Stevenson v Ashton

The Relevant Legislative Provisions

1. It is convenient, before identifying the issues to be determined, to set out the relevant parts of the further provisions of the Home Building Act which are relevant to these proceedings. Subsequent references to sections are to sections of the Home Building Act unless otherwise stated. 3B Date of completion of residential building work … (1) The completion of residential building work occurs on the date that the work is complete within the meaning of the contract under which the work was done. (2) If the contract does not provide for when work is complete (or there is no contract), the completion of residential building work occurs on practical completion of the work, which is when the work is completed except for any omissions or defects that do not prevent the work from being reasonably capable of being used for its intended purpose. (3) It is to be presumed (unless an earlier date for practical completion can be established) that practical completion of residential building work occurred on the earliest of whichever of the following dates can be established for the work: (a) the date on which the contractor handed over possession of the work to the owner, (b) the date on which the contractor last attended the site to carry out work (other than work to remedy any defect that does not affect practical completion), (c) the date of issue of an occupation certificate under the Environmental Planning and Assessment Act 1979 that authorises commencement of the use or occupation of the work, (d) (in the case of owner-builder work) the date that is 18 months after the issue of the owner-builder permit for the work. … 18B Warranties as to residential building work (1) The following warranties by the holder of a contractor licence, or a person required to hold a contractor licence before entering into a contract, are implied in every contract to do residential building work: (a) a warranty that the work will be done with due care and skill and in accordance with the plans and specifications set out in the contract, (b) a warranty that all materials supplied by the holder or person will be good and suitable for the purpose for which they are used and that, unless otherwise stated in the contract, those materials will be new, (c) a warranty that the work will be done in accordance with, and will comply with, this or any other law, (d) a warranty that the work will be done with due diligence and within the time stipulated in the contract, or if no time is stipulated, within a reasonable time, (e) a warranty that, if the work consists of the construction of a dwelling, the making of alterations or additions to a dwelling or the repairing, renovation, decoration or protective treatment of a dwelling, the work will result, to the extent of the work conducted, in a dwelling that is reasonably fit for occupation as a dwelling, (f) a warranty that the work and any materials used in doing the work will be reasonably fit for the specified purpose or result, if the person for whom the work is done expressly makes known to the holder of the contractor licence or person required to hold a contractor licence, or another person with express or apparent authority to enter into or vary contractual arrangements on behalf of the holder or person, the particular purpose for which the work is required or the result that the owner desires the work to achieve, so as to show that the owner relies on the holder's or person's skill and judgment. … 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. … (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 … 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. 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. … (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). … (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. 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. 48O Powers of Tribunal (1) In determining a building claim, the Tribunal is empowered to make one or more of the following orders as it considers appropriate: (a) an order that one party to the proceedings pay money to another party or to a person specified in the order, whether by way of debt, damages or restitution, or refund any money paid by a specified person, (b) an order that a specified amount of money is not due or owing by a party to the proceedings to a specified person, or that a party to the proceedings is not entitled to a refund of any money paid to another party to the proceedings, (c) an order that a party to the proceedings: (i) do any specified work or perform any specified service or any obligation arising under this Act or the terms of any agreement, or (ii) do or perform, or refrain from doing or performing, any specified act, matter or thing. (2) The Tribunal can make an order even if it is not the order that the applicant asked for. (3) Sections 79R and 79T-79V of the Fair Trading Act 1987 apply, with any necessary modifications, to and in respect of the determination of a building claim.
2. I note that, although s18E was amended with effect from 15 January 2015 by the Home Building Amendment Act 2014 (NSW), by virtue of clause 121 of Schedule 4 to the Home Building Act, the amended version of s18E is applicable even in respect of contracts entered into and work performed before the commencement of the amendment. The version of s 18E set out above is the amended version which is applicable in these proceedings.
3. It is not in dispute that these proceedings involve a building claim within the meaning of the Home Building Act. Accordingly, to the extent the proceedings are brought within the time limits laid down in s 18E, the Tribunal has jurisdiction to determine the proceedings pursuant to s 48K of the Home Building Act.
4. Apart from disputes concerning the existence of some of the defects, and the appropriate method of rectification and the reasonable cost of rectification of those defects, the proceedings also raised issues concerning: 1. Whether the proceedings have been brought within 2 years of the completion of the works; and consequently whether the applicants' claims were within the jurisdiction of the Tribunal by virtue of ss 18E and 48K of the Home Building Act, regardless of whether the alleged defects were "major defects" as defined in s 18E(4) of the Home Building Act; 2. If not, whether any and if so which of the defects were "major defects" as defined in s 18E(4); 3. Whether the alleged defects would have been obvious upon inspection of the property, and if so, whether that relieves the respondent from any liability to the applicant; 4. Whether the Tribunal ought make an order requiring the respondent to rectify any or all of the defects found to be established.
5. It is convenient to deal first with the question when the work was completed.

Time of completion of the works

1. The date of completion of the work the subject of the proceedings is to be determined in accordance with section 3B which is set out above.
2. The respondent's evidence was that the work was largely carried out by Mr Clifton or at his direction. The respondent did not suggest that there had been any written contract governing the relationship between the respondent and Mr Clifton. In those circumstances sub-section 3B(2) provides that the completion of the work occurred on "practical completion" of the work.
3. The applicants relied upon the presumptions set out in sub-paragraphs (c) and (d) of sub-section 3B(3). The occupation certificate was issued on 22 September 2015. The owner-builder permit was issued to the respondent on 7 August 2013. The date which was 18 months after that date was 7 February 2015. As that date is earlier than the issue of the occupation certificate, the presumption arising from s 3B(3) is that the work is presumed to have been completed on 7 February 2015.
4. If the respondent is unable to establish that the work was completed at an earlier date, the warranty period in respect of those defects which are not major defects would not have expired until 7 February 2017, by which the time the applicant had commenced proceedings.
5. As noted above, the respondent asserted that the work was completed by May 2014. If that is correct, the work was completed more than two years before the applicant commenced the proceedings, and the proceedings would have been commenced after the end of the warranty period in respect of any defects that are not "major defects" as defined in s18E.
6. The respondent's evidence was that Mr Clifton ceased working on the site in April 2014 and that after that date only two carpenters were still completing work at the property. One was Mr Edwards (who provided an affidavit). The other was a Mr Wilson. The respondent stated that the work that remained to be completed in April 2014 was a herringbone floor in the living room on the first level and the installation of kitchen cabinets.
7. The respondent stated that Mr Wilson completed work on the property at the end of April or the start of May and that Mr Edwards completed work at the property in or about May or June 2014. The respondent's evidence was that she and her husband had moved back into the property in mid May 2014 at which time she applied for an occupation certificate. The respondent stated that the occupation certificate was not granted until September 2015 because the property as completed did not match the plans as submitted and it was necessary to submit an application to amend the development consent, which application was approved at a Council meeting on 18 September 2015.
8. The respondent's evidence was that she had paid Mr Clifton and other tradesmen and suppliers in cash. She exhibited to her affidavit a bundle of bank statements which the respondent stated showed weekly withdrawals of cash which she used to pay Mr Clifton and pay suppliers for materials.
9. The bank statements do disclose significant cash withdrawals from December 2013 continuing until August 2014 when they appear to cease. The respondent did not seek to explain why the cash withdrawals continued until August 2014 if the work had been completed by May 2014.
10. The respondent also exhibited to her affidavit a number of tax invoices for windows, flooring, roofing materials and other items. These were dated from September 2013 up to 28 March 2014.
11. The respondent exhibited to her affidavit a letter from a Sydney City Council officer, dated 9 July 2014, referring to the proposed issue of an occupation certificate and referring to "a number of inconsistencies between the most recent development application amendments…and the approved construction certificate drawing".
12. The letter concluded: "Please note that an occupation certificate will not be considered until the above matters are satisfactorily resolved, and where amendments to the plans are not deemed to be 'substantially the same' as the completed works, that portion of works may be deleted from any future occupation certificate".
13. Ms Henrietta Ashton, the respondent's daughter, gave evidence that she had moved into the property on 16 May 2014. She annexed to her affidavit a photograph dated 10 May 2014 showing the herringbone floor in a state of near completion. Ms Henrietta Ashton gave evidence that when she moved into the property on 16 May 2014 it was complete except for the herringbone floor and carpeting in the attic. She stated: "I recall that at the time I moved into the property it was habitable. … I moved back to the Darlinghurst property because I was made aware that it was completed and that my parents were moving into the property also at that time". Ms Henrietta Ashton was not cross examined on her evidence.
14. Mr Edwards, the carpenter who the respondent stated was the last tradesman working on the property, gave evidence that he was engaged to complete "carpentry work such as timber framing, external lining, herringbone floor, assembly of the kitchen, minor amendments to the windows, skirting and fit out and formwork in concrete front stairs". He stated that he completed the kitchen and trimming work on or about 16 April 2014, that the last work completed on the property was the herringbone floor upon which he worked with Mr Wilson, and that the floor was completed in early May 2014. Mr Edwards stated: "At the time I finished working at the property I recall that the property was completed except for the kitchen bench top. Tim and Jacqueline Ashton were living in the property and, to my knowledge, there was no additional building work to be completed."
15. Mr Edwards was cross examined and, in response to questions from Mr Davie, he agreed that the last sentence of his affidavit (quoted above) referred only to Mr Edwards' "knowledge of the building work [he was] required to do."
16. Mr Hill, a plumber, gave evidence that he was engaged by Mr Clifton to complete drainage, gas piping, hot and cold water and plumbing fit out and that he finished working on the property on or about 18 February 2014. Mr Hill was not cross examined.
17. The respondent was cross examined by Mr Davie concerning email correspondence between Mr Tim Ashton, the respondent's husband, and the applicant. The applicant relied upon those emails as evidence that the work was not in fact completed until early March 2015. Those emails were received in evidence as Exhibit 3 and Exhibit A.
18. The email chain commenced in July 2016 with emails from the applicant concerning the water leaks in the house. In an email of 12 July 2016 the applicant stated: "The skylight in the downstairs family room and the large upstairs skylight both leak as well as issues of water coming into the bedroom via the balcony which has something to do with the flashings I understand. We also had damage around the window in the master bedroom."
19. In an email of 13 July 2016 Mr Ashton wrote: "For the skylights above the stairs, because there was talk of the difficulty in installing the flashings, I arranged, around the time the house was being finished, for it to have a flowable waterproof membrane painted on and I imagined this would be the repairs referred to. I also had the flowable membrane applied to the parapets either side as parapets are well known to be responsible for leaks in terrace houses. At this stage I have had my knees replaced so I did not supervise but the roof and skylights did survive the two east coast lows of the previous year without any signs of leaking."
20. On 30 August 2016 Mr Ashton stated: "In the middle of the build I reached the point where I had to do something about my bone on bone knees so I had them both replaced and the net result for me in relation to mobility was for supervising the work such as roofing I relied upon others. … Regarding the exact date of individual works we cannot help as we believed Peter Clifton removed the site diary (something he denies) but working back through bank statements the roofing was done between early February and end of March 2015."
21. Although Mr Ashton was present in the hearing at one stage he did not give evidence and no explanation for his failure to do so was provided by the respondent.
22. The respondent tendered in evidence further emails between the parties from October 2016 by which time the applicant had raised the issue of the respondent's potential liability. On 28 October 2016 Mr Ashton wrote: "It is our understanding that Jacqui is not liable to pay for your remediation work. All roofing works, including the skylights, were completed in mid-April 2014."
23. Although the respondent was not able to recall when Mr Ashton had his knee surgery, it was apparent from an email exhibited to the respondent's affidavit that, on 17 October 2014 Mr Ashton informed Mr Kelly, the Council officer dealing with the respondent's application for an occupation certificate, that he "would be out of the loop for the next 3/4 weeks getting two knee replacements". That would suggest the knee surgery was in late October 2014.
24. In his written submissions, Mr Davie submitted that the respondent's evidence "simply does not address the issue" of when "the work was completed except for any omissions or defects that did not prevent the work from being reasonably capable of being used for its intended purpose". He submitted that the respondent's evidence had addressed a separate issue "being when the builder, and, subsequently, some tradesmen, finished their work and left the site".
25. Mr Davie submitted that the Tribunal would be very cautious in drawing any conclusions from the respondent's evidence because: "First, she was not able to explain why she had originally thought and stated in a Defence that works were completed on site on 12 April 2014 and then in an amended Defence said that the works were completed in May 2014" and "Second, [the respondent] conceded that she did not have any reference to documentation or what she was told by anyone else but relied upon her unassisted memory, and was 'estimating' the date of the completion".
26. Although the statements in the emails by Mr Ashton cannot be considered to be admissions binding the respondent, the emails sent before the applicant first made claims against the respondent in October 2016 are documents prepared in circumstances where there is no reason to doubt that they genuinely reflected Mr Ashton's then recollection and, if accurate, would establish that the roofing work was not completed until late 2014 or early 2015.
27. However I am persuaded on the evidence before me that the work was completed within the meaning of s3B(2), that is "completed except for omissions and defects that do not prevent the work being reasonably capable of being used for its intended purpose" in May 2014. I reach this conclusion, notwithstanding Mr Ashton's emails, by reason of: 1. The unchallenged evidence of Henrietta Ashton that she had moved into the property on 14 May 2014 and that the work was completed at that date or shortly thereafter; 2. The tax invoices for roofing materials which were included in the respondent's evidence which suggest the roofing work was being carried out in March or April 2014; 3. The evidence of Mr Edwards, which, although he was only able to speak as to the completion of the internal carpentry work, does indicate that that work was completed by May 2014; and 4. The fact that the respondent applied for an occupation certificate in May 2014 and that the Council officer wrote to the respondent in July 2014 pointing out discrepancies between the work as completed and the approved plans.
28. Although Mr Ashton's unexplained failure to give evidence would, on the principle of Jones v Dunkel (1959) 101 CLR 298, have enabled me more comfortably to draw the conclusion that his emails were accurate and that the work had not been completed until early 2015, I find it impossible to reconcile the statements in the emails with the unchallenged evidence that the respondent and her family moved into the property in May 2014, and the correspondence concerning the occupation certificate.
29. I conclude that Mr Ashton's emails are not reliable evidence of the date of completion of the work.
30. Although Mr Davie suggested in cross examination of the respondent that the bank account statements disclosed expenditures on building materials in 2015, the expenditures in question (at Bunnings, at timber merchants and at glass merchants) were not large and do not on their own suggest that the work was still going on at that time. Mr Davie did not point to any cash withdrawals after August 2014 which would have been expected if work was still going on at that time.
31. Accordingly I find that the respondent has established an earlier date for practical completion for the purposes of section 3B and that therefore the presumption arising pursuant to s3B(3) does not apply in this case. I note that the applicant does not seek to rely upon section 18E(1)(e) and (f).
32. Accordingly the applicant did not commence proceedings before the end of the warranty period in respect of any defect which is not a "major defect" as that term is defined in s18E.

Defects

1. I now turn to consider the defects alleged by the applicant.
2. As noted above, the applicant asserted that the rear balcony had flooded in heavy rain in late 2016. As also noted above, there was no direct evidence of that flooding, however there was indirect evidence in the form of the email from the applicant to Mr Ashton on 12 July 2016 which is set out above and also evidence in the course of cross examination of Mr Nisbett to the effect that he had been told by the owner "that the property experiences water penetration causing damage to major building elements during rain periods" and that "during heavy rain, the external rear balcony floods causing water to penetrate the living room located below". There was also evidence of water staining at two points in the ceiling in the ground floor living room disclosed in photographs and marked on the plans (Exhibit 4), by each of Mr Nisbett and Mr Dietrich.
3. Although the evidence of the water penetration is limited, it is sufficient to persuade me that entry of water into the premises, in particular at the rear balcony, had occurred in heavy rain. It is against that background of water penetration that I will address the individual defects alleged by the applicants.

First floor external balcony

1. Mr Nisbett's evidence expressed in his report was that the balcony construction was defective because: 1. The assumed waterproofing membrane has not been installed with the required vertical upward termination (100mm minimum) which should be visibly evident on the inside surface of the perimeter walls above the balcony floor tiles, with the result that the waterproofing does not comply with the requirements of the relevant Australian standard for waterproofing. 2. A vertical upward termination over flashing has not been installed to prevent water penetration at the junction of the parapet walls and balcony floor again in non-compliance with the standard. 3. There is an inadequate step down between the floor surface at the balcony and the balcony surface level in non-compliance with the standard which required a minimum 40mm step down. 4. The existing drainage outlet located in the balcony floor cannot cope with a surge of rainwater causing the balcony to flood and there is no provision of an overflow spitter pipe as required by the standard.
2. Mr Nisbett's conclusion was "the build-up of water enters the bedroom floor because there is no step at the door sills, the membrane is possibly leaking at the junction of the parapet walls because there is no upturn or flashing and there is no provision of an overflow spitter pipe through the parapet wall". In each respect Mr Nisbett expressed the opinion that the construction of the balcony did not comply with the Australian standard AS4654.2-2009.
3. Mr Dietrich agreed that there was no sill to the double doors to stop water entry under the doors. Mr Dietrich agreed that the construction of the balcony without the relevant step down or a water stop barrier and without an overflow drain is defective. Mr Dietrich did not in his report offer any comment in relation to Mr Nisbett's assertions concerning the waterproofing system.
4. Mr Nisbett's report indicated that he had run water on the balcony and had noted that it pooled and that it did not drain adequately. Mr Dietrich asserted that the fall was adequate but had not himself tested the water run-off.
5. In oral evidence Mr Dietrich asserted that the fact that no up-turn on the waterproofing or flashing on the parapet wall was visible did not necessarily indicate that the waterproofing was inadequate or that flashing had not been installed on the parapet wall.
6. In his reply report Mr Nisbett stated that no waterproof flashing junction could be seen at the parapet or at the door sill and that they would be visible if they were installed.
7. Mr Nisbett and Mr Dietrich were examined at some length by counsel for both parties about what conclusions could be drawn from the extent of water staining on the living room ceiling and what it indicated about the source of the water penetration. The general effect of that evidence was that, in an old house, such as the one the subject of these proceedings, without significant destructive investigation it is not possible to identify the source of water penetration as water may travel along rafters or beams from an entry point and manifest as stains on the ceiling some distance from the entry.
8. To the extent there has been any departure from standards or building code requirements which may permit water penetration, I consider that to be a defect and breach of the warranties provided by section 18B(1)(a) and (c). That is that the work be done with due care and skill and that the work will comply with the Home Building Act and any other law (relevantly the development consent which required compliance with the Building Code of Australia).
9. Although it is impossible to determine whether the water stains visible in the living room were caused by water penetration from the balcony, I am satisfied that the balcony was not constructed in accordance with the relevant standards.
10. The respondent submitted that, even if construction of the balcony was defective, the defect was not a major defect.
11. There are three requirements for a defect to be a "major defect". First the defect must be in a major element of the building. Secondly the defect must be attributable to faulty 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). Thirdly the defect must cause or be 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.
12. Waterproofing is a major element. I am satisfied that the defects in the balcony are a defect in a major element, namely waterproofing. I am also satisfied that the defects are attributable to defective design or defective or faulty workmanship.
13. In a second report dated 1 November 2017 Mr Nisbett expressly addressed the question whether the defects in the balcony constituted a major defect. Mr Nisbett expressed the opinion that the balcony is a major building element "as it forms the roof over part of the ground floor living room and that the timber frames and floor joists are load bearing as they support the first floor bedroom in the ground floor plasterboard ceiling below".
14. Mr Nisbett also gave evidence that: "As a result of this water penetration and the underlying defects, the non-correct rectification of the balcony work overtime will result in the inability to use areas of the dwelling, the destruction and/or the collapse of the following elements of the building [including the timber floor joists supporting the first floor bedroom and balcony floor]".
15. In the course of his oral evidence Mr Dietrich agreed that: "If water penetration is allowed to continue without rectification of the balcony it will eventually be destructive of the plasterboard sheets in the ceiling below and it will eventually cause the joists and timber, structural joists and ceilings in the ceiling below to get wet which will set up conditions for rot and fungal decay." and that "It would be fair to say that if rot and fungal decay in timbers will eventually if left unchecked be destructive of those timbers."
16. To the extent that evidence was necessary to establish that water penetration into building cavities is likely to cause the threat of collapse of the building or part of the building, Mr Nisbett and Mr Dietrich gave such evidence. As noted above, although the evidence of water penetration was scant, I am satisfied that there had been significant water penetration into the building as a result of the defective balcony and that if the defects are not rectified that water penetration is likely to recur with the consequences stated by Mr Nisbett and acknowledged by Mr Dietrich.
17. Accordingly I find that the defects in the balcony were a major defect and the applicant's claim in respect of that defect is within the jurisdiction of the Tribunal to hear and determine.
18. Mr Nisbett assessed the cost to rectify defects he had identified in the balcony at $8,324.50 before margin and GST. Mr Nisbett added to his calculations a builder's margin of 30%. He did not provide any justification for that figure.
19. Mr Dietrich assessed the reasonable cost for a scope of works limited to installing a timber door sill to provide a step up to prevent water entering the property from the balcony. I am not persuaded that that work would be sufficient rectification of the defect.
20. Mr Dietrich also suggested that the cost of rectification to Mr Nisbett's specifications would be $6,442.26 before builder's margin and GST. Mr Dietrich included in his calculation builder's margin (described as "overhead and profit") of 20%.
21. Subsequently to the provision of Mr Nisbett's original report the applicant obtained quotes from three contractors for the carrying out of the work the subject of his claim.
22. The respondent submitted that those quotations were not reliable and should not be relied upon by the Tribunal as they were not prepared in accordance with any specified scope of works.
23. There is substance in this criticism. The evidence was that the builders had attended at the premises with Mr Karsai, the applicant's cladding expert, who had pointed out the areas requiring rectification, and that the builders had prepared their quotations on the basis of those instructions. It was only after the quotes had been received that Mr Karsai prepared a detailed scope of works for the rectification.
24. I consider the respondent's objection to the applicant's reliance upon the quotations is justified, notwithstanding that Mr Nisbett indicated that: "Although the tender prices are higher than my estimated price, I would agree that the lowest tender price is fair and reasonable considering the three builders have inspected the property, identified the issues such as accessibility and extent of the defect and I consider the tenders to be reflective of a fair and reasonable market quote for a job such as this."
25. I consider that a quotation prepared without a clear set of specifications cannot be relied upon as a fair indication of the cost of carrying out the work.
26. Mr Dietrich's alternative calculation is not that different to Mr Nisbett's calculation. Mr Nisbett's calculation was more detailed than Mr Dietrich's. I accept Mr Nisbett's calculation of $8,324.50 before builder's margin and GST.
27. I consider that Mr Nisbett's suggested margin is excessive. I note that Mr McGill, the applicant's plumbing and roofing expert, allowed only 15% in his calculations. I will allow Mr Dietrich's suggested margin of 20% giving $9,988.80, to which must be added GST, making $10,987.68 in total for this item.

External roof areas and gutters

1. This issue was dealt with in the evidence of Mr McGill and Mr Dietrich. Mr McGill identified 15 separate defects to the roof and related areas. A number of items were agreed by the experts to be defects. The items which were not agreed to be defects were as follows: Item 3 - sealed wall flashing integrated with apron flashing has not been provided Item 4 - fixings lacking corrosion or weather resistance Item 5 - roof sheets with unsealed lap joint Item 8 - sealant overlaid joints in metal apron flashing Item 12 - eaves gutters Item 13 - roof flashing lap joint
2. I will deal with the question whether each of those items constitutes a defect before addressing the question whether the roofing defects are major defects and the reasonable cost of rectification.
3. The respondent's submissions were critical of Mr McGill by reason of a number of matters which were said to indicate that he was not an independent impartial expert. Those matters included lack of transparency as to the instructions he received when initially attending the site, taking it upon himself to advise the instructing solicitor that he believed the cladding system might have been installed incorrectly notwithstanding that he had no expertise in the area, and taking apart a section of cladding without specific instructions to do so.
4. The respondent submits that this constituted Mr McGill "setting out upon a frolic of his own to obtain evidence in relation to building works outside his expertise in order to assist the home owner". This is said to be "the clearest example of an expert acting an advocate that one could ever see".
5. I do not accept that Mr McGill's conduct indicated that he was acting as an advocate. In my view Mr McGill was simply trying to be helpful. When he saw something he considered might be defective but was outside his area of expertise, he notified the solicitors. This does not suggest that Mr McGill displayed any lack of impartiality.
6. Having observed Mr McGill giving evidence I accept that he, as I find were all the experts, was seeking to assist the Tribunal to the best of his ability. I accept that he was qualified to give the evidence he gave and that, as the applicant pointed out, Mr McGill has specific specialist experience in plumbing and hydraulics whereas Mr Dietrich does not.

3. Sealed wall flashing integrated with apron flashing has not been provided
4. In relation to this item, Mr McGill and Mr Dietrich disagreed over whether the flashing on the roof had been rebated into the parapet wall at the Eastern side of the property.
5. Both experts agreed that the flashing along other parts of the building where "vertical elements of the building coincide with the roof" relied on a "pressure seal joint" and was not installed in accordance with the Building Code. Mr McGill stated that this would result in water penetration when the "pressure seals are compromised or are installed in a defective way". Mr Dietrich accepted that proposition in respect of those parts of the roof where the flashing relied upon a pressure seal but not in relation to the parapet wall.
6. Mr Dietrich gave evidence that he had accessed the roof and inspected the relevant areas and was of the view that the flashing had been rebated into the parapet wall at the Eastern side of the premises. Mr Dietrich did not include such an assertion in his report. His explanation for this in his oral evidence was that Mr McGill's report was not sufficiently specific about which flashings he had identified as defective.
7. Mr McGill responded that he did not think there was "enough clearance to even fit that overlaying rebated wall flashing in because the height of the wall above the apron flashing is so minimal". Mr McGill's proposed method of rectification was to "put a cap in over the top of that section of parapet but then overlay the apron flashing and negate the requirement for the apron wall flashing".
8. The photographs provided by Mr McGill do not enable an assessment either way and, given Mr Dietrich's evidence that the flashing had been rebated into the wall, I find that the applicant has not established that the flashings are not rebated into the parapet wall.
9. Hence, I find that the applicant has not established that the flashing at the parapet wall on the Eastern boundary is defective. I find that the flashing installed at other points where the roof meets the walls of the premises is not installed in accordance with the Building Code and that that constitutes a breach of the warranties set out in s 18B(1)(a) and (c).

4. Fixings lacking corrosion or weather resistance
5. Mr McGill explained in his evidence that the fixings used to secure the apron flashing are defective because a nylon anchor has been used with a drive pin that is not corrosion resistant and not intended for external application. Mr McGill also explained that the nylon anchors themselves are not ultra-violet rated and should not be used externally.
6. Mr Dietrich accepted that the fixings were not compliant with the requirements of the standard but stated that they will continue to perform much like other similar fixings he has observed on other residential and commercial properties.
7. Although that does not suggest that the fixings are not a defect, it may be relevant to the question whether the defect is a major defect.
8. I find the applicant has established this defect and that it constitutes a breach of the implied warranty in s18E(1)(a).

5. Roof sheets with unsealed lap joints
6. This defect was alleged to exist in the front of the building around the dormer window where two valleys in the roofing profile met. Mr McGill's evidence was that the length of individual roof sheets was insufficient to cover the roof as a single sheet with the result that an overlaid lapping joint had been utilised. Mr McGill stated that this was not common practice and the recommended practice was to seal and fasten the joints. Mr McGill's evidence was that the overlay of the roof sheet lap joints was inconsistent and was generally less than 150ml with excessive intervals between adjacent fasteners. Mr McGill's evidence was that that did not meet the relevant standard being AS/NZS3500.3:2003, the National Plumbing and Drainage Code.
7. Mr Dietrich asserted that the overlapping roof sheet was fit for purpose. In oral evidence he asserted that there was sufficient overlap.
8. In response Mr McGill stated that he had measured the overlap by placing a tape measure into the overlap and could attest that it was less than 150ml.
9. I am persuaded by that evidence that the defect does exist and constitutes a breach of the implied warranties in s18E(1)(a) and (c).

8. Sealant overlaid joints in metal apron flashing
9. This item related to failure to seal lap joints in roofing sheets both around the dormer window at the front and on the external area above the flat roof at the rear of the property. Mr McGill in his oral evidence described this defect as "basically this is about the consolidated storm water discharge from upper rainfall catchment areas onto lower rainfall catchment areas".
10. Mr Dietrich agreed that this was a defect around the dormer windows at the front of the property but disagreed in relation to the rear of the property.
11. Mr McGill's evidence was that the downpipe conveying stormwater from the level 2 roof discharges directly onto the level 1 roof and in those circumstances all of the flashings and overlaid lap joints in the sheet roofing within 1.8 meters of the discharge need to be sealant sealed to ensure the consolidated storm water flow doesn't enter into the building.
12. Mr Dietrich agreed that the standard required the roof to be sealed 1.8 meters either side of where there is a consolidated point of discharge, but he did not think that at the rear of the property there was any practical consequence that would result in water entering.
13. I find that Item 8 is a defect in that it involves a breach of the standards and as such a breach of the implied warranty in s18B(1)(c).

12. Eaves gutters
13. Mr McGill's evidence was that the gutters on the skillion roof at the western boundary were not installed in accordance with the standard and were installed so that in heavy rain the gutters would discharge onto the wall rather than overflowing away from the property.
14. Mr Dietrich stated in his report that the gutters were not defective and that he had not been able to locate any water ingress as a result of the configuration of the eaves. In oral evidence Mr Dietrich expanded upon his report, stating that: "There is an overhang in the eave which has got a slight sort of following the rafters so if any water flows into the back of the fascia, back of the gutter, and doesn't get in between the gutter and the fascia it can actually get up over the top and then if it gets over the top of the eaves it will come out through the groove but it's not sealed in the feedline".
15. Mr McGill indicated in his evidence that he understood what Mr Dietrich was saying but disagreed with him. He said: "The back of the gutter was fixed with a type of clip on brackets that secure the back face of the gutter directly to the fascia. That means that there is no gap. …To comply as the gap it's a 10ml gap so it's big enough that you can stick your finger in and it's not something that wouldn't see. …the front face of the gutter is higher than the top of the fascia so the eaves, gutters only sized for a 1 in 20 year rain event, so anything other than that it is intended to overflow and it's supposed to overflow externally from the building."
16. I accept Mr McGill's evidence. It seems to me clear that if there is no gap between the gutter and the wall and the front of the gutter is higher than the rear, as Mr McGill suggests and Mr Dietrich did not deny, then inevitably, in an event of overflow, the overflow will be back towards the building. Accordingly I find that this constitutes a defect and a breach of the implied warranties set out in s 18B(1)(a) and (c).

13. Roof flashing lap joint
14. This defect arises at the junction of the skillion roof and the parapet at the northern end of the rear of the property. Mr McGill's evidence was that the flashing at that point is an overlapping joint which should be configured so that there is an air gap so that water cannot enter by capillary action. Mr McGill stated that no such air gap was present and that that would permit water to enter through capillary action and that that was also a breach of the Building Code.
15. Mr Dietrich's evidence was that there was an air gap by the nature of the way the flashings were actually fixed.
16. Mr McGill's evidence was that the specific installation requirements would require a 30 degree fold in the flashing.
17. Mr Dietrich sought to explain that the spacing of the fixings was such that there was no way that the two flashings could be touching continuously all the way through. That does not in my view resolve the issue that Mr McGill identified. Mr Dietrich did not dispute that the standard required there be an "anti-capillary return fold or sealant where flashings overlay". The absence of an anti-capillary break as required by the standard constitutes a defect and a breach of the warranties set out in s 18B(1)(a) and (c).

Were the defects in the roofing and gutters major defects?

1. The applicant conceded that Mr McGill's Item 2, which related to the loss of protective coating on the roof sheeting, was not a major defect. The applicant maintained that the balance of the defects in the roof and guttering were major defects. The respondent disputed that they were major defects.
2. Mr McGill expressed the opinion that the entire roofing system was part of the waterproofing of the premises and was therefore a major element of the building. I did not understand the respondent to submit otherwise. In my view it is clearly correct.
3. The critical issue therefore is whether the defects cause or are likely to cause: 1. The inability to inhabit or use the building (or part of the building) for its intended purpose; or 2. The destruction of the building or any part of the building, or 3. A threat of collapse of the building or any part of the building.
4. Mr McGill gave evidence in his report in reply that: "When the roof leaks from defective unsealed joints, defective flashings or inadequate resistance to consolidated water flows, the roof water is permitted passage through the defective roof membrane system into internal areas within the building. These internal areas within the building contain structural roof framing and structural wall framing that support both wall and ceiling linings. The roof water permitted to enter into the building through the defective roof membrane system will then eventually lead to decay of the wooden framing systems and decay and deterioration of wall and ceiling linings." and gave similar evidence in relation to the roof drainage system "surcharging due to inadequate outlet capacity within the box gutter and the box gutter overflow systems."
5. Mr Dietrich's opinion was that the issues he agreed existed in the roof were not major defects. His evidence was that the defects were technical defects which had had no adverse effect on the property.
6. The following exchange occurred between Mr McGill and Ms McMahon in the course of Mr McGill's oral evidence [1] : Ms McMahon: Have you seen any evidence of water inside of the building as a result of what you say, directly? Mr McGill: Directly as a result, no. Ms McMahon: So that being the case, do you know this building was finished over 3 years ago, you were aware that's our position. Mr McGill: Yes Ms McMahon: Ok. If what you're saying is right you would expect wouldn't you to see some sort of water entry as a result of that defect wouldn't you. Mr McGill: As I've said, I've seen six locations in the house where I saw that there was water. Ms McMahon: So if you could just answer the question. If what you're saying is right about this defect, you would expect to see some direct water entry as a result of this defect, wouldn't you. If what you say is right? Mr McGill: Yep, you'd want, you'd expect to, you'd probably see water somewhere, some water damage somewhere. Ms McMahon: That would directly relate to the location of this defect as you see it? Mr McGill: No, you can't directly relate it to locally. As I said at the start anything to do with the roof, the roof has got insulation starting running along the entire length of the roof and so it deflects and redirects water to other locations so you don't get that straight through the, it's just a hole and it is able to drip through this, there's sarking underneath and it can transfer around the building. As Mr Dietrich said earlier, he said he's seen that water leaked that was up on level 5 and it popped out 5 levels lower on a totally different side of the building. Ms McMahon: You have referred to 19 different defects haven't you, with the roof. … Mr McGill: I think for the roof that there are 15. Ms McMahon: 15, and you're aware, aren't you that Mr Karsai said that the cladding needs to come out and if the windows need to come out aren't you. Mr McGill: Yes. Ms McMahon: And you aware that Mr Nisbett says that the balcony has to come out and the doors have to come out. Mr McGill: Yes. Ms McMahon: Because of all of these defects. On the basis that you are all right, you would agree with me that you would see more than a couple of stains, wouldn't you. If this, if this building contains all of these defects that are alleged, and think about the 15 you are, you'd expect, this place should be flooded should it not? … Mr McGill: I've seen 6 locations where there's water. That's without going invasively into the building. A lot of these leaks may take more time to manifest and destruct the drywall then some larger leaks. … Mr McGill: So, if, in another 3 years from now it wouldn't surprise me if it was 12 stains, not 6 stains. Ms McMahon: So with respect to this, when you say you've seen water, what you've now said is you've seen stains. Mr McGill: That's correct, yeah. Ms McMahon: Right. And have you put a moisture reading up against these stains. Mr McGill: No, I haven't. Ms McMahon: So you don't know whether these stains happened one off, a couple of years ago. Mr McGill: No. Ms McMahon: Or whether, you know nothing about those stains do you? Mr McGill: No. Ms McMahon: So you have no evidence of 15 different areas that you say that water was ingressing in this building, you don't even know as you sit here today, whether the stains that you say you witnessed are anything to do with any of the defects that you alleged? Mr McGill: Well they have to. Ms McMahon: Do they? Mr McGill: They have to, you can't have a hole in something and have it rain and water not go through it, it's just how, I mean - Ms McMahon: That's exactly what I'm putting to you Mr McGill if there [are] all of these defects as you've alleged that this house has been there for 3 years, and has been through a storm and I'm happy to take you through all the weather reports in Sydney for the last 3 years, you'd expect to see more than 6 stains where you don't even know if they're recent or even how moist they are. Mr McGill: I mean that's a matter of opinion. To me, six, the six areas where I saw that there's, appears to be water damage is, as I said before is quite a lot for a house in my opinion. Ms McMahon: Right. And you were aware that there was an allegation wasn't there of a leak in the main bedroom on the ceiling. Are you aware of that? Mr McGill: Yes, yes. Ms McMahon: And above that, directly above that ceiling is an ensuite bathroom isn't that right. Mr McGill: That's correct. Ms McMahon: And as far as you are aware, was there any testing ever done of that ensuite to see whether water ever flowed or were you aware of any instances that. Now do you now Mr McGill: I do not know. Ms McMahon: You don't know. Mr McGill: I don't know. Ms McMahon: And you don't know whether or not there's any rising damp in this building especially along the east wall with it being about 100 years old, you don't know, do you? Mr McGill: I don't know. Ms McMahon: No. So how many houses, have you been in houses that are 100 years old? Mr McGill: Have I? Ms McMahon: Yes. Mr McGill: Not many, no. Ms McMahon: No, not many. So you don't know what would exhibit in a house or what staining may exhibit in a house that's 100 years old in Sydney, that would be fair to say? Mr McGill: That would be fair to say.
7. Mr Dietrich's oral evidence at that point in response to questions from both Counsel was: Ms McMahon: And I've just put to Mr McGill, that given he raises 15 different defects. You've sat here this morning with Mr Nisbett and you're going to be sitting with Mr Karsai at some point, given all of those defects collectively, if they were all right, would you expect there to be much more water ingress, or evidence of ingress in this building? Mr Dietrich: If all of these defects were true, I would expect there to be definitely a lot of damage and a loss of facility. Mr Davie: Mr Dietrich, much greater damage, but because of what defects in particular would you expect there to be greater damage? … Mr Dietrich: The condition of the flashings that is indicated, the downpipes discharging the eaves gutter, every defect there has got the implication, or is alleged to be such that it's causing damage to the building. Mr Davie: And you would agree that because - Mr Dietrich: No, I don't agree with the actual defect, but I agree that if these things were as bad as what has been indicated, that there would be substantial defects, oh sorry, substantial damage evident. And in the photographs that I've observed, in 16, there's some damp underneath a couple of windows but…and there's the ones that I identified was in the living room, which was underneath the balcony door. Mr Davie: That wasn't quite what your evidence was, was it? You evidence in relation to the eaves, flashings and gutters, with the possible exception of item 12. You accepted that the defect in this matter configuration but thought there would be no practical consequence. Now you appear to be saying that if those defects were as stated you'd hope much more severe water ingress. Mr Dietrich: That's - I said if the defects are as severe as they allegedly are, that there would be substantial damage. But there's no damage there and with the eaves, gutter; Mr McGill hasn't identified any damage to the walls in a local area that could be attributed directly to eaves gutter. It's the same with the box gutter.
8. Section 18E requires that, to be a major defect, a defect be one that "causes, or is likely to cause" one of the identified consequences. There is no suggestion in this case that the defect has so far caused any of the relevant consequences. Therefore the question is whether the defects are "likely to cause" the relevant consequences.
9. The applicant did not lead any direct evidence of water penetration. I have accepted, as outlined above, that there is sufficient evidence before me to establish significant water penetration from and around the balcony, but in the absence of evidence that any of the roofing defects have led to sustained or substantial (or even any) water penetration in over three years, I am not persuaded that the roofing defects are sufficiently serious that they are "likely" to lead to any of the consequences necessary to establish that the defects are major defects. To be "likely" to cause a consequence requires more than that a consequence is a possibility.
10. I accept that the water penetration through defective roofing may occur without being observed, but in circumstances where: the only evidence of water penetration is what are said to be "six stains", the location of which is not made apparent in Mr McGill's report; where Mr McGill has not undertaken any moisture readings to assess the stains; and where there are other potential sources for the stains, I am not persuaded that the defects in the roof and guttering are "likely" to lead to significant or persistent water ingress or to cause any part of the premises to become uninhabitable, to cause the destruction of any part of the building or to cause a threat of collapse of any part of the building. That Mr McGill suggested that in three years he would not be surprised to see 12 stains does not indicate to me that the likely consequence of a failure to repair the roofing defects will be that any part of the building will become uninhabitable, be destroyed, or collapse.
11. I find that the defects in the roofing and guttering which the respondent conceded and those which I have found exist are not major defects and accordingly I find that the claims in respect of those defects were not brought within the warranty period and the Tribunal does not have jurisdiction to hear and determine the applicant's claim in respect of those defects.
12. Against the possibility that my conclusion in this regard is incorrect, I will consider the reasonable cost of rectification of the defects in the roof elements which I have found existed, excluding the replacement of the roof sheeting which the applicant conceded was not a major defect.
13. Neither of the parties provided an explicit calculation of the costs of rectifying the roof excluding the roof sheeting and the parapet flashings which I have determined were not defective.
14. Mr McGill calculated the cost of rectifying all defects that he had identified in the roof at $44,987.00 or $56,233.75 after the inclusion of 10% profit, 5% contingency and 10% GST. Mr McGill's figure includes the amount of $1,375 for parapet capping for the rectification of the parapet flashing which I have determined not to be a defect. Mr McGill included $604 for the provision of roof sheeting. Mr McGill's calculations also include $14,400 for labour, which is not allocated between the various defect items. Some of that labour must relate to the replacement of roof sheeting and the installation of the capping over the parapet. Mr McGill's estimate also includes $10,200 for scaffolding and associated Council permits.
15. Mr Dietrich calculates the cost of rectifying the roof at $8,639 before overhead and profit which Mr Dietrich calculates at 20% and GST, giving a total of $11,404.51. Mr Dietrich's allowances in respect of wall flashing appeared to be about $250, Mr Dietrich only allowed for the cleaning of the roofing sheets, also at a cost of about $250. Mr Dietrich allowed $9,350 before profit, overheads and GST in respect of preliminaries for all work. That figure included $5,000 in respect of scaffolding. I would infer that the cost of scaffolding would be incurred in relation to any work required to be conducted at height on the premises and that at least a proportion of the allowance for preliminaries would be necessary in relation to each part of the rectification work costed by Mr Dietrich.
16. Mr McGill's costings are generally more detailed than Mr Dietrich's which are difficult to interpret. Mr McGill's costings are also corroborated by a quotation for the roofing works provided by Patrick Arthur Plumbing, which Mr McGill included in his report. That quotation was for $66,450 plus GST, including an amount of $6,250 for the parapet flashing and $7,500 for the replacement of the roof. I also note that the tender responses obtained by the applicant exceeded $30,000 for access, installation and removal (ie scaffolding) and that the lowest quote for the roof works in those tender responses was $29,700, although some roofing defect items were excluded from that figure.
17. I conclude that Mr Dietrich's costings are likely to be unduly conservative and prefer Mr McGill's costings. Doing the best I can, I assess the reasonable cost of rectification of the defects in the roof other than roof sheeting and parapet flashing at $35,000 before profit, overhead and GST. I would allow profit and overhead at 15% or $5,250. GST on the total would be $4,025. Thus the amount that I would have awarded the applicant in respect of the rectification of roofing, if I had determined that the roofing defects were major defects, would have been $44,275. That figure includes the cost of scaffolding.

Plumbing related works

1. Mr McGill identified six items generally described as "plumbing related works". They are: 16 the sewer stack vent terminates within three lineal meters of an openable window 17 a temperature control has not been provided on the hot water system to limit the hot water delivery to ablution fixtures to 50 degrees. 18 a step up between the waste fixture branch line and soil sanitary plumbing has not been provided. 19 a basin fixture has been installed without an integral overflow in an area that is without a floor drain which fails to provide any protection to the property from damage attributable to fixture overflow. 20 the property has not been provided with sewer surcharge protection to prevent internal sewer flooding in the event of surcharge from the utility sewer main. 21 the external rear terrace area is low lying in nature and is open to rainfall and is without overflow provision to discharge such rainfall inflow to atmosphere in the event of piping system failure or flow rates exceeding the stormwater system's hydraulic capacity.
2. Mr Dietrich agreed that each of these defects existed. The critical issue therefore is whether each of the defects is a major defect.
3. The applicant conceded that items 16, 17 and 18, that is the sewer stack vent, the hot water temperature control and the absence of a step up between the waste fixture branch line and the soil sanitary plumbing, were not major defects. Accordingly I will not address them further.
4. The applicants asserted that the remaining three plumbing related defects were major defects. The respondent asserted that each of those defects was not a major defect.

Defect 19 - Basin overflow

1. Mr McGill gave evidence that he considered defect 19 to be a major defect. His evidence was: "The omission of a floor waste where overflow from a bathroom basin fixture is permitted to occur means the bathroom membrane system is incomplete and unable to drain waste water overflow to the property's sewer drainage system. To this extent, the bathroom floor drain is in my opinion an integral component of the bathrooms waterproofing system where fixture overflow can occur. This item is in my opinion a 'major' defect on the basis it relates to the lack of waterproofing of the building which is a major element. The defect in the 'major' building element will result in internal waste water overflow into the level two bedroom that will prevent the use and habitation of the level two bedroom. The reoccurrence of internal water entry from flooding will eventually lead to decay of the wooden floor joists which support the second floor structure and the level one living ceiling linings.
2. Mr Dietrich's evidence was that the defect was not a "structural defect". Mr Dietrich did not in his evidence address the question whether the defect was a major defect.
3. In my view the absence of a basin overflow is not a defect in a major building element. Notwithstanding Mr McGill's opinion, I consider that the fact that the overflow of the basin may lead to flooding does not make the basin itself part of the waterproofing provided to the building. Accordingly I find this defect is not a major defect.

Defect 20 - sewer surcharge protection

1. Mr McGill did not express an opinion concerning whether defect 20, that is the absence of surcharge protection was a major defect. Mr Dietrich stated that the defect was not a structural defect but did not address the question whether it was a major defect.
2. Mr McGill described the defect as arising because the top of the overflow relief gully provided for the sewer drainage system is approximately 150ml higher than the finished tiled floor level in the bathroom at the front entry door to the property. That tiled floor incorporates a floor waste outlet which is the lowest fixture connected to the sewer drainage system. Without surcharge protection, Mr McGill stated that: "To permit external sewerage surcharge without impact to internal areas the sewer surcharge gully must be located 150ml lower in elevation than the lowest internal fixture, in this case the floor waste in the ground level bathroom."
3. Although sewer surcharge would clearly have a capacity to cause the inability to inhabit or use part of the building for its intended purpose, I am not persuaded that the issue with the sewer surcharge is a defect in a major element of the building. The sewer lines are not a load bearing component of the building nor do they constitute part of the waterproofing of the building.
4. Therefore I find defect 20, the lack of sewer surcharge protection, is not a major defect.

Defect 21 - rear terrace overflow

1. Mr McGill's evidence was as follows: "I consider the installation of a threshold and the ability for stormwater to overflow around the building and not enter into the building to be an integral part of any building's waterproofing systems. This is generally achieved by constructing internal finished floor levels 300ml higher than the surface water flood level that would be expected to occur during a 1 in 100 year average rainfall intensity with a 5 minute duration. …The absence of an overlaid surface water flow path from these external perimeter enclosed areas …means the external areas will pond with storm water until it reaches a depth where the internal water entry occurs."
2. In my view the provision for stormwater overflow in external areas does not constitute part of the waterproofing of a building.
3. "Waterproof" is defined in the Shorter Oxford English Dictionary as: "impervious to water, completely resistant to the action of water; … make waterproof or impervious to water".
4. "Waterproofing" is defined as: "(a) the action of the verb; (b) the quality of being waterproof; (c) material with which to waterproof something"
5. The Macquarie Dictionary provides similar definitions.
6. In my view the term "waterproofing" when used in the definition of "major element" in s 18E(4) means the mechanisms by which water coming into contact, by whatever means, with a building or building element is excluded from the building or building element. I do not consider that the term extends to mechanisms designed to control water so as to prevent it coming into contact with the building.
7. I am thus not persuaded that any of the "plumbing related" defects are defects in a major element of the building. Accordingly the applicant's claim in respect of those defects is brought outside the warranty period and the Tribunal does not have jurisdiction to hear and determine the applicant's claim in respect of those defects.
8. Against the possibility that I am incorrect in this conclusion, I assess the cost of rectification of defects 19, 20 and 21 as the amounts assessed by Mr McGill, that is $500 plus 15% margin and GST in respect of Item 19, the basin fixture; and $7,271 plus 15% margin and 10% GST in respect of Items 20 and 21, the sewer surcharge protection and the external rear terrace. Mr Dietrich's assessment for Item 19 was higher than Mr McGill and he did not provide a costing for the full rectification of defects 20 or 21.
9. Thus if I had concluded that defects 19, 20 and 21 were major defects I would have allowed $632.50, inclusive of profit, contingency and GST, in respect of the hand basin and $9,197.50, inclusive of profit, contingency and GST, in respect of the sewer surcharge overflow and stormwater overflow.

Cladding - two walls on attic at rear and the rear wall of level 2 bedroom

1. The vertical faces of the rear extension of the attic and the rear wall of the level 2 bedroom have been clad with compressed fibre cement sheeting. Mr Karsai's evidence was that the sheeting was a proprietary product identified as "Hardies ExoTec". Mr Karsai stated that the manufacturer of that product details specific requirements for flashings and vapour barriers that are to be used in situations in where the cladding system is being relied upon to provide a weatherproof wall.
2. Mr Karsai stated in his report that he had not been able to verify the method of installation from his observations when attending the site. In his oral evidence he acknowledged that he was not insured to be involved with site work or deconstruction work and he had therefore not been able to inspect the panels directly. Mr Karsai had arranged for Mr McGill to remove a panel and take photographs and Mr Karsai expressed his opinion concerning the installation of the cladding by reference to those photographs.
3. As noted above, Mr Karsai had not completed his evidence at the end of the second hearing day and during the adjournment between the second and third hearing days the applicant arranged for Mr McGill to remove further sheets and take further photographs which were admitted into evidence as Exhibit 8.
4. Mr Karsai's conclusion in his report was: The Hardies ExoTec cladding system is a proprietary product that is suitable for external use provided it is installed in accordance with the manufacturer's requirements. Those requirements include the following mandatory components: - The installation of a vapour permeable sarking to the building structure; - The installation of Hardies proprietary metal top hats in front of the sarking line. These top hats incorporate a weatherproof plastic strip under the expressed joints in the overlying Exotec sheets; - The installation of metal flashings around windows and doors, and at the head, base and corners of the sheeted wall; and - The fixing of the Exotec sheets to the top hats. … The abovementioned details present a drained and flashed cavity behind the Exotec sheets, which can be relied upon to provide long term weatherproof performance of the enclosure. All of the sheeting, as installed on this property, fails to replicate the majority of the proprietary products mandatory components. In particular: - The installed Weatherwrap Foil is vapour impermeable (as opposed to vapour permeable, as required by Hardies) which will promote condensation behind the Weatherwrap Foil (Weatherwrap product data sheet is appended); - The omission of the proprietary top hats (and by default, the omission of the required drainage cavity); - The omission of the window and corner flashings; - The installation of the roof flashing in front of the Weatherwrap Foil; and - The reliance of sealant between the Weatherwrap Foil and the rear of the sheeting to weatherproof the expressed joints. In my opinion, the above-mentioned changes and omissions will result in weatherproof failure of all of the installed sheeting, with inevitable moisture ingress through the sheeting joints and the missing (or incorrectly installed) flashings. It will also lead to condensation behind the Weatherwrap foil. From my inspection of the site, there is evidence of moisture ingress along the ceiling under this wall. In my experience, there will also be additional moisture in the timber framing system that supports this cladding (due to leakage and condensation) which will not yet have been telegraphed through to the internal finishes, but will result in the inevitable longer term degradation of the timber framing (due to rot).
5. Mr Karsai further concluded that the cladding presented poor and defective building practices, was not performed in a proper and workmanlike manner and in accordance with the plans and specifications, and did not comply with the National Construction Code, in breach of section 18B(1)(a) and (c).
6. The respondent was highly critical of Mr Karsai, submitting in her written submissions (which it should be noted were drafted before the admission of Exhibit 8 into evidence): In addition, Mr Karsai concedes that: a. his report contains no assumptions. b. That he could have put additional photographs into his report to support the opinion he was advancing but chose not to. c. That he is not insured to be involved in site work or deconstruction work. d. He hadn't taken measurements of the cladding system, conceding this would be relevant to the costs of rectification. e. Nor had he counted the number of sheets so was unable to indicate whether the solitary sheet which Mr McGill had taken off was in any way representative of the entire cladding system. f. That condensation was not visible on the McGill photographs. g. There was no evidence of dampness. h. There was no evidence of damage to the waterproofing material. i. There was no evidence to show that water was tracking in any way behind the cladding sheets. j. That he was unable to give details as to the location of where the single sheet of cladding was removed. … In conclusion, Mr Karsai's report is nothing more than speculation. With respect to the cladding system he had done nothing more than make comment on photographs taken by others. His report clearly fails to identify defects to the installation and any resultant damage that flows from it. The report would not satisfy the Makita standards or the criteria set out in Dasreef being he: a. Failed to comply with the assumption identification rule. b. Failed to comply with the proof of assumption rule. c. Set out his statement of reasoning. Consequently his report can have little or no weight and the claim in respect of the cladding must be dismissed.
7. I do not accept the submission that Mr Karsai's report is mere speculation. Nor do I accept that Mr Karsai's report fails to meet the requirements of admissible expert evidence. Mr Karsai confronted difficulties in that he was not himself personally able to inspect the cladding but he is a specialist in cladding and façade construction and arranged to have photographs of the method of construction provided to him. The material upon which Mr Karsai based his opinions is clearly identified in his reports and his reasoning processes are clearly stated. In particular, Mr Karsai referred to photographs which clearly revealed, through brand labelling, the nature of the cladding and the backing membrane. Mr Karsai was satisfied that he had adequate material to form a conclusion and I am persuaded that his conclusions are accurate.
8. Mr Dietrich's evidence does not address the particular defects identified by Mr Karsai, merely commenting: "I am of the opinion that the alleged defective cladding has been performing as intended and there is no manifestation of a failure of the current system and that it is not defective and it is fit for purpose".
9. Mr Dietrich also stated that "any defects of the cladding and/or the sealants are a maintenance issue". I do not accept that evidence.
10. I am satisfied on the basis of the photographs and Mr Karsai's evidence that, contrary to good building practice and the manufacturer's recommendations, the cladding has been installed with a vapour impermeable backing or sarking which will promote condensation within the structure, that the cladding has been installed without the appropriate spacers (either the "proprietary top hats" or any alternative) between the sarking and the cladding which will result in moisture ingress through the sheeting joints and flashings; and that the installation relies inappropriately upon the provision of a sealant between the sarking and the rear of the fibre cement sheeting to weatherproof the joints. I accept Mr Karsai's evidence that these defects will inevitably in time lead to moisture penetration into the building.
11. One issue that arose in the course of Mr Karsai's oral evidence was that Mr Karsai asserted that the sarking had been installed behind the apron flashing at the base of the cladding wall with the result that the water reaching the sarking would drain behind the flashing and therefore enter the building envelope. Mr Karsai relied for this conclusion upon one photograph in particular which he included in his report.
12. The photograph in Mr Karsai's report (Photo 11) did appear to show the sarking behind the flashing but it was not entirely clear. As I understand it this is the reason why the further photographs were taken during the adjournment between the second and third hearing days. The further photographs appeared to me to demonstrate that in the cladding around the attic, the weather barrier did not extend behind the apron flashing but was installed outside the apron flashing. However, the photographs clearly show the sarking installed behind the apron flashing around the level 2 bedroom.
13. To the extent the sarking is installed behind the apron flashing, it is defective and likely to result in water penetration. I find that the sarking was installed behind the apron flashing around the level 2 bedroom but not around the attic.
14. I accept Mr Karsai's evidence, which was not directly contested by Mr Dietrich that the cladding has not been installed in a proper and workmanlike fashion or in accordance with the applicable building codes. Accordingly I find that the cladding has been installed in breach of the warranties provided by s 18B(1)(a) and (c).
15. Mr Karsai asserted that the defects relating to the cladding were major defects. The respondent submitted it was not a major defect. The defects are clearly a defect in waterproofing and, in my view. whether or not they have had to date any significant impact in terms of water penetration, it is likely that they will in due course, both by reason of the encouragement of condensation on the inside of the sarking and by reason of water penetration through joints in the sarking and where the sarking has been installed behind the apron flashing, lead to deterioration and the structural failure of the internal timber wall framing.
16. I distinguish the issues with the cladding from the issues identified with the roof and gutters because the issues with the cladding are more significant and exist throughout the cladding. I accept Mr Karsai's evidence, which was unequivocal in this respect, that the defects in the cladding will lead to long term deterioration of the timber framing due to rot.
17. Accordingly I conclude that the defects in the cladding are major defects and the Tribunal has jurisdiction to hear and determine the applicant's claims in respect of the cladding.
18. Mr Karsai assessed the cost of rectification of the cladding at $34,870.00 including contingency and GST. Mr Karsai included in that calculation the sum of $8,500 for scaffolding. Mr Karsai's estimate also included work related to the eastern windows which I will address below.
19. Mr Dietrich calculated the cost of rectification of the cladding including overhead and profit and GST at $21,980.09. Mr Dietrich did not include in that figure any allowance for scaffolding. As noted above, in his assessment Mr Dietrich had included, in the cost of preliminaries, provision for scaffold hire.
20. If the roofing works were to be conducted at the same time as replacement of the cladding, the same scaffolding would presumably be able to be used. However as I have dismissed the applicant's claim for compensation in relation to the roofing works, it is appropriate to allow the cost of scaffolding in assessing the reasonable cost of rectification of the cladding.
21. Mr Dietrich's calculations provide more detail than Mr Karsai's, in particular Mr Dietrich made estimates of the labour involved in various elements of the task, whereas Mr Karsai simply made an allowance of $18,000. Mr Karsai and Mr Dietrich allowed similar figures for materials and waste disposal and other associated issues.
22. By reason of their greater detail I prefer Mr Dietrich's calculations to those of Mr Karsai but I will make allowance of $8,500 plus GST as allowed by Mr Karsai for the provision of scaffolding. Accordingly my calculation of the reasonable cost to rectify the defective cladding is Mr Dietrich's figure of $21,980.09 plus Mr Karsai's figure for scaffolding of $8,500, plus $850 GST, which is $9,350, giving a total of $31,330.09 which I find is the reasonable cost of rectification of the cladding.

Windows

1. The property is a terrace house which was once bounded on both sides by other terrace houses. The terrace house on the eastern wall has been demolished and that area is now Council parkland. Given the age of the property Mr Karsai concludes that the wall is likely to be a non-cavity wall. Mr Karsai testified that where windows are installed into a non-cavity wall, the appropriate approach would be to install a metal head, sill and jam flashings. Mr Karsai stated that as far as he could tell that had not been done.
2. Mr Dietrich gave evidence that as far as he could see the windows were appropriately flashed. Mr Dietrich noted: "I was not able to identify any loss or damage to the subject property due to the alleged defect. I observed that the window frames were sealed between the edge of the frame and the rendered reveals. The surface of the render is smooth and uniform and provides the weatherproof surface. The window frames installed in the eastern wall have a well-formed rendered masonry sill which does not allow water to pond, all the water can run off the frame and the sill. The installation of the timber frame double hung windows is fit for purpose. I am of the opinion that there is no defect."
3. Mr Karsai recorded in his reply report of 1 November 2017 that he had inspected the interior surfaces of the eastern wall "both visually and with a moisture meter" and had confirmed that water ingress and resulting damage is clearly evident around the majority of the windows. Mr Karsai also asserted: "I also confirm that the moisture in the wall is migrating towards the adjacent floor construction".
4. Mr Karsai provided no specific details of the measurements taken with his moisture meter or the specific locations where those readings were taken, nor did he provide any photographs or other evidence of the alleged water penetration.
5. Mr Dietrich and the respondent were critical of Mr Karsai for not having undertaken any destructive investigation of the windows to determine whether they were adequately flashed. Whilst I do not conclude that destructive investigation was inevitably necessary, I accept that Mr Karsai's evidence in relation to the windows in the eastern wall is somewhat speculative.
6. In the absence of specific details of Mr Karsai's moisture measurements I do not find Mr Karsai's evidence sufficient to persuade me that the windows are leaking or that the window installation is defective. Accordingly I find the applicant has not established a breach of s 18B in relation to the construction of the windows in the eastern side of the building.
7. Issues 3 and 4 identified at paragraph 30 above remain to be determined.

Was it significant that defects would have been obvious on inspection?

1. Mr Dietrich's evidence in relation to the majority, if not all, of the defects was that they would have been obvious upon inspection of the property. In oral submissions the significance of this evidence was explained by reference to the Court of Appeal decision in Allianz v Waterbrook [2009] NSWCA 224, in particular the dictum of Ipp JA (with whom Hodgson JA agreed) at [110] to [113]: 110 In my opinion … a successor in title who acquires a building in full knowledge of its defects, suffers no loss from the existence of those defects. In those circumstances, the builder's breach of statutory warranty could not be said to have diminished the successor's assets, nor increased its liabilities. Any adverse impact to the successor's financial position, and any loss to the successor, would result from the successor knowingly and deliberately paying more for the building than it was worth. The loss would be caused by the successor's own decision to purchase at the agreed price. 111 The observations in [110] are predicated on the "full knowledge" of the defects being not only knowledge of the existence of the defects but also knowledge of their significance. A party may know of the existence of defects (because they are patent), but may not appreciate - even acting reasonably - that major expenditure would be required to remedy them. … 113 Causation in contract is to be determined by commonsense principles: Alexander v Cambridge Credit Corporation Ltd at 358 per McHugh JA. I have explained why I do not regard the relevant legislation as providing for any different meaning to "loss" as would be attributed to the term according to the general law. Applying those principles, should it be found that Waterbrook acquired the Village in full knowledge of the defects that exist, I would conclude that Waterbrook would fail to establish causation and legal responsibility for its loss. In such circumstances, Waterbrook's knowing and deliberate act in acquiring the Village would constitute a new and independent cause of harm.
2. The respondent argued that because the defects would have been obvious on inspection of the property, the proposition set out in paragraph [110] of Ipp JA's judgment in Waterbrook is applicable, in that the purchase price paid by the applicant for the property must be taken to have included allowance for rectification of the "obvious" defects. The respondent submitted, "the [applicant] has had accord and satisfaction".
3. There was no evidence before me whether the applicant had obtained a building inspection report prior to purchase or had himself observed any of the defects. It is clear from Ipp JA's dictum in Allianz v Waterbrook that what is required is "full knowledge" of both the nature of the defects and the work required to rectify them, so as to enable the inference (if it was not established directly) that the purchase price had been adjusted to take account of the defects with the result that, in effect, the purchaser had already been compensated.
4. The statement of Ipp JA at [116] of Waterbrook is significant: 116 I have pointed out that where defects are patent a party, even though acting reasonably, might be unaware that major expenditure would be required to remedy them. The repair of patent defects that on their face appear to be trivial, might - on opening up the work - be found to require major reconstruction. In my opinion, applying general principles of causation, in such circumstances the knowledge of a successor in title of the patent defects might not be a new intervening cause. In that event, the chain of causation would not be broken and the successor would be able to prove that it suffered loss.
5. The issue in Waterbrook was whether a home owners warranty insurance policy which excluded liability of a home warranty insurer for "any defects in the work which would have been reasonably visible at the time any successor in title acquired the dwelling" was inconsistent with the Home Building Act by purporting to exclude the operation of ss 18B and 18D. At [115] Ipp JA noted that the breadth of the limitation in the policy was wider than the proposition set out in paragraph [110] of his decision.
6. Clearly, more is required than that the defects were reasonably obvious, or would have been obvious to a qualified building consultant. Despite the fact that the applicant did not give evidence about his knowledge of the defects at the time of purchase, there is no basis upon which I can infer that he had at the time of purchase "full knowledge" of the defects in the sense used by Ipp JA in paragraph [110] of Waterbrook.
7. The fact that the existence of a number of the defects is disputed, is itself an indication that the applicant could not have purchased in full knowledge of the defects at a price which reflected the existence of the defects. The applicant's response to the initial water penetration, as expressed in his emails to Mr Ashton, is also inconsistent with the proposition that he already had full knowledge of the defects.

Section 48MA

1. The respondent submitted that if she was found to be liable to the applicant in respect of any defects she should be given the opportunity to arrange rectification of that work herself. The respondent submitted that, pursuant to s 48MA, rectification of the work by the responsible party was the preferred course.
2. The applicant accepted, on the basis of the Appeal Panel decision in Leung v Alexiakis [2018] NSWCATAP 11, that the respondent was "the responsible party" for the purposes of s 48MA. Accordingly, in determining this claim I am required to have regard to the principle that rectification of the defective work by the respondent is the preferred outcome.
3. The applicant submitted that the Tribunal should not make a work order because: 1. The respondent has not identified how the work would be carried out; 2. The respondent does not live in New South Wales, so the Tribunal has no reason to suppose that she is capable of taking responsibility for the procurement and supervision of appropriately qualified tradesmen to carry out the rectification work; and 3. There has been no identification of the necessary contractual arrangements in terms of scope, time frame, insurance and so forth, to give the Tribunal confidence that the work could be carried out in a manner that is acceptable and reasonable to the applicant.
4. The applicant also submitted that the Tribunal should have regard to the "traditional reluctance of the Courts to order specific performance of building contracts". In this respect the applicant referred to the judgment of McDougall J in Sugar Australia Ltd v Conneq [2011] NSWSC 805 at [17] to [19]. Whilst the traditional reluctance of the Courts to order specific performance of building contracts can be acknowledged, in proceedings under the Home Building Act it is necessary to recognise that s48MA requires that traditional reluctance to be set aside.
5. Nevertheless, before it could be appropriate to make a work order it would be necessary that the Tribunal can make an order with which the respondent is capable of complying without continued supervision by the Tribunal. At the least that would require a detailed scope of works but in the case of an owner-builder it would also require the Tribunal to be satisfied that the owner builder is able and willing to undertake the necessary co-ordination of the work.
6. I note that Mr Karsai produced a document headed "Detailed Scope" which includes marked up plans indicating the areas to be rectified and describes the work required with what the applicant (who put the document forward as reflecting the scope of works which the three builders who had provided quotations for the works had offered to undertake) would presumably accept was sufficient specificity to enable a builder to be contracted to undertake the rectification work. In the circumstances it may be accepted that an adequate specification has been provided.
7. Although the Appeal Panel in Leung v Alexiakis upheld orders that the owner-builder in that case cause the work to be carried out, the orders made in that case referred to specific plans in accordance with which the work was to be carried out and identified a specific certifier who was, at the owner-builder's cost, to "confirm in writing at the conclusion of the work that all work has been done in accordance with the plans".
8. I would consider the appointment of an independent certifier almost essential in any case where a work order is made against an owner-builder.
9. I am persuaded that it would not be appropriate to make an order pursuant to s48O requiring the respondent to engage contractors to carry out the rectification of the defects for which I have found the respondent responsible. Although I accept that sufficiently detailed specifications for the carrying out of the work are available, I am not persuaded that the respondent would be able to achieve the performance of the work at less cost or more conveniently than the applicant. Indeed, by reason of the need to provide for independent certification of the work, it is likely to be more expensive to make a work order. Moreover, the applicant is apparently occupying the premises. It will be inconvenient to impose the respondent as a further point of contact between the applicant and any builders retained to carry out the rectification work.

Conclusion

1. Accordingly I will not make an order pursuant to s48O(1)(c)(i) and will order that the respondent pay the applicant the sum of $42,317.77 immediately.

Costs

1. The amount in issue in the proceedings clearly exceeded $30,000 and, therefore, pursuant to rule 38(2)(b) of the Civil and Administrative Tribunal Rules 2014 (NSW), I need not find special circumstances in order to make an award of costs.
2. As the applicant has obtained an order in his favour, he would ordinarily be entitled to an order for his costs of the proceedings.
3. However the parties have sought an opportunity to be heard on the question of costs and I will permit the parties to make submissions on costs should they be so advised.
4. I will order that, if neither party files such submissions, the respondent is to pay the applicant's costs as agreed or assessed.

Orders 1. The respondent is to pay the applicant the sum of $42,317.77 immediately. 2. Either party may file written submissions within 14 days seeking an order in relation to the costs of the proceedings. 3. If either party files submissions in accordance with order (2), the other party may file submissions in response within a further 14 days. 4. Any submissions filed in accordance with orders (2) and (3) must address the question whether the question of costs should be determined on the papers and without a hearing pursuant to s50(2) of the Civil and Administrative Tribunal Act. 5. If no submissions are filed in accordance with orders (2) and (3), the respondent is to pay the applicant's costs of the proceedings as agreed or assessed.

Civil and Administrative Tribunal of New South Wales

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: 27 September 2018