Li v MACD Developments Pty Ltd

Appellants' submissions

1. The appellants provided written and oral submissions.
2. In respect of the tile claim, the appellants submitted that the Tribunal incorrectly construe the clause of the contract which required the respondent to supply new tiles to match existing roof tiles. The error was said to arise because the contract used the expression "existing tiles" whereas the Tribunal found at [37] that the tile which was to be matched was a "cleaned pre-existing tile".
3. The appellants identified the requirements in the contract as being contained in the drawings (Court Book pp 66-67) each of which referred to "new tile roof to match existing and in the schedule of materials and finishes (Respondent's Bundle p 89) which said "tile roof to match existing".
4. The appellants relied upon the decision of the High Court in Codelfa Constructions Pty Ltd v State Rail Authority of NSW [1982] HCA 24 at [22] and submitted that the contract terms should be construed in a manner which gives them their plain and ordinary meaning. The appellants accepted that the contract did not define the word "existing". The appellants relied on the definition found in the Oxford English Dictionary and said that the expression "existing" refers to the then existing state of the tiles, not a "cleaned existing tile".
5. The appellants submitted that the photographic evidence in the report of Dr Hutcheson (Court Book pp 176-177) shows that the new tiles supplied did not closely match the pre-existing tiles in their uncleaned state. Further, the appellants say that this fact was not disputed by the respondent's expert, Mr Goddard as recorded in his response to Scott Schedule (Court Book p 202 - Item 1).

Respondent's submissions

1. The respondent also provided written and oral submissions.
2. In essence, the respondent contends that the Tribunal's conclusion that the new tiles match the "cleaned pre-existing tiles" was a decision on a question of fact, not on a question of law in relation to the meaning of "existing tiles". The respondent submitted that the contract did not require the new tiles supplied to exactly match the existing tiles. The respondent submitted that the obligation under the contract was "to match existing as close as possible" and this expression should not be construed in a manner that would produce an impossible or commercially unachievable result. In this regard the respondent had originally provided a quotation for the works (Respondent Bundle pp 112 to 115) which stated at p115 under the heading "Roofing Tiles (In accordance with AS 2049-1992)": Supply and fix tiles (match existing as close as possible) to proposed extension roof including flashings.
3. The respondent referred to the evidence given by the appellants' architect in cross examination that the tiles to be supplied were "never going to be an exact match" of the existing tiles and to the evidence of the respondents representative Mr Wang, that he showed samples of the proposed tiles to Mr Li before they were all ordered and installed and that Mr Lee approved the use and installation.
4. Consequently, the respondent submits that the reasons provided by the Tribunal support the findings made and no error of law is shown to arise.

Appellants' submissions

1. The appellants challenge this aspect of the Tribunal's decision on the basis that the Tribunal incorrectly determined that cl 43.2(a) of the contract applied to relieve the appellant from liability for failing to install gutters to the upper roof section shown in section AA on drawing 1666 CC 04 Rev B (Respondent's Bundle p 65) and sectional detail D1 on drawing 1666 CC 03 Rev A (Court Bundle p 65)
2. The appellant submitted that the contract required the installation of an upper gutter and that the respondent had not installed it. The appellants submitted that because no work was done under the contract, cl 43.2 (a) can have no application so as to relieve the respondent from any liability. Consequently, the appellants submit that the failure to construct this work constitute a defect and the by failing to construct the gutter the respondent has "impermissibly attempted to unilaterally varied the contract by eliminating the gutter".
3. Alternatively, in so far as the inability to construct the gutter arose from the deficiency in the design of the appellants' architect, the appellants submitted that was not the sole cause for the absence of the gutter. Rather, the absence of the gutter arose from the builder's failure to seek clarification from the architect or take action under cl 6.2 of the contract (which relates to accuracy of contract documents), cl 17 of the contract (which relates to variations) and/or cl 43.3 of the contract (which in part relates to variations).
4. Further, insofar as the Tribunal found at [54] that it was "impossible" for the respondent to install the gutter as shown on the drawings, this finding was not consistent with the evidence before the Tribunal. In this regard, the appellants referred to their submissions to the Tribunal at first instance and the evidence provided by Mr Goddard to the effect that the respondent "had to make adjustments" due to differences between the existing residence and the architectural plans.
5. The appellants accept that this issue raises a question of fact and says that leave should be given because the decision was against the weight of evidence and Item 4 "is already properly before the Appeal Panel because it involves a question of law and thus any ancillary factual considerations should be considered as well".
6. In making these submissions, the appellants explained in oral submissions that they were not alleging there had been a failure to comply with the conditions of the Development Approval. Rather, they were asserting that there was a failure to construct the works in accordance with the plans.
7. In relation to cl 43.2 of the contract, the appellant also submitted that the expression "not liable" refers to a liability to the council or indemnification to the owner. However, it should not be construed in a manner to relieve the builder from constructing the works other than in compliance with the plans and specifications.

Respondent's submissions

1. Firstly, the respondent submits that the Tribunal's findings that it was "impossible" to construct the roof in a manner shown on the architect's drawings and that the defects relate "solely to the deficiencies in the architect's design" were findings of fact, not law.
2. The respondent submitted that there was a proper basis for the findings by the Tribunal on the evidence before it and therefore no error of the type referred to by the High Court in Kostas v HIA Insurance Services Pty Ltd (2010) 241 CLR 390. In this regard the respondent said that the challenge appeared to be on the basis that the decision was against the weight of evidence.
3. In relation to the evidence before the Tribunal the respondent made the following submissions: 1. The substance of the evidence of the respondent's expert, Mr Goddard, was that due to errors in the architectural drawings which were at odds with the existing roofline, it was impossible to construct the eaves and gutters in the location is shown on section AA and sectional drawing D1 because there was insufficient space where the upper and lower roof sections met to construct the architectural detail. In this regard the respondent provided MFI 2 as part of its submission to explain the geometry of the roof as described by the respondents expert, Mr Goddard. 2. The architect admitted in cross examination that the roof could not be built as shown on the drawings and large scale details.
4. The respondent submitted that the appellants are in error to characterise the failure to install the gutter as a failure to undertake work required by the contract simply because the gutter was not installed. The respondent says this is to mischaracterise what occurred. Rather, the respondent says the builder constructed the work as shown in the architectural drawings up until the point when the problem with the intersection of the roofs was identified.
5. The respondent says that the evidence establishes that when this error was discovered, the respondent sought instructions from one of the appellants, Mr Li, suggested Mr Li "get his architect involved in finding a solution" and offered suggestions about how the roof might give be completed having regard the then state of construction.
6. The respondent also points to this evidence to show that the appellants are incorrect in their submission that the respondent failed to take any steps to seek clarification in respect of the problems when first identified or to seek instructions as to how to proceed.
7. Further, the respondent said in oral submissions that the Tribunal did not accept the evidence of Dr Hutcheson, identified at [50] of the Decision, namely that the works did not comply with the drawings or meet the standard building practices or the requirements of section 18B of the Home Building Act 1989 (HB Act).
8. In relation to cl 43 of the contract the respondent made the following submissions: 1. The operation of this clause is not limited to dealing with claims by third parties against the owner or the builder. 2. Once the Tribunal found as a fact that the works could not be built in accordance with the drawings, the respondent was entitled to the protection of cl 43 and was not liable for any defects.
9. In relation to notifying the appellants of the problems, the respondent refers to the evidence of Mr Wang, particularly par [55] of his statement provided to the Tribunal (Respondent's Bundle p 32) and to the oral instructions given on behalf of the appellants by Mr Li.

Consideration

1. The appellants received notice of the Decision on 9 January 2015 and filed a Notice of Appeal on 6 February 2015. The appeal was filed in time.
2. The appellants have a right of appeal on a question of law and otherwise require leave to appeal: see s 80(2)(b) of the Civil and Administrative Tribunal Act 2013 (NCAT Act). To the extent leave is required, the appellants must also satisfy the Appeal Panel they may have suffered a substantial miscarriage of justice: see cl 12 (1) of Sch 4 of the NCAT Act. To the extent leave is required, the principles in Collins v Urban [2014] NSWCATAP 17 are applicable to the grant of leave.
3. The appellants challenge the Tribunal's decision in respect of the tiles defect and the gutter defect. Each of these is considered in turn.

Tile defect

1. There is no challenge to the Tribunal's finding at [33] of the Decision where the Tribunal concluded: The specification to the contract requires the roof tiles to be supplied and fixed to the extension to match as close as possible to the existing tiles.
2. The substance of the appellants' challenge is in relation to this matter is the Tribunal's conclusion at [37] of the Decision. The appellants assert that this conclusion amounted to an incorrect interpretation of the contract requirements and therefore constituted an error of law.
3. In our view, there was no error of law and the conclusion of the Tribunal was evaluating the competing evidence of the parties and determining a question of fact. On the one hand, the appellants expert Dr Hutcheson had said that the tiles were of different colour, "did not comply with the DA and CC drawings" and that the tiles supplied need to be removed and "replaced with tiles which exactly match the tiles of the existing residence (Court Book p 50). On the other hand, the respondent's expert Mr Goddard said (Court Book p 202): The original tiles have been subject to 10 years of exposure to the elements causing the tiles to darken from the original colour. Photo 1 depicts the original colour of the existing cement tiles after it has been washed down and scrubbed. Photo 2 depicts the original colour of the existing cement tiles under the overlap of the tiles. If the proprietor requires the existing tiles to match the colour of the new cement tiles the original roof tiles will be required to be water blasted or steam cleaned at the Proprietor's expense.
4. The Tribunal evaluated this evidence in the Decision at [34] - [37] and said: 34 The owners rely on photographs in their expert report. 35 The builder's expert makes the point that the existing roof tiles have at 10 years of exposure and as a result have become whether. 36 The builder's submission conveniently summarises the evidence in connection with this defect item. This summary of the evidence is not seriously challenged by the owner's submissions in reply. In any event I have not taken into account the architects view on how the contract should be interpreted. 37 The specification did not call for an identical match. In my view the photos attached to the builder's expert report establish that the new tiles are a close match to a cleaned pre-existing tile.
5. The photographic evidence of the respondent showing the tiles in the cleaned and uncleaned state is found at Respondent Bundle p 299. The applicant's submissions on this item are found in Court Book pp 282-3 and p 309. The submissions of the respondent on this item are found in the Respondent's Bundle pp 272 - 273.
6. Although the appellants' expert sought to suggest in his report that the tiles were required to match exactly, it was common ground on appeal that the specification required the new tiles supplied to match the existing tiles "as closely as possible" as found by the Tribunal at [33]: see appellants' submissions before the Tribunal, par [42] at Court Book p 282.
7. However, the appellants submitted to the Tribunal that the evidence showed that the tiles did not match the existing tiles in an uncleaned state. This was in response to the respondent's position (Respondent's Bundle page 272-3) that: 1. Exactly matching tiles could not be supplied, a matter conceded in cross examination by the appellants' architect. 2. The tiles supplied did match as close as possible the existing tiles once the existing tiles were cleaned. 3. The respondent had suggested to Mr Li that he jet clean and repaint the existing tiles in order to achieve uniformity, but Mr Li had made no request that he do so.
8. It seems to us that in order to evaluate this evidence the Tribunal was required to determine the colour of the existing tiles and compare them to the colour of the tiles that were supplied by the appellant in order to decide whether or not the tiles supplied matched the existing tiles "as closely as possible" as required by the specification. The Tribunal's reasoning is no more than to reflect that a comparison of the tile colour, as opposed to a comparison with the colour of any dirt or material stuck to the existing tiles, required the existing tiles to be first cleaned. This is what the respondent's expert did and, it would appear, what the respondent had suggested to the appellants be done in order to achieve uniformity in colour.
9. In doing so, the Tribunal was not determining or interpreting the meaning to be given to the specification requirement which it set out in [33]. Rather, having stated in [37] that "the specification did not require an exact match" the Tribunal was determining whether the contractual requirement had been met and in doing so has accepted the expert's approach to evaluating colour of the tiles was correct.
10. The Tribunal then went on to conclude at [39] that there had been no breach of the specification and the work was not defective.
11. Further, and in any event, even if the Tribunal was construing the specification and in fact determined that the words "closely matching the existing tiles" meant "existing pre-cleaned tiles", in our view no error is shown. No suggestion is made in the contract that the tiles for the new extension were to be used or weathered. Certainly the contract does not suggest the respondent was to match the dirt or other material stuck to the tiles. Rather, the interpretation that the colour of the existing tile should be determined by its state when clean is commonsensical and provides a way of ensuring consistency of colour across a roof that has discoloured over time.
12. Consequently, we are not satisfied the appellants have demonstrated any error of fact or law and this ground of appeal fails.

Gutter defect

1. This ground of appeal relates to a claim by the appellants in the Tribunal that the respondent had failed to construct the works in accordance with architectural drawings in that it had failed to install a gutter with the roof of the new extension met the lower roof of the existing house which was to be extended to meet the wall of the first floor being constructed as part of the new work. This claim, described as Item 4, was one of five items for which the appellants claimed the sum of $95,000.00. Item 1, which is also subject of the appeal, forms part of this claim. Other items included that the tiled roof was "wavy", that various trusses had not been constructed as shown on the drawings and that stormwater overflows the existing gutters.
2. The Tribunal rejected all of these claims.
3. In rejecting the gutter defect claim, the Tribunal noted the appellants' architect had made a number of admissions and the Tribunal accepted the respondent's submissions concerning the design defects arising from the drawings. These submissions made by the respondent are found in the Respondent's Bundle p 275 at [62] and following. The effect of these submissions which the Tribunal accepted was that: 1. The contract drawings were deficient in a number of respects. 2. The architect had assumed the existing roof pitch was 27 degrees, that he had prepared the drawings on that basis but he had not actually measured the existing pitch. In this regard the architect also agreed that if the picture of the existing roof was greater than 27 degrees, the extension to the existing roof would finish higher up the new wall to be constructed for the first floor. 3. It would be impossible to construct because there would be insufficient space to construct a gutter, facia, eaves lining, vertical cladding and flashings in that location in accordance with the architectural drawings.
4. The Tribunal also noted that the appellants did not seek to claim damages in connection with any alleged failure by the respondent to notify the appellants of inaccuracy of contract documents in accordance with cl 6.2 of the contract or to make any claims for variations pursuant to cl 17 or cl 43.3 of the contract by reason of the need fact the architectural drawings were defective. In this regard, the appellants did not challenge the Tribunal's finding that if the respondent had sought a variation it was probable that there would have been additional costs payable by the appellants to the respondent: see Decision at [52].
5. Rather, the appellants only challenges to the Tribunal rejecting this item of claim are that: 1. The Tribunal erred in concluding that cl 43.2 (a) of the contract relieve the respondent from liability for the gutter defect because no work was done. 2. The Tribunal erred as a matter of law and/or fact in determining that the gutter defect related "solely" to the deficiencies of the architects design.
6. It is convenient to deal with ground two first. In doing so, it is relevant to note that no challenge was made by the appellants on appeal to any other aspects relating to the construction of the extension of the existing roof or the construction of the new roof to the first floor. That is: 1. The works that lead to there being insufficient space in the area where the gutter was to be constructed, were themselves constructed in accordance with the plans and specifications and the other contractual requirements; 2. The gutter works were not constructed and this is the defect about which complaint is made.
7. At [57] of the Decision the Tribunal made the following findings of fact: I find that on the basis of the evidence referred to by the builder, being its experts evidence and the evidence of the owners architect in cross examination as referred to in submissions, the defect that the owners complain of, the lack of an upper gutter, relates solely to the deficiencies in the architects design.
8. In our view, these findings and the preceding paragraphs of the Decision make clear that the Tribunal was satisfied as a matter of fact, on the bases of the evidence of the respondent's expert Mr Goddard (Court Bundle p 204) and the appellants' architect's evidence in cross examination set out above that: 1. The eave width shown on the architectural drawing would be 450 mm if constructed in accordance with the drawings. 2. The actual eave width of the first story is only 175 mm. 3. The existing roof had been extended at the same pitch to the wall frame at the first floor as required by the drawings. 4. The extended rafters run into the new first floor pitched roof frame which has to match the pitch and ceiling height of the existing run floor. 5. Sectional detail D1 on the architectural drawing does not match or correctly depict the existing structure; and 6. Therefore there is no room to construct the gutter detail as shown on sectional detail D1.
9. In circumstances where these sections of the roof were otherwise constructed in accordance with the plans and specifications, and in circumstances where the architect conceded in cross examination that the drawings were deficient and that he had not measured the pitch of the existing roof to confirm it was 27 degrees, in our view the Tribunal was correct to conclude that the sole reason why the gutter could not be constructed in accordance with the plans and specifications arose from the architect's defective design.
10. Therefore, we do not accept any error was made in law or otherwise in the Tribunal in reaching this conclusion and this ground of appeal fails.
11. The other ground of appeal to dealt with is the conclusion at [58] of the Decision where the Tribunal said: On this basis the builder has persuaded me that the defect that the owners have raised, namely no upper gutter as shown on DA CC and contract plans, comes within section 43.2(a) of the contract with the result that the builder is not liable for such defect.
12. The obligation of a builder to construct the works in accordance with the plans and specifications and conditions of development approval arises under c 2 and cl 38 of the contract and s 18B of the HB Act. Clause 38.1(a) (which is in the same terms as the statutory warranty found in s 18B of the HB Act) provides: 38.1 To the extent required by the Home Building Act, the builder warrants that: (a) the building works will be performed in a proper and workmanlike manner and in accordance with the plans and specifications attached to this contract; …. (c) the building works will be done in accordance with, and will comply with, the Home Building Act or any other law.
13. It is not in dispute in this appeal that a builder may exclude certain liabilities arising under the contract. In this regard cl 43 of the contract provides: 43.1 To the extent required by the Home Building Act and subject to subclause 43.2, the building works will comply with: (a) the Building Code of Australia (to the extent required under the Environmental Planning and Assessment Act 1979, including any regulation or other instrument made under that Act); (b) all relevant codes, standards and specifications that the building works are required to comply with under any law; and (c) the conditions of any relevant development consent or complying development certificate. 43.2 The builder is not liable if the building works did not comply with the requirements of subclause 43.1 if the failure relates solely to: (a) a design or specification prepared by or on behalf of the owner (but not by or on behalf of the builder); or (b) a design or specification required by the owner, if the builder has advised the owner in writing that the design or specification contravenes subclause 43.1.
14. The appellant submitted that clause 43.2(a) has no application because the defect about which it complains does not arise out of work done by the builder, but rather because the respondent has not constructed the gutter as shown on the drawings.
15. In our view, this submission misconceives the effect of cl 43.
16. By its terms, cl 43.1(b) makes the respondent liable if the building works do not comply with any relevant code, standard and specifications "which the works are required to comply with under any law". One of the laws which the builder must comply with is the HB Act, including the requirements found in s 18B, which mirror the requirements found in cl 38 of the contract.
17. The claim made by the appellants to the Tribunal was that the works did not comply with the plans and specifications in that the builder had not constructed the gutter as shown on the drawings.
18. Ordinarily, a builder would be liable to a homeowner if the building works did not comply with the plans and specifications by reason of the builder's obligations to comply with s 18B of the HB Act. However, pursuant to cl 43.2 of the contract such a liability is excluded "if the failure relates solely to a design or specification prepared by or on behalf of the owner (but not by or on behalf of the builder)": see cla43.2 (a).
19. The Tribunal determined that the failure of the respondent to construct the works in accordance with the plans and specifications was caused solely by the defective drawing of the appellants' architect. Further, as determined by the Tribunal, it was not possible for the respondent to construct the gutter in accordance with the drawing provided. It follows that the respondent is not liable for its failure to construct the gutter in accordance with the plans and specifications.
20. The fact that works could not be constructed may have entitled the appellants to have the contract price for the works reduced by reason of the fact the work could not be carried out as required. Further, upon discovering that the drawings were defective the contract could have been varied so as to require alternative works to be carried out. However, none of these matters were raised on the appeal other than in support of the contention that the respondent had failed to construct the works in accordance with the contract.
21. While such submissions may have relevance if a different case had been pursued in the Tribunal or on appeal, the fact remains that, as determined by the Tribunal, it was not possible for the respondent to construct the works in accordance with the plans and specifications for the work solely because the plans prepared by the appellants' architect were defective.
22. Accordingly, the appeal in respect of the Tribunal's decision concerning the gutter defect fails.
23. Consequently, the appeal in relation to Item 5 - Estimation of costs, should also be dismissed.

Orders

1. The Appeal Panel makes the following orders: 1. Leave to appeal is refused. 2. The appeal is otherwise dismissed. 3. Any application for costs is to be filed and served within 14 days from the date of these orders. Any application is to include written submissions and any other material to be relied upon in support of the application. 4. The party against whom any application for costs is made must file and serve any submissions and material in reply within 21 days from the date of these orders. 5. The applicant for costs is to file any submissions in reply within 28 days from the date of these orders. 6. The submissions by the parties are also to address the question of whether or not any application for costs should be dealt with on the papers and whether the Tribunal should make an order to allow this to occur.

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: 31 December 2015