Nova Home Developments Pty Ltd v Manzala

Summary

1. The appellant, Nova Home Developments Pty Ltd (Nova), appeals from a decision of the Consumer and Commercial Division of the Tribunal (Tribunal) of 25 May 2021 in matter HB 20/53830 (the Decision).
2. The Tribunal ordered Nova to pay the respondent, Ms Manzala, $12,136.58 on or before 7 June 2021.
3. The principal ground of appeal was that the appellant had been denied procedural fairness in that he had not been allowed to cross-examine the respondent or her witnesses. Subsidiary grounds of appeal were that the decision was against the weight of the evidence, including the calculation of damages.
4. For the following reasons, the appeal is allowed.

Background

1. The Decision was made on 17 June 2021. Written reasons were provided to which reference will be made below.
2. On 22 June 2021, Nova filed a Notice of Appeal and an Application for Stay of Original Decision Pending Appeal.
3. On 13 July 2021, the Decision was stayed until further order of the Tribunal or finalisation of the appeal, whichever is the earlier in time.

Errors of law

1. The appellant raises seven errors of law (for which leave to appeal is not required). These are that the Tribunal erred: 1. by failing to dismiss the Application made in the wrong Division or failing to formally transfer the proceeding to the General Division and giving it a separate file number; 2. by denying Nova procedural fairness in allowing evidence of the respondent which was treated as expert evidence of should have been given no weight as being expert evidence; 3. by finding that Ms Manzala had incurred costs and made payments and thereby accepting evidence the Respondent not served that she made payment in cash to avoid paying GST; 4. by failing to consider or apply the Home Building Act 1989 (NSW) (HB Act); 5. by finding that there was evidence of leads on walls and nests on the retaining wall against the weight of expert evidence provided by both parties; 6. by rejecting Nova's claim for exclusions from claims under AS4349.3-201 or limit of claims under its contractual terms without giving cogent reasons for rejecting of the evidence of a qualified experts served by it and Ms Manzala; 7. by allowing Ms Manzala betterment in her damages claim and misapplying the law of betterment.
2. We note that the fifth submitted error is a combined error of law and an error for which leave was required.

Other errors

1. Nova also relies on a ground of appeal for which leave is required pursuant to s 80(2)(b) of the Civil and Administrative Tribunal Act 2013 (NSW) (NCAT Act). This is that the Decision was against the weight of the evidence.
2. We shall refer to this as Ground Eight.
3. The principles to be applied by an Appeal Panel in determining whether or not leave to appeal should be granted are well settled. In Collins v Urban [2014] NSWCATAP 17 the Appeal Panel conducted a review of the relevant cases at [65]-[79] and concluded at 84 that: Ordinarily it is appropriate to grant leave to appeal only in matters that involve: (a) Issues of principle; (b) questions of public importance or matters of administration or policy which might have general application; or (c) an injustice which is reasonably clear, in the sense of going beyond merely what is arguable, or an error that is plain and readily apparent which is central to the Tribunal's decision and not merely peripheral, so that it would be unjust to allow the finding to stand; (d) a factual error that was unreasonably arrived at and clearly mistaken; or (e) the Tribunal having gone about the fact finding process in such an unorthodox manner or in such a way that it was likely to produce an unfair result so that it would be in the interests of justice for it to be reviewed.
4. Even if an appellant establishes that they may have suffered a substantial miscarriage of justice in the sense explained above, the Appeal Panel retains a discretion whether to grant leave under s 80(2) of the Act. An appellant must demonstrate something more than that the Tribunal was arguably wrong: Pholi v Wearne [2014] NSWCATAP 78 at [32].

Reply to Appeal

1. In her Reply filed on 9 July 2021, Ms Manzala agrees with the Decision "even though it does not cover all losses". She states that Nova has failed to acknowledge the errors made and the costs due to its "neglegant [sic - negligent] report".
2. She opposes leave to appeal, stating: The Appealant had no viable evidence and member ruled termites were highly visable and presant at the time the report was conducted by the appealant. In NOVE HOME INSPECTIONS report, page 16 shows a clear picture of the termite nest on the retaining wall that was overlooked. Appealant also takes a photo of the garden retaining wall/ garden bed where he inspected and also where the second termite nest was presant. Video and photo evidence of mouldings and tunnels at clear view have been provided. (Typographical errors as in original)

Submissions

1. We had the benefit of written submissions filed by both parties. We will refer to these where relevant in the "Consideration" section of our reasons.

The Decision

1. It is appropriate to set out the important components of the Decision.
2. First, the Decision commences by noting that while the proceedings were filed as a "building claim" (that is a claim made under the provisions of the HB Act), given the definition of "building work" in Sch 1 of the HB Act, the work the subject of the claim was not in fact building work. The Decision then notes that by consent Ms Manzala had transferred her claim to the General Division of the Tribunal.
3. Here we note that while the Decision does not expressly say so, we assume the intention was that the application be treated as a consumer claim under the Australian Consumer Law (ACL). The ACL is part of the law of NSW, and may be applied in the determination of a consumer claim under Part 6A of the Fair Trading Act 1987 (NSW) (the FT Act): s 28 of the FT Act.
4. Secondly, the Decision then records that Ms Manzala purchased her home in Prestons after engaging Nova to conduct an inspection and prepare a report on the condition of the property during the "cooling off" period to settlement. Ms Manzala occupied the premises on September 2020 and the Nova report was dated 14 August 2020 following an inspection that day. Ms Manzala acknowledged that the inspection was visual only.
5. While the Decision does not say so, the Nova Report stated that there were no live or active termites present at the premises, including in the exterior of premises. However, Ms Manzala claimed at the hearing that "tunnels and 2 visible nests were on the outside of the property at knee height".
6. The Decision then refers to the expert evidence relied at the hearing: the report of Mr Dado of ABC Building Inspections dated 17 March 2021 and the report of Mr Lardis of Pest Help dated 4 November 2020. The Decision records that the experts agreed that the termite species found in the house were Nausutitermes which were not as destructive as other species, and were known to build leads and mounds in a very short space of time.
7. The Decision then states: [H]aving reviewed the expert and lay evidence I find that there were active termites in the premises at the time of the inspection by Mr Pante. I find that the majority of this activity would not have been visible to an inspector at the time Mr Pante conducted his inspection. I find however that there was evidence of termite activity externally evidenced by the leads which were visible on the walls and the nest on the retaining wall shown in still and video evidence produced by Ms Manzala. I find that the evidence of extensive attack demonstrated by the video and still photographic evidence on the thumb drive presented Ms Manzala could not be reasonably identified by Mr Pante except by intrusive investigation which was excluded from his brief. I find that there is a causal connection between the inspector's failure to identify the signs of termite entry, and that damages flow naturally from that.
8. The Decision then deals with the calculation of damages. Earlier in the Decision the Tribunal had stated: The premises require extensive remediation which has been estimated by Ms Manzala to cost in the order of $90,000.00. There is no evidence in the form of quotes or expert evidence to support this cost and the best evidence available of any cost is invoices to the value of $14,416.64 plus the cost of the report of $440.00. Total value $14,856.64. All of the invoices are for the purchase of materials some have been stamped "paid". Ms Manzala has said that she has been unable to obtain receipts from the various trades-persons who carried out work with the materials invoiced because she paid them in cash in order to avoid payment of GST. None of the invoices relate to labour nor is there any mention in the invoices provided of allowances for the removal and replacement of termite damaged members.
9. The Decision concludes: I find that Ms Manzala has failed to provide evidence of the damages rectified and the basis for the estimated claim made even allowing for her acceptance of the jurisdictional limit of the claim transferred to the Tribunal's General division.(Hadley v Baxendale (18540 [sic - 1854] Ex 341). On the evidence of Invoices submitted marked Paid I find in favour of Ms Manzala in the sum of [$]12,136.58 noting that there is no labour component associated with these supply costs. I also note that the renovated rooms have been completed to a standard higher than the areas replaced and doing the best I can I find that the labour component can offset the betterment.

Consideration

1. Not all errors were pressed at the appeal hearing. It sufficient to group the pressed errors as follows.

There were active termites in the premises at the time of the inspection by Mr Pante

1. We see the primary error of law submitted by the appellant was the Tribunal finding that there were active premises in the premises at the time of the inspection by Mr Pante, on which the Decision is founded, was against the weight of the evidence.
2. The Tribunal stated that it came to that finding having "reviewed the expert and lay evidence". The lay evidence relied on by Ms Manzala included the following.
3. First, her own evidence, being a statement of 21 January 2021 in which she stated, as noted by the Tribunal that: I understand that [Mr Pante] conducted a visual inspection although the tunnels the termites had created were on the exterior of the building knee high and extremely visible. There was also two visible nests in the back yard one outside the kitchen window and the other on the timber retaining wall.
4. We note that Ms Pante does not state when she observed the two nests in the backyard, although she told us during the appeal hearing that she would have seen them, but did not realise what they signified. However, at the appeal hearing she said that one nest is actually depicted in the Nova Report.
5. Secondly, a short statement of Mr Kamal Elmasri dated 22 February 2021. He says that he witnessed active termite activity at Ms Manzala's property in October and November 2020. He says he is in the construction industry, and had been "called out" to the property to assess and give his opinion on the damage and costs. He says he saw active termite tunnels on the outside exterior brick of the property, inside on the floor of wardrobes, in all bathrooms and in the roof.
6. Thirdly, an undated three sentence statement of Mr Jibreel Androus. He says he went to Ms Manzala's property to assess the retaining wall and saw a very large nest. Mr Androus does not say when he attended the premises.
7. Fourthly, a statement of Jeremy Jindi dated 24 February 2021. He says that he attended the premises "several times" in October, November and December 2020 and found multiple live termite nests in and around the property which had caused major damage.
8. Fifthly, a short statement of Ramez Michael dated 25 February 2021. He says he attended the premises and found a "surprising and dangerous" amount of termite activity throughout. He says he was "very shocked" to see the size of the of the two "very clearly located and visible termite nests". Mr Michael does not say when he attended the premises.
9. The expert evidence relied on by Ms Manzala was the expert report of Mr Lardis (Pest Help), dated 4 November 2020. Like Mr Pante, his was a visual inspection only. He found termites present in "but not necessarily limited to" the interior, roof void, wall exterior" and active termites coming over the "lip/edge of the concrete slab". He believed the termites to be of the Nausutitermes species. However, he found no termite nests present.
10. As to the expert evidence, the report of Mr Dado (ABC), relied on by the appellant, is dated 17 March 2021. By this time it appears Ms Manzala had renovated her property. His conclusion was that based on his inspection and conversations with all stakeholders, Nova had conducted a fair and reasonable inspection, had not been negligent and had met the requirements of Australian Standard AS 4349.1-2020.
11. We note that in the conclave report of 25 March 2021 noted that it was clarified by Mr Lardis that "NO active termites were seen in the Roof void, as it had not been inspected or in the interior of the building".
12. As to the identification of the Nausutitermes species, the conclave report states: With regard to this species both parties agree the following: ·Whilst a wood eating termite, Nasutitermes termites generally attack moist or decayed timbers. ·The damage caused by Nasutitermes termites is generally minor as they eat the top of timbers and rarely cause serious structural issues. ·Nasutitermes termites generally are found in fences and trees, however can attach other structures if the conditions are conducive. (High Moisture) . Nasutitermes termites are known to build leads and mounds in a very short period of time (days to weeks).
13. It is in the light of that evidence the Tribunal concluded that there were active termites in the premises at the time of the inspection by Mr Pante.
14. We do not accept that that finding was available to the Tribunal and we agree that it is a finding that is against the weight of the evidence. That is because:

• the evidence of Mr Pante was that there were no termites at the time of his inspection on 14 August 2020. At the appeal hearing Ms Manzala took us to p 16 of the Nova Report which she says showed a termite nest present on timbers outside the house, near the retaining wall, that is present at the time of the inspection - but there was no expert evidence to establish this;
• the evidence of Mr Lardis of November 2020 indicates some termites inside the property, but no nests;
• the evidence of Mr Dado of January 2021 was apparently prepared after Ms Manzala had renovated her property, as he found no termites present, and that Nova/Mr Pante had conducted a fair and reasonable inspection and had not been negligent and had met the requirements of Australian Standard AS 4349.1-2020.
• the evidence of the lay witnesses relied on by Ms Manzala all post-date the inspection of Mr Pante, occurring in the period to October 2020 to December 2020, and in the cases of Mr Androus and Mr Michael they do not say when the attended the premises at all.

1. We conclude that there is no probative evidence to support a finding that, on the balance of probabilities, there were termites present in the premises at the time of the inspection by Mr Pante.
2. That in our view is sufficient to dispose of the appeal. In our view leave to appeal should be granted in accordance with the principles in Collins v Urban and Pholi v Wearne.
3. However, we note the following other additional matters.

Denial of procedural fairness

1. The first is that the appellant submitted that the error in the factual finding above was compounded by a denial of procedural fairness. The appellant says that it was denied the chance to cross-examine the appellant. Ms Manzala says that the appellant was afforded every opportunity to ask questions.
2. A transcript was provided by the appellant. Here we note that apparently no sound recording was made, so the appellant's Mr Pante prepared a transcript based on his recollection of the hearing, which is set out in his statutory declaration of 2 August 2021. No objection was taken to his version of events. We note that, as claimed by Ms Manzala, Mr Pante was asked by the Tribunal "Ok, anything else you want to say".
3. However, the transcript also records the Tribunal asking Ms Manzala if her expert was available for cross-examination (he was not) and then asked Mr Pante "what else apart other than the expert report". Mr Pante stated in reply: "I want to ask Ms Manzala about her claims because she has a couple of references from unlicensed people claiming to be tradespersons. A bunch of invoices that were not for the works claimed, there is a mis-match of items for her bathroom including pc items. The various invoices for tiles totalled 80m2 when the average bathroom has less than 20m2. The colour of the items for on these invoices don't match the colours of the items she claims in the photos in Mr Dados' Report, the delivery addresses are different and she claimed $90,000, the invoices she provided only totalled 12k and they were not all relevant to the repair she is claiming. Also if there were extensive termite damage or repairs where are the invoices for the extensive work claimed. No photos of any termite damage, not one invoice for a piece of timber replaced or framing carpenter to repair, not in the kitchen, not in the bathroom and not in the roof. Also you can see the property was sold for less than market price, she obviously got a discount from my report because I said she had to get termite barrier installed, also you can see the kitchen and bathroom are in original condition and were obviously always going to be replaced. I would like to question about this".
4. The transcript records Ms Manzala responding to this and Mr Pante asking of the Tribunal "But how can you believe her". The Tribunal then adjourned the matter to allow the parties to try and resolve the dispute. After five minutes "or so", and a further opportunity to resolve the matter, the Tribunal concluded the hearing by stating "Okay I will read through all this carefully and send you my determination in writing. That concludes the proceedings thank you both for attending".
5. In those circumstances the appellant submits that Mr Pante was not allowed to ask Ms Manzala or her expert any questions, and that it had been denied procedural fairness.
6. We see substance in this submission.
7. As was noted by the Appeal Panel in White v Alto Artarmon Pty Ltd [2017] NSWCATAP 164, the authorities acknowledge that the right to cross-examination is important, and that restricting it can constitute a breach of procedural fairness.
8. The Tribunal has an obligation to ensure that the parties have an opportunity to be heard, and to apply the rules of natural justice or procedural fairness, pursuant to s 38(2) and 38(5)(c) of the NCAT Act. This includes an obligation to explain to a party about cross examination and allow a party to cross-examine witnesses if appropriate: see Gallo v Duflou [2014] NSWCATAP 115.
9. However, even a direction that there is to be no cross-examination may not amount to a denial of procedural fairness. Rather, what must be considered is whether the party complaining has in fact been denied a relevant opportunity in all the circumstances: Cheung v Yang [2013] NSWSC 1694 at [58].
10. In Cheung the Court stated that:

• the focus of the law in any enquiry about procedural fairness is not on fairness in an abstract sense, but rather on avoiding practical injustice: Re Minister for Immigration and Multicultural and Indigenous Affairs: Ex Parte Lam (2003) 214 CLR 1, per Gleeson CJ at 13-14 [37]; and
• the question is whether the lack of an opportunity to cross-examine resulted in practical injustice.

1. We are satisfied that the failure to allow Mr Pante the opportunity to cross-examine Mr Manzala and her witnesses amounted to a practical injustice in the sense described above.

Damages

1. We are also of the opinion that there are considerable difficulties about the way in which the Tribunal approached the assessment of damages (including its treatment of betterment) in that it appeared to determining a claim in negligence, but applied the damages rule for breaches of contract. This was perhaps caused by the Tribunal not articulating, having transferred the matter from the Home Building Division, what was the cause of action it was determining.

Contractual

1. Finally, the Tribunal did not deal with the issue of the clause in the contract which limited any claim to the cost of the inspection.

Conclusion

1. For the above reasons, we consider that that the appeal should be allowed. To the extent necessary leave to appeal is granted.
2. The appellant submitted that the appropriate order was that the Appeal Panel substitute an order of dismissal for the orders made by the Tribunal. We disagree. The appropriate order is that the matter be remitted to the Tribunal for rehearing. The matter should be listed for directions and the Tribunal can determine whether further evidence should be permitted.

Costs

1. The appellant sought costs. Given the size of amount in dispute, s 60 of the NCAT Act require "special circumstances" to be established before a costs order may be made.
2. If the appellant wishes to pursue costs, it should file submissions with the Registry and give to the respondent submissions within 14 days of receiving these reasons. Those submissions should indicate whether the costs of the hearing before the Tribunal are sought.
3. The respondent may respond within a further 14 days.
4. Each submission must be limited to three pages.
5. The Tribunal proposes to decide any application for costs "on the papers". If either party opposes this course, they should that issue in their submissions.

Other

1. We note that at the conclusion of the hearing we gave the parties an opportunity to pursue settlement discussions. On receiving a report from the parties, we formed the view that further time than was available might be of benefit, and having reserved our decision, informed the parties that we would not publish our reasons for decision for a period of seven days.
2. Regrettably the parties did not come to an agreement, and in the circumstances we have published these reasons.

Orders

1. The Appeal Panel orders: 1. Leave to appeal is granted. 2. Appeal allowed. 3. The stay of 13 July 2021 is lifted. 4. The orders of the Tribunal in HB 20/53830 are set aside. 5. Remit the matter to a differently constituted Tribunal for redetermination upon the evidence already adduced to the Tribunal at first instance and such further evidence as the Tribunal may allow. 6. If the appellant wishes to pursue costs, it should file submissions with the Registry and give to the respondent submissions within 14 days of receiving these reasons. 7. The respondent may respond within a further 14 days.

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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: 23 September 2021