Noel v Intelpools Pty Ltd

Submissions of the appellant

The appellant, in summary, submits that the Tribunal ought to have found that the limitation period did not commence until the "real" issues with the pool became manifest in September 2018, when there was a "major failure"; that the Tribunal erred in finding that the issues reported in October 2015 were "the same breach and the same remedy" as that which occurred in September 2018; and that the appellant could not reasonably have been expected to have known that Intelpools' failure to action the appellant's concern expressed in his email of 22 October 2015 would or could result in the pool being rendered completely inoperable.
The appellant submits that it was not until the pool cracked "and water spilled out of the pool underneath the pool causing the pool to lift, enabling the appellant to see for himself and identify that the capping of the pool and the pool itself is not supported by sufficient backfilling of the pool" that the true defect was identified.
In support of this submission, the appellant refers to an expert opinion of Habitat Building Consultancy dated 13 July 2020 which, with reference to the cracking of the pool, stated: 1. "… The backfill does not have sufficient cement content and/or has not [been] adequately mixed as part of mixing process and/or during the course of being backfill". 2. "The "remedial works" carried out by Autumn Solar of adding the concrete beneath the steps leading down into the pool, is likely to have exacerbated the issue by [creating] a localised 'hard spot' i.e. at the steps"; and 3. "The coping detail is not supported on natural ground or stabilised fill material."
The appellant referred the Appeal Panel to the decision of the High Court of Australia in Wardley Australia Ltd v The State of Western Australia (1992) 175 CLR 514; [1992] HCA 55 ("Wardley") which, in summary, determined that a cause of action for breach of the Trade Practices Act 1974 (Cth) does not accrue until loss and damage arising from the contravention is sustained. The appellant also relied upon the decision in Sacks v Hammoud [2016] NSWCATAP 225 at [56] in which the Appeal Panel observed that a cause of action under section 267(4) of the ACL: "… has two discrete elements: a failure to comply with a guarantee under Subdivs of Div 1 of Pt 3-2 of the ACL NSW… and suffering loss or damage as a result of such failure. It follows that the cause of action under s 267(4) does not accrue until loss or damage is sustained as a result of the alleged failure to comply…"
The appellant submits that the Tribunal erred in finding that the pool did not "pop" in September 2018. The appellant submitted that the respondent's manager, Ms Amanda Merrett, admitted, in the course of cross-examination, that the appellant telephoned the respondent's office in September 2018 informing the respondent of the pool "popping", and also submitted that Ms Merrett agreed that the appellant telephoned again in October 2018 as a result of the respondent's inaction and acknowledged that it was "possible" that the appellant telephoned again.
We note that the transcript of the hearing provided by the parties discloses that Ms Merrett recalled a conversation with the appellant in September 2018 in which she informed the appellant that the file had been archived and that she would recall the file and get back to him. She did not recall other details of the call but would have passed the service call on to whoever was handling the service works at the time.
Ms Merrett also accepted that it was possible that the appellant called again in October 2018.
The appellant seeks leave to refer to an affidavit of Janelle Marie Noel Swan dated 30 April 2020 which it is claims provides additional support to confirm "the timeframe in which the major failure took place". That affidavit is fresh evidence that was not before the Tribunal at first instance. As this appeal is an internal appeal from the Consumer and Commercial Division under section 80 of the Civil and Administrative Tribunal Act 2013 (NSW) ("the Act"), the Appeal Panel may grant leave to appeal on the basis of evidence that was not before the Tribunal at first instance, only if the evidence constitutes "significant new evidence" that "was not reasonably available at the time the proceedings under appeal were being deal with" (see clause 12(1)(c) of Schedule 4 to the Act).
The fresh evidence seeks to confirm that the pool "popped" and water escaped from it on a date in 2018. Evidence was given to this effect by the appellant. It was rejected by the Tribunal, the Tribunal finding at [41] of its reasons: "… There is no evidence from his family who were apparently in the pool at that time and apparently heard the 'pop'."
The fresh evidence is obviously sought to be relied upon to address that finding of the Tribunal. However, it was evidence that could have been called at the time of the first hearing. There is no explanation why such evidence was not called at that time. We are not persuaded that the evidence was not reasonably available at the time of the hearing at first instance: see Al-Daouk v Mr Pine Pty Ltd t/as Furnco Bankstown [2015] NSWCATAP 111 at [19]‑[29] and Owen v Kim [2017] NSWCATAP 26 at [37]‑[39].
The evidence before the Tribunal suggested that the appellant could not determine what was causing the pool to not be level and appearing to be lifting out of the ground. The appellant had called an expert from Aqua Pools to inspect the pool and the advice which the appellant received was to the effect that the "only way you're going to find out what's gone on is to pull the pool out. Once you've got the pool out you'll see everything". The evidence indicates that the appellant knew there was an issue with backfilling.
It is clear from the evidence that at least by 11 February 2015 it was apparent that there was some difficulty with the pool, and that there were ongoing discussions with the respondent at the conclusion of which an offer of $1,800 was made by the respondent. However, the defects apparent at that stage, namely 22 October 2015, as found by the Tribunal at [27], were the fact that the pool was "out of level" and the appellant's concern that the pool was sinking and that it needed to "be fixed together with the backfilling around the pool and in particular under the internal steps". As the Tribunal recorded: "In closing the email, the applicant [appellant] wrote 'I know Steve previously said he did not want to pull the pool shell out and 'reinstall' it. However the pool as it stands has not been installed as per contract'."
It is not clear on the evidence before the Tribunal, and the Tribunal did not expressly find, that at this stage, that is October 2015, the appellant knew the nature of the defects (if any) which ultimately led to the cracking of the pool. Such defects may not have been limited to insufficient backfill. It is possible that other defects existed in the construction. It is also possible that there were causes unrelated to construction, such as a geological fault beneath the pool.

Applicable principles

In Wardley it was made plain that a cause of action for breach of section 52 of the Trade Practices Act required two distinct elements to exist: a breach of the statute, and damages which are capable of being quantified. In that decision the majority (Mason CJ, Dawson, Gaudron and McHugh JJ) considered the question when such damage existed. Their Honours said (at 527): "When a plaintiff is induced by a misrepresentation to enter into an agreement which is, or proves to be, to his or her disadvantage, the plaintiff sustains a detriment in a general sense on entry into the agreement. That is because the agreement subjects the plaintiff to obligations and liabilities which exceed the value or worth of the rights and benefits which it confers upon the plaintiff. But… detriment in this general sense has not universally been equated with the legal concept of "loss or damage". And that is just as well. In many instances the disadvantageous character or effect of the agreement cannot be ascertained until some future date when its impact upon events as they unfold becomes known or apparent and, by then, the relevant limitation period may have expired. To compel a plaintiff to institute proceedings before the existence of his or her loss is ascertained or ascertainable would be unjust. Moreover, it would increase the possibility that the courts would be forced to estimate damages on the basis of likelihood or probability instead of assessing damages by reference to established events."
Their Honours later said (at 533): "The conclusion which we have reached is reinforced by the general considerations to which we referred earlier. It is unjust and unreasonable to expect the plaintiff to commence proceedings before the contingency is fulfilled. If an action is commenced before that date, it will fail if the events so transpire that it becomes clear that no loss is, or will be, incurred. Moreover, the plaintiff will run the risk that damages will be estimated on a contingency basis, in which event the compensation awarded may not fully compensate the plaintiff for the loss ultimately suffered. .… In such cases it is fair and sensible to say that the plaintiff does not incur loss until the contingency is fulfilled."
Deane J made observations concerning the purpose of section 82(1) of the Trade Practices Act, stating (at 543): "In so far as context is concerned, the context provided by the fact that an action under s 82(1) is to recover "the amount of the loss or damage" and by other provisions of the Act lends some support for the conclusion that loss or damage has not been suffered for the purposes of s 82 at a stage where all that is involved is an isolated contingent liability to make a future payment in the event that some possible or even likely, but nonetheless uncertain, future state of affairs comes about. In particular, s 87 of the Act expressly distinguishes between the actual suffering of loss or damage and the likelihood (or contingency) that loss and damage will be suffered in the future."
Deane J also observed that if a claim were instituted in the absence of quantification of loss, the result would be speculation. His Honour said (at 545): "The result would be to require the institution of proceedings before it was known whether any concrete loss or damage would ever come home, in order to avoid the possible injustice of a legitimate claim being barred if action was not instituted until it could be seen whether the contingent liability would result in ultimate loss."
Toohey J stated (at 551): "There can be no "action" under sub-s (1) unless the plaintiff has suffered loss or damage. Until that time no cause of action has accrued. Does that mean when the plaintiff has suffered any loss or damage whatsoever? Or does it mean the loss or damage for which the plaintiff claims damages? Or does it mean something else? One thing is clear. A person may not bring an action under s 82 (1) unless he or she has actually suffered loss or damage."
In the present circumstances, whilst the appellant believed, in October 2015, that the respondent had breached its warranty, and was aware of some issue with the backfilling (at least around the stairs), the pool was being used. Not until the expert's report obtained by the appellant came into existence was the full extent of the defective installation apparent. The report of Aqua Pools dated 6 April 2020 records as follows: "As you can plainly see from the images, the pool shell itself was not only insufficiently packed, but stabilised sand was not used at all. Especially in and around the seat. Therefore, there was no support provided to the pool shell therefore causing fractures and eventual failure of the pool structure. It was also noted, that the return water PVC piping joint was not glued. As this plumbing is actually pumping water under pressure. This would have caused constant excessive water loss beneath the pool which would have exacerbated the pool shell lifting as a water level dropped."
As an Appeal Panel recognised in Barbour v Autosports Five Dock Pty Ltd [2020] NSWCATAP 141 at [49]‑[54], in order to determine whether an application brought in the Tribunal is within the time limits laid down in s 79L of the Fair Trading Act, it is necessary to identify the cause or causes of action relied upon. Only once the causes of action are identified can the elements of each cause of action be ascertained and the question when each cause of action was complete be addressed.
In this case it was always clear that the appellant's claim related to the alleged failure of the respondent to comply with one or more of the consumer guarantees arising pursuant to Division 1 of Part 3-2 of the ACL.
The Tribunal observed, at [7], that the application was brought as a consumer claim, that is a claim brought in the Tribunal pursuant to s 79I of the Fair Trading Act, falling within the definition of "consumer claim" in s 79E of the Fair Trading Act, that is, relevantly, "a claim by a consumer for the payment of a specified sum of money that arises from a supply of goods or services by a supplier to the consumer". The Tribunal noted that the claim was not brought under the Home Building Act 1989 (NSW) because "it is well outside the statutory warranty period for a home building claim". The Tribunal did not undertake any further analysis of the nature of the claim.
Although the appellant's submissions suggested that the claim arose in respect of a breach of the consumer guarantees applicable to the supply of goods (ss 54 and 55 of the ACL), it is clear in our view that the claim relates to the supply of services (that is the installation of the pool) and not the supply of goods, in that it was not suggested that the problems experienced by the appellant arose from any defect or shortcoming of the pool shell itself.
As such, the appellant's claim was for breach of one or other of the consumer guarantees in ss 60 and 61 of the ACL. Those sections provide: 60 Guarantee as to due care and skill If a person supplies, in trade or commerce, services to a consumer, there is a guarantee that the services will be rendered with due care and skill. 61 Guarantees as to fitness for a particular purpose etc. (1) If: (a) a person (the supplier) supplies, in trade or commerce, services to a consumer; and (b) the consumer, expressly or by implication, makes known to the supplier any particular purpose for which the services are being acquired by the consumer; there is a guarantee that the services, and any product resulting from the services, will be reasonably fit for that purpose. (2) If: (a) a person (the supplier) supplies, in trade or commerce, services to a consumer; and (b) the consumer makes known, expressly or by implication, to: (i) the supplier; or (ii) a person by whom any prior negotiations or arrangements in relation to the acquisition of the services were conducted or made; the result that the consumer wishes the services to achieve; there is a guarantee that the services, and any product resulting from the services, will be of such a nature, and quality, state or condition, that they might reasonably be expected to achieve that result. (3) This section does not apply if the circumstances show that the consumer did not rely on, or that it was unreasonable for the consumer to rely on, the skill or judgment of the supplier. (4) This section does not apply to a supply of services of a professional nature by a qualified architect or engineer.
The remedies for a breach of ss 60 or 61 arise pursuant to s 267 of the ACL which provides: 267 Action against suppliers of services (1) A consumer may take action under this section if: (a) a person (the supplier) supplies, in trade or commerce, services to the consumer; and (b) a guarantee that applies to the supply under Subdivision B of Division 1 of Part 3‑2 is not complied with; and (c) unless the guarantee is the guarantee under section 60 - the failure to comply with the guarantee did not occur only because of: (i) an act, default or omission of, or a representation made by, any person other than the supplier, or an agent or employee of the supplier; or (ii) a cause independent of human control that occurred after the services were supplied. (2) If the failure to comply with the guarantee can be remedied and is not a major failure: (a) the consumer may require the supplier to remedy the failure within a reasonable time; or (b) if such a requirement is made of the supplier but the supplier refuses or fails to comply with the requirement, or fails to comply with the requirement within a reasonable time - the consumer may: (i) otherwise have the failure remedied and, by action against the supplier, recover all reasonable costs incurred by the consumer in having the failure so remedied; or (ii) terminate the contract for the supply of the services. (3) If the failure to comply with the guarantee cannot be remedied or is a major failure, the consumer may: (a) terminate the contract for the supply of the services; or (b) by action against the supplier, recover compensation for any reduction in the value of the services below the price paid or payable by the consumer for the services. (4) The consumer may, by action against the supplier, recover damages for any loss or damage suffered by the consumer because of the failure to comply with the guarantee if it was reasonably foreseeable that the consumer would suffer such loss or damage as a result of such a failure. (5) To avoid doubt, subsection (4) applies in addition to subsections (2) and (3).
The appellant submitted that the defects in the pool constituted a "major failure". However, in respect of that submission, the appellant's written submissions referred to s 260 of the ACL, which is applicable to the supply of goods, not the supply of services.
Section 267 of the ACL provides three distinct causes of action in respect of a failure to comply with a consumer guarantee in respect of the supply of services. Sub-sections (2) and (3) provide alternative causes of action depending upon whether the failure to comply with the guarantee can be remedied and whether it is a major failure. The causes of action arising under s 267(2) and (3) are not dependent upon loss or damage.
It does not appear that either cause of action was relied upon in this case.
There is no suggestion the appellant had had the defect remedied (so s 267(2)(b)(i) is not applicable) and it is not apparent that the appellant sought to recover compensation for any reduction in the value of the services below the price paid (pursuant to s 267(3)(b)).
Sub-section 267(4) provides a separate and additional cause of action which, consistently with the principles outlined in Wardley, Sacks v Hammoud and Barbour v Autosports Five Dock Pty Ltd, arises when a consumer suffers loss or damage by reason of a breach of a consumer guarantee relating to the supply of services.
The Tribunal determined at [49] that the cause of action arose when it was "first discoverable or ascertainable, that is, when it could have become known with reasonable diligence".
The Tribunal further determined at [50] that the appellant "could have discovered the alleged damage he now claims the respondent caused, had he employed reasonable diligence, in October 2015, when he expressed to the respondent his view that the pool needed to be lifted and reinstalled".
In our view the question when loss or damage first arises from a latent defect in a building or construction is not necessarily answered by the "discoverable with reasonable diligence" test applied by the Tribunal.
In Pullen v Gutteridge Haskins and Davey Pty Ltd [1993] 1 VR 27 ("Pullen") the question of damage centred on a swimming pool constructed in Melbourne. Damage to the pool was apparent more than six years before the commencement of the proceedings but the underlying defect which was the cause of the damage could not be ascertained until less than six years before commencement.
The Appeal Division of the Victorian Supreme Court identified the question as follows (at 65): "… The cause of action being for negligence, it is not complete until damage not negligible is sustained by the plaintiff. The question is when in contemplation of law damage is first sustained in a case like the present. The respondent says that damage is sustained as soon as physical damage is done to the structure.... The appellant contends that in a case like the present damage is not sustained, and so time does not begin to run, until either the latent defect in the building is actually discovered or it becomes manifest in the sense of becoming discoverable by reasonable diligence. The judge accepted the appellant's submission here but found that the appellant had in fact discovered 'the defects and damages flowing therefrom' more than six years before the commencement of the first action."
The Appeal Division accepted the appellant's submissions, holding (at 70): "The present respondent fails in its attempt to distinguish the present case as one of physical damage by reason of the damage to the structure consequential upon the latent defect." And (at 71): "Time began to run in the present case when the latent defect first became known or manifest. The latent defect was the inadequacy or unsuitability of the footings…"
Pullen was considered by the New South Wales Court of Appeal in Cyril Smith & Associates Pty Ltd v The Owners ‑ Strata Plan No 64970 [2011] NSWCA 181 ("Cyril Smith")
In Cyril Smith (at [17]) Basten JA, delivering the judgment of the Court, said: … Pullen is authority for the proposition that even where actual damage caused by the latent defect in the building has been suffered more than six years before the commencement of litigation, the cause of action does not accrue until the link between the physical manifestation and the underlying defect is known or ought to be known. …"
His Honour held (at [19]): "… it is necessary for this Court to follow the decision of the Appeal Division in Pullen , unless satisfied that it was clearly wrong. Not only is it not clearly wrong, but it is not necessarily wrong in any sense: all that can be said is that it appears to involve a development of the general law which may not find unequivocal support in the authorities upon which it relied."
Nevertheless, in the Cyril Smith case the Court of Appeal concluded the extension of principle accepted in Pullen was not applicable on the facts. Cyril Smith concerned issues of water penetration into units in a strata scheme. Proceedings were brought against the architect alleging that the water penetration was a consequence of faulty design of the windows.
Basten J held (at [24]): "The primary judge stated that 'the physical defect, the cracking in the walls and ingress of water was observable, but the latent defects, the faulty design of the windows ...' were not. This approach takes the test one step further than Sutherland Shire Council, as explained in Hawkins, and Pullen . Those cases are authority, at most, for the proposition that it is the physical defect which must be known or manifest, not that the cause of the defect must be identifiable. The relevant defect in the building was not the design, installation or inspection of the windows, but the windows themselves. Once it was appreciated that the windows themselves were defective (in that they were not adequately watertight) the defect was known. The physical consequence of the defect, namely the ingress of water, was not itself the defect, although it might well have been sufficient to lead a reasonable person to make inquiry and thus discover the defect. In this respect, there is an important distinction between a case of water penetration into a room, where the point ingress can readily be investigated, and the adequacy of footings or foundations to a building, which can often only be inspected with difficulty..."
In our view the Tribunal in this case failed to consider whether the alleged defect in the installation of the pool, as opposed to consequential damage caused by the faulty installation, could have been discovered with reasonable diligence in October 2015. In that respect the Tribunal failed to apply the correct legal test to determine whether the alleged defect in the installation of the pool was reasonably discoverable, and thereby made an error on a question of law.
Accordingly, the appeal must be allowed and the proceedings remitted for rehearing. As the decision under appeal contains adverse findings with respect to the credibility of the appellant, the proceedings should be remitted to the Consumer and Commercial Division of the Tribunal, differently constituted.
We note that the appellant's Notice of Appeal raised challenges to the Tribunal's factual findings, in particular in relation to whether the pool "popped" in September 2018 and whether the appellant telephoned the respondent at that time.
Because of our conclusion that the decision should be set aside, we have not determined those grounds of appeal. To the extent those factual disputes are relevant to the determination of the proceedings, the Member conducting the further hearing will need to determine those disputes afresh, on such evidence as the parties may see fit to adduce.
Nothing we have said should be taken to be confirmation or rejection of any factual finding made by the Tribunal.
We further note that these proceedings are an illustration of the proposition stated in Wardley at 533‑534: "We should, however, state in the plainest of terms that we regard it as undesirable that limitation questions of the kind under consideration should be decided in interlocutory proceedings in advance of the hearing of the action, except in the clearest of cases. Generally speaking, in such proceedings, insufficient is known of the damage sustained by the plaintiff and of the circumstances in which it was sustained to justify a confident answer to the question."
The determination of whether any defect in the installation of the pool was ascertainable with reasonable diligence at any point of time will require consideration of precisely what the defect was and the extent to which that defect should have been apparent from the physical phenomena observed by the appellant.
Although we do not make any direction limiting the Consumer and Commercial Division in this regard, we are of the view that the question whether the proceedings were brought within time should not be determined as a threshold question, but rather as part of the determination of, and after a hearing of evidence in respect of, all issues arising in the proceedings.

At a glance

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Decision date

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Judgment (9 paragraphs)

Parties

Legislation Cited (4)

Cases Cited (7)