Grilli v Downing (Building and Property) [2020] VCAT 704

1. The respondent must pay to the applicant damages in the sum of $35,859.85.
2. There is liberty to apply on the question of costs and reimbursement of fees. I direct the principal registrar to list any application for hearing before Senior Member Kirton for one hour.

1. The applicants (the owners) purchased a brand new townhouse in Balwyn North from the respondent builder (Samuel) and his brother (Philip) in 2011. It is one of three which were constructed by Samuel, who is a registered builder. The first applicant, Mr Grilli, said that he became aware of defects within a year of moving in and raised these with both Samuel and Philip Downing. The parties spent a number of years in discussion through the auspices of the Victorian Building Authority (VBA) and Consumer Affairs Victoria and the builder carried out a number of repairs. There remained 16 items on which the parties could not agree and they are the subject of this proceeding.

1. During the hearing I heard evidence from Mr Tellio Grilli, Mr Samuel Downing, Mr Philip Downing and the experts called by each of them, Mr Branko Mladichek and Mr Ian Donaldson respectively. I also conducted a view of the property, with the parties and the experts.

1. Before I turn to each of the defects alleged by the owners, I must address the legal basis on which they bring their claims. Neither party was legally represented and cannot be expected to understand the nuances of the Domestic Building Contracts Act 1995 (DBCA) and the Building Act 1993 (BA). Both parties assumed that the warranties implied by section 8 of the DBCA applied to the building of this home and that the applicants, as subsequent owners, were entitled to the benefit of the s8 warranties by reason of s9. Their only disagreement was in respect of landscaping works, which the builder submitted were not covered by the s8 warranties.
2. Sections 8 and 9 relevantly provide:

s8. Implied warranties concerning all domestic building work

The following warranties about the work to be carried out under a domestic building contract are part of every domestic building contract -

(a) the builder warrants that the work will be carried out in a proper and workmanlike manner and in accordance with the plans and specifications set out in the contract;

(b) the builder warrants that all materials to be supplied by the builder for use in the work 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) the builder warrants that the work will be carried out in accordance with, and will comply with, all laws and legal requirements including, without limiting the generality of this warranty, the Building Act 1993 and the regulations made under that Act [4] ;

(d) the builder warrants that the work will be carried out with reasonable care and skill and will be completed by the date (or within the period) specified by the contract;

(e) the builder warrants that if the work consists of the erection or construction of a home, or is work intended to renovate, alter, extend, improve or repair a home to a stage suitable for occupation, the home will be suitable for occupation at the time the work is completed;

(f) if the contract states the particular purpose for which the work is required, or the result which the building owner wishes the work to achieve, so as to show that the building owner relies on the builder's skill and judgement, the builder warrants that the work and any material used in carrying out the work will be reasonably fit for that purpose or will be of such a nature and quality that they might reasonably be expected to achieve that result.

s9. Warranties to run with the building

In addition to the building owner who was a party to a domestic building contract, any person who is the owner for the time being of the building or land in respect of which the domestic building work was carried out under the contract may take proceedings for a breach of any of the warranties listed in section 8 as if that person was a party to the contract.

1. However, notwithstanding the parties' assumptions, I am not satisfied that the owners can rely on the s8 warranties. For the DBCA to apply, there must have been a domestic building contract into which the warranties can be implied. In this case, the respondent built the home as a 'spec' home and there was no domestic building contract within the meaning of the DBCA.
2. Building speculative (or 'spec') homes is a common method of property development in Melbourne. A spec home is a new home that is constructed on land owned by a builder. Once it is completed the builder sells the house and land to a purchaser. There is no building contract between the builder and the purchaser, as the purchaser is buying land, with a completed home on it, with settlement of the sale usually only occurring after the home is complete. The builder funds the building project itself (there are no progress payments from the purchaser) and makes its profit on the sale price.
3. Samuel Downing suggested that as he was the builder, while the property was owned by himself and his brother Philip, there was in fact a building contract between himself on the one part and he and his brother on the other part. I do not accept this artificial construction. The certificate of title records that the respondent and his brother owned the land as tenants in common, with Philip holding 37 of 50 shares, and Samuel holding 13 of 50. This means that at least part of the building work was carried out by Samuel for himself. This is confirmed by the warranty insurance certificate issued by QBE, which records the project as 'speculative', and notes the builder was Samuel and the 'building owner/beneficiary' was also Samuel.
4. Having said that, the unavailability of the DBCA warranties does not mean that the owners have no remedy. The legislative scheme established in 1995 also provides warranties in circumstances where there is no domestic building contract, and a home has been constructed and then sold. The BA provides that certain warranties are to be implied into the sale contract. In Meier v Balbin[1] Senior Member Walker described the legislative protections as follows (emphasis added):

... sections [137B and 137C] were inserted into the Building Act 1993 by the Domestic Building Contracts and Tribunal Act 1995 (as it was then called) as part of a legislative scheme to provide protection to purchasers of dwelling houses and also to persons for whom domestic building work was undertaken.

1. Sections 137B and 137C of the BA provide as follows:

s137B. Offence for owner-builder to sell building without report or insurance

(a) the construction of a building (other than a home) by

(ii) an architect registered under the Architects Act 1991; or

(b) except as provided in subsection (5), the construction of a home under a major domestic building contract; ...

(2) A person who constructs a building must not enter into a contract to sell the building under which the purchaser will become entitled to possess the building (or to receive the rent and profits from the building) within the prescribed period unless -

(a) in the case of a person other than a registered building practitioner -

(i) the person has obtained a report on the building from a prescribed building practitioner that contains the matters that are required by the Minister by notice published in the Government Gazette; and

(ii) the person obtained the report not more than 6 months before the person enters into the contract to sell the building; and

(iii) the person has given a copy of the report to the intending purchaser; and

(b) the person is covered by the required insurance (if any); and

(c) the person has given the purchaser a certificate evidencing the existence of that insurance; and

(d) in the case of a contract for the sale of a home, the contract sets out the warranties implied into the contract by section 137C.

(3) A contract entered into in contravention of subsection (2) is not void by reason only of the contravention but is voidable at the option of the purchaser at any time before completion of the contract.

(5) [Not relevant as no exemption was given by the Director of Consumer Affairs Victoria]

(6) This section applies whether or not the construction of the building is complete at the date of the contract of sale.

"certified date of commencement", in relation to a building, means the date certified by the owner of the building by statutory declaration as the date of commencement of the building work for the construction of the building;

(a) the date of issue of the occupancy permit in respect of the building (whether or not the occupancy permit is subsequently cancelled or varied); or

(b) if an occupancy permit is not issued, the date of issue under Part 4 of the certificate of final inspection of the building work for the construction of the building;

(a) build, rebuild, erect or re-erect the building; or

(d) cause any other person to do anything referred to in paragraph (a), (b) or (c) in relation to the building; or

(e) manage or arrange the doing of anything referred to in paragraph (a), (b) or (c) in relation to the building;

"home" has the same meaning as it has in the Domestic Building Contracts Act 1995 ;

(a) in relation to a contract for the sale of a building on which domestic building work has been carried out -

(i) 6 years and 6 months (or such longer period (not exceeding 10 years) as is prescribed) after the completion date for the construction of the building; or

(ii) if neither an occupancy permit nor a certificate of final inspection is issued or required to be issued in respect of the construction of the building -

(A) 7 years after the date of the issue of the building permit in respect of the construction of the building; or

(B) if a building permit is not issued or required to be issued in respect of the construction of the building, 6 years and 6 months after the certified date of commencement for the building; and

(b) in relation to a contract for the sale of any other building - 10 years after the completion date for the construction of that building;

(a) an architect registered under the Architects Act 1991 ; or

(b) a building surveyor, building inspector or an engineer registered under Part 11; or

(c) a person recognised by the Minister under section 28 of the House Contracts Guarantee Act 1987 by order in force immediately before the commencement of section 166 of the Domestic Building Contracts Act 1995.

s137C. Warranties for purposes of homes under section 137B

(1) The following warranties are part of every contract to which section 137B applies which relates to the sale of a home -

(a) the vendor warrants that all domestic building work carried out in relation to the construction by or on behalf of the vendor of the home was carried out in a proper and workmanlike manner; and

(b) the vendor warrants that all materials used in that domestic building work were good and suitable for the purpose for which they were used and that, unless otherwise stated in the contract, those materials were new; and

(c) the vendor warrants that that domestic building work was carried out in accordance with all laws and legal requirements, including, without limiting the generality of this warranty, this Act and the regulations.

(2) In addition to the purchaser under a contract to which section 137B applies, any person who is a successor in title to the purchaser may take proceedings for a breach of the warranties listed in subsection (1) as if that person were a party to the contract.

(3) A provision of an agreement or instrument that purports to restrict or remove the right of a person to take proceedings for a breach of any of the warranties listed in subsection (1) is void to the extent that it applies to a breach other than a breach that was known or ought reasonably to have been known to the person to exist at the time the agreement or instrument was executed.

1. The drafting of s137B is difficult to follow, but its effect broadly speaking is that:

1. a person who constructs (which is defined at ss(7)) a home (which has the same meaning as in the DBCA), 2. which is not constructed under a major domestic building contract (ss(1)(b)),

1. must not enter into a contract to sell the home within the prescribed period (which is defined at s137B(7)), unless

1. they obtain a building report from a prescribed building practitioner within 6 months prior to entering into the sale contract, unless they are themselves a registered building practitioner (ss(2)(a)), 2. they are covered by the required insurance (ss(2)(b)), 3. they give the purchaser a certificate evidencing the existence of the insurance (ss(2)(c)), and 4. they provide the warranties implied into the contract by s137C (ss(2)(d)).
2. Section 137B applies to all contracts of sale of buildings except where:

1. The building is not a home and is constructed by a registered building practitioner or an architect (ss(1)(a)), 2. The building is a home but is constructed under a major domestic building contract (ss(1)(b)),

1. The building has been exempted by VCAT from the operation of s137B under s68 of the DBCA (ss(1)(c)), or

1. The building is a home being sold 'off the plan', in which case the vendor must either be a registered domestic builder or engage a registered domestic builder under a major domestic building contract (ss(1)(d) and s137E).
2. In the present case, the building is a home which was not constructed under a major domestic building contract. It was not sold 'off the plan'. Accordingly the builder was required to comply with s137B(2). This means that:

1. he was required to provide the required insurance (which he has done[2]),
2. he was not required to obtain a building report from a prescribed building practitioner prior to selling the home, as he is a registered building practitioner, and

1. the warranties set out at s137C are implied into the contract for the sale of the home.

1. I appreciate that neither party identified the builder as being an "owner builder" as that phrase is commonly understood; that is, someone who owns land, is building or renovating a single home in which they reside, or intend to reside, and is not in the 'business of building'[3]. However that does not mean that he has not acted as one within the meaning of the BA. Interestingly, the phrase "owner builder" is not defined in the BA or elsewhere. Its use in the headings of s137B and s137C are not determinative of anything.[4]
2. Notwithstanding the parties' assumptions, the actions of the building surveyor appear to support my view of the builder's role. From the occupancy permit (OP) it appears that the works commenced prior to 28 April 2009 (the date of the pre slab inspection). The warranty insurance policy was issued by QBE on 17 November 2010. The OP was issued on 2 December 2010. If the building surveyor had considered that a domestic building contract was in place, he should have required the insurance certificate prior to issuing the building permit (i.e. prior to April 2009). For the owners' benefit, I note that s25B of the BA permits an owner of land to carry out domestic building work as builder on that land if they are a registered builder. Accordingly there was no requirement for the builder to obtain a certificate of consent from the VBA (under Part 3 Division 3A of the BA) prior to constructing this home.
3. I will now address each of the defects alleged by the owners, in light of the warranties provided by the builder under s137C of the BA.

1. The builder conceded that there is unacceptable water ingress through the walls of the basement. He has already agreed to carry out work to remove the source of the water and that is not part of this claim. The remaining issues are the repair of the internal walls, replacement of floor tiles and improvement to the ventilation. I will consider each of these items in turn.

1. The builder conceded liability for this item and agreed with the owners' proposed scope of works to rectify the basement walls, which includes applying negative membrane tanking to the basement walls and recoating. He conceded that the amount claimed is a reasonable cost to rectify. On that basis, I allow $19,250 for this item.

1. As part of the repairs to the basement, the owners said that the floor tiles should be pulled up and replaced. The builder did not agree. The owners relied on a number of reasons for this claim, summarised as follows:
   1. a membrane should be installed over the join between the walls and the floor slab, and to do this, at least the perimeter tiles must be removed. It will then not be possible to find replacement perimeter tiles which match the remaining floor tiles;
   2. the grout and adhesive around each floor tile would have absorbed damp and is a breeding ground for mould, and a mould treatment may not remove all spores.
2. Mr Grilli submitted that he has a real concern that water is penetrating through the interface between the walls and the floor slab. All parties agreed that the interface required sealing with a chemical compound to fill the gap between the rebate in the slab and the wall. The difference between them is whether a membrane is also required over that join. If a membrane is required, then at least the perimeter floor tiles must be removed.
3. Mr Grilli's view was that given the obvious penetration of water via the slab rebate, it would be foolish to rely only on a chemical sealant. In order to cover the join with a membrane, it must be run from the walls onto the floor. His claim was that it will be necessary to remove at least the perimeter floor tiles. The owners suggested that if only the perimeter tiles are removed, it will be very difficult to match the existing tiles and so the whole floor should be retiled. Further, Mr Grilli was worried that there is moisture elsewhere in the slab, suggesting that if there was no membrane, dampness will make its way through the slab into the floor tiles.
4. Mr Mladichek said the main reason for his opinion that the floor tiles should be replaced is that the grout and adhesive around each floor tile would have absorbed damp and is a breeding ground for mould. He said simply treating the basement for mould may not remove all spores, but he conceded that a mould report should be obtained to provide expert evidence on this issue. He also agreed with Mr Grilli that a membrane over the slab/wall interface would be prudent, although not mandatory, as once the source of moisture outside the walls is removed his view is that there will be much less risk of water penetrating via the interface. He also agreed with Mr Grilli that there would be difficulty in matching tiles if only some are removed for the waterproofing.
5. Both Mr Donaldson and Mr Philip Downing submitted that there was no evidence of any water entering via the interface or the slab itself. Moisture meter readings were produced, and these show moisture levels in the slab are low[5]. There is no evidence of mould or moisture or cracking in the grout between the floor tiles. Mr Donaldson said that, in his opinion, the appropriate solution to the moisture ingress would be to remove the skirting boards, cut out the junction between the floor tiles and the wall to access the rebate, then fill it with a chemical compound. He said there is no need to run a membrane over that junction, nor to remove any floor tiles.
6. Mr Samuel Downing suggested to Mr Mladichek that there is no evidence of mould, efflorescence or drumminess in the floor tiles and asked whether he would expect the grout and tile adhesive to have a mould reducing agent built into it when used in the laundry. Mr Mladichek agreed with that as a general proposition but said when mould was likely to be a problem, he might expect some additional treatment would be used.
7. Based on the evidence before me, I am not satisfied that it is necessary or reasonable to replace the floor tiles in the basement. Neither expert was of the opinion that a membrane is needed to prevent water entry. At its highest, Mr Mladichek's opinion was that it would be prudent. There is no evidence that the floor tiles or grout are actually affected by mould or moisture, nor that a mould remediation treatment would not be satisfactory, if mould spores are present. Accordingly I do not allow this claim.

1. The owners claim that there is excessive moisture in the basement and that the existing ventilation by means of a fan is inadequate. Further, they say that the basement room was intended to be a habitable room, and the existing ventilation does not comply with the Building Code of Australia. In other words, they allege that the domestic building work was not carried out in accordance with all laws and legal requirements in breach of the warranty implied by s137C(1)(c).
2. The builder's defence is that there was originally automatic ventilation in the laundry, which was controlled by the light switch, and which complied with the Building Code of Australia. At the owners' request, the builder has modified the ventilation system twice. If it is now non-compliant, that is not the builder's responsibility. Further, the room was not designed as a habitable room within the meaning of the BCA and so does not need to be vented differently.
3. Mr Mladichek identified that the humidity levels in the basement were significantly higher than in the living room and there was evidence of moisture and mould affecting the plaster surfaces (separate to the moisture penetrating the external walls and at the slab interface referred to above). He attributed this to the waterproofing of the basement having failed, together with a lack of drainage in the basement. He said this was a breach of the following performance requirement of the National Construction Code (NCC):

Moisture from the ground must be prevented from causing -

(a) unhealthy or dangerous conditions, or loss of amenity for occupants; and

(b) undue dampness or deterioration of building elements.

1. Mr Mladichek has not set out where this clause is contained in the NCC or what it relates to. I note that the NCC commenced on 1 May 2011 whereas this home was built in 2010 when the Building Code of Australia 2008 (BCA) was the applicable legal requirement. Having said that, much of the NCC is a consolidation of existing building regulations, and Mr Donaldson has provided clause P2.2.3 of the BCA which is in the same terms as that set out above.
2. Mr Mladichek raised the question of whether the room was permitted or represented to be habitable, but has properly noted that this is a question for the Tribunal to decide. He has provided a scope of work, which he said "may only restore air quality befitting non-habitable room"[6]. His scope includes "provide improved room ventilation with required air changes per hour, preferably fitted to solar powered fan with auto override to mains power in need".[7] He estimated the cost of this work is $1215.50.
3. Mr Donaldson's opinion is that the room is a store room, which is a non-habitable room, and under the Building Code of Australia ventilation is not required[8]. He referred to the following provisions of the BCA:

Habitable room means a room used for normal domestic activities, and -

(a) includes a bedroom, living room, lounge room, music room, television room, kitchen, dining room, sewing room, study, playroom, family room, home theatre and sunroom; but

(b) excludes a bathroom, laundry, water closet, pantry, walk-in wardrobe, corridor, hallway, lobby, photographic darkroom, clothes-drying room, and other spaces of a specialised nature occupied neither frequently nor for extended periods.

Ventilation must be provided to a habitable room, sanitary compartment, bathroom, shower room, laundry and any other room occupied by a person for any purpose by any of the following means -

(a) Permanent openings, windows, doors or other devices which can be opened... [to outside]; or

(b) Natural ventilation to a room may come through a window, opening, ventilating door or other device from an adjoining room ...; or

(c) An exhaust fan or other means of mechanical ventilation may be used to ventilate a sanitary compartment, laundry or bathroom provided contaminated air exhausts -

(i) directly to outside the building by way of ducts; or

(ii) into a roof space ... [balance of clause is not relevant as the laundry is below ground, not near a roof space]

1. The stamped approved Council statutory plans (the planning permit plans) nominate the basement as a 'Store & Cellar' with an adjoining laundry. 2. The stamped approved building plans nominate the basement room as a 'Store & Cellar' with an adjoining laundry.

1. The building surveyor has inspected the work and provided an occupancy permit confirming approval for the basement works as constructed.

1. The BCA defines 'habitable rooms'. In accordance with this definition the basement rooms are not considered habitable rooms. As such no ventilation requirements are applicable. Note that the laundry is also not classed as a habitable room and is nominated in the BCA as an excluded room. 2. According to the BCA there was no requirement for ventilation to a store room. 3. There is ventilation achieved via opening doors, exhaust fan and open stair well. 4. Natural light is only required for habitable rooms. Since this room is not intended to be habitable, artificial light only is required. This has been provided. 5. A non-load bearing wall to the water tank area has been installed only for the purpose of screening the tank from the store room. 6. The building surveyor has provided an occupancy certificate indicating approval of this screening wall and other conditions in the store room / cellar and laundry.
2. The opinion of the building surveyor for the project, Mr Murphy,[9] is that as the room was to be a store/cellar and laundry, it is clause 3.8.5.2(c) of the BCA which is applicable. This requires the laundry to be vented, which may be by an exhaust fan ducted to the outside. In contrast, Mr Grilli provided a series of emails from another building surveyor, Mr Dean, in which Mr Dean said the home is a class 2 building and the relevant BCA clauses are F4.6 and F4.7. Mr Dean discussed the concept of borrowed ventilation. Mr Grilli also provided an email from another building surveyor, Mr Capouleas, in which he said ventilation is required but it can be borrowed from an adjoining room.
3. None of the building surveyors were called to give evidence. During the best I can, on the emails provided, I accept the statement of Mr Murphy. He was the building surveyor for the project. Mr Dean has presumed this is a class 2 building, whereas the building permit clearly states it is class 1. Mr Capouleas does not contradict anything said by Mr Dean and merely confirms what all agree: that the store/cellar requires ventilation.
4. Based on Mr Dean, the planning permit plans, the building plans, the permits issued by the building surveyor and clauses 1.1.1.2 and 3.8.5.2(c) of the BCA, I find that the basement was intended to be and was actually constructed as a laundry and store room or cellar. It was not intended to be a habitable room. The planning permit plans were provided to the owners as part of the contract of sale. They have led no evidence to say that the existing ventilation does not comply with the requirements of clauses 3.8.5.2(b) or (c) of the BCA. Accordingly there is no breach of the warranty to comply with all laws and legal requirements.
5. Having said that, the owners also rely on the fact that high humidity is present and Mr Mladichek's opinion that the levels are excessive and in breach of clause P2.2.3 of the BCA. During my inspection of the property I was shown a portable dehumidifier which the owners said they have been running fairly constantly. Despite these efforts I could still sense dampness in the basement.
6. The builder said that he had previously modified the existing ventilation at the request of the owners. Notwithstanding these attempts, I am satisfied that further work is required. I am satisfied that the builder is in breach of the warranties implied by s137C of the BA to carry out the ventilation work (including the subsequent modifications) in a proper and workmanlike manner and that the ventilation system would be suitable for its purpose. I accept Mr Mladichek's scope of work to "restore air quality befitting non-habitable room", at a cost of $1215.50.

1. The rainwater harvesting system is located in the basement. It is essentially a water collection tank, fed from the storm water pipes, and a Davey pump which pumps the greywater to outlets including the toilet cisterns in the house.
2. The owners' complaint is that the system was incorrectly installed in a number of ways, which will be discussed further below. The specific allegations made are that the system was not connected to a suitable overflow outlet, the pump was not installed in an enclosure, there is a lack of access, and failures to install a first flush mechanism, to mount the tank on a pad, and to use a flexible hose connection. The builder conceded liability in part, but did not agree with several items or the amounts claimed.
3. The builder also argued as a general defence that he engaged a licensed plumber on whom he relied to carry out this plumbing work. The plumber provided him with a compliance certificate certifying that the work had been done in accordance with all legal requirements. There is therefore no breach of the warranty provided by the builder under the DBCA. However, as discussed above, the DBCA warranties are not relevant. I will consider the s137B warranties as I address each item.

a) Connection to stormwater outlet/installation of drip tray

1. The owners allege that the pump and controller should be connected to a stormwater outlet in case of a leak or overflow. The builder agreed that further works were required, but relied on the manufacturer's installation instructions which provide that a drip tray may be used instead of a connection to a stormwater outlet. The Davey installation instructions state as follows (underlining added):

Installation inside buildings: To cater for possible plumbing leaks or damage to the RainBank system components, the installation must include an enclosure that will capture any water spraying from the plumbing or RainBank system and direct it into a properly constructed drain tray.[10]

1. I accept the builder's contention that if a properly constructed drain tray is installed, that will satisfy the manufacturer's requirements. The owners were unable to point to any installation instruction which required a connection to a stormwater outlet. Accordingly I will allow the cost of installing a drain tray.
2. The parties agreed that the appropriate labour cost for this work is $528[11], and materials of $59.40[12] (GST included). I will allow $587.40.

b) Failure to install the pump in an enclosure that will capture spray

1. The rainwater harvesting system has been installed in the basement within a timber stud framed enclosure. The owners say that the enclosure is required to be protected from water spray and provided with a system for collection of water leakage and draining it away by gravity. They rely on the Davey installation instructions which states as follows (underlining added):

Installation inside buildings: To cater for possible plumbing leaks or damage to the RainBank system components, the installation must include an enclosure that will capture any water spraying from the plumbing or RainBank system and direct it into a properly constructed drain tray.[13]

1. Mr Donaldson's opinion was that this requirement will be met if a cover is provided for the pump. Mr Downing conceded that a cover should be provided. The owners have agreed that a pump cover will suffice.
2. They have claimed $187 for the purchase of a pump cover. They have provided a page from an undisclosed website which appears to be advertising a pump cover for sale for $187. The builder has provided a page from the eBay website showing a cover at $75, and a page from the Bunnings website showing a cover for $35.95. In the absence of any explanation of why I should prefer one website over the other, and doing the best I can on the evidence I have, I am satisfied that the reasonable cost to provide a pump cover is $35.95.
3. No evidence was given about the cost of installing the cover, apart from Mr Donaldson's opinion that the cover did not need to be bolted to the floor. Nevertheless, the owners will require time and/or assistance to purchase the cover, collect it or have it delivered to their home, manoeuvre the cover into the basement and fit it over the pump and drainage tray. I will allow $100 labour costs on top of the cost of the cover, making a total of $135.95.

1. The owners complained that it is impossible to clean the tank as its location means there is no access. They say that black scale from dirty water in the tank is being pumped into the toilet pans. They sought $800 to allow them to construct an additional door in the stud wall through which they could access the tank.
2. The builder submitted that access to the tank had not been part of the owners' original claim. Nevertheless, they said that there is in fact access to clean the tank through the existing door and the addition of another door would not make access any better. The access issue is based on the height of the opening in the tank being close to the ceiling and the tank can be drained by pumping out the water and flushing it a few times using the pump. Further, they denied any obligation to provide access to the inside of the tank.
3. The Davey installation instructions do not provide any measurements or dimensions for how the tank should be installed. However the following notes are included:

Note: In order to carry out routine maintenance to the RainBank MUST be easily accessible to the end user or homeowner. (sic)[14]

You should also check for debris in the bottom of your tank a few times a year and clean this out if necessary.[15]

1. I accept the owners' concerns about the lack of access. Having viewed the tank on site, it was obvious that it will be very difficult, if not impossible to access the opening in the top of the tank. I am not satisfied that simply flushing the tank using the pump will be an adequate method of cleaning sediment on the bottom of the tank. Davey notes that the bottom of the tank must be accessible to carry out routine maintenance. I find that it is not reasonably accessible.
2. I have no evidence that the addition of a second door will not be adequate to allow the owners to access the tank. The builder's assertion that it will not, is not persuasive. The owners are satisfied that a second access point will allow them to maintain the tank. The builder did not provide any alternate costing for this item. I will allow $800.

1. The owners complained that pieces of dirt and debris are evident when they flush the toilet. They say this would not occur if the system was fitted with a first flush mechanism, as debris collected in the gutters and downpipes would be washed away before being stored in the tank. They rely on the following notes in the manufacturer's installation instructions:

RainBank does not need maintenance but there are things you can do to ensure its most reliable operation.

• Fit a "first flush" system that ensures the first run of dirty rainwater does not go into the tank.
• You should also check for debris in the bottom of your tank a few times a year and clean this out if necessary. A first flush system will greatly reduce the need for this action.[16]

Other things we recommend to maximise the performance and serviceability of your RainBank:

• Fit a first flush system to the guttering if possible to divert the initial run of water from the roof that may contain dirt and pollutants.[17]

1. The owners claim $300, to install 2 first flush downpipe water diverters. This amount is made up of 2 diverters at $52.99 each (according to an un-specified website) plus one hour labour for the installation of each.
2. The builder's defence is that the manufacturer does not require a first flush system, it is merely a recommendation. Second, the builder has fitted removable filters on all the downpipes which can be cleaned to prevent debris going into the tank.
3. No expert evidence was given about the need for first flush diverters. Based on the manufacturer's installation instructions, I am not satisfied that these were required by the manufacturer. Instead, they were recommendations made by the manufacturer for the ongoing maintenance of the RainBank. Each of the notes relied on by the owners comes after headings such as 'Maintaining RainBank' and 'Other Things We Recommend...'. In the absence of any positive requirement for a plumber to install first flush diverters, I am not satisfied that their absence is a breach of any of the warranties owed by the builder to the owners. I am not satisfied that there has been any failure to carry out works in a proper and workmanlike manner, that the materials used were not good and suitable for the purpose for which they were used and that the work was not carried out in accordance with all relevant laws and legal requirements. I will reject this claim.

e) Failure to mount the tank and controller on a pad

1. The builder conceded this complaint and has allowed the cost to rectify this as part of the scope of work needed to remove the pump reinstall it on a drip tray.

1. The builder conceded that a copper hose was used instead of a flexible connection and has allowed the cost to replace this as part of the scope of work needed to remove the pump and reinstall it on a drip tray.

1. The balcony piers are supported on a steel beam, which is buried approximately 200 mm under the ground. The complaint is that the beam is rusting. The owners said that the beam is painted, but should have been encased in concrete, which was the method approved by the building surveyor as part of the amended building permit. They said there was no approval to change from concrete to a painted protection, and although both methods are theoretically acceptable, the opinion of their expert engineer, Mr Cosentino, is that concrete encasement is preferable. Further, even if the painted finish is allowed, the paint has been poorly applied and is delaminating, allowing the beam to rust.
2. In response, the builder relied on a letter from his project engineer, Mr David Jones, in which Mr Jones has authorised the change from concrete to a painted finish. Although the letter is dated several years after the project was completed, it states that the engineer inspected the beam during construction and at that time approved the change to the painted finish.
3. Based on this evidence I am satisfied that there is no breach of the builder's warranty to build in accordance with all laws and legal requirements or that the materials used were not good and suitable for the purpose for which they were used. While it may have been preferable to use concrete rather than paint, that was not what the builder was actually required to do.
4. Having said that, I am satisfied that the painting of the beam was not carried out in a proper and workmanlike manner, in that the paint was too thinly applied in certain areas, allowing surface rust to develop. The builder submitted that the painted finish was originally satisfactory, but was damaged by the owners when digging around the beam. However I do not accept that contention, based on my observations when I viewed the beam on site. The builder is liable for the cost to repaint the beam.
5. The owners and Mr Mladichek provided cost estimates to encase the beam in concrete. They did not provide a figure for repainting. Mr Downing provided a cost estimate of $805 to excavate the beam, clean it, repaint it with 3 coats of bituminous paint and reinstate the soil and grass and then clean up. This figure includes a labour rate of $50/hour plus materials. It does not appear to include GST[18]. He also provided a quote from an apparently independent contractor (Systematic Maintenance dated 31 January 2020) to carry out this work for $604 plus GST.
6. I will allow the owners $885.50 for this item, being the builder's estimate of $805 plus GST. I prefer the builder's figure to the untested Systematic Maintenance quote, although I note that this quote supports the reasonableness of the estimate provided by the builder.

1. The retaining wall in the rear courtyard is constructed of sleepers. It is obviously bowed and leaning away from vertical. Mr Philip Downing's evidence was that in 2014 he and his brother replaced the old sleepers with new H5 sleepers. Mr Grilli's evidence was that they only changed the top sleepers and extended the length of the wall in 2014; they did not replace the underground posts and sleepers. As a result the wall has continued to rot and to move.
2. Mr Mladichek did not investigate this item. The owners relied on an inspection report prepared by Robert Karkut for the VBA in 2016, although Mr Karkut was not called to give evidence. In his report he stated that the below ground sleepers had deteriorated and should be replaced with new H5 treated timbers. Mr Donaldson's opinion was that the two underground sleepers of the retaining wall are rotting and should be replaced. The above ground sleepers can be reused. My observations on-site were consistent with these two reports. I accept that the below-ground sleepers have rotted. In light of the evidence of Mr Grilli and Mr Downing, the report on the condition of the sleepers in 2016 and their present condition, I accept that the above-ground sleepers were replaced in 2014, and I find that it is more likely than not that the below-ground sleepers were not replaced in 2014. I accept that they require replacement.
3. The owners contended that the original failure to use pine sleepers treated to H4 or H5 is a breach by the builder of the DBCA warranties. The builder's defence was that the DBCA does not apply to landscaping work, as it was not work done under the building permit and so is not domestic building work.
4. For the reasons set out above, it is the BA warranties which are implied into the sale contract, not the DBCA warranties. That is, the builder warrants that all domestic building work carried out in relation to the construction was carried out in a proper and workmanlike manner, that all materials used in the domestic building work were good and suitable for the purpose for which they were used and that, the domestic building work was carried out in accordance with all laws and legal requirements.
5. 'Domestic building work' has the same meaning as it does in the DBCA. That is, 'any work referred to in section 5', and s5 includes the following:

(a) the erection or construction of a home, including -

(i) any associated work including, but not limited to, landscaping, paving and the erection or construction of any building or fixture associated with the home (such as retaining structures, driveways, fencing, garages, carports, workshops, swimming pools or spas);...

1. Based on that definition, it is clear that if a person carries out work associated with the erection or construction of a home, including landscaping and the erection or construction of retaining structures, the work falls within the meaning of s137C warranties.
2. As discussed above, I am satisfied that the below ground part of the retaining wall requires replacement. I am satisfied that this is a breach of the warranty that all materials used in the domestic building work were good and suitable for the purpose for which they were used.
3. The owners relied on a quotation by R&N Building Services to replace the wall using redgum sleepers, at a cost of $3300 (including GST). The builder submitted that using red gum sleepers in place of treated pine is not replacing like-for-like. In the opinions of Mr Donaldson and Mr Karkut, treated pine sleepers are suitable, and on that basis I accept that the owners are entitled to compensation which allows them to replace like-for-like. Mr Donaldson provided a cost estimate of "no more than $500" to replace the rotted sleepers with H4 or greater treated pine, and to reuse the above ground ones. Mr Downing provided an estimate of $620 (presumably excluding GST) for Mr Donaldson's scope of work. I will allow the owners $682, being Mr Downing's estimate plus GST.

1. The base of the fence between the owners' property and the next door driveway is covered by soil and the plinth board is acting as a retaining wall, which all experts agreed was not appropriate. The builder's defence was similar to the previous item, that this work was not part of the building contract or the building permit and so the DBCA warranties do not apply. For the reasons set out above, I reject that submission.
2. The builder otherwise conceded that works are required to reconstruct part of the fence. During the hearing the parties agreed that $568.50 would be an appropriate amount to complete these works. I will allow this amount.

1. The builder accepted that the concrete piers at the front porch are corroding and must be rectified. The owners claimed $3850 for this work, based on the quote from R&N. Mr Philip Downing suggested during the hearing that $2000 is a more reasonable price, based on Mr Donaldson's estimate of $1500 and the quote from Systematic Maintenance of $1650.
2. R&N were not called to explain how they calculated their quotation of $3850. Mr Grilli speculated that they may have allowed more time than Systematic Maintenance in order to match the render colour. However I note that both written quotations include colour matching. The owners bear the onus of proving the amount they seek is reasonable. In circumstances where I have two quotations for the same scope of work, one of which is consistent with the expert opinion of Mr Donaldson and the concession of the builder that $2000 is reasonable, I am not satisfied that the owners have proved their loss and damage is $3850. I will allow $2000.

1. The owners originally claimed $3245 to carry out a localised repair to the tiled balcony above the lounge room ceiling. There is a leak from this balcony and R&N quoted that amount (including GST) to remove and replace four floor tiles with new membrane around the downpipe. Shortly before the hearing commenced, the owners increased their claim by including item 18, being the complete replacement of the balcony tiling. The builder had initially agreed that he was responsible for the leak in the lounge room and that the claimed cost of $3245 was reasonable. However when the claim was increased by the addition of item 18, he withdrew that concession. I will consider this claim together with item 18.

1. Mr Grilli's evidence was that there was a water leak in the ceiling of the upstairs corridor. He tracked the source of the leak to 5 cracked roof tiles which are located above the corridor. The cracks in the 5 tiles had been previously repaired with silicon, although Mr Grilli was not aware of when the silicon had been applied. He concluded that the cracks must have occurred prior to his purchase of the property, as he said that no one had been on that part of the roof since then.
2. Both Samuel and Philip Downing said they were sure the roof tiles were not cracked at the time the occupancy permit was issued. They said that there was a stack of roof tiles left at the property following handover, and if the cracks had been present at that time they would have replaced the tiles rather than applied silicon to them.
3. It was suggested by the builder that repairers had attended to the air-conditioning unit on the roof since the owners occupied the property. Mr Grilli acknowledged this but said that as the air-conditioning unit is located at a distance away from the cracked tiles, he did not think the repairer would have damaged the tiles in question.
4. The owners bear the onus of proving that it was more likely than not that the roof tiles were cracked prior to the settlement of the sale. In circumstances where no witness was able to give evidence about when or how the tiles were cracked, and there was evidence of intervening people on the roof over the years since the property was handed over to Mr Grilli, I am not satisfied that the owners have discharged this onus. I reject this claim.

1. The builder conceded the claimed cost for this item of $300. Accordingly I will allow that amount.

1. The owners alleged that at the time they purchased the home, the builder, via his estate agent, represented that the basement was a "Home theatre/games room", which is a habitable room. As they have since discovered, the room was never approved as a habitable room (see discussion at item 1(c) above), and they say this amounts to a misrepresentation in 2011. They seek damages "between nil and $105,000 commensurate with the seriousness of the misrepresentation". I note that this amount is 10% of the purchase price.
2. In support of this claim, the owners referred me to the internet sales advertisement and the sales brochure. The text of the advertisement states (emphasis added):

This outstanding townhouse is a superior choice... Includes open plan Bosch kitchen, alfresco entertainment terrace and stylish garden setting, spa-bathroom, fabulous basement home theatre/games room, cellar and heating/cooling/security.

1. The floorplan included in the advertisement describes the lower level space as:

1. Further, the owners say that when they inspected the dwelling prior to making an offer to purchase, the basement was fitted out with "fully lined and painted walls, fully tiled floor, internet network, TV outlet, five double power points, special lights". This led them to believe that the room could be used as a theatre room or work room, both of which fall within the definition of 'habitable room' in the BCA.
2. At the commencement of the hearing, the owners alleged:

The basement has been modified from what was included in the Building Permit without obtaining an amended permit... The room was sold as a habitable room however has no natural light or ventilation and as such does not comply with the requirements of the BCA and does not have a permit... Section 32 did not disclose this and hence the respondent has misrepresented the property...

Rectification work: Need to install mechanical ventilation in accordance with the requirements of the BCA to comply as a store room. Refer real estate agent's confirmation of loss of value as the room cannot be classified as a habitable room and can only be sold as a store room which in any event would need a new permit...

1. During the hearing the builder referred the owners to clause 4.1 of the contract of sale which provides an express contractual acknowledgement by the owners that they did not rely on any representations and that they relied entirely on their own inspections and enquiries. Following discussion about the effect of this clause, the owners filed a written submission in which they contend that the builder's advertising was a negligent misstatement within the meaning of Hedley Byrne & Co Ltd v Heller & Partners Ltd [1963] UKHL 4; [1964] AC 465.

1. The builder denied that the sales brochure or internet advertisement was a representation at all. Rather, "it is merely advertising puffery which was clearly not intended to be relied on by the purchaser".
2. Further, if the advertisement constituted a representation, the builder disputed that the owners had relied on it. Instead, he says that the owners were relying on their own inspection of the property prior to the sale and the information found in the section 32 statement and the contract of sale.
3. They inspected the property, including the basement, prior to making an offer to purchase. It was obvious that the basement area had no windows. Mr Grilli is an experienced architect, which indicates he would have been aware at the time of the inspection that without windows, the room could not legally be considered a habitable room.
4. The section 32 statement provided to the owners before they made an offer to purchase included the approved planning permit plans. These show the basement as a 'Store & Cellar' with an adjoining laundry. There was no mention of a home theatre or games room on the planning permit.
5. The owners then signed the contract of sale which clearly states that they are not relying on any representations made by the vendor or any of the vendor's agents. In particular, clauses 4.1 and 4.2 of the contract of sale which provided as follows:

This Contract contains all terms and conditions relating to the sale of the Property by the Vendor to the Purchaser and the only enforceable obligations of the parties in relation to the said sail are those set out herein. Any and all representations, promises, conditions, warranties or other items leading up to this Contract which are not expressly contained in the Contract or the Vendor's Statement, including those which may have been made by the Vendor or by any person on behalf of the Vendor (including the Vendor's Agent) are expressly negated and withdrawn.

(a) No information, representation or warranty provided or made by the Vendor, the Vendor's Agent or the Vendor's Representative was provided or made with the intentional knowledge that it would be relied upon by the purchaser;

(b) no information, representation or warranty provided by the Vendor, the Vendor's Agent or the Vendor's Representative has been relied upon by it;

(c) the Vendor or makes no representation that the improvements on the land sold or any alterations and/or additions there to comply with the requirements of the responsible authorities and save as otherwise expressly provided...

(e) the Purchaser has inspected the property and relies entirely on its own inspection, searches and enquiries in connection with the Property;

(f) to the extent permissible by law, the Indoor has no liability to the Purchaser for all or in connection with any information, representation or warranty that has been provided or made by or on behalf of the Vendor.

(a) The Purchaser shall not make any requisition, objection, or claim for any compensation, as a result of any alleged misrepresentation made by the Vendor's Agent or other person to it.

1. The owners claim that the representation was negligent and that any contractual acknowledgement they may have given does not affect any duty of care owed by the builder when making statements to them. The only legal analysis of this proposition they have provided is a lengthy article apparently written in the late 1970s which discusses the Hedley Byrne decision[19]. The owners have underlined several parts of the article and say that the law recognises the tort of negligent misstatement.
2. It is not the role of this decision to set out the development of the law of negligence in Australia over the last 55 years. Suffice to say that the principles contended by the owners are more complex than the passages they have underlined in the article. A brief summary of the relevant principles is contained in Halsbury's Laws of Australia at [110-5165][20], as follows (footnotes omitted):

Tortious liability for a statement carelessly made and not constituting fraud has only recently been recognised [in Hedley Byrne]. The field of liability for mere economic loss is a comparatively new and developing area of the law of negligence. It has been doubted whether it is possible or desirable to state any general, that is, comprehensive, principle.

The giving of negligent advice does not cause an immediate loss since the loss suffered depends on how the advice is used (a matter over which the defendant may have no control), and the courts have, at least until recently, been reluctant to find a legal duty to take care not to cause economic loss in the making of statements, breach of which would be actionable in tort giving rise, potentially, to indeterminate liability.

Claims for economic loss are 'special'.... [T]he elements of negligence may be found to be satisfied on particular facts conforming to the Hedley Byrne principle in a case of negligent misrepresentation, where an assumption of responsibility by a defendant is causally related through inducement and reliance to the plaintiff's economic loss. However, even where there is an assumption of responsibility, in the present context, the reference is to an imposed legal duty rather than consensually assumed responsibility.

Under the Hedley Byrne principle, there is no requirement that the statement be a factual representation, inducing a contract with the maker of the statement. Moreover, the principle is not limited to the giving of advice as distinct from factual information. Accordingly, a statement of opinion (or an undertaking) may give rise to a tortious liability for a negligent misrepresentation or misstatement, as may the careless giving of information or a recommendation. However, a person is under no duty to take reasonable care that advice or information given to another is correct, unless the maker of the statement knows, or ought to know, that the other relies on him or her to take such reasonable care and may act in reliance on the advice or information which he or she is given, and unless it would be reasonable for that other person so to rely and act...

1. The three elements required to succeed in such a claim can be simplified into the following (per Halsbury's at [110-5160]):

(1) a duty owed by the defendant to the plaintiff to take due care when providing the information or advice;

(2) failure by the defendant to take such due care; and

(3) loss or damage caused by reliance on the information or advice.

Unlike a claim in respect of a breach of contract, a plaintiff's cause of action in tort for negligence is not complete without proof of loss or damage.

1. Applying these elements to the present case, I do not accept that the builder owed a duty to the owners to take due care when providing the information in its advertising brochure. The general principle is that

a person should be under no duty to take reasonable care that advice or information which he gives to another is correct, unless he knows, or ought to know, that that other relies on him to take such reasonable care and may act in reliance on the advice or information which he is given ...[21]

I do not accept that the respondent knew or ought to have known that the applicants would rely on him to take reasonable care in providing the information contained in the advertising material, for the following reasons.

1. First, the brochure and website were an advertisement. They stated "Disclaimer: Please note floor plans are indicative only... Potential buyers should view the property in person". An objective reading of these words leads to the conclusion that a purchaser should not rely on the advertising material.
2. Second, clause 4 of the contract expressly tells the owners that they should not rely on the advertising material but must make their own enquiries. Further, the owners expressly agreed and acknowledged by that clause that they were not relying on any representations and had made their own enquiries. In those circumstances, I do not agree that the vendors of the property knew or ought to have known that the applicants would rely on the advertising material.
3. Third, Mr Grilli is an experienced architect, and described himself as "I am not a lawyer however I have had significant experience in the legal side of architecture." This is another reason why the vendors of the property would not be expected to know that the owners may be relying on the advertising material.
4. As for the second element, I am not satisfied that there was actually a failure by the respondent to take due care. I do not accept that the statement in the brochure "fabulous basement home theatre/games room" or the description on the floor plan "home theatre/wine cellar" is a representation that the room is a habitable room within the meaning of the BCA. These words must be read in their context, which is an advertisement. Further, the advertisement includes a disclaimer. Further, the advertisement and any other representations is expressly stated to be of no effect by clause 4 of the contract of sale.
5. The third element which the owners must prove is that they actually relied on the statement in the brochure and the note on the floor plan when they made their offer to purchase the property. I am not satisfied that they did so. During the hearing I asked Mr Grilli specific questions relating to the circumstances of the purchase. At no point did he say that he and his wife decided to make an offer because they thought they could use the basement as a home theatre or games room. Instead, his evidence was that:

1. the room was not furnished when they inspected it; 2. he noted that the walls were lined and the floor was tiled and lights and power points had been installed;

1. he then obtained the section 32 statement and the contract of sale from the estate agent;

1. he flicked through all the documents in the section 32 statement, although he said he did not study them; 2. he asked the estate agent for the building permit drawings, which request was refused; 3. he and his wife then made an offer to purchase the property which was accepted; and 4. they signed the contract of sale on 3 March 2011 and completed the purchase on or about 31 July 2011.
2. Further relevant evidence is contained in the contract of sale:
   1. By clause 23, the vendors agreed to provide access to the purchasers via a license agreement to occupy the premises prior to settlement of the sale.
   2. By clause 24, the vendors agreed to "repair dampness in basement at the vendors' expense prior to settlement".

1. Weighing up this evidence, especially the following contemporaneous events and documents, I do not accept on the balance of probabilities that the owners relied on the advertising material either when they made their decision to purchase the property, or when they completed the settlement of the sale:

1. the owners' awareness of the planning permit plans prior to signing the contract (in the section 32 statement), 2. the owners' awareness that the basement was damp prior to signing the contract (clause 24 of the contract of sale),

1. the owners' inspection of the property prior to making an offer to purchase, during which it would have been obvious there were no windows,

1. the presence of lights, power points, internet connection, lined walls and tiled floor is not inconsistent with the room being used as a store room or cellar, 2. the owners' acknowledgement that they had made their own enquiries and had not relied on any representations (clause 4 of the contract of sale[22]), 3. the lack of any evidence from the owners that they actually relied on the advertising material, and 4. the fact that they had the opportunity to occupy the home prior to settlement and to live with the basement before completing the sale.
2. As the owners have failed to satisfy me of any of the three elements required to succeed in a negligent misstatement claim, this item is rejected.

1. The builder conceded the claimed cost for this item of $500. Accordingly I will allow that amount.

1. According to Mr Grilli, the concrete crossover between the road and the owners' driveway cracked within the first year of occupation. He alleged that when the concrete was poured by the builder, he failed to adequately compact the base, allowing the concrete to subside and crack. He argued that in order to run the sewer drain from the house to the front of the property, the builder would have had to excavate a hole approximately 2m in diameter and 3.5m deep in the location of the present crack. He produced a historical photograph taken at the time of construction, which shows a large patch of dirt in the area of the crossover. He suggested this shows there was an extensive excavation, while Mr Downing suggested all that is shown is a large patch of dirt.
2. A significant crack in the crossover is obvious, which extends across two of the four crossover slabs, parallel to the gutter. However, the builder denied liability on a number of bases. First, the builder submitted that as the crossover is owned by the Council, and not the owners, they are not the persons who have suffered the loss and damage. Mr Grilli conceded that the crossover is owned by the local Council, however he said that he expects that the Council may direct him to rectify the damage at his cost.
3. Second, Mr Philip Downing's evidence was that the builder built the crossover to the design required by the local Council. He produced a copy of the Council's requirements, which did not allow reinforcing in the concrete. Mr Downing said that the lack of reinforcing had caused or allowed the concrete to crack. Mr Grilli responded that the issue was not the lack of reinforcing, rather that the base was inadequately compacted.
4. Third, Mr Donaldson's opinion was that the damage had been caused by the roots of the Lilly Pilly tree in the nature strip, in combination with the Council stormwater drain which runs the length of the nature strip and parallel to and under the crack in the driveway, and the lack of reinforcing in the concrete.
5. Mr Grilli submitted that I should not accept Mr Donaldson's opinion, because it is speculation, and the Council drain is not the issue. The builder submitted that I should not accept the owners' submission, as it too is speculation, and no evidence has been led to support the claim that the backfill was not sufficiently compacted, apart from the existence of the crack.
6. During my view of the property I observed a large Lilly Pilly tree in the nature strip, and evidence of buckling and cracked concrete in the footpath, the front fence and the gutter, as well as the crossover. I asked the experts on site whether they thought the other concrete damage was related to the tree. Mr Donaldson confirmed the opinion in his report, while Mr Mladichek suggested that tree roots are an issue, and said that the crossover should have been engineered to allow for the tree. I also note the opinion of Mr Karkut, who carried out an inspection for the VBA in October 2016, and concluded[23]:

A large nature strip tree is in close proximity to the driveway cross-over, potentially causing foundation movements... the cause and timing of driveway crack could not be determined. To determine this item, the owner would have to provide independent engineering assessment as to whether the crossover had been constructed correctly in the first instance and with due consideration of the adjoining large tree.

1. Fourth, the builder submitted that this work is not covered by the warranties provided by the DBCA, as it was landscaping work done outside of the building contract. However as with the retaining walls, this argument is misconceived.
2. I reject this claim, on the basis that the owners have not suffered any economic loss or damage from the crack. The crossover is not owned by the owners. Nor could they demonstrate that they have any actual (rather than speculative) liability to the owner, the Council. Mr Grilli's concern that the Council may order him to rectify, or may require him to reimburse it if it carries out works, does not equate to a current legal liability.
3. If I am wrong about this, I would nevertheless reject the claim, on the grounds that the owners have failed to establish the cause of the crack on the balance of probabilities. In assessing the differing possibilities as to the cause of the crack, I must accept the cause which I consider to be more likely than the other. The presence of cracks in the footpath, the front fence and the gutter, as well as the crossover, persuade me that it is more likely than not that the movement in the soil is caused by a combination of tree roots and the Council stormwater drain. It is not clear whether the tree roots have damaged the drain, or whether the source of moisture from the drain has encouraged the roots to grow. Nevertheless, I consider that a combination of these factors is more likely to have caused or exacerbated the movement than the alleged lack of compaction, in circumstances where there is no evidence the compaction was actually inadequate.

1. Each of the downlights in the property are connected to a circuit board, which has been installed in the ceiling cavity without any protection. The owners' claim is that "Lighting controllers have burnt out in the same location two times. A further controller has burnt out on a different circuit after the Hearing".
2. Initially the owners' claim was that "Bare bones circuit boards are bundled with and against 240 volt cables. These should have been separated and should have been enclosed in suitable fit-for-purpose enclosures".[24] However, the owners advised during the hearing that this issue was no longer a concern. Instead, they tendered an email dated 21 January 2020 from Mr Hugh Van Essen, of Waterman AHW (Vic) Pty Ltd, in which he raises concerns about the compliance and approvals of the system.
3. Mr Van Essen was not called to give evidence. His qualifications and experience are not apparent from his email. Mr Grilli advised that he is a "qualified electrical engineer and director" and that "Waterman Group is an international services company".[25]
4. Based on his email, Mr Van Essen's concerns are that "the controller is poorly built and installed". In particular:

1. At a minimum, he would have expected the device to have been approved by the Electrical Regulatory Authorities Council (ERAC) and passed to be installed as a commercial electrical product. 2. He has checked the reference number given CE N 3118 and this is not registered on the ERAC site. He said the contractor should provide details of compliance.

1. The heat sink is poorly designed. He said it "should be exposed outside the plastic case to enable heat to dissipate. Having the heat sink[26] enclosed in a plastic element would restrict the air flow and subsequently cause premature failure of the internal componentry. Plastic is an insulator and does not adequately allow for the transfer of heat from the heat sink to the outside."

1. On the carcass: "The case size should be enclosed so no finger or small element can penetrate the casing of the case." 2. On the ethernet connection: "This is low volt: no carcass needed: but from a dust and fault level reduction perspective: should be in a case to give it an IP [Ingress Protection] rating. Once again: poor installation practice as the electrical contractor should have enclosed the connection in its own enclosure."
2. The owners also provided photographs of the controllers and a printout from an unidentified website containing information about IP ratings.
3. The owners submitted that the controllers are not commercially available and appear to be "home-made". They have no specification or model number to allow replacement. They appear to have been manufactured and supplied by a company called Hytech Lighting Automation, which is a company owned by Andrew Downing, the father of the builder. They seek an order that the builder must replace all items not rated and registered with ERAC from a safety hazard point of view and for not being fit-for-purpose.
4. They also said that the evidence given by Andrew Downing should be discounted, as he is not an independent witness, being the father of the builder.
5. In response to Mr Van Essen's email and the owners' submissions, the builder provided a document describing the lighting system together with written statements from Dr Andrew Downing, the CEO of Hytech Lighting Automation, which stated:

1. The lighting system is a commercially available product manufactured by Hytech Lighting Automation. 2. Hytech has a 'C-tick' registration from the Australian Communications Authority which was required at the time of supply. A copy was provided. The code number is N3118. The CE mark was not relevant to Australian sales, but was placed on the product because the product was also exported.

1. None of the items supplied are or were 'prescribed' by Energy Safe Victoria and neither are they at this time on the list referenced by ERAC. They were not, and are not, required to be tested for IP rating.

1. The owners have not returned any items to the manufacturer for repair or replacement. From the photographs provided of one dimmable control, it appears that the unit has been subjected to a 240 V mains surge of greater than 700 V. The printed circuit board includes a fusible link which has vaporised following a surge to prevent secondary damage which could possibly occur following such an event. 2. It is unlikely that overheating was involved because these controls are rated for 750 W, whereas it is understood that the lights installed at that location were only 50 W.
2. I reject the owners' claim. I do not have sufficient evidence that the controllers are defective or non-compliant. I do not know Mr Van Essen's qualifications or experience. Similarly, I do not know if Dr Andrew Downing has electrical engineering qualifications or experience. He is described only as the 'managing director' of Hytech. The statements from both Mr Van Essen and Dr Downing were not tested and so I do not accept them as evidence.
3. Further, the onus is on the owners to prove their claim. While Mr Van Essen raised some concerns, these have been responded to by Dr Downing. I do not know whether Mr Van Essen would accept Dr Downing's responses. For example, Mr Van Essen said he expected that the device should be registered by the ERAC, while Dr Downing said they were not prescribed. For the owners to succeed in proving this claim, I would require positive evidence from the ERAC or be shown some applicable regulation or standard. In the absence of this evidence, I am unable to say whether the device should have been registered with the ERAC. As for Mr Van Essen's recommendation that the supplier should provide evidence of registration with the ERAC, Dr Downing has done that.
4. As for the suggestion that the lights may have blown because the heat sink and casing was poorly designed, preventing heat transfer, Dr Downing provided an alternative possibility, that a voltage surge had caused the controller to blow. As for the allegation that poor installation has affected the IP rating, Mr Van Essen does not say that this has caused the controller to blow. Given the competing explanations, neither of which was tested, I am unable to conclude that any failure was more likely than not to have been caused by poor design or installation of the controllers.
5. In the absence of any persuasive evidence that the design and installation of the smart lighting was not carried out in a proper and workmanlike manner, that materials used were not good and suitable for the purpose for which they were used, or that the work was not carried out in accordance with all laws and legal requirements, I am not satisfied that any of the warranties implied by s137C of the BA have been breached. I reject this claim.

1. Above the kitchen are a row of 6 glass panels which form the roof. Each panel is double glazed and is set into an aluminium frame. Moisture is entering between the double glazing, resulting in condensation in several of the panels. The owners originally suggested that the outermost pane of glass had slipped in the frame, however both Mr Mladichek and Mr Donaldson agreed that the cause was a breakdown in the seals between the panels. I accept their expert opinions as to the cause of the condensation.
2. The builder submitted during the hearing that the design and construction of the windows was carried out by an independent glazing company which provided a 7 year warranty, and as the windows were installed in 2009 and no complaint was made until 2017, the builder has met the expectation that they would be reasonably fit for purpose. In his written closing submissions, Mr Downing addressed each of the warranties implied by s8 of the DBCA and argued that the failure of the seals did not breach any of them. As discussed above, the DBCA warranties do not apply. Nevertheless, some of the arguments put in his submission are relevant to the s137C warranties and I will address his contentions on that basis.
3. In respect of the warranty that the works would be carried out in a proper and workmanlike manner (the warranty implied by s137C(1)(a)), he submitted that the design of the window panels was provided by a 'reputable', independent glazing company, commissioned by the builder in circumstances where the building plans provided no detail other than calling for a 'glass roof'. That company also installed the glass panels, which were inspected and accepted by the builder, the engineer and the building surveyor. Mr Downing said that this meant there was no evidence of a failure to carry out the work in the proper and workmanlike manner.
4. The warranty at s137C(1)(b) is that 'the vendor warrants that all materials used in that domestic building work were good and suitable for the purpose for which they were used'. Mr Downing submitted that the materials used, namely the windows, were good and suitable for their purpose, in that they did not deteriorate for approximately eight years. He also said that the owners had failed to put forward any evidence as to the cause of the failure of the panels.
5. While the builder has gone to great lengths to address s8 of the DBCA, including responding to arguments which were not put by the owners, the builder has failed to address the evidence that the glass panels are not performing as they should, that the cause is a breakdown in the seals between the panels according to the experts (which I accept), and that the seals are at most eight years old.
6. Mr Donaldson referred to clause 18.03 of the Guide to Standards and Tolerances[27] which he said provides that condensation is not a defect. However I note that this clause is not relevant to the present situation; instead it is referring to condensation in rooms, not between two panes of a glazed panel. I consider that the more relevant provision of the Guide is clause 18.08 and footnote 13, which provide:

Roofs, gutters, flashings, skylights, window and door frame joints or seals are defective if they leak under normal weather conditions, providing they have been properly maintained by the owner13 ...

... 13 Proper maintenance by the owner includes regular de-leafing of gutters and maintaining protective coating systems around window and door frames.

1. I find that the penetration of water into the void between the glass panels is a form of leakage, caused by the breakdown in seals between the panels. While the builder alleged that the owners had failed to clean the gutters under the panels, there was no evidence that the owners could have done anything by way of maintenance to preserve the seals between the panels. Based on the Guide, I accept that the leaking seals are a defect.
2. Even though the windows were apparently designed and installed by a window supplier, that company contracted to the builder and so the builder is liable to the owners for their work by reason of s137C.[28] The builder's remedy may be to seek contribution or indemnity from his subcontractor.
3. Further, the length of time the window company warrants its work is irrelevant to the warranties in either the DBCA or the BA. A person can commence a building action for 10 years from the Certificate of Occupancy (BA s134), regardless of what assurances the window company may have offered the builder.
4. I find that the windows (including the seals) are not good and suitable for the purpose for which they were used, which is a breach of the vendor's warranty at s137(1)(b). Further, I accept that the construction and/or installation of the panels was not carried out in a proper and workmanlike manner, in that condensation should not have occurred within 8 years of installation. This is a breach of the warranty implied by s137(1)(a).
5. The owners claimed $7700, based on the quote from R&N. Mr Mladichek provided an estimate of $3690 to replace the three affected panels. In circumstances where their scopes of work appear similar and R&N were not called to explain why their quotation was significantly higher, I will allow the amount estimated by Mr Mladichek.

1. The builder conceded responsibility for and the cost of this item at $2000. Accordingly I will allow that amount.

1. After initially claiming for a localised repair to the balcony (see item 8), the owners relied on the opinion of Mr Mladichek that the whole balcony should be retiled. Mr Mladichek said there were multiple issues as well as the leak, including that grout has dislodged, there are a number of loose tiles on the stepped area and the step itself is a trip hazard. His opinion was that it is not practical to repair these issues in isolation, and all the balcony tiling should be removed and re-laid.
2. Mr Downing responded that such wholesale replacement is not necessary. He had already carried out extensive repair works in January 2015, including replacing the substrate with compressed sheet, applying a new membrane and tiling the whole balcony. The only leak since that time has been from around the downpipe, which is the subject of the claim item 8. He acknowledged that 5 tiles are now drummy, but said this is a maintenance issue. He also referred to clause 11.05 of the Guide to Standard and Tolerances. I consider clause 11.06 to also be relevant. These clauses provide as follows:

11.05 Cracked, pitted, chipped, scratched, loose or drummy tiles

Tiles are defective if they are cracked, pitted, chipped, scratched, loose or drummy on completion.

After handover, tiles are defective when caused by the builder's workmanship, they become cracked, pitted, chipped, loose or drummy and such in more than five per cent of the tiled area within 24 months from completion.

... Grout is defective if it becomes loose within 24 months of completion.

1. The builder submitted that as the retiling was completed in 2015, and only 5 tiles were drummy on Mr Mladichek's inspection in July 2019, this is less than 5 per cent of the tiled area, and later than 24 months from completion. On that basis, the builder has not breached any of the warranties.
2. While the Guide to Standard and Tolerances is only a guide, it does provide some assistance in determining the liability of the builder[29]. Based on my observations of property, the length of time since the works were completed in 2015, and the tolerances set out in the Guide, I am not satisfied that the existence of five drummy tiles and some loose grout is a breach of any of the warranties implied by s137C.
3. As for Mr Mladichek's concern that the step was a trip hazard, I accept the builder's submission that it is not possible to rebuild the depth of the step, as this was part of the engineered design of the framework of the house. I agree that the height of the step is not a breach of the s137C warranties. It was designed by the project engineer and was implicitly approved by the building surveyor when he issued the Building and Occupancy Permits.
4. Moreover, the step was visible at the time the owners purchased the property and so the legal principle of 'caveat emptor' applies. This was explained by Member Farrelly (as he then was) in Meier v Balbin[30] as follows:

It is reasonable, in my view, to presume that a purchaser of a home makes allowance for known or patent defects when negotiating the purchase price and, as such, the purchaser can have no "loss" arising from a breach of the warranties in respect of such defects. By "patent" I mean a defect which ought reasonably have been observable on inspection and the significance of which, in terms of a likely need for rectifications, ought reasonably have been appreciated.

1. The owners were able to appreciate the height of the step prior to their purchase of the property, and so the law makes them responsible to address that issue when negotiating the purchase price. It does not matter whether or not they actually turned their mind to the issue. The law presumes that they did.
2. Accordingly, I reject this claim. However, I will allow the claim related to the leak at item 8 as it was conceded that there is a leak around the downpipe and the only cost estimate provided was that of R&N.

1. I will make the following orders.
   1. The respondent must pay to the applicant damages in the sum of $35,859.85.
   2. There is liberty to apply on the question of costs and reimbursement of fees. I direct the principal registrar to list any application for hearing before Senior Member Kirton for one hour.
2. In respect of costs, I refer the parties to s109 of the Victorian Civil and Administrative Tribunal Act 1998 which provides that the starting point is that each party bears its own costs. I also note that each party has been partially successful and partially unsuccessful in the proceeding. The parties should also consider decisions such as Barbary v CBL Insurance[31] which confirm that 'costs' in s109 means legal costs.

[1] [2015] VCAT 306 at [42]

[2] See Elturan v Unicon Property Group Pty Ltd & Ors [2013] VCAT 924 at [21]

[3] Victorian Building Authority website https://www.vba.vic.gov.au/owner-builders/owner-builder-eligibility

[4] Comment of SM Lothian in Joybay Pty Ltd [2018] VCAT 1587 at [20], which was not overruled on appeal in [2019] VSC 620

[5] While there was a discrepancy between the different approaches used to measure moisture, neither approach provided conclusive evidence that water had penetrated the slab.

[9] Mr Murphy was not called to give evidence but provided an email included in the builder's closing submissions. I accept the contents of the email, even though it was not tested, on the basis that it is consistent with the BCA and the extracts of the plans tendered.

[11] quotation from Highland Plumbing & Heating

[12] quotation from Hartac Sales & Distribution

[18] The builder's estimates quote hourly rates and material costs in round figures, eg labour at $50 per hour. If that item included GST I would expect it to be either be $55 or $49.50.

[19] D.W. McLauchlan, 'Pre-Contract Negligent Misrepresentation'. The source of the article was not provided.

[20] LexisNexis, Halsbury's Laws of Australia, (updated 26 February 2020) 'Negligent Misrepresentation in Contract' [110-5160] - [110-5195].

[21] Shaddock (L) & Associates Pty Ltd and Anor v Parramatta City Council (1981) 150CLR 225; BC8100102

[22] I note that it is arguable whether a term of a contract can override a duty of care, absent any statutory protections. I do not need to consider this further as I do not rely on the term of the contract to defeat the claim, but rather am considering it as part of the evidence of the owners' state of mind.

[24] Amended Summary of Costs provided at the commencement of the hearing

[25] Further Information dated 28 January 2020

[26] Mr Van Essen actually stated "Having the case enclosed" but from the context of his letter this must be a typographical error.

[27] Published by the Victorian Building Commission. The 2007 edition is applicable to these building works.

[28] Although it was not formally pleaded, it appears that the builder was trying to apportion liability with the window company. However the window company was not a party to the proceeding and so even if such a defence was allowed to be put, I would be unable to have regard to any liability it may have: s24AI(3) Wrongs Act 1958.

[29] Gombac Group Pty Ltd v Vero Insurance Ltd [2004] VCAT 2540; Gombac Group Pty Ltd v Vero Insurance Ltd [2005] VSC 442; Ashjam Pty Ltd v Carroll [2006] VCAT 2612

[30] [2013] VCAT 57 at paragraph 91

[31] [2016] VCAT 1218 at [29] - [31]