This appeal arises out of a decision (the Decision) published on 19 January 2021 concerning three applications which were heard together with directions that evidence in one be evidence in the other proceedings. The three applications comprised:
1. an application brought by the Appellant (who had contracted as builder with homeowners to conduct extensive renovations to their double storey home) against the homeowners;
2. an application brought by the homeowners against the Appellant; and
3. an application brought by the Appellant against the Respondent to this appeal, claiming damages in respect of any money that the Appellant might be found liable to pay to the homeowners in the event that it was found that the Respondent was its subcontractor and not an independent contractor with the homeowners.
The contractual arrangements between the parties to each application were regulated by the provisions of the Home Building Act, 1989 (NSW) (the HB Act).
This appeal concerns only the proceedings brought by the Appellant against the Respondent (the proceedings described at (3) above) and the orders made by the Tribunal in the Decision concerning that application. The relevant orders are order 2, which dismissed the Appellant's application against the Respondent and as well as orders 4 and 5 concerning costs as between the Appellant and the Respondent. As between the Appellant and the homeowners the Tribunal ordered the Appellant to pay to the homeowners the sum of $158,391.29. A portion of that amount is attributable to the subject matter of the contract found to have been made between the Appellant and the Respondent. The Appellant seeks an order from this Appeal Panel that that money be paid by the Respondent to the Appellant so as to reimburse the Appellant as a consequence of the Appellant paying that sum to the homeowners. We will refer to the amount of money in issue later in these reasons.
The particular work which was the subject of the dispute between the Appellant and the Respondent concerned the supply and installation of a staircase which was also described as item 14 in the homeowner's claim against the Appellant for defects.
It is necessary for the purposes of understanding this appeal to summarise the Decision insofar as it concerned item 14. That summary is as follows:
1. The homeowner's expert (Mr Capaldi) gave evidence concerning defects affecting the staircase. The defects reported by Mr Capaldi are described in paragraphs 227, 228, 229, 230, 231, and 232 of the Decision. The nature and cost of remediation is described in paragraph 233,the cost being $82,855.57.
2. At [238] the Tribunal found that the homeowners had established "item 14 as defective work and that the appropriate remediation and costing is that of the owner's expert". In short, the evidence of Mr Capaldi was accepted by the Tribunal.
3. At [239] the Tribunal stated that that there was a contest between the parties as to who were the contracting parties in respect of the staircase. The Appellant contended that in respect of the staircase the homeowners had a contract directly with the Respondent, whereas the homeowners contended that the Respondent was a subcontractor to the Appellant. The Respondent agreed with the homeowners' contention. The Tribunal found that the Respondent was a subcontractor to the Appellant [358], [361], [366] and [368].
4. From [354] the Decision deals with the contractual dispute referred to in the above subparagraph. The Tribunal referred to the Respondent here (and indeed throughout the Decision) as the "third party". The Appellant submits that that characterisation is of significance to the appeal.
5. As stated above, the Tribunal found that the Respondent had contracted with the Appellant in respect of the staircase. In this appeal, the Appellant does not contend otherwise and accepts the Tribunal's finding in that respect.
6. The stairs required a steel structure and at [361] the Decision records that the Appellant accepted that the steel for the stairs was the Appellant's responsibility, "being undertaken as to supply and install by the builder's subcontractor", and not the responsibility of the Respondent. At [368] the Tribunal found that the owners had established item 14 as defective work "by the builder and that the appropriate remediation and costing is that of the owners' expert".
7. From [369] the Tribunal dealt with the contentions as between the Appellant and the Respondent.
8. At [369] the Tribunal found that the evidence supported that the "manufacture[ of the stairs] was in line with drawings supplied to the third party and was not in line with the intended form of installation of the stairs as manufactured. The drawings supplied were those of the architect and designer. The steel fabricator's drawings were not supplied". The Tribunal found that the stairs were built to the architect's drawings.
9. At [370] the Tribunal found that the evidence supported the inference that the difficulties identified by the expert evidence "primarily arose from the attempted remediation of the stair treads to make them fit the steel stair structure and by the builder's installation of the balustrade. At [371] the Tribunal found that when it was realised that the stair treads did not fit over the steel structure, the builder's site foreman in a meeting with representatives of the "third party" and its installation contractor was given the options of suffering further delay by reason of the remanufacture and trimming of the back of the stair treads so that they fitted properly. The Tribunal found that the trimming which was carried out interfered with the integrity of the items as manufactured and supplied by the "third party" [372]. The Tribunal also found that the Appellant installed the balustrade with the associated defective capping and interface with the treads without the involvement of the "third party" [373].
10. At [374] the Tribunal found that it "appeared that both the builder and the third party had a role in the original laying of the treads which had the defects previously identified as regards interface with the wall plasterboard and levels, and possibly contributed to the difficulties with the joints and cracking". At [375] the Tribunal found that in "this state of the evidence, the builder has not discharged its onus to transfer responsibility to the third party as it claimed, nor has it sought to apportion responsibility and claimed compensation".
11. At [376] the Tribunal found that the "primary defective work, which required the remediation, as described above, appeared to be the defects in the treads from interference with their integrity at the rear and the interface with the treads from the balustrade installation, for which the builder was primarily responsible or at the least has not established that the third party was responsible".
12. At [377] the Tribunal stated that in the circumstances, the Appellant's claim against the Respondent was "not established".
[2]
Notice of Appeal
The Notice of Appeal was filed on 17 February, 2021 (ie. within time). The following is a summary of the grounds of appeal:
1. In the Decision [369]-[377] the Tribunal failed to exercise its jurisdiction in failing to deal with the Appellant's pleaded claim against the Respondent as set out in the Appellant's Points of Claim of 5 March 2019 for breach of the statutory warranties implied into the contract between them by the HB Act (s 18B) with respect to the work done and defects found in the Decision [227-239] for which it found the Appellant liable to the homeowners. This is an error of law.
2. The findings in the Decision at [369]-[377] involved errors of law in that they were unreasonable and bizarre:
1. when taken in the context of the Respondent's evidence that it contracted for and undertook the relevant work together with the expert evidence of Mr Capaldi in his May 2019 report at pp 38-46,
2. in the light of the Tribunal's findings at [354]-[368] that the contract under which the Respondent was engaged was a subcontract to the Appellant's building contract with the homeowners,
3. in the light of the Tribunal's findings in the Decision at [227]-[239] as to the defect with the stairs that were the subject of the said subcontract and the uncontested evidence that the Respondent contracted for and undertook the work the subject of those findings.
1. In the alternative to ground 1 the Tribunal had misconstrued the questions before it in the proceedings between the Appellant and Respondent, by failing to appreciate that in those proceedings the Appellant sued the Respondent for breach of the statutory warranties implied into its subcontract and sought damages from the Respondent to the extent to which the Appellant was found in the proceedings brought by the homeowner to be liable to the homeowners for defects in the internal stairs. That constituted an error of law.
2. Further to ground 3, the Tribunal at [369]-[377] of the Decision failed to construe the subcontract to determine its scope, or to apply the statutory warranties implied into the subcontract by HB Act (s 18B) or to address the question of the work for which the Respondent had undertaken and was responsible for by reference to the defects complained of by the homeowners and so failed to determine any liability, for breach of duty, or damages with respect to the Appellant's claims against the Respondent, all of which amount to a failure to exercise jurisdiction and are errors of law.
The Notice of Appeal submits that the Appeal Panel should quash order 5 of the Decision (ie. the order concerning costs) and find that the defective work done with respect to the defects to the stairs amounted to a breach of the Respondent's statutory warranties as contained in the subcontract for which it is liable to the Appellant.
The Appellant also seeks an order that the Respondent pay its costs of the appeal, together with a portion of the Appellant's costs in the proceedings at first instance between the Appellant and Respondent as well as the Appellant's costs in the proceedings with the homeowners to the extent that those costs related to the stairs, and further the portion of the homeowners' costs in the homeowners' proceedings for which the Appellant was ordered to pay (to the extent to which those costs related to the stairs).
[3]
Reply to Appeal
The Respondent filed a Reply to Appeal. It is sufficient to record that the Respondent's position is that there was no error of law made by the Tribunal and that the Appellant had failed to make out its case. It follows that there could not be and there was not a breach by the Respondent of the statutory warranties implied into the contract between the Appellant and the Respondent by s 18B of the HB Act.
[4]
Appellant's Submissions
The Appellant's written submissions were brief and were substantially developed by oral submissions made at the hearing of the appeal. The following is a summary of the written submissions of the Appellant:
1. The Respondent's involvement with the relevant work involved the supply, installation and rectification of the internal staircase (item 14). The Appellant does not challenge the findings recorded in the Decision that there were defects to the internal stairs.
2. In the homeowners' proceedings, the Appellant's work under its contract with the homeowners included the construction and installation of the internal stairs. That contract included statutory warranties. The installation of the stairs was undertaken for the Appellant by the Respondent pursuant to a subcontract between them. That subcontract also included the statutory warranties, this time being given by the Respondent to the Appellant. The Respondent's work under the subcontract involved the same work and the same statutory warranties that the Tribunal found to give rise to a breach by the Appellant of its statutory warranties to the homeowners.
3. Given the above, the Tribunal's findings with respect to the Appellant's claim either overlooked the Appellant's case entirely or the Decision records findings on that point that are illogical and represent a failure to understand and deal with those elements. The Tribunal had the Appellant's claim against the Respondent before it but failed to deal with the claim made in the proceedings in their terms.
4. If the Appellant is liable to the homeowners for defects in the internal stairs as a breach of statutory warranties, then the Respondent must be liable to the Appellant on the same basis and with respect to the same work and the same statutory warranties.
5. The Appeal Panel should order that the Respondent pay to the Appellant the amount found to be due by the Appellant to the homeowners in respect of item 14 and, in addition, order costs be paid by the Respondent.
[5]
Appellant's Oral Submissions
The Appellant's counsel referred to the evidence of the contract between the Appellant and the Respondent as contained in a document headed "Estimate" (see pages 579, 580 and 581 of the appeal book) issued by the Respondent. It refers in brief to the supply of stairs "as per drawing", installation and finishing of custom stair treads with glass balustrade and the installation and finishing of custom stair landing.
The Appellant's central submission was that the Tribunal at first instance failed to address the Appellant's claim for breach of statutory warranties. The Decision at [369] to [370] deals with the Appellant's claim against the Respondent (termed the "third party"). The Appellant challenges the finding at [376] of the Decision that the Appellant was primarily responsible for the defects in the treads or has not established that the Respondent was responsible.
The Appellant further contends that from the transcript (transcript for 11 March 2020 at page 168), it appears that the Tribunal equated the Appellant's claim against the Respondent with a third party claim. The Appellant submitted that this appeared to be a reference to s 3 of the Law Reform (Miscellaneous Provisions) Act 1948 and, if so, it reflects a misunderstanding by the Tribunal of the nature of the Appellant's claim.
The Appellant referred to the decision in The Owners - Strata Plan no 66375 v King [2018] NSWCA 170 for the proposition that a builder has no defence in respect of design faults (unless s 8F of the HB Act applies). In the Decision at [369] there is a discussion concerning the fact that the Respondent was supplied with the architect's drawing but not the steel fabricators drawings. The Appellant submitted that that does not alter the result. The statutory warranty applies to supplies and in this case the treads were supplied, then taken away and trimmed and then resupplied. The Appellant submitted that the trimming was undertaken by the Respondent and that the Decision failed to address that fact and that the statutory warranties apply to the trimming.
At [375] of the Decision the Tribunal found that the Appellant had not discharged "its onus to transfer responsibility to the third party". The Appellant submitted that there is in law, no concept of "transfer of responsibility". The only relevant question is whether there has been a breach of contract. In the same paragraph the Decision records that the Appellant had not sought to claim compensation. In fact the homeowner had claimed compensation and the Appellant had done so as against the Respondent. The Appellant submitted that the problem with the analysis recorded in the Decision is that the Decision does not identify the subject matter of the contract between the Appellant and Respondent or find breach. Further, the Decision does not then determine whether there has been a breach of statutory warranties. In short, the Appellant's cross-claim was not considered.
The second ground of appeal is that the findings in [369] of the Decision are unreasonable in the sense discussed in the following cases:
1. Re Minister for Immigration & Multicultural Affairs v Ex Parte Applicant S20/2002 [2003] 198 ALR 59
2. The Minister for Immigration & Citizenship v SZMDS [2010]) HCA 16
3. The Minister for Immigration & Border Protection v Stretton (2016) FCAFC 11 at [11] and [12]
4. The Minister for Immigration & Citizenship v Li [2013] HCA 18
The third ground of appeal is that the Tribunal did not consider the issues raised by the Appellant. The Tribunal did not consider the terms of the contract between Appellant and Respondent and did not attempt to make the findings necessary to resolve the claim against the Respondent.
[6]
Respondent's Submissions
The following is a summary of the written submissions made by the Respondent:
1. The Appellant's position is that the liability of the Respondent is coextensive with that of the Appellant. That is not so as it was the Appellant, and not the Respondent, whose conduct and whose defective work substantially contributed to the loss sustained by the homeowners.
2. The Tribunal's rejection of the Appellant's claim involved no error. The findings in the Decision at [369]-[377] accord with the evidence.
3. The Appellant bore the onus of establishing liability on the part of the Respondent. That involved the Appellant assuming the burden of proving the terms of the contract between Appellant and Respondent, that one or more of those terms had been breached by the Respondent and that the breaches committed by the Respondent caused or materially contributed to the Appellant suffering loss (represented by the Appellant's liability for damages to the homeowners in respect of defect 14). The Appellant bore the onus of establishing the quantum of the loss.
4. In the light of the overlapping works carried out by the Respondent and the Appellant the onus that rested on the Appellant to establish the elements of breach and the contribution of the breaches to the Appellant's loss required the Appellant to lead its own evidence. The Tribunal had inclined to the view that it was the Appellant who was primarily responsible for the loss suffered by the homeowners but also made the observation that the Appellant's failure to lead sufficient evidence on these issues meant that it could not be satisfied that the Respondent, as opposed to the Appellant, was responsible for the loss (see [375]-[376])
5. The Appellant did not challenge the expert evidence relied upon by the homeowners, namely the evidence of Mr Capaldi. That evidence did not differentiate between the works that fell within the Appellant's scope and that which fell within the scope of the Respondent's contract with the Appellant (see transcript p 256l 35-40). That limitation did not affect the homeowner's ability to prove its case against the Appellant as the homeowners had adopted the position that their only contract was with the Appellant. However, it was a limitation in the evidence insofar as it was to be used by the Appellant in its case against the Respondent because the evidence did not permit the Tribunal to attribute legal responsibility for any particular defect to one or the other. The expert witness for the Appellant did not disagree with Mr Capaldi as to the existence of the defects concerning defect 14 or the cost of rectification. His evidence assumed that there was no contractual relationship between the Appellant and the Respondent. The Respondent submits that, having regard to the Appellant's evidence, it is unsurprising that Mr Capaldi's unchallenged evidence as to defective work and the scope and costing of rectification was accepted by the Tribunal.
6. The Respondent's submissions also examined the evidence which led to the Tribunal finding at [369] and [370] that as between the Appellant and Respondent the manufacture of the component of the stairs manufactured by the Respondent was in line with the drawings supplied to the Respondent and not in line with the intended form of installation of the stairs. The Respondent was supplied with the drawings of the architect but not the drawings of the steel fabricator. The Respondent submits that it was the fault of the Appellant that the treads were too narrow for the steel cantilevers. Accordingly, it was open on the evidence for the Tribunal to find that the Appellant was primarily responsible for the problems which ensued from the modification to the tread design.
7. The Respondent's submissions also consider the evidence concerning the decision to modify the treads to enable them to fit over the oversized steel cantilevers. The submissions refer to the evidence provided by witnesses for both parties and the Respondent submits that the findings of the Tribunal at [371] were based upon that evidence. At [371] the Tribunal found that when it was realised that the stair treads did not fit over the steel structure the Appellant's site foreman in a meeting with representatives of the Respondent (and its installation contractor) was given the options of further delay from remanufacture or trimming back the stair treads so that they fitted. At [372] the Tribunal accepted the evidence of Mr Capaldi that the trimming of the treads interfered with the integrity of the items as manufactured and supplied by the Respondent. It was the impact of this trimming, together with the installation of the glass balustrade, which led the Tribunal to its conclusion at [376] that the primary defective work which required the remediation appeared to be the defects in the treads from interference with their integrity at the rear and the interface with the treads from the balustrade installation, for which the Appellant was primarily responsible.
8. The Respondent's submissions go into some detail in relation to the evidence concerning aspects of the alleged defects in the treads and in the glass balustrade. The Respondent submits that that evidence is dispositive of the Appellant's positive case against the Respondent because it demonstrates the failure of the Appellant to discharge its onus of proof on the questions of breach and causation.
In conclusion, the Respondent submits:
1. The Decision fairly accorded with the evidence.
2. It is not to the point that the Tribunal found in favour of the homeowners as to the defects alleged in item 14. The issue as between the Appellant and the Respondent went to the question of which party was to be held responsible for those defects.
3. The Appellant had the onus of establishing that the Respondent breached its contract and caused it to suffer loss. That onus required the Appellant to adduce evidence which distinguished between the works it performed and the works that the Respondent performed. It required the Appellant to prove that it was the work performed by the Respondent, not by the Appellant, which breached the contractual promise it made to the Appellant and caused loss.
4. The Appellant failed in the above endeavour. On the state of the evidence, the Tribunal could not be satisfied to the requisite standard that the Respondent was responsible for the defects. Indeed, the weight of evidence was to the contrary.
5. The appeal should be dismissed with costs.
[7]
Respondent's oral submissions
The Respondent's oral submissions may be summarised as follows:
1. The description of the Respondent as the "third party" was not intended to be used in the manner it is used in the Law Reform (Miscellaneous Provisions) Act. Paragraph 5 of the Decision records that the Respondent submitted that it was a subcontractor to the Appellant and that it disputed liability for defective work for which it was responsible, or that it was obliged to compensate the Appellant. That is indicative of the Tribunal understanding the dispute between the Appellant and Respondent.
2. In paragraph 5 of the Decision, the Tribunal described the claim brought by the Appellant against the Respondent for damages in the event that it was found liable to the homeowners. There is no significance in the use of the description "the third-party" to describe the Respondent and it is clear that the Tribunal understood that the Respondent claimed to have a contractual relationship with the Appellant and not with the homeowners.
3. In respect of defect 14, the only detailed expert evidence came from Mr Capaldi (the homeowners' expert). Mr Montgomery (the builder's expert) did not deal with defect 14 in detail and limited his comments to the view that the Appellant had no contractual relationship with the Respondent and therefore could not be responsible for the defects.
4. The Appellant's evidence concerning the defects to the stairs was inadequate to attribute liability to the Respondent. The Appellant seeks to focus on the remediation works that occurred after realisation that the stair treads would not sleeve over the cantilever frame. However, Mr Capaldi's evidence deals with those aspects. The findings of fact made by the Tribunal as recorded in the Decision are based upon the Tribunal's acceptance of Mr Capaldi's evidence. It can be seen that the principal reason for which the staircase works were defective related to the installation of the treads, the installation of the glass balustrade and installation of the capping boxes adjacent to the other side of the glass balustrade and, finally, failure to apply the silicon between the treads and the glass balustrade. It is clear from paragraph 227 of the Decision that the Tribunal accepted the findings of Mr Capaldi, which the Tribunal recorded in some detail. According to Mr Capaldi a bulkhead had been constructed which was visually out of level, the reassembly of the treads resulted in a poor finish to the tread edges and further delamination to the tread veneer mitred joints. Contrary to the specifications the treads were installed with zero gap to the wall and other treads had a 6 mm gap, the junction between the glazing and the tread is inconsistent in appearance and has not been detailed as per the approved drawings and specifications. A silicon bond was to be installed between the glazing in the treads but was not installed. Contrary to the drawings the Appellant used epoxy to fix the timber capping sections into position and this does not allow for removal without damaging the end capping and the glazing. The stair rises were not consistent in height, the stair tread system has been poorly constructed and departs from the approved details as well as being aesthetically poor when compared to design intent. There is limited space for movement, which means that there will be a likely result in further damage to the timber and glazing. The submission of the Respondent was that these references contained in Mr Capaldi's evidence found their way into the Decision and explained the basis for the finding at [376] to the effect that the primary defective work which required remediation was work for which the Appellant was primarily responsible or at least had not established that the Respondent was responsible.
5. The Respondent was not responsible for the installation of the glass balustrade which was entirely within the Appellant's scope. Mr Capaldi's evidence as to quantum contemplated the replacement of the balustrade. There is no basis for a finding against the Respondent to the effect that it would be liable for the full amount attributed to defect 14, namely approximately $82,000. Similarly, the comments concerning the capping boxes lay at the feet of the Appellant and had nothing to do with the Respondent.
6. The Appellant refers to the statutory warranties. Section 18B(1)(a) contains a warranty that the work will be done with due care and skill and in accordance with the plans and specifications set out in the contract. The relevant contract here between the Appellant and Respondent only related to the supply and installation of the stair treads. The defects identified by Mr Capaldi related to a range of defects concerning item 14 including in respect of works entirely within the Appellant's scope of works.
7. The evidence was clear that the Respondent built the stair treads in accordance with the plans provided and that it became apparent upon installation that they did not fit the steel structure. The Appellant instructed the Respondent not to manufacture them again but rather to modify them by trimming them. That course resulted in the trimming interfering with the integrity of the items as manufactured and supplied by the Respondent (as per the finding contained in [372] of the Decision). That problem (interference with the integrity of the items as manufactured) was the product of the Appellant's error in not providing the relevant engineering drawings to the Respondent and also was the result of the Appellant's instruction to the Respondent to undertake the trimming. The Decision was justified in coming to the conclusion that there was insufficient evidence to indicate that the faults referred to in Mr Capaldi's report could be sheeted home to the Respondent.
8. The agreement to undertake the trimming work occurred in a conversation between representatives of the Appellant and Respondent and the conversation did not include the Respondent offering any warranty to the Appellant.
9. The conversation by which the remedial work was agreed to be undertaken was not suggested to have been a contract and such a contract has not been pleaded or particularised.
[8]
Appellant's Submissions in Reply
The following is a summary of the Appellant's oral submissions in reply:
1. The Respondent's reliance upon Mr Capaldi's evidence that there was a problem with both the treads and the balustrade is not supported in the Decision. The Tribunal did not find a defect in the balustrade. The Tribunal's findings from [227] to [232] recites defects concerning the treads.
2. The ultimate finding was that the defect that ultimately emerged concerned the repair of the stairs. The finding that the Respondent and the Appellant, each had a "role" (see [374]) is not a proper finding. There are no findings about the balustrade.
3. The Respondent's defence does not address the question of a breach of section 18B(1)(e) of the HB Act. That provides for a warranty that work will be reasonably fit for purpose. At [232] of the Decision, the Tribunal found that the stairs did not achieve their purpose. That constitutes a finding of a breach of s18B(1)(e).
4. If the Appeal Panel were to find that there is "some mixed component that involves the deficiencies", then the correct course is to remit that question because that issue was not considered and therefore not discharged. In other words, if there was a joint responsibility between the Appellant and the Respondent is it is necessary to make a finding about that fact. No such finding was made and, accordingly, the Tribunal has not exercised its jurisdiction.
5. The evidence of Mr Minogue was to the effect that he was engaged by the Respondent to rectify the problem with the wooden sleeves. The evidence at page 178 lines 25 to 28 of the transcript confirms that Mr Minogue was so engaged and that the Respondent had undertaken responsibility for the rectification work.
6. The primary defective work was the defect in the treads. The Tribunal found at [370] that the evidence supporting the inference that the difficulties identified by the expert evidence primarily arose from the attempted remediation of the stair treads to make them fit the stair steel structure. The Respondent agreed to do the trimming and the trimming caused the problem.
[9]
Quantum
At the hearing there was discussion with counsel concerning the quantum of the claim brought by the Appellant against the Respondent (on the assumption that the Appeal Panel was of the view that the Respondent bore responsibility to compensate the Appellant). Counsel for the Appellant agreed that it was appropriate that he identify the workings in relation to quantum. As a consequence, directions were made for the parties to provide written submissions with respect to quantum. The following summarises the Appellant's submissions:
1. The evidence concerning quantum for defect 14 is contained in the report of Mr Capaldi.
2. He provided a "raw figure" totalling $52,026. He added to that figure for each of "preliminaries", "builder's margin" and "GST". The total comes $82,855.57.
The Respondent's submissions on quantum can be summarised as follows:
1. Mr Capaldi did not formulate his scope of rectification with a view to identifying separately the cost items tied to the Respondent's scope of works from those tied to the Appellant's scope of works.
2. If, contrary to the Respondent's primary position that it bears no responsibility for loss, the Appeal Panel concludes that both the Respondent and the Appellant contributed to the homeowners' loss the fact is that it is not possible to "reverse engineer" Mr Capaldi's work to carve out the value of the Appellant's contribution to the homeowners' loss from the overall sum awarded. It would not be a just outcome for the Respondent to "wear" all of the loss in circumstances where it is known that the Appellant was solely responsible for some of the unquantifiable proportion of the loss. However, the opposite is not also true. There is no injustice in the Appellant "wearing" all of the loss, given that it bore the onus of proof and failed to lead evidence capable of assisting the Tribunal with this issue. It would not be appropriate for the matter to be remitted on this point.
[10]
Consideration
In the proceedings at first instance, the Appellant brought an application (see a copy from page 138 of the appeal book) against the Respondent for a work order, or in the alternative, for an order for damages. The Appellant's claim against the Respondent is contained in a document described as the Second Cross- Applicants Points of Claim in the Second Cross Application. The application contended that the Respondent had entered into an agreement with the homeowners. It is now accepted by the parties to this appeal that that agreement was between the Appellant and the Respondent. The application stated that on installation it was discovered that the "wooden stair sleeves" were too narrow to be inserted over the steel cantilevers and that the Respondent "resolved to remove one side to enable enlarging of the hollow section before reaffixing the side of the tread before installation" (p 150 appeal book). It is further stated that the Appellant "thereafter installed the glass balustrading which is secured to the steel cantilevers". At paragraph 27 of the application, it is asserted that it was a term of the contract between the Respondent and the homeowners, or in the alternative, the Appellant, and implied by the provisions of s 18B of the HB Act that the Respondent warranted that:
1. The works performed by the Respondent would be performed in a proper and workmanlike manner and in accordance with the contract between the relevant parties.
2. All materials supplied by the Respondent would be good and suitable for the purpose for which they are used and would be new.
3. The works under the contract would be done in accordance with and comply with the HB Act and any other law.
4. The works would be done with due diligence and within a reasonable timeframe.
5. The work and any materials used in doing the work would be reasonably fit for the specified purpose or result.
The application goes on to contend that the Respondent was in breach of the above warranties.
It can be seen from the above that the Appellant's claim against the Respondent relies upon s 18B of the HB Act. That section provides:
18B Warranties as to residential building work
(1) The following warranties by the holder of a contractor licence, or a person required to hold a contractor licence before entering into a contract, are implied in every contract to do residential building work--
(a) a warranty that the work will be done with due care and skill and in accordance with the plans and specifications set out in the contract,
(b) a warranty that all materials supplied by the holder or person will be good and suitable for the purpose for which they are used and that, unless otherwise stated in the contract, those materials will be new,
(c) a warranty that the work will be done in accordance with, and will comply with, this or any other law,
(d) a warranty that the work will be done with due diligence and within the time stipulated in the contract, or if no time is stipulated, within a reasonable time,
(e) a warranty that, if the work consists of the construction of a dwelling, the making of alterations or additions to a dwelling or the repairing, renovation, decoration or protective treatment of a dwelling, the work will result, to the extent of the work conducted, in a dwelling that is reasonably fit for occupation as a dwelling,
(f) a warranty that the work and any materials used in doing the work will be reasonably fit for the specified purpose or result, if the person for whom the work is done expressly makes known to the holder of the contractor licence or person required to hold a contractor licence, or another person with express or apparent authority to enter into or vary contractual arrangements on behalf of the holder or person, the particular purpose for which the work is required or the result that the owner desires the work to achieve, so as to show that the owner relies on the holder's or person's skill and judgment.
(2) The statutory warranties implied by this section are not limited to a contract to do residential building work for an owner of land and are also implied in a contract under which a person (the "principal contractor") who has contracted to do residential building work contracts with another person (a "subcontractor" to the principal contractor) for the subcontractor to do the work (or any part of the work) for the principal contractor.
One of the contentions made by the Appellant in this appeal is that if the Appellant is liable to the homeowners for defects in the internal stairs as a breach of statutory warranties, then the Respondent must be liable to the Appellant on the same basis and with respect to the same work and the same statutory warranties. The Respondent disputes this contention and contends that the liability (if any of the Respondent) is not coextensive with that of the Appellant's liability to the homeowners.
The Appellant relied in support of the above submission on the decision in the Owners - Strata Plan No 66375 v King [2018] NSWCA 170. That case concerned the liability of a developer (a term defined in s 3A of the HB Act). Proceedings had been commenced by an Owners Corporation against various entities, including the builder (a company which went into liquidation), the previous owners of the property the subject of the development (Mr & Mrs King) and a company associated with them. A description of who is a developer is contained in s 3A of the HB Act and that description has been amended over time. Mr & Mrs King were held to have been developers. Essentially a developer is an entity on whose behalf residential work is done in the circumstances set out in s 3A.
At first instance the court considered the extent of the statutory warranties under ss 18B and 18C of the HB Act. Section 18C provides:
18C Warranties as to work by others
(1) A person who is the immediate successor in title to an owner-builder, a holder of a contractor licence, a former holder or a developer who has done residential building work on land is entitled to the benefit of the statutory warranties as if the owner-builder, holder, former holder or developer were required to hold a contractor licence and had done the work under a contract with that successor in title to do the work.
(2) For the purposes of this section, residential building work done on behalf of a developer is taken to have been done by the developer.
At first instance the court had held that it is implicit in s 18C that the notional contract described in s 18C is a contract for the carrying out of the same work as the contract into which the statutory warranties are implied by s 18B. The legislature could not have intended the notional contract to have a broader or narrower scope than the contract under which the work was actually performed. That decision was overturned by the Court of Appeal and at [297] Ward JA held that:
"A developer's liability pursuant to the notional contract contemplated by s 18C … is not predicated upon, nor limited by, the existence of an actual contract between the developer and a particular builder. Such a conclusion permits s 18C to operate consistently across the different categories of predecessors in title referred to in its text, and it closes a loophole which might otherwise exist permitting developers to, in effect, breach the statutory warranties in s 18B but escape liability because the breaches occurred with respect to work beyond the scope of the particular contract with the builder."
In the course of her judgment, Ward JA referred to her judgment at first instance in the Owners Strata Plan 62930 v Kell & Rigby Holdings Pty Ltd [2010] NSWSC 612. In that case the Owners Corporation brought a claim against both the developers and a builder for breach of statutory warranties. The developers were held liable to the Owners Corporation in relation to their amendment of the design specification of the air-conditioning system. That amendment had varied the building contract, such that in the outcome, the scope of the builder's liability on the actual contract with the developers did not align with the scope of the developer's liability on the notional contract [313]. The builder had contended that it had built the air-conditioning system in accordance with the plans and specifications in the building contract and her Honour held that the builder should not be liable for design faults with the air-conditioning system as approved by the developers. The developers were held liable to the Owners Corporation for design faults with respect to the air-conditioning system even though the builder was not liable to the Owners Corporation in that respect [315].
In our view, the King case is concerned with rights arising under s 18C. As Leeming JA said at [357]:
Section 18C conferred a new right upon persons who are the immediate successors in title to a certain class of people (in the present case a developer) who have done residential building work. The content of that entitlement is determined by reference to how the statutory warranties would apply had the developer done the work under a contract with that successor in title.
In our view s 18C is not relevant to a determination of the issues in this appeal and it does not stand for the propositions asserted by the Appellant. This appeal and the proceedings at first instance do not concern a successor in title. We are in agreement with the Respondent's submission that the liability (if any) of the Respondent is not coextensive with that of the Appellant to the homeowners.
The Appellant contends that the Tribunal did not identify the terms of the contract between the Appellant and the Respondent or consider whether the statutory warranties had been breached.
So far as the terms of the contract are concerned, we are of the opinion that the Tribunal did identify the terms of the contract sufficiently to determine the matters in issue. At [239] of the Decision, the Tribunal identified the fact that there was a separate contract "in respect of the staircase". It is common ground between the parties that the written evidence of the scope of works provided by the Respondent to the Appellant is contained in a document headed Estimate dated 23 March 2017 (see from page 579 of the appeal book). Further delineation of the scope of works is contained at [361] whereby the Tribunal found that the Appellant had accepted that the steel for the stairs was the Appellant's responsibility. At [367] the Tribunal recorded that the work with respect to item 14 (which included work outside the scope of work provided by the Respondent) was defective and that the scope and cost of the remediation was to be found in the evidence of the Mr Capaldi: see also [368].
Further discussion of the contractual scope of works between the Respondent and the Appellant is contained in [369] where the Tribunal found that the Respondent was obliged to manufacture the stairs in accordance with drawings supplied. The Tribunal also found that there was no evidence that the stair treads (which had been found on installation not to fit the steel stair structure) had departed from the drawings [370].
Although the Tribunal did not make express reference to whether the Respondent had breached statutory warranties applicable to the contract between the Respondent and the Appellant it is apparent from the Decision that the Tribunal found that there were no such breaches of those warranties. There are express findings that the Respondent found that the work was done in accordance with the plans and specifications provided to the Respondent. In our view that constitutes a finding of compliance with the statutory warranty contained in s 18B(1)(a) (which is the warranty that the work will be done with due care and skill and in accordance with the plans and specifications).
It is not apparent to us that the Appellant provided any evidence in support of an allegation of breach of s 18B(1)(b) which concerns a warranty that all materials will be good and suitable for the purpose for which they are used. We were not taken to any evidence which might have raised a question as to whether the materials used were not good and suitable. Similarly, we were not taken to any material which might have suggested that there had been a breach of section 18B(1)(c) which concerns the warranty that the work will be done in accordance with and will comply with this or any other law. Section 18B(1)(d) concerns a warranty that the work will be done with due diligence and within the time stipulated. There was no evidence concerning a suggested breach of that warranty.
Section 18B(1)(e) concerns a warranty that the work will result in a dwelling that is reasonably fit for occupation as a dwelling and s 18B(1)(f) concerns a warranty that the work will be reasonably fit for the specified purpose or result. This warranty is modified by only being applicable if the person for whom the work is done expressly makes known to the provider of the work the particular purpose for which the work is required or the result that the owner desires the work to achieve.
In our view, it is implicit in the Decision that the Tribunal found no breach of s 18B(1)(e). That conclusion was open to the Tribunal having regard to the finding that the Respondent supplied stairs in conformity with its contractual obligations.
In our view it is implicit in the Tribunal's findings that there was no breach of s 18B(1)(f) because it is clear that the particular purpose for which the work was required was the provision of stairs which would be installed within the steel structure provided by the Appellant. The expression of that purpose is contained in the plans provided by the Appellant to the Respondent and the Respondent complied with that purpose by providing stairs in conformity with those plans.
With respect to s 18B(1)(e) we accept that the Tribunal did not expressly consider whether the stairs provided by the Respondent resulted in a dwelling that was not reasonably fit for occupation. However, in our view, it is implicit that the defects were not of such a character that it would have been possible to make a finding that the dwelling was not reasonably fit for occupation. The Tribunal accepted Mr Capaldi's evidence and from [227] the Tribunal particularised his evidence. At [232] the Tribunal recorded that the overall impact was that an intended high-end feature departed from contract requirements and did not achieve that purpose, with the potential for damage to treads and glazing from future movement. We are of the opinion that that evidence falls short of permitting the Tribunal to have found that there had been a breach of s 18B(1)(e).
Although the Tribunal made no express reference to s 18B it is clear in our view that the Tribunal held the view that the Respondent had not breached its contractual or statutory warranties to which it was obligated to the Appellant.
The Appellant's submissions additionally seek to impose liability upon the Respondent because the trimming work undertaken by the Respondent (or on its behalf) following the initial attempts at installation failed to assist in achieving the result that the Appellant was contractually obliged to achieve.
We are in agreement with the Respondent that the Appellant bore the onus of establishing liability of the Respondent and, if liability was established, sufficient evidence to determine quantum. On the evidence before the Tribunal it was open to the Tribunal to find (as it did at [376]) that the Appellant was primarily liable for the defects found with respect to the stairs and the other elements of item 14. There was a conversation between the representatives of the Appellant and the Respondent by which the Appellant's representative requested the Respondent's representative to undertake trimming of the stairs. There was no contention that that arrangement gave rise to contractual obligations and the Tribunal did not make any finding as to what obligations might have arisen as a result of that conversation. Rather the Tribunal found that the activities of both the Appellant and Respondent had "a role" in the laying of the treads [373] and that the Appellant had installed the balustrades with defective capping [373]. On the evidence which was based upon Mr Capaldi's evidence, it was open to the Tribunal to find that the Appellant had not discharged its onus to satisfy the Tribunal that the Respondent should be held liable for item 14. As the Respondent points out, given the evidence concerning the defects in item 14 came from the homeowner's expert, Mr Capaldi, it is not surprising that that evidence did not seek to analyse the respective contributions to the makeup of the defects within item 14 as between the Appellant and the Respondent.
It follows from the conclusions we have reached as discussed above, that all grounds of appeal fail.
We add that the description of the Respondent as the "third-party" did not, in our view, lead the Tribunal to any error in its reasoning.
The Appellant submitted that if we were to form the opinion that there was joint responsibility between the Appellant and Respondent it would be appropriate to make an order remitting the proceedings back to the Consumer & Commercial Division so that appropriate findings of fact in that regard may be made. We do not agree. The Tribunal's conclusion was that on the evidence there was a failure by the Appellant to satisfy the Tribunal that it had discharged its onus of proving to the civil standard that the defects in item 14 could be attributed to the Respondent. A remittal would not be appropriate where the Tribunal's finding in that respect was open to it and was a finding that does not display error.
[11]
ORDERS
Accordingly, as we are of the opinion that all grounds of appeal are to be rejected and the appeal must be dismissed. The orders we make are as follows:
1. Appeal dismissed.
2. If the Respondent seeks an order for costs of the appeal, submissions in support of such application must be filed and served within 21 days of the date of these orders.
3. If the Respondent seeks costs then within a further period of 21 days the Appellant is to file and serve submissions opposing such application.
4. The parties' submissions should address whether the question of costs of the appeal may be determined by the Appeal Panel on the papers by dispensing with a hearing on costs.
[12]
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
[13]
Amendments
16 December 2021 - Inclusion of Catchwords.
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Decision last updated: 16 December 2021