Mazurek v Fisniku

Case •

[2023] NSWCATCD 81

•

18 July 2023

No judgment structure available for this case.

Civil and Administrative Tribunal


New South Wales

Medium Neutral Citation: Mazurek v Fisniku [2023] NSWCATCD 81
Hearing dates: 22 June 2023
Date of orders: 18 July 2023
Decision date: 18 July 2023
Jurisdiction:Consumer and Commercial Division
Before: G Ellis SC, Senior Member
Decision:

(1) By consent, the respondents are to carry out a satisfactory rectification of items referred to in Appendix A (the works).

(2) By consent, Central Coast Certifiers is to be the sole determiner of whether the works have been done in compliance with Order 1.

(3) By consent, the respondents are to bear the costs of Central Coast Certifiers.

(4) By consent, the respondents are to complete the works by 21 July 2023 (the completion date).

(5) By consent, with prior written notice to the applicants, the completion date may be extended to no later than 4 August 2023 where unforeseen events prevent completion of the works by the completion date.

(6) By consent, the applicants have leave to renew the proceedings, in accordance with clause 8(2) of Schedule 4 to the Civil and Administrative Tribunal Act 2013.

(7) The application is otherwise dismissed.

(8) Any application for costs is to be made by filing and serving, by 31 July 2023, submissions (not exceeding five pages), together with any relevant evidence.

(9) Any submissions in response (not exceeding five pages), together with any relevant evidence, are to be filed and served by 14 August 2023.

(10) Any submissions in reply from the party applying for costs (not exceeding two pages), together with any relevant evidence, are to be filed and served on or before 21 August 2023.

(11) Any such submissions should include an indication of whether the party agrees that costs should be determined on the papers, without a further hearing.

Catchwords:

BUILDING AND CONSTRUCTION - Whether costs plus contract replaced by fixed price contract – validity of termination – finding of mutual termination

ESTOPPEL - Promissory estoppel - estoppel by convention

BUILDING AND CONSTRUCTION - Cost of completion - alleged overcharging - storage costs

Legislation Cited:

Civil and Administrative Tribunal Act 2013 (NSW) – ss 38, 60

Civil and Administrative Tribunal Regulation (NSW)

Civil and Administrative Tribunal Rules 2014 (NSW) - rr 38, 39

Civil Procedure Act 2005 (NSW) - s 100

Home Building Act 1989 (NSW) - s 18B

Cases Cited:

Banco de Portugal v Waterlow and Sons [1932] AC 452 at 506

Bonita v Shen [2016] NSWCATAP 159

Browne v Dunn (1893) 6 R. 67, HL

Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Limited [1986] HCA 14; 160 CLR 226

Dabbs v Seaman [1925] HCA26; 36 CLR 538

Fox v Percy [2003] HCA 22

Grundt v Great Boulder Pty Gold Mines Ltd [1937] HCA 58; 59 CLR 641

Hadley v Baxendale (1854) 9 Exch 341

Hasell v Bagot, Shakes & Lewis Ltd [1911] HCA 62

Karacominakis v Big Country Developments Pty Ltd [2000] NSWCA 313

Latoudis v Casey [1990] HCA 59

L’Estrange v F Graucob Ltd [1934] 2 KB 394

Legione v Hateley [1983] HCA 11; 152 CLR 406

Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305

McDonald v Dennys Lascelles Ltd [1933] HCA 25; 48 CLR 475

Moratic Pty Limited v Gordon [2007] NSWSC 5

News v Cotes [2019] NSWCATAP 186

Oshlak v Richmond River Council [1998] HCA 11

Pongrass v Small [2021] NSWCATAP 314

Precision Plastics Pty Ltd v Demir [1975] HCA 27; 132 CLR 372 at 370-371

Taylor v Johnson [1983] HCA 5

TC Industrial Plant Pty Ltd v Robert’s Queensland Pty Ltd [1963] HCA 57

Thompson v Chapman [2016] NSWCATAP 6

Waltons Stores (Interstate) Limited v Maher [1988] HCA 7; 164 CLR 387

Watson v Foxman (1995) 49 NSWLR 315

Texts Cited:

None cited

Category:Principal judgment
Parties:

Applicants – Jamie Mazurek and Donna Burgess

Respondent – Fisnik Fisniku and Saskia Fisniku, trading as Nobel Homes Central Coast
Representation:

Counsel:
Applicants – E Glover

Solicitors:
Applicants – Tonkin Drysdale Partners
File Number(s): HB 22/03752

Reasons for decision

Outline

  1. On 28 January 2022 the applicants (the owners) commenced these proceedings against the respondents (the builder). After four directions hearings and four extensions of time, by notice dated 7 February 2023, a second hearing date of 22 June 2023 was allocated. Shortly prior to that hearing, a Consent Order was submitted which finalised the claims for defective work, leaving for consideration claims which, in the owners’ written submissions, were said to be: (1) $161,137.05 for the cost of completing incomplete works, (2) $1,506.90 for overcharging, and (3) $7,675.00 for storage costs. The owners also sought an order for costs.

  2. Having considered the evidence and submissions, the Tribunal determined that there had been mutual termination of both the costs plus contract and the fixed price contract and rejected each of the three claims of the owners.

Hearing

  1. Documents tendered and admitted as evidence were as follows:

Exhibit A   Joint Tender Bundle – Volume 1-3 (pp1-873)

Exhibit B   Supplementary Joint Tender Bundle (pp 874-1047)

Exhibit C   Statement of account and receipt from Coastwide Self Storage

Exhibit D   Revised schedule, replacing pages 849-850 in Exhibit A

Exhibit E   Consent Order, dated 20 June 2023

  1. The following documents were marked for identification:

MFI 1      Outline of the owners’ submissions

MFI 2      Builder’s outline of submissions

  1. After brief cross-examination of the owners’ expert, Mr Brincat, there was cross-examination of Mr Fisniku, after which it was indicated that the parties did not wish to supplement their written submissions with oral submissions.

Jurisdiction

  1. These proceedings relate to residential building work, have been commenced within time, and seek an amount within the limits of the Tribunal’s jurisdiction. Accordingly, the Tribunal has jurisdiction under the Home Building Act 1989 (the HBA).

Relevant law

  1. When it is necessary for a court or tribunal to determine an issue relating to the formation of the contract or its parties or its terms, that question is not determined by reference to what either of the parties thought or what they intended. Many decisions, such as that of the High Court of Australia in Taylor v Johnson [1983] HCA 5, have held that contract law is concerned not with the subjective intentions of the parties to a contract, but rather with the outward manifestations of those intentions. That is sometimes referred to as the objective theory of contract because the assessment is not made from the subjective view of either party but objectively, as if a reasonable person was considering what was said and done by both parties at the relevant time.

  2. However, when a defence of estoppel is raised, the subjective views of the parties are relevant. As the builder’s submission rely on equitable defences, it is necessary to note that the Tribunal can consider equitable defences but not equitable claims: Pongrass v Small [2021] NSWCATAP 314 at [61]–[81]. There are multiple forms of estoppel, but the two upon which the builder relies in this case are promissory estoppel and estoppel by convention.

  3. Promissory estoppel was accepted in Australia by the High Court in Legione v Hateley [1983] HCA 11; 152 CLR 406, 420-1 (Gibbs CJ and Murphy J), 437 (Mason and Deane JJ). Following what was said by Brennan J in Waltons Stores (Interstate) Limited v Maher [1988] HCA 7; 164 CLR 387 at 428, for the builder’s defence of promissory estoppel to succeed, it must be established that:

  1. the owners made a promise to the builder to continue the costs plus contract;

  2. the builder assumed or expected that legal relationship would continue and, in the latter case, that the owners would not be free to withdraw from that legal relationship;

  3. the owners induced the builder to adopt that assumption or expectation;

  4. the builder acted in reliance on that assumption or expectation;

  5. the owners knew or intended that the builder would act in that manner;

  6. the builder woud suffer detriment if the assumption or expectation was not fulfilled; and

  7. the owners failed to act to avoid that detriment.

  1. Estoppel by convention requires adoption by the parties of an assumption as the basis of their relationship: Dabbs v Seaman [1925] HCA26; 36 CLR 538, 549; Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Limited [1986] HCA 14; 160 CLR 226 at 244-5. In the circumstances of this case, the builder must prove that:

  1. the builder adopted an assumption as to the terms of its legal relationship with the owners;

  2. the owners adopted the same assumption;

  3. both parties have conducted their relationship based on that assumption;

  4. each party knew or intended that the other act on that basis; and

  5. any departure from the assumption would occasion detriment to the builder.

  1. For estoppel by convention, the assumption may be contrary to the actual state of affairs between the parties (Grundt v Great Boulder Pty Gold Mines Ltd [1937] HCA 58; 59 CLR 641 at 676) and the assumption may be contrary to any contract between them (Moratic Pty Limited v Gordon [2007] NSWSC 5).

  2. As a result, both promissory estoppel and estoppel by convention both represent a departure from the well-established starting point that parties are bound by the terms of a signed, written contract (L’Estrange v F Graucob Ltd [1934] 2 KB 394).

  3. However, similarities between the two doctrines do not mean there are no differences. In promissory estoppel, established in the courts of equity, the focus is on the conduct of one party which renders it unconscionable to permit that party to rely on that party’s rights. Conventional estoppel, created by common law courts, is based on the common understanding of the parties, and operates to hold both parties to that common understanding.

  4. The English decision in Hadley v Baxendale (1854) 9 Exch 341 established that one of two tests for the recovery of damages for a breach of contract be met: (1) damages which may fairly and reasonably considered to arise naturally (first limb); and (2) damages which may reasonably be supposed to have been in the contemplation of both parties when the contract was made (second limb).

  5. The right to recover damages is always subject to the requirement that the party claiming damages (the innocent party) take reasonable steps to mitigate their loss, but the onus is on the other party to show the innocent party acted unreasonably: TC Industrial Plant Pty Ltd v Robert’s Queensland Pty Ltd [1963] HCA 57. However, it must be noted that when an innocent party is required to take steps to mitigate, the steps required will not be set too high: Banco de Portugal v Waterlow and Sons [1932] AC 452 at 506. Where there has been a failure to mitigate loss, the damages are reduced to what they would have been had the innocent party acted reasonably: Hasell v Bagot, Shakes & Lewis Ltd [1911] HCA 62, Karacominakis v Big Country Developments Pty Ltd [2000] NSWCA 313 at [187].

  6. Decisions such as Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305 (Makita) make it clear that, for expert evidence to be accepted (1) the opinion must clearly indicate the facts upon which it is based, (2) those facts must be proved so there is a factual basis for the opinion, (3) reasons or the process of reasoning for the opinion must be disclosed, and (4) any opinion must fall within the expert’s qualifications and experience.

Pleadings

  1. Since Points of Claim and Points of Defence are intended to identify the issues between the parties, it is necessary to consider those documents, but excluding reference to the defects claims which have been resolved by the parties. The relevant documents are: (1) Points of Claim dated 28 January 2022 (A8, ie from page 8 in Exhibit A), (2) Amended Points of Claim dated 3 June 2022 (A13), (3) Points of Defence dated 20 July 2022 (A18), and (4) Amended Points of Defence dated 17 November 2022 (B874).

  2. It is not necessary to refer to the Points of Claim since the Amended Points of Claim repeated paragraphs 1 to 33 and then added paragraphs 33A and 35A, deleted paragraph 34, and amended paragraph 35. After referring to an 11 November 2019 costs plus contract and a 28 January 2020 fixed price contract, and the statutory warranties implied by s 18B of the HBA, reference was made to events said to have occurred between 11 November 2019 and 18 August 2020. It was contended that work under both contracts was incomplete and defective after which the owners’ claims were set out.

  3. It is not necessary to consider the Points of Defence since the Amended Points of Defence copies paragraphs 1 to 36 and then adds paragraph 37. The Amended Points of Defence included contentions that (1) the fixed price contract was entered into for the sole purpose of resolving issues between the owners and their lender, (2) there was termination by the builder and that was termination of the costs plus contract, (3) the owners were required to mitigate their loss, and (4) the builder had an estoppel defence.

Lay evidence

  1. The written lay evidence for the owners was as follows:

  1. The affidavits of Ms Burgess dated 18 May 2022 (A26), 12 September 2022 (A633), and 29 March 2023 (B901).

  2. The affidavits of Mr Mazurek dated 18 May 2022 (A254), 12 September 2022 (A649), and 31 March 2023 (B1031).

  3. The affidavits of the owners’ solicitor, Mr Tonkin dated 22 February 2022 (B882) and 29 March 2023 (B896).

  1. The written lay evidence for the builder was:

  1. The affidavit of Mr Fisniku dated 20 July 2022 (A668), which affidavit does include expert evidence.

  2. A 21 April 2022 document headed “Points of Defence”, signed by both Mr and Mrs Fisniku (B1037), containing evidence and submissions.

  1. The only oral, lay evidence is the cross-examination of Mr Fisniku which covered the following matters:

  1. The invoice referred to in his affidavit (A670 at [16]) should have been a reference to the document at A143, not A725.

  2. The email dated 20 April 2020, referred to in his affidavit (A674 at [36]), being the document at A774, was sent to the owners and not sent by the owners.

  3. The quote dated 4 May 2020 (A779) did not include a “costs plus margin of 15%”, as suggested in his affidavit (A674 at [40]).

  4. Mr Fisniku agreed the owners paid $5,605.25 towards the amount of $12,087.05 in invoice numbered 1069 dated 28 March 2020 (A203), which the Tribunal notes left an unpaid balance of $6,481.80, and agreed he sent an overdue notice for the full amount on 3 April 2020 (A216), but denied the evidence of Ms Burgess (B910 at [46]) that he agreed to include the unpaid balance in the first progress payment for the fixed price contract.

  5. It was accepted that Mrs Fisniku, in a 20 April 20202 email (A220) included the words: “Do you need the remainder of the last invoice $6482 included in the $88,000 Fixed Price?” but denied the conversation alleged by Mr Mazurek (B1033 at [6]) which alleged that Mr Fisniku asked if that unpaid balance was to come out of the first progress payment for the fixed price contract and that Mr Mazurek told him that “is part of the lockup stage and would have to wait”.

  6. After noting that a 20 April 2020 email (A221) from Ms Burgess referred to the inclusion of the unpaid balance in the “first lock-up stage costing”, Mr Fisniku accepted that the first progress claim invoice, being the 24 April 2020 invoice, numbered 1070, for $35,000 (A222 or A775) did not include a 15% margin. He agreed that his covering email (A776) included the words: “In this first payment is the remainder of the last invoice” but denied that the unpaid balance of the invoice numbered 1069 was included in the invoice numbered 1070.

  7. In relation to those two invoices (A775 and A776), Ms Fisniku suggested they were under the costs plus contract. He accepted that he received the amount of $35,000, as evidenced by a copy of a page of his bank statement (A787).

  8. It was agreed that a further invoice, numbered 1073 (A237), was sent under cover of a 24 May 2020 email (A235), and that the first item in that invoice was the $6,481.80 unpaid balance of invoice 1069.

  9. After being referred to the builder’s document headed “Notice of Mutual Termination of Contract” (A238), sent under cover of an email dated 5 June 2020 (A239), and to their 15 June 2020 document headed “Notice of Termination of Contract” (A241), also sent by email (A239), Mr Fisniku did not accept that there were no funds outstanding at that time.

  10. It was noted that the latter notice referred to clause 29.4, which was a termination clause in the fixed price contract (A188), clause 29 in the costs plus contract (A102) referring to the service of notices, and that both the Points of Defence (A21 at [28](e)) and the Amended Points of Defence (B877 at [28](e)) both referred to “clause 29a)iv) of the Costs Plus Contract”. Further, that the response of the builder, headed “Points of Defence” (B1037 at 3)), also referred to clause 29.

  11. In that response (B1038 at 16)), it was suggested the fixed price contract was never witnessed but the owners referred Mr Fisniku to the signature page in that contract (A165).

  12. It was noted that the two quotes (A060 and A62) which formed the basis of the 11 November 2019 (A77) both added a 15% margin to the cost estimate and Mr Fisniku agreed that work under that contract commenced on 18 November 2019.

  13. After being questioned as to the sequence of events whereby work under the costs plus contract stopped, Mr Fisniku accepted that he provided a quotation numbered 1048 and dated 8 January 2020 for $88,000, with no 15% margin, that he signed a fixed price contract with that contract price on 28 January 2020 (A161), and that there was a payment schedule in that contract (at A169).

  14. Mr Fisniku also accepted that the work covered by that contract was due to commence on 1 February 2020 (A170) which date was later varied to 1 April 2020 (A219) and that invoices issued after that date did not contain a 15% margin on costs.

  15. He also agreed that, under cover of a 4 May 2020 email (A223), a further quotation, for $94,229.70 (A224) was sent to the owners but was not accepted, after which the builder did not wish to continue working under the contract.

  16. While Mr Fisniku was taken to his email dated 15 June 2020 (A799), it is noted that was sent in response to an email earlier that day from the owners (A799).

  17. Finally, when questioned about Jasmin, who was the owners’ mortgage broker, Mr Fisniku indicated that they were close friends. He said he did not obtain a statement from her as he did not want to involve her in these proceedings.

  1. In re-examination, Mr Fisniku said the purpose of including the unpaid balance under the costs plus contract was to claim money that was owed.

Expert evidence

  1. The owners relied on reports from Mr Brincat dated 3 June 2022 (A802) and 7 November 2022 (A863). Mr Brincat’s brief cross-examination revealed that he assessed the builder’s labour costs as involving an overpayment on the basis that no breakdown was provided with the result that he was unable to assess whether those claims were reasonable. Thus, his approach was that if a claimed amount was not substantiated, he considered that amount to constitute an overpayment.

  2. The builder did not have an independent expert with the result that the only evidence in the form of expert evidence is that which is part of the affidavit of Mr Fisniku dated 20 July 2022 (A668).

Submissions for the owners

  1. After listing the amounts claimed and the evidence, what were said to be the salient events from September 2018 to 18 August 2020 were outlined.

  2. The owners’ case on liability was that the costs plus contract was terminated, the parties were bound by the fixed price contract, the builder’s notice of termination was not valid, and that entitled the owners to validly terminate the fixed price contract.

  3. As to quantum, the owners’ claims for damages comprised $161,137.05 for incomplete works, $1,506.90 for overpayment, and $7,675 for storage fees.

  4. It was also contended that the estoppel defence did not arise on the facts since the builder’s conduct affirmed the fixed price contract which is at odds with the continuation of the costs plus contract. Reference was made to seventeen aspects of the evidence in support of that contention. Further, that since the builder did not provide any evidence that the owners failed to mitigate their loss, that claim should be rejected.

Submissions for the builder

  1. Omitting submissions going to the defects claim, which are no longer relevant, the builder’s case was that the fixed price contract is not binding and that, even if it is, they are not liable for the amounts claimed. As with the owners’ submissions, the bulk of the builder’s submissions dealt with what was said and done between mid-2019 and 18 August 2020.

  2. Submissions were also made in opposition to the claim for incomplete works and in support of the estoppel defence of the builder, said to be based on promissory estoppel and estoppel by convention.

Consideration

  1. It is well recognised that human memory of what was said in a conversation is fallible for a variety of reasons and may be expected to decrease with time: Watson v Foxman (1995) 49 NSWLR 315 at 319. Further, it is noted that each of the lay witnesses has an interest in the outcome of these proceedings.

  2. While evidence that is not challenged is commonly accepted (Precision Plastics Pty Ltd v Demir [1975] HCA 27; 132 CLR 372 at 370-371) and while courts often require a party to out its case to the other party’s witnesses (Browne v Dunn (1893) 6 R. 67, HL), it is plainly unreasonable, a stringent application of those principles is clearly inappropriate in a Tribunal when one of the parties is self-represented.

  3. The Tribunal considers the preferable approach is to give priority to contemporaneous documents, which carry greater weight than documents prepared for the purpose of litigation, and to base conclusions on contemporary materials, objectively established facts, and the apparent logic of events, consistent with what McHugh J said in Fox v Percy [2003] HCA 22 at [30]-[31].

Issues

  1. The pleadings (ie Points of Claim and Points of Defence) and the written submissions (MFI 1 and MFI 2), reveal the following issues:

  1. Did the costs plus contract come to an end?

  2. If so: how, and when?

  3. Is the fixed price contract binding?

  4. How and when did that contract come to an end?

  5. Have either of the estoppel defences been established?

  6. Did the owners fail to mitigate their loss?

  7. Can the owners recover the cost of completion?

  8. Can the owners recover for overcharging?

  9. Can the owners recover the storage costs incurred?

Chronology

  1. It is necessary to go through the sequence of relevant events, as set out in the evidence, then make findings of fact upon which a determination of the issues depends. Only then can the Tribunal assess the claims of the owners which total $170,318.95.

  2. Appendix B sets out a chronology of events, as suggested by the evidence, prepared by starting with the evidence of Ms Burgess, then adding any additional references from the evidence of Mr Mazurek and Mr Fisniku.

Findings of fact

  1. Having regard to that chronology, and to the written submissions of both parties, the Tribunal makes the following findings of fact:

  1. On 30 January 2019 the owners’ bank approved a loan of $80,000.

  2. On 11 November 2019 the parties signed a costs plus contract which contained an estimated cost of $143,754.60, did not annex or refer to any plans, and which described the work as: “Structural alteration and addition. New Bathrooms, Laundry, Kitchen and Deck.”

  3. On 18 November 20198 the work covered by that contract commenced.

  4. On 3 January 2020 the owners advised the builder, by text message, that they were “out of money”.

  5. On 5 January 2020 the owners instructed the builder, by text message, to “put the build on hold for the foreseeable future”.

  6. On 6 January 2020 the builder’s work on the site stopped.

  7. In response to a request from the owners, on 8 January 2020 the builder provided them with a quotation for $88,000 “to complete structural additions as per plans and contract …”.

  8. Later that day, the owners replied, saying: “Thank you, it is what we need. We probably need it broken down a but more but for the purposes of giving to the bank, this is good. Thank you”.

  9. On 14 January 2020 the owners requested a “Fixed Price Building contract … with the staged payments detailed on it”.

  10. On 28 January 2020 a fixed price contract was signed by the parties and was witnessed. That contract contained the same description of the work, referred to architectural and engineering drawings dated September 2019, and amounts payable “when the following stages of the works are 95% complete”: $35,000 next to the words “Lock up stage”, $32,000 next to the words “Kitchen, bathroom & flooring”, and $31,000 upon “Completion of all works”. The sole prime cost item was “Total PC” of $5,000 and the only provisional sums specified were a rate per square metre for “Bathroom Tiles” and “Flooring Supply”. The date of commencement was specified as 1 February 2020.

  11. On 24 February 2020 the builder provided a further invoice on a costs plus basis, and the $1,973.70 amount of that invoice was paid by the owners on 27 February 2020.

  12. On 26 February 2020 the builder sought a date for the resumption of the building work.

  13. On 28 March 2020 the builder provided a further invoice, on a costs plus basis, for $12,087.05.

  14. On 4 April 2020 the owners paid $5,605.25 in respect of that invoice.

  15. During the period from 18 to 20 April 2020 there were meetings at which matters which included commencement date and product selections were discussed.

  16. On or about 18 April 2020 it was agreed that the commencement date shown in the fixed price contract would be changed from 1 February 2020 to 1 April 2020 and that the fixed price contract would apply from that date.

  17. On 20 April 2020, when the builder asked about the $6,481.80 unpaid balance of the 28 March 2020 invoice, it was suggested by the owners that amount would be “included in the first lockup stage costing”.

  18. On 24 April 2020 the builder issued an invoice for $35,000 which was described as “Lock up stage payment”. At that time the builder was entitled to receive $6,481.80 under the costs plus contract and $35,000 under the fixed price contract.

  19. On 27 April 2020 the owners provided the builder with their product selections.

  20. On 4 May 2020 the builder provided a quotation for $94,229.70 and a further quotation for variations for $33,456.50.

  21. On 14 May 2020 the parties signed variations for $8,529 and $6,573.

  22. On 18 May 2020 the builder received $35,000 from the owners’ bank.

  23. On 18 May 2020 the parties met at the site.

  24. On 18 May 2020 text messages were exchanged in which what the builder said included: “If you can’t pay for the variations, I just can’t do them. Sadly, I am wanting to walk away because I don’t see this working out.”

  25. The owners’ same day reply included the words: “It’s behind us now. Sadly. Tell us what you need to Settle the bill. Really sorry this has ended this way.”

  26. The builder then responded: “I will go through it and send you a final bill this week”.

  27. On 19 May 2020 the owners instructed the builder not to release any funds to the plumber.

  28. On 24 May 2020, under cover of an email which began “Here is your final invoice”, the builder issued an invoice for $26,110.10 to the owners which included the $6,481.80 unpaid balance of the 28 March 2020 invoice.

  29. On 24 May 2020 the owners sent the builder an email which requested that the builder return all keys to the premises.

  30. On 5 June 2020 the builder sent an email to the owners which enclosed a document headed “Notice of Mutual Termination of Contract”.

  31. On 7 June 2020 the builder paid the owners $8,889.90, being the difference between the amount of $35,000 received on 18 May 2020 and the $26,110.10 total amount in the invoice dated 24 May 2020.

  32. On 15 June 2020 the owners suggested, by email, that any termination was not mutual.

  33. On 16 June 2020 the builder sent a revised “Notice of Termination of Contract” to the owners.

  34. On 18 August 2020 the owners’ solicitor sent a “Notice of Termination of Contract” to the builder which asserted that the builder’s 16 June 2020 termination notice constituted repudiation of the fixed price contract.

Did the costs plus contract come to an end? If so: how and when?

  1. The Tribunal considers there was mutual termination of the costs plus contract by reason of the relationship between the parties being governed by the fixed price contract from 1 April 2020 for the reasons indicated below. That finding is supported by the fact that all invoices issued prior to 1 April 2020 were prepared on a costs plus basis and were each paid, except for the $6,481.80 balance of the invoice dated 28 March 2020.

Is the fixed price contract binding?

  1. Although the fixed price contract was signed on 28 January 2020, the contemporaneous documents clearly indicate: (1) the owners were unable to fund the work without a bank loan, (2) that bank loan required a fixed price contract, (3) the builder was assisting the owners to obtain that bank loan. By way of example, on 8 January 2020 the owners sent an email in relation to the provision of a quotation for $88,000 which included the words: “for the purposes of giving to the bank, this is good.” That document was clearly prepared and signed for the purpose of enabling the owners to obtain a bank loan.

  2. Bearing in mind that the objective theory of contract means that this issue is not governed by the subjective view of either party, the Tribunal considers that there was agreement, on or about 18 April 2020, to (1) defer of the date of commencement of the work from 1 February 2020 to 1 April 2020 and (2) for the fixed price contract was to apply from that date. As a result, the fixed price contract bound both parties on and after 1 April 2020.

  3. It is to be noted that (1) if the fixed price contract was only intended to satisfy the bank then it would not have been necessary to record that revised date of commencement for the work covered by that contract, (2) it was only after 1 April 2020 that there was discussion of matters such as product selection by the owners, (3) on 24 April 2020 the builder issued an invoice in accordance with the fixed price contract, (4) on 14 May 2020 the parties agreed to two variations to that contract.

How and when did that contract come to an end?

  1. Regardless of when the fixed priced contract commenced, the 18 May 2020 text messages clearly establish that there was mutual termination of the fixed price contract on that day.

  2. What happened is clear from the contemporaneous documents: (1) the owners sought to have matters included in the contract price, (2) the builder was not willing to include those matters unless they were variations to not only the work but also the contract price, (3) the owners accepted that and sought a final invoice, and (4) a final invoice was provided by the builder.

  3. Even if it could be said the costs plus contract still applied, not the fixed price contract, the Tribunal’s finding of mutual termination would still apply.

  4. The Tribunal is not satisfied there was any agreed variation of the fixed price contract to include the $6,481.80 unpaid balance of the 28 March 2020 invoice with the result that it remained an unpaid amount under the costs plus contract as at 18 May 2020 when the fixed price contract terminated because claims based on entitlements which accrued prior to termination can be maintained as only subsequent rights are extinguished: McDonald v Dennys Lascelles Ltd [1933] HCA 25; 48 CLR 475 at 476-7.

  5. While the builder could have retained the $35,000 received from the owners’ bank under the fixed price contract and claimed the unpaid amount of $6,481.80, the builder chose to only claim under the fixed price contract for work done, add that unpaid amount (as revealed by the final invoice dated 24 May 2020) and refund the balance (as revealed by the payment of $8,889.90 on 7 June 2020. As a result, the builder treated the unpaid balance of the costs plus contract as having been paid, clearly intending to finalise the not only the legal but also the financial aspect of the relationship between the parties.

  6. The fact that the owners did not agree there had been mutual termination when they received the initial notice of termination from the builder, on 5 June 2020, did not alter the fact that there was mutual termination on 18 May 2020.

  7. While it is not necessary to decide, if the builder’s second notice of termination, sent on 16 June 2020, constituted repudiation of the fixed price contract, that would require the owners to elect to either affirm or terminate the fixed price contract, which election should have been exercised within a reasonable time after 16 June 2020. Taking just over two months to issue a notice of termination on 18 August 2020 appears to have been beyond a reasonable time.

Have either of the estoppel defences been established?

  1. By reason of the finding that there was mutual termination of the fixed price contract on 18 May 2020, it is not necessary to consider the estoppel defences. However, it is well-established that a first instance court or tribunal should make findings on each issue with the objective of avoiding the need for a re-hearing in the event any finding is later overturned.

  2. The defence of promissory estoppel is not made out as the builder did not act in reliance on a continuation of the costs plus contract after 1 April 2020 by (1) agreeing to extend the date of commencement to 1 April 2020, (2) issuing the 24 April 2020 invoice, and (3) agreeing to two variations, dated 14 May 2020.

  3. As to the defence of estoppel by convention, after the agreement or or about 18 April 2020 agreement, the parties did not conduct their relationship based on the assumption that the costs plus contract continued to apply.

Did the owners fail to mitigate their loss?

  1. It was submitted, for the owners, that this allegation should fail because the builder failed to lead any evidence on this issue. The builder was not obliged to provide evidence on this issue but does bear the onus of proof with the result that the builder needs to establish the alleged failure.

  2. From the evidence before the Tribunal, it is sufficiently clear that the failure of the owners to complete the work is due to them not have sufficient funds to do so. Accordingly, if the owners were considered entitled to damages, they could not be considered to have failed to mitigate their loss.

Can the owners recover the cost of completion?

  1. The finding of mutual termination means that neither party is entitled to recover damages, as there is no breach upon which to base such a claim. However, the Tribunal considers each of those these three claims of the owners.

  2. The starting point for this claim was a quotation provided by Alpha Carpentry. However, (1) there is no indication of the author of that quote, (2) there is no indication that it was prepared with regard to the Tribunal’s Procedural Direction 3 which notably requires an acknowledgement of the primary duty to the Tribunal rather than the party seeking the quotation, (3) there is no indication of the document(s) upon which that quotation was based, (4) there are elements within this quotation which do not appear to be within the contract work, (5) there are elements within this quotation which appear to be work that has been carried out by the builder, (6) there are amounts which appear to be extravagant, such as $15,541.89 for “Labour to lay Floor Tiles” (A251), later reduced to $13,365 (A646), and (7) there are matters raised by Mr Fisniku which were neither challenged in cross-examination or contradicted by evidence from either Alpha Carpentry or the owners’ expert, Mr Brincat.

  3. While s 38(2) of the Civil and Administrative Tribunal Act 2013 provides that the Tribunal is not bound by the rules of evidence, that does not mean there are no rules and that a substantial amount, such as this claim for $161,137.05, can be awarded based on little more than a quotation. The quotations from Alpha Carpentry (A244 and A639) are a form of expert evidence, but are devoid of a factual foundation, because they do not indicate what were “the documents provided”. The provision of the details of how the total was obtained do not overcome that deficiency.

  4. The probative force of those two quotations is low. The position may have been different if the author of those quotations provided an affidavit or statutory declaration and was thus able to be cross-examined.

  5. The written submissions for the owners (MFI 1 from [133]) sought to bolster the Alpha Carpentry quotation by reference to the evidence of Mr Brincat, but his evidence suffers from the same deficiency that he did not provide copies of the documents upon which he relied, and those documents are not otherwise in evidence. For example, he refers to “Approved Architectural plans” and “Engineering Drawings” which are not in evidence with the consequence that the factual foundation for his opinions is also lacking.

  6. Further, the process of starting with the amount of the later Alpha Carpentry quotation of $242,386 and moving to the amount claimed of $161,137.05, as set out in the owners’ submissions (at [138]), includes reliance on Mr Brincat’s suggestion that $33,689.05 was paid under the fixed price contract which, in view of the findings set out above, the Tribunal rejects.

  7. In short, the evidence provided in support of this claim is insufficient and unsatisfactory.

Can the owners recover for overcharging?

  1. Mr Brincat assessed the work done under the costs plus contract and obtained an amount of $65,768.11 but the costs plus contract required the owners to pay the incurred costs as there is no basis in law for revisiting those amounts as the owners were obliged by that contract to pay the incurred costs, plus a margin of 15%, plus GST. Simply stated, the costs plus contract required the owners to pay actual costs and not reasonable costs.

  2. The brief cross-examination of Mr Brincat revealed that he took the view that there was overcharging because he did not have details of the labour cost. However, any such lack of detail does not elevate an allegation of overcharging to proof there has been overcharging.

  3. If the owners wanted to establish this claim, they need to provide evidence of what labour charge it considered to be reasonable for the subject work, quantified by hours and hourly rates, and compare that to what was charged for that work. That could have involved cross-examination of Mr Fisniku on this topic which did not occur. There is no factual basis for this claim of overcharging.

  4. Accordingly, there is neither a legal basis nor a factual basis for this claim.

Can the owners recover the storage costs incurred?

  1. Storage costs for a kitchen in relation to the work the subject of either the costs plus or fixed price contract cannot be fairly and reasonably considered to arise naturally with the result that the first limb of Hadley v Baxendale is not satisfied.

  2. The second limb of Hadley v Baxendale requires that such storage costs may reasonably be supposed to have been in the contemplation of both parties when the contract was made.

  3. In relation to this claim, the owners’ evidence was that of Ms Burgess who said she hired a storage unit to house the kitchen for the period from 19 October 2019 (A36 at [82]). The builder’s evidence was that of Mr Fisniku (A681 at [68]) who said that he was told, in March 2020, that the owners had purchased a second-hand kitchen and would store it in their garage. While he was not questioned on that topic during his cross-examination, there was evidence in reply (A636 at [13]) that the kitchen has been stored, as claimed, and that it was the wardrobe fitting and joinery that were stored in the garage.

  4. The Tribunal notes that the date of March 2020 is after the dated when the fixed price contract was signed, namely 28 January 2020, and the date when the Tribunal considers that contract commenced to bind the parties.

  5. There is no evidence in the owners’ case to suggest the builder was ever advised of both the purchase of the kitchen and its storage.

  1. If the evidence of Mr Fisniku is rejected, there is no evidence he was aware of those matters before March 2020. If the evidence of Mr Fisniku on this point is accepted, there is no basis for this claim.

  2. As indicated earlier, it is not necessary to determine this claim by reason of the finding that there was mutual termination of the fixed price contract. However, if it were necessary to reach a decision in relation to this claim, with conflicting evidence and no cross-examination, the Tribunal has no rational basis upon which to prefer the evidence of either party with the consequence that the owners have failed to discharge the onus of proof which they bear.

Claim for interest

  1. Both the Points of Claim and the Amended Points of Claim included a claim for interest.

  2. There is no power in the Act or the Civil and Administrative Tribunal Regulation 2022 (the Regulations) or Civil and Administrative Tribunal Rules 2014 (the Rules) that provides the Tribunal with a power to award interest for the period up to the date of the decision, commonly referred to as pre-judgement interest.

  3. While s 100 of the Civil Procedure Act 2005 does permit the awarding of interest for the period prior to the date of judgement, that section does not apply to proceedings in the Tribunal, as was noted in Thompson v Chapman [2016] NSWCATAP 6 (Thompson). As a result, any claim for pre-judgment interest can therefore only be allowed if there is a relevant provision for the payment of interest in the contract. However, the owners’ submissions did not suggest that any of their claims attracted interest under any provision in the contract.

  4. Recovery of interest is permitted by r 39. However, as indicated in the heading of that rule, namely “Interest in judgment debt”, that provision only applies to interest on a judgement debt, ie interest on an amount awarded by the Tribunal which is then registered as a judgment.

Claim for costs

  1. Since the amount claimed and in dispute exceeded $30,000, costs will be governed by r 38 of the Rules rather than by s 60 of the Act. Consequently, it is not necessary to consider whether there are special circumstances which warrant an order for costs.

  2. When r 38 applies there is a general discretion to award costs and it is well established, by decisions such as News v Cotes [2019] NSWCATAP 186, Bonita v Shen [2016] NSWCATAP 159 and Thompson, that: (1) the starting point is that the usual order for costs should be in favour of the successful party, (2) the award is not to punish the unsuccessful party but to compensate the successful party for the costs incurred in the proceedings, and (3) departure from the usual order is permissible if the circumstances favour that course of action.

  3. Simply stated, when r 38 applies it is not necessary to establish special circumstances and the usual order is that costs follow the event (ie follow the outcome of the case) unless there is disentitling behaviour by the successful party: Latoudis v Casey [1990] HCA 59, Oshlak v Richmond River Council [1998] HCA 11.

  4. Since the parties did not make submissions as to costs, the orders should provide an opportunity for any such application in the light of the outcome of these proceedings, with the usual three step sequence so that each party has an opportunity to set out their case and to respond to the case of the other party.

Summary

  1. The owners wished to renovate their home and opted for a costs plus contract as that gave them the flexibility. However, when they ran out of funds the work had to stop and they had to apply for a loan from their bank which required a fixed price contract.

  2. After the parties signed that fixed price contract, the commencement date for the both the operation of that contract and the work under that contract was deferred by two months. When the owners sought to have work included under that contract which the builder considered constituted price-increasing variations, the builder indicated an unwillingness to continue which the owners accepted by asking for a final invoice and for the return of the keys.

  3. The evidence reveals the builder endeavouring to accommodate both the work which the owners wanted and their budget until that became no longer economic for the builder at which time the parties agreed to terminate the contract then applying. As a result, the owners cannot now claim damages.

Orders

  1. For the reasons set out above, the following orders are made:

  1. By consent, the respondents are to carry out a satisfactory rectification of items referred to in Appendix A (the works).

  2. By consent, Central Coast Certifiers is to be the sole determiner of whether the works have been done in compliance with Order 1.

  3. By consent, the respondents are to bear the costs of Central Coast Certifiers.

  4. By consent, the respondents are to complete the works by 21 July 2023 (the completion date).

  5. By consent, with prior written notice to the applicants, the completion date may be extended to no later than 4 August 2023 where unforeseen events prevent completion of the works by the completion date.

  6. By consent, the applicants have leave to renew the proceedings, in accordance with clause 8(2) of Schedule 4 to the Civil and Administrative Tribunal Act 2013.

  7. The application is otherwise dismissed.

  8. Any application for costs is to be made by filing and serving, by 31 July 2023, submissions (not exceeding five pages), together with any relevant evidence.

  9. Any submissions in response (not exceeding five pages), together with any relevant evidence, are to be filed and served by 14 August 2023.

  10. Any submissions in reply from the party applying for costs (not exceeding two pages), together with any relevant evidence, are to be filed and served on or before 21 August 2023.

  11. Any such submissions should include an indication of whether the party agrees that costs should be determined on the papers, without a further hearing.

**********

Appendix A

Item No

Description

Scope of work

A

Rear parapet

1   Remove the barge flashing

2   Inspect and ensure the necessary degree of fall in the gutter

3   Install weatherproofing, if required, to the roof sheets

4   Rectify any water damage

5   Ensure roof sheets are turned up

6   Reinstall the barge capping

7   Clean up on completion

B

Pier caps

1   Jack up floor joists

2   Install ant caps under all brick piers

3   Lower floor joists onto ant caps

4   Clean up on completion

C

Tie down straps

1   Remove single plasterboard screw

2   Drill into the concrete footing at every pier a 10mm booker rod with epoxy to secure the rod. That is drill through the floor joists recessing the nut below the level of the joists for the new sheeting to be installed over

3   Clean up on completion

D

Window W09

1   Set up A frames

2   Install the correct length lintel with a minimum of 100mm bearing each side

3   Complete the brickwork to the head and sill with flashing

4   Install storm moulds to weatherproof the opening

5   Clean up on completion

E

Brickwork

1   Tooth the brickwork to the southern façade and complete the brickwork to watertight the building

2   Install window on northern façade including flashings to head and sill

3   Install lintel with a minimum 100mm bearing each side

4   Brickwork to window sill with weepholes

5   Install storm moulds to weatherproof the opening on the northern facade

6   Clean up on completion

F

Sarking wrap

1   Remove all existing sarking that has been exposed and deteriorated

2   Replace sarking that is removed with Ametalin wrap sarking

3   Clean up on completion

G

LVL beam

1   Remove LVL beam in master bedroom near the entrance to the ensuite which has been cut through

2   Install new VL beam

3   Clean up on completion

Appendix B

Date

Description

Reference

Feb 16

Owners purchased the subject property

A27, [8]

Sep 18

Owners contacted a mortgage broker, Jasmin Wilson

A27, [10]

Oct 18

Ms Wilson recommended the builder

A27, [11]

30 Jan 19

Commonwealth Bank (CBA) approved $80,000 loan

A27, [13]

07 Jun 19

Builder provided quote #1019 for $296,450 (4 stages)

A272

16 Jun 19

Builder provided quote #1021 for $296,450 (more details)

A44

01 Oct 19

Plans finalised, submitted to local council (1 page plan provided)

A47-48

02 Oct 19

Builder provided quote #1042 for $147,347.20

A49

02 Oct 19

Owners advised builder their budget was $90,000

A50

04 Oct 19

Owners bought & stored second-hand kitchen & appliances

A28, [23]

22 Oct 19

Development application approved (refers to 3 pages of plans)

A54

24 Oct 19

Builder sent quote #1043* for $93,230.50

A60

24 Oct 19

Builder sent quote #1044* for $50,524.10

A62

31 Oct 19

Certificate for homeowners’ warranty insurance provided

A64

09 Nov 19

Builder’s invoice #1053* for $17,796.04

A66

11 Nov 19

Costs plus contract signed

A77

13 Nov 19

$17,796.04 was paid: $840.95, $14,621.45 and $2,333.64

A65, 109

18 Nov 19

Work commenced at the site

A29, [35]

22 Nov 19

Builder’s invoice #1056* for $5,084.06, paid the next day

A111-117

02 Dec 19

Construction certificate issued by certifier

A126

14 Dec 19

Builder issued invoice #1060* for $22,104.01, paid 2 days later

A129-142

27 Dec 19

Builder issued invoice #1063* for $22,290.90, paid 2 days later

A143-156

03 Jan 20

Owners texted Builder: “… We’re out of money and confused on how to proceed…”

A726

03 Jan 20

Ms Wilson advised Owners CBA (1) would only release further funding when she was working, (2) required fixed price contract

A31, [46]

05 Jan 20

Owners advised Builder work to stop until loan situation resolved

A374

06 Jan 20

Owners’ email said: “Once again, we apologise for the inconvenience of not having the funds to get you working …”

A726

06 Jan 20

Work at the premises stopped

A31, [47]

Jan 20

Builder alleges conversation with Owners in which it was said the Owners wish to stay on a costs plus basis and that the fixed price was “just for the bank”

A671, [20]

08 Jan 20

Builder emailed quote #1048 for $88,000

A157-158

14 Jan 20

Owners asked for fixed price contract with staged payments

A160

28 Jan 20

A fixed price contract was signed by the parties

A161

24 Feb 20

Builder issued invoice #1067* for $1,973.70, paid 3 days later

A194, 202

Late Feb

Owners agreed to let Builder do “some small work”

A260, [49]

26 Feb 20

Builder (1) advised doors would be installed later that week, and (2) sought a date for resumption of the building work

A201

26 Feb 20

Owners replied, saying unable to indicate a resumption date

A418

21 Mar 20

Owners advised what they bought to seal underside of floor

A767

28 Mar 20

Builder issued invoice #1069* for $12,087.05

A203

30 Mar 20

Builder emailed Owners, saying: “… It’s hard because we’re doing costs plus”

A769

30 Mar 20

Builder emailed owners, raising contract arrangements

A215

01 Apr 20

Builder sought details from Owners

A433

01 Apr 20

Owners supplied details of fixtures and inclusions

A433-436

03 Apr 20

Builder sent overdue notice for invoice #1069*

A216

03 Apr 20

Owners told Builder (1) they no longer have control of the money, (2) they will pay the labour component of invoice #1069, (3) “the balance will be received when the first progress payment is made”

A261, [60]

04 Apr 20

Owners paid $5,605.25 in part payment of that invoice

A218

18 Apr 20

Owners allege meeting at which commencement date for fixed price contract amended from 01 Feb 20 to 01 Apr 20

A33, [60]

& A219

On or around

19 Apr 20

Builder alleges meeting at which Ms Wilson suggested the parties start relying on the fixed price contract, Builder said a “proper quote” should be made, and Builder asked Owners to provide a list of product selections

A673, [33]

20 Apr 20

Meeting: Owners suggest PC items & schedule discussed;

Builder suggests amended contract date also discussed

A33, [61]

A673, [34]

20 Apr 20

Builder emailed Owners, saying $88,000 was “vague pricing” and asking about unpaid $6,481.80 invoice #1069

A220

20 Apr 20

Owners reply email, which referred to the unpaid amount of invoice #1069* being “included in the first lock-up stage costing”

A221

24 Apr 20

Builder issued invoice #1070 for $35,000, seeking a progress payment described as “Lock up stage payment”

A222

27 Apr 20

Owner sent email, indicating their product choices

A777

04 May 20

Builder sent quote #1062 for $94,229.70 (cf $88,000)

A223-225

04 May 20

Builder sent quote #1063 for $33,456.50 (additional work)

A226-228

04 May 20

Owners replied “We aren’t sure we are on the same page …”

A229

05 May 20

Owners requested quotes for four specific trades

A230

07 May 20

Builder alleges conversation re owners’ additions

A675, [44]

14 May 20

Variations for $8,259 and $6,573 were signed

A231-232

14 May 20

Builder’s email included reference to the unpaid $6,481.80

A233

14 May 20

Owners’ reply referred to “what the $35,000 is meant to cover”

A233

14 May 20

Builder’s reply referred to the bank’s payment schedule

A233

18 May 20

On site conversation alleged by both parties

A34 [72]; A263 [69]; A676 [47]

18 May 20

Text messages exchanged

A785-786

18 May 20

Ms Wilson advised Owners CBA had paid Builder $35,000

A35, [73]

19 May 20

Owners requested no further payments be made “until we have resolved all issues and agree to what the next steps are”

A234

19 May 20

Builder replied: “No problem.”

A234

20 May 20

Owners alleges conversation in which it was suggested the builder wished to continue and wanted to work with them

A35, [75];

A263, [71]

24 May 20

Builder issued invoice #1073 for $26,110.10 which included $6,481.80, being the unpaid balance of invoice #1069*, under cover of an email which began: “Here is your final invoice”

A235-237

24 May 20

Owners sent email to Builder which ended with:

“All keys are to be returned on this final day.”

A456

25 May 20

Certifier issued two inspection notices: both satisfactory

A109,112

05 Jun 20

Builder emailed “Notice of Mutual Termination of Contract”

A238

07 Jun 20

Builder paid owners $8,889.90, equal to the invoice #1070 total of $35,000 less the invoice #1073 total of $26,110.10

A35, [78]

15 Jun 20

Owners email suggested any termination was not mutual

A239

16 Jun 20

Builder sent “Notice of Termination of Contract”

A240-241

18 Aug 20

Owners’ solicitor sent “Notice of Termination of Contract”

A242

08 Apr 21

Owners obtained quote from Alpha Carpentry for $195,958.00

A244-253

22 Aug 22

Owners obtained quote from Alpha Carpentry for $242,386.00

A639-648

* = quote or invoice which included 15% margin

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: 20 September 2023

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Con-stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd [1986] HCA 14
Fox v Percy [2003] HCA 22
Grundt v Great Boulder Pty Gold Mines Ltd [1937] HCA 58