Grace v Pepe

[2014] NSWDC 259

District Court

New South Wales

Medium Neutral Citation:	Grace v Pepe [2014] NSWDC 259
Hearing dates:	26, 27 and 28 November 2014
Decision date:	01 December 2014
Jurisdiction:	Civil
Before:	P Taylor SC DCJ
Decision:	(1) Allow the appeal. (2) Remit my decision on the questions set out in these reasons to the Tribunal and order a rehearing of the proceedings by the Tribunal pursuant to s 67(3)(b) of the Consumer, Trader and Tenancy Tribunal Act 2001. (3) Order the costs of the appeal (excluding the plaintiff’s costs of the first day of hearing) be costs in the Tribunal, to abide the determination by the Tribunal of the costs in the Tribunal. (4) By consent, grant liberty to either party to apply to this Court in respect of a Suitors’ Fund Act 1951 Certificate, in respect of the costs of these proceedings, after the determination of the rehearing by the Tribunal.
Catchwords:	APPEAL FROM CONSUMER, TRADER AND TENANCY TRIBUNAL, building contract - validity of owners’ notice of termination - validity of suspension by owners - validity of suspension by builder - validity of notice to rectify
Legislation Cited:	Consumer, Trader and Tenancy Tribunal Act 2001, s 67 Suitors’ Fund Act 1951
Cases Cited:	Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 Edyp and Ors v Brazbuild Pty Ltd [2011] NSWCA 218 Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603 Kostas v HIA Insurance Services Pty Ltd [2010] HCA 32 Progressive Mailing House Pty Ltd v Tabali Pty Ltd [1985] HCA 14
Category:	Principal judgment
Parties:	Sam Grace trading as Grace Design and Construction (plaintiff) Anthony Pepe (first defendant) Sophia Pepe (second defendant)
Representation:	Counsel: Mr K Ginges (plaintiff) Mr R Zikmann (defendants) Solicitors: Adams & Partners Lawyers (plaintiff) John Lloyd and Co (defendants)
File Number(s):	2013/308287

Judgment

INTRODUCTION

1. This is a residential building case. It arises on an appeal from a decision of the Consumer, Trader and Tenancy Tribunal (“the Tribunal”) between the builder, Sam Grace, and the owners, Anthony and Sophia Pepe.

THE CONTRACT

2. On 6 March 2010 the owners and the builder entered into a contract for building works. The contract included the following provisions:

“6. Commencement, purpose of and completion of work

(a)(i) The Owner must give the Builder possession of such parts of the work site as is reasonably required to allow work to proceed.

…

7. Progress Payments

…

(a) Claims for payment are to relate to the work done…

(b) The Builder should submit payment claims for the value of work carried out and costs incurred at the frequency specified in Schedule 4 point (i). If no selection is made then invoicing for work done approximately every fortnight will apply.

(c) The Owner is to pay progress payments to the Builder in accordance with Schedule 4 point (ii) or if it is left blank the Owner must make payment within five (5) days of receipt of the Builder’s invoice (‘the due date’).

…

(e) If a payment is not made by the due date the Builder is entitled to stop all work until such time as the payment is made. Any period of suspension will automatically adjust the date for practical completion of the works by the period of suspension.

…

(g) If the Owner identifies in writing within two (2) days of receipt of the progress claim work which has not been done or which is incomplete or defective or for which no deduction has been made then an amount equal to no more than 2.5% of the amount claimed may be withheld unless an alternative amount has been agreed between the parties. Any amount withheld becomes payable once the work omitted, incomplete or defective has been completed.

…

12. Dispute Resolution

Party to notify the other

(i) If any dispute or difference (a dispute) concerning this contract arises between the Owner and the Builder then either party must give the other written notice of the dispute. The notice of dispute is to clearly and accurately detail the matter or matters of concern and is to be supported by any material which the party serving the notice intends to rely upon.

…

13. Default by Builder

If the Builder makes default by: -

(i) wrongfully stopping work for an unreasonable period;

(ii) failing to proceed with due expedition to enable completion by the due date after allowing for changes to the construction period; or

(iii) failing to comply reasonably with a written notice to replace defective work or improper materials that the Builder can advise the Owner that he/she can complete the work for the contract sum or within the contract period, as varied or extended.

THEN the Owner by written notice is to advise the Builder of the matter or matters constituting the default and require the Builder to rectify the same within twenty (20) days. If the Builder fails to rectify the default within the period allowed, the Owner may by further written notice determine the Builder’s employment.

14. Default by Owner: -

(a) If the Owner

(i) interferes with or prevents the Builder from carrying out the work; or

…

(iii) fails to pay any sum or part sum of money due under the contract; or

…

then the Builder may suspend work until the default is rectified.

(b) The Builder must advise the Owner in writing of the suspension as work under this clause and identify the reason for the suspension. (c) The completion date for the work will be extended by the same number of days as any suspension under this clause.

(d) If the Owner does not correct the default within ten (10) days of receiving the suspension notice under this clause the Builder may by written notice determine this contract and the Owner is liable to the Builder for any money due to the Builder and by way of compensation any damage suffered by the Builder due to the Owner’s default.

15. Notices

(a) Any notice by one party to the other must be in writing and identify in sufficient detail, supported by relevant documents or reports, the purpose of and outcome required by the Notice.

(b) Any notice or claim to be given by one party to the other is sufficiently given or served if given to the party to who it is addressed at the contract nominated address or personally delivered to the other party or successfully sent to the facsimile number identified in this contract.

(c) However a notice or other document which require service can not [sic] be served by e-mail.

…

18. Interpretation

…

(b) In this contract:-

…

‘day’ or ‘days’ for the purpose of this contract does not include:-

(i) Saturdays, Sundays or industry rostered days off;

(ii) or any day that has been gazetted or proclaimed to be a public holiday in the locality where the works are being or are to be executed;

(iii) January 2, 3, 4, 5, 6 and December 27, 28, 29, 30 and 31 of the calendar year.”

THE DISPUTE

3. On 8 September 2010, the builder issued invoice number 9 which claimed an amount of $32,324.04. That invoice and other surrounding matters prompted an email dated 13 September 2010 from the owners to the builder that referred to “some very serious concerns”.

4. This email raised concerns about rent and storage costs incurred by the owners, referred to a collapsed ceiling, and made complaints about site attendance of the builder, a footprint in the front path, “damage to the drive” and oil on the driveway. The email attached a copy of a document that stated:

“9. Work still to be completed

Downstairs

• Staircase

• Lounge floor extension, flooring, sliding doors, ceiling, Gyprock.

• Dinning [sic] room doors, ceiling frame, tiles, gyprock.

• Plumbing (pipe work, water tank, drainage pit).

• Garage doors (Front panel, 2 x side doors).

• Front gate, Front fence, Front sliding gate.

• Sliding gate concrete finish.

• Veranda (Decorative finish).

• Decking (main stair moves to next position site, stair moves to next position).

• Pergola.

• Rendering.

• Painting (Internal and external).

• Floor sanding and finish.

Upstairs

• Plumbing (Pipe work, installation of bathroom suites).

• French doors.

• Balconies (Safety rails, tiles, finish).

• Gyprock (Insulation - walls & ceiling).

• Internal doors.

• Mac render.

• Painting (Internal and external).

• Chimney stack.

…

11. Problems to be addressed

• Packing

• Stairs

• Window height

• Structural steel…

• Pergola

• Decking height

• Brickwork incomplete (garage, veranda, lounge, dining, decking).

• Walls out of square (tiles, floor & decking will look bad).

• Should concrete step down for termite protection, will rain come in (Dinning [sic] area)

12. Damage/defect list

• Tiles on roof

• Drive/garage slab

• Footpath

• Concrete sliding gate

• Side gate panel broken

13. Damage to existing structure/damaged to personal property

• Ceilings - Lounge, kitchen, hall, bedrooms x 2, (Paint)

• Cornice - Lounge, bedroom (paint)

• Walls - Kitchen (white set), lounge (paint)

• Electric Heater

• Computer

• Video camera

• Multimeter

• Lounge doors (colonial)

• Bradford Buts insulation (From existing ceiling that had become water damaged and then thrown by trades

• Suede boots

• Floor raised hallway and water stained

• Floor water stained in bedroom

• Electrical cable cutters

• TV aerial (broken by trespasser)”.

5. The next day the owners sent another email to the builder. It raised matters concerning the rent, the need to replace certain structural steel, a failure to protect the front tree and other issues concerning lack of communication.

6. The following day, 15 September 2010, another email was sent by the owners to the builder which raised issues about insurance, driveway damage, front path damage, roof tile damage, pergola, structural steel, installation of the staircase and the “kitchen white set” and the sliding doors and bricks under the water tank.

7. On 18 September 2010 a further email was sent by the owners to the builder raising issues about plumbing pipes being external to a wall, the “yellow tongue” flooring, insurance, cleanliness on site and discrepancies concerning charges.

8. On Monday, 20 September 2010 the owners wrote to the builder by email in these terms:

“Sam,

All work will cease immidiately [sic] to ensure that a proper investigation by the office of fair trading and authorised personal [sic] can be carried out. You are not allowed to be on or near the site until this is done to ensure that any outstanding monies can be assessed without predjudice [sic]. You will be tresspassing [sic] if you or people on your behalf come on or near the site and neighbours have been notified to call the police to ensure that this happens. If in the event that there is money owed to you after the investigation then we will pay what is owed less any costs to fix damage and change any things that were nt [sic presumably ‘not’] built to the original plan and that you continued without advising us or seeking permission.

Obviously, this as stated will be going through the official process due to irrepairable [sic] problems. Unfortunately your threats have also been noted and reported and if necessary after a meeting with a solicitor tomorrow I will notify the police. It is very unfortunate that you have behaved in this manner not just in threats (which is not the first time) but your actions on this project. We have tried time and time again to deal with you but you have avoided all manner of communications that would have assisted in this projects completion. We believe that we have over paid up to this point but this will be veryfied [sic] when the house is assessed by multiple builders to veryify [sic] work outstanding and defects. We will of course be persuing [sic] damages caused to our property, personal belongings and of course rent that we have had to pay due to our property being accidently [sic] damaged by trades and of course damage caused by the weather and you negligent actions. We will be having several people coming through the property in the next 2 days so we can give this information to the fair trading to support our complaint and claim.

Can you please clearly itemise all outstanding work and the price you have quoted for that work, this is to include mac render upstairs and render all areas downstairs as per drawings, gyprock, timber flooring etc. Can you also provide a list of all damages that will be taken into account like tiles, concrete etc and changes you have made without notifying us like timber posts that you changed after quoting.

We are officially suspending work on site so a full evaluation of the work and damages can been assessed. It would be adviseable [sic] to allow assessments to be made so that we can all move forward without delay. Any futher [sic] delays will only mean there will be further damage claims due to not being allowed back in to the property due to health and safety issues and insurance claims.

Your co operation would be appreciated in the expediant [sic] working out of work outstanding and monies owed and of course cancelation [sic] of this contract.

Anthony”.

9. That email appeared to prompt a response from the builder on the next day, 21 September 2010. Mr Grace, the builder, sent a letter to Mr and Mrs Pepe in the following terms:

“Dear Mr and Mrs Pepe

NOTICE OF SUSPENSION OF WORK

…

Pursuant to Clause 14 of the Contract we advise you that works are suspended for the following reasons:

Clause 14(a)(i) Owner interference and prevention of the Builder from carrying out the work; and

Clause 14(a)(iii) Owner’s failure to pay money due under the contract.

Should you fail to correct these defaults within ten days of receiving this notice we will terminate the Contract.

Yours faithfully

Sam Grace”.

10. On the same day, the builder sent a notice of dispute to the owners in the following terms:

“Dear Mr and Mrs Pepe

NOTICE OF DISPUTE

…

Pursuant to Clause 12 of the Contract we advise you that there is a dispute for the following reasons:

1. Owner interference and prevention of the Builder from carrying out the work;

2. Owners' breach of Clause 2 of the Contract by repeatedly going onsite without consent of the Builder.

3. Non-compliance with Builder's requests by the Builder concerning OH&S, site access or site attendance.

4. Owners' failure to pay money due under the contract

5. Owner's email correspondence dated 20 September 2010 instructing work to cease and Builder to stay away from the site.

Within 10 business days after receipt of this notice we should meet at least once to attempt to resolve the dispute or agree on a method of resolving the dispute. Please nominate a date suitable to you to meet.

Additionally, Grace Design and Construction has applied to Fair Trading's dispute resolution service. Fair Trading will contact you to clarify the nature of the dispute. If you are agreeable a Fair Trading Building Inspector will organise a site visit and meet with both parties to conduct a mediation session to resolve the dispute.

Yours faithfully

Sam Grace”.

11. The following day, 22 September 2010, the builder issued and sent to the owners invoice 10 totalling $41,989.04. That invoice included the amount already invoiced in invoice 9 plus an additional $9,665.

12. On 27 September 2010 the owners, by their solicitors, suggested a meeting of the parties on either 28 or 29 September 2010. Apparently a mediation was held on 6 October 2010, which was unsuccessful, and on or about 11 October 2010 the owners declined to have intervention from New South Wales Fair Trading.

13. On 4 October 2010 the builder filed an application in the Tribunal claiming the amount of $41,989.04, which had been sought in invoice 10.

14. On 24 December 2010 the owners issued what might be termed a “notice to rectify” to the builder. It was in the following terms:

As Solicitors for Anthony Pepe and Sophia Pepe, the Owners, we hereby give you notice, on behalf of the Owners, pursuant to Clause 13 of the Contract between yourself and Mr, and Mrs. Pepe as follows:

1. You as the builder have made default by wrongfully stopping work for an unreasonable period and for failing to proceed with due expedition to enable completion by the due date, after allowing for changes to the construction period.

2. You as the builder have failed to comply reasonably with a written notice to replace defective work or improper materials so that the builder can advise the owner that he/she can complete the work for the contract sum or within the contract period, as varied or extended.

The Owners hereby advise you that you have not completed the works with due expedition by the due date allowed in the Contract and that the Owners have not consented to the delay in completion of the works and you have carried out defective works which you have not rectified and which are particularized in a Building Inspection Report prepared by Barry M. Morris Building & Construction Consultant ("the Report").

You are required to rectify the defaults above referred to and as referred to in the Report within 20 days from the date hereof. If you fail to rectify the defaults within this period the Owners, may, by further written notice, determine your employment.

DATED this 24th day of December, 2010.

[signature]   

John Lloyd

Solicitor

For and on behalf of Anthony Pepe and Sophia Pepe”.

15. Nothing of particular significance seems to have occurred thereafter between the builder and the owners, other than a confirmation that the letter was received and a rejection of the matters in it, in a letter dated 30 December 2010 from Mr Grace to the solicitor for the owners. The letter did indicate that the report by Mr Morris “will be responded to in due course following the break, and after seeking advice from our MBA Lawyers who are also on break till the 10th January 2011”.

16. On 8 February 2011 by facsimile, the owners sent a notice purporting to determine the contract in the following terms:

NOTICE PURSUANT TO CLAUSE 13 OF THE CONTRACT

1. The builder has failed to rectify the defects to which notice was given pursuant to clause 13 of the contract on 24 December 2010 within 20 days of the notice having been served;

2. The owner, by this notice, determines the employment of the builder. Signed, Anthony Pepe, Sophia Pepe, 8 February 2011.”

17. Shortly before the matter came before the Tribunal for hearing in December 2011, on 29 November 2011 the builder issued a notice to determine the contract in accordance with clause 14(d) of the contract on the basis that the owners had not complied with the builder’s notice of suspension of 21 September 2010 and that they had not, within the ten days, allowed the builder to carry out the work or paid the money due to the builder under the contract. The builder asserted that that notice was sent in case there had not already been an abandonment of the contract.

THE TRIBUNAL

18. The Tribunal dismissed the claim by the builder for payment of invoice 10 and ordered the builder to pay the sum of $82,281.85 in total on a claim made by the owners. In the course of that decision, the Tribunal made the following relevant findings:

“Discussions and Findings

16…I accept the evidence of the owners that this notice [of suspension by the owners] was issued for the purpose of attempting to resolve what they considered were major questions in relation to whether there were defective works and the costs of completing the contracted works, with the help of the Office of Fair Trading. While Mr Pepe conceded under cross-examination that he did not wish the builder to return to the site, I accept that this ‘prohibition’ was intended to apply only to the period during which an OFT investigation and perhaps mediation occurred. I reject the submission of the builder that this suspension amounted to a repudiation of the contract.

17. I am also satisfied that it was a usual practice of the builder (at least in this case) to suspend the works In order to force the owners to agree to pay for variations claimed by the builder, and that such suspension occurred on two occasions, prior to the suspension notice issued by the owners and immediately followed by a further suspension made by the builder on the following day. The evidence suggests that the builder did not intend to return to complete the works until the last progress claim in the sum of $41,989.04 was paid.

18. For these reasons I find the owners were entitled to issue their notice of suspension and later to terminate the contract.

…

26…the evidence appears clear to me that at the time of the final progress claim the value of the works then remaining, including necessary rectification of defective works, significantly exceeded the remaining contractual payment. The builder did not appear to me to accept this proposition but on this point he was at odds with his own expert. Significantly, the builder agreed in cross-examination that he was not entitled to claim for defective works or for work not completed as at the date of the claim, and that renders it more certain that he was not entitled to claim the amount actually claimed at that date. For that reason, the builder was not entitled to issue a notice of suspension of works. I find also that the reason for that final notice of suspension issued by the builder was because of non-payment of the final claim. The builder asserted that it was also a response to the owners' alleged refusal to allow him to continue the works, but as I have found above, it was clear the owners, by their notice of suspension were not intending to finally exclude the builder from returning to the site.

27. It follows from these findings that I reject the claim of the builder for loss of profits. The factual situation is that the builder was not going to make a profit from this work at all. Significantly, as noted, the builder's own expert's evidence leads to that conclusion.

28. In relation to the latter point, in my view the evidence as to whether the builder was actually and in terms invited to return to continue the works does not demonstrate the owners intended to repudiate the contract. In my view it is clear on the face of the documents in relation to the owners' suspension that it was intended to be a temporary measure, as noted above.

…

33…Even without allowing for rectification of defective works, it is clear that the builder's own expert demonstrates that the builder could not have been entitled to the amount claimed in the final invoice, thus answering the issue raised in the previous paragraph.”

THE APPEAL

19. The builder appeals under s 67 of the Consumer, Trader and Tenancy Tribunal Act 2001:

1. claiming $41,989.04 in unpaid invoices that were rejected by the Tribunal; and

2. seeking to reduce the amount of $82,281.85 awarded by the Tribunal to an amount of $11,707, being an amount for defects.

20. At the hearing before me, the builder took no issue about three other items awarded by the Tribunal, namely, $6,000 insurance excess, $1,540 reimbursement for packing and a variation of $3,741.85 for alternative accommodation. Thus, the residual amount of $59,293, of the amount awarded by the Tribunal, is disputed (i.e. $82,281.85 - ($11,707 + $6,000 + $1,540 + $3,741.85)).

21. To put it another way, the builder’s case is that $22,988.85 ($11,707 + $6,000 + $1,540 + $3,741.85) should have been ordered in favour of the owners which, when offset against the builder’s unpaid invoice 10, would produce a net amount of $19,000.19 in favour of the builder.

22. The owners support the Tribunal’s decision.

THE LAW

23. Section 67 of the Consumer, Trader and Tenancy Tribunal Act 2001 contains the following provisions:

“67 Appeal against decision of Tribunal with respect to matter of law

(1) If, in respect of any proceedings, the Tribunal decides a question with respect to a matter of law, a party in the proceedings who is dissatisfied with the decision may, subject to this section, appeal to the District Court against the decision.

…

(3) After deciding the question the subject of such an appeal, the District Court may, unless it affirms the decision of the Tribunal on the question:

(a) make such order in relation to the proceedings in which the question arose as, in its opinion, should have been made by the Tribunal, or

(b) remit its decision on the question to the Tribunal and order a rehearing of the proceedings by the Tribunal.

(4) If such a rehearing is held, the Tribunal is not to proceed in a manner, or make an order or a decision, that is inconsistent with the decision of the District Court remitted to the Tribunal.

…”

24. In Kostas v HIA Insurance Services Pty Ltd [2010] HCA 32 French CJ at [25] held that, “The words ‘question with respect to a matter of law’ are wide enough to encompass a question of mixed law and fact. Questions of fact and law are often closely intertwined”. The plurality in Kostas (Hayne, Heydon, Crennan and Kiefel JJ) determined at [90] and [91]:

“It is sufficient, for present purposes, to determine that the ground usually described as a ‘no evidence ground’ raises a question of law…Whether there was no evidence to support a factual finding is a question of law, not a question of fact…What amounts to material that could support a factual finding is ultimately a question for judicial decision. It is a question of law.”

25. The plurality at [88] declined to determine in the abstract the precise ambit of the words “question with respect to a matter of law”.

26. Decisions with respect to a matter of law may be implied rather than given expressly by the Tribunal (see Edyp and Ors v Brazbuild Pty Ltd [2011] NSWCA 218 at [28], [29]). Allsop P at [34] doubted the wider approach of French CJ quoted above but nevertheless regarded at [37] that whether a question is with respect to a matter of law is a matter of substance, not of form or drafting.

27. Speaking generally, relevant facts found by the Tribunal are not decisions on a “question with respect to a matter of law”. But decisions by the Tribunal in relation to entitlements that may (as a matter of substance) arise from those facts would be a question with respect to a matter of law, since it is the law that determines whether those facts give rise to the entitlement.

THE GROUNDS

28. There are 12 appeal grounds in the summons. The central issue argued, not disclosed plainly in those grounds, appears to be whether the owners’ termination by notice of termination on 8 February 2011 was valid. This issue could alternatively be expressed as whether the owners were entitled to terminate the contract. This is a decision with respect to a matter of law as required by s 67.

29. Appeal grounds 4 and 5 refer to the notice of termination and assert that the Senior Member failed to consider or failed to determine whether the notice was valid or wrongful. Neither ground asserts that the relevant decision of the Senior Member to uphold the termination was wrong. However, ground 12 asserts an error in deciding that the builder was liable for completion costs. The entitlement of the owners to completion costs depends upon the validity of the termination, and so there remains a basis to determine the central issue concerning the notice of termination.

30. Notwithstanding that there seems to be some surplus grounds in the summons commencing an appeal, I propose to deal with them seriatim.

GROUND 1

“The learned Member in the Tribunal erred in law in finding that the defendants’ suspension notice was a valid notice of suspension under the Contract.”

31. The Tribunal Senior Member said in [18], “I find the owners were entitled to issue their notice of suspension.” This finding of the Senior Member is a decision on a question with respect to a matter of law, namely, a question of whether the suspension notice was valid or whether the owners were entitled to issue the suspension notice.

32. The owners submit that the issue of the suspension notice was reasonable in the circumstances, including because the builder was claiming excessive moneys. But reasonableness, of itself, is insufficient to create a contractual or common law entitlement to give a suspension notice, and the owners, as I understood the submissions, did not assert that it did.

33. The builder did not assert that he had an interest in the land entitling him to possession, to do building works or otherwise. But the builder was a licensee under the contract with the right to access the property to do the building works. More accurately, under cl 6(a) of the contract, the builder had a right to possession of such parts of the site as he reasonably needed to allow the work to proceed. Thus, any exclusion of the builder from the site, by the owners, had contractual consequences.

34. Excluding the builder from the site was in breach of cl 6(a), unless there is some other contractual entitlement in the owners to exclude him. The owners were unable to identify any contractual provision, express or implied, that created such a right.

35. The Senior Member found that the suspension by the owners was “temporary”. However, that fact is insufficient to create the right to suspend or to validate the suspension. The suspension remained without a contractual basis. The Senior Member also rejected the submission that the suspension by the owners amounted to a repudiation of the contract. Even if that is so it does not create a contractual right in the owners to suspend the builder from the site.

36. The Senior Member indicated in paragraphs [17] and [18] of his decision that the entitlement to suspend arose because of the builder’s claims. But, even if a claim is invalid, or, worse still, a breach of contract, there remains no express contractual right to suspension, and suspension is not a common law remedy available for breach of contract. No right to suspension arises even if the builder is claiming excessive funds or has no intention to return to complete the work.

37. A breach of contract by the builder gives the owners a right to damages. If fundamental, the breach may entitle the owners to terminate. It may entitle the owners to other remedies expressed in the contract. But the suspension by the owners fits into none of those categories.

38. It follows that the owners’ suspension or, more accurately, their refusal to allow the builder to access or “possess” those parts of the site needed to complete the works, was in breach of cl 6(a) of the contract.

39. I accept that there was an error of law by the Senior Member in finding that the notice of suspension was valid.

GROUND 2

“The learned Member in the Tribunal erred in law in finding that the defendants’ notice of suspension was intended to be a ‘temporary measure’. There was no evidence to support such a finding, particularly in light of:

a. The Member’s finding that the defendants’ notice of suspension was only to operate for as long as an Office of Fair Trading investigation occurred;

b. The defendants’ refusal to allow any inspectors from the Office of Fair Trading inspecting [sic] the site; and,

c. The defendants’ express refusal to allow the plaintiff back on site to inspect the works or complete the works.”

40. The significance of this ground appears to have evaporated in view of my finding that the suspension notice was invalid. In any event, whether the owners’ notice of suspension was “intended” to be a temporary measure is not a question with respect to a matter of law. The intention of the owners is a factual matter and no other question of law is identified, save perhaps for the assertion that there was no evidence to support the finding of that intention.

41. As was held in Kostas, a finding of fact made without any evidence in support does raise a question of law. But, in the present case, there is some evidence to support the intention that the notice was to be a temporary measure, namely, the contents of the notice itself, which spoke of excluding the builder from the site “until” certain matters were done, and also the oral evidence of Mr Pepe when he asserted (7 December 2011, T117), “Well, we was expecting Mr Grace to come back, but we wanted an investigation done first of all so we knew where we stood.”

42. I do not need to consider the contrary evidence because there is some evidence to support the factual finding of the Senior Member. A factual finding that involves weighing the competing evidence is not a question of law. Thus, consideration of matters 2a, 2b and 2c in the builder’s grounds of appeal, even if they are correct, do not assist the builder to establish an error of law by the Senior Member.

43. I should not be taken to have accepted that the matters in paragraph 2 of the grounds correctly state the facts. Paragraph 2c at least (depending upon the time period intended by that ground) seems to be debatable and not based on any finding of the Senior Member.

GROUND 3

“The learned Member in the Tribunal erred in law in finding that the defendants had ‘invited’ the plaintiff, whether explicitly of implicitly, to return to the property to complete the building works, there being no evidence to support such a finding.”

44. The principles applicable to ground 2 also apply here. The absence of any evidence to support a finding of facts may give rise to a question of law.

45. In the present case, however, the builder himself conceded in re-examination that he was invited back. The following passage appears from the transcript:

“Q. Even after receiving that notice to rectify, did the owners invite or allow you to come back to the site?

A. Yeah, the, the owner sent us invitation to come back and to fix defects.”

46. It may be that other evidence given by the builder could diminish the value of that concession. Nevertheless, this evidence remained as some evidence supporting the finding made by the Senior Member.

47. In addition, the content of the notice to rectify might also be seen to support a finding of an implied invitation to the builder to return, since it requires him to complete the work. The fact that there may be other contrary evidence to the finding of the Senior Member does not support the assertion that there was no evidence.

48. This ground also fails because the finding asserted by the builder was not made by the Senior Member. Paragraph 28 of the Senior Member’s decision, quoted above, is not an express finding to the effect asserted in ground 3 and, in my view, is not even an implied finding about the existence of an invitation. Again, the significance of this ground has diminished given my finding in respect of ground 1.

GROUND 4

“The learned Member in the Tribunal erred in law in that he failed to consider whether:

d. The Notice to Rectify, issued to the plaintiff by the defendants on or about 24 December 2010, was issued in accordance with the Contract and, further, whether it was valid and effective at law; and e. The Notice of Termination, issued to the plaintiff by the defendants on about 8 February 2011 was issued in accordance with the Contract and, further, whether it was valid and effective at law.”

49. This ground concerns matters that the Senior Member is asserted to have failed to consider. But an appeal under s 67 concerns matters that the Tribunal decides, not ones that it fails to consider. Failures to consider matters may potentially result in errors in other decisions made by the Tribunal but it is necessary to challenge those decisions, not the failures to consider matters. There was no suggestion that the matters in ground 4 were implied decisions of the Tribunal.

50. The Senior Member (at [18]) found that the owners were entitled to terminate the contract. That is, in substance, a finding that the notice of termination was valid. The question of whether the notice of termination or the notice to rectify was valid is a question with respect to a matter of law but, as I read ground 4, it is a question not raised by that ground.

GROUND 5

“The learned Member in the Tribunal erred in law in that he either failed to consider or failed to determine whether the defendants’ Notice of Termination was wrongful and otherwise amounted to a repudiation of the Contract by them.”

51. This ground raises largely the same issue as raised by ground 4. There does not seem to me to be a material difference in the present case between whether the notice of termination was invalid and ineffective (under ground 4) or wrongful (under ground 5). The builder did not identify any material difference between them. Accordingly, the reasoning above in the previous ground applies also to this ground.

52. There is an additional assertion in ground 5 to the effect that the Senior Member failed to consider or determine whether the notice of termination was a repudiation. Again, for the reasons given in relation to ground 4, a failure by the Tribunal to decide a matter does not enliven the jurisdiction in this Court granted by s 67(1). Jurisdiction under this provision arises if the Tribunal decides a relevant matter.

53. Furthermore, repudiation, if established by the builder, would be of no significance since there is no assertion by the builder that the repudiation was accepted by him so as to bring the contract to an end.

GROUND 6

“The learned Member’s finding that that plaintiff was not entitled to issue invoices 9 and 10 was an error of law. It was an error of law to consider an assessment of the costs to complete the building works as a measure of whether the plaintiff was entitled to issue invoices 9 and 10, in the absence of any contractual or other legal basis.”

54. I referred earlier to the content of cll 7(a) and (b) of the contract. Those clauses provide that the claims by the builder are to relate to work done and are for the value of work carried out. The clauses refer to a schedule. There was no completed schedule in the contract. The question that arises is whether the builder carried out the value of work reflected in the claim.

55. It is apparent that the “value of work” expressed in cl 7(b) of the contract is informed by and must be measured against the contract price. Thus, as an example, the builder can claim 50% of the contract price once 50% of the contract work, by value, is done. This was a matter belatedly accepted by the builder in submissions. A review of his own invoices and other documents established that this proportionality principle between his invoices and the work done was apparently adopted by him in issuing invoices under the contract.

56. One of the documents in evidence before the Senior Member was a document headed “Construction Stages” which attributed to various matters a proportion of the contract works and contract value. Whilst that document might not have been contractual, it was evidence of the approach of the builder. I do not wish by this to suggest that what was in the mind of the builder or what he did after the contract was entered is relevant in determining the proper construction of a term of the contract (see Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603 at [10]-[12]; [2009] NSWCA 407 at [10]-[12], Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 at 352) but it may explain why the builder ultimately accepted the proposition that an invoice must be based on what proportion of the work had been done by the builder.

57. The builder submitted that the price that a third party might charge to complete the building work is not the test for what is the amount of work done by the builder.

58. How much work by value the builder has done at the time of the issue of the invoice can be determined by either how much he has done or what proportion remains to be done. It may be accepted that a third party might not charge the same amount as the builder to perform the residue of the work. But, in my view, it is possibly relevant to an assessment of the value of the works completed. The builder’s expert before the Tribunal conceded it to be relevant when he stated in evidence that he, in assessing the value of the work that has been done in the contract, would have regard to “the contract price…whether any of the work was defective…how much work was left to be done…the cost that it would cost to finish off that work…what had already been paid” and that if the “cost to complete the work under the contract exceeded the balance of the money under the contract” then the “builder would have no entitlement to payment.”

59. At [26] of the decision, the Senior Member found that the “value of the works then remaining…significantly exceeded the remaining contractual payment.” In my view, this is a relevant matter in determining the value of the works (measured against the contract price) at that stage completed by the builder.

54. Whether the builder was entitled to issue invoices 9 and 10 depended on the value of the work done. It also depended on the value of the work remaining since the value of the work done equals the contract price less the value of the work remaining. The Senior Member decided that there was no entitlement to issue the invoices because of the value of the work remaining, in view of the expert opinion of the builder’s expert. In my view, this was an approach open to the Senior Member that involved no error of law.

55. The Senior Member determined that the builder was not entitled to issue invoices 9 and 10. The decision of the Senior Member stated at [26] - “he was not entitled to claim the amount actually claimed,” - does not involve an error on a question of law for the reasons given.

56. I do not uphold ground 6.

GROUND 7

“The learned Member in the Tribunal erred in law in finding that the plaintiff was not entitled to claim for invoices 9 or 10. The learned Member failed to consider the legal effect of the Contract on the plaintiff’s entitlement to issue such invoices.”

63. This ground raises largely the same matters as in ground 6.

64. The reference in the ground to a failure by the Senior Member to consider a matter does not involve a decision on a question with respect to a matter of law.

65. The Senior Member made a determination in respect of the entitlement of the builder to issue the invoices. For the reasons previously given, I do not think that that finding was without evidence or was an incorrect approach to whether the builder was entitled to claim the amount claimed.

GROUND 8

“The learned Member in the Tribunal erred in law in finding that the plaintiff was not entitled to issue a notice of suspension for non-payment of invoices.”

66. Having found that the relevant invoices were not entitled to be issued by the builder, it follows that the non-payment of those invoices does not give rise to a right in the builder to issue a notice of suspension. Thus, the notice of suspension by the builder is invalid insofar as it relied on invoices 9 or 10, which were not justified. Whether the notice of suspension might be justified on other grounds, such as wrongful suspension by the owners, is not raised by this ground.

GROUND 9

“The learned Member in the Tribunal erred in law in implicitly (or otherwise) finding that the plaintiff had repudiated the Contract by issuing his notice of suspension.”

67. The builder does not identify any finding of the Senior Member to the effect that the builder’s suspension constituted a repudiation. The Senior Member does deny, in [26], the entitlement of the builder to issue the notice of suspension but ground 9 is not concerned with entitlement but with whether that notice constituted a repudiation. I do not find anything in what the Senior Member has said which amounts to an implicit decision that the builder’s issuing of the notice of suspension amounted to a repudiation.

68. Further, the issue of the suspension notice by the builder does not seem to be the basis of any conduct by the owners purporting to terminate the contract.

GROUND 10

“The learned Member in the Tribunal erred in law in that he either failed to consider or failed to determine the plaintiff’s Notice of Termination.”

69. This ground does not identify a matter decided by the Tribunal and, thus, does not enliven the jurisdiction under s 67.

70. In any event, it is apparent that there was no need for the Senior Member to decide anything further about the builder’s notice of termination since the Senior Member found that the owners were entitled to terminate nine and a half months prior to the issue of the builder’s notice.

GROUND 11

“The learned Member in the Tribunal erred in law in that he failed to consider whether the Contract [had] been abandoned by the parties.”

71. The same principles discussed earlier in respect of decisions not made by the Tribunal apply to this ground. In any event, an asserted abandonment after the owners’ termination (found by the Senior Member to be valid) would evidently not have been a matter for the Senior Member to consider.

72. Regarding any abandonment prior to the termination by the owners, the circumstance that the Senior Member found that the contract persisted up until the time that the owners issued the notice of termination on 8 February 2011 manifests an implicit decision by him that there had been no abandonment prior to that date. The parties’ conduct in September and December in issuing notices under the contract might be thought to support a decision that there was no abandonment of the contract.

GROUND 12

“The learned Member in the Tribunal erred in law in finding that the plaintiff was liable to pay for completion costs.”

73. The amount of completion costs in dispute is the sum of $59,293 to which I referred earlier. The entitlement of the owners to those completion costs from the builder depends upon the validity of the termination by the owners. This is a question with respect to a matter of law. The Senior Member at [18] determined, “For these reasons I find the owners were entitled to issue their notice of suspension and later to terminate the contract.” A fair reading of that finding indicates that the grounds that justified the suspension were the same grounds that justified termination.

74. This indicates that the Senior Member took the view that the matters that existed at the time of suspension were sufficient to justify termination. Although the suspension was invalid because it was not an available contractual remedy, nevertheless the matters that the Senior Member thought justified suspension could potentially justify termination, a valid contractual remedy. This could occur if either the contract or the general law of contract allowed termination in the circumstances found by the Senior Member.

75. In Progressive Mailing House Pty Ltd v Tabali Pty Ltd [1985] HCA 14 at [8], Deane J stated:

“More specifically, where a contractual right to terminate for past breach and the common law right to terminate for repudiation or fundamental breach exist concurrently, the reliance upon the contract involved in the exercise of the contractual right to terminate will not preclude the recovery of damages for loss of the future benefit of the contract by reason of repudiation or fundamental breach unless the contract expressly or impliedly so provides”.

76. Thus, the owners could potentially have a right to terminate both under the contract or alternatively for fundamental breach or repudiation. The exercise of the right under one power would not preclude it occurring under the other.

77. However, the reasons of the Senior Member indicate that termination was justified by matters that existed at the time of suspension. The matters raised by the Senior Member in [17] indicate that the basis of the termination was the practice of the builder to suspend works in order to force the owners to agree to pay for variations claimed and also, perhaps implicitly, the existence of an unjustified further claim by the builder.

78. It is difficult to understand how claims by the builder occurring prior to September 2010 could justify termination by the owners in February 2011. The owners had paid those claims. Payment of those claims, even if the claim amounted to a breach, involved an election by the owners not to terminate.

79. In addition, the passage of time after invoice 9 was issued and the conduct of the owners in not electing to terminate on the basis of that matter but rather, for example, to issue a notice to rectify (under the contract) constitutes an election to affirm rather than terminate the agreement.

80. Further, I am not persuaded that a claim by the builder that is not justified by the value of the work done could constitute a breach of the agreement. A claim not based on work done may be invalid but, in my view, it does not amount to a breach of the contract. Therefore, it cannot amount to some form of fundamental breach or repudiation sufficient to ground a termination.

81. The basis for the finding of a valid termination by the Senior Member was pre-20 September 2010 conduct. This finding seems to me to be invalid for reasons given above. The question whether the owners may have had an entitlement to terminate by reason of the conduct of the builder after the owners’ suspension on 20 September 2010, including any failure by the builder to comply with a valid notice to rectify, does not appear to be determined by the Senior Member.

82. It is apparent that the owners in issuing the notice of termination on 8 February relied principally on conduct after 20 September 2010, namely, the failure of the builder to comply with the notice to rectify. This raises a question as to whether I should consider and determine whether the termination by the owners was valid for reasons other than the reasons given by the Senior Member, including, in particular, whether there was a valid notice to rectify issued by the owners and whether that enlivened a right to terminate because of the builder’s conduct after he received that notice.

83. There are matters in the notice to rectify that cause concern. It apparently includes, by reference to the annexed report, both defective and incomplete works. It calls on the builder to complete both the defective and incomplete works in 20 days, perhaps 20 calendar days, in circumstances where there may have been an entitlement in the builder by virtue of the definition of “days” in the contract (see cll 13 and 18) to have until about 6 February 2011 to complete defective works as a result of the notice.

84. The time at which the builder needed to complete the contract works does not seem to have been given any attention by the Senior Member and was not given any particular attention before me. It maybe that the suspension of work by the owners operated to postpone the date for the builder to complete the works. The validity of the owners’ notice to rectify and the consequences of any failure by the builder to comply with it may also depend upon whether the notice operated as an express or implied lifting of the owners’ suspension.

85. There may also be questions about whether the items referred to as “defects” are, in an executory building contract, properly defects or merely incomplete work. There may also be questions about whether the builder’s conduct after the issue of the notice to rectify, whether valid or not, could constitute a fundamental breach or a repudiation.

THE PROPER ORDERS

86. The parties have accepted that I must refer the matter back to the Senior Member for the purpose of a determination in respect of the costs of the Tribunal.

87. No party raised any issue about whether the proceedings before me were premature given that there were some matters that had not been determined before the Tribunal. In any event, the matters that might enliven a power in the owners to terminate after 20 September 2010 have not been considered by the Senior Member. These matters need to be considered by the Senior Member in view of my decision that the circumstances existing as at 20 September 2010 did not justify the Senior Member’s decision at [18] that the owners could validly terminate some months later.

88. Accordingly, I propose to make an order under s 67(3)(b) to remit my decisions on these questions to the Tribunal and order a rehearing of the proceedings by the Tribunal. Although Section 67(7) enlivens at least the possibility of further evidence, it is not my intention by this order to require that there be any hearing de novo but rather that the Senior Member, with the benefit of the evidence already received, determine matters which have not been determined by him but which require determination.

89. The question of whether the notice to rectify is valid will involve consideration of a number of matters, including cl 13 of the contract, the content of the notice both as to “stopping work” and as to failing to rectify “defective work” and the circumstances at the time of the issue of the notice, including such matters as whether there had been prior written notice given to the builder of defective materials in view of the definition of “notice” under the contract.

90. I do not propose to provide any final view in respect of these questions which involve not only matters of law but questions of fact that have not been considered by the Senior Member.

91. The Senior Member may need also to consider the question of termination for repudiation or fundamental or sufficiently serious breach under the common law which may possibly arise from the conduct of the builder in failing to do anything after, if it be the case, he was invited back to do work by the notice.

92. If the termination by the owners were valid, there would be no need to determine the question of damages since the Senior Member has already determined them.

93. However, if the Senior Member came to the view that the matters to which I have referred do not give rise to an entitlement in the owners to terminate, then the Senior Member may need to consider whether the contract has been abandoned, given that the owners, after 8 February 2011, treated the contract as at an end and the builder, by his apparent conduct in doing nothing after that time, also appeared to have treated the contract as at an end.

94. The builder, by not terminating in October 2010, appears to have elected not to end the contract by reason of any failure in the owners to comply with the builder’s notice of suspension of work under cl 14. Although the Senior Member found that that notice was invalid by reason of the builder’s reliance upon a failure to pay moneys under invalid invoices, the question of whether the notice would nevertheless have been valid because of the owners’ invalid suspension has also not been considered. However, given that the builder did not act within a reasonable period after noncompliance with that notice but rather waited a further 14 months, it seems unlikely that any entitlement in the builder to terminate persisted. In any event, the builder’s primary submission before me was that the contract was abandoned, rather than that it was terminated by him.

95. The builder has only claimed for unpaid invoices and is only entitled to those funds if he has done the work sufficient to warrant the issue of those invoices under cl 7. The Senior Member has decided, validly in my view, that that did not occur. Thus, in the event that the owners’ termination was not valid, the question arises as to the proper assessment of the monetary entitlements of the parties. In that event, the builder is entitled to retain that proportion of the contract price that represented the proportion of the contract works that had been performed.

96. To give an example, invoice 10 claims an amount indicating that 91% of the contract works by value had been completed. The Senior Member concluded that those works had not been done. At that stage the builder had been paid approximately 71% of the contract value. Whether the builder was entitled to anything in addition to the amount already paid would depend upon a finding of the Senior Member as to what proportion of the work had been completed by the builder at the time he ceased work on 20 September 2010.

97. Additionally, if the Senior Member found an amount less than 71% the owners would have an entitlement to repayment of overpayments arising from excessive claims by the builder in invoice 8 and potentially earlier. Thus, if the owners have not validly determined the contract, it is necessary for the Senior Member to determine the percentage of the contract work completed by the builder. I leave aside the question of defects and the other amounts since the Senior Member has assessed them and they were not in dispute before me.

COSTS

98. The builder, Mr Grace, has had some success in having the matter referred back to the Senior Member. It may be (but might not be) that the amount to be awarded by the Senior Member is the same or a similar amount to what was originally awarded. In addition, Mr Grace’s claim for payment of invoices has failed.

99. Although the matter took three days of hearing before me, the first day was largely wasted because Mr Grace’s counsel was unavailable.

100. In these circumstances, I propose to order, in respect of the costs before me, that the defendants’ costs of the first day and the residue of the costs of the parties in the appeal be part of the costs of the Tribunal to abide the determination by the Tribunal of the costs in the Tribunal.

ORDERS

101. The orders of this Court are:

1. Allow the appeal.

2. Remit my decision on the questions set out in these reasons to the Tribunal and order a rehearing of the proceedings by the Tribunal pursuant to s 67(3)(b) of the Consumer, Trader and Tenancy Tribunal Act 2001.

3. Order the costs of the appeal (excluding the plaintiff’s costs of the first day of hearing) be costs in the Tribunal, to abide the determination by the Tribunal of the costs in the Tribunal.

4. By consent, grant liberty to either party to apply to this Court in respect of a Suitors’ Fund Act 1951 Certificate, in respect of the costs of these proceedings, after the determination of the rehearing by the Tribunal.

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Decision last updated: 09 February 2015