contract, or (ii) if there is no such date, the date of the contract. 1. Section 3B was introduced by the Home Building Amendment Act 2011. In accordance with Schedule 4 Clause 106(a) of the HB Act, the amendments enacted by that Act were "made for the purpose of the avoidance of doubt" and those amendments, including s 3B, extend to residential building work commenced or completed before the commencement of those amendments on 1 February 2012. Section 3B therefore applies to the residential building work in this case, notwithstanding that the contract was entered into in 2009. 2. Section 3B of the HB Act relevantly provides: 3B Date of completion of residential building work …. (1) The completion of residential building work occurs on the date that the work is complete within the meaning of the contract under which the work was done. (2) If the contract does not provide for when work is complete (or there is no contract), the completion of residential building work occurs on practical completion of the work, which is when the work is completed except for any omissions or defects that do not prevent the work from being reasonably capable of being used for its intended purpose. (3) It is to be presumed (unless an earlier date for practical completion can be established) that practical completion of residential building work occurred on the earliest of whichever of the following dates can be established for the work— (a) the date on which the contractor handed over possession of the work to the owner, (b) the date on which the contractor last attended the site to carry out work (other than work to remedy any defect that does not affect practical completion), (c) the date of issue of an occupation certificate under the Environmental Planning and Assessment Act 1979 that authorises commencement of the use or occupation of the work, (d) (in the case of owner-builder work) the date that is 18 months after the issue of the owner-builder permit for the work. 1. In our view, in accordance with s 3B(1) of the HB Act, the statutory warranty period commenced on completion of the building works within the meaning of the contract; that is, when the works reached practical completion. If the contract had not provided for when the building works were complete and s 3B(1) was not engaged, then s 3B(2) and s 3B(3) of the HB Act would apply. It is not in dispute that the owners took possession of the works on 13 July 2017. In this case, that would be the relevant date in accordance with s 3B(3)(a) of the Act. Issue of the FOC is not the completion date of the works under s 3B. 2. Overall, we conclude that the Tribunal erred in finding that the date of completion of the building works was 20 October 2010, when the FOC was issued. In making this finding, the Tribunal misinterpreted the contract and did not correctly apply sections 48K(7) and 3B of the HB Act. Ground 6 is established. In our view, if the completion date was not the date of practical completion (8 July 2010), it was the date on which the works were handed over the owners (13 July 2021). 3. If we have erred in finding that the Tribunal's finding in relation to completion date raises a question of law, then for the reasons set out above, we conclude that the Tribunal's finding in this regard is against the weight of evidence. We would grant leave to appeal on this ground because we consider that the Tribunal's finding concerning the completion date gives rise to an injustice to the builder which is reasonably clear. Disposition of the appeal 1. It follows from our conclusion that the parties did not enter into a new contract or vary their original contract that the respondent's application to the Tribunal was out of time. This is because the owners' proceedings were not commenced within seven years of completion of the building works. 2. The Tribunal has no power to extend time for the making of an application under the HB Act: S & G Homes Pty Ltd t/as Pavilion Homes v Owen [2015] NSWCATAP 190 at [53]. 3. In such circumstances, the appropriate orders are that the appeal be allowed, the decision under appeal be set aside and the Tribunal proceedings be dismissed. Costs of the Tribunal proceedings 1. The Tribunal formed what was expressed to be a "provisional view" that the builder should be ordered to pay the owners' costs and made the following costs orders: 4. Note the provisional view of the Tribunal that the respondent builder pay the applicant owners' costs of the proceedings on the ordinary basis as agreed or assessed. 5. Note that the parties do not require a hearing on costs, with costs to be determined on the papers if the provisional view is challenged. 6. Order as follows if the provisional view of the Tribunal on costs is sought to be challenged by either party: (a) Any party challenging the provisional view is to notify the Tribunal and the other party by email of that challenge on or before 24 July 2020. (b) Any challenging party to file and serve on or before 7 August 2020 their or its submissions and further material on costs. (c) A responding party to file and serve on or before 21 August 2020 their or its submissions and further material in response on costs. (d) A challenging party to file and serve on or before 28 August 2020 their or its submissions and further material in reply on costs. 7. If no party challenges the provisional view of the Tribunal on costs then order that the provisional view on costs stands as the costs order of the Tribunal on and from the date in order 6(a). 1. As we have concluded that the owners' application should be dismissed, it follows that the builder is the successful party in the Tribunal proceedings and should not be liable to pay the owners' costs of the Tribunal proceedings. 2. Rule 38 of the Rules applied to the proceedings before the Tribunal: Reasons [137]-[138]. This means that special circumstances do not need to be established to warrant an order for costs. 3. The starting point for exercise of costs discretion on the usual principles is that costs follow the event: see Latoudis v Casey [1990] 170 CLR 534 per Mason CJ at 554 and Oshlack v Richmond River Council (1998) 193 CLR 72 per McHugh J at 97 In this case, there appears to be no reason not to apply the usual principle that costs follow the event. We will therefore order the owners to pay the builder's costs of the Tribunal proceedings. Costs of the appeal 1. Rule 38A means that rule 38 also applies in relation to the costs of the appeal. There also appears to be no reason not to apply the usual principle that costs follow the event to the appeal costs. We will therefore order the owners to pay the builder's costs of the appeal. 2. As we did not hear from the parties on either the costs of the Tribunal proceedings or the costs of the appeal, we will make our costs order subject to any application for an alternative costs order. Orders 1. To the extent necessary leave to appeal is granted. 2. The appeal is allowed. 3. Orders made in proceedings HB 19/04425 are set aside. 4. Proceedings HB 19/04425 are dismissed. 5. Brett Anthony James and Liza Michelle James are to pay Jandson Pty Ltd's costs of the Tribunal proceedings and the appeal, on the ordinary basis, as agreed or assessed. 6. If either party seeks a different costs order, order 5 ceases to have effect and the following orders apply: 1. Any application for a different costs order is to be filed and served, supported by evidence and submissions not exceeding five pages in length, within 14 days of the date of publication of these orders. 2. Any evidence and submissions in response to the application for a different costs order not exceeding five pages in length are to be filed and served within 28 days of the date of publication of these orders. 3. Any evidence and submissions in reply not exceeding three pages in length are to be filed and served within 35 days of the date of publication of these orders. 4. Subject to the parties' submissions in respect of this issue, the Tribunal proposes to determine any application for a different costs order on the basis of the evidence and submissions provided. ********** 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 Amendments 24 September 2021 - Pursuant to s63 Civil and Administrative Tribunal Act 2013. Order 5 amended to clarify costs. 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: 24 September 2021