Stankovic v Aufderheide and Anor No. Scciv-03-1165

STANKOVIC v AUFDERHEIDE & ANOR
[2003] SASC 378
Magistrates Appeal

DUGGAN J. This is an appeal from the decision of a magistrate sitting in the Adelaide Magistrates Court. The action arose out of a dispute between the appellant and the respondents who are the appellant’s daughter and son-in-law.
The appellant is a construction manager who has experience in the building industry. In January 2002 the respondents’ house was damaged by fire. The respondents discussed the building work rendered necessary as a result of the fire with the appellant and, at the request of the respondents, he prepared a quotation for the repair work. The quotation was also applied to the respondents’ insurer. It was dated 15 February 2002.
The total cost of the work was quoted at $52,548. In due course, the respondents indicated to the appellant that they wanted him to perform the work. Although the insurance company paid the respondents the full amount of the estimated claim, they advised the appellant that the payout was limited to $50,000. It was then agreed that the appellant would do the work for $50,000.
While the construction work was in progress, the appellant and the respondents discussed other renovations which were not referred to in the written quotation. This work involved the replacement of guttering, the supply and installation of a door in the family room and the erection of a pergola. The respondents authorised the undertaking of these aspects of the construction work. According to the respondents’ version the appellant made it clear in the course of discussions with them that the cost of these additional works would come within the contract sum of $50,000. The appellant denies that this was the case and claims that the respondents authorised additional expenditure on these items.
The respondents refused to pay the amounts claimed and the appellant commenced proceedings in the Magistrates Court. The claim is “for material supplied and labour paid for the plaintiff for the defendants at their request in relation to building works on their property”. The total amount claimed is $6879.48. Although the appellant took part in some of the work on the additional aspects he did not charge for his own labour. The amount claimed was restricted to the cost of materials supplied and the recovery of amounts paid by him to tradesmen.
The appellant conducted his own case before the magistrate and on the hearing of the appeal. However he appears to have received some legal advice on the matter from time to time. He and his wife gave evidence at the trial. The respondent also gave evidence.
The appellant said in evidence that, although the guttering was not damaged during the fire, it became evident in the course of the construction work that it was in a poor state. He said he discussed this with the respondents and they authorised him to purchase new guttering and pay a tradesman to install it. The respondents claimed that when the guttering was discussed the appellant told them that the cost would come within the $50,000 originally quoted. The appellant denied that this was said. The amount claimed for the guttering and the labour to install it is $1181.33.
According to the appellant’s evidence, the respondents discussed installing a new family room door in the year before the fire. He obtained a quotation for the supply of the door at $1980. This did not include the cost of tracks on which the door was to run or the cost of installation. He said nothing further was discussed about the door until after the fire.
The appellant said that the issue was raised again while the construction work was in progress. The appellant said he was authorised to obtain quotations for the supply and installation of the door at this time. He did so and the total cost of materials and labour came to $4561.15. The respondents claimed in evidence that, when the door was discussed at the time the construction work was being undertaken, the appellant said that this also would be covered by the $50,000 contract price. The appellant denied that this conversation took place.
The third item discussed was the erection of a pergola. The appellant said that while the construction work was in progress his daughter asked him if an old verandah could be removed and replaced with a new pergola. The appellant said he agreed to arrange this and that he purchased timber and other material for the job. He also arranged for a carpenter to build the pergola. The cost for the materials and the carpenter’s labour totalled $1137. The respondents claimed that the appellant told them that the pergola would cost $450.00 and that this would be paid out of the contract price of $50,000. The appellant denied this conversation.
The magistrate dismissed the appellant’s claim. He delivered a short judgment in which he set out some of the history of the matter. The judgment continued:
“Nothing was spared by the defendants on their attack on the character of the plaintiff, no matter how much it may have been correct. In the first instance they deliberately failed to disclose to the plaintiff the amount recovered from the insurance company and used the figure of $52,000 to obtain maximum benefit from him. When he later discovered the true amount recovered by the defendants the plaintiff took the stance of a hurt and aggrieved father. The court finds no fault on this but questions why a daughter would require to be so secretive against her father.
The defendants encouraged the plaintiff to tender for the position and the court cannot but feel that they did so for the purpose of taking full advantage of him.
On the other hand the plaintiff has clearly demonstrated to the court that his behaviour in this matter was brought about due to hurt and at not being told by his daughter the true and correct amount received from the insurance company. However, in setting out how the court views this and accepting that the plaintiff was so hurt, the defendants committed no breach of law and could behave in the manner they did notwithstanding any hurt suffered by him.
The plaintiff elected to represent himself whilst the defendants were represented by Mr B Farmer of counsel. At the conclusion of the initial hearing the matter was called back on a couple of times. In each instance the defendants chose to submit further evidence attacking the character of the plaintiff. Whilst this of itself is not a bar to the defendants’ rights, it is another indication of the attitude of the defendants towards the plaintiff.
The court found the defendants to both be intelligent and articulate persons who were totally aware of what they were doing and of their dealings with the plaintiff.
The court finds it difficult to believe that the defendants were not aware of their position and quite cleverly played on the naivety of the plaintiff. The court does not accept that they expected all the additional work and materials to come within the sum of $50,000. The court is satisfied that the defendant and, in particular, the second defendant, took full advantage of the plaintiff without any concern of the effect that such would have on the relationship with the plaintiff. The court is further satisfied that the defendants obtained benefit which they may not have been able to achieve had another tenderer been successful for the job or if it had not been done directly through the insurance company.
As to the plaintiff, the court is satisfied that he undertook the work in the first place out of a desire to help his daughter. He suffered hurt at the failure of the defendants to disclose to him the true amount received by them from the insurance company. Notwithstanding this, the defendants in law did nothing wrong.
What is paramount in these proceedings is that the plaintiff throughout his dealings with the defendants failed to ensure that an agreement had been reached for the supply of materials and work done over and above that initially agreed to. The court is satisfied that he did not give this any consideration as, due to his daughter’s involvement, he could not foresee any problems. By his failure to protect himself he has forfeited his right to succeeding in this matter.
The court is satisfied that at the time he did not hold a certified registered builder’s licence and so could not hold himself out to be a builder. The plaintiff stated that he never held himself out as such but rather as an overseer who employed registered tradesmen to carry out the work. The court is not satisfied that he carried out the work simply as an overseer but that he infringed in the domain of a builder.
The court is of the belief that the plaintiff in his desire to do the work for the defendants gave no thought to whether or not he was a builder. As such, for this reason, also his action against the defendants must fail.
On the evidence before the court the defendants have done extremely well out of the work done by the plaintiff. It is also obvious to the court that prior to the instigation of these proceedings and after, as well as during the court hearing no offer was made by the defendants to the plaintiff to reduce his losses. Again this was their right but whether or not such is the case is now irrelevant. The hurt and ramifications resulting from these proceedings will almost certainly linger for quite some time.
Regrettably the court is unable to find for the plaintiff. In so arriving at its decision the court has taken the evidence as a whole into account and dismisses the claim.”
The process of reasoning which led the magistrate to dismiss the charge is difficult to discern. Leaving aside the issue raised by the fact that the appellant did not have a builder’s licence, the first task facing the court was to determine the content of any agreement or agreements entered into between the parties. This, in turn, gave rise to the need for assessments on credibility which were vital to the resolution of the case. There was a fundamental dispute on the evidence as to whether the appellant agreed on each of the occasions when the three disputed items were discussed that the costs in relation to them would be met within the original quotation of $50,000. Documentation tendered on either side was relevant to this issue.
However, the magistrate made no specific findings on the issue of credit. Furthermore, what he did say about the content of the agreement is ambiguous. He stated that the court did not accept that the respondents expected all the additional work and materials to come within the sum of $50,000. Later in his reasons, he said that the appellant failed to ensure that an agreement had been reached for the supply of materials and work done over and above that initially agreed to. There is no discussion of the evidence relevant to these findings.
It has been pointed out on many occasions that whether or not reasons for a decision are adequate, will depend upon the circumstances of the particular case. In a case such as the present, the reasons should indicate so much of the process of reasoning of the fact-finder as to allow adequate appellate assessment and review of the reasoning. In Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 at 259 Kirby P said:
“This decision does not require of trial judges a tedious examination of detailed evidence or a minute explanation of every step in the reasoning process that leads to the judge’s conclusion. But the judicial obligation to give reasons, and not to frustrate the legislative facility of appeal on questions of law, at least obliges a judge to state generally and briefly the grounds which have led him or her to the conclusions reached concerning disputed factual questions and to list the findings on the principal contested issues. Only if this is done can this Court discharge its functions, if an appeal is brought to it. Where nothing exists but an assertion of satisfaction on undifferentiated evidence the judicial obligation has not been discharged. Justice has not been done and it has not been seen to be done.”
In the present case there does not appear to be any resolution of the opposing versions put forward by the appellant and the respondents respectively. There is no discussion of the evidence or findings on credibility on the major dispute in the case. In these circumstances it is not possible for an appellate court to make the necessary findings on credibility without seeing and hearing the witnesses.
Before dealing with the consequences of the views which I have expressed, it is necessary to refer to the issue which arises by reason of the fact that the appellant was not a licensed builder at the time these events occurred. It will be seen from the magistrate’s reasons set out above that he was of the view that this consideration was also fatal to the appellant’s claim, although there was no discussion of the relevant legal considerations.
Presumably, the magistrate reached this conclusion because of s 6 of the Building Work Contractors Act 1995 which provides as follows:
“6     (1)    A person must not –
(a)    carry on business as a building work contractor except as authorised by a licence under this Part; or
(b)    advertise or otherwise hold himself or herself out as being entitled to carry on business as a building work contractor unless authorised to carry on business as such a contractor by a licence under this Part.
Maximum penalty:     $20 000.
(2)    A person required by this Act to be licensed as a building work contractor is not entitled to any fee, other consideration or compensation under or in relation to a contract with another on whose behalf the person performed work as a building work contractor unless –
(a)    the person was authorised to perform the work under a licence; or
(b)    a court hearing proceedings for recovery of the fee, other consideration or compensation is satisfied that the person’s failure to be so authorised resulted from inadvertence only.”
“Building work” is defined in s 3 of the Act as meaning:
“(a) the whole or part of the work constructing, erecting, underpinning, altering, repairing, improving, adding or demolishing a building; or
(b)the whole or part of the work of excavating or filling a site for work referred to in paragraph (a); or
(c)work of a class prescribed by regulation.”
If the appellant’s case is viewed as a claim in contract, the question arises whether he is prevented from recovering the amounts claimed. It is not in dispute that he was not a licensed builder and it is therefore necessary to decide whether the claim which he has made constitutes a “fee, other consideration or compensation under or in relation to a contract”.
In Jackson v Crosby (1977) 16 SASR 1 King CJ considered the meaning of the words “for fee or reward” as they appeared in a similar context in s 21 of the Builders Licensing Act 1967. He said (at 4):
“The carrying out of building work and the construction of a building for fee or reward connote the doing of those things by one person for another in exchange for remuneration in some form. Reward is a word of wide meaning. It embraces, I think, not only remuneration in money but also remuneration or recompense in kind. Remuneration or recompense by way of goods, reciprocal services or the transfer of an interest in land would constitute ‘reward’. But to my mind the sub-sections envisage some sort of builder and client relationship. They envisage the carrying out of the building work by one person for another in exchange for remuneration or recompense in cash or kind.”
These observations were approved in Jackson v Crosby (No 2) (1979) 21 SASR 280 at 301. They were also applied by Mullighan J in Saunders and Saunders v Cadman (1990) 54 SASR 534. This case was similar to the present matter in that it concerned a claim by an unlicensed builder for the cost of materials. Section 21(5) of the Builders Licensing Act 1967 provided that where a person had carried out building work in contravention of the section, “he shall not be entitled to claim, or recover in any court, the amount of any fee or charge for any building work so carried out”. Mullighan J said (538):
“The inclusion of the cost of materials in the statements for the purpose of recouping only the actual costs, in the circumstances of acquiring the materials as a favour to the appellants, where no amount was sought over and above the actual cost for the time and expense incurred in the acquisition, could not amount to the charging of a fee or the seeking of a reward. Common sense prevents any other interpretation. If a friend buys a sandwich for a colleague at lunch time and seeks reimbursement of the actual cost, to use an example given in argument by Mr White, it could not be said that he or she was charging a fee or was seeking a reward. The circumstances here are no different. The respondent sought no more than reimbursement for the cost of materials acquired by him as a favour to the appellants. It was not a charge in the relevant sense and was not a fee. The payments he received and sought for the materials were not a reward.”
The court reached a similar result in Mostia Constructions Pty Ltd v Cox (1994) 2 Qd R 55. Section 53(2)(d) of the Builders’ Registration and Home-owners’ Protection Act 1979 (Qld) provided that a person who is not a registered builder shall not “be entitled to claim, sue for or otherwise recover, by any process in a court, by arbitration or otherwise, any fee, charge, damages or other award of whatever nature” in respect of building construction work. White J said:
“ ‘Reward’ is not in my view apt to include prohibition against the recovery of the cost of materials and, for example, a charge made by a sub-contractor of the cost of materials and, for example, a charge made by a sub-contractor to the unlicensed builder. ‘Reward’ is however, capable of including the amount a builder charges for his labour. If he employs other labour then those wages would not in my view be encompassed by the expression ‘reward’. Mr Doyle, for the defendant, argued that it would be possible to avoid the subsection by subcontracting the whole of the work to a service company if reward were held not to include ‘outlays’. So be it. The legislature must be assumed to employ the words which reflect its intention and I do not find in the expressions used in s 53(2)(d) any intention to exclude such things as the cost of materials and other outlays. It could easily have said so as the Victorian legislation has done in s 19(1) of the House Contracts Guarantee Act 1987, see Sevastopoulas v Spanos [1991] 2 VR 194.”
It must be acknowledged that the resolution of this issue calls for a construction of the words used in the particular legislation under consideration. In the present case s 6 prevents recovery of “any fee, other consideration or compensation”. In my view the words “fee” and “other consideration” are inappropriate to describe the mere recouping of the costs paid by the appellant on behalf of the respondents in the present case. Although the position is less clear in the case of the term “compensation” it is my view that in the context of the legislation and its purpose this term should be confined to situations in which the claim is for work done as a building contractor as opposed to a claim for reimbursement.
It follows that in my view, even when looked at from the point of view of contract, the payments claimed in this action are not within s 6.
However, if I am wrong in taking this view, there remains the question whether the appellant was entitled to the amounts claimed on a quantum meruit. The starting point for a consideration of this question is the decision of the High Court in Pavey & Matthews Pty Ltd v Paul (1986) 162 CLR 221. Section 45 of the Builders Licensing Act 1971 (NSW) provided:
“A contact … under which the holder of a licence undertakes to carry out, by himself or by others, any building work or to vary any building work or the manner of carrying out any building work, specified in a building contract is not enforceable against the other party to the contract unless the contract is in writing signed by each of the parties or his agent in that behalf and sufficiently describes the building work the subject of the contract.”

The majority of the court held that this section did not prevent a licensed builder from bringing an action on a quantum meruit for the value of work done and materials supplied under an oral building contract. It was held that the right to recover on a quantum meruit did not depend upon the existence of an implied contract, but on a claim to restitution or one based on unjust enrichment. The action arose from the property owner’s acceptance of the benefits accruing to the property owner from the builder’s performance of the unenforceable oral contract: Mason and Wilson JJ at 227; Deane J at 256. The action could not be regarded as being founded on contract and so s 45 was inapplicable.
Pavey’s case was applied in Nunkuwarrin Yunti v A L Seeley Constructions Pty Ltd (1998) 72 SASR 21. The court was there dealing with s 39 of the Builders Licensing Act 1986, the precursor of s 6 of the Building Contractors Act. Section 39 provided:
“An unlicensed person who performs building work in circumstances in which a licence is required under this Act shall not be entitled to recover any fee or other consideration in respect of the building work unless the Tribunal or any court hearing proceedings for recovery of the fee or consideration is satisfied that the person’s failure to be licensed resulted from inadvertence only.”
The court held that s 39 did not preclude an unlicensed builder from recovering monies from a property owner on a quantum meruit. Doyle CJ said (23):
“Returning to s 39, I agree that the expression ‘fee or consideration’ is an expression suggestive of a contractual entitlement, although capable of being read more widely. I lean against the wider reading because of the consequences of giving that wider meaning. As I have already said, there seems no doubt that the contract remains enforceable at the suit of the building owner. It would be very harsh if the building owner could enforce the contract against the builder, leaving the builder with no entitlement to remuneration: see Pavey (at 229) per Mason and Wilson JJ. The scheme of the Act does not appear to require that the builder be denied a remedy in restitution in such a case.”
Prior J said:
“The submission put to this Court on behalf of the owner was that a claim based on quantum meruit, though not based on an implied contract, was nonetheless a claim for reasonable remuneration so that the prohibition against the recovery of any fee was capable of applying to both a quantum meruit claim for reasonable remuneration and the agreed fee or consideration stipulated by the contract. Against that, it was contended for the builder that the decision in Tea Tree Gully was a correct application of Pavey. I agree with that. The restitutionary claim recognised in Pavey is not an action to enforce a contract or to recover a contractual sum. True it is that s 39 makes no specific reference to contracts at all. It denies entitlements which arise in respect of building work. Those entitlements are entitlements ‘to recover any fee or other consideration in respect of the building work’. That language is referable to contractual sums alone.”
When s 39 of the Builders Licensing Act was repealed and replaced by s 6 of the Building Contractors Act the matter was put beyond doubt. The entitlement which is removed by s 6 is that which arises “under or in relation to a contract”. The section cannot be construed as applying to claims on a quantum meruit.
In my view, the broad pleadings in the action required consideration to be given to whether the appellant was entitled to succeed either in contract or on a quantum meruit.
It follows from what I have said, that the dismissal of the action must be set aside and the matter remitted to the Magistrates’ Court for re-hearing by another magistrate. If there is a finding that the appellant and the respondents agreed that the cost of the three items to which I have referred would come within the quotation of $50,000, the claim must be dismissed. On the other hand, if no such agreement took place, the court will have to decide in accordance with the above reasoning whether the appellant is entitled to succeed in his claim either in contract or on a quantum meruit.

[2003] SASC 378

20 November 2003