Wilson v Kyle
[2021] VSC 537
•1 September 2021
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
JUDICIAL REVIEW AND APPEALS LIST
S CI 2017 02023
| MICHAEL WILSON | Appellant |
| v | |
| PETER KYLE | Respondent |
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JUDGE: | Gorton J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 18 August 2021 |
DATE OF JUDGMENT: | 1 September 2021 |
CASE MAY BE CITED AS: | Wilson v Kyle |
MEDIUM NEUTRAL CITATION: | [2021] VSC 537 |
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ADMINISTRATIVE LAW – Appeal from a decision of the Victorian Civil and Administrative Tribunal – Domestic building dispute – Whether builder lawfully terminated contract – Whether builder in substantial breach of the contract – Evidence of capacity to pay contract price – Leave to appeal granted on one ground – Appeal dismissed.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr P van Eps | |
| For the Defendant | Mr A Schlicht | Vadarlis & Associates |
TABLE OF CONTENTS
A. Background................................................................................................................................... 1
B. Ground 1 – Was there legal error in the Tribunal’s finding that Mr Kyle was not in ‘substantial breach’ of the contract at the time he terminated?................................................................. 2
C. Ground 2 – Did the Tribunal err in law in determining that Mr Wilson had failed to produce written or other reasonable evidence to pay the contract price?........................................ 6
C.1.The approach of, and factual findings made by, the Tribunal...................................... 6
C.2.Mr Wilson’s legal challenges.............................................................................................. 9
C.3.Were the surrounding communications relevant?........................................................ 10
C.4.Did the Tribunal wrongly fail to have regard to the fact that Mr Wilson had paid the outstanding amount owing?............................................................................................ 11
C.5.Did the Tribunal misconstrue the contractual requirement?...................................... 11
C.6.Was the Tribunal bound to have regard to the fact that Mr Kyle could have, but did not, contact Mr Wilson’s bank directly?................................................................................. 12
D. Ground 3 – Was the notice to remedy ‘conjunctive’ and, if so, did the Tribunal err?. 13
E. Ground 4 – Was the Tribunal obliged to consider whether the breach was of an essential term?........................................................................................................................................................ 14
F. Final comments and disposition.............................................................................................. 15
HIS HONOUR:
A. Background
Mr Wilson, the applicant, owns a property in Bena, Gippsland. He engaged Mr Kyle, the respondent, to build him a house on that property for $337,190. Difficulties arose between them. Mr Kyle sought payment of an invoice for $50,578.50 for work done, and evidence of a capacity to pay the contract price. The latter request was made pursuant to cl 11.3 of the building contract, which required Mr Wilson to provide Mr Kyle with ‘written or other reasonable evidence’ that he had the ‘capacity to pay the balance of the Contract Price or any variation’ within 14 days of being asked to do so. On 10 December 2014, Mr Kyle commenced a proceeding in the Victorian Civil and Administrative Tribunal (‘the Tribunal’), in which he claimed $50,578.50 for the overdue invoice and an order that Mr Wilson provide evidence of his capacity to pay the contract price. Shortly after, by letter dated 12 December 2014, Mr Kyle gave formal written notice to Mr Wilson of his contention that Mr Wilson was in breach of the contract by failing to make the $50,578.50 payment and by failing to provide evidence of his capacity to pay the contract price. The letter also informed Mr Wilson, in accordance with a procedure set out in the contract, that, if he did not remedy those breaches within 14 days, Mr Kyle would exercise his right to terminate the contract.
Mr Wilson paid Mr Kyle the $50,578.50 but did so under protest. He provided some information about his capacity to pay the contract price, but Mr Kyle remained dissatisfied. Mr Kyle purported to terminate the contract on the basis of Mr Wilson’s failure to provide evidence of a capacity to pay the contract price. Mr Wilson commenced a counterclaim in the Tribunal proceeding in which he sought orders including that the house be demolished and rebuilt, that the notice of termination be ‘overturned’, and for compensation. Points of claim were exchanged. By the time the matter came to be heard, Mr Kyle was claiming, among other things, a declaration that he was entitled to terminate the contract and damages for breach of contract. On the other hand, Mr Wilson was claiming, among other things, that he had provided sufficient evidence of his capacity to pay, that Mr Kyle was not entitled to terminate the contract, and that Mr Kyle’s purported termination amounted to a repudiation of the contract. He also sought damages for that repudiation.
The Tribunal decided first to determine whether the contract had been lawfully terminated by Mr Kyle. This issue was heard over a number of days. Both Mr Kyle and Mr Wilson gave oral evidence and were cross-examined. The Tribunal held that the contract had been lawfully terminated by Mr Kyle.[1] There was then a second hearing to consider Mr Kyle’s claim for damages. The Tribunal ordered Mr Wilson to pay Mr Kyle damages that it assessed at $13,346.39.[2] The damages were assessed including by reference to the profits that Mr Kyle would have made if the contract had not been terminated. There was then an argument about costs. The Tribunal ordered Mr Wilson to pay (most of) Mr Kyle’s costs.[3]
[1]Kyle v Wilson (Building and Property) [2017] VCAT 544 (Senior Member Walker).
[2]Kyle v Wilson (Building and Property) [2018] VCAT 1446 (Senior Member Walker).
[3]Kyle v Wilson (Building and Property) [2019] VCAT 936 (Senior Member Walker).
Mr Wilson now seeks leave to appeal against each of these orders. The application is brought under s 148 of the Victorian Civil and Administrative Tribunal Act 1998. That section requires leave to appeal, and limits any appeal to a question of law. The application for leave was brought, and argued, on the basis that the appeal itself would be determined, if leave were granted, at the same time as the application for leave. The first three proposed grounds of appeal are directed at the finding that Mr Kyle had lawfully terminated the contract. If that finding were set aside on appeal, then the damages and costs orders would also be set aside. The fourth ground of appeal is directed at the approach taken to the assessment of damages.
B. Ground 1 – Was there legal error in the Tribunal’s finding that Mr Kyle was not in ‘substantial breach’ of the contract at the time he terminated?
Clause 22.3 of the contract provided that Mr Kyle was not able to terminate the contract if he himself was ‘in substantial breach of’ the contract. Mr Wilson submitted that Mr Kyle was, at the relevant time, in substantial breach of the contract because he had built the house otherwise than in accordance with the contract and had failed to obtain signed, written variations authorising those deviations from the build specified in the contract. The breaches relied upon, and the Tribunal’s findings of fact in relation to them, were as follows:
(a) Building the house on the wrong part of the block. Mr Kyle built the house in the position where Mr Wilson directed him to build it, but this position was some metres in rotation from the position for which the plans provided.[4] Mr Kyle later obtained an amendment to the building permit to reflect the position of the house as built. He did this with Mr Wilson’s authority or at least knowledge. But, in breach of the contract, Mr Kyle failed to obtain a signed variation recording this change.
(b) Using cypress rather than concrete stumps. The contract required concrete stumps, but Mr Kyle used cypress stumps. He put forward reasons for doing so which are not presently relevant. There was a dispute between him and Mr Wilson about this. Mr Wilson initially wanted Mr Kyle to remove the stumps and start again. At the same time, an issue arose as to the level of the floor, which was not separately marked on the plans. Mr Kyle maintained that the level to which he planned to build it was in accordance with the plans. Mr Wilson disagreed and contended that the proposed floor was too low. Mr Kyle suggested a solution whereby larger wooden bearers would be used, which would raise the level of the floor. He offered to pay the cost of doing this. Mr Wilson agreed to this solution. Mr Kyle paid the additional expenses involved, which included the use of more expensive materials, and additional engineering involvement to design the mechanism whereby the larger bearers would be affixed to the stumps. The method used to affix the bearers assumed wooden stumps. Both parties then signed a variation. The variation provided for the use of the larger bearers, and assumed, but did not in terms deal with, wooden rather than concrete stumps. The Tribunal concluded that the use of cypress stumps instead of concrete was ‘dealt with’ by this variation.
(c) Failing to ensure that there was at least a 400mm gap between the ground and the bearers. In breach of the contract, there was not at all locations a gap of at least 400mm between the ground and the bearers resting on and attached to the top of the stumps. It seems from the Tribunal’s findings that this came about in large part as a consequence of the request by Mr Wilson that the house be built where it was on the block, rather than at the spot provided for in the plans. Be that as it may, on the Tribunal’s findings, the breach was minor and could easily be remedied by ‘some minor excavation around those stumps which would have taken very little time’ and which could still be done at any time.
[4]Strictly, the house had been rotated, rather than moved.
The Tribunal accepted that Mr Kyle had deviated from the build provided for in the contract in these ways and had not obtained specific signed variations permitting him to do so. However, the Tribunal did not consider that those breaches meant that Mr Kyle was ‘in substantial breach’ of the contract, essentially because it concluded that the change in position of the house was at the request of Mr Wilson, the complaint about the use of cypress rather than concrete stumps had been resolved to Mr Wilson’s satisfaction, and the deviation from the required 400mm clearance was trivial. To the extent that these conclusions involved a resolution of contested fact, they cannot be challenged in this appeal. Further, ‘substantial’ is an ordinary English word[5] and was used as such in the contract. There is nothing to suggest that the Tribunal misunderstood its meaning. Accordingly, the Tribunal’s finding that the breaches were not of a quality such as to cause someone to be in ‘substantial breach of’ a contract was an evaluative, factual conclusion that is also not able to be challenged in this appeal, unless there was some error in approach or the finding was simply not open.[6]
[5]Dayton v Coles Supermarkets Pty Ltd (2004) 22 NSWCCR 46, 51 [16] (Meagher JA).
[6]S v Crimes Compensation Tribunal [1998] 1 VR 83, 89 (Phillips JA); Hope v The Council and City of Bathurst (1980) 144 CLR 1, 10 (Mason J); Vetter v Lake Macquarie City Council (2001) 202 CLR 439, 450 [24], 451 [27] (Gleeson CJ, Gummow and Callinan JJ), 466 [77] (Kirby J), 477 [108] (Hayne J); Central Bayside Division of General Practice Ltd v Commissioner of State Revenue (2003) 53 ATR 473, 474 [5] (Nettle J); Stojanovski v Australian Dream Homes Pty Ltd [2015] VSC 404, [53] (John Dixon J); Commissioner of State Revenue v Arrigo (2016) ATC 20-598, 19,257 [47] (Ashley, Santamaria and McLeish JJA); Chopra v Department of Education and Training (2019) 60 VR 505, 527 [88] (Tate, Whelan and Kyrou JJA).
However, Mr Wilson submitted that there was an error in approach. He submitted that it was the nature of the breach, and not the response of the other party to the contract to that breach, that informed the question of whether someone was in substantial breach of the contract. The relevant consideration, he contended, was the fact that the breach was a breach of the obligation to build as provided for in the contract and the associated failure to obtain a signed, written variation. The importance of the obligation to obtain a written, signed variation was such that a failure to do so, by itself, properly considered, would place someone in substantial breach of the contract. Accordingly, he submitted that the Tribunal erred in law by having regard to the facts: that Mr Wilson had requested the change to the location of the house; that Mr Wilson had, in a sense, forgiven the failure to use concrete stumps; and that the height to the bearers could be easily rectified. He submitted that the Tribunal erred in law by failing to have regard to the fact that, or in substance by failing to limit its consideration to the fact that, Mr Kyle had made these changes without complying with the process set out in the contract, and otherwise reflected in the Domestic Building Contracts Act 1995, for the obtaining of written, signed variations.
This ground concerns the construction of the phrase ‘in substantial breach of this Contract’ in cl 22.3 of the contract. Counsel for Mr Wilson was unable to identify any authorities concerning the interpretation of domestic building contracts that supported his submission. It is difficult to see why reasonable people in the positions of the parties would have understood cl 22.3 to have been limited in its operation in the way contended for by Mr Wilson.[7] The contract did not use a phrase such as ‘in breach of a substantial term’, but rather introduced the concept of a party’s status, as it were. The present tense was used, which indicates that the status of being ‘in substantial breach of’ the contract was not fixed at the time of breach but was instead a status that might vary as circumstances vary. In my view, on a proper construction, the phrase ‘in substantial breach of this Contract’ directs attention to the nature of the breach, but also allows the breach to be considered in light of the surrounding circumstances, including the consequences of that breach for the other party in the context of the contract as a whole. This then includes, and allows consideration to be given to, the steps the parties have taken in relation to that breach, including in order to mitigate its effect.
[7]Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451, 461 [22] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ); Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165, 179 [40] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ).
To interpret it otherwise could lead to anomalies. A blatant breach of one term may have few actual or practical consequences for the contract as a whole, but a minor breach of another term may have very significant consequences. If Mr Wilson’s submission were correct, then a builder who altered a build, even in accordance with a specific direction of the owner, but failed to obtain a signed variation, would be thereafter in substantial breach of the contract and prevented from terminating the contract, even if the owner thereafter engaged in conduct that would otherwise trigger a right to terminate. Or, a builder who built outside the contract, but later resolved the issues that arose to the satisfaction of both parties, would remain ‘in substantial breach of the contract’ and, again, unable to terminate the contract even if the owner thereafter engaged in conduct that would otherwise trigger a right to terminate. That cannot have been the intention.
For these reasons, I consider that the Tribunal was permitted to have regard to the surrounding circumstances of each breach when considering whether, as a result of that breach or those breaches, Mr Kyle was in substantial breach of the contract. I reject the argument that the Tribunal was required to limit its consideration to the fact that the breach involved a failure to build in accordance with the contract or a failure to obtain a written variation.
In this case, the Tribunal considered each breach and placed it in context with its surrounding circumstances in order to determine whether or not Mr Kyle was, by reason of those breaches, in substantial breach of the contract. It was entitled, if not obliged, to do so. No error of law has been established.
C. Ground 2 – Did the Tribunal err in law in determining that Mr Wilson had failed to produce written or other reasonable evidence to pay the contract price?
C.1. The approach of, and factual findings made by, the Tribunal
The contract price was $337,190. It was to be paid in instalments as the build progressed. This meant that Mr Kyle was, save for an initial deposit, paid after he had performed work, rather than in advance of his performing work. Clause 11.3 of the contract allowed Mr Kyle, at any time, to request Mr Wilson ‘to provide written or other reasonable evidence of capacity to pay the balance of the Contract Price’. Clause 11.3 then provided that Mr Wilson must provide ‘evidence of such capacity to pay’ within 14 days of the request.
Before the build commenced, Mr Wilson had provided to Mr Kyle a letter from the National Australia Bank (‘the NAB’), Mr Wilson’s bank, dated 28 August 2014, headed ‘Builder’s Advice’. That letter included reference to the contract price of $337,190 and stated: ‘all required documents have been executed by the customer and NAB has approved finance to assist with the above named property.’ As noted above, issues had since arisen between them. On 21 November 2014, Mr Kyle sent Mr Wilson an invoice for $50,578 on the basis that he had completed the framing stage. Mr Kyle had, on the Tribunal’s findings, which I consider further below, reason to be concerned about whether Mr Wilson would be able to pay him for the work that he had done, or for the work that he might do on the next stage. On 23 November 2014, Mr Kyle exercised his contractual right to ask Mr Wilson to provide evidence of his capacity to pay the balance of the contract price. Mr Kyle was dissatisfied with Mr Wilson’s response, so, on 12 December 2014, Mr Kyle[8] gave Mr Wilson a notice under the contract to remedy what was said to be Mr Wilson’s failure to provide evidence of his capacity to pay the contract price. On 17 December 2014, Mr Kyle wrote to Mr Wilson and asserted that he had to ‘provide evidence that he has the capacity to pay the “Contract Sum”, which actual sum must be specifically stated in the evidence’. On 22 December 2014, Mr Kyle advised Mr Wilson that he would not perform further work until Mr Wilson produced ‘evidence that he has sufficient funds to pay the Contract Sum’.
[8]Some of these communications were between solicitors. For convenience, I will refer to communications between solicitors as communications between Mr Kyle and Mr Wilson.
In response to these various requests, Mr Wilson provided, or arranged for the following material to be provided:
(a) an email from the NAB dated 1 December 2014 to Mr Kyle stating:
I can confirm that Michael Wilson has a current loan with NAB, with partial drawdowns still available.
and
(b) an email from the NAB on 8 December 2014 saying ‘please see attached unconditional approval that we have for your home loan’, which attached a copy of an earlier letter from the NAB to Mr Wilson dated 20 July 2014, stating that the NAB had approved his building loan application for $472,200.[9] Another copy of this letter was sent on 14 January 2015.[10]
[9]Kyle v Wilson (Building and Property) [2017] VCAT 544, [95] (Senior Member Walker).
[10]Ibid [105].
Mr Kyle, through his solicitor, responded on 14 January 2015 to Mr Wilson’s solicitor, saying:[11]
The attached NAB letter is not unequivocal evidence that your client has the capacity to pay the Contract Sum. Particularly and without limitation, it is a conditional letter and your client has not provided evidence that it was fully formalised as per the conditions in the letter or that ‘as at this day’, the loan is available to draw on or that your client has the capacity to pay the CS [presumably, contract sum].
[11]A minor typographical error has been corrected.
Then, on 19 January 2015, Mr Kyle purported to terminate the contract on the basis of Mr Wilson’s failure to provide written or other reasonable evidence of his capacity to pay the balance of the contract price.
The Tribunal considered various communications between Mr Wilson and Mr Kyle during the course of the build and the differences that had arisen between Mr Wilson and Mr Kyle as to whether or not the build was satisfactory. The end point of these communications was a meeting that took place on site on 23 November 2014, which was recorded. The Tribunal concluded from these communications that Mr Wilson had deliberately raised doubts about the willingness of his bank to continue to finance the build in his communications with Mr Kyle. The Tribunal observed:
It seems very strange that an owner would want to put doubt in the mind of his builder concerning the continuing availability of his own finance but that is certainly the import of what the Owner said at [the 23 November 2014] meeting. When the Builder expressed concerns about the implications of his comments the Owner did nothing to allay those concerns.[12]
[12]Ibid [142].
The Tribunal thought that the statements made by Mr Wilson to Mr Kyle that put doubt in Mr Kyle’s mind about the bank’s willingness to finance the build sat ‘uneasily’ with email correspondence that Mr Wilson had received from his bank that suggested that the bank had ‘no such concerns’.[13] The Tribunal noted that Mr Wilson had available to him information from his bank that might well have allayed Mr Kyle’s concerns, but which he did not provide to Mr Kyle. For example, the bank had emailed Mr Wilson on 17 November 2014 and informed him that ‘the base valuation came back and everything is fine’ and that it would arrange for payment and that payment should be made ‘within a couple of days’.[14]
[13]Ibid [145].
[14]Ibid [147].
The Tribunal ultimately concluded that Mr Wilson had not provided the required evidence of a capacity to pay. It stated:
I think that reasonable evidence of capacity to pay must at least refer to the amount of money that is available and indicate that it is available. Evidence that the Owner has the capacity to pay some unspecified amount of money is not evidence that he has the capacity to pay the balance of the contract price. Further, having suggested that the bank had concerns about the build and might itself decide not to pay, the Owner should have made it clear to the Builder that the bank did not in fact have these concerns.
For these reasons I am satisfied that the Owner failed to provide reasonable evidence of his capacity to pay the contract price when requested by the Builder. He had ample evidence at his disposal that he could have shown the Builder but he did not do so. The ground for termination is therefore established.[15]
C.2. Mr Wilson’s legal challenges
[15]Ibid [156]–[158].
Mr Wilson, sensibly, did not challenge in this appeal the Tribunal’s conclusion that he had put doubt in Mr Kyle’s mind about his ability to fund the build. The Tribunal read and considered the materials and observed both parties give evidence and being cross-examined. It was a view that was well open to it and was unsurprising in light of the evidence led. Rather, Mr Wilson contended that:
(a) the statements that he had made to Mr Kyle were not relevant to an assessment of whether or not the evidence he provided met the contractual requirement;
(b) the Tribunal failed to have regard to the fact that he had in fact paid the amounts of substance claimed to be owing at that time;
(c) the Tribunal misconstrued the requirement of the type of evidence required by the contract; and
(d) the Tribunal failed to have regard to the fact that Mr Kyle could have, but did not, contact Mr Wilson’s bank directly.
I will consider these in turn. I am prepared to assume, for the purpose of this proceeding, that a failure to have regard to a relevant consideration, being a principle more associated with administrative law, would permit the success of an appeal on a question of law in accordance with s 148 of the Victorian Civil and Administrative Tribunal Act 1998.
C.3. Were the surrounding communications relevant?
I do not accept that the statements made by Mr Wilson, whereby he placed a doubt in Mr Kyle’s mind as to his bank’s willingness to fund the ongoing build, were irrelevant to the question of what was required to satisfy the contractual obligation to provide ‘written or other reasonable evidence of capacity to pay’. The purpose of the contractual obligation was to provide the builder, Mr Kyle, with a level of comfort that he would be paid by the owner, Mr Wilson, for work that he was to do and moneys that he was going to expend building the next stage of Mr Wilson’s house. What was sufficient was a value judgment entrusted to the decision-maker. To my mind, it was open to the Tribunal, as the decision-maker, to have regard to the context in which the request was made and answered, and to assess the quality and sufficiency of the evidence provided in light of the previous assertions that had been made that related to Mr Wilson’s capacity to pay. Such an approach furthers the purpose of the contractual provision. It was open to the Tribunal to conclude that a party who had deliberately caused real doubt as to his capacity to pay ought provide more evidence of his capacity to pay than would have been the case if he had never caused that doubt in the first place. The weight given to the existence of the doubt was a matter for the Tribunal, but the existence of the doubt was relevant. It would be a very odd and unreal result were it otherwise.
Accordingly, I am not persuaded that the Tribunal erred in law by having regard to the surrounding communications.
C.4. Did the Tribunal wrongly fail to have regard to the fact that Mr Wilson had paid the outstanding amount owing?
The fact that Mr Wilson had paid Mr Kyle for the work done to date was not of central relevance to the issue the Tribunal had to consider. The contractual provision was directed more at protecting Mr Kyle in relation to work that he was to do in the future, rather than for work done in the past for which he had already invoiced. The fact that Mr Wilson had, under objection, paid the most recent invoice, later than the date upon which it fell due on its face, did not mean that he had the capacity to pay future invoices. That would depend on whether he had further funds available to him. So it is questionable whether this is a mandatory consideration such that a failure to have regard to it would mean that the Tribunal erred in law.
In any event, the Tribunal referred to the fact that the payment for the frame stage was made on 29 December 2014.[16] I am not persuaded that the Tribunal failed to have regard to this fact when assessing whether the evidence provided was sufficient. The failure to make specific reference to it when considering that issue is consistent with the Tribunal not considering the fact of the 29 December 2014 payment to be of significance, rather than indicating that the Tribunal simply disregarded that fact.
C.5. Did the Tribunal misconstrue the contractual requirement?
[16]Kyle v Wilson (Building and Property) [2017] VCAT 544, [103] (Senior Member Walker).
This submission was based on the fact that Mr Kyle had, through his solicitors, asserted in the email referred to in para 15 above that the evidence must be ‘unequivocal’. Were the Tribunal to have taken this approach, it would have erred. But I am not satisfied that the Tribunal took this approach. There is no part of its reasons where it adds an additional requirement that the evidence be unequivocal.
Mr Wilson also contended, as I understood it, that the use of the word ‘or’ in the phrase ‘written or other reasonable evidence of capacity to pay’ meant that he had to provide either ‘written evidence’, or ‘other reasonable evidence’, but that there was no requirement that he provide ‘reasonable written evidence’. I accept that the contract is not worded as clearly in this respect as it might be. However, it is apparent that the evidence provided must be sufficient to establish a capacity to pay. This inevitably involves an assessment by the decision-maker of the quality of the evidence that was provided, whether it be in writing or otherwise. Ultimately, whether the adjective ‘reasonable’ qualifies the written evidence that is to be supplied, or only any unwritten evidence, is of little consequence. Determining whether the written evidence that was supplied was sufficient to evidence a capacity to pay inevitably involves a value judgment that will import notions of what was reasonably required to establish that fact in the circumstances. It was not identified how this possible distinction led to an error of law by the Tribunal. If the submission were correct, it may be that a party would not be able to establish a capacity to pay by a combination of written and other evidence, which would not be an intended result of the contractual term. I do not accept this submission.
C.6. Was the Tribunal bound to have regard to the fact that Mr Kyle could have, but did not, contact Mr Wilson’s bank directly?
Communications that had in fact taken place between Mr Kyle and Mr Wilson’s bank could be relevant, but a failure by Mr Kyle to make an enquiry of Mr Wilson’s bank could not rationally affect the sufficiency of the evidence that Mr Wilson provided. The Tribunal was under no obligation to assess the evidence that was supplied by Mr Wilson in a context where, it was said, Mr Kyle could have, but had not, approached Mr Wilson’s bank directly.
Furthermore, it was not established that Mr Kyle could realistically have made such an inquiry or what the result of that inquiry would have been. It was, I consider, unrealistic to suggest, particularly in light of their acrimonious relationship, that Mr Kyle should have made enquiries of Mr Wilson’s bank directly. It is very likely that the bank would have refused to provide any information without Mr Wilson’s permission. And, of course, it could have provoked a response from Mr Wilson.
D. Ground 3 – Was the notice to remedy ‘conjunctive’ and, if so, did the Tribunal err?
The contractual right to terminate the contract required a process to be followed. First, Mr Kyle had to give Mr Wilson written notice describing the breach or breaches alleged and stating his intention to terminate the contract unless the breaches were remedied within 14 days. I will refer to this as a ‘notice to remedy’. Then, if the breach or breaches were not remedied within that time, he could give further written notice immediately terminating the contract.
This is the process that Mr Kyle purported to follow. His notice to remedy contended that Mr Wilson was in breach in two respects: he had failed to pay the $50,587.50 that it was said was owing, and he had failed to provide evidence of his capacity to pay the contract price. It was common ground that, by the time Mr Kyle sent the notice terminating the contract, Mr Wilson had remedied one of the alleged breaches, in that he had paid, albeit under protest, the $50,587.50. It was also common ground he had paid this within the 14 days provided for in the notice to remedy.
Mr Wilson contended that the termination by Mr Kyle of the contract was not in accordance with the contractual process because the notice to remedy was a ‘conjunctive notice’. He relied on the fact that the notice to remedy referred to the two breaches and then contained the sentence: ‘Accordingly, we hereby give you notice … that you are required to remedy the breaches described above within 14 days …’ He contended, as I understood it, that because one part of that breach had been remedied, it could not be contended that there was an extant breach that permitted the subsequent service of a notice of termination.
I do not consider that this analysis is correct. Mr Wilson relied on Fasham Johnson Pty Ltd v Ware.[17] But that case concerned a different issue. In that case, only one in a list of breaches alleged in a notice to remedy was found to be made out as at the date of the notice to remedy. The Tribunal in that case concluded that because the grounds were expressed ‘conjunctively’ that meant that ‘they all stand together or all fall together’,[18] with the result that they all fell together and the notice to remedy was ineffective. This case is different. In this case the Tribunal accepted that both of the breaches referred to in Mr Kyle’s notice to remedy were made out at the time the notice to remedy was sent.[19] There was no challenge to the validity of that notice.
[17][2003] VCAT 885.
[18]Ibid [22] (Assoc Prof Cremean).
[19]Kyle v Wilson (Building and Property) [2017] VCAT 544, [128] (Senior Member Walker).
Also, the Tribunal in this case did not read the notice to remedy conjunctively. It concluded that ‘a failure to remedy either [breach] meant a failure to comply with the notice’.[20] This was, in my view, the only view of the notice reasonably open. The notice asserted that Mr Wilson had failed to pay the $50,578 owing. Then it said, in a separate paragraph: ‘Furthermore, you have failed … to provide evidence of your capacity to pay the Contract price’. In my view, the notice to remedy clearly asserted two distinct breaches, not one breach consisting, in some manner, of two failures to comply. There was no error in the Tribunal interpreting it in the way it did.
E. Ground 4 – Was the Tribunal obliged to consider whether the breach was of an essential term?
[20]Ibid.
The Tribunal awarded damages including for loss of bargain. Mr Wilson submitted, on the authority of Shevill v Builders Licensing Board,[21] that unless his failure to provide written or other reasonable evidence that he had the financial capacity to pay the contract price was a breach of an essential term of the contract, Mr Kyle may have had a right to terminate the contract in accordance with its terms, but he did not have the right also to sue for damages for loss of bargain. Accordingly, Mr Wilson contended that the Tribunal erred in law by awarding damages for the profits that Mr Kyle would have made on the contract had it been completed without first considering whether the breach was of an essential term.
[21](1982) 149 CLR 620.
The difficulty with this argument, as was ultimately acknowledged by Mr Wilson, was that cl 22.4 of the contract provided:
If the Builder terminates this Contract in accordance with this Clause 22, the Builder will be entitled to recover from the Owner all the loss, expense and damages caused to the Builder resulting therefrom as if the Owner had wrongfully repudiated this Contract.
If Mr Wilson had wrongfully repudiated the contract, then Mr Kyle would have been entitled to sue for all damages that flowed from that repudiation including damages for loss of bargain. It follows that Mr Kyle, having terminated the contract in accordance with cl 22, was entitled to sue Mr Wilson for damages including for loss of bargain, and so it was not wrong in law for the Tribunal to have assessed and awarded them.
F. Final comments and disposition
As I noted at the outset, any appeal can only be on a question of law. In my view, the outcome of the case below depended essentially on the factual findings made by the Tribunal, which cannot be challenged in this application.
I consider that ground 2 was sufficiently arguable to grant leave to appeal. I will grant the applicant leave to appeal on that ground but dismiss the appeal. I will otherwise dismiss the application for leave to appeal.
I will hear the parties on the question of costs.
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