Iftikhar v Rockwall Homes Pty Ltd

Tribunal has jurisdiction to hear and determine the claim

1. There is no dispute between the parties that the claim in relation to the five pressed defects is a 'building claim' for the purposes of section 48A of the Home Building Act 1989 (NSW) (the 'Act'), that those alleged defects involve "major defects" for the purposes of s 18E of the Act, and that the Tribunal has the jurisdiction to hear and determine the dispute under section 48K of the Act.
2. It is also not disputed that the claim was brought within the 6 year limitation period stipulated in s 18E of the Act.

Preliminary matter - why the application for transfer of the proceedings to the District Court was refused

1. The first part of the hearing was spent dealing with the builder's belated application for an order that the Homeowner's Proceedings be transferred to the District Court of New South Wales.
2. Relevant to this application are two related matters lodged by the builder - HB 22/06720 and HB 22/52034 (the Related Proceedings).
3. HB 22/06720 was lodged on 15 February 2022 and is a claim by the builder against its roofing sub-contractor, Sydney Stellar Roofing Pty Ltd (SSR), for indemnification in respect of any liability found against the builder in these proceedings.
4. HB 22/52034 was lodged on 25 October 2022 together with a bundle of other documents lodged by the builder's solicitors. However, it was not formally registered by the Tribunal's registry until 23 November 2022 (i.e. the first day of the hearing of the Homeowner's Proceedings). That application concerns a claim by the builder against the homeowner for allegedly unpaid contract variations.
5. During the morning of the first day of the hearing the builder's counsel informed the Tribunal that he had formed the view that the Tribunal did not have jurisdiction to determine the Related Proceedings as they are time barred under s 48K of the Act. He said that he would either be withdrawing those applications and reinstituting them in the District Court of New South Wales, or would be seeking to have those proceedings transferred to the Court. He then made an application that the Homeowner's Proceedings be transferred to the Court.
6. After hearing the parties' submissions on this issue I refused the application for transfer of the Homeowner's Proceedings and indicated that I would provide written reasons for that decision in due course. My reasons for refusing the transfer application are set out below.

Builder's defence

1. In order to understand the builder's submissions regarding transfer it is helpful to provide a brief overview of certain aspects of its amended points of defence in these proceedings. Whilst the builder withdrew these parts of its defence on the second day of the hearing, they were relevant at the time the transfer application was being considered.
2. Firstly, the builder alleged that an agreement had been reached between the parties pursuant to which the homeowner agreed to release the builder from liability for defects. The builder said that in about September 2018 the parties entered into an agreement pursuant to which the parties agreed that: 1. the homeowner would pay $100,000 to the builder in respect of the balance of the purchase price, 2. the builder would provide an occupation certificate within 30 days of receipt of the first $80,000, 3. upon receipt of the occupation certificate the homeowner would pay the final $20,000, and 4. in consideration of the builder agreeing to release the applicant from paying $543,968.31 in respect of variations carried out by the builder, the homeowner would, at his own cost, rectify any defects that may arise as a result of the works carried out by the builder or its contractors (the Release).
3. The builder said in his amended points of defence that the effect of the Release was that the homeowner was estopped and precluded from bringing these proceedings, or in the alternative that the Release was a binding and enforceable agreement between the parties.
4. The builder also submitted that any loss or damage suffered by the homeowner was offset by the amount of $543,968.31 allegedly owed to the builder in respect of Contract variations.

The parties' submissions regarding transfer

1. The builder's submissions as to why the Homeowner's Proceedings should be transferred to the Court included the following: 1. It is desirable and indeed necessary for all claims to be heard together due to the interconnectedness of the applications. The builder would be prejudiced in the Related Proceedings if factual issues relevant to those proceedings are determined, or partially determined, in these proceedings. In particular, the builder says that evidence in relation to the Release and the variations claim will be relevant in the Related Proceedings and that if findings were made by the Tribunal in relation to those matters an issue estoppel would be likely to arise. 2. The Homeowner's Proceedings also involve jurisdictional issues as the builder asserts that some or all of the homeowner's warranty claims are out of time and it would be problematic if the Homeowner subsequently decided to bring a claim in the Court in relation to any issues time-barred in the Tribunal. 3. SSR would not be bound by findings in the Homeowner's Proceedings.
2. The homeowner's submissions included: 1. The builder's application for transfer was made belatedly on the day of the hearing and was not foreshadowed until the night before hearing. It is unsatisfactory for the homeowner to be required to deal with an application of this nature with virtually no notice. 2. Section 48L of the Act makes clear that the Tribunal is the preferred forum for resolution of claims under the Act. 3. The homeowner had filed and served all its evidence by 21 January 2022 (ie more than ten months ago). The hearing has already been delayed due to inaction by the builder and it would be prejudicial to the homeowner if the hearing was further delayed.
3. The solicitor for SSR, Mr Zreika, attended the first part of the hearing and informed the Tribunal that his client had not been provided with any details of the claim against it, or any of the builder's documents, until 24 October 2022. This was less than one month prior to the hearing and almost five months after the due date stipulated in the Tribunal's procedural directions made on 19 April 2022. Mr Zreika submitted that his client had not had sufficient time to respond to the builder's claim.

Procedural history

1. Relevant to the transfer application is the procedural history of this matter: 1. On 31 August 2021 the homeowner commenced the Homeowner's Proceedings. 2. The matter was first before the Tribunal for a directions hearing on 6 October 2021. 3. As at 21 January 2022 the homeowner had filed and served all of his evidence and documents. 4. On 24 January 2022 at the second directions hearing for the matter, the Tribunal made directions, including that the builder was to file and serve all of its documents by 7 March 2022. 5. On 9 February 2022 the builder's expert Mr Drexler was given access to the premises to prepare his expert report. 6. On 14 March 2022 Mr Drexler issued his report. However, the builder did not serve this report on the homeowner or the Tribunal until 24 October 2022 (ie over six months later). 7. On 15 March 2022, at the third directions hearing, the Tribunal made further directions, including that the time for the builder to file and serve his documents be extended to 22 March 2022, and that any cross application against the homeowner be filed and served by 29 March 2022. 8. On 19 April 2022, at the fourth directions hearing, the Tribunal made further directions, including an extension of time for the builder to file and serve its documents and cross-claim to 3 May 2022. The Tribunal also directed that "no further extensions shall be granted". 9. Following a multitude of email exchanges between the parties' legal representatives, the builder finally served its documents and cross-claim on 24 October 2022, ie almost six months after the extended due date for compliance. No extension of time had been sought from, or granted by, the Tribunal. 10. The only explanation given by the builder for the extraordinary failure to comply with the Tribunal's procedural directions is that the delay was attributable to a misunderstanding within the office of the builder's solicitor. 11. On 18 November 2022 the parties made a joint application for adjournment of all the proceedings. This application was rejected by Senior Member Ellis in chambers on the same day.

The law relevant to the transfer application

1. Part 4 Division 1 (ss 35-38) of the Civil and Administrative Tribunal Act 2013 (NSW) (the NCAT Act) contains provisions dealing with introductory matters relating to the practice and procedure of the Tribunal. Section 36 specifies the guiding principle to be applied to practice and procedure, and relevantly provides: 36 Guiding principle to be applied to practice and procedure (1) The guiding principle for this Act and the procedural rules, in their application to proceedings in the Tribunal, is to facilitate the just, quick and cheap resolution of the real issues in the proceedings. (2) The Tribunal must seek to give effect to the guiding principle when it - (a) exercises any power given to it by this Act or the procedural rules, or (b) interprets any provision of this Act or the procedural rules. (3) Each of the following persons is under a duty to co-operate with the Tribunal to give effect to the guiding principle and, for that purpose, to participate in the processes of the Tribunal and to comply with directions and orders of the Tribunal - (a) a party to proceedings in the Tribunal, (b) an Australian legal practitioner or other person who is representing a party in proceedings in the Tribunal.
2. Clause 6(1) of Schedule 4 of the NCAT Act provides: 6 Transfer of proceedings to courts or to other tribunals (1) If the parties in any proceedings for the exercise of a Division function so agree, or if the Tribunal of its own motion or on the application of a party so directs, the proceedings are: (a) to be transferred to a court (in accordance with the rules of that court) that has jurisdiction in the matter, and (b) to continue before that court as if the proceedings had been instituted there.
3. The Tribunal has a discretion to transfer proceedings, whether or not such an application is made by one of the parties. The discretion to make such an order, as is the case with any other discretion, must be exercised judicially.
4. In Ideal Waterproofing Pty Ltd v Buildcorp Australia Pty Ltd & Ors [2004] NSWSC 765 (Ideal Waterproofing) at [47] Sperling J made the following observations regarding the transfer of proceedings by the predecessor of the Tribunal to a court: "… the parliament has constituted the Tribunal with limited jurisdiction. From time to time, the Tribunal will have to decide whether it has jurisdiction to hear and determine a matter. That is part of its role. The prospect that the Tribunal may be called upon to fulfil that role in a particular matter is not a good reason for transferring a case to the District Court. It is only where there are bona fide claims genuinely requiring determination and which cannot be decided by the Tribunal that a transfer of proceedings is warranted."
5. Section 48L of the Act is also important. It relevantly provides: 48L Tribunal to be chiefly responsible for resolving building claims (1) This section applies if a person starts any proceedings in or before any court in respect of a building claim and the building claim is one that could be heard by the Tribunal under this Division. (2) If a defendant in proceedings to which this section applies makes an application for the proceedings to be transferred, the proceedings must be transferred to the Tribunal in accordance with the regulations and are to continue before the Tribunal as if they had been instituted there.

The decision regarding transfer

1. After considering the parties' respective submissions and the factual matrix I declined to transfer the Homeowner's Proceedings for the following reasons.
2. Firstly, the builder's submissions as to the potential prejudice to the builder in the Related Proceedings if the Homeowner's Proceedings were not transferred were vague. It referred to the interconnectedness of the proceedings and the "real risk" of an issue estoppel arising if the Tribunal decided matters which were relevant to the Related Proceedings. However, other than a generalised reference to the alleged Release and the variations claim, the builder did not identify with any specificity any legal or factual issues in relation to which an issue estoppel might arise. It did not refer to any draft pleadings intended to be lodged in the Court and did not elucidate how the Tribunal deciding the Homeowner's Proceedings might prejudice the builder's claim in the Court. It was simply not clear from the builder's submissions what was the nature of the disadvantage that the builder might suffer in the Related Proceedings if the homeowner's claim was determined by the Tribunal. As things turned out the builder subsequently abandoned his defences pertaining to the Release and the variations claim so that this concern became moot in any event.
3. Secondly, even if there is the potential for disadvantage to the builder in the Related Proceedings if the Homeowner's Proceedings are decided in the Tribunal, this must be balanced against the actual disadvantage to the homeowner if the Homeowner's Proceedings are transferred to the Court. A transfer would necessitate a further, likely significant, delay of the resolution of the homeowner's claim. The homeowner claims that water ingress from the defective roof is causing damage to his home. Whilst there is a dispute between the parties as to the extent of the defects, and the steps needed to remedy them, it is not disputed that there are at least some roofing defects which need to be remedied. There is some urgency to having these resolved. It is incontrovertible that water ingress is not only potentially damaging to the existing structure, it is also a source of distress and discomfort. It would be unjust, and contrary to the guiding principle of the Tribunal, to transfer the proceedings in circumstances where the homeowner's case has been ready for some ten months, the lengthy delay has been in large part due to the builder's non-compliance with procedural directions, the explanation for the delay is feeble at best, and the legally represented builder waited until the day of the final hearing to bring its application for transfer.
4. Thirdly, section 48L of the Act makes plain that the Tribunal is the preferred forum for resolution of disputes of this nature. There is no suggestion that this is a situation where the Tribunal does not have jurisdiction to hear and determine the homeowner's claim at least insofar as it relates to major defects. To the extent that the homeowner's claim may not involve major defects, it is a matter for the homeowner, not the builder, to assess the risk of bringing his claim in the Tribunal. This is not a situation (per Ideal Waterproofing) where the Tribunal cannot determine the claim. Indeed, if the homeowner's claim had been initiated in the Court it would have been susceptible under s 48L to be transferred to the Tribunal.
5. Finally, even if the builder's claim against SSR for indemnity remained in the Tribunal, it would not have been heard together with the homeowner's claim in any event. As the builder did not comply with the procedural directions in relation to that matter, SSR had had insufficient time to prepare for the hearing. The claim against SSR could therefore not have proceeded on the dates set for the Homeowner's Proceedings and for the same reasons as are articulated above, I would have refused any request to adjourn the final hearing of the Homeowner's Proceedings so that it could be heard together with the claim against SSR. Indeed, at a directions hearing of the Tribunal on 19 April 2022 the Tribunal foreshadowed that if the proceedings against the sub-contractor were holding up the main application, those proceedings "may be severed." The builder and his legal representatives were on notice that the claims may not be heard together if the claim against the sub-contractor was in any way holding up the substantive proceedings.

What evidence and materials did the parties rely on?

1. The homeowner relied on the following documents: 1. An expert report prepared by Anthony Capaldi of Tyrells Property Inspections Pty Limited issued January 2022 (the Capaldi Report); 2. An affidavit of the homeowner sworn 21 January 2022; 3. An affidavit of the homeowner sworn 24 November 2022; and 4. An affidavit of Mrs Nazia Junaid (the homeowner's wife) sworn 21 January 2022.
2. During the hearing the homeowner's counsel tendered the following additional documents: 1. a copy of a plan of the premises which had been marked up by Mr Capaldi during cross-examination to show the locations of water ingress and solar panels on the roof. This was marked as Exhibit A1. 2. A printout of an online Fair Trading licence search in respect of the builder which was marked Exhibit A2.
3. The respondent relied on the following documents: 1. An affidavit of Mr Mehcur (director of the builder) sworn 24 October 2022; 2. An affidavit of Mr Mehcur sworn 22 November 2022; 3. An expert report and scott schedule prepared by Dan Drexler of NSW Master Building Inspectors dated 14 March 2022 (the Drexler Report). 4. A letter from NSW Police Force to the homeowner dated 21 January 2022 which was tendered during the hearing and marked Exhibit R1.
4. At the hearing, the two experts gave oral evidence concurrently and were cross-examined by Mr Li and Mr Davie respectively. Mr Iftikhar and Mr Mehcur gave additional oral evidence in chief under oath. All three lay witnesses were cross-examined.
5. In making this decision I have also had regard to the written submissions lodged by the parties. The homeowner lodged submissions in chief on 13 January 2023 and submissions in reply on 21 March 2023. The respondent lodged written submissions on 2 February 2023.
6. At the commencement of the hearing the parties made submissions as to whether the Tribunal should exclude the builder's evidence which had been lodged belatedly on 24 October 2022.
7. The homeowner did not object to the admission of the builder's expert evidence but strongly opposed the admission of its lay evidence (being the affidavits of Mr Mehcur and the many documents attached thereto).
8. After consideration of the parties' submissions I decided not to exclude the builder's lay evidence and informed the parties that I would publish my reasons for this decision in due course. My reasons in this regard are as follows.
9. The builder acknowledged that the evidence was filed and served almost six months late but submitted that it should nonetheless be permitted to rely on it. It relied on an affidavit sworn by the builder's solicitor, Zeinab Tawbe, on 24 November 2022. The builder's submissions relevantly included: 1. The direction made on 19 April 2022 that no further adjournments would be granted was not a guillotine order; 2. The delay was attributable to a misunderstanding within the office of the builder's solicitor rather than due to any fault of the builder and it would be unfairly prejudicial to the builder to penalise it for an oversight by its lawyers; 3. The homeowner had had four weeks in which to address the respondent's evidence, which is not an unreasonable period of time to deal with lay evidence; 4. It would be contrary to the Tribunal's guiding principle in s 36 to refuse to allow the builder to rely on its evidence.
10. The homeowner's submissions relevantly included: 1. The explanation for the delay is unsatisfactory, particularly given the length of the delay; 2. The evidence of alleged contract variations cannot be dealt with because it is largely illegible and does not identify prices; 3. It would be a time-consuming process to take the homeowner through all that evidence and conduct an analysis of how the pricing of the alleged variations interacts with the Contract price; 4. It may be necessary to obtain additional expert evidence in relation to the builder's evidence of variations and the evidence in relation to the Release; and 5. It may be necessary to issue summonses to deal with the lay evidence.
11. In Mesiha v Murrell [2017] NSWCATAP 1 the Appeal Panel set out at [45] the principles to be applied in determining an application for an extension of time in the Tribunal.
12. Applying those principles I determined that although the builder's lay evidence was lodged woefully late, and the explanation provided for that lateness was not a convincing one, it was nonetheless appropriate to allow that evidence to be relied upon. My reasons were as follows: 1. Four weeks is not an insignificant amount of time to deal with lay evidence; 2. The homeowner did not provide an adequate explanation as to why that time was not productively used to further the various steps referenced by Mr Davie as being necessary to address that evidence; 3. Mr Davie said summonses and further expert evidence "may be needed" but was vague as to the nature of the summons which might be needed and the additional expert evidence which would be required. Moreover, he did not adequately explain why such steps could not have been taken in the four week period prior to the hearing.
13. For these reasons the builder was granted leave to rely on the lay evidence which had been provided out of time.

Statutory warranties - legal framework

1. The homeowner relies on s 18B of the Act pursuant to which the following warranties 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 principles applicable to determining whether there has been a breach of the statutory warranties in s 18B of the Act were summarised in Deacon v National Strategic Constructions Pty Ltd; National Strategic Constructions Pty Ltd v Deacon [2017] NSWCATAP 185 as follows (at [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.
3. As was also set out in Deacon, the Tribunal, when considering whether breach of s 18B of the Act has been established, must consider and make findings in respect of: 1. Whether the owner has established on the balance of probabilities that works have not been performed in accordance with s 18B of the Act. 2. If a 'defect' (in the sense of failure to comply with s 18B of the Act) is established, what is the appropriate method to rectify that defect.
4. I will now deal with each of the alleged defects.

Defect 1 - Water staining and water ingress - ground floor entry porch

1. This alleged defect relates to water staining and water ingress to the east facing ground floor entry porch. It is not disputed that there is water ingress and water staining to this area as a result of defective work. What is in dispute is the nature of the defective work which has caused the water ingress, and the appropriate method of rectification.

Homeowner's expert

1. Mr Capaldi says: 1. He observed impact damage to the roof sheeting and excessive silicone sealant installed to the perimeter of the roof sheeting; 2. He also observed the box gutter was measured 340 mm x 110 mm with a 65 mm downpipe outlet; 3. The excessive sealant observed is consistent with the builder "applying new sealant over failed sealant"; 4. The sealant was found to be cracked and delaminating in areas, with separation between the flashing and the sealant; 5. No overflow provision, rainwater head or sump has been installed to the box gutter section; 6. It follows that the weatherproofing of the entry porch has been poorly undertaken by the builder resulting in damage to the underlying soffit; 7. If the roof is not rectified, further water ingress and damage are expected which will, more than likely, result in damage to the soffit framework of the entry porch. 8. The architectural drawings noted that the roof sheeting was to be installed with fall from north to south with the box gutter on the southern edge. The builder has not constructed the roof in accordance with the approved drawings as the roof has been constructed with a fall from west to east and the box gutter along the east (front) elevation. 9. The water ingress and damage contravene the requirements of the National Construction Code of Australia 2015 (NCC) Volume 2 P2.2.2 "Weatherproofing". 10. As the roof was found to be leaking and allow for water ingress, the roof area drainage contravenes NCC Volume 2 P2.2.1(c) which deals with drainage. 11. The failure to install an overflow provision contravenes the NCC Volume 3 DP1.2 and Australian & New Zealand Standard (AS/NZS) 3500.3:2015 page 35 clause 3.7.5.

Builder's expert

1. Mr Drexler agrees there is impact damage to the roof sheeting but says that "the builder instructed me that he did not cause the impact damage to the roof sheeting". He goes on to say that in his opinion the impact damage to the roof sheeting was caused by the numerous trades people who accessed the roof for the installation of the 54 solar panels and electrical conduit on the main roof after the dwelling was constructed.
2. Mr Drexler agrees there is excessive sealant along the edge of the roof and says that "the builder instructed me that he did not install the excessive sealant along the edge of the roof".
3. Mr Drexler also agrees that the fall of the roof differs from that required by the plans but says that the change in fall of the roof was carried out with the consent of the homeowner and that in any event no loss has been suffered by the homeowner due to the change in fall.
4. Mr Drexler opines that water damage to the ceiling of the entry porch is due to there being no overflow provision to the roof and no rainwater head or sump installed to the box gutter section.

Decision on defect

1. It is not disputed that the lack of overflow, rainwater head and sump is a defect which has contributed to water ingress and requires rectification.
2. What is in dispute is whether the other issues identified by Mr Capaldi are also defects which have contributed to the water ingress.
3. With regard to the pitch of the roof, the Capaldi Report does not explain how the change to the fall of the roof has contributed to the water ingress and indeed Mr Capaldi conceded during cross examination that this change would not necessarily have affected waterproofing. I do not accept that the change in the fall of the roof contributed to the water ingress.
4. With regard to the impact damage to the roof it is not disputed that the homeowner engaged tradesmen to install solar panels and associated infrastructure. Having considered the homeowner's uncontested evidence in this regard, I find that the solar panels were installed in about May 2020. It is feasible that the impact damage to the roof was caused during the installation of the solar panels and there is no evidence from Mr Capaldi or any other witness which supports the homeowner's assertion that the impact damage to the roof occurred during the construction of the dwelling or was caused by the builder. On the balance of probabilities, I am not satisfied that the impact damage to the roof was caused by any act or omission of the builder. In any case, the Capaldi Report does not explain how the impact damage may have contributed to the water ingress.
5. With regard to the excessive sealant, there is no evidence which establishes that it was installed by the builder. Indeed, the homeowner's own evidence is that on about 24 May 2020 he arranged for a plumber to carry out temporary repairs to address the water ingress, and that the plumber "put sealant around the box gutters". It is possible that the excessive sealant was applied by the plumber engaged by the homeowner. I am not satisfied that the excessive sealant was installed by the builder. In addition, the onus is on the homeowner to establish that the sealant installed by the builder was defective. Whilst Mr Capaldi says that the excessive sealant is "consistent with the Builder applying new sealant over failed sealant", without more, this is not enough to establish a failure of the underlying sealant. Moreover, Mr Capaldi's report does not explain how the issues with the sealant may have contributed to the water ingress.

Decision on method of rectification

1. It follows therefore that the only rectification required to address the defects caused by the builder is the installation of an overflow provision, rainwater head and sump to the box gutter and repairs to the damaged ceiling areas. As the homeowner's evidence does not establish that the roof pitch, the impact damage to the roof, or the excessive sealant are attributable to the water ingress, or that those issues are the responsibility of the builder, it follows that no rectification is required in respect of those items.
2. With regard to the repairs to the damaged ceiling, Mr Drexler proposes painting of the damaged surface of the ceiling whereas Mr Capaldi proposes more extensive works, including supply of a new soffit lining.
3. Mr Capaldi did not provide an adequate explanation as to why painting the water damaged areas will not suffice to rectify that damage and therefore I am not satisfied that the further works proposed by Mr Capaldi are required.
4. I am satisfied that painting to restore the water damaged ceiling will be sufficient to rectify the damage caused by the water ingress.
5. Both Mr Capaldi and Mr Drexler have provided a scope of works which addresses these issues. I prefer Mr Capaldi's scope of works as it is more detailed and thorough.
6. For the above reasons I am satisfied that the works set out in lines 4, 5, 6, 17 and 18 of section 1 of Appendix B to the Capaldi Report are the only works necessary to rectify the water staining and water ingress at the ground level entry porch. Those works comprise supply and installation of overflow and box gutter provisions and painting.

Defect 2 - Water staining and water ingress - first floor ceilings

1. This alleged defect relates to water staining and water ingress emanating from the main roof and balcony roof. The homeowner says that the defective roofing has caused water staining and water damage to the following areas of the first floor of the dwelling: the balcony soffit, bedroom 1 (master ensuite) and first floor leisure room.
2. It is not disputed that there is water ingress through the main roof. What is in dispute is the cause of the water ingress. Mr Capaldi says the water ingress is caused by the builder's defective roofing work whereas Mr Drexler says the issue is caused by the installation of solar panels carried out by tradespersons unconnected with the builder after construction of the dwelling.

Homeowner's expert

1. The Capaldi Report describes in detail Mr Capaldi's observations and conclusions regarding the main roof. He opines that the weatherproofing of the roof, failed sealants, lack of overflow provisions, corrosion to roofing components and low roof pitch are all defects attributable to the work of the builder and contributing to the water ingress.

Builder's expert

1. Mr Drexler says that the builder is not responsible for the rainwater penetrating through the main roof because in his opinion the water ingress is caused by the subsequent installation by others of the 54 solar panels and hundreds of hex bolts that have been screwed into the roof to secure the electrical conduit to the roof.
2. He does however, acknowledge that no overflows have been installed to the box gutters or rainwater heads.
3. With regard to other issues identified by Mr Capaldi Mr Drexler says: 1. He was instructed by the builder that he did not install the excessive sealants on the main roof and that they were installed by a handyman engaged by the homeowner; 2. He did not observe corrosion on the parapet cappings as described by Mr Capaldi. He says that it is his opinion that no such corrosion was observed because others had applied a flexible sealant to the cappings between the time of Mr Capaldi's inspection and the time of Mr Drexler's inspection.

Decision on defect

1. Having considered the evidence of both experts I prefer the evidence of Mr Capaldi in relation to the defective roofing work causing water ingress into the first floor. My reasons for this include:
2. Firstly, Mr Capaldi's report provides a more detailed explanation as to the investigations he carried out and the observations made by him in relation to each of the various defects identified, and cross-refers to the relevant provisions of the Australian Standards and National Construction Code. Mr Drexler's report does not contain the same level of detail in relation to the tests and investigations done by him.
3. Secondly, with regard to the pitch of the roof, whilst Mr Drexler said in his report that there is no evidence that it is contributing to water ingress, he did acknowledge during cross-examination that the low pitch of the roof is not in accordance with the National Construction Code.
4. Thirdly, Mr Drexler opines that the water ingress through the roof is caused by the installation of solar panels which was carried out after completion of the dwelling by a third party tradespersons. He says "It is my opinion that the rainwater penetration through the roof is occurring through the numerous penetrations through the roof due to the installation of the 54 solar panels and hundreds of hex head bolts that have been screwed into the roof to secure the electrical conduit to the roof by others". For the following reasons I am not convinced that solar panels caused the water ingress: 1. Firstly, the evidence establishes that the water ingress first occurred before installation of the solar panels. I am satisfied on the basis of the homeowner's uncontroverted evidence, supported by photographs, that the roof leak (including into the upstairs bedroom and leisure room) was first observed in November 2018 and again in early 2019. However, the solar panels were not installed until May 2020, more than one year after the water ingress was first observed. The timeline does not support Mr Drexler's explanation that the roof leak was caused by the installation of the solar panels. 2. Secondly, the water ingress is not occurring in the same part of the roof as where the solar panels are located. 3. Thirdly, Mr Drexler has provided no explanation as to why he has concluded that the cause of the water leak is the solar panels other than to say that the electrical conduit has been installed in a "haphazard manner" and that "blobs" of sealant have been "haphazardly installed where the electric conduit has been inserted in the sides of the solar panels instead of neat beads of sealant indicating the contractor who installed the sealant did so with sufficient care and skill". The fact that the solar panel installation may have not have been carried out with the level of precision Mr Drexler would have expected is not enough to establish that the installation caused the water leak. No explanation has been provided as to how the manner of installation of the electrical conduit or the "blobs" of sealant have contributed to the water ingress. 4. Fourthly, the evidence given by Mr Drexler regarding the water leak is inconsistent and contradictory. On the one hand he says that the water ingress is caused by the solar panels and on the other he recommends installation of overflows to box gutters. By contrast the evidence of Mr Capaldi on this issue is clear and consistent.
5. For all of these reasons I prefer the evidence of Mr Capaldi in relation to this issue and am satisfied that the weatherproofing of the roof, failed sealants, lack of overflow provisions, corrosion to roofing components and low roof pitch are all defects attributable to the work of the builder and contributing to the water ingress.

Decision on method of rectification

1. Mr Capaldi has provided a detailed scope of works for rectification of the defective works.
2. The scope of works put forward by Mr Drexler relates only to the connection of the downpipe and installation of overflows to box gutters and rainwater heads. These steps are largely the same as those proposed by Mr Capaldi with regard to those particular items. For the most part, Mr Drexler's report does not comment on Mr Capaldi's method of rectification other than to say that the ceilings in the main bedroom and first floor living room can be restored rather than replaced as "water damage of the ceiling consists of localised staining and flaking which is superficial only".
3. Given that Mr Capaldi's scope of works is largely unchallenged by Mr Drexler, I accept the works proposed by Mr Capaldi to rectify the defective roof. With regard to the method of rectification for the ceilings in the main bedroom and first floor living room, in view of the level of detail and consideration contained in the Capaldi Report compared to that contained in the Drexler Report, I prefer Mr Capaldi's evidence in relation to this issue.
4. For these reasons I am satisfied that the schedule of works set out in section 2 of Appendix B to the Capaldi Report are the works necessary to rectify the defective roof and associated damage.

Defect 3 - Lower northern and southern roof elevations - roofing and roof drainage

1. This defect relates to water ingress and water staining allegedly emanating from the lower northern and southern roof elevations.

Homeowner's expert

1. Mr Capaldi says that no overflow provision, rainwater head or sump have been provided to the box gutter section of the roof, that the weatherproofing of the roof has therefore been poorly undertaken and that this has resulted in damage to the underlying soffit. Mr Capaldi says that he also observed separation and delamination to the waterproof sealants, and darkened staining to the perimeter ceiling area of the southern bathroom
2. He says that if the defect is not rectified, further water ingress and damage are to be expected.
3. Mr Capaldi refers to a number of provisions of the National Construction Code with which the roofing works do not comply.

Builder's expert

1. Mr Drexler agrees that overflow provisions have not been installed to the box gutter.
2. However, he also says that rainwater penetration is not occurring through the lower north and south roof. He says that he observed "mould … along the edges of the ceiling in the ground floor bathroom, however, it is my opinion that the mould … is due to poor ventilation of the bathroom when the owners use the bathroom and not due to water penetration through the roof of the building since bathroom are wet rooms that cause mould to appear".
3. He says that he has reached this conclusion because the pattern of the mould "is not consistent with damage caused by water penetration through the roof". He says water damage would present as staining of the ceiling or flaking of the paintwork at the point of water entry rather than as an even band of mould along four edges of the bathroom ceiling.
4. He says that it is his opinion that the builder is not required to remove mould.

Decision on defect

1. Having considered the evidence of both experts I prefer the evidence of Mr Capaldi in relation to the roofing and roof drainage at the lower northern and southern roof elevations. My reasons for this include the following.
2. Firstly, Mr Capaldi's report provides a more detailed explanation as to the investigations he carried out and the observations made by him in relation to the defects identified. His report also cross-refers to the relevant provisions of the Australian Standards and National Construction Code. Mr Drexler's report does not contain the same level of detail in relation to any tests, investigations or observations.
3. Secondly, Mr Drexler concedes that no overflow provisions have been installed to the box gutter and that these require rectification. He does not dispute that these deficiencies are in breach of the Australian Standards and National Construction Code, the relevant provisions of which make plain that these items are necessary components of a waterproofing system.
4. Thirdly, Mr Drexler does not address the soffit damage, the separation and delamination to the waterproof sealants, or the darkened staining to the perimeter ceiling area of the southern bathroom all of which are identified in the Capaldi Report.
5. Fourthly, Mr Drexler focuses only on the mould in the bathroom which he says is caused by poor ventilation during the owners' use of the bathroom. I am not convinced by Mr Drexler's explanation regarding the cause of the mould. It is not supported by any literature or other materials supporting his opinion and Mr Drexler is not a biology or mycology expert. In any event, regardless of whether Mr Drexler is correct about the provenance of the mould, he has not provided a response to any of the other evidence of water ingress referred to by Mr Capaldi.
6. For all of these reasons I am satisfied that the defects identified by Mr Capaldi are established, that those defects have contributed to water emanating from the lower northern and southern roof elevations, and that the defects have resulted in damage to the external walls and internal ceilings.

Decision on method of rectification

1. The Capaldi Report contains a detailed scope of works which includes removal and installation of sealants to flashings and box gutters, supply and installation of overflow provisions, mould remediation, preparing and painting ceilings.
2. The Drexler Report also contains a scope of work which allows for installation of overflow provisions only. His report does not comment on Mr Capaldi's scope of works other than to say that the builder should not be responsible for mould remediation.
3. I accept that the works proposed by Mr Capaldi are appropriate to rectify the defects and damage which are established.
4. The one exception to this is with regard to mould remediation. The Capaldi Report refers to water staining and damage but does not refer to mould. The only reference to mould is in the proposed scope of works. The report contains no explanation regarding the provenance of the mould or why the builder should be responsible for mould remediation and I am not convinced on the basis of the scant evidence before me that the mould in the bathroom is caused by the waterproofing issues identified by Mr Capaldi.
5. For these reasons I am satisfied that the schedule of works set out in section 3 of Appendix B to the Capaldi Report are the works necessary to rectify the defective roof and associated damage, other than the works set out in line 8 (allow for mould remediation).

Defect 4 - Alfresco roof - water staining to the soffit linings and "ghosting" of the roof framing

1. This defect relates to water ingress and water staining emanating from the alfresco roof, including "ghosting" of the roof and ceiling framing.

Homeowner's expert

1. The Capaldi Report opines that there is inadequate insulation between the underside of the roof sheeting and the void where the soffit lining is attached. Mr Capaldi says that this has resulted in condensation within the roof space leading to water staining and "ghosting". Mr Capaldi gave oral evidence that "ghosting is where you get elevated moisture levels within the void between the soffit and the underside of a roof sheeting, and what happens there, you get condensation, and then the dust then gets attracted to the condensation, generally around the fixings of the soffit line, and you get these straight, darkened lines. You can tell exactly where the fixings are, because that's the dust accumulating, then once the dust accumulates, it absorbs the water, and the water then absorbs into the soffit lining."
2. Mr Capaldi also identifies: 1. inadequate provision for a water drip to the perimeter of the alfresco roof to stop water tracking on the surface of the soffit lining; and 2. failed water sealants, allowing for water ingress to the external corners of the alfresco.

Builder's expert

1. The Drexler Report concurs that the alfresco roof is stained but opines that this is due solely to the fact that no drip angle has been installed along the perimeter of the alfresco to prevent water flowing under the roof.

Decision on defect

1. Mr Drexler agrees that the failure to install a drip angle to the perimeter of the alfresco is a defect that requires rectification.
2. Mr Drexler does not agree that the insulation between the underside of the roof sheeting and the void where the soffit lining is attached is inadequate. His response to Mr Capaldi's evidence in this regard is that he removed a downlight in the alfresco ceiling and observed that a vapour barrier had been installed.
3. The difficulty with Mr Drexler's evidence in this regard is that whilst he may have observed a vapour barrier, his evidence does not address the adequacy or otherwise of the vapour barrier or blanket insulation or the method of installation. Mr Capaldi's report in contrast provides a relatively detailed explanation of "ghosting" which explains why in his opinion the water stains or "ghosting" on the ceiling are attributable to defective insulation. His oral evidence reinforced his written evidence. Mr Drexler concurred with Mr Capaldi's oral explanation of ghosting.
4. In the absence of any evidence from Mr Drexler regarding the effectiveness of the barrier he observed, I prefer Mr Capaldi's more detailed and reasoned explanation and am satisfied that the insulation between the underside of the roof sheeting and the void where the soffit lining is attached is defective.
5. Mr Drexler has provided no response to Mr Capaldi's evidence regarding the defective water sealants and therefore I see no reason not to accept Mr Capaldi's evidence in this regard.

Decision on method of rectification

1. Mr Capaldi has provided a detailed scope of works for rectification of the defective alfresco ceiling works.
2. The scope of works put forward by Mr Drexler relates only to the installation of a drip angle and repainting of the ceiling. Mr Drexler's report does not comment on Mr Capaldi's method of rectification other than to say that the soffit lining can be restored and repainted rather than replaced as "water damage of the ceiling consists of localised staining and flaking which is superficial only".
3. Given that Mr Capaldi's scope of works is largely unchallenged by Mr Drexler, I accept the works proposed by Mr Capaldi to rectify the defective roof. With regard to the method of rectification for the soffit lining, in view of the level of detail and consideration contained in the Capaldi Report compared to that contained in the Drexler Report, I prefer Mr Capaldi's evidence in relation to this issue.
4. For these reasons I am satisfied that the schedule of works set out in section 4 of Appendix B to the Capaldi Report are the works necessary to rectify the defective alfresco ceiling and associated damage.

Defect 5 - Balcony waterproofing failure and cracking to the soffit linings

1. This defect relates to the bedroom 1 balcony. The homeowner alleges failure of waterproofing and cracking to the soffit lining of the balcony.

Homeowner's expert

1. In the Capaldi Report Mr Capaldi states he observed two straight line cracks to the balcony soffit as well as water ingress and water staining from the roof above.
2. Mr Capaldi states that the internal floor level of bedroom 1 is level with the top surface of the balcony hob. He also says that there is no visible overflow provision installed to allow for water to drain to the external building envelope in times of excess rain, or in the event of a partial or full blockage to the designated floor waste.
3. Mr Capaldi says that as the hob and the internal floor are level, there is no freeboard provision which would result in water ingress internally.
4. Mr Capaldi says an overflow provision is required to be installed to the north east corner.
5. Mr Capaldi also says that he observed water ingress into the garage below the balcony (evidenced by water staining in the garage ceiling) and infers that the balcony (which acts partially as the roof of the garage) is therefore not adequately waterproofed. He says this inference is strengthened by the absence of an observable water stop angle to the rear face of the sliding door threshold to bedroom 1, and the absence of a grated linear drain to the door threshold.
6. Mr Capaldi refers to several Australian Standards with which he says the balcony/garage roof have not complied.

Builder's expert

1. Mr Drexler agrees that the balcony is above the garage and states that he observed staining on the ceiling of the garage.
2. Mr Drexler says that he observed that the level of the internal floor in the main bedroom is 200 mm above the floor of the balcony and that therefore "it is highly unlikely that water will overflow the balcony floor and enter into the main bedroom".
3. Mr Drexler says that in his opinion the staining of the ceiling in the garage is due to water penetration through the balcony floor since the balcony floor is located directly above the garage.
4. He opines that repair of the balcony floor to prevent water penetration will necessitate the replacement of the floor tiles and waterproofing membrane on the balcony.

Decision on defect

1. The experts agree that the balcony waterproofing is inadequate and requires rectification. However, there is no consensus in relation to the additional defects identified by Mr Capaldi.
2. Having considered the evidence of both experts I prefer the evidence of Mr Capaldi in relation to the defective balcony/garage roof roofing. My reasons for this include: 1. The Capaldi Report contains a more detailed explanation as to the investigations he carried out and the observations made by him in relation to the defects identified and the works required to rectify those defects. His report also cross-refers to the relevant provisions of the Australian Standards. Mr Drexler's report does not contain the same level of detail in relation to any tests, investigations or observations. 2. Mr Capaldi refers to measurements undertaken which revealed the internal floor level of bedroom to be level with the surface of the balcony hob. The Drexler Report refers to the level of the bedroom floor being above the level of the balcony floor but contains no comment in relation to Mr Capaldi's observation regarding the level of the balcony hob, or in relation to Mr Capaldi's evidence regarding the implications of those observations. Mr Capaldi's evidence in this regard is therefore unchallenged. 3. Similarly, while Mr Drexler agrees that the balcony waterproofing is defective, he does not refer to the other issues highlighted in the Capaldi Report so that Mr Capaldi's evidence regarding the various defects identified by him is largely unchallenged.

Decision on method of rectification

1. Mr Capaldi has provided a detailed scope of works for rectification of the balcony/garage roof.
2. The scope of works put forward by Mr Drexler overlaps considerably with the scope of works in the Capaldi Report but is significantly less detailed. The Drexler Report does not address whether Mr Drexler agrees or disagrees with the additional works set out in the Capaldi Report and therefore the scope of works put forward by Mr Capaldi is either agreed by Mr Drexler or unchallenged by him.
3. For these reasons I am satisfied that the works set out in section 5 of Appendix B to the Capaldi Report are the works necessary to rectify the defective balcony.

What is the cost of rectifying the established defects?

1. The homeowner claims a total of $144,095.44 to rectify defects 1 to 5.
2. The builder's evidence is that the total cost to repair those defects is $15,587.22.
3. The discrepancy in the experts' costings is in large part attributable to the difference of opinion in relation to the nature of the defects, and the scope of works required to address those defects. These issues have been addressed above. In addition, the experts disagree as to the hourly rates which should be allowed, the appropriate percentage for preliminaries and builder's margin, and whether allowances for contingencies and home owners warranty insurance should be made. I will deal with each of these in turn.

Hourly rates

1. Both experts agree that the wage rates set out in "Rawlinsons Construction Cost Guide 2021" (the Rawlinsons Guide) are an appropriate starting point. However, the Capaldi Report allows for higher rates than the Drexler Report because Mr Capaldi has increased the rates provided in the Rawlinsons Guide by 20%.
2. Mr Capaldi's explanation for this increase is set out in his report, and Mr Capaldi elaborated on the issue when giving oral evidence. His reasons for the increase include: 1. The Rawlinsons Guide states "Costs should be adjusted to take account of factors such as sloping sites, foundation problems, high wall to floor ratios, unusual shape and any special design factors where costs can vary considerably from the range given." 2. Rectification and remedial works attract higher labour rates than allowed in the Rawlinsons Guide because they are not working off "a clean slate or a flat block". Such works involve demolition of existing works "and underneath those works there could be more issues. So what we normally see is specialised trades … because with rectifying builders, they're actually held under a bit more scrutiny than the first builder … specialised trades equals additional cost." 3. The increase of 20% is based on Mr Capaldi's experience of labour costs applied by rectifying contractors. In addition, Mr Capaldi is in regular contact with remedial builders to ascertain the hourly rates they use.
3. Mr Drexler disagrees with Mr Capaldi's approach. He says "It is my opinion that since Mr Capaldi is relying on Rawlinsons for his rates, Rawlinsons then becomes the basis of his rates." He also says that: 1. Fluctuations in rates (ie increases and decreases) occur for a number of reasons "including highs and lows in the building cycle, highs and lows in the economic cycle, increases and decreases in immigration and various other macro economic reasons". 2. The Homeowner's property is a standard two level house not of "significantly different size or type" and "therefore there is no valid reason to increase the Rawlinsons rate by 20%". 3. The property is not on a sloping site, does not have foundation problems, does not have high wall to floor ratios, is not an unusual shape and does not have any special design factors where costs can vary considerably.
4. Having considered the evidence of both experts on this issue, I prefer the evidence of Mr Capaldi. Mr Capaldi has provided a sound explanation for increasing the rates provided in the Rawlinsons Guide by 20%, which is, in essence that remedial works attract a higher rate because remedial works by their very nature involve a higher degree of complexity. Mr Drexler did not address that issue, which is the basis for Mr Capaldi's opinion, in his report, and in cross-examination conceded that rectifying builders "sometimes" charge more.
5. Mr Capaldi has also provided a convincing explanation for the 20% adjustment, explaining that he regularly consults with remedial builders. Mr Drexler's evidence focuses on why the rates in the Rawlinsons Guide should not be increased, but does not provide an opinion as to the rate of increase proposed by Mr Capaldi. He also conceded in cross-examination that (unlike Mr Capaldi) he had not consulted with any remedial builders prior to preparing his report.
6. For these reasons I accept the hourly rates proposed by Mr Capaldi.

Preliminaries

1. Both experts agree that costings should include preliminaries as a percentage of net costs. Mr Capaldi says the percentage should be 11% and Mr Drexler says the percentage should be 10%.
2. Mr Capaldi says that Rawlinsons Guide states that a rate of between 8% to 14% should be allowed and that he has "formed the opinion that 11% is reasonable."
3. Mr Drexler says "it is my experience from working in the building industry over the past 24 years that 10% preliminaries is the standard … used in the building industry."
4. I am not convinced by Mr Capaldi's evidence in relation to this issue. He says that he has formed the opinion that 11% is reasonable, without providing any explanation as to how or why he reached that opinion.
5. Accordingly, I am not satisfied that preliminaries in excess of 10% should be allowed.

Builder's margin

1. Mr Capaldi says a builder's margin of 25% should be allowed whereas Mr Drexler says a builder's margin of 20% is appropriate.
2. Mr Capaldi says an allowance of 25% is reasonable "based on my experience".
3. Mr Drexler says "it is my experience from working in the building industry over the past 24 years that 20% … is the standard builders margin used in the building industry.
4. I am not convinced by Mr Capaldi's evidence in relation to this issue. He has provided no explanation as to how he formed the view that 25% is a reasonable builder's allowance other than that it is based on his experience. In circumstances where both Mr Capaldi and Mr Drexler have extensive experience in the building industry and have offered differing opinions as to the appropriate builder's margin, it would require a more detailed explanation from Mr Capaldi as to how he formed his view, to convince me to accept that 25% is an appropriate margin.
5. Therefore I find that a builder's margin of 20% is appropriate.

Contingencies

1. Mr Capaldi says that a contingency rate of 5% should be allowed.
2. Mr Drexler says no contingency should be allowed.
3. Mr Capaldi explains in his report that contingency "refers to costs that will probably occur based on past experience, but with some uncertainty regarding the amount. The contingency allowance is designed to cover items of cost which are not known exactly at the time of the estimate but which will occur. It also covers lag time and lost time due to events outside the control of the rectifying builders".
4. Mr Capaldi elaborated on this issue in oral evidence stating "contingency is an allowance for either unforeseen items that you can't see when you quote a job, that may be present or may be a latent defect; not until you remove one thing do you find something else. So that's what I've allowed the continency for".
5. The Capaldi Report includes a definition of contingency taken from the Association for Advancement of Cost Engineering International which is consistent with Mr Capaldi's explanation.
6. Mr Drexler says "it has been my experience … that builders do not include contingency amounts … because the repairs that are required are clearly understood… It is my opinion that the alleged defects in the works provided by Mr Capaldi can be clearly understood by the contractor … and no contingency amounts are necessary".
7. I am not convinced by the evidence before me that a clear scope of works means that a rectifying builder will not charge a contingency. In any event, having regard to the lack of agreement between the experts in relation to almost every alleged defect, as well as in relation to the scope of works required to address those defects, I do not agree that the works required to address the defects in this instance are necessarily clearly understood. The lack of agreement between the experts exposes that there is an inherent degree of complexity involved in repairing the defective roof.
8. I accept Mr Capaldi's cogent and persuasive explanation regarding contingencies and accept that it is appropriate in a matter such as this to make an allowance for contingencies.
9. Mr Capaldi's proposed rate of 5% was not addressed by Mr Drexler and in the absence of any evidence contradicting that rate I accept that a contingency rate of 5%, which is based on Mr Capaldi's extensive experience in the industry, is appropriate.

Insurance

1. Mr Capaldi has allowed for HBCF insurance based on a percentage rate of 1.5% of the total cost of the rectification works.
2. Mr Drexler has provided no opinion in relation to this issue.
3. As the amount to rectify the defective works will be well in excess of the prescribed amount of $20,000, the contractor who performs the rectification works will be required to obtain a contract of insurance in accordance with s 92 of the Act.
4. As Mr Capaldi's evidence is in effect unchallenged in relation to this issue, I accept that an allowance for such insurance at a rate of 1.5% should be awarded.

Conclusion in relation to costings

1. For ease of reference, the following table sets out my conclusions in relation to costings. Item Description Tribunal's decision Amount 1 Water staining and ingress ground floor entry porch. Per lines 4, 5, 6, 17 and 18 of Item 1 Capaldi Report. $1,230.35 2 Water staining and water ingress, first floor ceilings. Per item 2 of Capaldi Report. $58,825.23 3 Poorly constructed roofing and roof drainage. Ground floor north and south apron roofing. Per item 3 of Capaldi Report less $1800 allowed for mould remediation. $4,774.78. 4 Water staining to the soffit linings and 'ghosting of the roof framing. Ground floor alfresco. Per item 4 of Capaldi Report. $4,807.63 5 Balcony waterproofing failure and cracking to the soffit linings. Per item 5 Capaldi Report. $14,281.89 Subtotal $83,919.88 Preliminaries 10% $92,311.87 Builder's margin 20% $110,774.24 Contingency 5% $116,312.96 GST 10% Not disputed 127,944.25 Home Warranty Insurance 1.5% $129,863.41 TOTAL $129,863.41

Should the Tribunal make a work order or money order?

1. By reason of s 48MA of the Act, the Tribunal must have regard to the principle that rectification of defective work by the responsible party is the preferred outcome.
2. In Kurmond Homes Pty Ltd v Marsden [2018] NSWCATAP 23 at [41]-[46] the Appeal Panel stated as follows: While not appropriate to seek to define all circumstances that might justify a court or tribunal making an order that departs from the preferred outcome, it is necessary to give some consideration to the nature of the obligation imposed on the court or tribunal by s 48MA. First, the principle, by its terms, only applies "in determining a building claim involving an allegation of defective residential building work or specialist work". It is not expressed to apply where, for example, the building claim only involves an allegation of incomplete residential building work or specialist work. That is not to suggest s 48O does not otherwise permit a work order in respect of work found to be incomplete. Second, s 48MA is directed towards the remedy or "outcome" to be provided by the court or tribunal where a claimant establishes the responsible party has carried out defective residential building work or specialist work. In this sense, it is not properly described as a "presumption". Rather, it is a remedy to be "preferred" to other forms of order which the court or tribunal might make. Third, while s 48MA provides the court or tribunal "is to have regard to the principle that rectification of the defective work by the responsible party is the preferred outcome", the section does not mandate that a work order must be made in all cases. Further, the section does not confine the form of orders that may be made under s 48O, including an order that defective work be rectified by the responsible party engaging another person to carry out that work on behalf of the responsible party. Fourth, the term "preferred" is not defined. The HB Act and Regulations do not specify circumstances in which the preferred outcome is not to be adopted. However, guidance as to the meaning of "preferred" and the circumstances that would justify an order for a different outcome is found in the second reading speech where the Minister for Fair Trading makes clear that the purpose of the amendment was to: (1) prevent a homeowner from unreasonably refusing a builder access to a building site to rectify defective work; (2) permit a builder to return to carry out necessary rectification work if they are willing; and (3) support the timely and cost-effective resolution of disputes. That is, in deciding what order should be made, a court or tribunal may consider whether there is a reasonable basis for any objection raised by the homeowner to the builder being permitted to rectify the defective work, the terms of any order, whether the builder is willing to return and whether such an order would support a timely and cost effective resolution of the dispute.
3. Whether the Tribunal departs from the "preferred outcome" that the builder who performed the defective work involves the exercise of discretion (Leung v Alexakis [2018] NSWCATAP 11 at [139]; Robinson v Hindmarsh Construction Australia Pty Ltd [2021] NSWCATAP 51 at [66]).
4. In Culina v Timilty Constructions PL [2022] NSWCATCD 109 the Tribunal helpfully summarised the applicable principles relevant to exercise of the discretion: 14. Under HBA s 48MA, a work order is the preferred, not the mandatory, outcome for defective work: Galdona v Peacock [2017] NSWCATAP 64 at [65]. Personal animosity is not sufficient to displace the primacy of a work order for defective work, as the test is objective and the flexibility of s 48O permits an order that the builder fulfil a work order by engaging another party to carry out the work order on behalf of the builder. 15. However, relational breakdown is an element in objective assessment, as can be the builder's conduct in unrelated projects and as will be doubts about the builder's capacity or skills to undertake the required remediation, the builder's attitude to the standard of work done and willingness to return and the likelihood of further dispute not meaning that a work order would be a timely or cost-effective resolution: Owners SP 78465 v MD Constructions PL [2016] NSWSC 162 at [47]-[48]; Brooks v Gannon Constructions PL [2017] NSWCATCD 12 (appeal not affecting s 48MA decision); Galdona at [64]; BNT Constructions PL v Allen [2017] NSWCATAP 186 at [33]-[36]; Kumar v Sabharwal [2017] NSWCATAP 200 at [29]-[30]; Clements v Murphy [2018] NSWCATAP 152 at [30], citing with approval Kurmond Homes PL v Marsden [2018] NSWCATAP 23 at [31]-[32], [46]; Brennan Constructions PL v Davison [2018] NSWCATAP 210 at [15]-[21]. 16. A work order is always available as one of the range of choices under HBA s 48O, even though there is no statutory preference for it in respect of incomplete work and it would be unusual to direct a builder to complete work under a work order where the builder's performance is the reason for acceptance of repudiation or termination of the building contract: Clements at [22]-[33]. It would be otherwise where the owner repudiated or provided the grounds for termination of the contract: White v Sunrise Pools Aust PL [2017] NSWCATAP 216 at [5], [70]. 17. The ultimate litmus test for whether a work order should be made, and formulating its content, is whether it is appropriate, having regard to the fact that HBA s 48O(3) imports the requirement in s 79U(1) of the Fair Trading Act 1987 (NSW) that the orders will be fair and equitable to all the parties to the claim: Petropoulos v CPD Holdings PL t/as The Bathroom Exchange (No 2) [2018] NSWCATAP 233 at [28], [30], citing with approval Kurmond Homes PL v Marsden [2018] NSWCATAP 23 at [25].

The homeowner's submissions

1. The homeowner submits that a work order would not be appropriate in this case for the following reasons: 1. The relationship between the parties has irretrievably broken down. The homeowner says he and his wife are frightened of the builder as a consequence of his aggressive behaviour. 2. The builder has shown an unwillingness to come back and rectify defects. 3. The builder was required to rectify defects by a rectification order issued by Fair Trading but has failed or refused to do so. 4. When the builder did attend site in November/December 2018 he looked at the ceiling of the main bedroom and garage roof and did nothing on the basis that it was a 'small leak'. It may be inferred, it is submitted, that he was unwilling or unable to rectify the defects.

The builder's submissions

1. The builder's submissions in support of its position that a work order rather than a money order should be made include: 1. Section 48MA stipulates a mandatory preference for the making of a work order. 2. The homeowner's evidence about alleged animosity between himself and the builder's principal, Mr Mehcur, is "an elaborate and fanciful exaggeration designed to avoid a work order" and that the evidence does not establish that Mr Mechur was or would be violent or aggressive to the homeowner. 3. The homeowner has installed solar panels on the property after the builder vacated the premises. This has had the effect of increasing the rectification costs and "it would do grave injustice to require [the builder] to pay a money order which is inclusive of work required to undo subsequent work done by the [homeowner]". 4. The contract between the builder and its roofing sub-contractor requires the sub-contractor to rectify defective work within 48 hours of receipt of notice from the builder, and provides that if the sub-contractor does not comply with such obligation, the builder may itself make good the defects and the cost will be a debt owing by the sub-contractor to the builder. A money order would result in the builder's rights under that provision being extinguished as the builder would lose the opportunity to direct the sub-contractor to perform the work and recover liquidated damages if the sub-contractor fails to perform the work. The builder would then have to sue under an implied term and seek unliquidated damages which would unfairly increase the risk that the builder would be able to recover any loss suffered on account of the sub-contractor's breach. 5. Mr Mehcur would not need to personally return to the site to perform the work other than to inspect the completed work. 6. The Tribunal should assume, unless there is evidence to the contrary, that if a work order is made the builder will abide by it. 7. In circumstances where the builder's variation claim in the order of $543,968 was compromised to $100,000 it was not unreasonable for the builder to believe that the release also operated in respect of latent defects. 8. The non-compliance with the rectification order made by NSW Fair Trading was on the basis that the builder was of the assumption that the homeowner had released all defects, including latent defects. It is not an independent basis to find that the builder would not comply with a work order. In circumstances where the alleged release is now not pressed in the Tribunal, there is no basis that would allow the Tribunal to find that the builder would not comply with a work order.

Decision in relation to s 48MA

1. I will first consider the submission regarding the relationship between the parties.
2. The builder made lengthy submissions regarding the probity of the evidence given by Mr Iftikhar in relation to the behaviour of Mr Mehcur during and after the build and I have considered them carefully. Whilst I accept that Mr Iftikhar's evidence was emotional and at time inconsistent, I am not satisfied that this is enough to establish that his allegations against the builder are an "elaborate and fanciful" exaggeration cynically made for the purpose of casting aspersions on Mr Mechur's character and avoiding a work order.
3. Having considered all the evidence I accept that there has been animosity between Mr Iftikhar and Mr Mehcur and that there has been a relational breakdown between the parties. My reasons for this include the following:
4. Firstly, despite there being some inconsistencies and possibly overstatements in Mr Iftikhar's evidence, this is not enough to establish the serious allegation that he deliberately lied about being fearful of the builder for the purpose of avoiding a work order. In any event the builder's counsel did not specifically put to Mr Iftikhar during cross-examination that he was in fact content for the builder to return to the site, or that he was exaggerating simply to obtain a money order.
5. Secondly, the contemporaneous evidence - namely a police report - establishes that police attended Mr Iftikhar's home following a meeting between Mr Iftikhar and Mr Mehcur on 20 August 2018, that at that time Mr Iftikhar alleged to police that he had been assaulted, and that he told police that Mr Mehcur "got frustrated and pushed [Mr Iftikhar] on the shoulder and walked out."
6. Thirdly, Mr Mehcur's own affidavit evidence regarding that incident supports the allegation that Mr Mehcur's behaviour towards Mr Iftikhar was confrontational. He states that during a disagreement about monies allegedly owed, he said to Mr Iftikhar (following an alleged refusal by Mr Iftikhar to go his brother's house next door to discuss money matters) "Really how convenient, you say talk to him, he says talk to you and you say you are not talking to him. Get up let's go talk like adults" and that he then "held [Mr Iftikhar] by the arm and gently nudged him towards the door". He says that Mr Iftikhar then said "Don't touch me Marley".
7. Thus, even disregarding Mr and Mrs Iftikhar's extensive testimony on the subject, it is abundantly clear from the police report and from Mr Mehcur's own evidence that at the very least there was animosity between the parties, that Mr Mehcur used derisive, condescending language towards Mr Iftikhar, and that Mr Mehcur made unwanted and inappropriate physical contact with Mr Iftikhar.
8. Fourthly, Mr Iftikhar's evidence is that a subsequent meeting with Mr Mehcur on 17 September 2018 to discuss the occupation certificate took place at Merryland's shopping centre. Mr Iftikhar says he was afraid of Mr Mehcur and therefore chose a "neutral" venue". Mr Iftikhar's evidence in this regard was not disputed by Mr Mehcur and was not challenged in cross-examination and I accept it.
9. The different accounts given by the witnesses make it virtually impossible to know exactly what happened at the 20 August 2018 meeting, or during previous interactions. However, the fact that police were called on 20 August 2018, Mr Mehcur's own evidence about the way he acted towards Mr Iftikhar on that date, and the fact that Mr Iftikhar elected for the subsequent meeting to take place at a "neutral" venue because of his concerns about Mr Mehcur's behaviour, are sufficient for me to be satisfied that the Iftikhars' concerns about Mr Mehcur are genuine, and there has been a relational breakdown between the parties.
10. I will now turn to the allegation that the builder has shown an unwillingness to stand by its work and rectify the defects.
11. The relevant facts, established on the basis of the parties' respective evidence, are as follows: 1. At the meeting at Merrylands shopping centre in September 2018 the homeowner presented to Mr Mehcur a list of defects that he wanted repaired. The list did not include the leaking roof. Mr Mehcur says that during that meeting the parties agreed to the Release. 2. Later that day Mr Mehcur sent an email to the homeowner stating: Both parties have agreed to the following: 1. Upfront payment of $80,000 to be made on Monday 17 September 2018 by Junaid Iftikhar. 2. Builder to obtain an Occupation Certificate within 30 days of payment 1. 3. Upon receipt of the Occupation Certificate, Junaid Iftikhar is to make another payment for $20,000. This payment will bring the balance of the debt from the owner to the builder to zero dollars. 4. Junaid Iftikhar will be responsible to repair his own defects. 5. Full and final settlement of the matter between Rockwall Homes and Junaid Iftikhar. 1. The homeowner responded on the same day by email, stating "Just a question defect is painting / randring [sic] / stairs you talking right? Not anything to get occupancy defects". 2. Two days later the homeowner paid the builder $80,000. 3. On 30 August 2019 the homeowner received the final occupation certificate for the property. On or about the same day the homeowner paid the builder $20,000. 4. In November 2018 the homeowner first noticed that the roof was leaking. 5. Since being made aware of the leaking roof the builder has repeatedly refused to carry out rectification works citing that it has been released from the obligation to rectify defects. 6. On numerous occasions Mr Mehcur has stated that the builder would be willing to rectify the defects if the homeowner paid extra money. For example, at [72] of Mr Mechur's affidavit of 24 October 2022, Mr Mehcur says that he had the following exchange with the homeowner on or about 11 September 2021, following the issue of a rectification order by NSW Fair Trading (the Rectification Order): [Mr Mehcur]: I thought we had an agreement. You repair your own defects and I pay for the variations. [The homeowner]: Yes, but this is a major defect. I have a quote to remove the roof more than $80,000. [Mr Mehcur]: Ok, then why don't you pay me $50,000 and I will repair the roof. [The homeowner]: I will think about it. 1. Similarly, during cross-examination, Mr Mehcur said that he had said to Mr Skaliasi (of NSW Fair Trading) in September 2021 "I'm happy to fix the defect [being the leaking roof], as long as he pays me some money." 2. The builder failed to comply with the rectification order issued by NSW Fair Trading on 17 August 2021, which required the builder to attend to the leaking roof (the Rectification Order). 3. Throughout the proceedings key components of the builder's defence were that: 1. the effect of the Release was that the homeowner was estopped and precluded from bringing these proceedings, or in the alternative that the Release was a binding and enforceable agreement between the parties. 2. any loss or damage suffered by the homeowner was offset by the amount of $543,968.31 allegedly owed to the builder in respect of Contract variations. 1. On the second day of the hearing both of these aspects of the defence were dropped by the builder, with no explanation given.
12. Putting aside the fact that (as Mr Davie submitted during the first day of the hearing), a provision of an agreement or other instrument that purports to remove a person's rights in respect of a statutory warranty is void (see s 18G of the Act), I do not accept that the arrangement discussed by the parties in September 2018 sufficiently explains Mr Mehcur's repeated refusal to rectify the leaking roof. In this regard I am not satisfied that Mr Mehcur genuinely believed that the homeowner had agreed to release him from liability to rectify latent defects, such as the leaking roof the subject of these proceedings.
13. Looking first at the contemporaneous correspondence, the homeowner's response to Mr Mehcur's email of 17 September 2018 made it abundantly clear that the homeowner did not consider that he was releasing the builder from any defects other than those that had already been discussed (ie the stairs, the rendering and the painting).
14. Furthermore, in cross-examination Mr Mehcur conceded that the defects which the parties discussed when agreeing to the release were limited to the defects identified in the list the homeowner had brought to the September 2018 meeting. The relevant exchange is as follows: DAVIE: Patently, in that conversation, the defects being referred to by you were the number of defects in the list, weren't they? Because those were the defects under discussion. MEHCUR: Those were the defects he was referring to, yes.
15. The defects identified in the homeowner's list did not include the leaking roof because that defect had not yet become apparent at that time.
16. Moreover, Mr Mehcur's own affidavit evidence is not consistent with his assertion that he believed the Release included latent defects. For example, in relation to the conversation between Mr Mehcur and the homeowner on around 11 September 2021 it is irrational that, if Mr Mehcur genuinely believed he had no obligation to rectify the leaking roof, he would have offered to carry out such significant repairs for $50,000. Not only was this $30,000 less than the price which the homeowner said he had been quoted by another builder, but the offer was made in circumstances where the builder had not prepared a scope of works or carried out its own investigations to identify the cause or extent of the leak.
17. For these reasons I do not accept that the purported Release sufficiently explains the builder's repeated refusal to carry out the roof repairs and overall, the builder's approach causes me to have serious concerns about its attitude to the standard of work done, its willingness to return, and the likelihood of further dispute.
18. I would add that it would seem to be inherently contradictory for the builder to repeatedly refuse to carry out the roof repairs because of the Release, and then to abandon this key part of its defence on the second day of the hearing. No explanation was provided for this decision, but presumably it was made following a consideration of the merits of the defence. The builder cannot "have its cake and eat it too". If it genuinely considered that it was released from the obligation to carry out the roof repairs, then it is incongruous that it did not seek to press this defence.
19. The builder's position is not advanced by its submission that it was reasonable for the builder to believe that the release operated in respect of latent defects in circumstances where its variations claim was compromised from $543,968 to $100,000. First of all, whether or not such a belief was reasonable is of no moment given that I am not satisfied that the builder did in fact hold the belief that the release covered latent defects. In any event, there is scant evidence before me as to the extent of the defects which were already known at the time of the alleged Release and no evidence as to what it would have cost to repair them. It is also worth adding that there is a serious disagreement between the parties as to the validity of the $543,968 variations claim. As the builder abandoned his set-off defence on the second day of the hearing, that dispute is not a matter that I am able to determine.
20. The builder's submission that its non-compliance with the Rectification Order was on the basis that all defects including latent defects had been released also does not assist the builder. Compliance with a Rectification Order is mandatory because it is a condition of every builder's licence: s 48E(5) of the Act.
21. For all these reasons, I am concerned that there would be a likelihood of further dispute if a work order was made, meaning that a work order in these circumstances would not be a timely or cost-effective solution to the dispute.
22. I will now turn to the other submissions made by the builder as to why it says a work order should be made.
23. The builder's submission regarding the homeowner's installation of solar panels is not convincing. There was no suggestion that it was unreasonable or inappropriate for the homeowner to install solar panels and no argument was made that this involved a failure to mitigate loss. In any event, even if a work order was made, the rectification works would still involve removal and replacement of the solar panels at the builder's expense.
24. I am not persuaded by the argument regarding the builder's contract with SSR. Firstly, the terms of the contractual relationship between the builder and its sub-contractors is a matter which is entirely out of the control or knowledge of the homeowner. Secondly, the builder has had ample opportunity to exercise its contractual right to require SSR to rectify the defects by serving a notice on SSR, yet there is no evidence of it having done so. This is another example of the builder's unwillingness to stand behind its work and rectify defects, and does not counter against the Tribunal making a money order.
25. The argument that Mr Mehcur would not need to return to site personally to perform the work other than to inspect SSR's completed work is problematic. There is no evidence of the arrangements the builder has in place for the work to be done (whether by SSR or otherwise) and in any event Mr Mehcur presumably would need to attend site to supervise the work and ensure it is done properly.
26. For all of these reasons I am satisfied that a money order is the appropriate remedy in the circumstances.

Orders

1. I make the following orders: 1. The respondent is to pay the applicant $129,863.41 within 14 days of the date of these orders. 2. If there is a costs application, the costs applicant is to file and serve submissions and documents on the costs application by 14 days from the date of these orders. 3. The costs respondent is to file and serve submissions and documents on the costs application by 28 days from the date of these orders. 4. The costs applicant is to file and serve costs submissions in reply by 35 days from the date of these orders. 5. The costs submissions of the parties are to state whether the parties seek an oral hearing on the issue of costs, or consent to the costs application being determined on the papers in accordance with s 50 (2) of the Civil and Administrative Tribunal Act 2013 (NSW). 6. The Tribunal may determine it appropriate to deal with any costs application on the papers and without a further oral hearing.

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 17 July 2023