BlueSky Property Builders Australia Pty Ltd v Dey

The nature and scope of internal appeals

1. By virtue of s 80(2) of the Civil and Administrative Tribunal Act 2013 (NSW) (NCAT Act), internal appeals from decisions of the Tribunal may be made as of right on a question of law, and otherwise with leave of the Appeal Panel.
2. In Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 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.
3. 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 Schedule 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 because: 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).
4. In Collins v Urban [2014] NSWCATAP 17, the Appeal Panel stated at [76] that a substantial miscarriage of justice for the purposes of cl 12(1) of Schedule 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.
5. Even if an appellant from a decision of the Consumer and Commercial Division has satisfied the requirements of cl 12(1) of Schedule 4, the Appeal Panel must still consider whether it should exercise its discretion to grant leave to appeal under s 80(2)(b).
6. In Collins v Urban at [84] the Appeal Panel held: (1) In order to be granted leave to appeal, the applicant must demonstrate something more than that the primary decision maker was arguably wrong in the conclusion arrived at or that there was a bona fide challenge to an issue of fact: BHP Billiton Ltd v Dunning [2013] NSWCA 421 at [19] and the authorities cited there, Nakad v Commissioner of Police, NSW Police Force [2014] NSWCATAP 10 at [45]; (2) 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; or (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, BHP Billiton Ltd v Dunning [2013] NSWCA 421 at [20] and the authorities cited there, SAB v SEM [2013] NSWSC 253 at [8] and [9] and the authorities cited there, Nakad v Commissioner of Police, NSW Police Force [2014] NSWCATAP 10 at [45]; (3) In relation to an application for leave to appeal relating to a question of practice and procedure, the application is to be approached with the restraint applied by an appellate court when reviewing such decisions, especially if the application is made during the course of a hearing: BHP Billiton Ltd v Dunning [2013] NSWCA 421 at [21] and the authorities cited there.

Grounds of Appeal

1. The builder's Notice of Appeal identified three grounds of appeal: "Ground One The Tribunal erred in law in determining the claim and making the Orders under section 480 (1) of the Act having regard to the Tribunal's award of disproportionate rectification damages and the Tribunal's findings as to: (i) the existence, nature and extent of any defect or defects; (ii) the scope and cost of any remedial works reasonably necessary to rectify (iii) the defect or defects, and the basis of liability of the builder for a breach of an obligation under the Act or the contract. Ground Two The Tribunal erred in finding that accommodation costs and relocation costs sustained while the rectification work is carried out have been caused by Bluesky's breaches of contract and are "appropriate consequential losses" in circumstances where the scope of Bluesky's contractual indemnification obligation did not include such costs. Furthermore, a claim for the cost of alternative accommodation is not one that flows naturally from Blueksky's breach or is one that ought reasonably to have been within Bluesky's contemplation at the time the Contract was entered into so as to fall within the principles stated in Hadley v Baxendale (1854) 9 Exch 341. Ground Three The Tribunal erred in law in its application of section 48MA of the Home Building Act 1989 (NSW). BlueSky contends that the Tribunal erred in failing to engage objectively and constructively with BlueSky's position concerning the appropriateness of a rectification order or money order. The Tribunal made findings which were not supported by evidence."
2. In written submissions, the builder clarified that Ground One challenged the Tribunal's awarding of compensation in respect of the rectification of the front balcony, the rear alfresco slab and the falls in wet areas. The builder's argument in respect of these items was: "Approved design was supplied by owner, Builder's was engaged, and scope of work was limited to perform tasks as per the design."
3. In respect of the front balcony, the builder submitted: "The defect report claims that the balcony is above the internal floor level which is the main defect to cause demolition of the balcony, but this issue is due to existing fault of the building. Builder's scope was to rebuild the existing balcony using existing timber support studs from the building. Refer to drawing 05/12 and 07/12, 09/12 page 118,120 and 122 respectively of the evidence book. Builders demolished the existing balcony and joined the new balcony structure to the existing timber studs coming out of the house. Upon completion of the balcony with standard thickness and support timber, the level of the balcony finished 25mm above the existing internal floor. The builder was not in a position to reduce the thickness of the new timber beams and LVL's of the balcony because that would have compromised the structural thickness and integrity of the balcony and make in unsafe. Please refer to page 552 of the evidence book which shows the new balcony structure is attached to the existing timber studs coming out of the house. Builder constructed the balcony as per existing scope and demolition of the balcony due to this reason would be completely unfair. The remaining issues are of minor nature and can be easily fixed."
4. In respect of the rear alfresco slab, the builder submitted "The alfresco slab is level with the house, should be below the internal floor level. However, during slab construction, the owner of the house directed that the alfresco slab must be level with the internal house because in future he would cover the alfresco with sliding doors which will make it part of the house living area. We followed the instruction of the owner. When the CDC certifier advised Builder to lower the alfresco slab [Page 279], the owner again instructed Builder to pour the slab at level and told us he will be responsible for any issues in future. The slab was constructed by concreter over 30 years' experience, and he only did it due to owner's request, no money was made from this. The ceiling to floor height is 2350mm which is non-compliant. However, during construction Builder noticed that the existing windows and plumbing pipes were clashing with the roof if it was built to 2400mm. refer to evidence book page 258 1st picture which shows the existing windows and plumbing pipes are close to the roof. Removal of the windows, and existing plumbing pipe was outside Builder's scope, moreover the existing condition of the brickwork is unstable, so Builder did not feel safe to remove the windows. During construction the decision was made to build the roof as high as possible without changing the windows and plumbing pipes which has left the ceiling to floor height 50mm less the requirement, but this was the best on site decision considering the existing condition of the house. The decision was agreed by all parties including owner. This issue can be referred to existing house condition and design issue- note the design was supplied by owner."
5. In respect of the falls to floor wastes, the builder submitted: "Builder' scope was to build only 1 new bathroom (next to the family dining), the remaining bathrooms were existing and Builder's scope was to install waterproofing and tiles on top of existing bathroom floors. Refer to drawing 05/12 page 118 of the evidence book. All the existing bathroom floor are defective, Builder only installed tiles on top of them. Tiles thickness is 15-20mm. Standard practice for construction of bathroom floors is- the bathroom concrete slab is constructed sloping towards the floor waste to achieve enough fall. If bathroom concrete floors are defective and lacks enough fall to the floor waste, it is impossible to fix up the falls issue with installation of tiles which is only 15-20mm thick. In other words, it is physically impossible to rectify the pre-existing concrete floor falls issue with tiles and outside the work ambit. Builder can fix the new toilet that we built but it is unfair to bear the repairing costs of the other toilet floors."
6. Although the builder's Notice of Appeal did not state that the builder sought leave to appeal, Mr Ferdous, a director of the builder who appeared for the builder at the hearing of the appeal, indicated that the builder did seek leave to appeal.
7. Mr Campbell, solicitor, who appeared for the homeowner, did not oppose the Appeal Panel considering whether to grant the builder leave to appeal.
8. The homeowner filed, with his written submissions, an affidavit by the homeowner, dated 24 March 2023. The Appeal Panel asked Mr Campbell what was the relevance of the affidavit. Mr Campbell did not seek to read the affidavit or submit that its contents had any relevance on the appeal, and we have not had regard to it.
9. The builder filed on 3 April 2023, that is the day before the hearing of the appeal, an affidavit from Mr Mohammed Alam dated 2 April 2023. Mr Alam was the building supervisor during the course of the building works and had given evidence at the hearing at first instance. Mr Ferdous' explanation for the affidavit was that it contained evidence which he had not realised was necessary at the time of the hearing at first instance.
10. The Appeal Panel indicated that it would reserve consideration whether to permit the builder to rely upon Mr Alam's affidavit.
11. It is clear that the evidence in the affidavit is not "new evidence that was not reasonably available at the time of the hearing". Mr Alam was available, and, if asked, could have given the evidence set out in the affidavit at that time.
12. We do not consider it appropriate to permit the builder to rely upon the affidavit of Mr Alam and we have not had regard to it, except to the limited extent that the affidavit incorporates part of a drawing from the approved plans which includes information which is cut off in the copies of the drawing included in the bundle of documents provided by the builder for the purposes of the appeal.

Ground One

1. In dealing with Ground One of the builder's grounds of appeal, it is convenient to consider the three building elements the subject of that ground separately.

Front Balcony

1. The evidence of the experts called by both parties was that the front balcony was defective in that it failed to comply with the requirements of the Building Code of Australia (BCA) (being volumes 1 and 2 of the National Construction Code). It was not in dispute that the builder was required pursuant to the Environmental Planning and Assessment Act 1979 (NSW) and the Environmental Planning and Assessment Regulation 2000 (NSW) to comply with the requirements of the BCA. The relevant provisions applicable in 2019 are set out in The Owners Strata Plan No 92888 v Taylor Construction Group Pty Ltd and Frasers Putney Pty Ltd [2019] NSWCATCD 63 at [12] - [15] [1] .
2. Mr Camenzuli, the building expert who prepared a report on behalf the homeowner, stated in respect of the front balcony: "The front balcony decking has a number of issues that in the opinion of the writer will require the complete demolition and re-building of the balcony as no other viable solution appears evident. 1. The finished floor level (FFL) of the balcony is above the internal floor level of the dwelling adjacent. In breach of AS 4654.2 2012 and NCC 2019. 2. The threshold of the doors opening onto the balcony are lower than the balcony FFL and consequently any water striking the door would have no other path than to run into the building. 3. The balcony floor tiles are questionably installed in that the grout joints are showing significant movement on the hob and the tiles are detaching. 4. There is a row of gaps evident on the front wall of the building under the soffit that have not been covered by the balcony construction. 5. That the installation of the floor joists and wall ledger to the balcony is questionable with unknown and insufficient fasteners. 6. The balcony facade construction is such that it does not provide the necessary and specified weathering component to protect the plasterboard lining forming the soffit of the balcony. The Balcony may have been waterproofed but from that observable the work could not be in compliance with AS4654.2-2012, "Waterproofing membrane systems for exterior use - Above ground level - Part 2. Design and installation" The internal floor level does not have the specified minimum 40mm freeboard above the FFL of the balcony. The internal floor level was measured to be 25mm below the FFL of the balcony; a discrepancy of 65mm below the minimum level."
3. Mr Nisbett, the expert retained by the builder, did not dispute those findings. The joint report, signed by both experts, incorporated the statement: "front balcony is defective on multiple grounds and needs replacement".
4. The builder's defence, as set out in its written submissions which we have extracted at [15] above, was that the relevant failure to comply with the Code was required by the drawings included in the contract which identified the required scope of works.
5. Section 18F of the Home Building Act provides: 18F Defences (1) In proceedings for a breach of a statutory warranty, it is a defence for the defendant to prove that the deficiencies of which the plaintiff complains arise from - (a) instructions given by the person for whom the work was contracted to be done contrary to the advice of the defendant or person who did the work, being advice given in writing before the work was done, or (b) reasonable reliance by the defendant on instructions given by a person who is a relevant professional acting for the person for whom the work was contracted to be done and who is independent of the defendant, being instructions given in writing before the work was done or confirmed in writing after the work was done. (2) A relevant professional is independent of the defendant if the relevant professional was not engaged by the defendant to provide any service or do any work for the defendant in connection with the residential building work concerned. (3) A relevant professional is not independent of the defendant if it is established that the relevant professional - (a) was engaged on the basis of a recommendation or referral of the defendant to act for the person for whom the work was contracted to be done, or (b) is, or was within 3 years before the relevant instructions were given, a close associate of the defendant. (4) In this section, relevant professional means a person who - (a) represents himself or herself to be an architect, registered design practitioner or registered principal design practitioner (within the meaning of the Design and Building Practitioners Act 2020), engineer or surveyor, or (b) represents himself or herself to have expert or specialised qualifications or knowledge in respect of residential building work or any particular aspect of residential building work, or (c) represents himself or herself to be engaged in a profession or to possess a qualification that is recognised by the regulations as qualifying a person as a relevant professional.
6. In RBV Builders Pty Ltd v Chedra [2021] NSWCATAP 56, the appellant submitted that a note incorporated within the contractual drawings was a written instruction for the purposes of s 18F(1)(b).
7. The Appeal Panel set out relevant parts of the decision under appeal at [59] - [64]. In particular, the Appeal Panel extracted, at [64], the relevant finding of the Tribunal at first instance: "64 The Tribunal held, at [68] and [69]: 68. In my view a contract drawing is not an instruction for the purposes of s 18F of the Act. If that were to be the case it would give rise to what I consider to be a difficult situation, namely that in discharging its contractual obligation to comply with the contract plans, a builder is given a defence to an action by the owner for breach of a statutory warranty because it complied with a contract drawing. As I have pointed out, the Act and the contract gave the builder an option to deal with that scenario, namely a clause articulating the limitation of liability referred to in clause 2.2(a) [of Schedule 2 to the Home Building Act]. 69. In arriving at this conclusion I have construed an "instruction" from a relevant professional to be something that occurs after the contract has been signed and something that occurs in context of performing the work under the contract. In that context, what was stated in Catapult Constructions Pty Ltd v Denison provides the appropriate example. I have stated that I agree with what has been said in Catapult. The rationale for the s18F defence is clear in that the builder is not to be liable for doing what it has been instructed to do, as stated in the second sentence of the second reading speech referred to by the builder at [56] of its submissions. The defence relieves the builder of 'second guessing' the expertise of construction professionals whose training and education may be more detailed and concentrated that the builder's in their chosen field. In addition there may be circumstances in which a builder is contractually obliged to follow the instruction of a relevant professional who is the contract administrator."
8. The Appeal Panel set out the parties' submissions, at [65] - [66]: "65 The builder submitted (at paragraph [39(c)] of its submissions in chief): Contrary to Decision [68], such a construction of s 18F(1) does not give rise to difficulties. A builder who complies with contract plans will not in any event breach the s 18B(1)(a) warranty for the work to be done 'in accordance with the plans and specifications set out in the contract' (regardless of any application of s 18F(1)), however in those circumstances compliance with instructions in the contract plans would be capable of engaging s 18F(1) as a defence to the other statutory warranties. In the absence of s 18F(1) being capable of operating in that manner, the independent operation of each of the statutory warranties is capable of giving rise to harsh outcomes for builders who following instructions in contract plans that are outside of their expertise and that result, for example, in works that are not compliant with the Building Code of Australia in respect of a structural aspect of those works. 66 The owners submitted: 30. The construction of s 18F(1)(b) for which the appellant contends … suffers from various difficulties. 31. First, it renders s 18F(1)(b) otiose. On the appellant's construction, a builder may invoke s 18F(1)(b) where it has complied with a contractual plan or drawing. Yet compliance with a contractual plan or drawing would result in compliance with s 18B(1)(a). The matter would end there and no question as to whether the defence if s 18F(1)(b) had been established would ever arise. In other words, making out the defence will result in no breach of s 18B(1)(a). That is an unworkable result. It can be avoided by rejection of the construction for which the appellant contends, which also contravenes the well-established principle of statutory interpretation that all words must be given some meaning and effect and surplusage must be avoided. 32. Secondly, the Parliament has chosen to employ different language in s 18B(1)(a) with that in s18F(1)(b). Sections 18B and 18F were enacted by cl 7 of Sch 1 to the 1996 Amendment Act. Each was amended by cll 25-26 and cl 30 respectively, of Sch 1 to the Home Building Amendment Act 2014 (NSW). The current 18F(1)(b) was inserted by that Act. Had the Parliament intended for contractual plans and specifications to engage the defence in s 18F(1)(b), the same form of words as that which appears in s 18B(1)(a) could have been, but was not, utilised. The use of different language indicates that the Parliament had intended the field of operation of s 18F(1)(b) to be different from that of s 18B(1)(a). 33. Thirdly, as the Tribunal correctly concluded at [65]-[68], the context of s 18F(1)(b) - relevantly, cl 2 of Sch 2 to the HBA (which operated by force of s 7E and which was accommodated by the terms of the contract) - supported the construction of that provision for which the respondents contended. 34. Fourthly, the Minister's Second Reading Speech to the Home Building Amendment Bill 2014 (NSW), to which the appellant refers …, says nothing as to the interplay between ss 18B(1)(a) and 18F(1)(b). It does not assist. In any event, the extrinsic material to the Bill does not control the meaning of the section.
9. The Appeal Panel stated its conclusion at [67]: "67 We tend to the view that the Tribunal was correct in concluding that contract drawings are not an instruction for the purposes of s 18F(1)(b) of the HBA. The provisions of clause 2 of schedule 2 would have no work to do if a builder could rely upon s 18F(1) in defence of a claim that its work fails to comply with the Building Code or a development consent simply because the relevant work complies with the contract drawings. Clause 2 requires that the contract make provision to that effect, which implies that that result is not intended to be automatic. …"
10. Part 1 of Schedule 2 to the Home Building Act sets out terms which, pursuant to s 7E of that Act, are required (and taken) to be included in a contract for the carrying out of residential building work. Clause 2 of Schedule 2, which is in Part 1, provides: 2 Quality of construction (1) All work done under this contract will comply with - (a) the Building Code of Australia (to the extent required under the Environmental Planning and Assessment Act 1979, including any regulation or other instrument made under that Act), and (b) all other relevant codes, standards and specifications that the work is required to comply with under any law, and (c) the conditions of any relevant development consent or complying development certificate. (2) Despite subclause (1), this contract may limit the liability of the contractor for a failure to comply with subclause (1) if the failure relates solely to - (a) a design or specification prepared by or on behalf of the owner (but not by or on behalf of the contractor), or (b) a design or specification required by the owner, if the contractor has advised the owner in writing that the design or specification contravenes subclause (1).
11. The Appeal Panel concluded that it was not necessary to decide this issue in order to resolve the appeal, as the appellant had not established in any event that it had complied with the notation on the drawings.
12. Similarly, we do not find it necessary to determine finally whether the contract drawings may constitute a written instruction for the purposes of s 18F. The plans do not unequivocally require the balcony to be built at a higher level than the internal floor level. In support of its submission, the builder referred to a photograph on page 552 of its appeal bundle. That photograph was part of annexure Q to Mr Ferdous' affidavit. The only reference to that photograph in the affidavit is a statement that the photograph is a picture of overhead wiring, which Mr Ferdous claimed needed to be moved and in respect of which the builder sought a variation under the contract. There is no evidence before the Tribunal, expert or otherwise, that the only way to build the balcony consistently with the drawings was the way in which it was built.
13. It is also apparent that Mr Camenzuli identified more defects in the balcony than just the finished floor level. Although the builder submitted that the issues other than the floor level "are of minor nature and can be easily fixed", the builder did not point to any evidence before the Tribunal to that effect.
14. Accordingly, we find that the Tribunal made no error in concluding that the builder was liable for breach of the statutory warranties, in particular the warranty arising pursuant to s 18B(1)(c) of the Home Building Act, in relation to the construction of the front balcony. Although we also tend to the view that contract drawings do not constitute an instruction for the purposes of s 18F(1)(b) of the Home Building Act, we do not found our decision in relation to the front balcony on that basis.

Rear Alfresco Slab

1. We have set out the builder's submissions in relation to the rear alfresco slab at [16] above.
2. The parties' respective experts agreed that the slab was constructed contrary to the architectural and engineering plans included in the contract. In defence of the claim, the builder sought to rely upon what Mr Ferdous alleged was an oral instruction from the homeowner.
3. The Tribunal addressed the construction of the slab at [99]: 99 It will also be recalled that the private certifier, when inspecting the slab, on 9 July 2020, identified that the pods in the alfresco area should be 150 deep but that on the site, the pods were 225 deep and also that there is no step down. The inspection report advised to change the pods in the alfresco area, cut the pods and add extra N-12 bar "where the pipe is in edge beam." That issue was not corrected by Bluesky according to the evidence before the Tribunal and it appears Bluesky went ahead and constructed part of the extension above the slab, notwithstanding the problem that the private certifier had disclosed. There is no suggestion in the evidence that the issue was brought to Mr. Dey's attention and that he gave instructions to press on with the construction without attending to the issue reported by the certifier.
4. Mr Ferdous did not suggest that there had been evidence, which the Tribunal had overlooked, of the conversation in which he alleged the homeowner had given the instruction. Rather Mr Ferdous stated that he had raised the matter in submissions. That does not amount to evidence.
5. The alleged oral instruction from the homeowner was one issue to which the further Alam affidavit was directed, but that evidence was not before the Tribunal at first instance and, as we have indicated, there is no basis upon which its admission could be justified on the appeal.
6. In any event, an oral instruction would not have been sufficient to justify a departure from the contractual plans and specifications. Section 18F of the Home Building Act requires that any instruction relied upon in defence of a claim for breach of statutory warranty be in writing.
7. We do not find any error in the Tribunal's conclusions regarding the rear alfresco slab.

Fall to Floor Wastes

1. The builder submitted that it had only constructed one bathroom, that the ensuite and upstairs bathroom had been pre-existing, and that the builder had been required only to waterproof and tile those rooms. We have set out the builder's submission in this regard at [17] above.
2. Mr Ferdous submitted that the absence of the falls was already present and not a consequence of the builder's work. However, the experts were agreed that the falls were inadequate and that the tiling work did not comply with the applicable code requirements or contract plans and specifications. The builder did not suggest that he had received any written instruction to lay tiles which did not meet the requirements of the BCA. It was the obligation of the builder to ensure that the work complied with the Code. In the absence of written instructions, it is no defence that the falls in the bathrooms were a consequence of the pre-existing state of the building.
3. We find no error in the Tribunal's conclusions regarding the falls to floor wastes.

Ground Two - Accommodation costs

1. The Tribunal awarded the homeowner compensation in respect of the costs of alternative accommodation for a period of 18 weeks while rectification work was carried out. The Tribunal's reasons for awarding accommodation costs were set out at [180] as follows: 180 Bluesky has breached the contract, as referred to above in these reasons. The rectification works that will need to take place are extensive, even on Mr. Nisbet's evidence, and involve a multiplicity of issues and different trades. Both experts appear to agree in the joint report that the dwelling would not be habitable whilst the rectification works are being carried out. In such circumstances, the Tribunal finds that accommodation costs and relocation costs sustained while the rectification work is carried out have been caused by Bluesky's breaches of contract and are "appropriate consequential losses": Waterbrook at Yowie Bay Pty Ltd v Allianz Australia Insurance Ltd [2008] NSWSC 1451 at [76] per MacDougall J. The Tribunal finds that accommodation costs and relocation costs should be payable by Bluesky. Further or alternatively, the Tribunal finds that accommodation costs and relocation costs are payable under the so-called first limb of Hadley v Baxendale (1854) 9 Ex 341; 156 ER 145. Further or alternatively, the Tribunal finds that accommodation costs and relocation costs are payable as it is only upon Mr. Dey being compensated for those costs during the rectification works that Mr. Dey will thereupon be left substantially in accordance with the position he would have been in had the contract being completed by Bluesky in accordance with its terms, as contemplated by Bellgrove, [Bellgrove v Eldridge (1954) 90 CLR 613].
2. The builder submitted: "The Tribunal erred in finding that accommodation costs and relocation costs sustained while the rectification work is carried out have been caused by Bluesky's breaches of contract and are "appropriate consequential losses" in circumstances where the scope of Bluesky's contractual indemnification obligation did not include such costs. Furthermore, a claim for the cost of alternative accommodation is not one that flows naturally from Bluesky's breach or is one that ought reasonably to have been within Bluesky's contemplation at the time the Contract was entered into so as to fall within the principles stated in Hadley v Baxendale (1854) 9 Exch 341. NCAT allowed for alternative accommodation cost during rectification works. Although the work was delayed by 8 weeks due to existing asbestos issue, Builder completed the works and allowed the owner to move in 14 weeks before the contract completion date. Builder knew that there are few incomplete works, but the owner repeatedly requested Builder to allow them to move in because they were evicted from the rental property. Builder accelerated the works in good faith to help owner. However, after the owner moved in, he refused to provide access to Builder in weekdays to complete few items and defect rectification works. He advised us that he will only provide access in weekends, but no tradespersons work in weekends, and it was impossible to complete works. If Builder had those 14 weeks as per contract, we would have finished most of the defect works. It is unfair for Builder to pay for accommodation whilst the contract was completed 14 weeks prior to accommodate the owner."
3. The Tribunal correctly identified that the question whether consequential losses are recoverable is governed by the tests set out in Hadley v Baxendale (1854) 9 Exch 341; 156 ER 145, at 151. The Tribunal's finding that the cost of alternative accommodation fell within the first limb of that test was a finding of fact and does not give rise to any question of law.
4. In any event, we agree with the Tribunal's finding.
5. The builder's submission, that the cost of alternative accommodation is not a consequence that flows naturally from the builder's breach of contract or is not a consequence that ought reasonably to have been in the builder's contemplation at the time the contract was entered into, is manifestly incorrect. The need for the occupants of residential premises to vacate the premises while substantial rectification works are carried out on the premises is obvious. It is, in our view, clearly a consequence flowing naturally from the builder's breach of contract in carrying out work which is defective to the degree that the premises will not be habitable while the work necessary to rectify the defective work is carried out.
6. The suggestion that it was not fair for the builder to pay for the homeowner's accommodation, when the contract was completed 14 weeks earlier than required under the contract in order to accommodate the owner, does not amount to an error of law or give rise to a substantial miscarriage of justice.
7. The builder conceded at the hearing of the appeal that the defects, rectification of which required the homeowner to move out, were not the result of the homeowner being given early access and were not defects the builder would have rectified if the homeowner had not moved in early.
8. The experts agreed, and the Tribunal determined, that the extent of rectification required will necessitate the homeowner moving out for a period. The Tribunal accepted that the cost of alternative accommodation was a loss falling within the first limb of Hadley v Baxendale. The Tribunal's decision in that respect involves no error of law, and cannot be said to be either against the weight of evidence or not fair and equitable.

Ground Three - Section 48MA

1. We have set out the Tribunal's finding concerning the appropriate remedy at [4] above. The builder's submission on this issue was as follows: "The Tribunal erred in law in its application of section 48MA of the Home Building Act 1989 (NSW). BlueSky contends that the Tribunal erred in failing to engage objectively and constructively with BlueSky's position concerning the appropriateness of a rectification order or money order. The Tribunal made findings which were not supported by evidence. NCAT did not allow Builder to rectify the works. In item 203, the tribunal says they are troubled by the fact that Builder did not follow private certifier's instruction. However as explained in item 11, Builder followed the instruction of the client(owner) which was different to the certifier's instruction. The owner reassured Builder that he will be responsible for this. If there was an outstanding issue, the certifier would never issue final occupancy certificate. In this case the final occupancy certificate as issued without any hesitation by the certifier because all the works were conforming, and they were satisfied with the levelled floor. Moreover, Builder was never given any opportunity by the owner to rectify the defects as explained in item 33. Builder has always worked to client's best interest, completed the works ahead of schedule to respect owner's request. Builder has also successfully built many houses around Sydney. It is really unfair to say by NCAT that they don't have confidence in Builder and deny Builder an opportunity to rectify the defects under it's the contract."
2. This submission critically relies upon the proposition that the reason the builder failed to follow the instruction of the certifier was that it received an instruction from the homeowner to the contrary. As we have noted above, the builder did not lead evidence before the Tribunal to establish that the homeowner had given such an instruction. The builder accepts that it did not put forward evidence of what it alleges was the critical conversation.
3. In those circumstances it cannot be said that the Tribunal erred in the exercise of its discretion under section 48MA.
4. Accordingly, leave to appeal will be refused and the appeal will be dismissed.

Costs

1. The respondent sought, in the event that the appeal was dismissed, an order for costs on the indemnity basis.
2. The amount in dispute, both at first instance and on the appeal, was more than $30,000. Accordingly, rules 38 and 38A of the Civil and Administrative Tribunal Rules 2014 (NSW) are applicable, and special circumstances are not necessary before the Tribunal may make an order for costs.
3. The usual rule, where the Tribunal has the discretion to award costs in the absence of special circumstances, is that the successful party is entitled to an order for their costs: Thompson v Chapman [2016] NSWCATAP 6 at [69] - [70]. The homeowner should have an order for his costs of the appeal, other than the costs relating to the affidavit of 24 March 2023 which the owner filed but did not seek to read at the hearing of the appeal. However, we are not persuaded that this is an appropriate case for the award of indemnity costs.
4. The Appeal Panel discussed the circumstances in which it would be appropriate to award indemnity costs in Mendonca v Tonna [2017] NSWCATAP 176 at [59] - [64]: "59 Indemnity costs are only awarded in limited circumstances. The discretion to do so must be the subject of careful reasoning (Degmam Pty Ltd (In Liq) v Wright (No 2) [1983] 2 NSWLR 354) and caution should be exercised in making such an award: Leichhardt Municipal Council v Green [2004] NSWCA 341; Ng v Chong [2005] NSWSC 385 at [13]. 60 Other than in relation to the unreasonable refusal of a genuine offer of settlement, one circumstance in which indemnity costs may be awarded is when a case is commenced or continued where there is no chance of success (Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd (No 2) [2009] NSWCA 12 at [4]), such as where the claim is "without substance", "groundless", "fanciful or hopeless" or so weak as to be futile, such as where a limitation period is obviously at an end: Hillebrand v Penrith Council [2000] NSWSC 1058. However, mere weakness of a case will not be sufficient to warrant an exercise of the discretion to award indemnity costs: Wentworth v Rogers (No 5) (1986) 6 NSWLR 534. 61 In this case, Dr Mendonca's fundamental case is that she has a residential tenancy agreement with Mr Tonna and that he owes a significant amount of rent arrears. While some aspects of the proceedings before the Tribunal clearly lacked merit - in particular the application to reinstate proceedings that had been withdrawn - we do not consider that her case overall was so weak that it would have had no chance of success had her applications not been withdrawn. 62 Another circumstance which may warrant an order for costs on an indemnity basis is where the proceedings amount to an abuse of process: Baillieu Knight Frank (NSW) Pty Ltd v Ted Manny Real Estate Pty Ltd (1992) 30 NSWLR 359 at 362. Examples of abuse of process include where the proceedings are commenced other than in good faith or for an ulterior or collateral purpose: Palmer v Gold Coast Newspapers Pty Ltd [2013] QSC 352; Packer v Meagher [1984] 3 NSWLR 486 at 500. Regardless of whether there is in fact a residential tenancy agreement between the parties, we are not satisfied that Dr Mendonca's applications either individually or collectively were made in bad faith or amount to an abuse of process. 63 An award of indemnity costs may also be made for unreasonable conduct. Such conduct may include unnecessarily prolonging the proceedings, (Degmam Pty Ltd (in liq) v Wright (No 2), at 358); unfounded allegations of fraud or improper conduct (Maule v Liporoni (No 2) (2002) 122 LGERA 216 at 229); deliberate or high-handed conduct (Rouse v Shepherd (No 2) (1994) 35 NSWLR 277) and behaviour which causes unnecessary anxiety, trouble or expense, such as the failure to adhere to proper procedure (FAI General Insurance Co Ltd v Burns (1996) 9 ANZ Ins Cas 61-384). Disregard of court orders may justify an indemnity costs order (O'Keefe v Hayes Knight GTO Pty Ltd [2005] FCA 1559 at [35]). Perverse persistence by an unrepresented litigant with a hopeless application may also do so: Rose v Richards [2005] NSWSC 758. 64 Misconduct of a serious nature, such as fraud, perjury, contempt or dishonest conduct may also justify costs being awarded on an indemnity basis: Berkeley Administration Inc v McClelland [1990] FSR 565 at 568-569; Ivory v Telstra Corporation Ltd [2001] QSC 102); Vance v Vance (1981) 128 DLR (3d) 109 at 122."
5. In seeking an order for indemnity costs, the homeowner does not rely on any offer of settlement. The only basis for the award of indemnity costs included in the homeowner's submissions is the proposition that: "[I]t appears these proceedings have been initiated in abuse of process as an attempt to subvert the Appellant's requirement to pay a Money Order".
6. The homeowner provided no further elucidation of the basis upon which he submits that the appeal proceedings are an abuse of process. That submission cannot be sustained.
7. We are not persuaded that there are any circumstances warranting an award of indemnity costs in this case. The builder's appeal has failed and was not a strong case. However, we do not consider that it could be said that it was "fanciful or hopeless".
8. The appropriate order in respect of costs is that the builder pay the homeowner's costs of and incidental to the appeal on the ordinary basis save that the homeowner should not be awarded the costs associated with the preparation, filing and service of the homeowner's affidavit dated 24 March 2023.

ORDERS

1. Our orders are: 1. Application for leave to appeal refused. 2. Appeal dismissed. 3. The appellant is to pay the respondent's costs of and incidental to the appeal, as agreed or assessed, excluding any costs incurred in relation to the preparation, filing and service of the affidavit of Subrata Dey dated 24 March 2023.

Endnote

1. The regulations in force in 2019 have been repealed and replaced by the Environmental Planning and Assessment Regulation 2021 (NSW). Regulation 69 of the 2021 Regulation makes provision relevantly equivalent to Regulation 98 of the 2000 Regulation. 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: 08 June 2023