TCM Builders Pty Ltd v Nikou & Anor [2013] VSCA 256 (HANSEN and TATE JJA)

September 19, 2015

SUPREME COURT OF VICTORIA
COURT OF APPEAL

S APCI 2013 0096

TCM BUILDERS PTY LTD	Applicant

v

OLYVIA NIKOU	First Respondent

and

GEORGE KAY	Second Respondent

—

JUDGES	HANSEN and TATE JJA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	23 August 2013
DATE OF JUDGMENT:	27 September 2013
MEDIUM NEUTRAL CITATION	[2013] VSCA 256
JUDGMENT APPEALED FROM	TCM Builders Pty Ltd v Olyvia Nikou & Anor [2013] VSC 322 (Vickery J, 20 June 2013)

—

DOMESTIC BUILDING DISPUTE – Application for leave to appeal from Victorian Civil & Administrative Tribunal (VCAT) – Double Recovery – Whether moneys received from settlement with other parties should be brought to account in assessing builder’s liability to remedy defects – Identification of questions of law – Evidentiary onus – Supreme Court Act 1986 (Vic) s 17A(3A)(a) – Leave to appeal granted.

—

HANSEN JA:

This is an application for leave to appeal from the order of Vickery J made on 20 June 2013[1] which dismissed an appeal from the order of the Victorian Civil and Administrative Tribunal (the Tribunal) made on 12 April 2012[2] that the applicant pay the respondents $22,654.97. A subsequent order for costs made on 8 May 2012 is also raised.[3]

[1]          TCM Builders Pty Ltd v Olyvia Nikou & Anor [2013] VSC 322 (Reasons).

[2]          TCM Builders Pty Ltd v Olyvia Nikou and George Kay & Ors [2012] VCAT 277 (Second Reasons). Earlier, on 13 March 2012, the Tribunal delivered reasons on questions of liability and quantum (Principal Reasons), Appeal Book 669-713. The Appeal Book is constituted by exhibit MJT3 to the affidavit of Michael John Telford sworn 19 July 2013.

[3]          Appeal Book 731.
Leave is sought pursuant to s 17A(3A)(a) of the Supreme Court Act 1986 (Vic). The right of appeal from an order of the Tribunal is restricted to a question of law. The approach to be taken to a grant of leave on a question of law from the Tribunal is stated in Secretary to the Department of Premier and Cabinet v Hulls.[4]

[4] [1999] 3 VR 331, 335-337 [8]-[16]. See also Myers v Medical Practitioners Board of Victoria(2007) 18 VR 48, 55-56 [28]-[29].
Leave to appeal should be granted. In the particular circumstances, the following reasons are provided.
Background
The parties are TCM Builders Pty Ltd (TCM) which was engaged by the respondents, Olyvia Nikou and George Kay, by a contract dated 30 August 2006 to construct a residential dwelling on the respondents’ property at East Hawthorn.
Other relevant personnel involved in the project were an architect, who designed the dwelling and who was engaged to administer the contract and certify TCM’s claims; an engineer who provided drawings and computations for the work; and a landscaper engaged by the respondents who designed and carried out landscaping work.
The works duly commenced and were deemed to have reached practical completion in September 2008 when TCM gave possession of them to the respondents.
In March 2009 TCM submitted its final progress claim, which the respondents refused to pay, contending that there were defects in the works. A dispute thus arose. TCM commenced a claim in the Domestic Building List at the Tribunal, and the respondents counterclaimed against TCM, the architect, the engineer, the landscaper, and two engineers engaged by the principal engineer to perform certain aspects of the engineering work.
The case was heard over 10 days in October 2011. Prior to the hearing, the respondents settled their claims against all parties other than TCM; each settlement provided for the payment of money to the respondents. The parties who settled with the respondents remained as parties only for the purpose of the apportionment of responsibility between them under Part IVAA of the Wrongs Act 1958 (Vic).
On 13 March 2012 the Tribunal published its reasons. In those reasons the respective claims are set out. TCM claimed $53,649.89 plus interest made up as follows: [5]

[5] Principal Reasons [12].

(a) Payment of retention fund:

(b) Interest on retention fund prior to 16 April 2008:

(c) Interest on retention fund after 16 April 2008:

(d) Interest on late payment of Progress Claim 2:

(e) Balance due in respect of variations:

(f) Interest on variation claim:

$38,358.79

$4,323.61

$2,892.51

$800.92

$15,291.10

$4,807.76

Of these items, the respondents disputed only the claims for interest on the retention fund and on the variation claim. That is, claims totalling $54,450.81 were not disputed.[6]

[6] Principal Reasons [13].
The respondents claimed against TCM $88,635 as the cost of remedying defects which arose as a result of TCM breaching its obligations. The items of claim were:[7]

[7] Principal Reasons [16].

(a) East pool wall:

(b) Gymnasium wall:

(c) Basement West patio wall:

(d) Damaged footpath:

(e) Eaves lining:

(f) Glass balustrades:

(g) Basement carpark:

$35,082

$19,640

$12,575

$4,100

$5,586

$9,160

$2,492

TCM contended that:

(1)          It was not responsible for these areas of defective work, either because the work was carried out by others engaged by the respondents, or that the defect was the result of an erroneous or deficient design by the architect or engineer. Further, the costs were excessive.

(2)          The settlement monies received by the respondents should be brought to account in assessing TCM’s liability.[8]

[8]          Principal Reasons [14], [17] and [18].
There were also issues concerning the retention fund and interest payable on the balance of that fund and the variation claim.
VCAT’s reasons
After dealing with and rejecting TCM’s claims concerning the retention fund and interest, the Tribunal dealt with the respondents’ claims for defective work, finding that TCM was solely responsible for the following works, the reasonable costs of which was:[9]

[9] Principal Reasons [129].

Gymnasium outbuilding $8,360.35

East wall over pool $19,296.94

West basement wall $3,289.80

Glass balustrading $713.20

Footpath and curbing $0.00

Eaves $5,586.00

Basement carpark $0.00

TOTAL $37,246.29

After then allowing an amount for preliminaries, the respondents’ claim came to $38,746.89.[10]

[10] Principal Reasons [131].
The Tribunal then turned to the question of double recovery, and TCM’s submission that the settlement amounts received by the respondents exceeded the liability of the settling parties resulting in a surplus of settlement funds. TCM submitted that the amount of the surplus was $70,524, made up as follows:[11]

[11] Principal Reasons [135].

(a)      Amount paid by the Landscaper, Architect, Engineer and 7^th respondent

(b)      Value of Landscaper’s claim forgone:

(c)       SUBTOTAL

(d)      Less amount of claim for the tennis court retaining wall

(e)       AMOUNT LEFT ‘IN HAND’

$179,264

$13,018

$192,282

$121,758

$70,524

This amount exceeded the amount TCM was liable to pay the respondents. As such, TCM submitted, recovery of $38,746.89 would constitute double recovery in accordance with the equitable principle stated in Boncristiano v Lohmann.[12]
The Tribunal rejected TCM’s submissions. The following references occur in the reasoning process:

141. First [counsel for the respondents] contended that the settlement agreements contain releases that extend beyond the scope of the defects identified in the proceeding. He argued that these releases have not been the subject of evidence that would allow them to be quantified in the proceeding. There is merit in this submission. In particular, it is not entirely clear from the express words of the settlement agreements that the amounts paid were limited to the defective work claims. Consequently, I have difficulty attributing all of the settlement monies (excluding those monies which are specified to be in satisfaction of any costs claimed) solely to the repair of defects.

[12] [1998] 4 VR 82 (Boncristiano). See also Townsend v Stone Toms & Partners (1984) 27 BLR 26; and Baxter v Obacelo Pty Ltd (2001) 205 CLR 635, 656 [46].
In relation to this paragraph it is to be noted that TCM tendered the settlement agreements but they were not explained by the respondents for the purpose of meeting the double recovery point.
Next:

145.         In my view, there is a clear distinction between the loss claimed against TCM and the loss claimed against the non-participating respondents. The proposition advanced by [counsel for TCM] would only eventuate where the Tribunal has determined that two or more respondents are proportionately responsible for the same loss or damage. For example, if TCM and the Engineer were held to be each 50% responsible for the damage to the east wall and the Engineer had settled for the full amount of the damage claimed, then recovery of a further 50% of the loss against TCM would result in over compensation. However, that scenario does not arise in the present case because I have not determined that any of the other non participating respondents are proportionately responsible for the same loss for which I have held TCM liable.

148.         In the present case, the only items of defective work claimed against TCM were those agitated in the hearing of this proceeding. Of those items for which I have held TCM liable, only the east wall of the pool and the gymnasium were items where the evidence remotely suggested that some of the non-participating respondents may have been proportionately responsible for the loss and damage suffered. However, that evidence was limited and did not assist me in determining what, if any, blame was to be attributed against those non-participating parties. Ultimately, I determined that the cause of the damage to the east wall over the pool and in the gymnasium was due to the failure by TCM to adequately waterproof that wall in accordance with the engineering and architectural drawings. I did not find that any ambiguity or conflict in those drawings exculpated TCM from liability, given my interpretation of those drawings and my finding as to what a reasonably competent builder would do in order to comply with its contractual obligations under the Contract.

153.         Further, I am not satisfied that there is sufficient evidence establishing that any of the settlement monies paid to the Owners represent payment or part payment of the damages suffered as a result of the defects claimed against TCM. The settlement agreements produced during the course of the hearing did not adequately disclose how monies were to be allocated in respect of the items of defective work described in the reports prepared by Mr Casamento. In those circumstances, I am unable to find that the settlement monies were paid in satisfaction or part satisfaction of any of the defective work claims that I have determined against TCM.

154.         Having regard to my comments and findings above, I am of the view that it is of no consequence whether the settlement sums paid to compromise claims not prosecuted against TCM either over or under compensated the Owners. The settlement sums only become relevant to the question of double recovery where they are paid to compromise a claim for which the non-participating respondents share responsibility with TCM. That is not the case here because I am unable to make any finding that the settlement sums paid have compensated the Owners for any loss and damage caused by TCM. Accordingly, I do not regard the settlement sums as being relevant to my findings against TCM.
The Tribunal concluded by determining that the respondents pay TCM $15,703.91, being the difference between the amount determined in favour of TCM ($54,450.80) less the amount determined in favour of the respondents ($38,746.89).[13]
However, that did not end the matter. The Tribunal adjourned the further hearing to 4 April 2012 to hear submissions as to the final form of the orders to be made, including on costs and interest.

[13] Principal Reasons [155].
As mentioned earlier, the Tribunal published the Second Reasons on 12 April 2012. The Tribunal revisited the matter of the retention fund. Noting that TCM had drawn on the fund, it was determined that the fund should not be included in the reconciliation between the competing claims.[14] The result was to leave TCM liable to pay the respondents $22,654.97, and the Tribunal so ordered. That is the order which TCM seeks to have set aside.

[14] Second Reasons [15].
That still left the question of costs and, as mentioned, this was dealt with by orders on 8 May 2012 by which:

1. The respondents were ordered to pay TCM’s costs up to 29 July 2011, and

2. TCM was ordered to pay the respondents’ costs thereafter.

Leave to appeal
By originating motion filed on 17 May 2012, TCM sought leave to appeal against the order made on 12 April 2012 that TCM pay the respondents’ $22,654.97 and the order made on 8 May 2012 that TCM pay the respondents’ costs after 29 July 2011, the latter to be set aside as a consequence of the appeal against the former.
Mukhtar AsJ heard the application. On 14 December 2012 he dismissed the proceeding with costs. His reasons, delivered in short form,[15] disclose that 18 questions of law were raised before him, the first five of which concerned double recovery. He said that the Tribunal had applied the correct legal principles and that TCM’s complaint was about findings of fact, which rendered the principle inapplicable (paragraph 7).

[15] Appeal Book 746-751.
TCM appealed against the orders of Mukhtar AsJ.[16]

[16] Appeal Book 752.
On 7 February 2013 Daly AsJ gave TCM leave to file an Amended Notice of Appeal (Notice of Appeal) to the effect of abandoning all questions of law other than questions 1 to 5 concerning double recovery.[17]

[17] Appeal Book 764.
The appeal was heard by Vickery J on 6 June 2013 as a rehearing de novo. When the matter came on, TCM’s counsel drew attention to an additional question 6 in the Notice of Appeal, which also concerned the issue of double recovery. The application was conducted on the basis of the six questions.[18] Each question is developed in the Notice of Appeal by a series of grounds.

[18] The Notice of Appeal is at Appeal Book 753-763.
In his reasons, Vickery J did not refer to the questions of law or the related grounds, or deal with them. This contributed to us being quite in the dark as to the existence of any questions of law or grounds until late in the argument before us. All that Vickery J identified as a question of law, and upon which he gave leave to appeal but dismissed the appeal, was the matter of the evidentiary onus in a double recovery situation, and in particular that in this case it had passed to the respondents. Vickery J was correct as to a question of law arising as to this, and in holding that the Tribunal had relevantly misapprehended the law. It is important to note as to this, that before Vickery J it was common ground between the parties, and the hearing was conducted on this basis, that the Tribunal had erred in this respect of the onus, but Vickery J did not acknowledge that this was common ground. That it was common ground involved a departure by the respondents from their position before the Tribunal.
Further, and as stated in TCM‘s written outline before us,[19] in the hearing before Vickery J the respondents conceded that the claims made in the pleadings against the parties who had settled, overlapped to some degree with the claims made against TCM. Vickery J did not acknowledge this.

[19] Paragraph 11 of TCM’s submission, dated 26 July 2013.
It was confusing that Vickery J did not otherwise refer to the questions of law submitted by TCM, even if it were to say that they did not raise a doubt as to the correctness of the Tribunal’s determination, and why that was so. After all, he was at least implicitly refusing leave on those questions, although this was not reflected in his orders. An indication that his Honour’s view was that no doubt was raised, appears in the argument where he said that the error of law is ‘the failure to apply the correct approach … Which is really the only error of law. That’s the way I take it.’[20] It is not entirely clear what his Honour meant by this. It may be that he meant to refer to the question of the onus. Whatever be the position, we were informed by counsel that he gave no reasons for excluding consideration of the questions.

[20] Transcript of Proceeding, TCM Builders Pty Ltd v Olyvia Nikou & Anor (Supreme Court of Victoria, Vickery J, 6 June 2013) 83.
In relation to this, it is to be noted that in paragraph [81] of his reasons his Honour did identify a second error. I refer to this below.
A further matter not dealt with by his Honour was the question of the amount to be taken into account if the defence of double recovery was held applicable. Before him and in this Court various calculations and approaches were put forward; see TCM’s written outline before Vickery J, the grounds of appeal, and the summary provided to Vickery J and found at Appeal Book 822. The same omission is to be found in the reasons of the Tribunal. Hence, at each level there has been an omission to deal with that aspect of the issue. The Court of Appeal should not be left in this position. The Tribunal ought to have dealt with the issue, in the event that its determination on the issue of double recovery was held to be wrong. It will be necessary for the parties to deal with this issue before the Court that hears the appeal in order that all matters may be disposed off at the one time.
Vickery J concluded, correctly, that the Tribunal erred on the matter of the onus and erred in stating (at [81]) that double recovery only applied where two or more respondents were proportionately responsible for the same loss and damage. Nevertheless, he held that the case was answered in favour of the respondents by the purported factual finding that the settlement sums did not compensate the respondents for damage caused by TCM.
In my opinion, the Tribunal’s decision on the matter of double recovery, with the consequent order against TCM, and the decision and order of Vickery J, is attended by doubt such that it is appropriate to grant leave, for the following reasons, at least.
As the respondents conceded before Vickery J, the Tribunal erred in not observing and having regard to the evidentiary onus on the respondents to explain the settlement sums.[21] The Tribunal regarded the onus of satisfaction as being on TCM, and in these circumstances made the findings at [141] and [153].

[21] See Boncristiano v Lohmann [1998] 4 VR 82, 89-90.
Then, the question under the double recovery principle is whether ‘the claims for damages are concurrent, in the sense that the claims “overlap”’, as stated by Winneke P in Boncristiano.[22] For this purpose, regard is had to the claims. That is, in this case, to the respective claims of the respondents against TCM and the settling parties. Counsel for TCM sought to demonstrate overlap by pointing to the claims made. It will be recalled that the respondents conceded before Vickery J that there was some overlap; cf the first sentence in [145] of the Tribunal’s reasons which TCM submits is wrong, and as to which there must be doubt.

[22] Ibid 88.
The Tribunal, however, approached the matter in a different way, by considering whether proportionate or shared responsibility was found for the loss and damage suffered; see [145], [148] and [154]. Vickery J correctly considered the Tribunal was wrong in this respect.
On this issue, Vickery J (at [82]) said it was difficult to see how the claims could be concurrent given the vastly different roles which the various parties were engaged to perform. To regard the ‘roles’ performed is not the same thing as testing the matter by regarding the claims made. Hence, there is doubt as to Vickery J’s decision, namely, whether he proceeded on a misapprehension of the law in this respect.
Further, it seems evident from Vickery J’s reasons at [79] and [80] that he understood the Tribunal to have found that TCM had failed to establish a prima facie case that the respondents received money as compensation in respect of concurrent claims, in the sense that they were claims made to recover the same damage; that, Vickery J said, was plain from [153] and [154].[23] TCM submitted that the Tribunal did not so find, and that in stating as he did, Vickery J misconstrued the Tribunal’s reasons. As to this, it is sufficient to say that doubt is established.

[23] Reasons [80].
On the issue whether TCM established a prima facie case, which TCM submitted it had, and that the respondents had not answered the case, it was again submitted that Vickery J was in error. That is arguable.
Next, TCM submitted that where global settlement sums could not be allocated to individual claims made, with the result that TCM could not show what payments were made in respect of the continuing claims against it, so that the global sum cannot be allocated to individual claims, and the sum is taken to be paid in respect of all claims, it followed from the Tribunal’s finding at [153] that payments had been made in respect of overlapping claims. This is directly contrary to Vickery J’s statement of the Tribunal’s findings at [79]-[80]. Further, Vickery J expressly based his decision on [153]. It is to be noted that Vickery J did not deal with the effect of the above global sum submission.
The above is not intended as an exhaustive list of every respect in which it may be submitted that Vickery J and the Tribunal erred on a question of law. Among other things, there are the matters referred to earlier in these reasons. TCM also submitted that Vickery J’s reasons were inadequate in the appellable sense; see TCM’s written outline. The above is rather an attempt to identify that which lies at the heart of the matter and in relation to which I consider it is shown that doubt exists as to the correctness of the decisions, and consequent orders, that warrant leave to appeal being granted. What is exposed, in my opinion, is a doubt that the
Tribunal’s orders are founded on a misapprehension of the applicable legal principle, and error in its application, which produced a purported finding or findings of fact but which in truth are arguably inextricably bound up with and reflect what may be multiple errors of law, comprehended by the question of law.
Furthermore, there is a consequential doubt over the appropriateness of the costs order that was made. In addition, I consider that substantial injustice will result if the decision of Vickery J is left to stand. The proposed Notice of Appeal should be amended to reflect the questions of law now relied upon.