Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Alta Building and Developments Pty Ltd v McAllery [2015] NSWCATAP 14 Hearing dates: 17 October 2014 Date of orders: 04 February 2015 Decision date: 04 February 2015 Jurisdiction: Appeal Panel Before: S Westgarth, Deputy President R Deutsch, Senior Member Decision: 1. Appeal allowed. 2. Order 1 made by the Tribunal on 24 June 2014 is set aside and in its place the order below is made. 3. Alta Building and Developments Pty Ltd must pay the sum of $ 62,825.31 to Brendan Joy McAllery and Tracy Catherine McAllery within 21 days of the date of this order. Catchwords: CIVIL AND ADMINISTRATIVE TRIBUNAL – question of law – implied terms – leave to appeal Cases Cited: CBA v Barker [2014] HCA 32 Collins v Urban [2014] NSWCATAP 17 Onesteel Manufacturing Pty Ltd v United KG Pty Ltd [2006] SASC 119 Category: Principal judgment Parties: Alta Building and Developments Pty Ltd (Appellant) Brendan McAllery (Respondent) Catherine McAllery (Respondent) Representation: Counsel: J Clifton (Respondent) Solicitors: Rexslaw Lawyers (Respondent) Appellant in person File Number(s): AP 14/46468 Decision under appeal Court or tribunal: Civil and Administrative Tribunal Consumer and Commercial Division Jurisdiction: Consumer and Commercial File Number(s): HB 11/04507 REASONS FOR DECISION Background 1. This concerns an appeal from two decisions of the Consumer and Commercial Division of the Tribunal in two related proceedings relating to a home building dispute between the builder (the appellant) and the home owners (the respondents). The decisions were published on 24 June 2014. 2. An appeal was also filed by the home owners but that appeal has been resolved by agreement between the parties. This decision concerns the builder's appeal. 3. In proceedings HB 10/38289 (the builders application) the Tribunal below held that the builder was entitled to the sum of $96,360.56 from the home owners who appealed. It is the appeal from that decision which has been resolved by agreement. 4. In proceedings HB 11/04507 (the home owners application) the decision of the Tribunal below was that the homeowners were entitled to an order that the builder pay them the sum of $131,825.31. That decision is the subject of this appeal brought by the builder. 5. It is convenient to refer to the appellant as the builder and to the respondents as the owners. 6. The decision below found that the contract between the parties contained an implied term that costs payable by the owners should be reasonably and properly incurred. The decision found that the owners had the onus of proving on the balance of probabilities that the builder had claimed for costs which were neither reasonable nor proper. The member found in respect of two identified matters that the builder had claimed for amounts which were not reasonably and properly incurred by the builder and therefore not payable by the owners. 7. In addition, the member found that in respect of five identified matters the work conducted by the builder was defective. 8. As a consequence of the findings referred to above the Tribunal below made an order that the builder should pay to the owners the sum of $131825.31. Orders challenged on appeal 1. The form of the Notice of Appeal filed by the builder identifies the orders challenged on the appeal and the grounds of appeal as follows: "1. The appellant seeks to overturn the order that the appellant pay to the respondent monies for alleged defective work carried out by the respondent after the contract was terminated. 2. The appellant seeks to have dismissed the finding that the expenditure under the contract was not reasonable and proper. The appellant asserts that the respondents were not able to show that any monies were expended improperly or unreasonably. 3. The appellant seeks in particular to have point 144 in the judgement dismissed as it does not take into consideration work that was not included in the alternative quote from Lotos Concretors. 4. The appellant seeks to have any alleged defects that were approved and signed off by the Council and the engineer be struck out as defects". Grounds of appeal "1. The respondent relies on an alleged variation to the contract which is not in writing and which cannot be sustained for reasons noted on the attached pages. 2. The Tribunal failed to take into consideration the fact that the appellant had terminated the contract by two letters in 2009, yet the Tribunal has ordered that the appellant pay to the respondent for work carried out after this date. 3. The appellant asserts that the respondent is estopped from claiming that monies were improperly or unreasonably expended. 4. The appellant asserts that the respondents were unable to show that monies were improperly or unreasonably expended as the appellant provided very detailed reports of all work activities and purchases. 5. The appellant asserts that the action of the respondent in occupying the site, and not paying the appellant constituted a serious repudiation of the contract and thus the appellant is able to claim damages as a result of this repudiation". 1. In addition, the builder sought leave to appeal and set out in the notice of appeal the reasons why leave to appeal should be granted as follows: "The decision was not fair and equitable The decision was against the weight of evidence The decision erred at law The decision was manifestly wrong The decision puts at jeopardy the proper administration of the Home Building Act, the Occupational Health & Safety Act, and the proper administration of The NSW SICorp (Self Insurance Corporation). The decision relies on an alleged variation to the contract which cannot be supported. The decision penalizes the builder for work not carried out by the builder, but work carried out by the owner. The builder lost control of the work site and the respondent carried out work which it now is claiming against the builder as defective". 1. The builder went on to describe how the decision was not fair and equitable in the following terms: "1. The respondent seeks to claim costs for rectification work on the site that was not carried out by the appellant, not at the direction of the appellant, and not paid for by the appellant. The respondent occupied the site and directed the appellant's staff, and made cash contracts with the appellant's staff and contractors. The appellant had no control over the work being done and was put in an impossible situation with regard to the Work Cover Laws and the OH&S laws applicable to the work site. 2. The respondent is claiming monies for rectification work beyond that required by Building Code of Australia. The appellant in the absence of any detailed specifications to the contrary is not required to exceed the requirements of the BCA. 3. The respondent is claiming monies for rectification work which has been certified as being properly done by the engineer responsible for the job, and for work certified as being properly done by the principal certifying authority which was Baulkham Hills Shire Council". 1. In support of the builders claim that the decision of the Tribunal below was against the weight of evidence the builder described the evidence given at the hearing in the following terms: "Details of the termination of the contract by the appellant prior to any defective work being carried out. Details of the requirements of the Building Code of Australia to show that the work complied with those standards Evidence that the respondent took over the building site and directed the appellant's workers without consent. Evidence showing that payments were not made to the appellant by the respondent under the terms of the contract. Evidence from experts showing that work was not defective and that work was not carried out by the appellant. Evidence that the respondent employed persons not known to the appellant to carry out work under the contract. Jurisdiction of the Appeal Panel 1. Section 80 of the Civil and Administrative Tribunal Act 2013 (NSW) (the Act) provides that an appeal against an internally appealable decision may be made to the Appeal Panel. There is no issue that the decision the subject of this appeal is one in respect of which the Appeal Panel has jurisdiction. Section 80(2) of the Act provides that an appeal from an internally appealable decision lies, as of right, on any question of law or, with leave of the Appeal Panel, on any other grounds. The question of leave is restricted in this case by the operation of clause 12 of Schedule 4 of the Act. 2. Clause 12 of Schedule 4 of the Act provides: 12 Limitations on internal appeals against Division decisions (1) An Appeal Panel may grant leave under section 80 (2) (b) of this Act for an internal appeal against a Division decision only if the Appeal Panel is satisfied the appellant may have suffered a substantial miscarriage of justice because: (a) the decision of the Tribunal under appeal was not fair and equitable, or (b) the decision of the Tribunal under appeal was against the weight of evidence, or (c) significant new evidence has arisen (being evidence that was not reasonably available at the time the proceedings under appeal were being dealt with). Note. Under section 80 of this Act, a party to proceedings in which a Division decision that is an internally appealable decision is made may appeal against the decision on a question of law as of right. The leave of the Appeal Panel is required for an internal appeal on any other grounds. (2) Despite section 80 (2) (b) of this Act, an internal appeal against a Division decision may only be made on a question of law (as of right) and not on any other grounds (even with leave) if: (a) the appellant is a corporation and the appeal relates to a dispute in respect of which the Tribunal at first instance had jurisdiction because of the operation of Schedule 3 to the Credit (Commonwealth Powers) Act 2010, or (b) the appeal is an appeal against an order of the Tribunal for the termination of a tenancy under the Residential Tenancies Act 2010 and a warrant of possession has been executed in relation to that order. 1. The builder submits that the decision below was in error in implying the term into the contract between the parties that "costs payable by the owners should be reasonably and properly incurred" (see paragraph 106 of the decision below). 2. The builder's appeal is partly based upon grounds requiring leave under clause 12. However, the builder also argues that the decision concerning the implied term may involve a question of law. In circumstances where an appellant is not legally represented it is appropriate for the Tribunal to consider the grounds of appeal generally and, if necessary, to determine whether a question of law has in fact been raised even if it is raised in the context of seeking leave under clause 12. It is necessary for the Appeal Panel in approaching the appeal in such a way to have regard to considerations of procedural fairness in so far as that approach impacts upon the respondent. The Appellant' submissions 1. The builder's submissions were extensive. It is not necessary to refer to all of the builder's submissions because some concern the related appeal which the parties have resolved by agreement. 2. The builder submitted that the decision below was in error in finding that the contract contained the implied term referred to above. 3. The builder contended in respect of the decision below that some work was defective, that the decision was in error because of the failure to find that the defective work was carried out after the builder had terminated the contract and that the defective work was undertaken by others engaged by the owners. 4. The builders submissions will be referred to in more detail later in these reasons. However, it is helpful to firstly consider the terms of the contract between the parties. The Contract 1. As the Tribunal below found, the contract was described as a "Head Contract Cost Plus (Residential)" and was on a form published by the Masters Builders Association, NSW. The essential obligations are contained in clauses (1) and (2). Clause (1) provides that the builder will complete the works subject to the contract terms and conditions. Clause (2) provides that the owners will pay to the builder the cost of the works plus the fee payable. 2. The contract contained a warning on a page attached to the front of the contract in these terms: "Control of Money Spent" "It is highly recommended that the Owner and Builder agree that claims for payment be made and required frequently (eg every 2 weeks). The Master Builders Association of NSW believes this will enable the budget to be kept under review. It is critical that the Owner and Builder report regularly to each other about any matters which affect the work to be done and payment for the same". 1. As stated above Clause (2) provides: "(2) The Owner will pay to the Builder the cost of the works plus the fee payable under contract and the GST consequences of the work, at the times and in the manner required by the contract." 1. The cost of the works which are payable by the owner are identified in Schedule 1. Schedule1 includes the builders own costs which are to be charged at the rate per hour which is specified (or in some cases a rate per square metre) and the cost of work carried out by trade contractors engaged by the builder. 2. Part D of Schedule 1 of the contract states that the builder is to provide a budget report at least monthly. The contract stipulates the information to be contained in the budget report (see Clause 1(e)). This includes a summary of work being performed and still to be performed and details of work about which the owner needs to provide instructions in order to allow the work to proceed (Clause 1(c)(iii)). 3. Clause 2 of the contract requires the owner to produce to the builder written instructions including instructions in relation to work under the contract. If the owner fails to provide instructions the builder may suspend the works pursuant to clause 19. 4. Clause 2A contains acknowledgements by both parties that the amount payable by the owner is not at the date of the contract known, nor the total amount ascertainable during the course of the contract. 5. Clause 2A goes on to state that "in order to manage this situation" the parties will regularly meet and review the work done and costs incurred and review the work to be done and the costs "thought to be payable for such work". A further purpose of such meetings is to be make "decisions and choices regarding work under the contract so that that the work to be paid for by the Owner is consistent with the Owner's capacity to pay". 6. Clause 2A further provides that in the event that there is a conflict between the costs of the work as set out in the budget report and the Owners capacity to pay the parties will "adjust the work to be done so that the conflict is eliminated and as such the work to be done is work for which the Owner has the capacity to pay". (Clause 2A(b)). 7. Clause 2A(e) provides: "(e) for the purpose of improved certainty the scope of work to be completed by the Builder is limited to that work for which the Owner has made or can make and does make payment. Consequently any work which is not able to be paid for by the Owner will be eliminated from the work to be carried out by the Builder". 1. Clause 10(b) of the contract requires the builder to proceed with due diligence and bring the works to Practical Completion within the construction period. 2. Clause 14 deals with variations and states that the work may be varied in a number of ways including by "deletions and omissions from the works". The same clause states that a variation is established by written instructions from the owner (or by other means) which "states the work done, to be done or requires adjustments to an existing situation or the work which was otherwise expected to be done". The clause goes on to say: "Accordingly a variation may for example result from such things as a request from the Owner, a choice made by the Owner..". 3. Clause 14(b) provides that the builder is not obliged to vary the contract unless he consents which consent is not to be unreasonably withheld. 4. Clause 14(e) states that if the owner reduces the work to be done by the builder the builder will be entitled to compensation for loss of work calculated in the manner provided for in clause 14(e). 5. Clause 17(1) provides that a claim for payment by the builder is to identify a number of matters including the work for which payment is required and the cost of the work performed. There is also a requirement for claims for payment to be evidenced by supporting documents (clause 17(d)). Clause 17(f) provides that: "a payment for an amount determined in accordance with the contract is verification of the amount to be paid to the Builder for work properly done". 1. Clause 26(a) provides that if the builder is in default in any of the respects identified in sub clauses (i) to (v) then the owner may determine the employment of the builder and engage another builder. One of the matters constituting default by the builder is if the builder fails to proceed "with due diligence or in a competent manner with regard to the circumstances of the contract" (see clause 26(a)(ii)). The submissions in respect of the implied term. 1. The Tribunal's decision below relied upon the decision of his Honour Debelle J in Onesteel Manufacturing Pty Ltd v United KG Pty Ltd for the finding that a term is to be implied into the contract that the costs incurred by the builder would be reasonable and proper. The particular passage of the judgment of Debelle J which the decision below agreed with was the passage in which his honour said: "As a matter of general principle and ordinary commercial common sense, it is quite obvious that, in the absence of a clear expression to the contrary, a provision in a building contract which entitles the contractor to be reimbursed for costs incurred will be subject to an implied term that the cost will be reasonably and properly incurred. In the absence of such a provision, the building owner has an entirely open-ended obligation or, looking at the other side of the coin, the contractor has been handed a blank cheque. Such a contract would put a premium on inefficiency and extravagance. There would be no proper accountability for incompetent or unnecessary work. There are, I think, compelling reasons why it is proper to imply a term that Reimbursable Costs should be reasonably and properly incurred". 1. The builder argues that the decision below is in error in applying the principles set out in the OneSteel case. A number of arguments are put forward. One argument was that the contract in the OneSteel case was distinguishable from the contract the subject of these proceedings 2. It is clear from the decision below that the term was implied because the Tribunal decided that it was necessary to do so in order to give business efficacy to the contract – see paragraphs 104 and 105 of the decision. 3. The builder submits that the implied term creates uncertainty and impracticality. The builder also draws attention to well known principles which identify the requirements which must exist before a term may be implied. These principles have recently been considered and approved by the High Court in Commonwealth Bank of Australia v Barker [2014] HCA 32. 4. The owners submissions supporting the finding of the implied term are described in the following paragraphs. 5. The owners submitted that the decision below finding for the existence of the implied term was a finding of fact and that no error has been shown in the process of reasoning which led to that finding. In other words it was a finding of fact that the implied term was a term of the contract between the parties. 6. The owners submitted that it was necessary to imply the relevant term into the contract in order to give business efficacy to the contract because without the implied term there would be no limit on the costs the builder could charge. The owners further say the implied term is reasonable and equitable 7. The owners further submitted that were such a term not implied a builder could, for example charge for a worker taking "numerous attempts to do something that should be done in one attempt or could arbitrarily order a worker to redo a particular task numerous times to the builders satisfaction and sheet such costs back to the homeowner". Without the implied term it was submitted that the contract would be manifestly unfair. 8. The owners submitted that clause 17(f) of the contract (which has been set out earlier in these reasons) reinforces the view that what the builder's charges must be reasonable and proper. 9. The owners submitted that because the finding of the implied term is a finding of fact no question of law is involved and the builder therefore requires leave to appeal under Schedule 4 Clause 12 of the Act. 10. The owners submitted that if it is accepted that the finding of the implied term is a ground requiring leave the necessary criteria for the grant of leave as required by Clause 12 are not satisfied in this case. The other submissions (ie other than those concerning the implied term) 1. The builder's submissions incorporate submissions on matters which have been resolved by the agreement between the parties concerning the related appeal. It is necessary for this appeal to deal only with the builder's submissions concerning the findings that there were a number of defects. The member dealt with those defects under the following headings: 1. Control joints to be installed in brickwork in accordance with engineers drawings 2. Reinforcing steel to be properly treated and sealed 3. Cracking and blistered bagged render 4. Plasterboard wall sheeting 5. Inadequate drainage (comprising both the item under the heading "Drainage to be installed to drain water from behind retaining wall including clean out pit", and under the separate heading "Adequate drainage for the works and the adjacent tennis courts to be installed"). First defect - control joints 1. The decision below was to the effect that the builder had breached the implied statutory warranty to perform work in a proper and workmanlike manner by not complying with the engineers drawings to install movement joints. The builder's submission was to the effect that the engineer certified the work as being carried out to his satisfaction and that Baulkham Hills Shire Council also signed off on the work as being satisfactorily complete. The builder submitted that the work was carried out in a workmanlike manner and that the engineer agreed. 2. The owners submitted that the builder simply seeks to reargue the case but does not point to any basis satisfying setting aside the decision below. The owners say that it is not the role of the engineer or the principal certifying authority to determine whether there are defects. Second defect - reinforcing steel 1. The decision below was to the effect that the builders expert agreed the item was defective. However, the builder has submitted that the builder was not able to complete the work as the owners had taken over the site. The owners submitted that the requirements for leave are not satisfied. Third defect - cracking and blistered bagged render 1. There are no submissions concerning this item. Fourth defect - plasterboard 1. The decision below was to the effect that the evidence of the owners expert satisfactorily established that the plasterboard had not been installed in accordance with the manufacturers recommendations. The decision also found that pursuant to an agreement between the parties reached on 25 August 2009 (ie after entry into the contract and after the work had commenced) it was agreed that the builder would organise the trades and the owners would pay them direct but that the builder was not relieved of responsibility for that work. 2. The builder submitted that the work concerning the plasterboard was carried out after the builder terminated the contract, that there was no defect and that the builder had no control over the work because the owners had occupied the site. The builder disputes the finding as to the terms of the agreement which the Tribunal found the parties reached on 25 August 2009. 3. The owners submitted that the requirements for leave have not been satisfied. Fifth defect - Inadequate drainage 1. The decision below was based on a consideration of expert and other evidence and was to the affect that the relevant work was defective. The builder submitted that the work to connect the pipe was not done and that the builder was not on site when the work could have been done. The submission does not address the finding made by the Tribunal that the drainage pipe was connected at the direction of the builder or the finding that a spoon drain was required. The builder's submission is that the work which was done was not carried out by the builder. This submission effectively disputes findings of fact made by the Tribunal below, particularly the evidence of Mr Wallace, which the Tribunal accepted. 2. The builder also submitted that there was a variation to the drainage work agreed between the parties under clause 14 of the contract and that the effect of this contract provision is that the builder "is not due to pay the Defendant [the owners] any monies re this alleged defective work". The basis for this conclusion is not adequately explained. 3. The builder submitted that because certificates of compliance were issued by the relevant authorities the alleged deficiencies cannot be claimed to be defects. The basis for this assertion is not adequately explained. 4. The builder submitted that the decision below erred in that it failed to take into account that the stormwater emanating from the tennis court should be excluded from consideration because the tennis court itself was excluded from the contract. This submission does not appear to take into account that the decision below expressly acknowledged that the construction of the tennis court was excluded from the contract between the parties and the finding that the builder undertook work which connected the tennis court drainage line to the drainage system that was installed by the builder. 5. The builder submitted that the Tribunal erred in effectively making the builder responsible for work which the owners engaged to be undertaken. 6. The builder submitted that the finding below as to the fact that the parties met and agreed on certain matters on 25 August 2009 were in error. The builder submits that the so called agreement was not legally enforceable because there was no consideration in the sense of a benefit passing from the owner to the builder. 7. The builder also submitted that the 25 August agreement was not in fact an agreement as the parties did not intend to enter an agreement. The builder does not describe the basis for this assertion. The builder further submitted that this agreement was illegal because it permitted the owners to take control of the work in contravention of the Occupational Health and Safety Act 1983 (NSW). The basis for this assertion is not described as the submission appears to ignore the finding that a feature of the agreement was the builder would organise the trades - that is there was no finding that the agreement included a provision that the owners would take control of the site. 8. The owners respond to the builder's submissions by stating that the builder essentially seeks to reargue points raised before the Tribunal below but does not address the criteria required to be addressed under Clause 12. 9. In respect of the builder's criticisms concerning the finding of an agreement on 25 August 2009, the owners say that the builder is seeking to reargue points it lost in the decision below without addressing the criteria required by Schedule 4 clause 12. The owners submitted that the 25 August agreement was not an agreement without consideration because the builder would continue to be paid its fee. The Appeal Panel's Decision about the implied term and whether builder's costs were reasonably and properly incurred. 1. The Appeal Panel is of the view that the finding that the contract included the implied term concerns a question of law and that therefore the appeal lies as of right. The Appeal Panel's reasoning is set out in the following paragraphs. 2. A finding concerning the terms of a contract may be classified as a finding of fact. However, a finding as to the existence of an implied term may occur by reason of a contract being construed in such a way that the decision maker concludes that the term must be implied in order to give business efficacy to a contract. In Commonwealth Bank of Australia v Barker [2014] HCA 32, the High Court described the ways in which courts have implied terms in contracts. One way is described as "in fact or ad hoc to give business efficacy to a contract". Necessarily, such an approach involves considering the terms of a contract and deciding that for the purposes of giving business efficacy to a contract it is necessary for "individualised gap fillers" (to use the phrase of Gageler J in that case) to be found to complete the terms of the contract. 3. In CBA v Barker the Court stated terms may be implied in some contracts as a matter of law. The court also said that the two kinds of implied terms (ie those implied in law and those implied in fact) both involve the requirement for "necessity". The requirement that a term implied in fact be necessary "to give business efficacy to the contract" in which it is implied can be regarded as a specific application of the criterion of necessity (paragraph 28). The court said that implications in law are a species of judicial law making and are not to be made lightly. The same constraints apply whether or not such implication are characterised as rules of construction (paragraph 29). Although that case was concerned with whether a term should be implied as a matter of law, the Appeal Panel is of the view that the process of implying a term as a result of construing the terms of a contract equally involves "judicial law making". 4. The Appeal Panel finds that the finding of the existence of the implied term involves a question of law and therefore the appeal lies as of right. 5. If the Appeal Panel is wrong in its conclusion that the finding of the implied term concerns a question of law, the panel is of the view that leave under Clause 12 should be granted for the reasons which follow. 6. The finding of the implied term was based upon the finding that the contract without such term gives the builder a "blank cheque" (to use the phrase of Debelle J). This conclusion necessarily involves a finding that the evidence (in this case the contract itself) does not contain terms which operate to constrain the builder from seeking a blank cheque. If the contract in fact contains terms (express or implied) relevantly constraining the builder the decision would be, in the opinion of the Appeal Panel, one to which clause 12(1)(b) is involved - namely a decision against the weight of evidence. 7. Alternatively, if the evidence relied upon for the findings that some charges were neither reasonable nor proper was evidence which was not sufficiently adequate or relevant upon which to base such findings, the findings may be ones to which both clause 12(1)(a) (the not fair and equitable ground) and clause 12(1)(b) apply. 8. Although clause 10(b) requires the builder to proceed with due diligence and clause 26(a)(ii) identifies the builder as being in default if it fails to proceed with due diligence and in a competent manner, there is in the opinion of the Appeal Panel no express clause which moderates the amounts which the builder may charge other than the provisions of Schedule 1 concerning the insertion of agreed hourly rates and rates per square metre. 9. Accordingly, it is the opinion of the Appeal Panel that it was open to the Tribunal to conclude that the contract contained the implied term and that the costs payable by the owners should be costs reasonably and properly incurred. 10. The Appeal Panel does not accept the builder's submission that clause 3(d) precludes the existence of any implied term. That clause provides that the whole of the terms, conditions and warranties are set out in the contract. The Appeal Panel agrees with the decision below that that clause does not exclude the finding of the existence of the implied term. 11. In the circumstances of this contract the Appeal Panel is of the opinion that the finding of the implied term does not involve any error of law. 12. However, it is the opinion of the Appeal Panel that the evidence upon which the decision relied for the finding that charges for the two items in question (namely, first the concrete slabs, stairs and paved area, and secondly, the carpentry roof and wall) were unreasonable and improper was not adequate or relevant evidence. The Appeal Panel is of the view that the decision in respect of these two items was not fair and equitable and was against the weight of evidence. 13. The basis for the finding below concerning the first of the two items was that the owners expert said a cost overrun had occurred because the builder had elected to do the work himself on an hourly rate basis rather than subcontract to Lotos Concretor Pty Ltd which had quoted on a lump sum basis for an amount less than the amount the builder would charge. In the opinion of the Appeal Panel simply because the builder elected to do the work himself as against contracting to do the work for a lesser amount does not mean that the builder's charge was not reasonable and proper. The contract requires the builder to do the work contracted for at the rates specified. There is no term (express or implied) that the builder must use subcontractors if they offer to do the work for a price which is less that the amount the builder would charge. It is necessary for the evidence to establish that the builder's charge was not reasonable and proper. For example if the difference between the builder's charge and the Lotos charge arose only because the hourly rates charged by Lotos were lower than the rates charged by the builder in accordance with the contract but the amount of time spent by both was approximately the same it would not be justifiable to describe the amount charged by the builder as not reasonable or improper. In the opinion of the Appeal Panel the decision below was not fair and equitable because the premise (i.e. that the subcontractor would charge less than the builder) does not justify the conclusion that the charge was not reasonable and proper. 14. The conclusion below also stated that the builder chose to do this work himself and that it was a "more costly outcome than subcontracting the works to achieve a more cost efficient outcome". As stated above in the opinion of the Appeal Panel this approach was essentially to compare the costs charged with what a subcontractor would have charged and to conclude that where the subcontractor was cheaper the builder's charge was unreasonable and improper. The decision may also be described as against the weight of evidence. 15. In respect of the second item, the evidence relied upon by the Tribunal was that the costs were excessive against both the builder's original estimate and the owners expert's evidence. The decision records that the expert said that the cost overrun was caused by the builder's decision to carry out this work on hourly rates rather than subcontracting it. The expert also provides his own estimate. However, there was no evidence that what the builder charged was unreasonable or improper. Rather the Tribunal found that a "more cost efficient outcome" would have been achieved by subcontracting the work. The Appeal Panel is of the view that the evidence relied upon was inadequate to support the findings which were made and that the approach (which was to compere the costs charged with what a subcontractor might have charged) was not fair and equitable and against the weight of evidence because it did not support the conclusion that the charge was not reasonable and proper. 16. In short, the view of the Appeal Panel is that the evidence did not establish that the builder's charge was unreasonable and improper and that the reasoning below approached the assessment of the evidence in a manner which did not appropriately address whether the charge was reasonable and proper. 17. The Appeal Panel is of the view that these two items were decided on a basis which attracts the provisions of clause 12 (i)(a) and (b). The next question is whether the decision involves a substantial miscarriage of justice as required by clause 12. 18. Appeal Panels of the Tribunal have dealt with the question of the operation of clause 12: see in particular Collins v Urban [2014] NSWCATAP 17. In that case the Appeal Panel pointed out that clause 12 does not require that the Appeal Panel must be satisfied that the appellant has actually suffered a substantial miscarriage of justice. All that is required is that the appellant "may" have suffered such a miscarriage. 19. The expression "substantial miscarriage of justice" is explained in some detail in Collins v Urban. For present purposes it is sufficient to say that if the Appeal Panel is of the opinion that the appellant may have been denied a chance that was fairly open of achieving a better outcome than occurred by reason of the manner in which the matter was conducted or decided then there may have been a substantial miscarriage of justice. Thus, there will be a substantial miscarriage of justice where it can be established that there was a significant possibility that a different, more favourable result would have been achieved if the evidence had been appropriately considered in a manner relevant to the issue in question. 20. In this case the decision under appeal can be said to be against the weight of evidence because the evidence concerning the two items in question when considered in totality preponderates so strongly against the conclusion as found by the Tribunal at first instance that it can be said that the conclusion was not one that reasonably could have been reached. In addition as stated above the decision may be described as not fair and equitable. Therefore, because the Appeal Panel is satisfied that the appellant may have been deprived of a significant possibility or chance that was fairly open of achieving a different and more favourable result the Appeal Panel is satisfied that the appellant may have suffered a substantial miscarriage of justice. Accordingly, leave to appeal ought to be given in this case subject to the general principles which are also dealt with in Collins v Urban. 21. As stated in Collins v Urban it is ordinarily appropriate to grant leave to appeal only in matters that involve: 1. issues of principle; 2. questions of public importance or matters of administration or policy which might have general application; 3. an injustice which is reasonably clear, in the sense of going beyond merely of what is arguable, or an error that is plain and readily apparent which is central to the Tribunals decision and not merely peripheral so that would be unjust to allow the finding to stand; 4. a factual error that was unreasonably arrived at and clearly mistaken; or 5. the Tribunal having gone about the fact finding process in such an unorthodox manner or in such a way that it was likely to produce an unfair result so that it would be in the interest of justice for it to be renewed. 1. In the circumstances of this matter it is the view of the Appeal Panel that the decision with respect to the two items under consideration has resulted in an injustice which is reasonably clear and that this has occurred for the reasons described above. The evidence did not support the conclusions and the owners two claims ought to have been dismissed. The Appeal Panel's Decision in respect of the Defects First Defect – control joints, Second Defect – reinforcing steel, Third Defect – cracking / blistered bagged render 1. The Appeal Panel is of the opinion that the findings below in respect of the first and third defects were open on the evidence (particularly the evidence of an expert) and that no grounds satisfying the provisions of clause 12 have been identified in respect of these two items. The fact that the engineer and the principal certifying authority may not have identified defects does not preclude the owners tendering evidence which establish that there were defects. No submission is made in respect of the second defect and there is no basis to set aside the decision in respect of that defect. Fourth Defect – plasterboard 1. The Appeal Panel does not agree with the builder's submissions. The finding below concerning the agreement of 25 August 2009 was that the agreement did not relieve the builder of its responsibilities. The builder was not able to demonstrate that the findings were against the weight of evidence or otherwise within the grounds required by clause 12 for leave to appeal. 2. The builder sought to argue that the agreement of 25 August 2009 was unenforceable because there was no consideration. The finding below was that that agreement involved the arrangement that the owners would pay the trades direct. There was the additional finding that the owners did not enter into direct contracts with the trades. In the related decision below, the finding was that this agreement included an agreement that the builder would complete the contract without any increase in his original fee and that if costs over ran estimates the costs would be absorbed by the builder. 3. In the opinion of the Appeal Panel the agreement of 25 August 2009 as found by the Member below is not a finding of the existence of an agreement having no consideration. Rather it was a finding of an agreement between the parties to vary in some respects the performance of the contract between them with confirmation that the builder would continue to be paid its fee. Even if there was no consideration (which is not the Appeal Panel's view) there was the finding was that one effect of the agreement of 25 August 2009 was that the builder was not relieved of its responsibilities. If, as the builder contends, the agreement was not enforceable, the position would still be that the builder has continuing responsibilities unless the builder had terminated the contract. The findings of fact do not include a finding that the builder terminated the contract. 4. The Appeal Panel is of the view that the decision below was open to the Tribunal and that the provisions of clause 12 have not been engaged. Fifth Defect – Inadequate Drainage 1. In the opinion of the Appeal Panel the findings of fact by the Tribunal below were open on the evidence. The builder's submissions contest these findings but do not provide any tangible basis to support a conclusion that the provisions of clause 12 have been satisfied. In particular, the appeal panel is not satisfied that the findings by the Tribunal could be said to be against the weight of evidence. Conclusion 1. The Appeal Panel concludes that the appeal should be upheld in relation to the order requiring the builder to pay the owners for the two items held to be charges not reasonably and properly incurred. These amounts are $47,011.00 and $22,459.00. Leave to appeal in respect of the order concerning defects should be refused. 2. The Appeal Panel will make orders accordingly and reduce the amount payable by the builder to $62,355.31 (ie $131,825.31 less $47,011 less $22,459). 3. Both parties seek costs. Both parties have been partially successful and unsuccessful. The Appeal Panel has decided that it is not appropriate to make orders concerning costs of the appeal. 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: 12 February 2015