Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Nu-Stone Building Pty Ltd v McInerney [2022] NSWCATAP 285 Hearing dates: 24 May 2022 Date of orders: 31 August 2022 Decision date: 31 August 2022 Jurisdiction: Appeal Panel Before: R C Titterton OAM, Senior Member C Mulvey, Senior Member Decision: 1. The time for filing the notice of appeal in matter 2022/00053249 is extended to 23 February 2022. 2. On or before14 September each party is to provide to the Registry and the other party: (a) draft orders setting the orders they say the Tribunal should make based on the reasons for decision together with submissions supporting those orders; (b) the costs of the applications before the Tribunal; and (c) the costs of these appeals; 3. Each party may respond on or before 28 September 2022. 4. The submissions should address whether a hearing as to the final form of the Appeal Panel's orders and costs should be dispensed with pursuant to s 50(2) of the Civil and Administrative Tribunal Act 2013 (NSW). 4. The stay of the Tribunal's orders of 19 January 2022 in matters HB 20/15757 and HB 20/36393 remain in place until final orders are published. Catchwords: BUILDING AND CONSTRUCTION – calculation of damages Legislation Cited: Nil Cases Cited: Collins v Urban [2014] NSWCATAP 17 Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64; [1991] HCA 54 Hyder Consulting (Australia) Pty Ltd v Wih Wihelmsen Agency Pty Ltd [2001] NSWCA 313 Kork v Merheb [2021] NSWCATAP 349 Leone v Green Solar Pty Ltd [2022] NSWCATAP 78 Mann v Patterson Constructions Pty Ltd (2010) 241 CLR 390; [2019] HCA 32 Pholi v Wearne [2014] NSWCATAP 78 Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 Robinson v Harmin (1848) 1 Ex Rep 850 Texts Cited: Nil Category: Principal judgment Parties: Nu-stone Building Pty Ltd (Appellant) Garry McInerney (First Respondent) Gladys McInerney (Second Respondent) Representation: Counsel: M Klooster (Appellant) M Galvin (Respondents) Solicitors: Sachs Gerace Lawyers (Appellant) Walker Hedges Forestville (Respondents) File Number(s): 2022/00037784 Publication restriction: Nil Decision under appeal Court or tribunal: Civil and Administrative Tribunal Jurisdiction: Consumer and Commercial Division Citation: [2022] NSWCATCD Date of Decision: 19 January 2022 Before: S Thode, Senior Member File Number(s): HB 20/36393 and HB 20/15757 Decisions under appeal REASONS FOR DECISION Introduction 1. On 19 January 2022, the Tribunal published its decision in matters HB 20/15757 and HB 20/36393 (Decision). 2. In HB 20/15757, Nu-Stone Building Pty Ltd (Builder) claimed payment of one unpaid progress payment (based on the contract between the parties) and for five variations of $129,518 (Builder's Application). The Tribunal decided that the Builder was owed $11,843.97. 3. In HB 20/36393, Mr and Mrs McInerney (the McInerneys or Homeowners) sought damages for defective and incomplete works, for delay and for breach of contract giving rise to excessive costs (Homeowners' Application). The Tribunal decided that the Builder should pay the Homeowners $126,401.14. 4. The Tribunal offset the amount to be paid to the Homeowners with the amount they owed the Builder (being $11,843.97), and the formal orders of the Tribunal were: 1. in the Homeowner's Application, the Builder was to pay the McInerneys $114,557.17; 2. the Builder's Application was otherwise dismissed. 1. Both parties appealed. The first appeal, matter 2022/00037784, was filed by the Builder on 7 February 2022 (Builder's Appeal). 2. The second appeal, matter 2022/00053249, was filed by the Homeowners on 23 February 2022 (Homeowners' Appeal). Preliminary matter 1. The Homeowners' Appeal was filed out of time. However, the Builder does not object to the Tribunal extending the time for the filing of the Homeowners' Appeal. Accordingly, we will make that order. The Decision 1. The Tribunal gave detailed reasons for the Decision, which were 61 pages in length. 2. Having summarised the Builder's Application and the Homeowners Application at a high level respectively at [3] to [4] and [6] to [7], the Tribunal states at [9] the issues to be determined were: 1. Have the Homeowners lawfully terminated the contract entitling them to the cost of completion? 2. What are the reasonable and necessary rectification costs? 3. If the Homeowners have lawfully terminated the contract what are the reasonable and necessary completion costs? 4. In the Builder's case, what is the fair and reasonable value of the contract works carried out? 5. What is the fair and reasonable value of the variations carried out? 6. What weight should be given to (the Homeowners' expert) Mr Redfern's evidence in light of the fact that the Homeowner's invoices are not tendered in the case. 1. The Tribunal then sets out the issues to be determined in each application. 2. It is to be noted that the issues set out at [9] are not completely congruent with the issues set out at [11] and [12] of the Decision. However, no issue was taken about this by either party. Issues in Homeowners' Application 1. The Tribunal stated at [11] that four issues that had to be determined. The first issue 1. The first issue was whether the Homeowners lawfully terminated the contract entitling them to the cost of completion? 2. The Tribunal noted that it was not in contention between the parties that the Builder had falsified invoices (at [14]), that the Builder admitted that those forgeries were perpetrated as a fraud against the Homeowners (at [15]). After finding that "a good faith term" could be implied into the contract, the Tribunal was satisfied that the Builder repudiated the contract and that the Homeowners accepted that repudiation and elected to terminate the contract effective from 18 March 2022 (at [48]). [1] The second issue 1. The second issue was what were the reasonable and necessary rectification costs. 2. The Tribunal found that six of the eight defects claimed by the Homeowners were established ([53] to [66]) and found that $84,034 for damages for defective works should be paid to the Homeowners (at [67]). The third issue 1. The third issue was, having found that the Homeowners had lawfully terminated the contract, what were the reasonable and necessary completion costs. 2. The Builder's expert was Mr Dzung Nguyen of AUBC Consulting Pty Ltd. Mr Nguyen is a quantity surveyor. He prepared a report dated 20 February 2021 (Nguyen Report). 3. The Homeowners relied on four reports of Mr Craig Redfern of Tyrells Property Inspections Pty Ltd. He prepared reports dated 26 October 2020, 17 August 2020 and "April 2020", together with a report dated 31 March 2021 in reply to the Nguyen Report. Mr Redfern is a licensed building contractor. 4. The Tribunal preferred the expert opinion of Mr Nguyen for the following reasons appearing at [75]: Overall, in view of the deficiencies in Mr Redfern's report, I am not satisfied that the owners have discharged the onus of establishing that Mr Redfern's figures should be accepted over and above those of Mr Nguyen. In particular I am persuaded by Mr Redfern's concession under cross examination that he did not carry out his own independent quantity assessment but instead relied entirely on the 2018 QS report that the Redfern opinion is unreliable. I find that the report of Mr Redfern does not provide an expert opinion but merely accepts and adopts the opinions of a QS who was not called to give evidence. The underlying assumptions that form the basis of Mr Redfern's opinion in relation to the value of the works have therefore not been made out and the opinion should be afforded little weight. 1. However, the Tribunal found that Mr Redfern's reply report of 2 October 2020 provided "significant and relevant critiques" of the Nguyen Report that required adjustments to be made to Mr Nguyen's figures (at [76]). 2. The Tribunal's conclusions were: 80 Adding the unified builder's margins to the Nguyen estimated costs brings the new and overall assessment of contract works to: Completed works $547,358 Additional 5% builders margin $24,879.90 Remaining works $345,752 Additional 15% builders margin $51,861.30 Subtotal exclusive GST $969,841.20 GST 10% $96,984 Total contract of works cost $1,066,825.20 81 The contract price is $995,852. I am satisfied that the total contract cost, as estimated by Mr Nguyen (but adjusted with consistent margins), adds $70,973.20 to the cost to complete over and above the adjusted contract price. 82 In conclusion I find that the owners are entitled to damages for defective work in the sum of $84,034. 83 Adding both figures together, [2] I find that the builder is liable to the owner in the sum of $155,007.20 for defective and incomplete work. 84 The owners concede that from this sum there must be deducted $28,606.06 to account for PC cost adjustments for windows. 85 Accordingly I make a finding and order that the builder pay to the owners the sum of $126,401.14. 1. The fourth issue was costs. Issues in Homeowners' Application 1. The Tribunal stated at [12] that four issues that had to be determined in the Builder's Application. The first issue 1. The first issue was what was the fair and reasonable value of the contract works carried out. This issue was determined in the Tribunal's calculation at [80] of the Decision set out above. The cost of the work carried out was calculated by the Tribunal as $572,237.90, being $547,358 ("completed works") and $24,879.90 ("Additional 5% builders margin"). The second issue 1. The second issue was whether the Builder was entitled to payment of variations. 2. The Tribunal considered six claimed variations. 3. The Tribunal found that variation (1), being earthworks and underpinning) had been paid in full in the sum of $29,097.50. 4. The Tribunal found that variation (2), being "The OSD & Detention Tank", had been paid in full in the sum of $16,703.49 (with a credit of $1,446.50). 5. Variation (3), being additional steel works, was not pressed by the Builder. 6. Variation (4), being skylights, was not allowed by the Tribunal. 7. Variation (5), being windows and doors was allowed in full by the Tribunal in the amount of $28,606.06. 8. Variation (6), being additional carpentry and steel work was not allowed by the Tribunal. 9. In total, the Tribunal allowed $82,442.35 for variations (1), (2) and (5). The third issue 1. The third issue was whether the Builder was entitled for moneys owed under contract at the time of termination. This was considered by the Tribunal under the heading "Is the builder entitled to $119,032 for 'underpayment'" at [97] to 98], and concluded: 99. For the reasons set out above, the builder was unsuccessful on his variations claim. The builder is not entitled to any further payment for variations, either on a contract basis, or on a restitution or quantum merit basis. The contract reconciliation thus is the value of the contract works (as per the builder's evidence) $575,733.81 less an amount paid to the builder $563,889.84 (as agreed between the parties), the difference being $11,843.97. 100. I award $11,843.97 to the builder for this head of damage, being an amount owed under the contract. 1. We pause to note that the statement "[f]or the reasons set out above, the builder was unsuccessful on his variations claim" is not correct, as the Tribunal had allowed variations (1), (2) and (5). We assume that error was inadvertent. However, as will be seen, it was consistent with the Builder's submission that the Tribunal did not include the allowed variations in its calculation of the contract price. The fourth issue 1. The fourth issue was whether the Builder was entitled to payment for interest. 2. The heading "Interest" appears immediately after [100] of the Decision. However, what the Tribunal states at [101] to [104] is: 101 Paragraph 8 of the builder's submissions poses the following question: Were the works forming part of [Payment Claim] 4 substantially complete? This is a question of fact. The only life issue the turn on this finding is whether the builder is entitled to interest on and from 27 March 2020 (five business days after the invoice issued) until final orders are made. 102 It is submitted that by the builder that if work is 90% completed then that would constitute a "substantial completion" (Simmonds v Rust; Rust v Simmonds [2018] NSWCATCD 75). It is the builder's submission that more than 90% of the Corden metal cladding was complete; more than 90% of the timber stud work was completed; the internal plumbing works must have been more than 90% complete with only $750 being paid by the owners to complete this task; at least 70% of the electrical roughing was complete on the owner's own evidence; more than 90% of the concreting work overall was complete; all doors and windows had been delivered to site. 103 The builder concludes that the "factual findings" referred to support the conclusion that the works for PP4 had reached substantial completion. And the builder should be awarded an additional amount of at least $14,802.67 for interest in this regard. 104 I have not been taken to any evidence that suggests the works were 90% complete. The issue was hotly contested and during cross-examination the builder conceded that among other incomplete work, there was no roof on the garage at the time he issued PP4. Mr Redfern in his report of 31 March 2021 129412) states that lock up was substantially incomplete (10.2.3). The builder bears the onus of proof and other than the submissions set out above I was not referred to the evidence bundle to support these contentions. In the absence of being referred to any specific evidence I am not satisfied, on balance, that the work was "substantially complete" and decline to make an award. 1. It appears therefore that the Tribunal did not consider the question of interest. No party complains about this in the Appeals. 2. However, the work the subject of Payment Claim 4 was the subject of discussion at [101] to [104] did feature in the Homeowners' Appeal. Other issues 1. Another issue agitated at the hearing, but not dealt with in the Decision and now raised on appeal by the Homeowners, was the Tribunal's rejection of the evidence in the tender bundle identified as the "Homeowners Tender Bundle Not Agreed by Builder" (Rejected Tender Bundle). 2. The transcript records at p 97 the Homeowners' counsel sought to tender that bundle, and a lengthy discussion ensued between the Tribunal and Mr Galvin. The tender was opposed by Mr Klooster for the Builder. After considering the application overnight, at the commencement of the second day of the hearing the Tribunal stated that it was going to exclude the materials, and would give reasons in the Decision. 3. As it transpired, the Tribunal did not give any reasons for rejecting the tender. Summary of the Appeals Builder's Appeal 1. The Builder does not challenge any of the Tribunal's factual findings. 2. The Builder's only grounds of appeal are that: 1. in concluding at [80] to [82] that the Homeowners were entitled to $70,973.20 the Tribunal applied a wrong principle of law; 2. in concluding at [99] that the Builder was not entitled to any further variations the Tribunal erred at [100] and applied the wrong principle of law when determining the Builder's underpayment claim. 1. The Builder asks the Appeal Panel to make an order that the Homeowners pay it $32,758.05. The Homeowner's Appeal 1. The Homeowners' grounds of appeal are: 1. the Tribunal erred in law by adopting the evidence in the Nguyen Report as to the estimate of costs of works completed set out in section 3.1 of the report; 2. the Tribunal failed to take into account relevant considerations and failed make findings in circumstances where the relevant considerations and findings ought to have been made in relation to: 1. the value of incomplete works and works paid for by the Homeowners; 2. determining that the work completed was $575,733.81 whereas the uncontroverted evidence was that items of the works that were not undertaken by the Builder, or items of the works that were paid for by the Homeowners reduced the quantum merit value ascribed in section 3 of Mr Nguyen's Report to $445,781.71; 3. regardless of the error referred to in ground 1 above, in the event that it is determined that ground 1 is not made out, the Tribunal erred at law by failing to take into account and make relevant findings which reduced the value of works completed and increased the value of work to be completed in the circumstances where work was not completed and payments were made by the Homeowners to subcontractors as referred to in Ground 2 (b). 1. the Tribunal erred in law by denying procedural fairness to the Appellants by the rejection of evidence contained in the Rejected Tender Bundle. 1. In summary, the Homeowners ask the Appeal Panel to order that Builder pay them the sum of $132,510.22 comprising: * damages of $84,030 for defective works; * completion costs of $77,082.28; and * less the agreed outstanding sum for windows PC adjustment being $28,606.05. 1. In the alternative, the Homeowners submitted that the Appeal Panel order that Builder pay them the sum of $115,749.51 comprising: 2. damages of $84,030 for defective works; 3. completion costs of $60,321.57; 4. less the agreed outstanding sum for windows PC adjustment being $28,606.05. Documents filed on the appeal 1. The parties filed a joint tender bundle for both appeals which contained all the evidence before the Tribunal (including the rejected evidence), the pleadings, the Decision, a transcript of the two day Tribunal hearing and all the submissions. The tender bundle was 2,262 pages in length. 2. In addition, both parties filed lengthy submissions on appeal, supplemented by oral submissions at the appeal hearing. Nature of an appeal 1. Section 80 of the NCAT Act sets out the basis upon which appeals from decisions of the Tribunal may be brought. That section states that an appeal may be made as of right on any question of law or with leave of the Appeal Panel on any other ground (s 80(2)(b)). A question of law 1. In Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69, without listing exhaustively possible questions of law, the Appeal Panel considered the requirements for establishing an error of law giving rise to an appeal as of right. These include (but are not limited to): * whether there has been a failure by the Tribunal to provide proper reasons; * whether the Tribunal identified the wrong issue or asked the wrong question; * whether a wrong principle of law had been applied; * whether there was a failure to afford procedural fairness; * whether the Tribunal failed to take into account relevant (that is, mandatory) considerations; * whether the Tribunal took into account an irrelevant consideration; and * whether there was no evidence to support a finding of fact. Leave to appeal 1. Clause 12 of Sch 4 of the NCAT Act provides that, in an appeal from a decision of the Consumer and Commercial Division of the Tribunal, an Appeal Panel may grant leave to appeal only if satisfied that the appellant may have suffered a substantial miscarriage of justice because: 1. the decision of the Tribunal under appeal was not fair and equitable; or 2. the decision of the Tribunal under appeal was against the weight of evidence; or 3. significant new evidence has arisen (being evidence that was not reasonably available at the time the proceedings under appeal were being dealt with). 1. The principles to be applied by an Appeal Panel in determining whether or not leave to appeal should be granted are well settled. In Collins v Urban [2014] NSWCATAP 17 the Appeal Panel conducted a review of the relevant cases at [65]-[79] and concluded at [84(2)] 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. 1. Even if an appellant establishes that the appellant may have suffered a substantial miscarriage of justice in the sense explained above, the Appeal Panel retains a discretion whether to grant leave under s 80(2) of the Act. An appellant must demonstrate something more than that the Tribunal was arguably wrong: Pholi v Wearne [2014] NSWCATAP 78 at [32]. Consideration of the Builder's Appeal 1. As noted, the Builder only presses two grounds of appeal. It says that the primary question in its appeal is the Tribunal's calculation of damages. No challenges are made to the Tribunal's factual findings, and the appeal is limited to the manner in which the "pertinent" legal principles were applied to the facts as found. Put simply, the Builder submits that the Tribunal: 1. applied the wrong principle of law in calculating completion costs; and 2. applied the wrong principle of law by failing to account for variations that were found by the Tribunal to have been agreed between the parties. Ground 1: Calculation of completion costs Builder's Submissions 1. The Builder submits that: 1. the Tribunal failed to put the parties in the same position with respect to damages as if the contract had been performed: Robinson v Harmin (1848) 1 Ex Rep 850; 2. the corollary of the principle in Robinson v Harman is that a plaintiff is not entitled to, by the award of damages upon breach, to be placed in superior position to that which he or she would have been in had the contract been performed; 3. the manner in which the Tribunal has assessed damages has placed the Homeowners in a much better position than if the contract had been carried out and performed by each party. 4. in order to place the parties in the position they would be in had the contract been completed two factual matters need to be determined. 1. the balance payable under the contract; and 2. the costs to complete; 1. the damages payable for completion costs is ascertained by deducting the costs to complete from the balance payable under the contract. Through applying this formula each party is placed in the position that would have been had the contract been carried out; 2. the balance of the contract price is $514,584.51 calculated as follows: Finding at Decision at [1] as to contract price excluding variations $995,852.00 Less finding at Decision at [97] that $497,926.00 was paid on account for contract works. [3] 1. the costs to complete as found by the Tribunal at [80] is $397,613.30; 2. as the costs to complete are less than the balance payable under the contract, the award for completion costs should be NIL. Homeowners' submissions 1. The Homeowners agree that the Tribunal applied the wrong principle of law when calculating the completion costs payable to them, but not for the reasons propounded by the Builder. 2. The Homeowners submit that the Builder's contention that, as Mr Nguyen valued the remaining works to be $345,742 (plus 15% Builder's Margin plus GST) totalling $437,363.63 is less than the balance remaining and therefore the Homeowners should receive NIL for their costs over and above the contract price that they have to pay to complete the remaining works, "is patently wrong in principle". 3. The Homeowners submit that the value assigned by Mr Nguyen to the remaining works does not take into account the value of disputed invoice NU0421. They submit that if the value of the disputed invoice is added to the value for the remaining works, then the Homeowners are owed an amount over and above the contract price in the range of $77,082.28 to $143,731.83. 4. The Homeowners say that the Tribunal erred by relying on the Ngyuen Report in so far as it was based on an assumption that the Builder had completed the work the subject of Payment Claim 4, in circumstances where the Tribunal found that the work the subject of Payment Claim Form was not substantially completed (see Decision at [104]). This the Homeowners submit is "clearly wrong". They say that the value of Invoice number NU0421 which was issued on 18 March 2021 for Payment Claim 4 should have been deducted from the value that was assigned by Mr Nguyen to the completed work. Ground 2: Failure to account for variations Builder's submissions 1. The Builder submits that: 1. the legal principle identified in Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 6; [1991] HCA 54 has not been properly applied on the findings as made; 2. when calculating the underpayment claim the Tribunal erred by failing to account for variations that were found by the Tribunal to have been agreed between the parties, thereby adjusting the contract price; 3. the Tribunal failed to perform a contract reconciliation taking into account the payments made for variations (1), (2) and (5) on the findings made at [88] to [90] and [94] of the Decision. Homeowners' submissions 1. The Homeowners agree that the Tribunal applied the wrong principle of law when calculating the Builders underpayment claim, in that the variations appear not to have been added back into the contract reconciliation. 2. But the Homeowners further contends that that error is "superfluous in the context of the wrong principles applied" by the Tribunal as "the wrong enquiry was made". 3. The Builder submits that the Builder failed to prove it had substantially completed any work that it said was due and owning pursuant to Invoice number NU042 of 18 March 2021 for the Payment Claim 4 "Lock-up plumbing & Electrical rough-in complete stage", but submits that Mr Nguyen's Report, relied on by the Tribunal, was based on the assumption that the Builder had in fact completed the stage for which it issued Invoice number NU042. 4. In short, the Homeowners submit that the Tribunal erred in adopting Mr Nguyen's value of the works in this regard. Consideration 1. Both grounds of the Builder's grounds of appeal relate to the Tribunal's calculation of the net monies one party was to pay the other. Both agree, in essence, that in undertaking what both described as a contract reconciliation the Tribunal: * erred in calculating the completion costs; * failed to take into account variations (1), (2) and (5). 1. The Tribunal found that the net amount to be paid by the Builder to the Homeowners was $126,4101.14, being $155,007.20 ($84,034 for defective works and $70,973.20 "to the cost to complete over and above the adjusted contract price"), less the agreed $28,606 to account for "PC cost adjustments for windows". 2. The Builder says the Tribunal erred in two ways. First, the Tribunal applied the wrong principle of law when calculating the completion costs, and secondly it failed to account for variations. 3. The Homeowners says the Tribunal erred because it included a sum for completion of the works the subject of Payment Claim 4. 4. The Tribunal found at [80] that the completion costs were $345,752 plus an additional Builder's margin of $51,861.30, a total of $397,613.30. 5. The Builder submits that the Homeowners are entitled to the damages payable for completion costs, calculated by deducting the costs to complete from the balance payable under the contract. The Builder submits that: The balance of the contract price is $514,584.51, calculated as follows: Finding at [1] as to contract price (excluding variations), $995.852.00 Less finding at [97] as to amount paid for contract works (excluding variations), $497,926.00 Balance payable to complete works (excluding variations) $514,584.51. 1. We consider that that submission and that calculation should be rejected as: 1. first, the Tribunal's calculation of the contract price was not the $995.852.00 found at [1], but the $1,066,825.20 found by the Tribunal at [80] and [81]; 2. secondly, while the Tribunal's calculation as to amount paid for contract works (excluding variations) was $497,926.00, the Tribunal should have found that the amount paid for contract works including variations was $572,333.05. 1. Therefore, adjusting the Builder's calculation, the amount paid for contract works (including variations), was: contract price (including variations), $1,066,825.20. less find the amount paid for contract works (including variations), $572,333.05. balance payable to complete works $494,492.15. 1. Nevertheless, the Builder's argument remains the same, the costs to complete the contract, being $457,255.295 ($397,613.30 plus 15% margin) is less than the balance payable under the contract (being $494,492.15), and therefore that the award for completion costs should be NIL. 2. However, for the reasons submitted by the Homeowners and the calculations set out in their submissions, we do not accept that proposition. 3. The substance of the Homeowners' response to the Builder's Appeal, and forming part of their own appeal (Ground 1), is that the value of Invoice number NU0421 which was issued on 18 March 2021 for Payment Claim 4 should have been deducted from the value that was assigned by Mr Nguyen to the completed work. 4. We accept that proposition. We agree that the Tribunal erred in failing to exclude Payment Claim 4 in its calculation of the contract price. 5. In addition, we also accept the submissions of both parties that the Tribunal erred in failing to take into account the variations when calculating the contract price. Mann v Patterson Constructions Pty Ltd 1. We will deal briefly with the Homeowners' other principal submission in response to the Builder's appeal. 2. The Homeowners say that the Tribunal erred in relying on Mr Nguyen at all, in that his calculations were based on a quantum meruit assessment contradictory to the principles of Mann v Patterson Constructions Pty Ltd (2010) 241 CLR 390; [2019] HCA 32. 3. In summary, in Mann the High Court unanimously held that a contractor who terminated a domestic building contract by accepting the principal's repudiation: 1. was not entitled to recover a quantum meruit (being a claim for the reasonable value of work done) for work carried out before termination and for which a contractual right to payment had accrued at the time of termination. The contractor's rights in relation to that work were limited to damages for breach of contract or debt for recovery of the amounts accrued; 2. was entitled to recover a quantum meruit for work carried out before termination but for which no contractual right to payment had accrued at the time of termination. However, in that event, the price stipulated in the contract limited the value of the claim in quantum meruit. 1. In other words, a contractor can no longer rely on quantum meruit to recover more than would have been recovered had the contract been performed. 2. The Builder submits, and we accept, that Mann is not relevant, because while Mann places a ceiling on any quantum merit claim in that: 1. a quantum merit claim for contract works performed cannot exceed the total contract price; and 2. a quantum merit claim for each variation cannot exceed the variation price offered by the Builder. [4] 1. We agree that neither issue arises as the costing of both experts did not exceed the ceilings imposed by the overall contract price and each variation. Conclusion 1. For the above reasons, we consider that the Tribunal erred in failing to include the value of variations (1), (2) and (5) in its contract reconciliation. 2. We also consider the Tribunal erred in including the value of Invoice number NU0421 which was issued on 18 March 2021 for Payment Claim 4 in its contract reconciliation. 3. We do not agree that either of these matters raise questions of law, much as they have been described as such by the parties. To the extent necessary we grant leave to appeal in respect of these issues and allow both appeals in relation to those matters. Consideration of the Homeowners' Appeal 1. The Homeowners raised three grounds of appeal. Ground 1: The Tribunal erred in law by adopting the evidence in the Nguyen's Report 1. The Homeowners submit that the Tribunal erred in law by adopting the evidence in the report by the Respondent's expert Mr Nguyen dated 20 February 2021 (Mr Nguyen's Report) as to the estimate of costs of works completed set out in section 3.1 of the report as: 1. the Contract was a written staged contract under which progress claims were made and paid whereas Mr Nguyen's Report at section 3 was a quantum meruit valuation for work assumed to have been completed up to and including Progress Payment 4 "Lockup Plumbing and Rough-in Complete"; 2. by relying upon section 3.1 of Mr Nguyen's Report as to the quantum meruit value of works the Senior Member ignored the application of legal principle that the value of work in a stage contract is governed by the contract and not by the principles of quantum merit, particularly so where the contract has been terminated and there remains work purportedly completed towards a stage of the contract that is not substantially complete and for which a claim under the contract cannot be made; 3. in the context of the misapplication of legal principle by taking into account and accepting the assumption in Mr Nguyen's Report at section 3 that Progress Payment 4 "Lock-up Plumbing and Rough-in Complete" had been completed at [731 of the Reasons for Decision, yet found at [104] that she was not satisfied that the work was substantially complete; 4. by adopting section 3 of Mr Nguyen's Report made a finding as to the value of works completed when in fact there was no evidence adduced by the Respondent as to the value of works purportedly completed in Progress Payment 4 "Lock-up Plumbing and Rough-in Complete". Ground 2: the Tribunal failed to take into account relevant considerations 1. The Homeowners submit that the Tribunal failed to take into account relevant considerations and to failed make findings in circumstances where the relevant considerations and findings ought to have been made in relation to: 1. the value of incomplete works and works paid for by the Homeowners; 2. determined that the work completed was $575,733.81 whereas the uncontroverted evidence was that items of the works that were not undertaken by the Builder, or items of the works that were paid for by the Homeowners reduced the quantum merit value ascribed in section 3 of Mr Nguyen's Report to $445,781.71; 3. regardless of the error referred to in ground 1 above, in the event that it is determined that ground 1 is not made out, erred at law by failing to take into account and make relevant findings which reduced the value of works completed and increased the value of work to be completed in the circumstances where work was not completed and payments were made by the Homeowners to subcontractors as referred to in Ground 2 (b). Consideration 1. These matters were substantively raised in the Homeowners' response to the Builder's appeal, that is the Tribunal erred in including the value of Invoice number NU0421 which was issued on 18 March 2021 for Payment Claim 4 in its contract reconciliation. 2. For the reasons set out above, we accept this submission, and we would allow the Homeowners' appeal to this extent. Ground 3: Failure of the Tribunal to admit the Rejected Tender Bundle Homeowners' submissions 1. The third error submitted by the Homeowners is that the Tribunal erred in rejecting the tender of the actual costs to be found in the Rejected Tender Bundle. 2. The Homeowners submit that the Tribunal erred in law by denying procedural fairness to the Homeowners by the rejection of evidence contained in the Rejected Bundle which was referred to by the Builder's expert as fair and reasonable in his report of April 2021 such evidence that consisting of invoices and receipts that supported spreadsheets prepared by the Homeowners in circumstances where: 1. the documents were made available for inspection; 2. the documents were produced pursuant to a Summons to Produce dated 4 June 2021 and served by the Respondent; 3. the spreadsheets prepared by the appellant's itemised the receipts; and 4. the spreadsheets and the documents comprised the Appellant's documents in support of the costs by them to complete the works consequent upon the repudiation of the contract by the Respondent and termination of the contract. 1. If necessary the Homeowners also seek leave to appeal in relation to this ground on the basis that it is not fair and equitable that they be deprived of the opportunity to prove their costs to complete in excess of the contract sum in circumstances where the Builder's director Mr Younan initially denied fraudulent conduct, propounded a case that the Contract was a sham and that an earlier contract applied and only withdrew the allegation at hearing, and propounded a case based on the wrong legal principle as referred to in grounds 1 and 2. 2. In summary, the Homeowners submit that: 1. Mrs Mclnerney adduced evidence of the actual payments made, and a summary of the costs associated by reference to receipts; 2. Mr Redfern in his report of April 2021 made reference to the spreadsheet of expenses and indicated that individual receipts (underpinning the spreadsheets) were supplied by the Homeowner but stated that they were not included in the report due to the logistics of scanning a large volume of documents of multiple sizes. It was stated that the documents would be available for review at the office of the solicitor for the Homeowners if required; 3. Mr Redfern detailed the expenses to complete including GST incurred by the Homeowners to total $558.247.57 to complete the work. He concluded that the costs in completing the works the subject of the spreadsheets and the invoices were fair and reasonable. His conclusion was based on the fact that his original estimate to calculate the costs of the work was $564,677.00 which was within 1% of the Homeowner's actual costs; 4. notwithstanding that the evidence of Mrs Mclnerney was before the Tribunal and the evidence of Mr Redfern in his report number 12922740 confirmed the fair and reasonable costs, Tribunal disallowed the tender of the receipts which underpinned that evidence; 5. the actual cost of the completion provided for sound evidence of the reasonable costs of rectification and damages. Whilst the actual costs are not necessarily to be preferred over theoretical costs as a rule the evidence of those costs ought to have been allowed: see Hyder Consulting (Australia) Pty Ltd v Wih Wihelmsen Agency Pty Ltd [2001] NSWCA 313 at [99]; 6. this was in circumstances where the receipts were made available for inspection and were specifically referred to in evidence served in accordance with the orders of the Tribunal; 7. the specific receipts were the subject of a Summons to Produce issued on 4 June 2021 which was responded to by the Homeowners and produced to the Tribunal; 8. the very documents the subject of the Summons were produced to the Tribunal for the Builder and were the documents sought to be tendered; 9. no reasons were provided in the Reasons for Decision, notwithstanding the agitation of the matter such failure constituting an error of law and a denial of procedural fairness by the ruling as to admission of the documents: Prendergast at [14] and [17]; Leone v Green Solar Pty Ltd [2022] NSWCATAP 78. Builder's submissions 1. In summary, the Builder submits: 1. this error challenges a discretionary decision by the Tribunal to exclude evidence that was served about a week before the final hearing. As the decision to refuse to admit the evidence was a discretionary decision relating to practice and procedure, the Homeowners must demonstrate that in making its decision to refuse to admit the material because of its late service the Tribunal did one (or more) of five things: 1. it made an error of legal principle; 2. it made a material error of fact; 3. it took into account some irrelevant matter; 4. it failed to take into account or gave insufficient weight to, some relevant matter; or 5. it arrived at a result so unreasonable or unjust as to suggest that one of the foregoing categories of error had occurred, even though the error in question did not explicitly appear on the face of the reasoning: Kork v Merheb [2021] NSWCATAP 349 at [39]. 1. the Homeowners have not identified, articulated or demonstrated a House v King [5] type error; 2. any contention that there has been a denial of procedural fairness cannot succeed as the Homeowners were given ample time to adduce the evidence and simply elected, for reasons unknown and not explained, to do so: Kork at [37]; 3. it is immediately apparent from the exchange with the Tribunal that: 1. the material should have been adduced in chief; 2. the material was available by the very latest 16 March 2021; 1. no satisfactory explanation was provided to the Tribunal, or to the Appeal Panel, as to why the material was not served in accordance with orders made on 2 October 2020. Consideration 1. It is to be noted that the application to tender the Rejected Tender Bundle came at the conclusion of the first day of the hearing after the cross-examinations of both Mr Nguyen and Mr Redfern had been completed. 2. The Tribunal allowed Mr Galvin the opportunity to make a lengthy oral submissions to tender the materials in reply. Mr Galvin emphasised that: 1. the documents had been referred to by Mr Redfern in his report, 2. the documents had been produced by the Builder under a Summons to Produce; 3. the Homeowners had informed the Builder they wished to rely on the materials, albeit "[a] About a week or so ago. 1. During the course of this dialogue the Tribunal comment that it was difficult to understand that the invoices wished to be relied on were evidence in reply and that they should have been led in chief. 2. Mr Klooster responded opposing the tender. In summary, he submitted that: 1. orders had been made by the Tribunal requiring the parties to serve on each other all documents they intended to rely on; 2. the Builder would have conducted its case in a different basis had the documents been served in a timely fashion; 3. the Builder was not in a position to deal with the documents. 1. Mr Galvin then made brief submissions in reply. 2. It is common ground that the Tribunal did not provide oral reasons for its decision, announced at the commencement of the second day of the hearing that the tender was rejected, and the Tribunal did not provide written reasons in the Decision as indicated at the hearing. 3. However, when hearing the application the Tribunal clearly indicated its concerns by: * enquiring when the Homeowners first informed the Builder they wished to rely on the documents ("[a]bout a week or so ago"); * stating that the Homeowners, by seeking to tender the material in reply, had deprived the Builder the opportunity to traverse the material in cross-examination, which may have been a denial of procedural fairness; * stating that the materials should have been led in chief. 1. We may not have come to the same conclusion as the Tribunal. But we understand why it had concerns about admitting the materials, as they had not been served in accordance with directions and particularly when the application to tender the materials was made after the cross-examinations of both Mr Nguyen and Mr Redfern had been completed. 2. While we accept that no reasons where provided, in circumstances where the Tribunal's concerns can be adduced from an examination of the transcript, we are not persuaded that the Tribunal arrived at a result so unreasonable or unjust as to suggest that one of the foregoing categories of error had occurred, even though the error in question did not explicitly appear on the face of the reasoning: Kork at [39] or otherwise made an error of the type referred to in House v The King. 3. This ground of appeal is rejected. Nor would we grant leave to appeal on this issue. Conclusion 1. As noted above, in our view the Tribunal erred in its calculation of the money to be paid by: 1. failing to include the value of variations (1), (2) and (5) in its contract reconciliation; and 2. including the value of Invoice number NU0421 which was issued on 18 March 2021 for Payment Claim 4 in its contract reconciliation. 1. After considering our reasons for our decision, we direct the parties to provide submisions on: 1. the form of the final orders to be made by the Appeal Panel; 2. the costs of the applications before the Tribunal; 3. the costs of these appeals. 1. These submissions are to be provided within 14 days. Each party can reply within a further 14 days. 2. We note that in the Decision the Tribunal ordered the Builder to pay the Homeowners costs as agreed or as assessed. The Tribunal indicated that if either party applied for a different costs order, the costs order made would cease to have effect. The Tribunal gave directions in the event that either party sought a different costs order. 3. We were not told that either party did so. 4. We propose to consider the question of the final orders and costs "on the papers" and without a hearing. If either party opposes that course they should address that issue in their submissions. 5. Following receipt of the proposed draft orders and submissions further reasons and final orders will be published. 6. The stay of the Tribunal's orders of 19 January 2022 in matters HB 20/15757 and HB 20/36393 remain in place until final orders are published. Orders 1. The Appeal Panel orders: 1. The time for filing appeal in matter 2022/00053249 is extended to 23 February 2022. 2. On or before 14 September 2022 each party is to provide to the Registry and the other party: 1. draft orders setting the orders they say the Tribunal should make based on the reasons for decision together with submissions supporting those orders; 2. the costs of the applications before the Tribunal; and 3. the costs of these appeals; 1. Each party may respond on or before 28 September 2022. 2. The submissions should address whether a hearing as to the final form of the Appeal Panel's orders and costs should be dispensed with pursuant to s 50(2) of the Civil and Administrative Tribunal Act 2013 (NSW). 3. The stay of the Tribunal's orders of 19 January 2022 in matters HB 20/15757 and HB 20/36393 remain in place until final orders are published. ********** Endnotes 1. In the alternative to finding that there was an implied term of good faith (that is, that there was no such term), the Tribunal found at [47] that the Builder had defrauded the Homeowners, and that fraud was a sufficient reason to terminate the contract. 2. That is $84,034 for defective works and $70,973 being the additional contract cost as estimated by Mr Nguyen and adjusted by the Tribunal. 3. We note that $995,582.00 minus $497,926 does not equal $514,584.51. It actually equals $497,926 4. Parasio v CBS Build Pty Ltd [2020] NSWSC 190 at [102] 5. (1936) 55 CLR 499 I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 31 August 2022