respondent. The Appeal Panel varied the work order to specify methodology in paragraphs 99–118 of Mr Winton's report; varied the first-instance costs order to remove the lump-sum expert disbursements and...
Key principles
A contract that references AS 3700 and the BCA does not automatically require an M3 mortar class where the BCA requirements for the site (Exterior Moderate) only require an M2...
When multiple defects exist (manganese staining, evidence of mortar degradation from prior acid cleaning, and uneven perpends), a work order under s 48MA Home Building Act 1989...
A tribunal's costs order that fixes a lump sum for expert disbursements without reasons showing assessment of reasonableness or giving a party opportunity to make submissions on...
Issues before the court
Did the contract require an M3 mortar mix?
Was the Tribunal's work order requiring sealing/rendering appropriate under s 48MA of the Home Building Act 1989 (NSW)?
Was there procedural unfairness in the Tribunal's costs order fixing a lump sum for the applicants' expert disbursements?
Should leave to appeal be granted and did the appellant raise a question of law sufficient for appeal?
Plain English Summary
Owners sued their builder for stained and defective brickwork. The Tribunal ordered the builder to seal, render and paint the exterior per the owners' expert and ordered the builder to pay the owners' costs including expert invoices. The builder appealed, arguing an alternative chemical neutralisation method could fix the staining and the costs award was procedurally unfair. The Appeal Panel held the contract did not require a higher-grade (M3) mortar, found rendering was an appropriate final remedy because staining, mortar friability from prior acid washes and uneven perpends meant neutralisation alone would not cure all defects, and varied the costs order because the Tribunal had fixed a lump-sum for experts without adequate assessment or procedural opportunity. The appeal was otherwise dismissed and the appellant ordered to pay 80% of the respondents' appeal costs.
AI-generated legal information, not legal advice. Zoe can make mistakes. Check the cited source, and for advice about your situation consult a qualified Australian lawyer.
Deep Dive
1,662 words · generated 05/08/2026
Cited legislation
3 cited instruments linked from this judgment.
What happened
Champion Homes Pty Ltd (the builder/appellant) constructed a new house for the Lals (respondents). The respondents alleged defective brickwork: visible manganese/iron staining after repeated cleaning attempts, mortar that was stained and friable, and uneven perpends beyond tolerances. The first-instance Tribunal (Senior Member McDonald) ordered rectification by sealing, rendering and painting the exterior in accordance with the respondents' expert report (Mr Winton), and ordered the appellant to pay the respondents' costs including full expert disbursements totalling $43,253 (Reasons at [2], [3], [5]; Costs at [52]-[53]).
Champion Homes appealed, arguing two central points: (1) the Tribunal should have ordered the appellant's proposed neutralisation/cleaning methodology (alkaline flooding followed by acid clean) as the appropriate rectification, rather than rendering; and (2) the first-instance costs order was procedurally unfair because the Tribunal fixed a lump-sum for expert disbursements without giving the appellant an opportunity to make submissions on that discrete question or otherwise assessing reasonableness (Amended Notice of Appeal grounds and Grounds 1 and 4). The Appeal Panel heard the appeal and delivered reasons on 10 July 2019.
The Panel concluded the contract did not require an M3 mortar mix (contrary to the respondents' contention) because the BCA and contract specifications required only M2 for the site, and the mortar in fact met M2 performance (see 'Was M3 mortar mix required?' section). On the remedy, the Panel accepted that three distinct defects required rectification, manganese staining, mortar degradation from prior acid washes, and uneven perpends, and that the neutralisation method (while possibly addressing manganese staining) would not reliably remediate the mortar damage or the perpend/laying defects and was not guaranteed to succeed. Rendering/sealing would address all three defects proportionately, whereas demolition and rebuild to reinstate face brick would be unreasonable. The Panel therefore confirmed the work order but varied its wording to specify that the rendering be carried out "being in the methodology set out at paragraphs 99–118" of Mr Winton's report (see Reasons at [36], [47]-[48], orders).
On costs, the Panel held that fixing the full expert disbursements as a lump sum without clear assessment or giving the appellant a focused opportunity to respond was procedurally unfair. The Panel varied the costs order to delete the lump-sum disbursement award and directed that costs be as agreed or assessed on an ordinary basis; it otherwise dismissed the appeal and ordered the appellant to pay 80% of the respondents' appeal costs (Reasons at [52]-[53]; orders).
Why the court decided this way
Three analytical strands drove the decision.
Contract interpretation and BCA/AS 3700 application. The Panel analysed clause 1.4.1(d) of AS 3700, documents must show mortar class, and the contract's incorporation of the HIA General Housing Specifications. The site classification (Exterior Moderate) required M2 under the BCA. There was no express specification imposing M3. On that basis, the Panel concluded the mortar supplied (which met M2 performance when tested) did not breach the contract by failing to be M3 (see 'Was M3 mortar mix required?' analysis).
Remedy appropriateness and finality. The Panel emphasised remedies under s 48MA Home Building Act 1989 should aim to rectify defects and, where reasonably possible, finalise disputes. Three defects were accepted by the parties and experts: staining, mortar friability (from acid washing), and uneven perpends. The neutralisation methodology proposed by the appellant's expert (Mr Mouatt) might address staining, but evidence (including chemical analyses and photographic evidence of friable mortar) showed that the mortar had been compromised through cleaning processes and that neutralisation would not reliably restore durability or address perpend tolerances (Reasons at [47]-[48] and factual findings in the Joint Expert Reports). Rendering/sealing was an available remedy that would stabilise mortar joints and produce a durable, final finish without demolition and rebuild. The Panel therefore regarded rendering as proportionate and apt to finalise the dispute.
Procedural fairness on costs. The Panel invoked costs principles (compensatory nature, need to assess reasonableness) and administrative law fairness. It found the first-instance Tribunal's decision to include the full expert invoices in a fixed amount ($43,253) had not been accompanied by a clear assessment of necessity and reasonableness nor had the appellant been given a discrete opportunity to address the propriety of fixing a lump sum for disbursements. That defect warranted varying the costs order so costs be agreed or assessed on an ordinary basis (Reasons at [52]-[53]).
The Panel therefore struck a balance: it left the substantive remedy intact (subject to clarification), but corrected the costs process where procedural fairness required it.
Before and after state of the law
Before this decision: principles about appropriate remedies under s 48MA, the interpretive primacy of contract documents and applicable standards (AS 3700 and the BCA), and costs principles requiring assessment of reasonableness were already established. The Panel applied those principles to the specific factual matrix.
After this decision: the judgment reaffirms several points:
A practical final remedy that addresses all defects may be ordered even if it alters the aesthetic finish (rendering rather than face brick), where demolition and rebuild would be unreasonable and where the ordered remedy is proportionate and capable of remedying the defects.
A tribunal should not fix a lump-sum expert disbursement award without either (a) assessing necessity and reasonableness in reasons or (b) giving parties a discrete procedural opportunity to contest that aspect; failure to do so may lead an appellate panel to vary the costs order to assessment on an ordinary basis.
This decision is an application of existing doctrines rather than doctrinal innovation; its contribution is factual: clarifying when rendering is proportionate as a final remedy in the presence of staining plus mortar degradation and laying defects, and underscoring procedural fairness requirements in costs awards.
Key passages with plain-English translation
Paragraph [47] (quoted): The Tribunal recorded consensus that alkaline flooding could neutralise manganese and might stop further leaching, but noted it would be the only method short of rendering that might restore bricks to buyer-expected state. Plain-English: Experts said chemical neutralisation could stop staining but only rendering would more certainly fix appearance to a buyer standard.
Paragraph [48] (quoted): The Tribunal recorded doubt about guaranteed success and noted other experts lacked experience in the neutralisation technique. Plain-English: The neutralisation method was unproven and not widely used among the experts; success was uncertain.
Paragraphs [52]-[53] (quoted): The Tribunal said the dispute had lasted some time and that respondents had incurred experts' costs, some of which were unnecessary, then ordered the full invoices paid. Plain-English: First-instance tribunal thought the builder's conduct extended the dispute, causing additional expert costs, and therefore awarded the owners their expert bills, but it did so without a detailed breakdown or assessment.
Orders (final): The appeal panel clarified the work order to follow Mr Winton's methodology in paragraphs 99–118 and removed the lump-sum expert invoice award, directing ordinary assessment. Plain-English: The remedy stays but must be performed per a specified technical scope; the costs award must now be assessed or agreed through normal processes.
What fact patterns trigger this precedent
This decision will be directly informative where:
A homeowner claims brick staining caused by cleaning/chemical processes, and experts differ on whether chemical remediation (neutralisation) is likely to succeed versus rendering.
There is evidence of mortar degradation (friability) following cleaning, combined with laying defects (uneven perpends), such that a single remedial approach must address multiple defects.
A tribunal at first instance fixes a lump-sum payment of expert invoices without evident assessment or without giving the paying party a targeted opportunity to contest reasonableness.
Practitioners should note that where a remedy would not address all defects (or its success is unproven), a tribunal may properly select a remedy that finalises all issues even if it alters the finish, provided the remedy is reasonable and proportionate.
How later courts have treated it
The decision is a 2019 NCAT Appeal Panel decision. Within the judgment the Panel cites authorities on reasons and costs (Beale, House v The King, Bellgrove) to apply existing principles. The Panel applied those authorities to conclude the work order was substantively sound and to adjust the costs order for procedural fairness. Subsequent courts would assess this decision for persuasive value in similar factual matrices but it does not purport to overturn any higher-court authority. Where subsequent appellate decisions address the same intersection of remedial finality and procedural fairness in costs, they would treat this decision as a tribunal-level application of established principles. (The judgment itself does not record later treatments; practitioners should check subsequent citations in databases.)
Still-open questions
The Appeal Panel found the first-instance Reasons inadequate on the particular point of "ancillary defects" but nonetheless confirmed the order because the evidence supported that rendering was appropriate. The threshold for when inadequate reasons require setting aside a remedy versus varying or confirming it remains case-specific; litigants may still contest orders where reasons do not identify the precise ancillary defects said to justify a particular remedial choice.
The Panel accepted that rendering would stabilise mortar joints; detailed technical proof of long-term durability after rendering is context-dependent. If a party can provide robust empirical evidence that a neutralisation technique reliably restores durability, a court might reach a different conclusion.
The costs ruling emphasises the need to give parties opportunity to controvert a proposed lump-sum disbursement award. The exact form of procedural engagement required (e.g., whether brief submissions suffice or a discrete mini-hearing is necessary) will depend on the circumstances. The Panel's directions for post-decision contest of costs (orders permitting either party to apply for alternate costs orders with tight timetables) suggest flexibility, but future cases will refine procedural minima.
Final note, legal-information reminder
This deep dive summarises and analyses the Appeal Panel's reasons in Champion Homes Pty Ltd v Lal [2019] NSWCATAP 170 using the judgment text. It is legal information, not legal advice. I can make mistakes. Before you rely on this analysis, use it in litigation, or act on it, get a qualified Australian lawyer to check it.
Judgment (9 paragraphs)
[1]
Introduction
The appellant is a licensed builder who carried out residential building work at the property owned by the respondents located at Bungarribee, New South Wales.
The respondents filed home building application HB 16/36337 on 10 August 2019. The application related to a claim concerning brickwork in a new house which was said to have been defectively laid and/or which exhibited signs of staining despite having been cleaned on a number of occasions. The contract sum for the construction of the new house was $371,363. The respondents claimed $150,000 by way of damages "for ongoing maintenance and in loss in value of the house".
On 14 February 2019 the Tribunal made a work order for rectification of the defective work and to correct the defective staining of the bricks ("work order"). The work order consisted of "sealing, rendering and painting all of the bricks and mortar on the exterior surfaces of the residential dwelling … in accordance with the methodology and recommendation of the [respondents'] expert Mr Ken Winton outlined in his report dated 29 January 2017".
Mr Winton (KW), building consultant, was the respondents' expert. The respondents' other expert witness was Mr Franceschini (JF), chemist.
In addition, the appellant was ordered to pay the respondents' costs of the proceedings at first instance. Those costs were to be assessed on a party/party basis but were to include "the full amount of the [respondents'] expert's disbursement invoices in the sum of $43,253.00 ("costs order").
The Tribunal provided written reasons for its decision (Reasons).
The appellant appealed the Tribunal's decision by Notice of Appeal filed 13 March 2019. The Notice of Appeal was filed in time. Subsequently, an amended Notice of Appeal was filed on 28 March 2019 pursuant to leave given by the Appeal Panel on 26 March 2019. The appellant sought leave to appeal on grounds other than questions of law.
[2]
Notice of Appeal and grounds of appeal
The appellant challenges both the work order and the costs order.
In doing so it relies on evidence from its experts, Mr Mouatt (CM), a ceramics engineer and Mr Hall (DH), a building consultant.
In relation to the work order, the appellant says it should be set aside and the following orders should be made:
1. The appellant to carry out at its expense the neutralising procedure recommended by its expert, Mr Mouatt, to be completed within eight (8) weeks of the date of the order;
2. Refer the matter to the Tribunal sixteen (16) weeks, or such other date after 16 weeks suitable to the Tribunal after the date of this order, to determine if the procedure was successful to neutralise the mortar and brick.
3. The appellant to carry out at its expense chemical analyses of the brick and mortar to assess if the brick and mortar has been neutralised and file a copy of the report with the Tribunal before the next appearance.
4. If the procedure is unsuccessful the Tribunal to order the rendering of the brickwork in accordance with order 1 of the Tribunal as originally made and to nominate a period for the work to be completed.
In relation to the costs order, the appellant says the order should be vacated and in lieu an order should be made that each party pays its own costs of the proceedings before the Tribunal at first instance.
The appellant raised six grounds of appeal in the amended Notice of Appeal. These were:
1. The decision was unreasonable on the evidence. The Tribunal wrongly found Mr Mouatt did not have confidence in his proposed rectification procedure and wrongly found that issues relating to mortar and brick discolouration could not be rectified adopting this procedure. In doing so, the Tribunal failed to have regard to Mr Mouatt's evidence concerning his experience using this procedure and the evidence of Mr Winton, that he had no experience in this process. In this regard the appellant also said the decision was contrary to the joint expert conclave reports.
2. The Tribunal identified the wrong issue. Section 48MA of the Home Building Act 1989 (NSW) (HB Act) contemplates a work order that rectifies any defect so as to bring it into conformance with the contractual obligations. The rejection of the methodology of Mr Mouatt, that contemplated the neutralisation of chemicals within the wall and subsequent cleaning, occurred despite the expert's evidence that he had "a high degree of confidence in the method". Rather, the Tribunal ordered rectification by means of rendering of the brickwork, as proposed by Mr Winton.
3. The Tribunal misapplied a principle of law. In determining that orders should be made to bring about a final resolution of the dispute, the Tribunal's orders were "subject to engineer's approval and also subject to failure". Further, rendering would not bring the works into conformity with the contract.
4. The Tribunal did not afford the appellant procedural fairness on the costs issue. While the Tribunal asked the parties to provide submissions on costs, ordinarily any order made would be for a costs assessor to determine the reasonableness and necessity. Here, the Tribunal made a "lump sum" order in respect of some disbursements. If it was proposing to do so, it should have allowed the appellant the opportunity to make submissions on this aspect.
5. The Tribunal failed to take into account relevant considerations. The Tribunal wrongly considered the evidence of the appellant's witness Mr Vardas when that affidavit was not read. Otherwise, the Tribunal should have given more weight to the evidence of Mr Mouatt.
6. The Tribunal failed to give proper reasons. In stating that it had considered various issues and in reaching the conclusion concerning ongoing maintenance, the Tribunal failed to provide a "reasoned discussion as to how the Tribunal reached the conclusion".
[3]
Consideration
There is a right of appeal on a question of law. Otherwise leave to appeal is required: s 80(2)(b) of the Civil and Administrative Tribunal Act 2013 (NCAT Act). Collins v Urban [2014] NSWCATAP 17 sets out the principles applicable in determining whether leave should be granted.
At the outset, it should be noted there is no dispute that the building works are defective. The substance of the appeal is that while a work order was appropriate, the particular methodology to render the building was not.
The appellant says there was no obligation to provide an M3 mortar mix. While the mortar provided was neither an M2 nor M3 mix, it did satisfy the performance requirements for an M2 mix and the M2 mix was all that was required under the terms of contract. The appellant also accepted in oral submissions there was an issue with perpends. However, the extent of this issue did not warrant rendering the whole of the brickwork of the building. Finally, the appellant says that the Tribunal should have adopted the methodology proposed by Mr Mouatt of neutralising and cleaning the brickwork, such a work order being one which would bring the works into conformance with the contractual obligation which was for a face brick finish rather than a rendered finish.
[4]
Was M3 mortar mix required?
A preliminary issue is whether the contract required an M3 mortar mix, it being an agreed fact that the mix actually provided did not meet this requirement and only met the performance requirements of an M2 mortar mix.
The respondents contended that the mortar mix the appellant originally proposed was an M3 mix: see respondents' submissions at first instance (AB 1 Tab 8 p 13 E iv). The respondents submitted that the appellant (who was also the designer) was required to specify the mortar mix having regard to the notation in cl 1.4.1 (d) of AS 3700. Once the appellant specified the mix as M3 as required by cl 1.4.1, the respondents said that the failure to provide such a mix constituted a breach of the contract and a failure to build in accordance with the plans and specifications. In making this submission, the respondents noted that the purchase order given to the subcontractor did not in fact specify the mortar mix.
Clause 1.4 of AS 3700 is titled "Information to be provided on documents". Clause 1.4.1 is titled "General". Under this heading, cl 1.4.1(d) states:
Documents Shell show information necessary to construct the masonry, including the following:
…
(d) Mortar class or mix proportions or, for proprietary thin-bed mortar, the relevant specification.
Note: If mortar is specified by class, a range of deemed-to-satisfy mortar mixes is given in table 11.1. If it is desired to use a mix other than those deemed to satisfy, the standard requires that evidence of performance be provided (see Clause 11.4.1 (ii)). In all cases, the designer should ensure that the requirements for mortar are adequately communicated to the builder.
It is on the basis of this clause and the fact that there was some evidence the appellant required an M3 mix that the respondents contend there was a contractual obligation to supply such a mix.
We do not agree that the supply of M3 mortar was required by the contract.
The HIA General Housing Specifications, which form part of the contract (AB 2 Lal Tender Bundle p 1) stated in clause 12.5 (p 5) that:
Mortar shall comply with the BCA. Joint tolerances shall be in accordance with AS 3700.
There is no dispute that the site had a "durability classification" of "Exterior Moderate" for which an M2 mortar mix was required to comply with the Building Code of Australia (BCA). The present mortar mix in fact met the performance requirements for an M2 mix. There was no express requirement otherwise in the specifications to which we were referred requiring an M3 mortar mix. In these circumstances, there is no reason to conclude the mortar supplied did not comply with the BCA or the specifications for the work.
[5]
Was the form of rectification order appropriate?
The Tribunal determined the appropriate rectification method was rendering. In reaching this conclusion the Tribunal recorded the following in its Reasons.
At [2] of the Reasons, the Tribunal noted the respondents' claims as follows:
The [respondents] allege in Points of Claim filed with the application that the defects to the residential dwelling concern:
(1) the bricks, which they allege are defective and severely stained and which is clearly visible from a normal viewing position. The Applicants allege the staining was caused by the Respondent or its agent who used incorrect brick cleaning techniques in a final clean of the bricks before the completed residential dwelling was handed over to the Applicants;
(2) the mortar is defective, in that it is stained and soft caused by the Respondent which incorrectly mixed the mortar and it was also damaged by the brick cleaning technique of the Respondent or its agent; and
(3) the brickwork is defective as the mortar perpend thicknesses exceed Standards and Tolerances.
The Tribunal said there was evidence from Mr Mouatt, in his report dated 7 July 2017, that hydrochloric acid had been used to clean the brickwork which had resulted in "mobilising of the manganese within the clay bricks": Reasons at [32]. Further attempts were made to clean the bricks, one using acetic acid in May 2015. Of these attempts, there was evidence from the respondents' expert that "white manganese stains returned to the surface of the bricks and the strength of the mortar was impacted": Reasons at [34].
The Tribunal determined there were "three defective elements of the [respondents'] residential dwelling namely the bricks, the mortar mix and the brickwork" which any work order must address: Reasons at [36]. The Tribunal also determined that the manganese staining to the brickwork impacted the aesthetic appearance of the dwelling and the ultimate value of the dwelling and that the respondents were entitled under the contract to a building constructed with "durable mortar and proper brickwork": Reasons at [37].
Having regard to the provisions of s 48MA of the HB Act, the Tribunal accepted that a work order should be made to rectify the defects: Reasons at [44]. In considering the appropriate rectification work to be required the Tribunal then said at [47] - [48]:
47. There did appear to be some consensus of the experts led by Mr Mouatt, who appeared to have considerable specific expertise in this area, that the manganese staining could be stopped if the brickwork was flooded with an alkaline solution which would neutralise the acid content inside the bricks. This apparently resulted in the manganese stain being neutralised and it was suggested would stop further leaching to the surface of the bricks. This appeared to be the only solution short of rendering the house which may restore the bricks and the brickwork to a state expected of a new home buyer. However it did not appear to the Tribunal to address the ancillary defects and issues with the Applicants' mortar and brickwork.
48. Additionally, there was some doubt expressed Mr Mouatt in cross-examination about the success of this technique. He could not guarantee success and the other experts were unfamiliar with, or had never employed, this neutralising technique.
[6]
Costs awarded at first instance
The last aspect of the appeal to deal with is the Tribunal's decision concerning costs, particularly the allowance of all disbursements. The ground of appeal stated:
Ground 4- Procedural Fairness on the costs
At the conclusion of the hearing the Tribunal asked the parties to submit on the question of costs. Ordinarily this would be the foundation for an order for costs and not a lump sum or grow some costs order. The costs would then be determined by a costs assessor as to the reasonableness and necessity in accordance with the action.
The appellant says it was denied procedural fairness because it was not given an opportunity to make submissions concerning whether a lump sum or some other cost order should be made. In this regard, the appellant said that ordinarily an order would be made for costs to be determined by a costs assessor who would review the reasonableness and necessity for particular amounts claimed.
In its written submissions, the appellant accepted the discretion to award costs was a broad one and that it must demonstrate error of a type referred to in House v The King (1936) 55 CLR 499; [1936] HCA 40 to upset the discretion.
The appellant challenged the findings of fact that it had prolonged the proceedings. The appellant referred to various conclaves and evidence which the respondents served but did not rely on at the final hearing. The appellant reiterated that it was not given the opportunity to make submissions concerning whether a lump sum order should be made in regard to the costs of the reports. The appellant referred to the ordinary practice of making a costs order on the basis the costs were subsequently assessed.
The costs submissions of the parties made to the Tribunal at first instance were included in the bundle of documents. The respondents sought an order that the appellant pay "disbursements and incidental costs in relation to these proceedings associated with experts and other disbursements, including NCAT filing fees transcription fees, service fees": AB 1 Tab 10.
In reply, the respondents said that the appellant had been given an opportunity to respond to their submissions which "set out all costs and disbursements sought". However, no submissions appear to have been made concerning the reasonableness of the cost or how the claim for costs might be assessed.
[7]
Costs of the Appeal
Our preliminary view is that the appellant has only been successful in relation to that part of its appeal concerning the costs order. Otherwise, it has been unsuccessful in challenging the work order, although we have varied the work order to clarify the scope.
Having regard to the value of the rectification work, which the parties agreed was greater than $30,000.00, it would seem that r 38 of the Civil and Administrative Tribunal Rules 2014 (NSW) would apply to the appeal by reason of r 38A.
The challenges concerning the work order and the costs order were discrete issues. Some allowance should be made for the successful challenge to the costs order.
We do not think it appropriate to order an assessment of costs by reference to issues. This will unnecessarily protract the costs assessment process and lead to further disputation. Rather, we think the appropriate approach is to allow the respondents their costs of the appeal, having been substantially successful in defending the appeal, but reduced to take account of the appellant's success on costs. We would assess an appropriate allowance of 20% and therefore would order the appellant to pay 80% of the respondents' costs of the appeal, as agreed or assessed on an ordinary basis.
Notwithstanding this preliminary view, either party may make an application for a different order if thought appropriate. Prior to doing so the parties should meet to try and resolve this issue and avoid any further unnecessary costs.
[8]
Orders
The Appeal Panel makes the following orders:
1. Order 1 made 14 February 2019 is varied by adding the words at the end of that paragraph "being in the methodology set out at paragraphs 99 - 118 of that report".
2. Order 3 is varied to read as follows:
"The respondent is to pay the applicants' costs of and incidental to the application, such costs to be as agreed or assessed on an ordinary basis."
1. Save as provided above, leave to appeal is refused and the appeal is otherwise dismissed.
2. Subject to order 5, the appellant is to pay 80% of the respondents' costs of the appeal, as agreed or assessed on an ordinary basis.
3. Either party may apply for a different costs order to that in order 4 in which case the following order and directions apply:
1. Order 4 will cease to have effect.
2. The applicant for costs (costs applicant) is to file and serve any evidence and submissions on costs within 7 days of the date of publication of these orders;
3. The respondent to the costs application (cost respondent) is to file and serve any evidence and submissions in reply within 14 days of the date of publication of these orders;
4. The costs applicant is to file and serve any submissions in reply within 21 days from the date of publication of these orders;
5. The submissions of the parties are to include submissions about whether an order should be made dispensing with a hearing of the costs application pursuant to s 50(2) of the Civil and Administrative Tribunal Act 2013.
[9]
I hereby certify that this is a true and accurate record of the reasons for decision of the New South Wales Civil and Administrative Tribunal.
Registrar
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: 10 July 2019
The Appeal Panel varied the work order to specify methodology in paragraphs 99–118 of Mr Winton's report; varied the first-instance costs order to remove the lump-sum expert disbursements and direct costs to be agreed or assessed on an ordinary basis; refused leave to appeal except insofar as costs were varied; dismissed the appeal otherwise; ordered the appellant to pay 80% of the respondents' costs of the appeal, subject to possible later application for altered costs directions.
The parties provided written submissions, supplemented by oral submissions at the hearing of the appeal on 17 June 2019. A two-volume appeal book (AB) was provided containing the evidence from the proceedings at first instance.
Concerning the defects about which complaint was made, the parties agreed there were three issues. These were:
1. Whether it was a term of the contract that the mortar was required to be of an M3 mix as stated in Australian Standard AS 3700 - 2011 Masonry structures. M3 is a mix or mortar which is deemed to satisfy the performance criteria for particular masonry structures under the Australian Standard. The parties agreed that:
1. the mortar actually provided was intended to be an M3 mix.
2. an M2 mix (again another deemed to satisfy mix) was all that was in fact required for the current structure to meet the engineering specification:
3. the mortar mix actually provided was not an M2 mix. Rather it was between an M2 and M3 mix; and
4. the mortar mix provided, when tested using a "scratch test" method agreed by the experts, met the performance criteria of M2 as required by the engineering specification.
However, the respondents said that the appellant had specified the M3 mix to its subcontractor and, despite the contract otherwise permitting the use of M2 mix or a mortar mix which could perform at a similar level, in specifying an M3 mix to its subcontractor the appellant thereby became bound to supply an M3 mix. Consequently, the respondent said the mortar was not in conformance with the contract.
1. The bricks and mortar were showing staining which was thought to be caused by iron or manganese in the bricks. This staining had been the subject of several earlier cleaning attempts by the appellant which had failed and/or had not prevented further staining. However, the appellant said that the treatment of neutralisation/cleaning proposed by its expert, Mr Mouatt, was a new solution and would rectify these matters.
2. There were visual defects in that the perpends were not of uniform mortar thickness, beyond relevant tolerances and the brickwork had been laid unevenly. In addition, the respondents contended that the mortar had degraded and become friable by reason of earlier cleaning treatments carried out by the appellant.
Accordingly, we do not accept that the mortar supplied was required to be of an M3 mix, nor was the mortar supplied defective.
However, we will return below to the claim the mortar was degraded by acid washing arising from the attempt to clean the staining of the bricks and the mortar.
The appellant says these reasons are inadequate to explain why the Tribunal rejected the methodology proposed by Mr Mouatt. In addition, the appellant says the finding at [48] concerning the likely success of adopting Mr Mouatt's rectification methodology was not consistent with the evidence given by Mr Mouatt and the Tribunal failed to have regard to the fact that no other expert had experience in this process.
In its written submissions, the appellant challenged the finding at [48] of the Reasons that Mr Mouatt expressed doubt about the success of the technique which he proposed.
As to the finish of the mortar joints, the appellant refers to the evidence of its experts, Mr Mouatt and Mr Hall and submitted the joints were in a "normally acceptable range".
As to the effect of previous acid cleaning which had been carried out by the appellant and the work proposed by Mr Mouatt to rectify the bricks staining, the appellant submitted at para 76 of its submissions in chief (AB Vol 1 Tab 4) that Mr Mouatt gave evidence to the following effect:
d. The purpose of hydrochloric acid cleaning is to dissolve the cement [paste] in the mortar smears on the outside and then you rinse off any residues with water: T:73.35.
…
j. Once manganese is mobilised it continues to come out; T: 80.15.
k. The attempt here is to neutralise the acidity which immobilises the manganese and this is then followed up with an acid clean: T: 80.15. The acid clean would have no negative impact on the bricks and mortar once the alkaline properties are restored within the bricks.
…
m. The underlying neutralisation step is much more important, and critical to prevent the manganese staining from re-occurring: T: 81.32.
n. The essential aspect is not the acid to remove the stain, it is to flood the bricks with the neutralising solution and change the chemical nature of the inside of the brick to an alkaline environment because manganese is virtually immobile in an alkaline environment: T: 97.35.
Ground 6 of the Notice of Appeal raised the issue of inadequacy of reasons.
In short, the appellant said the Tribunal:
1. failed to explain why the rectification method proposed by Mr Mouatt should be rejected, particularly having regard to the lack of experience of Mr Franceschini in remedial work for manganese staining issue and the lack of familiarity Mr Winton had with the remediation technique proposed by Mr Mouatt; and
2. made "no finding that the 'ancillary concerns' were defective or that they in fact required rectification".
In relation to the mortar mix, the respondents conceded that the reasons were inadequate in explaining what mortar mix was required and whether the mortar mix supplied complied with the BCA. As to the respondents' assertion that an M3 mortar mix was required, for the reasons stated above we do not accept this submission and it is unnecessary to consider this aspect any further.
However, the issue remains as to whether the reasons are otherwise inadequate.
There is no dispute concerning the applicable principles. However, it is useful to restate what the Court of Appeal said in Beale v Government Insurance Office of New South Wales (1997) 48 NSWLR 430. There, Meagher JA said at 443-4:
… the content of the obligation is not the same for every judicial decision. No mechanical formula can be given in determining what reasons are required. However, there are three fundamental elements of a statement of reasons, which it is useful to consider. First, a judge should refer to relevant evidence. There is no need to refer to the relevant evidence in detail, especially in circumstances where it is clear that the evidence has been considered. However, where certain evidence is important or critical to the proper determination of the matter and it is not referred to by the trial judge, an appellate court may infer that the trial judge overlooked the evidence or failed to give consideration to it: North Sydney Council v Ligon 302 Pty Ltd (1995) 87 LGERA 435. Where conflicting evidence of a significant nature is given, the existence of a set of evidence should be referred to.
Secondly, a judge should set out any material findings of fact and any conclusions or ultimate findings of fact reached. The obvious extension of the principle in North Sydney Council is that, where findings of fact are not referred to, an appellate court may infer that the trial judge considered that finding to be immaterial. Where one set of evidence is accepted over a conflicting set of significant evidence, the trial judge should set out his findings as to how he comes to accept the one over the other. But that is not to say that a judge must make explicit findings on each disputed piece of evidence, especially if the inference as to what is found is appropriately clear: Selvanayagam v University of the West Indies [1983] 1 WLR 585; [1983] 1 All ER 824. Further, it may not be necessary to make findings on every argument or destroy every submission, particularly where the arguments advanced are numerous and of varying significance: Rajski v Bainton (Court of Appeal, 6 September 1991, unreported).
Thirdly, a judge should provide reasons for making the relevant findings of fact (and conclusions) and reasons in applying the law to the facts found. Those reasons or the process of reasoning should be understandable and preferably logical as well.
There is no dispute between the parties that the manganese staining is a defect requiring rectification. While brief, the Tribunal's reasons at [37] explain why an order should be made to rectify this defect. Mention is also made at [37] of the respondents' entitlement to "durable mortar and proper brickwork". However, no explanation is given in that paragraph as to what that expression means. There is a statement at [34] that "the strength of the mortar was impacted" following a third cleaning with acetic acid.
At [47] of the Reasons, the Tribunal noted there was consensus between the experts "led by Mr Mouatt" that "manganese staining could be stopped if the brickwork was flooded with an alkaline solution which would neutralise the acid content inside the bricks" and that this was the only rectification method "short of rendering the house". However the Tribunal concluded this did not "address the ancillary defects and issues with the [respondents'] mortar and brickwork".
Again, the Reasons at [47] did not identify what the "ancillary defects and issues" were. Rather, a conclusion was reached that sealing and rendering was appropriate in order to finalise the respondents' claim in the first instance proceedings.
The Reasons do not adequately explain why sealing and rendering was appropriate, particularly in the absence of findings as to the nature and extent of the ancillary defects which, in our view, are critical to the rejection of the rectification method proposed by Mr Mouatt. This constitutes an error of law.
Despite this view, a consideration of the evidence which we have been provided in this appeal leads us to the conclusion that the work order made by the Tribunal should not be set aside.
Our reasons are as follows.
There are three defects which require rectification. These are the manganese staining to bricks and mortar, the uneven perpends, and the damage occasioned to the mortar by the cleaning process.
There is no dispute that the manganese staining is caused by the washing of the bricks and render with acid which has mobilised the manganese, causing bleeding and staining of the bricks and mortar.
While not identified with precision in the Reasons, it is clear the Tribunal at first instance accepted the evidence of the respondents' experts in preference to the views of the appellant's experts concerning defective mortar joints and damage to the mortar.
The views of the various experts are recorded in the Joint Expert Reports, variously found at AB 2 Tab 12 and Tab 17, being the meetings of experts on 16 May 2017 and 26 February 2018 respectively.
The following matters are recorded in the Joint Expert Report dated 26 February 2018:
24. KW and JF maintain excessive amounts of mortar have been blown out of the brick joints as a result of excessive cleaning and acid breaking the mortar down.
25. JF - My opinion is based on the evaluation of several thousand projects for mortar analysis and durability over 34 years.
26. DH and CM maintain the finish of the mortar joints is considered to be in the normally acceptable range for cleaned brickwork.
…
40. DH opined: …
At the finish to the mortar is "normal" in that it has a typical finish consistent with cleaned with acid which is to be expected for this type of building. The surface is not damaged but is showing very minor effect from the cleaning. This is a new issue not previously raised in the Winton Report and not included in the memorandum of conclave with Member Briggs [dated 16 May 2017]
The evidence from Mr Mouatt referred to in the appellant's submissions above supports the view that the earlier acid cleaning may weaken the structure of the mortar by creating a paste (necessary for removal when cleaning excess mortar).
There was evidence from Mr Franceschini that because of the "extent of the acid penetration into the brickwork it's going to have to be an extensive flooding under quite alkaline conditions to properly reverse this and neutralise it", there being no "guarantee of this working at all" and a method which this expert described as risky: AB 1 Tab 12 T: 98.40. That is, Mr Franceschini held the view that the proposed rectification work would not remediate the damage done to the existing mortar in the earlier acid cleaning attempts.
Lastly, there is evidence in the photographs forming part of Mr Winton's report dated 29 January 2017 (AB 2 Tab 8) that the mortar between the bricks has been damaged or has become friable and can be removed or is eroding from various joints in the brickwork: Tab 8 p 2 - bottom photograph, p 5 top photograph. In one place, 15 mm of mortar could easily be removed from a joint: Tab 8 p 3 - top photograph.
This evidence was not refuted by Mr Hall. Rather, in his first report, he expressed the following opinions:
1. that the bricks staining was not a result of the bricklaying or brick cleaning process: at AB 2 Tab 9 para 10.1,
2. there were "very minor holes … typical of lumps of sand being not thoroughly mixed during the mortar mixing process" : para 11.1.19; and
3. "In the absence of any evidence of mortar deterioration, crumbling mortar or erosion, then the mortar is fit for purpose": para 11.1.20.
The views of Mr Winton and Mr Hall are further detailed in aScott Schedule: part of Tab 9, again to the effect of the evidence above.
Mr Mouatt provided an opinion concerning scratch testing of the mortar and says that "all scratch indices are 0.5 mm or less and therefore the mortar meets the requirements of him to mortar". However, he does not address the evidence of the respondents' witnesses to which we have referred above showing friable mortar, easily removed to a depth of 15 mm.
In our view, this evidence, when taken as a whole, demonstrates that the mortar has been damaged by acid washing which has permeated throughout the whole of the mortar between the bricks. This damage has resulted in the mortar being less durable and, in places, friable and easily removed. Having regard to the extent of acid penetration found by Mr Franceschini in his chemical analysis, it was reasonable to conclude this defect would not be corrected by the rectification method proposed by Mr Mouatt.
In submissions, the appellant did not otherwise address mortar damage caused by the earlier acid cleaning processes nor did the appellant deal with the specific photographic evidence concerning the perpends being out of tolerance and related unevenness in the bricklaying. This photographic evidence showing perpends of uneven dimensions and soft/dislodged mortar includes those in Mr Winton's report (AB 2 Tab 8 p 2, 3 and 5) and Mr Hall's report (AB 2 Tab 9 p7).
In circumstances where no expert suggested that rendering would not rectify all the defects, in our view the order made was appropriate.
In reaching this conclusion, we should deal with various matters raised in the grounds of appeal.
First, it was not submitted the method proposed by Mr Mouatt (i.e. alkaline neutralisation and acid cleaning) would rectify the mortar which had been damaged and become friable; nor would it rectify the perpend issue. As all defects would not be rectified by this method, and no additional work was proposed beyond rectifying the staining, we are not satisfied the (alternate) work order proposed by the appellant in its amended Notice of Appeal is appropriate. This is so even in the absence of experience of the other experts in the method proposed by Mr Mouatt and whether or not Mr Mouatt had confidence in the method.
Secondly, the remedy granted by the Tribunal should be one to finalise all issues in dispute. In this regard, the form of orders proposed by the appellant suggests a process of review of the rectification method some weeks after it is completed and, if necessary, a relisting of the application to consider making further orders.
While there is an ability to renew proceedings under Sch 4 cl 8 of the NCAT Act if orders are not complied with, any remedy granted following a hearing on the merits (including work orders) should have as its intent and effect a finalisation of all issues in dispute.
Thirdly, the appellant submitted that rendering is not appropriate as it will not bring the works into compliance with the contract. In this regard, the building was to have a face brick finish and not a rendered finish. Reliance was placed on the decision of the High Court in Bellgrove v Eldridge [1954] HCA 36; 90 CLR 613, the passages at 618 often being referred to in determining the proper measure of damages.
There are three problems with this contention:
1. To achieve compliance and rectify all defects to retain the face brick finish would require demolition and rebuilding of the walls, a matter neither party contended was reasonable,
2. The experts accepted rendering was an available remedy;
3. There is an obligation on the respondents to mitigate their loss and damage, a reasonable approach being to render the walls and provide a different ascetic finish to that proposed at a cost estimated between $30,000 and $58,000.
The appellant suggested that the rectification method of rendering was itself "subject to engineer's approval and also subject to failure".
The Tribunal, in its orders made on 14 February 2019, defined the scope of work required to be "in accordance with the methodology and recommendations of the [respondents'] expert Mr Ken Winton outlined in his report dated 29 January 2017 especially at [49]".
This appears an incorrect reference. Paragraph 49 of Mr Winton's report records the cost to render and paint the exterior façade. He did not specify the scope of work in this paragraph. Rather, the scope of work to which Mr Winton was referring is found in paragraphs 99 - 118.
The only item of this specification which requires any technical input is the appropriate additive for the render to seal the staining in the brickwork. This appears to be a product identification issue, there being no suggestion that an appropriate sealing compound suitable for the addition to a render coating is not available.
No suggestion is otherwise made that this rectification method will fail or is subject to subsequent review by the Tribunal. Mr Winton has provided evidence that rendering "will stabilise the mortar joints": AB 2 Tab 8 para 135. Otherwise, it is self-evident that rendering will provide an even surface, in effect covering up perpends that are out of tolerance and correct any aesthetic deficiencies.
In relation to the reference in the Reasons to the evidence of Mr Vardis, it does not appear the Tribunal had any regard to its content in reaching its decision. In so far as the Tribunal incorrectly recorded the evidence that had been tendered and relied upon by either party, that fact had no relevance to the resolution of the real issues in dispute. Accordingly, this ground is rejected.
It follows from the above that the orders of the Tribunal should be confirmed, subject to variation of the work order to clarify the works to be undertaken. Those works are to render the building using the methodology found in paragraphs 99 - 118 of Mr Winton' report referred to above.
In the Reasons at [52]-[53] the Tribunal said:
52. Notwithstanding the lengthy and detailed submissions of the Applicants in relation to costs, the Tribunal is unwilling to make a costs order on an indemnity basis in the Applicants' favour. However it does appear to the Tribunal that this dispute has gone on for a significant amount of time, as a result at least in part of the Respondent's conduct. This has resulted in the Applicants incurring unnecessary costs in expert reports, some of which were not required by the time the issues in dispute had been narrowed for the hearing.
53. For this reason, the Tribunal considers that the Respondent should pay the Applicants' costs of and incidental to the application on a party/party basis but including the full amount of the Applicants' experts' disbursement invoices in the sum of $43,253.00 outlined at pp 6‑7 of the Applicants' Submission on Costs dated 12 August 2018.
In reaching this conclusion, the Tribunal did not suggest the parties have made submissions concerning the reasonableness of the costs nor has the Tribunal purported to assess the reasonableness of the costs other than in the most general terms.
It is clear from the authorities, an order for costs is compensatory; there being a need to determine reasonable compensation. The effect of the Tribunal's orders to fix an amount for disbursements is to assess the reasonableness of the cost. However, the Reasons provided do not suggest the parties have had an opportunity to make submissions on this aspect or that this task has been undertaken by the Tribunal in awarding a lump sum for disbursements. Further, the Reasons themselves suggest some of the expert reports "were not required by the time the issues in dispute had been narrowed for the hearing". However, which reports fall into this category is unknown and whether other reports provided by the respondents were unnecessary is not the subject of any findings.
In these circumstances, we are satisfied that ground 4 is made out. Accordingly, we will vary the costs order, being order 3 made 14 February 2019 to delete the words "but including the full amount of the Applicants' expert's disbursement invoices in the sum of $43,253.00 outlined at pp 6-7 of the Applicants' Submission on Costs dated 12 August 2018" to the intent that the appellant should pay the respondents' costs of the proceedings at first instance which, unless agreed, should be assessed on an ordinary basis.
In relation to any factual challenges concerning the conduct of the proceedings, we have not been provided with all evidence as to the course the proceedings took and do not consider it appropriate to grant leave to appeal the factual finding. In any event, this matter was not identified as a ground of appeal and only raised in submissions. While addressed by the parties in their written submissions, we do not consider it appropriate to intervene in respect of the Tribunal's conclusion.