Shao v AG Advanced Construction Pty Ltd
[2019] VSCA 93
•30 April 2019
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2018 0046
| WENLI SHAO | Applicant |
| v | |
| AG ADVANCED CONSTRUCTION PTY LTD (ACN 089 153 597) | Respondent |
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| JUDGES: | WHELAN, KYROU and McLEISH JJA |
| WHERE HELD: | MELBOURNE |
| DATE OF HEARING: | 25 February 2019 |
| DATE OF JUDGMENT: | 30 April 2019 |
| MEDIUM NEUTRAL CITATION: | [2019] VSCA 93 |
| JUDGMENT APPEALED FROM: | [2018] VSC 116 (Daly AsJ) |
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BUILDING AND CONSTRUCTION – Major domestic building contract – Termination by owner under Domestic Building Contracts Act 1995 s 41 – Builder entitled to reasonable price – Defects – Whether termination under s 41 extinguishes damages claim for defective work – Shevill v Builders Licensing Board (1982) 149 CLR 620; McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457, applied – Whether costs of rectifying defects to be calculated in builder’s reasonable price under s 41(5) – Builder paid more than reasonable price – Whether owner entitled to refund – Domestic Building Contracts Act 1995 s 53(2)(b) and (f).
ADMINISTRATIVE LAW – Appeals – Victorian Civil and Administrative Tribunal Act 1998, s 148 – Appeal allowed – Whether to exercise power of Tribunal to order refund – Whether to remit proceeding to Tribunal – Victorian Civil and Administrative Tribunal Act 1998 s 148(7)(b) and (c).
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| APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Mr R Andrew | Oldham Naidoo Lawyers |
| For the Respondent | Mr P D Corbett QC with Mr C M Fenwick | Portfolio Law |
WHELAN JA
KYROU JA
McLEISH JA:
Section 41 of the Domestic Building Contracts Act 1995 (‘the Act’) gives a building owner the right to end a major domestic building contract if that contract has not been completed within one and a half times the period during which it was required to have been completed. The right arises if the reason for the increased time was something that could not have been reasonably foreseen by the builder when the contract was made. If the owner exercises this right, the builder is entitled under the section to a reasonable price for the work carried out to that point.
The present appeal concerns the rights of the building owner who gives notice under the section and, in particular, the relationship between the builder’s statutory right of recovery and any statutory or contractual claim the owner might have for damages by reason of defects in the building work.
The applicant seeks leave to appeal from orders made in favour of the respondent builder by an associate judge in the Trial Division. By those orders, the associate judge allowed an appeal from orders made by the Victorian Civil and Administrative Tribunal (‘the Tribunal’) and set aside an order that the respondent pay to the applicant the sum of $93,153. The associate judge declined to make further orders in respect of the fact that the applicant had paid the respondent an amount exceeding the ‘reasonable price’ the Tribunal had assessed.
For reasons set out below, leave to appeal should be granted and the appeal should be allowed so that the consequence of the overpayment to the respondent can be remitted for further hearing and determination by the Tribunal.
Background
On 31 August 2013, the applicant engaged the respondent to construct a new home on her property at 39 Lansdown Street, Balwyn North. Work commenced on 6 December 2013. The contract provided for a construction period of 321 days, with a contract price of $970,000, inclusive of GST.
There were substantial delays in progressing and completing the work, which the Tribunal attributed to a number of causes including, substantially, the owner’s ‘own indecision and failure to provide instructions and plans’ to the builder.[1] Construction of the home was still not complete by 20 August 2015, on which date the applicant purported to terminate the contract by a solicitor’s letter, which relevantly provided:
While the total construction period including delay days in the new homes [sic] contract stipulated 321 days, the work that you have done has taken much longer than this time period and the contract is still yet to be completed. The time you have spent on the contract already exceeds one and a half times of the original construction period and accordingly, our client hereby ends the contract in accordance with section 21.1 of the contract and section 41 of the Domestic Building Contracts Act 1995.
[1]Shao v AG Advanced Construction Pty Ltd [2017] VCAT 903 [186] (Senior Member Walker) (‘Tribunal Reasons’).
Section 41 of the Act relevantly provides as follows:
41 Ending a contract if completion time or cost blows out for unforeseeable reasons
(1) A building owner may end a major domestic building contract if—
(a) either—
(i) the contract price rises by 15% or more after the contract was entered into; or
(ii) the contract has not been completed within 1½ times the period it was to have been completed by; and
(b) the reason for the increased time or cost was something that could not have been reasonably foreseen by the builder on the date the contract was made.
(2) For the purposes of subsection (1), any increased time or cost that arises as a result of a prime cost item or a provisional sum or that is caused by a variation made under section 38 is to be ignored in calculating any price rise or increase in time.
(3) To end the contract, the building owner must give the builder a signed notice stating that the building owner is ending the contract under this section and giving details of why the contract is being ended.
…
(5) If a contract is ended under this section, the builder is entitled to a reasonable price for the work carried out under the contract to the date the contract is ended.
(6) However, a builder may not recover under subsection (5) more than the builder would have been entitled to recover under the contract.
(7) Section 39 does not apply to this section.[2]
[2]Section 39 provides that references to the contract price or the date for completion of a building contract are to be read so as to take account of variations.
Clause 21 of the contract was in substantially the same terms, except that it omitted sub-ss (6) and (7) of the statutory provision.
On 16 December 2015, the applicant commenced a proceeding in the Tribunal seeking damages of $547,450 owing to the delay in completing the works and for alleged defects in construction of the home. A substantial proportion of the damages sought was referable to a claim for the cost of completing the home after the termination of the contract.
Tribunal’s decision
Several matters were determined by the Tribunal which are no longer in issue between the parties. It was common ground that construction had extended beyond one and a half times the contract period by a substantial degree, and that there was no formal suspension of work or any claim for an extension of time under the provisions of the contract or those of the Act. The Tribunal found that the applicant had not established that the respondent had repudiated the contract. Further, even if the respondent’s conduct had been repudiatory, the applicant had elected to affirm the contract before later terminating it pursuant to s 41 of the Act.
The Tribunal also found that the applicant had paid the respondent a total of $1,040,700, being the instalments provided for by the contract as well as additional amounts to take account of variations. It was found that the respondent was not to blame for all or even a substantial part of the delay in construction. Nonetheless, the contract was terminated by the letter dated 20 August 2015. The Tribunal further found that the respondent could not have reasonably foreseen the numerous and substantial changes made by the applicant to the scope of works or the time that would be taken for the applicant to provide instructions concerning her wishes.
Importantly, the Tribunal found that there were significant defects in the works completed prior to termination and that the cost to rectify those defects was $93,153. The Tribunal found that warranties as to workmanship expressed in the contract or implied into it by s 8 of the Act applied to give the applicant an entitlement to damages for the defective workmanship. For example, s 8(a) incorporates into every domestic building contract a builder’s warranty that the work will be carried out in a proper and workmanlike manner and in accordance with the contractual plans and specifications.
At the same time, the Tribunal held that the respondent was entitled under s 41(5) to a reasonable price for the work it had done pursuant to the contract up to the date of termination. The Tribunal assessed the ‘reasonable value’ of the work at $917,802.02. It reached that figure by starting with a sum assessed by an expert building consultant, namely $1,006,073, and subtracting the cost of rectifying the defects ($93,153). The figure should have been $912,920, but nothing turns on the miscalculation.
The Tribunal found that termination under s 41 of the Act gives rise to no claim in damages and that neither party was entitled to damages resulting from the termination of the contract. Since the contract was terminated under s 41 of the Act, which did not require a breach of contract on the part of the respondent, no damages were recoverable by the applicant for the cost of completing the work. Further, even though the respondent was paid more than the value of the work that it had completed, the Tribunal declined to order a refund to the applicant of the amount overpaid. The Tribunal said:
The Builder has been paid $1,040,700.00, which, when defects are taken into account, is more than the value of the work that it has provided. Neither s 41 nor Clause 21 provides for a refund to the Owner if the Builder has received more than the reasonable value of the work.[3]
[3]Tribunal Reasons [216].
In the result, the Tribunal ordered the respondent to pay the applicant the sum of $93,153, by way of damages for the defects in the works completed prior to the termination.
The respondent sought leave to appeal under s 148 of the Victorian Civil and Administrative Tribunal Act 1998 (‘the VCAT Act’), upon the question of law whether the applicant was entitled to recover damages from the respondent for defective workmanship after having elected to terminate the contract under s 41 of the Act. Section 148 is relevantly in these terms:
148 Appeals from the Tribunal
(1) A party to a proceeding may appeal on a question of law from an order of the Tribunal in the proceeding—
…
(b) … to the Trial Division of the Supreme Court with leave of the Trial Division.
…
(7) The Court of Appeal or the Trial Division, as the case requires, may make any of the following orders on an appeal—
(a) an order affirming, varying or setting aside the order of the Tribunal;
(b) an order that the Tribunal could have made in the proceeding;
(c) an order remitting the proceeding to be heard and decided again, either with or without the hearing of further evidence, by the Tribunal in accordance with the directions of the court;
(d) any other order the court thinks appropriate.
(8) If the court makes an order under subsection (7)(c), it must give directions as to whether or not the Tribunal is to be constituted for the rehearing by the same members who made the original order.
…
The respondent relied upon grounds of appeal asserting that the applicant was not entitled to damages and that the Tribunal had erred in law by finding that the applicant was entitled to recover $93,153 for defective workmanship. It was said that the Tribunal should have held that, because the applicant elected to terminate the contract pursuant to s 41 of the Act, no further sum was payable by the respondent to the applicant.
Decision of associate judge
The associate judge set out the submissions made by the respective parties before summarising her findings regarding the proper construction of s 41. As will become apparent, it is not necessary to set out here the arguments that were raised before the associate judge.
The reasons of the associate judge for allowing the appeal emerge from the following part of her reasons for decision:
In my view, the application for leave should be granted, the appeal should be allowed, and the order made by the Senior Member that the builder pay the owner the sum of $93,153 be set aside. However, I do so for different reasons than those advanced by the builder, as I accept some of the owner’s contentions concerning the proper construction and application of the Act. I do not consider that the Senior Member misconstrued s 41 of the Act: rather, in making an award of damages for breach of the warranty provisions in circumstances where the cost of rectification of defects had already been taken into account in the calculation of a reasonable price, the Senior Member misapplied the provisions of ss 41 and 8 of the Act. Misapplication of a statutory provision or provisions is a vitiating error of law.
In my view, the owner is correct in her contention that the terms of s 41 of the Act do not preclude an owner (or subsequent purchaser) making a claim against a builder pursuant to the warranty provisions of the Act. Such a construction of s 41 of the Act would be inconsistent with the consumer protection objectives of the Act, and, as submitted on behalf of the owner, would lead to absurd and unjust results. By relying upon s 41 of the Act to terminate a domestic building contract, an owner is merely taking advantage of a ‘no-fault’ provision to terminate the contract. The price to be paid for not having to establish a repudiatory breach of contract on the part of a builder is the loss of the right to claim damages for loss of bargain. In that respect, the submission of the builder is correct, as is the statement of the Senior Member that ‘neither party is entitled to damages resulting from termination of the contract’. ...
However, an owner is not precluded from relying upon otherwise accrued statutory and/or common law rights, including the warranty provisions of the Act, simply because the owner has terminated a building contract relying upon s 41 of the Act. A construction of the Act which did so preclude an owner suing for defective work would lead to unfair and/or absurd results, in that an owner who terminated under s 41 of the Act would have less rights than an owner who terminated for breach (or where the builder has terminated for breach), or an owner where a contract had been completed. Such an outcome could not have been intended by the legislature.
However, the legislature could also not have intended that, in circumstances where a building contract has been terminated under the ‘no-fault’ provisions of the Act, a builder entitled to a ‘reasonable price’ for the work completed up until termination be required to, in effect, pay twice for defects for which it is liable. Applying the provisions of the Act in such a way not only unduly penalises the builder, it provides a windfall for the owner.[4]
[4]AG Advanced Construction Pty Ltd v Shao [2018] VSC 116 [54]–[57] (footnotes omitted) (‘Reasons’).
The associate judge summarized her legal conclusions as follows:
(a) reliance upon s 41 of the Act precludes an owner from claiming damages for loss of bargain consequent upon termination;
(b) reliance upon s 41 of the Act does not preclude an owner (or subsequent purchaser) from claiming damages for defective works under the warranty provisions of the Act, whether discovered or discoverable prior to or after termination of the building contract;
(c) the cost of rectification of defects may be utilised to calculate the reasonable price for the work carried out for the contract, or be the subject of a separate award of damages under s 8 of the Act, but not both; and
(d) while the terms of s 41 of the Act do not expressly confer upon VCAT the right to order a refund of any overpayment, they do not preclude the making of such an order under s 53 of the Act if there is a proper legal basis to do so.[5]
[5]Ibid [59].
The associate judge held that it followed that the appeal should be allowed and the order requiring the respondent to pay the applicant $93,153 should be set aside. She then turned to the question what followed from the fact that the respondent had been paid $1,040,700, some $122,898 more than the ‘reasonable price’ to which it had been entitled. The associate judge stated that she considered that the applicant ‘may have been entitled to a restitutionary payment of the overpayment pursuant to s 53’ of the Act.[6] However, she accepted submissions made by the respondent that she should not make any orders in that regard.
[6]Ibid [62] (emphasis in original).
The applicant had submitted that the associate judge should make an order pursuant to s 148(7)(b) of the VCAT Act in order to require the respondent to refund the overpayment. The associate judge accepted that it would have been at least open to the Tribunal to order a refund pursuant to s 53(2)(b)(iii) of the Act. Section 53 relevantly provides:
53 Settlement of building disputes
(1) VCAT may make any order it considers fair to resolve a domestic building dispute.
(2) Without limiting this power, VCAT may do one or more of the following—
…
(b) order the payment of a sum of money—
(i) found to be owing by one party to another party;
(ii) by way of damages (including exemplary damages and damages in the nature of interest);
(iii) by way of restitution;
…
(f) order the refund of any money paid under a domestic building contract or under a void domestic building contract;
The associate judge accepted submissions that had been made by the respondent to the effect that the Tribunal was obliged to determine the matters before it according to established legal principles and that no claim for restitution had been made before the Tribunal and neither party had led evidence or advanced arguments in respect of any such claim. The associate judge held that it would therefore not be appropriate for her to make an order pursuant to s 148(7)(b) of the VCAT Act. This, it was held, would involve embarking upon the exercise of resolving disputed questions of fact on an appeal limited to questions of law.[7]
[7]Ibid [67], citing m3 Property (Vic) Pty Ltd v Whitehorse Towers Pty Ltd [2012] VSC 109 [30] (Beach J); XYZ v State Trustees Ltd (2006) 25 VAR 402, 425 [64] (Cavanough J).
The associate judge held that, were she to determine the matter herself, she would need to determine whether the remedy of restitution was available to the applicant based upon a cause of action such as unjust enrichment. This in turn would require determination as to whether the enrichment was unjust and whether any applicable defences arose. She further observed that the Tribunal had raised concerns about the credibility of both the applicant and the principal of the respondent which could affect the determination of factual matters necessary to decide whether the applicant was entitled to a remedy in restitution.
Finally, the associate judge stated that she did not consider it appropriate to remit the matter to the Tribunal pursuant to s 148(7)(c) of the VCAT Act in order to determine whether an order ought to be made. She declined to do so on the basis that:
[t]he proposition that the Senior Member ought to have made an order refunding any overpayment pursuant to s 53 of the Act was not raised or ventilated at VCAT, and was not the subject of any cross-examination or notice of contention in this proceeding. The principles of finality in litigation carry some weight in determining the nature of an order to be made under s 148(7) of the VCAT Act.[8]
[8]Ibid [71].
The associate judge stated that she would leave it to the applicant and her advisors to determine whether it was feasible to apply to VCAT to reopen the matter, while accepting that there might be ‘significant hurdles in doing so’.[9]
[9]Ibid.
Proposed grounds of appeal and notice of contention
The applicant seeks to appeal on the following two grounds:
1.The Court erred at paragraphs [54] and [57] in determining that the Tribunal’s orders in effect required the Respondent to pay twice for defects, because the Tribunal did not in any sense require the respondent to pay twice for defects.
2.Further, the Applicant was denied natural justice, as she was not given an opportunity to address the Court on whether the Tribunal’s orders should be set aside on this basis.
The respondent filed a notice of contention asserting that the associate judge should have held that reliance on s 41 of the Act precluded the applicant from claiming damages for defective work.
Applicant’s submissions
The applicant submitted that the Tribunal had not in any sense required the respondent to pay twice for the defects. Instead, the Tribunal found that the respondent was not entitled to any payment under s 41(5) because it had already been paid more than the ‘reasonable price’ for which that provision allowed. It had then awarded the applicant damages for defects in the sum of $93,153. The applicant submitted that the result would have been the same if the Tribunal had not deducted the amount representing defects in calculating the ‘reasonable price’. In either case, the respondent was paid more than the reasonable price and had no entitlement under s 41(5), but was liable in damages for the defects.
The applicant submitted that the decision of the associate judge had given the respondent a windfall of $127,780 (taking into account also the Tribunal’s miscalculation referred to at [13] above). The respondent had paid nothing for the defects and retained a balance of $34,627 as well.
In response to the notice of contention filed by the respondent, the applicant submitted that the associate judge was correct to hold that the applicant’s right to damages for defects, not being a right to damages upon termination, survived the termination of the contract and the operation of s 41. Counsel relied on McDonald v Dennys Lascelles Ltd[10] and submitted that nothing in Shevill v Builders Licensing Board[11] or AMEV-UDC Finance Ltd v Austin[12] was to the contrary. It was submitted that the consumer protection purpose of the Act supported this interpretation.
[10](1933) 48 CLR 457, 476–7 (Dixon J) (‘McDonald v Dennys Lascelles’).
[11](1982) 149 CLR 620 (‘Shevill’).
[12](1986) 162 CLR 170 (‘AMEV-UDC’’).
In relation to the second proposed ground of appeal, the applicant submitted that the associate judge had not sought or received submissions as to the ‘double counting’ upon which she based her decision. It was said that she had sought submissions only as to the orders that should be made if the respondent’s submission that there was no entitlement to damages were to be accepted.
In the course of the hearing before us, counsel for the applicant accepted that no refund had been sought before the Tribunal, and suggested that the applicant had not anticipated that the determination of the reasonable price under s 41(5) might give rise to that issue. He submitted that this Court could order the appropriate refund itself. Counsel accepted that the applicant had been content to let lie the overpayment of $34,627, on the Tribunal’s reasoning, and brought no cross-appeal from that decision. However, he submitted that the appropriate course would be to remit the matter to the Tribunal so that it could decide the overpayment issue.
Respondent’s submissions
By its notice of contention, the respondent submitted that the associate judge ought to have held that, if an owner terminates a building contract under s 41 of the Act, the owner is precluded from claiming damages for defective work under that contract. It was said that this was because loss of bargain damages were not available following such a termination (relying on Shevill[13]) and because termination under s 41 involves an election between inconsistent rights.
[13](1982) 149 CLR 620, 627–8 (Gibbs CJ).
This argument was refined in the hearing. Senior counsel for the respondent accepted that defects not known at the time of termination could not be taken into account in determining a reasonable price and might be the subject of a later claim for breach of warranty under s 8 of the Act. However, the point was pressed with respect to known defects. In addition to Shevill, reference was made to AMEV-UDC and Phones 4U Ltd (in admin) v EE Ltd.[14]
[14][2018] 1 Lloyd's Rep 204, 225 [117] (Andrew Baker J) (‘Phones 4U’).
It was submitted that the associate judge was therefore correct to set aside the award of damages. In any event, the associate judge did not go so far as to find that the Tribunal had effectively made the respondent pay twice for the defects. She instead held that damages could not be awarded because the defects had already been taken into account in determining the reasonable price for the work done.
The respondent submitted that no question of refund had been raised in the Tribunal or by way of cross-appeal before the associate judge. Nor was it advanced as a ground of appeal in this Court. The associate judge was correct not to decide the point and not to remit the matter to the Tribunal.
Finally, the respondent submitted that there had been no denial of procedural fairness.
Analysis
It is convenient first to consider the notice of contention. As mentioned above, the respondent submitted that the associate judge ought to have held that, if an owner terminates a building contract under s 41 of the Act, the owner is precluded from claiming damages for identified defective work under that contract. The respondent relied on two bases for this conclusion. It was submitted, first, that loss of bargain damages were not available following such a termination (relying on Shevill,[15] AMEV-UDC[16] and Phones 4U[17]); and secondly that termination under s 41 involves an election between inconsistent rights. As already noted, in argument the submission was confined to the position regarding claims for damages based on defects known at the time of termination.
[15](1982) 149 CLR 620, 627–8 (Gibbs CJ).
[16](1986) 162 CLR 170, 186 (Mason and Wilson JJ).
[17][2018] 1 Lloyd's Rep 204, 225 [117] (Andrew Baker J).
It was submitted that the associate judge was in error in stating that the cost of rectification of defects may be utilised to calculate the reasonable price for the work under s 41, or could be the subject of a separate award of damages, but not both.[18] While the respondent submitted that the ‘not both’ reference was correct, the true position was that the cost of rectification of defects was required to be taken into account in calculating the reasonable price for the work and was legally unable to be the subject of an award of damages.
[18]Reasons [59(c)].
The breadth of the proposition advanced by the respondent cannot be accepted. First, the cases relied upon concern loss of bargain damages in circumstances where a contract is terminated otherwise than for breach. The present case has nothing to do with loss of bargain damages. Nor are the damages for defects alleged to be payable by virtue of the termination of the contract. Moreover, as counsel for the applicant submitted, it is recognised in Shevill itself that the lessor in that case remained entitled, after exercising a contractual right of re-entry, to the recovery of arrears of rent and damages for breaches and other events that occurred before re-entry.[19] This is consistent with the general position articulated by Dixon J in McDonald v Dennys Lascelles, in the following terms:
When a party to a simple contract, upon a breach by the other contracting party of a condition of the contract, elects to treat the contract as no longer binding upon him, the contract is not rescinded as from the beginning. Both parties are discharged from the further performance of the contract, but rights are not divested or discharged which have already been unconditionally acquired. Rights and obligations which arise from the partial execution of the contract and causes of action which have accrued from its breach alike continue unaffected. When a contract is rescinded because of matters which affect its formation, as in the case of fraud, the parties are to be rehabilitated and restored, so far as may be, to the position they occupied before the contract was made. But when a contract, which is not void or voidable at law, or liable to be set aside in equity, is dissolved at the election of one party because the other has not observed an essential condition or has committed a breach going to its root, the contract is determined so far as it is executory only and the party in default is liable for damages for its breach.[20]
[19](1982) 149 CLR 620, 629 (Gibbs CJ).
[20](1933) 48 CLR 457, 476–7.
Just as acquired rights to sue for damages are not lost upon termination of a contract for breach, there is no reason in principle, in the absence of contractual or statutory provision to the contrary, why such rights would be lost upon termination on a basis other than breach. In the end, the question will fall to be decided by reference to the terms of the contractual and statutory provisions in question.
This leads to the second submission advanced by the respondent in its notice of contention, namely that termination under s 41, or cl 21 of the contract, involved an election between inconsistent rights so as to preclude a claim for damages. However, the respondent did not point to any inconsistency between rights, beyond submitting that the calculation of the reasonable price under s 41 necessarily accounts for defects. This falls well short of showing that, because an amount referable to defects might be taken into account in determining the reasonable price under s 41, termination of the contract under s 41 altogether forecloses a claim for damages on account of such defects.
It may be accepted that, if an owner has recovered the amount required to rectify defects by way of a deduction from the amount of the ‘reasonable price’, then that owner could not thereafter claim the same amount by way of damages. But that is not because the right to terminate under s 41(1) and the right to damages are inconsistent rights. It is because it would be unjust for the owner to recover a second time that which has already been allowed as a deduction from the amount owing to the builder under s 41(5).
The rights are not inconsistent because there will not necessarily be such a deduction allowed in every case. For example, there might be major defects apparent shortly after the start of work. The defects might be fundamental and very costly to rectify. If the cost of rectifying identified defects exceeds the reasonable value of the work done, the reasonable price for that work will be zero. Yet the owner will not have been fully compensated for the cost of rectifying the defects. There is no reason why, having pursued the right of termination under s 41, the owner would be disentitled to seek recovery of the balance by way of damages.
Of course, the question is, as mentioned earlier, ultimately one of construction of s 41 (and the contract). But the respondent pointed to no feature of the Act, or the contract, that would support the suggested result. Given that the Act is a consumer protection measure, of which ss 8 and 41 are examples, the suggested construction is unlikely. But more fundamentally, since it involves the loss of accrued statutory and common law rights, the construction could only be supported by clear statutory, or contractual, language.[21] Yet there is none.
[21]Coco v The Queen (1994) 179 CLR 427, 437–8 (Mason CJ, Brennan, Gaudron and McHugh JJ); Momcilovic v The Queen (2011) 245 CLR 1, 46–7 [43] (French CJ); Lee v New South Wales Crime Commission (2013) 251 CLR 196, 308–311 [308]–[314] (Gageler and Keane JJ).
For these reasons, the respondent’s notice of contention must be rejected.
It is not necessary to consider whether, when an owner terminates a building contract under s 41 of the Act, the cost of rectifying defects is always to be taken into account in determining the reasonable price to which the builder is entitled, or whether it may sometimes more properly give rise to a claim in damages. The Tribunal here fully deducted the cost of rectifying the identified defects, and no issue is taken with it having done so. The result was that the reasonable value of the work done was assessed at $917,802.[22]
[22]As noted earlier, the correct figure based on this arithmetic ought to have been $912,920.
The associate judge was correct to identify that, by then ordering that the builder pay damages in respect of the defects, the Tribunal misapplied the provisions of s 41 because the cost of rectifying defects had already been taken into account in calculating the ‘reasonable price’.[23] The associate judge described a builder in such circumstances as being ‘required to, in effect, pay twice’ for the defects.[24] But we do not read this as a conclusion that the respondent itself had been ‘paid twice’. Plainly, because of the overpayment, it had not ‘paid’ for the defects at all.
[23]Reasons [54].
[24]Ibid [57].
The associate judge sought further submissions after the hearing before her on this very issue, being the one upon which she ultimately decided the case. After the matter was heard, the associate judge had her associate write to the parties seeking written submissions on this question:
If the construction of s 41 of the Act contended for by the [respondent] is accepted: that is, that the Tribunal was not entitled to make a separate award of damages for defects where the value of those defects had already been utilized in the calculation of the reasonable price under s 41(5) of the Act, whether, given that the [respondent] has received payments greater than the reasonable price, by reason of the terms of s 41(6) and ss 53(1) and (2) of the Act, it was open to the Tribunal to order that the amount of the overpayment be refunded.
The parties were further asked to make submissions as to:
what would flow from such a construction of the Act, including, but not limited to, whether the matter ought to be remitted to the Tribunal in order to determine whether it would be ‘fair’ to make an order by way of restitution.
It is apparent from these communications, taken with the way in which we have understood the reasons for judgment, that there is no substance in the applicant’s first proposed ground of appeal. In short, the associate judge did not find that the Tribunal required the respondent to pay twice for the defects. Equally, for the same reason, there is no substance in the procedural fairness point sought to be raised as the second ground of appeal.
However, that is not the end of the matter. As argument developed in this Court it became clear that the principal issue between the parties was whether the associate judge was correct not to exercise the powers under s 148(7) of the VCAT Act, either by ordering a refund of the amount overpaid by the applicant using the Tribunal’s powers under s 53 of the Act, or by remitting to the Tribunal the question whether there should be any such order. While no precise ground of appeal was formulated, and leave was not sought to add an additional ground, the matter was fully argued and it was not suggested that the respondent would be prejudiced if the issue were to be decided by this Court. It is appropriate, in the circumstances, that we do so.
The written submissions filed in response to the request made on behalf of the associate judge both addressed the possibility of restitution as requested, but the exchange of submissions revealed that the parties had different understandings of the basis for any possible restitution. The respondent addressed the requirements for establishing a claim in unjust enrichment. The associate judge accepted those submissions and found that there could be matters of fact, potentially involving the credibility of witnesses, which would need to be decided if such a claim were to be advanced. The applicant did not address the question of unjust enrichment but appears rather to have founded her submissions on restitution of moneys had and received.
Be that as it may, there was no claim made in the Tribunal of either description. Nor was there a claim for a ‘refund’ under s 53(2)(f) of the Act. It is not apparent to us, on the materials before us, what defence the respondent might have to a claim for a refund of the $127,780 said by the applicant to have been overpaid. But equally it is not obvious that there could be no such defence. That is a result of the matter not having been run at the Tribunal. Like the associate judge, we do not feel equipped in the circumstances to determine such a claim ourselves.
The question of remitter, however, is another matter. The associate judge had power under s 148(7)(c) of the VCAT Act to remit the matter to the Tribunal for further consideration. She declined to do so, principally on the basis of the importance of finality in litigation. However, counsel for the applicant informed us that the question of an overpayment emerged only upon publication by email of the Tribunal’s reasons and orders. Further, while finality of litigation is important, on the face of it a builder has retained a substantial overpayment made by an owner, leaving a significant matter between the parties unresolved. It was unfortunate that the Tribunal did not seek submissions as to what course it should have taken. Instead, it stated that s 41 does not provide for a refund and did not refer to its powers under s 53.
The applicant did not seek to cross-appeal against the Tribunal’s order, choosing instead to try to defend the orders she had secured. But the associate judge still considered the question and, as the matter developed, it was a live issue before her. Similarly in this Court, the applicant did not initially pursue the refund point, relying instead on arguments directed to sustaining the Tribunal’s original decision. But again the matter was ultimately fully argued.
In our opinion, the interests of justice require the question of any refund due to the applicant to be determined by the Tribunal. The fact that this did not happen at first instance is a product of the issue having been fully exposed only when the Tribunal published its reasons and orders. The matter should have been argued and decided before that point. In the circumstances, this Court should exercise the power under s 148(7)(c) by remitting the matter to the Tribunal, constituted if possible by the same member, for determination whether any, and if so what, amount is due from the respondent to the applicant by way of refund of money paid under the contract.
Conclusion
The above reasons lead to the conclusion that the application for leave to appeal should be granted and the appeal should be allowed in part. While the associate judge’s order allowing the appeal should be left in place, the orders should be varied by adding an order as to remitter to the Tribunal in the terms outlined above. The associate judge’s order as to costs should be set aside.
We will hear the parties as to costs if they wish. Unless the matter is agreed, we shall direct that the parties file and serve any submissions as to costs, of no more than 3 pages, within 7 days of the publication of these reasons. If no submissions are filed, we will order, in light of the mixed success of the parties both in this Court and before the associate judge, that there be no order as to the costs of either proceeding. In that event, we would grant the respondent an indemnity certificate under s 4(1) of the Appeal Costs Act 1998 and leave intact the corresponding order of the associate judge in favour of the applicant. If submissions are filed, we will decide the matter on the papers.
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