Sunrise Pools Australia Pty Ltd v Sudeep Apana
[2014] NSWCATCD 170
•24 September 2014
NSW Civil and Administrative Tribunal
New South Wales
Medium Neutral Citation: Sunrise Pools Australia Pty Ltd v Sudeep Apana [2014] NSWCATCD 170 Hearing dates: 4 September 2014 Decision date: 24 September 2014 Before: Mark J Cohen, Senior Member Decision: 1. The respondent is to pay to the applicant the sum of $35,282.00 immediately
Catchwords: Adjournment - cross-examination; rescission of contract - termination of contract - penalties - void by reason of penalty - jurisdiction -just - quick and cheap - implied duty to co-operate Legislation Cited: Home Building Act 1989
Civil and Administrative Tribunal Act 2013
Civil and Administrative Tribunal Rules 2014Cases Cited: AON Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175;
Workers' Compensation Commission (NSW) v FAI Insurances Ltd [1983] 3 NSWLR 362
Provincial Homes v Doyle [2004] NSWSC 624;
Grygiel v Baine [2005] NSWCA 218
State of Queensland v. JL Holdings Pty Ltd (1997) 189 CLR 146;
GSA Industries Pty Ltd v NT Gas Ltd (1990) 24 NSWLR 710;
State Pollution Control Commission v Australian Iron and Steel Pty Ltd (No 2) (1992) 29 NSWLR 487;
Woolfe v Alexander Sussman t/as Sussman Construction Consulting Services & Anor [2001] NSWSC 702;
Collings Homes v Head & Ors [2002] NSWSC 1219;
Isherwood v Butler Pollnow Pty Ltd (1986) 6 NSWLR 363;
CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384;
Corporate Affairs Commission (NSW) v Yuill (1991) 172 CLR 319;
Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297;
Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485;
CAL No 14 Pty Ltd v Motor Accidents Insurance Board (2009) 239 CLR 390
Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89;
Marshall v Director-General, Department of Transport (2001) 205 CLR 603;
Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority (2008) 233 CLR 259;
Hasler v Singtel Optus Pty Ltd [2014] NSWCA 266;
Metro Windows Pty Ltd & Ors v Commissioner of Fair Trading (No 2) [2012] NSWADT 232;
Mackay v Dick (1881) 6 App Cas 251;
Butt v M'Donald (1896) 7 QLJ 68;
Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596;
Peters (WA) Ltd v Petersville Ltd (2001) 205 CLR 126;
Park v Brothers (2005) 222 ALR 421;
Alati v Kruger (1955) 94 CLR 216;
Vadasz v Pioneer Concrete (SA) Pty Ltd (1995) 184 CLR 102;
Xu v Jinhong Design & Constructions Pty Ltd [2011] NSWCA 277;
Legione v Hateley (1983) 152 CLR 406;
Exports Credits Guarantee Dept v Universal Oil Products Co ("ECGD") [1983] 1 WLR 399;
Interstar Wholesale Finance Pty Ltd v Integral Home Loans Pty Ltd [2008] NSWCA 310; (2008) 257 ALR 292;
Kemble v Farren [1829] EngR 590; (1829) 6 Bing 141 at 148 [130 ER 1234 at 1237];
Reynolds v Bridge (1856) 6 El & Bl 528 at 541 [1856] EngR 555; [119 ER 961 at 966];
AMEV-UDC Finance Ltd v Austin ("AMEV-UDC") (1986) 162 CLR 170;
Wardley Australia Ltd v Western Australia (1992) 175 CLR at 526;
Sellars v Adelaide Petroleum NL (1994) 179 CLR 332;
The Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64;
Toteff v Antonas (1952) 87 CLR 647.Texts Cited: None Category: Principal judgment Parties: Sunrise Pools Australia Pty Ltd (applicant) Representation: None
The respondent's solicitor, for the respondent
File Number(s): HB 14/27748 Publication restriction: Unrestricted
reasons for decision
Jurisdiction and background facts
The claim by the applicant is for what may be called "break costs" under a terminated building contract, and pursuant to an express mechanism in that contract in the event of repudiation by the customer and upon acceptance of such conduct, termination by the builder. The sum claimed is $35,282.00.
The proceeding was conducted in Sydney, with the applicant builder being self-represented by its director; and the respondent being legally represented.
The Tribunal ordinarily in such matters can be understood to have jurisdiction in such matter pursuant to the Home Building Act, 1989 (the "Act"), for what prima facie would be understood to be residential building work. It is the case, however, that the respondent contends there is no jurisdiction by reason that there is no such residential building work that ever has been undertaken. For the reasons that follow, that contention must fail.
The matter was called on for hearing on 4 September 2014, having been specially fixed by the Registry for a hearing of three hours.
Extensive directions had been made on 1 July 2014, for the purpose of bringing the application into readiness for hearing, and these were communicated to the parties both orally by the Tribunal at the directions hearing and by the Registry by Notice of Order sent to them that day.
The applicant was ordered to file with the Tribunal and serve on the Respondent all materials to be relied upon by the applicant on or before 22 July 2014, placed in a bundle with index, chronology, and operative transaction documents. The applicant complied.
The respondent was subject to the same direction, save that all such materials were to be filed and served on or before 12 August 2014. This did not occur. What did occur was the purported filing of materials by the respondent with the Registry on 29 August 2014, clearly out of time.
Moreover, at the time of the hearing, the respondent's solicitor sought leave to introduce a standard A4 lever arch file with what the Tribunal was informed were documents relevant to the claim. The applicant, understandably enough, objected to the late reception of such materials. Further, these documents represented an entirely new collection of materials which neither the presiding member nor the applicant had had no opportunity to read and understand prior to the hearing.
Prior to the commencement of the hearing of the evidence, the Tribunal sought an explanation from the respondent's solicitor, on what basis such materials ought be accepted from the respondent, given the objection advanced by the applicant, and the evident prejudice arising from the inability reasonably of any party in such circumstances to deal with such materials. No affidavit of facts and circumstances was proffered to explain the default, or to provide an understanding of what the further materials comprehended, and what likely operative prejudice might be visited on the applicant, and most importantly, upon the efficient administration of justice by the Tribunal.
The Tribunal merely was informed that this was necessary to avoid procedural unfairness being visited upon the respondent. On the footing that a legally represented party bears a higher duty to observe procedures that are common place in an adjudicative forum such as the Tribunal, and understood by the legal representative as being required, in a fashion that an unrepresented litigant might not comprehend so easily, it was the Tribunal's view that the cumulative effect of initial late service of materials and the provision of further materials at the hearing that meant the prejudice was likely to be in the other direction, and would fall upon the applicant.
Given that it was the respondent's default that had first visited prejudice upon the applicant by reason that it was not able to come to an understanding of the case to be put against it at the time of the hearing; and, moreover, where it was the case, as here, that the applicant had no effective opportunity before the time of the commencement of the hearing to come to any understanding of what materials were contained within the A4 lever arch bundle, leave to rely on the materials was refused in the fashion foreshadowed by the directions made on 1 July 2014.
It is trite law that any party seeking an indulgence of this type (and this was greater in magnitude than most) must give a proper explanation of the default (usually upon an affidavit of facts and circumstances); why there is unlikely to be prejudice to the non-defaulting party; and how any prejudice that has arisen is to be ameliorated: see AON Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175.
Nothing of this type was proffered, beyond the respondent's solicitor's protestations that the respondent would be prejudiced. In the light of the specific directions made on 1 July 2014 not commanding even the barest attempt at compliance by the respondent, the Tribunal refused to permit any of the respondent's materials to be used in the course of the hearing; or for the respondent to have the use of them as material upon which to found any cross-examination of the director of the applicant. The bundle of materials that was before the Tribunal which had been advanced by the applicant in accordance with the directions made on 1 July 2014 was, by direction of the Tribunal during the course of the hearing, the sole source of material for such a purpose.
The respondent's solicitor took objection to this ruling, harbouring (it appeared) a belief that the respondent enjoyed a free-standing right to cross-examine the applicant's witness on whatever basis, and with recourse to whatever materials may be available for the purpose. The law, of course, provides no such basis for that view. The conduct of cross-examination, and the basis upon which it is to be conducted, remains within the control of the Court or Tribunal conducting the proceeding. See Workers' Compensation Commission (NSW) v FAI Insurances Ltd [1983] 3 NSWLR 362.
It needs to be restated that directions that may be made by the Tribunal are not an optional extra that parties can pick and choose between, or observe, or not, at their convenience. If the guiding principle found within s 36 of the Civil and Administrative Tribunal Act 2013 (the "C&AT Act"), and the Civil and Administrative Tribunal Rules, 2014 (the "CA&T Rules") which the NSW Parliament has required the Tribunal to observe as central to its deliberations and the discharge of the business that comes before it, is to have any purpose and not be denuded of effect, then the duties imposed upon parties by that section of the C& AT Act & Rules must be observed scrupulously. Litigants who come before the Tribunal must be aware that the Tribunal will be assiduous in requiring adherence to directions it makes for the disposition of matters; and exacting of the observance of the duties parties owe to the Tribunal by operation of s 36(3) of the C&AT Act.
The respondent's solicitor thereupon advanced the contention that the Tribunal was without jurisdiction, and that the application must fail. This contention was founded upon what appeared to the Tribunal to be a misconception (founded, it appeared, in heavy reliance upon the decision in Provincial Homes v Doyle [2004] NSWSC 624), about the better view of the meaning of the defined term "residential building work" found in s 3 of the Home Building Act, 1989, in the way enunciated by the Court of Appeal in Grygiel v Baine [2005] NSWCA 218 at [47] - [63]. For the reasons that appear below, the contention advanced by the respondent, by their legal representative, is in error.
That having been said, the respondent's solicitor, insisted that there was no jurisdiction and that his clients were entitled to an order that the proceeding be dismissed for want of jurisdiction. On the footing that this position also had not been communicated to the applicant, the Tribunal declined to accede to such a position given it bespoke circumstances that were procedural unfairness writ large. If the applicant had been placed on notice in a proper fashion that this point was being advanced, it may have acted in a fashion that is common in such applications being that an amendment to the claim would be made to permit an alternative claim upon a quantum meruit. On inquiry by the Tribunal of the applicant this was confirmed by the applicant to be the likely case.
Moreover, such events flowing from the conduct of the respondent were not, and never could be, capable of discharging the duty that the respondent owed to the Tribunal in the manner imposed by s 36(3) of the CA&T Act. Consequentially, leave was granted to the applicant to amend the application to include a claim for remuneration on a quantum meruit conformably with the provisions of s 94(1A) of the Home Building Act, 1989 (the "Act").
The respondent's solicitor, upon his instructions, then applied for an adjournment of the hearing so that the respondent might have time within which to arrange and serve their materials, and (so it was put to the Tribunal) arrange for evidence to be led to meet such a case. It also was put that such adjournment would obviate any sting in the default by the respondent (which the Tribunal apprehended was not conceded in any event) to the prejudice of the applicant might be ameliorated.
By reason of the failure of the respondent to provide an affidavit of facts and circumstances which explained his default (and which it might reasonably be expected an experienced practitioner would advise a client as of course was an essential step), the Tribunal was not confident that any of the material that the respondent suggested would be obtained in the course of the adjournment proposed would be provided.
It seemed to the Tribunal that it was unlikely that any direction would be complied with; that the prejudice to the applicant was not able to be removed; and that the overall prejudice to the efficient discharge of the Tribunal if an adjournment were to be allowed, was unable to be alleviated. A three hour hearing was to be vacated and no alternative business was available to be conducted in the resulting time liberated, being a period of some two hours remaining at the time the application was brought.
This application, also, was refused.
It cannot be doubted that the raison d'etre of the guiding principles in s 36 of the CA & T Act are: a proper decision according to law; expeditious resolution of any proceeding before the Tribunal; which occurs on a footing that incurs the least practicable cost to the parties. That is to say: just, quick and cheap. The corollary of this must be, when it is remembered that the statute also directs the Tribunal to give effect to the guiding principle when it exercises any power, that there is not an inappropriate licence given to the Tribunal in the exercise of discretions conferred with procedural powers. The particular relevance of such matters is where the exercise of a discretion, such as to grant a significant indulgence during the course of a hearing by ordering that there be an adjournment, has a predictable risk that consequential delay in the conduct of the proceeding will occur.
This is not merely a factor to be weighed in the interests of the parties to the dispute. It follows necessarily in times of strained resources that the burden such decisions place upon the administration of justice, and the question of whether the exercise of the discretion to grant an indulgence is justifiable, must be measured as a part of the efficient use of the resources of the Tribunal. It is not a matter of chance that the Parliament also requires the Tribunal to have regard to the resolution of the issues between the parties in such a way that the cost to them and the Tribunal is proportionate to the importance and complexity of the subject matter of the proceeding.
The principles to this effect are enunciated quite crisply by the High Court of Australia in AON Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175, especially at [96] - [97]. See also State of Queensland v. JL Holdings Pty Ltd (1997) 189 CLR 146; GSA Industries Pty Ltd v NT Gas Ltd (1990) 24 NSWLR 710, at 716-717; State Pollution Control Commission v Australian Iron and Steel Pty Ltd (No 2) (1992) 29 NSWLR 487, at 493-495.
This question, therefore, also must be a factor to be weighed and considered by the Tribunal in the proper exercise of any of the discretions reposed in it. The short point is that the exercise of the discretion must not be surrendered to "idiosyncratic personal responses" in the fashion identified by Kirby J in JL Holdings. There must be consideration of the materiality of the default, the consequences of acceding to the application, and the apprehended or real consequences for the efficient use of Tribunal resources, and then, and only then, the principled exercise of the discretion.
When all of these matters were considered, and it was understood that the real issue between the parties appeared to turn upon the proper construction of a narrow clause in the underlying building contract, it was the view of the Tribunal that no adjournment legitimately could be ordered in the principled exercise of the discretion reposed in it. This rendered clearly into view just how late the application was for the adjournment was; how little in the way of adequate justification was able to be mustered by the respondent in aid of it; and why it was refused.
The applicant then confirmed that it relied upon the materials it had filed with the Tribunal, and its director, Mr Moore gave evidence and was cross-examined at considerable length by the respondent.
On occasion the legal representative for the respondent strayed into the territory of the potentially unfair. A particular example was when it was put to the director of the applicant; Mr Moore was lying, when no proper foundation had been laid for the assertion of conscious dishonesty during the course of giving evidence under oath. Such question was not permitted in circumstances that it was wholly unclear whether what had occurred between witness and cross-examiner rose any higher than a difference of view about, and/or recollection of, events that were being put to the applicant on instructions by the legal representative of the respondent. This process was made all the more uncertain, and potentially unfair, by reason that the respondent had not advanced any material before the Tribunal, such material as was proffered being rejected as in default of the directions for filing of such material.
The intervention by the Tribunal to control such questioning drew the response from the respondent's solicitor, that the authorities (as to which it was left unstated) disclosed that it was not proper for a Tribunal to intervene and interrupt the course of a cross-examination. This misses the point that a determinative forum such as the Tribunal, notwithstanding there is a limit upon formality including being relieved of the observance of the rules of evidence, must nonetheless control its procedures such that an unrepresented litigant is not subjected to unfair questioning of a type that, had they been legally represented, would draw instantaneous objection and almost certain rejection.
Situations such as this require caution by legal representatives in the conduct of any such cross-examination, and the Tribunal must be astute to ensure that operative procedural unfairness does not arise from such a circumstance.
The Tribunal's view, in any event, was that the director of the applicant in the giving of his evidence was not shaken when under cross-examination, and contrary to the assertions of the respondent, was entitled to be believed on his oath.
This then requires the Tribunal to consider the body of evidence before it, and whether as the respondent contend, there was no operative building claim and accordingly no jurisdictional fact present enabling the powers of the Tribunal to be enlivened and any discretion to be exercised that may be proper on the facts found.
The applicant's claim
The applicant relied primarily upon the building contract dated 13 September 2012, which included relevant essential particulars of the work to be performed and a Sch of structural details necessary for the builder to build the structure; and contemporaneous documents arising out of the contractual relationship, with a short statement dated 19 May 2014 and signed by its director being relied upon to articulate its case.
It appears tolerably plain that this standard form building contract satisfies the requirement of s 7 of the Act, and the Tribunal finds this as a fact. It follows that, prima facie, the building contract is enforceable pursuant to s 10 of the Act.
The essential facts which underlie the dispute, were able to be found by the Tribunal by reference to the bundle of materials relied upon by the applicant at the hearing. For ease of reference, when a date is identified below, it identifies the date of a document within the applicant's bundle which provides the source of such facts that are found. The facts thus found, are:
(1) A quotation was provided by the applicant to the respondent on 30 August 2012 and was accepted by them in writing on 10 September 2012.
(2) The building contract thereupon was executed on 13 September 2012, and was accompanied by a development consent rendered by the consent authority which required compliance with 42 stated conditions and required considerable work to obtain a dilapidation report, a stormwater consultant's report, and a necessary construction certificate. The evidence discloses that development consent was granted by Lane Cove Council on 13 June 2012.
(3) The respondent, who upon the evidence appeared astute to seek a reduction of costs or a discount upon a quoted charge if possible, sought such a reduction of costs from the builder. It is to be noted that the structural details submitted to Council were drawn by another pool builder, Mirage Pools NSW. Albeit there is no evidence before the Tribunal, it is a reasonable inference to drawn that the respondent engaged in a process of picking and choosing elements in the process, with the aim of keeping costs lower. It is wholly plausible that having obtained plans from one pool builder, they hawked them around to other contractors in the quest for the lowest price.
(4) On 2 October 2012, the applicant quoted a cost of $6,000.00 inclusive of GST for obtaining a construction certificate.
(5) It emerged from the oral evidence which was given by the applicant's director, that the respondent assumed and laboured under the misapprehension that receipt of development consent from the consent authority (here Lane Cove Council) equalled authority to commence construction, and baulked at the further cost required to obtain approval and a necessary further construction certificate from Council. So much also can be divined from an email from the applicant's representative to the respondent dated 3 October 2012.
(6) On or about 4 October 2012, the respondent complained about uncertain additional costs noting "I do not have spare funds". It would seem clear that funding was a problem for the respondent even at the time of commencement of the process, and thereafter throughout the life of the project until the time of termination of the contract by the builder for non-payment of amounts outstanding.
(7) It would appear tolerably plain that the respondent, having signed a building contract which contemplated variations and adjustments to the contract sum, nonetheless expected it to be performed as if it was for a wholly fixed sum.
(8) On and from 6 November 2012, the applicant sought but did not receive timely responses to its request for executed certification as to surface water flows and shedding upon other adjacent properties.
(9) A response on this issue remained outstanding as at 14 December 2012, as did the associated account for services provided. The evidence discloses that this position remained unvaried as at 15 January 2013.
(10) On 1 February 2013, the evidence discloses that written communications in the form of emails directed to the respondent; together with oral communications in the form of voice recorded messages placed with telephone answering services, all remained unanswered.
(11) On 21 February 2013, the evidence of an internal email created by the applicant's officer discloses that the respondent informed that officer and thus the applicant that "things have changed" and that a letter had been sent to the director of the applicant and that the respondent "only wished to speak with him".
(12) As at 27 February 2013, the evidence discloses that no such correspondence had been received by the applicant.
(13) On 6 March 2013, the respondent provided an email purporting to attach a letter dated 15 February 2013 and asserted to have been forwarded to the applicants at that time, noting that there had been "a change in my circumstances due to certain family matters" with the consequence that there was a purported termination of the building contract and a demand for the return of the deposit paid in the amount of $13,640.00 less reasonable cost of reports and expenses to date.
(14) On the strength of this evidence, which is redolent of conduct that is recognised under the Bankruptcy Act, 1966 (Cth) as an act of bankruptcy, the Tribunal is comfortably satisfied that the respondent did not have the ready financial resources to meet the commitments they had made under the building contract.
(15) On 8 April 2013, the applicant responded that it required the Respondent to execute an "HOW cancellation letter" at which point a full reconciliation would be provided.
(16) On 8 April 2013, the respondent replied that they were "unable to sign a document that states that there are no monies owed, when this is clearly not the case".
(17) On 23 April 2013, the applicant replied by letter noting that it would thereafter accept the respondent' breach of the building contract and terminate, thereafter relying upon the provisions of cl 15.4 of the building contract to adjust the position between the parties, and would revert to the respondent with a reconciliation of the position.
(18) This precipitated a meeting at the site on 8 May 2013 between the director of the applicant and the respondent which was reduced to writing in a letter dated 13 May 2013. The Tribunal accepts this evidence, and finds that the letter dated 13 May 2013 records accurately the facts arising on and after that meeting.
(19) On 22 May 2013, the applicant directed a further letter recording yet further demands by the respondent for a reduction in costs, and that the applicants "had already absorbed many thousands of dollars of cost, and cannot absorb any more".
(20) Thereafter a further period of three months elapsed before the respondent on 20 August 2013 forwarded a necessary executed consent certificate by way of attachment to an email that day, with a certificate purported to be executed on 30 May 2013. The Tribunal is unable to accept, on the weight of this evidence, that the certificate was executed in late May 2013, but finds it to be more probable than not, that its true date of execution was contemporaneously with if not on the date of the email, that is to say 20 August 2013.
(21) On 10 September 2013, further certifications were required of the respondent by the applicant, including from a plumber that the existing stormwater system on site in in good working order.
(22) On 10 September 2013, the respondent replied that such certification already had been supplied. The evidence discloses, however, that the certification was in excess of 12 months old and was no longer valid and effective for the purpose, which the Tribunal is satisfied was the case.
(23) On 17 September 2013, the applicant was informed of this situation and noting that use of the applicant's plumber to prepare the necessary certification would incur a cost of $300.
(24) On 11 October 2013, approval from Council for construction was received.
(25) On 14 October 2013 notice of proposed commencement of works was served on the respondent by the applicant.
(26) On 13 November 2013, the respondent sent a text message to the applicant requiring commencement to be delayed until after Christmas 2013.
(27) On 30 January 2014, the applicant notified the respondent of cost increases to the contract price by reason of delay, and that such prolongation costs would be for the account of the respondent.
(28) On 30 January 2014, the respondent replied that they "cannot allow the work to begin until I have seen and considered the additional charges that you are about to propose". There followed an instruction that the applicant's workmen were not to attend at the property on the scheduled commencement date on the following Monday.
(29) On 4 February 2014 a schedule of further costs in the amount of $4,750 was served upon the respondent by the applicant. The evidence discloses and the Tribunal finds that the additional costs were occasioned by delay, and rises in statutory charges during the period of delay but nonetheless required to be met in carrying out the contemplated works.
(30) On 21 February 2014, the respondent communicated by email noting that they "would appreciate if you could revise the additional costs due to delays." The Tribunal notes that if this was an endeavour to suggest that the applicant was responsible for the delays and thus the costs being increased, it discloses breathtaking audacity and a disingenuous approach in equal measure.
(31) On 26 February 2014, the respondent communicated with the applicant by further email, which notes "our budget has blown out way over expected" and invited the applicant to revise downward the budget required.
(32) On 27 February 2014, the applicant responded that it would "see what solution we can come up with".
(33) On 7 March 2014, the respondent purported to rescind the contract on a second occasion.
(34) On 10 March 2014, the respondent responded that it had not delayed the project and was not responsible for increased costs, but rather had absorbed costs. On the contest on this question, the Tribunal finds that the true position on the balance of probabilities is as stated in the applicant's email dated 10 March 2014.
(35) On 18 March 2014, the respondent replied by email in what appear quite self-serving terms, asserting that all delays were the consequence of the applicant's conduct, and that the applicant had conducted itself unfairly. The Tribunal finds that this assertion does not accord with the weight of the evidence, and may be disregarded as lacking in veracity.
(36) On 21 March 2013, the applicant communicated it would waive additional cost increases and revert to the original contract sum.
(37) On 2 April 2014, notwithstanding that the respondent had now obtained what was required of the applicant by their email on 26 February 2014, the respondent confirmed their purported rescission.
(38) On 9 April 2014, the applicant accepted the breach by the respondent of the contract on this second occasion, and terminated pursuant to cl 15.4 of the contract, and rendered their claim for break costs under the contractual mechanism in cl 15.4 in the amount of $35,282.00, after allowances for amounts paid.
This evidence clearly throws the situation which is at the focus of the dispute into relief.
The conduct of the respondent in this matter may most charitably be described as obdurate and capricious in equal measure.
It is clear on any view, and the Tribunal finds as a fact, that the respondent was responsible for a series of breaches of the building agreement, any one of which was sufficient to found termination by the applicant. That it chose to do so on 9 April 2014 was entirely justified.
The respondent's contentions
An absence of residential building work?
The only matter to be resolved, therefore, is the basis upon which the Tribunal concludes that it has jurisdiction in this matter, so that it properly may propound an order.
Prima facie, the Tribunal has jurisdiction conferred by s 48K of the Act to hear and determine the claim, which is clearly within the monetary limit prescribed and brought within time.
By s 48A of the Act, building claim means a claim for:
(a) the payment of a specified sum of money, or
(b) the supply of specified services, or
(c) relief from payment of a specified sum of money, or
(d) the delivery, return or replacement of specified goods or goods of a specified description, or
(e) a combination of two or more of the remedies referred to in paragraphs (a)-(d),
that arises from a supply of building goods or services whether under a contract or not, or that arises under a contract that is collateral to a contract for the supply of building goods or services, but does not include a claim that the regulations declare not to be a building claim.
The respondent' contention is that, by reason that no residential building work was undertaken, there was not a building contract. Reliance to found this contention, as was observed above, is placed squarely and heavily upon Provincial Homes v Doyle [2004] NSWSC 624; and derivatively upon Woolfe v Alexander Sussman t/as Sussman Construction Consulting Services & Anor [2001] NSWSC 702; and Collings Homes v Head & Ors [2002] NSWSC 1219. This does not aid the respondent.
As Basten JA noted in Grygiel v Baine [2005] NSWCA 218 at [47] - [63], and with which judgment Mason P concurred:
"[57] It is not necessary to determine whether, in relation to the first limb of the definition, services can be supplied "for or in connection with" the carrying out of residential building work, for the purposes of the definition of "building goods or services", where no residential building is in fact carried out. On one view, the definition of "residential building work" is not limited to activities, such as laying foundations and painting a building, on site, but extends to work of a preparatory nature. Alternatively, preparatory work could be said to have a sufficient connection with the carrying out of building work because its purpose was to give rise to residential building work and it had a sufficient causal nexus with such work: see generally, Technical Products Pty Ltd v State Government Insurance Office (Qld) [1989] HCA 24; (1989) 167 CLR 45 at 47-48 (Brennan, Deane and Gaudron JJ). Accordingly, it is at least arguable that project management arrangements, of the kind address in both Collings Homes cases, would fall within the definition of "building claim". Were that not the case, distinctions would need to be drawn which might have an arbitrary result, at least from the perspective of the homeowner. Thus, where an architect or project manager provides plans and designs, locates a builder and coordinates and supervises the actual building work, any loss suffered as a result of inadequate coordination and supervision would fall within the building claim, but other conduct would not.
[58] That is not to say that the jurisdiction of the Tribunal under the Home Building Act should be expanded beyond the proper construction of the terms used in Part 3A. The fact that the Tribunal has a jurisdiction under that Part up to $500,000, whereas its current jurisdiction under the Consumer Claims Act is limited to $25,000, demonstrates the need to maintain proper limits on the jurisdiction. Nevertheless, to the extent that the statutory terminology permits, those limits should not be arbitrary, nor should an unduly restrictive construction be given to the words of the statute, especially to the extent that they mirror the terminology of the Consumer Claims Act. Of particular concern would be a construction which meant that services of a project manager might fall within the definition of "building claim" where residential building works actually eventuated, but not otherwise. Such a distinction can be avoided if the phrase "the carrying out of residential building work" is treated as adjectival, in the sense that it is descriptive of the services with which a connection must be established, rather than being treated as a factual pre-condition to the necessary connection."
That enunciation of principle by Basten JA succinctly delineates the very situation that the respondent contends the Tribunal cannot entertain. That contention advanced by the respondent cannot be right.
Extending the reach of the discussion conducted by Basten JA in Grygiel v Baine at [57], it can be seen that if the Parliament has seen fit by operation of s 94(1A) of the Act to carve out work which is otherwise unlawful by reason of the lack of proper building insurance and make it amenable to remuneration on a common law quantum meruit basis, it must equally be the intention that any such work that would be apt to include preparatory or supervisory work in a lawful contract carrying relevant insurance, also must be residential building work.
So much equally can be the result of the application of orthodox principles of statutory construction to the meaning of the residential building work.
As a statement of general principle, in Re Bolton; Ex Parte Beane (1987) 162 CLR 514, Mason CJ, Wilson and Dawson JJ (at 518) said that the function of the Court is to give effect to the will of Parliament as expressed in the law.
McHugh JA (as his Honour then was) observed in Isherwood v Butler Pollnow Pty Ltd (1986) 6 NSWLR 363 at 388:
"if the apparently plain words of a provision are read in the light of the mischief which the statute was designed to overcome and of the objects of the legislation, they may wear a very different appearance. Further, inconvenience or improbability of result may assist the court in preferring to the literal meaning an alternative construction which, by the steps identified above, is reasonably open and more closely conforms to the legislative intent.
Their Honours Brennan CJ, Dawson, Toohey and Gummow JJ in CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 at 408, expressly approved this proposition.
In Corporate Affairs Commission (NSW) v Yuill [1991] HCA 28; (1991) 172 CLR 319 at 340, Gaudron J noted similarly that the better view of statutory construction is that it is:
"dictated by elementary considerations of fairness, for, after all, those who are subject to the law's commands are entitled to conduct themselves on the basis that those commands have meaning and effect according to ordinary grammar and usage."
See also Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297 at 320-321, which exhibits the long-held principle in the jurisprudence which eschews a statutory construction productive of absurd results.
It is clear, when regard is had to all of the above factors, particularly in the light of the enunciation of principle by Basten JA in Grygiel v Baine, there is a convincing basis to conclude that, at the necessarily high level of abstraction required, the interpretation employed in Provincial Homes, Woolfe & Collings Homes is plainly wrong and ought not be followed. See Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485; CAL No 14 Pty Ltd v Motor Accidents Insurance Board (2009) 239 CLR 390; Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; Marshall v Director-General, Department of Transport (2001) 205 CLR 603; Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority (2008) 233 CLR 259; Hasler v Singtel Optus Pty Ltd [2014] NSWCA 266, at [98] - [99] per Leeming JA.
It must be the case that the Tribunal is entitled to conclude that the Parliament did not intend that the contest between parties conducted before deliberative bodies such as the Tribunal was to result in an elaborate forensic game. If the respondent's contentions be followed in this matter, that would be the necessary result.
Informed by such principles, the operative definition within the Act which the respondent here must persuade the Tribunal is not enlivened is residential building work, which is defined by s 3 of the Act to mean:
any work involved in, or involved in co-ordinating or supervising any work involved in:
(a) the construction of a dwelling, or
(b) the making of alterations or additions to a dwelling, or
(c) the repairing, renovation, decoration or protective treatment of a dwelling.
It includes work declared by the regulations to be roof plumbing work or specialist work done in connection with a dwelling and work concerned in installing a prescribed fixture or apparatus in a dwelling (or in adding to, altering or repairing any such installation). It does not include work that is declared by the regulations to be excluded from this definition.
It is tolerably plain upon the evidence led by the applicant which has been identified above, and in respect of which there is no answer by the respondent, that the applicant has done "work involved in, or involved in co-ordinating or supervising any work involved in (relevantly) the making of alterations or additions to a dwelling" in just the way that is contemplated by the reasons of Basten JA in Grygiel v Baine.
This Tribunal is bound directly by what the Court of Appeal said in Grygiel v Baine, and it matters not, contrary to the contentions of the respondent, that authorities at the level of first instance trial courts support their decision, but which do not bind this Tribunal. The Tribunal notes, also, that the respondent advanced a decision of Judicial Member Molony in a decision given by the former Administrative Decisions Tribunal in Metro Windows Pty Ltd & Ors v Commissioner of Fair Trading (No 2) [2012] NSWADT 232, which appears to be authority for precisely the opposite of what the respondent contend.
In a lengthy and careful judgment, Judicial Member Molony at [33], having reviewed all of the authorities relevant on this point, including Grygiel v Baine, observed:
"In my opinion this evolving chain of authority has now reached the point that when, considering whether work is residential building work within the meaning of the definition in s 3, it is necessary to closely consider the type and nature of work in issue, and then to determine whether it is of such a nature that, properly viewed, it forms part of and is a necessary incident of any work involved in (or involved in co-ordinating or supervising any work involved in) relevantly, the repairing, renovation, decoration or protective treatment of a dwelling: as opposed to being a non-essential precursor of or incidental to that work."
Suffice to say, for the reasons expressed above, the Tribunal is of the view that Metro Windows is of no assistance to the respondent, and merely advances a view that Grygiel v Baine must be weighed in the balance of decision making.
There can now be little doubt and it now must be accepted that Grygiel v Baine is the governing authority on this question, both on the basis of the logical force of the argument advanced by Basten JA which is compelling in the invariable fashion that his Honour approaches and enunciates any reasoning on a complex question or issue; and, of course, in accordance with the binding force of such a decision upon the Tribunal. See Hasler v Singtel Optus Pty Ltd [2014] NSWCA 266.
This Tribunal finds that there is a causal connection between the applicant's work involved in, or involved in co-ordinating or supervising any work involved in the making of alterations or additions to the respondent's dwelling, by way of preparation for the construction of a swimming pool on the respondent's land. Moreover, on the evidence before the Tribunal, the applicant was upon the very cusp of commencement of that work in early February 2014, when the respondent directed that work not commence on 30 January 2014. Thereafter the respondent purported to rescind the contract in circumstances which the Tribunal finds was a breach of the construction contract, and thereafter the applicant in reliance upon that breach properly terminated the contract in accordance with its express terms under cl 15.4 therein.
In the view of the Tribunal, it cannot be seriously suggested that such a state of affairs, which came about by reason of the respondent's capricious conduct, does not constitute work which was undertaken so as to be involvement in co-ordination or supervision of essential preparatory stages, without which no work of any type might otherwise occur on any basis.
So much is the essence of residential building work that the Parliament contemplates in the extended definition under the Act, and thereby on those jurisdictional facts enlivens the Tribunals power to hear and determine the application.
It follows necessarily that those facts simultaneously attract the jurisdiction of the Tribunal and make out a clear breach of the provisions of cl 15.4 which sets out the factors to be taken into account in determining by agreement the "reasonable amount in compensation for loss of profit". The contract provision goes on to provide that in the absence of agreement, the amount of 25% of the contract sum will be payable.
In the events that occurred after termination on 9 April 2014, the respondent steadfastly declined to enter into any negotiation on this question, but reverted to an earlier form of obduracy which exhibited the simple and repeated demand that they ought to have all of their money back without any attempt to justify that position by reference to the terms of the building contract which were binding upon them.
So much is a failure by the respondent to discharge their implied duty to co-operate, the content of which is the general rule applicable to every contract that each party agrees, by implication, to do all such things as are necessary on his part to enable the other party to have the benefit of the contract: see Mackay v Dick (1881) 6 App Cas 251; Butt v M'Donald (1896) 7 QLJ 68, 70-1; Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596, at 607 per Mason J; Peters (WA) Ltd v Petersville Ltd (2001) 205 CLR 126, at 142; Park v Brothers (2005) 222 ALR 421.
The Tribunal, thus, is comfortably satisfied on the balance of probabilities, that in fact the respondent did every conceivable thing to frustrate the taking into effect of the contractual terms, and thereby deprived the applicant of the reasonable expectation and opportunity of profit from the work, in breach of the implied duty to co-operate and thus of the building contract.
The respondent contended that this course should not occur by reason that what, on their case, had occurred was a series of misrepresentations as to the nature of the work that resulted in bald overcharging and an entitlement by the respondent to have such moneys as had been advanced refunded to them. Such an argument falls at the first hurdle given that the respondent put on no cross-application, and in any event they advanced no evidence in support of any such claim had it been propounded before the Tribunal.
If the Tribunal be wrong as to that conclusion, it was in any event comfortably satisfied on the balance of probabilities that no step taken by the applicant, or any conduct in which it engaged which was put before the Tribunal in the evidence, properly may be characterised as a misrepresentation, much less fraudulent misrepresentation, and no occasion arises thereby for the respondent, contrary to their submissions, to repudiate and sue for damages in the manner contemplated by the respondent.
The authorities which the respondent prayed in aid, namely Alati v Kruger (1955) 94 CLR 216; Vadasz v Pioneer Concrete (SA) Pty Ltd (1995) 184 CLR 102; or Xu v Jinhong Design & Constructions Pty Ltd [2011] NSWCA 277, were of little assistance to them, or more importantly, the Tribunal, by reason that no evidence to make out such a contention was adduced in this case to prove such matters.
Is the contractual term relied upon by the applicant void as a penalty?
The Tribunal would, ordinarily, at this point conclude that the applicant had made out a proper entitlement to orders, and note that it was unnecessary to determine the residual point as to whether the applicant had an alternative claim upon a quantum meruit.
It remains the case, however, that upon the submissions and argument advanced by the respondent, the Tribunal must also determine whether such an entitlement as it has found arises does justify the exercise of its discretion to grant relief to the applicant and make orders accordingly, nonetheless must not occur by reason that the operation of cl 15.4 of the building agreement must be struck down upon its proper construction as being void as an impermissible penalty.
That submission was put on the footing, so it seemed, that the asserted penalty was so obvious on the face of the contract, that it merely needed to be stated to be understood in that fashion. The submissions advanced by the respondent on this question were circular and self-referential, and lacked in probative force.
The proper construction of cl 15.4 of the building contract does not appear to bear that asserted obvious meaning. The respondent relied upon the authority of Andrews v Australia and New Zealand Banking Group Limited [2012] HCA 30 for support for the contention that cl 15.4 was truly a penalty. That argument must fail.
The work to be done by cl 15.4 of the building agreement is, upon termination, to require the parties to endeavour to agree a position under the now terminated contract by which the entitlements of each are adjusted for costs and expenses so that the applicant as builder may obtain "a reasonable amount in compensation for loss of profit". If, and only then, if all other options for the assessment of such reasonable sum are exhausted, the contract provides that the amount payable thereupon shall be 25% of the contract sum.
In Andrews, the High Court observed (at [9]) that in Legione v Hateley (1983) 152 CLR 406, at 445, Mason and Deane JJ said, as the term suggests, a penalty is in the nature of a punishment for non-observance of a contractual stipulation and consists, upon breach, of the imposition of an additional or different liability.
The High Court went on to note in the circumstances of an indemnitor under an indemnity for the events arising under a contract of guarantee would suffer a liability which mirrors the loss incurred by guarantor in the event of default by the primary obligor. Particular reference was made to the speech of Lord Roskill in Exports Credits Guarantee Dept v Universal Oil Products Co ("ECGD") [1983] 1 WLR 399 at 403; [1983] 2 All ER 205 at 224, where His Lordship said:
"Perhaps the main purpose, of the law relating to penalty clauses is to prevent a plaintiff recovering a sum of money in respect of a breach of contract committed by a defendant which bears little or no relationship to the loss actually suffered by the plaintiff as a result of the breach by the defendant."
The High Court in Andrews, in the overruling of Interstar Wholesale Finance Pty Ltd v Integral Home Loans Pty Ltd [2008] NSWCA 310; (2008) 257 ALR 292, was directing attention to the circumstances respectively of loan facility agreements which were in default, and commission agents' remuneration pursuant to agreements for the origination by the commission agent of loan obligations on behalf of a principal lender, in which the derivation of default charges were the result of obligations being deemed under the respective agreements to require an accounting for events which, in substance, were not causative of any breach of the underlying agreement governing contractual relations, the remedy for which was the general law action in assumpsit.
French CJ, Gummow, Crennan, Kiefel & Bell JJ, giving judgment per curiam in Andrews, went on to record that in Kemble v Farren [1829] EngR 590; (1829) 6 Bing 141 at 148 [130 ER 1234 at 1237], Tindal CJ in dealing with an action in assumpsit by the manager of the Covent Garden Theatre against an actor who had failed to meet an engagement at that theatre, said:
"But that a very large sum should become immediately payable, in consequence of the non-payment of a very small sum, and that the former should not be considered as a penalty, appears to be a contradiction in terms; the case being precisely that in which courts of equity have always relieved, and against which courts of law have, in modern times, endeavoured to relieve, by directing juries to assess the real damages sustained by the breach of the agreement."
Their Honours then went on to observe that Coleridge J (as his Lordship then was), in Reynolds v Bridge (1856) 6 El & Bl 528 at 541 [1856] EngR 555; [119 ER 961 at 966] referred to Kemble v Farren and concluded that:
"the principle seems to be, that, if you find a covenant the breach of which will occasion a damage, not uncertain, but such as is capable of being ascertained, as where there is a particular sum to be paid which is much less than the sum named as payable upon the breach, there it is held that the last named sum is specified by way of penalty, because a Court of equity would limit the amount to be actually paid."
In supplementation of that distillation of principle, their Honours then noted in Andrews that the judgment of Gibbs CJ in AMEV-UDC Finance Ltd v Austin ("AMEV-UDC") (1986) 162 CLR 170, at 174, emphasised that the High Court was not required to consider the proposition, said to be derived from ECGD, that no clause which provided for the payment of money on the happening of a specified event, other than a breach of a contractual duty owed by the contemplated payor to the contemplated payee, could ever be a penalty.
Further, in reviewing AMEV-UDC, their Honours also noted in Andrews that Mason & Wilson JJ (at 190) said:
"(1) equity would only relieve where compensation could be made for the actual damage suffered by the party seeking to recover the penalty; (2) the actual damage suffered by the party was assessed in an action at common law, such as an action of covenant, or upon a special issue quantum damnificatus which could be joined in an action on the case ... (3) the expression 'actual damage' seems to have been used in contradistinction to 'agreed sum' or 'liquidated' or 'stipulated' damages, not by way of opposition to damage which was recoverable at law; (4) there seems to have been no instance of equity awarding compensation over and above the amount awarded as common law damages, other than cases in which equity would not relieve against the penalty; and (5) relief was granted, in the case of penal bonds, where there was no express contractual promise to perform the condition (see Hardy v Martin (1783) 1 Cox 26 [29 ER 1046]), though it seems such a promise could in many cases readily be implied."
That long recording of the analysis of the High Court in Andrews, and to which the respondent cleaves very closely, discloses that the penalty arises if, and only if, the contractual sum required to be paid deviates materially from the expected smaller sum likely to result from any breach. In the events which occurred, the situation arising on the facts appears to be the very opposite of this position.
The respondent, a matter of days before the construction phase of the contract was due to commence in February 2014 and at a time when substantial preparations had been undertaken and costs incurred by the applicant, repudiated the contract which, had it been carried into effect, would have required the respondent to meet a contract sum of $134,650 together with any further charges for variations, or other payments flowing from the administration of the contract.
This the respondent did not do in further breach of the agreement, and the condition subsequent in cl 15.4 was enlivened, permitting the sum of 25% of the contract sum to be claimed. It is quite difficult, if not impossible for the Tribunal to perceive such a mechanism as forcing the respondent without any true choice into a contractual consequence properly able to be characterised as a penalty. Rather, the mechanism employed is analogous to the measure of damages available under the Australian Consumer Law, for the "loss of the chance". The prejudice or disadvantage which the applicant suffered in the present case was the loss of the opportunity or chance of securing commercial benefits which entry into the construction agreement, and completion of it, would have brought.
What the applicant here is entitled to recover is analogous to relief provided under the statutory cause of action being "a sum representing the prejudice or disadvantage (the applicant) has suffered in consequence of his altering his position under the inducement" See Toteff v. Antonas (1952) 87 CLR 647 at 650; Wardley Australia Ltd v Western Australia (1992) 175 CLR at 526; Sellars v Adelaide Petroleum NL (1994) 179 CLR 332, at [17].
As was pointed out in The Commonwealth v. Amann Aviation Pty. Ltd. (1991) 174 CLR 64, per Mason CJ and Dawson J (at 92); Brennan J (at 102-104); and Deane J. (at 118-119), the lost commercial advantage or opportunity was a compensable loss, even though there was a less than 50 per cent likelihood that the commercial advantage would be realized. Damages for breach of contract were assessed by reference to the probabilities or possibilities of what would have happened.
Understood upon its proper construction, the contractual term invoked by the applicant when it accepted the repudiation and terminated for breach, required the respondent to agree the true deprivation of the lost profit, a significantly lesser sum than the contract sum. The respondent arguments on this matter never were able to grasp that while the contractual clause dealt with loss of opportunity for profit, it necessarily relied upon a position dependent upon revenues flowing under the contract. The pre-estimate was not ensuring a profit of 25% under the contract, but access to 25% of revenues to ensure that builders' margins were obtained, from which profit might be extracted.
The Tribunal finds, therefore, that the operation of cl 15.4 was not a penalty in the manner which it would be void by operation of law, and the applicant thereby was entitled to enforce the contractual term in pursuit of compensation for breach of the contract, aided by its election to terminate and sue upon the breach.
It follows that the Tribunal ought to exercise its discretion upon the application and give relief for the money sum claimed in the amount of $35,282.00.
Mark J Cohen
Senior Member
Civil and Administrative Tribunal of New South Wales
24 September 2014
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: 06 November 2014
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