Johnson v Lukeman

The Grounds of Appeal

1. The appellants appealed against all orders of the Tribunal. The grounds of appeal found in the [Amended] Notice of Appeal received on 1 September 2016 relied upon are as follows: The Tribunal erred in failing to adjourn the hearing on 10 May 2016. As a result of Mr Johnson is ill health, the appellants were unable to fairly and reasonably present their case to the Tribunal on 10 May 2016. By failing to grant an adjournment, the Tribunal denied procedural fairness to the appellants and acted in breach of the requirements of section 38(2) of the Civil and Administrative Tribunal Act 2013 (NSW). In relying on the expert evidence of Mr Maher as to the cost of rectification work, the Tribunal failed to take into account, or gave insufficient weight, to Maher's the failure to provide any reasoning to support his opinion as to the likely cost of rectification work. This was a failure which the Tribunal should have taken into account, or giving considerable weight to, because the failure of Mr Maher to provide any reasoning to support his opinion was: the little pivotal: see, e.g., Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705 and Dasreef Pty Limited v Hawchar [2011] HCA 21; (2011) 243 CLR 588; and created procedural unfairness in that the appellants could not meaningfully and reasonably respond to the evidence of Mr Maher until his reasoning process was exposed. The Tribunal erred in failing to have regard to the principle that rectification of any defective work by the appellants is the preferred outcome, which principle the Tribunal was required to have regard to by section 48MA of the Home Building Act 1989 (NSW) (which commenced operation on 15 January 2015).
2. It was also contended at the hearing before the Appeal Panel, in amplification of Ground 1, that the Tribunal erred in failing to provide adequate reasons for its refusal to grant an adjournment.
3. The appellants contended that each of their grounds of appeal raises a question of law and did not seek leave to appeal. Section 80(2) of the Civil and Administrative Tribunal Act 2013 (NSW) (the Act) provides that an appeal lies as of right on any question of law, or with the leave of the Appeal Panel, on any other ground.
4. The Appeal Panel is satisfied that each of the grounds of appeal raises a question of law: 1. Ground 1 raises the question of law whether there was a failure to afford procedural fairness: Clements v Independent Indigenous Advisory Committee (2003) 131 FCR 28 at [8]. To the extent that Ground 1 encompassed a question of whether there had been a failure to provide adequate reasons, as the Tribunal was under a duty to provide reasons (Pettitt v Dunkley [1971] NSWLR 376 at 387; Campbelltown City Council v Vegan (2006) 67 NSWLR 372 at [109]; Supermarkets Pty Limited v Xu [2009] NSWADTAP 28 at [56]; Collins v Urban [2014] NSWCATAP 17 [43] to [64]), that too raises a question of law: Stoker v Adecco Gemuale Constructions Pty Ltd [2004] NSWCA 449 per Santow JA at [41]; Beale v Government Insurance Office of NSW (1997) 48 NSWLR 430 at 444 per Meagher JA; Pollard v RRR Corporation Pty Ltd [2009] NSWCA 110 at [56] per McColl JA (Ipp JA and Bryson AJA agreeing); Qushair v Raffoul [2009] NSWCA 329 at [52] and the following paragraphs, per Sackville AJA (Campbell JA and Bergin CJ in Eq agreeing). 2. Ground 2 raises a question of law concerning procedural fairness, but also raises a "no evidence" ground or an unreasonableness ground, which each raise questions of law: Kostas v HIA Insurance Services Pty Ltd (2010) 241 CLR 390 at [91]; Duncan v Independent Commission Against Corruption [2016] NSWCA 143 at [278]; see too Allen v TriCare (Hastings) Ltd [2016] NSWCATAP 2016 at [183] to [184] (TriCare). 3. Ground 3 raises the following questions of law: 1. Whether the Tribunal failed to have regard to a mandatory consideration (being s 48M of the HBA Minister for Aboriginal Affairs v Peko-Wallsend Limited (1986) 162 CLR 24 at 39-41 (Peko-Wallsend). 2. Whether the Tribunal misconstrued the HBA: Allsop P in B&L Linings Pty Limited v Chief Commissioner of State Revenue [2008] NSWCA 187 at [95] per Allsop; Lombard Farms Pty Ltd v Chief Commissioner of State Revenue [2013] NSWADTAP 42. 3. Whether the Tribunal asked itself the wrong question: Craig v South Australia (1995) 184 CLR 163. 4. see too Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 at [13].

Parties' submissions on procedural fairness

1. The appellants contended that the Tribunal erred in failing to adjourn the hearing on 10 May 2016 on account of Mr Johnson's ill health. Mr Johnson was representing the builder and was providing evidence for the builder.
2. The Tribunal had before it several medical certificates: 1. A medical report of Dr Martin Carlson dated 13 October 2015 noting that Mr Johnson had undergone a hip replacement 10 months earlier, that he had developed acute severe hip pain indicating sepsis of his hip prosthesis and that this major complication may result in his incapacitation for the next few weeks and further noting that he suffers from severe pain, cannot sleep, cannot stand or sit for lengthy periods and "certainly cannot concentrate". The doctor opined that Mr Johnson was "not capable of completing any report with the due diligence it requires". 2. A further medical report of Dr Martin Carlson dated 9 December 2015 identifying that Mr Johnson did in fact have a significant infection of the hip prosthesis, that he was admitted to hospital on 7 November and his hip prosthesis was removed and he was currently an inpatient at the hospital on intravenous antibiotics awaiting a further hip replacement in the first or second week of February, pending adequate eradication of the infection. The report noted that he was bedbound, in hospital and in pain, unable to concentrate and psychologically incapable of completing a report and physically incapable of attending any court session until at least two months after his hip revision surgery. 3. An updated report from Dr Martin Carlson dated 9 February 2016 identifying that Mr Johnson was scheduled for surgery on 16 March 2016. The report noted that there was a slight chance that this may be further delayed if the infection in his hip joint had not cleared up entirely. The report noted that "if all goes well, his pain and mobility should have improved to the point he can complete reports and attend a hearing on or about 1 May 2016." The report also noted that "while he remains keen to finalise this matter, he is incapable of attending to it in his current circumstances."
3. The appellants contended that they were denied procedural fairness by the Tribunal holding the hearing in circumstances where Mr Johnson was the appellants' witness and the person responsible for defending the application brought by the homeowners and where he was not in a position to adequately prepare for the hearing. The appellants rely on Bourke v Companies Auditors and Liquidators Disciplinary Board (Federal Court of Australia, Burchett J, 26 June 1998) and Dick v Piller [1943] KB 497 at 499 per Scott LJ as support for the proposition that illness may prevent a litigant from exercising a reasonable opportunity to be heard and therefore illness has been seen as a compelling consideration in favour of granting an adjournment. Whilst these particular cases concern a litigant's illness on the day of the hearing, the Appeal Panel accepts that illness that precludes preparation for the hearing could also provide a compelling consideration in favour of an adjournment.
4. The respondents contended twofold. First it was submitted that the medical evidence does not rise so high as to demonstrate that Mr Johnson was unable to prepare for the hearing and in any event there has been no articulation of what might have been done differently, had there been an adjournment. The final medical certificate indicates that Mr Johnson was anticipated to have been in a position to prepare necessary reports and attend the hearing by 1 May. The hearing was not conducted until 10 May 2016.
5. Secondly, the respondents contended that whilst it is accepted that the medical certificates were before the Tribunal at first instance, the Appeal Panel ought not to infer that the adjournment application at the commencement of the hearing was made on the basis of Mr Johnson's ill health. The respondents contended that as the appellants (contrary to orders of the Appeal Panel dated 30 July 2016) did not put before the Appeal Panel either a sound recording of the hearing at first instance or a transcript, it was not possible for the Appeal Panel to be satisfied that the adjournment had been sought on medical grounds.
6. The respondents pointed to the fact that the appellants were contemplating a cross-claim against Richard Charles Wheat, a subcontractor (see at [48] of the Decision) and submit that the Appeal Panel accordingly cannot be satisfied that the adjournment application had not been made in order to give the builder an opportunity to bring the cross-claim.
7. In reply, the appellants contended that, in any event, the medical certificates ought to have alerted the Tribunal to the need for an adjournment.

Parties' submissions on failure to provide adequate reasons

1. The Tribunal did not, in the Decision, articulate the basis upon which the adjournment application had been brought. As [25] the Tribunal stated: "At the opening of the hearing the builder sought to adjourn the hearing. The owners opposed the adjournment. The Tribunal ordered that for the guiding principles of the Civil and Administrative Tribunal Act 2013 to be given effect and after consideration of the interest of all parties, the interests of justice were not served by an adjournment. The owners were ready and able to proceed with the application and the matter should proceed to determination on the day of hearing'."
2. The appellants contended that the lack of disclosed reasons in the Decision for refusal to grant the adjournment disclosed error by the Tribunal. The respondents contended that the Appeal Panel could not be satisfied that paragraph [25] of the Decision encapsulated all of the Tribunal's reasons and invited the Appeal Panel to infer that oral reasons for the refusal of the adjournment application were given at the hearing.

Consideration of Ground 1

1. The Tribunal has a duty to ensure that the parties have a reasonable opportunity to be heard or otherwise have their submissions considered in the proceedings: s 38(5)(c) of the Act. The Tribunal is subject to the rules of natural justice: s 38(2) of the Act. The Appeal Panel is prepared to accept that the hearing rule, as it is sometimes called, extends to allowing the litigant an opportunity to adequately prepare for the hearing. What is adequate will depend on the circumstances and the nature of the hearing.
2. The only basis proffered to the Appeal Panel to warrant the adjournment and underpin the contention of breach of procedural fairness was the incapacity of Mr Johnson to prepare for the hearing. The final medical certificate indicates that Mr Johnson was expected to be competent to prepare for and attend the hearing by 1 May and the hearing did not take place for another 9 days. Furthermore, the evidence received by the Tribunal included exhibit R-1 being a response to Mr Maher's Report (Decision at [29]) dated 2 March 2016, suggesting that, contrary to Dr Carlson's medical certificate of 9 February 2016, the appellants had in fact been able to prepare a report in opposition to Mr Maher's report. Had it been the case that Mr Johnson was unfit as at the date of the hearing or had not been adequately able to prepare due to his incapacity, one may have expected a further medical certificate to have been filed. Even if Mr Johnson was unable to obtain the medical certificate in time for the hearing, one would have expected a medical certificate to have been provided to the Appeal Panel that explained why, contrary to Dr Carlson's report of 9 February, Mr Johnson was in fact still unfit as at 10 May 2016.
3. As noted by the Appeal Panel in Waters v Waghorn [2016] NSWCATAP 247 at [30]-[33] where there is an allegation of a breach of procedural fairness it may be necessary for the appellant to file material that was not before the Tribunal at first instance, in order to prove the breach. Where a person is incapacitated and therefore not in a position to provide appropriate medical evidence at the time, it would be anticipated that such medical evidence would be provided by the date of any appeal.
4. Assuming that the adjournment application was made on medical grounds, the Appeal Panel is not satisfied, on the medical evidence before us, that there was any breach of procedural fairness by the hearing being conducted on 10 May 2016.
5. Further, even if the Appeal Panel was prepared to accept that the Tribunal did not adequately disclose its reasons for refusing the adjournment, the only basis proffered to warrant the adjournment was the medical grounds and the medical evidence does rise so high that the Appeal Panel would conclude that an adjournment ought to have been granted. Accordingly, this aspect of the ground of appeal must fail or is of no utility and would therefore not be allowed: Stead v State Government Insurance Commission (1986) 161 CLR 141 at 145-146.
6. Ground 1 therefore fails.

Submissions in relation to Ground 2

1. The Tribunal's conclusion in relation to the costs of rectification was entirely based upon the evidence of Mr Maher: at [43] of the Decision.
2. The appellants contended that in adopting the costs identified by the home owners' expert, the Tribunal fell into error. The appellants do not challenge the expertise or qualification of the expert and they do not cavil with his report insofar as it identifies the defective work. However, they challenge the quantum of the costs to rectify the work. The appellants put their case on the basis that Mr Maher does not expose his reasons for allocating costs and that aspect of the report failed to satisfy the basic tenant of expert evidence, being the requirement to expose the reasoning so that the trier of fact may evaluate the opinion: Makita (Aust) Pty Ltd v Sprowles (2001) 52 NSWLR 705 at [85] and Dasreef Pty Limited v Hawchar [2011] HCA 21 at [91]-[92]; (2011) 243 CLR 588. The appellants contended that this deprived them of the ability to meaningfully respond to or cross examine the expert as to quantum. It was also suggested that by failing to expose the reasoning, the report provides no evidentiary support for the Tribunal's conclusion.
3. By way of example Mr Maher states at item 5 of his Scott Schedule "Hardies scyon deck sheets to be removed, existing sheets not fixed in accordance with manufacturers specifications, no expansion joints installed & sheets have been laid in a staggered pattern, as shown in the construction photographs supplied by the owner (see 2.6, 2.7)". As an aside, the Appeal Panel notes that the references to 2.6 and 2.7 were not explained in the expert's report or by the parties. Mr Maher then states in the Scott Schedule that the loss for item 5 is $23,500. That figure is not broken down into labour costs or hours of estimated work. Each of the items in the Scott Schedule follows a similar pattern. By way of another example, item 7 refers to "New tiles and tile screed to entire deck areas, existing will be damaged during removal, vertical edge tiles incl. & gutter incl. (See 2.6, 2.7)" The loss is stated to be $24,500 with no breakdown of materials and labour.
4. The appellants contended that the builders could not have had a reasonable opportunity to respond to the home owner's evidence in relation to quantum unless and until they knew how Mr Maher had arrived at his conclusions as to the likely cost rectification works. The appellants point to McDougall J in Assafiri v Shell Company of Australia Ltd [2010] NSWSC 930; at [5]: To admit the report would put the defendant's counsel to the task of cross-examining in an attempt to impeach the conclusions expressed, without knowing how those conclusions were reached. There is a very real risk that, in that process, the conclusions might be shown to be supported by some appropriate chain of reasoning. It is in my view entirely inappropriate to put on a report that is totally devoid of any rational process of reasoning and leave the defendant to the choice either of not cross-examining (and taking the risk that, despite what I have said, some of the opinions might be accepted) or cross-examining (and taking the risk of validating those opinions).
5. The respondents contended that the expert's reasoning was sufficiently exposed as the subject matter of the work is itemised. In those circumstances the expert could be meaningfully cross examined as to the basis of his estimates and meaningfully challenged by evidence in reply.
6. The respondents contended that in order to challenge an expert's report on question of law grounds, the appellants must demonstrate that the report provides no evidentiary support at all or that no reasonable decision maker would rely on it: TriCare at [298]. The appellants, in effect, contend that they have satisfied these tests.
7. The respondents also highlighted that the appellants have chosen to not put before the Appeal Panel exhibit R-1 which responds to Mr Maher's report. They have also chosen to not put before the Appeal Panel the sound recording or transcript of the hearing which included the evidence in chief of Mr Johnson and the cross examination of Mr Maher. In answer to this, the appellants contended that an objective reading of Mr Maher's report reveals that any cross examination or report in reply to Mr Maher's report must necessarily have been hampered by the lack of reasons in Mr Maher's report.
8. The respondents also highlighted that the particular aspect of Mr Maher's report, the subject of the complaint goes to the relief claimed and not the liability, and therefore a less stringent test applies.

Consideration - Ground 2

1. In this case, Mr Maher's expertise and qualifications are not challenged and where liability has been established for defective works and where there is an itemised description of the rectification works necessary, the Appeal Panel is satisfied that the Tribunal did not err in relying upon Mr Maher's report. This is not a case where the expert has simply provided a lump sum for rectification works. The works have been described in some detail. The information provided disclosed the facts on which Mr Maher relied, giving the appellants the opportunity to test his report in cross examination: TriCare at [202]. Mr Maher was available for cross examination and was cross examined (this is apparent from [28] of the Decision although the Appeal Panel does not know the content of such cross examination). The reasons identified in his report are not so opaque as to have made impossible useful cross examination to challenge his estimates for costs. The appellants were made aware of the nature of the work and materials required and the scope of works. For these reasons we do not need to consider whether a less stringent test applied in this case.
2. Ground 2 accordingly must fail.

Ground 3

1. Section 48MA of the HBA was introduced into the HBA by the Home Building Amendment Act 2014. It provides as follows: A court or tribunal determining a building claim involving an allegation of defective residential building work or specialist work by a party to the proceedings (the "responsible party" ) is to have regard to the principle that rectification of the defective work by the responsible party is the preferred outcome.
2. The Explanatory Note to the bill introducing s 48MA of the HBA states that the purpose of the section is to make further provision for the issue of rectification orders and relevantly, requiring a court or tribunal, when determining a building claim, to have regard to the principle that rectification of the defective work by the responsible party is the preferred option.
3. Section 48MA identifies a relevant consideration as contemplated in Peko-Wallsend [at 39-41] (i.e. it is a mandatory consideration) yet the Decision does not reveal that it was taken into account.

Submissions on Ground 3

1. The respondents contended that the Appeal Panel may infer that the Tribunal did not fail to have regard to the mandatory consideration and that the Tribunal had in mind that an order for rectification is the preferred outcome, despite it not being referred to in the Decision. The respondents highlighted that the written submissions relied upon at first instance (which were before the Appeal Panel) address the possibility of rectification. The respondents submitted that the Tribunal must have considered rectification, but nevertheless determined this was not an appropriate case for rectification.
2. The respondents further submitted that not every failure to take into account a relevant consideration will vitiate a decision: Peko-Wallsend at 40. Here, it was submitted, that the factor is so insignificant to the decision that the failure to take it into account could not have materially affected the outcome. Moreover, it was submitted, this was not a suitable case for rectification and so this ground has no utility and should be dismissed.
3. The respondents relied on the following factors, gleaned from findings made by the Tribunal to demonstrate that this is not a suitable case for rectification orders: the history of dealings between the parties, the breakdown of their relationship, the appellants' earlier failures to address the underlying cause of the leaks, the denial of liability, an apparent lack of understanding of statutory warranties and a miscomprehension about liability for sub-contractors.
4. Finally, the respondents contended that the Appeal Panel is in equally as good a position as the Tribunal at first instance to take into account s 48MA of the HBA and determine that a rectification order is not appropriate.
5. The appellants contended that the Tribunal was obliged to consider the principle in s 48MA of the HBA, in resolving the question of whether a rectification order was appropriate and that it is apparent from the Decision that this was not done. Further, it was submitted that parties ought not to be left to speculate as to whether or not a particular factor has been taken into account and further still, the Tribunal must state explicitly how it has resolved a conflict: Pollard v RRR Corporation Pty Ltd [2009] NSWCA 110 at [56]-[59]. The appellants therefore contended that the failure to provide reasons is another way of characterising the error.

Consideration of Ground 3

1. The Appeal Panel is satisfied that the Tribunal did not have regard to s 48MA of the HBA when determining whether a rectification order ought to be made. Despite the fact that the parties' written submissions referred to the appropriateness or not of a rectification order, they did not raise s 48MA of the HBA. Where the Tribunal ordered the payment of money instead of rectification, one might have expected to see an analysis of why such an order should be made, in the face of s 48MA of the HBA. We do not suggest that a money order could not be made, simply that having been made, it ought to have been explained in light of s 48MA of the HBA. The Tribunal therefore fell into error in failing to consider s 48MA of the HBA or in failing to disclose the reasons for not making a rectification order.
2. Making a rectification order need not be an all or nothing decision. For some portions of the defective work it may be appropriate to make a rectification order and for others a money order. For this reason, the Appeal Panel is satisfied that this part of the case is to be reconsidered by the Tribunal on such evidence as the Tribunal sees fit.

Costs

1. As noted above, the Tribunal made orders with respect to the filing of submissions on costs at first instance (Orders 2 to 5). It has come to the Appeal Panel's attention that the day after the hearing of oral argument in this appeal (i.e., on 25 October 2016), the Tribunal (as constituted by Senior Member Boyce) delivered a decision in relation to costs at first instance. We have not been provided with the reasons for that decision and any orders the subject of that decision were not the subject of this appeal. As Orders 2 to 5 of 8 July 2016 (which were the subject of this appeal) have been overtaken by events, we make no orders in this appeal with respect to those orders.
2. The Appeal Panel directs the parties to file submissions on costs by 15 January 2017 and (if it is the case) why an oral hearing on costs is required.

The Builder

1. The Appeal Panel raised with the parties a matter which had not been raised as a ground of appeal, but which had come to the Appeal Panel's notice. The Appeal Panel noted that the Decision (including Order 1) refers, in most places, to the "builder" (in the singular). However, there were two respondents at first instance and each may be described as a builder.
2. The appellants did not, in their grounds of appeal, expressly deal with this aspect of the Decision, albeit they did seek to set aside all orders made at first instance which would have resolved this issue. Whilst this issue was raised briefly during oral argument during the appeal hearing, the parties did not address their submissions to the point; although the respondents relied upon the fact that this issue does not arise under one of the stated grounds of appeal.
3. It appears to the Appeal Panel that the reference to "the builder" in the Tribunal's Order 1 may be a typographical error and ought to be read as a reference to "the builders" jointly. This would be consistent with the stated intention of the Tribunal (at paragraph [4] of the Decision), that the "builders are referred to throughout these reasons for decision as 'builders'" (in the plural) and the references to "the builders" in the remainder of the Tribunal's orders. The Appeal Panel does not however, propose to deal with this as a ground of appeal and makes no orders or findings in relation to it.

Conclusion and Orders

1. The Appeal Panel makes the following orders: 1. The appeal is allowed. 2. Order 1 of the Tribunal in HB 15/35078 is set aside. 3. The case is to be reconsidered by the Tribunal, on such evidence as the Tribunal sees fit, on the question of whether a money order ought to be made. 4. The parties are to file and serve submissions on costs by 15 January 2017 and (if it is the case) why an oral hearing on costs is required.

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: 21 December 2016