Stern v C & E Critharis Constructions Pty Limited

B. Issues

1. I earlier outlined the central issue in these proceedings. It is to be understood by reference to the particular issues in this case as follows: 1. First, whether the building works performed by the builder were defective in that the vertical downpipes of the new dwelling were deficiently sized and were not constructed and/or installed in accordance with the minimum requirements in AS3500.3 (First Question); 2. Secondly, if there were defective works: 1. What is the method of rectifying them? (Second Question) 2. What is the cost of rectifying them? (Third Question) 1. Thirdly, if there were defective works: 1. Whether there is contributory negligence on the part of the architects pursuant to s 5S of the Civil Liability Act 2002 (Fourth Question); and/or 2. Whether there is 'apportionable contributory negligence' on the part of the architects pursuant to s 35 of the Civil Liability Act 2002 (Fifth Question); 1. Fourthly, if there were defective works, whether the appropriate remedy for the owners is: 1. Damages (Sixth Question); or 2. An order pursuant to s 48MA of the Home Building Act 1989 (Seventh Question).
2. For completeness, I note that a pleaded allegation that the building works, insofar as they concerned the construction of an outdoor kitchen unit, specifically the cupboard drawers, doors and panel on the front of the bin of the outdoor kitchen unit, had not been constructed from fibre-cement sheeting in accordance with the requirements of the contract, was not pressed at the hearing.

C. Evidence

1. The evidence in this matter comprised the following: 1. For the owners: 1. Affidavit of Raechel Stern sworn 26 March 2021; 2. Exhibit RS-1 to the affidavit of Ms Stern; 3. Affidavit of Raechel Stern sworn 6 April 2021; 4. Expert report of Simon Ingegneri of Forensic Engineering Australia Pty Limited dated 27 March 2021 (Exhibit 1); 1. For the builder: 1. Affidavit of Elia Critharis sworn 29 March 2021; 2. Exhibit EC-1 to the affidavit of Mr Critharis; 3. Expert report of Dr John Cunniffe dated 29 March 2021 (Exhibit A); 4. Expert report of Michael Ell dated 26 March 2021 (Exhibit B).
2. I also note the parties' agreed statement of facts and issues was tendered as Exhibit 2.
3. Neither Ms Stern, nor Mr Critharis, was cross examined. Mr Ingegneri, Dr Cunniffee and Mr Ell were all cross examined. I have commented on their evidence below.

(a) Introduction

1. I will now outline my findings. Before doing so, I will outline the builder's defence to the owners' claim.
2. The builder's defence is as follows: 1. The eave gutters and vertical downpipes were constructed by the builder pursuant to the hydraulic design and specification provided by the architects and hydraulic engineer (being ITM Design) retained by the owners; and 2. The stormwater system was approved and certified by the architects and ITM Design pursuant to the certification provided on 8 June 2016
3. The builder says that if the Court finds that the building works contained defects, the consequences are as follows: 1. If the building works complied with the designs from the architects and ITM Design, the builder pleads contributory negligence of 100% against the architects; 2. If the building works complied with the designs from the architects and ITM Design, but that the builder bears some responsibility for the defective works, the builder pleads apportionable contributory negligence against the architects; and 3. If the building works did not comply with the designs of the architects and ITM Design, the Court should order the builder to carry out rectification works in respect of the defects pursuant to s 48MA of the Home Building Act 1989.
4. In the builder's opening address to the Court, the builder also asserted that the owners' claim was time barred under s 18E of the Home Building Act 1989, because the alleged breach of statutory warranties was not in respect of a major defect, and the breaches occurred more than 2 years after the warranty period ended. The builder, however, did not plead a time bar in its defence. No application was made at the hearing to amend the builder's defence. A time bar defence must be specifically pleaded (see Pt 14.4 of the Uniform Civil Procedure Rules 2005). Accordingly, I have not further considered this issue, and I have only addressed the issues and questions identified above, consistent with the pleaded case.
5. With the above understanding of the background facts, I now turn to answer the 7 questions identified above. In this respect, I have been assisted by the parties' written closing submissions, being those of the owners dated 26 April 2021, those of the builder dated 10 May 2021 and those of the owners, in reply, dated 17 May 2021.
6. At the conclusion of the hearing on 12 April 2021, the parties agreed that the Court determine the owners' claim based on the written submissions and without the need for any further oral hearing. Accordingly, I have addressed the agreed issues, as defined by the parties, based on the closing written submissions.

(b) First Question

1. Were the building works performed by the builder defective in that the vertical downpipes of the new dwelling were deficiently sized and not constructed and/or installed in accordance with the minimum requirements in AS3500.3?
2. I have considered all of the evidence, and the parties' respective submissions, and I am satisfied, for the following reasons, that this question should be answered in the affirmative.
3. I make this finding based on the following: 1. On the builder's own expert evidence, the building work deviated from the hydraulic design because: 1. The slopes of the gutters do not fall to the downpipes as required; 2. The cross-sectional area of the gutter is 18,000mm2 which exceeds the minimum cross section area required by the hydraulic engineer of 9,000m2; and 3. An additional downpipe has been added; 1. Under the contract, the builder agreed that the building works would: 1. Comply with:
4. 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);
5. All other relevant codes, standards and specifications that the work is required to comply with under any law; and
6. The conditions of any relevant development consent or complying development certificates; 1. Be performed in a proper and workmanlike manner and in accordance with the plans and specifications set out in the contract documents; 1. In those circumstances, the builder is not entitled to choose to comply with part of the building contract and not with other parts. The builder has warranted and promised both that the work will be carried out in accordance with the plans and specifications and that it will comply with the law and the other warranties to which I have referred; 2. In the present case, the owners argue a breach of the contract, rather than a breach of the statutory warranties under the Home Building Act 1989, however the express contractual warranties are in identical terms to the Home Building Act 1989 warranties. Accordingly, I consider that the findings in The Owners - Strata Plan No. 66375 v King [2018] NSWCA 170 per Ward JA at [325] and [332] and White JA at [388] - [408] are apposite. That is, the building works must be carried out not only in accordance with the plans and specifications, but also that the works will comply with the law and the other warranties and promises to which I have referred; 3. Mr Ingegneri opines, and I accept, that an insufficient number of downpipes were installed to meet the requirements of AS3500.3 (being the relevant standard specified on the hydraulic services drawings for the works); 4. Dr Cunniffe, in his report and in cross examination, agreed that there were insufficient downpipes, being a breach of the Building Code of Australia; and 5. Mr Ell opines, and I accept, that additional downpipes will need to be added, particularly in the front portion of the house and a new design with additional downpipes needs to be carried out.
7. Accordingly, for these reasons, I answer the First Question in the affirmative, and it necessarily follows that I must therefore answer the remaining questions 2 - 7.

(c) Second Question

1. The defective works include not only the vertical downpipes being deficiently sized and not constructed and/or installed in accordance with the minimum requirements in AS3500.3, but also that the eave gutters of the dwelling were not constructed or installed with sufficient falls as required by AS3500.3. The builder admits this latter defect.
2. For completeness, insofar as concerns the eave gutters: 1. Mr Ingegneri opines that the gutters were not installed with sufficient gradient (as required by AS3500.3) which is causing permanent water ponding and, as a direct consequence, resulted in premature corrosion of the gutters. Mr Ingegneri did not admit in cross examination that he had not examined the guttering to identify if it had corroded more than an equivalent gutter with the correct fall. Rather, Mr Ingegneri admitted that he did not test to see if the guttering had corroded more than what was expected for a property near the ocean. Given Mr Ingegneri's unchallenged opinion that the insufficient gradient of the gutters has caused the corrosion, there was no need for any such test to be conducted; 2. Mr Ingegneri did not admit in cross examination that the current gutter as constructed was sufficient to move the volume of water the site was subject to. Rather, Mr Ingegneri admitted that the gutters had a sufficient cross sectional size to move the volume of water the site was subjected to. Mr Ingegneri's unchallenged opinion is that the deficiency with the gutters is not their cross section size, but rather their insufficient gradient; 3. The fact that there was no evidence of the guttering over-topping is not relevant, as this is not a defective the subject of these proceedings; 4. The unchallenged evidence of the owners was that water appears in the middle of the driveway for days and leaks from the eave gutter at the front of the new dwelling onto the driveway; 5. Dr Cunniffe said in his report and in cross examination that the falls of the installed gutters are insufficient and causing significant ponding, which he witnessed when he inspected the property; and 6. Mr Ell opined that the slopes of the gutters do not fall to the downpipes as required.
3. I am satisfied that, having regard to the above matters, the method of rectifying the defective works is as follows: 1. Remove all of the eave gutters; 2. Replace the eave gutters with new eave gutters with a minimum gradient of 1:500 towards each downpipe and a minimum cross-sectional area of 8,000m2; 3. Provide 6 additional downpipes and connect the same into the existing stormwater system; 4. Remove the 2 redundant downpipes and cap and seal the existing stormwater connections to those downpipes; and 5. Remove and replace facia and/or roof sheeting as required.
4. I make this finding based on the following: 1. These are the recommendations of Mr Ingegneri; 2. Mr Ingegneri was cross examined about the necessary rectification works and did not waiver from the evidence he gave in his expert report; 3. No evidence was proffered in contradiction to Mr Ingegneri's recommendations; 4. Mr Ell opined in his report and agreed in cross examination that Mr Ingeneri's design solution would resolve the problems with the downpipes; and 5. Mr Ell opined in his oral evidence on alternative rectification works but did not identify any proposal in his expert report.
5. Accordingly, the only evidence that provides me with any comfort as to the proper solution to the defective works is that set out in Mr Ingegneri's evidence. It is therefore necessary to determine the next question, being the cost of the rectification works and hence the quantum of damages that should be awarded to the owners.

(d) Third Question

1. I am satisfied that the cost of rectifying the defective works is between $65,296 (including GST) and $72,876 (including GST).
2. This finding is based on the quotations relied on by the owners and which were admitted into evidence without objection. The quotations are based on the methodology set out by Mr Ingegneri and which implement Mr Ingegneri's design solution for the defective works, which I have earlier found is an appropriate and reasonable solution. In circumstances where the quotations were admitted into evidence without objection, they provide evidence of the cost of rectifying the identified defects, and no additional evidence, such as from a quantity surveyor or expert with costing experience or credentials, is necessary to support the quotations.
3. I accept, however, that the evidence demonstrates the potential range of the cost to remedy the building defects. In relative terms, the range is not significant, but it will be necessary to quantify the award of damages to which the owners are entitled. I have provided for the resolution of this issue in my reasons below.
4. The owners have made an additional claim for the cost of investigating the building defects. That claim is for $4,111.25. The owners' unchallenged evidence was that Mr Ingegneri was engaged by the owners to inspect the property and investigate the existence of defects and that they were invoiced for those services. The invoice was tendered into evidence without objection. Accordingly, I am satisfied that this was a reasonable expense and that the builders are liable to reimburse the owners for this cost.
5. I find that the absence of evidence that the invoice was actually paid is not relevant. As I have said, the unchallenged evidence is that the owners were invoiced for the expense. They are therefore liable for the expense, even if the invoice has not yet been paid.

(e) Fourth Question

1. As to whether there is contributory negligence on the part of the architects for the purposes of s 5S of the Civil Liability Act 2002, I make the following findings: 1. In relation to the eave gutters of the dwelling not being constructed and/or installed in accordance with the minimum requirements in Australian Standard AS3500.3, there is no evidence that any act or omission of the architects caused or contributed to the loss and damage suffered by the owners; and 2. Likewise, in relation to the vertical downpipes of the new dwelling being deficiently sized and not constructed and/or installed in accordance with the minimum requirements in AS3500.3, likewise, there is no evidence that any act or omission of the architects caused or contributed to the loss and damage suffered by the owners.
2. I also note, for completeness, the following 3 matters.
3. First, the hydraulic drawings and specifications were prepared by a hydraulic engineer, being ITM Design. This is clear from: 1. The express terms of the contract; 2. The unchallenged evidence of the owners; 3. The lay evidence of the building which refers to and attaches the hydraulic drawings and specifications; 4. The drawings and specifications which appear at appendix C to Mr Ingegneri's report; 5. The drawings and specifications which appear at document D6 of Dr Cunniffe's report; and 6. The express instructions given to both the builder's experts, namely, 'did our client's work on site comply with the hydraulic engineer's original plans?'
4. Secondly, if there is some difficulty which arises from the hydraulic specification, that is not a matter which has anything to do with the architects. The hydraulic specification and drawings were prepared by ITM.
5. Thirdly, even if there was compliance with the hydraulic drawings and specifications, this would not relieve the builder of any responsibility for insufficient downpipes. The builder's failure to comply with AS3500.3 is a breach of the express terms of the contract and the builder is not entitled to choose to comply with part of the contract and not with another part of the contract.
6. Further, I find: 1. The builder's reliance on the decision in Hometeam Constructions Pty Ltd v McCauley [2005] NSWCA 303 is misplaced. The builder is not relieved from any liability for any of the warranties in the contract. The builder is required to comply with all warranties, as the decision in King makes clear; 2. The builder's reliance on the decision in Cable v Hutcherson Bros (1969) 123 CLR 143 is misplaced. In that case, the Court was required to determine whether the relevant builder was subject to a fitness for purpose obligation. That is not the present case. The contract requires that the builder expressly warrant, inter alia, that the works will be fit for purpose; 3. That the terms of settlement between the owners and the architect are not relevant to the determination of the issues in dispute between the owners and the builder. The claim against the architects was in respect of a single defect regarding an outdoor kitchen unit. The defects the subject of the dispute between the owners and the builder were different; and 4. Third-party certification of the stormwater system's compliance with relevant legislation, building codes and the development consent is not evidence as to whether there has been compliance by the builder with the contractual warranties it agreed with the owners.
7. For these reasons, I do not find that there was any contributory negligence on the part of the architects, nor any other basis which absolves the builder from liability for the defective building work.

(f) Fifth Question

1. As to whether there is apportionable contributory negligence on the part of the architects for the purposes of s 35 of the Civil Liability Act 2002, I repeat my answer to the Fourth Question. There is no evidence that any act or omission of the architects caused or contributed to the loss and damage suffered by the owners.
2. Likewise, I repeat in answer to the Fifth Question the additional observations I made in answer to the Fourth Question. I therefore find that there is no apportionable contributory negligence on the part of the architects.

(g) Sixth Question

1. I am satisfied that an award of damages is the appropriate remedy in this case, because, for the reasons set out in answer to the Seventh Question, I find I do not have the power to order the builder to carry out rectification works under s 48MA of the Home Building Act 1989.
2. It follows from my findings above that the appropriate award of damages is the cost necessary to rectify the defective works.

(h) Seventh Question

1. Section 48MA provides: 48MA Rectification of defective work is preferred outcome in proceedings A court or tribunal determining a building claim involving an allegation of defective residential building work or specialist work by a party to the proceedings (the responsible party) is to have regard to the principle that rectification of the defective work by the responsible party is the preferred outcome.
2. In Ippolito v Cesco [2020] NSWSC 561, Ball J described s 48MA as a 'curious provision' (at [65]). The Court went on to say at [75] that: 'At most, s 48MA should be interpreted as requiring the Court to give preference to a remedy of specific performance where one is sought'.
3. This provision, therefore, only mandates that I have 'regard' to the principle that rectification of the defective building works by the builder is the 'preferred' outcome. I have had regard to that principle, in that it may be more efficient and economical that the builder attend on the property and carry out the necessary rectification works, given that the builder carried out the building works and is therefore familiar with the property and any peculiarities of the new dwelling.
4. I consider, however, that I must award damages to the owners, notwithstanding the above-stated principle, because there is no provision in the Home Building Act 1989, the Local Court Act 2007 or any other legislation that gives me the power to order the builder to carry out rectification works, being an order in the nature of specific performance or a mandatory injunction.
5. Further, the owners do not wish for the builder to carry out any such works, and have not made a claim for any order under s 48MA. The owners' claim is only for damages.
6. Accordingly, consistent with Ippolito, I should only make an order for damages in this case.

E. Other remarks

1. In the builder's closing written submissions, the builder argued the following further matters: 1. That the building contract indemnifies the builder and its liability is limited by the owners' early possession; 2. Despite non-compliance with the terms of AS3500.3, the eave gutters meet a 'deemed to satisfy' provision of the National Construction Code; 3. The building contract limits the builder's liability.
2. The owners argue, in their closing written submissions, that these issues: 1. Were not pleaded in the builder's amended defence; 2. Were not identified by the builder in the agreed statement of facts and issues comprised in Exhibit 2; 3. Were not identified by the builder in its opening submissions; 4. Were not identified by the builder's counsel in their opening oral submissions at the hearing; and 5. Have been raised only in the builder's closing submissions, after the conclusion of the hearing.
3. I agree with each of the 5 arguments advanced by the owners in respect of the new matters which the builder has raised in its closing written submissions.
4. The parties are bound by the pleadings and the only issues that the Court could, in fairness, determine, are those which have been identified in the parties' agreed list of issues as comprised in Exhibit 2. The owners declined in their written closing submissions to respond to these new issues and, likewise, I have not addressed those matters in these reasons.

F. Conclusion

1. It follows from the above reasons that the owners have succeeded in their claim. Orders reflecting this outcome will be made.
2. Costs follow the event (see Pt 42.1 of the Uniform Civil Procedure Rules 2005). As the owners have been successful, prima facie the builder should be ordered to pay their costs. The builder, however, seeks to be heard separately on the question of costs, and so I propose to make provision for that opportunity.
3. Subject to my observations below at [59], I will ask the parties to submit Short Minutes of Order to the Court reflecting the above findings, being: 1. Judgment for the Plaintiffs, comprising damages in the sum of either $65,296 or $72,876, plus the sum of $4,111.25; and 2. The First Defendant is ordered to pay the Plaintiffs' costs of the proceedings.
4. Those Short Minutes of Order should also provide for any other outstanding matters, including any claim for interest.
5. I direct the parties to submit the agreed Short Minutes of Order giving effect to these reasons by 4pm on 14 June 2021, by email to the Downing Centre Civil Registry (sydneycivilregistry@justice.nsw.gov.au). If agreement cannot be reached by that time, including because of the matters I have identified above at [31] and/or [56], or if Short Minutes of Order are not received by that time, I will list the proceedings for directions at 9.30am on 17 June 2021 before me. At that time, appropriate directions will be made to deal with any outstanding matters that remain in dispute, including directions for any further evidence and/or submissions. Magistrate Scott Nash Downing Centre Local Court 24 May 2021

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: 19 January 2022