Syed v Delcon Group Pty Ltd

Syed v Delcon Group Pty Ltd - [2024] NSWCATCD 33 - NSWCATCD 2023 case summary — Zoe

[5]

Background Facts

On or about 7 September 2015, Mrs Nausheen Syed as Owner (also referred to as Mrs Syed), of the one part, and Delcon Group Pty Ltd as Builder (also referred to as Delcon), of the other part, signed a contract in the HIA form 'NSW Residential Building Contract for New Dwellings' (Building Contract or Contract) for residential building work within the meaning of the Home Building Act 1989 NSW (HB Act) to be carried out on the Owner's property at Bella Vista NSW (Property).
The Contract provided for the construction of a three (3) storey residence including in-ground swimming pool, retaining walls, and detached patio/cabana as per architectural drawings, prepared by Dela Designs AWD 100, for a contract price (including GST) of $1,350,000. Apart from the conditions of contract, the plan and specifications, and the architectural drawings, other documents forming part of the Building Contract were a Costs Estimate Report prepared by Aria Luxury Homes dated 18 August 2015, hydraulic drawings dated August 2014, and structural drawings prepared by Rafeletos Zanuttini, consulting engineers.
Works commenced under the Building Contract in or about November 2015. Between November 2015 and October 2016, Delcon performed residential building work relating to the retaining walls, drainage, ground floor slab, timber and steelworks, brickwork, cement rendering and roofing.
On 10 March 2017, KCB Waterproofing issued a certificate certifying that all wet areas were waterproofed in accordance with Australian Standards and the Building Code of Australia.
On 3 May 2017, Rafeletos Zanutti issued certificates confirming that the structural beams, floor joists, roof trusses, reinforced block wall, and concrete slabs were constructed in accordance with the required engineering design.
On or about 5 May 2017, Delcon consented to Mrs Syed, and her husband, Samad Ghafur (Mr Ghafur), moving into the Property before completion.
On or about 12 May 2017, Delcon completed the contract works at the Property. It issued a Notice of Practical Completion to the Owner on that date.
On 13 May 2017, the Owner paid the Builder the final progress claim under the Contract.
Shortly after moving into the Property, Mr Ghafur says that he noticed a leak in the living room after any light rain. The Owner similarly says that she noticed leaking in the living room through a window, as well as chipped tiles, cracks, holes in walls, and faulty bi-fold doors in the alfresco dining area.
While there is some dispute as to the date on which the Builder via its director, Wasel Delawar (Mr Delawar) was first notified of the defects, there is no doubt that on or about 25 March 2020, Mr Delawar arranged an inspection of the Property, including testing for water leaks, by Mirko Nad (Mr Nad) of Keystone Building Solutions Australia Pty Ltd.
In a written report dated 2 April 2020, with photographs and recommendations for remediation/rectification, Mr Nad reported that the Property had several water damaged areas.
On 5 June 2020, there was a meeting in Delcon's office. In attendance were the Owner, and her husband, Mr Ghafur, and Mr Delawar, and his brother and business partner, Waise Delawar (hereinafter referred to, with no disrespect intended, as Waise). It was agreed that the Builder would undertake remedial/rectification works, and a spreadsheet was forwarded by Mr Delawar with a timeline for the works.
After the meeting of 5 June 2020, during the rest of 2020 and into 2021, remedial/rectification works, including the replacement of the balustrade, were carried out by the Builder at the Property. The Owner, however, was not satisfied that the Builder's remediation/rectification works addressed the defects, and she and her husband continued to report water ingress issues in the Property.
On 3 May 2022, Mr Ghafur, on behalf of the Owner, lodged a Home Building Complaint with NSW Fair Trading. On 7 July 2022, NSW Fair Trading issued the Builder with a rectification order (Rectification Order) requiring that Delcon investigates the cause of the water penetration in the Property's residence and then undertakes all necessary remedial/rectification work by 8 August 2022.
On 2 August 2022, Delcon informed NSW Fair Trading that it had sent a water leakage expert to the Property and was waiting for the expert's report before completing all necessary remedial/rectification works for the Property.
On 21 September 2022, the Owner brought her application to the Tribunal for orders under the HB Act (Proceeding). The application and the Points of Claim filed on that day expressly stated that a money order and no other form of relief was being sought.
Relying on a report dated 6 March 2023, with expert opinions expressed in accordance with the Tribunal's Procedural Direction 3 relating to the Expert Witness Code of Conduct, as well as a Scott Schedule of defective items dated 28 February 2023, both prepared by Stephen Iskowicz (Mr Iskowicz), the Owner sought in the Proceeding, an order to pay money (HB Act, s 48)(1)(a) for the costs of remediation/rectification of eight (8) items of defective work, plus an allowance for preliminaries (10%), a builder's margin (20%), a contingency allowance (10%), and GST (10%), in an amount of up to $490,042.97, together with an order for her costs of the Proceeding.
The Builder engaged its own expert, John Cunniffe (Dr Cunniffe) who prepared an alternative scope of works and costings for the defective items. Dr Cunniffe in his report in accordance with NCAT Practice Direction 3, and his Scott Schedule, each with an 'inspection date' of 23 June 2023 and a 'report date' of 10 July 2023, expressed the opinion that the reasonable rectification cost of defective items at the Owner's Property (inclusive of preliminaries, builder's margin, contingency, and GST) is an amount of $99,691.82.
In further answer to the whole of the Owner's claims for damages in respect of breaches of the statutory warranties in s 18B of the HB Act, and for her costs in the Proceeding, the Builder said (see Points of Defence dated 10 July 2023), firstly, that the Owner is out of time to bring the Proceeding for a breach of the statutory warranties in the HB Act which does not result in a "major defect" within the meaning of subsection 18E(1)(b) of the HB Act, and secondly, that in respect of any "major defect" found by the Tribunal, the Tribunal should make a work order having regard to the principle that rectification of defective work by the responsible party is the 'preferred outcome' pursuant to s 48MA of the HB Act.

[6]

Procedural History of the Proceeding, the Parties' Exhibits for Hearing, and the Parties' Written Submissions following the Hearing.

The Proceeding was case managed in the usual manner by the Tribunal with prior directions' hearings (on 1 November 2022, and 14 March 2023) when directions were made (including, at the second directions' hearing, extensions of time) for the parties to file and serve all documents, such as lay and expert evidence, on which each sought to rely for the hearing.
The Owner filed and served her lay evidence by 17 December 2022, and her expert evidence by 6 March 2023. As indicated above, her expert evidence served on 6 March 2023 contained quantification of the Owner's claim for defective works. I observe that such quantification of damages is only required in circumstances where an order to pay money (HB Act, s 48O(1)(a)) is being sought.
At the second directions' hearing (on 14 March 2023), the Tribunal had extended the time for the Builder to file and serve its lay and expert evidence, to 17 April 2023. In fact, no evidence was filed by that date.
On 19 April 2023, the Tribunal issued a Notice of Hearing to the parties. The Notice informed the parties that the Proceeding had been listed for a two-day hearing on 11 and 12 July 2023.
The parties had been granted leave for legal representation in the Proceeding at the first directions' hearing on 1 November 2022: see order 2. In fact, the Owner was represented by the same solicitors throughout the Proceeding, who instructed counsel for the hearing on 11 and 12 July 2023 and for a later hearing (referred to below) on 21 November 2023.
The Builder had engaged solicitors (Fortis Law) to represent it in the Proceeding. On 19 June 2023, the Builder's solicitors made an application to the Tribunal on behalf of their client requesting an extension of time within which to file and serve their client's lay and expert evidence, and for an adjournment of the hearing on 11 and 12 July 2023.
On 22 June 2023, the Builder's application was refused by the Tribunal. The Tribunal made the following orders and gave the following reasons: 1. The Respondent's further request to extend the time for its compliance with the procedural directions first made on 1/11/2022 is refused. 2. The application to adjourn the hearing set down for 11 and 12 July 2023 is refused. Reasons: The Respondent has failed to provide an acceptable explanation for its continuing delay in compliance with the Tribunal's procedural directions. The applicant is entitled to determination of the claim within a reasonable time having regard to the Tribunal's Guiding Principle which is just, quick, and cheap resolution of the real issues in the proceedings.
On 27 June 2023 the Builder filed a further application to adjourn the July hearing, which was refused by the Tribunal on 30 June 2023.
On 4 July 2023, the Builder's then solicitors (Fortis Law) withdrew from acting for the Builder, i.e., a matter of days only prior to the scheduled hearing.
On 10 July 2023, the day before the hearing, the Builder served its Points of Defence, and its lay and expert evidence. The Points of Defence expressly raised s 48MA of the HB Act (see [12]), and the lay evidence (see the Witness Statement of Mr Delawar at [20] - [25]) expressly addressed matters pertinent to the nature of the relief the Tribunal should grant.
Mr Delawar as director of the Builder represented Delcon at the hearing on 11 and 12 July 2023. The Builder then retained new solicitors during September 2023, who instructed counsel and represented the Builder at the later hearing on 21 November 2023.
For the hearing on 11 and 12 July 2023, the parties filed and served their own separate bundles of documents. The Owner's bundle (Exhibit 1) included her application lodged on 21 September 2022 with points of claim, the Owner's witness statement of 17 December 2022 and her exhibit NS -1, Mr Ghafur's witness statement of 17 December 2022 and his exhibits SG - 1 and SG - 2, Mr Iskowicz's expert report of 6 March 2023, and Mr Iskowicz's Scott Schedule of 28 February 2023, and some documents produced on summons by Sydney Building Certifiers.
The Builder's bundle (Exhibit 2) included a letter dated 10 July 2023 requesting an adjournment of the July hearing (Builder's Third Adjournment Application), the Points of Defence to the Owner's Points of Claim, the witness statement of Mr Delawar dated 10 July 2023 and his exhibit WS - 1, a witness statement of Waise Delawar also dated 10 July 2023 and Waise's exhibit WS - 2, and the expert report and Scott Schedule of Mr Cunniffe.
On the first day of the hearing, 11 July 2023, I refused the Builder's Third Adjournment Application. It was opposed by the Owner's counsel. Referring to the procedural history and to the Builder's failed first and second adjournment applications, I further noted that the Builder had since the advent of the Proceedings, the benefit of legal representation (and accordingly, an opportunity to obtain advice in respect of the Proceeding, and to prepare for the hearing) up until its solicitors' withdrawal on 4 July 2023; see also Transcript Day 1 (11.7.2023) 10.28 - 12.7. Further, even though the Builder's bundle of documents (including expert report) had been served out of time, I admitted the documents into evidence, as Exhibit 2, as the Owner's counsel indicated that he was able to deal with the late evidence without the need for the Proceeding to be adjourned. Furthermore, I was unpersuaded that the hearing could not proceed with Mr Delawar as the Builder's director presenting the Builder's case, and in circumstances where Mr Delawar could put questions to the Owner by way of cross examination as regards the nature of the relief (including work order) that the Tribunal should grant. Although recognising that Mr Delawar has no formal legal qualifications, as an architect by trade, I considered he could, and should, understand technical matters, especially as regards scopes of works for rectification of home building defects, such as would enable him to ask informed questions when the parties' experts gave their evidence in joint session. In this regard, the Builder's expert, Dr Cunniffe, was present for the hearing and available to give oral evidence, as was the Owner's expert, Mr Iskowicz.
Accordingly, I determined in all those circumstances that granting the Builder's Third Adjournment Application would be inconsistent with the Tribunal's guiding principle in s 36(1) of the Civil and Administrative Tribunal Act 2013 NSW (NCAT Act), and that adjourning the Proceeding to a later date would not facilitate the just, quick, and cheap resolution of the real issues in the Proceeding.
Moreover, as no evidence was taken on the first day of the allocated time (2 days) for the hearing, as a matter of procedural fairness, Mr Delawar was given further time to obtain professional advice (if he wished to do so) and to prepare for the hearing the following day. This was because I had directed the parties' experts to use the rest of the first day of the hearing, to confer and then to prepare a joint report (in the form of a Scott Schedule) identifying their areas of agreement and disagreement, and in respect of their disagreements, the reasons for the disagreements.
As matters transpired, the experts' differences as to the quantum of the remediation/rectification costs to the Owner were in fact, narrowed very significantly because of the preparation of their Joint Report, which was available at the commencement of the second day of the hearing, on 12 July 2023, and became Exhibit 3. Ultimately, Dr Cunniffe adopted the same methodology and hourly rate as Mr Iskowicz, and their disagreement was confined to the number of personnel and hours to perform the various remediation/rectification works.
Also, on the second day of the hearing (12 July 2023), I asked the Owner a question that went directly to the nature of the relief the Tribunal should grant (i.e., why a money order, and not a works' order). Indeed, my question to the Owner was prompted by Mr Delawar. He had put the issue of s 48MA (raised in the Builder's Points of Defence) to Mrs Syed in cross-examination, when suggesting to her the possibility of the Builder going back to the Property to "repair the works". My question as to her reasons for a money order then arose when Mrs Syed had rejected that possibility.
At the conclusion of the hearing on 12 July 2023, I reserved my decision and directed the parties to file and serve written submissions including the findings of fact and law for which each party contended in their respective cases. With an extension of time allowed, the Tribunal then received the Owner's Closing Written Submissions dated 12 September 2023 (Owner's Closing Submissions) with a transcript of the hearing (Transcript).
On 19 October 2023, which was before the Builder had lodged its closing submissions, the Builder's new solicitors lodged on their client's behalf, an application to re-open the case: see the Application for miscellaneous matters (Application to Re-open), the affidavit of Mr Delawar dated 19 October 2023, and the supporting written submissions of six (6) pages prepared by the Builder's counsel. The Builder sought leave to file and serve additional evidence on whether the Tribunal should make a work order under s 48MA and/or s 48O(1)(c) of the HB Act (the Work Order Issue).
At a hearing on 21 November 2023, I declined the respondent's Application to Re-open (as to why, see later in these Reasons). I also extended time for the respondent's closing written submissions and the applicant's submissions in reply.
The Tribunal has now received the Builder's Closing Written Submissions dated 6 December 2023 (Builder's Closing Submissions) and the Owner's Submissions in Reply dated 31 January 2024 (Owner's Submissions in Reply).

[7]

Overview of the Issues in Dispute

There are three (3) principal issues for the Tribunal's determination in the Proceeding: 1. Whether some or all the defects in the Owner's case, are "major defects" within the meaning of s 18E of the HB Act (the Jurisdiction Issue), 2. The Work Order Issue, and 3. If a work order is not made, what is the quantum of the Owner's claim, considering the experts' written and oral evidence (the Quantum Issue).
In making my decision in relation to the Owner's application for orders of the Tribunal under the HB Act, I have considered the entirety of the written material, as referred to, and the written submissions and supporting documents of the parties, also as referred to. In addition, I have read the Owner's Transcript, which was provided with the Owner's Closing Submissions on 12 September 2023. I have also relied upon my own recollections of the evidence given at the hearing, but particularly my impressions of the evidence in joint session of Mr Iskowicz and Dr Cunniffe. Some of their oral evidence was in response to questions from me.
In these Reasons for Decision, I focus on the material which is central to the considerations of the application for orders of the Tribunal; but to the extent that these Reasons may not refer to a specific piece of evidence or singularly deal with a submission of a party, it should not be assumed that I have ignored that evidence or submission.
As in any civil proceedings, applicants for orders of the Tribunal bear the legal onus of presenting sufficient evidence to satisfy the Tribunal to the requisite standard of proof, i.e., on the balance of probabilities, that the orders sought in the application must be made. As indicated, in respect of her case for defective residential building work arising from breaches of the statutory warranties in s 18B of the HB Act, the Owner sought an order to pay money on account of the remediation/rectification costs, as found by the Tribunal, whereas the Builder sought a work order.

[8]

Applicable Law

In determining Delcon's Application to Re-open, I must give weight to the dictates in the Civil and Administrative Tribunal Act 2013 NSW (NCAT Act), as to procedure and practice, in s 36 and s 38. The Tribunal determines its own procedure informed by the guiding principle, which is to facilitate the just, quick, and cheap resolution of the real issues in the proceedings (NCAT Act, s 36(1), s 38(1)). It is not bound by the rules of evidence and may enquire into any matter in such manner as it thinks fit, subject to the rules of natural justice (NCAT Act, s 38(2)). The Tribunal is also required to act with as little formality as necessary, to avoid technicalities and legal forms, and to ensure as far as practicable that all relevant material is disclosed to the Tribunal (NCAT Act, s 38(4), s 38(6)(a)).
While Delcon's application should be determined in a manner consistent with s 36 and s 38 of the NCAT Act, the general law surrounding leave to re-open also guides and informs how the Tribunal's discretion ought to be exercised.
As a broad proposition, in Urban Transport Authority of NSW v Nweiser (1982) 28 NSWLR 471 at 478 (Nweiser), Clarke JA (with whom Mahoney and Meagher JJA agreed) pointed to the relevance, in an application to reopen, of the question "whether the interests of justice are better served by allowing or rejecting the application as the case may be". His Honour observed in Nweiser that it is relevant to take account of likely prejudice to the party resisting the application and the reasons why the evidence, the subject of an application to re-open, was not led in the first place.
In Rodriguez & Sons Pty Ltd v Queensland Bulk Water Supply Authority trading as Seqwater (No 18) (2018) NSWSC 1828 (Rodriguez), applying Nweiser, Beech-Jones J said (at [57] - [62]) that the various factors affecting an assessment of the interests of justice include the following: [58] First, the nature and significance of the evidence sought to be adduced (Nweiser at 477; ASIC v Rich [2006] at [18(e), (h) and (i)]). [59] Second, the timing of the application in the context of the litigation as a whole (The Movie Network Channels Pty Ltd v Optus Vision Pty Ltd [2009] NSWSC 132 at [4]). [60] Third, the circumstances surrounding the failure to adduce the evidence at an earlier stage in the proceedings (CPA; s 58(2)(b)(iv)) ASIC v Rich at [16] and [18((b),(d) and (i)]) including any delay in making the application (CPA; s 56(2)(b)(ii) and (iii)). In particular, if there was a deliberate decision made not to call the evidence then "ordinarily that will tell decisively against the application" (Smith v New South Wales Bar Association [1992] HCA 36; (1992) 176CLR 256 at 266-7). On the other hand, if the necessity to call the evidence could not have been reasonably foreseen then that will favour the application (Nweiser at 479 to 480) although if the evidence was not called through mistake or inadvertence then "the justice of the case may well point to the granting of the application" (Nweiser at 476). Any failure or compliance by a party with its under obligations under s56(3) of the CPA bears upon the exercise of the power to reopen (CPA; s 58(2)(iv)). [61] Fourth, the degree of injustice or prejudice to the party resisting the tender both in terms of the decisions they have made in the course of the litigation to that point, and the additional cost, expense and inconvenience occasioned to that other party (CPA s56(2)(b)(iv); ASIC v Rich at [18(g)]; and generally, Aon Risk Services Australia Ltd v ANU (2009) 239 CLR 175; [2009] HCA 27; "Aon"). [62] Fifth, the public interest in the timely resolution of proceedings including the impact on other litigants of delays in the resolution of these proceedings (CPA s 58(2)(a) and s57; Aon; ASIC v Rich at [18(h)]).
Rodriguez refers to the Civil Procedure Act 2005 NSW (CPA) in s 56 and s 58, which are provisions of that Act directed to procedure and practice in the Supreme Court of New South Wales. Pertinently, the 'overriding purpose' (see CPA, s 56(1)) in the application of the Supreme Court's procedure to civil proceedings, is put in the same terms as the 'guiding principle' in s 36(1) of the NCAT Act.
The authorities support a conclusion that no single factor or group of factors is determinative in deciding whether to grant an application for leave to re-open. The primary consideration must be what the interests of justice require in a particular case, not whether the case falls within a defined category.

[9]

Consideration

I declined the Application to Re-open for the following reasons.
This is not a case where a failure to adduce evidence about the Work Order Issue could not have been reasonably foreseen at an earlier stage of the Proceeding. When the Proceeding was brought to the Tribunal on 21 September 2022, the Owner's application and the Points of Claim filed on that day, expressly stated that a money order and no other form of relief was being sought. The Builder had the benefit of legal representation from at least November 2022 (i.e., the first directions' hearing) until Fortis Law withdrew from acting for the Builder on 4 July 2023. Referring to the preferred outcome in s 48MA of the HB Act, the Builder's Points of Defence (at [12]) raised the Work Order Issue in answer to the whole of the Owner's claim. It was a document prepared by Fortis Law, but it was not filed before they ceased acting for the Builder - see the affidavit of Mr Delawar sworn 19 October 2023 at [6].
Materially, I adverted to the importance of the s 48MA issue on the first day of the hearing: see Transcript Day 1 (11.7.2023) 6.21 - 7.31, given what the Builder put in its points of defence. Moreover, as indicated above, the Builder was able to cross-examine Mrs Syed on the Work Order Issue during the second day of the hearing, in fact, suggesting to her the possibility of the Builder going back to the Property to "repair the works", which prompted a follow-up question from me on that matter, and an answer to my question from Mrs Syed: see Transcript Day 2 (12.7.2023) 57.5-20. Mr Delawar was then permitted to cross examine further on the matter: see Transcript Day 2 (12.7.2023) 58.6-25.
In my view, the need to adduce evidence addressing whether a work order should be made in the Proceeding, was quite plain. It was obvious from the outset of the Proceeding, particularly to experienced and skilled legal practitioners as had been engaged by the Builder, that the Work Order Issue was important in the Builder's defence of the Owner's claim. In its case management of the Proceeding and in the lead-up to the 2 day hearing commencing on 11 July 2023, as outlined above, the Tribunal afforded the Builder (who was then legal represented), ample opportunity to comply with directions that it provide to the Tribunal and the other party all documents on which it sought to rely in opposition to the Owner's claim, including granting the Builder an extension of time to comply with the Tribunal's prior directions.
I considered the affidavit of Mr Delawar sworn 19 October 2023 in support of the Application to Re-open. It appeared to me that the Builder did not wish to adduce new evidence on the Work Order Issue; rather, the Builder sought to improve its existing evidence on that issue, especially as to the Builder's preparedness, and its capacity and willingness, to comply with a work order of the Tribunal. In the circumstances, I found that improving its existing evidence on the Work Order Issue, is not a proper basis to grant the Builder's Application to re-open. To the extent it was said that the Builder suffers prejudice if denied the opportunity to present better evidence (as opposed to new evidence) on the Work Order Issue, that circumstance is of its own making. To the extent it may be said that the Builder's then lawyers, Fortis Law, did not provide adequate advice on the Builder's evidence for the Work Order Issue (c.f., affidavit of Mr Delawar sworn 19 October 2023 at [8]), the Builder's proper recourse is against those legal advisors.
The Application to re-open was made in October 2023, being more than 3 months after the hearing of the evidence had been completed, and I had reserved my decision. I considered that the Builder's Application, if granted, would significantly delay the Proceeding, because, inevitably, a further hearing (with an opportunity for cross examination of Mr Delawar) would follow some months later. In this regard, the Builder's submissions in support of the Application to re-open contemplated that if the Application is granted, there would be directions for the Builder to file and serve its further evidence on the Work Order Issue and then for the Owner to file and serve any evidence in reply. Therefore, I found that in the circumstances of this case granting the Builder's Application to re-open, would not align with the Tribunal's guiding principle in s 36(1) of the NCAT Act.

[10]

Applicable Law

Pursuant to s 18E(1) of the HB Act, proceedings must be commenced before the end of the warranty period for the breach. The warranty period: 1. is 6 years for a breach of a statutory warranty that results in a "major defect", as defined in subsection 18E(4), or 2 years in any other case: subsection 18E(1)(b), and 2. starts on completion of the work to which it relates: subsection 18E(1)(c).
Subsection 18E(4) provides, relevantly: (4) In this section - "major defect" means - 1. 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 - 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, or 1. a defect of a kind that is prescribed by the regulations as a major defect, or 2. the use of a building product (within the meaning of the Building Products (Safety) Act 2017) in contravention of that Act. … "major element" of a building means - 1. 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 2. a fire safety system, or 3. waterproofing, or 4. any other element that is prescribed by the regulations as a major element of a building.
It is common ground that practical completion of Delcon's building works at the Property, occurred on 12 May 2017 (when the notice of practical completion was issued), and by which time the Owner and Mr Ghafur had moved into the new residence on the Property.
Pursuant to subsection 18E(1)(a), proceedings must be commenced before the end of the warranty period for the breach. The Owner commenced the Proceeding against Delcon on 21 September 2022. Therefore, to the extent that the Owner's claim relates to defects which are not "major", as defined in subsection 18E(4), the Tribunal has no jurisdiction to determine the claim, or part of claim.

[12]

Item 2 - First Floor balcony

In his report (Exhibit 2 page 16 at 8.12), the Builder's expert, Dr Cunniffe, relevantly stated: "I agree that the upper-level balcony waterproofing is a major defect as defined by the Act". The experts' Joint Report, signed by Dr Cunniffe, confirmed that Item 2 was agreed to be with respect to a "major element" of the building and therefore a "major defect" under the HB Act: see Exhibit 3 page 4 at [2] under 'Classification'.
In the Builder's Closing Submissions, although this was not put to either expert during the hearing, it is said that Item 2 is not a major defect, as defined in the HB Act. Nor was the proposition that Item 2 was not "likely" to cause an inability to inhabit or use part of the building for its intended purpose, put to either expert, or to the Owner's lay witnesses, herself, and Mr Ghafur.
The Builder's submission now made as to Defect Item 2 has the effect of depriving the Owner of procedural fairness and natural justice. This is because I can reasonably infer that had the Builder made known at the hearing (notwithstanding its own expert's evidence), there was a contest as to whether Item 2 was a major defect, then the Owner would have conducted her case at the hearing differently, including (for example) to cross-examine Mr Delawar, if in fact, the Builder's contention is that Item 2 was not "likely" to cause an inability to inhabit or use part of the building for its intended purpose.
In any case whether Item 2 is major defect, as defined, is a question of fact: Vella v Mir [2019] NSWCATAP 28 at [47] - [49], [58] - [63]; Stevenson v Ashton (2019) NSWSC 1689 at [74], [87], [92]. Weighing all the available evidence for the hearing, I am satisfied that Defect Item 2 is, within s 18E(4), "likely" to cause an inability to inhabit or use part of the building for its intended purpose.
Mrs Syed gave evidence on this issue in her Witness Statement dated 17 December 2022 (at [21] and [22] - see Exhibit 1, pages 14 and 15). That evidence was unchallenged. I am satisfied that the extent of water ingress in the relevant areas of the Property is "likely" to cause an inability to inhabit or use part of the building (i.e., the Owner's residence) for its intended purpose. It is not necessary for the Owner to establish that she had to 'vacate' the Property (c.f., Builder's Closing Submissions at [27]) - that is not the language of the definition of major defect in s 18E(4) of the HB Act.
Mrs Syed's evidence is supported by the objective evidence including the photographs taken by Mr Iskowicz, which clearly show: 1. Extensive black mould on the balcony areas - photos 2 - 19, Exhibit 1 pages 379 - 396, 2. Fungal growth on timber elements - photo 20, Exhibit 1 page 397, 3. Water damage caused by the water ingress to structural floor joists - photos 21 and 22, Exhibit 1 pages 399 - 400, 4. Water damage caused by the water ingress to structural steel elements' joists - photo 24, Exhibit 1 page 401, 5. Evidence of water ponding on the balcony floor surface - photos 31 and 32, Exhibit 1 pages 408 - 409, 6. A video taken on 26 July 2020 by Mr Ghafur showing the extent of water ingress into the Owner's residence and the pooling of water on tiled surfaces creating an obvious slip hazard - see Witness Statement of Mr Ghafur dated 17 December 2022 at [13] and SG - 2 referred to in the Statement.
For those reasons, I find that Item 2 is a major defect, as defined in the HB Act.

[19]

The Work Order Issue

As indicated, the Owner has always sought a money order in her defects' case, specifically, a money order that is consistent with Mr Iskowicz's scope of works and costings. She opposes any order that the Builder is to rectify defective work.
On the other hand, the Builder argues for a work-order (HB Act, s 48O(1)(c)). It agrees (see the 'Proposed Work Order', which is attached to Builder's Closing Submissions) that it will carry out rectification/remediation works at the Owner's Property in accordance with the scope of works in Mr Iskowicz's report in respect of all Items found to be major defects. The Builder also accepts the appointment (at the Builder's own cost) of an independent expert to inspect the Builder's work; it accepts that the terms of the Tribunal's work-order must require the Builder to comply with all reasonable directions of the said expert; and it accepts that the said expert must approve the Builder's work to completion within a reasonable timeframe. The Builder relies on s 48MA of the HB Act which provides that the Tribunal is to have regard to the principle that rectification of the defective work by the responsible party (in this instance, the Builder) is the "preferred outcome".
The language of s 48MA makes clear that a work-order is the "preferred outcome", but not a "mandatory outcome": Galdona v Peacock [2017] NSWCATAP 64 at [65].
The Tribunal retains discretion as to whether (or not) in all the circumstances of a particular case, it is appropriate to make a work-order.
On the available evidence, I am satisfied that this is a case where the Tribunal should depart from the "preferred outcome".
Any work-order made by the Tribunal as the preferred outcome would be subject to a right of renewal of the Owner under cl 8 of Sch 4 of the NCAT Act in the event of non-compliance with the work-order by the Builder. While I accept that the Builder is licensed and insured, and that Mr Delawar may understand the legal effect of a work-order of the Tribunal, and the importance of compliance with any work-order, it is also the fact that the Builder has not always acknowledged the true nature and extent of the defects. Nor has the Builder always acted in a timely manner to investigate, and then to rectify, satisfactorily, or at all, the defects in the Owner's Property, for which it was responsible. In this regard, I observe that even in respect of Mr Delawar's lately served written evidence (i.e., his Witness statement dated 10 July 2023), other than general statements (at [27], with attached doctor and psychotherapist reports dated 22 and 23 June 2023) bearing upon Mr Delawar's own personal "ongoing mental (health) issues", there is no evidence about the Builder's (i.e., the company's) reasons for not complying with the Rectification Order dated 7 July 2022, which was issued by NSW Fair Trading.
The Rectification Order required the Builder to carry out incomplete and defective work by 8 August 2022. As regards defective work, the Rectification Order stated, relevantly: Investigate as required to determine the cause of why water is penetrating the first-floor external tiled balcony and on to the internal plasterboard ceiling lining of the bedroom directly below causing damage. Undertake all necessary remedial works engaging suitably qualified contractor for such remedial works required and finish to an acceptable industry standard. Reference: AS 4654.2 - 2012 Waterproofing membranes for external above ground use - Design and installation
In the events which occurred, Fair Trading NSW confirmed to the Owner on 12 August 2022, that the Builder had failed to comply with the Rectification Order. If there were any personal mental health issues affecting the director of the company which had impacted upon the Builder's ability to comply with the Rectification Order within the time required by Fair Trading NSW, these issues had not been communicated to Fair Trading NSW at the time. The correspondence to the Builder from Fair Trading NSW was a serious matter in the operation, administration, and management of the Builder company, because any non-compliance with a rectification order is a breach of the obligations imposed on a licence holder under the HB Act. Apparently, the Builder did not seek an extension of time within which to comply with the Rectification Order. In that context, the Owner had brought the Proceeding to the Tribunal on 21 September 2022.
As indicated, there is no doubt that the Owner expressly requested a money order in her application filed with the Tribunal on 21 September 2022. Clearly, this was well before the Builder put any remediation/rectification proposal to the Owner in the form of a 'Proposed Work Order' that was attached to the Builder's Closing Submissions dated 6 December 2023.
I am satisfied that personal relations between the parties have broken down irretrievably. I observed the discord between Mrs Syed and Mr Delawar at the hearing on 12 July 2023. In her oral evidence, which was subject to cross examination by Mr Delawar and to questioning by me, Mrs Syed expressed genuine concern, which I accept, in the events that have happened since 2017, about the Builder's ability to attend to remediation/rectification work at the Owner's Property with due care and skill, and in a timely manner. There is no doubt that the defects in the Owner's claim are significant and substantial. Even on Dr Cunniffe's (lower) costings for the defects, the total cost to remediate/rectify the defects exceeds $391,000.
Of course, personal animosities between a builder and a homeowner, in and of themselves, are not sufficient to displace the "preferred outcome" in s 48MA; nevertheless, the relevant discretion of the Tribunal in the HB Act (s 48O(1)(c) and s 48MA) to make a work-order must be exercised objectively, and a relational breakdown between a homeowner and a builder is an element of the Tribunal's objective assessment. As the Appeal Panel observed in Brennan Constructions Pty Ltd v Davison [2018] NSWCATAP 210 at [20]: … in deciding what order should be made, a court or tribunal may consider whether there is a reasonable basis for any objection raised by the homeowner to the builder being permitted to rectify the defective work, the terms of any order, whether the builder is willing to return and whether such an order would support a timely and cost effective resolution of the dispute.
I am satisfied on the available evidence that multiple opportunities were given to the Builder to rectify the defects, and that the Builder's inability to do so, militates against a work-order being made. I find that the Builder was informed as early as May 2017 that there were substantial defects adversely affecting the Owner's amenity in her residence. I further find that the Builder did not adhere to its written commitment to rectify the defects by 2 July 2020 and that it was even unable to rectify the list of defects it had prepared at that time, or at all. Further, in 2022, the Builder did not comply with the Rectification Order.
Contrary to the Builder's Closing Submissions, there is no evidence that Mr Delawar's familiarity with the design of the residential build on the Owner's Property is likely to yield efficiencies which would not be available to arms-length contractors engaged by the Owner to remediate/rectify the Builder's defects. In my determination, a builder's familiarity with a project (whether in a design, or in a construction, sense) is not an essential requirement as would justify the Tribunal making a work-order, and especially so in the present circumstances, where I am satisfied that there are already detailed scopes of work prepared by Mr Iskowicz to rectify each item of defective work.
Under the Proposed Work Order (attached to the Builder's Closing Submissions), the Builder is required to pay for an independent expert to certify the Builder's work, at various stages of the remediation/rectification works. Given the Builder's reluctance in the past to truly acknowledge the nature and extent of the defects, and what is required to rectify them, I find that even with the Builder carrying out remediation/rectification work under the terms of the 'Proposed Work Order', this is an outcome which is reasonably likely to lead to the Owner's case coming back before the Tribunal on a renewal application. Therefore, the Tribunal's discretion to make a work-order is not engaged in the circumstances of this case because I am not satisfied that a work-order would bring finality to the Owner's Proceeding, an outcome which is not consistent with the Tribunal's guiding principle in s 36(1) of the NCAT Act.
For those reasons, I find that an order to pay money is the appropriate relief (HB Act, s 48O(1)(a)) for the remediation/rectification of each of defect Items 1 - 8 in the Joint Report within the scope of works put by Mr Iskowicz in his written and oral evidence.

[20]

Generally

As indicated, the experts had their differences as to the cost to fix some defects, as referred to in the Joint Report. In that context, the Builder advocated that it is fair and reasonable that the Tribunal adopt a figure "at the midpoint of (the experts') estimates": see Builder's Closing Submissions at [77].
The following principles are pertinent. The Owner always bears the onus of proof on the issue of defects. She must establish, as a matter of fact, that any rectification work is necessary to produce conformity with the Building Contract and that the expenditure of money on the proposed rectification is reasonable: see, for example, The Owners - Strata Plan 62930 v Kell & Rigby Holdings Pty Ltd [2010] NSWSC 612 at [249], Bennett v Lavery [2014] NSWCATAP 118 at [52] - [53].
Accordingly, the scope of remedial works must not be disproportionate to the defect, such that the Tribunal will not order damages for rectification where the proposed remedial work is not a reasonable course to adopt: Bellgrove v Eldridge (1954) 90 CLR 613 at 617 - 619, [1954] HCA 36 (Bellgrove v Eldridge). An example of where the proposed remedial work is not "a reasonable course to adopt" (Bellgrove v Eldridge, at 618) is where the expenditure on the proposed rectification work is out of all proportion to the benefit to be obtained: Ruxley Electronics & Construction Ltd v Forsyth (1966) 1 AC 344.
Nevertheless, if experts have expressed differing opinions about the cost of fixing defects, and the defects are, as I have found in this instance, ones for which the Builder is responsible, then where within the proved case, there is a range, the wrongdoer can hardly complain if the loss is found at the upper end of the range: see McCartney v Orica Investments Pty Ltd [2011] NSWCA 337 at [158] per Giles JA (with whom Macfarlan and Young JJA agreed)
To the extent there is any divergence of opinion as to costings in the Joint Report, I prefer Mr Iskowicz's costings, which are considered and detailed. There is no doubt that Mr Iskowicz had much more time than Dr Cunniffe to provide an opinion as to costings for remediation/rectification of the defects. That Mr Iskowicz had much more time was rightly acknowledged by Dr Cunniffe as he gave his oral evidence. Notably, Dr Cunniffe embraced during the hearing, other aspects of Mr Iskowicz's costings, such as the hourly rate. Dr Cunniffe further agreed that there had been a general increase in building costs in the current commercial environment that had not been accounted for in either expert's costings: Transcript (12.7.2023) 17.35 - 18.5.
Moreover, during his oral evidence on the second day of the hearing, Dr Cunniffe accepted that some of his costings were lacking, and he made additional allowances. For example, there was an increase of 70% in his original costings for Item 4, from $225 per weephole to $385 per weephole, which resulted in a total cost increase for that Item from $18,000 to $30,800: Transcript (12.7.2023) 28.20-25. Similarly, Dr Cunniffe conceded in cross-examination, that his costings in Item 5 of $215 per window, were too low: Transcript (12.7.2023) 37.1-5.

[22]

Item 2 - First Floor Balcony ($63,988.64 found)

I prefer Mr Iskowicz's costing of $63,348.64 as the trade cost for this Item. Dr Cunniffe's trade cost for this Item was $57,719.84. Within Item 2, paragraphs 1.3 to 1.11, 1.18, 1.20, 1.21, and 1.21, are agreed by the experts. The contest with the residual paragraphs is as to the number of persons involved (with Mr Iskowicz allowing for a tradesperson and one or two additional labourers for certain tasks), and as to the amount of time it takes to carry out the task.
In essence, the Builder's case is that Mr Iskowicz's allowances for the paragraphs which are not agreed, are excessive. The Builder advocates that it would be fair and reasonable for the Tribunal to adopt the mid-point of the experts' respective estimates, being $60,534.24: see the Builder's Closing Submissions at [83].
On the available evidence, I am not persuaded that I should depart from Mr Iskowicz's estimate. Apart from my general preference for Mr Iskowicz (as stated above), my other reasons particular to this Item 2 for preferring him, are as follows. As regards the number of persons involved, I accept Mr Iskowicz's evidence that a labourer, while needed to carry out tasks such as heavy lifting, should not be left on site without the direction or supervision of a skilled tradesperson: Transcript (12.7.2023) 12.1-8, 13.5-25. With respect to the amount of time (i.e., hours) it takes to carry out a relevant task in fixing the defect, I accept Mr Iskowicz's evidence that there would be a minimum charge out fee: Transcript (12.7.2023) 10.1-30. I also see no reason why Mr Iskowicz's $400 charge for cleaning (paragraph 1.24), which was not challenged, should not be accepted by the Tribunal.
There is also an additional $640 that was inadvertently omitted from paragraph 1.21 and in respect of which both experts agreed is reasonable: Transcript (12.7.2023) 18.1-10, see also Exhibit 1 pages 592 - 593. When the additional amount is added to Mr Iskowicz's costing as stated in Exhibit 3, I find that the trade cost for Item 2, is $63,988.64.

[30]

Conclusion as to Quantum

The trade costs I have allowed for each of Defect Items 1 to 8, total $306,813.78.
With preliminaries (10%), margin (20%), contingency (10%), and GST (10%) progressively added, I find that the compensation amount for remediation/rectification costs (HB Act, s 48O(1)(a)), is $490,042.97.
In the Owner's Submissions in Reply dated 31 January 2024 at [5.14], the Owner seeks a total amount of $495,534.17, which includes in addition to the costs of remediation/rectification of the Defect Items 1 to 8 ($490,042.97), a further amount of $5,491.20 on account of the Owner's out-of-pocket-expenses in paying to rectify motorised blinds in the living room of her residence.
I find that the Owner's claim for the further amount of $5,491.20 has a proper evidentiary foundation in the Statement of Mr Ghafur dated 17 December 2022 at [15], and in Exhibit 1 at pages 155 - 156 (being the Tax Invoice, paid by the Owner). Mr Ghafur's evidence was not challenged by the Builder during the hearing, and further, it is supported by the objective evidence that there was water ingress in that area of the Owner's residence, caused by defects for which the Builder was responsible. Furthermore, the Builder did not lead any evidence in reply.
The Owner's Closing Submissions dated 12 September 2023 did not expressly refer to the evidence about the further amount of $5,491.20, but I do not consider that circumstance is fatal to Builder's claim in that further amount.
In my view, there can be no doubt that the Owner always claimed a further amount for her out of-pocket expenses based upon Mr Ghafur's evidence and the Tax Invoice. This is because at [5.2] of the Owner's Closing Submissions dated 12 September 2023, the Owner's total claim is stated to be $495,329.70, and therefore, as not just a claim for remediation/rectification costs (calculated, as indicated, based upon a trade cost for Defect Items 1 to 8, plus agreed percentages for preliminaries, builder's margin, contingency, and GST, progressively added to reach a grand total) in an amount of $490,841.57. While the amount for remediation/rectification costs was stated on 12 September 2023 in an amount which is higher than the amount for remediation/rectification costs ($490,042.97) now sought in the Owner's Submissions in Reply (and which is the amount I have found to be the appropriate amount of compensation for remediation/rectification costs), I am satisfied that the difference is explained by the earlier error in the trade cost for Defect Item 4 (see above), which was not picked up in the Owner's Closing Submissions, but which, when corrected in the Owner's Submissions in Reply, reduced the trade cost for that Item from $106,740 to $106,240.
In the circumstances, that the Builder did not take issue with the Owner's claim for the further amount of $5,491.20 in its Closing Submissions dated 6 December 2023, is unsurprising, given that the evidence as to the Owner's expense of $5,491.20 was not challenged by the Builder at the hearing, and as indicated, the Builder did not lead any evidence to dispute the Owner's claim.
For those reasons, I am satisfied that the Owner has made out her case for an order to pay money in the amount of $495,534.17.

[31]

Costs of the Proceeding

The Owner submitted that the parties should be heard as to the issue of the costs of the Proceeding at the appropriate time. Be that as it may, in the interests of the just, quick, and cheap resolution of the real issues in the Proceeding (NCAT Act, s 36(1)), I have determined to express a preliminary view on the issue of the costs of the Proceeding, while also allowing the parties, if they so wish after considering these Reasons for Decision, to make a separate application as to their costs of the Proceeding (supported by written submissions).
As is well known, the starting point in any application for costs is that parties to proceedings in the Tribunal are to pay their own costs: see s 60(1) within Part 4 'Practice and Procedure' of the NCAT Act. Subsection 60(2) provides costs are awarded only if the Tribunal is satisfied that there are: "special circumstances warranting an award of costs". Subsections 60(3)(a) - (g) of the NCAT Act then set out various matters which the Tribunal may have regard to in determining whether there are special circumstances warranting an award of costs.
Each of the provisions of Part 4 of the NCAT Act is subject to enabling legislation and the "procedural rules": NCAT Act, s 35. As defined in s 4 (1) of the NCAT Act, "procedural rules" means the Civil and Administrative Tribunal Rules 2014 NSW (NCAT Rules).
Rule 38 of the NCAT Rules relates to costs in the Consumer and Commercial Division of the Tribunal. Rule 38(2) says that despite s 60 of the NCAT Act, the Tribunal may award costs in the absence of special circumstances warranting such an award if the amount claimed is more than $10,000.00 but not more than $30,000.00 and the Tribunal has made an order under cl 10(2) of Sch4 of the NCAT Act in relation to the proceedings, or the amount claimed or in dispute in the proceedings is more than $30,000.00.
Because the amounts in issue in the Proceeding clearly exceeded $30,000, I find that r 38 of the NCAT Rules applies. Accordingly, the usual position under s 60 of the NCAT Act is modified by r 38 of the NCAT Rules and the Tribunal may award costs without "special circumstances".
In the exercise of the Tribunal's discretion as to costs under r 38, the usual position is that costs "follow the event". In Hawkesbury District Health Service Limited v Chaker (No 2) [2011] NSWCA 30 at [10] - [11], the Court of Appeal said that the substance and the reality of the outcome of a proceeding is the key consideration as to who is the successful party "in the event". In these Reasons for Decision, I have found that the Builder's case as regards each of the Jurisdiction, Work Order, and Quantum Issues, is not made out on the available evidence.
Having regard to those findings, my preliminary view is that the successful party in the overall outcome of the Proceeding is the Owner, who has obtained an order to pay money as sought in her original application and who has incurred costs in pursuing that application during litigation in the Tribunal, which was vigorously defended by the Builder on each of the Jurisdiction, Work Order, and Quantum Issues. In those circumstances, in the exercise of the Tribunal's discretion as to costs, I consider that the Owner should have her costs of the Proceeding on the ordinary basis as agreed, or as assessed in accordance with the applicable costs' assessment legislation.
Nevertheless, as there may be matters of which I am not aware (e.g., any relevant offers of compromise, or factors in the Owner's conduct of the Proceeding which the Builder says would warrant a departure from, or militate against, the usual principle that costs "follow the event"), that preliminary view as to the issue of costs is subject to any application as to costs that may be made by the parties. I have made orders and directions accordingly.

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Judgment (33 paragraphs)

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Cases Cited (15)