MIKEL v DUDLEY & ORS

Commercial Tribunal Act 1984 LEGISLATION CITED : Consumer, Trader and Tenancy Tribunal Act 2001 Home Building Act 1989

Forrester v Harris Farm Pty Limited (1996) 129 FLR 431 CASES CITED : Kalokerinos v HIA Insurance Services Pty Limited [2004] NSWCA 312 Prentice v Cummins (No 6) [2003] FCA 1002

PARTIES : Frank MIKEL v Alison DUDLEY & ORS

COUNSEL : P: W S Veitch 1/2D: E Petersen

P: N/A SOLICITORS : 1/2D: Macquarie Legal Centre 3D: I V Knight (submitting appearance)

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION ADMINISTRATIVE LAW LIST

JUDGMENT 1 HIS HONOUR: These proceedings concern an order made by the Consumer Trader and Tenancy Tribunal, the third defendant in the proceedings, on 20 August 2007 in favour of the first and second defendants against the plaintiff. 2 On that date, the Tribunal ordered that the plaintiff pay the first and second defendants $122,995.92, the Tribunal having determined the application made by the defendants for reasons set out in the decision given on the date I have referred to. 3 The application before the Tribunal was a claim made by the first and second defendants for damages as home-owners against the plaintiff, a licensed builder, together with a cross-application for the balance of contract monies said by the plaintiff to be owed by the defendants to him. 4 The building project involved the construction of a two-storey home at Lot 17 St Andrews Close, Belrose. The Tribunal had jurisdiction to determine the proceedings pursuant to the Home Building Act 1989, ss.48A, 48B and 48K. 5 On the hearing of the proceedings in this Court, Mr W S Veitch of counsel appeared on behalf of the plaintiff and Mr E Petersen of counsel appeared on behalf of the first and second defendants. I had the benefit of written submissions lodged by both counsel and I express my appreciation to them for their submissions which I have found to be of considerable assistance in identifying the issues that fall for determination and, in addition, assisted by the oral submissions today. 6 The proceedings were commenced by the plaintiff by way of summons and, on 7 October 2008, a further amended summons was filed. The nature of the relief sought by the plaintiff as expressed therein was, in part, in the nature of prerogative relief. Mr Veitch confirmed that the proceedings were to be heard and determined solely upon the basis of the jurisdiction which this Court has under Part 6 of the Consumer, Trader and Tenancy Tribunal Act 2001. 7 In that respect, the plaintiff did rely upon the provisions of s.65 as well as s.67 and by s.65(3) the court is not prevented from granting the relief of the kind referred to in subsection (1) being relief in the nature of prerogative relief and declaratory judgments or orders, in relation to a matter in respect of which a Tribunal has made an order if, amongst other things, relief or remedy is sought in relation to the hearing or determination by a party who had been denied procedural fairness. 8 Additionally, as I have stated, the plaintiff relies on s.67(1) which is in the following terms:- "67(1) If, in respect of any proceedings, the Tribunal decides a question with respect to a matter of law, a party in the proceedings who is dissatisfied with the decision may, subject to this section, appeal to the Supreme Court against the decision." 9 By the terms of s.67, this Court, accordingly, does not have a general appellate jurisdiction and, in particular, the Court cannot hear an appeal in relation to questions of fact. In Kalokerinos v HIA Insurance Services Pty Limited [2004] NSWCA 312, Bryson JA stated that the observations of Carruthers J in relation to a similar provision (s.20(5) of the Commercial Tribunal Act 1984) were apposite to s.67(1). Carruthers J in that case stated "a question with respect to a matter of law" is confined to a "pure question of law" . Bryson JA added at [47]:- "47. A decision on 'a question with respect to a matter of law' in s.67(1) must be a decision on something which arose or was in issue or was debated in the proceedings; something which had to be decided in order to dispose of the proceedings, whether or not it was expressly referred to in the decision. The Tribunal may decide on such issue without overtly referring to it. Consistently with Carruthers J's observations, express advertence to the matter of law is not necessarily required, and the decision might be with respect to a matter of law even though the matter of law is not mentioned, if some decision with respect to it was necessarily involved in the decision."

The evidence on the appeal 10 The plaintiff tendered documents relating to the record of proceedings before the Tribunal and, in that respect in particular, the following:-

(1) Exhibit A: the reasons for decision of the Tribunal.

(2) Exhibit B: the transcript of proceedings before the Tribunal.

(3) Exhibit C: particular exhibits tendered before the Tribunal.

Factual matters 11 The following were matters established before the Tribunal:-

(1) That the plaintiff was a licensed builder and the first and second defendants were the owners of the residential property which I have earlier referred to.

(2) That the parties entered into a building contract in terms of the "NSW Plain Language Building Contract for New Home Construction" published by the Housing Industry Commission. A copy of the contract was included in Exhibit C at pp.45 to 77.

(3) That the contract consisted of the terms set out in that document together with documents identified in clause 14 (p.50 of the tender bundle) which were:- (a) Tender document dated 15 July 2002. (b) Clause 24(D) - four pages. (c) Signed plans and HIA specifications for colour selection and standard specification.

(4) There was a dispute as to whether the relevant plans for the purposes of the contract consisted of plans drawn by Dvyne Design & Construction which bore the date 28 July 2002 or whether the plans were the plans approved by Warringah Council with Construction Certificate 2002/347CC1, which approval was given on 6 May 2002 and a copy of those plans being included in Exhibit C. The Tribunal determined at p.12 of the reasons for the decision that there was no evidence that the Dvyne Design & Construction plans formed part of the contract, they being plans that had not been approved by the Council even though those plans had been signed by Mr Dudley in circumstances not explained in the evidence. The original exhibit, being the contract and its annexures, was not produced or requested to be produced at this hearing. 12 Mr Petersen of counsel said that his instructions did not enable him to address that the four pages with the heading D, Clause 24, being pp.74 to 77 of the bundle, were in fact part of the original contract exhibit before the Tribunal. There has been some discussion about this matter. The transcript was referred to and, in particular at p.40 of Exhibit 3, which is said to be the whole of the contract, there was reference to item 14 and Mr Veitch referred, amongst other things, to clause 24D of four pages. I think, in the circumstances, I am entitled to have regard to the documents that were tendered without objection forming part of Exhibit C and drawing necessary inferences that pp.74 and 77 were, as Mr Veitch submitted, part of the original exhibit and I proceed upon that basis. 13 The Tribunal made a finding in relation to the question as to the terms of the contract and those findings included that the Council approved plans produced by Mr Brown, being the Council approved plans formed part of the contract, and that, accordingly, the plaintiff's obligation was "… to construct in accordance with the approved plans" . 14 It was established that the plaintiff undertook work under the Building Contract as so determined and finally in this respect expert evidence established that there were a number of defects in the building work which are identified on pp.14 to 21 of the reasons for decision.

Findings made by the Tribunal 15 In the reasons for decision, the Tribunal identified a number of defects found to have existed and findings were made by it as to the cost of rectification required. There was, and of course can be no challenge to the findings of fact relating to such defects, to the need for rectification or to the cost of rectification, they all being matters for determination by the Tribunal on the evidence including, in particular, the expert evidence. In that respect, Mr Lemon who was the expert called for the defendants and Mr Philpot for the plaintiff gave evidence before the Tribunal. In most respects, the Tribunal member preferred the evidence of Mr Lemon and made findings accordingly. 16 In general terms, the major items the subject of findings under the heading "defects" in the reasons for decision were the upstairs verandah, the rear balcony and the en suite bathroom. The subject of the findings in respect of those specific areas may be summarised as follows. 17 As to the upstairs bathroom the defects were found to be:-

(4) Rectification required to eyes of stainless steel wire. 18 In respect of the upstairs bathroom and those defects, the assessed rectification cost was $56,100. 19 As to the rear balcony the defects were found to be:-

(2) Failure of the builder to waterproof the balcony.

(3) Failure to supply capping to the balcony walls. 20 The rectification costs in respect of these items was $21,714. 21 As to the ensuite bathroom, the bathroom floor was flexing and full of water. The Tribunal determined there had been a failure to properly waterproof. 22 The rectification costs in respect of this item was assessed at $23,760. 23 The remaining defect items are recorded in paragraphs (rr) to (ddd). Each involves relatively small sums of money totalling in all approximately $17,500. 24 As earlier observed, the total amount of the order made by the Tribunal was $122,995.92.

Submissions 25 At the outset of the hearing, Mr Veitch was asked to identify in precise terms the grounds relied upon in the appeal that raised a question or questions "… with respect to a matter of law" within s.67 of the CTTT Act. Mr Veitch helpfully summarised those matters said to fall within the terms of s.67, namely:-

(1) An error by the Tribunal on the construction of the contract in that the Tribunal incorrectly identified the "Brown" drawings approved by Council as the plans to which the contract related and not the Dvyne Design & Construction drawings.

(2) The Tribunal's failure to permit cross-examination of Mr Dudley who had given short evidence in the proceedings. It was contended that there was, in consequence, a denial of procedural fairness.

(3) A denial of procedural fairness in a number of respects, namely:- (a) By the Tribunal disallowing the application to join Mr May. (b) By the Tribunal failing to exercise its statutory powers to call witnesses and, in this respect, the author of the certificate issued by Essential Services, certifies in relation to the project, being a Ms Lorraine Santangelo. (c) The failure to permit cross-examination of Mr Dudley, in particular, in relation to the Dvyne Design & Construction plans signed by him. (d) In relation to the cross-claim it was said there was a denial or procedural fairness in relation to the matters raised in paragraphs (ooo) and (ppp) and in that respect to invite submissions from the parties in respect of the matters referred to in those paragraphs. 26 In relation to the four matters summarised by Mr Veitch as giving rise to a question with respect to a matter of law, I will deal with each in turn.

(1) The construction of the contract point 27 There are two particular issues arising in respect of this aspect of the matter. 28 It was not disputed that there was some evidence before the Tribunal capable of supporting the finding made that to the effect that the approved drawings did constitute the plans for the purposes of the building contract entered into between the parties. Mr Veitch, however, submitted the Tribunal nonetheless erred and should have found and determined that the plans to which the contract related were the Dvyne Design & Construction plans. 29 I have been taken to some of the evidence that bears on this issue including, for example, p.155 of the transcript. 30 The Tribunal was also entitled to have regard to the plans, including the fact that the approved plans were highly detailed plans which one would expect a builder would require in order to perform his obligations under the building contract, especially having regard to the fact that there are statutory warranties requiring the builder to comply with plans, whereas the Dvyne plans seem to me to be what might be called the most basic plans which lack the detail that is apparent on the Council approved plans. 31 In the Tribunal deciding that question as to what was the contract, in particular what plan went with the contract and imposed obligations on the builder, what the Tribunal had to do was to consider the evidence and make a finding of fact. Such findings cannot be challenged in an appeal under Part 3 of the CTTT Act. 32 In Kalokerinos (supra), Bryson JA stated:- "37. The Notice of Appeal contains a second statement (passage B) identifying a number of findings and decisions under appeal. Statements concerning the nature of the contract made between the appellants and the builder, which should be understood to refer to the terms of the contract, are plainly challenges to findings of facts, and can have no other character. The grounds of appeal which could be taken to refer to these challenges do not identify any question of law. The challenge in passage B to decisions that the appellants had not suffered loss or damage also raises questions of fact, as appears from reasons I have given earlier." 33 The finding made by the Tribunal in the present case as to the approved plans does not, in any event, and this is the second point I referred to earlier, undermine or conflict with the determinations made by the Tribunal as to the defects detailed in the reasons for decision. As Mr Petersen observed, the contract contains statutory warranties in accordance with the Home Building Act and that statutory scheme includes the fact, as I have earlier referred, s.18B(a) states that the holder of a contract or licence in effect in respect of the residential building work is subject to an implied 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. On the findings made by the Tribunal, the nature of the defects would certainly fall within that description and they constitute a breach of the statutory warranty under s.18B(a) which are imported into the contract in question entitling the home owners to claim in respect of damage resulting and rectification costs associated with such damage. 34 Accordingly, the issue as to whether the plans that related to the contract would have been referred to as the Brown plans or the Dvyne plans is not directly relevant to or determinative of the question as to the defendants' entitlement to claim in respect of defective work. By virtue of the implied warranty, the nature of the defective work I have previously indicated in relation to the main items - things such as inadequate waterproofing - have nothing to do with plans. They have everything to do with an obligation, however, of a builder on the findings made by the Tribunal to undertake in a workmanlike manner a building contract, whatever the plans might say in terms of the plans in this case. 35 As to the cost of the quantification of such work, again the Tribunal member had before him competing expert opinion evidence. The experts were cross-examined at some length and all matters relevant to the question of quantification were available to the Tribunal to consider and determine. The determination on questions of rectification and costs are all questions of fact and no challenge to such findings of fact are available in these proceedings.

(2) The failure to permit cross-examination of Mr Dudley 36 Mr Veitch contended that the Tribunal effectively prevented him from cross-examining Mr Dudley and that, by reason of the Tribunal's conduct of the proceedings, he was denied procedural fairness. In support, he referred to the judgment in Prentice v Cummins (No 6) [2003] FCA 1002, a judgment of Sackville J. Reference was made to the judgment at paragraph [25], wherein his Honour referred to the general principle that a witness called by a party can be cross-examined by the other party on any matter relevant to an issue in the proceedings. 37 His Honour there also stated:- "29. If Mr Brereton had been able to point to injustice flowing from the Trustees' entitlement to cross-examine Mrs Cummins on all issues relevant to the proceedings, there may have been a sound basis for curtailing her cross-examination on issues relevant to the causes of action in respect of which the respondents elected to call no evidence. However, I do not think that Mr Brereton identified any such injustice." 38 In the present case, the question arises as to what issue relevant to the present appeal could or would have been raised in cross-examination of Mr Dudley. In that respect, Mr Veitch made a number of submissions in relation to Mr Dudley including the circumstances in which he came to sign the Dvyne plans, the role adopted by Essential Services Liverpool, Private Accredited Certifiers and the involvement of Mr Stephen May. Each of these matters are dealt with in Mr Veitch's written submissions (paragraphs [46] to [51]). 39 I am satisfied that cross-examination of Mr Dudley on any of the identified issues would, in no way, have conflicted with or prevented findings being made by the Tribunal as to defects found to have existed and need and cost for rectification. 40 The question of defects was an issue that stood alone in the sense that it depended upon expert evidence identifying specific faults or defects, the nature of the defects, the nature and extent of damage flowing from such defects and the cost of rectification. 41 All of those matters fell for determination, as I have stated, against the implied warranty which bound the plaintiff. I do not consider that there was any injustice at all and certainly none that has been identified in relation to the approach taken by the Tribunal in relation to the cross-examination of Mr Dudley. 42 I will return to say something further about Mr May.

(3) Other grounds for denial of procedural fairness 43 I have, in what I have already stated, dealt with the claimed denial of procedural fairness in relation to Essential Services and Mr May and I need not repeat what I have said. 44 So far as Mr May is concerned, an application had been made by the plaintiff in March 2006 for the joining of Mr May to the proceedings. That application was refused by the Tribunal. There is no transcript of what occurred in relation to that application before me. It was submitted by Mr Petersen in his written submissions that there is no other material which tends to show that the Tribunal's determination on 16 March 2006 amounted to a denial of procedural fairness and that is obviously so. 45 In any event, the Tribunal determined, and there was really no issue that the parties to this contract were the plaintiff and the defendants and not Mr May, whatever role Mr May or association Mr May have had with the contract in no way created any impediment in the Tribunal making findings against the plaintiff.

(4) Failure to invite submissions re cross-claim 46 There is not, in my opinion, any basis for a finding of a question of law in relation to the matter raised concerning the claim which the Tribunal referred to as being available on a quantum meruit basis. The Tribunal granted leave, in any event, to seek directions and pursue any claim on a quantum meruit basis if the amount justified proceedings having regard to the costs that would be involved. 47 I should add, in relation to this aspect that I was concerned, to determine whether or not there have or might be some error in the Tribunal in the way in which the Tribunal dealt with the cross-claim issue. If there was unarguably moneys withheld or still owing to the plaintiff but that had not been paid out in anticipation of a claim for defective work then it seems to me that a cross-claim, having been made the Tribunal, could and perhaps should have dealt with it as offset against any moneys awarded to the defendants. 48 However, after the matter was raised by me and discussed with counsel, it seems that the only evidence tendered at the hearing before the Tribunal was the exhibit the Tribunal referred to in the reasons, namely, Exhibit 25, and further the written submissions of Mr Veitch before the Tribunal made only one reference to the evidence on the cross-claim and that was to that exhibit, and it was in the very last line of his submissions. 49 It seems that that claim was not pursued at a level that would have enabled the Tribunal to make any determination as to whether, and if so, what monies were owing on the cross-claim. In that circumstance the course adopted was not to find against the defendant but to leave the door open to him in the future if he wished to pursue. Given the limited amount of evidence, it seems that the Tribunal adopted the more generous option in finding as it did. I do not consider that there is any error of law established here on this question. 50 In relation to other matters set out in the written submissions, I will deal with them briefly.

The plaintiff claimed that a party was under responsibility to adduce all evidence reasonably available to that party (see p.12 of the written submissions) 51 In that respect, it was submitted that, having regard to the nature of the proceedings "the party having the onus of proof as to what is and is not in the contract is required to be particularly diligent in calling available evidence, if the material before the Tribunal is to be considered adequate, eg, the plans …" (p.12). 52 I do not consider that there was any obligation on the defendants to call evidence as suggested. As Mr Petersen has, in my view, correctly submitted in his oral submissions, the question as to whether a person is to give evidence in civil proceedings is a strategic one to be made by the party or his or her representatives.

Failure by the Tribunal to exercise its powers to call witnesses: s.39 of the CTTT Act 53 Mr Veitch observed that the Tribunal has an unusual power to be able to call witnesses of its own motion. However that may be, there was no requirement for the Tribunal and certainly no obligation upon it to exercise the power under s.39(1)(a) of the Act and I do not consider there was any error of law established in respect thereto.

Expert evidence 54 Mr Lemon's opinion evidence was attacked upon the basis that his opinions were not properly based. Mr Veitch referred in that regard to the decision of Miles CJ in Forrester v Harris Farm Pty Limited (1996) 129 FLR 431. It was submitted that Mr Lemon based his opinions and estimates upon Council approved plans and not the Dvyne plans signed by Mr Dudley. 55 I do not consider there is any basis for a finding of error by the Tribunal and certainly there is no question with respect to a matter of law. The Tribunal, as I have previously stated, was entitled to make the finding it did as to the Council approved drawings and, accordingly, there is no basis for impugning the findings that the Tribunal in due course made based on Mr Lemon's evidence.

Failure by the Tribunal to inquire 56 The submission was that the Tribunal erred in law in not pursuing the statutory powers under s.28 of the CTTT Act. The submission was that the Tribunal erred in law in not pursuing the statutory powers under s.28, in particularly, by not informing itself as to what was termed the "mysterious way" in which the Dvyne plans as signed by Mr Dudley came into existence. 57 There was no basis demonstrated in this appeal whereby the Tribunal would be required to exercise such a power. In any event, given the findings made as to the approved plans, the issue does not bear upon any relevant matter for determination on this appeal.

The question of there being no variation to the contract 58 It was submitted in the written submissions that the Tribunal erred in respect of findings made as to the variation of the contract. As I have earlier stated, the question of the contract and its terms was a question of fact which the Tribunal was entitled to determine in the way it did. 59 In the written submissions, a contention was made as to the illegality of the contract. However, Mr Veitch indicated that he had decided to refine his oral submissions and, accordingly, no oral submission was made in that respect. His decision, in that respect, I consider to be a prudent one for there is no basis, in my opinion, for a contention as to illegality. 60 For the conclusions that I have expressed, I do not consider that the appeal raises a question with respect to a matter of law under s.67(1) of the CTTT Act and I do not consider that the plaintiff is entitled to relief otherwise in respect of the claim based, on alleged denial of procedural fairness. Accordingly, I make orders as follows:-

(2) Parties have liberty to make submissions on the question of costs. 61 The appropriate order is in accordance with Civil Procedure Act 2005, that costs follow the event. The plaintiff is to pay the first and second defendants' costs.

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