Raysons Constructions Pty Ltd v The Owners Strata Plan No 87003

NCAT Appeal Panel|2024-02-26

Principal judgment Parties: Raysons Constructions Pty Ltd (Appellant) The Owners - Strata Plan No. 87003 (Respondent) Representation: G Carolan (Appellant)

P Horobin (Respondent) File Number(s): 2023/00257814 Publication restriction: Nil Decision under appeal Court or tribunal: NSW Civil and Administrative Tribunal Jurisdiction: Consumer and Commercial Division Citation: (Unreported) Date of Decision: 17 July 2023 Before: R Titterton OAM, Senior Member File Number(s): HB 20/49739

The Tribunal proceedings and decision

The written reasons for decision published by the Tribunal are relatively lengthy, and for ease of reference we have set out only the critical findings in relation to those passages which were referred to by the respective parties in their submissions on appeal: [13] Prima facie, as the application was filed after the conclusion of the warranty period, the Tribunal does not have jurisdiction to hear and determine this matter: … Consideration 35 In my view, the matters set out in [18] to [27] support a finding that the Owners Corporation was aware of breaches of s 18B warranties as early as: • December 2014 in relation to the water pooling on the balcony of unit 28; • December 2014 in relation to water penetration, calcium leaks and wall and ceiling cracks in the car park; • June 2016 in relation to water ingress to units 1 and 3, and damage to the ceilings of units 12, 25 and 40; • May 2017 in relation to water penetration into unit 13; • February 2018 in relation to water entry to unit 3; • March 2019 in relation to corrosion to the door frame of unit 29. 36 In my view, the evidence is sufficient to support a finding that the Owners Corporation was first aware of the defects in relation to units 1, 12, 13, 14, 29 and 40 and water penetration, calcium leaks and wall and ceiling cracks in the car park before, and in some case well before, the last six months of the warranty period. 37 However, the evidence is not sufficient to support a finding that the Owners Corporation was first aware (or ought reasonably to have become aware) of any breaches of warranty for those matters before the last six months of the warranty period. While I accept the Builder's submission that there was knowledge of these defects at the times stated I reject the Builder's submission that there was knowledge of "defect issues giving rise to a potential claim for breach of warranties well before 2020". …..
The Tribunal ordered the respondent to repair the defective work, including but not limited to the cracks in the car park slab. No single work order was made. Instead the Tribunal ordered the parties to provide "draft orders reflecting these reasons". We are not aware that the parties have provided draft orders and the order of the Tribunal remains unfinalised.
The reasons for decision were published on 14 July 2023 and amended on 21 November and 24 November 2023 respectively.
In principle the builder alleges the Tribunal erred on a question of law because although a finding was made at [35] that the owners corporation was aware of a breach of statutory warranty in 2014, it concluded that the owners corporation was not aware the defects gave rise to breaches of statutory warranties and was entitled to extend the time for filing the application by another six months under s 18E(1)(e) until November 2020. The builder says these findings are internally inconsistent and the Tribunal erred on a question of law.

Relevant Law: The nature and scope of internal appeals

Internal appeals in this Tribunal may be made as of right on a question of law, and otherwise with permission (that is, the "leave") of the Appeal Panel: s 80(2) Civil and Administrative Tribunal Act 2013 (NCAT Act).
As has been noted in Robinson and Lucy's "NCAT Practice and Procedure", Second Edition 2020, at [NCATA80.30] at page182, there is no satisfactory test of universal application to define the concept of an error of law. However, in Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 the Appeal Panel set out at [13] a non-exclusive list of errors of law. 1. a failure to provide proper reasons; 2. identification of the wrong issue or asking the wrong question; 3. the application of a wrong principle of law; 4. a failure to afford procedural fairness; 5. a failure to take into account relevant (i.e., mandatory) considerations; 6. the taking into account of an irrelevant consideration; 7. the absence of evidence to support a finding of fact; and 8. the decision was so unreasonable that no reasonable decision-maker would have made it.
The circumstances in which an Appeal Panel may grant leave to appeal from decisions made in the CCD are limited to those set out in cl 12(1) of Sch 4 of the NCAT Act. In such cases, the Appeal Panel must be satisfied that the appellant may have suffered a substantial miscarriage of justice on the basis that: 1. the decision of the Tribunal under appeal was not fair and equitable; or 2. the decision of the Tribunal under appeal was against the weight of evidence; or 3. 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 (Collins), the Appeal Panel said at [76] that a substantial miscarriage of justice for the purposes of cl 12(1) of Schedule 4 may have been suffered where: … there was a "significant possibility" or a "chance which was fairly open" that a different and more favourable result would have been achieved for the appellant had the relevant circumstance in para (a) or (b) not occurred or if the fresh evidence under para (c) had been before the Tribunal at first instance.
Even if an appellant from a decision of the CCD 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). In Collins, at [84], the Appeal Panel said that ordinarily it is appropriate to grant leave to appeal only in matters that involve: 1. issues of principle; 2. questions of public importance or matters of administration or policy which might have general application; or 3. 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; 4. a factual error that was unreasonably arrived at and clearly mistaken; or 5. 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.
In the NCAT Act, s 81 deals with the determination of internal appeals. (1) In determining an internal appeal, the Appeal Panel may make such orders as it considers appropriate in light of its decision on the appeal, including (but not limited to) orders that provide for any one or more of the following - (a) the appeal to be allowed or dismissed, (b) the decision under appeal to be confirmed, affirmed or varied, (c) the decision under appeal to be quashed or set aside, (d) the decision under appeal to be quashed or set aside and for another decision to be substituted for it, (e) the whole or any part of the case to be reconsidered by the Tribunal, either with or without further evidence, in accordance with the directions of the Appeal Panel. (2) The Appeal Panel may exercise all the functions that are conferred or imposed by this Act or other legislation on the Tribunal at first instance when confirming, affirming or varying, or making a decision in substitution for, the decision under appeal and may exercise such functions on grounds other than those relied upon at first instance.
Importantly, in Ryan v BKB Motor Vehicle Repairs Pty Ltd [2017] NSWCATAP 39 an Appeal Panel stated at [10]: An appeal does not provide a losing party with the opportunity to run their case again except in the narrow circumstances which we have described. Mr Ryan has not satisfied us that those circumstances apply to his case and we refuse permission for him to appeal.

Notice of Appeal and Submissions

The appeal was commenced on 11 August 2023 date and was, therefore, filed in time.
The amended grounds of appeal were filed on 27 November 2023: 1. Ground 1: whether the Tribunal erred as a matter of law [sic] in finding that the Respondent was entitled to rely upon section 18E(1)(e) of the Home Building Act to extend the warranty period for claims in respect of major defects beyond 14 July 2020. 2. Ground 2: whether the Tribunal erred in finding that the Appellant bore an evidentiary onus in respect of whether the Respondent was entitled to rely upon section 18E(1)(e) of the Act to extend the warranty period for claims in respect of major defects beyond 14 July 2020. 3. Ground 3: whether the Tribunal's decision at subparagraphs 254 (1) and (2) of the Reasons for Decision that those items were major defects satisfied the requirements of section 18E (4) of the Act, given: (a) there was no evidence to support the finding in respect of some of the defects; or (b) the Respondent's expert did not identify the cause of some of the alleged defects as being attributable to a breach by the Appellant of the statutory warranty; or (C) there was a constructive failure to engage with the evidence and submissions; or (D) the findings were against the weight of evidence. 4. Ground 4: whether the Tribunal's decision that the lack of alternative drainage on the balconies identified in item SD.3 satisfied the requirements of section 18E(1)(4) of the Act constituting a major defect: (a where there was no evidence or insufficient evidence to support that findings; or (B) the Tribunal failed to address the evidence of the appellant; (C) the Tribunal did not provide adequate reasons for its decision.; … 5. Ground 5: whether the Tribunal's decision that Item 37.1 was a major defect satisfied the requirements of section 18B(4) or constituted a constructive failure to exercise jurisdiction in circumstances where the weight of the evidence did not support the finding, the Tribunal did not provide adequate reasons for its decision; the Tribunal overlooked the evidence of the appellant's expert that there was no evidence of the existence of the defects complained of. 6. Ground 6: whether the Tribunal constructively failed to exercise its jurisdiction in respect of the table 6 defects by failing to provide any or any adequate reasons finding that the cracking car park slab was the result of any breach by the Appellant of the statutory warranties; but overlooking not addressing material evidence relevant to the determination of the issue. 7. Ground 7: whether the Tribunal's decision in respect of the table 6 defects was made without jurisdiction given the finding at [35] of the Reasons that the Respondent was aware of the alleged breaches of the statutory warranties in the car park as early as December 2014. …..

Appellant's Submissions

We refer to the amended outline of submission filed on 8 December 2024.
The first ground of appeal is summarised as follows:
The Tribunal found at [35] of its reasons that the "Owners Corporation was aware of the breaches of s18B warranties as early as December 2014."
Despite that finding the Senior Member rejected the appellant's argument that owners corporation's application was commenced out of time. At [37] of the Reasons for Decision the Senior Member found 37 However, the evidence is not sufficient to support a finding that the Owners Corporation was first aware (or ought reasonably to have become aware) of the any breaches of warranty for those matters before the last six months of the warranty period. While I accept the Builder's submission that there was knowledge of these defects at the times stated I reject the Builders submission that there was knowledge of "defect issues giving rise to a potential claim for breach of warranties well before 2020".
The Tribunal accepted the owners corporation's contention that it was not until it received the report of Mr Le of RHM dated June 2020 that it was aware of items that were capable of amounting to breaches of warranties under s18B of the HBA: reasons at [33].
However, according to the submission, that reasoning is fraught with error considering the findings at [35] that an awareness of breaches was present as early as 2014. Mr Le's report in June 2020 merely provided further particulars of what had already been identified as breaches of warranty. It documented further examples of the same types of problems already known to the owners corporation. The further 2020 particulars do not constitute the breaches of statutory warranty within the cause of action, they merely detail the ways in which those breaches manifest themselves: The Owners SP 78460 v MD Constructions Proprietary Limited [2016] NSWSC 162 at [23] - [25] per Hammershlag J. There was nothing new in terms of establishing a breach of warranty not previously known.
It is submitted that the reasoning in [37] this inconsistent with the finding at [35] and constitutes an error of law on the part of the Tribunal which goes to the heart of the question of whether the Tribunal has jurisdiction to entertain the claim.
For the purpose of calculating a limitation period, knowledge of the defect is sufficient to trigger an obligation to ascertain who was responsible, in this case, whether there was a claim for breach of warranty. In Cyril Smith & Associates Pty Ltd v The Owners - Strata Plan No 64970 [2011] NSWCAT 181, the Court of Appeal (Bathurst CJ, Basten and Young JJA) said at [35]: Knowledge that the windows were defective did not of course mean that the owners corporation knew who was responsible for the defect, but the time within which it needed to ascertain who was responsible and, if necessary, commence proceedings, had started to run. It failed to act within six years of the accrual of the cause of action in the proceedings brought in respect of the defect were, accordingly, statute barred is against the appellant."
It is submitted that time under the HB Act commences to run from the date of completion. However, where the [owners corporation] sought to extend the time it needed to establish that the breach of warranty was not apparent until the last six months of the warranty period. Given that there had been complaints about the defects issues over a number of years which had put the respondent on notice that there existed breaches of statutory warranty, and arriving at that very finding at [35], the entitlement to an extension of time should not have been entertained.
The decision of the Supreme Court in The Owners - Strata Plan No 90018 v Parkview Constructions Pty Ltd [2022] NSWSC 1123 highlighted the problem. Justice Stephenson considered the application of section 18E(1) to the question of whether a breach of the statutory warranties in section 18B gave rise to multiple causes of action. His Honour concluded that warranty periods can commence and perhaps are likely to commence on different dates depending on when the work in question was completed.
His Honour found at [52]: "whether there are six separate causes of action for breach of any of the six warranties or only one cause of action for breaches of any of the six warranties I do not see how it can follow that there is a separate cause of action for each individual breach of each of those warranties"
The decision at first instance was considered by the Court of Appeal in Parkview Constructions Pty Ltd v The Owners - Strata Plan 90018 [2023] NSWCA 66. The headnote to the decision of the Court of Appeal records: " in a conventional case for breach of contract there is a single cause of action complete when a defective structure is provided, irrespective of the number of ways in which those defects manifested themselves. Although the Home Building Act makes important inroads into the position of general law, those changes do not alter the fact that the nature of the Owners Corporation's claim is that the building which is the subject of the contract has not been provided in accordance with the terms of the contract… Where a successor in title sues a builder or developer on the statutory warranties in section 18B of the Home Building Act, the proceedings is for breach of the single contract (which may be actual or deemed) against that party. An amendment which does nothing more than introduce further departures from the building as promised will not give rise to a new cause of action before because the cause of action is for breach of the same contract.
The appellant submits that as a matter of statutory interpretation the intention of the legislature was not to extend the time for the commencement of proceedings to 6.5 years, where an applicant was aware of breaches of warranty prior to the last six months of the warranty period. It was not intended to deprive a builder of an entitlement to rely on the six year time limit for breach of statutory warranties under s18B of the HB Act.
The breach of warranty did not become apparent in the final six months of the warranty period, given that there was but one cause of action which could be sued upon. The section does not reopen the gates to allow an applicant to litigate breaches which have become time-barred.

Reply to Appeal

In its Reply to Amended Appeal filed on 1 December 2023 the respondent supports in full the orders made on 4 May 2023.

Respondent's submissions

The Appeal Panel refers to the respondent's amended outline of submissions filed on 15 December 2023.
The respondent submits that the appeal should be rejected on all grounds, not least of which because the grounds of appeal assert errors on questions of law when the grounds as pleaded merely challenge questions of fact. The respondent submits that where a challenge to a decision raises a mixed question of fact and law a challenge on appeal is limited to the circumstances identified in Commissioner of Police (NSW Police Force) v Adam [2022] NSWSC 789 at [19]; that is, if it is determined that the conclusion proceeded from a misdirection of law" and in this appeal none of the grounds identified how the Tribunal is said to have misdirected itself as to a question on an error of law.
The respondent submits there are multiple actions available to a homeowner for breaches of statutory warranties, or contract claims, under the HB Act.
The respondent submits that a homeowner is not bound to commence proceedings once it has become aware of a breach of statutory warranties and will remain able to rely on section 18E(1)(e) even after it has become aware of a breach but has elected not to bring a claim (see submissions [11].
It is submitted that the Onerati principle does not apply. Onerati v Phillips Constructions Pty Ltd (in liq) (1989) 16 NSWLR 730 as per Giles J: "there is but one cause of action for breach of contract founded upon breach of a promise such as to carry out the work in good and workmanlike manner", with the result that the plaintiff must bring a claim for all defects in the one proceeding.
The Court of Appeal decision in Parkview Constructions Pty Ltd v The Owners - Strata Plan 90018 [2023] NSWCA 66 is authority for the proposition that the Onerati principle only applies in circumstances where proceedings have been commenced and concluded, precluding the homeowner from bringing a further claim for breaches of statutory warranty by reasons of a defence of res judicata and or Anshun estoppel. It is submitted the Onerati principle does not apply in the current proceedings as proceedings were not litigated and concluded prior to commencing proceedings on 29 November 2020.
The appellant's interpretation of s18E(1)(e) is too restrictive and leads to a limited interpretation of s18E(2) and is contrary to canons of statutory construction.

Errors on questions of law- or mixed question of law and fact

As was set out above, the appellant confirmed that the grounds of appeal relied upon raise errors on questions of law in respect of grounds one and two. The parties confirmed that in the event we find ground 1 of the appeal established, it is not necessary to determine the remainder of the grounds of appeal set out in the notice of appeal.

Ground 1 - Did the Tribunal err in its application of the facts to s 18E(1)(e) of the HB Act?

It is not in dispute that these proceedings involve a building claim within the meaning of the HB Act. Accordingly, to the extent the proceedings are brought within the time limits laid down in s18E, the Tribunal has jurisdiction to determine the proceedings pursuant to s 48K of the HB Act.
Apart from disputes concerning the existence of major defects, the appeal primarily concerned whether the owners corporation's claim was within the jurisdiction of the Tribunal by virtue of ss18E and 48K of the HB Act, and whether the alleged defects were "major defects" as defined in s18E(4) of the HB Act.
We consider that that ground 1 of the appeal raises mixed questions of law and fact.
For the reasons that follow we are of the view that the Senior Member misapplied the correct test at law based on inconsistent findings of fact. For these reasons we have decided to allow the appeal and to set aside the orders made by the Tribunal at first instance. By reason of the fact that the proceedings were commenced after the six year time period for major defects expired, the Tribunal does not have jurisdiction to hear and determine the issues between the parties and the application must be dismissed.

The relevant legislation

The Tribunal derives its jurisdiction in relation to building claims from section 48K, but the proceedings must be commenced within the time limits set out in section 18E: Jurisdiction of Tribunal in relation to building claims 48K JURISDICTION OF TRIBUNAL IN RELATION TO BUILDING CLAIMS (1) The Tribunal has jurisdiction to hear and determine any building claim brought before it in accordance with this Part in which the amount claimed does not exceed $500,000 (or any other higher or lower figure prescribed by the regulations). (2) The Tribunal has jurisdiction to hear and determine any building claim whether or not the matter to which the claim relates arose before or after the commencement of this Division, except as provided by this section. (3) The Tribunal does not have jurisdiction in respect of a building claim relating to building goods or services that have been supplied to or for the claimant if the date on which the claim was lodged is more than 3 years after the date on which the supply was made (or, if made in instalments, the date on which the supply was last made). (4) The Tribunal does not have jurisdiction in respect of a building claim relating to building goods or services that are required under a contract to be supplied to or for the claimant on or by a specified date or within a specified period but which have not been so supplied if the date on which the claim was lodged is more than 3 years after the date on or by which the supply was required under the contract to be made or, if required to be made in instalments, the last date on which the supply was required to be made. (5) The fact that a building claim arises out of a contract that also involves the sale of land does not prevent the Tribunal from hearing that building claim. (6) The Tribunal does not have jurisdiction in respect of a building claim arising out of a building cover contract required to be entered into under this Act if the date on which the claim was lodged is more than 10 years after the date on which the residential building work the subject of the claim was completed. (7) The Tribunal does not have jurisdiction in respect of a building claim arising from a breach of a statutory warranty implied under Part 2C if the date on which the claim is lodged is after the end of the period within which proceedings for a breach of the statutory warranty must be commenced (as provided by section 18E). (8) The Tribunal does not have jurisdiction in respect of a building claim relating to-- (a) a contract for the supply of goods or services to which none of subsections (3), (4), (6) and (7) applies, or (b) a collateral contract, if the date on which the claim was lodged is more than 3 years after the date on which the contract was entered into. (9) This section has effect despite clause 5 (Relationship between Tribunal and courts and other bodies in connection with Division functions) of Schedule 4 to the Civil and Administrative Tribunal Act 2013.
It is convenient to set out section 18E of the HB Act. Proceedings for breach of warranty 18E PROCEEDINGS FOR BREACH OF WARRANTY (1) Proceedings for a breach of a statutory warranty must be commenced in accordance with the following provisions-- (a) proceedings must be commenced before the end of the warranty period for the breach, (b) the warranty period is 6 years for a breach that results in a major defect in residential building work or 2 years in any other case, (c) the warranty period starts on completion of the work to which it relates (but this does not prevent proceedings from being commenced before completion of the work), (d) if the work is not completed, the warranty period starts on-- (i) the date the contract is terminated, or (ii) if the contract is not terminated--the date on which work under the contract ceased, or (iii) if the contract is not terminated and work under the contract was not commenced--the date of the contract, (e) if the breach of warranty becomes apparent within the last 6 months of the warranty period, proceedings may be commenced within a further 6 months after the end of the warranty period, (f) a breach of warranty "becomes apparent" when any person entitled to the benefit of the warranty first becomes aware (or ought reasonably to have become aware) of the breach. (1A) If a building bond has been lodged for building work under Part 11 of the Strata Schemes Management Act 2015 , the period of 2 years specified for commencing proceedings for a breach of a statutory warranty for that work is extended until the end of 90 days after the end of the period within which a final inspection report on the building work under that Part is required. (1B) Subsection (1A) does not limit any other law that permits the period for commencement of proceedings to be extended. (2) The fact that a person entitled to the benefit of a statutory warranty specified in paragraph (a), (b), (c), (e) or (f) of section 18B has enforced the warranty in relation to a particular deficiency in the work does not prevent the person from enforcing the same warranty for a deficiency of a different kind in the work ("the other deficiency) if-- (a) the other deficiency was in existence when the work to which the warranty relates was completed, and (b) the person did not know, and could not reasonably be expected to have known, of the existence of the other deficiency when the warranty was previously enforced, and (c) the proceedings to enforce the warranty in relation to the other deficiency are brought within the period referred to in subsection (1). (3) The regulations may prescribe defects in a building that are not (despite any other provision of this section) a major defect. (4) In this section-- "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. Note : The definition of "major defect" also applies for the purposes of section 103B (Period of cover). "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.

Consideration

The correct enquiry is whether, in this case, the owners corporation first became aware of a breach of statutory warranty within the last six months of the warranty period. If the owners corporation had been aware of a breach of statutory warranty prior to the last six months of the six year period, the owners corporation was not entitled to file the application after the expiration of the six year limitation period set out in s18E, or specifically, the Tribunal does not have jurisdiction in respect of applications filed after 14 July 2020.
The Tribunal made the following relevant findings of fact to establish whether section 18E(1)(e) had become enlivened or not.
The Tribunal found that: 1. an occupation certificate was issued on 15 July 2014 at [12]; 2. the warranty period concluded on 14 July 2020 at [12]; 3. the last six months of the warranty period was the period 14 January 2020 to 14 July 2020 and the application was filed on 26 November 2020. 4. Prima facie the Tribunal found that as the application was filed after the conclusion of the warranty period, the Tribunal did not have jurisdiction to hear and determine the case (see [13]).
After arriving at the prima facie conclusion that it did not have jurisdiction, the Tribunal then enquired: "did the breach of warranty becomes (sic) apparent within the last six months of the warranty period?
The builder led comprehensive evidence to establish that the owners corporation was aware of the breach(es) of statutory warranty since 2014 and did not "become aware" of the breach(es) in the last six months of the warranty period.
The crucial evidence led by the builder, establishing the owners corporation's longstanding awareness of breaches of statutory warranty is set out by the Tribunal. The Tribunal's recital of the critical facts giving rise to the requisite awareness of 'the breach of statutory warranty' as early as 2014 are as follows: 1. The builder had received a bundle of documents produced under summons which established the owners corporation's knowledge of drainage problems with the balconies, allowing water penetration into the building and this had become known as early as 1 November 2014 (at [19]). 2. On 11 December 2014 the owners corporation wrote to the builder alerting the builder to signs of water penetration in the garage and car spaces, cracks in the car park slabs and walls, including calcium leaks, and leaks penetrating around and down plumbing pipes (at [21]) 3. An email dated 17 May 2015 from the strata committee to the strata manager establishes further water ingress issues from the balcony to the interior of unit 13 manifested and that the builder had been notified of the defect but was unresponsive (at [22]); 4. A site meeting was held on 16 June 2016 with the builder to inspect the leaking roof areas, and a storm water damage inspection report was obtained reporting of water penetration into several units that was inspected by the builder and the builder rectified ceiling damage (at [23]). 5. On 25 February 2018 the owners complained that the builder had failed to rectify water ingress through the ceiling of unit 3 (at [24]). 6. On 20 March 2019 the owners of unit 29 complained to the builder of corroding door frames and lifting tiles inside the unit (see at [25]). 7. On 17 June 2018 the owners corporation obtained a Storm Water Damage Inspection Report (at [26]); 8. On 23 August 2019 the owners corporation received a letter from a rectifying builder, Freyssinet Australia Pty Ltd, stating that "the shortening shrinkage cracks, including previously repaired cracks, do not affect the structural adequacy or serviceability of the structure" (at [29]). 9. On 10 January 2020, six months before the six year statutory warranty period expired, the owners corporation received an email from the builder indicating that it would not return to repair shrinkage cracks in the upper basement and ground floor because the cracks "do not affect the structural adequacy or serviceability of the structure" (at [27]). 10. Several owners complained of water ingress after a rain event in February 2020 (at [17]). 11. The owners waited another four months until June 2020 to obtain the RHM Report which refers to 'breaches of statutory warranty pursuant to s18B of the HB Act in respect of slab crack defects and balcony leaks' at [33]. 12. In July 2020 the six year period statutory warranty period expired. 13. In August 2020 the builder returned to attend to further defects and issued a report outlining a rectification schedule on 16 September 2020;
Taking into account its findings of the extensive awareness of the owners corporation of the breaches of statutory warranties set out in paragraphs [18] to [27] the Tribunal, correctly in our view, concluded at [35] "In my view the matters set out at [18] to [27] support a finding that the owners corporation was aware of breaches of s18B warranties as early as December 2014, in relation to water pooling on the balcony of unit 28; December 2014 in relation to water penetration, calcium leaks and wall and ceiling cracks in the car park; June 2016 in relation to water ingress to units 1 and 3 and damage to the ceilings of units 12, 25 and 40; May 2017 in relation to water penetration into unit 13; February 2018 in relation to water penetration to unit 3; and March 2019 in relation to corrosion to the door frame of unit 29"
At [36] the Tribunal again concludes that the evidence is sufficient to support a finding that the owners corporation was first aware of the defects in relation to units 1, 12, 13, 14, 29, and 40, water penetration, calcium leaks; wall and ceiling cracks in the car park well before the last six months of the warranty period. All of these defects relate to water penetration.
The Tribunal, already having arrived at its finding that the owners corporation was aware of statutory breaches in 2014, then arrives at an inconsistent finding at [37] "that the evidence is not sufficient (emphasis added) to support a finding that the Owners Corporation was first aware (or ought reasonably have become aware) of the any (sic) breaches of warranty for those matters before the last six months of the warranty period".
The Tribunal at [37] seeks to make a distinction between being aware of the defect but not being aware of those defects giving rise to a potential claim for breaches of statutory warranty. In our view that distinction was not made by the Tribunal in [35] where it was concluded that the owners corporation was not only aware of defects but was aware of "breaches of s18B warranties" as early as December 2014. If the Tribunal wished to distinguish between the two concepts of being merely aware of a defect, but that not giving rise to an awareness of a breach of statutory warranty, it did not do so. Two inconsistent findings were reached.
Reviewing the facts as found from [18] to [27], the Tribunal could not reasonably come to the conclusion that the owners corporation, being aware that the building was suffering from water ingress problems at the balconies and in the upper basement and ground floor, that these defects did not amount to breaches of statutory warranty.
The Tribunal erred in concluding that the owners corporation could not form the view that the significant defects outlined in [18] to [27] were not capable of being interpreted as breaches of warranty until the owners corporation obtained an expert report to that effect. It is not the task of an independent expert to conclude whether a defect amounts to a breach of a statutory warranty, that remains, as the ultimate question, for the Tribunal to determine.
In light of the Tribunal's finding at [35] that the owners were aware of the warranty breaches, the Tribunal's next finding at [37] that the owners corporation could not have reached the requisite level of "awareness" is against the weight of the evidence and internally inconsistent. There is no adequate reconciliation of all of the evidence bearing on the point and the respondent did not cross appeal the list of findings made between [18] to [27]. The issue of when awareness became apparent was never put to the owners corporation in cross examination and the Tribunal was clearly under the impression that the owners could only become aware of breaches of statutory warranty if there was an expert opinion to that effect. There is no explanation given by the Tribunal as to why it arrived at that finding and there are no authorities to support that proposition. We are of the view that the finding reached in [37] is in error and this ground of appeal must succeed.
"Becoming aware" of a breach of statutory warranty is not dependent upon the receipt of an expert report that refers to the requirements of s18B of the HB Act. The awareness of a breach of statutory warranty was created when the owners corporation detected water ingress into substantial parts of the common property.
The same defects as first identified in 2014, were prosecuted by the owners corporation in its points of claim signed by its solicitor on 26 November 2020. We are of the view that the defects listed in the claim form are, except in some very minor respects, identical to, in nature, those defects the owner's corporation had been aware of for six years prior. The nature of the defects identified in 2014 related to water ingress to units, through balcony doors, walls, windows and through calcification of cracks in the car park slabs.
The same comment can be made about the table handed up by the owners corporation at the commencement of the second day of the hearing of the appeal which sought to highlight some defects which were said to have only been identified in 2020, and were not known by the owners corporation in 2014. In the Appeal Panel's view, these defects as particularised, were simply further manifestations of water ingress and slab cracking and not defects of a different kind of work. For this reason we also do not consider it necessary to consider, notwithstanding the submission of counsel for the owners corporation, s18B(2) of the HB Act, except to note that the provision only applies where there is "a deficiency for a different kind of work".
The "breaches of statutory warranty" as prosecuted in 2020 are particularised at page 89 of the tender bundle: "Particulars of Breaches and defective work": 1. Defects and non-complying work in the common property including without limitation: (a) water emanating beneath sliding doors; (b) water penetration emanating from head of glass sliding doors; (c) moisture damage to timber adjacent to sliding doors; (d) moisture damage to timber gripper strip beneath carpet; (e) moisture damage to skirting; (f) moisture damage to plasterboard ceiling; (g) water seepage emanating from base of walls; (h) corroded door jambs; (i) water penetration from downlights; (j) water penetration to plasterboard bulkhead; (k) water penetration from around windows; (l) dripping noise behind walls; (m) water damage resulting in mould growth; (n) cracking and delaminating concrete; (o) water accumulation within the light fixture on soffit of balcony slab; (p) water penetration affecting built in robe; (q) moisture damage to plasterboard window sills; (r) water tracking beneath the sliding doors; (s) omission of flashings; (t) moisture damage to timber floorboards generally; (u) water penetration emanating from pipe penetration; (v) no sealant around pipe penetration in soffit of balcony slab; (w) water penetration damage to bedroom doorways; (x) water dripping from plasterboard ceiling/ wall junction; (y) mineral leaching resulting from water damage emanating from shrinkage cracking on soffit of balcony slab; (z) stalactite formation resulting from water damage emanating from shrinkage cracking on soffit on balcony slab; (aa) leaching staining to floor tiles; (bb) water tracking down pre-cast; (cc) water ponding on floor slab; (dd) cracked and delaminated render to external wall; (ee) water seepage emanating from cold joint on soffit on; (ff) floor waste blockage causing blockage; (gg) dripping calcium from piping installed in roof in car park; (hh) defective back up fire alarm monitoring system; (jj) defective electrical circuit in common areas; (kk) defective emergency lighting in common areas; and (ll) defective roller door in car park.
With the exception of electrical defects particularised in (hh) to (ll), (and it is not apparent from the Decision that these issues were pressed by the owners corporation as major defects), the nature of the defects were identified by the owners corporation in 2014. As water ingress progressed and was left unchecked, it caused more corrosion to an increased number of units, resulting from the same breaches of statutory warranty that the owners corporation became aware of in 2014 as found by the Tribunal at [35] of the written reasons for decision.
Water ingress is classified as a "major defect" within the meaning of the legislation. The defects were globally identified by the expert Mr Le, in the RHM report of 14 July 2021 as follows: "in failing to ensure the building exterior was water proofed sufficiently to prevent the penetration of water into the building interior, an unsatisfactory standard of workmanship has been executed". The fact that water had penetrated the building interior was known to the owners corporation and it did not require an expert opinion to alert the owners to breaches of statutory warranty particularly in circumstances where the owners corporation had the builder, or a related entity, return to the premises to rectify defects between 2016 and 2020.
For the purpose of calculating the limitation period, knowledge of the water ingress was sufficient to trigger an obligation to investigate defects and to ascertain all breaches of statutory warranty before the expiration of the six year period. In Cyril Smith & Associates Pty Ltd v The Owners - Strata Plan No 64970 [2011] NSWCA 181, (Cyril Smith) the Court of Appeal (Bathurst CJ, Basten and Young JJA) said at [26]: This material demonstrates that the referee was searching for material, in the relevant period, indicating that the Owners Corporation either did, or should have, identified not merely that the windows were defective (a physical condition) but that responsibility lay in the design of the windows (the cause of the defect). The authorities do not support that approach. For example, there was no suggestion in Sutherland Shire Council, or Pullen, that the cause of action did not accrue until the owner knew or ought to have known, not merely that the footings of the buildings were inadequate, but the cause of the inadequacy. The appellant's submissions were partly correct in alleging that the referee had erroneously sought, not merely signs of the defect, but that "those defects were due to the act or omission of the alleged tortfeasor": see judgment, at [72]. The referee did not go so far as to require knowledge that responsibility lay with the architect, rather than the engineer or the builder, but he did erroneously look not merely for knowledge of the defect, but also the cause of the defect. Her Honour was, therefore, in error in rejecting that aspect of the submission: at [73].
And at [32]: Knowledge that the windows were defective did not, of course, mean that the Owners Corporation knew who was responsible for the defect, but the time within which it needed to ascertain who was responsible and, if necessary, commence proceedings, had started to run. It failed to act within six years of the accrual of the cause of action and the proceedings brought in respect of the defect were, accordingly, statute barred as against the appellant.
And at [37] With respect to knowledge of the defect, it is clear that the approach adopted by the referee was precisely that identified above with respect to the windows, only more starkly expressed. The defect was not latent for long: what took time to be revealed was the element of responsibility attaching to the respective parties. For reasons already explained, accrual of the cause of action did not depend upon that knowledge. Accordingly the limitation defence should have succeeded on this basis in respect of the steel rooftop structure.
Although Cyril Smith concerned the accrual of a cause of action in a negligence claim, the same principles apply to an owners corporation pursuing a cause of action under statutory warranty. Having identified a series of defects, it was incumbent upon the owners corporation to investigate the water ingress problem and as long as there was awareness of a breach within the six year defect limitation period, the defence under s18E(1)(e) could not be triggered. No expert opinion was required, but in any event the owners corporation had some expert reports and some lay observation which should have led to an awareness of the breaches of statutory warranty before the last six months of the six year limitation period. The owners corporation had observed many locations of staining, water ingress during a rain or flooding event, and was aware of the water ingress through balconies and the ongoing problems of crack and calcium formation in the car park slab.
The owners corporation was aware, or ought to have been aware, that particular defects existed and that the defects, namely water ingress, were likely to result in any damage that might indicate the likelihood the premises will become uninhabitable or destroyed in the future by reason of the defect: Ashton v Stevenson; Stevenson v Ashton [2020] NSWCATAP 233 (9 November 2020).
It was incumbent upon the owners corporation to show that the deficiencies complained of in 2014, were different to the defects claimed in the pleadings of 2020. This was not achieved, and the owners corporation has not shown that the Onerati v Phillips principle is not applicable here. The decision in Onerati v Phillips Constructions Pty Ltd (in liq) (1989) 16 NSWLR 730 at 746 (Onerati), that 'there is but one cause of action for breach of a contract founded upon breach of a promise such as to carry out the work in a good and workmanlike manner' has the effect that once judgment has been obtained, a successor in title can no longer enforce the warranty. The relevant consideration in these proceedings is that the owners corporation could have commenced proceedings within the six year period and added particulars as and when they became known through the use of expert opinion, but it was not open to the owners corporation to wait until November 2020 before commencing proceedings. In Honeywood v Munnings Honeywood as Executrix of Honeywood v Murray [2006] NSWCA 215; (2006) 67 NSWLR 466 at 470 [13] - [18] and in Bardon v Occhiuto Enterprises [2016] NSWCATAP 191 at [31] - [32], the Court and the Appeal Panel applied the ratio of Onerati to confirm that there was not a series of causes of action in respect of different defects or classes of defects.
It was open for the owners corporation to seek a more thorough investigation of the defects but it chose not to. In order to rely on the extension of s18E(1)(e) it was not sufficient to rely on a 2020 expert report that did not distinguish the formerly known defects from those later pleaded and particularised.
The test as to whether the owners corporation was "aware" must be both subjective and objective. There is the actual knowledge of the owners corporation as found by the Tribunal in [18] to [27]. The second limb is the objective test of what could not reasonably be expected to have been known. In order to succeed we are of the view that the owners corporation ought to have led evidence that the defects pleaded in 2020 were different to those noticed in 2014 and that the defects now particularised could not reasonable have been manifest in 2014. The owners corporation, however, did not do so.
We conclude that the defects, the subject of the claim, were or reasonably could have been expected to have been known by the owners corporation when they first investigated the water ingress issues and the slab issues. We are satisfied that the Tribunal's finding, that the awareness of defects could not give rise to awareness of breaches of statutory warranties, was made in error. This ground of appeal succeeds. The result must be that the owners corporation is unable to maintain its claim and the orders made below must be set aside, and the application dismissed.

Mixed question of fact and law

Whether the provision of s18E(1)(e) was correctly applied is a question of law. The determination as to when the awareness of the owners corporation objectively ascertained had been formed is a question of fact or mixed law and fact, and the appellant requires leave to appeal.
Whilst the line between a ground raising an error of law alone and one reliant upon mixed questions of fact and law can be blurred, the grounds advanced by the appellant are, in our view, more properly characterised as raising questions of both fact and law. To that extent, leave is required to advance them.
Obtaining leave to appeal is a two-stage process. At the first stage the appellant must persuade us that it may have suffered a substantial miscarriage of justice under clause 2 of Schedule 4, because of one or more of the matters referred to in his grounds (a) to (g). Should the builder persuade us that it may have suffered a substantial miscarriage of justice the appellant must then, at the second stage, persuade us that we should exercise our discretion to grant leave to appeal on one or more of those grounds. The principles applicable to the granting of leave were set out in Collins at [65] - [84].
For the reasons above we are satisfied that inconsistent findings at [35] and [37] of the decisions amount to an error of fact, in that the facts correctly applied could not have led the Tribunal to find that s18E had been enlivened. We are therefore satisfied that the builder has suffered a substantial miscarriage of justice in that the builder was prevented from reliance on the six year limitation period as a complete defence to the application.
We are satisfied that the appellant may have suffered a substantial miscarriage of justice because the decision of the Tribunal was against the weight of the evidence and internally inconsistent. In those circumstances we grant leave to appeal and set aside the orders below and in lieu thereof dismiss the application.
The appellant has been successful in its appeal. Our preliminary view is that "costs follow the event" and that the appellant would be entitled to its costs of the appeal on the ordinary basis. Our preliminary view is subject to any other costs application which may be made by the parties.
We have made orders and directions as to costs, accordingly.

Orders

In 2023/00257814 we make the following orders: 1. Leave to appeal is granted. 2. The appeal is allowed. 3. The orders made in HB 20/49739 are set aside, 4. In lieu thereof the Appeal panel orders that application HB 20/49739 be dismissed. 5. Subject to order (6), the respondent is to pay the appellant's costs of the appeal on the ordinary basis, as agreed or assessed. 6. Should any party seek a different costs order, the following directions apply: 1. The applicant for costs (costs applicant) must file and serve an application with its written submissions on that issue (no more than 5 pages), within 14 days of the date of these orders. 2. Upon filing an application in accordance with order 6(a), order 5 will cease to have effect. 3. A costs respondent must file and serve any written submissions in response (no more than 5 pages), within a further 14 days of receipt of the costs applicant's submissions. 4. A costs applicant may file and serve a written submission (no more than 3 pages) in reply within a further 7 days of receipt of the costs respondent's submissions. 5. In any such submissions, the parties are to address whether, pursuant to the provisions of s50(2) of the Civil and Administrative Tribunal Act 2013 NSW, the Appeal Panel should dispense with a hearing on the issue of the costs of the appeal, so that the issue is decided on the papers lodged with Appeal Panel and with appearances of the parties not required.

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: 20 June 2024

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