John Churchill and Louise Churchill v Troy Paschini trading as The Labyrinth Garden

JURISDICTION AND LEGISLATION

1. Section 48A of the Home Building Act defines: "building claim" means a claim for: (a) The payment of a specified sum of money, or (b) The supply of specified services, or (c) Relief from payment of a specified sum of money, or (d) The delivery, return or replacement of specified goods or goods of a specified description, or (e) A combination of 2 or more of the remedies referred to in paragraphs (a)-(d) that arises from a supply of building goods or services whether under a contract or not, or that arises under a contract that is collateral to a contract for the supply of building goods and services, but not include a claim that the regulations not to be a building claim". "building goods and services" means goods or services supplied for or in connection with the carrying out of residential building work or specialist work, being goods or services: (a) Supplied by the person who contracts to do, otherwise does, that work, or (b) Supplied in any circumstances prescribed by the regulations to the person who contracts to do that work.
2. Section 3 of the Home Building Act defines: "residential building work" means any work involved in, involved in co-ordinating or supervising any work in: (a) The construction of a dwelling, or (b) The making of alterations or additions to a dwelling, or (c) The repairing, renovation, decoration or protective treatment of a dwelling".
3. Section 48K(1) of the Act provides: Jurisdiction of Tribunal in relation to building claims (1) The Tribunal has jurisdiction to hear and determine any building claim brought before it in accordance with this Part in which the amount claimed does not exceed $500,000 (or any other higher or lower figure prescribed by the regulations).

STATUTORY WARRANTIES

1. Section 18B of the Act provides: Warranties as to residential building work The following warranties by the holder of a contractor licence, or a person required to hold a contractor licence before entering into a contract, are implied in every contract to do residential building work: (a) a warranty that the work will be performed in a proper and workmanlike manner 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 Tribunal finds that the applicants have a building claim for the purposes of the Act and is satisfied that it has jurisdiction to hear and determine the application before it. The statutory warranties in s 18B of the Act are implied into the contract between the applicants and the building contractor.

EVIDENCE

1. The applicants tendered evidence. Subject to objections made and considered, the evidence was admitted as follows: 1. Exhibit A1- a copy of the ASIC Search of Paschini Enterprises Pty Ltd; 2. Exhibit A2-a screen shot of the Labyrinth Garden web site accessed 15 December 2014; 3. Exhibit A3- the statement of John Michael Churchill dated 8 August 2014 (including interim report of Fred Gray dated 23 May 2012) ; 4. Exhibit A4-the expert report of Fred Gray ("Expert Gray") dated 14 April 2015; 5. Exhibit A5- the statement of Louise Charlotte Churchill dated 8 August 2014; 6. Exhibit A6- a copy of "Guide to Standards and Tolerances-2007" published by the Victorian Building Commission; 7. Mr and Mrs Churchill and Mr Gray gave sworn oral evidence and were cross examined.
2. The respondent tendered evidence. Subject to objections made and considered, the evidence was admitted as follows: 1. Exhibit R1-an expert report of Engineer Geoffrey Gleeson ("Expert Gleeson") dated 30 September 2014; 2. Exhibit R2- a statement of Ben Skeen dated 19 September 2014, a former employee of the Labyrinth Garden; 3. Exhibit R3- a statement of Troy Paschini dated 30 September 2014 4. Messrs Paschini, Skeen and Gleeson gave sworn oral evidence and were cross examined.
3. The Tribunal has considered all the evidence placed before it.

ISSUES AND THEIR CONSIDERATION

1. The issues between the parties have crystallised as follows: 1. Whether the respondent was a party to the contract; 2. The nature and extent of the defects ( that is, the respondent's liability) to the; 1. Driveway/turning circle; and 2. Balconies/stairs/path, 1. Whether Mrs Churchill's driving is the cause of the defects. 2. Whether the respondent has a defence under s18F of the Act because of his claim about the sub base provided by another contractor on which the pavers were laid; 3. Quantum of the claim.

THE PARTIES TO THE CONTRACT

1. The applicants contend that they contracted with the respondent. This is denied by the respondent who contends that the contracting party was Paschini Enterprises Pty Limited trading as The Labyrinth Garden.
2. The applicants have made a thorough examination of the authorities. The respondent examines the issue with similar thoroughness. It is useful to set out their reasoning in consideration of this issue to the fullest extent.
3. The applicants submit that the relevant principles applied to determine who the particular person to a contract is are a matter of mixed fact and law: Lym International Pty Ltd v Marcolongo [2011] NSWCA 303 at [127]. Further, the Court of Appeal has expressed concern where a trial judge seeks to determine the identity of the parties to the contract as a separate question in advance of the real issues: Suncorp Metway Insurance Ltd v Owners Corporation SP 64487 [2009] NSWCA 223 at [31]-[36].
4. The determination of the identity of the parties to a contract must be made in accordance with the objective theory of contract: Pethybridge v Stedikas Holdings Pty Ltd (2007) Aust Contract R 90-263; [2007] NSWCA 154 at [54]; Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603; [2007] NSWCA 65 at [262]-[266].
5. Einstein J explained in FloMin Inc v Australian Raw Materials Corporation Pty Ltd (formerly named Tennant Ltd) (voluntary administrators apptd) [2011] NSWSC 585 at [21]-[22]: What matters is "what each party by words and conduct would have led a reasonable person in the position of the other party to believe": Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at [40]. The terms of the contractual arrangement are to be determined objectively, by reference to the text of any documents passing between the parties, the surrounding circumstances known to the parties and the purpose and object of the transaction and its genesis, and the background, context and markets in which the parties were operating: Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at [22]; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at [40]. The court determines the parties to the contract by asking what a reasonable observer would conclude from the objective evidence of the communications that led to the entry into the contract, together with the background facts known to the parties: Pethybridge v Stedikas Holdings Pty Ltd (2007) Aust Contract R 90-263, [2007] NSWCA 154 at [54]. … Where having discussed the commercial essentials and put in place the necessary structural matters, the parties go about their commercial business on the clear basis of some manifested mutual assent, without ensuring the exhaustive completeness of documentation, a binding contract will exist if it can be treated with confidence that by a certain point the parties mutually assented to a sufficiently clear regime which must, in the circumstances, have been intended to be binding…This analysis involves: Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424 at [369] (Allsop J; with whom Drummond and Mansfield JJ agreed): [T]he inferring of a real intention expressed through, or to be found in, a body of conduct, including, sometimes, communications, even if it be the case that the parties did not consciously advert to, or discuss, some aspect of the relationship and say: "and we hereby agree to be bound/in this or that respect". The essential question in such a case is whether the parties' conduct, including what was said and not said and including the evident commercial aims and expectations of the parties, reveals an understanding or agreement or, as sometimes expressed, a manifestation of mutual assent, which bespeaks an intention to be legally bound to the essential elements of a contract.
6. Further, if an issue in dispute is the identity of contracting parties, subsequent communications may legitimately be used against a party as an admission of the existence or non-existence of a subsisting contract: Tomko v Palasty [2007] NSWCA 258 at [63]-[68]. Relevant considerations in making such a determination include the name of the licensee recorded in the contractual documentation (Suncorp Metway Insurance Ltd v Owners Corporation SP 64487 [2009] NSWCA 223 at [76]); the letterhead used to make the requests for progress payments (Suncorp at [76]); the licence number recorded on request for progress payment communications; account details into which payments were made, subject to such an account being used 'exclusively for transactions relating to the company' (Suncorp at [76]). It can be 'quite inconsistent' that a person contracts using his contracting license but organises for a company to do the work, 'perhaps to minimise their risk of incurring personal liability to suppliers of materials or labour' (Suncorp at [77]).
7. The applicants submit that evidence in support of their contention that they contracted with the respondent is: 1. Text of contractual documents passing between the parties: 1. Quotation of 5 June 2011- 1. Is on letterhead of "Labyrinth interior & landscape design"; no reference to "Labyrinth" as a business name of the respondent or Paschini Enterprises Pty Ltd. 2. It is signed in the signature block by the respondent, quoting the respondent's own licence number and the address of the respondent; there is no reference to the company "Paschini Enterprises Pty Ltd". There is no reference to an ABN or an ACN in the text. 3. The reference of pages 4 and 5 of the quotation to the name "The Labyrinth Garden" may support a contrary view to the overwhelming factors supporting the interpretation that the applicants' were contracting with the respondent. 1. The applicants also contend that the covering email of 5 June 2011 supports the contention that the respondent entered into the contract in his own capacity in that: 1. It is from "troy paschini<troypaschini@optusnet.com.au", the applicants contend that he wrote it in his personal capacity. 2. Attaches a "new quote" from the respondent; 3. Signed by the respondent using his own name and his contractor's licence number; 4. The only reference to "Paschini Enterprises Pty Ltd" is to the name of the account where the deposit for the works is to be paid. The applicants argue that this alone does not support the respondent's contention that this alone rebuts the presumption they were dealing with the respondent personally. 1. In regard to the invoice dated 5 June 2011 and numbered #994 the applicants' contend: 1. It accompanied the lengthy quotation and cover email already analysed and was not a standalone document and ought to be read in that context. 2. It is on "Labyrinth" letter head with no reference to the name being a registered business name of the respondent or Paschini Enterprises Pty Ltd. 3. The reference to Paschini Enterprises Pty Ltd is for the name of the account into which the deposit is to be paid. The reference to the company's ABN is on an isolated line without explanation under the letterhead banner "Labyrinth" more than ¾ of the page separated that ABN from the payee Paschini Enterprises Pty Ltd. 1. The emails of 8 and 9 June 2011 noting payment of the deposit record payment to the respondent's nominated account and are addressed to the respondent personally. 1. The applicants' contend further that in relation to the purpose, object and context: 1. The authorities require having regard to the "surrounding circumstances known to the parties and the purpose and object of the transaction and its genesis, and the background, context and markets in which the parties were operating": Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR at [22]; Toll (FGCT) v Alphapharm Pty Ltd (2004) 219 CLR 165 at [40]. 2. The "market" in which the parties operated is regulated by the Home Building Act 1989. The applicants argue that the parties did not intend to contract contrary to the requirements of the Act and with that intention to comply it can be construed as the "evident commercial aims and expectations of the parties: Branir Pty Ltd v Ownston Nominees (No 2) Pty Ltd (2001) 117 FCR 424 at [369]. 3. Sections 4 and 5 of the Act provide that a company or person who does not hold a contractor licence cannot lawfully do work to which the Act applies nor can a person represent that a company can do the work. 4. Section 7 of the Act requires that a contract under the Act must show a contractor's licence and s 7A provides that it is an offence under the Act for a person to do contract work unless s 7 of the Act is complied with. 5. On this basis, the applicants contend that Paschini Enterprises Pty Ltd could not have lawfully contracted to carry out the work, the contractual documentation complying with the Act in all respects if the respondent is the contracting party. 1. In relation to subsequent communications the applicants' propound that there was no mention of Paschini Enterprises Pty Ltd in the variation of the Contract on 13 July 2011. The later invoices record to whom payment was made as directed by the respondent (to Paschini Enterprises Pty Ltd), but this does not overcome the primary inferences and express terms of the contractual documents themselves. The applicant repeats that the invoices were preceded by emails from the respondent's personal email address, with his personal contractor's licence number.
8. In his submissions the respondent raises preliminary issues in regard to the identity of the parties to the contract. The respondent accepts that there is little doubt that Paschini Enterprises Pty Ltd was in contravention of ss 4 and 5 of the Act; however, the difficulty is in the word "knows" in s 5(2). That is, the section provides that a corporation requires knowledge that they were contracting to do the work without a contractor's licence. The evidence supports the respondent's contention that he was not aware that Paschini Enterprises Pty Ltd was required to have a contractor's licence.
9. Section 7(1) of the HBA requires a building contract to be in writing dated and signed by the parties. The respondent contends that 2 of the 3 requirements have been met and with the authority of Kavia Holdings Pty Ltd v Suntract Holdings Pty Ltd [2011] NSWCA at [33] a notice sent by email satisfies the obligation of signing. S 7(2) sets out what must be in a building contract. The Labyrinth Contract did not satisfy the criteria required by the HBA. However, this is of no consequence as it is accepted that through the provisions of s 10 the result of failure to comply with s 7 is that a builder cannot claim damages but is subject to damages for breach of contract.
10. The respondent makes detailed submissions as to the contract, including: 1. It is on The Labyrinth Garden letterhead which has a logo and references "Labyrinth" and "interior and landscape design". 2. It is: 1. addressed to the applicants by first names; 2. in the third paragraph refers to "Labyrinth Garden Budget Estimate June 2011"; 3. at page 4 quotes "This quotation has been prepared by The Labyrinth Garden" and "The Labyrinth Garden makes every effort to accurately estimate this amount"; 4. that the signature block is as described by the applicants; and, 5. the reliance on the email address used by the respondent is not determinative of the identity of contracting parties or the circumstances surrounding the entry into a contract; 1. Although the signature is ambiguous as to the respondents capacity, but the only business name used throughout the document is "The Labyrinth Garden". 2. The documents show that the contracting party was "The Labyrinth Garden", whatever or whoever that might be as the principal was not disclosed. 3. The tax invoice included in the email of 5 July 2011 from the respondent to the applicants with the attached proposal included the banking details showing the monies were to be deposited into the company's account also using the company's Australian Business Number. 4. The respondent urges the Tribunal to accept that a reasonable person in the position of the applicants would conclude that Paschini Enterprises Pty Ltd was the undisclosed principal. 5. The applicants in their cross examination admitted they did not verify the respondent's position or his licence at the time of the formation of the contract. 6. The respondent submits that authorities supporting his contention that the contracting party was not him personally, but Paschini Enterprises Pty Ltd as the proprietor of "The Labyrinth Garden" are: 1. Air Tahiti Nui Pty Limited v McKenzie [2009] NCSWCA 429 where Allsop P and Handley AJA say at [28]: "The identity of the contracting party is to be determined looking at the matter objectively, examining and constructing any relevant documents in the factual matrix in which they were created and ascertaining between whom the parties objectively intended to contract…Where the documents are silent or ambiguous, but there is undoubtedly a contract, the identity of the parties must be determined objectively from the surrounding circumstances." 1. Pethybridge v Stedikas Holdings Pty Ltd [2007] NSWCA 154 as also referred to in the applicants' submissions and repeats the relevant test stated by Campbell JA: [54] "Identification of the parties to the contract must be made in accordance with the objective theory of contract…That is because the correct conclusion to draw from the objective evidence is that a reasonable observer of the communications that led to the entering of the contract, together with the background facts known to the parties, would conclude that the parties intended that the contract would be with whomever it was that was carrying on business under the name C & D Asphalt Service." 1. The respondent submits that the applicants have incorrectly applied the facts to the authority of Pethybridge and as set out in FloMin Inc, Toll and Pacisific Carriers. Those are relevant to identification and construction of the term of a contract and what those terms mean, but do not apply to identification of the parties, 2. In Suncorp the respondent submits that case is not authority for identification of parties to a contract or where a company owned by the registered proprietor of a business name carried on that name under that business name. 3. The reference by the applicants to "text, context and purpose" is misused and irrelevant to the issue of the identifying the parties. The genesis of the phrase was in a statement made by Mason J in Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 and deals with the meaning of the words or the way they are used in context of the contract and whether extrinsic evidence relevant to the commercial object of the transaction can be taken into account in the absence of ambiguity. 4. The principle in Air Tahiti and Pethybridge are to be applied. That is: 1. "The legal onus is on the applicants to prove the respondent was a party to the contract; and, 2. Looking at the matter objectively, examining and construing the relevant documents in the factual matrix, what would have been ascertained between the parties whom intended to contract?"
11. In applying those principles the respondent submits: 1. Onus on applicant; 1. The applicants have tendered to the Tribunal the ASIC Current and Historical Extract of Paschini Enterprises Pty Ltd ACN 089 953 944 and 2 pages of the "Labyrinth Gardens" website dated 15 December 2014. 2. The evidence of the company extract is unconnected to the applicants claim. The applicants were contracting with the respondent personally. The respondent contends that the burden of proof is not met and supports the respondent's contention that it was the Company that engaged and contracted with the applicants. 3. The cross examination of the respondent about the name "Troy Paschini" appearing on the website resulted in the respondent admitting: 1. That the business name "The Labyrinth Garden", rights attaching to it and the web site were sold to a third party after the company went into liquidation; 2. The website was maintained by a third party at the time the extract was taken (15 December 2015). 3. The website as at 15 December 2015 referenced that the business name had been "around for about 10 years", during which time several people would have input into its content beyond the control of the respondent; 4. The applicants adduce no other pages of the website and the information tendered does not provide a reference to who owns and maintains the website; 5. The website refers to respondent as a designer, inferring that he is an employee. The website is without date and text as would assist in applying the "text, context, purpose test" of Codelfa Constructions Pty Ltd. At best the inference is that the residence referred to was in fact the applicants and the testimonial dates from July/August 2011. 1. At best only tenuous inferences can be drawn from the content of the web site without proving that the respondent traded as The Labyrinth Garden. 1. The factual matrix: 1. The respondent asserts that the company was the principal and owner of the business name The Labyrinth Garden. 2. The contract was between the Labyrinth Garden and the applicants. 3. At the time of formation of the contract the deposit was paid to a bank account held by the company. 4. Six invoices were issued by the company. 5. Six further instalments were paid to the company's account by the applicants. 6. The applicants made no objection to dealing with the company and continued to make payments to the company's account. 7. A search of the ASIC web site would have revealed the owner and principal of the business name. 8. The complaint made to the Department of Fair Trading names the company as the contracting party. The inspection report dated 13 December 2012 from the officer of the Department lists the contracting party as the company. 9. A letter from the Department dated 27 may 2013 is addressed to the respondent and describes him as the former director and then "Paschini Enterprises Pty Ltd t/as The Labyrinth Garden" is identified as having carried out the work on the "information available". There is no evidence of who provided that information, the respondent contends that it was likely the applicants. 10. The application filed with the Tribunal on 29 May 2014 nominated the respondent trading as the business, the Australian Business Number of the Company and the contractor licence of the Company and the respondent. On 19 June 2014 Member Smith of the Tribunal identified that the identity of the contracting party would be an issue and the applicants were given an opportunity to amend their application by 8 August 2014. The applicants did not make any amendments to their application and proceeded to hearing with the application as originally filed. 1. The respondent submits that the weight of evidence is in favour of the Tribunal finding that the contracting party was the Company, Paschini Enterprises Pty Limited and not Troy Paschini.

FINDING AS TO THE CONTRACTING PARTY TO THE CONTRACT

1. The Tribunal has set out the submissions made by the parties as to the identity of the contracting party to demonstrate the commercial ambiguity that can be created when identity is clouded by facts of the day to day dealing of parties. Such ambiguity is not uncommon in home building disputes that come before the Tribunal particularly when contractors slide effortlessly between their personal and corporate identities as a matter of practice.
2. The Tribunal is assisted by the authorities in guidance as to the relevant legal principles to apply in making a determination as to the correct contracting party. The complexity is unravelling the facts to apply to those principles. The application now before the Tribunal is a case in point.
3. The legal principle to be applied is that set out by Campbell JA in the Court of Appeal in Pethybridge at [54]. [54] At the risk of some repetition, I will seek to draw the threads together. Identification of the parties to the contract must be made in accordance with the objective theory of contract: Ryledar Pty Ltd & Anor v Euphoric Pty Ltd [2007] NSWCA 65 at [262]- [266] and cases there cited. It was the Respondent who bore the legal onus of proving that the Appellant was the other party to the contract that had undoubtedly been entered for the performance of the work on the two carparks. It was relevant, for that purpose, to establish who was carrying on business under the name C & D Asphalt Service. That is because the correct conclusion to draw from the objective evidence is that a reasonable observer of the communications that led to the entering of the contract, together with the background facts known to the parties, would conclude that the parties intended that the contract would be with whomever it was that was carrying on business under the name (emphasis added) C & D Asphalt Service.
4. 42. The Campbell JA continued in his reasoning in Pethybridge to also examine the effect of tendering the extract from the Business Names Register in the absence of other evidence sufficient to establish who was carrying on the business. [55] It is the effect of section 24 Business Names Act 1962 that, if there had been no other evidence on the topic, tender of the extract from the Business Names Register would have been sufficient to establish that it was the Appellant who was carrying on business under the name C & D Asphalt Service. A principle that can be drawn from Press v Mathers, Re Johnson, Re ABC Plastik and Aikman v Brown is that, once it has been proved who is carrying on business under a particular business name, the evidence leading to that conclusion may overcome the merely prima facie evidence that arises from section 24 Business Names Act 1962.
5. The tender of the Business Name Extract of "The Labyrinth Garden" shows that the registration of the business name had expired at the time the contract was entered into.
6. The evidence is that the respondent was introduced to the applicants by a designer who had been working with the applicants in other parts of the applicants' property. The applicants did not engage with the respondent because of any response to advertising or marketing material. It was the recommendation of that designer that the respondent could carry out the work required to be done.
7. The contract entered into by the applicants paying a deposit of $20,000.00 on 8 June 2011 for the quoted landscaping works, the scope for which was set out in an email exchange between Mr Churchill on behalf of the applicants and Mr Paschini. At that time the business name "The Labyrinth Garden" was not registered to Labyrinth Garden Pty Ltd or at all. The registration had been cancelled on 20 April 2010. The respondent was the holder of a contractor licence from 4 September 2009 until 3 September 2013. The company, Paschini Enterprises Pty Ltd was granted a contractor licence under the HBA to carry out structural landscaping work from 20 December 2011 until 19 December 2014.
8. The respondent relied upon the emails passing between the parties to document the contract. In all the emails, the respondent's signature block uses his name, his contractor's licence number and his personal address. He also uses the business name, although it had been cancelled well before the dates of the emails.
9. Section 4 of the HBA prohibits a person contracting to carry out residential building work unless that person is the holder of a contractor licence. In his submissions the respondent concedes that Paschini Enterprises Pty Ltd was not the holder of a contractor's licence at the time of making the contract. However, this does not advance the respondent's assertion that Paschini Enterprises Pty Ltd was the contracting party.
10. The respondent relies on the fact that the applicants paid the deposit and all instalments due under the contract to Paschini Enterprises Pty Ltd to further support his assertion that the contracting party was the company. It was only after the initial payments that invoices of Paschini Enterprises Pty Ltd were produced by the respondent for payment. The respondent urges the Tribunal to accept the evidence adduced by the respondent that the payments were made to the company account used for the conduct of the company's business, satisfying an element of the test in Suncorp at [76].
11. In the ordinary course of business, parties can and are directed, by the other party to a contract to make payments to other than the party they are contracted with. The direction by the respondent to pay the instalments due under the contract to the company account does not, in the absence of other of the Suncorp elements, establish that the contract was between the applicants and the company.
12. The test to be applied is that on the objective evidence would a reasonable observer of the communications conclude who were the parties that intended to enter into the contract (Pethybridge).
13. The company was not the registered the proprietor of the business name, nor did it hold contractor's licence under the HBA at any time during the entering into the contract or during the carrying out of the work. The objective evidence is that the documentary exchange forming the contract was that the applicants intended to be dealing with the respondent, a licenced contractor for the carrying out of structural landscaping work. A reasonable observer would conclude that the parties to the contract are the applicants and the respondent. On any reasonable examination of the material forming the contract and the negotiations between the parties leading up to the formation of the contract is absent any reference to the company. Despite the use by the respondent of the name "The Labyrinth Garden" by the respondent in his correspondence the Tribunal is satisfied that a search of the business name would have revealed that it was in fact deregistered more than 12 months before the contract was entered into. The only reasonable conclusion that could be drawn is that the applicants were dealing with the respondent in his personal capacity.
14. The Tribunal finds that the parties to the contract were the applicants and the respondent.

Liability to the nature and extent of defects

1. The respondent contends that for the Tribunal to be able to make a finding of liability, it must be satisfied that there was a building claim and a commonly recognised legal entitlement; Maconachie v Kullenberg [2005] NSWCA 294. The respondent argues that the applicants have not dealt with liability and make an assumption that the report of Expert Gray establishes liability. The building claim, on the respondent's submission, was for compensation for breach of statutory warranty incorporated into the contract as an implied term and that the applicants had not asserted that claim orally although they did particularise it in their Points of Claim.
2. The respondent further contends that the applicants have failed to make out liability because: 1. Mrs Churchill admits to driving on the driveway before the grout had settled; 2. the applicants did not comply with recommendations of the report of Smart Civil Engineering ("Smart Report"), which means that there were inherent and latent issues with the sub-base that caused the grout to fail; and, 3. the applicants failed to inform the respondent of the Smart Report to alert him to potential issues with the sub-base prior to commencing the works.
3. The respondent also raises: 1. the 2011 amendments to the Civil Liability Act 2002 which excluded proportionate liability from apportionable claims brought by a person having the benefit of a statutory warranty from Part 2C of the HBA from 25 October 2011; and, 2. the defence under s 18F of the HBA where a respondent is able to prove that the defects complained of by an applicant arose from instructions given by the plaintiff were done contrary to the advice of in writing of the respondent or person who did the work.
4. The applicants contend that the respondent is confused as to the basis of the liability asserted by the applicants in that Points of Claim clearly identify the particulars of the alleged breach of statutory warranties, as: 1. The works were not performed in a "proper and workmanlike manner" in breach of the first limb of s 18B(a). The absence of plans and specifications has no bearing on that claim; 2. The materials were not "good and suitable for the purpose for which they [were] used" in breach of s 18B(b); 3. The works do not comply with the relevant standards in breach of s 18B(c). That is, the work will be done in accordance with, and comply with, the HBA or any other law. 4. The works do not result in the dwelling that is "reasonably fit for occupation as a dwelling" in breach of s 18B(d). 5. The applicants relied on the respondent's skill and judgement in carrying out the work and that he failed to comply with s 18B(e) in that the works were not "reasonably fit for the specified purpose or result".
5. The effect of the alleged breaches in the preceding paragraph is that the applicants are making a building claim within the definition of s 48A of the HBA. They are making a building claim under s 48(2)(b) for compensation for a loss arising from a breach of the statutory warranty implied under Part 2C of the HBA.
6. The Tribunal is satisfied that the applicants are making a building claim for the purposes of the HBA and have properly particularised that claim in their Points of Claim. Liability has been made out against the respondent by the applicants for the breach of the statutory warranties. The failure of the respondent to comply with the statutory warranties is set out below.
7. The respondent also raises as a defence that the applicants did not provide to the respondent specification of the sub base which contributed to the above surface problems. Neither expert carried out core drilling to test the respondents defence. Neither expert attributed the cause of the defects to the paving to the failure of the concrete sub base. Further comment is made in this respect later in these reasons.

DEFECT TO DRIVEWAY AND TURNING CIRCLE PAVING

1. The applicants refer to the expert reports of Expert Gray for the applicants and Expert Gleeson for the respondent and submit a table examining the findings of each expert in respect of the driveway and turning circle paving. The table is summarised and reproduced to assist in identifying the defects claimed: Defect Expert Gray Expert Gleeson 1 Grouting defects: Grouting and etching present; attributed to misuse of acid No comment etching and pitted Evidence of being able to scratch out the grout suggesting failure of BS7533-2010; 2 Soft Grout Schmidt Hammer results; Soft grout in a number of locations could be removed by hand; other areas it was reasonable 5% of grout was relatively hard; part where grout missing; grout damaged by poor workmanship and acid 3 Bedding Layer defect The stone units are not bonded adequately to the driveway slab; bedding mortar thin, mortar soft and friable; sieve analysis results: 6 parts sand and 1 part water, unsatisfactory Found grout surrounding the setts not properly attached; unreasonable to take all tiles up; estimated 5-10% of total area to be rectified 4 Inconsistent works and aesthetic defects Obviousness of localised repairs; Evidence of localised repairs to the grouted joints Works present an amateurish look and do not meet relevant standard, poor joint alignment and width control 5 Absence of expansion joints No movement joints have been installed anywhere in the paving No evidence of suitable joints applied; Usual practice to install expansion joints 6 Explanation for defects Misuse of acid; No comment 7 Assessment of effectiveness of defects and rectification works required Total removal and replacement of the driveway and turning circle High pressure blast all grout out of joints, then re-grout it.50% unaffected. NO need to take up granite sets. Under cross examination unable to say the extent of the defect, more or less than 50% 8 Whether complete replacement of stone necessary Salvage: No evidence of cost of replacement against reuse if all stones need to be relaid not financially favourable, likely to be increase in labour cost to salvage, unable to achieve uniformity 9 Stone slab is not an issue/cause of the defects Concrete slab underlay (done by others) not cause of problem with paving. Disintegration not from contact with water, but from poor workmanship and contact with acid No evidence that concrete slab is defective; found slab to be structurally sound

1. On an analysis of the reports, the applicants submit that Expert Gray's evidence should be preferred and carries greater weight than Expert Gleeson.
2. Expert Gray undertook three site visits plus a further inspection in December 2014 prior to the first day of hearing and has observed the deterioration of the paving over a period starting on 16 April 2012 through to December 2014. His observation recorded that on 12 December 2014 he poked an 8mm masonry drill bit through the grout in 18-25 places by hand across the paving and that the stone pieces were moved by twisting his foot. Expert Gray carried out sieve analysis testing of the grout and mortar bed, Schmidt Hammer testing of the grout along a measured grid for the entire length of the driveway in areas of subject to vehicular traffic, finger, screw driver and drill bit penetration testing, removal of loose paving stones to examine material and workmanship in the bedding layer and detailed observation of works and analysis of results.
3. Expert Gleeson undertook one inspection on 22 September 2014. He conducted no testing other than removal of grout by hand. His evidence does not challenge Expert Gray's opinion as to accuracy and results of Expert Gray's testing.
4. For those reasons, the applicants submit that Expert Grays evidence should be preferred to Expert Gleeson's.
5. The Tribunal gives greater weight to the reports of Expert Gray and is preferred to Expert Gleeson's.

DEFECTS TO BALCONIES, STAIRS AND PATHS

1. The applicants refer again to the expert reports of Expert Gray for the applicants and Expert Gleeson for the respondent and submit a table examining the findings of each expert in respect of the alleged defects to the balconies, stairs and paths. The table is summarised and reproduced to assist in identifying the defects claimed: Defects balconies, stairs, paths Expert Gray Expert Gleeson 1 Grouting defects See bedding layer defects below Missing grout in tile joints at numerous locations 2 Bedding layer defects Stone units not bonded to significant parts of stairs, landings and paths and are progressively delaminating; more than 60% of area delaminated totally or more than 50% tiles are drummy. Rear of balcony there are a number of drummy tiles at rear of living area tiles could be removed by hand, tile glue not used 3 Efflorescence Need for barriers and methods of control efflorescence Tiles on front stairs possess some calcification stains 4 Absence of expansion joints Noted in report Noted in report 5 Drummyness 50% drummy; lack of movement joint and poor fixing practices more likely to cause drummyness Some drummyness on balconies, grout missing; if tiles greater than 25% drummy generally they should be replaced 6 Assessment of extensiveness of defects and extensiveness of rectification works 70% to be replaced, once work starts likely that whole needs to be replaced No assessment directly given 7 Whether complete replacement of stone necessary Salvage of existing tiles not generally financially favourable; aesthetic differences in similar tiles and sets from different suppliers Reuse spare tiles

1. The applicants rely on the same reasons as for the driveway and turning circle paving to support their contention that Expert Gray's evidence is to be preferred.
2. Expert Gray attributes the defects in the paving at paragraphs [139]-[145] of his report as follows: 139. In my opinion the combination of understrength mortar and the lack of bond coats would be sufficient to allow the dislodgement as grout deteriorated from the joints. 140. The lack of movement joints has been offset by the lack of strength in the joints. 141. The poor tile alignment and grout joint control is the aesthetic manifestation of poor workmanship of this project. 142. There are very simple techniques and methods that could have been followed to ensure a much better looking project. 143. Hollows/depressions in the surface of the pavement, porous grouting and the probable watering of potted plants near the stairs and glass doors have allowed for regular ponding of the water and the subsequent infiltration of water into the bedding. 144. This is likely responsible for localised bed saturation, some rising damp to the stone walls and surface staining. It is not however responsible for the poor quality of the bedding and grouting mortars. 145. The alleged lack of drainage under the driveway background slab also has no bearing on the poor condition of the stone installation system.
3. For the same reasons as accepting the report of Expert Gray for the driveway and turning circle, the Tribunal accepts Expert Gray's report and recommendation for the stairs, paths and patio.

DEFICIENT SUB BASE AND DAMAGE TO WORK BY APPLICANTS

1. The respondent submits that the Smart Report dated 10 May 2010 prepared by Engineer Smart following testing carried out by him on 17 September 2009 concluded that there was poor drainage of the site and fine sand being carried in suspension. The inspection by Engineer Smart was carried out before the concrete slab was laid. The respondent had no knowledge of the content of the Smart Report until after the completion of the paving work. The respondent contends that if the sub-base was not constructed in accordance with specifications and the respondent continued to act under direction of the applicants then he has a defence to the claims under s 18F of the HBA.
2. Expert Gray in his evidence stated that there was no need to test the sub-base and assesses from observation. Expert Gleeson posits that areas of high moisture content in isolated areas of the paving require different grout and spacing or use of flanges.
3. There was no testing of the sub-base to identify any latent properties about the sub-base.
4. The conclusion, submitted by the respondent, is that the cause of the failure of the paving is undetermined.
5. The respondent submits that the applicants failed to properly instruct and provide adequate information so that the respondent could complete the work. This defence is not established by the respondent. There is no evidence before the Tribunal sufficient for the making of a finding that the sub base caused or contributed to the defects to the paving.
6. The evidence is that Mrs Churchill drove on the paving in November 2011 after the wet slurry had been applied to the whole surface area in an attempt by the respondent to remedy the defects. She drove on it approximately a day after the slurry was applied. Expert Gray in his evidence said that to drive on the paving 1-2 days after applying the slurry would not have detrimental effects as the bonding layer and bonding of the stone should be sufficient to withstand a vehicle being driven over it. Expert Gleeson gave no evidence of the effect of the driving of the vehicle on the paving at that time.
7. The applicants contend that the defence under s18F imposes on the respondent an onus to make out the defence and must prove the deficiencies arose by reason of the applicants giving instructions contrary to the respondent's written advice. The applicants submit that s 18F is not engaged. The applicants did not give any advice that the work should be performed in a manner contrary to the advice of the respondent and certainly there was nothing in writing given by the applicants to the respondent contradicting the respondent's instructions.
8. The respondent's reliance on the evidence of Mr Skeen is insufficient to establish expert evidence as to the effect of driving on the driveway. Mr Skeen is neither an independent expert or has qualifications in tiling or paving.
9. The Tribunal finds that the defence raised by the respondent pursuant to s 18F does not apply as the applicants gave no direction or advice to the respondent to carry out work contrary to the advice of the respondent in writing or at all .
10. The Tribunal finds that the respondent has breached the statutory warranties in that the work has not been done a proper and workmanlike manner, that the materials used have failed and are not good and suitable for the purposes for which they are used and that the work and materials used were not reasonably fit for the result to be achieved, the applicants having relied on upon the respondent's skill and judgement.

QUANTUM

1. The applicants tendered to the Tribunal quotes for the cost of carrying out the remedial work as recommended by Expert Gray, as follows:- 1. A quote from Belcastro Designer Tiling for $67,320.00 (including GST) dated 16 January 2013; 2. A quote from Sydney Brick Paving Company for $70,600.00 plus GST of $7,600.00, total $78,300.00 plus $15,300.00 for the removal of the defective work dated 12 March 2013; 3. The statement of Mr Colin Cass that on his view in April 2012 the paving could not be remediated successfully; 4. Expert Gray's opinion of the true costs of the remediation work based on his experience as set out in his report of 14 April 2014 is $64,350.00 (not including GST) for 100% of the work to replace the paving in the driveway and turning circle and rectification of 75% of the stairs, landing and paths.
2. Expert Gleeson admitted in cross examination that he could not give a quote and would require a tiling contractor to do so. He admitted that he did not undertake physical building work and was not able to provide a quote for the rectification work.
3. The respondent contends that the Tribunal should accept Expert Gleeson's opinion as "an objective assessment of the rectification work". Such an assertion is not supported by the evidence.
4. The respondent submits that Expert Gray's report recommends the "re-doing the sub-base following excavation of the area" because that is referred to in the quote of Sydney Brick Paving Company. That quote does not imply that the sub-base is to be excavated. The Scope of Works as set out in Expert Gray's Report of 14 April 2015 makes no recommendation to "re-do" the sub-base as submitted by the respondent.
5. The respondent submits that the reasonable and necessary cost to rectify defects using the rates given by Mr Gray, reusing existing pavers, is $14,325 based on the respondent's counsel's calculations.
6. As to reusing the existing paver setts, the evidence is that they are supplied fixed to matting to ensure uniformity of spacing and ease of handling rather than placing each individual sett. This achieves a uniform and consistent spacing. Loosened individual sett's replaced and re-grouted with different batching of mortar has resulted in a patchy appearance. It has failed to achieve that uniform aesthetic that paving should achieve. The Tribunal is not satisfied that re-using loosened paver setts to remedy the defects in the work will remedy the failure to comply with the statutory warranties of s18B of the HBA.
7. The respondent also challenges the expertise of Expert Gray. He submits that evidence before the Tribunal is that Expert Gray is a Tiling Consultant. He admitted that he was not a structural engineer or paving expert. The respondent submits that a tiling consultant should be distinguished from a paving consultant. A tiling consultant deals with smooth surfaces and different materials to a paving consultant.
8. Mr Gray has considerable experience in relation to tiling as set out in his curriculum vitae. His experience includes that his company has completed one large paving contract for the road paving at the corner of Glebe Point Road and Broadway. Despite the lack of formal qualifications his experience in tiling and paving satisfies the Tribunal of his expertise and qualification to give expert evidence to the Tribunal.
9. Expert Gleeson holds qualifications as a structural engineer and is a licensed builder with expertise as a segmental paving consultant. Without detracting from Expert Gleeson's report and evidence, his experience, testing and inspections of the works by Expert Gray increases the weight to be given to Expert Gray's evidence.
10. On balance, the Tribunal is satisfied that the evidence of Expert Gray is preferred to the evidence of Expert Gleeson.

Conclusion

1. Having made the findings as set out in these reasons, the Tribunal is satisfied that the appropriate order is that as a result of the respondent's breach of the statutory warranties in carrying out building work the applicants are entitled to damages for the loss suffered.
2. Accordingly, the respondent is to pay to the applicants damages in the sum as determined by Expert Gray in the amount of $64,350.00 plus GST of $6,435.00 being a total of $70,785.00.

COSTS

1. As to costs: 1. Any application for costs is to be in writing to the Tribunal supported by evidence and submissions and is to be filed and served on or before 24 July 2015; 2. Any evidence and submissions in reply from the party opposing the application for costs is to be filed and served on or before 7 August 2015; 3. The parties are to advise the Tribunal in their respective submission if they consent to the issue of costs being determined dealt with on the papers; 4. Alternatively the parties are to make submissions as to why such an order should not be made pursuant to section 50 of the Civil and Administrative Tribunal Act 2013. P Boyce Senior Member Civil and Administrative Tribunal of New South Wales 9 July 2015 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: 28 August 2015