Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Lucchese v McDonell [2018] NSWCATAP 120 Hearing dates: 01 May 2018 Date of orders: 21 May 2018 Decision date: 21 May 2018 Jurisdiction: Appeal Panel Before: G Curtin SC, Senior Member K Ransome, Senior Member Decision: In Appeal AP 18/08577: (1) Time for the appellants to lodge their Notice of Appeal be extended up to and including 20 February 2018. (2) Appeal allowed in part. (3) The decision of the Tribunal dated 19 January 2018 is set aside. (4) In lieu thereof, order the proceedings be dismissed. In Appeal AP 18/08247: (1) Time for the appellants to lodge their Notice of Appeal be extended up to and including 20 February 2018. (2) Appeal allowed in part. (3) The decision of the Tribunal dated 19 January 2018 is set aside. (4) In lieu thereof, order that the respondents pay the appellants the sum of $10,494.84 immediately. In both Appeals AP 18/08247 & AP 18/08557; If any party desires to make an application for costs: (5) the appellants are to lodge with NCAT and serve on the respondents any written submissions (in support of any application for costs or being notice that they do not desire to apply for costs) of no more than three pages, and any documents or material in support, on or before 14 days from the date of this decision; (6) the respondents are to lodge with NCAT and serve on the appellants any written submissions of no more than six pages (opposing any application for costs made by the appellants, in support of any application for costs by the respondents or being notice that they do not desire to apply for costs), and any documents or material in support, on or before 21 days from the date of this decision; (7) the appellants are to lodge with NCAT and serve on the respondents any written submissions in reply of no more than three pages on or before 28 days from the date of this decision. Catchwords: APPEALS – building engineering and related contracts – general contractual principles – termination – accrued rights – remuneration – deposit – cost of rectification – proof of claim – departure from the rules of evidence. CIVIL PROCEDURE – inferior tribunal – Civil and Administrative Tribunal (NSW) – multiple appeals – practice and procedure – decisions and orders – set-off of amounts found to be owed in separate appeals. Legislation Cited: Civil and Administrative Tribunal Act 2013 No 2 (NSW), s 3, 36, 38(2), (4), 50, 81(1), 81(2) Civil Procedure Act 2005 (NSW), s 90(2)(a) Fair Trading Act 1987 (NSW), s 79U Home Building Act 1989 (NSW), s 48O Civil and Administrative Tribunal Rules 2014 (NSW), r 13 Cases Cited: Allen v TriCare (Hastings) Ltd [2016] NSWCATAP 216 Brewarrina Shire Council v Beckhaus Civil Pty Ltd [2005] NSWCA 248 Champion Homes Sales Pty Limited v DCT Projects Pty Limited [2015] NSWSC 616 Collins v Urban [2014] NSWCATAP 17 Hancock v East Coast Timber Products Pty Limited [2011] NSWCA 11 In the matter of Fewin Pty Ltd [2017] NSWSC 1093 Jackson v NSW Land and Housing Corporation [2014] NSWCATAP 22 Johnson v Dibbin; Gatsby v Gatsby [2018] NSWCATAP 45 McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457; [1933] HCA 25 Moloney v Taylor [2016] NSWCA 199 Owners-Strata Plan No 76674 v Di Blasio Constructing Pty Ltd [2014] NSWSC 1067 Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 Radford v de Froberville [1978] 1 All ER 33; [1977] 1 WLR 1262 Southern Han Breakfast Point Pty Ltd (in Liquidation) v Lewence Construction Pty Ltd [2016] HCA 52; (2016) 340 ALR 193 Texts Cited: J W Carter, E Olsen, G J Tolhurst, Contract Law in Australia (5th ed, 2007, LexisNexis Butterworths) Category: Principal judgment Parties: Frank Lucchese (First Appellant) Janelle Lucchese (Second Appellant) Paul McDonell (First Respondent) Angela McDonell (Second Respondent) Representation: Counsel: D Neggo (Appellants) M Hadley (Respondents) Solicitors: Cappello Rowe (Appellants) Cater & Blumer (Respondents) File Number(s): AP 18/08247 and AP 18/08577 Publication restriction: Nil Decision under appeal Court or tribunal: NSW Civil and Administrative Tribunal Jurisdiction: Consumer and Commercial Division Citation: N/A Date of Decision: 19 January 2018 Before: D Goldstein, Senior Member File Number(s): HB 16/32356 and HB 16/24634 REASONS FOR DECISION 1. These are appeals from decisions in two related proceedings in the Tribunal in relation to disputes arising from the performance and early termination of a contract between the owners of property and builders for the construction of a dwelling in Leeton NSW. 2. The appeals concern the proper assessment of the value of work performed by the builders but unpaid as at the date of termination, what account, if any, should be taken in relation to the payment of a deposit, whether an unaccepted and unpaid quote was evidence of the cost of rectification of certain defective work and whether the Tribunal erred in rejecting the owners' claim for compensation for their labour allegedly undertaken, or required to be undertaken, to rectify a particular defect. 3. For the reasons that follow we are of the opinion that each appeal should be allowed in part. Background 1. The parties entered into a lump sum contract in the standard form Residential Building Contract (BC4) published by the Master Builders Association and dated 18 August 2014 (the "First Contract") for the construction of a new dwelling. 2. The appellants were the owners of the property on which the dwelling was to be constructed. The respondents were the builders. For ease of reference we shall hereafter refer to the parties as the Owners and Builders respectively. 3. Pursuant to the terms of the First Contract the Owners paid to the Builders a deposit of $24,465 representing 3.5% of the total contract sum of $699,000 inclusive of GST. 4. Clause 18(c) of the First Contract provided that: "The deposit is not to be deducted from or assigned to a progress claim until Practical Completion is reached." 1. Clause 20 of the First Contract provided: "20. Payment a) The Contract price or sum is to be paid to the Builder in accordance with Item 4 of Schedule 2. b) A progress payment claim by the Builder is to show: i) the value of the contract work performed at the date of the claim; ii) ... iii) ... iv) the amount previously paid by the Owner, other than a deposit ... c) ... d) i) A stage or aspect of the works is to be treated as reached, and therefore enabling a payment claim to be made, when it is complete except for minor omissions, incompleteness or defects which do not prevent the work from progressing. The value of the work omitted, incomplete, or defective, should not be claimed by the Builder." 1. Item 4(b) of Schedule 2 of the First Contract provided that payments were to be made when each of ten identified stages of the works were 95% reached. In relation to each of the ten identified stages a dollar figure, and the percentage of the total lump sum payable under the First Contract that dollar figure represented, were specified. 2. Disputes arose between the parties part way through construction of the dwelling. The parties agreed to terminate the First Contract and agreed that the Owners would pay the Builders for the work done up to an agreed date for which payment had not been made. The agreed date was 20 April 2015. 3. As at 20 April 2015, the Builders had completed, and been paid for, Stages 1 and 2. The Tribunal below found that Stage 3 had been completed other than for work valued in the sum of $5,000 and Stage 4 had been completed. There is no challenge to those findings in these appeals. 4. The Builders issued an invoice in relation to the completed but unpaid work. In the Builders' evidence, accepted by the Tribunal, the Builders calculated the amount owing to them as being the total amount that should have been paid to them under the First Contract up to completion of Stage 4, plus amounts for variations and extra brickwork, less what had been paid to the Builders or paid by the Owners (an amount of $48,568) directly to subcontractors (which otherwise would have had to have been paid by the Builders) less the $5,000 for the uncompleted Stage 3 works. The Builders said they were entitled to be paid a "reasonable amount" for the work done but unpaid, and that this method of calculation resulted in a reasonable amount. 5. Relevantly for these appeals, the Builders included in their calculations the deposit in calculating what they said were the "payments that should have been made" on completion of Stage 4. Put another way, the Builders' total figure for what should have been paid under the First Contract up to completion of Stage 4 included agreed progress claim amounts for each of Stages 1 – 4, plus the deposit. 6. The resultant amount claimed by the Builders pursuant to their invoice was $57,730.69. The Owners disputed the invoice. The Builders commenced proceedings HB 16 / 24634 seeking payment of that amount from the Owners. 7. In those proceedings the Builders calculated the amount they said was owed to them as we have described at [12] above (the "first basis"), namely, what was payable pursuant to the terms of the First Contract up to a particular point in time. Alternatively, the Builders sought to value the work on a quantum meruit basis. 8. The Builders were successful on the first basis although for reasons different to those advanced by them to the Tribunal. The Tribunal rejected the claim based upon a quantum meruit. The Tribunal ordered the Owners to pay the Builders $57,440.81 in those proceedings. 9. The Owners alleged there were various defects in the work completed by the Builders. The Owners commenced proceedings HB 16 / 32356 seeking compensation for the costs of rectification of those defects from the Builders. 10. The Tribunal found in favour of the Owners in relation to certain defects, and against them in relation to others, and ordered the Builders to pay the Owners $36,879.65 in those proceedings. 11. The Owners appealed from both of the decisions submitting they should have been ordered to pay the Builders a lesser sum in proceedings HB 16 / 24634 and should have been awarded a greater sum in proceedings HB 16 / 32356. Extension of Time 1. The decisions of the Tribunal were given on 19 January 2018. A Notice of Appeal was required to be lodged within 28 days from the day on which the appellants were notified of those decisions, or given reasons for the decisions, whichever was the latter. 2. It is common ground that the Owners were notified of the decisions on 19 January 2018. The last day for lodgement of any Notice of Appeal was therefore 16 February 2018. 3. On 16 February 2018, a law clerk in the employ of the Owners' solicitors spoke to an officer of NCAT. The law clerk mentioned that that day was the last day for lodging Notices of Appeal, and enquired how that could be achieved, noting the Owners' solicitors were not situated in Sydney. The NCAT officer said that they could email their Notice of Appeal in each matter to the NCAT Registry that day (which was done) and post the original Notices of Appeal to NCAT (which was done by express post on 19 February 2018). The original Notices of Appeal were received by NCAT by no later than 20 February 2018. 4. Rule 13 of the Civil and Administrative Tribunal Rules 2014 (NSW) (the "NCAT Rules") provides that a document may be lodged with the Tribunal by such electronic means as the Tribunal has made available for use for the lodgement of documents with the Tribunal. 5. The appellants (Owners) submit that this rule was satisfied given the conversation with the NCAT officer described above. Alternatively, the appellants apply for an extension of time to lodge their Notices of Appeal. 6. In this case the Notices of Appeal were arguably lodged by electronic means made available for that purpose by the NCAT officer and were therefore lodged on the 28th day from the day on which the appellants were notified of those decisions. Whilst the Tribunal is obliged to apply rules of law in arriving at its decisions, the Court of Appeal in Moloney v Taylor [2016] NSWCA 199 held that the Tribunal: "is not expected to conduct its proceedings with the formality of a court of law. Rather, it is required to conduct itself with minimum formality and to reach decisions according to the substantive merits of the case, and not by reference to legal form or technicalities. Further, it is to exercise its powers speedily and economically." [Footnotes omitted] 1. We would be inclined to the view that, consistently with that holding in Moloney, r 13 of the NCAT Rules should be given a broad interpretation consistent with the objects of the Civil and Administrative Tribunal Act 2013 No 2 (NSW) (the "NCAT Act") as set out in s 3, the guiding principle set out in s 36 and the requirement in s 38(4) to act with as little formality as the circumstances permit and according to the substantial merits of the case without regard to technicalities or legal forms. If that interpretation is correct then, in our view, r 13 was satisfied in this case and no extension of time is required. 2. But there are countervailing considerations and, sensibly, the parties did not direct their attention to this point in these appeals given the applications for extensions of time, the circumstances relevant to those applications and the preference of the parties to concentrate on the real issues in dispute. In those circumstances we should not decide whether r 13 (on its proper interpretation) was satisfied as the point was not fully argued and, as we indicated to the parties, we were otherwise satisfied that an extension of time to appeal should be granted in this case. 3. The relevant principles to apply to an application for an extension of time are well known and are set out in Jackson v NSW Land and Housing Corporation [2014] NSWCATAP 22. They need not be repeated. 4. In the present cases the respondents (Builders) do not assert any prejudice arises if extensions of time to appeal are granted. It is not in dispute that the Owners emailed NCAT, and the respondents, copies of their Notices of Appeal on the 28th day after receiving notice of the decisions. We infer that had the Owners' solicitor been geographically situated in Sydney the Notices would have been lodged in person on that same day, in which case they would indisputably have been lodged within time. 5. Rejection of the application would work an injustice to the Owners as they have, for the reasons set out below, established the Tribunal below erred in certain respects, the delay is minimal and there is no prejudice to the Builders. 6. In those circumstances we order that time for the appellants to lodge their Notices of Appeal in each case be extended to and including 20 February 2018. The Tribunal's Reasons 1. Both proceedings were heard together, with the evidence in each proceeding being admitted as evidence in the other. A decision in each proceeding was given. 2. The parties had agreed to terminate the First Contract. They agreed that the Builders were to be paid for the work done but unpaid, but there was a dispute whether, reduced to its simplest terms, that would include variations. That dispute was resolved in favour of the Builder. No appeal is made from that finding. 3. The Tribunal found that the parties agreed that the Owners would pay the Builders for work that they did until the day they stopped working. 4. The Tribunal accepted the Builders' evidence as to what work had been done up to the date of termination and rejected the evidence of the Owners on that matter. 5. The Tribunal inferred from the parties' agreement to terminate the First Contract that they desired to bring the First Contract to an end and have the Builders paid for any unpaid work. The Tribunal said that the parties would then be in a position to go their separate ways. 6. The Tribunal found that the Builders were obliged to submit a tax invoice for work done but not invoiced up to an including 20 April 2015. The Tribunal found that to recover the amount claimed in the invoice the Builders were obliged to prove that the amount claimed represented an amount they were entitled to be paid under the First Contract. 7. The Tribunal rejected the Builders' claim to be paid for the work done, and unpaid, on a quantum meruit basis. The Tribunal found that the agreement between the parties to terminate the First Contract was to the effect that the Builders would submit an invoice for work done but unpaid. The Tribunal said that it was not an agreement that the Builders could claim for work done on a quantum meruit basis which would have allowed the Builders to: "... re-claim for all work carried out on a basis that ignored the contract price, or the amounts claimed and paid ..." before the agreement to terminate. 1. The Tribunal also rejected, at least impliedly, the submissions by the Builders that they were to be paid a "reasonable amount" and the Owners' submission that there was an implied term that the price for the unpaid work was to be a "reasonable price". How that implied term arose for determination is more fully explained under the heading "Ground 1" below. The Tribunal also, impliedly, rejected the Builders' contention that the amounts specified to be paid for each stage as set out in the First Contract were objectively reasonable amounts for the work described in each stage. 2. Accordingly, the Tribunal accepted the calculation of the amount owed to the Builders as we have described at [12] above (although on a different basis to that contended for by the Builders) and ordered the Owners to pay the Builders that amount. 3. As previously mentioned, that calculation included the agreed amounts to be paid under the First Contract for completion of Stages 1 – 4 (with necessary adjustments) together with the deposit. 4. In the other proceedings, the Owners claimed compensation for various defects in the works completed by the Builders. These were the subject of a Scott Schedule which extended to 52 items. This appeal is limited to the decisions in relation to Items 12, 27 and 35 from that Scott Schedule. 5. Item 12 related to the laundry floor slab. The Scott Schedule references paragraph 22 of Mr Lucchese's affidavit sworn 27 November 2016 in which he describes the defect as the non-completion of waterproofing along the western outside wall which, it was said, gave rise to flooding of the laundry floor after rain. It was also said that there was a possible slab construction issue. 6. The Builders agreed there was a defect. The Owners claimed a total of $7,432.20 for this Item. The Tribunal allowed $1,902.20 for one aspect of the rectification required for this defect, but disallowed $5,280 for another aspect, and disallowed the $250 claimed for the Owners' time. 7. The appeal is limited to the disallowed claim for $5,280. The Tribunal rejected this claim because, the Tribunal said, what was relied on by the Owners was a quote, and there was no evidence that the quote had been accepted or paid. 8. Item 27 was a claim by the owners for compensation for the need to remove and correctly reinstall certain windows. The Owners claimed 16 hrs of their time at the rate of $62.50 p/hr. The Builders agreed that there was a defect but did not suggest any other amount or estimate. 9. The Tribunal disallowed this claim because there was no evidence of the Owners spending 16 hrs to rectify this defect, there were no records to show they had spent that time, and there was no explanation of why they ought to receive $62.50 p/hr when they had no qualifications or experience in construction work. The Tribunal found that the Owners had failed to prove loss and awarded the Owners $100 as nominal damages. 10. Item 35 related to a defect with in-floor conduits for data cables. The Builders agreed that this Item was a defect. The Owners relied on two quotes totalling $1,311.00. The Tribunal allowed $100 for nominal damages only in relation to this Item, finding there was no evidence that the Owners had accepted the two quotes or paid any money to have that defective work rectified. 11. Having allowed claims for the cost of rectification of other defects, the Tribunal ordered the Builders to pay the Owners the sum of $36,879.65 in those proceedings. 12. The net result of the amounts ordered to be paid in the two proceedings was that the Owners were to pay the Builders $20,561.16. Grounds of Appeal 1. The Owners' Grounds of Appeal, as ultimately advanced, were: 1. The Tribunal erred in calculating the amount owed to the Builder for work done, but unpaid, according to the terms of the First Contract rather than by reference to the value of that work. 2. The Tribunal erred in failing to take into account the deposit when determining the amount owed to the Builders. 3. The Tribunal erred in disallowing the Owners' claims in relation to Items 12 and 27 because the Owners relied on quotes. 4. The Tribunal erred in disallowing the Owners' claim for labour in Item 27. Ground 1 1. This ground raises two possible questions of law: whether a wrong principle of law was applied [1] or whether the Tribunal erred as to the proper construction of the law or vital agreements / contracts. [2] 2. The Owners submitted there were two contracts: the first was the First Contract to which we have already referred, and the second was the agreement to terminate the First Contract (the "Second Contract"). 3. The Owners submitted the Tribunal erred in calculating the amount owed to the Builder according to the terms of the First Contract because, at the time of termination, the Builders had no entitlement to payment of those amounts. The Owners submitted the work should have been valued pursuant to the terms of the Second Contract. 4. The Owners submitted that there was no express term of the Second Contract how the works were to be valued, and accordingly there was an implied term in that Second Contract to the effect that the price for the work would be "a reasonable one" citing Champion Homes Sales Pty Limited v DCT Projects Pty Limited [2015] NSWSC 616. 5. Accordingly, the Owners submitted the Tribunal erred in assessing the amount to be paid pursuant to the terms of the First Contract rather than the terms of the Second Contract. 6. The Owners also drew attention to the evidence of Mr Paul McDonell in his affidavit sworn 5 August 2016 at [5], namely that, for the reasons explained in that evidence, the amounts set out in the First Contract for payment on completion of each stage were not the Builders' estimates of the true costs of each stage but were simply the amounts the Owners were prepared to pay for each stage. It followed, the Owner submitted, that those payments could not be a genuine assessment of the value of the works completed. 7. We do not accept the Owners' submissions. 8. Discharge of a contract which is still executory, that is, where at least one primary obligation remains unperformed, is effected by the parties entering into a new contract. In the new contract each party promises to release the other party from further performance of any primary obligations on their part under the former contract then remaining unperformed, but without such non-performance giving rise to any substituted secondary obligation under the former contract to pay damages. 9. This discharge brings to an end the obligation of either party to further perform their respective contractual obligations. But it is clear that termination affects the parties' rights rather than the contract itself. [3] That is, termination does not rescind the contract from the beginning, and rights which have already been acquired are not divested or discharged. In McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457; [1933] HCA 25 Dixon J, with whom Rich and McTiernan JJ agreed, said at p 476: "When a party to a simple contract, upon a breach by the other contracting party of a condition of the contract, elects to treat the contract as no longer binding upon him, the contract is not rescinded as from the beginning. Both parties are discharged from the further performance of the contract, but rights are not divested or discharged which have already been unconditionally acquired. Rights and obligations which arise from the partial execution of the contract and causes of action which have accrued from its breach alike continue unaffected." 1. As the learned authors say in Contract Law in Australia at [[32-04], Dixon J used the word "rescinded" in the sense of "terminated". It is also the case that the principle applies generally to all bases for termination, and not simply where there is breach. 2. That statement of principle is subject to the qualification identified by Kiefel, Bell, Gageler, Keane and Gordon JJ in Southern Han Breakfast Point Pty Ltd (in Liquidation) v Lewence Construction Pty Ltd [2016] HCA 52; (2016) 340 ALR 193 at [79]: "On the hypothesis that Lewence accepted Southern Han's repudiation and terminated the Contract on 28 October 2014, the effect of termination was that Lewence and Southern Han were both discharged from further performance of the Contract and that Lewence's rights under the Contract were limited to those which had then already accrued under the Contract except in so far as the Contract is properly to be interpreted as stipulating to the contrary." [Our emphasis] 1. Although not stated in express terms, it is apparent that this was the principle applied, correctly with respect, by the Tribunal. 2. It is, of course, open to contracting parties to agree in their later contract that accrued rights may be dealt with differently than under their former contract. But that is not what happened here. The Second Contract, it is common ground, was silent on how the work done by the Builders but unpaid would be valued. In other words, the parties did not agree in their Second Contract to vary the rights to payment contained in the First Contract. 3. It is apparent from the Tribunal's findings as to the terms of the Second Contract and the rejection of the Builders' claim to be remunerated on a quantum meruit basis that the Tribunal found the accrued rights to payment arising under the First Contract remained unaffected by the Second Contract. Accordingly, the Builders' right to payment for those works fell to be determined under the First Contract as the Tribunal correctly held. 4. Those rights to payment were not stipulated to the contrary, per Southern Han Breakfast, on the proper interpretation of the terms of the First Contract. The terms of cl 20(d)(i) and Item 4(b) of Schedule 2 of the First Contract were, on the factual findings of the Tribunal, met, thus triggering the Builders' entitlement to payment for the amounts claimed pursuant to the terms of the First Contract. 5. As those accrued rights to payment existed, there was no room for the implication of the term suggested by the Owners. Ball J's reasoning in Champion Homes at [134] – [135] was to the effect that in the absence of an agreement on price before work was done, or an express mechanism for the pricing of work done without a prior agreement on price, the court would imply a term that the price would be a reasonable one. In this case there was, in the First Contract, an agreement on price before the work was done. In those circumstances Champion Homes is distinguishable from the present case. 6. That reasoning also explains why the evidence of Mr McDonell which we briefly described at [57] above was and is not relevant to the present question. Whilst he may have held the opinions expressed, the Builders and Owners had nevertheless entered into the First Contract on the terms set out therein. They had therefore agreed the amounts the Builders would be paid on completion of the various stages. The effect of the Tribunal's decision was to give effect to that agreement, as the Builders' rights to payment under and pursuant to the terms of the First Contract had accrued, and remained in existence, at the time of termination. 7. Ground 1 is dismissed. Ground 2 1. This ground does not raise a question of law, but we grant leave to raise it because in our opinion, and for the reasons that follow, the Owners have suffered a substantial miscarriage of justice because the decision of the Tribunal was not fair and equitable. The failure to take account of the deposit was, in our opinion, an injustice which is reasonably clear, in the sense of going beyond merely what is arguable, so that it would be unjust to allow the finding to stand – see Collins v Urban [2014] NSWCATAP 17. 2. The result of the Tribunal's decision in the proceedings in which the Builders sought payment of amounts owed, was that the Builders were paid for all work done pursuant to their agreement (the First Contract) and, in addition, had received the deposit. 3. In our opinion the Tribunal erred in failing to account for this deposit in calculating the amount due to the Builders, although, in fairness, the Tribunal was perhaps not given all of the assistance it should have been by the parties on this point. 4. Be that as it may, there was no legal basis on which the Builders were entitled to retain the deposit. The deposit was not, per cl 18(c) of the First Contract, money paid for work done. The Builders' accrued rights to payment under the First Contract, at the date of termination, did not include any right to thereafter retain that deposit. In calculating what the Builders were owed (pursuant to the Builders accrued rights) the Tribunal erred in failing to take into account the deposit. 5. The Builders submitted that the Owners had adopted a forensic position to the contrary effect in the Tribunal and should not be allowed to alter that position now. The Builders directed our attention to certain written submissions of the Owners below in which the Owners said that the "issue of the deposit does not arise". 6. However, that submission by the Owners arose in a different context. The Owners' submission went on to say that: "There is no dispute as to the amount paid to the builder." 1. What was being conveyed was recognition of a fact on which both parties agreed, that the deposit had been paid to the Builders. It was not the adoption of a forensic position that the Owners agreed the Builders could keep the deposit even though that would represent an overpayment for work done pursuant to the terms of the First Contract. 2. The Builders also submitted that we should infer that the Tribunal found that the Builders were entitled to retain the deposit as part of the price to be paid for the work done. The Tribunal's reasons do not include that reasoning not any reasoning from which we might infer the matter suggested. In addition, such reasoning would conflict with the terms of the First Contract. We therefore decline to draw the inference suggested. 3. Ground 2 is upheld. Ground 3 1. The Owners submitted that the Tribunal erred in disallowing the Owners' claims in relation to Items 12 and 27 of the Scott Schedule because the Owners relied on quotes. They submitted that the Tribunal erred in law in that it identified the wrong issue or asked itself the wrong question (for decision). [4] 2. We agree. 3. Prima facie the measure of damage for defective work performed in breach of contract is the cost of rectification - Owners-Strata Plan No 76674 v Di Blasio Constructing Pty Ltd [2014] NSWSC 1067 at [43]. 4. In that case Ball J quoted at [47], with approval, the statement from Oliver J in Radford v de Froberville [1978] 1 All ER 33; [1977] 1 WLR 1262 at 1287E–F, namely that: "[O]nce proceedings have been commenced and are defended, I do not think that the defendant can complain that it is unreasonable for the plaintiff to delay carrying out the work for himself before the damages have been assessed, more particularly where his right to any damages at all is being contested, for he may never recoup the cost. If, therefore, the proceedings are conducted with due expedition, there seems to me to be no injustice if, by reason of the time that it takes for them to come to trial, the result of inflation is to increase the pecuniary amount of the defendant's ultimate liability …" 1. As is clear from Oliver J's statement, the work to rectify a defect does not have to have been done before damages are assessed. By parity of reasoning, a quote describing the work required to be but not yet done, and the cost of doing so, is not required to have been accepted or paid at the time damages are assessed. 2. So much is made clear by Ipp JA, with whom Hodgson and McColl JJA agreed, in Brewarrina Shire Council v Beckhaus Civil Pty Ltd [2005] NSWCA 248 at [173] – [174]: [173] There was an issue between the parties as to the relevance of the omission of the Council to lead any evidence showing that it intended to rectify the levees in accordance with the Contract. [174] In my opinion, in the present case, an intention to rebuild or to rectify is not relevant to the measure of damages: Bellgrove v Eldridge (at 620), De Cesare v Deluxe Motors Pty Ltd (1996) 67 SASR 28. 1. That statement of principle is subject to some exceptions and qualifications, but none are presently applicable and so need not be considered. 2. It is true that a quote may not be the best evidence a party could lead in order to prove the scope and cost of rectification, but that would usually be a question of weight. In this case, the Builders did not lead any evidence to contradict the quotes or provide alternate costs of rectification. 3. The Builders submitted that the Tribunal's finding was a classic fact-finding exercise justified by the evidence. The Builders submitted that Mr Lucchese had conceded in cross-examination that quotes were not reflective of the actual charges he had paid, he was not willing to disclose any actual monies he had paid with respect to quotations and thus doubt was raised as to the reliability of his evidence in relation to quotations. The Builders submitted there was no evidence that the work described in the quotes had been done. The Builders further submitted that, in written submissions to the Tribunal, the Owners had said that Item 12 appeared to be the same as Item 50, the Owners were awarded a sum of $100 as nominal damages for that Item, and thus to allow a sum for Item 12 would result in double compensation. 4. The Builders' submissions, with respect, overstate the cross-examination. An examination of the transcript of the cross-examination does not support the submission made. If nothing else the cross-examination was generalised in nature and did not address the particular quotes in question. 5. Further, the Tribunal did not reject the quotes as evidence, and thus this was not classic fact-finding as the Builders submitted. The Tribunal allowed the quotes into evidence but reasoned that a quote could not (as a matter of law) establish the cost of rectification because it had not been accepted or paid. In our opinion the Owners were not required to have accepted and paid for work in relation to a defect before they could claim the costs of rectification. That is, in our view, contrary to the authorities to which we have referred. 6. The submission that the Owners accepted that Item 12 appeared to be the same as Item 50 is correct but only to an extent. The particular item described in each was the same, but the defect alleged in each Item was different. Item 50 described an incorrect slab height whereas Item 12 described non-completion of waterproofing along the western outside wall. Thus, the amount awarded as compensation for Item 50 was for a different defect to that alleged in relation to Item 12. Accordingly, awarding a sum for Item 12 would not result in double compensation. 7. Ground 3 is upheld. Ground 4 1. The Tribunal found there was no evidence of this labour having been expended, or that the rate per hour for it was justified. The Tribunal held that the Owners had failed to prove loss in relation to this Item. 2. The Owners submitted that the Tribunal was not bound by the rules of evidence, citing s 38 of the NCAT Act. The Owners submitted that, consistently with that section and particularly sub-sections (2) and (4), the Tribunal should have applied the parties' agreed rate of $55 p/hr, and thus awarded the Owners 16 hrs of labour at that reduced rate rather than $100. The rate of $55 p/hr was set out in the First Contract as the agreed rate for labourers for variations. 3. Arguably, this raises a question of law, being whether a wrong principle of law was applied, or whether the Tribunal failed to apply a correct principle of law. 4. Section 38 of the NCAT Act says: 38 Procedure of Tribunal generally (1) The Tribunal may determine its own procedure in relation to any matter for which this Act or the procedural rules do not otherwise make provision. (2) The Tribunal is not bound by the rules of evidence and may inquire into and inform itself on any matter in such manner as it thinks fit, subject to the rules of natural justice. (3) ... (4) The Tribunal is to act with as little formality as the circumstances of the case permit and according to equity, good conscience and the substantial merits of the case without regard to technicalities or legal forms. 1. In Johnson v Dibbin; Gatsby v Gatsby [2018] NSWCATAP 45 the Appeal Panel (constituting Wright J, Boland ADCJ and Renwick SC) held that s 38(4) of the NCAT Act did not authorise the Tribunal from acting other than in accordance with law. 2. One principle of law is that facts are required to be proved. That is, a Tribunal may not speculate that certain facts exist or existed. Thus, s 38(4) did not relieve the Owners from the requirement that they prove their case. 3. In Johnson at [98] the Appeal Panel went on to say: "Even though the Tribunal is not generally bound by the rules of evidence, its processes and procedures and the nature of its predominant functions point to the conclusion that the Tribunal is exercising judicial power when it deals with matters in its general jurisdiction, including matters under the RT Act. This is reinforced, in NCAT's case, by the express requirement in s 38(2) of the NCAT Act to comply with the principles of natural justice even when not bound by the rules of evidence. These principles include the duty to act impartially and ensure all parties have the opportunity to be heard, as well as the implicit obligation to act lawfully, rationally and fairly will be likely to have an effect similar to the application of the rules of evidence. As Evatt J observed in The King v War Pensions Entitlement Appeal Tribunal; Ex parte Bott (1933) 50 CLR 228 at 256: 'But this [the inapplicability of the rules of evidence] does not mean that all rules of evidence may be ignored as of no account. After all, they represent the attempt made, through many generations, to evolve a method of inquiry best calculated to prevent error and elicit truth. No tribunal can, without grave danger of injustice, set them on one side and resort to methods of inquiry which necessarily advantage one party and disadvantage the opposing party. In other words, although the rules of evidence, as such, do not bind, every attempt must be made to administer 'substantial justice'." 1. In our opinion, the Tribunal acted in accordance with those principles. 2. In Allen v TriCare (Hastings) Ltd [2016] NSWCATAP 216 at [191] the Appeal Panel (constituting Wright J, Seiden SC and Titterson), held that the reasoning and approach set out in Hancock v East Coast Timber Products Pty Limited [2011] NSWCA 11 at [82] – [83] should be applied to proceedings in the Tribunal when the rules of evidence do not apply. That approach was to the effect that although the (Tribunal) is not bound by the rules of evidence, there was no doubt that it is required to be satisfied that expert evidence provides a satisfactory basis on which the Tribunal can make its findings, and that the question of the acceptability of expert evidence will not be one of admissibility but of weight. 3. Those cases concerned expert evidence, and their ratio may, strictly speaking, be confined to that subject. But we do not think that reasoning would apply differently to non-expert evidence. 4. In the present case the Tribunal disallowed this claim because there was no evidence of the Owners spending (or needing to spend) 16 hrs to rectify this defect, there were no records to show they had spent that time, and there was no explanation of why they ought to receive $62.50 p/hr when they had no qualifications or experience in construction work. There was no evidence that their qualifications or experience in construction work (if they had any) justified the rates for labour set out in the First Contract. 5. With the requirement that the Tribunal act according to law, and notwithstanding the acceptability of evidence may be one of weight rather than admissibility, the Tribunal held that the Owners had not proven their case in relation to this Item. On this appeal the Owners were not able to identify any evidence which would support the findings contended for, nor were not able to identify any such evidence. A reference to this Item in the Scott Schedule, and it appearing as a line item in a schedule included in an expert report when the Tribunal found the expert did not provide any expert opinion in relation to that Item, was not evidence of the basal facts required to be proved. 6. Ground 4 is dismissed. Conclusion 1. We uphold Grounds 2 and 3 and dismiss Grounds 1 and 4. 2. The result is that the original amount the Tribunal ordered the Owners pay to the Builders for work done but unpaid, being $57,440.81 should be reduced by the amount of the deposit, being $24,465. The Owners should therefore pay the Builders $32,975.81 in relation to that claim. 3. In the other proceedings, the result is that the original amount the Tribunal ordered the Builders pay the Owners for the cost of rectification of defects, being $36,879.65, should be increased by $5,280 (Item 12) and $1,311 (Item 35). The Builders should therefore pay the Owners $43,470.65 in relation to that claim. 4. The net result is that the Builders should pay the Owners $10,494.84. 5. There is no provision in the NCAT Act, the Civil and Administrative Tribunal Regulation 2013 (NSW) or the NCAT Rules which expressly addresses the question whether, in circumstances such as these, a single order for the net amount owing may be made, rather than an order in one appeal that the Owners pay the Builders $32,975.81 and an order in the other appeal that the Builders pay the Owners $43,470.65. 6. Section 90(2)(a) of the Civil Procedure Act 2005 (NSW) provides that a court may give a single judgment for the balance only of the sums of money awarded where there is a claim and a cross-claim, but no equivalent provision applies to proceedings in NCAT. In addition, superior courts of record have an inherent jurisdiction to set off one judgment or order for the payment of money against another - In the matter of Fewin Pty Ltd [2017] NSWSC 1093 at [8]. The setting-off of such amounts under both s 90(2)(a) or inherent jurisdiction is discretionary. 7. In Fewin, at [24], Brereton J said that the exercise of the discretion was to: "... do what is just and to avoid absurdity and injustice." 1. The Civil Procedure Act does not apply to NCAT, nor does NCAT have inherent jurisdiction. NCAT does have some implied jurisdiction, and that implied jurisdiction may allow for the setting-off of orders for the payment of money in circumstances such as these, but, in our opinion, NCAT is expressly authorised by statute to do so where it is just, and to avoid absurdity and possible injustice. 2. Section 81(1) of the NCAT Act provides that in determining an internal appeal: ... the Appeal Panel may make such orders as it considers appropriate in light of its decision on the appeal, including (but not limited to) ... [Emphasis ours] the orders set out in s 81(1)(a) – (e). 1. Section 81(2) provides that an Appeal Panel: ... may exercise all the functions that are conferred or imposed by this Act or other legislation on the Tribunal at first instance when confirming, affirming or varying, or making a decision in substitution for, the decision under appeal and may exercise such functions on grounds other than those relied upon at first instance. 1. One piece of "other legislation" referred to in s 81(2) in relation to these appeals is the Home Building Act 1989 (NSW) ("HBA"). Section 48O of that Act provides: 48O Powers of Tribunal (1) In determining a building claim, the Tribunal is empowered to make one or more of the following orders as it considers appropriate: (a) an order that one party to the proceedings pay money to another party or to a person specified in the order, whether by way of debt, damages or restitution, or refund any money paid by a specified person, (b) ... (c) ... (2) The Tribunal can make an order even if it is not the order that the applicant asked for. (3) Sections 79R and 79T–79V of the Fair Trading Act 1987 apply, with any necessary modifications, to and in respect of the determination of a building claim. 1. Section 79U of the Fair Trading Act 1987 (NSW), expressly referred to in ss 48O(3) of the HBA, provides: 79U Matters to be considered by Tribunal when making orders (cf CC Act 1998, s 13) (1) When making any orders under this Division, the Tribunal must be satisfied that the orders will be fair and equitable to all the parties to the claim. 1. Finally, and as we have adverted to at [25] above, in Moloney v Taylor the Court of Appeal held that NCAT was required to conduct itself with minimum formality, and to reach decisions according to the substantive merits of the cases before it, taking into account the objects of the NCAT Act as set out in s 3, the guiding principle set out in s 36 and the requirement in s 38(4) to act with as little formality as the circumstances permit and according to the substantial merits of the case without regard to technicalities or legal forms. 2. Taking all of those matters into consideration, in our opinion it is appropriate, in light of our decisions, to make a single order for the payment of the balance owing by the Builders to the Owners. That single order is, in our opinion, authorised by the statutory provisions to which we have adverted on the basis that the single order is fair and equitable in the circumstances, and is in accordance with the substantial merits of the appeals as we have decided them. 3. Accordingly, in proceedings AP 18 / 08577 we make the following orders: 1. Appeal allowed in part. 2. The decision of the Tribunal dated 19 January 2018 is set aside. 3. In lieu thereof, order the proceedings be dismissed. 1. In proceedings AP 18 / 08247 we make the following orders: 1. Appeal allowed in part. 2. The decision of the Tribunal dated 19 January 2018 is set aside. 3. In lieu thereof, order that the respondents pay the appellants the sum of $10,494.84 immediately. Costs 1. The parties desired to consider the making of applications for costs depending on our decision. The parties consented to doing so in writing, and consented to an order under s 50 of the Civil and Administrative Tribunal Act 2013 No 2 (NSW) dispensing with a hearing of any costs applications if we were satisfied that the costs issues could be determined in the absence of the parties by considering any written submissions or other documents or material provided to us. 2. Accordingly, we make the following directions: 1. the appellants are to lodge with NCAT and serve on the respondents any written submissions (in support of any application for costs or being notice that they do not desire to apply for costs) of no more than three pages, and any documents or material in support, on or before 14 days from the date of this decision; 2. the respondents are to lodge with NCAT and serve on the appellants any written submissions of no more than six pages (opposing any application for costs made by the appellants, in support of any application for costs by the respondents or being notice that they do not desire to apply for costs), and any documents or material in support, on or before 21 days from the date of this decision; 3. the appellants are to lodge with NCAT and serve on the respondents any written submissions in reply of no more than three pages on or before 28 days from the date of this decision. 1. For the avoidance of doubt, the parties should lodge and serve only one set of submissions covering both appeals, as distinct from one set of submissions for each appeal. ********** ​ Endnotes 1. Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69, citing Chapman v Taylor [2004] NSWCA 456 at [33], per Hodgson JA (Beazley and Tobias JJA agreeing). 2. Re R [2000] NSWSC 866 at [25], cited with approval in C v W [ [2015] NSWSC 1774 at [48]. 3. J W Carter, E Olsen, G J Tolhurst, Contract Law in Australia (5th ed, 2007, LexisNexis Butterworths) at [32-01]. 4. Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69, citing Craig v State of South Australia (1995) 184 CLR 163 at 179; HCA 58, Minister for Immigration and Multicultural Affairs v Yusuf (2001) 206 CLR 323; HCA 30 at [82]. 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: 21 May 2018