MSP Consulting and Building Constructions Pty Ltd v Karkoulas

NCAT Appeal Panel|2016-01-28

Solicitors: Peter Merity Solicitor Pty Ltd (Respondents)

In Person: P Ghobrial (Appellant) File Number(s): AP 15/59140 Decision under appeal Court or tribunal: Civil and Administrative Tribunal Jurisdiction: Consumer and Commercial Division Date of Decision: 25 September 2015 Before: G Meadows, Senior Member File Number(s): HB 15/04685 HB 15/16433

Relevant legal principles concerning the appeal

The Appeal Panel is satisfied that the Tribunal has jurisdiction to hear this claim: Home Building Act, sections 48A, 48I, and 48K. Neither party raised objection to the jurisdiction of the Tribunal or the Appeal Panel.
This is an internal appeal: see sections 4 and 32 of the Civil and Administrative Tribunal Act 2013 (NSW) ("the Act"). Section 81 of the Act provides: 81 Determination of internal appeals (1) In determining an internal appeal, the Appeal Panel may make such orders as it considers appropriate in light of its decision on the appeal, including (but not limited to) orders that provide for any one or more of the following: (a) the appeal to be allowed or dismissed, (b) the decision under appeal to be confirmed, affirmed or varied, (c) the decision under appeal to be quashed or set aside, (d) the decision under appeal to be quashed or set aside and for another decision to be substituted for it, (e) the whole or any part of the case to be reconsidered by the Tribunal, either with or without further evidence, in accordance with the directions of the Appeal Panel. (2) The Appeal Panel may exercise all the functions that are conferred or imposed by this Act or other legislation on the Tribunal at first instance when varying, or making a decision in substitution for, the decision under appeal.
An internal appeal from a final decision in the Consumer and Commercial Division is heard by the Appeal Panel. The basis upon which appeals from decisions of the Consumer and Commercial Division may arise is referred to in section 80(2)(b) of the Act. That section states that an appeal may be made as of right on any question of law, or with leave of the Appeal Panel on any other grounds. The grounds for which leave may be granted are limited by clause 12 schedule 4 of the Act.
The Appeal Panel therefore has the capacity to make a different decision to that of the Tribunal below if the appeal is allowed.
The decision of the Appeal Panel in Collins v Urban [2014] NSWCATAP 17, constituted by the President Justice Wright, Deputy President Westgarth and Principal Member Harrowell, comprehensively discussed the processes of an internal appeal such as this one.
The Appeal Panel in Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 considered the requirements for establishing an "error of law" giving rise to an appeal as of right and noted at [12] that in circumstances where an appellant is not legally represented, the Tribunal may approach the issue by looking at the grounds of appeal generally. The appellant in this matter is not legally represented. The Appeal Panel in Prendergast while not expressing exhaustively possible questions of law, referred to the following at [13]: 1. Whether there has been a failure to provide proper reasons. 2. Whether the Tribunal identified the wrong issue or asked the wrong question. 3. Whether a wrong principle of law has been applied. 4. Whether there was a failure to afford procedural fairness. 5. Whether the Tribunal failed to take into account a relevant (mandatory) consideration. 6. Whether the Tribunal took into account an irrelevant consideration. 7. Whether there was no evidence to support a finding of fact. 8. Whether the decision was so unreasonable that no reasonable decision-maker would have made it.
The appellant seeks leave under the first two limbs of clause 12 of schedule 4 of the Act, if leave is required. The third limb of the clause is not able to be relied upon by the appellant. That limb refers to leave on the basis of a substantial miscarriage of justice in relation to fresh evidence which was not available before the Tribunal. The first two limbs of this provision are as follows: (1) An Appeal Panel may grant leave under section 80(2)(b) of this Act for an internal appeal against a Division decision only if the Appeal Panel is satisfied the appellant may have suffered a substantial miscarriage of justice because: (a) the decision of the Tribunal under appeal was not fair and equitable, or (b) the decision of the Tribunal under appeal was against the weight of evidence,...
These provisions were extensively discussed in Collins v Urban at [65]-[84], and will be dealt with later in these reasons.

Question of Law

The written reasons of the Tribunal have been provided for the consideration of the Appeal Panel. The hearing in the Tribunal took place on 3 and 4 August 2015. The evidence was concluded on 4 August 2015 and the matter was then reserved for the delivery of written reasons which were published on 25 September 2015. The written reasons in the Tribunal below shall be referred to as "the Decision" in these reasons.
The appellant has not provided the Appeal Panel with the full transcript of the hearing in the Tribunal. Parts of the recording have been transcribed and were referred to during the course of the appeal: Exhibit B.
In the Notice of Appeal, the appellant sought leave to appeal.
However, the appellant alleges a "conflict of interest" on the basis that Mr Merity, the principal of the solicitor corporation for the homeowners is a cost assessor appointed by the Chief Justice under section 390 of the Legal Profession Act 2004 (NSW). The Senior Member who heard the matter is also a cost assessor. It is thus contended by the appellant that this fact gives rise to a conflict of interest or a perception of bias. If this ground is made out then this would be an error of law for which the appellant does not require leave: see for example Johnson v Johnson [2000] HCA 48; (2000) 201 CLR 488. The formulation of the test in that case (ibid. at [11]) is "whether a fair-minded lay observer might reasonably apprehend that the judge might not bring an impartial and unprejudiced mind to the resolution of the question the judge is required to decide".
Leave is required in relation to the other matters raised in the Notice of Appeal alleging failures to consider evidence and failure to give adequate weight to particular evidence: section 80(2)(b) and clause 12 schedule 4 of the Act.

Notice of Appeal

It is convenient to summarise the gravamen of the grounds of appeal as follows: 1. The appellant alleges there is a conflict of interest or a perception of bias because the Senior Member Mr Geoffrey Meadows and the solicitor Mr Peter Merity are both appointed cost assessors. 2. The Tribunal dismissed the cross-claim without considering the evidence produced in support of the cross-claim. In effect, the appellant alleges that the Tribunal did not have regard to the evidence in support of the cross-claim. 3. The provisions of section 18BA of the Home Building Act, which impose obligations on the party having the benefit of the statutory warranty to mitigate loss, were not followed by the homeowners. This ground was not maintained at the hearing of the appeal because the appellant conceded this provision did not apply at the relevant time. 4. There was no written notice from the homeowners to the builder. (This is similar to the previous ground.) This ground was also not maintained at the hearing of the appeal. 5. The tradesmen who attended were able to be cross-examined on their statutory declarations. The Tribunal did not give appropriate weight to the statutory declarations provided and was in error when it stated that the witnesses did not attend the hearing. 6. The costs of rectification referred to in the expert report were excessive and not all items of work were within the scope of the building contract.

The respondent has filed a reply to the appeal and relevantly it may be summarised as follows: 1. The respondent states that there was no conflict of interest because, firstly, the solicitor with conduct of the matter was not in fact Peter Merity but his employed solicitor Michelle Joanne Sultana. Secondly, neither Mr Merity nor Ms Sultana know Mr Meadows personally, nor do they have any social or personal contact with him. In those circumstances it is submitted that there is no apprehension of bias or actual bias. Nor could it be said in those circumstances that there is a conflict of interest. 2. There was consideration by the Tribunal of the relevant evidence and no oversight of any of the evidence. 3. The cross-claim was dismissed on the consideration of the evidence having regard to its admissibility and weight. The Tribunal found that the homeowners' case and evidence was more compelling than that of the builder. 4. Section 18BA of the Home Building Act does not apply to this matter because the contract was entered into on 6 September 2011, before the commencement of that section. 5. The respondent submits that there was evidence of written notice and refers particularly to that evidence. 6. The respondent submitted that there is evidence of the requests to fix defects actually delivered to the appellant. 7. The respondent submits that the Tribunal made a finding that the homeowners did not prevent the builder gaining access to the property to fix any defects and although the builder advised it was willing to return to the site, it did not do so. 8. The Tribunal actually did consider the statutory declarations which the appellant contends the Tribunal ignored. 9. The deponents of the statutory declarations were not required for cross-examination and were not formally called to give evidence additional to their written declarations. 10. The expert evidence was accepted by the Tribunal notwithstanding the fact that it was placed into contention by the appellant during the hearing in the Tribunal.

Was there bias or any basis for an apprehension of bias?

Mr Merity gave evidence consistent with his affidavit, Exhibit E. It was clearly his evidence that Mr Meadows was not an acquaintance and was not previously known to Mr Merity.
Mr Merity does not know Mr Meadows personally and would not be able to recognise him if he were to meet him. Mr Merity does not recall ever speaking with Mr Meadows. Mr Merity has not met Mr Meadows at any large meetings held for costs assessors.
It would appear the first time Mr Merity came across Mr Meadows was during the proceedings in the Tribunal and even then the employed solicitor, Ms Sultana, was the responsible solicitor in the firm, and Mr Merity did not attend the hearing. The fact that they are both costs assessors appointed under statute is merely a coincidence and there is no reason to suspect that Mr Meadows was therefore likely to decide issues other than in an objective and proper manner. On that basis and accepting the evidence given in his affidavit, as the Appeal Panel does, there could not be said to be any proper basis for an apprehension of any bias.
Simply because a decision is adverse to a party does not mean that the decision maker is necessarily biased. It is clear from the transcription of the audio recording that Mr Meadows performed his duty appropriately during the course of the hearing. The Decision does not display any prejudgment of the issues for determination.
The appellant has not established that there was a conflict of interest or any apprehension of bias or actual bias. There is thus no ground of appeal on a question of law. The appellant is consequently required to identify a substantial miscarriage of justice in order to obtain leave to appeal on the basis that (a) the decision of the Tribunal was not fair and equitable, or (b) the decision of the Tribunal was against the weight of evidence.

Should the appellant be given leave to appeal?

The appellant builder appeared in the Appeal Panel hearing by Mr Rafik Ghobrial who was assisted by his son Peter Ghobrial. Neither father nor son profess to be legally qualified but were able to adequately address the issues raised by reference to both the submitted written submissions and their oral explication of those submissions.
The homeowners were legally represented and provided submissions in response to the appellant's contentions.
The remaining grounds upon which the appellant seeks leave to appeal can be reduced to the following topics identified in the 3 subheadings which are now set out.

The Tribunal did not have regard to the evidence in support of the cross-claim

To some extent the grounds raised by the appellant overlap particularly when they refer to the statutory declarations of witnesses on behalf of the appellant which were received into evidence in the Tribunal hearing.
The appellant argues that the sum of $124,000 is owed by the homeowner to the builder. The cross application is referred to in the Decision at [4] where the sum of $124,321.02 is identified and at [23] where the rounded down sum of $124,000 is identified as the amount sought by the builder.
In essence the Tribunal found that the homeowners' case and evidence was more compelling than the evidence provided by the builder: see Decision at [31]. The Tribunal also found that where the evidence differed and the builder's evidence is unsupported by independent evidence, preference would be given to the evidence of the homeowner because the record-keeping of the builder was in some instances "unprofessional": see Decision at [33].
The evidence relied upon by the appellant in support of the cross-claim amount of approximately $124,000 is contained in a document created by the appellant that sets out the contract amount of $786,500 plus variations of $84,167.40 and professional design of $5,500 totalling $876,167.40. The deduction for non-completed work at 5 April 2013 is recorded as $72,559, the deduction for payment received for the contract work is $606,650, and payment receipts for variations is recorded as $72,637.38. Total of those deductions is $751,846.38. The difference between the two totals is $124,321.02 which is the amount claimed by the appellant.
The homeowner in an affidavit dated 29 June 2015, contained at tab 10 of Exhibit C in the appeal, denies that there is any money owing to the builder and specifies the following amounts in support of that contention. Both parties agreed that the contract price including GST is $786,500: Exhibit C tab 10 [12]. The amount paid as at 14 April 2013 is $656,131 plus $72,637.38 for variations, that is, $728,768.38. Adjustments to be made to the amount then owing is $36,251. According to the homeowner that leaves a balance of $94,118 which was paid between 14 April 2013 until November 2013: Exhibit C tab 10 [13]. The homeowner relies upon a schedule which cross-references ANZ bank statements of the homeowner to support the assertion that the payment was made between 14 April 2013 and November 2013: Exhibit C tab 9 [11], schedule at page 74. The homeowner, by reference to identified records shows that a total was paid in the sum of $911,413. Reference is also made by the homeowner to the document created by the appellant with the identification "D99" in the top right hand corner of the document. That document is in Exhibit A, Annexure 2 relied upon by the appellant.
The figure for variations of $72,637.38 and adjustments in the sum of $36,251 is recorded in that document "D99" relied upon by the appellant. The figure of $656,131 is also included in the appellant's document. It is noted that the amounts are different to the amounts used to calculate the quantum of the cross-claim. They more closely align with the figures relied upon by the homeowner in his affidavits.
Therefore, the disputed amount between the appellant and the homeowner for decision by the Tribunal was whether at least $94,118 was in fact paid by the homeowner to the builder. It is also clear that despite the submission from the appellant that there was no contrary evidence from the homeowner at the hearing, when clearly there was, the Tribunal preferred the evidence contained in the affidavits of the homeowner. This was a permissible finding by the Tribunal in assessing all the evidence. The rationale for accepting that evidence is unremarkable. It could not be said that there was a substantial miscarriage of justice.
As observed by the Appeal Panel in Collins v Urban, for leave to appeal to be granted, an appellant must demonstrate something more than that the primary decision maker was arguably wrong in the conclusion arrived at or that there was a bona fide challenge to an issue of fact. Ordinarily it is appropriate to grant leave to appeal only in matters that involve issues of principle, questions of public importance or matters of administration or policy which might have general application, an injustice which is reasonably clear, a factual error that was unreasonably arrived at and clearly mistaken; or that the Tribunal went about its fact finding process in such an unorthodox manner that it produced an unfair result.
The Appeal Panel is not satisfied the appellant has established any of these matters in respect of this ground. Relevantly, the appellant has not established that the finding was against the weight of the evidence. This aspect of the application for leave to appeal therefore does not succeed.

The Tribunal did not give appropriate weight to the statutory declarations provided by witnesses who were present at the hearing

The next issue is whether the Tribunal failed to give appropriate weight to the statutory declarations. Related to this ground is the question of whether the evidence of the deponents to the statutory declarations relied upon by the appellant proved the assertions of the appellant. The Tribunal found that three of the statutory declarations referred to repairs to the main or master bedroom, which was not in dispute in the claim, because the necessary repairs had been undertaken: Decision [38]. A review of those statutory declarations supports that conclusion.
The Tribunal found at [39] that the balance of the statutory declarations relied upon by the appellant did not demonstrate that the homeowner had assumed supervision of the works.
In his affidavit filed in the proceedings below and provided to the Appeal Panel, the homeowner refuted that he supervised the building works or that he took over the building works as asserted by the appellant: Exhibit C, tab10 at [34]-[72]. The Tribunal noted that the builder did not specifically challenge that evidence but relied entirely on the statutory declarations.
None of the persons who made those declarations were cross-examined and so their evidence as set out in those declarations can be accepted if they prove an assertion. The weight to be accorded to that evidence is a matter of discretion.
The Tribunal did not accept that the evidence contained in the statutory declarations proved the assertions of the appellant: Decision [40]. The Tribunal did not dismiss that evidence or fail to have regard to that evidence, as asserted by the appellant. The submission of the appellant is that oral evidence from those witnesses would have cleared up any misconceptions or misunderstandings. The fact is that the witnesses were not called to give oral evidence, nor was there any obligation on the homeowner or the Tribunal to do so.
In Exhibit B the appellant transcribed an exchange between counsel for the homeowner and the Tribunal. The Tribunal indicated to the gentleman who were present that they could stay and watch the proceedings or go away and come back. Counsel for the homeowner indicated that he would not be cross-examining the gentleman at that time, if he was going to cross-examine them at all. It subsequently transpired that they were not required for cross-examination.
In its reasons, the Tribunal stated that deponents of the statutory declarations did not attend the hearing. This may have been an error or it may have been a shorthand reference to the fact that the deponents did not give evidence. Either way, this was not material to the outcome of the proceedings. The deponents were not required for cross examination and their evidence was accepted by the Tribunal on its face value.
The statutory declaration by Mr Haddad, a builder, dated 29 April 2015 contained a number of opinions which were not accepted by the Tribunal: Decision [41]. Mr Haddad attended the home and spent approximately 3 to 4 hours going through all the defects previously identified in an earlier affidavit by Mr Karkoulas. No report was provided by Mr Haddad and he does not refer to this inspection or a report in his statutory declaration. On this basis the Tribunal rejected the opinion evidence in the statutory declaration.
Having regard to the nature of the evidence contained in the statutory declarations against the unchallenged evidence of the homeowner, the finding of the Tribunal was permissible and the appellant has not established that there has been any error that would justify leave to appeal. This is certainly not a case where there is an injustice which is reasonably clear, a factual error that was unreasonably arrived at and clearly mistaken; or that the Tribunal went about its fact finding process in such an unorthodox manner that it produced an unfair result.
Accordingly, this aspect of the appellant's case for leave to appeal is not established.

The costs of rectification referred to in the expert report were excessive and not all items of work were within the scope of the building contract

The Tribunal noted that the builder conceded that there remains significant defects to be rectified, although the parties are not in agreement as to the costs of such rectification: Decision [42].
The Tribunal referred to the report of Mr Al-Taiff which was prepared on behalf of the builder: Decision at [44]-[47]. This report did not comply with the Expert Code of Conduct. There were a number of reasons why that report was considered particularly unhelpful which are unnecessary to set out in these reasons. The Tribunal referred also to the expert evidence from Mr Ransley on behalf of the homeowners. The reasons set out by Mr Ransley in Appendix A of his second report were adopted and his opinion as to the nature of the various defects was accepted by the Tribunal: Decision at [50].
The figure arrived at by Mr Ransley in his second report was $367,477. The amount for rectification work calculated by the Tribunal was $297,745.67 in total, inclusive of GST: Decision at [48] and [50]-[51].
It can therefore be clearly seen that not all the amounts calculated by Mr Ransley were considered by the Tribunal to be appropriate. Indeed, the Tribunal exercised its own judgment as to the acceptability of the rates put forward by Mr Ransley. In relation to quantum generally the Tribunal preferred Mr Ransley's evidence to that of Mr Al-Taiff for reasons which are given in the body of the judgment: Decision [48]. Where there is competing expert evidence it is a matter for the Tribunal to determine which evidence is preferred. This outcome is within the range of discretion permitted and is not unreasonable. The reasoning process is a balance of the competing contentions and is not against the weight of the evidence.
The appellant argues that the scope of works under the building contract did not include the matters included and, as an example, refers to the stainless steel kitchen bench top. The appellant refers to the cross examination of Mr Karkoulas which has been partially transcribed in Exhibit B. The cross-examination was of a paragraph in Mr Karkoulas's later affidavit: Exhibit C tab 10 at [85]. The evidence in that paragraph identifies that the stainless steel kitchen bench top was meant to be sourced from China but the builder was not satisfied with the quality of that product. The item was then sourced from Sydney.
The cross-examination elicited that Mr Karkoulas paid the builder the original $2,000 for the item sourced from China. Subsequently, the alternative benchtop was sourced directly from Australia and Mr Karkoulas paid the manufacturer directly for the same item. The words attributed to Mr Karkoulas in the submissions of the appellant do not accord with the transcript provided by the appellant of the audio recording.
The appellant argues that the kitchen stainless steel benchtop was not part of the contract or variations. In the transcribed cross examination Mr Karkoulas says it was a defect because the kitchen was part of the contract and building of his house. The submissions subsequently made by the builder to the Tribunal have not been transcribed.
The original specifications for the kitchen provide for "20 mm season (sic) stone granite top of 40 mm edge". In the appellant's Exhibit F, Attachment F page D110 is handwritten, "need to add the amount for stainless steel" in the Variations section of the document.
There does not appear to be any doubt that the stainless steel kitchen bench top was in fact installed and that the builder arranged for its manufacture. The evidence of the homeowner is that he paid for the manufacture of that benchtop sourced from China which was rejected by the builder. In those circumstances, the Appeal Panel does not consider that the example chosen by the appellant is illustrative of the point the appellant seeks to make.
The Appeal Panel is not in a position to investigate in any detail the list of defects which is more properly a matter for expert evidence. The Tribunal considered the expert evidence relied upon which delved into the necessary detail and has not fallen into error as identified in these reasons.
In the circumstances, the appellant has not established reasons for a grant of leave to appeal.

Conclusion

In summary, for the reasons previously stated our conclusion is that there is no appeal as of right established on the basis of an apprehension of bias. Nor is there any substantial miscarriage of justice. It has not been established that the decision of the Tribunal was not fair and equitable or that it was against the weight of evidence. Leave to appeal is therefore not granted.
The orders of the Appeal Panel are as follows: 1. Leave to appeal is refused. 2. Appeal dismissed.

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: 17 March 2016

Home Building Regulations 2014(NSW)

Legal Profession Act 2004(NSW)

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