John Boyd t/as Kalana Homes v Spurr

The Appeal

1. As noted above, Kalana Homes appeals from the decisions made in respect of Items 1, 3 and 4 and in respect of the decision to make a money order rather than a work order. Kalana Homes also refers to the costs order which was subsequently made by the Tribunal and states that, in the event that the appeal is successful, the costs orders should reflect any changes. In addition, Kalana Homes disputes the original costs orders and states that the original price for rectification work was highly exaggerated thus bringing the claim within the costs provisions. It is also stated that the Tribunal has made the costs order based on the number of items "won" and has not considered the reduction in quantum from the original application.

Item 1 - Front path - Weepholes and termite barrier concealed

1. At the hearing before the Tribunal, both experts agreed that the path to the front entry of the house conceals the weepholes and breaches the termite protection barrier at that location. This issue was also found to be a defect by the Fair Trading Inspector as there is non-compliance with the relevant Australian Standard. The experts, however, differed on the method and cost of rectification, with Mr Waddell stating the path needs to be rebuilt while Mr Haslam said that to rebuild it is out of proportion to the issue. At the hearing it appears that Kalana Homes argued that the path could be lowered without removing it.
2. Kalana Homes also referred to an instruction from Mr and Mrs Spurr that the path was not to be rectified. The Senior Member placed no weight on the instruction as it was issued well after the work was completed. It appears that Mr and Mrs Spurr asked Kalana Homes to rectify the path as there was a trip hazard where it joined the patio. Kalana Homes states that it raised the footpath at their request to remove the trip hazard.
3. In the appeal Kalana Homes states that it should not have been found responsible for any defect. As we understand it, the arguments are twofold. First, that Mr and Mrs Spurr should not be permitted to allege that the footpath is defective as they signed a document stating they did not want the path lowered. Second, even though the weepholes are partially covered in breach of the Australian Standard, no water is entering the building from the weepholes which means there are no unhealthy or dangerous conditions, or loss of amenity for the occupants, and no undue dampness or deterioration of building elements. Kalana Homes states that this indicates that the weepholes are performing as required by the Building Code of Australia and there is therefore no defect.
4. Mr and Mrs Spurr state the path has never been raised by the builder and, as noted by the Fair Trading Inspector, was defective from the beginning. They state that they signed the document referred to by the builder as they did not want the path moved as they needed to prove it was not poured correctly. They state that the termite barrier has been breached and the weepholes partially covered from the time the path was poured. They contend the Tribunal's decision was correct in this regard.

Item 3 - Ensuite and bathroom - leaking shower recess

1. There was disagreement between the experts at the hearing on whether there was any leak from the ensuite or bathroom shower recesses and, if there was any leak, its cause. Mr Waddell observed elevated moisture levels, efflorescence in some grout lines and water damage to the ensuite vanity. The fall on the floors was also less than required by the standard. He concluded that the non-installation of a drainage flange had led to excessive amounts of water being retained in the tile bed of the shower recess. He stated that, because of poor detailing of the waterproof membrane around the shower recess, the water escapes saturating the main tiled areas of both the main bathroom and the ensuite. The consequent build up of moisture within the tile bed then migrates towards the door threshold of both the ensuite and the bathroom where the detailing of the membrane has failed allowing moisture to escape the wet area.
2. Mr Haslam was of the view that the likely cause was a leaking shower screen rather than a failure of the waterproof membrane. He argued that the high moisture readings could be attributed to a failure by Mr Waddell to calibrate the meter. He also did not observe any damage to the carpet at the entrance to each room which he would have expected if water was in fact escaping from the rooms as alleged.
3. Given the disparity between the views of the experts, the Tribunal determined that they should attend the property together and conduct a test over the lunch break on the day the hearing. Following the test, they both agreed that the shower screen is leaking in the ensuite. They also agreed that, after isolating the shower screen, water escaped from the grout line in front of the shower after about 30 minutes. Mr Waddell was of the opinion that the test proved that the membrane had failed. Mr Haslam, however, argued that, as there was no dye in the water, it could not be concluded the membrane had failed.
4. The Tribunal preferred the conclusions of Mr Waddell to those of Mr Haslam and found that, in circumstances where the leak from the shower screen had been isolated and water appeared in front of the shower recess, then on the balance of probabilities the leak demonstrated that the waterproofing system had failed. The Tribunal also referred to the fact that the standard falls in the floor had not been observed and that there had been damage to the vanity in the ensuite which tended to support a finding that the builder had breached the warranties. As the construction techniques in both the main bathroom and ensuite were identical, the Tribunal applied its findings to both.
5. In the appeal, Kalana Homes reiterates its position that the problems were caused by a leaking shower screen and not due to any failure of the membrane. Kalana Homes also argues strenuously that a drainage flange is not required to be fitted and states that a drainage flange is not installed where there is construction on a concrete slab as a matter of industry practice and is not required by any relevant standard. Kalana Homes continues to rely on the report by Mr Haslam and states that the Tribunal should not have relied upon the Waddell report in relation to flood testing, the fall of the floors or the method of construction of the bathrooms. Kalana Homes also states that no defect was found in the main bathroom which indicated that the construction method was in fact correct in both it and the ensuite.
6. Mr and Mrs Spurr state that the Tribunal reached the correct conclusions based on the expert evidence, particularly the report by Mr Waddell. Mr Spurr provided a statutory declaration dated 15 March 2021 in which he alleges that the builder attempted to interfere with the test conducted on the day of the hearing. They state that the leak in the shower screen is a secondary leak not the primary leak which has been evident since occupation.

Item 4 - Toilet pan leak

1. The Tribunal referred to Mr Waddell's report in which he concluded that high moisture readings in the toilet area were due to a leak from the toilet pan. This toilet was little used by Mr and Mrs Spurr. Mr Haslam and the builder both stated they found no evidence of a leak. The Senior Member preferred the evidence of Mr Waddell to that of Mr Haslam who did not use a meter to ascertain any moisture readings. She allowed $820 plus builder's margin and GST for replacement of the toilet pan.
2. In the appeal, Kalana Homes states that there is no evidence that the pan is actually leaking and reiterates evidence given by Mr Haslam and the builder that no water could be seen coming from the toilet when it was flushed. Kalana Homes further asserts that if there is a leak, there is no need to demolish and replace the pan, arguing for a less expensive solution.
3. Mr and Mrs Spurr rely on the report by Mr Waddell and state that the tiles in the toilet area are popping with moisture readings, as found by Mr Waddell, all the way to the door.

Work order versus money order

1. In her decision, the Senior Member noted that the Home Building Act requires that the Tribunal consider a work order is the preferred outcome in resolving building disputes. Mr and Mrs Spurr were seeking a money order as they had lost confidence in the builder while Kalana Homes sought to be able to return to undertake the rectification work. After considering the evidence of both parties, the Tribunal concluded that it was not appropriate to give the builder a further chance to rectify the defective work. In particular she noted that the builder had not rectified work in accordance with the order issued by the Fair Trading Inspector, had strenuously opposed the rectification sought by Mr and Mrs Spurr and had not expressed a willingness to underscore take the scope of work recommended by Mr Waddell. There also was a high degree of animosity between the parties.
2. Kalana Homes states that it has not in fact had an opportunity to rectify some issues as these were not the subject of the Fair Trading Inspector's order and wishes to be given that opportunity. Kalana Homes also argues that some items can be rectified at a significantly lower cost or in fact may not be needed at all. The builder also denies that there is any animosity between the parties.
3. For their part, Mr and Mrs Spurr state that the money order is appropriate as they have lost all confidence in the builder who has failed to rectify the defects despite being given opportunities to do so.

Relevant legal principles

1. Section 80(2)(b) of the Civil and Administrative Tribunal Act 2013 states: Any internal appeal may be made: (a) in the case of an interlocutory decision of the Tribunal at first instance - with the leave of the Appeal Panel, and (b) in the case of any other kind of decision (including an ancillary decision) of the Tribunal at first instance - as of right on any question of law, or with the leave of the Appeal Panel, on any other grounds.
2. Clause 12 of Schedule 4 to the NCAT Act states with respect to decisions made in the Consumer and Commercial Division that: An Appeal Panel may grant leave under section 80 (2) (b) of this Act for an internal appeal against a Division decision only if the Appeal Panel is satisfied the appellant may have suffered a substantial miscarriage of justice because: (a) the decision of the Tribunal under appeal was not fair and equitable, or (b) the decision of the Tribunal under appeal was against the weight of evidence, or (c) significant new evidence has arisen (being evidence that was not reasonably available at the time the proceedings under appeal were being dealt with).
3. In this appeal Kalana Homes has not identified with any particularity what are its grounds of appeal. In circumstances where an appellant is not legally represented it is appropriate for the Tribunal to look at the grounds of appeal generally, and, to determine whether a question of law has in fact been raised, subject to any procedural fairness considerations in favour of the respondent: Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 at [12]. In Cominos v Di Rico [2016] NSWCATAP 5, the Appeal Panel explained at [13]: 13. It may be difficult for self-represented appellants to clearly express their grounds of appeal. In such circumstances and having regard to the guiding principle, it is appropriate for the Appeal Panel to review an appellant's stated grounds of appeal, the material provided, and the decision of the Tribunal at first instance to examine whether it is possible to discern grounds that may either raise a question of law or a basis for leave to appeal. The Appeal Panel has taken such an approach in a number of cases, for instance, Khan v Kang [2014] NSWCATAP 48 and Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69. However, this must be balanced against the obligation to act fairly and impartially (Bauskis v Liew [2013] NSWCA 297 at [68] citing Hamod v State of New South Wales [2011] NSWCA 367 at [309]- [316]). Relevantly, s 38(2) provides that that Tribunal "may inquire into and inform itself on any matter in such manner as it thinks fit, subject to the rules of natural justice.
4. The only matter raised by Kalana Homes which concerns a question of law involves the exercise by the Tribunal of its discretion to make a money order and not a work order. From the written material we discern that the primary ground of appeal is that the Tribunal's decision was against the weight of the evidence. At the hearing the Kalana Homes agreed that this is its primary reason for the appeal. We also consider that the submissions put forward by Kalana Homes indicate that it does not consider the decision was fair and equitable. These last two grounds require leave to appeal.
5. Obtaining leave to appeal is a two-stage process. At the first stage Kalana Homes must persuade us that it may have suffered a substantial miscarriage of justice under clause 2 of Schedule 4, because of one or more of the matters referred to in its grounds of appeal. Should it persuade us that it may have suffered a substantial miscarriage of justice it must then, at the second stage, persuade us that we should exercise our discretion to grant leave to appeal on one or more of those grounds. The principles applicable to the granting of leave were set out in Collins v Urban [2014] NSWCATAP 17 at [65] - [84].
6. For the reasons which appear below we are not persuaded that Kalana Homes has suffered a substantial miscarriage of justice.

Items 1, 3 and 4

1. In its appeal, Kalana Homes primarily states that, in relation to Items 1, 3 and 4, the report of its expert and the builder should have been preferred over the report of the expert engaged by Mr and Mrs Spurr. Kalana Homes submits, in effect, that the Member's decision was against the weight of the evidence. The expression "against the weight of evidence" in the Tribunal means that the evidence in its totality preponderates so strongly against the conclusion favoured by the Tribunal that it can be said that the conclusion was not one that a reasonable Tribunal member could reach: Calin v Greater Union Organisation Pty Ltd (1991) 173 CLR 33; [1991] HCA 23 at [153], followed in Collins v Urban at [77].
2. In her decision the Senior Member referred to the evidence of both experts and that of the builder. It is apparent that, in relation to each item claimed, she carefully considered both the lay and expert evidence that had been provided and made findings based upon that evidence. Her reasons for making these findings are clearly set out. In this appeal, the builder seeks to reargue matters that were argued at the hearing and insists the expert evidence of Mr Haslam should be preferred to that of Mr Waddell.
3. In relation to Item 1 - Front path, the evidence before the Tribunal was clear. There was in fact agreement between the experts that the path to the front entry of the house at least partially conceals the weepholes and that the termite barrier had been breached. The fact that Mr and Mrs Spurr later signed a document stating they did not wish the path to be lowered, does not alter this fact and the Senior Member was right to give it no weight. Despite the builder's protestations that there has been no adverse effect to date leading to water ingress or dampness, the simple fact is that the work is defective. The point of difference between the experts was in the method of rectification and in that respect the Tribunal accepted the evidence of Mr Waddell.
4. Kalana Homes continues to argue in relation to Item 3 - Ensuite and bathroom leaking shower recess - that problems have been caused by a leaking shower screen and not through any failure of the membrane. In the appeal Kalana Homes places great emphasis on Mr Waddell's statement that a drainage flange had not been installed which led to excessive amounts of water being retained in the tile bed of the shower recess and argued that such a flange was not required to be installed.
5. To a large extent, Kalana Homes misreads the Tribunal's decision. The Senior Member was clearly of the view that the defect in question is the failure of the membrane. While she refers to Mr Waddell's comments about the drainage flange, that issue is not decisive in her reasoning. There was clearly evidence before her, including from the flood test conducted during the lunch break on the day of the hearing, that water leaked from the shower. On the basis of the evidence, including high moisture readings, that standard falls had not been observed in the floor and that there had been actual damage to the vanity, it was open to her to reach the conclusion she did.
6. The builder's complaint that the Tribunal made the same findings in relation to the ensuite and the main bathroom in circumstances where there was no evidence of a leak in the main bathroom is not borne out by the evidence. The evidence before the Senior Member was that the same construction techniques had been employed and Mr Waddell's report set out the evidence of elevated moisture levels in both the main bathroom and the ensuite.
7. Similarly, in relation to Item 4 - Toilet pan leak, the builder reiterates claims made at the hearing that there was no evidence of a leak. Again, the Senior Member preferred the evidence of Mr Waddell who had taken moisture readings and found moisture all the way from the toilet area to the door in circumstances where Mr Haslam had taken no readings.
8. We are not satisfied that any error has been established in the manner in which the Member considered the evidence. The fact that the Tribunal preferred the evidence of one expert over another is not sufficient to establish any error. In our view the findings made by the Member were reasonably available on the evidence put forward by both parties at the hearing.
9. Kalana Homes also disputes the making of a money order rather than a work order in relation to defective items. Section 48MA of the Home Building Act states that in determining a building claim the Tribunal is to have regard to the principle that rectification of the defective work by the responsible party is the preferred outcome. There will, of course, be circumstances in which a money order will be preferable and the Tribunal has a discretion to make such an order.
10. The failure to properly exercise a discretion can constitute an error of law (House v The King [1936] HCA 40; (1936) 55 CLR 499). As the High Court said at pp 504-5: The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so.
11. The matters which the Tribunal identified as the reasons for why it decided that in the circumstances of this case it was preferable to make a money order are set out in the decision. The matters which the Tribunal took into account were matters that were relevant to the exercise of its discretion. In our view, no error in the House v King sense arises from the Tribunal's decision. The Tribunal made findings that were open to it on the available evidence and reached a conclusion based on that evidence that it should exercise its discretion not to make a work order in the circumstances of this case.
12. For these reasons, we find that the Tribunal made no error of law. In addition, cl 12(1)(c) of Schedule 4 to the NCAT Act does not provide a basis upon which we may grant leave to appeal as Kalana Homes has not established that the decision was against the weight of the evidence.
13. Kalana Homes also indicates that it has suffered a substantial miscarriage of justice as the decision was not fair and equitable. There is no doubt that Kalana Homes has genuinely held views about the decision which it believes should have been made by the Tribunal. That is, however, not a basis upon which we may conclude that the decision was not fair and equitable.
14. In all the circumstances we are unable to find that the builder has suffered a substantial miscarriage of justice. There was no real possibility or fair chance of a different result on the state of the evidence before the Tribunal.
15. None of the grounds of appeal have been established. Leave to appeal is therefore refused and the appeal is dismissed. In those circumstances, there is no need to address the costs order made by the Tribunal.

Costs of the appeal

1. In their written submissions Mr and Mrs Spurr sought their costs of the appeal in the amount of $590.68. The matter was not addressed orally at the appeal hearing and Kalana Homes has made no submissions on the issue.
2. As this is an appeal from proceedings before the Consumer and Commercial Division where the amount claimed or in dispute was more than $30,000, we may order costs. In the ordinary circumstances costs would follow the event. We note that Kalana Homes has been wholly unsuccessful in the appeal, but before making any order as to costs must be given an opportunity to make submissions.

Orders

1. We make the following orders: 1. Leave to appeal refused. 2. Appeal dismissed. 3. The appellant is to file and serve any evidence and submissions in reply to the respondents' application for costs within 14 days of the date of publication of these orders. 4. The respondents (the applicants for the costs order) are to file and serve any submissions in reply within 21 days from the date of publication of these orders 5. The submissions of the parties are to include submissions about whether an order should be made dispensing with a hearing of the costs application pursuant to s 50(2) of the Civil and Administrative Tribunal Act 2013.

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: 27 July 2021