Campbell v Chronis

Section 48MA of the Home Building Act

1. This section states: '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.'
2. While the preferred outcome as referred to in s48MA is not a mandatory outcome, I am required to consider whether the principle referred to should be the subject of an order in these proceedings requiring the builder to rectify the defective work.
3. The owners submit that the builder waited 12 months to attend to defect rectification after being provided with a defects list before practical completion.
4. The owners also submit that work was not supervised by a person who was licensed. The situation is that Peter Chronis was responsible for carrying out the works and he was supervised by his father Mr Andreas Chronis, the first respondent, who holds builder's licence No 287758C.
5. Given that the value of defective work is so little, and the builder submits that it should carry out the rectification of defective work, I find that it is appropriate to make a work order which will be subject to the conditions that persons who supervise the rectification of defective work must hold a supervisor's certificate under the Home Building Act and persons who carry out the rectification work must also be licensed under the Home Building Act.

Item 1 - Roof south end barge gutter and capping

1. The first item is roof south end barge gutter and capping. It is uncontroversial that the contract documents required new sections of timber framed sheet metal roof to be supplied and installed to match existing roofing. Refer page 106 of exhibit A.
2. Mr Corbishley stated that the capping installed by the builder above the roof cladding does not close off gap between the top of the barge gutter and roof cladding. He estimates the rectification cost to be $1,262. Mr Drexler stated that the gap between the top of the barge/gutter and the roof cladding could not be identified and there were no photos of the gap provided. He estimated the rectification cost to be $550.00 if found.
3. Mr Corbishley referred to photo 2 of his report which shows the area to which he refers, the south elevation, His photograph does not show the gap to which he refers.
4. The experts either gave an affirmation or took an oath before giving evidence. Mr Corbishley stated that he went onto the roof with Mr Drexler and put his hand through the junction of the capping and the roof sheeting. Mr Drexler agrees that he went onto the roof but he did not see the gap that Mr Corbishley has referred to. I have also been referred to page 143 of exhibit A in which the owners have provided photographs. However these photographs do no show capping above the roof cladding. I am not persuaded that these photographs show the area of the roof referred to by Mr Corbishley. The owners were complaining that possums were entering their roof space.
5. Given that Mr Corbishley affirmed his evidence and stated that he had a clear recollection of a gap between the junction of the capping and the roof sheeting, I accept his evidence even though Mr Drexler could recall being on the roof but could not recall seeing the gap that Mr Corbishley referred to.
6. Mr Drexler also relied upon the NSW Guide to Standards and Tolerances regarding inspecting surfaces from a normal viewing position The NSW Guide is not a legal requirement in NSW. I find that if an expert witness states on affirmation that he has seen a gap between the junction of the capping and the roof sheeting that persuades me that the gap does exist and that in allowing such a gap to remain after practical completion without rectification, the builder will be in breach of s18B(1)(a) of the Home Building Act and clause 39 of the contract. I find that observation of the gap while on the roof is sufficient to prove the existence of the gap even if it can't be observed from a normal position on the ground.
7. I find for the owners in relation to item 1 of the JER.

Item 2 - Damage to new roof sheeting

1. This item refers to damage to new custom orb roof sheeting. The owners' expert states that the roof sheeting is damaged with scratching at greater than 2 mm and dents which will likely void the manufacturer's warranty provisions and typically leads to accelerated deterioration.
2. Mr Drexler states that the scratching is less than 2 mm in width and dents to the roof sheeting come under cuts and bends in the manufacturer's warranties.
3. The owners' practical completion report based on a 9 July 2020 inspection which is at page 149 of exhibit A, refers to scratched and damaged colourbond roofing. Photographs on page 159 show dents and scratches to some roof areas. Mr Corbishley's report shows scratching to roof sheets at photo 3 and dents to a roof sheet at photo 8.
4. Mr Drexler provides a photo which shows that some of the ribs on the metal roof are bent. He states that he observed that scratches were less than 2mm wide. Mr Drexler also refers to the manufacturer's technical bulletin to state that the warranty is not likely to be voided.
5. I find that the builder or its contractors caused the scratching and denting of the colourbond roofing since the owners' practical completion report at page 158/9 of exhibit A shows the scratches and dents to some sections of the roof as at 9 July 2020. I infer from the date of this report that the dents and scratching to the roof were caused the builder or its contractors and not by the owners, third parties or the owners' expert.
6. Mr Drexler has attached various pages of a technical nature from Colourbond at pages 276 - 283 of exhibit A. He relies on the following extract, among others: 'Minor scratches (< 2mmin width and unnoticeable from ground level) should be left alone as the available metallic coating will protect against corrosion.'
7. Mr Corbishley relies on the following sentence: 'If scratches are more noticeable on new material, it is the recommendation of BlueScope to replace the affected product.'
8. Mr Corbishley's report does not address the width of the cracks. From the photographs in evidence, I am unable to determine their width. I also find that it is not the function of the Tribunal to determine the width of a scratch from the photographs in the absence of expert or other evidence. Since the only evidence of scratch width is that from Mr Drexler, namely that the width of a scratch was less than 2mm, I find that the manufacturer's recommendation is that the scratch is minor and should be left alone.
9. I find that the owners have not established that minor scratching of the colorbond roof was a breach of clause 39 of the contract.
10. So far as the dents to the roof are concerned, I have found that that the builder or its contractors caused the denting of the colourbond roofing. I further find that the Overpainting and restoration material annexed to Mr Drexler's report does not address dents in colourbond roofs. I also find that Technical Bulletin 10 annexed to Mr Drexler's report is not relevant to denting of the product which might occur during construction. I infer that denting colorbond roofing sheets in the course of construction is in breach of clause 39.1(a) of the contract to carry out the works with due care and skill.
11. I will find for the owners in connection with this item of the Scott schedule so far as dented roof sheets are concerned.

Item 7 - Roof Gutter west elevation

1. The experts agree that this item was incorrectly installed. There is a disagreement about the rectification methodology.
2. The owners' expert assesses the cost of rectification at $1,723.20 and provides a breakdown of the costs at page 12 of exhibit A.
3. At the hearing there was a great deal of discussion about the necessity for scaffolding the western elevation and whether the work can be done in stages. Mr Drexler referred to scaffolding in his report, Mr Corbishley did not.
4. Since I have decided to make a work order that the builder will be required to carry out the rectification of this defect, I will include it in the work order on the basis that the experts agree that this item was incorrectly installed.

Item 11 - Entry deck balustrading

1. The experts do not agree on this issue.
2. The owner's expert states that there is excessive movement to the entry deck balustrading at the top of the stairs. The builder's expert states that the balustrading has been sufficiently secured to the deck and is in a satisfactory condition.
3. I note that this item was not referred to in the handover report prepared on behalf of the owners.
4. This is a minor matter. Mr Drexler states that in his opinion 1 hours work by a carpenter will be required. Since I have stated that I will make a work order I will include fixing in the base of the balustrade.

Item 12 - Entry stair balustrading

1. The experts do not agree on this item.
2. The owners' expert states that there are excessive non-compliant barrier gaps to the stair balustrading along with omitted balustrading to the south side of the entry stairs for falls greater than 1m. The builder's expert states that the balustrade complies with the Building Code of Australia and does not require additional balustrading. It is suggested that there has been a structural engineer's certificate for Balustrades dated 2 June 2020. However the certificate referred to by the builder's expert relates only to a steel frame balustrade fitted with glass system. The report from the builder's expert provides photographs of the balustrade in issue which does not have a glass system. I therefore conclude that the engineer's certificate does not relate to the balustrade the subject of this particular item of the Scott schedule
3. Given that there is no agreement on this issue by the experts, I find that the owners' expert's evidence is not sufficiently detailed and therefore persuasive enough to establish that the builder breached the warranties at clause 39 of the contract in relation to this item.

Item 18 - Sub floor electrical wiring

1. The experts do not agree on this item.
2. The owners' expert says that several areas of the subfloor have electrical wiring which has been incorrectly terminated and likely a safety issue. He states that the wiring is untidy and inadequately clipped in parts and redundant wiring has not been removed. He further states at the wiring is not compliant with AS/NZS 3000.
3. The builder's expert states that there is new wiring in the subfloor that the builder has installed and that there is old wiring that was pre-existing. He states that he observed that the joins between the old electric wiring in the subfloor below the house have not been enclosed in a junction box for protection and safety purposes and that otherwise the new one wiring installed by the builder is satisfactory. He further refers to a certificate of compliance for electrical work dated 16 July 2020 which is in evidence as an annexure to the builder's affidavit. That document is a poor copy and so far as I can ascertain does not refer to sub-floor areas. Nonetheless it refers to the electrical work carried out.
4. The construction certificate for the contract works indicated that the nature of the work was 'Alterations and Additions'. This certificate gives support to Mr Drexler's opinion that there was pre-existing electrical work which was not the builder's responsibility and I find not part of the builder's scope of work referred to in the contract.
5. The owners' expert's brief opinion about this issue does not persuade me that there has been a breach of contract by the builder in connection with this issue. Mr Drexler's evidence and the construction certificate, page 90 of exhibit A, satisfy me that given the contract work was for alterations and additions it was highly probable that there was pre-existing wiring present. The owners' expert has not distinguished between old and new wiring. On that basis this item of the owners' claim is rejected.

Disposition of the owners' claim

1. I have stated that I would make a work order. The work order is to apply to the agreed items of the Scott schedule, namely items 3, 4, 9, 10, 14, 15, 16, 17 and 19.
2. Of the disputed items the owners have been successful on items 1, 2, 7 and 11 of the Scott schedule.
3. I will make orders that: 1. the builder must carry out the necessary rectification work on defect items 1, 2 (as regards dented colorbond roof sheets), 3, 4, 7, 9, 10, 11, 14, 15, 16, 17 and 19 of the scott schedule with due care and skill, in accordance with the Building Code of Australia and all applicable Australian Standards (the 'rectification work'); 2. The rectification work must be supervised by a person who holds a supervisor's certificate under the Home Building Act and persons who carry out the rectification work must have the necessary tradesperson certificates under the Home Building Act; 3. All rectification work must comply with the licensing requirements of the Home Building Act; 4. The rectification work must be completed within 3 months of the date of this decision; 5. The owners must give the builder all necessary access for the purposes of carrying out and completing the rectification work.

Costs

1. The parties made submissions regarding costs at the hearing. In their Points of Claim the owners claimed a costs order. The builder submitted that the owners should pay its costs.
2. Regrettably, the issues regarding the costs of the proceedings are legally the most complex of the issues to be determined.
3. Section 60 of the Civil and Administrative Tribunal Act 2013 ('CAT' Act) creates the general rule that each party to proceedings must pay their own costs: s60(1). I may order costs only "if satisfied that there are special circumstances warranting an award of costs" (emphasis added): s60(2). Section 60(3) sets out a non-exhaustive list of factors that may be considered in deciding whether there are special circumstances warranting an award of costs.
4. The term "special circumstances" is not defined by the CAT Act. It has been interpreted to mean circumstances that are out of the ordinary, but not necessarily extraordinary or exceptional. The discretion to award costs must be exercised judicially having regard to the underlying principle that parties to proceedings in the Tribunal are ordinarily to bear their own costs.
5. Rule 38 of the Civil and Administrative Tribunal Rules 2014 ('NCAT Rules') states: 'This rule applies to proceedings for the exercise of functions of the Tribunal that are allocated to the Consumer and Commercial Division of the Tribunal. (2) Despite section 60 of the Act, the Tribunal may award costs in proceedings to which this rule applies even in the absence of special circumstances warranting such an award if: (a) the amount claimed or in dispute in the proceedings is more than $10,000 but not more than $30,000 and the Tribunal has made an order under clause 10 (2) of Schedule 4 to the Act in relation to the proceedings, or (b) the amount claimed or in dispute in the proceedings is more than $30,000.'
6. Part 4 of the CAT Act deals with Practice and Procedure. Section 60 of the CAT Act is in Part 4. Section 35 of the CAT Act which is also in Part 4 states: 'Each of the provisions of this Part is subject to enabling legislation and the procedural rules.'
7. I find that s35 of the CAT Act makes it clear that s60 of the CAT Act is subject to Rule 38.
8. The owners' claim was originally $32,788.22. It was then increased to $54,814.29, refer page 310 of exhibit A. The owners' claim was brought under the Home Building Act 1989. Pursuant to section 3 of Schedule 4 of the CAT Act, proceedings under the Home Building Act are allocated to the Commercial and Consumer Division of the Tribunal.
9. The builder relied on [9] and [10] of its Points of Defence dated 11 February 2022 which state: 'The Respondents seek an Order that the Applicants pay the Respondents' legal costs on the basis that these proceedings should not have been commenced for more than $30,000.00 and that leave for each party to be legally represented ought not to have been granted under the NCAT Guideline on Representation issued in August 2019. Particulars a. Item 5 in the Amended Scott Schedule (also included in the original Scott Schedule) was never part of the scope of works and was "invented" by the Applicants' expert witness and rightly abandoned. b. Item 6 in the original Scott Schedule was never part of the scope of works and was carried out by others before the Respondents undertook any work on the site. Item 6 should never have been included in the original Scott Schedule. c. Item 6 in the original Scott Schedule was deleted and Item 6 of the Amended Scott Schedule was substituted. The Applicants' expert relied upon an assertion by the first named Applicant as to what materials were used to construct the roof over the deck, the study and the 2nd' bedroom. The Applicants' expert carried out no independent investigation to verify the accuracy of the assertion by the first named Applicant. Item 6 in the Amended Scott Schedule was rightly abandoned. d. Item 20 in both the original and amended Scott Schedule was "invented" by the Applicants' expert witness and rightly abandoned. e. The total claimed for items 5, 6 and 20 in the original Scott Schedule was $16,421.03. f. The total claimed for Items 5, 6 and 20 in the Amended Scott Schedule was $41,701.83. g. Had Items 5, 6, and 20 in the original Scott Schedule and in the Amended Scott Schedule been omitted, the total amount claimed by the Applicants would have been $11,112.46. h. Leave for each party to be legally represented before the Tribunal would not have been granted in the circumstances of this case if the Applicants' claim had been for $11,112.46. i. The institution of proceedings claiming more than $11,112.46 amounted to conduct under section 60 of the Civil and Administrative Tribunal Act, 2013 which: i. unnecessarily disadvantaged the Respondents: ii. raised claims that had no tenable basis in fact or law; and 15 iii. were frivolous or vexatious or otherwise misconceived or lacking in substance. 10. Further, the Respondents seek an Order that the Applicants pay the Respondents' legal costs on the basis that the Respondents were always ready and willing to carry out any rectification work that might be required and the Applicants unreasonably prevented the Respondents carrying out the required rectification work.'
10. The experts' reports were finalised on 30 November 2021 when Mr Drexler prepared his report.
11. As stated at [9] of these reasons, I was informed that the JER was prepared on 24 January 2022. At that time, it was clear that items 5, 6, 8 and 20 were not pressed by the owner's expert. It follows that the builder has made good [9a,b,d] of the Points of Defence only insofar as these items were not pursued by the owner's expert. I find that these items were claimed at a total of $33,107.45 as referred to in the owners scott schedule which is at page 218 of exhibit A. ($11,180.45 + $20,987.00 + $940.00)
12. As at 24 January 2022, the balance of the owner's claim was $8,418.54 excluding margins and GST. Of those claims the builder's expert agreed items 3, 4, 9, 10, 14, 15, 16, 17 and 19, the cost of rectifying which was agreed at $1,650.54. As stated at [12] of these reasons the disputed items in the JER, were items 1, 2, 7, 11, 12 and 18. The amount claimed in connection with the disputed items was $6,768.00.
13. I find that the real issue for me to determine as regard the costs of the proceedings is whether for the purposes of Rule 38 of the NCAT Rules, the amount claimed or in dispute in the proceedings was more than $30,000.00.
14. There are at least 3 possibilities. First, when the application was filed when the amount claimed was $32,788.22. Secondly, when it was then increased to $54,814.29, in the owners' undated Points of Claim filed in the Tribunal on 5 November 2021. Thirdly, the amount truly in issue at the commencement of the hearing, $6,768.00.
15. In Thornton v Desire Constructions Pty Ltd [2020] NSWCATAP 116 at [2] an Appeal Panel formulated the question that was to be considered as regards costs, stating: 'An appeal against the costs order made in the first instance proceedings raises the issue of, at which point in proceedings is the amount 'claimed or in dispute' ascertained for the purpose of rule 38 of the Civil and Administrative Tribunal Rules 2014.'
16. At [87] - [89] of this decision the Appeal Panel stated: 'In Carlson v ARA Engine Reconditioning Pty Ltd (No 2) [2020] NSWCATAP 39 an Appeal Panel considered the position in circumstances where an appellant commenced proceedings seeking an amount less than $30,000.00, but after the respondent's evidence was filed, his claim exceeded $30,000.00. At [27] the Appeal Panel stated: 'Mr Carlson's solicitor has submitted that the original claim "was for a figure of $10,771" and claims that the change in the amount sought by Mr Carlson was "a direct result of the position [ARA Engine Reconditioning] took" in the proceedings below. It is correct that Mr Carlson's originally claimed $10,771. However, regardless of the reason he increased his claim, by the time the matter came before the Tribunal for hearing, the amount claimed in the proceedings was more than $30,000. Rule 38 therefore applied to costs of the Tribunal proceedings.' In Carlson v ARA Engine Reconditioning Pty Ltd (No 2) the Appeal Panel found that the relevant time to consider the 'the amount claimed or in dispute' in the proceedings was at the time the matter came before the Tribunal for hearing. Based on the authorities that we have discussed above, we are of the view that the amount claimed or in dispute in the proceedings is to be determined by the amount claimed in the application, or the amount claimed at the commencement of the hearing. '
17. As at 24 January 2022, after a consideration of the JER it ought to have been plain that the amount in dispute between the parties was $6,768.00 excluding margin and GST. As at 11 February 2022 the builder made it clear in [8] of its Points of Defence that it would seek a work order.
18. I find that at 11 February 20211 the amount truly in issue between the parties was the owners' claim for $6,768.00 plus margin and GST, given that there was a contest between the parties regarding a money order or a work order. Even if I included the cost of the agreed items into the issue because a money order was sought in relation to them, the amount truly in issue was $8,418.54 plus margin and GST which would have worked out as $1,683.65 margin, giving a sub-total of $10,102.19 with GST of $1,010.22, - total $11,112.41.
19. I find based on what was said in Thornton v Desire Constructions Pty Ltd that the amount in issue in these proceedings was less than $30,000.00, because it was clear before the hearing commenced on 28 March 2022 that the total amount in issue was not more than $11,112.41. I find that as a result s60 of the CAT Act applies and the primary rule is that each party must pay its own costs of the proceedings.
20. The builder has raised costs submissions that leave for the parties to be legally represented would not have been granted in the circumstances of the case if the owners claim had been for $11,112.46. It is submitted that the institution of proceedings by the owners claiming more than $11,112.46 amounted to conduct under section 60 of the CAT Act which unnecessarily disadvantaged the builder, raised claims that had no tenable basis in fact or law and were frivolous or vexatious or otherwise misconceived or lacking in substance.
21. I reject these submissions. First, leave for legal representation was granted on 30 September 2021. At that point, the owners' claim was $54,814.29. It was not until at 24 January 2022 that the experts met and reduced the amount in issue. I am unable to agree that the owners should have costs ordered against them because they sought and obtained leave for legal representation on 30 September 2021 when at that time it was reasonable for them to have done so. I also do not agree that the owners unnecessarily disadvantaged the builder, or raised claims that had no tenable basis in fact or law and were frivolous or vexatious or otherwise misconceived or lacking in substance.
22. I find that the owners were successful on 4 of 6 disputed scott schedule items and were entitled to be heard on the question of whether or not 48MA would be given effect to, even if the builder stated that it would seek a work order. This is enough to reject the builder's submissions.
23. I will make an order that pursuant to s60 of the CAT Act, each party must pay their and its own costs of the proceedings.

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

Amendments 20 September 2023 - Formatting amendments. 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: 20 September 2023