Emrit Services Pty Limited v Lidden

BACKGROUND

1. The respondent engaged the appellants to undertake landscaping works which included the construction of a timber retaining wall at the rear of her property pursuant to a written quote dated 9 December 2017.
2. Work on the retaining wall commenced by the appellants on about 19 December 2017.
3. A second quote was issued by the appellants to the respondent on about 10 January 2018 which was accepted by the respondent and work continued.
4. The retaining wall was completed by the appellants on about 7 February 2018.
5. The retaining wall separates the raised back garden of the main house from a granny flat, both the house and the granny flat were pre-existing structures and not built by the appellants.
6. The respondent had the benefit of the statutory warranties as set out in s 18B of the HB Act under her contract with the appellants, including a warranty that the retaining wall would be constructed with due care and skill.
7. On about 23 February 2018, the respondent arranged with a third party contractor for a timber fence to be built behind the retaining wall.
8. Parts of the retaining wall started to lean or bow in about May 2019, so the respondent contacted the appellants who arranged for an employee to return to site to perform some rectification work to the retaining wall at no cost to the respondent.
9. In about May 2023, the respondent noticed that the retaining wall had begun to lean again and contacted the appellants; Mr Khamis attended the site.
10. Mr Khamis on behalf of the appellants declined to undertake any further rectification work on the basis that they were not liable for the issues with the retaining wall given the subsequent construction of a fence behind the retaining wall which the appellants claim has impacted on the retaining wall and caused the issues.
11. The respondent filed the application in the Tribunal on 23 December 2023 seeking a money order of $31,220.
12. The contested hearing took place on 19 April 2024 and the Decision was published to the parties on 14 May 2024.
13. The senior member found at [63] that the sagging and bowing of the retaining wall along its northern boundary and particularly in the north east corner was a major defect for the purpose of s 18E(4) of the HB Act and as such the Tribunal had jurisdiction to determine the claim as it was filed within the statutory time period for major defects which is 6 years.
14. In effect, the Tribunal found: 1. that there were defects in the retaining wall caused by the way it was constructed (not because of the fence built behind it); 2. that the appellants were in breach of the statutory warranties contained in the HB Act; 3. that the breach resulted in major defects as defined by s 18E(4) of the HB Act because the retaining wall was a "major element" as defined by s 18E(4) because the Tribunal was satisfied that it was a major element of a building (being the granny flat) and was likely in the future to cause destruction of some part of the granny flat; 4. the proceedings were filed within the 6 year limitation period prescribed by s 18E(2) of the HB Act; 5. the appropriate remedy was a money order in favour of the applicant in the Tribunal proceedings (the respondent in this appeal) in the sum of $24,976.16.
15. The operation of the money order was stayed by consent order of the Appeal Panel on 21 June 2024 until further order or finalisation of the appeal, whichever is the earlier in time.

NOTICE OF APPEAL

1. In Annexure A attached to the Notice of Appeal the appellants seek orders as follows: 1. An order setting aside Orders 1 and 2 dated 14 May 2024 2. An order that the appellants are not required to pay the respondent $24,976.16; 3. An order for costs of the appeal; 4. Any other appropriate order.
2. In the Notice of Appeal the appellants claim that no reasonable decision maker would have ordered a money order; the Decision was not fair or equitable; the Tribunal failed to afford procedural fairness (which was not pressed at the hearing) and the Tribunal took into account irrelevant considerations.
3. In written and oral submissions the appellants submitted that the Tribunal has made the following errors on a question of law: 1. The Tribunal erred in determining that the defects in the retaining wall were a major defect pursuant to s 18E(4) of the HB Act and therefore the 6 year limitation period of s 18E(2) applied; 2. The Tribunal erred by considering the granny flat to be the relevant building for the definition of "major defect" in s 18E(4) of the HB Act; 3. The Tribunal erred by considering that the retaining wall could be a major element of a building, being the granny flat for the purpose of the definition of "major element" in s 18E(4) of the HB Act; 4. The Tribunal erred by finding that the retaining wall was holding back "hundreds of tonnes" of earth from crushing the granny flat, as there was no such evidence to support the finding; 5. The Tribunal erred by finding that the retaining wall was likely in the future to cause destruction of some part of the granny flat, as there was no such evidence to support such a finding; 6. The Tribunal erred in making a money order instead of a work order and failed to consider s 48MA of the HB Act and failed to give adequate reasons as to why a money order was made instead of a work order.

SCOPE AND NATURE OF INTERNAL APPEALS

1. An appeal is not an opportunity for the party who was unsuccessful before the Tribunal to run their case again: Ryan v BKB Motor Vehicle Repairs Pty Ltd [2017] NSWCATAP 39 at [10].
2. Internal appeals may be made as of right on a question of law, and otherwise with leave of the Appeal Panel: s 80(2) NCAT Act.
3. In Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 the Appeal Panel set out at [13] a non-exclusive list of questions of law, which included matters such whether the Tribunal identified the wrong issue or asked the wrong question; whether a wrong principle of law had been applied; whether there was a failure to afford procedural fairness; whether the Tribunal took into account an irrelevant consideration; whether there was no evidence to support a finding of fact; whether the decision was so unreasonable that no reasonable decision-maker would make it.
4. Schedule 4, cl 12(1) of the NCAT Act limits the circumstances in which leave can be granted in appeals of this nature. An appellant must first demonstrate that they may have suffered a substantial miscarriage of justice because the decision was not fair and equitable, or against the weight of evidence or there is significant new evidence that was not reasonably available at the time the proceedings under appeal were being dealt with.
5. Even if an appellant from a decision of the Consumer and Commercial Division has satisfied the requirements of sch 4, cl 12(1) of the NCAT Act, the Appeal Panel must still consider whether it should exercise its discretion to grant leave to appeal under s 80(2)(b). The decision of Collins v Urban [2014] NCWCATAP 17 sets out the principles applicable in respect of the grant of leave.
6. In Collins v Urban, the Appeal Panel stated at [84] that ordinarily it is appropriate to grant leave to appeal only in matters that involve: 1. issues of principle; 2. questions of public importance or matters of administration or policy which might have general application; or 3. an injustice which is reasonably clear, in the sense of going beyond merely what is arguable, or an error that is plain and readily apparent which is central to the Tribunal's decision and not merely peripheral, so that it would be unjust to allow the finding to stand; 4. a factual error that was unreasonably arrived at and clearly mistaken; or 5. the Tribunal having gone about the fact finding process in such an unorthodox manner or in such a way that it was likely to produce an unfair result so that it would be in the interests of justice for it to be reviewed.

DID THE TRIBUNAL MAKE AN ERROR ON A QUESTION OF LAW

1. The primary ground of appeal is that the Tribunal erred on a question of law by finding that the defects in the retaining wall constituted a "major defect" as defined in s 18E(4) of the HB Act because the retaining wall met the definition of a "major element" of a building as defined in s 18E(4). Following this error, the Tribunal then erred in determining that the applicable period to file the application was 6 years.
2. The appellants contend that the Tribunal did not have jurisdiction under section 48K of the HB Act to determine the dispute because the proceedings had not been filed within the warranty period for the breach as required under section 18B(1)(a) of the HB Act.
3. The retaining wall work was completed on about 7 February 2018. There was no issue that if the appellants' breach of the statutory warranty resulted in a "major defect" for the purpose of s 18E then the proceedings were filed within the prescribed time period of 6 years: s 18E(1)(b) of the HB Act. However, if the breach resulted in a defect which was not a "major defect" then the proceedings were filed well outside of the 2 year time period prescribed for "any other case" to use the words of s 18E(1)(b).
4. If the proceedings are filed out of time, there was no jurisdiction for the Tribunal to determine the claim under s 48K(7) of the HB Act which provides: (7) The Tribunal does not have jurisdiction in respect of a building claim arising from a breach of a statutory warranty implied under Part 2C if the date on which the claim is lodged is after the end of the period within which proceedings for a breach of the statutory warranty must be commenced (as provided by section 18E).

Appellants' submissions

1. The retaining wall specifically falls within the broad definition of "dwelling" as set out in sch 1, cl 3(2)(l) of the HB Act and therefore the works to construct the retaining wall were "residential building works" as defined by sch 1, cl 2 of the HB Act and the statutory warranties set out in s 18B of the HB Act were implied into the contract between the parties for construction of the retaining wall.
2. Section 18E(1)(b) of the HB Act requires proceedings in relation to a breach of the implied warranties to be filed before the end of the warranty period - being 6 years for a "major defect" or 2 years in any other case from completion of the work to which the warranty relates.
3. The timber retaining wall was completed on 7 February 2018 as part of broader landscaping works. The first complaint from the respondent regarding the wall was in May 2019 and some rectification work was done by the appellants at that time. In May 2023 the respondent made a further complaint which the respondent attended to inspect and refused to rectify because of the timber fence which had been constructed behind the retaining wall by a third party contractor.
4. The respondent filed the Tribunal Proceedings on 6 December 2023. The appellant defended the proceedings on various grounds including the ground that there was no jurisdiction for the Tribunal to determine the claim because it had been filed out of time as the applicable time period was 2 years under s 18E of the HB Act, not 6 years. This submission was based on the argument that the issues with the retaining wall did not meet the definition of a "major defect".
5. The definition of "major defect" in s 18E(4)(a) is limited to defects in a major element of a "building" not a "dwelling" and a retaining wall could not be considered a building nor a component of the buildings on the property (being the house and the granny flat) as they had already been constructed before the retaining wall.
6. "Major defect" is defined in s 18E(4) of the HB Act as follows: (4) In this section - "major defect" means - (a) a defect in a major element of a building that is attributable to defective design, defective or faulty workmanship, defective materials, or a failure to comply with the structural performance requirements of the National Construction Code (or any combination of these), and that causes, or is likely to cause-- (i) the inability to inhabit or use the building (or part of the building) for its intended purpose, or (ii) the destruction of the building or any part of the building, or (iii) a threat of collapse of the building or any part of the building, or (b) a defect of a kind that is prescribed by the regulations as a major defect, or (c) the use of a building product (within the meaning of the Building Products (Safety) Act 2017 ) in contravention of that Act. Note--: The definition of "major defect" also applies for the purposes of section 103B (Period of cover). "major element" of a building means - (a) an internal or external load-bearing component of a building that is essential to the stability of the building, or any part of it (including but not limited to foundations and footings, floors, walls, roofs, columns and beams), or (b) a fire safety system, or (c) waterproofing, or (d) any other element that is prescribed by the regulations as a major element of a building.
7. The appellants refer to the following principles of statutory interpretation: 1. Ascertainment of the meaning of a statutory provision is via its text, having regard to its context and purpose: SZTAL v Minister for Immigration and Border Protection (2017) HCA 34. 2. If general words are used, they should be given their plain and ordinary meaning unless the contrary is shown: Cody v JH Nelson Pty Limited (1947) 74 CLR 629, 647 Dixon J; 3. Historical considerations and extrinsic material cannot be relied upon to displace the clear meaning of the text and that the language actually employed in the text of the legislation is the surest guide to legislative intention: Alcan (NT) Aluminium Pty Limited v Commissioner of Territory Revenue (NT) (2009) 239 CLR 27. 4. Although not of strong weighting, there is a presumption that different words are used to suggest a difference in meaning: King v Jones [1972] HCA 44, 128 CLR 221 at 226; Paul v Cooke [2013] NSWCA 311 at [44], Els v Commissioner of Police [2023] NSWSC 347 at [102]. 5. All words must prima facie be given some meaning and effect, and construed to produce the greatest harmony and the least inconsistency - Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) CLR 355.
8. The appellants summarised the main findings of the Tribunal as follows: 1. There are two buildings on the property - the main house and the granny flat; 2. The retaining wall holds back hundreds of tonnes of earth from crushing, covering or destroying the granny flat and as such can be an external load-bearing component of a building that is essential to the stability of the building or any part of it; there is no requirement in the definition for there to be a structural link between the retaining wall and the granny flat, proximity is sufficient; 3. The sagging in the retaining wall is likely in the future to cause the destruction of some part of the granny flat; 4. It follows that the sagging and bowing of the retaining wall along its northern boundary and in the north east corner was a major defect within the meaning of 18E(4) of the HB Act.
9. The appellants contend that under the ordinary and natural meaning of the term "building," which is not defined in the HB Act, a retaining wall cannot be considered a "building", particularly where it was constructed separately to and after the construction of the residential home or the granny flat. The appellants submitted that the Tribunal has accepted this proposition by considering the granny flat to be the relevant building for the purpose of considering the definition of "major defect" and "major element".
10. The appellants submit that in order for their breach with respect to the construction of the retaining wall to be a major defect it would need to be shown that the retaining wall met the definition of being a "major element" of the granny flat as defined in section 18E(4)(a) - that it was 1) an internal or external component of the granny flat, 2) it was a load bearing component of the granny flat and 3) it was essential to the stability of the granny flat.
11. The appellants submit that applying the above principles of statutory interpretation it is difficult to see how the retaining wall could be a component of the granny flat when it does not form part of the building and it was constructed entirely separately to the granny flat. The appellants also submit that the retaining wall is not a load-bearing component as commonly understood because it does not hold or transfer the weight of any element of the granny flat and there is no structural component between the retaining wall and the granny flat.

Respondent's submissions

1. The respondent submits: 1. The Decision is correct and fair; 2. As per the VDM's Engineering report, the retaining wall was never built according to industry building standards; 3. It was determined by the specialised team at NSW Fair Trading and the Tribunal that the defects with the retaining wall qualified as "major defects" due to its location and proximity of 900mm to the granny flat which is an inhabited dwelling; 4. The retaining wall poses a large risk to the building structure and safety of the tenants who live in the granny flat should the retaining wall fail; 5. The granny flat has flooded on two occasions in wet weather conditions (March 2019 and February 2020) due to the retaining wall not draining properly which has in turn caused damage to the granny flat; 6. The reasons why the costs of rectification are now high is because costs of materials are higher, the wall needs to be rebuilt to building standards which will require the entire rear yard to be dug up, drainage to be checked and earth to be re-supported; 7. The making of the money order was an appropriate order; 8. The appellants have already had an opportunity to repair the retaining wall once in 2018, and given that it has failed again, the respondent objects to a work order being made in the place of a money order; 9. The relationship between the appellants and the respondent has broken down and so a work order would not be appropriate.

Consideration

1. We agree with the appellants' interpretation of the Tribunal's findings that the Tribunal has found that the appellants' breach of the implied statutory warranties has resulted in a "major defect" because the Tribunal considered the retaining wall to be a major element of the granny flat, on the basis that it is an external load-bearing component of the granny flat which is essential to the stability of the building or any part of it.
2. We agree with the appellants' submission that the Tribunal has not found the retaining wall itself to be the building for the purposes of the definitions of "major defect" and "major element" in s 18E(4) of the HB Act.
3. We are satisfied that the Tribunal has erred in finding that the appellants' breaches of the statutory warranties resulted in a "major defect". Although construction of a retaining wall may have some impact on nearby buildings such as the granny flat, here the fact that the granny flat was built prior to and separately from the retaining wall and by another builder, means that the retaining wall is not an element of it. There was no issue that the retaining wall was a separate construction and even though it was very proximate we do not agree that the retaining wall can meet the definition of an internal or external load-bearing component of the granny flat because it was not designed or built as part of the granny flat.
4. It follows that we consider the Tribunal's reasoning that the retaining wall in these circumstances was a "major element" of the granny flat and therefore a "major defect" was an incorrect application of these definitions. As the breach by the respondent did not result in a major defect, these proceedings were required to be filed within 2 years of completion of the work, not 6 years - s 18B(2) of the HB Act.
5. There was no issue that the retaining wall work was completed on about 7 February 2018 which meant the application had to be filed before 7 February 2020. The application was filed on 6 December 2023 which was substantially out of time. It follows that there was no jurisdiction for the Tribunal to determine the application as a building claim under s 48K(7) of the HB Act: S&G Homes Pty Ltd t/as Pavilion Homes v Owen [2015] NSWCATAP 190. The appeal is to be allowed on this basis.
6. The money order, which is Order 2 is to be set aside.

OTHER GROUNDS OF APPEAL

1. As we are satisfied that the Tribunal erred on a question of law and the Tribunal did not have jurisdiction to determine the dispute we allow the appeal on that basis. It is not necessary for the Appeal Panel to consider the other grounds.
2. The appellants also seek in the Notice of Appeal to set aside Order 1, being the joinder of Emrit Services Pty Limited. No submissions were made during the hearing regarding this issue and accordingly we do not set aside that order.

COSTS

1. The appellants sought their costs of the appeal. The only basis on which they were sought was that the costs should follow the event if the appeal succeeded.
2. This is not a matter where costs ordinarily follow the event. The parties are referred to the relevant costs regime in rr 38 & 38A of the Civil and Administrative Tribunal Rules 2014 (NSW). The claim in the Tribunal Proceedings was in excess of $30,000, meaning the usual rules as to costs found in courts applied there. However, the general rule in the Tribunal that the parties are to bear their own costs in the absence of special circumstances warranting a different outcome is not displaced in the appeal unless the amount claimed or in dispute in the appeal also exceeds $30,000, and that is not the case: Allen v TriCare (Hastings) Ltd [2017] NSWCATAP 25.
3. In the absence of any identified special circumstances we will make no order as to costs.

ORDERS

1. The Appeal Panel makes the following orders: 1. The appeal is allowed. 2. Order 2 dated 14 May 2024 in proceedings 2023/00442223 is set aside and the proceedings are dismissed. 3. Make no order as to costs.

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: 03 October 2024