Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Champion Homes Sales Pty Ltd v Bailey [2018] NSWCATAP 212 Hearing dates: 9 March 2018 Date of orders: 14 September 2018 Decision date: 14 September 2018 Jurisdiction: Appeal Panel Before: K Rosser, Principal Member A Boxall, Senior Member Decision: (1) Leave to appeal is refused and the appeal is dismissed. (2) The appellant is to pay the respondent's costs of the appeal, on the ordinary basis, as agreed or assessed. (3) If either party seeks a different costs order, the following orders apply: (a) Order 2 is stayed until further order of the Appeal Panel. (b) The party seeking a different costs order (the costs applicant) is to file an application, supported by evidence and submissions, within 14 days of the date of publication of these orders. (c) The other party is to file and serve evidence and submissions in response to the application within 14 days thereafter. (d) The costs applicant is to file and serve any submissions in reply within 7 days thereafter. (e) Subject to the parties' submissions, an application for a different costs order will be determined on the papers. Catchwords: APPEAL – interpretation of contractual provisions – question of law – leave to appeal Legislation Cited: Civil and Administrative Rules 2014 Civil and Administrative Tribunal Act 2013 Home Building Act 1989 Cases Cited: Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337 Collins v Urban [2014] NSWCATAP 17 David Securities PL v Commonwealth Bank of Australia (1992) 175 CLR 353, [1992] HCA 48 Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 at 656 [35]; [2014] HCA 7 Finance Facilities Pty Ltd v Commissioner of Taxation (Cth) (1971) 127 CLR 106 Hookway v Racing Victoria Limited & Anor [2005] VSCA 310; 13 VR 444; 1 BFRA 469 Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR115; 241 ALR88; [2007] HCA 61; BC200710839 Liebe v Molloy (1906) 4 CLR 307 Mount Bruce Mining Pty Limited v Wright Prospecting Pty Limited [2015] HCA PMT Partners Pty Ltd (In Liquidation) v Australian National Parks and Wildlife Service [1995] HCA 36; 184 CLR 3013 Toll (FCGT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; 219 CLR 1657 (14 October 2015) Wright v Foresight Constructions Pty Ltd [2011] NSWCA 327 Texts Cited: Nil Category: Principal judgment Parties: Champion Homes Sales Pty Ltd – Appellant Scott Donald Bailey and Catherine Frances Bailey - Respondents Representation: Counsel: Mr C Stomo – Appellant Solicitors: Kedron Lawyers - Appellant M Hamwood - Respondent File Number(s): AP 17/52529 Publication restriction: Nil Decision under appeal Court or tribunal: Civil and Administrative Tribunal Jurisdiction: Consumer and Commercial Division Citation: [2017] NSWCATCD Date of Decision: 15 November 2017 Before: G Burton SC, Senior Member File Number(s): HB 16/42074 Decision under appeal reasons for decision Introduction 1. This is an internal appeal under s 80(2) of the Civil and Administrative Tribunal Act 2013 against a decision made in the Consumer and Commercial Division of the Tribunal on 15 November 2017. The proceedings in the Tribunal involved an application made under the Home Building Act 1989 (the HB Act) 2. The application to the Tribunal was brought by the respondent to the appeal (the owners) against the appellant (the builder). 3. For the reasons set out below, we have decided to refuse leave to appeal and dismiss the appeal. Background to Tribunal proceedings 1. The parties entered into a contract for the performance of residential building work on 20 June 2014. The contract price in Schedule 1 to the contract was $802,200. A contract price adjustment increased the contract price to $827,000. The builder claimed variations and further contract price adjustments, which raised the final claimed contract price to $920,000. 2. The owners paid the amounts claimed by the builder, but disputed some of the claimed variations and price adjustments before and at the time of payment. Practical completion occurred on 14 March 2016. The homeowners commenced proceedings in the Tribunal on 16 September 2016. The matter was listed for directions on various occasions and for final hearing on 13 and 14 September 2017. Contract provisions 1. The contract between the parties was a standard form HIA contract (2012 edition). In addition to the standard form terms and conditions (GC 1 to 43), the contract contained a number of special conditions (SC 44 to SC 54). 2. Relevant clauses of the contract are reproduced below. Clause 4. Essential matters 4.1 The owner must, within the initial period, give the builder: (a) written proof that the owner owns or is otherwise entitled to build on the site; (b) written details of any encumbrances, covenants, easements and caveats affecting the site; (c) if required, written evidence that the security account has been established and the amount required to be paid into the security account is held in clear funds; (d) if the owner is obtaining finance from a lending body, written advice from the lending body that: (i) the amount of finance, when added to the owner's own available funds, is sufficient to pay the contract price; and (ii) the building works may commence. (e) if the owner is named in Item 11 of Schedule 1, written evidence of development consent for the building works; (f) if required, written proof that the owner has obtained any building approvals and has satisfied any conditions imposed by a statutory or other authority where required prior to commencement of work; (g) if required, written proof that the owner has appointed the principal certifying authority and has paid any costs associated with such appointment; and (h) written proof that all of the owners' other statutory obligations that are listed in Item 9 of Schedule 1 have been satisfied. 4.2 If the owner fails to satisfy all of the above within the initial period the builder may end this contract, by giving the owner a written notice to that effect, at any time prior to physical commencement of the building works. 4.3. If the builder so ends this contract, the owner must pay to the builder the price of the services provided and the works carried out to the date that this contract is ended. The price includes the builder's margin applied to the costs incurred by the builder which costs include the cost of materials on site or already ordered from suppliers that are non-returnable. Clause 8. Commencing the Building Works 8.1 The builder is to commence the building works within 20 working days after the day that : (a) the builder receives all necessary building permits and planning approvals for the building works to commence; or (b) the owner satisfies all of the requirements of Clause 4, Whichever is later. 8.2 The contract period commences on the date the builder is obliged to commence the building works under sub-clause 8.1. Clause 14 Contract Price Adjustments 14.1 A contract price adjustment is due and payable at the next progress payment after it arises unless a different time is agreed. 14.2 When there is a deletion to the building works or substitution of materials resulting in a contract price adjustment, the contract price will be adjusted at the progress payment of the stage where the building works would have been carried out, unless a different time is agreed in writing. Clause 15 Progress Payments 15.1 The owner must pay the deposit stated in Item 4(b) of Schedule 1 on the later of the day that: (a) this contract is signed by the owner; and (b) warranty insurance described in Schedule 5 is in force and the owner is provided with the certificate of insurance for such insurance. The deposit is brought to account with the first progress payment. 15.2 The owner must pay the contract price progressively as claimed by the builder. 15.3 The builder must give the owner a written claim for a progress payment for the substantial completion of each stage. 15.4 A progress claim is to state: (a) The amount claimed and not paid for the stages substantially completed; (b) The amount claimed and not paid for contract price adjustments; (c) The amount claimed and not paid for variations; and (d) The sum of the above amounts. 15.5 The owner must pay a progress claim within 5 working days of the builder giving the claim. 15.6 Other than in relation to the final progress claim: (a) payment of a progress claim is on account only; and (b) the owner has no right of set off. Clause 17 Variations 17.1 A variation must be in writing and signed by or on behalf of each party to this contract. Either the owner or the builder may ask for a variation. 17.2 If the owner asks for a variation, the builder must reply in writing as soon as is reasonable. 17.3 The reply is to be either: (a) a signed written offer to carry out the variation detailing; (i) the work required to carry out the variation; (ii) the price of the variation; (iii) any extension of time to the contract period as a result of carrying out the variation; or (b) a refusal to carry out the variation. The builder does not have to give any reasons for refusing to carry out a variation. 17.4 If the owner does not give to the builder a signed written acceptance of the builder's offer within 5 working days of the builder giving the reply, the builder's offer is deemed to be withdrawn. 17.5 If the price of a variation is not agreed prior to it being carried out, that price includes: (a) the deduction of the reasonable cost of all deletions from the building works; and (b) the addition of the total cost of all extra work plus the builder's margin applied to that cost. 17.6 The price of a variation is due and payable at the next progress payment after it is carried out unless a different time is agreed. 17.7 The owner must not unreasonably withhold consent to any variation which is required for the building works to comply with the law or a requirement of any statutory or other authority. 17.8 The owner acknowledges that the colour of timber, granite and other natural materials can vary. The builder is to use reasonable endeavours to match the colour or grain of any sample selected by the owner but is under no liability if there is a difference and such difference is not a variation. Special Conditions - Clause 44 Owner Acknowledgements and Agreements 44.1 Notwithstanding the order of precedence listed in Clause 6.4, in the event of any discrepancy between the documents forming part of this contract, the following order of precedence will apply: 1. These special conditions; 2. These general conditions; 3. Variations; 4. Tender; 5. specifications; 6. Copy of the plans; 7 Other documents. 44.2 Despite Clause 8 the builder shall commence building works within 20 working days after the owner satisfies the requirements of Clause 4 and the following requirements: (a) Receipt of approval by any statutory authority or land developer; (b) Receipt of final plans, tender documents, variations, kitchen layout, Champion Homes colours and accessories agreement all signed by the owner; (c) If applicable, completion by the owner to the builder's satisfaction of any preparatory building work to enable the builder to commence building works. 44.3 The building looks and contract will not commence until all of the above requirements and the requirements of Clause 4 are satisfied by the owner. 44.4 If the time allowed in the tender for building works to commence expires before all the Clauses and all the Special Conditions of this contract governing the commencement of building works are satisfied, the builder shall be entitled to vary the contract price by way of a contract price adjustment of 3.75% of the price shown in Schedule 1. 44.5 The building works are to be insured by the owner when practical completion is achieved. 44.6 No allowance has been made for shoring, piering, underpinning or any other structural support works to existing adjoining properties. 44.7 No allowance has been made for double handling. 44.8 No allowance has been made for Sydney Water Section 73 works. 44.9 No allowance has been made for any traffic management reports or requirements. If traffic control measures are required by any statutory authority or if in the builders opinion control measures are necessary, then any cost is to be paid by the owner. Clause 49 variations 49.1 Despite Clause 17.6 & 14.1, all variations and contract price adjustments are payable after the Homeowners Warranty Insurance Certificate has been issued and within five (5) working days of payment being requested by the builder. If the variations or contract price adjustments are not paid as set out in this close in the builder is entitled to an automatic extension of the contract period. For every day the variation or a contract price adjustment is not paid the contract will be extended by one (1) day irrespective whether the builder continues with the building work. Clause 53 exclusions 53.1 No allowance has been made for the upgrading and/or redirecting of existing services or for the opening and/or reinstating of any statutory authority's or other authorities' driveways, pathways, kerb, guttering and/or roadway. Should any of this be required by any statutory or other authority Clause 17 shall apply. 53.2 Unless stated in writing, no provision has been made for: (a) Removal of rubbish and trees, including roots & stumps; (b) Rock excavation and removal, importing of additional fill, or removal of spoil and fill from the site; (c) Encountering unsuitable contaminated soil; (d) Any items or alterations arising from statutory or other authority requirements including NATHERS & BASIX requirements and engineering requirements; (e) Any retaining walls and steps, landings, patios, deepened edge beams, porches and railings, unless specified in the tender or variations; (f) Collection, diversion and/or dispersion of surface water to statutory or other authority satisfaction; (g) Any structural steel which is subject to engineering details; (h) Perimeter deepened edge beans; (i) Articulated patios and porches; (j) Shading or privacy devices or requirements; (k) The cost of engineering detail and certificates, survey reports and certifications in respect of the building works. 53.3 No allowance is made for statutory or other authority bonds, levies, contributions or any land development application costs and conditions. 53.4 No allowance has been made for compliance with any dual occupancy or subdivision requirements or payment of any dual occupancy on subdivision fees. 1. Relevantly, GC 1 of the contract defines "contract price adjustment" as "an amount that it added to or deducted from the contract price under this contract" and a variation is defined in GC 1 as: 1. An omission, addition or change to the building works; or 2. A change in the manner of carrying out the building works. Owners' claim 1. In their application, the owners sought an order for repayment of sums paid to the builder. The following table sets out what the owners were claiming by the time of the hearing. Item Description Amount A Contract Price Adjustment No 3 – additional amount of 3.75% of contract price, relying on SC 44.4 $30,082 B Damages for failing to achieve practical completion as required by GC 30 of the contract $3,143 C Variation No 3 – claim for surface water line and pits $3,164 D Completed height and setback of buildings not in accordance with the plans requiring re-certification $4,440 E Variation No 5 – charge for all structural steel required, including additional crane hire and new stud work to conceal portal frame $12,018 $810 F Variations No 2 amended, 7 and 9 for removing 336 tonnes of spoil being approximately 286 tonnes more than the contractual allowance $4500 G Contract Price Adjustment No 1 amended for 147.7 lineal metres of piering being 27.7 more than the contractual allowance $3462 H Contract Price Adjustment No 2 for H class slab in lieu of M class slab $6760 I Variation No 11 for costs incurred for engineering and survey work $5596 J Variation No 12 for additional underground mains $840 K Not pressed $0 L Failure to properly install gas cooktop $5700 M Failure to complete aprons on the lower roof section resulting in water penetration $528 N Lost rent at $700 per week from 1 February 2016 $4200 Total $81,243 1. The owners had paid the builder all of the amounts claimed, other than items L and M. Tribunal decision 1. The Tribunal found in favour of the owners in respect of all items, with the exception of the second part of item E; that is, new stud work to conceal a portion of the portal frame. It made the following orders: 1. Respondent to pay applicants $80,433 on or before 22 November 2017. 2. Respondent to pay applicants' costs of the proceedings as agreed or assessed on the ordinary basis to and including 4 April 2017 and on the indemnity basis on and from 5 April 2017. Notice of Appeal 1. The builder appealed the Tribunal's decision. The Notice of Appeal was lodged on 11 December 2017, which is within the 28-day time period specified in cl 25(4) of the Civil and Administrative Tribunal Rules 2014 (the Rules). Amended Grounds of Appeal were lodged on 30 January 2018. Grounds of Appeal 1. The grounds of appeal set out in the Notice of Appeal and the Amended Grounds of Appeal are somewhat discursive. The Amended Grounds of Appeal in effect seek leave to appeal on each of the grounds specified in the Notice of Appeal. 2. The first five grounds of appeal concern the Tribunal's interpretation of SC 44 and its findings in relation to Contract Price Adjustment No 3. 3. Ground 6 concerns the Tribunal's finding in relation to Variation No 9 (fill removal). 4. Ground 7 concerns the Tribunal's finding in relation to Variation No 3 (stormwater / surface water line and pits). 5. Grounds 8 and 9 concern the Tribunal's findings in relation to Variation No 5 (structural steel). 6. Ground 10 concerns the Tribunal's findings in relation to Variation No 12 (underground mains). 7. Ground 11 concerns the Tribunal's findings in relation to Contract Price Adjustment No 1 (piering). 8. Ground 12 concerns the Tribunal's finding that the owners did not make payments voluntarily. Scope and nature of internal appeals 1. Internal appeals may be made as of right on a question of law, and otherwise with leave of the Appeal Panel: s 80(2) Civil and Administrative Tribunal Act 2013 (NCAT Act). 2. The circumstances in which the Appeal Panel may grant leave to appeal from decisions made in the Consumer and Commercial Division are limited to those set out in cl 12(1) of Schedule 4 of the NCAT Act. In such cases, the Appeal Panel must be satisfied that the appellant may have suffered a substantial miscarriage of justice on that basis that: 1. the decision of the Tribunal under appeal was not fair and equitable; or 2. the decision of the Tribunal under appeal was against the weight of evidence; or 3. significant new evidence has arisen (being evidence that was not reasonably available at the time the proceedings under appeal were being dealt with). Submissions and evidence 1. In deciding the appeal, we have had regard to the following: * The Notice of Appeal received on 11 December 2017; * The Amended Grounds of Appeal received on 30 January 2018; * The Reply to Appeal received on 8 January 2018; * The builder's submissions dated 2 February 2018; * The homeowners' submissions dated 20 February 2018; * The orders made at call over on 9 January 2018; * The oral submissions made at the hearing; * The Appeal Bundle, which included the material filed in the Tribunal proceedings; * The application to the Tribunal; and * The Tribunal's reasons for decision dated 15 November 2017 (the Reasons for Decision). Consideration Grounds 1 to 5 – SC 44 and Contract Price Adjustment No 3 1. The proper construction of a contract is a question of law. The builder therefore has a right of appeal in respect of Grounds 1 to 5. 2. Whether the builder was entitled to claim Contract Price Adjustment No 3 turns on the interpretation of SC 44, which relevantly provides: Clause 44 Owner Acknowledgements and Agreements 44.1 Notwithstanding the order of precedence listed in Clause 6.4, in the event of any discrepancy between the documents forming part of this contract, the following order of precedence will apply: 1. These special conditions; 2. These general conditions; 3. Variations; 4. Tender; 5. specifications; 6. Copy of the plans; 7 Other documents. 44.2 Despite Clause 8 the builder shall commence building works within 20 working days after the owner satisfies the requirements of Clause 4 and the following requirements: (a) Receipt of approval by any statutory authority or land developer; (b) Receipt of final plans, tender documents, variations, kitchen layout, Champion Homes colours and accessories agreement all signed by the owner; (c) If applicable, completion by the owner to the builder's satisfaction of any preparatory building work to enable the builder to commence building works. 44.3 The building works and contract will not commence until all of the above requirements and the requirements of Clause 4 are satisfied by the owner. 44.4 If the time allowed in the tender for building works to commence expires before all the Clauses and all the Special Conditions of this contract governing the commencement of building works are satisfied, the builder shall be entitled to vary the contract price by way of a contract price adjustment of 3.75% of the price shown in Schedule 1. Grounds 1 and 2 – Categorisation of SC 44.4 1. The Tribunal relevantly dealt with the interpretation of SC 44.4 as follows: 27 The correct interpretation of SC 44.2 to SC 44.4 is of relevance, not only to the price increase claimed, but also to the commencement date of the contract period under SC 44.3, which (with contractually valid GC 9 extensions) must be compared with the practical completion date of 14 March 2016 (effectively accepted by both parties) to determine other claims by the owners. 28 The owners' first ground of attack was on the contractual effectiveness of SC 44.4. The owners did not seek to make a case that the 3.75% flat rate increase, irrespective of the length of the delayed start to building works, was a penalty, or unconscientious, and could not make such a case without the opportunity for further evidence by both parties. Rather, the owners said that the flat rate 3.75% increase was not supported by consideration because the builder did nothing further to obtain the increase in the fixed contract price. 29 This would be a good argument if the increase had been sought to be imposed later for existing contracted work, as occurred in the case cited by the owners, Leon Holdings Pty Ltd v O'Donnell (2009) 25 VR 569; [2009] VSC 430 at [61]-[62]. However, the provision for a price increase formed part of the contract as originally entered into and was an integrated component of the bargain. It was therefore supported by the consideration moving from the builder for the obligations of the owners including this obligation. 30 Next, the owners, correctly in my view, submitted that the words in SC 44.4 "all the Clauses and all the Special Conditions of this contract governing the commencement of building works are satisfied" was governed in scope by SC 44.2 and what it incorporated by reference. Contrary to the builder's submission, SC 44.2 does not simply set the contract period; that work is done by only one aspect of SC 44.3. Rather, SC 44.2 ("Despite Clause 8 the builder shall commence") and one part of SC 44.3 ("The building works ... will not commence") impose an obligation on the builder to begin the building works once the requirements of those SCs are satisfied. Those requirements are stated in substantively the same terms in SC 44.2 ("after the owner satisfies the requirements of [GC] 4 and the following requirements [(a)-(c)"] and SC 44.3 ("until all of the above requirements and the requirements of [GC] 4 are satisfied by the owner"). 31 Again contrary to the builder's submission, there is nothing in the language or context of SC 44.2 or SC 44.3 to change the usual mandatory meaning of "shall" and "will", which is appropriate language to impose an obligation to commence both the building works and the contract period. 32 It makes commercial sense that the builder's obligation to commence the building works is mandated by defined compliance or performance and also triggers the contract period in which those works are to be brought to practical completion. 33 In the light of the foregoing, it is clear that SC 44.2 and 44.3 specify exhaustively the contract provisions ("all the Clauses and all the Special Conditions" to use the language of SC 44.4) that govern the commencement of the building works. Accordingly, the builder is entitled to charge the 3.75% uplift only if those requirements are not fulfilled by the owners before the end of the mandated period. The only requirements in dispute, as previously stated, are aspects of SC 44.2(b) and (c), discussed below, on which I have resolved the disputes of fact and interpretation in favour of the owners. I therefore consider that there was no justification for the builder claiming the amount in Contract Price Adjustment No 3 from the owners. 34 The owners raised a further contractual bar to the effectiveness of Contract Price Adjustment No 3, in that it was not signed by the owners. I consider this to be a good alternative basis for finding no justification for the builder's being entitled to claim or be paid the amount claimed in Contract Price Adjustment No 3. There is no basis for the suggestion that the owners acted unreasonably in not signing it, given the legitimate dispute over its meaning and operation described above, which I have found in any event in favour of the owners. The owners' claim about meaning and operation was raised immediately after the delayed service of the adjustment claim (almost a year after the alleged entitlement to the adjustment arose). 35 As set out above, GC 17.1 stated that a variation "must be in writing and signed by or on behalf of each party to" the contract. There was no separate procedure governing contract price adjustments from the procedure in GC 17 applying to variations. SC 49.1, which overrides GC 14.1 and 17.6, applied the same requirements for payment to variations and contract price adjustments; GC 14.2 described certain variations (deletions and substitutions) as resulting in a contract price adjustment. The definitions of the two terms were complementary: "variation" means "(a) an omission, addition or change to the building works; or (b) a change in the manner of carrying out the building works"; "contract price adjustment" means "an amount that is added to or deducted from the contract price under this contract". 36 In other words, variation was the terminology used in the contract to describe the actual change to the contracted building works or their actual manner of performance, whereas contract price adjustment in one of its operations described the effect on contract price of such an actual change; contract price adjustment also applied to the adjustment in SC 44.4 which operated before the variation regime, prior to crystallisation of the contract documents specified in SC 44.2. "Manner of carrying out the building works" necessarily encompasses the timing of performance since when something is done is an intrinsic characteristic of how something is done. Indeed, the entire justification for a time-based uplift as is found in SC 44.4 is that the (delayed) timing of commencement of building work and the contract period intrinsically affects the entire project work in terms of the cost of its components (labour and materials). 37 The overlapping and complementary nature of the two terms explains why they are treated with the same mechanism in SC 49.1 (which did not override GC 14.2 where the two are expressly linked) and why there is no separate procedural regime for contract price adjustments distinct from GC 17 and SC 49 for variations. 1. The builder submits that the Tribunal erred when it found at [30] that SC 44.4 was "defined by the scope of SC 44.2 and what it incorporated by reference". The builder submits that while SC 44.2 and SC 44.3 impose an obligation on the builder to begin the building works once the requirements of those special conditions are satisfied, the obligation to commence "has no bearing on the operation of clause 44.4". 2. The builder's position is that "in its proper interpretation" the clause sets the contract period and does not impose an obligation on the builder to commence work on the date calculated in accordance with SC 44.2. The builder's position in this regard is set out at [16] to [20] of the builder's submissions. The builder submits that a failure by the builder to commence work on the appointed date would not amount to "a substantial breach under clause 33 and subject to it not being an extensive unexplained delay would not be a breach of the warranty to carry out the work with due diligence under cl 38": [16] of the builder's submissions. The builder submits that failure to commence the work on the appointed date is "unlikely if at all possible" to amount to a repudiation by the builder and would not be a breach of an essential term giving the owner a right to terminate the contract. The builder submits that the word "shall" in SC 44.2 "should be considered facultative rather than mandatory on the obligation to commence [the building work]". 3. The builder also submits that the Tribunal erred in concluding that the fact that the owners did not sign Contract Price Adjustment No 3 disentitled the builder from any payment for the Contract Price Adjustment. In relation to this issue, the builder submits that the Tribunal has conflated the contract price adjustments with variations and states at [27] of the builder's submissions: 27…. While an association between a variation and a contract price adjustment might occur it does not follow that if there is a contract price adjustment there is necessarily a variation or that even a variation would lead to a contract price adjustment. 1. The rights and liabilities of parties under a provision of a contract must be objectively determined by reference to the text of the provision, its context (that is, the entire text of the contract and any contract, document or statutory provision referred to in the text of the contract) and its purpose: Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 at 656 [35]; [2014] HCA 7; Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337 at 350; Mount Bruce Mining Pty Limited v Wright Prospecting Pty Limited [2015] HCA 37 (14 October 2015) at [46]. 2. When assessing the meaning of written terms of a contract, the Tribunal must apply an objective rather than subjective approach. As Gleeson CJ, Gummow, Hayne , Callinan and Heydon JJ stated in Toll (FCGT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; 219 CLR 165 at [40]: It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction. 1. In relation to the builder's argument that use of the word "shall" in SC 44.2 did not impose an obligation on the builder to commence works by a specified date, there is authority for the proposition that although on the face of it, the meaning of the word "may" in a contractual term is permissive, "may" can mean "must" upon construction of the clause as a whole: see, for example, Finance Facilities Pty Ltd v Commissioner of Taxation (Cth) (1971) 127 CLR 106 at 134, per Windeyer J. However, the builder has not referred us to any authorities for the proposition that use of the word "shall" in a contract can mean "may". 2. In our view, there is no reason to conclude that "shall" in the context of SC 44.2 is not mandatory and should instead be taken to mean "may". 3. First, the plain meaning of the word "shall" is mandatory rather than facultative or permissive. The Oxford Dictionary relevantly defines "shall" as "expressing an instruction, command, or obligation". 4. Second, when dealing with rights and obligations, the word "shall" implies a mandatory aspect: PMT Partners Pty Ltd (In Liquidation) v Australian National Parks and Wildlife Service [1995] HCA 36; 184 CLR 301, per Brennan CJ. Gaudron and McHugh JJ. SC 44 clearly concerns the rights and obligations of the parties to the contract. 5. Third, while SC 44.2 can be characterised as an intermediate or a non-essential term of the contract, a sufficiently serious breach of cl 44.2 – that is, a breach "going to the root of the contract" or a breach which substantially deprives the owners of the benefit of the contract - could give rise to a right to terminate at common law: Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR115; 241 ALR88; [2007] HCA 61; BC200710839 at [51] to [55]. Such a breach could also amount to a substantial breach which would give the owners the right to terminate the contract under cl 33. In relation to SC 44.2, this could occur if there was, for example, such a delay in the commencement of the building works that it was unlikely that the works could be completed within the contract period. In any event, even if the builder's breach of SC 44.2 would not give rise to a right of termination, this does not mean that the builder does not have a contractual obligation to commence the building works in accordance with SC 44.2. 6. We conclude that the Tribunal did not err when it found at [31] of the Reasons for Decision that: 31. …. [T]here is nothing in the language or context of SC 44.2 or SC 44.3 to change the usual mandatory meaning of "shall" and "will", which is appropriate language to impose an obligation to commence both the building works and the contract period. 1. We reject this aspect of Ground 1. 2. As noted above, the builder also submits that the Tribunal erred in finding that the failure of the owners to sign the Contract Price Adjustment No 3 disentitled the builder from any payment for the Contract Price Adjustment. The Tribunal's reasoning process is set out at [34] to [37] of the Reasons for Decision, extracted above. 3. We will deal with this briefly, as it was an alternative position put by the Tribunal, rather than central to the Tribunal's interpretation of SC 44.2. 4. We agree with the builder's submission that "variations" and "contract price adjustments" are different concepts and operate independently of each other under the Contract. 5. GC 1.1 of the Contract defines "variation" as "an omission, addition or change to the building works" or "a change in the manner of carrying out building works". The same clause defines "contract price adjustment as "an amount that is added to of deducted from the contract price under the contract". 6. GC 17 sets out the procedure for variations. Relevantly, GC 17.1 requires variations to be in writing and signed by or on behalf of the parties to the contract. There is no equivalent contractual procedure for approving contract price adjustments. 7. The parties are obliged to follow the procedure set out in GC 17 where there is an omission, addition or change to the building works or a change in the manner of carrying out the building works. This is so even if the variation does not lead to an adjustment of the contract price; that is, where the variation is price neutral. 8. However, the Contact does not impose such an obligation on the parties in the case of a contract price adjustment that does not arise from a variation. This will be the case where there is no change to the scope of work, or no change to the manner in which the scope is to be carried out. In such cases, the contract price adjustment is an allowance for a builder to offset any escalation or reduction in the ancillary costs incurred in completing the scope of works. 9. We do not agree with the Tribunal's conclusion that the manner of carrying out the building works "necessarily encompasses the timing of performance since when something is done is an intrinsic characteristic of how something is done". A later starting date than anticipated for the installation of a roof, for example, does not change the scope of work required to install the roof, although it may affect the cost of installation. 10. We conclude that, in the absence of a change to the scope of work or to the manner in which work is to be carried out, the builder is not required to follow the procedure mandated for variations by GC 17 in order to claim a contract price adjustment. However, nothing turns on our finding in this regard, given our conclusions in respect of Ground 3. Ground 3 – Builder's entitlement to Contract Price Adjustment No 3 1. The builder claims that SC 44.4 "operates independently of the contract period". It submits: [I]rrespective of the date on which the contract period commences or ought to commence, the Tender stipulates a further date before which construction must commence. Should construction not commence by that date (whether or not the contract period as commenced) the builder will be entitled to claim the price increase. 1. We do not accept this submission. In accordance with the wording of the clause, the builder's entitlement to a contract price adjustment under SC 44.4 is triggered if the time allowed in the Tender for the building works to commence expires before "all the Clauses and all the Special Conditions of this contract governing the commencement of building works are satisfied". 2. GC 8 is the general term of the contract governing the commencement of the building works. It incorporates a requirement that the owner satisfy the requirements of GC 4. However, SC 44.2 overrides GC 8 ("despite cl 8 the builder shall commence …..") and requires the owner to satisfy requirements additional to those set out in GC 4. SC 44.3 specifies that the building works and the contract period will not commence until "all of the above requirements" and the requirements of GC 4 are satisfied. We agree with the Tribunal that "all of the above requirements" can only be a reference to the requirements set out in SC 44.2. 3. When SC 44.2 and SC 44.3 are considered in conjunction with SC 44.1, which gives precedence to the Special Conditions over the General Conditions in the event of any discrepancy between the contract documents, it is clear that together with GC 4, they constitute "all the Clauses and all the Special Conditions of this Contract governing the commencement of building work" for the purpose of SC 44.4. 4. We therefore agree with the Tribunal that the builder could only claim Contract Price Adjustment No 3 in accordance with SC 44.4 if that clause had been triggered; that is, if the owners had not complied with one or more of their obligations under GC 4 and under SC 44.2. There is no other basis upon which Contract Price Adjustment No 3 could be claimed. 5. It is not in dispute that the builder claimed Contract Price Adjustment No 3 under SC 44.4 because, according to the builder, the owners had not provided a "kitchen layout, Champion Homes Colours & Accessories Agreement all signed by the owner" in accordance with SC 44.2. Kitchen layout 1. In relation to the kitchen layout, the Tribunal found, at [42] of the Reasons for Decision: 42 "Kitchen layout" was not defined. A kitchen layout was included in the plans sent to the builder by the male owner on 17 July 2014 and was also included in the wet area plan. "Layout" in its ordinary meaning is satisfied by a conceptual drawing that captures the main integers of what will later be detailed in plans for construction purposes. The document sent in October 2014 belonged in the latter category. This is confirmed by the message on the October drawing which contrasts what is in the contract or tender with "this kitchen detail". 1. The builder submits that SC 44.2 requires the "final" kitchen layout to be executed before work can commence. It submits that the Tribunal's finding that the initial plans that were sent in July 2014 were sufficient to comply with the contractual obligation of executing kitchen layout plans "avoids the mandate and 44.2" [sic] that requires the plans to be "final kitchen layout plans signed by the owner". The builder further submits that given that there was later evidence and correspondence indicating receipt of signed off plans until October 2014, it was not open to the Tribunal to conclude that the contractual obligation in relation to the kitchen layout was fulfilled in July 2014. 2. We disagree with the builder's submission in this regard. SC 44.2(b) requires the owner to provide "final plans, tender documents, variations, kitchen layout, Champion Homes colours and accessories agreement all signed by the owner". In this clause, the word "final" qualifies the word "plans". In order to conclude that "final" also qualifies "kitchen layout", it would be necessarily to conclude that it also qualified "tender documents" and "variations". In our view, such an interpretation would be absurd. Furthermore, we see no error in the Tribunal's observation that "kitchen layout" was not a defined term and by its ordinary meaning could apply to both the layout in the owners' final plans or the builder's own wet area plan. 3. Overall, we see no error in the Tribunal's conclusion that the kitchen layout was provided in accordance with SC 44.2. 4. In any event, the Tribunal's finding that the kitchen layout had been provided within the relevant period is a finding of fact for which leave to appeal is required. For the reasons set out below, we refuse leave to appeal. Colours & Accessories Agreement 1. In relation to the Colours & Accessories Agreement the Tribunal found at [] that: 40 There is no basis for not accepting the male owner's evidence that he signed the Colours & Accessories Agreement (CAA) sent by the builder on both 22 and 24 July 2014. 41 That this was accepted by the builder as fulfilling the contractual requirement, so that the signed documents became contract documents, is implicit in the evidence of the principal of the builder and his relevant staff member who emailed the documents. It becomes explicit when that staff member referred to and treated the returned documents as final by communicating the release of the project for construction although a start date could not be specified by the builder. Accordingly, further changes were said to require a variation and the GC 6.2 procedure stated above was the correct procedure implicitly used to iron out inconsistencies or errors. The emails after the end of the works commencement period fall into this category. Re-signing of the complete document on each occasion was insisted upon by the staff member – this does not alter the contractual effect of the original signed documents. To the extent that these documents were required because the builder had not completed its changes to the contract plans, that is not the responsibility of the owners and is not to be used against them for the same reasons as explored below in relation to kitchen layout. 1. It is clear to us that [40] can only be interpreted as a finding by the Tribunal that it accepted Mr Bailey's evidence in relation to the signing of the Colours & Accessories Agreement in July 2014. Furthermore, in Mr Bailey's statement dated 16 March 2017, which is at Tab 4 of Volume 1 of the Appeal Bundle, Mr Bailey states (at [19] and [20]) that the colour selections were signed and given to the builder on 22 July 2014, with amendments signed and returned on 24 July 2018. We conclude from [40] of the Reasons for Decision that the Tribunal impliedly accepted that evidence. The Tribunal's finding in relation to the Colours & Accessories Agreement is a finding of fact which the builder requires leave to appeal to challenge. For the reasons set out below, we have refused leave to appeal. 2. We further conclude that SC 44.2 does not require the kitchen layout or the Colours & Accessories Agreement to be "final". Any changes made subsequent to their provision to the builder could be the subject of variations in accordance with GC 17 of the Contract. 3. Overall, we discern no error in the Tribunal's conclusion that the kitchen layout and the Colours & Accessories Agreement were provided to the builder in accordance with SC 44.2. Nor do we otherwise discern error in the Tribunal's finding that SC 44.4 was not triggered. 4. Ground 3 is not made out. Grounds 4 and 5 – Final plans 1. These grounds are also relevant to the builder's entitlement to claim Contract Price Adjustment No 3. The builder claims that the Tribunal erred in finding at [46] of the Reasons for Decision that the final plans were provided before 2 September 2014 "so far as the owners were concerned". The builder submits that: [W]hen considering the contract as a whole, this interpretation does not give commercial efficacy to the bargain as it completely ignores the contractual terms relating to those plans, which are necessary should there be deficiencies in the plans that required amendments (which was the case here). 1. The Tribunal dealt with the builder's argument about the meaning of "final plans" for the purposes of SC 44.2 as follows: 47 In its closing written submissions the builder gave a broad meaning to "final plans" - and, by implication or parallel reasoning, tender amendments and variations – that effectively required the contract period and works obligation to begin only once the builder's final plans were signed by the owner. The builder submitted this did not occur until at least 22 September 2014 and even then the builder's final plans (Revision "D") were not signed by the owner. Accordingly, the builder was entitled to Contract Price Adjustment No 1 of the 3.75% uplift. 48 This argument has already been dealt with. If it was correct, the builder had control of the process of developing final plans and could in effect control whether or not it received the uplift, which would be contrary to the implied terms discussed above. It would also create unworkable internal inconsistencies in the contract documents by not recognising the distinction between the original priced contract works and variations or price adjustments, some of which the owner was obliged to accept if, for instance, they were required by the builder's engineer or appropriately-demonstrated soil conditions. 49 Additionally, the builder's interpretation ignored the fact that it was prepared to accept the owners' plans subject to proper variation during the contract. It had priced the job on the basis of the owners' plans. It could not then re-draw those plans and in effect (if that took longer than the period contractually allowed, on the basis of the owners' plans, for the contract works to begin) gain an automatic price uplift without having to justify that uplift under the contract's variations requirements and procedure. 1. We see no error in the Tribunal's analysis. There is nothing particularly unusual about plans being amended during the building process. To the extent that the plans which were accepted by the builder and formed part of the contract documents later required amendment, this could be dealt with under the variation procedure in the contract. We see no justification to interpret "final plans" for the purpose of SC 44.2 to mean anything other than those plans which were considered to be final at the time they were provided to the builder. 2. The builder also seeks leave to appeal on this ground. We see nothing unjust or unfair in the Tribunal's interpretation of "final plans". In any event, we would not grant leave to appeal for the reasons set out below. 3. This ground of appeal fails. Ground 6 – Variations No 2 amended, 7 and 9 - Fill removal 1. SC 47.13 of the Contract states: The builder will remove any spoil, rubbish, fill from the site. The cost of such removal will be charged to the owner at the builder's cost plus the builder's margin. 1. In relation to the owners' claim for a refund of Variation No 9, the Tribunal found as follows: 60 There were only two invoices for fill removal in evidence. 61 The first dated 29 September 2014 was claimed by the builder in Tender Allowance 1 and in Variation No 2. 62 The second, dated 30 November 2014, was claimed in amended form in Variation No 7. 63 Variation No 9 appeared to claim again against the 30 November 2014 invoice without any clear evidence showing why a second bite of the cherry was justified. There was no clear chain from underlying invoices which justified a departure from the builder's correction to his sub-contractor's claimed amount which had been paid already in the earlier variations. The builder claimed Variation No 9 as a variation. It probably is more accurately described as a contract price adjustment but that, as said already, was governed by the requirements of GC 17. The deciding factor however, without need for more, is the absence of clear justifying evidence. 64 The owners accordingly are entitled to claim back the amount of Variation No 9 being $4,500. 1. The builder submits that the Tribunal was correct in concluding that Variation No 9 was properly categorised as a Contract Price Adjustment rather than a Variation. We agree with that proposition. In the context of SC 47.13, a charge associated with fill removal is a Contract Price Adjustment rather than a Variation, as the contract did not provide any allowance for fill removal and there was no change to the scope of work or the manner of carrying out the work. 2. The builder submits that the Tribunal's "only basis for disallowing the amount is that the variation was not signed". We disagree with that submission. As set out in [63] of the Reasons for Decision the "deciding factor" for the Tribunal's decision in relation to this item was "the absence of clear justifying evidence". The Tribunal articulated why "justifying evidence" was required is set out in the first sentence of [63]; that is, the Tribunal's conclusion that there was a lack of evidence explaining an apparent double charge for the same item. 3. We see no error in the manner in which the Tribunal has considered the evidence, or rather, in relation to this issue, the lack of evidence to support a conclusion that the owners had not been charged twice for the same item. 4. We have dealt with the basis on which the owners claimed repayment of amounts paid to the builder under Ground 12 below. 5. The builder seeks leave to appeal on the basis that the Tribunal's decision in relation to this issue is against the weight of evidence. We are not satisfied that it is against the weight of evidence. There was evidence before the Tribunal which supported the Tribunal's findings. However, even if that were so, we would not grant leave to appeal for the reasons set out below. 6. This ground of appeal fails. Ground 7 – Variation No 3 - stormwater/surface water line and pits 1. In the Notice of Appeal, the builder states that the builder's engineers have the final say in the construction of the works and that "the storm water engineering amendments was an engineering requirement by the builder's engineer which would take precedence over the engineering design provided by the owner". The builder submits that this required "an alteration to the plans that becomes a variation and in fact a variation which cannot be unreasonably refused because it would be required to be carried out" and "even if the storm water drainage was on the plans it was excluded from the contract works". 2. In the Amended Grounds of Appeal, the builder sought leave to appeal against the Tribunal's decision in favour of the owners in respect of this variation. The builder claims that the Tribunal's decision in relation to Variation 3 was against the weight of evidence, stating that: Leave is sought to appeal against the finding that there was no reason shown to justify the owners paying more for the deviation when the weight of evidence suggests that additional pits were included as built. 1. We note that the first part of the builder's submissions in relation to this ground of appeal relates to Contract Price Adjustment No 2 - a change in slab classification - which was the subject of item H in the owners' claim. The Tribunal's decision in relation to item H was not raised in the original Notice of Appeal or in the Amended Grounds of Appeal. The builder did not seek and was not given leave to further amend the grounds of appeal and we do not propose to allow the Notice of Appeal to be further amended by way of submissions. In these circumstances, we have not considered the builder's submissions in relation to Contract Price Adjustment No 2. 2. In relation to Variation No 3, the Tribunal found that: 65 Surface water line and pits are shown on the owners' plan dated 19 May 2014 which was expressly incorporated into the contract works for the contract price by item 1 of Tender Amendment No 1 (a defined contract document as previously indicated). The fact that as built the item departs from the owners' plan does not, without more, indicate it was a variation the subject of proper claim by the builder. This is reinforced by the fact that the owners' engineer contradicted the builder's claims that the engineer was contacted and approved any change and that the engineer did not certify the 19 May 2014 plans. The work was already paid for in the contract price and certified, so there was no need for a variation except by reason of deviation from that design by the builder for no reason shown to justify the owners paying more for the deviation. Rather, it seems the builder did not follow the certified plan and required the extra work to achieve the same outcome because slabs had already been poured and prevented a return to the certified plan. The owners are entitled to be paid back what was paid being $3,164. 1. The builder submits that work was required that was outside the contract, that the owners accepted the "audited construction plans, if in fact they were altered" or at the very least the work was done with the owners' acquiescence. 2. We are not satisfied that the builder ran a case at the hearing that the final stormwater design was based on the requirements of the builder's engineer. The builder's director's (Mr Malasev's) statement (which is at Tab 5 of Volume 1 of the Appeal Bundle) does not refer to a change in engineering design approved by the builder's engineer. Rather, at [60] of his statement, Mr Malasev states that two additional pits were constructed at the request of the owners. In relation to stormwater drainage works, Mr Malasev states that the stormwater drainage works "were done in substantial compliance with the plans after allowing for the constraints of the site". 3. We are not satisfied that the evidence before the Tribunal supported a conclusion that the reason for the variation was a change in the engineering plans required by the builder's engineer. Rather, it is clear from [60] of the Reasons for Decision that the Tribunal found that the stormwater works and pits were part of the contract works, that design of those works was included in the owners' plans which formed part of the contract documents and that the builder had not shown a reason to deviate from that design in a way which would justify the owners paying more for it. 4. We agree with the Tribunal's observation that the fact that an item as built departs from the owners' plans "does not, without more, indicate it was a variation the subject of proper claim by the builder". For example, if a builder fails to undertake particular work in accordance with the approved plans and then undertakes additional work to deal with the consequences of its failure to follow the plans, the additional work can be properly characterised as rectification work, rather than as a variation. It is implicit in [60] of the Reasons for Decision that this is what the Tribunal accepted had happened in relation to the stormwater line and pits. 5. We discern no question of law arising from the manner in which the Tribunal has dealt with this item. Further, we are not satisfied that the Tribunal's decision in respect of this item was against the weight of evidence. Even if it was against the weight of evidence, we would not grant leave to appeal for the reasons set out below. Grounds 8 and 9 - Variation No 5 - Structural Steel 1. SC 53(2)(g) of the Contract provides that "unless stated in writing", no provision has been made for "any structural steel which is subject to engineering details". 2. The building works required the use of structural steel. The cost was charged to the owners through Variation No 5. 3. At the hearing, the builder argued that SC 53(2)(g) applied to all structural steel used in the construction of the house. The Tribunal rejected that interpretation of SC 53(2)(g), stating: 68 This simply could not be the case. On the literal wording of SC 53.2(g) the steel is that which is subjected to more details than in whatever engineering plans or specifications are part of the contract documents. That is, it covers extra steel which is later detailed. 69 That reading of SC 53.2(g) also is required by the contractual context. The engineering drawings provided by the owners showed the majority of the steel and were expressly made contract documents that defined the building works to be constructed for the contract price. A house cannot be built as a habitable dwelling, as required by the warranty in GC 38.1(e) which reproduces the statutory warranty, unless it has structural steel. Although it could be said that the warranty related to the end product, not the pricing inclusions on getting to the end product, that would not deal with the fact that the engineering drawings provided by the owner were contract documents. 70 It also would be an unusual situation where a primary structural component of the dwelling was excluded from the contract price, would have to be the subject of a variation or a contract price adjustment (governed by the same requirements in GC 17, as said above, including signature by the owners), yet was part of the original contracted works. Not only is that a strained interpretation when a more common-sense interpretation emerges. It also would be something that one would reasonably expect to have been expressly drawn to the owners' attention when an employee of the builder discussed the engineering drawings with the male owner when finalising what was and was not included in the tender that became a contract document, otherwise there would be misleading conduct as claimed by the owners in their alternative basis for the builder's liability. 1. In the appeal, the builder relevantly submits that: 1. The Tribunal erred in suggesting that because structural steel was on the plans included in the contract documents, its cost must therefore form part of the contract price. The plans and specifications may record "any number of items", but this does not mean that the builder has undertaken all the scope of work referred to in the plans and specifications. 2. What is included and excluded from the scope of work cannot be determined solely by what is disclosed on the plans. 3. The Tribunal erred in concluding that the building cannot be built otherwise than with structural steel. There is no evidence for that proposition. 4. This aspect of the work did not manifest itself until after the contract came about and the plans were forwarded to the builder's framers, who pointed out that the structural steel in the engineering details would not be sufficient for the structure. This gave rise to a further inquiry of the builder's engineer and led to an alteration of the structural steel by the addition of further steel and a redesign of the structural steel elements. It was not possible to bring this to the attention of the owners at the time of the contract and it "was not a question of misleading conduct". 5. There was no basis for the conclusion drawn by the Tribunal that there should be a refund for the steel and in particular that there should not be an apportionment. 6. The owner is a draughtsman who was quite capable of reading plans and understanding building procedure. Accordingly, it is "difficult to see how it was misleading in any way was to what was happening on the site". 1. While it is true that building plans and specifications may contain items that are excluded from the a builder's scope of work, this submission is not, in our view, relevant to whether provision for structural steel was made in this particular contract. Further, while technically correct that a building can be constructed without using structural steel, it is clear that the building the builder constructed for the owners could not be built without using structural steel, because the plans and specifications required it. Whether or not a building can be built without using structural steel is also not relevant to whether provision for structural steel was made in the contract. 2. The relevant issue is the correct interpretation of SC 53(2)(g). In relation to this, SC 53(2)(g) excludes from the contract price structural steel which is subject to engineering details "unless stated in writing". Therefore, if the provision of structural steel has been stated in writing, then it follows that it is included in the contract price. 3. It is not in dispute that the engineering drawings provided by the owners detail the use of structural steel. The engineering drawings are clearly in writing and form part of the contract documents. We conclude from this that SC 53.2 does not apply to exclude structural steel which is subject to engineering details set out in the engineering drawings, because provision of that structural steel was "stated in writing" at the time the contract was entered into. 4. It follows that the structural steel which was included in the engineering drawings was included in the contract price and was not properly the subject of a variation. While we consider that the Tribunal's reasoning may not directly address the issue of whether provision of structural steel was stated in writing, we see no error in the Tribunal's rejection of the builder's interpretation of SC 53.2(g). In such circumstances, we do not need to address the Tribunal's tentative alternative finding in relation to misleading conduct. Nor do we need to address the Tribunal's conclusion concerning the applicability of the warranty in GC 38.1(e). 5. If additional structural steel was required during construction, it could be the subject of a variation. The Tribunal dealt with the issue of additional structural steel as follows: 71 The owners did not at final hearing dispute that the additional portal steel that was not in the owners' engineering plans but was required by the frame manufacturer and appeared in the final design as approved by the builder's engineer was a legitimate variation. In the absence of a separate quantification of those beams by the builder the owners did a quantities calculation and were prepared to accept $3,206.80 as the cost of those beams. This in itself was not challenged as a basis for apportionment. The owners are accordingly entitled to a refund from the paid variation of $12,018. 72 The owners did not make closing submissions to support the claim in MI2 for $810 for new stud work to conceal portion of the portal frame. It seems to me that this was ancillary to the variation accepted by the owners and the owners were right not to press that claim in closing submissions. 1. We see no error in the Tribunal's conclusion in relation to additional structural steel. Nor are we persuaded that the Tribunal's finding is against the weight of evidence. Even if that were the case, we would not grant leave to appeal for the reasons set out below. Ground 10 – Variation No 12 - additional underground mains 1. In the Amended Grounds of Appeal, the builder claims that the Tribunal erred in allowing the owners' claim in relation to Variation No 12. 2. In relation to this item, the Tribunal found at [74] of the Reasons for Decision: 74 Variation No 12 is for 21m of underground mains. The Tender (on page 2 under the heading "Connection of Authority Services") did not specify a lineal limit on conduit and wiring. The evidence does not allow me to determine that the amount claimed represents an addition to the contracted work to which the tender refers and, if so, by how much in terms of quantity and cost. The variation is not signed and it has not been established that it was unreasonable for the owners not to sign and thereby signify assent. The owners are entitled to be paid the $840 variation claim which has not been justified by the builder. 1. The builder states that the Tender allowed for eight metres of connection to any of the authorities. The builder also submits in the Notice of Appeal that: 51. One also has to give commercial reality to the particular situation of the connection. In practical terms, the exact extra work may not be able to be determined until the subcontractors are on site and it would be impractical to stop work, obtain a variation and then bring the workmen back to continue with the work. In circumstances where there is an allowance of 8 m then the balance would need to be a reasonable variation which the owner cannot unreasonably refuse because the works cannot then be built and the owner would lose the benefit of the contract. Both parties have the duty to cooperate in this sense. It is not limited to the builder. The work would need to be done and need to be paid. 52. The owner has made the payment and accordingly he would note to show that there has been no consideration if he wishes to recover: Wright v Forsythe Constructions [sic]. 1. We note the wording of Variation No 12, which is included in Volume 2.1 of the Appeal Bundle. Contrary to the submission that the tender allowed for eight metres of underground mains, the variation itself states that the tender allowance was ten metres. However, page 2 of the Tender (which is also included in Volume 2.1 of the Appeal Bundle) contains a notation that connection of services is "subject to the relevant statutory or other authority connection point of each service being suitable for connection and not further than eight metres from the connection point in the dwelling …..". The line in which "not further than eight metres from the connection point in the dwelling" is blurred and difficult to read. We are satisfied that the notation records an allowance of eight metres for this item. 2. We conclude that, contrary to the finding at [74] of the Reasons for Decision, there was evidence before the Tribunal that the Tender specified an allowance in relation to connection of services to the mains and that that allowance was eight metres rather than the ten metres referred to in Variation No 12. While we see no legal error in the Tribunal's analysis or conclusions in relation to this item we conclude that the Tribunal's decision in relation to this item was against the weight of evidence. However, we have refused leave to appeal in relation to this item for the reasons set out below. Ground 11 - Contract Price Adjustment No 1 for additional piering 1. The builder submits that the Tribunal did not take into account there was a contractual allowance for piering. The builder states that "it was a contractual term that a certain lineage for piering was allowed and the balance to charged at a specified rate within the terms of the contract". 2. Item 41 of Tender Amendment No 1 (at pp 67-68 of Volume 2.2 of the Appeal Bundle), provides: Note: Should additional piering be required (over 120 lineal metres) the additional charge will be $125.00 per lineal metre. 1. In Contract Price Adjustment No 1, the builder claimed $3,462 on the basis that 147.7 metres of piering was required on site; that is, an additional 27.7 metres above the allowance of 120 lineal metres. The builder originally claimed $5875, based 47 lineal metres of piering over and above an allowance of 100 lineal metres. That claim was later amended to $3,462 when the owner pointed out that the contractual allowance was 120 lineal metres. 2. According to Mr Malasev's statement, the evidence in support of Contract Price Adjustment No 1 is the invoice at page 263 of his statement, which is included in Volume 2.2 of the Appeal Bundle. That invoice is from JD Concrete Pty Ltd. The invoice relates to "additional piering (450 20MPa) – 117.7Lm x $71. An unsigned handwritten note on the invoice adds 117.7 to 30 to reach a total of 147.7. According to the handwritten note, 100 was deducted from this total, and was then rounded down to 47, which was in turn multiplied by $125. This gave a total of $5875, which was Contract Price Adjustment No 1, before the amendment to reflect the fact that the contractual allowance was 120 lineal metres of piering, not 100 metres. Mr Malasev's statement does not refer to another invoice for 30 lineal metres of piering work and we have been unable to locate such an invoice in the Appeal Bundle. Other invoices from JD Concrete Pty Ltd that are included in the Appeal Bundle appear to relate to spoil removal rather than to piering. 3. In relation to Contract Price Adjustment No 1, the Tribunal found: 75 The only evidence that there was 147.7 lineal metres of piering, being 27 metres above the tender allowance, is handwritten annotations on a copy of the builder's tax invoice and the footing and slab plan. These are not explained or justified. Even if, as the builder says, the matter is not one of variation but of contract price adjustment, the same requirements apply as has been previously discussed. The owners are entitled to claim back the amount on the adjustment of $3,462. 1. The builder submits that the builder was contractually entitled to charge Contract Price Adjustment No 1, the amount was agreed and it was paid. The builder further submits that the owners must have been aware of their bargain and that if the provisional allowance for this work was exceeded, they were to pay the additional cost. In addition, the builder submits that there has not been a total failure of consideration and that the Tribunal erred in equating the claim as a variation that the owners had to accept and sign. 2. In our view, Contract Price Adjustment No 1 is properly characterised as a Variation and not a Contract Price Adjustment. This is because the installation of more than 120 metres of piering represents a change in the scope of work. Therefore, while we agree (for the reasons set out above) that the process for a Contract Price Adjustment is different to that of a Variation, there was a requirement that the variation was signed by the owners under GC 17. The amended version of Contract Price Adjustment No 1 was signed by the owners. 3. However, a builder cannot either raise a variation or adjust the contract price without a sufficient basis for doing so. It is clear from the Tribunal's Reasons for Decision that the Tribunal concluded that there was insufficient evidence for it to be satisfied that the criteria for Contract Price Adjustment No 1 had been satisfied; that is, that the handwritten annotations on the invoice provided by the builder and on the plans did not sufficiently explain the builder's claim for the cost of an additional 47 lineal metres of piering. 4. We see no error in the Tribunal's conclusion in this regard. We are not satisfied that a question of law arises in relation to this item. Leave to appeal is required to disturb the Tribunal's finding that there was insufficient evidence to explain the contract price adjustment. The basis for recovery of this item is dealt with below. 5. We are not satisfied that the builder has demonstrated that the Tribunal's decision was against the weight of evidence. Even if that were the case, we would not grant leave to appeal for the reasons set out below. 6. This ground of appeal is refused. Ground 12 – Finding that payments were not voluntary 1. This ground of appeal relates to the Tribunal's findings concerning the basis on which the owners could recover payments they had made to the builder. The builder claims that the Tribunal erred in its findings in that regard. The builder seeks leave to appeal on the basis that the Tribunal's finding that payments made by the owners were not voluntary are against the weight of evidence. The builder also seeks leave to appeal the finding that there was a "total failure of consideration" on the basis that the finding is against the weight of evidence and "manifestly unfair". 1. In relation to the basis of recovery of payments and whether the payments made to the builder were voluntary, the Tribunal found that: 83 Recovery of the damages claims is for breach of contract. If a payment made was unjustified then the claim for it is a breach of contract, for which damages sounds in the amount of the payment. 84 Recovery of price adjustments unsupported by contract provisions or a variation, and recovery of unjustified variations, is (as just said) a claim for damages for breach of contract (making an unjustified claim in breach of contract) or a claim in quasi-contract or restitution for money had and received. 85 The claim in money had and received can be on one of two relevant bases, duress or similar conduct not having been alleged. The first basis is under a mistake causing the payments, the mistake being one of mixed law and fact that the claims were evidenced and justified in law by the contract as the builder maintained and did not enter into negotiation about. 86 There is no indication that payments were made in any event without the owners seeking to press their rights or not caring about their rights, or in payment of a genuine compromise of a dispute, which is reinforced by the absence of signature of the owners on some of the relevant adjustment and variation claims and the owners' evidence about payment under protest described below. 87 Rather, the builder's claims were paid because of contract terms (spelled out in part on the builder's payment claims) which favoured the builder during resolution of any dispute, namely, extension of the contract period by non-payment and suspension of work, and possible imposition of interest, together with claims by the builder which were not negotiable so far as the builder was concerned despite the communication by the male owner that he was paying to avoid disruption of work but expressed his concerns, disagreement and protests. 88 In other words, payments were not made by the owners that were "voluntary" in the sense used by the majority of the High Court in David Securities PL v Commonwealth Bank of Australia (1992) 175 CLR 353, [1992] HCA 48 at 373-374, 378 (and cp areas of common ground accepted by Brennan J at 394-397); cp Hookway v Racing Victoria Ltd (2005) 13 VR 444, [2005] VSCA 310 at [21]-[22], [42]-[44]. Legal advice to the owners on the contract prior to its execution (put forward by the builder) is not the end of the matter, let alone when there is no evidence of advice on each specific payments claimed under the contract and the evidence was that advice received didn't change the payment, under protest and because of the factors already mentioned: Qld Alumina Ltd v Alinta DQP PL [2007] QCA 387 at [5]-[19], [68]-[72] (special leave refused). 89 The second basis of recovery which can be classified as in contract or restitution is for total failure of consideration. Each variation or adjustment was separate and distinct and the promised work or event said to be the subject of the variation or adjustment was, as found above, either not established or was within the existing scope of the contract works: Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516, [2001] HCA 68 at [13] et seq esp [21], [101] et seq, [194]-[199]. 90 The builder's submissions, and case law cited in support, relied upon the absence of recovery by either party of monies owed or paid under oral variations where the Home Building Act requires writing. They are not relevant to the present situation where there were written but non-contractually-compliant and unjustified variations or price adjustments. It is a case of absence of proof of the right to the variation or price adjustment under the terms of the contract, not illegality. 91 Similarly, and contrary again to the builder's submission, if the variation or price adjustment is not compliant with or not proven to be justified by the contract terms then there is no benefit demonstrated to the owners, and no request by the owners, so as to resist recovery by the owners. 1. The builder submits that the Tribunal erred in not accepting that there had not been a voluntary acceptance of the work that was being carried out "in consideration of the works being carried out with the knowledge of the owner and thereafter making payment". The builder further submits that: 154. In circumstances where there is continuous communication between the parties as to the work that is to be done and where the owner as a draftsman understands the work that is done to the Senior Member to come to the conclusion that the works were not accepted. This was noted in the decision of Priestley JA summarised it in Update Constructions Pty Ltd v Rozelle Childcare Centre Ltd (1990) NSWLR 251. If the proper inferences from the facts were that (i) the owner had actual knowledge of the extra works as they were being done, (ii) knew that they were outside the contract and (iii) knew that the builder expected to be paid for them as extras then a contract to pay for them could probably be implied. However, if the fact was that the owner did not know the particular works were extras or did not know or believe that the builder expected to be paid for them, then it would be proper to conclude that no contract to pay for them should be implied. 154. However unlike Update payments were in fact made on in those circumstances and upon the same facts the owner shifts to whether or not it has been a total failure of consideration in the sense described by the Court of Appeal in Wright v Foresight Constructions Pty Ltd [2011] NSWCA 327 which were referred to the Senior Member. 155. The Senior Member's reasoning however avoids the distinction and simply goes to the concept of unjustness based on either mistake of fact or law. 156. The Senior Member erred in that reasoning because the payment was made for the works that were carried out by the builder were not paid by any belief of the legal entitlement for such payment. They were in fact paid for the purpose of allowing the building works to continue in his belief that there was no entitlement. For example the email in regard to the stormwater drainage was the owner "cannot get my head around" referred to above. 1. The owner submits that the Tribunal's finding that the payments made by the owners were not voluntary in the sense discussed in Davids Securities was a finding of fact that was "not only open, but the only reasonable finding to be made on the evidence presented". The owner also submits that the builder cavils with the Tribunal's finding "without demonstrating why that finding is erroneous, or seeking to establish any of the requirements for leave to appeal against it". 2. The owner further submits that the builder's reliance on Wright v Foresight Constructions is misplaced, as that decision "dealt with an entirely different basis for recovery, namely that the amounts had been paid pursuant to variations which, because they were only orally agreed to, were unenforceable and of no contractual effect". The owner submits that in Wright and Foresight Constructions, there was no dispute that additional work had been undertaken or that the amount paid represented the value of the work". The owner submits that the facts of that case stand in stark contrast to the facts of this case, as found by the Tribunal. 3. The Tribunal's Reasons for Decision demonstrate that the Tribunal found that the owner could recover the amounts claimed on a number of bases. Relevantly to Ground 12 is that the payments were made by mistake and in circumstances retention of the payments would unjustly enrich the builder and that there was a failure of consideration. The Tribunal's comments at [83] and [84] of the Reasons for Decision imply that the Tribunal also considered that damages for breach of contract – the breach being an unjustified claim for payment – was a basis for recovery in this case. The Grounds of Appeal do not refer to [83] and [84] of the Reasons for Decision and it is arguable that the Tribunal did not make a finding that the basis for recovery in this case was as damages for breach of contract. 4. In relation to the payments having been made by mistake, David Securities PL v Commonwealth Bank of Australia (1992) 175 CLR 353, [1992] HCA 48 is the leading authority. In that case, the High Court decided that payments made under a mistake of law are prima facie recoverable in the same way as payments made under a mistake of fact. The principal judgment of the Court was delivered by Mason CJ, joined by Deane, Toohey, Gaudron and McHugh JJ, with Dawson delivering a concurring judgment and Brennan dissenting in part. All Justices rejected the traditional rule which precluded the recovery of money paid under a mistake of law. 5. The Court emphasised that the plaintiff must identify and prove a mistake which is causative of the payment, but was not unanimous on the precise nature of the causative mistake that must be established. The Court accepted that the law should recognise a defence of 'change of position'. This was to ensure that enrichment of the recipient of a payment is only prevented in circumstances where it would be unjust to do otherwise. The central element of the change of position defence is that the recipient of the money has acted to his or her detriment on the faith of having received the payment. 6. The majority defined "voluntary" as to mean "a payment made in satisfaction of an honest claim". In relation to whether a payment is voluntary, the Court also stated at 373-374: The payment is voluntary or there is an election if the plaintiff chooses to make the payment even though he or she believes a particular law or contractual provision requiring the payment is, or may be, invalid, or is not concerned to query whether the payment is legally required; he or she is prepared to assume the validity of the obligation, or is prepared to make the payment irrespective of the validity or invalidity of the obligation, rather than contest the claim for payment. 1. We have agreed with the Tribunal's findings in relation to all items other than Variation 12. The Tribunal's findings in relation to the other items claimed can be summarised as follows: 1. The builder had no entitlement to Contract Price Adjustment No 3 because SC 44.2 was not triggered. 2. The builder had not established that it was entitled to any additional payments under Variation No 9 (fill removal) because the invoices did not support the claim for additional payments. 3. The builder was not entitled to Variation No 3 (stormwater / surface water line and pits) because the stormwater works and pits were part of the contract works and the requirement for a variation had not been established. 4. Variation No 5 (structural steel) was not properly a variation because structural steel was included in the plans. 5. The evidence did not support the additional cost for piering claimed in Contract Price Adjustment No 1 (piering). 1. The Tribunal's findings in relation to these items demonstrate that it was open to the Tribunal to conclude that the payments made by the owner were not payments made "in satisfaction of an honest claim" and that the payments were not voluntary in the Davids Securities sense. That the Tribunal concluded that this was the case and had turned its mind to David Securities and to the further analysis of David Securities set out in Hookway v Racing Victoria Limited & Anor [2005] VSCA 310; 13 VR 444; 1 BFRA 469 is supported by [86] to [88] of the Reasons for Decision. 2. We see no error in the Tribunal's finding that the owner's payments to the builder in respect of the disputed items were not voluntary in the David Securities sense. There is nothing to suggest that the builder had a "change of position" defence to the owners' claim. Given our conclusion in relation to this issue, it is unnecessary for us to consider the second basis for the Tribunal's decision in relation to this issue; that is, whether the owners received consideration for the payments. 3. We agree with the owner's submission that the Court of Appeal's decision in Wright v Foresight Constructions was not relevant to the Tribunal's decision in respect of this Ground of Appeal. In relation to this, Wright v Foresight Constructions concerned an oral variation to a written contract. There was no dispute in that matter that the parties had agreed to the variation. Nor was there any dispute about the value of the works undertaken by the builder in respect of the variation. The Consumer, Trader and Tenancy Tribunal found that the builder had established a claim in quantum meruit in respect of the work undertaken. The Tribunal's finding in this regard was upheld on appeal. That was not the situation in these proceedings. Rather, the builder's case was that it was contractually entitled to the payments made. 4. Ground 12 is not established. We refuse leave to appeal in relation to this ground for the reasons set out below. Leave to appeal 1. As noted above, the circumstances in which the Appeal Panel may grant leave to appeal from decisions made in the Consumer and Commercial Division are limited to those set out in cl 12(1) of Schedule 4 of the NCAT Act. 2. In Collins v Urban [2014] NSWCATAP 17 (Collins v Urban), the Appeal Panel stated at [76] that a substantial miscarriage of justice for the purposes of cl 12(1) of Schedule 4 may have been suffered where: … there was a "significant possibility" or a "chance which was fairly open" that a different and more favourable result would have been achieved for the appellant had the relevant circumstance in para (a) or (b) not occurred or if the fresh evidence under para (c) had been before the Tribunal at first instance. 1. Even if an appellant from a decision of the Consumer and Commercial Division has satisfied the requirements of cl 12(1) of Schedule 4, the Appeal Panel must still consider whether it should exercise its discretion to grant leave to appeal under s 80(2)(b). 2. In Collins v Urban, the Appeal Panel stated at [84] that ordinarily it is appropriate to grant leave to appeal only in matters that involve: (a) issues of principle; (b) questions of public importance or matters of administration or policy which might have general application; or (c) an injustice which is reasonably clear, in the sense of going beyond merely what is arguable, or an error that is plain and readily apparent which is central to the Tribunal's decision and not merely peripheral, so that it would be unjust to allow the finding to stand; (d) a factual error that was unreasonably arrived at and clearly mistaken; or (e) the Tribunal having gone about the fact finding process in such an unorthodox manner or in such a way that it was likely to produce an unfair result so that it would be in the interests of justice for it to be reviewed. 1. In relation to all grounds of appeal other than Ground 10, we are not satisfied that the builder has established the existence of any of the cl 12 Schedule 4 grounds. Even if those grounds had been established, we would not grant leave to appeal because we are not satisfied that the factors relevant to the granting of leave to appeal set out in Collins v Urban apply. 2. In relation to Ground 10, we are satisfied that the Tribunal's findings at [74] of the Reasons for Decision that "[t]he Tender … did not specify a lineal limit on conduit and wiring" and that the evidence did not allow the Tribunal "to determine that the amount claimed represents an addition to the contracted work to which the tender refers and, if so, by how much in terms of quantity and cost" were against the weight of evidence. Contrary to the Tribunal's findings, the Tender did specify an eight metre allowance and there was evidence of the amount an cost of the conduit and wiring actually installed, in the form of an invoice from the builder's subcontractor. 3. However, we have not granted leave to appeal for the following reasons. 4. First, we are not satisfied that the decision in relation to Ground 10 involves issues of principle, questions of public importance or matters of administration or policy which might have general application. Further, we are not satisfied that the Tribunal went about the fact finding process in relation to this issue in an unorthodox manner or in a way that was likely to produce an unfair result. Rather, we conclude that the Tribunal missed a piece of evidence – that is, the specification of an eight-metre allowance in the Tender – because the document before the Tribunal was almost illegible. 5. Second, while we are satisfied that the Tribunal's conclusion in relation to the existence of a tender allowance was a mistake of fact, the Tribunal did not err when it found that Variation 12 had not been signed by the owners. Variation No 12 therefore had not been processed in accordance with GC 17. 6. In Liebe v Molloy (1906) 4 CLR 307, the High Court considered a claim for unwritten variations in the context of a lump sum written contract. The High Court held that a contract to pay for the variations could properly be implied if the proper inferences to be drawn from the facts were that: 1. the owner had actual knowledge of the extra works as they were being done; 2. the owner knew that the extra works were outside the contract and 3. the owner knew that the builder expect to be paid for them as extras. 1. However if the owner did not know the particular works were extras or did not know or believe that the builder expected to be paid for them, then it would be proper to conclude that no contract to pay for them should be implied. 2. In this case, we are not satisfied that the owner had actual knowledge about the work as it was being done or that the extra work was outside the contract, until after the claim for Variation No 10 was made. While we note the builder's submission in the Amended Grounds of Appeal concerning the "commercial reality" of determining additional work, it was open to the builder to assess how much additional work was required and raise a variation in accordance with its obligation under GC 17. 3. In these circumstances, even though the Tribunal made a factual error in relation to the Tender allowance, we are not satisfied that the appellant may have suffered a substantial miscarriage of justice or that the circumstances of the case warrant a grant of leave to appeal. Conclusion 1. None of the Grounds of Appeal have been established and leave to appeal is refused. Costs 1. Rule 38 of the Civil and Administrative Tribunal Rules 2014 applied to the proceedings in the Consumer and Commercial Division. This means that costs could be awarded in the absence of special circumstances. Because of the operation of Rule 38A the same costs provision applies in the appeal proceedings. 2. The builder has been unsuccessful on appeal. We conclude that the builder should be ordered to pay the owners' costs of the appeal, on the ordinary basis, as agreed or assessed. If either party seeks a different costs order, it may do so in accordance with our orders. Orders 1. Leave to appeal is refused and the appeal is dismissed. 2. The appellant is to pay the respondent's costs of the appeal, on the ordinary basis, as agreed or assessed. 3. If either party seeks a different costs order, the following orders apply: 1. Order 2 is stayed until further order of the Appeal Panel. 2. The party seeking a different costs order (the costs applicant) is to file an application, supported by evidence and submissions, within 14 days of the date of publication of these orders. 3. The other party is to file and serve evidence and submissions in response to the application within 14 days thereafter. 4. The costs applicant is to file and serve any submissions in reply within 7 days thereafter. 5. Subject to the parties' submissions, an application for a different costs order will be determined on the papers. ********** 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: 14 September 2018