Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Grace v Pepe [2016] NSWCATAP 157 Hearing dates: 5 May 2016 Date of orders: 22 July 2016 Decision date: 22 July 2016 Jurisdiction: Appeal Panel Before: D Patten, Principal Member R Titterton, Senior Member Decision: (1) Appeal allowed in part. (2) Quash orders made below and in lieu order that the builder Sam Grace pay the owners Anthony and Sophia Pepe the sum of $10,281.85. (3) No order as to costs. Legislation Cited: Civil and Administrative Tribunal Act 2013 Cases Cited: Maloney v Sterling Estates Development Corporation [2002] NSWSC 920 Texts Cited: Carter's Breach of Contract 3rd Edition 2011 Category: Principal judgment Parties: Sam Grace (Appellant) Sophia Pepe and Anthony Pepe (Respondents) Representation: Counsel: K Ginges (Applicant) R Zickmann (Respondent) Solicitors: File Number(s): AP 16/06563 Decision under appeal Court or tribunal: NSW Civil and Administrative Tribunal Jurisdiction: Consumer and Commercial Division Date of Decision: 26 November 2015 Before: G Meadows File Number(s): HB 11/08243 REASONS FOR DECISION 1. This matter has a complicated history which it is necessary to outline in order to clarify the issues raised for decision on the appeal. 2. The appeal concerns residential premises in Maroubra and a "Short Form Residential Building Contract" dated 6 March 2010 entered into between Anthony Pepe and Sophia Pepe (the owners) and Sam Grace trading as Grace Designs and Constructions (the builder). Disputation arose between the parties and proceedings were commenced in the Consumer, Trader and Tenancy Tribunal (the CTTT) pursuant to the Consumer Trader and Tenancy Tribunal Act 2001 (the CTTT Act) by the builder (proceedings HB 10/51266) and by the owner (proceedings HB 11/08243). Those proceedings resulted in a hearing before Senior Member Meadows who on 17 September 2013 dismissed the builder's application HB 10/51266 and in the owners application HB 11/08243 ordered the builder to pay to the owners the sum of $82,281.85. This award of damages was based on a finding by the Tribunal that the owners were entitled to issue a notice of suspension of the contract and later to terminate it. 3. A limited appeal from the CTTT then lay to the District Court of NSW under s67 of the CTTT Act. Section 67 provided 67 Appeal against decision of Tribunal with respect to matter of law (1) If, in respect of any proceedings, the Tribunal decides a question with respect to a matter of law, a party in the proceedings who is dissatisfied with the decision may, subject to this section, appeal to the District Court against the decision. (2) An appeal is to be made in accordance with the rules of the District Court. The rules of the District Court may provide that an appeal (or such classes of appeal as may be specified in the rules) may be made only with the leave of the Court. (3) After deciding the question the subject of such an appeal, the District Court may, unless it affirms the decision of the Tribunal on the question: (a) make such order in relation to the proceedings in which the question arose as, in its opinion, should have been made by the Tribunal, or (b) remit its decision on the question to the Tribunal and order a rehearing of the proceedings by the Tribunal. (4) If such a rehearing is held, the Tribunal is not to proceed in a manner, or make an order or a decision, that is inconsistent with the decision of the District Court remitted to the Tribunal. (5) If a party has appealed to the District Court against a decision of the Tribunal on a question with respect to a matter of law, either the Tribunal or the District Court may suspend, until the appeal is determined, the operation of any order or decision made in respect of the proceedings. (6) If the Tribunal suspends the operation of an order or a decision, the Tribunal or the District Court may terminate the suspension or, where the District Court has suspended the operation of an order or a decision, the District Court may terminate the suspension. (7) If a rehearing is held, fresh evidence, or evidence in addition to or in substitution for the evidence on which the original decision was made, may be given on the rehearing. (8) A reference in this section to a matter of law includes a reference to a matter relating to the jurisdiction of the Tribunal. (9) The regulations may exclude the making of an appeal under this section in such classes or description of cases as may be prescribed. 1. The builder appealed against the decision of the Tribunal in respect of the owners' application HB 11/08243. That appeal was heard by P Taylor SC DCJ on 26, 27 and 28 November 2014. On 1 December 2014, His Honour made these orders: (1) Allow the appeal. (2) Remit my decision on the questions set out in these reasons to the Tribunal and order a rehearing of the proceedings by the Tribunal pursuant to s 67(3)(b) of the Consumer, Trader and Tenancy Tribunal Act 2001. (3) Order the costs of the appeal (excluding the plaintiff's costs of the first day of hearing) be costs in the Tribunal, to abide the determination by the Tribunal of the costs in the Tribunal. (4) By consent, grant liberty to either party to apply to this Court in respect of a Suitors' Fund Act 1951 Certificate, in respect of the costs of these proceedings, after the determination of the rehearing by the Tribunal. 1. On the remitter by Judge Taylor, the matter was heard again by Senior Member Meadows in the NSW Civil and Administrative Tribunal (NCAT), which by then had acquired the jurisdiction formerly exercised by the CTTT. NCAT heard the matter on 26 November 2015 and published its orders with reasons occupying over 30 pages on 31 December 2015. The essence of the orders and reasons was stated in paragraphs 104 and 105: 104. The owners accepted the builder's repudiation by issuing their notice of termination on 8 February 2011. I therefore find that the owners' termination of the contract was valid. 105. On that basis I find the money order made by me on 17 September 2013 does not require amendment. 1. Before us is an appeal from NCAT's decision of 31 December 2015. In considering the submissions made to us, it is necessary not only to focus on the reasons given below but also upon the findings and reasons of Judge Taylor having regard to order 2 made by him and the terms of s67(4) of the CTTT Act. 2. The dispute between the parties seems to have arisen about September 2010 and on 20 September 2010 the owners sent an email to the builder purporting to suspend work on the project. 3. The email and the documents and events which followed it were reproduced and dealt with by Judge Taylor as follows: 8. On Monday, 20 September 2010 the owners wrote to the builder by email in these terms: "Sam, All work will cease immidiately [sic] to ensure that a proper investigation by the office of fair trading and authorised personal [sic] can be carried out. You are not allowed to be on or near the site until this is done to ensure that any outstanding monies can be assessed without predjudice [sic]. You will be tresspassing [sic] if you or people on your behalf come on or near the site and neighbours have been notified to call the police to ensure that this happens. If in the event that there is money owed to you after the investigation then we will pay what is owed less any costs to fix damage and change any things that were nt [sic presumably 'not'] built to the original plan and that you continued without advising us or seeking permission. Obviously, this as stated will be going through the official process due to irrepairable [sic] problems. Unfortunately your threats have also been noted and reported and if necessary after a meeting with a solicitor tomorrow I will notify the police. It is very unfortunate that you have behaved in this manner not just in threats (which is not the first time) but your actions on this project. We have tried time and time again to deal with you but you have avoided all manner of communications that would have assisted in this projects completion. We believe that we have over paid up to this point but this will be veryfied [sic] when the house is assessed by multiple builders to veryify [sic] work outstanding and defects. We will of course be persuing [sic] damages caused to our property, personal belongings and of course rent that we have had to pay due to our property being accidently [sic] damaged by trades and of course damage caused by the weather and you negligent actions. We will be having several people coming through the property in the next 2 days so we can give this information to the fair trading to support our complaint and claim. Can you please clearly itemise all outstanding work and the price you have quoted for that work, this is to include mac render upstairs and render all areas downstairs as per drawings, gyprock, timber flooring etc. Can you also provide a list of all damages that will be taken into account like tiles, concrete etc and changes you have made without notifying us like timber posts that you changed after quoting. We are officially suspending work on site so a full evaluation of the work and damages can been assessed. It would be adviseable [sic] to allow assessments to be made so that we can all move forward without delay. Any futher [sic] delays will only mean there will be further damage claims due to not being allowed back in to the property due to health and safety issues and insurance claims. Your co operation would be appreciated in the expediant [sic] working out of work outstanding and monies owed and of course cancelation [sic] of this contract. Anthony". 1. That email appeared to prompt a response from the builder on the next day, 21 September 2010. Mr Grace, the builder, sent a letter to Mr and Mrs Pepe in the following terms: "Dear Mr and Mrs Pepe NOTICE OF SUSPENSION OF WORK … Pursuant to Clause 14 of the Contract we advise you that works are suspended for the following reasons: Clause 14(a)(i) Owner interference and prevention of the Builder from carrying out the work; and Clause 14(a)(iii) Owner's failure to pay money due under the contract. Should you fail to correct these defaults within ten days of receiving this notice we will terminate the Contract. Yours faithfully Sam Grace". 1. On the same day, the builder sent a notice of dispute to the owners in the following terms: "Dear Mr and Mrs Pepe NOTICE OF DISPUTE … Pursuant to Clause 12 of the Contract we advise you that there is a dispute for the following reasons: 1. Owner interference and prevention of the Builder from carrying out the work; 2. Owners' breach of Clause 2 of the Contract by repeatedly going onsite without consent of the Builder. 3. Non-compliance with Builder's requests by the Builder concerning OH&S, site access or site attendance. 4. Owners' failure to pay money due under the contract 5. Owner's email correspondence dated 20 September 2010 instructing work to cease and Builder to stay away from the site. Within 10 business days after receipt of this notice we should meet at least once to attempt to resolve the dispute or agree on a method of resolving the dispute. Please nominate a date suitable to you to meet. Additionally, Grace Design and Construction has applied to Fair Trading's dispute resolution service. Fair Trading will contact you to clarify the nature of the dispute. If you are agreeable a Fair Trading Building Inspector will organise a site visit and meet with both parties to conduct a mediation session to resolve the dispute. Yours faithfully Sam Grace". 1. The following day, 22 September 2010, the builder issued and sent to the owners invoice 10 totalling $41,989.04. That invoice included the amount already invoiced in invoice 9 plus an additional $9,665. 2. On 27 September 2010 the owners, by their solicitors, suggested a meeting of the parties on either 28 or 29 September 2010. Apparently a mediation was held on 6 October 2010, which was unsuccessful, and on or about 11 October 2010 the owners declined to have intervention from New South Wales Fair Trading. 3. On 4 October 2010 the builder filed an application in the Tribunal claiming the amount of $41,989.04, which had been sought in invoice 10. 4. On 24 December 2010 the owners issued what might be termed a "notice to rectify" to the builder. It was in the following terms: As Solicitors for Anthony Pepe and Sophia Pepe, the Owners, we hereby give you notice, on behalf of the Owners, pursuant to Clause 13 of the Contract between yourself and Mr, and Mrs. Pepe as follows: 1. You as the builder have made default by wrongfully stopping work for an unreasonable period and for failing to proceed with due expedition to enable completion by the due date, after allowing for changes to the construction period. 2. You as the builder have failed to comply reasonably with a written notice to replace defective work or improper materials so that the builder can advise the owner that he/she can complete the work for the contract sum or within the contract period, as varied or extended. The Owners hereby advise you that you have not completed the works with due expedition by the due date allowed in the Contract and that the Owners have not consented to the delay in completion of the works and you have carried out defective works which you have not rectified and which are particularized in a Building Inspection Report prepared by Barry M. Morris Building & Construction Consultant ("the Report"). You are required to rectify the defaults above referred to and as referred to in the Report within 20 days from the date hereof. If you fail to rectify the defaults within this period the Owners, may, by further written notice, determine your employment. DATED this 24th day of December, 2010. [signature] John Lloyd Solicitor For and on behalf of Anthony Pepe and Sophia Pepe". 1. Nothing of particular significance seems to have occurred thereafter between the builder and the owners, other than a confirmation that the letter was received and a rejection of the matters in it, in a letter dated 30 December 2010 from Mr Grace to the solicitor for the owners. The letter did indicate that the report by Mr Morris "will be responded to in due course following the break, and after seeking advice from our MBA Lawyers who are also on break till the 10th January 2011". 2. In 8 February 2011 by facsimile, the owners sent a notice purporting to determine the contract in the following terms: NOTICE PURSUANT TO CLAUSE 13 OF THE CONTRACT 1. The builder has failed to rectify the defects to which notice was given pursuant to clause 13 of the contract on 24 December 2010 within 20 days of the notice having been served; 2. The owner, by this notice, determines the employment of the builder. Signed, Anthony Pepe, Sophia Pepe, 8 February 2011." 17. Shortly before the matter came before the Tribunal for hearing in December 2011, on 29 November 2011 the builder issued a notice to determine the contract in accordance with clause 14(d) of the contract on the basis that the owners had not complied with the builder's notice of suspension of 21 September 2010 and that they had not, within the ten days, allowed the builder to carry out the work or paid the money due to the builder under the contract. The builder asserted that that notice was sent in case there had not already been an abandonment of the contract. 1. At par [19] and following of his reasons Judge Taylor explained the issues raised in the appeal before him: 19. The builder appeals under s 67 of the Consumer, Trader and Tenancy Tribunal Act 2001: 1. Claiming $41,989.04 in unpaid invoices that were rejected by the Tribunal; and 2. seeking to reduce the amount of $82,281.85 awarded by the Tribunal to an amount of $11,707, being an amount for defects. 20. At the hearing before me, the builder took no issue about three other items awarded by the Tribunal, namely, $6,000 insurance excess, $1,540 reimbursement for packing and a variation of $3,741.85 for alternative accommodation. Thus, the residual amount of $59,293, of the amount awarded by the Tribunal, is disputed (i.e. $82,281.85 - ($11,707 + $6,000 + $1,540 + $3,741.85)). 21. To put it another way, the builder's case is that $22,988.85 ($11,707 + $6,000 + $1,540 + $3,741.85) should have been ordered in favour of the owners which, when offset against the builder's unpaid invoice 10, would produce a net amount of $19,000.19 in favour of the builder. The owners support the Tribunal's decision. 1. In relation to the notice purporting to suspend the contract given on 20 September 2010 by the owners, his Honour found: 38 .It follows that the owners' suspension or, more accurately, their refusal to allow the builder to access or "possess" those parts of the site needed to complete the works, was in breach of cl 6(a) of the contract. 39. I accept that there was an error of law by the Senior Member in finding that the notice of suspension was valid. 1. These findings disposed of the first ground of appeal to the District Court. The second ground of appeal challenged the findings below that the suspension notice of 20 September 2010 was intended to be a temporary measure. Judge Taylor held that this was not a finding capable of amounting to an error of law as there was some evidence to support it. He observed that the significance of the ground appeared to have evaporated in light of his finding that the notice of suspension was invalid. 2. The third ground of appeal was that the Tribunal below erred in law by finding that the owners had "invited" the builder to return to the property to complete the building work. Judge Taylor held that this could not be a question of law as there was indisputably some evidence to support it. 3. In relation to grounds 4 and 5 Judge Taylor again held that they did not raise questions of law which he could decide: GROUND 4 "The learned Member in the Tribunal erred in law in that he failed to consider whether: d. The Notice to Rectify, issued to the plaintiff by the defendants on or about 24 December 2010, was issued in accordance with the Contract and, further, whether it was valid and effective at law; and e. The Notice of Termination, issued to the plaintiff by the defendants on about 8 February 2011 was issued in accordance with the Contract and, further, whether it was valid and effective at law." 49. This ground concerns matters that the Senior Member is asserted to have failed to consider. But an appeal under s 67 concerns matters that the Tribunal decides, not ones that it fails to consider. Failures to consider matters may potentially result in errors in other decisions made by the Tribunal but it is necessary to challenge those decisions, not the failures to consider matters. There was no suggestion that the matters in ground 4 were implied decisions of the Tribunal. 50. The Senior Member (at [18]) found that the owners were entitled to terminate the contract. That is, in substance, a finding that the notice of termination was valid. The question of whether the notice of termination or the notice to rectify was valid is a question with respect to a matter of law but, as I read ground 4, it is a question not raised by that ground. GROUND 5 "The learned Member in the Tribunal erred in law in that he either failed to consider or failed to determine whether the defendants' Notice of Termination was wrongful and otherwise amounted to a repudiation of the Contract by them." 51. This ground raises largely the same issue as raised by ground 4. There does not seem to me to be a material difference in the present case between whether the notice of termination was invalid and ineffective (under ground 4) or wrongful (under ground 5). The builder did not identify any material difference between them. Accordingly, the reasoning above in the previous ground applies also to this ground. 52. There is an additional assertion in ground 5 to the effect that the Senior Member failed to consider or determine whether the notice of termination was a repudiation. Again, for the reasons given in relation to ground 4, a failure by the Tribunal to decide a matter does not enliven the jurisdiction in this Court granted by s 67(1). Jurisdiction under this provision arises if the Tribunal decides a relevant matter. 1. Ground 6 was that the Tribunal below erred in law when it found that the builder was not entitled to issue progress claim invoices 9 and 10. In relation to this ground Judge Taylor concluded: 59. At [26] of the decision, the Senior Member found that the "value of the works then remaining…significantly exceeded the remaining contractual payment." In my view, this is a relevant matter in determining the value of the works (measured against the contract price) at that stage completed by the builder. 60. Whether the builder was entitled to issue invoices 9 and 10 depended on the value of the work done. It also depended on the value of the work remaining since the value of the work done equals the contract price less the value of the work remaining. The Senior Member decided that there was no entitlement to issue the invoices because of the value of the work remaining, in view of the expert opinion of the builder's expert. In my view, this was an approach open to the Senior Member that involved no error of law. 61. The Senior Member determined that the builder was not entitled to issue invoices 9 and 10. The decision of the Senior Member stated at [26] - "he was not entitled to claim the amount actually claimed," - does not involve an error on a question of law for the reasons given. 1. Ground 7 raised substantially the same issue as ground 6. Judge Taylor held that it did not raise a question of law. 2. In respect of ground 8 Judge Taylor held that as the builder was not entitled to issue invoices 9 and 10 non- payment by the owners did not entitle the builder to issue his notice of suspension which was accordingly invalid. 3. Ground 9 raised the question whether the Tribunal erred in law by implicitly or otherwise finding that the builder repudiated the contract by issuing his notice of suspension. Taylor DCJ held that the Tribunal did not make such a finding nor was there any basis for doing so. 4. Grounds 10 and 11 were dealt with by Taylor DCJ as follows: GROUND 10 "The learned Member in the Tribunal erred in law in that he either failed to consider or failed to determine the plaintiff's Notice of Termination." 69. This ground does not identify a matter decided by the Tribunal and, thus, does not enliven the jurisdiction under s 67. 70. In any event, it is apparent that there was no need for the Senior Member to decide anything further about the builder's notice of termination since the Senior Member found that the owners were entitled to terminate nine and a half months prior to the issue of the builder's notice. GROUND 11 "The learned Member in the Tribunal erred in law in that he failed to consider whether the Contract [had] been abandoned by the parties." 71. The same principles discussed earlier in respect of decisions not made by the Tribunal apply to this ground. In any event, an asserted abandonment after the owners' termination (found by the Senior Member to be valid) would evidently not have been a matter for the Senior Member to consider. 72. Regarding any abandonment prior to the termination by the owners, the circumstance that the Senior Member found that the contract persisted up until the time that the owners issued the notice of termination on 8 February 2011 manifests an implicit decision by him that there had been no abandonment prior to that date. The parties' conduct in September and December in issuing notices under the contract might be thought to support a decision that there was no abandonment of the contract. 1. The final ground 12 asserted that the Tribunal erred in law in finding that the builder was liable to pay for completion costs. As we understand his reasons, Judge Taylor held that the circumstances which led to the owners giving an invalid notice of suspension on 20 September 2010 could potentially be sufficient to justify termination, termination being a valid contractual remedy whereas suspension was not. 2. However, His Honour proceeded to find that the Tribunal's reasons did not reveal any pre-September 2010 conduct by the builder sufficient to warrant termination. He went on to say: The question whether the owners may have had an entitlement to terminate by reason of the conduct of the builder after the owners' suspension on 20 September 2010, including any failure by the builder to comply with a valid notice to rectify, does not appear to be determined by the Senior Member. 82. It is apparent that the owners in issuing the notice of termination on 8 February relied principally on conduct after 20 September 2010, namely, the failure of the builder to comply with the notice to rectify. This raises a question as to whether I should consider and determine whether the termination by the owners was valid for reasons other than the reasons given by the Senior Member, including, in particular, whether there was a valid notice to rectify issued by the owners and whether that enlivened a right to terminate because of the builder's conduct after he received that notice. 83. There are matters in the notice to rectify that cause concern. It apparently includes, by reference to the annexed report, both defective and incomplete works. It calls on the builder to complete both the defective and incomplete works in 20 days, perhaps 20 calendar days, in circumstances where there may have been an entitlement in the builder by virtue of the definition of "days" in the contract (see cll 13 and 18) to have until about 6 February 2011 to complete defective works as a result of the notice. 84. The time at which the builder needed to complete the contract works does not seem to have been given any attention by the Senior Member and was not given any particular attention before me. It maybe that the suspension of work by the owners operated to postpone the date for the builder to complete the works. The validity of the owners' notice to rectify and the consequences of any failure by the builder to comply with it may also depend upon whether the notice operated as an express or implied lifting of the owners' suspension. 85. There may also be questions about whether the items referred to as "defects" are, in an executory building contract, properly defects or merely incomplete work. There may also be questions about whether the builder's conduct after the issue of the notice to rectify, whether valid or not, could constitute a fundamental breach or a repudiation. 1. Thereafter acknowledging that the matter needed to be referred back to the Tribunal for rehearing, Taylor DCJ gave guidance as to the matters requiring further consideration: 89. The question of whether the notice to rectify is valid will involve consideration of a number of matters, including cl 13 of the contract, the content of the notice both as to "stopping work" and as to failing to rectify "defective work" and the circumstances at the time of the issue of the notice, including such matters as whether there had been prior written notice given to the builder of defective materials in view of the definition of "notice" under the contract. 90. I do not propose to provide any final view in respect of these questions which involve not only matters of law but questions of fact that have not been considered by the Senior Member. 91. The Senior Member may need also to consider the question of termination for repudiation or fundamental or sufficiently serious breach under the common law which may possibly arise from the conduct of the builder in failing to do anything after, if it be the case, he was invited back to do work by the notice. 92 If the termination by the owners were valid, there would be no need to determine the question of damages since the Senior Member has already determined them. 93. However, if the Senior Member came to the view that the matters to which I have referred do not give rise to an entitlement in the owners to terminate, then the Senior Member may need to consider whether the contract has been abandoned, given that the owners, after 8 February 2011, treated the contract as at an end and the builder, by his apparent conduct in doing nothing after that time, also appeared to have treated the contract as at an end. 94. The builder, by not terminating in October 2010, appears to have elected not to end the contract by reason of any failure in the owners to comply with the builder's notice of suspension of work under cl 14. Although the Senior Member found that that notice was invalid by reason of the builder's reliance upon a failure to pay moneys under invalid invoices, the question of whether the notice would nevertheless have been valid because of the owners' invalid suspension has also not been considered. However, given that the builder did not act within a reasonable period after noncompliance with that notice but rather waited a further 14 months, it seems unlikely that any entitlement in the builder to terminate persisted. In any event, the builder's primary submission before me was that the contract was abandoned, rather than that it was terminated by him. 95. The builder has only claimed for unpaid invoices and is only entitled to those funds if he has done the work sufficient to warrant the issue of those invoices under cl 7. The Senior Member has decided, validly in my view, that that did not occur. Thus, in the event that the owners' termination was not valid, the question arises as to the proper assessment of the monetary entitlements of the parties. In that event, the builder is entitled to retain that proportion of the contract price that represented the proportion of the contract works that had been performed. 96. To give an example, invoice 10 claims an amount indicating that 91% of the contract works by value had been completed. The Senior Member concluded that those works had not been done. At that stage the builder had been paid approximately 71% of the contract value. Whether the builder was entitled to anything in addition to the amount already paid would depend upon a finding of the Senior Member as to what proportion of the work had been completed by the builder at the time he ceased work on 20 September 2010. 97. Additionally, if the Senior Member found an amount less than 71% the owners would have an entitlement to repayment of overpayments arising from excessive claims by the builder in invoice 8 and potentially earlier. Thus, if the owners have not validly determined the contract, it is necessary for the Senior Member to determine the percentage of the contract work completed by the builder. I leave aside the question of defects and the other amounts since the Senior Member has assessed them and they were not in dispute before me. 1. In light of the above, we come to consider the decision of the Tribunal below and the grounds of appeal. 2. As indicated earlier the re-hearing occurred on 26 November 2015 by the Tribunal again constituted by Mr Meadows. Its decision was published on 31 December 2015. At the outset we reproduce clauses of the contract which we regard as relevant: 6 Commencement, purpose of and completion of work (a) (i) The Owner must give the Builder possession of such parts of the work site as is reasonably required to allow work to proceed. (ii) The proposed commencement date and the anticipated number of days required to do to the work are set out in Schedule 3. (iii) The Builder is to complete to work within the period identified in Schedule 3 as adjusted under the contract. This period is known as the construction period. The construction period will commence from the date of actual commencement of work. (b) The construction period is to be adjusted as set out below: (i) An extension of time for delays due to variations and other events or matters reasonably beyond the Builder's control must be allowed, Issues such as an inability to work due to weather or its consequences, site access issues including safety, an inability to obtain materials or trades people will affect the ability to do work. Such issues will justify extra time to do the contract work. (ii) The Builder is to notify the Owner, in writing, of such matters within a reasonable time of becoming aware of the same. (iii) The construction period will be adjusted accordingly. 13 Default by Builder If the Builder makes default by:- (i) wrongfully stopping work for an unreasonable period; (ii) failing to proceed with due expedition to enable completion by the due date after allowing for changes to the construction period; or (iii) failing to comply reasonably with written notice to replace defective work or improper materials so that the Builder can advise the Owner that he/she can Complete the work for the contract sum or within the contract period, as varied or extended. THEN the Owner by written notice is to advise the Builder of the matter or matters constituting the default and require the Builder to rectify the same within twenty (20) days. If the Builder fails to rectify the default within the period allowed, the Owner may by further written notice determine the Builder's employment. 14 Default by Owners:- (a) If the Owner (i) interferes with or prevents the Builder from carrying out the work; or (ii) fails to satisfy the requirements of clause 1(d); or (iii) fails to pay any sum or part sum of money due under the contract; or (iv) fails to provide written instructions as required by the contract, including confirming variation. then the Builder may suspend work until the default is rectified. (b) The Builder must advise the Owner in writing of the suspension as work under this clause and identify the reason for the suspension. (c) The completion date for the work will be extended by the same number of days as any suspension under this clause. (d) If the Owner does not correct the default within ten(10) days of receiving the suspension notice under this clause the Builder may by written notice determine this contract and the Owner is liable to the Builder for any money due to the Builder and by way of compensation any damage suffered by the Builder due to the Owner's default. 15 Notices (a) Any notice by one party to the other must be in writing and identify in sufficient detail, supported by relevant documents or reports, the purpose of and outcome required by the Notice. (b) Any notice or claim to be given by one party to the other is sufficiently given or served if given to the party to who it is addressed at the contract nominated address or personally delivered to the other party or successfully sent to the facsimile number identified in this contract. (c) However a notice or other document which require service can not [sic] be served by e-mail. (d) If a party's contact details change the party who's details have changed must notify the other party in writing. This must be done within a reasonable time of the change occurring. 1. We note that it appears to be common ground that no work was performed by the builder in response to the notice of 24 December 2010, although his solicitors acknowledged the notice by letter of 30 December 2010, rejected its contents and promised to communicate further after considering the report of Mr Barry Morris referred to in the notice. 2. The Tribunal below held that the notice of 24 December 2010 "was valid and effective" pursuant to clause 13 of the contract and that non-compliance entitled the owners to terminate as they did by their notice of 8 February 2011. 3. The Tribunal also found that the owners were entitled to terminate the contract at common law following the builder's repudiation: 102. A party repudiates a contract by evincing an intention no longer to be bound by the contract, or to fulfil its contractual obligations when and if it suits that party, or to fulfil its obligations only in a way substantially inconsistent with its contractual obligations. It should be noted that the phrase "ready and willing" includes two (at least) separate concepts: being able to perform contractual obligations, and being willing to perform. 103. In the circumstances of this case, the notice to rectify clearly and specifically required the builder to return to continue the works. In my opinion, by failing to do so, the builder evinced his intention not to perform his contractual obligations, or at least to only do so in ways which suited him and were not related to contractual provisions. That is the effect of the builder maintaining his suspension of works pending payment of his invalid invoices. As I said in my reasons at first instance, the builder had adopted the tactic previously, in this case, of suspending works to force payment. To do so in circumstances where he was not entitled to payment, as was the case with invoices #9 and #10, demonstrated his intention to only perform his contractual obligations in ways which suited him. I agree with the submission of the owners that this intention is demonstrated not simply by the builder issuing the notice of suspension, but importantly by continuing the suspension even after the owners had indicated they wished him to return to the site. 1. In light of those conclusions, the Tribunal affirmed the order it had made originally, namely that the builder pay the owners the sum of $82,281.85. 2. Against that order the builder has appealed relying on 9 asserted errors of law. The notice of appeal also sought leave to appeal on 4 grounds. Before dealing with the application for leave we will deal with the asserted errors of law seriatim. 3. Grounds 1 and 2 are related: 1. The Tribunal below (Tribunal) erred in law in finding that claims made by the Builder prior to 20 September 2010 could support the Owners termination of the Contract in February 2011, having regard to the following findings of the District Court, specifically that: a. "the passage of time after invoice 9 was issued and the conduct of the Owners in not electing to terminate on the basis of that matter but rather, for example, to issue a notice to rectify (under the contract) constitutes an election to affirm rather than terminate the contract'; and b. "A claim not based on work done... cannot amount to some form of fundamental breach or repudiation sufficient to ground termination". 2. Further, or in the alternative, the Tribunal erred in law in that it failed to apply the following findings of the District Court, specifically that: a. "the passage of time after invoice 9 was issued and the conduct of the Owners in not electing to terminate on the basis of that matter but rather, for example, to issue a notice to rectify (under the contract) constitutes an election to affirm rather than terminate the contract" ; and b. "A claim not based on work done ... cannot amount to some form of fundamental breach or repudiation sufficient to ground termination". 1. The builder submits that par [83] and following of the Tribunal's reasons conflicted with rulings on matters of law given by Judge Taylor. Although the owners contest this, and there may be some doubt as to whether an express finding was made by Judge Taylor, it seems to us that the purported notice to rectify of 24 December 2010 did in law constitute an affirmation of the contract which precluded the owners from relying either contractually or at common law on pre-existing conduct known to them as constituting repudiation by the builder. We think that the following statement in Carter's Breach of Contract 3rd Edition 2011 correctly states the law: [524] - A promisee who is entitled to elect to terminate the performance of the contract for breach or repudiation loses the right to terminate if the promisee elects to continue with the performance of the contract; [533] - An election to continue with performance by a promisee entitled to terminate the performance of the contract for breach or repudiation is generally final and irrevocable. Thus, the usual result of such an election is permanent loss of the right to terminate. [534] - Where a promisee who is entitled to terminate the performance of the contract for breach or repudiation elects instead to continue with the performance of the contract the promisee loses any right to terminate to which the conduct is referable. Therefore, if the promisee enjoyed only one such right, any subsequent attempt by the promisee to terminate the contract will be ineffective. Where the promisee has elected to continue with the performance of the contract, the general principle is that election will extend to all rights of termination based on breaches within the promisee's knowledge. This principle operates whether the rights are concurrent or independent. [548] - Where a promisee who is entitled to terminate the performance of the contract for breach or repudiation by the promisor loses the right by election to continue with the performance of the contract,... Both parties remain bound to perform their respective contractual obligations. 1. Accordingly, in our opinion, the Tribunal below did err in law by concluding that defaults by the builder existing as at 24 December 2010 could be relied upon for the termination of the contract and indeed at 79 of his reasons Judge Taylor seems to have expressed that conclusion. 2. Grounds 3 and 4 challenged the validity of the notice to rectify issued by the owners on 24 December 2010. In its submissions the builder referred to para 94 of the Tribunals reasons: 94. I am also satisfied that the owners had provided, on several occasions, written requests for rectification of defects and completion of works. Examples of this are the documents relating to the site meeting of 13 September 2010 being an email of that date and the 3-page "agenda" also dated 13 September 2010, as well as the email communications of 14 and 15 September 2010 from the owners to the builder, both with the subject line "complaint". Those communications may not themselves be sufficient justification for termination by the owners, but they answer any criticism or submission of the builder that the notice to rectify (called by them notice of default) was ineffective and unenforceable because, inter alia, there was no prior written request by the owners 1. Clause 13 (iii) of the contract refers to a failure to comply reasonably with written notice to replace defective work. The only reference to such written notice in the Tribunal's reasons is contained in para 94 reproduced above. 2. It is plain from the terms of clause 15 of the contract that the written notice required by clause 13 is not satisfied by an email. To the extent the Tribunal regarded emails as sufficient notice it erred in law. 3. The builder also challenged the notice of 24 December 2014 on less technical grounds. It was submitted that the owners were not entitled to give such a notice while their unlawful notice of suspension remained on foot. See Maloney v Sterling Estates Development Corporation [2002] NSWSC 920. 4. The owners countered this submission by arguing that the notice itself plainly invited the builder to return to the site. In our view something more than an implied invitation to return to the site was required in light of the owners very serious breach of their obligations under the contract which had continued since 20 September 2010. Particularly in view of the dire threats made to the builder if it returned to the site in breach of the notice. For that reason also in our opinion the Tribunal erred in law by finding that the notice was a valid exercise of the right given by cl 13 of the contract. 5. A further reason for regarding the notice as invalid is as submitted by the builder that it was bad for uncertainty. In our view cl 13 (iii) of the contract as a matter of construction required the notice to identify with some specificity the defective work and improper materials alleged. There was no attempt to do this except by reference to a report which accompanied the notice. Item 1 in the notice although sufficiently certain in its terms could hardly be a legitimate complaint given the terms of the letter of 20 September. 6. In reaching the conclusion that the notice of 24 December 2010 was not a valid exercise of rights given to the owners by cl 13 of the contract we have considered the submissions of the owners and the cases cited which deal with the validity of contractual notices. The cases largely depend on their own facts but while we accept that the contract should be interpreted broadly so as to give it commercial effect we are firmly of the view in this case that the notice so manifestly departed from the requirements of cl 13 that even the most generous interpretation of the clause does not enable it to be given any effect in law. 7. It follows that the owners were not entitled to rely on non-compliance with the notice as a reason for terminating the contract. In that circumstance we do not need to consider the obvious impossibility of complying with such a notice served on Christmas Eve within 20 days. 8. The notice of purported termination given on 8 February 2011 referred only to "failure to rectify the defects". In its decision the Tribunal below found that by its failure to remedy the alleged defects in accordance with the notice the builder repudiated the contract. Obviously however failure to comply with an invalid notice would not constitute repudiation. Nor does it seem to us that anything done or omitted by the builder between 24 December 2010 and February 2011 could be regarded as repudiatory conduct. 9. The Tribunal below therefore erred in law when it found that the owners validity terminated the contract by their notice of 8 February 2011. It follows that the owners are not entitled to damages including additional costs of completion as a consequence of their termination of the contract for breach. They are however entitled to be compensated for any overpayment to the builder and for the costs of rectifying any defective workmanship. For this purpose it is necessary to revisit the decision of the Tribunal below given on 17 September 2013. 10. The learned member found that the builder was not entitled to payment of his outstanding invoices but made no finding that he had been overpaid for work actually performed. Unfortunately the decision of the Tribunal does not make a specific finding as to the costs of rectification but it does make express findings of an entitlement of the owners to $6,000.00 insurance excess, $1,540.00 reimbursement for wrongly claimed variation in respect of roof packing variation and $3,741.85 alternative accommodation. These items total $10,281.85 and as it seems to us constitute the only entitlement proved by the owners. 11. Although these proceedings have been unduly protracted and expensive we do not think that there are special circumstances within s60 of the Civil and Administrative Tribunal Act. Accordingly no order for costs should be made. In the various sets of proceedings each party has had a measure of success ORDERS 1. Appeal allowed in part. 2. Quash orders made below and in lieu order that the builder Sam Grace pay the owners Anthony and Sophia Pepe the sum of $10281.85. 3. No order as to costs. ********** I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar Amendments 09 August 2016 - Formatting paragraphs corrected 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: 09 August 2016