Jing Sun v Jun Li; Jun Li v Jing Sun

Jing Sun v Jun Li; Jun Li v Jing Sun - [2016] NSWCATAP 112 - NSWCATAP 2016 case summary — Zoe

[3]

The Proceedings Below

It is only necessary to give a brief summary of the proceedings below. The summary is taken from the reasons of the Tribunal at [4]-[14]. None of the findings in those paragraphs are challenged on appeal.
The Owner commenced proceedings (HB 14/59080) against the Builder seeking damages in the sum of $99,155.15, later reduced to $58,950.15 (being $99,255.15 less the amount of $40,205 which was the amount claimed by the builder as the unpaid balance of the contract price (see reasons at [1]).
The Builder commenced proceedings against the Owner seeking the sum of $40,205 calculated by deducting the total amount said to have been paid by the Owner ($72,300) from the contract price of $119,735. As the Tribunal noted, that calculation resulted in a sum of $47,435, but the Builder claimed, and the Tribunal accepted, that the Owner's progress payments had excluded GST which the Builder assessed at $7,230 (being 10% of the $72,300 paid by the Owner) (see reasons at [2]and [144].
The parties had entered into a Fair Trading "Home Building Contract for Work over $5,000" on 3 May 2014. Work commenced on 13 May 2014 and progress payments were initially made by the Owner. Disputes arose and eventually on 30 September 2014 the Owner issued a Notice of Intention to Terminate based on clauses 6 and 25 of the Contract. Various other controversies arose, such as each of the Builder and the Owner changing locks at the premises to lock the other out and involvement of the police to allow materials to be removed. It is unnecessary to recite the details.
There was extensive evidence, including expert evidence, and submissions filed and served by each party in the proceedings below. There was cross-examination of the experts, including as to the alleged defects and the joint Scott Schedule prepared by them. The Tribunal had the advantage of seeing and hearing the witnesses before it. There was a dispute as to whether the Contract had been terminated by the Owner, and if so, the consequences of the termination. There was also a dispute as to the nature of any defects resulting from the work undertaken by the Builder before the termination of the Contract and the quantum of any damages payable to the Owner.
In summary (see reasons at [72] -[145]) the Tribunal found: 1. The Owner was entitled to and did effectively terminate the Contract on 25 October 2014 by the notice referred to above; 2. As a result of the termination, the premises were effectively taken over by the Owner and any loss suffered by him by reason of defective and incomplete was to be calculated from the date of termination; 3. The Contract price was $119,735 of which the Owner had paid $72,300 (exclusive of GST); 4. The Owner was obliged to pay the Builder the sum of $7,230 for the GST on the sums paid. The Builder's claim that he was entitled to the balance of the Contract price (which was not a claim for payment of work already done, but work yet to be done in accordance with scope of works in the Contract) was rejected; 5. The Owner's claim for compensation being the cost for him to complete the works specified under the Contract as at the date of termination, was rejected; 6. The Owner's claim for compensation for costs of rectification of defective works was allowed in part. There was agreement between the experts for the parties in relation to items 1,2,4,10,13,14,17 and 18 of the Joint Scott Schedule. The Builder had asserted that items 7,8 and 9 in the Joint Scott Schedule were outside of the scope of works for the Contract but this argument was rejected by the Tribunal and the amounts as agreed in the Joint Scott Schedule were allowed; 7. The Tribunal analysed the evidence and material with respect to the outstanding claims by the Owner. It decided some in favour of the Owner based upon his expert (items 3 and 15) and others in favour of the Builder either based on his expert of because the Owner had failed to prove the claim (items 5, 6,11,12 and 16); 8. In its reasons issued on 10 December 2015 the Tribunal originally allowed the Owner the sum of $28,657.80. Subsequently, the Owner wrote to the Tribunal noting that this figure ought to include GST and seeking to be heard on costs. Accordingly, the Tribunal amended its reasons on 12 January 2016 such that it allowed the Owner the sum of $28,657.80 plus GST being a total of $31,523.58 but it did not make any arrangements for a hearing as to costs. 9. The Tribunal set off from the amount found in favour of the Owner the amount of GST payable to the Builder such that it ordered the Builder to pay to the Owner the sum of $24,293.58.

[4]

Principles Applicable for Leave to Appeal

Where a party to proceedings in the Consumer and Commercial Division of the Tribunal seeks to appeal on matters other than those which raise questions of law leave is required: cl 12 of Sch 4 to the Civil and Administrative Tribunal Act 2013 (the CAT Act). The principles applicable in such circumstances are well known: see Collins v Urban [2014] NSWCATAP 17 where at [76]-[79] and at [84] the Appeal Panel said: "[76] Accordingly, it should be accepted that a substantial miscarriage of justice may have been suffered because of any of the circumstances referred to in cl 12(1)(a), (b) or (c) where there was a "significant possibility" or a "chance which was fairly open" that a different and more favourable result would have been achieved for the appellant had the relevant circumstance in para (a) or (b) not occurred or if the fresh evidence under para (c) had been before the Tribunal at first instance. [77] As to the particular grounds in cl 12(1)(a) and (b), without seeking to be exhaustive in any way, the authorities establish that: If there has been a denial of procedural fairness the decision under appeal can be said to have been "not fair and equitable" - Hutchings v CTTT [2008] NSWSC 717 at [35], Atkinson v Crowley [2011] NSWCA 194 at [12]. The decision under appeal can be said to be "against the weight of evidence" (which is an expression also used to describe a ground upon which a jury verdict can be set aside) where the evidence in its totality preponderates so strongly against the conclusion found by the tribunal at first instance that it can be said that the conclusion was not one that a reasonable tribunal member could reach - Calin v The Greater Union Organisation Pty Ltd (1991) 173 CLR 33 at 41-42, Mainteck Services Pty Limited v Stein Heurtey SA [2013] NSWSC 266 at [153]. [78] If in either of those circumstances the appellant may have been deprived of a "significant possibility" or a "chance which was fairly open" that a different and more favourable result would have been achieved then the Appeal Panel may be satisfied that the appellant may have suffered a substantial miscarriage of justice because the decision was not fair and equitable or because the decision was against the weight of the evidence. [79] In order to show that a party has been deprived of a "significant possibility" or a "chance which was fairly open" of achieving a different and more favourable result because of one of the circumstances referred to in cl 12(1)(a), (b) or (c), it will be generally be necessary for the party to explain what its case would have been and show that it was fairly arguable. If the party fails to do this, even if there has been a denial of procedural fairness, the Appeal Panel may conclude that it is not satisfied that any substantial miscarriage of justice may have occurred - see the general discussion in Kyriakou v Long [2013] NSWSC 1890 at [32] ff concerning the corresponding provisions of s 68 of the CTTT Act and especially at [46] and [55]. [84] The general principles derived from these cases can be summarised as follows: (1) In order to be granted leave to appeal, the applicant must demonstrate something more than that the primary decision maker was arguably wrong in the conclusion arrived at or that there was a bona fide challenge to an issue of fact: BHP Billiton Ltd v Dunning [2013] NSWCA 421 at [19] and the authorities cited there, Nakad v Commissioner of Police, NSW Police Force [2014] NSWCATAP 10 at [45]; (2) Ordinarily it is appropriate to grant leave to appeal only in matters that involve: issues of principle; questions of public importance or matters of administration or policy which might have general application; or an injustice which is reasonably clear, in the sense of going beyond merely what is arguable, or an error that is plain and readily apparent which is central to the Tribunal's decision and not merely peripheral, so that it would be unjust to allow the finding to stand; a factual error that was unreasonably arrived at and clearly mistaken; or the Tribunal having gone about the fact finding process in such an unorthodox manner or in such a way that it was likely to produce an unfair result so that it would be in the interests of justice for it to be reviewed. (3) In relation to an application for leave to appeal relating to a question of practice and procedure, the application is to be approached with the restraint applied by an appellate court when reviewing such decisions, especially if the application is made during the course of a hearing: BHP Billiton Ltd v Dunning [2013] NSWCA 421 at [21] and the authorities cited there.
Additionally, the Appeal Panel has stated in Pholi v Wearne [2014] NSWCATAP 78 at [31]: "Even if the appellant establishes that [they] may have suffered a substantial miscarriage of justice in the sense explained above, the Appeal Panel then retains the discretion whether to grant leave under s 80(2) of the Act (see Collins v Urban, supra at [80]-[84]). [The appellant] must demonstrate something more than that the Tribunal was arguably wrong. Leave is ordinarily granted only where the matter involves an issue of principle, questions of public importance, where the injustice is reasonably clear or where the Tribunal has gone about its fact finding process in such an unorthodox manner that it is likely to have produced an unfair result."
It is these principles we will apply in considering the two appeals before us.

[5]

The Owner's Appeal - AP 16/00765

The Owner seeks leave to appeal against the Tribunal's reasons. He seeks orders overturning the Tribunal's order that he pay the Builder any amount of GST and that the Builder's proceedings be dismissed. He also seeks orders that the Builder provide to him a Certificate of Termite Management System and as can be seen below, other certificates as well as payment from the Builder of additional amounts for items 6, 11 & 12 and for legal costs and expert fees.
The Owner accepts he needs leave to appeal. We agree he needs leave on the grounds of appeal identified by him but for one ground, namely the ground dealing with his legal costs and expert fees. As will be seen, we are of the view that the Tribunal failed to provide procedural fairness to the Owner in dealing with his application for payment of those amounts. That is an error of law (see for example, Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 at [13]) and the Owner can appeal as of right with respect to that ground.
The Owner stated 6 grounds of appeal. They are (as stated in the Notice of Appeal): 1. Failure to add GST component when calculating the cost of rectification; 2. Failure to justify the defective item 6. Both the Tribunal and the builder's expert Mr Foster failed to verify two assumptions, 1) the structural engineer had inspected the pier and, 2) the engineer design was defective. My affidavit dated 14 July 2015 was the further evidence from the engineer and appeared to contradict Mr Foster's assumptions, however, it was rejected at the final hearing; 3. Failure to justify the defective item 11 & 12. Both the tribunal and the builder's expert Mr Foster failed to verify the assumption that I had already been issued the waterproofing certificate. The assumption was false and had no factual basis; 4. Failure to consider Home Warranty Insurance for the order of HB 15/0536 which was against the s 92 & s 94 of the Home Building Act 1989 No 147 in regard to home warranty insurance purchased partly by the builder; 5. Failure to give proper consideration to the fact that the builder had failed to provide: 1. The Certificate on Method of Termite System which the builder is holding right now, 2. The waterproofing certificate, 3. The proper plumbing certificate; 1. Failure to afford the parties an opportunity to make submissions on the issue of costs.

[9]

Ground 2

This ground relates to item 6 in the Joint Scott Schedule. This item is in relation to a brick pier constructed at the Owner's premises. The Owner alleges that the brick pier was built on an existing footpath at the premises without any or any adequate footings and is thus defective. The Builder said that he built the pier according to the engineering drawings provided to him.
The Tribunal dealt with this claim at [132] of the reasons. It held that neither expert made a finding that the pier was defective. The Owner's expert, Mr Nash-Smith, noted the lack of footings and stated an appropriate expert report be obtained. The Builder's expert, Mr Foster, noted that the Builder followed the engineer's drawings. The Tribunal found in accordance with the submissions by the Owner, that in appropriate cases an experienced builder should be able to determine whether there is an error in particular drawings and if there is, the builder should bring that error to the attention of the owner. The Tribunal found, however, that there was simply no evidence that the pier was defective as built and dismissed the Owner's claim for this item.
On appeal, the Owner submits that the Tribunal erred in finding that there was no evidence that the pier was defective. As we understood from his Notice of Appeal, written submissions and oral submissions, he submitted that he ought be granted leave to appeal on this ground as the decision was unfair or inequitable, against the weight of the evidence and he had thus suffered a substantial miscarriage of justice.
The Owner took the Appeal Panel to each of the experts' reports dealing with this item (see Owner's Bundle AP-O-1-5 p 13 and AP-O-4 p 8 and AP-B-2 p 15-17). He submitted that those reports showed that the experts both considered the pier to be defective. We do not agree that is what the reports say. The reports do not find that the pier was defective. The Builder's expert noted that the pier was built in accordance with the drawings of the engineer. The highest that the report in reply of the Owner's expert gets to is that if the Builder constructed the pier in accordance with the engineer's drawings, he ought to have sought instructions from the engineer as to whether building them on the footpath was appropriate and in accordance with the relevant standard. As the Tribunal held, there is no evidence that the pier as built was defective.
The Owner also took the Appeal Panel to the relevant part of his cross examination of the Builder's expert. He extracted this passage at [11] of his written submissions. He submitted that in this passage Mr Foster accepted that the pier was defective. We do not agree that this concession can be drawn from the passage of the cross-examination identified. The highest the passages identified get to is that Mr Foster accepted, when put to him by the Owner, that if it is found the footpath on which the pier was built was not suitable to support it, the engineering drawings were defective in design and, that being so, the Owner should take that matter up with the engineer. Leaving aside the fact that there is no finding that the footpath was not suitable as a support, the passage extracted does not support the Owner's submission that the Builder's expert conceded that the pier was defective.
The final matter raised by the Owner in respect to this ground is the failure by the Tribunal to allow him to rely on an affidavit sworn by him on 14 July 2015. The Tribunal refused to allow him to rely on this affidavit as it was late in being served and there had been no leave granted for the Owner to rely on additional material (see [19] of the reasons). In the Notice of Appeal the Owner asserted that the Appeal Panel ought to receive this affidavit as it was new evidence not available at the time of the hearing. That is clearly incorrect.
In fact, as the Owner appeared to accept at the Appeal Panel hearing, he was seeking to challenge the Tribunal's discretion to refuse him leave to read this affidavit at the hearing below. We see no basis to interfere with the Tribunal's ruling. There were directions made on 22 May 2015 which required evidence in chief and in reply to be filed and served by 4 June 2015. This was done. The Tribunal was entitled to refuse leave to the Owner to rely on the late affidavit when objection was taken to it by the Builder. In so far as the Owner seeks to tender the affidavit as new evidence in the appeal, we reject the tender.
The Owner also made submissions about the Builder's misconceived reliance on a possible defence under s 18F of the Home Building Act 1989 in respect to this item. However, as we have found no error in the Tribunal's reasoning in dealing with this item, we do not need to deal with that issue.
We find no error in the Tribunal's findings on this item. Ground 2 is rejected.

[10]

Ground 3

This ground relates to items 11 and 12 in the Joint Scott Schedule. Those items were dealt with at [134]-[138] of the reasons. The items relate to defective water stops in the bathrooms. The Tribunal held that there was no evidence that the waterproofing in the bathrooms was generally unsatisfactory. It rejected the Owner's expert opinion that as a subsequent builder coming in to fix the defect with the water stops cannot know whether there are defects in the waterproofing generally, a general approach should be taken and allowance made for the total re-waterproofing of the bathrooms. The Tribunal preferred the Builder's expert opinion that the only agreed defect identified by the experts was the door entry water stop in the bathrooms. Thus, the only amount allowed should be to fix the identified defects. The Tribunal held that the Owner's expert did not set out a proper reason for his general approach and it was speculation to opine on what a hypothetical new builder would require.
The Owner submits that the experts' findings were based on the wrong assumption that the Owner had been provided with a waterproofing certificate by the Builder. No waterproofing certificate has, in fact, been provided. The Owner submits that Mr Foster conceded in cross-examination that he had assumed a waterproofing certificate had been issued whereas none had (see the Owner's written submissions at [22]). However, a reading of the cross examination referred to shows that whilst it is apparent that the Builder's expert did not know that the waterproofing certificate had not been provided, he did not as a result concede that the whole of each of the bathrooms needed to be re-waterproofed. The absence of a waterproofing certificate does not invalidate his approach, which was accepted by the Tribunal. That is that in order to fix the agreed defect the only work reasonably necessary was to fix the water stoppers at the bathroom doors. It would not be necessary nor reasonable to order the Builder to pay for the re-waterproofing of the whole of each of the bathrooms when it has not been shown that there is any defect in the waterproofing itself (see Bellgrove v Eldrige (1954) 9 CLR 613 at 619).
We can find no error in the Tribunal's reasons in preferring the Builder's expert to the Owner's expert. We reject this ground.

[11]

Ground 4

This ground relates to an issue with respect to the Home Warranty Insurance taken out by the Builder for the job. The Builder took out such insurance in the sum of $70,000.00. The Owner received a copy of the certificate for the insurance on 5 May 2014. The final Contract price was over $119,000.00.
The Owner submits that because the Builder did not have Home Warranty Building Insurance in the full amount of the Contract price, the Builder is in breach of the provisions of the HB Act and cannot be paid any money. He therefore submits that as he has already paid the Builder the sum of $70,000 for work done under the Contract, and that is the extent of the insurance, the Tribunal could not order him to pay the GST amount (or any other amount) to the Builder. The Owner complains that the Tribunal did not refer to his submissions about this issue in its reasons.
This ground misconstrues the requirements for a contractor to take out insurance under the relevant provisions of the HB Act and HB Regulations. It is not disputed that the Builder did take out such insurance. The Certificate which the Builder provided to the Owner is in the Owner's Bundle at AP-O-1-D. It states that a contract of insurance complying with sections 92 and 96 of the HB Act was issued by QBE Insurance (Australia) Ltd in favour of the Builder. The Owner would be included in the beneficiaries of the policy. We have not been provided with a copy of the policy wording.
True it is that the certificate states that the declared contract price is $70,000.00, whereas the true contract price was $119,000.00. However, we do not accept that the Builder is therefore, necessarily, in breach of the HB Act or Regulations. The purpose of such insurance is to protect parties entering into relevant building contracts with contractors for loss and damage resulting from the non-completion of the contracted work, or from a breach of statutory warranty in respect of which the beneficiaries (relevantly here the Owner) cannot recover from the contractor because of the insolvency, death or disappearance of the contractor or the suspension of the contractor's licence pursuant to s 42 of the HB Act (see HB Reg 40). In this case there is no suggestion that the Builder is insolvent of cannot pay the amounts he has been ordered to pay. Indeed, he has appeared at the hearing below and at the Appeal Panel and vigorously pursued his claim and defended that of the Owner.
There is nothing in the relevant sections of the HB Act, or the HB Regulations, which expressly provides that the amount of insurance must equal the contract price. Section 102(3) of the HB Act provides that the contract of insurance must provide cover of not less than the amount prescribed by the regulations. Regulation 45 prescribes $340,000 for each dwelling as the minimum amount of cover. We have referred to the certificate which states that the cover taken out by the Builder complies with the relevant provisions of the HB Act. We assume, therefore, it provides insurance at least to the minimum amount of cover.
In any event, if it was said that the Builder failed in his duty of disclosure or that contract was entered into by reason of a misrepresentation by the Builder by him not stating the correct contract price (and we do not say that this is the case) Regulation 38 provides that an insurance contract must contain (and is taken to contain) a provision to the effect that the insurer is not entitled either to refuse to pay a claim under the contract or to cancel the contract on the ground that the contract was obtained by misrepresentation or non-disclosure by the contractor or that the policy premium was not paid providing, in the latter case, that a certificate evidencing insurance has been given or the insurer has otherwise accepted cover.
There is no merit in the Owner's submission that he should not be ordered to pay the Builder the GST which would otherwise be payable for the work undertaken by him and for which he would be liable to account, on the basis that a different contract price was declared by the Builder in obtaining the required insurance. We reject this ground.

[12]

Ground 5

Ground 5 asserts that the Tribunal did not give proper consideration to the fact that the Builder had failed to provide certificates for the termite system, waterproofing or plumbing work undertaken. It is not clear what effect it is said this has on the Tribunal's reasons or the orders which were made. The Notice of Appeal states that the Appeal Panel ought to make an order that the Builder provide to the Owner a Certificate for Method of Termite Management System. In his written submission the Owner also referred to the absence of the waterproofing certificate and plumbing certificate.
The Owner's application to the Tribunal in HB 14/59080 did seek orders that these certificates be provided to him. He has referred us to submissions made to the Tribunal where he addressed these matters (see for example his submissions dated 14 August 2015 at Owner's Bundle AP-O-7). Those submissions make reference to the requirement that he be provided with an occupation certificate under the Environmental Planning and Assessment Act 1979 (the EPA Act) before he can commence occupation of the premises, and that the relevant certificates are required before an occupation certificate can be provided. We note that the reference he gave as to what needs to be done to obtain an occupation certificate (which reference to the EPA Act did not have a section number) does not correspond to the relevant sections of the EPA Act as currently in force which deal with the provision of those certificates. We were informed from the Bar table that no occupation certificate has been issued. We were also informed that there is a private certifier for the project. We were told by the Builder that he has documents which may be relevant to the issue of any relevant certificate, including an occupation certificate, but he has not provided them to the Owner or to the private certifier. We do not know why, but certainly there is no reason why the Builder should not provide all such material in his possession to the Owner.
It is true, as the Owner submits, that the Tribunal did not deal with this aspect of his application. We are not being critical of the Tribunal when we note that fact; the Tribunal was faced with an unusually voluminous amount of submissions and reply submissions by both parties on every conceivable point. However, it remains the fact that the Tribunal did not deal with this matter. It seems to us that the Tribunal does have the power to order the provision of any relevant certificates (if appropriate) or that the Builder provide all information in his possession to the Owner in determining the building claim before it: see s 48O HB Act.
We do not have a proper and full understanding of the scope of the work undertaken, or that which needs to be completed, in order for the Builder to be able to issue whatever relevant certificates are required, or whether indeed such certificates ought to be required. We would certainly not order the Builder to issue such certificates unless there was adequate evidence before us as to the work done and the requirement for the issue of such certificates.
In the circumstances, we accept that the Owner may have suffered a substantial miscarriage of justice by the Tribunal failing to deal with this issue. He may be prejudiced by the fact that the private certifier may not be able to issue an occupation certificate without the relevant certificates from, or material indicating the work undertaken by, the Builder. We are of the view that the Owner should have leave to appeal this part of the Tribunal's decision and that this issue ought to be remitted to the Tribunal, as previously constituted, to be determined.

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