Colourrender (Australia) Pty Ltd v Sarkis; Sarkis v Colourrender

Colourrender (Australia) Pty Ltd v Sarkis; Sarkis v Colourrender - [2023] NSWCATAP 90 - NSWCATAP 2022 case summary — Zoe

The Decision under Appeal

The Decision records that the Builder submitted a quote to apply render to the property of the Homeowners for a fixed price of $35,449.80. That quote constituted the contract between the parties [6].
It was common ground between the parties that the contract did not comply with the requirements of ss 6 and 7 of the HB Act, but that it is still enforceable by the Homeowners on the basis that the requirements of s 10(1)(a) and (b) of the HB Act are satisfied [8]. The Homeowners' claim is for breach of the statutory warranties imposed by s 18B(1) of the HB Act [9].
At [42]-[45] the Tribunal recorded that the Builder provided two other quotes to the Homeowners for work to be done and that the total sum of the three quotes, and therefore the total contract sum was $71,216.20
The Tribunal noted at [54] that the Homeowners' claim was set out in its Amended Points of Claim and was based upon the three quotations referred to earlier, namely the quotation dated 29 August 2016, the quotation dated 18 October 2016 and quotation dated 7 September 2016. The Tribunal also noted that the Homeowners' case included a claim that there were representations made by the Builder concerning the product "K Rend."
From [58] the Tribunal referred to the evidence of Ms Sarkis concerning information contained in a product brochure as to the characteristics of the K Rend product. From [69], the Tribunal recorded Ms Sarkis' evidence concerning a conversation she had with Mr Eugene Conlon (a director of the Builder) to the effect that the product was water repellent and had a glistening finish. At [80] the Tribunal determined that the conversations alleged by Ms Sarkis "do not form part of or particularise" the Amended Points of Claim.
At [83] the Tribunal found that the rendering work commenced towards the end of September 2016 and that Ms Sarkis understood that the work would be completed by mid-December 2016 or by early January 2017 at the latest.
At [84] the Tribunal stated that the delays in completing the rendering resulted in the Homeowners incurring scaffolding costs of $660 per week and that because of the extra time taken by the Builder to complete the job, the Homeowners incurred "losses of $68,900".
At [89] the Tribunal recorded that by July 2017 the Homeowners and the Builder were "at loggerheads" about completion of the contract and that the Homeowners were concerned about defects in the render applied to the external façade of the property. The Tribunal also recorded that in July-August 2017, an issue arose about the use of a Gerni high-pressure cleaner to wash stains off the walls.
From [93] the Tribunal referred to the cross-examination of Ms Sarkis by the Builder's counsel. The Tribunal stated that Ms Sarkis rarely answered questions that were asked of her simply. With respect to questions put as to what Mr Conlon had said to her and what she relied upon the Tribunal described her responses as "vague and inconsistent." The Tribunal stated that in cross-examination, Ms Sarkis referred to conversations with Mr Conlon which had not been included in her affidavit. The Tribunal went on to record other issues concerning Ms Sarkis' evidence and concluded at [99] that the Tribunal is "cautious of accepting Mrs Sarkis' evidence from her cross-examination other than as it appears in her evidence in chief in her affidavits".
From [100] the Tribunal dealt with evidence of tradesmen. One of these was Mr Yousef Sarkis whose evidence was that his company had been engaged by the Homeowners to complete the rendering on the exterior of the property as the Builder had not returned to site to complete the render. Mr Yousef Sarkis gave evidence as to defects in the render and incomplete works.
The Homeowners' evidence included the evidence of Mr Francisco who was hired by the Homeowners to paint the property internally. Mr Francisco gave evidence concerning the internal render and described defects with respect to that work. The Homeowners engaged Mr Francisco to fix the render defects for which the Homeowners paid the sum of $11,750 plus GST.
From [112] the Tribunal described evidence adduced by the Builder and in particular considered the affidavits of Mr Bkassini and Mr Phelan. Mr Bkassini's evidence was that he had been engaged by the Homeowners from October 2016 to manage the "project". Mr Bkassini gave evidence that the scaffolding remained erected for approximately 8 to 9 months after May 2018 [115]. The Decision also summarises the second affidavit of Ms Sarkis, the purpose of which was to respond to the affidavit of Mr Bkassini. Ms Sarkis disputed the evidence of Mr Bkassini.
From [126] the Tribunal recorded the evidence of Mr Conlon. His evidence was that all rectification works required by the Homeowners were achieved by the end of August 2017. He gave evidence that the Homeowners had paid his company $40,000 but that $40,679.72 remained owing.
From [130] the Tribunal summarised the evidence of the Homeowners' expert, Mr Matley. He inspected the property on 14 September 2020 and his evidence identified both defects and methods of rectification. Two methods of rectification were proposed by him. Option 1 was to remove all existing render and re-render the external façade of the property. The estimated cost was $163,016.70. Option 2 was described as a "patch and repair" methodology. The cost was estimated at $107,606.97.
Mr Matley produced a third report in which he attributed unevenness, dense and out of plumb services on the outside of the render to be solely attributable to the manner to which the render was applied and had nothing to do with cleaning. Similarly, he expressed the view that drumminess was solely attributable to the application of the render and not to any cleaning of the render that may have occurred after the render was applied.
From [144] the Tribunal summarised the evidence of Mr Fittinghoff, the Builder's expert. His evidence was that apart from photographs 1, 5 and 26 annexed to his report, the Builder was not responsible for the "misses/defects and incomplete works" claimed by the Homeowners [144]. His evidence was that all other defects alleged by the Homeowners were a result of interference in the works by the Homeowners while undertaking high-pressure/abrasive cleaning, or failure by the Homeowners to carry out maintenance and delays to the completion of the render works by the Homeowners.
From [145], the Tribunal summarised the content of Mr Fittinghoff's second report and recorded that, in his opinion, the reasonable costs necessary to repair the works is the sum of $2,579.79.
At [149] the Tribunal found that the contractual terms are those pleaded in the Amended Points of Claim at paragraphs 16 to 21. At [150] the Tribunal stated that it did not consider that "additional, oral pre-contractual representations or allegations of misleading and deceptive conduct against Mr Conlon are sustained". Three reasons were given: first, they were not pleaded or included in the Amended Points of Claim. Secondly, they rely upon oral representations between Mr Conlon and Ms Sarkis alleged by Ms Sarkis in her cross-examination and they do not form part of her statement and alluding to them in cross examination for the first time is unsatisfactory. Thirdly, the way in which the Homeowners concluded the contract "without specifications, scope reference or qualification in their email dated 29 August 2016 does not support such a finding or reliance by the Homeowners".
From [151] to [156] the Tribunal dealt with the Homeowners' scaffolding claim. This was a claim for $26,400 for the cost of hiring scaffolding from 6 February 2017 to 15 November 2017 [151]. Mr Bkassini gave evidence that the scaffolding remained on site for other contractors [153]. The Tribunal also referred to the fact that the Builder informed the Homeowners in writing on 30 June 2017 that it had suspended the works and the Tribunal concluded that it is "difficult to see how the Renderer [i.e. the Builder] can be liable thereafter in the circumstances" [154].
At [156] the Tribunal found that the Homeowners were responsible for scaffolding costs under the contract and that, notwithstanding the dispute between Homeowners and the Builder, that other trades and subcontractors used the scaffolding and that therefore the claim cannot be brought against the Builder for the period claimed (February 2017 to November 2017).
From [157] to [168] the Tribunal considered the claims with respect to the use of the Gerni pressure cleaner. The Tribunal described the evidence with respect to the use of the Gerni given by Ms Sarkis, on the one hand, and Mr Bkassini, on the other hand, as contrasting. Mr Bkassini's evidence was that the idea to Gerni the exterior render came from Ms Sarkis and that a Gerni was used several times on the exterior render.
At [163] the Tribunal found that the Homeowners have not proved, on the balance of probabilities, that the application of a Gerni to the external render is the liability of the Builder. At [164] the Tribunal stated that the "least likely probability" is that the Builder or its employees or agents were involved in high-pressure "Gerniing" of the render surface that they had applied because they were aware of its fragility. Mr Conlon's evidence denied that the Builder was involved in the Gerniing.
At [167] the Tribunal concluded that any damage caused to the external render by the use of the water Gerni is not the liability of the Builder. At [160] the Tribunal found that any glitter effect or finish that the Homeowners sought or believed was a characteristic of the K Rend was "impacted or depleted" by the use of the water Gerni.
From [169] the Tribunal moved to a consideration of the amount of damages to be awarded. At [169] the Tribunal stated that the only common ground between the Homeowners' expert and the Builder's expert in respect of damages is that some rectification work was required. The Tribunal found that the Homeowners had proved that the renderers' work under the contract between the parties was defective and/or incomplete in the manner outlined in Mr Matley's reports. However, the Tribunal stated that the precise nature and extent of the defects identified by Mr Matley remained unclear.
At [170] the Tribunal set out reasons for not accepting aspects of Mr Matley's evidence and in the course of that consideration the Tribunal made the finding that the glittery finish (which the Homeowners had contended was a feature of the render contractually promised by the Builder) was not a contractual term pleaded by the Homeowners nor a representation made by Mr Conlon to Ms Sarkis.
At [171] the Tribunal stated that as a result of the above findings and the Tribunal's findings concerning the use of the Gerni, it was not appropriate to adopt Mr Matley's scope of works or assessment of damages contained in his option 1.
At [172] the Tribunal stated that it was "also not appropriate to adopt the scope of works or cost of rectification because of the quite disproportionate sum Mr Matley has attributed to these in contrast to the original contract sum". The Decision records that the Tribunal was concerned by the great disproportion in damages claimed, as against the original contract sum.
At [176] the Tribunal found that the render stains may be attributable to the Gerni and any mould growth is a "maintenance issue and not a product liability issue". The Tribunal went on to make reference to the lack of evidence that the Homeowners had carried out appropriate maintenance and stated that there was significant doubt as to the existence or degree of at least some of the defects raised by Mr Matley and the appropriate scope of repair and methodology required to be implemented [178].
The Tribunal also made reference to the evidence of the Builder's expert, Mr Fittinghoff and stated that his costings were grossly inadequate" [180].
At [182] the Tribunal found that the expert evidence did "not support a re‑rendering of the whole exterior façade of the house as Mr Matley's option 1 prescribes. Rather the Tribunal considers that the most appropriate methodology is patch and repair with a ceiling coat across all exterior façade." At [183] the Tribunal noted the existence of several quotes for remedial work in Ms Sarkis' first affidavit and stated that the quotation which appears to have a scope of works closest to the Tribunal's factual findings is the quotation of Proyalbi Organic Set Plaster dated 22 October 2020. The cost there stated was $63,299.50 [184].
At [186] the Tribunal stated that it considered that the Proyalbi quote should be discounted by 20% to accommodate the work required to be undertaken to repair stains and marks which were caused by the Gerni pressure cleaning and which should not have been attributable to the Builder as defective work. The Tribunal concluded that the amount of damages due to the Homeowners amounted to $50,639.60 [187].
From [189] the Tribunal considered a claim brought by the Homeowners for an expense of $1,310 incurred with J&K Plastering. This was stated to be for work undertaken to complete some parts of the incomplete render. The Tribunal allowed this claim. From [193] the Tribunal considered the Homeowners' claim for reimbursement of $3,520 paid to Rogertex for repair to the soffits. The Tribunal referred to the submissions of the Builder that the work was not defective and ultimately at [199] the Tribunal stated that it had accepted the Homeowners' evidence and the submissions in reply and awarded the Homeowners the sum of $3,520.
From [200] the Tribunal considered the Homeowners' claim for reimbursement of the sum of $12,925 paid to iPaint to remedy the internal render. The Tribunal recorded difficulties with the evidence and allowed 60% of the amount claimed, namely $8530.

[5]

The Jurisdictional Issue

The Builder submitted that the Tribunal had no jurisdiction to determine the Homeowners' application (which had been lodged on 16 May 2020). That application alleged that the Builder had breached statutory warranties contained in s 18B of the HB Act. This was confirmed in paragraph [9] of the Decision - see [5] above. Section 18E of the HB Act provides that the warranty period commences on completion of the work to which it relates and that the warranty period is six years for breach of a major defect or two years in any other case. The Builder contended that the Homeowners' claim was for minor defects and was lodged out of time because the evidence disclosed that the last of the work was completed on 1 May 2018.
The Builder acknowledged that the submissions concerning jurisdiction had not been raised in the first instance proceedings nor considered by the Tribunal. Our attention was drawn by the Builder to annexure M to the affidavit of Sonya Sarkis dated 8 December 2020. This annexure is a chain of text messages between Mr Sarkis or Ms Sarkis and the Builder between 19 April 2018 and 2 May 2018. It discloses that the Builder intended to "render" after Anzac Day. There was also a text message dated 2 May 2018 which the Builder contends is a photograph of the completed work.
The Builder also sought leave to rely upon new evidence consisting of the affidavit of Gregory O'Sullivan sworn 2 August 2022, the affidavit of Eugene Conlon sworn 2 August 2022 and the affidavit of Assid Bkassini sworn 16 August 2022. Mr Conlon's affidavit states that he was last on site in the first week of May 2018. Mr O'Sullivan's affidavit stated that he completed rendering work on 1 May 2018. Mr Bkassini's affidavit states that Mr Conlon did not return to the site after completion of the final stages of the work in May 2018.
It is convenient to refer here to the contentions of the Homeowners concerning the jurisdictional point.
Section 18E of the HB Act relevantly states: 18E Proceedings for breach of warranty (1) Proceedings for a breach of a statutory warranty must be commenced in accordance with the following provisions - (a) proceedings must be commenced before the end of the warranty period for the breach, (b) the warranty period is 6 years for a breach that results in a major defect in residential building work or 2 years in any other case, (c) the warranty period starts on completion of the work to which it relates (but this does not prevent proceedings from being commenced before completion of the work), (d) if the work is not completed, the warranty period starts on - (i) the date the contract is terminated, or (ii) if the contract is not terminated - the date on which work under the contract ceased, or (iii) if the contract is not terminated and work under the contract was not commenced - the date of the contract,
The Homeowners sought to rely on fresh evidence, namely the affidavit of Sonya Sarkis dated 9th August 2022.In that affidavit Ms Sarkis stated that as at 16 May 2018 the works were 'still manifestly defective and incomplete". We were informed at the hearing of the appeal that the tender of fresh evidence by both parties was not opposed by the other.
The Homeowners agreed with the Builder that the question of jurisdiction had never been raised at first instance. It was first raised in the appeal. The Homeowners drew to our attention the completion advice form required by a builder's insurer (in this case iCare) which Mr Conlon swore on 3 July 2020. In that document he stated that the date of practical completion was 3 September 2018. We were also taken to an email from Mr Conlon dated 17 May 2020 to Ms Sarkis in which Mr Conlon is chasing up an outstanding account. In that email he stated that work was completed "back in August 2018". We were also taken to Mr Conlon's email of 24 August 2018 addressed to Mr Sarkis in which he stated that he has been to the site "a couple of times in recent weeks".
We do not regard the fresh affidavits sought to be tendered by the Builder as being determinative of the Builder's contention that the work was completed before 16 May 2018 (i.e. outside 2 years from when the Homeowners' application was lodged with the Tribunal). Mr Conlon's evidence refers to various dates for when the work was completed. Mr O'Sullivan's and Mr Bkassini's evidence is arguably inconsistent with Mr Conlon's evidence.
Based upon the evidence before the Tribunal, the Tribunal was entitled to proceed on the basis that the application had been lodged within the relevant two-year period from the date of completion of the work under s 18E of the HB Act for non-major defects. With respect to the new evidence tendered in the appeal, that evidence does not cause us to find that the work was completed before 16 May 2018 or to doubt the assumption upon which the Tribunal proceeded (i.e. that the work was not complete as at 16 May 2018).
We allow the tender of the fresh evidence referred to above but the jurisdictional point is rejected. There is no need for us to consider the Builder's submissions to the effect that the Homeowners' claims were limited to non-major defects because even if they were, the application was lodged within the relevant two year period.
In coming to the conclusion expressed above, we have considered the Homeowners' submissions concerning the Builder Project Completion Advice Form to iCare and the email dated 17 May 2020. The Builder submitted that the form states that it is not to be used for the purposes of litigation. Nevertheless, in our view, it constitutes an admission by the Builder as to the date that the work was completed. From that document it is reasonable to infer that work was not complete as at 16 May 2018.
The Builder submitted that s 3B of the HB Act applies in that the last day the work occurred is the applicable date for determination of the date of completion. The Builder submitted that the reference in the email dated 17 May 2020 that the work was completed in August 2018 is a reference "to the notice as to the date stated on the Builder's Project Completion Advice as the date of practical completion which itself is not evidence of the date of completion of the work". In our view the email of 17 May 2020 constitutes a further admission by Mr Conlon that the work was completed in August 2018. He goes on to say that the Homeowners took up occupation shortly afterward. It is, in our view, an admission by the Builder and, although arguably inconsistent with the notice to iCare (which referred to the date of 3 September 2018) nevertheless constitutes an admission that the work was not completed until after 16 May 2018.
The Builder's submission referred to paragraph 116 of the Decision in which the Tribunal stated that in May 2018 the Builder "purportedly completed all contract works and did not return to the property". In our view this does not constitute a finding by the Tribunal, but rather a statement of what the Builder contended.
The Builder made further submissions to be considered in the event that the Appeal Panel found against the Builder with respect to the jurisdiction point. As we have found that the Tribunal has jurisdiction we deal with the further submissions in the following paragraphs.
We observe that the thrust of the Builder's appeal is to argue that the amounts it has been ordered to pay should be substantially reduced. On the other hand the thrust of the Homeowner's appeal is to seek to have the amounts ordered to be paid by the Builder substantially increased. The result is that there is a not insignificant degree of repetition in both the parties submissions concerning specific issues as well as repetition in our consideration of those issues.

[6]

Patch and Repair $50,639.60

The first of the Builder's submissions concerned the award for damages of $50,639.60 for what the Builder described as "patch and repair". The basis for the Tribunal's award of approximately $50,000 was the quotation obtained by Ms Sarkis from Proyalbi Organic Set Plaster (Proyalbi). The Builder submitted that that quotation was "dubious" and listed a number of reasons for coming to that conclusion. These reasons were to the effect that the Tribunal engaged in erroneous reasoning in finding that the Homeowners had undertaken remedial work using the contractors, Rogertex and the product Rockcote and that that work was able to be undertaken without non-matching surfaces which led to the Tribunal to the conclusion that patching and repairing was appropriate. The Builder submitted that the Rogertex/Rockcote product was used on surfaces elsewhere and not where the K-Rend product had been applied, had a different look to K-Rend, and that its use did not enable the Tribunal to conclude that patch and repair was appropriate.
The Builder submitted that there was no evidence that Proyalbi had inspected the site. Their quote was based upon the inspection by Mr Matley and his evidence was submitted by the Builder to be unreliable. The Builder also contended that that portion of the Proyalbi quote dealing with the cost of protecting windows was inflated, that there should not have been any allowance for scaffolding because scaffolding was never part of the Builder's quoted work and that the component for drummy render was also inflated. Further, the Builder contended that the component of $15,000 for "supply and apply acrylic render" was inflated because it was a quote for re-rendering the entire surface, not patch and repair.
The Builder noted that the Proyalbi quote was for $63,299 and that the Tribunal considered that there should be a discount of that sum by 20% to accommodate the work required to be undertaken to repair stains and marks which were caused by the Gerni pressure cleaning, which issues should not have been attributable to the Builder.
Earlier in the Decision at [165] the Tribunal found that 70% to 80% of the render surfaces had been degraded and damaged consistent with the use of high-pressure cleaning. That evidence was given by Mr Phelan and at [167] the Tribunal concluded that any damage caused to the external render of the property by the use of a Gerni is not the liability of the Builder. The Builder submitted that the Tribunal had accepted the evidence of Mr Phelan that 70% to 80% of the render surfaces had been degraded and damaged consistently with high-pressure cleaning.
The Builder submitted that the sum determined as reasonable for "patch and repair" is disproportionate to the contract sum and the defects that could be attributable to the Builder's work after taking into consideration the accepted fact that damage had been caused to the fragile render surface by others. The Builder submitted that the Tribunal has "determined that the work to be done is not patch and repair, but a whole new exterior rendering job with a product that requires several applications over which a sealant is to be applied, that will not match the quality, texture, style, nor colour of the original render."
The Builder submitted that the Tribunal erred in finding that the appropriate methodology is "patch and repair with a ceiling coat across all exterior façades" [181]. For "patch and repair" the Tribunal ought to have found, in the absence of other evidence that the sum of $2,579.79 is the value of that work, in accordance with the expert evidence of Mr Fittinghoff.

[8]

Quantum and Patch and Repair - Homeowners Submissions

The Homeowners submitted that the Tribunal did not err in its reasoning regarding the repair methodology as contended for by the Builder. However, the Homeowners submitted that the Tribunal erred in its assessment of the damages to which the Homeowners were entitled on account of the defective works because the Tribunal did not base that assessment on the best evidence which was the expert evidence of Mr Matley. The Homeowners developed this submission in their cross-appeal and their more detailed submission will be dealt with later in these reasons.
With respect to the Builder's submissions concerning the out-of-pocket expenses, the Homeowners submitted that it was open to the Tribunal to award damages on account of each of the claims based upon the Homeowners' evidence. However, the Homeowners submitted that the Tribunal should not have disallowed part of the claim for the work done by IPaint (Crew) Pty Ltd as that claim was supported by sufficient probative evidence. That evidence is contained in the affidavit of Sonia Sarkis dated 20 December 2020 (pages 30-31, paragraphs 161-168). There is also the evidence of the painter, Mr Francisco (being his statement of 19 December 2020 appearing at page 217 of the Homeowners' bundle of documents).
The Homeowners submitted that the Appeal Panel should dismiss the Builder's appeal and order that the Builder pay the Homeowners' costs of the appeal on an indemnity basis, as agreed or as assessed. However, the Homeowners also submitted that the issue of costs should be reserved and dealt with following publication of the substantive decision of the Appeal Panel.
Further submissions were made by the Homeowners with respect to the Rogertex and Rockcote issue in which the Homeowners contested the accuracy of the submissions made by the Builder. The Homeowners submitted that the evidence concerning this work came from the sworn evidence by Ms Sarkis that the work on the soffits was to repair work which had been unsuccessfully attempted by the Builder and required rectification. The quotation by Rogertex for remedial work was in evidence. The evidence of Ms Sarkis in cross- examination confirmed that the work was "rectification" of defective work undertaken by the Builder. The Builder's submission that the Homeowners' claims included claims for work which was never the responsibility of the Builder was made in the absence of any probative evidence, is misleading and is wrong as a matter of fact.
The Homeowners submitted that the Builder's submissions do not accurately reflect the totality of the expert evidence. That evidence (which included concessions made by Mr Fittinghoff in cross-examination) supported the Tribunal's finding that the entire exterior of the dwelling needed to be recoated with a suitable coating after any localised "patch and repair" was undertaken.
The Homeowners submitted that Mr Fittinghoff also conceded in cross-examination that he had made no allowance in his costings for the application of the uniform coating to the entirety of the works after any "patch and repair" had been carried out (see the transcript at page 1005 of the Homeowners' bundle of documents at [15]-[35]). The Homeowners submitted that the suggestion that the defective works could be rectified just by localised "patch and repair" at a cost of only $2,579.79 is contrary to the evidence and must be rejected. The Homeowners submitted that the correct measure of damages which should have been awarded is in the sum of $163,543.60 in accordance with the expert opinion of Mr Matley.

[9]

Out-of-Pocket Expenses

The Homeowners made the following submissions with respect to the issues concerning out-of-pocket expenses. The evidence concerning these expenses came from Ms Sarkis, Youssef Sarkis (renderer) and Hugo Francisco (painter). The Homeowners submitted that the evidence of the two tradesmen corroborated the evidence of Ms Sarkis. Neither her evidence nor the evidence of the tradesmen was challenged about the costs incurred by the Homeowners or the necessity for the work being done. The Tribunal's decision to disallow 30% of the claim in respect of the IPaint (Crew) invoice was arbitrary and the full amount should have been awarded.
With respect to the contentions concerning the J&K Plastering invoice, the Homeowners referred to the evidence of Ms Sarkis and the evidence of the renderer, Youssef Sarkis. There was no denial of procedural fairness as claimed. In respect of the invoice of Rogertex, the Homeowners contended that the Builder's submissions are misleading and misconstrue the evidence. The evidence concerning these expenses came from Ms Sarkis whose evidence provided an adequate explanation of the costs which were incurred.
The Homeowners submitted that the amounts claimed should have been allowed in full, because they were supported by necessary probative evidence. The discounting by the Tribunal was arbitrary and made without any evidentiary basis or without notice to the Homeowners. The Homeowners were denied procedural fairness. The Homeowners submitted that the full amount of $12,925 paid by the Homeowners should be awarded.
With respect to the "rectification order" point (i.e. that a work order should have been made under s 48O of the HB Act for the Builder to rectify defects rather than an award of damages, taking into account the 'preferred outcome' under s 48MA of the HB Act), the Homeowners submitted that the Tribunal did not err. There was evidence against the making of a rectification order. This included evidence that the Builder was given numerous opportunities to return to the site and rectify the defects, the failure to properly address defects despite orders issued by the Department of Fair Trading and evidence by Ms Sarkis concerning alleged harassment and intimidation by Mr Conlon. There was also evidence of the denials by Mr Conlon that the work was still in any way defective. In the circumstances it was not appropriate to order that the Builder undertake the rectification work and there were cogent reasons for departing from the 'preferred outcome' under s 48MA of the HB Act.

[11]

The Homeowners' cross-appeal against the Builder

The Homeowners filed a Cross-Appeal on 17 August 2022, by which they challenged the order that the Builder pay them the sum of $76,660. In its place the Homeowners sought an order for payment of $172,674.48 or alternatively $117,264.75. They also sought costs at first instance and costs of both the appeal and the cross-appeal.
The grounds of appeal may be summarised as follows: 1. The Tribunal erred by making findings with respect to both liability and damages on a basis unknown or contrary to law. 2. The Tribunal made findings of fact and arrived at conclusions on the issue of liability, which were contrary to or not supported by those findings. 3. The Tribunal made findings of fact which were not supported by or alternatively did not give the necessary weight to the available lay and expert evidence. 4. The Tribunal made findings which were against the weight of evidence. 5. The Tribunal made findings of fact and law without due regard to the lay and/or expert evidence without providing the Homeowners with the opportunity to be heard in those matters and denied them natural justice and/or procedural fairness. 6. The Tribunal's reasons disclose a degree of undisclosed bias against one of the Homeowners, Ms Sarkis, which caused the Tribunal to misdirect itself regarding the weight which would have been given to her affidavit evidence and her unshaken evidence in cross-examination. 7. The Tribunal erred and misdirected itself in its determination on the quantum of damages to which the Homeowners were entitled. 8. The Tribunal erred and misdirected itself by making arbitrary adjustments to the damages awarded in reliance on its own lay opinion in preference to the available expert evidence.
Where the appeal is not based upon a question of law, the Homeowners sought leave to appeal.
The Homeowners also sought an extension of time in which to lodge the appeal. Their submissions in support may be summarised as follows: 1. The Homeowners were not intending to appeal notwithstanding that they believed the Decision was flawed. 2. The Homeowners had no prior notice prior to the expiry of the relevant 28 day period that the Builder was planning to appeal. They first became aware of the Builder's appeal, the day after the 28 day period expired. 3. The Homeowners believe that there are additional matters which need to be ventilated in addition to those raised in the Builder's appeal. Now that the Builder has appealed and the Homeowners' participation in further proceedings is inevitable, they desire to have those additional matters considered. 4. There is no prejudice to the Builder if leave is granted to the cross-appeal being filed out of time. The Homeowners properly notified the Tribunal and the Builder of their intention to seek leave well before the first call-over.
The Builder filed a Reply to Appeal in which they put their position as follows: 1. The Builder agrees with grounds 1, 2, 3, 4, 7 and 8 of the Homeowners' grounds of appeal. 2. The Builder disagrees that the Homeowners were denied procedural fairness or that there was any undisclosed bias against them as set out in grounds 5 and 6. 3. The Builder says that the Homeowners are not entitled to the two sums claimed and, in any event, the Tribunal did not have jurisdiction.

[12]

Homeowners' submissions in support of cross-appeal

The Homeowners submissions are summarised in the following paragraphs.
The Tribunal did not consider or deal with the entirety of the Homeowners' claims as disclosed in the Homeowners' Amended Points of Claim, the sworn affidavit evidence of Ms Sarkis and the Homeowners' written submissions. This is apparent because the Homeowners' claims were not just claims for breach of the statutory warranties but were also claims on account of pre-contractual representations made by the Builder to the Homeowners on its website and in its marketing brochures as well as in samples of the K-Rend product provided to the Homeowners. The Homeowners alleged that the representations constituted misleading and deceptive conduct in breach of "schedule 2, ss 4 and 18(1) of the Competition and Consumer Act 2010" We take this to be a reference to the Australian Consumer Law 2010 (NSW) (the ACL). The Homeowners also made claims for breach of the statutory guarantees described in s 60 of the ACL.
The Decision does not disclose that the Tribunal had regard to all of the evidence and/or the Homeowners' written submissions. An example is that the Decision does not take into account the "unpaid contract sum" described in Annexure B to the Homeowners' submissions relevant to the determination of the final amount of damages.
The Tribunal erred in finding, contrary to the evidence, that the pre-contractual representations were not pleaded or included in the Homeowners' Amended Points of Claim. In fact, they were expressly pleaded at paragraphs 3, 4, 8 and 14 of the Amended Points of Claim. The Homeowners had relied on oral representations by Mr Conlon and also on representations displayed on the Builder's website and brochures.
The Tribunal found, contrary to the evidence, that the way in which the Homeowners concluded the contract without specification, scope, reference or qualification in their email dated 29 August 2016 did not support a finding that there were pre-contractual representations or representations relied upon by the Homeowners. The Homeowners submitted that s7(2)(c) and (d) of the HB Act makes it clear that the obligation to clearly specify these matters lay entirely with the Builder.
The Tribunal erred in giving no weight to the evidence of Ms Sarkis concerning the pre-contractual representations and the Tribunal's findings were against the weight of evidence. Ms Sarkis' evidence was unshaken despite vigorous cross-examination and the Tribunal erred in giving her evidence little weight. The Tribunal member erred by finding fault with what, in his opinion, Ms Sarkis did not expressly include in her affidavit about her conversations with Mr Conlon. The best evidence was the documentary evidence, including the unrebutted sworn affidavit of Ms Sarkis.
With respect to the claim of defective work, the Homeowners contended that the Decision on quantum was not based on the best evidence. That was the evidence from the Homeowners' expert, Mr Matley. He provided detailed costings. Those costing stood unrebutted and were not challenged in cross-examination. Instead of assessing damages on the basis of Mr Matley's opinion, the Tribunal based damages on a single commercial quotation obtained by the Homeowners (the Proyalbi quotation). The Proyalbi quotation did not reflect Mr Matley's opinion or conclusions on the cost of defect rectification. It was only one of three quotations which he considered. The other two quotations were for higher amounts.
Mr Matley's opinion was that there were only two viable methods of defect repair available: option 1 costing $163,543.60 or option 2 costing $108,133.87. Mr Matley recommended the adoption of option 1 and provided reasons. The Builder's expert, Mr Fittinghoff conceded in cross-examination that after any defect repair the entire building would have to be recoated with a suitable acrylic in order to achieve a uniform and water-resistant finish. He agreed that no allowance had been made for this work in any of his costings. Only Mr Matley had made such allowance.
The Homeowners contended that the Tribunal adopted the Proyalbi quotation in preference to the expert evidence of Mr Matley and then made an arbitrary adjustment of 20%, further reducing the total of the quotation. That was done without prior notice to the parties and they were thereby denied procedural fairness.
The basis of the Tribunal's 20% adjustment was contrary to the available expert evidence. The Tribunal held that the adjustment was required to accommodate the work required to be undertaken to repair stains and marks caused by the Gerni pressure cleaning which should not have been attributable to the Builder. Mr Matley's report dated 17 March 2021 stated that the unevenness, dense and out of plumb surfaces were attributable to the manner in which the render was applied and had nothing to do with cleaning. He also concluded that the drumminess was also attributable to the application of the render and not attributable to any cleaning of the render occurring after the render was applied. Further, he concluded that the primary cause of the staining and damages was not the result of any cleaning.
The Homeowners submitted that the Tribunal's determination of the Homeowners' damages was not based on the best evidence (i.e.. the evidence of Mr Matley), was against the weight of evidence, arbitrary and denied the Homeowners procedural fairness.
With respect to the claims for out-of-pocket expenses, the Homeowners submitted that the Tribunal erred in disallowing 30% of the claim for work done by IPaint (Crew) by failing to give the necessary weight to the evidence which was before the Tribunal.
In the Decision, the Tribunal dismissed the Homeowners' claims for additional scaffolding costs incurred during the time when the Builder was refusing to return and rectify the defects of which it had been notified. The Homeowners contended that the Tribunal failed to give necessary weight to the evidence, in particular, the affidavit evidence of Ms Sarkis which stood unrebutted. The claim for scaffolding costs relates to the period from 9 February 2017 to 17 November 2017. The Homeowners contended that it is self-evident from the events described in schedule A to the Homeowners' submissions that the Homeowners were making repeated but unsuccessful attempts to get the Builder to return and rectify defects. The scaffolding was required to be left in place to enable that to happen. The Homeowners contended that the additional scaffolding costs were incurred as a direct consequence of the Builder's ongoing refusal to return and complete the works.
The Homeowners contended that the Appeal Panel should uphold their appeal, make an order that the issues in dispute be redetermined "by the Appeal Panel" and that the amount of damages should be increased. Orders with respect to costs (summarised earlier) were also sought. In particular the Homeowners submitted that the Homeowners' damages should be redetermined on the basis of the best evidence, namely the evidence of Mr Matley. Further, the Homeowners' claim for additional scaffolding costs should be accepted and the claim for out-of-pocket expenses should be accepted without adjustment.

[13]

The Builder's submissions in response to the Homeowners' submissions in support of the Homeowners' cross-appeal

The Builder's submissions concerning the alleged lack of jurisdiction have been considered. We have determined that issue against the Builder and there is no need to repeat those submissions.
With respect to the Homeowners' contentions that the Tribunal erred in not adequately considering the alleged pre-contractual representations, the Builder submitted that the Tribunal took account of the Homeowners' evidence, noted anomalies between written and oral evidence and came to conclusions in respect of Ms Sarkis' character and her evidence.
With respect to the Homeowners' claims for defective work, the Builder submitted that once it was accepted that the defects complained of were minor and required patch and repair, the only evidence available was that of the Builder's expert. All other evidence concerned a complete re-render of the Homeowners' property contrary to the Tribunal's finding. In circumstances where the Builder was successful in arguing that rectification entailed only minor amounts of patch and repair but nowhere in the Homeowners' expert evidence was the value of that work addressed, it was erroneous on the part of the Tribunal to use quotes for complete re-rendering of the entire property. The only available evidence for consideration was the sum stated in the Builder's expert evidence. This was the only relevant evidence concerning patch and repair.
However, the Builder submitted that the Tribunal erred when it used a quote for the re-render of the entire house (that was annexed to the Homeowners' rejected expert report). No evidence was provided that the Proyalbi person quoting the job actually inspected the site. Both parties were caught by surprise.
With respect to the Homeowners' submission that the Builder's expert (Mr Fittinghoff) admitted in cross-examination that sealing of the acrylic product would give a uniform finish but he gave no evidence as to the value of sealing the product. The Builder submitted that there was no cross-examination by the Homeowners on whether the particular product was conducive to sealing and if it was, the cost. The Tribunal erred by 'guessing' that the product could be sealed and the value of sealing by utilising a quote for sealing the entire house. The quote included the use of scaffolding which was expressly excluded from the original quote provided by the Builder.
With respect to the claims for out-of-pocket expenses, the Builder relies upon its submissions in support of its own appeal.
With respect to scaffolding, the Builder submitted that the Tribunal correctly did not allow the cost of scaffolding as it was not part of the original quote. Further, the evidence of witnesses who were found to be credible was that it was only after the scaffolding was removed that the Builder could complete the remaining incomplete work.
The Homeowners submitted that their cross-appeal should be upheld. The Builder submitted that it agrees that the cross-appeal should be upheld.
With respect to the Homeowners' submission that the findings of liability for defective building work did not reflect the totality and/or probative evidence of either the lay or expert evidence, the Builder submitted that the Decision does not reflect the value of the work to be done. The sum that should have been ordered was the value given by the Builder's expert for patch and repair rather than the Proyalbi sum which was for the whole house to be re-rendered including the cost of scaffolding, less 20%.
We refer to the Homeowners' submission that the determination of the Homeowners' entitlement to damages was made on an arbitrary basis unknown to law, and note that the Builder submitted that the Tribunal did not err in the manner contended for by the Homeowners. However, the Builder submitted that the Tribunal did "dispose of the matter in accordance with its own rules," save for the jurisdictional issue and the failure to utilise the best evidence available following its finding that the remedy was for patch and repair. The error was not one of law, but of "fact and degree."
With respect to the Homeowners' contention that they were denied procedural fairness by not being afforded the opportunity to be heard on the basis on which the Tribunal proposed to calculate the Homeowners' damages, the Builder disagreed and submitted that the Homeowners were not denied procedural fairness other than in relation to the Tribunal's use of the Proyalbi quote and in and its findings relating to the Homeowners' out-of-pocket expenses.
With respect to the Homeowners' submission that the Tribunal formed an "undisclosed adverse view" of Ms Sarkis (which affected the weight which would have been given to her unrebutted sworn evidence), the Builder disagrees that any undisclosed view was taken of the Homeowners. If contradictory evidence was given, the Tribunal, using its best endeavours, formed the view that, in any event, gave the Homeowners much more than they were entitled to.
With respect to the Homeowners' claim for out-of-pocket expenses and additional scaffolding costs, the Builder agrees that out-of-pocket expenses were not dealt with correctly and relies on its submissions in support of its appeal. The Homeowners were not entitled to the sums claimed. With respect to scaffolding, the Tribunal made the correct determination.
We refer to the Homeowners' contention that the proceedings should not be remitted but should be redetermined by the Appeal Panel, or if remitted that that take place on the papers without a further hearing. We note that the Builder also submitted that the preferred outcome would be for us the determine quantum or if there is to be a remittal it take place on the papers without a further hearing.
We now turn to recording the submissions of both the Homeowners and the Builder with respect to the eight grounds of the Homeowners' cross-appeal.

[14]

Ground 1

This ground concerns the Homeowners' contention that the Tribunal misdirected itself with respect to both liability and damages by making findings on the basis unknown to or contrary to law. With respect to the assessment and determination of damages for defects, the Homeowners contended that the Tribunal misdirected itself by applying a principle of "disproportionality" between the contract sum and the quantum of damages. This is evident from [172] of the Decision.
The Homeowners contended that it is evident that the Tribunal was influenced by concerns of disproportionality. The Proyalbi quotation was $63,299.50, the lowest of three quotations considered by the Homeowners' expert, Mr Matley. Another quote was for approximately $186,000 and a third for approximately $148,000.
The Homeowners contended that the evidence of Mr Matley was that the Proyalbi quote omitted many items required as part of the defect rectification scope of work. His opinion was that if these items had been included the Proyalbi quote would have been at least $15,489 higher.
The Tribunal also erred by disregarding the best evidence in preference for relying on the quotation which had been attached to Mr Matley's report. It did not reflect his opinion. He merely considered it.
The Homeowners also contended that the determination of damages was based upon speculation, conjecture and the Tribunal member' personal opinion. At [176] the Tribunal stated that it seemed to it that the render stains may be attributable to the Gerni. At [177] the Tribunal said that there was a three-year gap between the date of the application of the render and Mr Matley's inspection. The Tribunal concluded that therefore there must be significant doubt as to the existence or degree of at least some of the defects raised by Mr Matley.
The Tribunal further erred in making an arbitrary 20% reduction to the figures taken from the Proyalbi quotation.
A further error by the Tribunal was that it dismissed the admission made by Mr Bkassani that he was the person who had done the pressure cleaning with the Gerni and that it had been done at the suggestion of Mr Conlon. The Homeowners also contended that the determination of the claim for additional scaffolding costs was made in error.
The Homeowners contended that both experts agreed on the remedial work required. Therefore, the Tribunal should have based its assessment of the Homeowners' damages on the opinion of Mr Matley. Mr Fittinghoff's evidence was regarded as of little assistance because it made no allowance for the cost of recoating the entire exterior of the dwelling. That cost was in the order of $164,000. The evidence of Mr Bkassini should have led to the conclusion that the use of the Gerni was the responsibility of the Builder, not the Homeowners.
With respect to the claim for compensation for the cost of scaffolding, the Homeowners submitted that the Tribunal should have found that the suspension of the works by the Builder was wrongful and that it contributed toward the accumulation of the additional scaffolding costs claimed by the Homeowners against the Builder. The Homeowners submitted that the Tribunal's findings with respect to the scaffolding claim were against the weight of evidence.
We now turn to the Builder's rebuttal of the above contentions.
Although the Tribunal did express concern as to the proportionality of the claim, the Builder contended that the Decision did not reflect that concern.
The Builder submitted that the evidence of Mr Matley was correctly rejected by the Tribunal. Accordingly, the quotes that he relied upon for his costings were similarly unreliable. These quotes were taken into consideration by the Tribunal but none of the authors of the quotes provided direct evidence, nor was the evidence tested as the direction taken by the Tribunal was unknown to either party.
The Builder contended that the Tribunal erred in applying a quote for the whole property re-render when the Tribunal's findings were for patch and repair. The best evidence was therefore that of the Builder's expert witness even in circumstances where he said in cross-examination that the sum appeared to be a bit "low."
The Builder submitted that the Tribunal did not err in its findings concerning who was responsible for the Gerniing.

[19]

Ground 6

This ground concerns the Homeowners' contention that the Tribunal's reasons reveal a degree of undisclosed bias against Ms Sarkis which caused the Tribunal to misdirect itself regarding the weight which would have been given to her affidavit evidence, and her "unshaken" evidence in cross examination. The Homeowners submitted that the Tribunal should have found that the evidence of Ms Sarkis was compelling and unrebutted. The criticisms made by the Tribunal of Ms Sarkis' evidence were in the form of generalities without providing one example by way of substantiation.
The Tribunal placed some emphasis on oral representations allegedly made by Mr Conlon to Ms Sarkis. The Homeowners' submissions contend that the oral representations alleged by Ms Sarkis and relied upon by the Tribunal in criticising her, were largely irrelevant. This was because the representations relied upon were confined to just the oral representations by Mr Conlon in several conversations during precontract discussions. However, the Homeowners' Amended Points of Claim included allegations of representations made on the Builder's website and in marketing brochures given by Mr Conlon to Ms Sarkis. The representation of an attractive glittery finish and texture was given in a sample by Mr Conlon. There were also representations regarding quality and finish in the form of two homes which the Homeowners were referred to where the K‑Rend product had been successfully used. Given these representations (described by the Homeowners as "non-verbal" representations) it is not surprising that Ms Sarkis did not depose to her verbal discussions with Mr Conlon in the manner which the Tribunal thought to be necessary. There was no need for her to do so because they were not the basis of her claims.
The Homeowners submitted that in the absence of any specific examples to substantiate the criticisms, the Tribunal's comments suggest undisclosed dislike of Ms Sarkis as a witness.
In reply, the Builder made submissions to the effect that it disagreed with the Homeowners' submissions concerning procedural fairness, with the exception of two matters where the Builder agreed that there was a lack of procedural fairness. This concerned the contention that there was no opportunity given to the parties to address the Proyalbi quote or the matters discussed in the Builder's evidence in support of its appeal.

[20]

Ground 7

This ground concerns the Homeowners' contention that the Tribunal heard and misdirected itself in determination of the quantum of damages to which the Homeowners were entitled. This submission largely repeats earlier submissions concerning the use of the Proyalbi quote and the arbitrary adjustment of 20%. The Homeowners submitted that the Tribunal should have found that the Homeowners' entitlement to damages should have been based upon Mr Matley's opinion and the costings of his proposed option 1. That costing was in the amount of $163,543.60.
The Homeowners contended that the evidence supported a finding that the work of the Builder was manifestly defective. There was ample photographic evidence supporting the Homeowners' contentions in this respect.
The only expert evidence on the cost to undertake comprehensive repair of all of the defects was that of Mr Matley who had offered only two "viable rectification methods": option 1 and option 2. Mr Matley favoured the adoption of option 1. His reasons stood unchallenged and unrebutted. Accordingly, option 1 (and its cost) should have been accepted.
The Homeowners repeated earlier submissions to the effect that the use by the Tribunal of the Proyalbi quote was not justified. The quotation was not expert evidence. It was not endorsed by Mr Matley or adopted by him as the basis for his eventual expert opinion. Mr Matley's report contained a review of the Proyalbi quotation which contained comments to the effect that the Proyalbi quotation did not make allowance for certain necessary work to be undertaken. In adopting the Proyalbi quotation as the starting point of the assessment of damages, the Tribunal appears to have overlooked or disregarded Mr Matley's opinion that the costings made up by the Proyalbi quote were inadequate.
In response the Builder submitted that the Tribunal denied both parties procedural fairness when reliance was had on the Proyalbi quote. However, the Builder submits that the Tribunal should have used the evidence of the Builder's expert as to the value of patch and repair.

[22]

The Homeowners' Application for Leave

The Homeowners' submissions include submissions to the effect that they may not require leave to appeal because their appeal is based upon errors of law. However, against the possibility that the Appeal Panel does not agree that there are errors of law, the Homeowners submitted that there are leave grounds upon which their appeal is also based. These submissions are summarised in the following paragraphs.
The Homeowners made submissions to the effect that the Decision was not fair and equitable because: 1. The Tribunal did not consider all of the Homeowners' claims or the evidence. The Tribunal ignored the best evidence (the evidence of Mr Matley) and relied on the member's own lay opinion including making an arbitrary downward adjustment to the Homeowners' damages. 2. The Tribunal considered and made findings concerning whether the appearance of the render had been adversely affected by the use of the Gerni. Based upon the Tribunal's findings in that regard, the Tribunal arbitrarily reduced the entirety of the damages and ignored the expert evidence. The expert evidence was that the majority of the defects observed were unrelated to the issue of the cleaning. Mr Matley's evidence was that the issues with the render were solely attributable to the manner in which the render was applied and had nothing to do with the cleaning. The same opinion was expressed by Mr Matley with respect to drumminess. 3. The Homeowners also made submissions to the effect that the Decision was against the weight of evidence. The Homeowners submitted that the only expert opinion on the cost to undertake comprehensive repairs to all of the defects was that of Mr Matley's evidence. Only Mr Matley contained costings for recoating the entire building with new weather-resistant acrylic coating after the rectification of render defects had been carried out. Mr Fittinghoff conceded that he had made no allowance for these costs even though he agreed in cross-examination that this would be necessary. 4. The Tribunal considered three commercial quotations which were not the best evidence available. 5. With respect to the use of the Gerni, there was evidence that Mr Conlon initiated the use of the Gerni. Ms Sarkis' evidence was that Mr Conlon brought the Gerni to the site. There was "strong" evidence that Mr Bkassini had used the Gerni on the walls at the suggestion of Mr Conlon but nevertheless the Tribunal found that this evidence simply confused the contradictory evidence given by Mr Bkassini. The Homeowners submitted that the Tribunal's finding regarding the party responsible for the use of the Gerni was against the weight of the evidence. 6. The Builder's submissions in response were to the effect that the Builder does not agree with the Homeowners' submissions concerning the assertion that the Decision was not fair or inequitable. With respect to the assertion that the Decision was against the weight of evidence, the Builder agrees but says that the evidence should have been construed against the Homeowners and not for the benefit of the Homeowners as they have submitted.
The Homeowners' submissions conclude with the following: 1. The Decision at first instance cannot stand and the Homeowners cross-appeal should be upheld. 2. The determination of the Homeowners' damages should be redetermined on the basis of the best evidence (i.e. that of Mr Matley). 3. The claim for additional scaffolding costs should be accepted. 4. The claim for out-of-pocket expenses should be accepted without adjustment. 5. The issue of costs at first instance should be reserved for further submissions and determination by the Appeal Panel in chambers without further hearings. 6. The Builder should bear the Homeowners' costs of the cross-appeal.
In reply, the Builder submitted that the Decision cannot stand, but relies on its submissions made in support of its appeal. In particular, the Builder submitted that if the Tribunal determines that it has jurisdiction (contrary to the primary submission of the Builder) then the proceedings should be determined by us, the Appeal Panel, or remitted without a further hearing on specific issues, namely the value of the patch and repair work and the out-of-pocket expenses claim.
The Builder submitted that the best evidence is not that of Mr Matley. His evidence was correctly set aside due to his having been inadequately briefed. The best and only evidence is that of Mr Fittinghoff. The scaffolding issue was correctly decided and the out-of-pocket expenses claim should be remitted for rehearing.
The Builder agrees that costs should be reserved for further submissions and determination by the Appeal Panel in chambers without further hearing.

[23]

Consideration

Appeals from decisions made in the Consumer & Commercial Division of the Tribunal are regulated by both s 80 of the Civil and Administrative Tribunal Act (the NCAT Act) and by cl 12 sch 4 of that Act. Essentially this means that appeals lie as of right on any question of law or, with leave only upon the grounds stipulated in cl 12. Clause 12 provides that an Appeal Panel may grant leave only if 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 of the proceedings under appeal were being dealt with).
In Collins v Urban [2014] NSWCATAP 17 the Appeal Panel dealt with the issues requiring consideration when considering whether leave should be granted pursuant to cl 12.
One issue for consideration is whether an Appellant may have suffered a substantial miscarriage of justice. In Collins v Urban the concept of a substantial miscarriage of justice was determined to refer to a failure in the way a matter was conducted or decided which deprived the Appellant of a chance that was fairly open of achieving a better outcome than occurred.
In Collins v Urban the Appeal Panel referred to the grounds in cl 12(1)(a) and (b) and stated that if there has been a denial of procedural fairness the decision under appeal can be said to have been "not fair and equitable". A decision can be said to be against the weight of evidence where the evidence in its totality preponderates so strongly against the conclusion found by the Tribunal at first instance that it can be said that the conclusion was not one that a reasonable Tribunal member could reach.
If the Appeal Panel is satisfied that the applicant for leave may have suffered a substantial miscarriage of justice on one of the grounds identified in cl 12(1) then the Appeal Panel "may" grant leave under s 80(2)(b) of the NCAT Act. Thus, the Appeal Panel must still consider whether it should exercise its discretion to grant leave. The principles for granting leave were set out in Collins v Urban and may be summarised as follows: 1. Where there is an issue of principle it may be appropriate to grant leave. 2. Where a question of public importance or a matter of administration or policy having general application is in issue it may be appropriate to grant leave. 3. Where there is an injustice which is reasonably clear in the sense of going beyond what is merely arguable or an error that is plain and readily apparent central to the Tribunal's decision it may be appropriate to grant leave. 4. Where there has been a factual error that was unreasonably arrived at and clearly mistaken it may be appropriate to grant leave. 5. If the Tribunal has 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 been in the interests of justice for it to be reviewed, then it may be appropriate to grant leave.
We will deal with the Builder's appeal first. We will then consider whether the Homeowners' appeal should be allowed given that it was filed out of time and, if so, we will then consider that appeal.

[24]

The Builder's Appeal

As stated above we will deal first with the Builder's appeal but it will be necessary to include in this section some of our determinations concerning the Homeowners appeal.
The central plank of the Builder's appeal was that the Tribunal erred in determining the cost of the patch and repair option by relying on the Proyalbi quote. The Builder does not cavil with the Tribunal's finding at [169] that some rectification work was required. The Tribunal's finding in respect of the defects was equivocal. It was equivocal because at [169] the Tribunal found that the work was defective and/or incomplete in the manner outlined in Mr Matley's reports. The Tribunal then added "However, the precise nature and extent of those defects remain unclear."
The Tribunal's finding was also equivocal in that the Tribunal at [170] stated that it had some hesitation and accepting the evidence of Mr Matley. Five reasons were given. One of those reasons was that Mr Matley's scope of works included redoing the external rendering in its entirety because there was no "glittery refinish." The Tribunal found that there was no glittery finish promised either as a contractual term or as a representation made by Mr Conlon. For this reason (and the others stipulated in the Decision) option 1, as proposed by Mr Matley, was held to be inappropriate.
Importantly the Tribunal found at [178] that "significant doubt must apply to the existence or degree of at least some of the defects raised by Mr Matley and the appropriate scope of repair".
We divert to comment upon the representation issue. This issue was resolved in favour of the Builder but in the Homeowners' appeal the representation issue was raised as an issue that the Tribunal had determined in error.
The Homeowners' representation claim was included in its Amended Points of Claim (which appear from page 690 of the appeal book). In summary, it contained these representations: 1. The Builder distributed the product called K Rend which was advertised on the Builder's website and in its marketing material as having certain characteristics: [3]. 2. The advertising on the website and in marketing brochures constituted representations made in trade and commerce: [4]. 3. On or about 12 August 2016, the Homeowners contacted Mr Conlon and after discussing the suitability and attributes of the K Rend product the Homeowners invited him to provide a quotation: [7]. 4. Mr Conlon gave the Homeowners the addresses of two other properties where the K Rend product had been applied for the purposes of enabling the Homeowners to inspect the Builder's work regarding the quality and attractiveness of the K Rend product: [9] and [10].
In our view the Amended Points of Claim included contentions which required the Tribunal to assess the merits of the Homeowners' allegation that they had received, via the website and from Mr Conlon, representations as to the nature, performance and appearance of the K Rend product. However, at [149], the Tribunal stated that the contractual terms are as identified in the Amended Points of Claim in paragraphs 16-21 (which paragraphs did not incorporate the representation contentions). At [150] the Tribunal found that it did not consider that "additional, oral pre-contractual representations or allegations of misleading and deceptive conduct against Mr Conlon are sustained". One reason given was that the Tribunal found Ms Sarkis to be an unreliable witness because the allegations of pre-contractual negotiations were found by the Tribunal to have been made for the first time in cross-examination. In our view they were made in the Amended Points of Claim and to that extent the reasoning of the Tribunal was in error. Counsel for the Homeowners contended that the representations were implied contractual obligations. Because the Tribunal found that they were not pleaded that contention was not considered.
The error referred to above was an error of law because the Tribunal misconstrued the claims made in the Amended Points of Claim and thereby applied the wrong principle of law in considering the Homeowners' contentions: see John Prendergast and Vanessa Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 at [13(3)].
We return to the Tribunal's rejection of Mr Matley's option 1. The rejection was based in part upon the finding that the costings of Mr Matley included the cost of achieving a glittery finish. That rejection was in error because, for the reasons given above, the Tribunal erred in not adequately considering the alleged pre-contractual representations. This involved making findings as to the nature and extent of the representations and whether they were relied upon by the Homeowners. In particular, the representation as to a glittery finish needed to be specifically addressed.
Before leaving the issue of representations we note that at [77]-[80] the Tribunal described Ms Sarkis' first affidavit in which she deposed to conversations with Mr Conlon and alleged that he had represented, as had his website, that the product had a unique glistening finish. The Tribunal then found at [79] that the three conversations alleged by Ms Sarkis did not refer to a unique glistening finish but there was other evidence that the product had a glitter running through the render. The Tribunal, at [80], appears to have declined to make findings of fact as to what was in fact represented either in writing or orally on the basis that the conversations alleged by Ms Sarkis did not form part of the Amended Points of Claim. In our view that analysis of the Amended Points of Claim was in error.
In our view had the Tribunal considered and made a finding that a representation concerning a glittery finish had occurred and had been relied upon, then option 1 may have been the appropriate option.
Turning back to the Builder's complaint which concerns the use of the Proyalbi quotation, both the Builder and the Homeowners assert that the use of that quote as a basis for determining the amount of damages took them by surprise because it was not foreshadowed and, because it was not foreshadowed, the possibility of adducing further evidence was not made available to either party.
Given that the Tribunal found in favour of patch and repair a question arises as to why Mr Matley's option 2 was not favoured and instead the Tribunal favoured the Proyalbi quotation. The reason given was that Mr Matley's option 2 disclosed "some excesses" [185]. In our view the identified excesses (i.e. where the Proyalbi figure was less than the Matley figure) constitute no more than the Tribunal's preference for the lower figure. For example, Mr Matley allowed for four coats of sealer and Proyalbi for three. Had Mr Matley been able to address that distinction he may have been able to satisfy the Tribunal that four was appropriate. This point illustrates the view of both parties that they have suffered procedural unfairness by reason of the Tribunal's decision to base the calculation of damages upon the Proyalbi quote. A failure to provide procedural fairness constitutes an error of law: see Prendergast at [13 (4)].
In addition, the Tribunal stated that Mr Matley's option 1 was not appropriate because it involved a "quite disproportionate sum" when compared with the original contract sum. The Homeowners contended that the Tribunal had introduced a principle of disproportionality unknown to the law. The Builder appears to have acknowledged that but has contended that it was inconsequential.
In respect of breach of the statutory warranties in s 18B of the HB Act, if breach is established (see Deacon v National Strategic Constructions Pty Ltd; National Strategic Constructions Pty Ltd v Deacon [2017] NSWCATAP 185 ('Deacon') at [46]) for a discussion of relevant principles) the Homeowner bears the onus of establishing the method of rectification of the defect and the cost of rectification (if an award of damages for the cost of rectification is sought): Catapult Constructions Pty Ltd v Denison [2018] NSWCATAP 158 at [58]-[59]. If rectification by the builder is found not to be the preferred outcome under s 48MA (see Kurmond Homes Pty Ltd v Marsden [2018] NSWCATAP 23 and Leung v Alexakis [2018] NSWCATAP 11 for applicable principles) then damages are assessed on the well-established principles arising from Bellgrove v Eldridge [1954] HCA 36; (1954) 90 CLR 613. That involves making a finding that a particular method of rectification is necessary to achieve compliance with the contract and a reasonable course to adopt; and then assessing the cost of that method of rectification based on the evidence (including expert evidence).
It is an error of law to make factual findings regarding a particular defect and method of rectification, but to award damages for the cost of rectification based on an entirely different method of rectification (Deacon at [29]-[30]).
There is no general principle of "disproportionality" in the assessment of damages for the cost of rectifying a defect by comparing the original contract sum with the cost of rectification. A contract to perform work can be for a moderate sum, but the breach of the statutory warranties under s 18B of the HB Act (i.e. a found defect that falls within the scope of work under the contract) can involve a method of rectification that is expensive. A complex and very expensive method of rectification of a found defect may indicate that the method of rectification is unnecessary to achieve compliance with the contract or a reasonable course to adopt (see the discussion in Walker Group Constructions Pty Ltd v Tzaneros Investments Pty Ltd [2017] NSWCA 27 at [186]-[189] of applicable principles), but the Tribunal must explain why it is accepting, or rejecting, a particular method of rectification in accordance with those principles.
We are of the view that there was an error of law in taking into consideration the significant difference in the cost of option 1 compared with the original contract sum. We are also satisfied that it played a role in the Tribunal's decision-making including in relation to the 'excesses' contained in option 2. Accordingly, the Tribunal's concern as to disproportionality is of an error of law in that there is no such principle (as the Tribunal itself acknowledged): see Prendergast [13(3)].
The Tribunal's decision to favour the "patch and repair" option was influenced by the rejection of the Homeowners' argument that the render was to produce a glistening effect. Had that representation issue been fully considered the patch and repair option may not have been favoured. Accordingly, we are unable to agree with the Builder's submission that the Tribunal should have favoured the patch and repair option and the costing put forward by their expert, Mr Fittinghoff.
At [168] the Tribunal found that any glittery finish that the Homeowners were expecting was impacted or depleted by the use of the Gerni. This finding was based on the expert evidence of Mr Phelan and amounted to a rejection of the opinion of Mr Matley. The Tribunal found that the use of the Gerni was the Homeowners decision and that the Builder was not liable for resulting damage [169].
The Homeowners have disputed the Tribunal's finding that the use of the Gerni was not the liability of the Builder and say that Mr Conlon suggested that a Gerni be used. Assuming that such a suggestion was made it does not follow that it was made in the context of the Builder giving advice which was relied upon by the Homeowners or their agent and for which the Builder acquired liability. The Tribunal dealt with the evidence as to use of the Gerni from [157] and found at [163] that the Homeowners had not satisfied the Tribunal that its use occurred in circumstances imposing liability on the Builder. In our view the findings of fact and conclusions made by the Tribunal were open on the evidence. This ground of appeal is rejected.

[27]

Homeowners' Appeal

The initial question is whether time should be extended for lodgement of the appeal. The appeal was lodged approximately one month out of time in the circumstances that have been explained. In our view the Builder's appeal raised the need to comprehensively review the dispute between the parties and the addition of issues now raised by the Homeowners does not add to the issues to be faced by the Builder. Accordingly, we are of the opinion that no prejudice arises to the Builder by reason of the late lodgement of the Homeowners' appeal. Rather, we are of the opinion that justice is better served by allowing consideration of the Homeowners' appeal.
The principles to be considered when deciding whether time should be extended were explained in Jackson v NSW Land and Housing Corporation [2014]NSWCATAP 22. Applying those principles: the length of the delay is short, the reason for the delay is understandable and as stated above an injustice may arise if the Homeowners appeal is not considered in conjunction with the Builders appeal.
Accordingly, we will order that time for lodgement of the Homeowners' appeal be extended to the date of actual lodgement.
We have already expressed our view that the Tribunal did not adequately consider or make a determination with respect to the entirety of the Homeowners' Amended Points of Claim in that the representation issue was not properly addressed and proceeded upon the misunderstanding contained in [80] of the Decision that certain conversations relied upon by the Homeowners did not form part of the Amended Points of Claim.
In respect of Mr Matley's evidence, the Homeowners, like the Builder, have objected to the use by the Tribunal of the Proyalbi quotation. For the reasons given above, we agree that the use of that quotation has led to procedural unfairness.
The Homeowners contended that we should make an order consistent with Mr Matley's option 1 and order the Builder to pay $163,543.60. The Homeowners also contended that option 2 proposed by Mr Matley was viable. We do not think it is appropriate for us to make a determination as to the quantum of the damages due by the Builder to the Homeowners. That is because it is necessary for consideration to be given to the representation claims contained in the Amended Points of Claim, and whether, if those claims are upheld, the Builder's liability to the Homeowners is to be calculated consistently with the expert opinion of Mr Matley or whether the quantum of damages is to be calculated on a basis differently from the way in which the Tribunal calculated quantum. We are of the opinion that those issues need to be reconsidered at first instance and that it would not be appropriate for us to do so.
Regrettably therefore, the issue of the contentions contained in the Amended Points of Claim and the calculation of damages for the cost of rectification of defective work and for incomplete work will have to be the subject of a remittal.
The proceedings on remittal will not reconsider the jurisdictional issue which we have determined in favour of the Homeowner's contentions.
We have considered whether the remittal may be limited in any additional way given our determination of the issues concerning the out of pocket expenses. We have also considered whether the remittal may be confined in other ways so as to avoid the expense imposed on the parties in being engaged in fully relitigating the issues in dispute. For example there is an issue concerning the claim for scaffolding costs. We are of the view that limiting the remittal by excising some issues could result in difficulties , lead to ancillary disputes as to the ambit of the remittal and possibly operate to hamper the decision making obligations of the member on remittal if an issue is not fully discrete from the issues being considered on remittal.
For the above reasons, the appropriate decision is to order a remittal in which the only issue which is not to be reconsidered is the jurisdictional issue.
Our conclusion is that both appeals should be upheld and further that the Homeowners' application at first instance must be remitted for rehearing.
In the remitted proceedings the parties should have leave to adduce evidence as to the balance due under the contract (if any) so that the amount (if any) due by the Homeowners to the Builder may be set off against the amount of damages due to the Homeowners. This is necessary in order to ensure that any damages awarded to the Homeowners puts them in the same position they would have been in had the contract been performed without breach, and not in a better position: see BKB Constructions Pty Ltd v Sawan [2022] NSWCATAP103 at [77].
Whether the parties should have leave to adduce other evidence within the parameters of the remittal will be a matter for the tribunal determining the proceedings on the remittal.
The tribunal determining the proceedings on remittal should be constituted differently from that which determined the proceedings at first instance. This is so because an issue on the remittal will be consideration of the pleadings alleging misrepresentation by the Builder and whether representations (if made) became implied terms of the contract between the parties. At first instance the Tribunal put the credibility of Ms Sarkis in issue in relation to this issue.
Having regard to the reasons set out above, we will make appropriate orders including orders for the parties to make submissions as to whether costs orders should be made both in respect of these appeals and in respect of the proceedings at first instance.
The following orders are made: 1. The time for lodgement of the Homeowners' appeal is extended to the date of lodgement of the Homeowners' Notice of Appeal. 2. Orders 2 and 3 made in the proceedings at first instance are set aside. 3. Both appeals are upheld 4. The Homeowners' application at first instance is remitted to the Consumer & Commercial Division to be determined in that Division (by a tribunal differently constituted) with fresh evidence, if the Tribunal on remittal so determines. 5. The parties have leave to file and serve submissions with respect to costs of the appeals and costs as first instance within 21 days of the date hereof. 6. The parties have leave to file and serve submissions on costs in response to the submissions received pursuant to the above order within 21 days of the receipt of the initial submissions on costs. 7. Submissions on costs shall include whether the parties consent or oppose the Appeal Panel determining costs on the papers by making an order dispensing with a further hearing.

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Judgment (28 paragraphs)

Legislation Cited (2)

Cases Cited (10)