RBV Builders Pty Ltd v Chedra

RBV Builders Pty Ltd v Chedra - [2021] NSWCATAP 56 - NSWCATAP 2020 case summary — Zoe

Background

The appellant is a builder (the builder) which carried out residential building work on premises owned by the respondents (owners) at Ashbury, New South Wales.
The parties entered into a contract on 30 November 2016 for alterations and additions to an existing dwelling on the land involving, among other things, the construction of a basement storage area.
From March 2017, after the builder had constructed the floor, walls and roof of the basement, the parties fell into dispute, in particular in relation to water penetration into the basement.
The owners commenced proceedings in the Tribunal seeking the cost of rectification of defective work, costs incurred in investigating defective work and the cost of completing incomplete work.
The owners did not press their claim for the cost of completion of incomplete work at the final hearing.
By their final written submissions before the Tribunal the owners indicated that they would consent to a work order under the Home Building Act 1989 (HBA) for the rectification of defective work.
By its decision (the Decision), dated 24 January 2020, the Tribunal ordered that the parties file in the registry of the Tribunal "signed consent work orders based on the work order annexed to RBV Builders Pty Ltd's closing submissions dated 29 August 2019" with leave to relist the matter if the parties were unable to finalise the appropriate orders.
The Tribunal also made orders for the parties to file submissions concerning the costs of the proceedings. The parties filed submissions on costs and, by a decision dated 7 April 2020 (the Costs Decision), the Tribunal ordered the builder to pay 80% of the owners' costs as agreed or assessed plus the sum of $34,944.25 in respect of investigation expenses.
The builder filed a Notice of Appeal against the Decision on 21 February 2020 seeking to set aside the work order and sought a stay of that order.
On 12 March 2020 the Appeal Panel stayed "the operation of any final work order that results from the Decision and the assessment or enforcement of any costs order that results from the decision until a determination of the appeal and application for leave to appeal from the decision".
By Notice of Appeal filed on 22 April 2020 the builder appealed against the orders in the Costs Decision that the builder pay the owners 80% of their costs, seeking instead an order that the builder pay only 50% of the owners' costs.
The parties prepared a joint appeal tender bundle consisting of five volumes which included the parties' submissions to the Tribunal at first instance, a transcript of the hearing and relevant parts of the evidence tendered to the Tribunal at first instance. The parties also prepared a supplementary appeal book containing documents relevant to the costs appeal.
Each party filed submissions in chief and the builder filed submissions in reply on both the substantive appeal and in respect of the costs appeal. The owners filed a further outline of submissions in response to the builder's submissions in reply on the substantive appeal.

[4]

The nature of the dispute

The major part of the work carried out by the builder was the excavation of the basement area and the construction of concrete footings and walls for the basement. Those walls were constructed utilising "Dincel", a proprietary product which we understand is a replacement for traditional formwork in the construction of reinforced concrete walls.
The Tribunal set out a number of agreed or uncontroversial facts in paragraphs 16 and 40 to 42 of the Decision as follows: 16 The parties agree that the builder carried out the excavation for the basement and then formed and poured concrete footings in the basement slab, the Dincel basement walls and the concrete ground floor slab above the basement which formed the basement roof. They also agree that during the course of the works referred to, and following an email exchange between the parties and United Consulting Engineers and Fusion regarding the potential use of a waterstop, the builder before pouring concrete installed a CETCO RX 101 waterstop at what would become, following placement of the concrete, the cold joint at the base of the Dincel basement walls. The parties also agree that Fusion inspected the work on three occasions being before each concrete pour as referred to. They agree that Fusion subsequently certified in respect of each of those inspections, that the third concrete pour as referred to, occurred on or about 21 February 2017 and that the builder's work at the property ceased at that time. … 40. First, the builder accepts that there is water ingress into the basement at the base of the Dincel walls. 41. Secondly, the builder accepts that the water ingress is a potential structural issue. 42. Thirdly, the parties have agreed that the builder carried out the excavation for the basement and then formed and poured concrete footings in the basement slab, the Dincel basement walls and the concrete ground floor slab above the basement which formed the basement roof. In other words, the parties agree that it was only the builder, or those for whom it was responsible, that carried out the work that has given rise to these proceedings.
We note that United Consulting Engineers were the firm responsible for the preparation of drainage plans and "Fusion" was RAS Engineers Pty Ltd trading as Fusion Engineering Services, which prepared revised structural engineering plans. Each of those plans formed part of the contract.
Each of the parties had retained an engineer to provide expert evidence. The experts prepared a joint report which included the following "General Opinion": General Opinions 3.1 The Experts agree that there is water ingress into the basement of the recently constructed basement at the property. 3.2 The Experts agree that the water ingress is occurring at the base of the Dincel wall to slab joint that has a potential of affecting the long term stability of the Dincel wall due to potential corrosion of the installed wall vertical reinforcement exposed to a water source. 3.2 The Experts agree that the gap at the base of the Dincel walls allowing water ingress has been caused by the method [of] construction of the Dincel Walls, including the placement of the P-G Guide and the RX-101 water stop at the joint. 3.3 The Experts agree that Dincel walls will be structurally adequate to withstand the applied loads provided the bottom of the Dincel wall to slab joint is repaired as follows: (a) prevent water ingress into the wall reinforcement, and (b) the gap at the base of the wall joint is re-constructed to eliminate the gap with equivalent concrete to the wall.
The builder nevertheless submitted that its installation of the Dincel walls and the waterstop did not involve any breach of the contract or the warranties implied into the contract by s 18B of the HBA, and also, in relation to a number of alleged defects in its construction of the walls, relied upon s 18F of the HBA.
Section 18F of the HBA relevantly provides: 18F Defences (1) In proceedings for a breach of a statutory warranty, it is a defence for the defendant to prove that the deficiencies of which the plaintiff complains arise from - (a) instructions given by the person for whom the work was contracted to be done contrary to the advice of the defendant or person who did the work, being advice given in writing before the work was done, or (b) reasonable reliance by the defendant on instructions given by a person who is a relevant professional acting for the person for whom the work was contracted to be done and who is independent of the defendant, being instructions given in writing before the work was done or confirmed in writing after the work was done. (2) A relevant professional is independent of the defendant if the relevant professional was not engaged by the defendant to provide any service or do any work for the defendant in connection with the residential building work concerned. … (4) In this section, relevant professional means a person who - (a) represents himself or herself to be an architect, registered design practitioner or registered principal design practitioner (within the meaning of the Design and Building Practitioners Act 2020), engineer or surveyor, or (b) represents himself or herself to have expert or specialised qualifications or knowledge in respect of residential building work or any particular aspect of residential building work, or (c) represents himself or herself to be engaged in a profession or to possess a qualification that is recognised by the regulations as qualifying a person as a relevant professional.

[5]

The Decision

The Tribunal held that the owners' engineers and architect were relevant professionals for the purposes of s 18F of the HBA and that they were independent of the builder.
The builder also submitted that all contract drawings whether described as drawings or plans were themselves instructions for the purposes of s 18F. The Tribunal determined that a contract drawing is not an instruction for the purposes of s 18F. The Tribunal held at [69]: "In arriving at this conclusion I have construed an 'instruction' from a relevant professional to be something that occurs after the contract has been signed and something that occurs in the context of performing the work under the contract."
The Tribunal found that the work carried out by the builder was in seven respects carried out in breach of the implied warranty in s 18B(1)(a) of the HBA, that the work will be done with due care and skill and in accordance with the plans and specifications set out in the contract.
The seven respects in which the Tribunal found the builder had breached s 18B(1)(a) were identified, by reference to the Scott Schedule filed in the proceedings, as: 1. Item 2 - "Failure to install Dincel walls with adequate concrete contact to the basement slab". 2. Item 3 - Use of Dincel guides with in-situ cast starter bars. 3. Item 4 - Use of a Dincel profile guide with a waterstop. 4. Item 5 - Use of a waterstop RX-101 with a concrete cover less than 75mm contrary to waterstop manufacturer's technical data sheet. 5. Item 6 - Use of a waterstop RX-101 without two rows of reinforcement, contrary to waterstop manufacturer's technical data sheet. 6. Item 7 - "Failure contrary to technical data sheet for the waterstop RX-101 to scabble to concrete surface to remove loose/flaking concrete". 7. Item 11 - "Failure to install waterproofing to the external side of the Dincel wall in accordance with drawings".
In respect of Items 2, 3, 4 and 11 the Tribunal found the builder had failed to comply with the plans and specifications set out in the contract. In respect of Items 5, 6 and 7 the Tribunal found that the builder failed to carry out the building work with due care and skill.
The Tribunal rejected the defence raised by the builder pursuant to s 18F of the HBA in respect of Items 2 to 6, and made work orders requiring the builder to carry out work to the bottom of the Dincel walls in order to address the defects and prevent water penetration under the walls and into the basement.

[6]

Costs Decision

In their submissions on costs the owners submitted that they were the successful party and should receive their costs. The owners also referred to a number of offers made to the builder in the course of the proceedings and submitted that they should receive their costs on the indemnity basis.
The builder submitted that costs should be apportioned having regard to the parties' relative success on discrete issues. The builder pointed to seven items in the owners' Scott Schedule, three of which were withdrawn or not pressed by the owners and four in respect of which the owners were not successful. One of the items not pressed was the claim for the costs of completion. The builder also relied upon the fact that the owners had shortly before the hearing withdrawn a claim in relation to an option for rectification utilising "Geofoam". The builder submitted it should be liable for no more than 30% of the owners' costs.
In determining that the builder should pay 80% of the owners' costs (excluding the cost of consultants' reports and the costs of investigation) the Tribunal held: 57 The applicants were not successful in connection with item 1 of the scott schedule, on the basis of a s18F defence under the Home Building Act 1989. At [92] of the Principal judgment I commented on the fact that there was a suggestion that this item of the scott schedule had no practical consequence and that a deal of time had been spent in the proceedings agitating this issue, including cross examining witnesses and writing detailed submissions. The owners were also unsuccessful on their ss 18B(1)(e) and (f) cases relating to item 9 of the scott schedule. They were also unsuccessful in connection with scott schedule items 10, 14, 15 and 17. Items 12, 13 and 16 of the scott schedule were not pressed by the owners. Also as referred to earlier, the owners were unsuccessful in their claim for $26,444.52 relating to an increase in the costs to be incurred in completing the building works. This was a claim that did not take up time at the hearing but was dealt with in some detail in the applicants' written submissions. 58 In making an order that requires the respondent to pay a proportion of the applicant's costs I have had regard to the fact that the applicants' claim regarding the water penetration into the basement of their premises was brought on a broad basis, with numerous, but different, elements of the claim, each of which was capable of securing success for the applicants. While this might have been a prudent way for the applicants to proceed, it was not with the benefit of hindsight the most efficient way of proceeding. Item 1 of the scott schedule is an example of such an approach. I made comments about that at [92] and [93] of the Principal judgment. Similarly the applicants' ss 18B(e) and (f) cases relating to item 9 of the scott schedule appeared to me to have been pressed for abundant precaution, rather than because a compellingly clear case could be made out. In addition the applicants' claim for the increased costs of completing the works struck me as being somewhat speculative. Some items of the scott schedule were abandoned. The respondent was no doubt put to cost in meeting those scott schedule items that were abandoned or unsuccessful and in preparing submissions on the increased cost of construction claim. 59 Despite the success that the respondent obtained on some of what might be described as the applicants' secondary claims, I cannot find any basis for the applicants recovery of costs to be limited to 30% of their costs incurred. I have found that the applicants succeeded on the dominant issue which accounted for far more than 30% of the time taken in the proceedings. There is also the fact which I find should be taken into account as I referred to at [70] of the Principal judgment, that the respondent sought in some respects to distance itself from what had been agreed between the experts in their joint report. Item 2 of the scott schedule is an example of that as I observed at [102] of the Principal judgment.
The Tribunal dealt separately with the costs of expert reports, identified as "consultants' reports and the cost of investigation". The Tribunal determined that the owners should not recover the cost of two items, being leak testing and concrete scanning services, which had been claimed by the owners, but that the owners should recover the balance of the amount claimed in this regard being the sum of $34,944.25.

[7]

The Scope and Nature of Internal Appeals

By virtue of s 80(2) of the NCAT Act, internal appeals from decisions of the Tribunal may be made as of right on a question of law, and otherwise with leave of the Appeal Panel.
In Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 the Appeal Panel set out at [13] a non-exclusive list of questions of law: 1. Whether there has been a failure to provide proper reasons; 2. Whether the Tribunal identified the wrong issue or asked the wrong question; 3. Whether a wrong principle of law had been applied; 4. Whether there was a failure to afford procedural fairness; 5. Whether the Tribunal failed to take into account relevant (i.e., mandatory) considerations; 6. Whether the Tribunal took into account an irrelevant consideration; 7. Whether there was no evidence to support a finding of fact; and 8. Whether the decision is so unreasonable that no reasonable decision-maker would make it.
The circumstances in which the Appeal Panel may grant leave to appeal from decisions made in the Consumer and Commercial Division are limited to those set out in cl 12(1) of Schedule 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 because: 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, the Appeal Panel stated 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 Consumer and Commercial Division has satisfied the requirements of cl 12(1) of Schedule 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 v Urban, the Appeal Panel stated at [84] 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.
It is convenient to deal with the appeal against the Decision before we consider the appeal against the Costs Decision.

[17]

Construction of the contract

The builder submitted that the Tribunal erred in "holding that the note on the structural drawings to build the Dincel walls 'to manufacturer's specification' required [the builder] to construct the Dincel walls in accordance with the recommendation in the Dincel Construction Manual and without regard to any other specification from Dincel".
The builder submitted that the term "specification" could mean "the act of specifying" or could have the technical meaning of "a statement of particulars; a detailed description setting forth the dimensions, materials, etc for a proposed building engineering work, or the like". The builder submitted that the Tribunal had applied the latter meaning to the exclusion of the former, and that there was no reason to do so.
The builder submitted that "to manufacturer's specification" "should not be taken as referring only to, rather than merely including, the Dincel Construction Manual".
The owners submitted that the builder's submissions did not raise a question of law.
We agree. The interpretation of a contract is a question of law. However, the question, what constituted the "manufacturer's specification", was a question of fact. The Tribunal determined that the manufacturer's specification included the Dincel Construction Manual, but not any oral or "site specific instructions" that may have been given to the builder.
In any event, we consider that the Tribunal's identification of the "manufacturer's specification" was correct. The alternative conclusion, for which the builder contended, would have left the meaning of the contract uncertain and open to dispute. The contract did not require the construction of the Dincel walls to be carried out "under the supervision of the manufacturer". Rather it referred to the "manufacturer's specification". Oral instructions from an employee of the manufacturer, the content and meaning of which would be inherently contestable, do not fit easily within the term "manufacturer's specification".
In our view the Tribunal made no error of law in concluding that the contract required the Dincel walls to be constructed in accordance with the Dincel Construction Manual, which did not incorporate oral instructions provided by representatives of Dincel, nor was that conclusion not fair and equitable or against the weight of evidence.

[18]

The Tribunal's construction or application of section 18F of the HBA

The builder submitted that the Tribunal had erred in finding that the note on the contractual drawings that the construction was to be to 'manufacturer's specification' was not a written instruction for the purposes of s 18F of the HBA.
The Tribunal dealt with this issue at [62]-[69]. At [64] the Tribunal stated: 64. One difficulty with this submission is that the word 'instruction' does not by its plain meaning indicate a contractual requirement. In my view the word instruction in context of s 18F of the Act means an instruction given in the course of the building work being carried out.
The Tribunal then referred to clause 2 of the contract, which incorporated the term set out in clause 2 of schedule 2 to the HBA, which provides: 2 Quality of construction (1) All work done under this contract will comply with - (a) the Building Code of Australia (to the extent required under the Environmental Planning and Assessment Act 1979, including any regulation or other instrument made under that Act), and (b) all other relevant codes, standards and specifications that the work is required to comply with under any law, and (c) the conditions of any relevant development consent or complying development certificate. (2) Despite subclause (1), this contract may limit the liability of the contractor for a failure to comply with subclause (1) if the failure relates solely to - (a) a design or specification prepared by or on behalf of the owner (but not by or on behalf of the contractor), or (b) a design or specification required by the owner, if the contractor has advised the owner in writing that the design or specification contravenes subclause (1).
The Tribunal noted that the builder could have, had it chosen to do so, limited its liability for a failure to comply with clause 2(1) relating to a design or specification prepared by or on behalf of the owners.
The Tribunal had previously referred to the Appeal Panel decision in Catapult Constructions Pty Ltd v Denison [2018] NSWCATAP 158 at [26]: 26 The interface between the responsibility of design consultants and the obligations of builders in the course of construction work is illustrated by the later introduced "defences" under section 18F of the Act. What is clear is that for a defence to succeed there must be, prior to carrying out the work, an enquiry by the builder as to the adequacy of the design and a written instruction to proceed from the consultant. This approach reflects the approach of the common law in relation to negligent design and obligations upon builders to warn if what is proposed is questionable or unbuildable. There was no evidence before the Tribunal of any such approach by the Appellant before proceeding with the particular work.
The Tribunal noted, correctly in our view,that that passage is not an exhaustive statement of the elements of the s 18F defence but rather "one, albeit wide ranging, instance what facts would constitute a section 18F defence".
The Tribunal held, at [68] and [69]: 68. In my view a contract drawing is not an instruction for the purposes of s 18F of the Act. If that were to be the case it would give rise to what I consider to be a difficult situation, namely that in discharging its contractual obligation to comply with the contract plans, a builder is given a defence to an action by the owner for breach of a statutory warranty because it complied with a contract drawing. As I have pointed out, the Act and the contract gave the builder an option to deal with that scenario, namely a clause articulating the limitation of liability referred to in clause 2.2(a). 69. In arriving at this conclusion I have construed an "instruction" from a relevant professional to be something that occurs after the contract has been signed and something that occurs in context of performing the work under the contract. In that context, what was stated in Catapult Constructions Pty Ltd v Denison provides the appropriate example. I have stated that I agree with what has been said in Catapult. The rationale for the s18F defence is clear in that the builder is not to be liable for doing what it has been instructed to do, as stated in the second sentence of the second reading speech referred to by the builder at [56] of its submissions. The defence relieves the builder of 'second guessing' the expertise of construction professionals whose training and education may be more detailed and concentrated that the builder's in their chosen field. In addition there may be circumstances in which a builder is contractually obliged to follow the instruction of a relevant professional who is the contract administrator.
The builder submitted (at paragraph [39(c)] of its submissions in chief): Contrary to Decision [68], such a construction of s 18F(1) does not give rise to difficulties. A builder who complies with contract plans will not in any event breach the s 18B(1)(a) warranty for the work to be done 'in accordance with the plans and specifications set out in the contract' (regardless of any application of s 18F(1)), however in those circumstances compliance with instructions in the contract plans would be capable of engaging s 18F(1) as a defence to the other statutory warranties. In the absence of s 18F(1) being capable of operating in that manner, the independent operation of each of the statutory warranties is capable of giving rise to harsh outcomes for builders who following instructions in contract plans that are outside of their expertise and that result, for example, in works that are not compliant with the Building Code of Australia in respect of a structural aspect of those works.
The owners submitted: 30. The construction of s 18F(1)(b) for which the appellant contends … suffers from various difficulties. 31. First, it renders s 18F(1)(b) otiose. On the appellant's construction, a builder may invoke s 18F(1)(b) where it has complied with a contractual plan or drawing. Yet compliance with a contractual plan or drawing would result in compliance with s 18B(1)(a). The matter would end there and no question as to whether the defence if s 18F(1)(b) had been established would ever arise. In other words, making out the defence will result in no breach of s 18B(1)(a). That is an unworkable result. It can be avoided by rejection of the construction for which the appellant contends, which also contravenes the well-established principle of statutory interpretation that all words must be given some meaning and effect and surplusage must be avoided. 32. Secondly, the Parliament has chosen to employ different language in s 18B(1)(a) with that in s18F(1)(b). Sections 18B and 18F were enacted by cl 7 of Sch 1 to the 1996 Amendment Act. Each was amended by cll 25-26 and cl 30 respectively, of Sch 1 to the Home Building Amendment Act 2014 (NSW). The current 18F(1)(b) was inserted by that Act. Had the Parliament intended for contractual plans and specifications to engage the defence in s 18F(1)(b), the same form of words as that which appears in s 18B(1)(a) could have been, but was not, utilised. The use of different language indicates that the Parliament had intended the field of operation of s 18F(1)(b) to be different from that of s 18B(1)(a). 33. Thirdly, as the Tribunal correctly concluded at [65]-[68], the context of s 18F(1)(b) - relevantly, cl 2 of Sch 2 to the HBA (which operated by force of s 7E and which was accommodated by the terms of the contract) - supported the construction of that provision for which the respondents contended. 34. Fourthly, the Minister's Second Reading Speech to the Home Building Amendment Bill 2014 (NSW), to which the appellant refers …, says nothing as to the interplay between ss 18B(1)(a) and 18F(1)(b). It does not assist. In any event, the extrinsic material to the Bill does not control the meaning of the section.
We tend to the view that the Tribunal was correct in concluding that contract drawings are not an instruction for the purposes of s 18F(1)(b) of the HBA. The provisions of clause 2 of schedule 2 would have no work to do if a builder could rely upon s 18F(1) in defence of a claim that its work fails to comply with the Building Code or a development consent simply because the relevant work complies with the contract drawings. Clause 2 requires that the contract make provision to that effect, which implies that that result is not intended to be automatic. However, it is not necessary to determine that question in order to resolve this appeal.
The builder's case relying upon s 18F, insofar as it concerns compliance with the direction in the contract drawings to construct "in accordance with manufacturer's specification", is dependent upon a conclusion that the reference to "manufacturer's specification" in the contract drawings included any "site-specific instructions" provided by the manufacturer.
We have concluded that the Tribunal was correct in concluding that the requirement to comply with the manufacturer's specification required compliance with the Dincel Construction Manual and was not affected by subsequent site-specific oral instructions from a representative of the manufacturer. On that basis the Tribunal concluded (we consider correctly) that the builder did not comply with the written instruction on the contractual drawings. Accordingly, even were the builder correct in submitting that the instruction on the contract drawing constituted an instruction for the purposes of s 18F(1)(b), that would not be sufficient for the builder's appeal to succeed.

[19]

Failure to give reasons

As we have noted above, Ground A1 in the builder's amended grounds of appeal, was included out of abundant caution in response to a submission from the respondent that the Tribunal had determined at paragraphs [43]-[46] that the builder was in breach of the statutory warranties by reason of the conclusions of the experts in their joint report.
It is clear in our view that the Tribunal did not draw the conclusion that the builder was in breach of the statutory warranties by reason of the conclusions in the joint expert report, which we have set out at [17] above.
It is clear from the way in which the Decision is structured that, having set out the experts' conclusions from their joint report, the Tribunal considered separately whether each of the items in the Scott Schedule involved a breach of the statutory warranties.
Accordingly it is not necessary to consider Ground A1, as it does not challenge any finding which the Tribunal actually made.
The other respects in which the builder asserts the Tribunal made an error of law in failing to give adequate reasons involved the conclusion that the defects identified in Items 6 and 11 of the Scott Schedule were causative of the water penetration into the basement.
The builder also submitted that the Tribunal failed to consider the builder's submissions that Items 5 and 7 in the Scott Schedule were not causative of the water ingress.
The owners submitted that these issues involved a question of fact and did not involve an error of law and further submitted that the builder's submissions "wrongly assume" that the defects were limited to water ingress. The owners referred to the experts' conclusion set out at paragraph 3.0 in the joint report that "a consensus was developed with respect to many of the items within the Scott Schedule together with an additional remedial solution which addressed the primary structural concerns of the Experts".
We accept that the Tribunal did not make specific findings concerning whether Items 5, 6, 7 and 11 in the Scott Schedule were the cause of the ingress of water. However, the Tribunal was not called upon to do so. The experts had propounded a solution to the defects they agreed existed in the construction of the basement. That solution did not involve the reconstruction of any particular items of defective work, but rather a global solution to overcome the issues raised.
The builder does not submit that Items 2, 3 and 4, involving the failure to install the Dincel walls with adequate concrete contact to the basement slab, the use of Dincel guides with in-situ cast starter bars, and the use of the Dincel profile guide with a waterstop, were not causative of the water ingress.
Unless the builder succeeded in establishing that Items 2, 3 and 4 did not involve breaches of statutory warranty, it could not resist the making of orders requiring it to undertake the rectification work which the experts had devised, and which was the subject of the work orders made by the Tribunal.
Whether or not Items 5, 6, 7 and 11 were causative of water ingress, the Tribunal concluded that each of those items involved a breach of statutory warranty. A failure to consider whether those particular breaches of statutory warranty were causative of water ingress did not mean that those defects did not exist.
The manner in which the Tribunal approached the issue of remedies was largely governed by the experts' and parties' approach to the issue, which was that, rather than undertaking wholesale demolition and reconstruction of walls, an indirect solution, directed to overcoming the issue of water ingress and the consequential risk of corrosion of the vertical reinforcing, should be adopted.
We do not find any error of law in the Tribunal's approach to the question of causation in relation to Items 5, 6, 7 and 11.
Nor are we persuaded that the Tribunal's decision was against the weight of evidence or not fair and equitable.

[20]

Addressing the wrong issue

The builder's submission in relation to this asserted error of law, insofar as it concerned items 2 and 4, was that a reason given by the Tribunal (in paragraph [125] of the Decision) for rejecting the defence under s 18F(1)(b) was that the experts did not state that the use of a modified P-G profile in itself was a defect.
At paragraph [125] of the Decision the Tribunal stated: 125 At [96] of its submissions the builder submits that the use of modified P-G profiles was in accordance with advice from Dincel. The submission then states that in using the modified P-G profile, the builder was complying with the requirement to build to the manufacturer's specification, as stated on S3, drawn by Fusion. This is put forward as a s 18F defence. I would reject the submission on the basis that the experts do not state that the use of a modified P-G profile in itself was a defect. As I read items 2, and 4 the experts state that the installation of the P-G profile guide and the waterstop was contrary to the Dincel Construction Manual which stated as set out above: 'The use of a P-G guide is not recommended where waterstops are used for waterproofing purposes'.
It is clear in our view that the Tribunal correctly stated the builder's submission at paragraph [96] of its closing submissions, and correctly noted that the submission did not accurately reflect the evidence of the experts. What the Tribunal rejected was the builder's submission which relied upon an inaccurate statement of the evidence. The builder's submissions on the appeal proceed on an erroneous interpretation of the Tribunal's decision. The Tribunal did not address the wrong question and the conclusion at paragraph [125] did not involve an error of law.
The builder's submissions to the effect that the Tribunal had addressed the wrong issue in relation to Item 3 merely repeated the submission that the builder was entitled to rely upon site-specific advice from a Dincel representative in utilising the Dincel profile guide with the in-situ cast starter bars. For the reasons addressed above, there was no error of law involved in the Tribunal's rejection of that argument.
In respect of item 7, the inadequate preparation of the concrete surface prior to application of the waterstop, the builder submitted that the expert evidence referred to in the Decision at [135] "was concerned with the preparation of the concrete surface for the purpose of laying further concrete, rather than for the purpose of the application of the waterstop".
At paragraphs [133]-[136] of the Decision the Tribunal held: 133. The experts agree that the failure to scabble the concrete surface to remove loose flaking concrete or laitance is contrary to the CETCO Technical Data sheet for the waterstop RX-101 and there has been a failure to clean and remove all the dirt and other construction debris prior to application of the water stop. 134. The experts have not directly expressed an opinion whether a builder would be proceeding with due care and skill if it failed to scabble the concrete surface to remove loose flaking concrete or laitance contrary to a suppliers Technical Data sheet. 135. The evidence of the experts at T41 and 42 is that scabbling or roughening the concrete is a normal and basic requirement that they would expect a person operating in the building industry and involved in the construction of concrete walls to be familiar with. I find that this evidence supports a finding that the builder failed to carry out building work with due care and skill. 136. I would also infer from the very nature of the experts agreement that the failure to scabble the concrete surface with a failure to clean and remove all the dirt and other construction debris prior to application of the water stop falls within the category of a failure to carry out building work with due care and skill.
The discussion in paragraph [135] is clearly addressing the relevant question, which is whether the failure to scabble the concrete was a failure to carry out work with due care and skill. That question came to be addressed in circumstances where the experts had not directly dealt with the question whether the failure to scabble the concrete contrary to the CETCO Technical Data Sheet for the waterstop RX-101 was itself sufficient to establish that the builder had failed to proceed with due care and skill. The Tribunal reached the conclusion on the available evidence that the failure to scabble the concrete was a failure to proceed with due care and skill.
It is clear from paragraphs [133]-[136] that the Tribunal did not misunderstand the experts' evidence. In our view, the builder's submissions proceed on an erroneous understanding of paragraphs [135] and [136] of the Decision.
We find no error of law in the conclusion reached in those paragraphs, nor are they against the weight of evidence or not fair and equitable.

[21]

Failure to deal with an argument

To the extent the builder's grounds of appeal alleged that the Tribunal failed to deal with an argument in relation to the causal effect of Items 6, 7 and 11, that issue has already been addressed under the heading "Failure to give reasons". For the reasons there set out, these grounds of appeal cannot succeed.
The remaining basis upon which the builder asserts the Tribunal failed to deal with an argument related to the proposition that the Tribunal proceeded, in relation to Item 5 of the Scott Schedule, on the assumption that there was concrete cover of less than 75mm, that that in itself was a defect, and that it was causal of water ingress, without considering all the evidence or making any findings. The builder submitted that the evidence suggested that there was at least 90mm of concrete cover around the waterstop for the purpose of controlling the expansion of the waterstop.
To the extent the builder's submissions rely upon the Tribunal's asserted failure to consider the question of causation, that issue has been addressed above.
In support of its submission that there was evidence that there was at least 90mm of concrete on either side of the waterstop, the builder relied upon three sections of the transcript of the concurrent evidence of the experts, in which Mr Joannides (the expert called by the builder) gave evidence that "the waterstop still is placed a minimum of 90mm from the inside face of the concrete" (AB 1044 line 43), that "you have 90mm of concrete from the edge of the waterstop to the outside face of the concrete wall" (AB 1046 line 42), and that "the waterstop, if installed correctly, would have prevented the water going through" (AB 1175 line 28).
The builder submitted that the Tribunal had not considered that evidence in finding that the builder had failed to proceed with due care and skill when it used the waterstop RX-101 by CETCO with concrete cover less than 75mm.
The owners referred to the experts' joint report which recorded, in relation to Item 5, "Experts agree that the use of the waterstop RX-101 by CETCO with a concrete cover less than 75mm, which is contrary to the manufacturer's [CETCO] Technical Data Sheet", and recorded "Nil" in a column headed "Experts' differences, where Experts disagree". The owners submitted that the evidence referred to by the builder was "an attempt by the [builder's] expert to resile from that agreement during the trial".
The owners noted that the Tribunal had addressed the issue of "the builder seeking to resile from the agreement of the experts". The Tribunal set out in the Decision (at [71]) an extract from the transcript in which Mr Moorhouse had raised the proposition that Mr Joannides' agreement in relation to defects was agreement as to the factual basis of the defects and it was not "intended to represent any causal conclusion as to the water ingress or any conclusion as to a breach of the statutory warranties". The Tribunal had commented in response to Mr Moorhouse' statement: "I am most disinclined to have experts retreat from signed joint expert reports, to qualify it or, to use layman's language, to try and wriggle out of it one way or another" and "it's not my practice or inclination … to allow experts to resile from what they have written and from what they have freely agreed in a joint report with their engineering colleague". The transcript discloses that the Tribunal recorded that it would hear from Mr Moorhouse "in connection with anything you might wish your expert to deal with in relation to this joint report". In paragraph [72] of the Decision the Tribunal determined: 72 The Joint Expert Report was dated 1 March 2019. I regard the experts agreements, statements and conclusions in that report and in the Scott Schedule contained therein to be the most recent expression of their opinion on the subjects dealt with in that document. In particular I regard such agreements, statements and conclusions to supersede anything to the contrary to the reports referred to in paragraphs 2.3 and 2.4 of Joint Expert Report for the reasons stated in the extract above.
At [112]-[116] the Tribunal determined: 112 The experts agreed that the use of the water stop RX-101 by CETCO with a concrete cover less than 75mm was contrary to the waterstop manufacturer's (CETCO) technical data sheet. 113 The experts have not directly expressed an opinion whether a builder would be proceeding with due care and skill if it used a product contrary to the manufacturer's or suppliers technical data sheet. 114. The builder's evidence offers various reasons why it did not refer to the CETCO technical data sheet. However the fact is that it did not. 115. If there was uncertainty or confusion about the applicable technical data sheet, the experts have stated that the best course to adopt was for the builder to seek the engineer's direction or instruction. The builder did not take that action. 116. Having regard to all of the evidence in connection with this issue, I infer that the builder did not proceed with due care and skill when it used the water stop RX-101 by CETCO with concrete cover less than 75mm contrary to the waterstop manufacturer's (CETCO) technical data sheet. It follows from this finding that the builder breached s 18B(1)(a) of the Act and clause 9(a) of the contract in connection with this item of the scott schedule in the Joint Expert Report.
We are not persuaded that the Tribunal made an error of law in reaching its conclusion that the builder did not proceed with due care and skill when it used the waterstop RX-101.
The Tribunal recorded at [116] that it had had regard to all the evidence in connection with the issue. The Tribunal is not required to refer to every piece of evidence in reaching a conclusion: Mitchell v Cullingral Pty Ltd [2012] NSWCA 389 at [2]; Meacham v Commissioner of Police [2020] NSWCATAP 107 at [31]-[35]; Kimberley Developments Pty Ltd v Cicihour Pty Ltd [2020] NSWCATAP 213 at [47]. In our view, having regard to the conclusion in the joint experts report, the Tribunal was not required to give this issue further consideration than was expressed in paragraphs [112]-[116] as set out above.
In any event we note that, for the reasons set out above, the Tribunal's conclusion concerning Item 5 was not essential to the making of the Tribunal's final orders.

[22]

Irrelevant considerations

The builder's submission in relation to the ground asserting that the Tribunal had relied upon irrelevant considerations was that the Tribunal relied upon the agreed fact that the "interface between the bottom of the Dincel walls and the basement slab was not watertight", in determining that the contract drawings required a waterproof membrane to the external side of the Dincel walls.
At paragraph [210] of the Decision the Tribunal referred to the experts' agreement that the interface between the bottom of the Dincel wall and the basement slab was not watertight. The Tribunal inferred from that agreed fact that the builder did not waterproof the external side of the Dincel wall and in particular the wall/footing junction.
The Tribunal did not infer, from the fact that the interface between the wall and the basement slab was not watertight, that the drawings required a waterproof membrane. Rather the Tribunal determined that a waterproof membrane was required and inferred from the fact of water penetration that the waterproof membrane had not been installed. Clearly in our view, the builder's ground of appeal asserting that the Tribunal had relied upon irrelevant considerations is founded upon a misunderstanding of the Tribunal's Decision, and the ground must fail.
In seeking leave to appeal in relation to the Tribunal's finding concerning Item 11, the builder also submitted that the Tribunal had erred in concluding that the drawings required the installation of a waterproofing membrane on the outside of the Dincel walls.
The Tribunal drew that conclusion from the existence of a dotted line on the relevant drawings. That was a finding of fact and we are not persuaded that it was against the weight of evidence or not fair and equitable.
The builder further submitted that the drawings had been prepared at a time when the basement walls were intended to be blockwork walls, and that the drawings had not been amended when the decision was made to use Dincel walls instead of blockwork.
The Tribunal noted that it was not appropriate to have regard to "drawings or correspondence which pre-dated the contract and which are not referred to in the contract or agreed by the parties to be contract drawings or documents, unless it is necessary to have regard to such drawings or documents because of some ambiguity". The Tribunal concluded that the existence of the dotted line "indicated waterproofing of some type was required" and that no waterproofing had been installed.
We are not persuaded that this conclusion was against the weight of evidence or not fair and equitable. The builder was required to build in accordance with the plans and specifications and the drawings indicated that waterproofing was required. Hence, in failing to instal waterproofing, the builder failed to comply with the plans and specifications.
We have rejected each of the builder's grounds of appeal and grounds for leave to appeal. Accordingly leave to appeal against the Decision will be refused and the substantive appeal must be dismissed.

[25]

Grounds 1, 2 and 4

The builder's submissions effectively addressed together each of the first, second and fourth grounds of appeal raised by the builder in its Notice of Appeal against the Costs Decision.
It is appropriate to consider them together.
The builder submitted that, from the commencement of the proceedings, the owners had sought compensation for rectification costs relating to water ingress at the base of the Dincel walls, miscellaneous alleged defects, and the amount by which the reasonable costs of completing the works exceeded the remaining amount due under the building contract.
The latter claim, which was based upon the owners' contention that they had validly terminated the contract so as to enliven an entitlement to completion costs set out in clause 25 of the contract, was referred to by the builder as the "clause 25 claim".
The builder submitted that, in the Scott Schedule served in November 2018 (that is seven months before the hearing in June 2019), the owners had claimed amounts varying from $111,000 to $445,000 for completion costs.
The builder's submissions recorded that the owners only abandoned the clause 25 claim in their outline submissions served three business days prior the commencement of the final hearing and at that time also abandoned some miscellaneous defects.
At that time the owners also gave notice of a new claim based on the increasing building costs since the builder had ceased work on the property. That claim is referred to by the builder as the "inflation costs claim".
The builder submitted that, in the critical part of the costs decision, that is paragraphs [57]-[59] which we have set out above at [28], the Tribunal did not make any reference to the abandonment of the clause 25 claim, the costs wasted by the parties in relation to that issue, or to what the builder asserted was the fact that, in the absence of apportionment, the builder was "entitled to be indemnified for its costs incurred in defending the clause 25 claim".
The builder submitted that, in failing to make reference to the abandoned clause 25 claim or the proposition that the builder was entitled to its costs of the clause 25 claim, the Tribunal made an error of law.
The builder submitted that the clause 25 claim was "wholly discrete from the water ingress issue". The builder relied on authorities which it submitted required that the owners' abandonment of the clause 25 claim shortly before the final hearing entitled the builder to be awarded its costs incurred in defending that claim. Those cases were Norris v Routley [2016] NSWSC 147 at [18]-[20]; Haviv Holdings Pty Ltd v Howards Storage World Pty Ltd (No 2) [2009] FCA 652 at [35]; and Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (No 3) [2007] FCAFC 11 at [11].
The owners submitted that the Tribunal did not fail to take into account the fact that the owners had abandoned the clause 25 claim. The owners noted that the Tribunal had made reference to the abandoned claim in the Costs Decision, both in observing that the owners were "not successful in all issues raised by them in the proceedings" (paragraph [26] of the Costs Decision), and in referring to the items in the Scott Schedule withdrawn either at the hearing or shortly before. The owners submitted that the items withdrawn, to which the Tribunal referred, included the clause 25 claim, which had been incorporated within the Scott Schedule.
The owners also referred to the judgment of the Full Federal Court in Applicant WAEE v Minister for Immigration and Multicultural and Indigenous Affairs (2003) 236 FCR 593 at 604, [47]. "The inference that the Tribunal has failed to consider an issue … is an inference not too readily to be drawn where the reasons are otherwise comprehensive and the issue has at least been identified at some point."
The owners submitted that the Tribunal had recorded and had regard to the builder's submissions in relation to the costs of the clause 25 claim. The owners identified eight paragraphs in the Costs Decision where the Tribunal had referred to the builder's submissions concerning the clause 25 claim.
The builder's submissions asserted that the parties had put on substantial evidence in relation to the issue of when and by whom the contract had been terminated. The builder submitted that the owners had filed and served "four detailed completion quotes", and that it had replied by means of its director giving evidence in response to the quotes, "highlighting the differences between the work set out in these quotes and the work the respondent had contracted to complete", and also "by obtaining the expert report of a quantity surveyor as to completion costs".
The builder also submitted that it had devoted a substantial part of its opening outline of submissions to the clause 25 issue.
The builder did not seek to quantify the proportion of its costs which it had incurred in relation to the clause 25 claim, although the builder had submitted that, by reason of the relative success of the parties on the various issues, the builder should only be ordered to pay 30% of the owners' costs. The Tribunal explicitly rejected that figure as being inappropriate.
The owners submitted that the clause 25 claim did not occupy significant time and noted that the expert report from a quantity surveyor obtained by the builder, and the other evidence relevant to the clause 25 claim referred to by the builder in its submissions, were short and that there was no basis to conclude that their preparation would have involved substantial costs.

[26]

Consideration - Grounds 1, 2 and 4

We are not persuaded that the Tribunal failed to have regard to the builder's abandonment of the clause 25 claim in reaching its decision regarding the allocation of costs. As the owners submitted, the Tribunal referred to the owners' abandonment of the clause 25 claim and the builder's submissions concerning the significance of that abandonment at a number of points in the Costs Decision.
The fact that the Tribunal did not specifically refer to the abandonment of the clause 25 claim in paragraphs [57] to [59] of the costs decision does not establish that the Tribunal failed to take that matter into account.
We do not accept the proposition, put forward by the builder as a "fact", that, in the absence of an apportionment, the builder would have been entitled to its costs on the abandoned clause 25 claim.
In the decisions cited by the builder: Norris v Routley, Haviv Holdings Pty Ltd v Howards Storage World (No 2 ) and Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (No 3), Courts did make orders awarding costs to an unsuccessful party in respect of separate issues which an otherwise successful party had abandoned shortly before or in the course of a hearing. However, those cases do not set out any general rule. It cannot, in our view, be said that, in the absence of an award of a proportion of the owners' costs, the builder would necessarily have been entitled to recover its costs of the clause 25 claim. That issue was a matter for the discretion of the Tribunal as much as the allocation of costs generally.
In this regard, as Dal Pont notes in Law of Costs, 4th ed 2018 at [8.5], an allocation of costs by reference to issues has "an air of potential artificiality" and, as Dal Pont states: "The more usual approach, described as 'a pragmatic approach', is to order a proportion of costs in favour of one of the parties (or if the court finds the issues are evenly balanced, make no order as to costs). Although imprecise, an intelligently made apportionment of costs may generate an outcome no less fair than an issue-by-issue approach".
Having recognised that the owners had failed on some issues and not pressed other issues, the Tribunal determined that it was appropriate that the builder pay the owners 80% of their costs. It cannot be said that that conclusion was inherently wrong.
We are not persuaded that the Tribunal failed to take account of the parties' relative success on all issues, including the clause 25 claim. Nor are we persuaded that the 80% awarded by the Tribunal was so disproportionate to the parties' relative success in the proceedings, including the clause 25 claim, that it could be seen either to involve an error of law of the type described in the last two sentences of the extract from House v The King which we have set out above, that is that the decision was unreasonable or plainly unjust.
Grounds 1, 2 and 4 must be rejected.

[29]

Costs of the Appeals

It does not appear to be in dispute that the value of the work order the subject of the appeal exceeded $30,000. We note that the parties acknowledged in their submissions to the Tribunal on the question of costs that Rule 38 of the Civil and Administrative Tribunal Rules 2014 (NSW) was applicable to the costs of the proceedings at first instance.
As the substantive appeal challenged the entirety of the work order, the amount in dispute in the substantive appeal also exceeded $30,000. Accordingly, by reason of Rule 38A of the Rules, the Appeal Panel need not find that there are special circumstances before making an order for costs of the substantive appeal.
The substantive appeal has been dismissed and the owners have been entirely successful. We are not aware of any reason why the usual rules should not apply and the builders pay the owners' costs. Unless either party makes an application within 14 days of the date of publication of this decision, the appellant is to pay the respondents' costs of the substantive appeal, that is AP 20/09081.
The parties did not provide any evidence or submission in relation to the question whether the amount claimed or in dispute in the costs appeal exceeded $30,000. Although it would seem likely that the builder's liability for costs under the costs orders made by the Tribunal would substantially exceed $30,000, the builder did not challenge the order that it pay the costs of consultants' reports and the costs of investigation and sought to have the order that it pay 80% of the owners' costs varied to require that it pay 50% of the owners' costs. Thus the amount in dispute in the costs appeal was 30% of the owners' costs as agreed or assessed, excluding the costs of consultants' reports and the cost of investigation. We are not prepared to assume that that amount exceeds $30,000. Special circumstances therefore must be established to warrant an order for costs. There is nothing in the material before us that leads us to conclude that there are special circumstances in this case. Accordingly, unless either party makes application for a different order within 14 days of the date of this decision, there will be no order in relation to the costs of the costs appeal, that is AP 20/108109.
We note that, by the terms of the stay order granted on 12 March 2020, the stay will expire on the publication of this decision. No further order is required in that regard.
Our orders are: In AP 20/09081 1. Leave to appeal refused. 2. Appeal dismissed. 3. Unless either party files written submissions seeking a different order within 14 days of the date of publication of this decision, the appellant is to pay the respondent's costs of the appeal as agreed or assessed. 4. Any application in respect of the costs of the appeal is to be made by written submissions filed and served within 14 days of the date of publication of this decision. Such submissions should address the question whether the application can be dealt with on the papers and without a hearing pursuant to s 50(2) of the Civil and Administrative Tribunal Act. 5. If either party files submissions in accordance with order 4 above the other party may file and serve submissions in response within a further 28 days. Such submissions should address the question whether the application can be dealt with on the papers and without a hearing pursuant to s 50(2) of the Civil and Administrative Tribunal Act.
In AP 20/18109: 1. Leave to appeal refused. 2. Appeal dismissed. 3. Unless either party files written submissions seeking a different order within 14 days of the date of publication of this decision, no order as to costs of the appeal. 4. Any application in respect of the costs of the appeal is to be made by written submissions filed and served within 14 days of the date of publication of this decision. Such submissions should address the question whether the application can be dealt with on the papers and without a hearing pursuant to s 50(2) of the Civil and Administrative Tribunal Act. 5. If either party files submissions in accordance with order 4 above the other party may file and serve submissions in response within a further 14 days. Such submissions should address the question whether the application can be dealt with on the papers and without a hearing pursuant to s 50(2) of the Civil and Administrative Tribunal Act.

At a glance

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Judgment (30 paragraphs)

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Legislation Cited (4)

Cases Cited (11)

Cited By (3)