K & K Quality Constructions Pty Ltd v Issa

[2019] NSWCATCD 65

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:

K & K Quality Constructions Pty Ltd v Issa [2019] NSWCATCD 65

Hearing dates:

26 August 2019 and 28 October 2019

Date of orders:

5 November 2019

Decision date:

05 November 2019

Jurisdiction:

Consumer and Commercial Division

Before:

B Shipp, Senior Member

Decision:

The Respondent is to pat the Applicant the sum of $6,270 on or before 30 November 2019.

Catchwords:

Residential Building Work – Preliminary Work – Entitlement to payment when no written contract – Quantum Meruit – Just and Equitable.

Legislation Cited:

Home Building Act 1989

Cases Cited:

Grygiel v Baine & Ors [2005] NSWCA 218

Allcastle Homes Pty Ltd v Wilkinson [2016] NSWCATAP 3

Xu v Jinhong Design & Constructions Pty Ltd [2011] NSWCA 277

Darin v Olzomer [2012] NSWCA 60.

Jason and Michelle Zammit trading as Zammit’s Quality Constructions v Saul Markunsky and Shereen Markunsky [2015] NSWCATCD 21

Eddy Lau Constructions Pty Ltd v Transdevelopment Enterprise Pty Ltd [2004] NSWSC 273.

Stephenson v State Bank of New South Wales (1996) 39 NSWLR 101

Talga v MBC International Limited [1976] HCA 22; (1976) 133 CLR 622.

Sullman v Sullman [2002] NSWSC 169.

Pender v Robwenphi Pty Limited & Anor [2008] NSWSC 1144.

Texts Cited:

NIL

Category:

Principal judgment

Parties:

K & K Quality Constructions Pty Ltd, Applicant
Albert Issa, Respondent

Representation:

Ms Hamede for the Applicant
The Respondent in person

File Number(s):

HB 19/22163

Publication restriction:

NIL

REASONS FOR DECISION

Background and Application

1. The Applicant alleges that an agreement was entered into with the Respondent to undertake preliminary work in relation to the construction of a granny flat on a property owned by the Respondent at Airds. There is no dispute that there was no signed contract between the parties in respect of this work, but the Applicant alleges there was an exchange of email correspondence and some other documents signed by the Respondent from which it inferred instructions by the Respondent to proceed to a certain point.

2. There is no dispute that there is no binding contract between the parties to construct the granny flat, but the Applicant claims it undertook certain preliminary work (including obtaining a survey, architectural plans and a S 149 certificate from Council) in preparation for lodging a development application, and that it incurred costs in doing so.

3. The Applicant says it has issued Invoices in respect to this work which the Respondent has refused to pay. In May 2019, the Applicant applied to the Tribunal seeking a money order in respect of these unpaid invoices totalling $7,770.

4. The Respondent denies any binding agreement to pay the Applicant for any work, preliminary or otherwise, associated with the construction of the granny flat. He also refers to correspondence and other communications between the parties in which he specifically requests no action to be taken by the Applicant until a contract is provided.

Proceedings

5. The matter first came before the Tribunal on 13 June 2019. The Respondent had not been properly served and did not attend. The Respondent’s address was subsequently amended, and he was properly served with the Tribunal Directions and the Notice of Hearing. The matter was adjourned for hearing with directions that the parties file and serve any material on which they relied within certain timeframes. The time for service of the respondent’s documents was subsequently extended. The parties complied with these Directions.

6. The matter came before me for final hearing on 26 August 2019. The Applicant was represented by Ms Hamede (wife of the director of the Applicant). The Respondent attended in person. Both gave their evidence on oath.

7. After hearing the evidence, the Respondent submitted there was no evidence in the Applicant’s documents establishing proof of payment of the third party invoices the subject of the invoices issued to the Respondent. The Respondent did not object to allowing the Applicant some further time for submission of this evidence. I therefore made directions for this further material to be filed within certain timeframes, with an opportunity for the Respondent to respond. I directed that this material then be forwarded to me to make a final determination on the papers.

8. Following the hearing, the Applicant filed the following documents:

1. Receipt from Ali Salame Devine Design dated 6 September 2018 indicating payment by the Applicant of a total of $5,500 for preparation of various documents relating to the Architectural plans and docs, structural plans and docs, structural/stormwater design certificates, stormwater plan and Basix certificates for the construction of the Respondent’s granny flat in Airds.

2. Commonwealth Bank Netbank transaction record of transfer of $3,000 being part of the above

3. Separate Commonwealth Bank Netbank transaction record of transfer of $770 to Helensburgh surveying

9. The only response of the Respondent to these documents is:

I have no comments besides I do not believe $3000 in cash and then $2,500 (total $5500) bank transfer is strong evidence.

10. The Application was filed as a Home Building Application. This is despite the fact that no building work has actually commenced. There has been NCAT Appeal panel and judicial consideration of the definition of “building claim” in Section 48A of the Home Building Act. Despite some differing positions taken in the common law over recent times, the authoritative nature of the reasoning in Grygiel v Baine has been confirmed in the Appeal Division of this Tribunal in Allcastle Homes Pty Ltd v Wilkinson [2016] NSWCATAP 3. Basten JA in Grygiel v Baine at [58] observed that “the carrying out of residential building work” should be treated as descriptive of the building services and therefore contemplated that there may be building goods and services within the meaning of s 48A where no residential building has been carried out. He cautioned against an unduly restrictive construction be given to the words of the statute.

11. I am satisfied therefore that, if there was a binding agreement between the parties, the preliminary work for which the Applicant seeks payment can be regarded as residential building work, and that the Tribunal would have jurisdiction to consider this claim pursuant to Sections 48K, 48A and Sch 1 Cl 2(1) which relevantly state:

Schedule 1 Clause 2

2 Definition of “residential building work”

(1) In this Act, "residential building work" means any work involved in, or involved in co-ordinating or supervising any work involved in:

(a) the construction of a dwelling, or

(b) the making of alterations or additions to a dwelling, or

(c) the repairing, renovation, decoration or protective treatment of a dwelling.

…

48K Jurisdiction of Tribunal in relation to building claims

(1) The Tribunal has jurisdiction to hear and determine any building claim brought before it in accordance with this Part in which the amount claimed does not exceed $500,000 (or any other higher or lower figure prescribed by the regulations).

(2) The Tribunal has jurisdiction to hear and determine any building claim whether or not the matter to which the claim relates arose before or after the commencement of this Division, except as provided by this section.

(3) The Tribunal does not have jurisdiction in respect of a building claim relating to building goods or services that have been supplied to or for the claimant if the date on which the claim was lodged is more than 3 years after the date on which the supply was made (or, if made in instalments, the date on which the supply was last made).

(4) The Tribunal does not have jurisdiction in respect of a building claim relating to building goods or services that are required under a contract to be supplied to or for the claimant on or by a specified date or within a specified period but which have not been so supplied if the date on which the claim was lodged is more than 3 years after the date on or by which the supply was required under the contract to be made or, if required to be made in instalments, the last date on which the supply was required to be made.

(5) The fact that a building claim arises out of a contract that also involves the sale of land does not prevent the Tribunal from hearing that building.

(6) The Tribunal does not have jurisdiction in respect of a building claim arising out of a contract of insurance required to be entered into under this Act if the date on which the claim was lodged is more than 10 years after the date on which the residential building work the subject of the claim was completed.

(7) The Tribunal does not have jurisdiction in respect of a building claim arising from a breach of a statutory warranty implied under Part 2C if the date on which the claim is lodged is after the end of the period within which proceedings for a breach of the statutory warranty must be commenced (as provided by section 18E).

(8) The Tribunal does not have jurisdiction in respect of a building claim relating to:

(a) a contract for the supply of goods or services to which none of subsections (3), (4), (6) and (7) applies, or

(b) a collateral contract,

if the date on which the claim was lodged is more than 3 years after the date on which the contract was entered into.

(9) This section has effect despite clause 5 (Relationship between Tribunal and courts and other bodies in connection with Division functions) of Schedule 4 to the Civil and Administrative Tribunal Act 2013 .

48A Definitions

(1) In this Part: "building claim" means a claim for:

(a) the payment of a specified sum of money, or

(b) the supply of specified services, or

(c) relief from payment of a specified sum of money, or

(d) the delivery, return or replacement of specified goods or goods of a specified description, or

(e) a combination of two or more of the remedies referred to in paragraphs (a)-(d),

that arises from a supply of building goods or services whether under a contract or not, or that arises under a contract that is collateral to a contract for the supply of building goods or services, but does not include a claim that the regulations declare not to be a building claim. "buildingdispute" means a dispute that has been notified as referred to in section 48C. "building goods or services" means goods or services supplied for or in connection with the carrying out of residential building work or specialist work, being goods or services:

(a) supplied by the person who contracts to do, or otherwise does, that work, or

(b) supplied in any circumstances prescribed by the regulations to the person who contracts to do that work.

"goods" , "services" and "supply" have the same meanings as in Part 6A of the Fair Trading Act 1987 .

(2) Without limiting the definition of "building claim" , a building claim includes the following:

(a) an appeal against a decision of an insurer under a contract of insurance required to be entered into under this Act,

(b) a claim for compensation for loss arising from a breach of a statutory warranty implied under Part 2C.

12. It remains to be determined whether there was a binding agreement between the parties.

Was there a binding agreement between the parties to do any preliminary or other work in association with the construction of a granny flat on the Respondent’s premises at Airds.

13. There is no dispute that there is no signed contract which specifically includes a scope of works identifying, and making the Respondent liable for, the preliminary work to be undertaken by the Applicant to obtain approval to construct of the granny flat. The only contract in evidence is a construction contract that was sent by the Applicant to the Respondent on 8 September 2018. The copy submitted in evidence is not signed by either party, and it is common ground that there is no signed version.

Applicant’s Evidence

14. Despite the absence of a signed contract, the Applicant submits that he is entitled to the costs he has expended because the Respondent had given verbal instructions to provide services and pre-approval plans to obtain a DA approval for a granny flat at his Airds property. After conducting the work in accordance with his request, the Respondent decided not to proceed with the project and refused to pay for the costs incurred by the Applicant. The Applicant suggests that the Respondent was, or should have been aware of the services it was providing to obtain these approvals, and by his actions indicated he approved of these actions.

15. In making these claims, the Applicant relies on the following material:

1. A quote for the works sent to the Respondent on 9 August 2018. The covering email notes that “the section 149 has been logged and a surveyor booked”.

2. A document signed by the Respondent on 12 September 2018 requesting a private certifier to submit the application to get the building approval. This document was forwarded from the Certifier to the Respondent on 10 September 2018, requesting the Respondent to “sign and return the attached fee proposal and application form. The document itself is a Certification Fee Proposal and Service contract dated 10 September 2018, noting the Client as the Respondent. The Respondent has signed the following section

Acceptance by Client

I hereby accept the fee proposal of Building Certifiers Pty Ltd dated 10 September 2018 for the above-mentioned project.

The total fee proposal is as follows:

Total Fees   $2,000 + GST ($2,200)

Upon accepting the Fee Proposal and the job is cancelled a Fee of $250 will apply

There is a further note to indicate that the fee must be paid before the work commences. The definition section in the Terms and Conditions defines “Client” as the applicant/owner of the subject development – this is clearly the Respondent in these proceedings.

3. The Respondent has also signed the Certification Application form on 12 September 2018, declaring amongst other matters that he is applying for approval to carry out the development at the subject property.

4. An email from the Respondent to the Applicant dated 12 September 2018 which attaches the relevant forms and states

Attached is everything I can fill out

If there’s anything missing/incorrect please let me know today …

5. An email dated 28 August 2018 from the Respondent to the Applicant responding to the Applicant’s email forwarding the plans. The Respondent writes:

Looks good to me. PLS forward contract through when it’s available before we do anything else

16. Ms Hamede also notes that the relationship between the parties commenced when the Respondent requested the Applicant to construct a granny flat on another one of his properties in Narellan. It was during the course of the construction of the Narellan granny flat, that he mentioned he was considering constructing a granny flat on his Airds property.

17. The Applicant notes that the contract submitted to the Respondent was for the construction phase of the granny flat, and post-dated the agreement reached concerning the preliminary work. They do not prepare the contract until the work preliminary to obtaining the DA approval has occurred.

18. Although there was no written contract to do the preliminary work, Ms Hamede suggests that the course of dealings between the parties clearly indicated to the Respondent that such work would be carried out. In addition to the above documents, the Applicant provided the Respondent in August with the layout and elevation, a copy of the survey, and the final plans. The Applicant suggests that the provision of all of these documents must have indicated to the Respondent that it was undertaking work on his behalf, in preparation for commencing the construction of the granny flat. All of the Respondent’s communications implied that the work was to go ahead. It was not until he received the Applicant’s request for payment on October 14, 2018 that the Respondent indicated he had not authorised the work, and did not wish the construction to proceed on the disclosed terms.

Respondent’s evidence

19. In response, the Respondent claims that his dealings were always with the Director of the Applicant Mr Carl Salami. He agrees that while the Applicant was building the granny flat on his Narellan property, he had raised the possibility of the Applicant constructing a granny flat on his Airds property. However, this was always predicated on the Applicant providing him with a formal contract, as required under the Home Building Act. The Respondent relies on the following documents:

1. The quote from the Applicant dated 9 August 2018, and his text message back to Mr Salami on the same day. This text message states:

Do we need to sign another contract before we send surveyor or anything like that?

Mr Salami responded:

Yes, I’ll get it ready soon

2. His email to Mr Salami of 19 August 2018, in which he states:

I haven’t budgeted for part of this … Not sure what’s in the contract. I’ll have to take a look but this is very expensive. Can we please also send the Airds contract before we commenced any work. I want to make sure everything is clear in the contract and we sign this before we do any work so that there are no surprises like this.

This email was in response to a Variation sent by Mr Salami

3. His email of 28 August 2018, as noted above, in which he states:

Please forward contract through … before we do anything else.

4. Email from the private certifier to the architect dated 10 September 2018 particularly reference to payment having to be made prior to issue of an approval.

20. The Respondent notes that he was not aware that the Applicant had undertaken any work until 14 October 2018, when he received the Invoices for payment. Until then, he had assumed no work, preliminary or otherwise, would be undertaken until there was a final agreement reached between them for the construction of the granny flat. He also submits an exchange of emails dated 12 and 13 September indicating the parties were still in negotiation regarding the terms of the contract including the completion date, liquidated damages for loss of rent, and the progress payments.

21. The Respondent also highlights that the draft building contract sent to him notes that the total cost includes all plans and approvals. He suggests that this implies he was not committing to payment for any preliminary work until he signed the building contract.

22. The Respondent states he signed the certifier documentation when requested, based on the verbal assurance from Mr Salami that it would only be submitted for the work to be undertaken “when the granny flat was ready to go”. As the parties never came to a final agreement regarding the cost and terms of payment for construction of the granny flat, he believes he should not be liable for these costs.

23. In summary, the Respondent submits that there was no written contract, and no verbal instruction from him for the Applicant to proceed with undertaking the necessary preparatory work to obtain the development approval to proceed with construction of the granny flat. In his email to the Applicant dated 20 December 2018, he writes:

… I told you numerous times in writing and verbally not to proceed with anything until there was a contract in place

Applicant in Reply

24. In reply, the Applicant indicates that he understood the Respondent to be requesting that no construction commence until the building contract was signed, but

… that has nothing to do with the prior paperwork and approvals that you consented to.

[email to the Respondent dated 20 December 2018]

Consideration

25. The work for which the Applicant seeks to charge is residential building work as defined in the HBA. The Applicant cannot rely on the draft construction contract sent to the Respondent because:

1. It post-dated much of the work completed by the Respondent, or on its behalf

2. The terms were never accepted by the Applicant, and cannot therefore amount to a binding agreement.

26. The absence of a written contract has certain important consequences. It means he has no contractual right to seek payment for his services (Section 10(1)(c) of the HBA. To maintain his claim, he must rely on the concept of quantum meruit.

26. The general principle of quantum meruit has been applied by the Court of Appeal on many occasions with respect to building cases involving no written contract, in the context of the HB Act: see, for example, Xu v Jinhong Design & Constructions Pty Ltd [2011] NSWCA 277 and Darin v Olzomer [2012] NSWCA 60. To succeed on this basis, the Respondent must establish that it would be just and equitable to recover money for work performed. I note in this matter that neither party was legally represented. The Applicant did not raise this issue, but in my view, this does not relieve me from consideration of any legal issues that might affect liability.

27. The approach of the Courts to claims for relief on a quantum meruit basis was summarised by Senior Member Goldstein in the Tribunal matter of Jason and Michelle Zammit trading as Zammit’s Quality Constructions v Saul Markunsky and Shereen Markunsky [2015] NSWCATCD 21 as follows:

“Section 94(1A) of the Act was considered by Barrett J in Eddy Lau Constructions Pty Ltd v Transdevelopment Enterprise Pty Ltd [2004] NSWSC 273. At paragraphs 43 – 61 of his judgement his honour considered the ‘just and equitable criterion under section 94(1A)’ of the Act and the factors bearing upon the just and equitable assessment.

In considering the just and equitable criterion Barrett J. referred to a number of authorities which establish that the words just and equitable are of wide significance. His honour referred to a passage of the judgement of Sheller JA in Stephenson v State Bank of New South Wales (1996) 39 NSWLR 101 where his honour quoted from a decision of the High Court in Talga v MBC International Limited [1976] HCA 22; (1976) 133 CLR 622.

The passage quoted was:

‘Stephen, Mason and Jacobs JJ dealing with the issue raised for the Court by the Banking Act 1974 of whether it was just and equitable that a transaction should be treated as valid, said: ‘The court will have before it an existing transaction replete with all its surrounding facts and circumstances and in their light will determine what is just and equitable. In doing so it will certainly be exercising a wide discretion that this is a commonplace of the curial process; the court will be bound to act judicially, exercising its discretion by reference only to such considerations affecting the transaction as, on an examination of the legislation, may be seen to be material to the decision which it is called on to make. Irrelevant matters, matters such as the plaintiffs instanced in the course of argument, which have no rational connection with the policy of the regulations but would be expressive only of the personal predilections of the Court, cannot be allowed by it to play any part in its decision.’

Barrett J. observed that this approach was endorsed by Campbell J in Sullman v Sullman [2002] NSWSC 169.

At paragraph 49 of his judgement Barrett J. stated in connection with section 94(1A) of the Act:

‘The inquiry directed by the statute is therefore, in effect, whether the surrounding circumstances are such as to justify the creation of a right and an obligation as to the payment of the sum separately determined to represent fair remuneration. The Act, as I see it, does not attempt to control quantification. That is left to the general principle imported by the expression “quantum meruit”. The Act is concerned with factors influencing a decision whether, in the particular circumstances in which the court finds the parties, it is fair that one receive the quantum meruit sum and the other pay it.’

The owners have referred me to the decision of Hall J in Pender v Robwenphi Pty Limited & Anor [2008] NSWSC 1144. In that case Hall J stated, commencing at paragraph 41, in connection with the decision of Barrett J in Eddy Lau Constructions Pty Ltd v Transdevelopment Enterprise Pty Ltd:

‘In relation to the analysis undertaken by Barrett J in Eddy Lau Constructions (supra), the following propositions may be derived from the judgment:-

(1) The words “just and equitable” are of the widest significance and involve evaluations of questions of fact.

(2) In exercising the wide discretion under the provision, a Court or Tribunal is to have regard to considerations affecting the particular transaction as are material to the decision to be made. Irrelevant matters are those that have no rational connection with the policy of the statutory requirement.

(3) The statutory discretion under s.94(1A) must be exercised judicially in light of the whole of the circumstances surrounding the relevant subject matter.

(4) Inquiry is directed to ascertaining whether the surrounding circumstances are such as to justify the creation of a right and an obligation as to the payment of the sum separately determined to represent fair remuneration.

(5) The Act is concerned with factors influencing a decision whether, in the particular circumstances in which the Court finds the parties, it is fair that one receive the quantum meruit sum and the other pay it.

It is apparent from the analysis by Barrett J in Eddy Lau Constructions (supra) that the conduct of the party in breach is an important matter for consideration. In that respect, ignorance or oversight of the statutory requirement under the Act stands in marked contrast to a contravention that is wilful or deliberate.

29. In my view, it is just and equitable that the Applicant recover something for the work it performed. There is no evidence that the Respondent intentionally neglected his obligations to provide a written contract at a time early enough to allow the Respondent to fully understand his payment obligations for preparatory work. The error may have occurred because the parties had an existing relationship, arising from the work the Applicant was completing for the Respondent at separate premises. It is likely that this led to a less formal approach than would otherwise have occurred if the parties were unknown to each other. Nevertheless, the Applicant’s failure to provide more specific details of the work it was undertaking means it would generally not be just and equitable to make the Respondent liable for items of which he would not otherwise be expected to be aware of from surrounding circumstances.

30. The Respondent asserts that he should not be liable for any costs associated with obtaining approval for the construction of the granny flat, because he had made it clear to Mr Salami that he was awaiting a written contract. Even if this was the impression given to him by Mr Salami’s reply to his message of 9 August, the surrounding circumstances must have made it clear to him that the Applicant was in fact undertaking work on his behalf (including providing the Respondent with the layout and elevation, a copy of the survey, the final plans, and the certifier documentation). It was not sufficient in these circumstances for the Respondent to do or say nothing, and then object when the received the Invoices.

31. Nor do I accept the Respondent’s assertion that he had only signed the Certification Fee Proposal and Service when Mr Salami assured him that it would only be acted upon “when the granny flat was ready to go”. It was not possible to commence construction of the granny flat until the certifier had undertaken his work as part of the DA approval process. In the light of the surrounding circumstances, it was quite reasonable for the Applicant to regard the Respondent’s statement:

Attached is everything I can fill out

If there’s anything missing/incorrect, please let me know today …

as an endorsement of the work the Applicant was completing.

32. The Applicant seeks payment for the following items:

1. Structural Design, architectural design and stormwater plan   $5,500

2. Section 149 lodgement, visit to council and 3 visits to site   $1,500

3. Survey   $ 770

33. Following the hearing, the Applicant provided proof of payment for items 1 and 3. Ms Hamede indicated Item 2 relates many to their labour costs, but conceded that they had contracted out the majority of the work to third parties. The Respondent denied having visited the site with Mr Salami or anyone else from the Applicant, and doubted whether the Applicant had attended with any other third party.

34. Taking into account my comments at paragraph 29, I am satisfied it is just and equitable to make a money order in respect of Items 1 and 3 above, but, in the absence of more specific detail as to calculation of payment, not in respect of Item 2.

35. To be entitled to any part of a claim under quantum meruit, the contractor must generally provide some independent evidence as to the true value of the work performed. Pavey & Matthews Pty Limited v Paul (1987) 162 CLR 221 stands for the proposition that a claim for quantum meruit relies upon a claim to restitution, based upon unjust enrichment. In paragraph 75 of Eddy Lau Constructions, Barret J writes:

“The quantum meruit sum is the reasonable cost of the work done and expenditure incurred, with the assessment of reasonableness being undertaken by reference to the results produced and evidence of what it would in the ordinary course of things be necessary to outlay in order to produce those results.

36. The Respondents in this case have provided no such evidence in respect of Item 2.

37. I therefore order the Respondent to pay the Applicant the sum of $6,270. I will order the Respondent to pay this amount on or before 30 November 2019.

**********

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

Decision last updated: 26 November 2020