Ong v CTT & Son Constructions Pty Ltd

When does the statutory warranty period start?

1. Under s 3B(1) and (2) to the HB Act, the completion of residential building work occurs on the date that the work is complete within the meaning of the contract under which the work was done. If the contract does not provide for when work is complete (or there is no contract), the completion of residential building work occurs on practical completion of the work, which is when the work is completed, except for any omissions or defects that do not prevent the work from being reasonably capable of being used for its intended purpose.
2. Under s3B(3) it is to be presumed (unless an earlier date for practical completion can be established) that practical completion of residential building work occurred on the earliest of whichever of the following dates can be established for the work (relevantly) (a) the date on which the contractor handed over possession of the work to the owner, (b) the date on which the contractor last attended the site to carry out work (other than work to remedy any defect that does not affect practical completion) or (c) the date of issue of an occupation certificate under the Environmental Planning and Assessment Act 1979 that authorises commencement of the use or occupation of the work.
3. This application was lodged on 3 November 2021. In response to the Tribunal's request for evidence that the applicants had attempted to resolve the dispute through the Department of Fair Trading, the applicants had advised that the warranty would expire in December 2021. The application was accepted on the basis that there was less than three months before the time for lodging a claim would expire. According to the information provided at the directions hearing on 1 December 2021, an interim occupational certificate was issued in December 2015, however that certificate was not in evidence at the hearing.
4. The final occupation certificate is dated 9 April 2016. At the hearing, the parties agreed that the date of completion was greater than two years but less than six years before the application was lodged.
5. In Vella (at [47] - [49]) the Appeal Panel noted that jurisdiction is not conferred on the Tribunal by the consent of the parties or by the failure of a respondent to raise the issue of jurisdiction. The Tribunal must determine whether it has jurisdiction to consider and determine an application. The onus is on an applicant to establish that the Tribunal has jurisdiction to hear and determine a claim. Nevertheless, parties may agree on jurisdictional facts; that is, on the elements which enliven the Tribunal's jurisdiction.
6. The earliest date which can be established on the evidence provided is the date of the occupation certificate, being 9 April 2016. Accordingly, for present purposes, the statutory warranty is taken to commence on that day.

Is each of the claimed defects in a major element of a building?

1. Under s18E(4), a major element of a building means: (a) an internal or external load-bearing component of a building that is essential to the stability of the building, or any part of it (including but not limited to foundations and footings, floors, walls, roofs, columns and beams), or (b) a fire safety system, or (c) waterproofing, or (d) any other element that is prescribed by the regulations as a major element of a building.
2. Expert evidence is relevant to whether a claimed defect is in a major element of a building and whether it meets the definition of a major defect in s 18E(4). However, it is not determinative of the issue (Vella at [49]).
3. The Homeowners provided an expert witness building report dated 10 March 2022 by Geoffrey Matley (Owner's Expert (OE)). The Builder provided an expert witness building report dated 21 April 2022 by Hugo Garcia (Builder's expert (BE)).
4. Both experts attended the hearing and gave sworn evidence. In oral evidence, the OE sought to clarify his evidence with observations which had not been included in his report regarding areas of dampness around the bathrooms. Counsel for the Builder noted that it was difficult to meet that evidence when it was raised for the first time at the hearing. However the new evidence did not relate to whether the waterproofing issue met the definition of a major defect, and in light of the Tribunal's findings below it has not been necessary to give weight to that additional evidence.

Item 1: Cracked Brickwork & No Expansion Joints

1. According to the OE's report, there were numerous cracks found in the north and south elevation walls, some of which coincided with internal brick cracks. No expansion joints had been installed to make allowance for brick growth/movement, resulting in large cracks up to 5mm in width. The work did not comply with ASA 3700.
2. At the hearing, the OE conceded that (at most) two cracks were evident in the south elevation wall. There were only cracks on the external south wall, not the external north wall. It was an exaggeration to say that there were numerous cracks in the external walls.
3. The OE's concessions regarding exaggeration of the cracking in his report reflect poorly on his evidence in the report.
4. The OE also provided a closing paragraph in his report to the effect that the report was based solely upon documents and not inspection of the property. When questioned about this by Counsel for the Homeowner, the OE stated that this was a typographical error and he had inspected the property. Although I accept that the paragraph was mistakenly included and the OE did inspect the property, it indicates a lack of attention to detail by the OE in the report.
5. According to the BE's report, the BE observed only one vertical crack on the south elevation of the external brick walls, extending from the bottom face of the brick wall up to the window sill level of the stairwell. The maximum width of the crack was 2mm. The BE contended that ASA 3700 did not apply; however at the hearing Counsel for the Builder conceded that the exterior brick walls were to be built in compliance with ASA 3700. The Builder accepted that the wall required expansion joints but contended that this was not a major defect and the claim was made outside the warranty period.
6. At the hearing, under cross-examination by Counsel for the Owner, the BE gave the opinion that a crack would not cause a loss of structural cohesion in the wall. The building was supported by the internal skin of the brick wall and the external skin was not supporting the weight of the building. The crack did not extend beyond the windowsill of the stairwell and was unlikely to do so fully, considering that the building had now been standing for six years.
7. The OE's report further does not comment on whether the external wall is a load-bearing component of a building that is essential to the stability of the building or any part of it. The only evidence before the Tribunal on this point was from the BE, whose opinion was that it was not load bearing.
8. As a result, the Homeowners have not made out that the external wall is a major element of the building.

Item 2: Water tanks & Controls

1. According to the OE's report, the grey water re-use system was not operating and there was no power connection to the pump and controls. Under the Basix Certificate the water tank was required to be connected to all toilets, the washing machine and at least one garden tap. A provisional allowance was included in the OE's report as it was unclear what rectification work was to be undertaken.
2. The BE noted in his report that this was incomplete work.
3. The Homeowners' Counsel acknowledged difficulty in bringing this item within the definition of a major element of a building. Ultimately the Homeowners' Counsel submitted that the water tank could be part of a fire safety system. However s 18E(4) states that "major element means … (b) a fire safety system." Stretching that definition to include something that could potentially become part of a fire safety system goes beyond its intended scope and I am not satisfied that the claimed defect regarding the water tanks and controls is in a major element of a building.

Item 3: internal bricks, render & ceiling cracks

1. The OE reported that the internal brickwork was cracked in the south corner of the study and lounge in the ground floor. Cracks were also observed in the stairwell walls. There was a question whether the crack extended to the south west corner of the bathroom on the ground floor because the external cracks on the south wall corresponded to the large cracks in the study and in regard to the ground floor bathroom the tiles were full height and wall tiles had numerous cracks, although hairline.
2. The BE's opinion was that the internal skin of the brick wall supported the building and so I am satisfied that the internal bricks are a major element of the building as an internal or external load-bearing component of a building that is essential to the stability of the building.

Item 4: Cracked internal wall tiles and incorrect floor gradient

1. The OE notes that there were over 100 cracked tiles in 2 bathrooms and 3 ensuites. The OE observed that, the tiles were "drummy" and surmised that the tile adhesive might have sparse dabs of adhesive on the back, leaving large pockets of air between each dab.
2. At the hearing, the OE acknowledged that he had undertaken a visual non-invasive inspection and he did not have evidence to demonstrate how the tiles were attached to the substrate.
3. In his report, the BE stated the opinion that the wall tiles showed hairline cracks less than 0.1mm and were not a major defect. There was a fall on the floor tiles towards the outlet but the water was not ponding and this was not a defect.
4. There is nothing in the OE's report to suggest that the tiles or floor gradient met any part of the definition of a major element of the building and there is no other evidence to that effect.
5. Most of the evidence regarding this item concerned whether the cracking constituted a major defect, and I have also addressed that evidence below.

Item 5: Waterproofing failure

1. The OE's report notes that the shower in bedroom 3 is leaking through to the vanity floor area. Water is leaking from the shower recess of the master ensuite to the door and down into the kitchen ceiling below.
2. The BE's report noted that bedroom 3 ensuite floor waste has a blockage, which needed to be rectified. Their site inspection revealed that the floor tile sealant in both of the wet areas was highly deteriorated in many sections and mould had grown. The BE referred to the NSW Fair Trading Guide to Standards and Tolerances 2017 Item 14.3 and quoted "Silicon sealants may require replacement after 5 years. This is regarded as a normal house maintenance which is the Owner's responsibility."
3. At the hearing, the OE maintained that a photograph purporting to show a water stain showed the kitchen ceiling. This was confirmed by the BE.
4. At the hearing, the BE stated that he could not confirm, without removing the tiles, how the bathroom had been waterproofed. He agreed that there should not be damage to the kitchen ceiling if the property had been properly waterproofed. The BE confirmed that the silicone sealants had deteriorated.
5. On the basis of the evidence from the OE and the BE, I am satisfied that there is a waterproofing defect which has caused a small stain in the kitchen ceiling.
6. Waterproofing is included under subparagraph (c) of the definition of a major element of a building set out in s 18E(4).

Item 6: Storm moulds and Item 7: Drainage

1. Counsel for the Builder accepted that both of these items constituted part of the waterproofing system for the building and so were major elements of the building.

Is each of the claimed defects in a major element a major defect?

1. Under s 18E(4), major defect means: (a) a defect in a major element of a building that is attributable to defective design, defective or faulty workmanship, defective materials, or a failure to comply with the structural performance requirements of the National Construction Code (or any combination of these), and that causes, or is likely to cause: (i) the inability to inhabit or use the building (or part of the building) for its intended purpose, or (ii) the destruction of the building or any part of the building, or (iii) a threat of collapse of the building or any part of the building, or (b) a defect of a kind that is prescribed by the regulations as a major defect, or (c) the use of a building product (within the meaning of the Building Products (Safety) Act 2017) in contravention of that Act.
2. Clause 69A of the Home Building Regulation 2014 (HB Regulation) prescribes external cladding which fails to comply with the National Construction Code for fire resistance and fire safety as a major defect for the purposes of paragraph (b) of the definition of major defect in s 18E(4) of the HB Act. The HB Regulation does not prescribe any other major defect.
3. Items 1 and 2 were not found to be in a major element of a building and do not require further consideration under this step.

Item 3: internal bricks, render & ceiling cracks;

1. The OE stated in his report: 8.35 A main issue is that no expansion joints were installed to make allowance for brick growth/movement on the external brick skin and this has, to an extent, transferred movement across the cavity ties resulting in some cracking in the SW corner of the study and possibly the ground floor bathroom.
2. As noted at the hearing, the only photograph in the OE's report to confirm that an internal crack corresponds with an external crack is photo 22. Photos 23 and 24 depict internal wall cracks but do not identify their location. Further internal cracks are depicted in photos 49 - 56.
3. In his report, the BE noted that most of the cracks on the render were hairline or slight cracks with a width of cracking that did not exceed 1mm and repair was not required.
4. In relation to cracks on the rendered internal walls surrounding the stairwell, the BE found that the maximum width of these cracks was 1.5 mm which could be easily filled. Regarding the ceiling crack and at wall junctions, the BE noted in his report that these cracks also did not exceed 1mm. The BE stated the opinion that neither type of cracking constituted a major defect.
5. Under cross examination at the hearing, the BE stated that there was a cavity between the external and internal walls and they were not structurally connected. Damage to the external walls could only cause damage to the internal walls if there was movement in the footings, which was not the case here. The cracking in the external wall had been caused by heat, not movement. The external skin of brickwork was just "make up" and external damage did not cause internal damage. If the walls were connected, moisture would wick inside.
6. The Homeowners' Counsel submitted that the external cracking was causing damage to the internal structure which could cause collapse and so constitute a major defect. However the only evidence was the OE's statement that the omission of expansion joints had "to an extent" transferred movement across the cavity ties. There is no explanation as to how this would cause the internal cracks and the BE was not of the view that the external cracking caused the internal cracking because the walls were not sufficiently connected.
7. Considering the OE's previous exaggeration regarding the external cracking, I do not find his theory that the cracking occurred across the cavity ties sufficiently persuasive to offset the BE's firm opinion that the external cracking did not cause the internal cracking and that it would not cause or be likely to the inability to inhabit or use (part of) the building for its intended purpose, or the destruction of (part of) the building a threat of collapse of (part of) the building. The Homeowners have not demonstrated to the civil standard that item 3 meets the definition of a major defect.

Item 4: Cracked internal wall tiles and incorrect floor gradient

1. The OE notes that most of the cracks are hairline and therefore would normally be considered minor defects and come under the 2 year warranty but in his opinion the extent of the cracking was major indicating defective tiling installation. However in order to be a major defect, the defect must meet the definition in s 18E(4) and must cause or be likely to cause the circumstances set out in subparagraphs (i), (ii) or (iii). The Homeowners have not provided evidence to demonstrate to the civil standard that the hairline cracks in the wall tiles would cause or be likely to cause the inability to inhabit or use (part of) the building; the destruction of (any part of) the building or a threat of collapse of (any part of) the building.
2. The Homeowners have also not demonstrated to the civil standard that item 4 meets the definition of a major defect.

Item 5: Waterproofing failure; Item 6: Storm moulds; Item 7: Drainage

1. Although the OE attempted to provide further information at the hearing regarding his observations of leaks from the bathrooms, he did not provide evidence in the report or at the hearing regarding what if any damage might be caused by the waterproofing issues in the master bedroom and bedroom 3 bathrooms.
2. The Homeowners' Counsel submitted that the waterproofing failure was causing damage to the kitchen ceiling underneath and could cause it to collapse.
3. The BE gave evidence under cross examination that water damage could potentially weaken the structure of a building so badly that it could cause collapse. However the BE noted that in this case, the water proofing issue had only caused one stain on a ceiling which was not otherwise damaged and was not falling down. Six years had passed since the bathroom was installed and it was unclear when the stain had first appeared.
4. In closing submissions Counsel for the Homeowners submitted that the BE had conceded that waterproofing failure could cause structural damage (but not necessarily in this case) and the Tribunal could draw an inference from the BE's evidence that it possibly could become sufficiently bad as to cause the collapse of the floor.
5. However, again, in order to be a major defect, the defect must meet the definition in s 18E(4) and must cause or be likely to cause the circumstances set out in subparagraphs (i), (ii) or (iii). This likelihood is greater than a mere possibility that something might happen.
6. The Appeal Panel in Ashton v Stevenson; Stevenson v Ashton [2020] NSWCATAP 233 ('Ashton') considered the applicable principles for whether or not a defect was a "major defect" under Section 18E (1) (b) and (4) of the HB Act, relevantly: 134. Evidence is required from which it can be concluded the defects will likely cause the specified outcome. 135. Whilst it is inappropriate to try and catalogue all evidence that might be relevant to resolving the issue of whether the defects are likely to cause the building to become uninhabitable or to be destroyed in whole or in part, it can be readily accepted that the fact of water ingress arising from one or more of the defects would be relevant even though such an outcome had not presently manifested itself. The nature, location and extent of the defects would also be relevant in assessing the likelihood of the prescribed outcome. Lastly, expert evidence assessing the likelihood of the particular defects causing the prescribed outcome would be relevant, it being noted that the evidence must be of a type which is "comprehensible and reach conclusions that are rationally based" in order to "furnish the trier of fact with criteria enabling the evaluation of the validity of the expert's conclusion" .
7. The Homeowners and the OE have not provided evidence or opinion to the effect that the waterproofing issue would cause or would be likely to cause any of the circumstances set out in subparagraphs (i), (ii) or (iii). As a result, the Tribunal does not have evidence from which to conclude the defects will likely cause the specified outcome.
8. The evidence regarding the omission of storm moulds and drainage suffers from the same failure.
9. The OE's report notes that most external door and window brick openings do not have storm moulds; a couple of windows do have small storm moulds that do not cover the gaps. There are numerous gaps for rainwater entry, especially during periods of wind-driven heavy rains. However, again, the Homeowners and the OE have not provided evidence or opinion to the effect that the waterproofing issue would cause or would be likely to cause any of the circumstances set out in subparagraphs (i), (ii) or (iii).
10. Regarding the drainage, according to the OE's report, the sitting room balcony on the first floor is blocked. The spitter outlet is too small to disperse water build-up from the original tile bed installation that has blocked the drain.
11. According to the BE's report, the front balcony drain is partially blocked and the spitter outlet is too small. In the BE's view, both defects needed to be rectified.
12. The BE agreed under cross examination that there were drainage issues on the balcony but was not of the opinion that this could seep into the structure. The Balcony had a spitter which was partly blocked and caused water to pond but the structure was not affected because the water escaped through the spitter.
13. The Homeowners' Counsel submitted that the drainage issues could cause damage to the internal structure which could cause collapse and so constitute a major defect. However, again, the Homeowners and the OE have not provided evidence or opinion to the effect that the waterproofing issue would cause or would be likely to cause any of the circumstances set out in subparagraphs (i), (ii) or (iii).
14. As a result, each of items 5, 6 and 7 does not meet the definition of a major defect.

Has the application been made in time?

1. The OE's report set out seven claimed defects. On the basis of the reasoning above, none of them has resulted in a major defect within s 18E(1)(b) when read with s 18E(4) of the HB Act.
2. The consequence is the proceedings were not commenced before the end of the warranty period of 2 years for the breach and accordingly the Tribunal has no jurisdiction to hear and determine the claim for any of the defects.
3. The application is accordingly 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: 26 August 2022