Beechwood Homes (NSW) Pty Ltd v Hassos

NCAT Appeal Panel|2022-11-17

Hadley v Baxendale (1854) 9 Ex 341; 156 ER 145 Ho v Powell [2001] NSWCA 168 House v The King [1936] HCA 40; (1936) 55 CLR 499 Ippolito v Cesco [2020] NSWSC 561 Italiano v Carbone & Ors [2005] NSWCA 177 Jones v Dunkel & Anor [1959] HCA 8; (1959) 101 CLR 298 Kurmond Homes Pty Ltd v Marsden [2018] NSWCATAP 23 Leeda Projects Pty Ltd v Zheng [2020] VSCA 192; (2020) VR 384 Leung v Alexakis [2018] NSWCATAP 11 McKerlie v Leeser [2023] NSWCATAP 112 Minister for Immigration and Multicultural Affairs; Ex parte Lam [2003] HCA 6; 214 CLR 1 Moses v Ratner [2022] NSWSC 1234 Pholi v Wearne [2014] NSWCATAP 78 Pollock v NSW Trustee & Guardian [2022] NSWSC 923 Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 Robinson v Harman (1848) 154 ER 363 Robinson v Hindmarsh Construction Australia Pty Ltd [2021] NSWCATAP 51 Ryan v BKB Motor Vehicle Repairs Pty Ltd [2017] NSWCATAP 39 Sabouni v Revelop Building and Developments Pty Ltd [2021] NSWSC 31 Selstam Pty Ltd v McGuiness; James Hardie & Coy Pty Limited v McGuiness [2000] NSWCA 29 Simjanovska v Dogan [2023] NSWCATAP 69 Toplace Pty Ltd v Rashidianfar [2021] NSWCATAP 235 Touma v Colantuono [2021] NSWCATAP 152 Water Board v Moustakas [1988] HCA 12; (1994) 180 CLR 491 Williams v McFarlane [1996] NSWCA 559 Wojciechowska v Blue Mountains City Council [2022] NSWCATAP 299 Texts Cited: None cited Category: Principal judgment Parties: Beechwood Homes (NSW) Pty Ltd (Appellant) Polixeni Hassos (Respondent) Representation: Counsel: D Neggo (Appellant) M Walsh (Respondent)

Solicitors: Snelgroves Pty Ltd (Respondent) File Number(s): 2022/00275892 Publication restriction: Nil Decision under appeal Court or tribunal: Civil and Administrative Tribunal Jurisdiction: Consumer and Commercial Division Citation: [2022] NSWCATACD 121 Date of Decision: 20 August 2022 Before: D Goldstein, Senior Member File Number(s): HB 21/08577

REASONS FOR DECISION

This is an appeal from a decision of the Consumer and Commercial Division of the Tribunal to award an owner of residential premises damages of $485,817.
The residential premises are a house constructed by the appellant pursuant to a written contract between the appellant and the respondent located in Port Stephens NSW, a coastal urban area approximately 65 klms north of Newcastle, NSW.
In this decision, the appellant is referred to as 'the builder' and the respondent is referred to as 'the owner.'
The damages were awarded in respect of: 1. $137,966, for the cost of rectifying defective work performed by the builder in breach of the statutory warranties in s 18B of the Home Building Act 1989 (NSW) ("the HB Act') ('the defect damages claim'); and 2. $347,851 for loss of income derived from renting the premises for short term holiday occupation in the period from 1 July 2019 and 31 December 2019 ('the rental damages claim').
The Notice Of Appeal was filed on 15 September 2022. The appeal was filed within the applicable limitation period under r 25 of the Civil and Administrative Tribunal Rules 2014 (NSW).
The grounds of appeal raised by the builder are that the Tribunal erred in law in respect of: 1. Denial of procedural fairness by (a) refusing an adjournment application of the builder in relation to the defect damages claim and then adjourning the hearing to allow the owner a further opportunity to adduce evidence in the rental damages claim; and (b) admitting into evidence two affidavits (one being the affidavit of the owner dated 7 February 2022; and the other an affidavit of Mr Kim (accountant) dated 14 February 2022) without informing the builder the Tribunal intended to do so and give the builder an opportunity to provide evidence in response and make submissions on those affidavits; 2. Failing to make a work order under s 48O of the HB Act that the builder rectify defects rather than awarding damages for the cost of rectification. The builder submits that the Senior Member "reversed the onus of proof" and did not correctly apply s 48MA of the HB Act. Ground 3 of the appeal asserts that the Tribunal should have made a work order, and does not add in substance to Ground 2. 3. The assessment of damages in the rental damages claim. The builder submits that there was "no evidence to support" the award of damages. The builder further submits that the Senior Member erred by assessing an amount that was a gross amount, and did not make any deduction for expenses and tax obligations (i.e. was not a 'net' amount).
The builder also seeks leave to appeal under cl. 12 of sch. 4 of the Civil and Administrative Tribunal Act 2013 (NSW) ('the NCAT Act').
The Appeal Panel granted a partial stay of the award of damages made by the Tribunal. The owner has engaged a new builder to rectify defects. The builder submits that if the appeal is successful the proceedings will need to be remitted back to the Tribunal and the terms of such remittal should include a recalculation of the damages to make an adjustment to reflect the costs that the builder would have incurred in complying with a work order (i.e. the owner would only be awarded defect damages up to the amount of the cost to the builder in rectifying the defects, as distinct from the costs of engaging another builder to rectify the defects).

The Decision of the Tribunal

There was an oral hearing in the Tribunal on 9 December 2021. The proceedings were subsequently listed for a further hearing 'on the papers' on 29 March 2022. The decision was then reserved, and a written decision published on 29 August 2022.
The Tribunal's decision is divided into two parts.
The first part deals with the defect damages claim. Evidence regarding that claim was heard by the Tribunal on the first hearing day (9 December 2021).
The Tribunal set out at paras [10]-[12] of the decision that: 1. The builder had not filed a defence to the owner's Points of Claim and had not filed and served any lay evidence or expert evidence until it filed and served an expert report of Mr Brincat, building consultant, the day before the hearing. The owner had filed and served an expert report by Mr Waddell, building consultant, and Mr Brincat was responding to that report. Mr Waddell's report (which contained a Scott Schedule) was dated 9 April 2021. 2. The builder had "done little to comply with Tribunal orders or prepare its case" other than the late service of Mr Brincat's report. 3. The builder's representative, Mr Wilson (who appears, from the written submissions provided in the Tribunal proceedings, to be an in-house lawyer as he describes himself as "Solicitor for the respondent"), stated the builder opposed paying damages for the cost of rectification, and argued that if defects were found the builder should be ordered to rectify, raising the 'preferred outcome' under s 48MA of the HB Act. 4. The builder did not seek to cross examine the owner on her lay evidence.
The Tribunal stated that the experts had not conferred and prepared a Joint Scott Schedule due to the late service of the builder's expert report. The Tribunal admitted the reports of the experts into evidence, and directed that they confer with each other to identify areas of agreement and disagreement prior to giving evidence at the hearing.
After that meeting and prior to giving evidence, the Tribunal was informed by the experts that Mr Brincat agreed with Mr Waddell's opinion regarding both defects and the method of rectification in respect of defect items 2,3,4,6 and 8. Mr Brincat agreed with Mr Waddell that defect items 1, 10 and 11 were defective, but did not agree with Mr Waddell's opinion on the appropriate method of rectification of those items. Mr Waddell had provided costings of his proposed method of rectification of all of the defects items. Mr Brincat had offered no opinion on rectification costs or Mr Waddell's costings.
The Tribunal set out at [17]-[55] the evidence of each of the experts on the 14 defect items, and explained its findings on the defective work, the method of rectification, and the cost of rectification. The experts agreed on many issues, and where they did not agree, the Tribunal largely accepted the opinion of Mr Waddell over Mr Brincat .
At paragraphs [56]-[61] the Tribunal deal with the issue of whether a work order should be made under s 48O of the HB Act that the builder rectify defective work, or an award of damages should be made for the cost of the owner engaging another builder to rectify the found defects. The Tribunal referred to the 'preferred outcome' under s 48MA of the HB Act, and that the owner did not agree to an order that the builder rectify defects as the builder "has on three separate occasions attempted to rectify defects without success".
The Tribunal stated as follows (at paras [59]-[61]): The builder has not filed evidence in these proceedings. Orders were made on 23 April 2021 giving it the opportunity to file (sic) all documents on which it intended to reply upon. Despite this the only document provided by the builder was Mr Brincat's report the day before the hearing. While the builder seeks to rely on s 48MA of the Home Building Act, it has not placed any material before the Tribunal which might be relied upon to make a work order secure in the knowledge that the builder will treat the rectification work seriously with appropriate resources, and importantly, a high level of supervision and inspection to ensure the necessary work is carried out with due care and skill in accordance with all applicable Codes and Australian Standards. An offer to have an expert certify that the work has been carried out in accordance with a proper rectification scope and in accordance with all applicable Codes and Australian Standards will often help the Tribunal to make a work order, with confidence that proceedings will not be re-litigated as renewal proceedings because the original work orders were not complied with. Given that the owner's evidence, which I accept, that the builder has on three separate occasions attempted to rectify defects without success has not been contradicted, and the builder has made no proposals as to how the rectification work will be carried out in an effective way, I have decided not to make a work order.
The Tribunal then calculated damages for the cost of rectifying defective work. The amount calculated was $137,966.
The second part of the decision deals with the rental damages claim.
The Tribunal stated (at paras [64]-[65]) that orders were made at the hearing on 9 December 2021 "to allow the owner to call further evidence and made submissions on her holiday rental claim and also to allow the builder to call evidence and made submissions in response to the claim".
The procedural directions were that the owner file and serve all further documents in respect of the "holiday rental damages claim" by 31 January 2022; the builder file and serve all documents in respect of the "holiday rental damages claim" by 28 February 2022; both parties were to file and serve written submissions setting out their respective positions on the "holiday rental damages claim" by 7 March 2022; and: 10. The applicant's 'Holiday Rental' damages claim is by consent to be determined on the papers without a need for a hearing. If either party seeks a hearing either in person or by audio-visual link, that party must write to the Registrar of the Consumer and Commercial Division of the Tribunal seeking such a hearing in lieu of a hearing on the papers.
The procedural directions made on 9 December 2021 also included the following direction: 7. A failure by a party to provide documents in accordance with the Tribunal orders may result in the party not being able to rely on the documents at the hearing unless leave is granted to do so.
The Tribunal set out the parties' evidence and submissions on the rental damages claim. The claim was first identified in the witness statement of the owner dated September 2021 when the owner informed the builder's "salesman" (sic) that she was building the dwelling the subject of the proceedings as a holiday let to earn some extra income for herself, and that due to the defects in the dwelling and her lack of funds to have the defects rectified, she had been unable to rent the dwelling. The owner asserted she would have no difficulty in renting the dwelling during holiday periods (para [65]-[66] Tribunal's reasons).
The Tribunal then referred to the evidence and submissions of the owner on the holiday rental damages claim. The evidence was a further witness statement of the owner dated 7 February 2022 and an affidavit of Mr Kim, chartered accountant, dated 14 February 2022. The further statement of the owner was filed and served on or about 7 February 2022. The affidavit of Mr Kim and the owner's written submissions on the rental damages were filed and served on or about 15 February 2022..
The builder filed and served written submissions on the rental damages claim on or about 8 March 2022.
The evidence contained in Mr Kim's brief affidavit is set out at paragraphs [72]-[73] of the Tribunal decision. Mr Kim is a chartered accountant and partner in an accountancy firm. He performed a rental valuation. He used 3 sources to calculate an annual rental yield (Winnings Holidays; O'Meara Property; and Air DNA). Mr Kim asserted that the annual return for renting the property was $99,386. His calculations commenced from 1 July 2019 as constituting the earliest the dwelling would have been available to rent on the basis that the handover between the builder and the owner occurred on 11 March 2019.
The owner's further evidence is set out at paragraph [73] of the Tribunal decision. The owner stated that she was not residing in the property and had been unable to rent the property due to the extent of the defects (which included water ingress issues) and being unable to afford the cost of engaging a new builder to perform rectification works. The owner stated that she was seeking damages for loss of rental income for the period from 14 February 2019, but with an additional period to take into account the time necessary for defects to be rectified so that the premises could be rented.
Importantly, at paragraphs [74]-[78] of the decision, the Tribunal sets out the submissions of the builder in response to the rental damages claim.
The builder submitted that none of the further evidence and submissions of the owner in respect of the rental damages claim should be considered by the Tribunal due to non-compliance with Tribunal directions (as they were filed late).
The Tribunal at paras [75]-[76] rejected that submission. The Tribunal acknowledged the owner's further evidence and its submissions on the rental damages claim had been filed and served late. However, to accept the builder's submission on this issue would have the effect of preventing the owner from pursuing this aspect of the claim.
The Tribunal stated that the builder had not identified any prejudice or unfairness to the builder to allow the further evidence and submissions to be taken into account. The Tribunal pointed out that the builder could have applied for an extension of time to file and serve its evidence in the rental damages claim, but chose not to do so. Had the builder applied for an extension of time it would "have inevitably been given" (Tribunal decision para [75]).
The Tribunal noted the provisions of s 38 (4) of the NCAT Act which states that the Tribunal is to act "with as little formality as the circumstances of the case permit and according to equity, good conscience and the substantial merits of the case without regard to technicalities or legal forms", and held that provision was "also a reason for rejecting the builder's submission" that the further statement of the owner and the report of Mr Kim should not be admitted into evidence.
The Tribunal then at paras [77]-[103] dealt with the builder's submissions and made findings in respect of the rental damages claim.
The Tribunal noted that the builder made submissions on the merits of the owner's rental damages claim. The builder submitted that there was no evidence of any managing agency agreement with a real estate agent to let the premises; there was no evidence of the terms of the occupation certificate; the dwelling would need to be furnished to be rented out; the first complaints about defects occurred in April 2020 which was approximately 12 months after the date of practical completion; and there was evidence the owner, her partner, or other family members had occupied the property at various times.
The Tribunal noted the builder's submissions did not assert the owner's rental damages claim was too remote (i.e. that principles in Hadley v Baxendale meant the owner was precluded at law from claiming damages for loss of rental income).
The Tribunal made the following factual findings: 1. Work under the contract reached practical completion on 11 March 2019. 2. The owner obtained an interim Occupation Certificate on 7 March 2019, subject to 3 minor conditions. 3. The owner first raised defective work with the builder on 30 May 2019. 4. The owner did furnish the premises. 5. The owner attended the property for short periods of time from March 2019 onwards in the context of attempting to get the builder to rectify defects, but was not in continual occupation of the residence. 6. The expert evidence of Mr Kim was not based on there being continual rental occupation for the premises for 365 nights per year, but was based on a much more conservative occupation estimate based on holiday periods. 7. The owner has not been able to rent the premises due to the extent and magnitude of the building defects. 8. The owner could not afford to engage another builder to rectify the defects so that the premises could be rented out. 9. The owner would have no difficulty in renting the premises during holiday periods. 10. The owner not engaging a managing agent did not affect the rental damages claim, because irrespective of whether a managing agent was engaged the extent and magnitude of the defects precluded the property from being rented. 11. The owner was not challenged on factual matters underpinning the rental damages claim; nor did the builder adduce evidence to contradict it, such as evidence that the defects were not sufficient to prevent the premises being rented. That failure made it easier to accept the owner's evidence. 12. The extent and magnitude of the defects was a sufficient cause of the owner incurring loss by reason of the inability to rent the premises (the Tribunal referring to the 'common sense' test of causation in Alexander v Cambridge Credit Corporation Ltd (1987) 9 NSWLR 310 at 358; and Selstam Pty Ltd v McGuiness; James Hardie & Coy Pty Limited v McGuiness [2000] NSWCA 29 at [202]-[204].
The Tribunal accepted the evidence of Mr Kim that the annual rental income for holiday periods for the residential premises was $99,386. The Tribunal found that it would take approximately 4 months to rectify defects from the date of the decision, and accordingly the rental damages loss was the period from 1 July 2019 to 31 December 2022 (3.5 years) in the amount of $347,851.

Conduct of the Tribunal Hearing

The appeal submissions and documents included a transcript of relevant extracts of the hearing relied upon by the builder.

The Adjournment Application by the Builder

At the commencement of the hearing on 9 December 2021, the builder submitted that it was seeking an adjournment because it was "not in a position" to cross examine the owner's expert Mr Waddell; and that it believed in any event the owner would be seeking to amend the claim to bring the holiday rental claim. The builder would oppose such an application and, if leave were granted to amend, the builder would be seeking an adjournment in any event, because it could not meet such a claim.
The builder conceded that only just prior to the hearing it had filed and served the report of Mr Brincat, with such a report being filed and served well out of time. The builder blamed delays due to Covid 19 for failing to file and serve its expert report in accordance with Tribunal directions.
The owner (represented by her Solicitor) submitted that, despite the report of Mr Brincat having been served just prior to the hearing, the owner could "deal with" the report if it were admitted into evidence.
The owner denied that the rental damages claim was a new claim. However, after further argument, the owner accepted that in the Points of Claim filed on 25 March 2021 there was no reference to the rental damages claim, with the cause of action and remedy confined to damages for rectification of allegedly defective work in breach of the statutory warranties under s 18B of the HB Act.
The owner had filed Amended Points of Claim dated 13 April 2021. The focus was upon breach of statutory warranties, but the Amended Points of Claim did refer to the owner suffering "loss in rectifying the defective work and incomplete work" (paragraph 17) and in paragraph 21 sought orders that included the builder paying the owner's "costs (sic) to rectify defective building work and completing the incomplete work in the sum of $137,863" and additionally "damages".
The owner's evidentiary statement dated September 2021 had referred to a potential rental damages claim as follows: I say that due to defects and my lack of funds to have them rectified, I have been unable to rent the House out as a Holiday Let. I have made enquiries with Winning Holidays, O'Meara Property and LJ Hooker as to the expectation of market rental for the house. A copy of the advices received are exhibited at Tab 15 of Exhibit PPH-1. I say that from my own enquires I would have no difficulty in letting the property during the holiday periods.
The owner's building consultant's expert report was served in April 2021. The owner's witness statement was served on 13 September 2021.
On 6 December 2021, the owner had served an outline of submissions, which relevantly included the following reference to the holiday rental claim: The respondent gave practical completion on 14 February 2019. The applicant has been unable from that period until now and continuing to let the dwelling at the rates set out in LJ Hooker updated schedules averaging rentals out to a reasonable sum of the lesser rates shown for (address) allowing for the Easter of 2019 until the Summer of 2021.
In the "orders sought" part of the submissions, in addition to the amount of $137,863 for the cost of rectifying defective work (and completing incomplete work) the owner identified the following: An order that the respondent pay to the applicant a sum to be assessed by the Tribunal for loss of Holiday Rental.
The position of the owner in respect of the rental damages claim was that the builder had been on notice since mid-September 2021 that it was possible that such a claim would form part of the owner's claim for "damages" because there was no other reason it would be referred to in a witness statement.
The builder submitted that it regarded the paragraphs in the owner's statement dated September 2021 referring to loss of an ability to rent the premises and the enquiries she had made regarding what income could have been obtained as "irrelevant" as there was no specific pleading referring to a claim for loss of rental income damages, and the issue had only been clearly raised in the owner's outline of submissions. The builder further submitted that the witness statement of the owner was served "late" and that it was unfair that the builder had to deal with "some material in a late witness statement" that did not specifically relate to a pleading.
The hearing transcript also refers to correspondence prior to the hearing between the parties where the builder indicated on 9 November 2021 the hearing should be adjourned, and the owner's Solicitor made clear that the owner would not be seeking an adjournment of the hearing.
At the hearing, the Senior Member did not accept that the there was any reasonable excuse for the builder not having complied with procedural directions regarding the filing and serving of evidence, or being prepared for the hearing in respect of the defects damages claim. The Senior Member determined that the late report of Mr Brincat could be tendered on the basis that both experts were available for questioning (as was the owner) on 9 December 2021, and the experts could confer on the morning of the hearing and identify to the parties and the Tribunal what they agreed and disagreed about prior to giving evidence in the afternoon.
In respect of the rental damages claim, the Senior Member rejected this as a basis of adjourning the whole of the hearing. The Senior Member raised that the proceedings could be part-heard, with both parties being given an opportunity to adduce further evidence and make submissions on the rental damages claim.
The Senior Member stated: Senior Member: Mr Wilson, in circumstances where you have done absolutely nothing in these proceedings, despite two directions hearings, and an extension of the timetable (sic). You've done nothing in these proceedings until the morning of the hearing. And then to suggest all of the problems are the fault (sic) lie at the applicant's feet, I find quite incredible. To misquote William Shakespeare, methinks you protest too much. I have already given you a way that I can deal with your issues, and accommodate the situation regarding this holiday rental, despite the fact that this was material that was in front of you plain as a pikestaff so they say (sic) from September and your only issue in relation to it is that it doesn't seem to have been linked to a paragraph in the amended claim. I've said with that, I do have a slight amount of sympathy for you , and I will accommodate you. But I don't see the fact that I am accommodating you in connection with this type (sic) small issue, a secondary issue, should really cause the adjournment of the entire hearing for some time, until March or April. And as I have said, when you get, even if you do marshal evidence, it may be that your evidence won't contradict that of the applicant, and if it does, so be it. But nonetheless, it seems to me that any discussion we are going to have regarding the holiday rental damages, it can be constrained and within a short period of time. So, as I have said, I do not grant the extension of the adjournment that you have sought, and during the course of the day, we will come up with some type of arrangement to deal with the holiday letting claim the applicant now wishes to bring. But the main claim, the defects claim, I would like to deal with today. …
After Mr Waddell and Mr Brincat gave evidence (including the parties questioning of the experts) the Tribunal returned to the manner in which the rental damages claim would be dealt with. Although it is not precisely stated in the transcript of the hearing, it is clear that the Tribunal granted the owner leave to amend the claim to seek damages for loss of rental income, on the basis that both parties were given the opportunity to adduce evidence and make submissions on this issue.
A brief exchange occurred where the Senior Member referred to evidence from Mr Brincat that indicated he had formed a view (for reasons that are unclear) that the owner was residing in the premises. The owner's Solicitor stated that this was contrary to his instructions and understanding of the facts, and he would seek further instructions, which would have a bearing on what further evidence would be adduced on the rental damages claim and if the claim would be pursued.
The Senior Member then called for oral submissions of the parties in respect of the defects damages claim. Both representatives made submissions, including on the issue of whether a work order or award of damages should be made and the provisions of s 48MA of the HB Act.
The Tribunal then returned to the issue of how the rental damages claim was to be dealt with.
The Senior Member referred to a proposed timetable for both parties to file and serve evidence and submissions on the issue if the claim was going to be pressed. The following exchange then occurred: Builder's Representative: Certainly, Member. Can I say though Member, and I just wish to recount the objection I made earlier. In circumstances where I have been forced on today, and I don't cavil with that decision, but these proceedings were commenced in February and it's not until its put in writing in the applicant's submissions served two days earlier that they wished to amend. And then I have to deal with the amendment, and I appreciate the indulgence that you have granted me Member, but the applicant shouldn't get a chance to get their house in order. Senior Member: Well, the point is rather than pushing people on in short periods of time to do things when it's going to take a bit of time to get a hearing date anyway, we might as well just use the time we've got available. Because the worst thing that can happen is people get short periods of time, then they have to sit on their hands waiting for a long period of time to get a hearing date. We might as well use all of the time before the hearing date to get out cases worked up as much as possible. I'm going to give you until the 28th of February Will that be enough? Builder's Representative: But Member, I don't know if you understand. The objection I am making is why should the applicant at this late stage be given a chance to put on further evidence when the hearing for the entire matter was scheduled for today. Senior Member: Because I don't think, there's…Essentially because you, even though it wasn't pleaded against you, you were given an indication in September that you would have to face a holiday letting case, because the evidence was there on the table looking at you. But you did nothing in connection with it because you thought it hadn't been pleaded, and then when the obvious happened and it was brought to your attention you've said look, I've been taken by surprise. So don't want to keep traversing this Mr Wilson, I've made my mind up on it. Builder's Representative: Certainly, Member. …
The Senior Member then pointed out that the builder would have ample time in the timetable the Senior Member proposed to make for further evidence and submissions to "look into holiday rentals in this part of the world up hill and down dale."
The builder then stated that it wished to "issue some Summonses too, Member" and the Senior Member responded that the builder could issue Summonses upon "whatever organisations that you might think are necessary if you can't get relevant information from them otherwise."
The owner then raised that it was "content" with the rental damages claim being determined on the papers and without further hearing. The Senior Member asked the builder to identify whether or not it agreed with that course of action. The following exchange occurred: Senior Member: What do you say about that Mr Wilson? Are you content for it to be dealt with on the papers? Builder's Representative: Member, I'd like to qualify the answer that I give now by saying not knowing what I am going to be dealing with, my primary position will be to deal with it on the papers, but if there was something that is coming on 29th January that causes me to depart from that, I would seek to notify the Tribunal and my friend of that. Senior Member: I'll grant leave for you to seek a hearing if appropriate. …
The hearing then concluded with the Tribunal making the procedural timetable for further evidence and submissions to be made by both parties on the rental damages claim.
The Senior Member also referred to giving an "interim" (sic) decision on the defects damages claim, but it appears it was subsequently determined appropriate to deal with all issues in a single decision. Nothing arises from this, as no ground of appeal was raised that the Tribunal committed any error on a question of law by giving a single decision, rather than separate decisions on the defects damages claim and the rental damages claim.

Parties Further Evidence and Submissions on the Rental Damages Claim

The evidence and the submissions of the parties is referred to earlier in this decision. However, it is salient to reiterate: 1. The further statement of the owner and the report of Mr Kim were served beyond the Tribunal procedural direction requirement. 2. The owner's supplementary witness statement dated 7 February 2022 denied that she or anyone else was residing in the premises. 3. The builder never sought an extension of time to file and serve evidence in response to the supplementary statement of the owner and the expert report of Mr Kim if that evidence was admitted. The builder submitted that the evidence should not be admitted because it had been filed and served late and the owner had not formally applied for an extension of time. The builder also did not inform the Tribunal that it sought a further oral hearing to question the owner and/or Mr Kim on their evidence if the Tribunal granted an extension of time and the evidence was admitted. The builder simply submitted that it was "not required" to cross examine the owner or Mr Kim in circumstances where the evidence was served late. 4. The builder also made submissions that went to the substance of the owner's rental damages claim, dealing with issues of (a) lack of evidence of the owner appointing a managing agent and furnishing the premises for rental; (b) lack of evidence that a final Occupation Certificate had been issued or the owner had addressed the conditions in the interim Occupation Certificate; (d) delay in complaining to the builder about defects; and (e) evidence that the owner, her partner, or family members were residing in the property. On the basis of those matters, the builder submitted the owner had not proved her claim for loss of rental income.

GROUNDS OF APPEAL AND SUBMISSIONS ON APPEAL

The builder's grounds of appeal have been set out previously and do not require repetition. The builder filed and served written submissions in support of the appeal and submission in reply. The owner filed and served written submissions. Oral argument was made at the appeal hearing supplementing the written submissions.

Builder's Submissions

The builder's submissions are summarised as follows:

Procedural Fairness 1. The owner's further lay evidence in the rental damages claim was served on 7 February 2022; the expert evidence of Mr Kim was served on about 14 February 2022, and the owner's written submissions on the rental damages claim were served on 15 February 2022. No leave was sought in accordance with direction 7 of the Tribunal dated 9 December 2021 to extend the timetable, nor was any explanation provided as to why the evidence and submissions were not filed by 31 January 2022. 2. The owner was entitled to oppose the owner's evidence being admitted because the owner had not sought leave to extend the timetable and rely upon it. 3. The Tribunal did not "properly resolve" why it was granting leave for the owner to rely upon late evidence in its reasons, and admitting the material was procedurally unfair to the builder because no leave to extend the timetable was sought by the owner prior to or when it served its late material. 4. In exercising its discretion to admit the late material, the builder was not given the opportunity to make submissions opposing leave being granted or to seek an extension of the timetable for it to file and serve evidence in response. This was both a denial of procedural fairness, and an error in the exercise of discretion within the principles enunciated in House v The King [1936] HCA 40; (1936) 55 CLR 499. 5. Leave to appeal is required on the decision to admit the late evidence of the owner as it was an interlocutory decision, but due to the nature of the error leave should be granted.

Failure to Make a Defects Rectification Work Order

The Tribunal's reasons at [59]-[61] constituted a reversal of the onus and a misapplication of the 'preferred outcome' under s 48MA of the HB Act. In substance, the Tribunal adopted a position that the builder was obliged to provide evidence to satisfy the Tribunal that a work order was appropriate, rather than the owner to persuade the Tribunal that the 'preferred outcome' under s 48MA of the HB Act should be departed from.

Rental Damages Claim Assessment

The Tribunal based its assessment on Mr Kim's evidence. Mr Kim's assessment of yearly loss of holiday rental income was based on a gross amount per year, and actual loss must take into account the expenses that the landlord would incur in renting the property. There was no evidence from Mr Kim assessing the actual loss of income to the owner and if damages were to be awarded they should have been nominal damages.

Leave to Appeal Under Cl. 12 of Sch. 4 of the NCAT Act.

Although the Notice of Appeal identified that leave to appeal was sought under cl. 12 of sch. 4 of the NCAT Act, all of the builder's submissions were based on error on a question of law and no submissions were made that leave to appeal should separately be granted under cl. 12 of sch. 4 of the NCAT Act.

Owner's Submissions

The owner's submissions are summarised as follows: 1. There was no denial of procedural fairness to the builder in the Tribunal refusing the builder's application to adjourn the hearing on 9 December 2021. The builder had ample time to prepare for the owner's defects damages claim and had failed to do so, including substantial breaches of procedural timetable obligations. 2. In any event, the builder does not challenge any of the findings made in the defects damages claim, where the Tribunal made findings about the nature of the defects, the extent of the defects, the appropriate method of rectification and the cost of rectification. The only order challenged in the defects damages claim is that a work order should have been made rather than an award of damages. This has nothing to do with the decision of the Tribunal not to grant the builder an adjournment of the hearing on 9 December 2021. 3. The Tribunal made no error in applying the legal principles under s 48MA of the HB Act, and all of the matters it took into account were relevant matters as to whether the preferred outcome under s 48MA should be departed from. The Tribunal did not 'reverse the onus of proof.' 4. There was no denial of procedural fairness in the Tribunal admitting into evidence the supplementary witness statement of the owner or the expert report of Mr Kim. The builder had the opportunity to adduce its own evidence to rebut the owner's evidence in the rental damages claim, and chose not to do so. The builder made submission on the claim in any event, and there was no error in the Senior Member's factual findings. 5. The builder did not make a submission that the evidence of Mr Kim should not be accepted because he calculated a gross rather than net amount, and the builder should not be able to raise this issue on appeal. Had the builder made such a submission to the Senior Member, the owner would have made a submission in reply. 6. There was no error in the Senior Member accepting the uncontradicted and unchallenged evidence of the owner and Mr Kim. However, if the Appeal Panel was satisfied an error had occurred, the Appeal Panel should exercise its power to recalculate damages rather than remitting the matter. There is documentary evidence of the percentage agent management fee in the documents that formed part of Mr Kim's report, and an appropriate recalculation to take into account such fees would be damages of $306,854.28. 7. Additionally, the owner sought the Appeal Panel award further damages for an additional 3 month delay in rectifying defects caused by the appeal process.

SCOPE AND NATURE OF APPEALS

Internal appeals may be made as of right on a question of law, and otherwise with leave (that is, the permission) of the Appeal Panel: s 80 (2) of the NCAT Act.
Internal appeals involve consideration of whether there has been any error of law; or any error other than an error of law sufficient to grant leave to appeal under cl. 12 of sch. 4 of the NCAT Act.
An appeal is not simply an opportunity for a dissatisfied or aggrieved party to re-argue the case they put at first instance: Ryan v BKB Motor Vehicle Repairs Pty Ltd [2017] NSWCATAP 39 at [10].
In Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 ('Prendergast') the Appeal Panel set out at [13] a non-exclusive list of questions of law: 1. Whether there has been a failure to provide proper reasons. 2. Whether the Tribunal identified the wrong issue or asked the wrong question. 3. Whether a wrong principle of law had been applied. 4. Whether there was a failure to afford procedural fairness. 5. Whether the Tribunal failed to take into account relevant (i.e., mandatory) considerations. 6. Whether the Tribunal took into account an irrelevant consideration. 7. Whether there was no evidence to support a finding of fact; and 8. Whether the decision is so unreasonable that no reasonable decision-maker would make it.
The circumstances in which the Appeal Panel may grant leave to appeal from decisions made in the Consumer and Commercial Division are limited to those set out in cl. 12 (1) of sch. 4 of the NCAT Act. In such cases, the Appeal Panel must be satisfied that the appellant may have suffered a substantial miscarriage of justice on the basis that: 1. The decision of the Tribunal under appeal was not fair and equitable; or 2. The decision of the Tribunal under appeal was against the weight of evidence; or 3. Significant new evidence has arisen (being evidence that was not reasonably available at the time the proceedings under appeal were being dealt with).
In Collins v Urban [2014] NSWCATAP 17 ('Collins v Urban'), the Appeal Panel stated at [76] that a substantial miscarriage of justice for the purposes of Cl. 12 (1) of Sch. 4 may have been suffered where: … there was a "significant possibility" or a "chance which was fairly open" that a different and more favourable result would have been achieved for the appellant had the relevant circumstance in para (a) or (b) not occurred or if the fresh evidence under para (c) had been before the Tribunal at first instance.
Even if an appellant from a decision of the Consumer and Commercial Division requiring leave to appeal has satisfied the requirements of cl. 12 (1) of sch. 4 of the NCAT Act, the Appeal Panel must still consider whether it should exercise its discretion to grant leave to appeal under s 80 (2) (b) of the NCAT Act.
In Collins v Urban, the Appeal Panel stated at [84] that ordinarily it is appropriate to grant leave to appeal only in matters that involve: (a) issues of principle; (b) questions of public importance or matters of administration or policy which might have general application; (c) an injustice which is reasonably clear, in the sense of going beyond merely what is arguable, or an error that is plain and readily apparent which is central to the Tribunal's decision and not merely peripheral, so that it would be unjust to allow the finding to stand; (d) a factual error that was unreasonably arrived at and clearly mistaken; or (e) the Tribunal having gone about the fact finding process in such an unorthodox manner or in such a way that it was likely to produce an unfair result so that it would be in the interests of justice for it to be reviewed.
Even if the appellant establishes that it may have suffered a substantial miscarriage of justice in the sense explained above, the Appeal Panel retains discretion whether to grant leave under s 80 (2) of the NCAT Act. The appellant must demonstrate something more than the Tribunal was arguably wrong (Pholi v Wearne [2014] NSWCATAP 78 at [32]).

Adjournment, Admission of Late Evidence, and Denial of Procedural Fairness

Although it is referred to as a ground of appeal, the builder's submissions did not refer to the failure of the Tribunal to adjourn the hearing of the defects damages claim on 9 December 2021 as an error of law.
However, because it is referred to in the grounds of appeal, we will deal with that issue for the sake of completeness.
The principles applicable to granting an adjournment of a hearing are well established. A concise summary of the principles is set out in Touma v Colantuono [2021] NSWCATAP 152 as follows at [56]-[58]: 56. When refusing the adjournment application, the Tribunal cited the Appeal Panel in Hanson v Metricon Homes Pty Ltd [2019] NSWCATAP 133 from [25] to [28] (Hanson). While the Supreme Court allowed an appeal from the Appeal Panel's decision in Hanson (see Hanson v Metricon Homes Pty Ltd [2020] NSWSC 401), the Court's judgment turned on the facts of the particular case rather than on the legal principles articulated in the Appeal Panel's decision, which are uncontroversial. 57. The Appeal Panel in Hanson cited another Appeal Panel decision, Armee v Brealey [2017] NSWCATAP 141 (Armee), on the issue of the circumstances in which a refusal to grant an adjournment may give rise to a denial of procedural fairness. In that matter, the Appeal Panel stated at [121]: 121 The Tribunal has the power to adjourn proceedings under s 51 of the Act. The power to adjourn is to be exercised according to the principles set out by the High Court in Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management Pty Ltd [2013] HCA 46; (2013) 250 CLR 303, French CJ, Kiefel, Bell, Gageler and Keane JJ at 321 [51] (see O'Neill v T and I Engines Pty Ltd [2015] NSWCATAP 77 at [21]). Procedural fairness may be denied if a decision maker fails to adjourn proceedings where such a failure has the effect of depriving a person of adequately presenting the person's case: see Grozdanov v N&T Buildings Pty Ltd [2015] NSWCATAP 107 at [51]; Tiwari v Champion Homes Sales Pty Ltd [2016] NSWCATAP 73 at [21]-[22]. … 58. The Appeal Panel in Armee cited another Appeal Panel decision which considered the issue of adjournment applications: O'Neill v T and I Engines Pty Ltd [2015] NSWCATAP 77. In that matter, the Appeal Panel stated at [20] to [23]: 20 In Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Limited [2013] HCA 46, a unanimous High Court said: "In Aon Risk Services Australia Ltd v Australian National University, it was pointed out that case management is an accepted aspect of the system of civil justice administered by the courts in Australia. It had been recognised some time ago by courts in the common law world that a different approach was required to tackle the problems of delay and cost in the litigation process. Speed and efficiency, in the sense of minimum delay and expense, are essential to a just resolution of proceedings. The achievement of a just but timely and cost-effective resolution of a dispute has effects not only upon the parties to the dispute but upon the court and other litigants. The decision in Aon Risk Services Australia Ltd v Australian National University was concerned with the Court Procedures Rules 2006 (ACT) as they applied to amendments to pleadings. However, the decision confirmed as correct an approach to interlocutory proceedings which has regard to the wider objects of the administration of justice." 21 That approach is applicable in this Tribunal. Section 36(1) of the Civil and Administrative Tribunal Act 2013 ('the Act') is in relevantly identical terms to s 56(1) of the Civil Procedure Act 2005, the provision considered in the Expense Reduction decision. 22 It follows that a number of principles apply to applications for an adjournment: (1) matters should almost always proceed on the date fixed for hearing, for the reasons enunciated above, (2) an application for an adjournment should be seen as the exceptional rather than the ordinary course; (3) where the adjournment is caused, at least in part, by the delay of the party seeking the adjournment, or non-compliance by that party with an extant order of the Tribunal, adequate explanation is called for, and its absence weighs heavily, and sometimes decisively against the grant of an adjournment 23 Further, there is the effect on the opposing party to consider. In Sayhoun v Owners Corporation Strata Plan 75123 [2014] NSWCATAP 112, an Appeal panel of this Tribunal said at [17], in terms we would adopt: "We are satisfied that the respondent would be prejudiced if an extension of time were granted. That prejudice may be addressed by an award of costs, although we note the remarks of the plurality in Aon Risk Services Aust Pty Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175 at [100] that justice cannot always be measured in money and that a judge is entitled to weigh in the balance the strain the litigation imposes upon litigants; and their approval (also at [100]) of Bowen LJ's statement in Cropper v Smith [1884] 26 Ch D 700 that: Non-compensable inconvenience and stress on individuals are significant elements of modern litigation. Costs recoverable even on an indemnity basis will not compensate for time lost and duplication incurred where litigation is delayed or corrective orders necessary."
The decision of the Tribunal not to adjourn the hearing on 9 December 2021 and allow evidence to be taken on the defects damages claim was logical, rational, and consistent with established legal principles. The Tribunal allowed the builder to rely upon the very late report of Mr Brincat and for the experts to confer before commencing the hearing and both parties were given the opportunity to question the experts and make submissions on the defects damages claim.
The builder submits that the Tribunal committed an error of law in refusing the builder's adjournment application (of the entire hearing), but allowing the owner to amend the proceedings and claim damages for loss of rental income. However, that conflates different issues.
The Tribunal's guiding principle is that it must focus upon the just, quick, cheap and efficient resolution of the real issues in dispute (s 36 (1) of the NCAT Act) and parties and representatives have a duty to assist the Tribunal to achieve that outcome (s 36 (3) of the NCAT Act).
However, the provisions of s 36 (1) of the NCAT Act must be considered in conjunction with the provisions under s 38 of the NCAT Act.
Section 38 of the NCAT Act relevantly states: 38 Procedure of Tribunal generally (1) The Tribunal may determine its own procedure in relation to any matter for which this Act or the procedural rules do not otherwise make provision. … (4) The Tribunal is to act with as little formality as the circumstances of the case permit and according to equity, good conscience and the substantial merits of the case without regard to technicalities or legal forms. (5) The Tribunal is to take such measures as are reasonably practicable - (a) to ensure that the parties to the proceedings before it understand the nature of the proceedings, and (b) if requested to do so - to explain to the parties any aspect of the procedure of the Tribunal, or any decision or ruling made by the Tribunal, that relates to the proceedings, and (c) to ensure that the parties have a reasonable opportunity to be heard or otherwise have their submissions considered in the proceedings. …
It is well established the Tribunal must conduct hearings in a procedurally fair way, and the provisions of s 38 of the NCAT Act provide a statutory context to that duty.
Procedural fairness is not an abstract concept. As Gleeson CJ in Re Minister for Immigration and Multicultural Affairs; Ex parte Lam [2003] HCA 6; 214 CLR 1 ('Lam') said at [37] in respect of procedural fairness: ...Fairness is not an abstract concept. It is essentially practical. Whether one talks in terms of procedural fairness or natural justice, the concern of the law is to avoid practical injustice.
Basten JA addressed the same issue in Italiano v Carbone & Ors [2005] NSWCA 177 at [88]: An opportunity foregone, but reasonably available, does not demonstrate breach of procedural fairness. To demonstrate procedural fairness it is usually necessary to show that a claimant "lost an opportunity to put any information or argument to the decision-maker, or otherwise suffered any detriment," as explained by Gleeson CJ in Re Minister for Immigration, Multicultural and Indigenous Affairs; Ex parte Lam (2003) 214 CLR 1 at [36]. …
The principle expressed in Lam has been considered and followed on many occasions. In Christian Community Ministries Ltd v Minister for Education and Early Learning [2023] NSWSC 272, Basten AJ again referred to the Lam principle as follows at [73]-[74]: Re Minister for Immigration and Multicultural and Indigenous Affairs; Ex parte Lam[13] was a case in which the applicant said that procedural fairness arose from the failure of a departmental officer to contact a particular witness, having agreed to do so. Gleeson CJ stated: "22 The applicant was unable to point to any additional information, or any argument, that might have been put before the respondent if there had been contact between the Department and Ms Tran following 7 November 2000, or if the applicant had been told that there would be no such contact. There is nothing to justify a view that, considered objectively, proper decision-making required further contact with Ms Tran." In short, the lost opportunity was not shown to have caused any detriment to the applicant. Gleeson CJ continued: "37 A common form of detriment suffered where a decision-maker has failed to take a procedural step is loss of an opportunity to make representations. ... A particular example of such detriment is a case where the statement of intention has been relied upon and, acting on the faith of it, a person has refrained from putting material before a decision-maker. In a case of that particular kind, it is the existence of a subjective expectation, and reliance, that results in unfairness. Fairness is not an abstract concept. It is essentially practical. Whether one talks in terms of procedural fairness or natural justice, the concern of the law is to avoid practical injustice."
One of the arguments raised by the builder in respect of denial of procedural fairness is that the Tribunal refused to adjourn the defects damages claim, but that the Tribunal granted leave to the owner to amend the proceedings to claim damages for loss of rental income and then adjourned the hearing with procedural directions allowing the parties time to file and serve evidence and submissions on the rental damages claim.
It was within the discretion of the Tribunal to allow the amendment at the hearing. In exercising that discretion the Tribunal was obliged to focus upon doing justice between the parties according to law, but in the context of balancing considerations that include the lateness of the application to amend; the explanation for the need to amend, whether the proposed amendment was consistent with the just, quick and cheap resolution of the real issues in dispute; any prejudice or unfairness caused to the other party if the amendment was allowed; and the public interest in proceedings being determined efficiently rather than delayed by way of further adjournment (Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175 at [30]; [102]; [116]).
In allowing the amendment, the Tribunal accorded procedural fairness to both parties because both parties were given a reasonable opportunity to adduce further evidence and make submissions on the rental damages claim.
The Tribunal correctly took into account the provisions of s 50 (2) and (3) of the NCAT Act when determining that the rental damages claim be determined without oral hearing, because the issue was raised at the hearing; both parties were given an opportunity to be heard on that issue; and the builder was given an opportunity in the procedural directions made on 9 December 2021 to seek a further oral hearing.
Section 50 of the NCAT Act states: 50 When hearings are required (1) A hearing is required for proceedings in the Tribunal except - (a) in proceedings for the granting of leave for an external or internal appeal, or (b) in connection with the use of any resolution processes in proceedings, or (c) if the Tribunal makes an order under this section dispensing with a hearing, or (d) in such other circumstances as may be prescribed by the procedural rules. (2) The Tribunal may make an order dispensing with a hearing if it is satisfied that the issues for determination can be adequately determined in the absence of the parties by considering any written submissions or any other documents or material lodged with or provided to the Tribunal. (3) The Tribunal may not make an order dispensing with a hearing unless the Tribunal has first - (a) afforded the parties an opportunity to make submissions about the proposed order, and (b) taken any such submissions into account. (4) The Tribunal may determine proceedings in which a hearing is not required based on the written submissions or any other documents or material that have been lodged with or provided to the Tribunal in accordance with the requirements of this Act, enabling legislation and the procedural rules. (5) This section does not prevent the Tribunal from holding a hearing even if it is not required.
The issue of a whether it is appropriate to conclude a final hearing 'on the papers' was discussed by the Appeal Panel in Simjanovska v Dogan [2023] NSWCATAP 69, where the Appeal Panel stated at [91]-95]: Section 50 (2) of the NCAT makes clear that the Tribunal has a discretion to dispense with an oral hearing were parties and witnesses appear (either in person, by telephone, or by Audio-Visual Link) if it is "satisfied that the issues for determination can be adequately determined in the absence of the parties" by considering the documents and written submissions of the parties. Section 50 (3) states that such an order may not be made (provided that it is the type of matter requiring a "hearing" under s 50 (1) of the NCAT Act, which does not involve matters such as a set aside application under r 9 of the Civil and Administrative Tribunal Regulation 2022 (NSW)-see r 9 (8) of the Civil and Administrative Tribunal Regulation 2022 (NSW)) unless the parties have been given the opportunity to be heard on this issue and if they have made submissions, for those issues to be considered. In exercising that discretion, the Tribunal must consider whether "the issues for determination can be adequately determined" solely on the basis of the documentary evidence and submissions. "The issues for determination" is to be read in the context of s 36 (1) of the NCAT Act as being the "real issues" for determination, which is assessed objectively and not on the basis of the subjective assertions of a party as to what it regards as the issues for determination. The Tribunal cannot be used as a vehicle for a party to insist that every issue or grievance it raises be heard and determined, no matter if it is manifestly groundless; irrelevant; peripheral to the real issues in dispute; or vexatious. The Tribunal must also take into account its obligation under s 38 (5) (c) of the NCAT Act that parties are to be given a reasonable opportunity to be heard or otherwise have their submissions considered in proceedings; and its general duty whilst exercising judicial power to conduct proceedings in a procedurally fair way, which includes giving parties a reasonable opportunity to be heard (Minister for Immigration and Multicultural Affairs v Bhardwaj [2002] HCA 11; (2002) 209 CLR 597 at [40]; Sullivan v Department of Transport [1978] FCA 48; (1978) 20 ALR 323 at 343). Section 50 (2) of the NCAT Act uses the phrase "adequately determined". The Macquarie Dictionary defines "adequate" as follows: adjective 1. (sometimes followed by to or for) equal to the requirement or occasion; fully sufficient, suitable, or fit. 2. Law reasonably sufficient for starting legal action: adequate grounds By deciding that a hearing should be conducted without an oral hearing, a party is not able to question the other party's witnesses. However, the inability to do so does not, of itself, constitute a denial of procedural fairness.
Applying those principles to the circumstances of this appeal, there was no denial of procedural fairness in allowing the amendment of the proceedings and the determination of the rental damages claim without a further oral hearing.
The critical issue raised by the builder on the issue of denial of procedural fairness is that the decision of the Tribunal to admit the second statement of the owner and the expert report of Mr Kim despite the evidence being served in a manner non-compliant with the procedural directions made on 9 December 2021 was procedurally unfair to the builder.
Direction 7 of the Tribunal dated 9 December 2021 does not state that evidence filed and served outside the procedural directions timetable would not be admitted into evidence. It states that the "result" of a party failing to comply with procedural directions "may" be that the party is not able to rely on such documents (i.e. the documents not being admitted into evidence) unless the Tribunal grants leave.
We accept that the Solicitor for the owner did not formally seek leave to rely upon the further statement of the owner and the affidavit of Mr Kim by seeking an extension of the procedural timetable and providing a reason for the non-compliance. It is regrettable the Solicitor for the owner failed to do so. However, the documents were filed and served a relatively short period after the timetable obligation, and the submissions of the owner on the rental damages claim were filed and served within the time period prescribed in the timetable obligation.
Direction 7 of the Tribunal dated 9 December 2021 did not state that a party must formally seek leave to rely on late evidence. Rather, it reposes in the Tribunal the discretion to grant leave to allow the late evidence irrespective of whether there is a formal application for leave.
It is clear that the owner was seeking to rely upon the further statement of the owner and the evidence of Mr Kim. The builder was aware, or should reasonably have been aware, that the Tribunal had the discretion to admit that evidence even though a timetable extension had not formally been sought beforehand.
In its submissions filed on 8 March 2022 the builder made a strategic decision to simply assert that the evidence should not be admitted because of non-compliance with procedural directions. The written submissions of the builder on this issue were as follows: … 3. By order 6, the Tribunal ordered that"[t]he (sic) documents provide by each party must be placed in a folder, each page must be numbered for easy identification by all concerned at the hearing". 4. The respondent has not been served in accordance with Tribunal orders. No documents were furnished by 31 January 2022. No folder of documents has been furnished to the respondent. No application for an extension or variation to the orders has been made by the applicant. The applicant has sent two emails, dated 7 February 2022 and 15 February 2022 as well as submissions in support dated 7 March 2022. No explanation for the delay has been proffered by the applicant. 5. It is the respondent's submission that the 'new' documents referred to by the applicant are not properly before the Tribunal and must be excluded from consideration. …
As discussed previously, the builder then made submissions at paragraphs [7]-[11] of the written submissions that the owner's rental damages claim should be rejected based only on the evidence up to and including the hearing on 9 December 2021.
A legally represented party is bound by the strategic decisions it makes in the manner in which it runs its case, other than in the exceptional circumstance of a mistake, omission, or incompetence leading to a serious miscarriage of justice (Williams v McFarlane [1996] NSWCA 559 at pp 3-5 per Kirby P-'Williams v McFarlane') .
The builder could have, as the Tribunal pointed out in its decision, sought an extension of time to file and serve evidence in response to the slightly late evidence of the owner in the rental damages claim. It could also have sought the proceedings be re-listed before the Tribunal, or sought an oral hearing on the rental damages claim. It had ample time to do so. It could have made submissions that dealt with the slightly late evidence of the owner and Mr Kim on the basis that it was within the discretion to allow the evidence to be admitted. It could have submitted that the Tribunal give no or little weight to the additional evidence. For example, the builder could have submitted that Mr Kim was not suitably qualified to express an expert opinion, or that his methodology was flawed, or that the factual matters he was asked to assume were unproven or speculative.
The builder did none of those things. It made a strategic decision to limit its submissions on the rental damages claim, and is bound by the consequences of that strategic decision. That strategic decision does not fall within the exceptional circumstances identified in Williams v McFarlane. There is no denial of procedural fairness because the builder had the reasonable opportunity to both adduce evidence and make submissions on the basis that the further statement of the owner and the affidavit of Mr Kim were admitted into evidence despite having been served slightly late. No practical injustice arises other than that which was self-inflicted, which is not a basis for the establishment of denial of procedural fairness.
The builder submits that the Tribunal's exercise of its discretion to allow the late evidence was an error of law within the well-established principles expressed by the High Court in House v The King [1936] HCA 40; (1936) 55 CLR 499 ('House v The King'). Those principles are set out at 504-505 as follows: [i]t is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed … It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance
We are not satisfied that the exercise of the Tribunal's discretion to grant leave to allow into evidence the further statement of the owner and the affidavit of Mr Kim fall within the error of law identified in House v The King. It was, as previously discussed, within the power of the Tribunal to admit the evidence even where the owner had not formally sought leave to extend the time period for the filing and serving of evidence. There was no misapplication or legal principle; or mistake as to the facts; or failure to consider material considerations leading to an exercise of discretion that was unreasonable or plainly unjust.
The grounds of appeal based on denial of procedural fairness and House v The King are dismissed. It is unnecessary to consider the issue of whether leave to appeal would be granted from an interlocutory decision to admit the late evidence, as the interlocutory decision is not infected with legal error or an error of a type that leave would be granted under cl 12 of sch. 4 of the NCAT Act.

Section 48MA of the HB Act

Section 48 MA of the HB Act states: 48MA Rectification of defective work is preferred outcome in proceedings A court or tribunal determining a building claim involving an allegation of defective residential building work or specialist work by a party to the proceedings (the responsible party) is to have regard to the principle that rectification of the defective work by the responsible party is the preferred outcome.
The principles applicable to s 48MA of the HB Act are well established.
In Kurmond Homes Pty Ltd v Marsden [2018] NSWCATAP 23 at [41]-[46] the Appeal Panel stated as follows: While not appropriate to seek to define all circumstances that might justify a court or tribunal making an order that departs from the preferred outcome, it is necessary to give some consideration to the nature of the obligation imposed on the court or tribunal by s 48MA. First, the principle, by its terms, only applies "in determining a building claim involving an allegation of defective residential building work or specialist work." It is not expressed to apply where, for example, the building claim only involves an allegation of incomplete residential building work or specialist work. That is not to suggest s 48O does not otherwise permit a work order in respect of work found to be incomplete. Second, s 48MA is directed towards the remedy or "outcome" to be provided by the court or tribunal where a claimant establishes the responsible party has carried out defective residential building work or specialist work. In this sense, it is not properly described as a "presumption." Rather, it is a remedy to be "preferred" to other forms of order which the court or tribunal might make. Third, while s 48MA provides the court or tribunal "is to have regard to the principle that rectification of the defective work by the responsible party is the preferred outcome", the section does not mandate that a work order must be made in all cases. Further, the section does not confine the form of orders that may be made under s 48O, including an order that defective work be rectified by the responsible party engaging another person to carry out that work on behalf of the responsible party. Fourth, the term "preferred" is not defined. The HB Act and Regulations do not specify circumstances in which the preferred outcome is not to be adopted. However, guidance as to the meaning of "preferred" and the circumstances that would justify an order for a different outcome is found in the second reading speech where the Minister for Fair Trading makes clear that the purpose of the amendment was to: (1) prevent a homeowner from unreasonably refusing a builder access to a building site to rectify defective work; (2) permit a builder to return to carry out necessary rectification work if they are willing; and (3) support the timely and cost-effective resolution of disputes. That is, in deciding what order should be made, a court or tribunal may consider whether there is a reasonable basis for any objection raised by the homeowner to the builder being permitted to rectify the defective work, the terms of any order, whether the builder is willing to return and whether such an order would support a timely and cost effective resolution of the dispute.
Whether the Tribunal departs from the "preferred outcome" that the builder who performed the defective work rectify it involves the exercise of discretion (Leung v Alexakis [2018] NSWCATAP 11 at [139]; Robinson v Hindmarsh Construction Australia Pty Ltd [2021] NSWCATAP 51 at [66]).
We do not accept the builder's submission that the Tribunal applied s 48MA of the HB Act on the basis that the builder bore an onus of establishing that a work order should be made rather than an award of damages.
When the reasons of the Tribunal at paras [56]-[61] of the decision are read fairly and in their full context, the Tribunal was clearly considering all the relevant facts and circumstances as to whether it should depart from the preferred outcome that the builder rectify its defective work. The Tribunal gave a rational explanation as to why it was departing from the preferred outcome. Such matters included the previous unsuccessful attempts of the builder to rectify defects; the builder failing to adduce any evidence in the proceedings (as distinct from a mere submission) that it was prepared to return to the site and rectify defects; or adduce evidence that there were mechanisms to avoid future disputes such as rectification work being 'signed off' by an independent expert.
The Tribunal did not find that the builder must provide evidence on those issues, but merely that the absence of evidence in the context of previous unsuccessful attempts to rectify defects and the owner's opposition to a work order were sufficient to depart from the 'preferred outcome' under s 48MA of the HB Act. That, in our view, did not involve an incorrect application of legal principles pertaining to s 48MA of the HB Act; nor a wrong exercise of discretion under House v The King principles.
The grounds of appeal based on the Tribunal making an award of damages for the cost of rectifying defective work rather than a work order under s 48O of the HB Act are dismissed.

Assessment of Damages for Loss of Holiday Rental Income

This ground of appeal is that the Tribunal applied the wrong legal principle to the assessment of damages; and (a) should have found there was no evidence to support the claim; or (b) the evidence was insufficient to discharge the onus of proof; or (c) if there was sufficient evidence, the Tribunal applied the wrong legal principle to quantification of loss.
The owner submits that the builder cannot raise this as a ground of appeal because it was not raised at first instance. That, in substance, raises the issue of a party not being able to raise a fresh matter on appeal that was not raised in the hearing below. The Appeal Panel discussed applicable principles in Divola v Natural Solar Power Pty Ltd [2022] NSWCATAP 379 at [28]-[29]: …As the plurality of the High Court of Australia noted in Coulton v Holcombe (1986) 162 CLR 1 at 8; [1986] HCA 33: . . . in a recent decision of six Justices of this Court (University of Wollongong v. Metwally [No. 2] ) the Court said: "It is elementary that a party is bound by the conduct of his case. Except in the most exceptional circumstances, it would be contrary to all principle to allow a party, after a case had been decided against him, to raise a new argument which, whether deliberately or by inadvertence, he failed to put during the hearing when he had an opportunity to do so. (citations omitted) See too Drivas v Burrows [2014] NSWCATAP 87 where the Appeal Panel observed: 32. The considerations favouring finality of litigation are at least as strong, and probably stronger, in the case of the Tribunal given the importance attached to the expeditious and inexpensive disposition of proceedings [under the] Civil and Administrative Tribunal Act (the Act). 33. Generally, a new point will not be allowed where the consequence would have to be a new trial because "evidence could have been given which by any possibility could have prevented the point from succeeding": Suttor v Gundowda [[1950] HCA 35; (1950) 81 CLR 418] at 438.3.
In Water Board v Moustakas [1988] HCA 12; (1994) 180 CLR 491 Mason CJ, Wilson, Brennan and Dawson JJ stated at [13]-[17]: 13. More than once it has been held by this Court that a point cannot be raised for the first time upon appeal when it could possibly have been met by calling evidence below. Where all the facts have been established beyond controversy or where the point is one of construction or of law, then a court of appeal may find it expedient and in the interests of justice to entertain the point, but otherwise the rule is strictly applied. See Suttor v. Gundowda Pty. Ltd. [1950] HCA 35; (1950) 81 CLR 418, at p 438; University of Wollongong v. Metwally (No.2) (1985) 59 ALJR 481, at p 483; 60 ALR 68, at p 71; Coulton v. Holcombe [1986] HCA 33; (1986) 162 CLR 1, at pp 7-8; O'Brien v. Komesaroff [1982] HCA 33; (1982) 150 CLR 310, at p 319. 14. In deciding whether or not a point was raised at trial no narrow or technical view should be taken. Ordinarily the pleadings will be of assistance for it is one of their functions to define the issues so that each party knows the case which he is to meet. In cases where the breach of a duty of care is alleged, the particulars should mark out the area of dispute. The particulars may not be decisive if the evidence has been allowed to travel beyond them, although where this happens and fresh issues are raised, the particulars should be amended to reflect the actual conduct of the proceedings. Nevertheless, failure to amend will not necessarily preclude a verdict upon the facts as they have emerged. See Dare v. Pulham (1982) 148 CLR 658. In Leotta v. Public Transport Commission (N.S.W.) (1976) 50 ALJR 666, at p 668; 9 ALR 437, at p 446, a case having been submitted to the jury which was factually different from that alleged in the pleadings and particulars, Stephen, Mason and Jacobs JJ. observed that the pleadings should have been amended in order to make the facts alleged and the particulars of negligence precisely conform to the evidence. The failure to apply for the amendment in that case was held not to be fatal. But in Maloney v. Commissioner for Railways (N.S.W.) (1978) 52 ALJR 291; 18 ALR 147, Jacobs J., with whom the other members of the Court agreed, pointed out (at p 294; pp 151-152 ALR) that the conclusion in Leotta was reached only upon the presupposition that the new issue or new way of particularizing the existing issue had emerged at the trial and had been litigated. 15. It is necessary to look to the actual conduct of the proceedings to see whether a point was or was not taken at trial, especially where a particular is equivocal. The particular in question in this case falls into that category. The allegation that the employer failed to provide adequate barriers did not indicate the purpose for which it was contended that barriers ought to have been provided. The case presented by the plaintiff, however, made it quite clear that it was being alleged that the barriers ought to have been provided to prevent traffic from crossing into the first lane. The plaintiff could have presented his case in the alternative, upon the basis that the employer was negligent in failing to provide a barrier to prevent him from straying into the second lane. The relevant particular, because of its breadth, would have allowed such a case to be put. But it was not put. The plaintiff presented his case solely on the basis that he remained in the first lane and the imprecision of the relevant particular cannot be the means of attributing to the plaintiff a case which he did not make. Cf. Esso Petroleum Co. Ltd. v. Southport Corporation (1956) AC 218. 16. The employer was never required to meet a case that the plaintiff was hit by the bus in the second lane and it was entitled in conducting its defence to rely upon the case which was actually put. Had the plaintiff alleged in the alternative that the accident occurred in the second lane, the employer may have been compelled to address in a different way the question of its failure to erect adequate barriers if necessary calling evidence concerning the feasibility of adopting such a measure. The point was, however, raised for the first time upon appeal and, because of the possibility that the employer may, if it had been raised below, have wished to call evidence in response to it, it ought not to have been entertained. 17. It is true that in Maloney (at p 294; p 152 ALR) it was recognized that in "very exceptional cases" a plaintiff's omission to put at trial a case formulated on appeal may not be conclusive against him. But it was pointed out that the opportunity to assert the new case at another trial should only be granted where the interests of justice require it and such a course can be taken without prejudice to the defendant. No exceptional circumstances arise in this case where the parties adopted the course which they took of their own choice. Moreover, it could hardly be said that a new trial could be held now, more than ten years after the accident, without prejudice to the defendant.
In this matter, the builder did not make submissions or adduce evidence in response to the further evidence of the owner and the affidavit of Mr Kim in the rental damages claim.
However, the builder did oppose the rental damages claim, by submitting at paragraphs [7]-[11] of its submissions dated 7 March 2022 that the owner should not be awarded damages because "any loss was suffered was not occasioned by the respondent". The Tribunal dealt with the builder's submissions in its reasons, as discussed previously.
The claim for rental damages was opposed, and the Tribunal had to correctly apply legal principles to assess the rental damages claim. Although the owner complains that the owner could have made submissions in reply to the Tribunal if the builder had submitted that loss of rental income damages should be assessed on a basis that takes into account the expenses of the owner in renting the property, it does not submit that it would have sought to adduce fresh evidence if that point had been raised in submissions; nor does it clearly identify what submissions it would have made before the Tribunal in reply. In any event, the Tribunal had not made any procedural direction for evidence or submissions in reply in the rental damages claim.
Further, what is being raised on appeal involves the application of legal principles to the facts found by the Tribunal at first instance. In substance, the point raised is that the owner was overcompensated because the Tribunal did not make any deduction for her likely expenses in renting the property.
We are satisfied that the builder can raise this ground of appeal.

No Evidence to Make Factual Findings

The builder submits that there was "no evidence" from the owner for the Tribunal to make the finding that the owner was unable to holiday let the house due because of the building defects. The builder submits (at paras [31]- [34] of written submissions in chief) that the owner's evidence properly read: "…was evidence of either a value judgement or an assumption by the owner that the house could not be holiday-let until the defects were rectified. It was not evidence that, as an objective fact, that there was no market for holiday letting the house, or that it would not have been possible to holiday let the house at a rate which would have mitigated the owner's loss. Nor was it, properly read, evidence of an opinion of that objective fact. The Tribunal erred in misconstruing the owner's evidence and in finding that, as an objective fact, that due to defects the owner had been unable to rent the house as a holiday let. There was no other evidence to support that finding. In the course of making that finding, the Tribunal further erred in placing weight on the fact the owner was not challenged on her evidence. It was not necessary to challenge that evidence, as it was only evidence of the owner's value judgement or assumption. There was no obligation on the builder to cross examine on evidence which did not prove the owner's case. Alternatively, if (contrary to the foregoing) the owner's evidence was evidence of an objective fact, then the Tribunal erred in accepting that evidence at face value and, in doing so, failing to administer "substantial justice." The Tribunal ought to have found the evidence did not discharge the requisite standard of proof…"
Rules of evidence do not strictly apply in the Tribunal other than for specific types of proceedings (ss 38 (2) and (3) NCAT Act). However, litigation between an owner and a builder where the owner is seeking an award of damages under principles of breach of statutory warranties and breach of contract is adversarial in nature (McKerlie v Leeser [2023] NSWCATAP 112 at [83]) and common law evidentiary principles are relevant to the procedurally fair conduct of such adversarial litigation (Chi Building Pty Ltd v Wedgwood [2016] NSWCATAP 64; Deacon v National Strategic Constructions Pty Ltd; National Strategic Constructions Pty Ltd v Deacon [2017 NSWCATAP 185 at [36]-[37]).
The Tribunal made no finding under the principles in Jones v Dunkel & Anor [1959] HCA 8; (1959) 101 CLR 298 that an inference should be drawn that witnesses who would reasonably expected to be called would, if called, not have assisted the builder's case. The pertinent issue (leaving aside remoteness of damage, which is not challenged in the builder's grounds of appeal or appeal submissions) is whether there was sufficient evidence for the Tribunal to make factual findings that the owner intended to rent the property to derive income; and that the extent of the defects were a sufficient cause of her being prevented from doing so, causing loss.
Harrison J stated in Moses v Ratner [2022] NSWSC 1234 at [40]-[41]: The oft cited passage from Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; [2011] HCA 11 at [63] should be noted: "[63] The rule in Jones v Dunkel is that the unexplained failure by a party to call a witness may in appropriate circumstances support an inference that the uncalled evidence would not have assisted the party's case. That is particularly so where it is the party which is the uncalled witness. The failure to call a witness may also permit the court to draw, with greater confidence, any inference unfavourable to the party that failed to call the witness, if that uncalled witness appears to be in a position to cast light on whether the inference should be drawn." It is also instructive to note McDougall J's observations in LKT v Chun [2004] NSWSC 820 at [39]: "[39] As Campbell J pointed out in Manly Council v Byrne & Anor [2004] NSWCA 123 at [51], application of the principle in Jones v Dunkel & Anor (1959) 101 CLR 298, where it applies, may have two results. The first is that the tribunal of fact may infer that the evidence of the uncalled witness would not have assisted the party who should have, but did not, call that witness. The second is that the tribunal of fact may with greater confidence draw any inference unfavourable to that party if it appears that the evidence of that witness might have assisted the making of the decision, whether that inference should properly be drawn."
In Clayton v Clayton [2023] NSWSC 399, Meek J summarised the principles applicable to circumstances where a party does not cross examine an opposing party's witness on a particular issue as follows at [89]-[92]: The consequences of a failure to cross-examine may vary in any given case depending on the relevant circumstances: Starr v Miller; Starr v Miller [2021] NSWSC 426 at [366]-[367] per Hallen J; Gooley at [1147]-[1158]. A trial judge is not required to accept evidence merely because it is unchallenged. The fact that evidence is unchallenged may provide a cogent reason for its acceptance. However, ultimately, it depends upon the nature of the evidence including, for example, whether the unchallenged evidence is ex facie illogical or inherently inconsistent: Taupau v HVAC Constructions (Queensland) Pty Limited & Ors [2012] NSWCA 293 at [130] per Beazley JA (as her Excellency then was), with whom Basten (as his Honour then was) and Macfarlan JJA agreed, citing Hull v Thompson [2001] NSWCA 359 at [21] per Rolfe AJA (Sheller JA and Davies AJA agreeing). Nonetheless, according to the ordinary conventions of the adversarial system, when a party does not cross-examine on evidence relating to a significant issue in a case, that party is taken to concede the point: Goodrich Aerospace Pty Ltd v Arsic (2006) 66 NSWLR 186; [2006] NSWCA 187 (Goodrich) at [117] per Ipp JA (Mason P at [1] and Tobias JA at [126] agreeing). On the other hand, it has been said that a cross-examiner's job is not to make out a party's case for her (or him). If the evidence is insufficient, it may be perfectly sensible for a cross-examiner not to provide an opportunity for the party to overcome the deficiencies: Evans v Levy [2011] NSWCA 125 (Evans v Levy) at [41]-[43] per Young JA (Campbell JA and Sackville AJA agreeing) . Thus, where there is an absence of evidence from the party on a particular issue, the Court is entitled to take the view that if a witness could have given the Court appropriate details and evidence, but has not done so even though legally represented, then the Court can assume that the person involved is not in a position to go any further than she (or he) did: Evans v Levy at [43] citing Commercial Union Assurance Co of Australia Limited v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 418-419 per Handley JA.
The Appeal Panel in Wojciechowska v Blue Mountains City Council [2022] NSWCATAP 299 referred to the applicable principles that arise from a party failing to adduce evidence as follows at [52]-[55]: In Manly Council v Byrne & Anor [2004] NSWCA 123 at [44]-[45] under the heading "Jones v Dunkel" Campbell J considered the authorities subsequent to Jones v Dunkel [1959] HCA 8 [1959]; 101 CLR 298 and said at 51 that: "If a witness is not called two different types of results might follow. The first is that the tribunal of fact might infer that the evidence of the absence witness, if called, would not have assisted the party who failed to call that witness. The second is that the tribunal of fact might draw with greater confidence any inference unfavourable to the party who failed to call the witness if that witness seems to be in a position to cast light on whether that inference should properly be drawn." His Honour further said at 55 that: "If the evidence which has been admitted is enough to prove the case of the party who has not called the witness, the tribunal of fact could be justified in not counting the failure of that party to call that witness as something that reduces the strength of that case." In Bell IXL Investments Limited v Life Therapeutics Limited [2008] FCA 1457, Middleton J said at 93 that: "The failure to call evidence may, not must, lead to an inference that the uncalled evidence would not have assisted a party's case. The application of the principles in Jones v Dunkel must be applied in the context of the evidence that is presented to a court." As the authorities make clear, the failure to call a witness whose evidence might have been relevant to a fact in issue, without more, and there was no more in this case, simply means that the decision maker can more readily accept evidence of the fact in reliance upon the evidence of the other party to the proceedings.
In respect of the issue of giving weight to evidence and drawing inferences in the absence of one party adducing evidence, Hodgson JA stated in Ho v Powell [2001] NSWCA 168 at [13]-[15]: 14 There is a long-standing controversy whether the civil standard of proof requires a numerical probability in excess of 50 per cent (see Davies v. Taylor [1974] AC 207 at 219), or belief amounting to reasonable satisfaction (see Briginshaw v. Briginshaw [1990] HCA 20; (1938) 169 CLR 638 at 642-3). My own opinion is that the resolution of the controversy involves recognition that, in deciding facts according to the civil standard of proof, the court is dealing with two questions: not just what are the probabilities on the limited material which the court has, but also whether that limited material is an appropriate basis on which to reach a reasonable decision. I discussed this in some detail in an article published at (1995) 69 ALJ 731. 15 In considering the second question, it is important to have regard to the ability of parties, particularly parties bearing the onus of proof, to lead evidence on a particular matter, and the extent to which they have in fact done so: cf. 69 ALJ at 732-3, 736, 740. As stated by Lord Mansfield in Blatch v. Archer [1774] EngR 2; (1774) 1 Cowp. 63 at 65 [1774] EngR 2; (98 ER 969 at 970): All evidence is to be weighed according to the proof which it was in the power of one side to have produced, and in the power of the other to have contradicted.
In respect of proving a fact on the balance of probabilities, Hallen J in Pollock v NSW Trustee & Guardian [2022] NSWSC 923 set out the applicable authorities as follows at [74]-[75]: Emmett J in Warner v Hung, in the matter of Bellpac Pty Ltd (Receivers and Managers Appointed) (In Liquidation) (No 2) (2011) 297 ALR 56; [2011] FCA 1123 wrote at [48]: "When proof of any fact is required, the court must feel an actual persuasion of the occurrence or existence of that fact before it can be found. Mere mechanical comparison of probabilities, independent of any belief in reality, cannot justify the finding of a fact. Actual persuasion is achieved where the affirmative of an allegation is made out to the reasonable satisfaction of the court. However, reasonable satisfaction is not a state of mind that is attained or established independently of the nature and consequences of the fact to be proved. The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, and the gravity of the consequences flowing from a particular finding are considerations that must affect whether the fact has been proved to the reasonable satisfaction of the court. Reasonable satisfaction should not be produced by inexact proofs, indefinite testimony or indirect inferences: see Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 at 361-2; [1938] HCA 34; [1938] ALR 334 at 342." In Nguyen v Cosmopolitan Homes [2008] NSWCA 246, speaking with the concurrence of McColl and Bell JJA, McDougall J, similarly, had expressed the view, at [44]-[52], that proof on the balance of probabilities required a feeling of actual persuasion; that the event in question was more likely than not to have occurred; with "a probability in excess of 50%". His Honour repeated that view in Ballard v Multiplex [2012] NSWSC 426 at [126].
The submission made by the owner before the Tribunal in support of the rental damages claim was that the Tribunal should reject the submissions of the builder on the principles in Browne v Dunn (1893) 6 R 67 ('Browne v Dunn') because the builder had not questioned the owner or Mr Kim. The Tribunal correctly found at para [90] of the decision that the principles in Browne v Dunn (which involve there being a denial of procedural fairness where a party makes a submission that an inference adverse to a witness should be drawn when the substance of the purported adverse inference was not put to the witness in cross examination such that the witness was not given an opportunity to fairly respond) had no application to the failure of a party to adduce evidence or make submissions on an issue.
The evidence of the owner in her first statement on the issue of renting the house for income (September 2021) was relevantly as follows: "In the first half of the 2017, I approached Beechwood Homes (NSW) Pty Ltd…with a view to building a home on the property which I had seen at the Shellharbour Show Home exhibition village where the respondent had an exhibition home. After discussions with the respondent, including the respondent's salesman that I was building a home as a Holiday let to earn some extra income from myself, I received a tender dated 26 May 2017… I say that due to the defects and my lack of funds to have them rectified, I have been unable to rent the House out as a Holiday Let. I have made enquiries with Winning Holidays, O'Meara Property and LJ Hooker as to the expectation of Market rental for the house. A copy of the advices received are exhibited…"
The evidence of the owner in her second statement (7 February 2022) was relevantly as follows: "During the course of the hearing the solicitor for the respondent builder suggested that I was living in the property, which I have not. In fact, since that the respondent issued me with its Notice of Practical Completion on the 14 February 2019 I have been unable to holiday let the home as I intended. I note that I was not cross examined on this point. … I confirm that I seek compensation for the loss of holiday rental from 14 February 2019, being the date of Practical Completion until a date four (4) months after rectification commences and that (sic) four (4) month period to start from the date of the decision. I further say that I cannot afford to commence rectification until these proceedings are finalised."
We do not accept that there was no evidence to support the factual findings of the Tribunal that (a) the owner, at all relevant times, intended to rent out the residential premises upon completion of the building works by the builder under the contract; and (b) the owner was unable to do so due to the defects in the premises in breach of the statutory warranties in s 18B of the HB Act.
Further, we are satisfied that there was sufficient evidence for the Tribunal to make the factual findings it did (summarised previously in this decision).
The owner's evidence clearly states that from the time that she first spoke to the builder prior to entering the contract onwards it was her intention to rent out the property upon completion to derive income. The evidence could undoubtedly have been given in a more comprehensive manner, but it is still sufficient evidence of her intention. It is not evidence of an "opinion," it is evidence of a factual matter, being her intention (which was conveyed to the builder prior to the signing of the contract) that to rent the property rather than reside in it; and she gave further factual evidence that she did not reside in it.
Additionally, the evidence regarding the extent and nature of the defects supported a finding that the extent and nature of the defects was of sufficient magnitude that the property could not be rented until the defects were rectified. A number of the defects involved water ingress issues. The Tribunal's findings regarding defects were not challenged in the appeal, and those findings together with the evidence of the owner was sufficient for the Tribunal to make the findings it did.
No error of law is established in respect of the factual findings made by the Tribunal that the owner intended to rent the premises to obtain rental income; the owner or family members were not residing in the premises; the owner was prevented from renting the premises due to the nature and extent of the defects; and that the owner had suffered loss due to her inability to rent the premises. The findings of the Tribunal may have been different if the builder had challenged the evidence of the owner, but the builder chose not to do so.

Principles Applicable to Loss of Rental Income

There have been a number of authorities where it has been argued that an owner of residential premises being constructed by a builder has suffered loss because they have not been able to rent out premises due to the nature and extent of defects; or that work was not completed within the time period stipulated in the contract. However, many of those decisions have revolved around issues of whether the loss was too remote; or whether there has been a failure to mitigate (e.g. Bui v DB Homes Australia Pty Ltd [2017] NSWCATAP 218; Ippolito v Cesco [2020] NSWSC 561; Toplace Pty Ltd v Rashidianfar [2021] NSWCATAP 235) .
As discussed previously, no issue is raised in the appeal regarding remoteness of damage (i.e. the principles in Hadley v Baxendale (1854) 9 Ex 341; 156 ER 145).
The starting point for any assessment of damages for breach of contract is that a party who suffers loss by reason of breach of is to be put in the same position than had the breach not occurred; not in a better or worse position. That principle arises from Robinson v Harman (1848) 154 ER 363 at 365 and has been referred to in a plethora of Australian legal authorities (e.g. Commonwealth v Amman Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64 ('Amman Aviation') at 80; Leeda Projects Pty Ltd v Zheng [2020] VSCA 192; (2020) VR 384 at [12])). That principle encapsulates different types of loss, including expectation loss damages; reliance loss damages; and loss of an opportunity or chance damages.
The owner was, in effect, asserting that the premises was a capital asset from which she would earn income. In that context (and without evidence or submissions that she was seeking reliance damages for expenditure incurred during performance of the contract) the damages sought were expectation loss damages, being loss of the profit she would have made had she been able to rent the property.
Accordingly, the correct principle that should have been applied was to assess the income the owner would have obtained, less the expenses she would have incurred in renting the property (i.e. her net profit-Amman Aviation per Mason CJ and Dawson J at [24]-[28]). Otherwise, the owner would be overcompensated, because she would be awarded damages for costs she would have incurred in any event had the builder complied with its obligations under the contract.
We are satisfied that the Tribunal applied the incorrect legal principle when assessing damages for loss of rental income. In doing so, the owner was put in a better financial position than she would have been but for the builder's breach.
The assertion by Mr Kim that, based upon his consideration of the various rental appraisals he had been provided the owner could have obtained "an annual return of $99,386" was not only exceedingly brief, but it also failed to identify, or make any deduction for, the expenses the owner would have incurred in renting out the premises during the relevant period until rectification works were completed. Even in the absence of evidence and submissions of the builder on this point, to apply the briefly explained assessment of Mr Kim to the quantification of the owner's loss was an error of law.
Accordingly, the builder succeeds on this issue in the appeal. The next issue is whether the proceedings should be remitted to the Tribunal to assess damages for loss of rental income; or whether it is a matter appropriate for us to determine on the basis of the existing evidence under s 81 of the NCAT Act.

Clause 12 of Schedule 4 of the NCAT Act

As discussed previously, the builder's submissions focused upon error on a question of law, and no submissions were made that leave to appeal should be granted under cl.12 of sch.4 of the NCAT Act. However, for the sake of completeness, we have considered that issue. We are not satisfied that leave to appeal should be granted under cl. 12 of sch. 4 of the NCAT Act. One of the grounds of appeal on error on a question of law has succeeded, and the other grounds have failed.

Should the Proceedings Be Remitted In Part?

The owner submits that we should make an assessment of damages based on the evidence before the Tribunal, and simply reduce the amount of the rental damages claim from $347,851 to $306,854.28.
The basis of this submission is that one of the documents attached to the affidavit of Mr Kim was a document "Holiday Property Management Made Easy" by O'Meara Property. That document, at page 22, refers to management fees of 11% including GST for 1st year, then 13.75% inclusive of GST thereafter. If that course of action was adopted by us, the only expense for which a deduction would be made is managing agency fees.
However, what the owner's submission fails to take into account is the other expenses identified in that document as likely expenses in renting out a property. The "management fees" also includes "sundry fees" ($3.30 including GST per month); "advertising" ($180 per annum payable every January); "gift bags" ($45.50 per booking for the supply of a gift bag); and "professional photography" (photos $150; video $150; floorplan $50 (with pictures or video).
Further, the O'Meara Property document contains reference at pp 19-20 to the importance of an owner preparing "a budget on your investment property" that "will help you estimate the annual income against expenditure". The items referred to as expenditure items (without any amounts specified) include cleaning; repairs; pest control; insurance cover; gardening and lawns; and other expenses in addition to managing agent fees.
In our view, it is inappropriate to invoke s 81 of the NCAT Act to reassess damages. We cannot, on the limited evidence available, perform an assessment that is procedurally fair and complies with the principles for assessing damages summarised by Black J in Sabouni v Revelop Building and Developments Pty Ltd [2021] NSWSC 31 at [41]-[42]: The damages to which RBD is entitled…is the monetary sum which, so far as money can, represents "fair and adequate compensation for the loss or injury" which it sustained by reason of that breach or repudiation: Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 116 per Deane J. The Court must do the best it can to make a reliable assessment of damages, where damages are difficult to assess, including where a party has failed to lead the best evidence of damages: Commonwealth of Australia v Amann Aviation Pty Ltd above at 83, per Mason CJ and Dawson J, 125 per Deane J, 153 per Gaudron J. In Uszok v Henley Properties (NSW) Pty Ltd [2007] NSWCA 31 at [135], Beazley JA observed that: "Where there has been an actual loss of some sort, the common law does not permit difficulties of estimating the loss in money to defeat the only remedy it provides for breach of contract, an award of damages….Such damages should not be nominal only, notwithstanding that the award may be difficult to assess…" (Citations omitted) On the other hand, the case law also recognises that damages must be proved with a degree of precision which reflects the proof that is reasonably available to the parties: State of New South Wales v Moss (2000) 54 NSWLR 536 at [72]; Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd (2003) 77 ALJR 768 at [38]. In Schindler Lifts Australia Pty Ltd v Debelak (1989) 89 ALR 275 at 319, Pincus J noted that "if the evidence called on behalf of [the plaintiff] fails to provide any rational foundation for a proper estimate of damages, the Court should simply decline to make one". That approach was approved by Brooking J in JLW (Vic) Pty Ltd v Tsiloglou [1994] 1 VR 237 at 243 and by the Court of Appeal in Troulis v Vamvoukakis [1998] NSWCA 237 where Gleeson CJ observed that, where damages were susceptible of evidentiary proof, but there was an absence of raw material to which good sense may be applied, "[j]ustice does not dictate that … a figure should be plucked out of the air". That decision has been approved in subsequent cases, including McCrohan v Harith [2010] NSWCA 67 at [128], where McColl JA (with whom Campbell JA and Handley AJA agreed) held that an estimate of damages, in the nature of a "guess", should not be made where precise evidence of the damages suffered could have been adduced, but was not. I followed that decision in Re Hair Industrie Penrith Pty Ltd, Hair Industrie Merrylands Pty Ltd [2015] NSWSC 1578 at [20], on which I have drawn for the summary which appears above.
The owner also submits that the Appeal Panel should, under s 81 of the NCAT Act, increase the rental damages claim amount for a further 3 months (in the sum of $8,282.16 or $7,246.89 depending upon the calculation used) due to delay in performing works to rectify defects due to the time of the appeal. That is, in our view, a matter well beyond the ambit of the appropriate scope of s 81 of the NCAT Act and, if the owner seeks to ventilate that issue the appropriate place to do so (without expressing any view as to the merit of the application), is in the remitted proceedings to assess damages.
It will be a matter for the Tribunal in the remitted proceedings as to whether the parties are granted leave to rely upon fresh evidence; or for the owner to be able to seek additional loss of rental income damages by reason of the appeal process. However, one issue that cannot be raised in the remitted proceedings is remoteness of damage under Hadley v Baxendale principles, as this was not an issue raised in the appeal by the builder. There was also no error of law established in respect of the finding of the Tribunal that the defects were not a sufficient cause of the owner not being able to rent the property, and that is a further issue that cannot be raised in the remitted proceedings.
In our view, the remitted proceedings do not necessarily have to be allocated to the Senior Member who made the original decision. The remitted proceedings may be heard by any Member at the discretion of the Tribunal, as the issues in the remitted proceedings are of narrow compass.

The Issue of Costs of the Appeal

Our orders include procedural directions to dispose of any costs application from the appeal.

ORDERS 1. Appeal allowed in part. 2. Decision of the Tribunal dated 29 August 2022 in Matter HB 21/08577 that appellant pay respondent $347,851 damages for loss of rental income is set aside. 3. Issue of what, if any, damages for loss of rental income should be awarded is remitted to the Tribunal to be determined according to law. 4. What, if any, fresh evidence is allowed in the remitted proceedings is a matter for determination by the Tribunal. 5. The appeal is otherwise dismissed. 6. Costs of the appeal are to be determined in the following manner: 1. Appellant to file with the Registry and serve on the respondent all costs submissions and documents by 14 days from the date of this decision. 2. Respondent to file with the Registry and serve on the appellant all costs submission and documents by 28 days from the date of this decision, both in response to any costs application by the appellant and in support of any costs application by the respondent. 3. The costs submissions of the parties are to address whether the parties seek to be orally heard on the issue of costs or whether the issue of costs should be determined on the papers and without an oral hearing. 4. Subject to consideration of the costs submission of the parties the Appeal Panel may determine it appropriate to determine the issue of costs without further oral hearing pursuant to s 50 (2) of the Civil and Administrative Tribunal Act 2013 (NSW). 5. Either party may seek to vary the timetable for the filing and service of costs submissions by written application to the Appeal Panel by no later than the date of the applicable timetable obligation.

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 07 July 2023

Building Act 1989(NSW)

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