Precise Builders (NSW) Pty Ltd v Jones & Krel

NCAT Appeal Panel|2018-02-19

The Appeal

This is an internal appeal by Precise Builders (NSW) Pty Ltd (the Builder), against orders made on 2 November 2017 by Senior Member Meadows in the Consumer and Commercial Division of the Tribunal.
Proceedings HB 16/54978 were an application by the respondents to the appeal, Edward Jones and Helena Krel (the Owners), seeking an order for payment of $28,000.00, arising from residential building works performed by the Builder for the Owners under a building contract dated 11 January 2013. In those orders the Senior Member: 1. Found that the appellant was in breach of a statutory warranty under section 18B(1)(e) of the Home Building Act 1989 (NSW) (the HB Act), arising from a defect being cracking to the brick parapet wall above the garage which was agreed in expert evidence to have been caused by a defect in a steel beam above the garage door supporting the parapet; 2. Found that this was the case even though the Builder had not itself designed or manufactured the steel beam; and 3. Having regard to the provisions of section 48MA of the HB Act, made a work order that the Appellant "… or properly licensed contractors on behalf of the respondent company, are to return to the site and undertake [certain] detailed rectification and associated works …".
The Builder lodged an appeal against these orders on 27 November 2017. In its Notice of Appeal the Builder: 1. Sought leave to appeal against the orders, on the basis that the orders were not fair and equitable and the decision was against the weight of evidence; and 2. Sought to have the work order set aside and replaced with an order for the payment of damages in the amount of $18,845.84, being the net cost of rectifying the defective works as determined by an expert quantity surveyor who gave evidence to that effect to the Tribunal during the original hearing, for the following reasons: 1. All parties had preferred a damages award rather than a work order, and the Owners had originally sought an order for payment of $28,000.00; 2. The work order will perpetuate a hostile relationship between the parties; 3. The Builder does not have a licence to perform the remedial works or to provide Home Warranty Insurance for such works; 4. The Builder was not at fault as the defects arose due to the engineer's specifications; and 5. Payment of damages in the amount so determined will allow the rectification works to be completed by licensed and insured builders who specialise in remedial works.

Availability of Appeal

The appeal under s 80 (2) of the Civil and Administrative Tribunal Act 2013 (NSW) (the NCAT Act) may be brought as of right on a question of law or, with the leave of the Appeal Panel, on other grounds. As this appeal is brought from a decision of the Consumer and Commercial Division of the Tribunal, by virtue of cl 12(1) of Sch 4 to the NCAT Act leave to appeal may only be granted under s 80(2)(b) 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, or (c) significant new evidence has arisen (being evidence that was not reasonably available at the time the proceedings under appeal were being dealt with).
In Collins v Urban [2014] NSWCATAP 17 the meaning of "substantial miscarriage of justice" was summarised at [71] and [79] as follows: [71]. . . [I]t can be seen that the concept of a substantial miscarriage of justice refers to a failure in the way a matter was conducted or decided which deprived the appellant of a chance that was fairly open of achieving a better outcome than occurred. . . [79] In order to show that a party has been deprived of a "significant possibility" or a "chance which was fairly open" of achieving a different and more favourable result . . . it will be generally be necessary for the party to explain what its case would have been and show that it was fairly arguable. If the party fails to do this, even if there has been a denial of procedural fairness, the Appeal Panel may conclude that it is not satisfied that any substantial miscarriage of justice may have occurred.
Even if an appellant from a decision of the Consumer and Commercial Division has satisfied the requirements of cl 12(1) of Sch 4, the Appeal Panel must still consider whether it should exercise its discretion to grant leave to appeal under s 80(2)(b).
The central question in the appeal is whether the Tribunal erred by giving effect to the statutory presumption in favour of a work order which is set out in section 48MA of the HB Act by making a work order in favour of the Owners.

The Member's Reasons

The Member found that while the Builder had allowed its licence to lapse in 2014, at all relevant times during the subject works it was properly licensed and its Directors, Mr Pappas and Mr Ramirez, were both properly licensed. The Member found that the defect with the beam, accepted to be so by all the experts, was a major defect under s 18E of the HB Act, and that the damage was caused by the design of the beam by the original engineer. While accepting that the Builder was not itself responsible for the defective beam and the resulting damage, there was a breach of the statutory warranty in s18B(1)(e) of the HB Act. There is no appeal against those findings.
The Member stated his conclusion as to the appropriate order as follows: Preferred Outcome 77 Section 48MA of the Act provides: A court or tribunal determining a building claim involving an allegation of defective residential building work or specialist work by a party to the proceedings (the "responsible party") is to have regard to the principle that rectification of the defective work by the responsible party is the preferred outcome. 78 The Tribunal accepts that it does not have to order the preferred outcome, however, in order not to do so some persuasive reason or evidence is required from the homeowner to rebut the presumption. The assessment about whether the preferred outcome should be ordered is an objective one and the Tribunal must weigh up the factors in each case and make the decision accordingly. 79 In this case, the homeowners frankly admitted they would prefer not to have the builder return, but that if that was ordered by the Tribunal, they would accept it. 80 The respondent submitted that it could return and do the work, relying on the licences of Mr Ramirez and Mr Pappas. 81 On that basis, I find there is no reason not to order the "preferred outcome". 82 For the sake of completeness, I briefly consider the report and evidence of Mr Zakos, the expert quantity surveyor. Mr Zakos's report is in the correct format for expert reports in this Tribunal pursuant to the "Expert Witnesses" Code of Conduct and Mr Zakos appears regularly in this Tribunal. 83 On page 6 of his report, Mr Zakos sets out his calculations of the net cost of rectification, being $18,845.84. 84 Mr Zakos, as noted above, was cross examined by the builder. The cross-examination related almost entirely to the issues summarised by Member Boyce and discussed above. In my opinion, Mr Zakos's evidence and opinions were not at all shaken by the cross-examination, and indeed he was given, and took, the opportunity to further explain his reasons for making the calculations as he did. I accept the methodology, conclusions and calculations in the report. 85 However, for reasons already provided, I order that the respondent, or properly licensed contractors on behalf of the respondent company, are to return to the site and undertake the detailed rectification and associated works set out in Appendix "D" to the report of Sherrard & Associates Pty Ltd dated 10 May 2017. 86 These works are to commence at a mutually agreeable date and time and are to be concluded no later than 31 January 2018.

The Parties' submissions

The Builder submits that it was not at fault, and is not able to fulfil the work order as it is not licensed and cannot obtain insurance for the rectification works. Both Mr Ramirez and Mr Pappas are licensed however the technical nature of the works is beyond their capacity. The Builder would prefer a money order.
The Owners rely on the Member's findings of breach of statutory warranty, and submit that the orders only require a "properly licensed contractor" to do the work. They will make access available. The defects have continued to worsen, and the cost is now more than $18,000.00.

The Appeal Panel's decision

The Appeal Panel decided to dismiss the appeal.
The terms of the order are clear. They do not require the Builder to perform building work which it is no longer licensed lawfully to perform. Rather, the work which the orders require the Builder to perform is as follows: The respondent company [viz, the Builder], or properly licensed contractors on behalf of the respondent company, are to return to the site and undertake the detailed rectification and associated works set out in Appendix "D" to the report of Sherrard & Associates Pty Ltd dated 10 May 2017.
It expressly contemplates the possibility that the Builder will not itself perform the relevant works, but will cause one or more licensed contractors to do so, and that for the Builder to do so will be sufficient compliance with the order. Nothing in the work order places the Builder in the invidious position of being required to perform work which it is legally prohibited from doing.
This conclusion is consistent with the scheme of the HB Act. Section 4 of that Act prohibits a person from contracting: " …. to do: (a) any residential building work, or (b) ……., except as or on behalf of an individual, partnership or corporation that is the holder of a contractor licence authorising its holder to contract to do that work".
If the Builder complies with the work order by causing or procuring at its own expense a licensed contractor to undertake the remedial works it may well be causing or procuring residential building work to be performed at the Owners' premises. It will not, however, be contracting to do that work itself. Rather, the licensed contractor or contractors engaged by it will be engaging with the Builder to perform that residential building work in order to meet the Builder's obligations under the orders.
In relation to the contract between the Builder and the contractor or contractors engaged by it to perform the relevant work, the Owners will be non-contracting owners within the meaning of Schedule 1 to the HB Act, since in relation to the contract between the Builder and the licensed contractors whom it engages to do the work each of the Owners is "… an individual … that is the owner of the land but is not a party to the contract …". The consequence is that the provisions of section 18D(1A) of the HB Act will apply to extend to the Owners as non-contracting owners the benefit of the statutory warranties enjoyed in respect of that work by the Builder as contracting parties: "A person who is a non-contracting owner in relation to a contract to do residential building work on land is entitled (and is taken to have always been entitled) to the same rights as those that a party to the contract has in respect of a statutory warranty"
The policy objective of the HB Act, to ensure that a home owner has the benefit of statutory warranties in respect of building work conducted on his or her land, is therefore satisfied if the Builder contracts with a licensed third-party contractor to undertake the remedial work in satisfaction of its obligations under the orders.
The Builder's Notice of Appeal and submissions did not in terms identify any errors of law in the Member's application of s 48MA of the HB Act. Subject to the issue of fairness to the respondent, where the Appeal Panel determines that an error of law is raised in the material before it, even if not identified by an unrepresented appellant in the Notice of Appeal, it ought to deal with that identified error on the appeal: Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 at [12]. Having undertaken that exercise, we can discern no error in how the Member approached his consideration of s 48MA.
Section 48O of the HB Act confers power on the Tribunal to make a range of orders, including an order that a party pay money to another party (s48O(1)(a)), or that a party do any specified work or act (s48O(1)(c)). The Tribunal can make an order even if it is not the order that the applicant asked for: s48O(2). The operation of s 48MA in that context was considered in Leung v Alexakis [2018] NSWCATAP 11, where the Appeal Panel held (at [134]) that s 48MA is not limited to circumstances in which defective residential building work was directly carried out by the party responsible, or is to be directly rectified by that person. The Appeal Panel went on to hold: 139. Rather, there was a discretion the Tribunal was required to exercise as to whether or not to make an order for compensation, an order in the nature of a work order or some other order as permitted by s 48O(1). In this regard, s 48O(2) provides the Tribunal can make a work order even if not asked for by the applicant who makes a claim for defective residential building work. In doing so, s 48MA requires the Tribunal "to have regard to the principle that rectification of the defective work by the responsible party is the preferred outcome". Section 48MA is not, in terms, mandatory. Rather, it is a factor to be taken account of in the exercise of a discretion about what orders should be made to resolve a building claim. 140. Being expressed as a "preferred outcome", it operates in the manner of a presumption. That is, unless the facts of the particular case make it inappropriate to order rectification of the defective work by the responsible party, an order should be made in terms that give effect to the principle.
In Kurmond Homes Pty Ltd v Marsden [2018] NSWCATAP 23 the Appeal Panel confirmed (at [44]) that s48MA confers a discretion, and does not mandate that a work order must be made in all cases, and that a range of factors may be relevant. The fact that there is a dispute which necessitated the commencement of proceedings by an aggrieved homeowner is not of itself sufficient to justify the Tribunal in departing from an application of the preferred outcome principle in s48MA: Kurmond at [55].
For the Builder to succeed in a challenge to the way in which the Member applied s48MA, it would need to establish that an error had been made in exercising the discretion, for example that the decision-maker has acted upon a wrong principle, or allowed extraneous or irrelevant matters to guide or affect the decision, or mistaken the facts, or has failed to take into account some material consideration: House v The King [1936] HCA 40; (1936) 55 CLR 499. No such error is evident from the Member's reasons. The Member correctly identified that there was a discretion, and having regard to his findings as to the nature and cause of the defect, took into account relevant factors in determining that it was not inappropriate to order rectification of the defective work by the responsible party.
The Builder has not established any error of law in the Member's conclusion as to the appropriate order.
The grounds on which leave to appeal is sought are in substance a dispute as to merits of the Member's conclusion. The hostility between the parties, the inability of the Builder to carry out the work itself either directly or through its directors, and the fact that the Owners' claim was for a money order, would not stand in the way of the application of the preferred outcome in s 48MA. The Builder has not established that it has been deprived of a significant possibility or a chance that was fairly open that a different and more favourable result would have been achieved, such that it may have suffered a substantial miscarriage of justice in the sense explained in Collins v Urban. Leave to appeal is not granted.

Conclusion

Leave to appeal is not granted and the appeal is dismissed. Section 81(1) of the NCAT Act specifies the orders that the Appeal Panel may make in determining an internal appeal, which include under s81(1)(b) that the decision under appeal be varied. The work order made by the Member stands, however the time specified in his orders for the work to be carried out has passed. The Builder expressed a preference for the time for compliance to be extended to 3 months after the date of the Appeal Panel orders; the Owners preferred 8 weeks, on the basis that the original time was set taking into account the Christmas break. In the circumstances, the Appeal Panel considers that as the Builder will need to engage another contractor rather than commence the work itself, a period of 10 weeks is appropriate.

Orders

The Appeal Panel orders; 1. Leave to appeal is refused. 2. Appeal dismissed. 3. The stay on the operation of the orders granted on 7 December 2017 is lifted. 4. Order 2 is varied so as to require that the works in Order 1 be concluded no later than 10 weeks after the date of these orders.

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: 14 May 2018

At a glance

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Judgment (8 paragraphs)

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Legislation Cited (2)

Cases Cited (6)

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