New South Wales Supreme Court CITATION : Alvaro Homes Pty Limited v Ellsteel & Engineering Supplies Pty Limited [2007] NSWSC 702 HEARING DATE(S) : 02/07/2007 JUDGMENT DATE : 5 July 2007 JUDGMENT OF : Associate Justice Malpass DECISION : The judgment and orders made by the Magistrate are set aside. The proceedings are remitted back to the Local Court for re-hearing according to law. The defendant is to pay the costs of the Summons. If so entitled, it is to have a certificate under the Suitors Fund Act. CATCHWORDS : Dispute as to nature of contract - alleged payment under mistake - claimant not licensed to perform residential building work - defence of illegality and alternative claim for quantum meruit not pleaded - claim for the latter allowed - opportunity not given to raise defences or adduce evidence in respect of the claim - cross-claim cursorily dismissed without reasons LEGISLATION CITED : Home Building Act 1989 (NSW) PARTIES : Alvaro Homes Pty Limited (Pl) Ellsteel & Engineering Supplies Pty Limited (Def) FILE NUMBER(S) : SC 10192/07 COUNSEL : Mr H. Altan (Pl) Mr R. Sergi (Def) SOLICITORS : Willis & Bowering (Pl) AP Sparke & Broad (Def) LOWER COURT JURISDICTION : Local Court LOWER COURT FILE NUMBER(S) : 1581/2006 LOWER COURT JUDICIAL OFFICER : Miller LCM LOWER COURT DATE OF DECISION : 14/12/2006 - 6 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION ASSOCIATE JUSTICE MALPASS 5 JULY 2007 10192/07 Alvaro Homes Pty Limited v Ellsteel & Engineering Supplies Pty Limited JUDGMENT 1 HIS HONOUR: The plaintiff is a builder. It successfully tendered for the building of a home at Mittagong. The defendant was in the business of providing and fixing steel beams and components. It was invited to do such work for the plaintiff. 2 In the course of the contact between them, the defendant came to give the plaintiff a quotation (on or about 13 August 2003) for a sum in the order of $35,000. It also gave the plaintiff some plans or basic drawings. There was a delay and later the defendant gave the plaintiff a further set of plans (which were at least replete with more detail) or detailed drawings. 3 The defendant did work for the plaintiff and rendered invoices. The plaintiff paid invoices in the order of a total of $62,000. The defendant rendered further invoices in the order of a total sum of $32,000. This amount was not paid by the plaintiff. The parties came to be in dispute as to whether or not the detailed drawings involved the performance of additional work. 4 The defendant brought proceedings in the Local Court to recover that amount. The plaintiff defended the proceedings and brought a cross-claim to recover what it regarded as overpayment. 5 Both parties accept that the pleadings relied on fell well short of being adequate. I will come back to this matter in due course. 6 The dispute went to a hearing. The parties were represented by Counsel. At an early stage of the hearing, Counsel for the defendant summarised the issues as follows:- "So in summary, the plaintiff says there was no quote, it was a do and charge. The defendant says it was a quote and we've overpaid you." 7 During cross-examination, it emerged that the defendant was not licensed to carry out the work it was performing. Following the conclusion of the evidence, Counsel for the plaintiff sought to raise a defence which has been treated as one of illegality (by reason of s10 of the Home Building Act 1989 (NSW)). The defendant contended that such a defence had not been pleaded. The proceedings were then adjourned for about a month. The parties returned to make submissions. 8 The submissions were made on 8 December 2006 and contained the following on behalf of the defendant [at transcript p1]:- "Your Honour I'll make mention a bit later on of a quantum meruit, which could be a fall back and there we are". And later [at transcript p4]:- "If your Honour was to find against me on the do and charge question it is open to your Honour to find for the plaintiff on a quantum meruit…." And later on behalf of the plaintiff [at transcript pp8-9]:- "In any event your Honour this is not an (sic) defence of illegality at all. It's the operation of an Act that precludes a party from bringing a claim. That's the proper classification of this provision. While I'm on the point of raising matters which haven't been pleaded, quite distinct from this issue my learned friend now, today for the first time wishes to brief a case of quantum meruit. Now that is a matter that requires pleading and he's not entitled at this stage, having not led any evidence of it, having not pleaded it, to rely on an alternative, as he puts it of a quantum meruit. It ought to have been pleaded as an alternative and we ought to have been given an opportunity to respond to it and deal with it in evidence. Now not only has he not pleaded it but no evidence has been put forward in support of the claim in any event. For example your Honour one of the elements of a quantum meruit is that attention is given to what is a reasonable price, no evidence before your Honour as to what a reasonable price for work done was. Your Honour that's all I wish to say." 9 The pleadings were not altered to formally raise the defence of illegality. During the submissions, the Magistrate did not make any indication to the parties as to whether or not he intended to allow the defendant to agitate the alternative claim of quantum meruit. Whilst the cross-claim did not expressly raise a claim of payment made under mistake, this was the cross-claim argued by the plaintiff before the Magistrate. 10 The judgment of the Magistrate was delivered on 14 December 2006. The judgment contains various sub-headings (including "Statement of agreed facts", "The agreed issues in the proceeding", "Illegality", "The nature of the contract" and "The alternative submission"). 11 Under the heading "The agreed issues in the proceeding" appeared the following:- "The issues in these proceedings are: 1. The plaintiff/cross-defendant asserts that the contractual relationship that it had with the defendant/cross-claimant was on a "do and charge" basis. 2. The defendant/cross-claimant denies that the relationship was one of "do and charge" and contends that it had accepted a firm quote from the plaintiff/cross-defendant such quote dated 13 August 2003." 12 After setting out these issues, the Magistrate came to deal with the question of "Illegality". He decided that he could not ignore the law. Then, after making the observations under the heading "The nature of the contract", (he observed that the evidence showed that the work done was more than had been envisaged in the quotation and that he preferred the defendant's version as to the nature of the contract) he proceeded to deal with "The alternative submission". Under this heading, the following observation was made:- "In this case the invoices subject of the Plaintiff's claim are for work performed, invoices authorised for payment by Mr Moras, the Defendant's project manager in charge of the work. No issue was raised that the work was not done; only that they exceeded the alleged quotation price. In such circumstances the defendant cannot say the cost of such invoices are not fair and reasonable." 13 The judgment concluded with the following:- "Conclusion For all the above reasons, a verdict will be entered for the Plaintiff. Accordingly, the Cross Claim is dismissed." 14 On 30 January 2006, the plaintiff filed a Summons in this Court. It purports to bring an appeal as of right from the decision of the Magistrate. It contains three appeal grounds. 15 The Summons did seek an extension of time. It appears that this prayer for relief was included as a precaution. The parties were ad idem that no extension was required. 16 It is unnecessary to address all of the matters that were argued. It suffices to concentrate on one area of the appeal. 17 Prior to the emergence of the question of illegality, the simple issues being litigated between the parties were whether or not the amount recoverable by the defendant was restricted by the quotation and whether or not overpayments had been made by mistake. The evidence that had been adduced had been restricted to these issues. 18 The defence of illegality became a full answer to the claim advanced by the defendant in contract. An alternative claim in quantum meruit required the Magistrate to address different issues. The plaintiff complains that had it been aware that the Magistrate intended to consider such an alternative claim, it would have both raised defences and adduced further evidence (inter alia, evidence as to the value of the work). It further complains that such a claim requires a Court to make an assessment, inter alia, on the evidence as to the value of the work and that this was an exercise that the Magistrate failed to perform. In my view, these complaints are properly made. 19 Further, the Magistrate cursorily dismissed the cross-claim, without giving reasons for so doing. He appears not to have addressed the question of mistake. 20 In my view, the plaintiff has discharged the onus of demonstrating that there was error in point of law, which justifies the disturbing of the decision of the Local Court. 21 It is unfortunate for the parties, that this matter has to be re-litigated in the Local Court, but in the circumstances there is no alternative. 22 The judgment and orders made by the Magistrate are set aside. The proceedings are remitted back to the Local Court for re-hearing according to law. The defendant is to pay the costs of the Summons. If so entitled, it is to have a certificate under the Suitors Fund Act. ********** 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. 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