DB Homes Australia Pty Ltd v Zhao

Proceedings before the Appeal Panel

1. The builder lodged its Notice of Appeal on 8 October 2019. The homeowners filed and served a Reply to Appeal on 22 October 2019.
2. On 23 October 2019, at a call-over, the Appeal Panel made a number of directions. Mr J Taouk, a Project Manager of the builder, was granted leave to represent the builder. The Appeal Panel also made orders for the lodging (i.e. filing and serving) of evidence and written submissions. The orders for filing and serving evidence expressly included an order that each party was to lodge: 1. any evidence provided to the Tribunal at first instance on which they sought to rely; and 2. if sought to be relied on, the sound recording of the hearing before the Tribunal at first instance and a typed copy of any relevant parts.
3. The Appeal Panel also set down the matter for hearing on 10 December 2019. On 13 November 2019, the Appeal Panel made an order granting an adjournment of the hearing to 3 February 2020, for half a day commencing at 10.15 am.
4. On 3 February 2020, Mr M Fareh, Project Manager, appeared in person on behalf of the builder. There was no appearance by or on behalf of the homeowners. After being advised by the Registry that it had not received any communication from the homeowners, we proceeded to hear the appeal, as we were satisfied that the homeowners had been given notice of the adjourned hearing date. At the conclusion of the hearing we reserved our decision.
5. Later that day, the homeowners sent an email to the Registry explaining that they had children who had returned from overseas in late January 2020 and who were required to quarantine at home for 14 days. They said that this meant that they were also required to quarantine at home. They said they had sought to send an email asking ask for an adjournment 10 days before the hearing, but realised that day that the email had not been sent for network reasons. The homeowners apologised and said they did not know what to do.
6. At our request, on 6 February 2020 the Registry wrote to the parties noting the email that had been received from the homeowners in regard to their non-attendance at the hearing and the orders we had made in chambers that day. These orders included an order for: 1. the homeowners to file and serve, by 13 February 2020, a written request for the hearing of the builder's appeal to be re-opened so that they could present their case; and 2. the builder to file and serve, by 20 February 2020, a written document indicating whether it consented or did not consent to the re-opening of the hearing of the appeal in the event the homeowners made a written request as ordered.
7. On 11 February 2020, the homeowners sent an email to the Registry requesting that the hearing of the builder's appeal be reopened. They also forwarded a copy of the adjournment application they had attempted to send prior to the 3 February 2020 hearing. No response was received from the builder.
8. On 10 March 2020, we made the following directions, in chambers: 1. Grant leave to reopen the hearing of the appellant's appeal. 2. The appeal is listed for a further short hearing on 1 April 2020, at 10.15am. 3. At the further short hearing of the appeal, the Appeal Panel will hear: a. Oral submissions of the respondent in Reply to the Appeal, and b. Oral submissions of the Appellant in response to the respondents' oral submissions.
9. Due to the COVID - 19 restrictions the 1 April 2020 hearing was conducted by telephone. Mr J Taouk appeared on behalf of the builder and the homeowners, Mr Zhao and Ms Xia, also appeared. Neither party was legally represented. Nor had they been previously legally represented at the 3 February 2020 appeal hearing or before the Tribunal at first instance.

Background

1. From the material filed by the parties, the background to the dispute between the parties is as set out below.
2. On 7 November 2017, the builder and the homeowners signed what appears to be a DB Homes Australia pro-forma 'Contract Agreement' for a 'Gold Package Brick Veneer Granny Flat - DA Approval by Client' ('the Agreement'). Page 2 of the Agreement set out the 'Progress Payment Schedule'. Page 3 of the Agreement set out the 'Progress Payment Definitions'. Page 4 of the Agreement set out the 'Special Conditions', page 5 set out the 'Exclusions', pages 6 to 9 set out the 'Scope of Works' and page 10 set out the 'Job specific Inclusions & Conditions'.
3. It is not disputed that, prior to signing the Agreement, the homeowners had engaged another company to prepare the drawings for the granny flat and obtained Development Approval from the local Council for the construction of the granny flat immediately behind the main residence on the property which is the homeowners' home. This was noted, in handwriting on page 6 of the Agreement against the heading 'Design & Certification'.
4. The builder commenced work on 6 February 2018 by excavating the backyard drainage pipe and testing the water flow from the toilet in the main residence. The toilet drained slowly. The builder arranged for a plumber, from NSW Maintenance Plumbing Pty Ltd ('NSW Maintenance Plumbing') to attend the building site the following day. It was while Andrew the plumber was using a high-pressure water blaster on the front sewer shaft that his hose got stuck in the pipe/drain. The builder advised the homeowners that the toilet was still congested and the pipe/drain in the front yard needed replacing for the cost of about $2,000.00. That evening the Andrew the plumber attended the home of the homeowners and said he was still owed $400.00 for the work he had already done and that the additional work would cost between '$2-$3000'. Andrew took the homeowners to the front yard and showed them his hose that had become stuck in the front pipe/drain of the sewer. The following day, when the homeowners 'refused to pay the $400' to Andrew, or 'the further amounts to dredge and maintain the pipeline in the front yard', Andrew cut the hose sticking out of the pipe and took his tools and left the site.
5. We understand that the construction of the granny flat continued until early July 2018, when the toilet in the main house did become completely blocked. There were some discussions between the homeowners and the builder. However, on 10 July 2018, the homeowners engaged Tony Huang ('Mr Huang'), a plumber, of MJ Industries Australia ('MJ Industries') to inspect the cause of the blockage. On this day, on the instructions of the homeowners, Mr Huang inspected the back yard sewer drain. He found concrete in the back yard sewer drain that he said was the cause of the blockage.
6. Again there were some further discussions between the homeowners and the builder about removing the blockage. The homeowners at all times asserting that the blockage was due to the builder's excavation work under the granny flat. On 13 July 2018, when the builder failed to send a plumber to unblock the blockage, the homeowners engaged Mr Huang to do that work.
7. Mr Huang inspected the front yard sewer drain on 24 July 2018. Mr Huang found that the front yard sewer drain was not the cause of the blockage. He told the homeowners that 'there were tree roots and a hose in the pipeline … but they didn't affect the drainage and it should not be repaired until after the project was completed'.
8. In October 2018, the homeowners notified the Office of Fair Trading about their dispute with the builder.
9. On 23 October 2018, pursuant to s 48 E of the HB Act, Fair Trading issued a rectification order to the builder in which he was directed to complete the 'incomplete work', as follows: 1. Complete work in accordance with contract dated 7 November 2017. Incomplete work includes but is not limited to: internal fit out (external drainage excluded) Rectification Order considers (sic) complied upon issuing of Practical Completion Notice Note: The contractor to resolve plumbing issue regarding removing cable that may involve digging on Council footpath and monetary reimbursement for work done by plumber engaged by the complainant.
10. The builder completed the construction works to the extent that the granny flat was built and the stormwater drainage from the granny flat to the front of the property had been installed. However, the builder did not remove the hose from the front sewer drain, or reimburse the homeowners for the plumbing work undertaken by Mr Huang to the backyard sewer drain.
11. In June 2019, the homeowners commenced proceedings against the builder in the Consumer and Commercial Division. The details of the dispute were stated to be as follows: 1. Remove the hose left by the builder in the stormwater pipe; 2. Pay damages incurred by the builder's defective works, including the cost for repairing the blockage of the sewer pipe and inspection fees; 3. Complete all the items prescribed in the building contract and procure obtaining occupation certificate; …
12. The orders sought were: An order to pay me the amount of $3740 … Complete all the items prescribed in the building contract and procure obtaining an occupation certificate Total amount Claimed: $3740
13. As we have already noted, the Tribunal heard and determined the claim of the homeowners, on 10 September 2019.
14. Subsequently, after the homeowners had commenced enforcement action, the builder paid the homeowners the amount of $4,240 as per order 1 of the Tribunal. In this appeal the builder is seeking a refund of this amount.

Notice of Appeal

1. In its Notice of Appeal, the builder identified the following as its grounds of appeal: 1. The cost to cover issues related to the sewer is a result of contractors engaged by the client. 2. The remaining works required to obtain the occupation certificate is clearly excluded in the signed contract. There are emails from the client confirming remaining works will be covered by the client.
2. The builder also said that: 1. the decision of the Tribunal was not fair and equitable, because: 'it is not based on the evidence provided such as signed contract and email correspondence'; and 2. the decision of the Tribunal was against the weight of the evidence, as: 'the Tribunal has disregarded the signed contract. The senior Member has stated that the signed contract is of no importance'.
3. Attached to the builder's Notice of Appeal was a copy of: 1. the builder's written response to the owners' claim before the Tribunal; 2. the signed contract agreement between the builder and the homeowners; 3. the site plan and sections plan of the homeowners' development application for the granny flat that was approved by the local Council in October 2017; 4. a report of Charlie Makhlouf of NSW Maintenance Plumbing, dated 26 October 2018; and 5. a Fair Trading Rectification Order, issued on 23 October 2018 and directed to the builder.
4. Subsequent to lodging its Notice of Appeal, the builder filed and served more detailed written submissions. Attached to those submissions was a copy of the homeowners' DA Approved 'Stormwater Drainage Plan'. The copy of the Plan contained some highlighting and handwriting.

Reply to Appeal

1. In their Reply to Appeal, the homeowners said: 1. The builder's plumber left the hose in sewer pipe, so the cost is caused by this failed tasks, builder can't continue to evade your (sic) responsibilities. 2. Contract is not 'practically completed' without obtaining occupation certificate.
2. Attached to the owners' Reply to Appeal was a copy of their submissions before the Tribunal and a chronology of events.
3. Prior to the 3 February 2020 hearing, the owners filed a further chronology in regard to the blocked sewer pipe/drain, together with a copy of a plumbing report, dated 13 July 2019, from Mr Huang of MJ Industries.

Decision of the Tribunal

1. In its reasons for decision, the Tribunal set out the nature of the homeowner's claim as follows: 1. … [the applicant owner seeks] the payment of money (originally the sum of $3740 amended at hearing to $4620), rectification work, and completion of all work so that a certificate occupation may be obtained, pursuant to s 48O of the Home Building Act 1989 (HBA) by … (the respondent builder). … 3. The applicant claims that the builder has performed defective work and has not completed all items in the building contract and has not procured an occupation certificate. Specifically the applicant wants repayment for plumbing work caused by the builder's defective work, a hose in a sewer to be removed and an occupation certificate to be provided.
2. The Tribunal went on to consider separately each aspect of the homeowner's claim, namely the homeowner's claim for: 1. the payment of money (the $4,620 for the repair of the back yard sewer drain blockage); 2. the removal of the pipe from the sewer drain at the front of the property; and 3. the occupation certificates.
3. At [28], the Tribunal found that it was unable to make a finding that the builder had caused the damage to the backyard sewer drain. The Tribunal also found that it was the homeowners who had engaged Mr Huang and stated that 'No order for payment of money' would be made in regard to this aspect of the homeowners' claim (i.e. reimbursement for the cost of unblocking the sewer drain in the back yard.
4. The homeowners have not appealed this decision. Hence, it is not a matter over which the Appeal Panel has any jurisdiction.
5. In regard to the homeowners' claim for the removal of the pipe (hose) in the sewer drain at the front of the property, the Tribunal found that the builder, and not the homeowners, had engaged Andrew. The Tribunal went on to find that it was the builder who was responsible for the cost of removing the pipe (hose). In its reasons for decision in regard to this claim, the Tribunal said: 30 The owner lodged copies of an email from DB Holmes (sic) to the owner dated 12 July 2018. The email reads in part "we have booked our plumber to investigate the pipework under the granny flat." 31 The owner lodged a further email from DB Holmes (sic) to the owner dated 21 July 2028 attaching a quote from Andrew Younan of NSW Maintenance Plumbing in the sum of $4240 for excavation and repair of the front sewer line. The quote is addressed to DB Holmes (sic) and notes "Nsw maintenance plumbing attended the above address … to try to unblock the sewer pipes, … 32 The builder says that Andrew was referred to the owner by the builder, but it was owner who engaged Andrew. The builder pointed to the NSW Fair Trading schedule note of 18 November 2018 which read "the contractor to resolve plumbing issues regarding removing a cable that may involves (sic) digging on Council footpath and monetary reimbursement for work done by the plumber engaged by the complainant. (builder's emphasis). The issue is therefore one between the owner and Andrew as the builder claims Andrew is the owner's plumber as opposed to the builder's plumber. 32 The builder lodged a report dated 26 October 2018 from Charlie Mahlouf of NSW Maintenance and Plumbing. It is noted that Andrew Younan's name also appears on the letter heard (sic) … That report notes that NSW Maintenance were called out as an urgent with a blocked sewer on 7 February 2018: "We attempted to unlock the sewer shaft with the high pressure water jet blaster, as a result our hose got stuck … this is not our responsibility". 33 Having weighed the evidence, the Tribunal finds that the builder engaged Andrew on an urgent basis on 7 February 2018 to unlock the front sewer line, and the builder is liable for the work and cost of removal of the hose from the sewer pipe. The builder is to arrange and pay for the work to remove the pipe within 28 days.
6. In regard to the homeowners' claim for the occupation certificate, the Tribunal said: 34 The owner claims that the builder is to provide the occupation certificate. 35 The builder says that because the design and approval were undertaken by the owner, it is the owner's responsibility to obtain the occupation certificate. 36 The builder contends that the work has been completed. … The builder refers to page 9 of the contract. Under the heading "Extra Inclusions" … are the words "DA & OC by the client". 37 Further the builder says that it is the obligation of the owner to complete stormwater works, specifically a grid, in order to obtain the occupation certificate. The builder relies on page 5 of the contract which excludes Stormwater easement works. 38 The Tribunal notes page 9 of the contract includes "stormwater pipe to street" and "stormwater to existing storm water drain. 39 The Tribunal finds the contract is contradictory to some extent or at least unclear regarding the builder's responsibility with respect to the stormwater grate. 40 The owner's gave evidence that they were not aware of any requirement for them to complete stormwater works in order to obtain an occupation certificate. There seems to be some misunderstanding that the hose in the sewer pipe was somehow involved. 41 The Tribunal finds it is unclear as to which party is responsible for the stormwater works required to obtain the occupation certificate and under those circumstances orders that the owners and the builder pay the cost of finishing the storm water works equally and that work is to be completed within 28 days in order that the occupation certificate can be obtained.

Appellant's (builder's) submissions

1. In its written submissions filed and served in this appeal, the builder gave the following reasons for appealing order 1 of the Tribunal (i.e. the order that the builder pay the homeowners a sum of $4,240.00 for the removal of the hose/pipe in the front sewer drain: 1. it was the homeowners who had engaged NSW Maintenance Plumbing and not the builder; 2. the works undertaken by NSW Maintenance Plumbing were excluded in the signed contract and not the responsibility of the builder. The builder pointed to the following exclusions, at page 6, of the signed contract: Upgrading of existing stormwater, sewer, town water, gas or electricity services No allowance for collapsed Sewer Junction to the Mains 1. the signed contract also stated, at page 9, that the builder had not allowed for the upgrade of existing sewer service; and 2. the 26 October 2018 report of NSW Maintenance Plumbing that confirmed that the blockage in the front sewer pipe and had nothing to do with the granny flat completed by the builder - in this regard the builder noted the following remarks contained in that report: We attempted to unblock the sewer shaft with a high-pressure water jet blaster, as a result our hose got stuck which indicates that there was a problem with the existing sewer pipes at the front of the property. … [the] sewer line did have a problem from the sewer shaft at the front of the property which connects to the Sydney Water sewer line, (please note that the work that has been carried out for the granny flat has nothing to do with the existing sewer pipes at the front of the property). … [Our] hose did get stuck in the sewer line and we advised the owners of the property that this is not our responsibility and gave them the option of our company to dig up the affected area and replace sewer line or they would have to reimburse us for the hose which had been cut off. … 1. the stuck hose was evidently a result of the blocked and collapsed sewer line.
2. In its written submissions, the builder went on to give the following reasons for appealing order 2 of the Tribunal (completion of stormwater works and obtaining an occupation certificate): 1. the builder had completed all stormwater works in accordance with the signed contract. The remaining stormwater works in the homeowners' plans that are required in order to obtain the occupation certificate are for the existing dwelling (the main house). These works were excluded from the signed contract in that they were an 'Upgrading of existing stormwater, sewer, town water, gas or electricity services'; 2. the stormwater works provided for in the 'Scope of Works' of the signed contract were 'Stormwater - New Service from granny flat to front boundary & Street Kerb or existing services' (at page 8) and 'Stormwater pipe to the street' (at page 9); and 3. in the May 2019, in email exchanges with the builder, the homeowners had agreed to complete the remaining stormwater work.
3. In oral submission at the hearing on 3 February 2020, Mr Fareh ('Mr Fareh'), on behalf of the builder reiterated what was contained in the written submissions. In regard to the stormwater drainage, Mr Fareh relied on the copy of the 'Stormwater Drainage Plan' that had been attached to the builder's written submissions in this appeal. As we have noted above, the copy of this Plan contained some highlighting and handwriting on it. Mr Fareh was unable to explain whether this highlighted Plan was before the Tribunal at first instance. However, we understood that the builder had made the highlighted sections and the handwriting on the copy of the Plan so as to better explain its case of what sections of the stormwater drainage was included the Agreement between the builder and the homeowners and what was not included.
4. Mr Fareh explained that the section of stormwater drainage highlighted in blue (and identified in handwriting as 'DB Homes') was that which was included in the builder's scope of works. This section of stormwater drainage ran from the granny flat to the street. The remaining section of stormwater drain is highlighted in yellow and is identified in handwriting as 'Existing House'. Mr Fareh explained that this was not included in the Agreement. The stormwater highlighted in yellow appears to be made up of a number of sections, the main section being that which runs from where the granny flat adjoins the back of the main house and then goes around the side (i.e. opposite side to the stormwater drainage highlighted in blue) and front of house. Ultimately all sections of the stormwater drainage highlighted in yellow appears to end in the same corner on the street to where the stormwater highlighted in blue ends.
5. Mr Fareh asserted that the stormwater drainage highlighted in yellow was the diversion of the existing drainage from the existing (main) house on the property. Hence, it was excluded from the agreement.
6. At the hearing of 1 April 2020, Mr Taouk was unable to say whether the highlighted 'Stormwater Drainage Plan' was before the Tribunal at first instance. However, he said a copy of that Plan, not highlighted or marked, was certainly before the Tribunal.
7. Mr Taouk submitted that order 1 was unfair, because the contractor (NSW Maintenance Plumbing) was engaged for an issue that had nothing to do with the construction of the granny flat. Hence, it was the homeowner who had engaged the contractor and not the builder.
8. Mr Taouk acknowledged that the 26 October 2010 report of NSW Maintenance Plumbing had been prepared at the request of the builder for the purpose of the hearing of the homeowners' application before the Tribunal. He also acknowledged that, in its report, NSW Maintenance Plumbing did not state that the homeowners had engaged their services.
9. In regard to the occupation certificate, Mr Taouk said that the builder would obtain an occupation certificate if the homeowners completed the stormwater works that were not part of the signed contract (Agreement).

Respondents' (homeowners') submissions

1. The respondent homeowners have relied on their written submissions provided to the Tribunal at first instance. To the extent that those submissions are relevant to the orders of the Tribunal the subject of this appeal, the homeowners said: 1. it was the builder, not the homeowners, who called NSW Maintenance Plumbing for a plumber to come and inspect the front sewer and they were responsible for his negligence. The contract 'exclusions' were not 'exemption' or 'disclaimer' clauses that released the builder from any liabilities it had in connection with the damage to the sewer lines caused by their plumber; 2. the trapped hose was 'of no consequence to the patency of the sewer pipe in the front yard'. Sydney Water had advised the homeowners that the sewer pipe could stay and would not cause any major issue. There was also ample photographic and expert evidence that the pipe blockage was in the backyard and that the long-standing front yard cracked pipe had never caused an issue with the household drainage; 3. it was not open to the builder to say that the building works had been completed, as at page 3 of the signed contract under the definition of the term 'practical completion' the following statement is made: The Occupation Certificate will only be provided after the Builder has received the Final Progress Payment and any outstanding Variation Payments Invoiced. The process will begin after the Practical Completion Invoice has been paid. Allow approximately 3 weeks for the O. C. to be released. 1. while upgrading of existing services was not included in the contracted scope of works, the Scope of Works included (at page 8) 'complete PVC Sewer drainage works as required'.
2. In their oral submissions on 1 April 2020, the homeowners said: 1. the pipe/hose was still in the front sewer drain and the builder had not done any work on the stormwater drain around the main house; 2. at no time had they contacted NSW Maintenance Plumbing; 3. the 26 October 2018 report of NSW Maintenance Plumbing was provided to them by the builder and not the plumber; 4. the Tribunal's finding in regard to order 1 was correct and the builder had failed to produce any new evidence to indicate it was incorrect; 5. the 'Stormwater Drainage Plan' had been provided to the builder together with the other DA approved plans. The stormwater drainage shown on that Plan did not include work that was to be done on existing drainage - it was new work that the builder had agreed to do, including the stormwater drainage around the main house; and 6. the 'Stormwater Drainage Plan' provided to the builder and the Tribunal at first instance did not have any handwriting on any coloured markings.

Consideration

1. Neither party is legally represented in this appeal. Nor were they legally represented at the hearing before the Tribunal at first instance.
2. In this appeal, the builder has not specifically articulated a question of law, in that it did not assert that the Tribunal erred in law. However, in accordance with the principles set out in Cominos v Di Rico [2016] NSWCATAP 5 at [13] and Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 at [12], in our view, the builder's submissions in regard to order 2 (the stormwater works around the main house) do raise a possible question of law, because it raises an issue as to the proper construction of the terms of the Agreement (building contract) signed by the builder and the homeowners on 7 November 2017: Francis v Lyon (1907) 4 CLR 1023 at 1040.
3. The builder's submissions concerning order 1 (the hose in the front sewer drain), do not, in our opinion, raise any possible question of law. What is asserted is that the Tribunal erred in its finding of fact that the builder, and not the homeowners, had engaged NSW Maintenance Plumbing. To appeal on this ground of appeal, the builder must first be granted leave to appeal by the Appeal Panel.

Question of law - the stormwater works around the main house

1. The builder and the homeowners have at all times accepted that the terms of their agreement was that contained in the written Agreement they each signed on 7 November 2017. In the proceedings before the Tribunal at first instance, the onus was on the homeowners to satisfy the Tribunal that, under the terms of the Agreement, the builder was responsible for undertaking the disputed stormwater drainage work (including the grid that was located towards the front or the main house).
2. As we have noted above, the Tribunal found that it was unclear as to whether the builder or the homeowner was responsible for the disputed stormwater works, but nevertheless made an order that the builder complete this work and that the cost of such work was to be shared between the builder and the homeowner. In our view, based on the findings of the Tribunal, an order of this kind was not open to the Tribunal. However, this is not a ground of appeal relied on by the builder. Instead, the builder contends that under the terms of the Agreement it was not responsible for the disputed stormwater drainage. As we have already noted, this does raise a question of law.
3. It is well accepted that when construing the terms of a contract, a court or tribunal does so in order to determine the 'intention' of the parties. 'Intention' may be actual (i.e. intention subjectively held by the parties), expressed (i.e. disclosed in the words of the contract) or implied (i.e. intention that is inferred in relation to matters on which no intention has been expressed).
4. It is also accepted that the word 'intention' in this context is used objectively. Hence, it is an objective inquiry as to the intention reasonable persons would have had if placed in the situation of the parties. In Barton v Calliden Insurance Ltd [2015] NSWCATAP 202, at [22], the Appeal Panel made the following observations in this regard concerning the determination of the rights and liabilities of a party under the terms of a building contract: 22 … [we] emphasise that objective theory is to be applied in the determination of rights and liabilities in contract. As Gleeson CJ said in Australian Broadcasting Commission v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 549 "…the general test of objectivity…is of pervasive influence in the law of contract." In Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at 179 the High Court confirmed the principle of objectivity by which the rights and liabilities to a contract are determined: "It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration known to the parties, and the purpose and object of the transaction." Principles of construction of contracts were recapitulated in the majority judgment of the High Court in Electricity Generation Corporation v Woodside Energy (2014) 251 CLR 640 at [35]: "Both [parties] recognised that this Court has reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable business person would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding 'of the genesis of the transaction, the background, the context [and] the market in which the parties are operating'. As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption 'that the parties…intended to produce a commercial result'. A commercial contract is to be construed so as to avoid it 'making commercial nonsense or working commercial inconvenience;"
5. In Cherry v Steele-Park [2017] NSWCA 295, at [72], Leeming JA (with the agreement of Gleeson and White JA) said the following in regard to the starting point and ending point of construction: 72 … The starting point and the ending point of the construction of a written commercial contract is the language chosen by the parties to record their bargain. In a familiar passage, Gibbs J referred in Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109; [1973] HCA 36 to the "primary duty" of a court construing a written contract to ascertain the legal meaning of a document "from the words of the instrument in which the contract is embodied". As I have said, "very often, nothing in the context will come close to displacing the ordinary grammatical meaning of the legal text": Mainteck Services Pty Ltd v Stein Heurtey SA (2014) 89 NSWLR 633; [2014] NSWCA 184.
6. At [73], his Honour noted that there was limited scope for evidence of surrounding circumstances to detract from the contractual text.
7. One such circumstance is that to which Mason J (with the agreement of Stephen and Wilson JJ) referred in Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337 concerning ambiguity. In Codelfa, at [22] and [24], Mason J said: 22. The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed. (at p352) … 24. Consequently when the issue is which of two or more possible meanings is to be given to a contractual provision we look, not to the actual intentions, aspirations or expectations of the parties before or at the time of the contract, except in so far as they are expressed in the contract, but to the objective framework of facts within which the contract came into existence, and to the parties' presumed intention in this setting. We do not take into account the actual intentions of the parties and for the very good reason that an investigation of those matters would not only be time consuming but it would also be unrewarding as it would tend to give too much weight to these factors at the expense of the actual language of the written contract. (at p352)
8. In Cherry v Steele-Park (supra), at [83], Leeming JA observed that the abovementioned remarks of Mason J in Codelfa were directed to how ambiguity might be resolved and not to how ambiguity might be identified.
9. At [84] and [85], his Honour went on to observe the following: 84 The absence of inconsistency between Mason J's "true rule" in Codelfa and the permissibility of resorting to objective evidence of surrounding circumstances was considered by Barrett AJA in WIN Corporation Pty Ltd v Nine Network Australia Pty Ltd at [59] (footnotes omitted): "A potential tension that inheres in [Mason J's formulation of the 'true rule' in Codelfa] is that to recognise words as bearing a 'plain meaning' is merely to state a conclusion arrived at by some process of interpretation which cannot, as a matter of logic, exclude context. As Leeming JA noted in Mainteck Services Pty Ltd v Stein Heurtey SA (2014) 89 NSWLR 633; [2014] NSWCA 184 at [77], to state that a legal text is 'clear' does no more than recognise that 'there is nothing in the context which detracts from the ordinary literal meaning'. It therefore becomes clear that the notion that it may first be necessary to consider context when construing a contract is not inconsistent with Mason J's 'true rule'. On this footing, it does not follow that the task of assessing whether a phrase or expression is ambiguous or susceptible of more than one meaning must be undertaken without regard to evidence of surrounding circumstances. This position corresponds with the approach of the High Court in Victoria v Tatts Group Ltd where the relevant contract was construed by reference to its text, context and purpose without any anterior finding of ambiguity as a precondition to a consideration of surrounding circumstances as an aid to discovering or elucidating context and purpose." 85 I made the same point as to the effect of the reasoning in Victoria v Tatts Group Ltd in Calvo v Ellimark Pty Ltd [2016] NSWCA 136 at [55]. Further, in addition to what was said in Mainteck, Newey, Stratton and WIN to which reference has already been made, additional recent authority supporting the proposition that ambiguity is a conclusion, which can only be assessed after regard has been had to context, may be found in Righi v Kissane Family Pty Ltd [2015] NSWCA 238 at [44] (Emmett JA, Ward and Gleeson JJA agreeing) and in Todd v Alterra at Lloyds Ltd (2016) 239 FCR 12; [2016] FCAFC 15 at [75] (Beach J). Substantially the same point is well established in statutory construction, where it is clear that "the apparently plain words of a provision" may "wear a very different appearance" when they are "read in the light of the mischief which the statute was designed to overcome and of the objects of the legislation": CIC Insurance Ltd v Bankstown Football Club Ltd (1987) 187 CLR 384 at 408; [1987] HCA 2.
10. In this case, other than noting that the express exclusion of 'Stormwater easement works' on page 5 of the Agreement, the express inclusion of 'stormwater pipe to street' and 'stormwater to existing stormwater drain' at page 9 of the Agreement appeared to be contradictory, the Tribunal did not consider whether this contradiction could be resolved by construing the express exclusion and the specific inclusions in the context of the Agreement as a whole.
11. If the contradiction was not resolved by examining these provisions in the context of the Agreement as a whole, then it was open to the Tribunal to consider relevant evidence (if any) of the surrounding circumstances, known to both parties, at the time the Agreement was entered into. In our view, the May 2019 email exchanges between the homeowners and Mr Taouk and Mr Fareh are not relevant as they do no more than explain what the builder contended to be the position as at that time and not what was 'intended' at the time the Agreement was entered into.
12. In this case, the Agreement between the homeowners and the builder is contained in the pro-forma form of agreement the parties signed in 2017. While the pro-forma form of agreement makes provision for the builder to be responsible for the architectural drawings and stormwater drainage plan, in this case, at the time the parties signed the 2017 Agreement, DA approval for the granny flat build had already been obtained by the homeowners. That approval included approval of the homeowners' 'Architectural drawings' and 'Stormwater Drainage Plan'. This is expressly noted on the cover page of the Agreement and at pages 6 and 10 of the Agreement.
13. Hence the purpose and object of the Agreement is as stated on the front cover of the Agreement; namely for the builder to build for the homeowners, at the agreed price, a 'Gold Package Brick Veneer Granny Flat' as per the 'DA Approval' obtained by the homeowners (the 'Client').
14. We understand the builder accepts, and appropriately so, that the homeowners' DA Approved Plans, including the homeowners' approved 'Stormwater Drainage Plan', formed part of the Agreement. The evidence is that, at the time the 2017 Agreement was entered, the homeowner's approved 'Stormwater Drainage Plan' did not have any coloured highlighting or handwritten notations on it. The builder added these more recently, either for the purpose of defending the claim of the homeowners before the Tribunal at first instance, or for the purpose of this appeal. While these markings support the builder's contention that, under the terms of the 2017 Agreement, it is not responsible for the disputed stormwater drainage, they do not assist in construing what the parties intended in 2017 when the Agreement was signed.
15. As well as not having any coloured highlighting or handwriting on it, the stormwater drainage lines marked on the homeowners' approved 'Stormwater Drainage Plan' does not distinguish one set of drainage lines form any other set of drainage lines. That is, the stormwater drainage lines that run at the side of the granny flat and the main house are identical in form those that begin to run adjacently from that drainage line and across from where the granny flat and the main house are joined. Furthermore, the stormwater drainage lines all meet at the same point at the front of the main house. Nor is there any marking or notation on the Plan to indicate that the stormwater drainage lines in some parts is existing stormwater drainage or the upgrading of existing stormwater drainage. The drainage lines all appear to be for new stormwater drainage lines. Hence, the question is whether the 2017 Agreement excludes that section of the stormwater drainage that is now disputed.
16. As noted by the Tribunal, page 5 of the Agreement lists a number of exclusions for which no allowance had been made. Again, they are exclusions that are included as part of the builder's pro-forma agreement form. Included in that list is: 1. 'Stormwater Easement Works' which is defined as follows: All care but no responsibility will be taken during works involving neighbour's boundaries, stormwater connections etc. No allowance has been made to repair existing Stormwater Services, Easements if found to be damaged or in need of repair will be a variation. 1. and, the 'Upgrading of existing Stormwater'.
17. As the stormwater drainage lines on the homeowners' approved 'Stormwater Drainage Plan' did not identify the disputed stormwater drainage as being an upgrading of existing drainage, it is difficult to see how the parties intended the abovementioned exclusions to have applied.
18. Even if we are wrong, page 5 of the pro-forma form of Agreement signed by the parties contains the following qualification to the exclusions listed on that page: No allowance has been made for the following, unless noted in the Scope of Works or other contract documents:
19. The homeowners' DA Approved 'Stormwater Drainage Plan' is a contract document hence, the qualification on page 5 of the Agreement would apply even if the homeowners' Approved 'Stormwater Drainage Plan' included some upgrading of existing drainage. As we have already noted, there is no notation or other marking on that Plan to indicate that this is so.
20. As noted by the Tribunal, the Scope of Works on page 9 of the Agreement expressly includes the following: 1. 'Stormwater' which is defined as follows: Stormwater to existing stormwater drain, unless specified. Maximum 1 Pit to be Supplied by builder if required/specified. Stormwater New Service from Granny Flat to Front Boundary & Street Kerb or existing service if specified. 1. and, 'Stormwater pipe to the street' under the heading 'Extra Inclusions (Included in the Contract Price)'.
21. In this case, the storm water drainage lines on the homeowners' approved 'Stormwater Drainage Plan' did all connect to a single pipe to the street.
22. Accordingly, we are not persuaded that the disputed stormwater drainage work was excluded as contended by the builder. On the contrary, for the reasons set out above, we find, on the proper construction of the terms of the 2017 Agreement, the builder is responsible for all the stormwater drainage work identified on the homeowners' Approved 'Stormwater Drainage Plan' which includes the disputed stormwater drainage work. That is, we find that, on the proper construction of the 2017 Agreement that there is no contradiction.
23. Based on the material that was before the Tribunal, which we understand to have been the same as that which the parties have relied on in this appeal, we find that, had the Tribunal not erred in its approach to construing the terms of the 217 Agreement, a finding of this kind was open to the Tribunal at first instance.
24. As the builder has agreed to obtain the Occupation Certificate we have not considered this issue any further other than to note that on page 2, 3 and 5, of the 2017 Agreement the builder undertook to obtain the Occupation Certificate once it receives the final progress payment and any variations payment. These undertakings were not deleted.

Should leave to appeal be granted?

1. As we have noted above, Appeal Panel may only grant leave to appeal if it is satisfied that there is a miscarriage of justice because the decision of the Tribunal was (a) not fair and equitable, or (b) against the weight of evidence; or there is significant new evidence that was not available previously.
2. In Collins v Urban [2014] NSWCATAP 17, at [71] and [79] the Appeal Panel made the following observations about the meaning of the term 'substantial miscarriage of justice': [71] … [I]t can be seen that the concept of a substantial miscarriage of justice refers 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. . . [79] In order to show that a party has been deprived of a "significant possibility" or a "chance which was fairly open" of achieving a different and more favourable result . . . it will be generally be necessary for the party to explain what its case would have been and show that it was fairly arguable. If the party fails to do this, even if there has been a denial of procedural fairness, the Appeal Panel may conclude that it is not satisfied that any substantial miscarriage of justice may have occurred.
3. In this appeal, the builder contends that the decision of the Tribunal is not fair and equitable and against the weight of the evidence in that the Tribunal disregarded the 2017 Agreement, the email exchanges with the homeowners and the quotation and report of NSW Maintenance Plumbing.
4. In our opinion the builder has misunderstood the findings of the Tribunal at first instance. The main issue for determination by the Tribunal in regard to the plumber's hose being stuck in the front sewer drain was who engaged Andrew, the plumber. It was not an issue of whether the work undertaken by Andrew was excluded under the terms of the 2017 Agreement.
5. Again, in order to succeed in their claim, the onus was on the homeowners to prove, on the balance of probabilities, that the builder had engaged Andrew. In this regard, the Tribunal accepted the evidence of the homeowners. In our opinion, such a finding was open to the Tribunal on the material before it. First, there was no dispute that the builder had contacted NSW Maintenance Plumbing. The invoice for the work done and the retrieval of the hose from the drain was sent to the builder and not the homeowners. Furthermore, at no time did the homeowners accept the work undertaken by Andrew or NSW Maintenance Plumbing.
6. Hence, we find that the builder has failed to establish that the Tribunal erred in finding that it and not the homeowners had engaged Andrew. And on this basis there are no grounds on which to grant leave to appeal.

Conclusion

1. For the reasons set out above, we are satisfied that the builder has established that the Tribunal erred in law in its approach to construing the terms of the 2017 agreement. However, we are not persuaded that on the proper construction of the 2017 Agreement that the disputed stormwater drainage was excluded. On the contrary, we have found that on its proper construction, included in the Scope of Works of the 2017 Agreement between the parties was the entirety of the stormwater drainage as set out in the homeowners' Approved 'Stormwater Drain Plan'. Hence, order 2 of the Tribunal was correctly made, but for the wrong reasons, to the extent it required the builder to complete that work. In light of our findings, the costs for such work, is also to be borne by the builder.
2. Hence, on this ground alone it is appropriate to allow the appeal in part and to vary order 2 by: 1. extending the date on which the work is to be carried out by. While no stay of this order had been sought by the builder, in our view it is appropriate to extend the date on which the work is to be completed by; and 2. removing the requirement that costs of that work is to be shared.
3. We are otherwise not satisfied that the builder has established any grounds to grant leave to appeal.

Orders

1. We make the following orders: 1. The appeal is allowed in part. 2. Order 2, made by the Tribunal on 10 September 2019 is varied by deleting: 1. '09-Oct-2019' and inserting '[a date which is 4 weeks after the publication of these reasons for decision], and 2. 'shared between the parties' and inserting 'paid by DB Homes Australia Pty Ltd.' 1. The appeal is otherwise dismissed.

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: 12 October 2020