Long & Fitzpatrick v Wollongong Homes Pty Ltd

NCAT Consumer and Commercial|2014-12-02|Before: Mr J

Reasons for the DecisioN

The applicants in these reasons will be referred to as the homeowners and the respondent as the builder.
The application was lodged with the Registry on 14 February 2013. The matter was heard over two days on 2 December 2014 and 18 March 2015.
The homeowner's initial application was for the builder to undertake rectification works for defects in the premises. On 28 November 2013, the homeowners amended their application seeking a monetary amount of $200,000.00 for breach of statutory warranty pursuant to section 18E of the Home Building Act (NSW) 1989 (The Act). They were also seeking damages for defects in negligence that by their own admissions was not materially different to the scope of the breach of statutory warranties contained in the Act. The $200,000.00 amount is for the following: 1. Rectification and relocation costs; 2. Interest 3. Costs
The amount now claimed by the applicant for rectification costs has now been revised to $101,116.88.

Jurisdiction

It is agreed that the parties entered into a contract dated 15 October 2010 for the builder to construct a single level home for the homeowners for an amount of $248,780.69. That contract was provided to the Tribunal. It is also not in dispute that construction commenced in January 2011 and the Tribunal finds it was completed on about 16 July 2011 when the property was handed over by the applicant. It should be noted that that the applicant had complained in relation to the defective brickwork before handover, but in any case handover occurred.

Issues in Dispute

There is no dispute in relation to the progress of the works under the contract. There is also no material dispute about the scope and liability for the defects. The dispute relates to the reasonable method and costs of rectification of the defects. There is also a dispute relating to a Tribunal facilitated conclave.

The Conclave

On 24 February 2014 the Tribunal directed a joint expert report. The Tribunal ordered: 5. An expert conclave is a meeting between the expert witnesses, usually on site, at which the expert's discuss the issues on which they have prepared reports, with a view, as far as possible, to clarifying matters in dispute and reaching agreement or narrowing points of difference. The purpose of the conclave is to allow the experts to discuss matters between themselves in a courteous and non-adversarial manner. For this purpose, neither parties nor lawyers are to attend the conclave or participate unless the Tribunal otherwise directs. An expert may, if the member facilitating the conclave directs, seek brief advice or instruction from lawyers or a party. … Any revised Scott Schedule/joint report must set out the areas of agreement and disagreement and any reasons for the disagreement including cost references to the experts reports previously filed and served in support of each expert position this direction does not authorise the provisions of new evidence in the revive Scott schedule or joint report
Pursuant to those directions, a conclave was held on site 6 May 2014. In attendance was the homeowner's expert Mr Stephen Campbell, the builder's expert Mr Andrew Connor and it was convened by a conclave Member of the Tribunal, Mr Toplinsky. Following the conclave, both experts signed a joint memorandum, which was based on an earlier joint Scott Schedule that had previously been completed by both experts. It included handwritten changes initialled by both experts.
Following the conclave, and after receiving a copy of what he had signed at the conclave, Mr Campbell, the homeowner's expert, decided that the Scott Schedule attached to the joint memorandum and agreed on by both experts did not accurately reflect the scope of works required to rectify the defects. On 13 June 2014, Mr Campbell provided a supplementary report in which he indicated he was "unable to support the joint report" as it did not provide for all the works that should be done and did not reflect the correct quantum for rectification. Mr Campbell also provided an affidavit explaining the difference of opinion on 30 July 2014 and an amended Scott Schedule to reflect the supplementary report and affidavit. He also subsequently tendered for and costed the works and provided a final report dated 10 October 2014.
Mr Connor provided a response to that amended Scott Schedule by way of a consolidated Scott Schedule. That amalgamated Scott Schedule included the contents of the conclave Scott Schedule and in these reasons it will be referred to as the "amalgamated Scott Schedule". The homeowner's suggest that is the best point of reference for the Tribunal. The homeowners make submissions that the revisions by Mr Campbell made after the conclave and brought to the attention of the Tribunal stand to his credit. They submit it is consistent with the Tribunal's code of conduct and his obligation to assist the Tribunal that he should highlight the deficiencies in the conclave report, having recognised them after the fact. They make submissions that Mr Connor's response simply holds firm to the agreement made at the conclave and does not demonstrate that he has exercised a fresh mind and that undermines his credit. The homeowners make submissions that Mr Campbell's affidavit of 30 July 2014 lists comprehensively the process he went by before and after the conclave. Mr Ilkin, the solicitor also provided an affidavit dated 30 July 2014 explaining the process with the expert, before and after the conclave. They make submissions that Mr Ilkin was not cross-examined and so his evidence should be accepted. They also highlight that while Mr Campbell is an experienced builder, this was Mr Campbell's first conclave and he was inexperienced in conclave matters and sought to clarify issues in relation to the complete scope of works. They suggest that Mr Connor has approached the conclave in a spirit of "settlement" as opposed to "a technical analysis of the defects." They submit that consistent with this is Mr Connors failure to engage with the technical issues raised by Mr Campbell after the conclave. The applicants also make submissions that Mr Campbell presented as a more measured witness who was at times prepared to speak against his witness where as Mr Connor lacked candour. They suggest that the report of Mr Connor did not properly address technical issues, rather the methodology of Mr Campbell. They also make submissions that Mr Connor lacks expertise when it comes to actual building experience and for all of those reasons, the evidence of Mr Campbell should be preferred.
The builder alleges that the homeowner's cannot "cherry pick" those items in conclave which are unfavourable to them and they allege that Mr Campbell has not demonstrated independence in relation to the expert evidence as he has changed his opinion after taking legal advice and to favour his clients' case. They suggest that Mr Campbell's change in position throws considerable doubt on his ability to give reliable expert evidence. They refer to a number of other grounds on which Mr Campbell is not credible beyond the fact that he agreed to the cost and method of repair in the conclave. They claim he has provided an initial report with unsubstantiated allegations in relation to the absence of piering and termite barriers. He assisted the homeowner's in making the claim to Fair Trading and to the Tribunal where they say he estimated an amount of $30,000.00 for repairs. He prepared a scope of works and obtained tenders which he did not disclose and represented the owners in meetings with Fair Trading and the builder. They make submissions that Mr Campbell did not disclose his prior involvement in his subsequent reports. The builder makes submissions that for those reasons where there is contrary opinion between the experts, the Tribunal should prefer the evidence of the builders expert Mr Connor over that of Mr Campbell.

Findings in Relation to the Experts and Conclave

NCAT procedural direction 3, dated 7 February 2014, relates to expert witnesses and relevantly states the following: General duty to the Tribunal 11. An expert witness has an overriding duty to assist the Tribunal impartially on matters relevant to the expert witness's area of expertise. 12. An expert witness's paramount duty is to the Tribunal and not to any party to the proceedings (including the person retaining the expert witness). 13. An expert witness is not an advocate for a party. 14. An expert witness must abide by any direction given by the Tribunal.
In Davis Homes Pty Ltd v Listowski (Home Building) 2010 NSWCTTT 250 (8 June 2010) the respondents and their expert sought to resile from conclusions reached between experts at a conclave. Senior Member Durie found that they were bound by what the experts had agreed. In doing so, he cited the following paragraph from the decision of Brereton J in Lucantonio v Kleinert [2009] NSWSC 929 (5 August 2009): It would entirely defeat the purpose of the expert conclave process, including the production of a joint report, to permit one of the parties now to adduce the evidence of a further expert witness, after the conclave has taken place and after the joint report has been prepared, to give an opinion contrary to at least some of those agreed to by some of the experts in the course of the conclave and joint report. The court manages closely the use of expert evidence. In this case, the purpose of the course of management adopted would be entirely frustrated if the plaintiff were now permitted to call a further expert witness who had not been involved in the conclave and the preparation of the joint report.
Senior Member Durie stated that Brereton J's reasons go further than "the simple rejection of a post-conclave report". He held the respondents to what was agreed at the conclave, stating: His Honour refers to the subversion of the conclave process by the tender of a report giving an opinion contrary to that reached at conclave. I respectfully agree with what His Honour says.
This case differs in some respects. This is not a situation where the applicants have called a new expert and are resiling from the position. Instead Mr Campbell indicates that after the conclave he found that the outcome "did not sit well with him" and that he was seeking to assist the Tribunal in relation to the actual amount. However, the Tribunal finds that this is evidence that Mr Campbell changed his mind a number of times in relation quantum and as such his expert evidence is unreliable.
Both experts gave evidence at hearing and were cross-examined. The Tribunal makes no findings against their credibility based on their demeanour. The Tribunal is also not persuaded that Mr Campbell lacks candour because he failed to disclose prior involvement in subsequent reports or has made unsubstantiated findings previously.
However, in this case the Tribunal finds that the change in the Mr Campbell's position does damage the reliability of his evidence. The purpose of the Tribunal conclave was made clear from the directions of the Tribunal. The role of an expert is clear from the expert code of conduct. The change in opinion about quantum by Mr Campbell is substantial and the Tribunal finds it does throw cast substantial doubt in relation to the reliability of his evidence. In his affidavit of 30 July Mr Campbell states that he was unfamiliar with the conclave process as this was his "first" conclave. The joint memorandum which he signed stated the following: "The experts agree that the following pages numbered 1 to 11 are a true and accurate record of all matters discussed and agreed to at the expert conclave: (Signatures) When signed off the agreements reached will be relied upon by the Tribunal in any hearing in relation to this application.
Further, Mr Campbell has initialled all of the handwritten comments to the Scott Schedule where the parties have either agreed or where matters are not pressed. In his affidavit of 30 July 2014, Mr Campbell states the following: 7. …. After the conclave, I received a copy of the adjusted Scott schedule from member Topilinsky. During my review of the Scott schedule I immediately became concerned about the lack of detail. I then commenced reconstructing the remedial methodology with a view to pricing the work as I would as a builder. On 19 May 2014 I notified Member Toplinsky and Mr Connor of my concerns about the lack of detail in the scope and the omission of items required to execute the remedial works: see tab 5 of the affidavit of Alex Ilkin sworn this day. I was not provided with any authority from the applicants to sign the joint memorandum on their behalf. While I signed the joint memorandum I did so as a record of my agreement with its contents, although, at the time, I now consider I did not have sufficient appreciation that it was to record my final and considered view on the cost of each item.
Mr Campbell needed no authority from his clients to sign the joint memorandum; he only needed authority to attend the conclave. There is no doubt he was authorised to attend the conclave and his duty was to the Tribunal. It is clear on the joint memorandum that by signing the memorandum he was agreeing to the recordings and that the agreements reached would be relied on in future hearings. While Mr Campbell now states he felt "rushed" at the conclave, he is a builder with 14 years of experience. The Tribunal finds that he understood the conclave purpose and that by signing the joint memorandum, he was agreeing that the conclave report was an accurate record of all matters discussed and agreed between the experts and that he understood that the agreements reached by the experts at the conclave would be relied upon by the Tribunal in any hearing in relation to this application.
On 13 June 2014, after agreeing to the costs, Mr Campbell provided nine items in his supplementary report for which he states that insufficient costs were allowed in the conclave. He proceeds in his affidavit to explain why he has reviewed those costs and that certain items were missing from the conclave calculations. The Tribunal simply has before it a conclave Scott Schedule in which experts have agreed to certain rectification and costing's and it is agreed that those total costing are $24,248.40. By signing the memorandum the experts acknowledged that the Tribunal in any future hearing would rely on any agreements reached at the conclave.
In the conclusion of his affidavit dated 30 July 2014, Mr Campbell states: 24. I felt rushed at the conclave and, as a result, some compliance type detail for a number of items was overlooked. I do not take issue with the remedial works proposed, only that not enough costs were allowed at the conclave to effectively and correctly carry out the agreed remedial works. 25. I say the $26,304.96 will not represent a fair price to carry out the rectification works. I am now in the process of preparing scope of works for the items in the joint memorandum of sixth of May 2014 plus the nine items called and seeking tenders from experience builders to carry out the works.
In that same affidavit, Mr Campbell estimated that the extra works, not accounted for at the conclave would be a total of $20,491. After obtaining the tenders (quotations), Mr Campbell revises his costing to a total of $101,116.88.
The Tribunals finds no evidence before it that Mr Campbell changed his mind after the conclave because of instructions given by his clients or by the solicitor. However, Mr Campbell states in his Curriculum Vitae that he has been a licensed builder for 14 years and successfully operated a construction business and it is difficult to understand how with Mr Campbell's construction experience there can be such significant difference between the amounts agreed at the conclave and the amount arrived at in his affidavit of 30 July 2014 and then finally in his revised report of 10 October 2014. The Tribunal is not persuaded by the explanation given by Mr Campbell himself as to the variation in the amounts agreed on at the conclave. The Tribunal does not find that Mr Connor has approached the conclave in the spirit of settlement. Mr Connor does have experience as an expert and there is no reason to doubt that he also understands the purpose of a conclave. Both parties have been represented throughout the proceedings. The Tribunal finds that by signing the conclave agreement, Mr Campbell agreed to the annotated Scott Schedule and that it was a reflection of what was agreed at the conclave and that he understood that the agreements reached would be relied upon by the Tribunal in any future hearing in relation to this application. The Tribunal finds that Mr Campbell's changing views on quantum do undermine the reliability of his expert evidence. Accordingly the Tribunal does not accept that the revised costing's subsequently provided by Mr Campbell are simply items which were not included in the agreement at the conclave

The Defects

Having made the finding that Tribunal should not go behind the conclave report and what was agreed between the experts and in light of the fact that the experts signed the memorandum which clearly stated that "When signed off the agreements reached will be relied upon by the Tribunal in any hearing in relation to this application" the Tribunal also makes findings consistent with what was agreed at the conclave The most significant items in dispute was the brickwork and the Tribunal shall deal with that item first.

Items 2 & 3: Demolish Existing Brickwork and Erect New Brick Work

It is clear from the conclave report and the handwritten notes initialled by the experts at conclave that where relevant responsibility was agreed, rectification was agreed and cost were agreed. In relation to item 3 and the remedial work, it is even noted what that the remedial work includes: -install remedial ties through masonry - render existing facades - coat with heavy build acrylic to manufacturer's specifications - install and trim door flashings
It was agreed at the conclave that the brickwork was a defect and the amounts for rectification relating to item 2 was included as part of item 3 and the agreed amount was $15,170.00 Mr Campbell now states it will cost $48,777.10 for removal and replacement of the new brickwork and render. He states that certain items were not allowed at the conclave.
Mr Connor, after indicating that an amount was agreed at the conclave states the following: If Found I have reviewed the Bill of Quantities (BOQ) prepared by Wollongong Homes Pty Ltd (dated 8 October 2014) for the replacement of brickwork reusing the steel lintels and agree with the Scope of Works and costing methodology utlisied (copy attached at Appendix "f" to IBAS report dated 17 November 2014) Accordingly, I opine that a replacement cost of $28,123.80 + builders margin is an appropriate quanta for this matter
Mr Connor claims an amount of $28,123.80 based on the builder's bill of quantities, which is dated 8 October 2014. The Tribunal is not persuaded that this relates directly to the defects, scope of works and amount agreed at the conclave. While the Tribunal is not entirely clear why the amount is in the amalgamated Scott Schedule, it is clear from Mr Connors report dated 17 November 2014 that he does not agree with the findings made in Mr Campbell's affidavit after the conclave, including in relation to matters contained within item 3. He indicates at page 19 of his report that 8.2.7 All matters relating to brickwork repairs/restoration were considered at the Experts Conclave
The applicant makes submissions that the Tribunal should reject evidence by Mr Connor because Mr Campbell has provided detailed reasoning for his conclusions and prepared an experts report that is independently costed as it is based on quotes that he has sourced. They make submissions that Mr Connor says nothing in response to Mr Campbell's revised costing's. However, Mr Connor has responded to Mr Campbell's affidavit in his report of 17 November 2014 and the Tribunal does not agree with the submissions of the applicant on this point. For the reasons stated above the Tribunal is not persuaded by the reliability of Mr Campbell's evidence. He has mind changed significantly over the course of the litigation. Given the findings made in relation to the reliability of Mr Campbell's evidence, the Tribunal prefers the evidence of the Mr Connor and finds that what was agreed at the conclave is a proper reflection of the liability, scope and quantum and allows the amount of $15,170.00 for the defect relating to brickwork.

The remaining defects

In relation to the remaining defect Mr Campbell now seeks to revise that amounts agreed to in the conclave. The Tribunal finds no reason to depart from the conclave agreement in relation to those items. The Tribunal makes the following findings consistent with what was agreed at the conclave. 1. Item 1 relates to preparing the site for remedial work. It was agreed at the conclave that the item was not pressed. 2. Item 4 relates to repair of the sliding door and it was agreed this was a defect at the conclave and an agreed amount of $290.00 was agreed for rectification. 3. Item 5 relates to carpentry defects and it was agreed that this was a defect and it was also agreed that $960.00 should be allowed for rectification. 4. Item 6 relates to repainting of the soffits and trims referred to in items 5 and it was agreed at the conclave that this was part of item 5. No further amount is allowed for those items. 5. Item 7 relates to disconnecting services and it is noted that it was "not pressed" at the conclave. It is also noted that it is "part of item 3". 6. Item 8 relates to renewing the front patio and it was agreed that this was defect and it was agreed to allow an amount of $1,500.00 for rectification. 7. Item 9 relates to concrete repairs and the defect is agreed and there is an agreed cost of $450.00. 8. Item 10 relates to the front drive and was not pressed at the conclave. in the case it was found not to be included in item 3 and is an independent component of the costing. 9. Item 11 relates to the site clean on completion and it was agreed that an amount of $1,558.00 should be allowed.

Orders for the Builders to Undertake Rectification

The builder suggests that they should be entitled to undertake the rectification of the works. They rely in particular on Bitannia v Parkline [2009] NSWSC and the fact that the building contract itself allows for defects liability period at clause 29.
It should be noted that section 48MA which has recently been inserted into the Act for a work order to be the preferred outcome does not apply in this case, as the application was commenced prior to the amendment of the Act. The homeowners highlight that they initially made an application for the builder to return to rectify the defects at a time when they were unrepresented, but subsequently amended the application as they had lost faith in the builder and they found him difficult to deal with. They also refer to the reluctance of the builder to comply with certain orders of Fair Trading. The homeowners also submit that a work order is inappropriate given the significant nature of the defective work, the poor standard on existing rectification work and the deterioration in the relationship between the parties makes a work order impractical. The homeowners also refer to a series of cases which they say support their case. The cases are all prior cases of the former Consumer, Trader and Tenancy Tribunal.
Having considered the submissions and cases provided on this point the Tribunal is not satisfied that a work order should be made. The Tribunal agrees that the defects are significant and that the relationship of the parties has broken down. The homeowners raised the main defect relating to the brickwork before handover. While the builder proposed some rectification, it was certainly not in the same scope that the Tribunal has now found is required. Attempts for rectification following orders by Fair Trading demonstrate the uneasy relationship between the parties. Having considered the evidence on this point the Tribunal does not find it appropriate in the to make a work order in the circumstances.

The Cost that the Builder Would Incur in Carrying out the Works

The builder argues in the alternative that if the Tribunal does not allow a work order then they should limit the costs that the builder would incur in carrying out the works. They submit that the builder has failed to mitigate the loss and they refer to the fact that at the beginning of the proceedings the owners were seeking an order that the builder return.
The homeowner seek to differentiate this case from the case of Bitannia v Parkline [2009] NSWSC on the basis that in that case the builder was refused access to the site. They make submissions that in this case the respondent was not denied access to rectify the defects, but has refused to rectify them in a reasonable manner and that the builder was not deprived of the opportunity to complete the rectification works.
Having made a finding that a work order is not reasonable, the Tribunal does not find that there is any reason that the homeowners should be required to accept an amount less than that which it would actually cost them to undertake to rectify the works. The Tribunal is satisfied that there is nothing akin to failure to mitigate loss and the homeowners are entitled to the cost of rectification including the builder's margin and GST.
The builder also makes submissions that a builder's margin of 20% is excessive and that the homeowners quotes from other tradespeople show margins between 10-17%. They also suggest that there should be no allowance of 5% for supervisions.
The conclave schedule notes that 20% was agreed between the experts relating to the builders margin and that GST was agreed at 10%. On that basis the Tribunal is satisfied that it is reasonable to allow 20% for the builder's margin and 10% for GST. Accordingly the Tribunal allows the amount of $24,248.40
The applicant has not proposed on what grounds interest would be awarded. Directions have been made for submissions and evidence in relation to costs. The orders are made accordingly. T Simon Senior Member Civil and Administrative Tribunal of New South Wales 18 November 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: 12 January 2016

At a glance

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Judgment (10 paragraphs)

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Cases Cited (2)

Cited By (2)