Paraiso v CBS Build Pty Ltd

1. [1]

   This is an application under s 83 of the Civil and Administrative Tribunal Act 2013 (NSW) for leave to appeal on questions of law against a decision of an Appeal Panel of the Civil and Administrative Tribunal made on 19 August 2019: Paraiso v CBS Build Pty Ltd [2019] NSWCATAP 211.

2. [2]

   The plaintiff is the registered proprietor of land at Bray Street Dundas. By written contract dated 23 March 2016 she engaged the defendant to build two conjoined dwellings on the land for a price of $630,000. The work was performed between 31 May 2016 and May 2017. By mid-2017 the plaintiff had paid $719,267.20 by way of progress payments, amounts invoiced for variations and amounts for excess over provisional sums and prime cost allowances. This was nearly $90,000 or 14% over the contract price.

3. [3]

   On 26 July 2017 the defendant filed an application in the Tribunal claiming further amounts said to be due for variations and for adjustments to provisional sums. The plaintiff denied liability for many of the variations and adjustments. On 6 September 2017 she filed an application claiming a refund to herself in the amount of $300,000. The plaintiff alleged that some of the building work was defective.

4. [4]

   A Senior Member of the Tribunal heard the competing claims over two days in June 2018. He received written submissions in the period July to October 2018 and on 14 March 2019 ordered that the plaintiff pay to the defendant $94,381.21. That brought the total payable by the plaintiff to $813,648.41, an increase of $183,648 or 29% on the contract price. The Senior Member also ordered that certain rectification work be carried out by the defendant. He published reasons comprising 144 pages. The plaintiff filed an internal appeal against this decision, which was heard on 1 July 2019. On 19 August 2019 the Appeal Panel of two senior members dismissed the appeal with costs and published the judgment cited above.

5. [5]

   The grounds of appeal for which leave is now sought in this Court are primarily concerned with the basis on which the Senior Member (a) upheld numerous claims by the defendant for variations and (b) allowed the defendant’s claims against a provisional sum of $56,000 for plumbing work. There are two sundry grounds, concerning prime cost items and Home Owner’s Warranty insurance. The grounds raise the following questions:

   1. (1)

      Whether variations to the work to be performed under the contract, as requested by or on behalf of the plaintiff or as dictated by extraneous circumstances, gave rise to binding contractual obligations of the plaintiff to pay for the additional work, in the absence of written details for each variation signed by both the plaintiff and defendant in accordance with cll 2A(b) and 14(d)(i) of the contract (ground 1(ii)).

   2. (2)

      Whether payments by the plaintiff in respect of the defendant’s variation invoices issued during the course of the work were on account only and were open to dispute by the plaintiff as to liability and/or amount at the conclusion of the works (grounds 2 and 3).

   3. (3)

      If the amounts paid by the plaintiff for variations during the course of the work were agreed and contractually binding, whether the defendant was entitled to a margin of 15% on these amounts (ground 9).

   4. (4)

      In the alternative to the defendant’s contracted claim for payment for variations, whether the defendant was entitled to payment for additional work executed at the request of the plaintiff or her representative, by way of restitution of a quantum meruit (ground 4).

   5. (5)

      Whether the Senior Member should have assessed the quantum meruit in respect of the variations in accordance with cl 14 (g), (h) and (i) of the contract, having regard to costs incurred by the defendant to subcontractors and the agreed rates for the defendant’s own employees as prescribed in item 2 of Sch 2 of the contract (grounds 5(i) and 6).

   6. (6)

      Whether there was no evidence of costs incurred by the defendant in respect of 19 of the variations and adjustments for which the Senior Member assessed amounts payable to the defendant (ground 10).

   7. (7)

      Whether the plaintiff was denied procedural fairness by the Senior Member as a result of not being afforded an opportunity to cross examine the defendant’s expert on his written report regarding the cost of the work (ground 5(ii)).

   8. (8)

      Whether the contract provided for a provisional sum in respect of plumbing work (ground 7).

   9. (9)

      Whether the contract provided for a prime cost for the supply of bricks and for foundation piers (ground 7).

   10. (10)

       Whether the plaintiff was entitled to a credit for an amount paid by her for Home Owner’s Warranty insurance premium (ground 8).

6. [6]

   At first instance the defendant relied upon 63 claimed variations and provisional sum or prime cost expenditures. On the basis of these alleged adjustments to price the defendant sought to retain the extra $90,000 that it had been paid up to mid-2017 and to recover an additional amount of over $94,000.

7. [7]

   The dispute in relation to many of the claimed variations concerned whether the alleged additional work was actually included in the contract scope. Uncertainty about this was in a number of cases due to poor contract documentation. To take an example, an original landscape plan prepared by Greenland Design Pty Ltd was dated 25 June 2015 and was listed in a schedule to the Council’s notice of determination of the Development Application. The notice of determination was provided to the defendant prior to its first quotation dated 25 February 2016. It is not clear from the evidence tendered in this Court whether the 25 June 2015 landscape plan was provided to the defendant at that time. However the defendant’s Standard Inclusions List accompanying its 25 February quotation contained an item “Landscaping – As per plan – Included”. The Standard Inclusions List of each subsequent revised quotation and of the contract executed on 23 March 2016 contained the same item. The list of drawings in the contract did not include a landscape plan. The list of progress payments in Sch 2 of the contract described the stage at which the tenth payment was to be made as “Landscaping and driveway completed”. The scope of the contract landscaping work was left highly uncertain. A significant number and value of variation claims turned on this.

8. [8]

   In relation to provisional sum allowances, the contract left room for argument concerning the extent of the plumbing work for which a provisional sum of $56,000 was allowed. This is referred to in more detail below at [138]-[140]. There was a dispute as to whether the defendant was required to construct two on site detention (“OSD”) tanks within its price for the construction generally or whether the cost of these tanks was to be brought to account against the $56,000, so that the defendant would be entitled to extra payment if the tanks contributed to that allowance being exceeded. Again, a significant number and value of items turned upon this issue.

9. [9]

   The administration of the contract was deficient. There was evidence that the detail of additional work was not documented at the time when variations were requested or when they otherwise became necessary. For reasons explained below, detail in writing of any additional work was essential in order for there to be a contractually effective variation upon which the defendant could claim extra payment in accordance with cl 14. This deficiency of administration led to a great deal of the dispute. Similarly the defendant failed to provide in a timely fashion detailed breakdowns of its claimed prices for variations, applying the labour rates specified in the contract. Many one line invoices were issued long after the work was done.

10. [10]

    Responsibility for the above deficiencies of contract documentation and administration lies primarily with the defendant. On the other hand, the dispute has been widened and inflamed by the plaintiff making an unsustainable claim that she was entitled to receive an $80,000 refund of part of the contract price. The result has been very expensive litigation involving 63 separate contentious areas of work, each concerning a relatively small sum and the whole adding up to a total amount in issue to which the legal costs are vastly disproportionate. Although hearing time at first instance and on appeal in the Tribunal was relatively short, massive amounts of paper have been generated. The documents submitted to the Appeal Panel comprised 10 lever arch volumes.

11. [11]

    Against that background it is extremely unfortunate that an error of interpretation of the contract and a failure to accord procedural fairness make it necessary, in my view, for a significant part of the dispute to be remitted to the Tribunal at first instance for redetermination. The plaintiff has not sought leave to appeal against the Senior Member’s resolution of her claim for defective work, nor with respect to the dismissal of her claim for a refund of $80,000.

12. [12]

    Upon reconsideration at first instance of the defendant’s variation claims and claims for plumbing work counted towards the $56,000 provision, it is conceivable that the outcome of the proceedings will be little different in monetary terms from what the Senior Member ordered. When cl 14 of the contract, concerning variations, is applied according to what I have held is its correct interpretation, the result may be that while the defendant is not entitled to payment for a contractual variation in any amount agreed to by the plaintiff he is entitled to a quantum meruit calculated at the labour rates prescribed in the contract. The difference in law and in principle is between, on the one hand, the defendant seeking to retain or recover an amount to which the plaintiff is alleged to have agreed in circumstances that do not sustain an agreement binding at law and, on the other hand, the defendant establishing its entitlement to restitution of an assessed reasonable payment for its additional work. The assessed amount may prove to be not materially different from the amount that the plaintiff agreed, unenforceably.

The contract

1. [13]

   According to the findings of the Senior Member at first instance, on about 15 January 2016 the plaintiff provided drawings and specifications to the principal of the defendant, Mr Gagic, and requested that he quote for the construction work on the basis of, inter alia, “$1.00 per brick”.

2. [14]

   On 25 February 2016 the defendant provided an estimated total cost of $550,000. The written estimate incorporated a “Standard Inclusions List” in which the areas of work and trades were broken down into elements and marked as either “Included” or “By Owner”. Significantly for the issues that arose before the Tribunal, the following items were marked “By Owner”:

3. [15]

   The explanation for most of these exclusions from the builder’s scope of work in its first quote is that the plaintiff’s husband, Mr Gonzales, was a plumber and it appears to have been intended that he would do the plumbing work that was designated “By owner”. On 25 February 2016, in response to the defendant’s estimate, the plaintiff sent to Mr Gagic the following email with a copy to Mr Gonzales:

4. [16]

   Evidence given by the plaintiff before the Tribunal suggests that in making this request she expected that Mr Gonzales would still do the plumbing work, that the cost to the defendant would therefore be reduced and that so far as the provisional sum for plumbing work would therefore not be expended by the defendant there would be a credit to herself. The plaintiff exhibited considerable confusion and illogicality about this. In her own mind the potential credit in respect of the provisional sum for plumbing work done by her husband was misconceived as an entitlement to a refund from the defendant of $80,000.

5. [17]

   On 28 February 2016 Mr Gagic on behalf of the defendant sent to the plaintiff a revised estimate of $630,000. The document containing this figure included schedules suitable to form part of a BC4 standard contract of the Master Builders Association of New South Wales. In Sch 3(a) the following description of the work was inserted:

6. [18]

   A Standard Inclusions List was attached in the same terms as the list that had accompanied the estimate of $550,000 provided on 25 February 2016. In particular the items set out at [14] above were similarly marked “By Owner”. Most of those items are within the description of “plumbing” and “sewage”. Marking them as “By owner” was inconsistent with the defendant’s increase of the price by $80,000.

7. [19]

   Schedule 3(b) to the estimate of 28 February 2016 nominated aspects of the work described in the contract drawings and specifications that was excluded from the contract. The following words were typed on this schedule:

8. [20]

   At item 12A and 12B of Sch 2 of the BC4 pro forma contract the revised estimate of 28 February 2016 contained a table of allowances for prime cost items and a table of allowances for provisional sum items. The only entry in each of these tables was: “As per separate list of inclusions”.

9. [21]

   On 3 March 2016 the plaintiff emailed the defendant in reference to item 12 of Sch 2 of the draft BC4 contract, with the following request:

10. [22]

    The defendant replied to the plaintiff’s email of 3 March 2016 on the same day. He attached a further copy of the schedules to the BC-4 pro forma contract with Table 12B of Sch 2 now completed in accordance with the plaintiff’s request, as follows:

11. [23]

    On 5 March 2016 the plaintiff’s finance broker informed her that finance would not be available if part of the work was to be undertaken by herself. The broker required that the notation at Sch 3(b) of the BC4 pro forma contract (see [19] above) be removed and that all items in the Standard Inclusions List that related to plumbing and air-conditioning (quoted at [14] above) be marked “Included” rather than “By Owner”.

12. [24]

    In the contract signed on 23 March 2016 the Table of Allowances for Provisional Sum Items at 12B of Sch 2 was not completed with the items that had been included in the defendant’s revised estimate when it increased its price to $630,000; that is, the items referred to at [22] above. It contained only the words “As per separate list of inclusions”. The price in the executed contract was $630,000. The Senior Member found that it was a term of the contract that this price included $80,000 on a provisional sum basis for the items referred to at [22] above, despite their omission from Table 12B of Sch 2.

13. [25]

    The Senior Member also found (at [51] and [77] of his reasons) that the cost of bricks was a prime cost item at an allowance of $1.00 per brick although this was not referred to anywhere in the signed contract. He found (at [77] and [206]), on the basis of entries at pages 6 and 7 of the Standard Inclusions List, that the price included piering for the foundation slab of the building to a depth of 1.5m for the piers shown on the structural engineer’s drawings and that any additional or deeper piers would incur an additional cost of $95 per lineal metre.

Statutory provisions and contract terms re variations.

1. [26]

   The contract of 23 March 2016 was for “residential building work” within the meaning of the Home Building Act 1989 (NSW): see cl 2 of Sch 1 of the Act. The defendant was a building contractor licensed under Pt 3 of the Act and the contract price exceeded the amount prescribed by the Regulation made under the Act. Accordingly, by force of ss 6 and 7(1A), ss 7-7E applied to the contract. Relevant parts of those sections as in force at 23 March 2016 were as follows:

2. [27]

   In compliance with s 7(4) and (5) the price of $630,000 was stated prominently on p 1 of the contract, followed by a clear statement that certain provisions of the contract “will, or may in appropriate circumstances, change the contract work and/or the contract price or costs payable by the Owner”. Clause 14 relating to variations and cl 15 relating to prime cost items and provisional sums were included in the list of contract provisions that could potentially affect the contract price.

3. [28]

   Schedule 2 of the contract, commencing at p 7, stated in item 1 that the percentage to be allowed for supervision, overhead and profit on variations was 15%. Item 2 set out the labour rates for various trades and supervising personnel to be applied in calculating the cost of variations. Both of these items made express reference to cl 14, which dealt with variations to the contract work.

4. [29]

   Schedule 3 at pp 13-14 identified the work to be performed. It incorporated by reference an attached quotation and the eight-page Standard Inclusions List referred to earlier. It also listed the applicable drawings, including those of the architect, hydraulics engineer and structural engineer. Schedule 3 identified a Specification booklet in accordance with which the work was to be undertaken.

5. [30]

   The contract incorporated unamended provisions of the standard BC4 contract. The following are extracts from the provisions concerning variations to the work, so far as relevant to the present application for leave to appeal:

6. [31]

   By the operation of cl 20 in conjunction with item 5 of Schedule 2, the plaintiff was required to make 11 progress payments during the course of the works. Clause 20 contained the following further provisions:

Construction of cl 14

1. [32]

   The introductory words of cl 14(a) are: “The works may be varied by …”. The sub-paragraphs that follow do no more than describe what will amount to a difference between the work that was agreed to be done, in the contract as made, and the work actually performed. Clause 14(a) does not purport to describe events or circumstances that of themselves amount to or give rise to a change in the builder’s contractual obligations. For example cl 14(a)(i) provides that the works “may be varied by” actions of the builder such as doing additional work. Clause 14(a)(iii) states that the works “may be varied by […] changes in the character or quality of any material or work such as may be necessary due to the existence of a latent condition”.

2. [33]

   Clause 14(b) commences with the words: “… a variation is established by …”. The effect of par (b) is merely to expand the concept of what may be treated by the builder as an instruction or request to vary the works. For example, cl 14(b)(i) and (ii) state that “a variation is established by” express written instructions from the owner or the supply of post-contract details such as drawings. Clause 14(b)(iv) extends this to an instruction from a relevant authority. Paragraph (b) of cl 14, like par (a), does not purport to describe events or circumstances that of themselves change the builder’s contractual obligations.

3. [34]

   The events described in sub-paragraphs (a) and (b) of cl 14 are either unilateral actions of the builder or owner or they are events extraneous to and independent of both parties. Clause 14(c) makes it clear that such unilateral actions and extraneous events are not sufficient, alone, to change the builder’s contractual obligations with respect to the scope of work. By force of cl 14(c) a change of contractual obligation does not occur unless the builder consents. As the Senior Member observed at [154] it would be a very rare case in which the builder’s consent could reasonably be withheld. Nevertheless, the requirement in par (c) that the builder must consent before the parties will be contractually bound by a variation confirms that pars (a) and (b) of cl 14 do not operate independently of the other paragraphs of the clause. They do not constitute alternative, stand-alone provisions under which a contractually effective variation to the works can come into being.

4. [35]

   Clause 14(d) stipulates that a variation in the scope of contractual works, to which the Builder consents, “is to be detailed in writing and signed by [both parties]”. If the variation is initiated by a written instruction from the owner or by the supply to the builder of post-contract details such as drawings (see pars (i) and (ii) of cl 14(b)), par (d)(i) does not necessarily require that the variation be “detailed in writing” in an additional document. The written instruction or post-contract details/drawings, signed by the owner, may sufficiently specify the variation for the purposes of par (d)(i) so that the only further requirement of that sub-paragraph is that it should also be signed by the builder.

5. [36]

   Paragraph (d)(i) is to the same effect as cl 1(2) of Pt 1 of Sch 2 of the Home Building Act, which is statutorily imported under s 7E. That provision, quoted at [26] above, is repeated for ease of reference as follows:

6. [37]

   If the parties should both sign a variation, detailed in writing, but fail to agree at that time upon a certain sum to be deducted from or added to the contract price on account of the change in the works, there would nevertheless be a concluded and contractually binding variation. That is because pars (f), (h) and (i) of cl 14 provide certain and enforceable formulae for calculation of the price adjustment. In the case of a variation involving additional work and extra cost, pars (h) and (i) allow for the alternative of the builder and owner agreeing a price adjustment. I construe those paragraphs as providing for agreement on the price of a variation either before or after the extra work is executed. These provisions with respect to cost are not inconsistent with the statutorily imported term referred to above.

7. [38]

   The Home Building Act does not state what, if any, consequence follows if the parties should fail to comply with the statutory term that there be a signed written agreement for any variation of the works. Likewise, the BC4 contract does not expressly stipulate the effect of the parties failing to have the variation “detailed in writing” and signed by or on behalf of both parties as required by cl 14(d)(i). Clause 14(d)(i) contains imperative language: “the variation is to be etc”. From this I impute to the clause an objective intention that non-compliance is to have a consequence. I take into account the nature and purpose of the entire contract. Inherently from its subject matter the clause is intended to protect the parties against uncertainty with respect to variations, which very commonly arise during the execution of building contracts and are a notorious source of dispute.

8. [39]

   First, with respect to the requirement that the variation be “detailed in writing”, the clear purpose of this is to avert disputes about what extra work the owner requires to be performed, for which the builder may require the owner to pay. I conclude that the absence of a detailed written description of the variation is intended to protect both parties equally. If this requirement is not met then either party may invoke the omission to deny that the putative variation has altered contractual obligations, with respect to what is to be built in the case the builder and with respect to what is to be paid for in the case of the owner. If the instructed variation of the works is not “detailed in writing” then the contract scope of works is not varied.

9. [40]

   Secondly, with respect to the requirement of signatures the clear purpose is to benefit the parties severally, so that if the builder has not signed the written details no obligation to perform additional or different work can be enforced against it and if the owner has not signed no obligation to pay can be enforced against her. It would be an unreasonable and capricious construction to treat cl 14(d)(i) as having the effect that a sufficiently detailed written variation signed by the owner would not be contractually enforceable by the builder for payment where the work has been done, merely for lack of the builder’s signature. All of the disputed variations in the present case concerned situations where the defendant had done the work and claimed payment. On the above analysis, in these instances relevant fulfilment of cl 14(d)(i) is concerned with details in writing and signature of the owner or owner’s representative. In the following consideration of cl 14 I will ignore the requirement of a signature by the builder as not being presently relevant.

10. [41]

    If a putative variation is detailed in writing and signed at least by the owner or owner’s representative, the variation will have contractual effect under cl 14 and be enforceable as to payment, if the builder has performed the varied work. The parties may reach agreement on the sum payable for such a variation pursuant to cl 14 (h) or (i). The agreed amount will then be contractually enforceable. But if there is no written detail signed by the owner there will be no variation capable of being contractually binding and enforceable. Hence there will be no contractual variation to which agreement as to an amount payable could attach as a term. In that situation the builder’s only recourse would be a claim in restitution for a quantum meruit, provided that the owner’s request for the additional work, although not detailed in writing or signed, is clear and has been acted on by the builder and provided that other prerequisites for a restitution reclaim are satisfied: Xu v Jinhong Design & Constructions Pty Ltd [2011] NSWCA 277 at [106] (Macfarlan JA, Basten JA agreeing).

11. [42]

    Section 10 of the Home Building Act would not disentitle the defendant from pursuing restitution of a quantum meruit for additional work in these circumstances. It could not be said that by entering into the BC4 contract the defendant acted in contravention of any provision of the Act or regulations, which is the only basis upon which s10 denies a builder remedies at law. Having regard to the consistency between cll 2A(b) and 14(d)(i) of the BC4 contract and statutory cl 1(2) from Sch 2 of the Act, it is apparent that the defendant contracted upon terms entirely in conformity with the legislation.

12. [43]

    In the hearing at first instance the Senior Member’s task with respect to each separate variation was to address the following questions:

    1. (1)

       Were the prerequisites in cl 14, particularly details in writing signed by the owner as required by sub-cl (d)(i), satisfied so as to give rise to a contractual variation for which the defendant could enforce payment?

    2. (2)

       For each variation found to have been contractually effective, was the price agreed under sub-cl (h) or (i) and if so in what amount?

    3. (3)

       For each contractually effective variation where a price was not agreed, to what amount is the defendant entitled upon application of the rates in item 2 of Sch 2 and the 15% margin in item 1?

    4. (4)

       For each claimed variation that was not contractually effective by reason of the prerequisites in cl 14 not having been satisfied, did the defendant carry out work additional to or different from that required under the contract and did this occur in circumstances that entitle the builder to restitution of a quantum meruit?

    5. (5)

       For each claimed variation that was not contractually effective but for which the builder is entitled to a quantum meruit, what is a reasonable payment for the varied or additional work, subject to a cap calculated at the rates and 15% margin in Sch 2, as discussed at [97]-[104] below?

Issue (1)/ground 1(ii) – contractual variations under cl 14

1. [44]

   The Senior Member held that cl 14(b) specifies mechanisms by which a variation to the work could become contractually binding independently of and as an alternative to the signing of written details under cl 14(d)(i). In effect he construed the words “a variation is established” in par (b) as meaning that a contractually binding variation would result from any of the events listed in that paragraph, without more.

2. [45]

   This construction is expressed at [148]-[163] of the Senior Member’s reasons, from which the following passages are extracted (emphasis added):

3. [46]

   The Senior Member also said:

4. [47]

   The Senior Member’s construction of cl 14 is in my view not correct. Contrary to his reasons at [149], [162] and [164], oral instructions from the owner for a change to the work are not capable of giving rise to a contractual variation under cl 14. It follows that oral variation instructions are not capable of supporting an agreement, enforceable against the owner, as to a sum to be paid for the variation. The true effect of par (b) of cl 14 is limited as described at [33]-[34] above. It is not a provision that enables contractually binding variations to the contract works to be brought about without compliance with cl 14(d)(i).

5. [48]

   The supply of amended drawings may be capable of serving as an instruction from the owner for a variation to the works (see [163] of the Senior Member’s reasons), provided that the drawings detail the variation adequately. The doubt expressed by the Senior Member at [158] as to whether cl 14(d)(i) applies to post-contract drawings that are delivered by or on behalf of the owner and require a change to the work is misplaced. It may not be necessary for the amended drawings to be accompanied by an express written instruction. But cl 14(d)(i) must be satisfied. If amended drawings are the only document in which a putative variation is “detailed in writing” then the detail must be sufficient for contractual certainty and cl 14(d)(i) requires that the drawing be signed by the owner (or agent) and by the builder.

6. [49]

   Reading cl 14 as a whole shows that par (b) does not provide an independent, alternative route by which there may be brought about a binding contractual variation to the works. That paragraph simply elaborates the ways in which the extent of a required variation to the works may be communicated. Paragraph (b) is dependent upon pars (c) and (d) for the means by which the requested variation may become contractual. This is reinforced by cl 2A(b). There has not been cited to me any binding authority that would support the Senior Member’s construction and the only case referred to in his reasons is a previous decision of his own to the same effect. The contract in this case is in different terms from that considered in Wright v Foresight Constructions Pty Ltd [2011] NSWCA 327, where the equivalent of cl 14(d)(i) only provided that “the variation should be detailed in writing and signed by the Owner or the Owner’s agent” (emphasis added): see [38]. The decision in Wright v Foresight Constructions Pty Ltd was concerned with a builder’s defensive reliance upon an oral instruction to vary the work, not with a claim for payment under an oral variation.

7. [50]

   Relevantly to [155] of the Senior Member’s reasons, upon the considerations stated in [40]-[41] above it may be accepted that if the builder proceeds with the varied work in response to an adequately detailed written description of the variation (whether in a post-contractual drawing or otherwise), signed by or on behalf of the owner, then the builder would be able to enforce the owner’s obligation under cl 14 to make payment. The enforceable obligation would be to pay any amount agreed under par (h) or (i) or an amount calculated from the schedule of rates under par (i).

8. [51]

   If the Senior Member’s construction were correct cl 14 would be inconsistent with the statutory term in cl 1(2) of Sch 2 of the Home Building Act and would be unenforceable by operation of s 7E: Xu v Jinhong Design & Constructions Pty Ltd at [28]-[29] (Basten JA). The Senior Member did not consider this and it is not apparent from the materials before me that the parties raised the point with him. Even if they did not, it was an error for the Senior Member to give effect to par (b) of cl 14 according to his construction where the Act rendered the paragraph unenforceable if so construed. Statutory unenforceability cannot be disregarded. On the construction of cl 14 that I have adopted no inconsistency with the statutory term arises. My decision on the present appeal does not turn upon the operation of the Act in that respect. There is therefore no occasion to examine more closely whether inconsistency and statutory unenforceability were sufficiently raised at first instance or before the Appeal Panel or whether failure to argue these points below should have any procedural consequence in this Court.

9. [52]

   The Senior Member’s statement at [144] cannot be accepted. In cll 2A(b) and 14(d)(i) the parties agreed upon the manner in which any requested or required variation would become contractually binding, namely by bringing into existence written details signed by both of them. They also agreed at cl 3(d) that, apart from any terms implied by statute, “the whole of the terms, conditions and warranties of this Contract are set out in the Contract”. They bound themselves not to make agreements varying the works to be performed except in accordance with cl 14 and in particular sub-cl (d)(i). If the contract left it open to the parties to make separate simple contracts to vary the works, without complying with sub-cl (d)(i), that would be inconsistent with the statutory term referred to above and would be unenforceable.

10. [53]

    At [390]-[391] the Senior Member found as follows (emphasis added):

11. [54]

    In the highlighted part of [391] the Senior Member treated cl 14(d)(i) as casting upon the owner responsibility for having variations detailed in writing. That is not borne out by the terms of the sub-clause. Clause 14(d)(i) is not concerned with who must prepare the written details of the variation but it makes the production of such a document, signed by or on behalf of the parties, an essential requirement of a contractually effective variation. The reference at [392] to establishing “any relevant breach by the builder” is inapposite. Fulfilment or otherwise of the prerequisites in cl 14(d)(i) is not a question of “breach by the builder”.

12. [55]

    The words highlighted above in [391] do not address the case of a change to the work that is necessitated by an extraneous event such as the discovery of a latent condition or the issue of instruction by the local Council. In such an event the change in the contract work that is made necessary must be detailed in writing by one of the parties and then signed by both.

13. [56]

    At [396] the Senior Member held as follows:

14. [57]

    Paragraphs [390]-[392] and [396] in their entirety are directed by the Senior Member to the question of what would constitute a request from the owner for a change to the work, which is one of the events identified in cl 14(b) by which the process towards a contractual variation may be commenced. In applying his construction of cl 14 the Senior Member did not address the requirement under cl 14(d)(i) of a mutually signed document and did not examine each putative contractual variation for compliance with this sub-clause, as in my view he was required to do.

15. [58]

    At [172]-[370] the Senior Member worked through all of the variations claimed by the defendant and found that approximately 10 of them had been requested by the provision of post-contract drawings. On this basis, in accordance with his construction of cl 14(b), the Senior Member concluded that each such variation to the work had been “established”. He used that word in the sense that the defendant had become contractually bound to perform the varied work and that the plaintiff had become liable to pay for it in accordance with cl 14(h) and (i). In each of these cases the relevant drawings may have sufficiently identified in writing the extra work required and they may have been signed by the plaintiff’s architect or engineer. But no finding was made on either of these requirements of cl 14(d)(i) for any of the drawings-based variations. It was essential for the Senior Member to make such findings, with reasons.

16. [59]

    The drawings-based variations upheld by the Senior Member are listed as follows. I have adopted the Senior Member’s convention of referring to the number of the variation used in the defendant’s aide memoire table presented at the hearing, followed in parentheses by the number used in the defendant’s variation register and in the joint report of the building experts. References in square brackets are to the commencement point of consideration of the relevant variation in the Senior Member’s reasons:

17. [60]

    The Senior Member found that where an architect or engineer had delivered amended drawings to the defendant he or she did so as the plaintiff’s agent: [396]. It was also held that Mr Gonzales, the plaintiff’s husband, was her authorised agent and that he communicated requests for some variations: [123]-[129]. It is possible that any drawing that called for changes to the work but did not bear a signature may have been transmitted under cover of a signed letter or by email in circumstances that may have satisfied the requirements of the Electronic Transactions Act 2000 (NSW). These matters are not the subject of findings by the Senior Member. But they had to be addressed in order to apply cl 14(d)(i) according to its proper construction.

18. [61]

    In order to determine whether cl 14(d)(i) was satisfied, in some cases it was necessary to compare post-contract drawings with drawings that were scheduled to the contract or otherwise referred to in it. For example, in connection with variation items 31(28), 32(29) and 33(30) related to landscaping, the plaintiff deposed that on 25 May 2016 she provided to the defendant a hard copy of Greenland Design Pty Ltd’s revised landscape plan dated 29 October 2015. This raised the problem of what landscape plan was intended to be referred to in the Standard Inclusions List (see [7] above). The Senior Member’s reasons do not disclose that he determined what landscaping work was called for under the executed contract or that he attempted a comparison for the purpose of ascertaining what if any variation to the works was called for by the plan delivered on 25 May 2016. The Senior Member described how, in his view, the requirement for additional work was initiated in relation to landscaping. This description indicates that changes were not nominated on the revised plan but came from an oral discussion: see the boundary fence items 31(28) at [274], 32(29) at [278] and 33(30) at [282]. Clearly the Senior Member did not determine that cl 14(d)(i) was satisfied.

19. [62]

    About 17 further variations allowed by the Senior Member were described in his findings as having been initiated by oral requests from the plaintiff or by some form of written communication other than a drawing, the particulars of which are not stated in the reasons. In respect of the variations in this group no finding was made that they were “detailed in writing” or signed by or on behalf of the plaintiff as required by cl 14(d)(i). The Senior Member did not consider whether the circumstances of initiation of any of the variations in this category would engage the Electronic Transactions Act in the absence of handwritten signatures. The relevant items are as follows:

20. [63]

    Some items in the above list were allowed by the Senior Member although he expressly could not identify how the relevant change was initiated, for example items 14(11) (see [223] of the Senior Member’s reasons) and 55(52) (at [344]). In those circumstances a contractual variation under cl 14 could not be upheld.

21. [64]

    Approximately 6 of the variations allowed by the Senior Member were found to have been “established” under cl 14(b)(iv) as a result of an instruction from the local Council. On what I regard as the correct construction of cl 14, such variations are not exempt from the requirements of cl 14(d)(i). If an authority should give an instruction that would require varied and/or additional work then in order to be entitled to payment under cl 14 the builder would have to ensure that written details were prepared and signed by the owner showing what change to the contract work was necessitated. The Council might give its directions in writing, spelling out the work required. Satisfaction of cl 14(d)(i) might then require no more than that the builder procure the owner to counter-sign Council’s instruction. In other cases the alteration to the agreed works that would flow from a Council direction would not be self-evident and would have to be written up by one of the parties and signed by both.

22. [65]

    As a result of the Senior Member applying his construction of cl 14 he allowed variations in this category without making any finding as to whether the additional work required by Council’s directives was detailed in writing and signed by or on behalf the owner. The relevant items are as follows:

23. [66]

    Approximately 3 further variations upheld by the Senior Member were found to have been necessitated by the discovery of a latent condition in the site (cl 14(b)(iii). From the builder’s perspective such a discovery would require that one of the parties prepare written details of what work was required to address the latent condition and that the owner sign those details. The three variations said to have arisen from latent conditions are as follows:

24. [67]

    Written details of these variations, particularly the last two, would likely be very brief documents. But the formality of reducing the variations to writing and of the parties affixing their own or their agents’ signatures is a requirement of a binding alteration to the contract work and it was incumbent on the Senior Member to make a finding as to whether it had been complied with.

25. [68]

    The Senior Member found that the plaintiff had, for the purposes of cl 14(h) and (i), agreed a “price … for additional work” in relation to all but a few of the many variations that he upheld. The reasons do not identify what, if any, evidence of agreement the Senior Member accepted. At best I can infer from his reasons it seems that agreement was implied solely from the fact that the plaintiff paid the defendant’s variation invoices. The Senior Member’s reasons do not address the circumstances in which the plaintiff made these payments. Without regard to those circumstances the mere fact of payment was in my view incapable of establishing agreement on price in the contractual sense relevant to the operation of sub-cll (h) and (i). Whether the plaintiff had agreed prices in that sense was a live issue in the hearing at first instance.

26. [69]

    Agreement by the plaintiff to a monetary amount for any variation asserted by the defendant could not be binding upon her as an agreed “price … for additional work” for the purposes of cl 14(h) and (i) unless the variation became contractual. That could only occur through fulfilment of the other prerequisites of cl 14, in particular those of sub-cl (d)(i). Failing fulfilment of those other prerequisites, mere agreement on quantum would not form part of a contractual variation and would not give rise to an enforceable liability to pay the agreed amount. As the Senior Member misconstrued cl 14 and did not determine whether any of the variations were detailed in writing and signed by or on behalf of both parties, the proceedings will have to be remitted to the Tribunal at first instance for determination of those factual issues, variation by variation. For each item of additional work in respect of which it may be found that sub-cl (d)(i) was satisfied, the Tribunal will then have to determine on the rehearing whether the plaintiff agreed a price for additional work or whether the defendant’s entitlement must be calculated under sub-cl (i), applying the rates prescribed in Sch 2 of the contract. These are steps (1), (2) and (3) referred to at [43] above.

27. [70]

    If upon rehearing the matter it should be found that sub-cl (d)(i) was satisfied in relation to the change of slab design (variation No 6(3)), consideration of whether a price was agreed would have to take into account the timing of the parties’ communications. On 25 June 2016 the defendant informed the plaintiff that the raft slab specified in the contract was unsuitable for the site and would have to be redesigned. No replacement design had been prepared at that time. On 27 June 2016 the defendant quoted the plaintiff a price of $24,180 for additional labour and materials associated with building a waffle pod slab. This was not accompanied by any quantification or breakdown of the cost of building the slab to the original design, or any comparison of that with a breakdown of the cost of the redesigned slab. No comparison was possible because replacement engineering drawings had still not been issued at 27 June. They were not issued until 4 July 2016, a week later. Even then no price breakdowns or comparative costings were provided. They have never been provided.

28. [71]

    On 27 June the plaintiff agreed to an adjustment of $24,180. Necessarily, that was in respect of changes that were undefined in terms of structural drawings, let alone in terms of comparative building quantities – labour and materials – and/or cost. In this state of uncertainty it is difficult to see how the plaintiff’s acceptance of the defendant’s quote on 27 June could be treated as contractual for the purposes of cl 14(h) and (i), as a “price … for additional work”. It was a price for something that had not been detailed in writing, particularised with any certainty, or signed by anyone.

29. [72]

    The plaintiff deposed that on 16 August 2016 she received from the defendant a list of what purported to be nine variations. Six of these were in the nature of asserted variations, including the change to the slab design for $24,180 and five other items for $5,702. The other three entries on the list were quantifications of work the defendant said was within the provisional sum of $56,000 for plumbing. The plaintiff responded in writing to the schedule of 16 August 2016, to the effect that she disputed some of the items. She deposed that after this date she attempted to discuss the amounts with the defendant but resolution was not achieved. The plaintiff said that in late 2016 and early 2017 she requested updates on the amounts claimed for variations but did not receive any information from the defendant until the end of March 2017.

30. [73]

    The plaintiff further deposed that on 31 March 2017 she received a schedule of 26 claimed variations for a total of $128,199 (including GST), of which it was said that only about $10,000 had been paid. This schedule was accompanied by invoices for each of the 26 items. The schedule made allowance for a “line of credit based on contract” of $75,000, presumably meaning that many of the items claimed concerned work for which provisional sums were allowed. The net amount said to be outstanding was $42,544. The plaintiff deposed that Mr Gagic told her the defendant would cease work unless payment was made that day. She said that at that time she was expecting to give birth in May and that she was very anxious to have the building work completed so she could move into one of the units. The Senior Member’s reasons do not state whether he accepted or rejected any of this evidence.

31. [74]

    The above references to the evidence illustrate why the mere fact of payment without taking into account surrounding circumstances could not support a finding of contractual agreement on quantum. Upon rehearing, this evidence will need to be considered and findings made upon it in relation to any change to the work for which the Tribunal finds that a contractual variation became effective in accordance with cl 14(d)(i). If the Tribunal Member who re-hears the matter should find, upon sufficient evidence, that the plaintiff agreed an amount in respect of a contractually effective variation then that amount would be brought to account as payable by her. If it should be found with respect to any of the variations that satisfied sub-cl (d)(i) that there was no agreement on quantum, then it will be necessary to examine any evidence that the defendant may adduce to support a calculation based on sub-cl (i) and the rates in Sch 2. These are steps (2) and (3) referred to at [43] above.

32. [75]

    Ground 3 in the plaintiff’s summons before this Court is as follows:

33. [76]

    This ground relies upon cl 20, which is partly extracted at [31] above. The plaintiff’s proposition is that all payments made during the performance of the contract were on account only. She contends that at the conclusion of the work she was entitled to have a review of liability and quantum in respect of any variation invoice. The plaintiff submitted that because cl 20 impressed all payments with the quality of being on account only, she could not be finally bound by any amount paid during the course of the works and therefore could not be taken to have agreed, in a contractual sense, the price of any variation.

34. [77]

    I reject this submission and leave will not be granted in respect of ground 3. Sub-clauses (h) and (i) of cl 14 envisage that a price for a variation may be agreed. In my view the clear effect of sub-cl (h) is that any such agreement on price will be mutually binding. An agreed sum for the purposes of this clause is in an entirely different position from progress payments towards the full contract price, which may be subject to adjustment under cl 20 according to whether or not the contract work was fully and satisfactorily performed. Contrary to the plaintiff’s ground 3, cl 20 does not preclude the parties from making final binding agreements on the price of variations, under sub-cll (h) and (i), during the course of construction under the contract.

35. [78]

    At [28]-[30] of their decision the Appeal Panel agreed with the Senior Member’s construction of cl 14. The Panel consequently rejected the following grounds of appeal that were before them:

36. [79]

    The construction of a contract is a matter of law and it is open to the Court to grant the plaintiff leave to appeal in respect of it. The BC4 contract is available for download from the Master Builders Association of NSW website for a modest fee. I infer that it is a standard contract that is probably widely used. Variations to the scope of works under any building contract, including for domestic or residential work, are a frequent occurrence. The construction of cl 14 has the potential to be significant for the residential building industry and for home owners who engage with industry participants. Leave to appeal will therefore be granted in respect of ground 1(ii).

37. [80]

    The plaintiff’s ground 1(ii) is in these terms:

38. [81]

    In lieu of the Appeal Panel’s orders, there will be orders to the following effect:

    1. (1)

       grounds 3, 7 and 10 of the appeal to the Appeal Panel are upheld;

    2. (2)

       the appeal to the Appeal Panel is allowed;

    3. (3)

       the Senior Member’s order (1) made 14 March 2019 that the owner pay the builder $94,381.21 is set aside and

    4. (4)

       the proceedings are remitted to a Member of the Tribunal in the Consumer and Commercial Division for re-determination with respect to amounts payable or repayable between the parties in respect of variations.

Issue (2)/ground 2 – status of agreed payments for variations

1. [82]

   At first instance, in anticipation of the Senior Member finding that contractually effective variations to the work had been made, the plaintiff argued that her payments of the defendant’s variation invoices were on account only, by force of cl 20. She argued before the Senior Member that at the end of the contract she was entitled under cl 20 to have a reconciliation and adjustment of all payments, in which her liability to pay anything for a putative variation could be contested and, if relevant, the amount payable could be determined. This argument was repeated in this Court, as referred to at [75]-[77] above.

2. [83]

   Reference has been made (at [68] above) to the Senior Member’s conclusion that where the plaintiff had paid an amount invoiced by the defendant on a progress claim in respect of a variation, the payment signified contractual acceptance of liability for the amount. The Senior Member held that cl 20(e) did not “permit a reassessment of the amounts agreed and paid for variations” by way of reconciliation or adjustment at the end of the contract: at [386]. Clause 20(e) is set out at [31] above. The Senior Member’s conclusion followed from his construction of cl 14 and his view that binding obligations of the plaintiff to pay for variations came into force despite the absence of signed details in writing as required by cl 14(d)(i). Further, it was based upon his conclusion that by paying the defendant’s invoices the plaintiff had agreed quantum in respect of what the Senior Member found to be contractual variations.

3. [84]

   At [31]-[33] of their reasons the Appeal Panel accepted the Senior Member’s view that the amounts paid by the plaintiff on the defendant’s invoices were agreed amounts for contractually effective variations. The Panel also accepted that agreed amounts under cl 14 were not merely “on account” and were not able to be reopened in the final reconciliation of contract payments, under cl 20(e).

4. [85]

   Ground 2 in the plaintiffs summons before this Court asserts that the Appeal Panel erred:

5. [86]

   I will not grant leave in respect of this ground. The Senior Member and the Appeal Panel only construed cl 20 with respect to its application to cases where a variation has been effectively made and where the parties have agreed the amount payable, pursuant to sub-cll (h) or (i). I see no error in their view of the operation of cl 20 in such a case. If the prerequisites for a contractually effective variation were fulfilled and if the parties agreed under 14(h) or (i) on a price for such variation, then the agreement upon that price would not be open to review at the end of the contract under cl 20. The only thing that would be amenable to review and reconciliation would be whether the extra work for which the variation price had been agreed had actually been performed.

6. [87]

   In the case of a variation recorded in writing and signed by both parties, as required by cl 14(d)(i), where the builder proceeded with the work but the plaintiff did not agree on a price the builder would be contractually bound to carry out the variation and would be entitled to payment calculated under cl 14(i) and the rates in Sch 2. If the amount thus calculated should be included on a progress claim and if the owner should pay that claim, it would be a payment on account under cl 20(e). At the end of the contract the owner would be entitled to require that the calculation be justified under cl 14(i). The Senior Member made no finding that there had occurred circumstances such as those just described. It remains to be seen whether findings of that nature will be made upon rehearing.

Issue (3)/ground 9 – 15% margin on variation amounts agreed

1. [88]

   At [511] the Senior Member set out in a table the variations in respect of which he found that the plaintiff had agreed a price, as claimed in the defendant’s invoices, and had paid that price. The total was $105,003.90. In the same table he listed further variations that had not been included on invoices or paid by the plaintiff and in relation to which the Senior Member assessed a value. The total of these was $15,571.29. The combination of the two figures was $120,574.19. For the purpose of calculating the defendant’s entitlements the Senior Member applied to this figure 15%, apparently for supervision, overhead and profit pursuant to item 1 of Sch 2 of the contract: see [351], [352] and [678].

2. [89]

   The plaintiff challenged this 15% margin before the Appeal Panel, in part upon the basis that if $105,003.90 of the total payable for variations was said to have been agreed by the parties then such agreement must already have taken into account any allowance to the defendant for builder’s margin. At [64] and [65] of their reasons the Appeal Panel upheld the Senior Member’s decision to add the 15% margin.

3. [90]

   Ground 9 for which the plaintiff seeks leave in the present proceedings is in these terms:

4. [91]

   I have found that there has not been a determination according to the proper construction of the contract of whether the plaintiff became bound by any contractual variations or whether she agreed any amounts in respect of variations under cl 14(h) or (i). The proceedings must be remitted independently of ground 9, which arises only hypothetically. I will not grant leave for ground 9 in those circumstances. But I record my disagreement with conclusion of the Senior Member and of the Appeal Panel on builder’s margin. On the rehearing, when cl 14 is applied according to its proper construction, the Tribunal will have to consider all evidence that bears upon whether the plaintiff agreed the price of any variation that may be found to have satisfied the contractual prerequisites of cl 14(d)(i). Clause 14(h) clearly provides that the 15% margin only applies to a variation price that is calculated under sub-cl (i) of cl 14, on the basis of the schedule of rates. The 15% would have no application to any variation prices that the Tribunal on rehearing may find were agreed, unless there was express agreement in the form of “$x + 15%”.

Issue (4)/ground 4 – defendant’s entitlement to a quantum meruit

1. [92]

   The Senior Member concluded that if the defendant had not become contractually entitled to any payment for additional work arising from variations then it was, in the alternative, entitled to restitution of a quantum meruit: [406]-[437]. The Senior Member cited the applicable authorities and summarised the principles from them. I do not identify error in his statement of the law. Application of the law to the facts turned in part upon findings as to the extent of communications between the parties, the participation of the plaintiff in decisions regarding changes to the work and the extent of her knowledge of these variations: see [426]-[431]. The findings at those paragraphs led the Senior Member to conclude that the plaintiff had requested the additional work, that she knew it was being undertaken by the defendant in the expectation of being paid for it and that she accepted the benefit of the extra work.

2. [93]

   The Appeal Panel at [34]-[37] upheld the Senior Member’s determination that, in the alternative to cl 14 or any other contractual basis for claiming payment, the defendant was entitled to restitution of the reasonable cost of the additional work. Pursuant to ground 4 of the plaintiff’s summons she now asserts that the Panel erred in accepting this alternative. Ground 4 is in these terms:

3. [94]

   Leave will not be granted to argue this ground. So far as it involves any question of law, the principles governing circumstances in which a restitution claim may be made are well settled and there is no apparent error in the Appeal Panel’s reasons for rejecting the grounds that were argued before them on this aspect.

4. [95]

   There is no substance in the contention underlying ground 4 that by reason of having attempted to substantiate a contractually effective variation the defendant is precluded from recovering a quantum meruit on principles of restitution. The plaintiff did not support that contention in this Court with any reference to authority. Her written submissions on ground 4 were difficult to follow, lacking in coherence and unpersuasive.

5. [96]

   Nevertheless, upon rehearing the case the Tribunal will have to determine, for each claimed variation that does not satisfy the contractual requirements of cl 14(d)(i), whether the conditions for restitution have been made out. That is, step (4) referred to at [43] above. This must be re-determined because the Senior Member’s consideration of the issue has been invalidated by his erroneous application of cl 14, by his associated findings of contractual agreement on prices of variations and by his departures from the requirements of procedural fairness (dealt with at [106]-[133] below).

Issue (5)/grounds 5(i) and 6 – assessment of quantum meruit

1. [97]

   Ground 5(i) for which the plaintiff seeks leave in these proceedings asserts that the Appeal Panel should have found, in relation to the Senior Member’s assessment of the defendant’s alternative quantum meruit claim, that the Senior Member:

2. [98]

   Ground 6 is as follows:

3. [99]

   These two grounds are repetitive of each other. In support of them the plaintiff relies upon Mann v Paterson Constructions Pty Ltd [2019] HCA 32. In that case the owners had repudiated a domestic building contract when the works had been partially executed. The builder’s entitlement to payment for variations completed up to the date of termination was governed by the Domestic Building Contracts Act 1995 (Vic) and is not relevant for present purposes. With respect to work other than variations, Nettle, Gordon and Edelman JJ held as follows:

4. [100]

   Gaegler J came to the same conclusion. With respect to work done by the builder in accordance with the contract, for which the builder had accrued a contractual right to payment at the time of termination, his Honour said (citations omitted):

5. [101]

   With respect to work for which the builder had not accrued a contractual right to payment at the time of termination, Gaegler J said (some citations omitted):

6. [102]

   Gaegler, Nettle, Gordon and Edelman JJ have held that contract rates are a ceiling upon reasonable remuneration where a builder’s non-contractual quantum meruit claim arises from termination of a contract through fault of the owner. It must follow in logic and in principle that contract rates will similarly be an upper limit on a quantum meruit claim that has arisen because the two parties did not sign written details of each variation, as required by cll 2A(b) and 14(d)(i) of the present contract. That circumstance may be viewed as equally the fault of both parties, or the fault of neither, or the fault of the defendant himself. The defendant should not have proceeded with any variation work without, for example, placing his signature on amended post-contract drawings and securing the plaintiff’s signature, with a notation that execution of the altered work was agreed.

7. [103]

   It is apparent from the Senior Member’s reasons that he did not compare the amounts that he assessed as reasonable, for any of the variations, against the upper limit of a calculation in accordance with cl 14(h) and (i). For each variation under which additional work was carried out by the defendant’s employees, the Senior Member should have determined what price would be arrived at by applying the labour and other rates listed in item 2 of Sch 2 of the contract and applying the 15% builder’s margin in item 1. For each variation under which additional work was performed by sub-contractors, the Senior Member should have verified the amount of the sub-contractor’s tax invoice and added the 15% margin to that.

8. [104]

   The High Court’s decision in Mann v Paterson Constructions Pty Ltd was handed down on 9 October 2019. The Senior Member and the Appeal Panel cannot be criticised for not having applied the principle that emerges from the decision, limiting the assessment of a quantum meruit in the present case. Nevertheless, the law having been declared in Mann v Paterson Constructions Pty Ltd and there being a clear logical extension of it to the assessment of a quantum meruit in a case such as the present, leave to appeal on grounds 5(i) and 6 should be granted and the grounds should be upheld. The upholding of these grounds contributes to the necessity for the matter to be remitted to the Tribunal for re-determination at first instance.

Issue (6)/ground 10 – no evidence of defendant’s costs of 19 variations

1. [105]

   In the plaintiff’s ground 10 there are 19 variations listed for which the defendant claimed payment but in respect of which the plaintiff submits there was no evidence of any amount payable in accordance with a calculation under cl 14(h) and (i). As I have determined that the matter must be remitted to a single Member of the Tribunal at first instance for reconsideration of the defendant’s quantum meruit claim by reference to cl 14(h) and (i), there would be no utility in granting leave with respect to ground 10. It would be pointless for this Court to trawl through the materials that were before the Senior Member to ascertain whether there was or was not evidence for 19 of the variations in circumstances where the Tribunal will be required to carry out the exercise afresh for all items claimed by the defendant.

Issue (7)/ground 5(ii) – denial of procedural fairness

1. [106]

   The plaintiff submits that procedural unfairness arose from the manner in which the Senior Member took the evidence of the building experts, Mr Brincat for the plaintiff and Mr Roberts for the defendant. In relation to the defendant’s alternative quantum meruit claim, the Senior Member had to consider the reasonableness of (a) amounts that had been invoiced by the defendant and paid and (b) additional amounts that were claimed in the proceedings. With respect to the paid amounts which the plaintiff sought to have refunded, the Senior Member held (at [454]-[459]) that the plaintiff bore the onus of proving that the claims were excessive. This reversed the true onus.

2. [107]

   At [469]-[493] the Senior Member recorded his findings on the defendant’s quantum meruit claim for variations that had not been invoiced or paid. In respect of a number of items the Senior Member preferred Mr Roberts’ evidence over competing calculations by Mr Brincat and assessed a reasonable amount accordingly. For some of the other items the Senior Member considered that Mr Brincat had not given an alternative assessment and he therefore adopted Mr Roberts’ figures.

3. [108]

   Mr Brincat’s report of 9 November 2017 contained a table of the defendant’s claimed variations with his own estimates of quantities and rates for all of the items that he considered were additional to the contract scope of works and for which he had sufficient information. He estimated nil when he perceived no change from the original scope and either nil or a negative amount where he considered that a change in the works had not involved additional cost to the builder or had effected a saving. He also estimated nil where the defendant had not supplied sufficient information regarding a change to the work, so that no estimate of quantities and rates could be made.

4. [109]

   The two building consultants prepared a joint report but they appear to have reached very little agreement. In Mr Roberts’ report of 2 February 2018 and in his comments in the joint report he provided rates and calculations for many of the claimed variations and estimated reasonable prices that were similar to or greater than those that the defendant had charged. He purported to confirm the reasonableness of the defendant’s charges for some variations while expressly acknowledging a lack of information and an inability to assess quantities or rates.

5. [110]

   In relation to variation No 6(3) – Waffle pod concrete slab ($26,598 inclusive of GST), for example, Mr Roberts said this:

6. [111]

   At the commencement of the first day of the hearing the Senior Member expressed strong displeasure at the failure of the experts to agree upon the reasonable cost of the claimed variations. Such a contest with respect to 63 relatively small value items presented the Senior Member with a tedious and laborious task. His frustration is understandable but it should not have led to the one-sided response that followed. On the second day both experts attended to give evidence concurrently. The Senior Member did not swear or affirm either of them but addressed them in the following terms:

7. [112]

   These words were spoken to the two experts together but it soon became apparent that they were directed to Mr Brincat. The Senior Member proceeded to cross-examine him upon what work was or was not within the scope of the contract. This questioning was characterised by frequent interruption of Mr Brincat’s answers and explicit and at times contemptuous rejection of the witness’ opinions as they were given. The following passage early in the Senior Member’s cross-examination concerned a claimed variation for pegging out a sewer line (Mr Condon appeared for the plaintiff):

8. [113]

   Mr Roberts was asked very few questions by the Senior Member but, as seen in the above example, he from time to time volunteered opinions supportive of the Senior Member’s challenges to Mr Brincat. Early attempts by the plaintiff’s senior counsel to secure an opportunity for his witness to complete his answers and explain the foundations of his opinions were not carried very far. I infer that senior counsel perceived the Senior Member to have adopted an adverse view of Mr Brincat from before his oral evidence had commenced and that further intervention would be unproductive. Judging by the transcript, many counsel in the same position would have had that perception.

9. [114]

   The Senior Member frequently cut off Mr Brincat’s answers and either turned to Mr Roberts or changed the subject. This is illustrated in the following passage concerning whether the OSD tanks were within the provisional sum for plumbing or were within the scope of structural work covered by the defendant’s fixed price:

10. [115]

    I have concluded from my own review of the contract documents that the OSD tanks were part of the plumbing works for which a provisional sum was allowed (see [138]-[140] below). But as the Senior Member chose to question Mr Brincat on his reasons for holding a contrary view, a fair hearing required that he should listen to the answers. Instead he silenced Mr Brincat, mid-answer, and sought the opposing expert’s view.

11. [116]

    Undue confinement of Mr Brincat’s answers was pervasive. The Senior Member exhibited hostility and resistance to his evidence from the outset. This was not a reaction that developed over time, in response to recalcitrance or argumentativeness of the witness. A further instance of the Senior Member stopping Mr Brincat from providing reasons for his opinions is to be seen in the following extract concerning a structural retaining wall:

12. [117]

    The Senior Member’s reasons include the following:

13. [118]

    The Senior Member on occasions accused Mr Brincat of acting as an advocate rather than an independent expert and cited this as justification for stopping his answers. The accusation lacked foundation on any occasion it was made. The following passage concerning the defendant’s claim for additional piering illustrates this:

14. [119]

    Contrary to the view of the Senior Member it was appropriate for Mr Brincat to qualify his answers. The Senior Member sought to confine him to an acknowledgement that if there was additional piering, that would be a variation – more accurately, an addition to a prime cost item. It did not amount to advocacy for this witness to point out that no particulars of the claimed extra piering had been provided by the defendant. Such particulars have not been provided to this day. The question upon which the Senior Member pressed Mr Brincat so heavily – if there was additional piering, would it be a variation – was in those circumstances hypothetical.

15. [120]

    Another gratuitous allegation of advocacy was made in the course of the Senior Member cross-examining Mr Brincat about the defendant’s variation claim in relation to subdivision work, as follows:

16. [121]

    The passages I have extracted from the transcript are representative of the whole of the Senior Member’s questioning of Mr Brincat. A court would not permit counsel to hector an expert witness in this manner. Such cross examination cannot be regarded as consistent with procedural fairness when conducted by the Tribunal itself. The Senior Member departed from the requirements of a fair hearing by preventing the plaintiff’s witness from giving material parts of his testimony and by questioning with a manifest preconception of what the answers should be, instead of postponing assessment of the weight and utility of the evidence until the answers had been fully given. The Senior Member’s questions were transparently directed to extracting from Mr Brincat his agreement with conclusions that the Senior Member had apparently already formed.

17. [122]

    Almost the entire cross-examination of Mr Brincat by the Senior Member was concerned with the witness’ view of what work was or was not included in the contract scope. This was primarily a matter for the application by the Tribunal of legal standards to the relevant documents and to the facts as found, including the sequence in which documents were communicated and the manner in which they were referred to or identified. The utility of expert evidence on the issue of scope of the contract works lay in any opinion that could be given about the usual meaning of terms, usual practices of the industry, technical understanding of drawings and similar matters.

18. [123]

    The Senior Member treated “concessions” made by Mr Brincat under the Senior Member’s cross-examination of him as a sufficient basis for determining the scope of the contract work. He found as follows:

19. [124]

    Opinion evidence regarding the reasonable cost of claimed variation work was material and admissible and lay within the expertise of Messrs Brincat and Roberts. The Senior Member suppressed any attempt by Mr Brincat to address that subject orally. One example has been given at [118] above. Another is the Senior Member’s questioning of Mr Brincat as to whether he agreed that construction of a kerb and layback constituted a variation. The following exchange took place:

20. [125]

    At the end of the Senior Member’s cross-examination of Mr Brincat senior counsel for the plaintiff was not invited to cross-examine Mr Roberts, on any subject. The Senior Member said that he would assess reasonable amounts in respect of disputed variations by considering the documentary evidence as to the extent of additional work performed, taking into account appropriate rates and estimates of time required and applying “a couple of decades” of his own experience in the costing of building work.

21. [126]

    In giving reasons for his conclusions on reasonable quantum the Senior Member said that Mr Roberts’ assessments were careful and that they confirmed “the general reasonableness” of those variation charges that had been paid pursuant to builder’s invoices: [467]. He found the opinions of Mr Brincat unreliable and he preferred Mr Roberts’ view where the experts differed: [468]. The Senior Member said this:

22. [127]

    Before the Appeal Panel there does not appear to have been a ground of appeal in relation to procedural unfairness. The issue must have been argued because at [57]-[61] of its reasons the Panel rejected what was put by the plaintiff on the subject. The Panel gave the following reasons:

23. [128]

    Ground 5(ii) of the grounds in the plaintiff’s summons, for which leave to appeal is now sought, is as follows:

24. [129]

    Section 38 of the Civil and Administrative Tribunal Act is material to the merits of this proposed ground. Relevant extracts of that section are as follows:

25. [130]

    In some cases a failure to invite or permit cross examination of an expert in the Tribunal might not constitute a denial of procedural fairness. In the present case where the Senior Member had taken it upon himself to cross-examine Mr Brincat in a vigorous, critical and at times unfair manner, procedural fairness certainly could not be restored unless the plaintiff’s counsel was invited to cross-examine Mr Roberts, and probably not even then. Certainly the failure to invite such cross examination was, in the circumstances, the denial of an important aspect of being heard. What took place also gave rise to a manifestation of pre-judgment, being a form of actual bias.

26. [131]

    At [58] the Appeal Panel adopted the Senior Member’s description of Mr Brincat’s evidence as “an ‘all or nothing’ approach” to valuation of the claimed variations. That characterisation is not meaningful in the context. Mr Brincat did not express an opinion that extra work claimed for by the defendant was worth nothing. His reasons for attributing nil value to numerous items were that they were not true variations but were within the contract price and/or that there was insufficient information from the builder about what work he had performed to enable Mr Brincat to make a sensible estimate. The fact that Mr Roberts purported to value items for which Mr Brincat said there was not enough detail made it necessary that, at the least, the plaintiff’s counsel be invited to cross-examine Mr Roberts from this point of view. The Senior Member’s clear indication of his lack of regard for Mr Brincat as an expert heightened this need.

27. [132]

    With respect to [59] of the Appeal Panel’s reasons, I have already referred to the absence of objective support for the Senior Member’s view that Mr Brincat was “pre-disposed to act as an advocate in the Owner’s case”. That view was expressed before Mr Brincat had given any oral evidence. It could not be justified from the terms of his reports. The Senior Member criticised Mr Brincat for having treated post contract drawings as if they were contractual. From par 6.2 of Mr Brincat’s report of 9 November 2017 it is not apparent that he made this error at all. If he did, the Senior Manager did not put to Mr Brincat that he had done so deliberately, in a partisan fashion. I respectfully disagree with the Panel’s conclusion at [59] that it was open to the Senior Member to find “that Mr Brincat was predisposed to act as an advocate in the Owners’ case.”

28. [133]

    Leave will be granted to the plaintiff in respect of ground 5(ii) of her appeal and the ground will be upheld. This makes no difference to the scope of the issues that must be remitted to the Tribunal for rehearing but it does confirm that the matter should not be remitted to the Senior Member who previously heard the case. It would be reasonably apprehended by the parties that the Senior Member has already been strongly influenced in his assessment of quantum meruit by pre-judgment regarding all of Mr Brincat’s opinions.

Issue (8)/ground 7 – construction of contract with respect to provisional sums

1. [134]

   At [13]-[25] above I have referred briefly to the evidence relied upon by the Senior Member to support his finding that, although no schedule of provisional sum items was annexed to the contract as referred to at item 12 of Sch 2, a draft schedule submitted by the defendant to the plaintiff at the latter’s request was intended to be referred to and was incorporated by reference as an operative provision of the contract. Before the Appeal Panel the defendant challenged this construction under ground 2 of its internal appeal. The Appeal Panel upheld the Senior Member’s decision on this question at [45].

2. [135]

   The plaintiff seeks leave to argue that the Appeal Panel was wrong in this respect. The plaintiff’s proposed ground 7 is as follows:

3. [136]

   The Senior Member’s decision on this followed an orthodox approach to construing the contract and determining objectively the parties’ intention with respect to documents referred to and incorporated. He did not purport to rectify the contract, as suggested in ground 7 and in the plaintiff’s submissions in support of this ground. The relevant principles had to be applied to only a handful of facts concerning the pre-contract exchange of a small number of documents. I would reach the same conclusion as the Senior Member if approaching the issue afresh. A grant of leave to appeal on this ground is not warranted. The position would be different if the point of construction of the contract had been highly dependent upon contested findings of fact regarding the negotiation that resulted in the contract. If that were the case I would consider remitting this issue for redetermination at first instance pursuant to my upholding of the procedural fairness ground considered in issue (7)/ground 5(ii).

4. [137]

   The plaintiff’s submissions seek to expand ground 7 to an attack upon the Senior Member’s findings as to what extent of work was comprehended in the prime cost item of $56,000 for “all plumbing work” (see [22] and [24] above). As the Senior Member observed at [506], provisional sums are most often specified for work that is to be performed in its entirety under subcontracts. In such cases the amount incurred for the relevant work can readily be ascertained from what is paid to the subcontractors and the scope of the work that is the subject of the provision will be clearly defined and spelled out in the subcontracts. In the present case the use of the general description “all plumbing work” was particularly uncertain and unsuitable for a provisional sum, given that there was no subcontract and that most of the work was done by the builder. The main controversy that resulted from this provision concerned whether the two OSD tanks, to be located under twin patios at the rear of the property, were included within the provisional sum for plumbing work.

5. [138]

   Elementary construction details for the OSD tanks were shown on the structural engineer’s drawings accompanying the contract. They were in due course constructed on a concrete base with Dincel walls and a concrete lid for each. Dincel is a proprietary system of plastic hollow core panels that may be erected vertically and fitted internally with steel reinforcing before being filled with concrete. One OSD tank was approximately 8m2 by 1.35m deep. The other was approximately 10m2 by 0.9m deep. Each had a volume of between 9m3 and 10m3. They are distinct from stormwater pits that were also installed, those being factory made junction boxes for stormwater lines. The trade work involved in constructing OSD tanks would include excavation and concrete construction. This may be regarded as outside the normal range of a plumber’s skills. On the other hand, Section 2.7 of the Specification to the contract, entitled “Plumber: stormwater services” describes the following scope (some items omitted and emphasis added):

6. [139]

   A stormwater plan to which the works were built shows what could fairly be described as a “complete system of site stormwater drainage”. The OSD tanks are shown as an integral part of this. They are within the description “water retention pits”, as used in the Specification. Their purpose is water retention. The term “water retention pits” in the Specification refers to something different from the stormwater pits, the function of which is to facilitate the free flow of stormwater rather than to retain it.

7. [140]

   I arrive at the same conclusion as the Senior Member, that the OSD tanks were within the scope of “all plumbing work” to which the provisional sum of $56,000 applied. This Court is in as good a position as the Senior Member to determine this, as it is not a construction issue that would be affected by assessment of oral evidence or a substantial matrix of contested facts. The issue is governed by a small number of documents. The fact that the proceedings must be remitted to the Tribunal for reasons that include my upholding of the plaintiffs procedural unfairness ground (ground 5(ii)) does not warrant that this legal question of construction of the contract should be remitted. The Court is able to resolve it.

8. [141]

   Clause 15(b) required the plaintiff to furnish to the defendant “written directions regarding the selection and supply of the work and/or goods represented by [prime cost items and provisional sums]”. Paragraph (c) of cl 15 provided that, at the completion of all prime cost and provisional sum work, any unspent part of the total of the allowances for these items should be deducted from the contract price. Under par (d), if the total amount expended should exceed the allowances then the excess would be added to the contract price.

9. [142]

   So far as I can ascertain from the Senior Member’s reasons and from other materials before the Court, the defendant did not claim that there were any variations to the contract scope of plumbing work. The defendant claimed only that its expenditure on the plumbing work it had executed, within the contract scope, had exceeded $56,000. This appears, particularly, from the Senior Member’s treatment of the plumbing items at [511] and [669]-[672]. In order to apply cl 15, the whole of the defendant’s expenditure on plumbing had to be counted against the $56,000. The contract does not expressly provide for the basis upon which expenditure is to be assessed where the work is not sub-contracted. However the builder appears to have adopted for this purpose the rates for its own employees specified in item 2 of Sch 2.

10. [143]

    Upon rehearing the Tribunal will have to consider what evidence there is to substantiate the defendant’s expenditure on the numerous items that it has sought to bring to account against this provisional sum. “Expenditure” is the word used in cl 15. The plumbing provisional sum items considered by the Senior Member are identified as “PS” under various sub-headings of paragraphs of the reasons in the range [185]-[329]. The item numbers are summarised at [370]. The third item in that paragraph should read “9(6)”. Item 16(13) concerned air-conditioning. There should be added items 41(39) and 49(47).

11. [144]

    There are 15 plumbing items. In relation to nearly all of these the Senior Member relied entirely upon alleged agreement by the plaintiff to the amounts invoiced. He treated payment invoices as proof of agreement that the amounts had been expended and should be brought to account. Unlike cl 14, cl 15 contains no provision for the plaintiff and defendant to agree upon and be bound by an amount of expenditure in respect of the whole or any part of the plumbing work. Given the terms of cl 15, any purported agreement on the quantum of the builder’s expenditure for any part of the plumbing work would be unsupported by consideration and not enforceable contractually. Further, the plaintiff’s purported agreements to amounts are not based on anything other than payment which, for reasons given earlier, cannot support an inference of agreement without having regard to the circumstances surrounding the payment. The mere evidence of payment is conspicuously insufficient to prove agreement where, as occurred in many cases here, payment was made in response to one line invoices for significant sums. Even as evidence of an admission by the plaintiff that the invoiced amount had been expended, the fact of payment had little if any weight.

12. [145]

    Mr Roberts’ evidence before the Senior Member will be of little utility when the Tribunal attempts to determine the defendant’s total expenditure on plumbing. In his report of 2 February 2018 Mr Roberts acknowledged that there is “insufficient information to determine the extent of work involved and carried out at the time” for several such items. For most of the others, his opinion is limited to noting that the invoice was paid. He has reiterated numerous times the following formulaic statement:

13. [146]

    If, contrary to my understanding, any of the plumbing items claimed by the defendant are for work beyond the original contract scope to which the provisional sum applied, the Tribunal on rehearing also would have to go through the steps listed at [43] above for each such claim.

Issue (9)/ground 7 – construction contract with respect to prime cost items

1. [147]

   Contrary to the plaintiff’s submissions, it was open to the Senior Member to find that the cost of bricks and the extent of foundation piering were both prime cost items: see [25] above. I agree with those conclusions. Leave will be refused in relation to ground 7 so far as it relates to prime cost items.

2. [148]

   Whether any additional piering was carried out over and above the allowance of 1.5m indicated in the original engineering drawings and if so the extent of that work is a matter that will have to be re-determined in the Tribunal. The Senior Member dealt with this at [212] and simply allowed the amount claimed by the defendant on the basis that that it was “agreed to and paid for by the Owner”. Like all other matters of quantum and of supposed agreement by the plaintiff this must be re-determined pursuant to my upholding of ground 5(ii) concerning procedural fairness.

3. [149]

   The defendant appears to have provided no substantiation of the additional length of piers as mentioned above at [119]. Its own expert, Mr Roberts, could only say that the amount claimed appeared to represent 30m of additional pier length, which he thought would “not be unexpected”. He repeated the following familiar formula that, as I have said in relation to its use in another context, is no evidence upon which the defendant’s entitlement could be assessed:

Issue (10)/ground 8 – plaintiff’s claim for refund of warranty insurance

1. [150]

   Pursuant to Pt 6 of the Home Building Act the defendant was prohibited from carrying out building work under the contract unless there was in force a policy of insurance for the benefit of the plaintiff, against risks of loss arising from non-completion of the work due to insolvency of the defendant or through non-compliance with statutory warranties. The plaintiff deposed that the insurer’s charges for each Home Owner’s Warranty policy in respect of the dwellings under construction, one policy for No 12 Bray Street and one for No 12A, were as follows:

2. [151]

   On 16 March 2016 the defendant issued invoice No 323 in the sum of $5,929.17 for “Home Owner’s Warranty policy, administration and broker fees” for No 12 Bray Street. That charge represented a markup of $2,200, nearly 60%, for which no justification is evident on the materials that were before the Senior Member. The plaintiff tendered documentary evidence that she paid the defendant the full amount of this invoice on 23 March 2016, unaware of the insurer’s actual charges, which were not disclosed on invoice No 323.

3. [152]

   On 31 March 2016 the defendant issued invoice No 325 in the sum of $5,929.17, with the same description but in respect of No 12A Bray Street. The plaintiff’s documentary evidence showed that she paid the defendant the full amount of this invoice on 27 April 2016.

4. [153]

   The Standard Inclusions List in the contract provided that Home Owner’s Warranty insurance was “Included”. The defendant asserted that this was a mistake. The Senior Member made no determination that it was a mutual mistake or that the contract was to be rectified. The plaintiff was entitled to a credit for the full amount of these two invoices, being a total of $11,858.34. They were within the contract price, on an objective construction of its terms.

5. [154]

   The defendant claimed at first instance that it was owed $2,200 in respect of Home Owner’s Warranty insurance for each dwelling, a total of $4,400. The amounts were claimed as variations Nos 0 and 57. There was never any justification for either of these claims so far as I can see on the materials presented to this Court. At p 244 of the transcript on the second day of the hearing counsel for the defendant said:

6. [155]

   At [177], [353], [470] and [511] the Senior Member gave effect to a credit in favour of the plaintiff of $2,200 in respect of each unit on account of Home Owner’s Warranty insurance. This should have been a credit of $5,929.17 on each unit both because the defendant, through its counsel, conceded everything in relation to the subject and because there was no contractual basis for the defendant’s invoices Nos 323 and 325. The Appeal Panel found no error in the Senior Member’s decision on this matter (at [63]) but it should have done.

7. [156]

   The plaintiff’s ground 8, for which leave to appeal is now sought, is as follows:

8. [157]

   Leave will be granted in respect of this ground. The error was one of law in that the Senior Member acted on the basis of no evidence and, indeed, contrary to an explicit concession and in the face of evidence to the contrary of what he decided. The Appeal Panel should have upheld the ground pursuant to which this was raised before them, which was part of ground 14. The plaintiff’s ground 8 in her summons will be upheld

Orders

1. [158]

   The orders of the Court will be to the following effect:

   1. (1)

      Leave to appeal is granted in respect of grounds 1(ii), 5(i), 5(ii), 6 and 8 in the plaintiff’s amended summons and each of the said grounds is upheld.

   2. (2)

      Leave to appeal is refused in respect of all other grounds in the plaintiff’s amended summons.

   3. (3)

      The appeal is allowed.

   4. (4)

      The orders of the Appeal Panel of the Civil and Administrative Tribunal made 19 August 2019 are set aside.

   5. (5)

      In lieu thereof the following orders are made:

2. [159]

   The costs of the proceedings in this Court will be determined after hearing submissions of the parties following publication of these reasons.