Ghazal v Masterton Homes Pty Ltd

1. The Tribunal determined that the basis for the adjournment was the request by the respondent to prepare jurisdictional arguments and other defences in relation to the claim being made against the wrong respondent. The respondent did not provide satisfactory reasons why, in the eight months since the application was commenced, these arguments were not prepared. The respondent was prepared to raise these defences at the hearing and provided evidence in support of these defences.
2. The prejudice to the applicants in adjourning the hearing was identified as continued delay, during which the damage would increase.
3. The Tribunal was not satisfied that the respondent would be prejudiced if the hearing was adjourned, as he did not identify further arguments or evidence required to advance his defence. Any potential prejudice would be far outweighed by the prejudice suffered by the applicants by increased damage to their property. The Tribunal refused the adjournment application.

1. The homeowners seek an order that the respondent pay them $96,995 amounting to the cost to rectify the defective swimming pool work performed by the respondent. The homeowners claim that they contracted with the respondent individually. They claim he held himself out as a licensed and experienced pool installer and provided expert advice in relation to the pool installation.
2. The respondent claims that his company was only engaged as a labourer by the applicants, where the first applicant held an owner-builder license. He claims all work was performed under the direction and control of the first applicant as owner builder, and as such the owner builder is responsible for any defects with the pool. He claims neither he nor the Company was ever licensed or purported to be a pool installation expert.
3. At the hearing, the homeowners relied on documents filed on 23 October 2024, 21 November 2024, 6 January 2024 and 15 January 2024. These documents relevantly included quotations, correspondence, photographs, payment records and an expert report of Siegfried Schnitzler dated 20 November 2024.
4. The builders relied on a bundle of documents filed on 20 December 2024, and his adjournment application, which relevantly included payment records and a statement from the respondent's accountant.
5. At the hearing, the first applicant and respondent gave oral evidence and asked questions of each other. Mr Schnitzler also gave oral evidence, and both parties were given the opportunity to ask questions of him.

1. This is a dispute about the defective construction of a pool.
2. Section 48K of the Home Building Act 1989 (NSW) ("the HB Act") gives the Tribunal jurisdiction to hear and determine any building claim in which the amount claimed does not exceed $500,000 and otherwise complies with that Part of the HB Act.
3. In this case, the Tribunal is satisfied that the works carried out, being the installation of a pool, are residential building works within the definition set out in clause 2 of schedule 1 to the HB Act.
4. The Tribunal is further satisfied that the application is a building claim within the meaning of s48K of the HB Act because it is a claim for the rectification of defective building works, arising from the warranties within the HB Act which apply to the construction work performed by the builder.
5. It is common ground that the work was performed in April 2020. The application was submitted within the limitation set out in s 18E of the HB Act for major defects. The orders sought are for a money order in the amount of $96,995, which is below the $500,000 jurisdictional limit for monetary claims.
6. The Tribunal is therefore satisfied that it has jurisdiction under s 48K of the HB Act to hear and determine the application.

"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."

1. Section 18E of the HB Act limits claims on the implied warranties on major defects to claims made within 6 years of completion of the works, and other defects to claims made within 2 years of completion of the works. Major defects are then defined as:

"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.

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."

1. Deacon v National Strategic Constructions Pty Ltd; National Strategic Constructions Pty Ltd v Deacon [2017] NSWCATAP 185 ('Deacon') sets out the test for determining whether the statutory warranties have been breached. Deacon states at paragraph 46:

"Although objective standards such as Australian Standards, the Building Code of Australia and the Guide are of significant relevance in establishing whether work has been performed in a proper and workmanlike manner (Wheeler v Ecroplot Pty Ltd [2010] NSWCA 61 at [10]), the absence of such evidence does not automatically mean a homeowner has failed to establish breach of statutory warranty. In our view, the relevant principle was succinctly stated by Senior Member Goldstein in G MacFayden and Anor v G Tadrosse [2014] NSWCATCD 194 at [46] as follows:

...[E]vidence that work does not comply with the Building Code of Australia would establish a basis for a finding that sub section 18B(c) of the Act has been breached. Evidence of the details in which work does not comply with the contractual plans and specifications would form the basis for a finding that sub section 18B(a) of the Act has been breached. Evidence of work not being carried out in a proper and workmanlike manner would in my view involve identification of the work in question, a statement of how the expert would expect it to be carried out in in a proper and workmanlike manner and then identification of the factors which establish that the way in which the work has been carried out falls short of it being carried out in a proper and workmanlike manner. Evidence of this nature, if accepted, would form the basis for a finding that sub section 18B(a) of the Act has been breached."

1. Deacon also states that a Tribunal must consider:

(1) whether the homeowner has established on the balance of probabilities that the works have not been performed in accordance with s 18B of the HB Act; and

(2) then, where a defect is established, what is the appropriate method to rectify that defect and the cost of rectification.

1. Section 48MA of the HB Act also states that the Tribunal must consider an order that the contractor rectify the work is the "preferred outcome".
2. If assessing damages, it is well established that damages should be used to put the party affected by the breach into the position they would have been in if the breach had not occurred: Haines v Bendall [1991] HCA 15.
3. However, Bellgrove v Eldridge [1954] HCA 36 (Bellgrove) determines that the rectification method must be both necessary and reasonable, and the rectification cost must be reasonable.

1. The Tribunal makes the following findings based on consideration of the evidence before it. Whilst this decision may not refer to all evidence before the Tribunal, it has considered all evidence when making these findings.
2. The first applicant held an owner-builder license at all material times during the construction of the pool.
3. The homeowners sought a quotation for an inground pool supply installation from the builder.
4. On 25 February 2020, the builder provided a quotation to the homeowners by email ("the Quote"). There were no company details on the quotation. The email address was Mr Williams' wife's personal email address.
5. The quotation included a breakdown of items for the pool shell, filtration for pool and spa, spa pump, installation and excavation. The quotation noted that all items except the category of "installation and excavation" were for the actual cost. The installation and excavation section stated:

"ESTIMATE ONLY (excluding under ground unforeseen obstructions and or cave ins)

Installation and Excavation

Excavator 2 x days

Level the pool floor

Backfill around the pool

Supply 40 tonne of crusher dust

Inclusive labour 3 x men for 3 days $8,000.00"

1. The total amount of the quote was $40,616.25.
2. On 24 March 2020, on behalf of the builder, the builder's wife sent Invoice 1 to the second applicant by email from her personal gmail address. The invoice stated it was from:

"Robert McWilliam

xxx Drive

Macksville"

1. Invoice No 1 was in respect of the deposit. It stated details for banking as:

"Banking details:

McWilliam Investments

BSB: xxx...."

1. The parties agreed the contract, partly oral and party written, on or about 27 March 2020, when further emails were exchanged and the second applicant transferred the deposit ("the Contract").

1. The builder claims that he did not perform the work in his personal capacity, and instead a company, McWilliam Investments Pty Ltd was contracted to perform the work. He relies on a statement from his accountant and bank statements, showing all payments in respect of the works were paid into the account of this company.
2. It is common ground that the payments were made into the account of McWilliam Investments Pty Ltd.
3. Neither the quotation, Invoice No 1, nor the correspondence sent on behalf of the respondent to the applicants listed a full company name, ABN or ACN. Invoice 1 stated it was from the respondent in name. Invoices 2 and 3 contained the same details as Invoice 1. I find based on the evidence before the Tribunal that the builder entered into the contract personally.

1. The parties are in dispute as to the scope of the contract. The applicants claim the respondent was wholly responsible for the supply and installation of the pool, and that they engaged him as an expert pool installer. The respondent claims he was engaged solely as an excavator and performed works under the direction of the first applicant, who held an owner builder license.
2. The Quote sets out that the builder is to supply the pool shell and equipment, and perform installation of the pool. There is common ground that the builder supplied this equipment, and the homeowners paid the builder for this equipment.
3. There is common ground that the homeowners directly procured the heat pump, tiling and landscaping.
4. The builder supplied the engineering diagram of the pool to the homeowners, for the purposes of council approval.
5. There is common ground that the builder used to operate a business named "Birds of Paradise Pools Pty Ltd." The builder used an account at a pool supplier under this name to purchase equipment used in the works.
6. The first applicant gave evidence that he relied on the builder for expertise in pool installation, and that he was seeking an experienced pool installer. I accept this evidence.
7. I find that under the Contract, the builder was contracted to supply and install the pool as set out in the Quote. I find that the scope of the Contract included the builder determining the method of installation.

1. The builder claims that the warranties set out in the HB Act do not apply because the homeowner held a home builders license. It is common ground that the builder did not hold a relevant license nor insurance. It is common ground that the homeowners did not ask the builder for a copy of his insurance or license.
2. These facts do not relieve the builder of the warranties set out in s18B of the HB Act. These warranties apply to all residential building work as defined under the HB Act, which includes the works performed under the Contract.
3. Therefore, the warranties set out in s18B of the HB Act apply to the work performed by the builder.

1. The homeowners claim the building works are defective due to the pool shell cracking due to defective installation. They rely on the expert report of Mr Schnitzler. The builder does not dispute the pool cracks, but claims that the cause of the cracks is misuse by the homeowners children and/or the presence of a drainage ditch adjacent to the pool.
2. It is common ground that the fibreglass pool shell was backfilled with crusher dust.
3. It is common ground that the fibreglass pool shell has cracked at the internal corner on the uphill side. I am also satisfied that both long sides of the pool have large deformations towards the outside of the pool. in the pool wall on the long side wall on the uphill side. I find there is vertical movement at the spa and shallow end of the pool.
4. I find that the pool currently cannot be filled to its normal depth due to the cracking. I am satisfied that over time, the cracking will increase.
5. Mr Schnitzler's report acknowledges the expert witness code of conduct, and is based on an inspection of the pool in addition to photos and video material.
6. Mr Schnitzler's report concludes that the movements and deformities including cracks are a "structural failure caused by non-suitable backfill material."
7. I accept the uncontested evidence of Mr Schnitzler. I find that the structural cracking, deformation and uneven settlement is a defect in the load bearing component of the pool that is essential to its stability, and therefore is a defect in a major element of the pool. I find that the defect is likely to cause the inability to use the pool for its intended purpose as a pool.
8. I therefore conclude it is a major defect under the HB Act.
9. I find that by backfilling the pool shell with crusher dust, an unsuitable material, the builder is in breach of the warranty set out in s 18B(1)(a) that the work is to be performed with due care and diligence.
10. I find that by supplying an unsuitable material, crusher dust, for the backfill material, the builder is in breach of the warranty set out in s 18B(1)(b) of the HB Act, that all materials supplied by builder will be good and suitable for the purpose for which they are used.
11. I am not satisfied on the evidence before the Tribunal that the nearby drainage trench nor the pool use by the homeowner's family contributed to or caused the defect.
12. I find that repairs of the crack alone will not rectify the underlying defect, which is the uneven pressure applied to the pool shell from the backfill material. I accept the uncontested evidence of Mr Schnitzler that a patch over the cracked area is insufficient to repair the defects.
13. I find that the sole remedy given the extensive structural defects is to remove the pool and reinstall a new pool shell with appropriate backfill material and methodology. I find this is the necessary and reasonable rectification scope for the structural defect.

1. The homeowners seek a money order on the basis that the respondent is unlicensed and uninsured to perform the work, and that the homeowners have lost faith in the builder.
2. Section 48MA states that a work order is the 'preferred outcome', however the appeal panel in Galdona v Peacock [2017] NSWCATAP 64 noted that it not a mandatory outcome. The Tribunal's appeal panel noted that a work order would not be appropriate where either the relationship between the parties has broken down, the builder has not acknowledged a poor standard of work, and/or there are concerns about whether the builder has the ability to rectify the work with due care and skill.
3. In determining whether to depart from the preferred outcome, the Tribunal is required to weight up the factors in each case.
4. Here, there Tribunal is satisfied that it is appropriate to depart from the preferred outcome on the basis that the builder has not acknowledged the poor standard of work, and that the builder is not qualified to perform the rectification works.
5. I therefore find that a money order is the appropriate outcome.

1. The homeowners rely on a quote form Gibson Family Pools dated 9 July 2024, in the amount of $96,995. The quote is detailed and contains a breakdown of each item within the scope. I am satisfied that this is the reasonable and necessary scope, and accept the uncontested evidence that this is the reasonable quantum of loss to rectify the defect.
2. I am further satisfied that the homeowners have attempted to mitigate their losses, through promptly reporting the cracking issue to the respondent in December 2023, when it was first observed.

(1) The Tribunal orders the respondent is to pay the applicants the sum of $96,995 within 14 days of the date of this order.

(2) Any application for costs, of no longer than three pages length, is to be made in writing to the Tribunal within 14 days of the date of these orders.

(3) Any response to an application for costs, of no longer than three pages length, is to be sent to the Tribunal and the other party within 28 days of the date of these orders.

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.