The Owners-Strata Plan No 93227 v In Style Developments Pty Ltd

NCAT Consumer and Commercial|2022-02-09

nd Administrative Tribunal Act 2013 (NSW) Civil and Administrative Tribunal Regulation 2022 (NSW) Civil and Administrative Tribunal Rules 2014 (NSW) Home Building Act 1989 (NSW) Home Building Legislation Amendment Act 2001 (NSW) Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 (NSW) Cases Cited: Aiton v Transfield [1999] NSWSC 996 BCI Finances Pty Ltd (In Liq) v Binetter (No 4) [2016] FCA 1351; (2016) 348 ALR 227 Bellgrove v Eldridge [1954] HCA 36; (1954) 90 CLR 613 Blatch v Archer (1774) 1 Cowp 63; (1774) 98 ER 969 at 970 Bouffard v CDM Australasia Pty Ltd [2021] NSWDC 124 Catapult Constructions Pty Ltd v Denison [2018] NSWCATAP 158 Cherry v Steele-Park [2017] NSWCA 295 Deacon v National Strategic Constructions Pty Ltd; National Strategic Constructions Pty Ltd v Deacon [2017] NSWCATAP 185 El-Mir & 1 Or v Risk [2005] NSWCA 215 Ericon Building Pty Limited v The Owners-Strata Plan No 96597 [2020] NSWCATAP 265 Fisher v N. Phillips and M. Phillips t/as Arise Building Services [2022] NSWCATCD 80 Gerard Cassegrain & Co Pty Ltd v Cassegrain (2013) 87 NSWLR 284; [2013] NSWSC 453 Glenquarry Park Investments Pty Ltd v Hegyesi [2019] NSWSC 425 Harrison v Melham [2008] NSWCA 67; (2008) 72 NSWLR 380 Jagatramka v Wollongong Coal Ltd [2021] NSWCA 61 Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298 Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361 New South Wales Bar Association v Stevens [2003] NSWCA 95 Owners of "Shin Kobe Maru" v Empire Shipping Company Inc [1994] HCA 54; (1994) 181 CLR 404 Owners SP 92648 v Binah Constructions Pty Ltd and Anor [2021] NSWCATAP 68 Penrith Whitewater Stadium Ltd v Lesvos Pty Ltd [2007] NSWCA 103 Project Blues Sky v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 Re Bolton; Ex parte Beane [1987] HCA 12; (1987) 162 CLR 514 Stevenson v Ashton [2019] NSWSC 1689 Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 Warburton v County Construction (NSW) Pty Ltd [2022] NSWSC 941 Texts Cited: None cited. Category: Principal judgment Parties: The Owners-Strata Plan No 93227 (Applicant) In-Style Developments Pty Ltd (First Respondent) Arden CH (NSW) Pty Ltd (Second Respondent) Representation: C Blackwell, Solicitor (Applicant) S Puttick, Counsel (First Respondent) A Thurlow, General Manager (Second Respondent)

Bannermans Lawyers (Applicant) Miller Prince Lawyers (First Respondent) HWL Ebsworth Lawyers (Second Respondent) File Number(s): 2020/00386106 (formerly HB 20/46506) Publication restriction: Nil

REASONS FOR DECISION

This is a dispute involving alleged defects in a strata scheme building brought in the Tribunal under the Home Building Act 1989 (NSW) ('the HB Act').
The strata complex involves four buildings that contain 107 residential Lots; 2 levels of underground parking; and a club house and pool. It is located in a north-western suburb of Sydney, NSW.
An interim Occupation Certificate was issued on 1 August 2016.
Neither respondent is the original builder of the strata scheme. The original builder was Red 1 Constructions Pty Ltd. That builder went into liquidation and was deregistered. The deregistration occurred on 19 April 2018.
The second respondent ('Arden') is one of a group of associated companies that was the developer of the strata scheme.
Mr May is a Lot owner, and moved into the building in about September 2016. In about March 2017 he was elected to the strata committee. According to the evidence of Mr May contained in his affidavit dated 22 July 2021, he "took the lead in communicating" about the issue of identification and rectification of building defects on behalf of the strata committee.
Mr May states in his affidavit that he was aware the "2 year deadline…for cosmetic defects (sic) rectification…" expired on 31 July 2018.
In about 2017 the owners corporation obtained legal advice regarding building defects.
In late May or early June 2017 the owners corporation obtained a building defects expert report of Mr Davies, building consultant of Acity Pty Ltd dated 29 May 2017.
The report of Mr Davies stated that he was not instructed if (and when) a Final Occupation Certificate had been issued. His report contains a large number of photographs and a Property Inspection Schedule. The report does not contain a detailed scope of works or costings for rectification, which Mr Davies states can be provided "if required".
In early 2018 the owners corporation engaged Integrated Consultancy Group ('IBC') to prepare further building defects expert reports. The first report was prepared by Mr Binnington, building consultant. The second report was prepared by Mr Kavanagh, building consultant.
The first was dated 5 April 2018 and was in respect of the common property swimming pool room/area.
The second was dated 31 May 2018. That report deals with defects in common property and Lot property. 267 defects are identified, each with a scope of works to rectify.
At pages 297-298 of the report, Mr Kavanagh summarises defect items that require "immediate attention". Included in those items are matters pertaining to water ingress, including deficiencies in the waterproofing membrane of the roofs of buildings 4, 4, 5A, 6 and 7. Other water ingress issues identified include the upper western garage. Ventilation issues are also identified.
On 31 July 2018 the owners corporation and Arden signed a "Settlement Agreement for Rectification Works".
That document is in the form of a Deed in the sense that it contains recitals, but does not use the phrase Deed of Release.
The "recitals" include the following: 1. The second respondent is identified as "the owner of land at (address of strata scheme) and so was a "Developer" as defined under the Home Building Act 1989 (NSW)". 2. The "agreed rectification scope of works" is identified in Annexure A as follows: 1. Integrated Consultancy Group-Expert report of Pool Plant Room & Associated Underlying and Adjacent Building Elements dated 5 April 2018. 2. Integrated Consultancy Group-Technical Report dated 31 May 2018. 3. Acity defects report dated 29 May 2017. 1. The second respondent entered into a contract with Red 1 Constructions Pty Ltd under which the strata scheme buildings and other improvements were constructed. 2. The owners corporation claims the building works were defective and Arden is liable as the Developer. 3. The owners corporation and Arden agreed to the appointment of a Mr Barry Tozer as joint expert to inspect the building and determine a scope of works to rectify. 4. The joint expert's determination was binding, and would be in full and final settlement of the dispute. 5. The owners corporation would enter into a building contract with a remedial builder selected by Arden to undertake remedial works. 6. Arden would pay the remedial builder all monies under the remedial works contract, including variations. 7. As security for Arden's obligation to pay all monies under the remedial works contract, Arden would deposit $100,000 into the trust account of its lawyers, HWL Ebsworths upon the owners corporation signing the remedial works contract. 8. Arden to pay the owners corporation $10,000 excluding GST within 28 days of the date of the agreement for remedial work undertaken by the owners corporation to date. 9. If there is a dispute under the Agreement, party is to give the other party written notice of the dispute within 7 days, including adequate details of the dispute. 10. Within 7 days after receiving notice of the dispute, the parties are to confer at least once to resolve the dispute or agree to a method of doing so. 11. Should the dispute not resolve, Mr Tozer (or if he is not available, an expert to be nominated by the Institute of Arbitrators and Mediators Australia NSW Chapter) to be appointed for expert determination in accordance with the Institute of Arbitrators and Mediations Australia Expert Determination Rules 2010.
It does not appear that Mr Tozer was engaged by the owners corporation and Arden as a joint expert. There is no reference in the affidavit of Mr May dated 22 July 2021 of Mr Tozer being involved in rectification works in any capacity; or why he was not involved in rectification work despite being referred to in the "Settlement Agreement for Rectification Works" in Clause 2 of the Settlement Agreement.
Rather, from the email exchanges attached to Mr May's affidavit, it appears that the owners corporation and Arden agreed that the appropriate scope of works to rectify were contained in the IBC reports of 5 April 2018 and 31 May 2018. Such reports are identified as part of the "agreed rectification scope of works" .
According to the evidence of Mr May, the owners corporation was told by Arden (through its representative, Mr Ben Messina), that it would "contract with a builder who would complete the cosmetic defect rectification works" and on 16 and 17 August 2018, Mr Messina told Mr May that Arden was having difficulty finding a builder who would take on the work.
On about 18 September 2018, Mr May asserts that he had a conversation with Mr Messina. Mr May's affidavit contains contemporaneous written notes. According to Mr May, Arden stated that it was having difficulty with engaging a remedial builder; one builder had "walked away"; and that Arden was considering entering into separate contracts with separate builders for the pool area rectification; and rectification of other Lot and common property.
According to Mr May, by mid-2018, "Jason Williams from Arden Group had been appointed Project Manager for the…defects rectification program".
Mr May states that in the course of negotiations and discussions about rectification of building defects, he communicated with persons that included the following: 1. Arden-Ben Messina (Asset Manager); Jason Williams (first defects rectification project manager); Peter Murawai (second project manager); Craig Ellul (third defect project manager); Mark Seddon (Queensland office based Project Manager) and Lindsay Gregory (Sydney based, who, according to Mr May "represented Arden at times in negotiations). 2. In-Style Developments Pty Ltd-Mr Joseph Frangieh, director. 3. Ronson Group (sic)-Anthony Mokdassi and Andrew Mokdassi.
The contemporaneous written file notes of Mr May's conversations with Mr Messina of Arden that are attached to his affidavit relevantly state as follows: 17 August 2018 Contract by end of this month. Start work 1st week September. Standard template. Nominal figure $100k to (indescribable) + $100k. A best guess, not a cap. Have to put a price in the contract. Our contract-more detail. 18 September 2018 The building contract. Putting a $ figure on a scope that scares builders. Can't give us a contract. Don't want to avoid the (indescribable). Still getting progress. Get pool decommissioning. Jason lock in Wed. arvo (sic) next week. 'N' (sic) defects. Builders don't like it. Faith in Jason. Builder by trade. Putting in all contracts. Got let down by 1st builder. Were almost there. Then back to market. Can't find the right builder. Talking to 3 builders now. One for pool & one for the rest. Email to Poolwerx. Bent to talk to Jason split the pool from the rest.
In about September 2018, Arden informed the owners corporation that it had found a suitable remedial builder. According to Mr May, he was not told the identity of the builder at that stage.
In about early October 2018 Mr May sought legal advice from Bannermans Lawyers about the addition of special conditions to a draft contract. It is unclear from Mr May's evidence as to when a draft contract was obtained; how it was obtained; or when it was sent to the owners corporation's Solicitors for advice.
Mr Blackwell of Bannermans Lawyers emailed Mr May on 8 October 2018 attaching proposed "special conditions" to be added to the unsigned contract, relevantly including clauses pertaining to the builder invoicing Arden and Arden being solely responsible for payment to the builder.
Mr Blackwell also stated in the email: … I haven't seen the Reports referred to in the Scope of work which define the scope of work-Cause (sic) 1 of Contract. The Draft Contract is very minimal but (with the insertion of the attached Special Conditions) will most likely suffice. You will however need to get a copy of the insurances from the Builder, including Public Liability and Contract works, Also the Contract requires Home Owners Warrant Insurance policy-as the work is over $20k (sic).
At 3.54 pm on 8 October 2018, Mr May sent an email to Mr Jason Williams of Arden an email headed "Building Contract" with a copy of that email sent to various persons, including Mr Blackwell. The attachments identified were "special conditions to contract".
The email stated as follows: Hi Jason, As just discussed, the attached special conditions will be appended to the contract. We both agree that those conditions are beneficial to all 3 parties. Can you arrange to send me the insurance documents required below. Craig, the scope of works and contract works are drawn from about 700 pages across 2 defects reports. Arden and the Owners Corporation representative (Phil May) have sat down on 2 occasions to go through the defects reports. We have agreed to a list that categorises defects as Y, N, or ? Jason/Arden have agreed that most of the reported defects are defects (Y). There are a few which we are unsure still exist (?), but we're saying they do until it's proven they were rectified. There a few more which may end up being in dispute (N), but both parties have agreed to work through those with the objective being to avoid involving Barry Tozer if possible. Jason/Arden have also been open to discussing and possibly adding new defects which have been discovered since 31/7/18 signing of the defects rectification agreement. The upshot is that we can't nail down to the last detail a specific scope of works. The original agreement appends the 2 defects reports to the rectification agreement. Unless I'm mistaken theses and the defects Y/N/? list are the documents referred to in clauses 1 and 22 (Jason, can you confirm please?) Do you want those appended to the contract? They are attachments to the original defects rectification agreement between the Owners Corporation and Arden. Arden has made arrangements to start on the pool rectification work early this week. It's been delayed for a few days until the contract is finalised and signed under seal. Thanks regards …
On 24 October 2018 a written contract was signed between the owners corporation and In-Style.
The document has the seal of the owners corporation with Mr May signing the document on behalf of the owners corporation.
The contract is in the form of the NSW Fair Trading contract for residential building work.
The "owner" is identified as the applicant, and the "contractor" is identified as "In Style Developments Pty Ltd". The contract had details pertaining to In-Style including builder's licence and address.
The contract is signed by Joseph Frangieh of In Style. The contract price is identified as $100,000.
In Clause 1 of the contract ('Contract documents') there is no reference to plans or specifications. However, the following is identified as "other documents prepared by": 1. Integrated Consultancy Group Technical report-defects dated 31 May 2018. 2. "Ditto" (sic) "pool plant room" dated 5 April 2018. 3. Acity defects report dated 29 May 2019.
In Clause 10 of the contract (provisional sum items) the following is identified in the provisional sum schedule: All defects item 1-Provisional sum $100,000.
In Clause 12 of the contract (progress payments) the following is identified in the schedule of progress payments: Progress payment to be made on satisfactory valuation
The contract includes 3 written special conditions in the same form as recommended by Mr Blackwell in his email of 8 October 2018.
The affidavit of Mr May dated 22 July 2021 at paragraph 18 contains very little factual detail as to the signing of the written contract, including when he became aware the owners corporation was signing a contract with In Style; when he first met Mr Frangieh; and how the contract was to be administered.
On 24 October 2018, Mr Williams of Arden emailed to Mr May (with a copy to Mr Messina) a Certificate Of Currency of Vero Insurance. That Certificate Of Currency stated that In Style had taken out contract works and legal liability insurance for residential building and construction works. The email of Mr. Williams stated that "Joseph has confirmed that he does not carry workers compensation as all works are carried out by contractors".
On 31 October 2018, Mr May emailed Mr Williams of Arden, with a copy of the email sent to other strata committee members, the strata manager, and Mr Messina. That email sought an "update" so that a strata committee member could present "clear action plan on defects" at the of the owners corporation, in circumstances where Mr May would be "away" end unable to attend the Annual General Meeting of the owners corporation on 5 November 2018
On 5 November 2018, Mr Williams of Arden responded by email as follows: Hi Phil, We are currently awaiting the revised insurance documents from the builder (In Style). They're expected in the next couple of days. Once we have these, and have sign-off from the OC to commence (in accordance with Motion 28) ,we should be able to start on the pool plantroom within 2 weeks. This demolition and re-build process should take up to three weeks. Tentative-pre Christmas completion. We should be able to carry out the minor internal defects rectification concurrently, but I would be allowing up to 2 weeks to complete these works. Tentative-mid January completion. The concrete pathway rectification works are still booked in to commence early December and they should be completed within 2 weeks. Tentative-mid December completion. Note that these dates are tentative, and we will keep you and the OC updated once works commence. …
The affidavit of Mr May does not contain a copy of the minutes of the annual general meeting of the owners corporation on 5 November 2018. However, Mr Williams email of 5 November 2018 contains an extract of what appears to be a Motion (Motion 28) on the Agenda of the meeting that the owners corporation: …agree to execute and sign the agreement with In Style Developments Pty, Arden Group Pty Ltd's chosen builder to rectify the defects identified under the common seal as per Section 273 of the Strata Schemes Management Act 2015. Explanatory Note: This motion is to ratify the agreed defect rectification with Arden Group Pty Ltd builder as per the Engineering reports carried out and has been agreed between the Strata Committee and Arden Group Pty Ltd.
According to Mr May, rectification work did not immediately commence. In early to mid-November 2018 there was an email exchange between persons including Mr May; other strata committee members; the strata manager; and Mr Williams of Arden.
On 12 November 2018, Mr Williams of Arden sent an email to Mr May and another strata committee member (with a copy to Mr Messina) that stated as follows: Hi Phil, Joel, Please find attached revised insurance certificate for the defect rectification works as requested. Can you please confirm authority to proceed with the works as soon as possible?
The email attached a certificate of Home Warranty Insurance that was issued by the home warranty insurer on 9 November 2018. That document relevantly: 1. Describes the work as advised by the builder as "Minor rectification works to existing building and common area". 2. Identifies the works as being in respect of "Multiple Dwelling Alterations/Additions-Structural. 3. Identifies the builder as "In Style Developments Pty Ltd". 4. Identifies a building licence number. 5. States that the contract date is "16/10/2018". 6. Identifies the contract amount as "100,000".
According to the affidavit of Mr May (at para [23]) he "understood" that a company called "Ronson Group ('Ronson'), to whom In Style subcontracted…defects rectification work" began working on the defects in January 2019…"
Mr May states that Mr Frangieh of In Style attended the site "on about the weekend of 26 or 27 January 2019" but that he did not recall Mr Frangieh attending the site other than on that occasion.
According to Mr May, he had substantial contact with Mr Anthony Mokdassi and Mr Andrew Mokdassi of Ronson Group, who performed works. There were regular meetings and "the Arden project manager at the time" would often attend such meetings. According to Mr May, he regarding his role as a strata committee member as being the "facilitator/administrator/communicator" between all parties involved" in the rectification of strata building defects.
In the period between 29 January 2019 and 1 February 2019 there was an email exchange involving Mr May, Mr Williams, and Mr Frangieh.
On 29 January 2019, Mr May sent Mr Williams and email asking how "In Style, who we have a signed contract, relate to Ronson Group?"
Mr Williams responded on 30 January 2019 as follows: Hi Phil, In Style homes (sic) and Ronson partner on numerous projects Regards …
On 30 January 2019 Mr Frangieh sent an email to Mr Williams of Arden, with a copy to Mr May and additionally to the email address of Ronson Group as follows: Hi Guys, I was there over the weekend and everything looks like it is smooth sailing. Any issues, please don't hesitate to call. Regards …
On 1 February 2019, Mr May sent an email to other strata committee members as follows: Further to my previous email, Jason Williams has obviously organised the email below to be sent to me. Our defect repair contract is with In Style Homes and is signed by Joseph Frangieh. The company website is legitimate and I've checked Frangieh's profile on LinkedIn. It is consistent.
According to Mr May, in late February 2019 he was informed by Mr Anthony Mokdassi of Ronson Group that Mr Williams was "no longer with Arden" and that he should seal with Mr Derek Williams of Arden "until a new project manager was appointed".
On 27 February 2019 Mr May sent an email to Mr Blue, a "site supervisor" of Wade Civil Engineering in response to an email of Mr Blue, with a copy sent to other strata committee members as follows: Hi Mitchell, Jason Williams is no longer at Arden. Anthony Mokdassi is speaking directly with Derek Williams, Owner/MD of Arden while we wait for another Project Manager to be appointed to manage the defects rectification project. Re: paths., Anthony listened to what you had to say and has proposed they insert several expansion beds as you suggest in the right places. Other than that I have no further information on paths, but will follow up tomorrow and advise. It seems, but I'll need to reassess the situation and confirm, that Arden are giving Ronson Group a fairly free hand. Ronson Group are insisting that they will not cut corners and will do whatever is necessary to ensure that the builder they are subcontracted to (the builder who signed the defects rectification agreement) will not be brought back to (the strata building) down the track due to home owner warranty issues with their work. I know its only words, but Ronson Group seems committed to achieving this. Regards …
According to Mr May, defects rectification works continued for a number of months in 2019.
On 25 October 2019 the home warranty insurer emailed the strata manager of the strata scheme with a generic email to state that the home warranty insurer had been advised that the works were complete; and that the date of "defect warranty commencement" was 5 November 2018. The details of the builder; the works; the license number of the builder; and the contract price are the same as the details on the Certificate of Home Warranty Insurance issued on 9 November 2018.
On 1 November 2019 a strata committee member Mr Baker emailed the strata manager (with a copy of the email sent to various persons) stating that the "defect rectification work is not complete" and the "Phil May is still working on defect rectification with the builders and developer".
On 5 November 2019 the strata manager emailed the home warranty insurer stating as follows: Hi, The Strata Committee of SP 93227 identify the following areas as defects still requiring completion: Rooftop Waterproofing Membrane and Protection Over Membrane Ventilation to Foyers and Hallways. Ventilation Shaft Next to the Garbage Room at (building) Disabled Access Balcony Drainage (Splitters) Water Penetration-Electrical Communications Room, Basement 1, Western Carpark Anchor Points Balcony Ceiling Water Penetration-Building 7 Storage Cage Penetration Unit 324-Building 7 Damage to Building 6 Fascia Eastern End Product Manufacturer Warranties (Membranes, Sealants etc) Missing Documents, Drawings and Certificates These are under discussion with the builder so they are aware of them. Thanks, …
On 6 November 2019 Mr Frangieh emailed the strata manager as follows: Will thanks for talking this afternoon. Could you please send me an email to the effect and confirming that there is no defect which instyle (sic) is liable for. Instyle (sic) was not the original builder and we only recent (sic) carried out minor remediation works engaged by the Developer Arden Group and that has been completed in accordance with our scope.
On 7 November 2019 the strata manager emailed Mr Frangieh's email of 6 November 2019 to Mr May. Mr May responded to the strata manager by email on 7 November 2019 as follows: Hi William, Arden had to find a builder to contract to repair cosmetic defects. That builder is Instyle Developments (sic). No builder wants to repair another builder's work. It took 3 attempts before Arden could find one that stuck through the negotiation period and signed up. STM should have handed over a copy of the agreement with Instyle that they signed on our behalf. Instyle then subcontracted the work to Ronson Group. What needs to happen is for Ronson Group or Arden to tell Instyle that the work hasn't been completed yet and what work remains outstanding. I'm surprised that this communication hasn't occurred between the companies involved. I'm away on leave, back on 16 November. I don't have the documents with me. I think I sent Peter Stevens copies. Kind regards …
On 7 November 2019 Mr May also emailed Mr Frangieh. That email states as follows: Hi Joseph, Phil May here. I think we spoke once. I have been managing the cosmetic defects rectification works on behalf of the (building) strata committee (I am an owner). I met two weeks ago with Arden and after that Ronson Group to lay down a schedule to finish the cosmetic defects works, as there are still some matters outstanding. I suggest that you talk to Anthony Mokdassi and/or Tony Pizzolato (new GM of Arden) to understand their time frames. I am on leave until 16 November and don't have any documentation with me. I can't help further until my return. …
Mr Frangieh responded to that email on 7 November 2019 as follows: Thank you for your email. Please note the scope of works for Instyle (sic) has been finalised with Arden and anything further needs to be discussed with Anthony Mokdassi and Tony Pizzolato.. Our obligations under the contract have been fulfilled.
The applicant provided little or no evidence as to what, if anything, occurred regarding building works in 2020.
On 5 April 2020 the owners corporation obtained a further report from Integrated Building Consultancy (Mr Binnington, engineer and building consultant.
That report was engaged via the owners corporation's legal representatives, Bannermans Lawyers.
The report does not refer to the Deed entered into with Arden, or the building contract signed between the owners corporation and In Style. Rather (at pp 16-17 there is an email from Mr Blue (who appears to be a strata committee member to Mr Binnington (with copies of the email sent to persons including Mr May) setting out the history of the alleged defects regarding the pool. That email does not make any mention of the Deed with Arden or the contract with In Style.
Mr Binnington asserts (at pp 34-44 of the report) that the pool construction was defective because the builder had failed to adequately prepare the founding earth/substratum to an adequate strength to prevent downward subsidence, displacement rotation lean and existing and ongoing consequential damage involving structural cracking, movement and failed plumbing. Mr Binnington identified a number of failures to comply with the National Construction Code.
At page 39 of the report there is a scope of works to rectify, involving the Pool Plant Room; the basement slab; and the pool structure, South perimeter wall.
On 5 November 2020, the owners corporation filed NCAT proceedings against In Style (as first respondent) and Arden (as second respondent).
On 6 January 2021 the Tribunal made consent orders regarding the applicant filing and serving Points of Claim; the parties filing and serving evidence; and the matter being re-listed for procedural directions.
Despite the directions of 6 January 2021 referring to the applicant fling and serving Points of Claim; there were Points of Claim filed with the application on 5 November 2020.
The Points of Claim sought orders that (a) the respondents pay damages for the cost of rectifying defective works; (b) the respondents "returns (sic) to rectify "the Remedial Defective Work"; (c) Arden "returns to rectify the Further Original Work Defects"; and (d) an order for costs.
The Points of Claim allege that the applicant and Arden entered into a "settlement agreement" on 31 July 2018 that Arden "rectify defective residential building works to the Original Works" and that Arden "agreed to undertake the Remedial Works by paying for the applicant to engage a remedial builder to undertake the Remedial Works on the Second Respondent's behalf but remained liable to undertake the Remedial Work".
The Points of Claim allege that the applicant engaged In-Style to "carry out the Remedial Works in accordance with s 18B of the HB Act"
"Remedial Work is identified as rectification of "defective residential building works to the Original Work"; and "Remedial Work Breaches" is identified as performing "defective and non-complying work" identified in the reports of Mr Davies dated 29 May 2017; Mr Binnington dated 5 April 2018; and Mr Kavanagh dated 31 May 2018.
On about 18 January 2021, In-Style filed and served Points of Defence. Relevantly, the Points of Defence: 1. Admit that the Director of In-Style signed and dated a contract for works at the address of the applicant. 2. Denies that it received contract signed by the applicant in return to effect the contract. 3. Denies it was engaged by the applicant to perform remedial works. 4. Asserts it was not instructed to commence the remedial works. 5. Asserts it did not perform the remedial works. 6. Asserts it did not receive payment in exchange for performance of the remedial works. 7. Asserts the remedial works are not sufficiently particularised.
On about 18 January 2021, Arden also filed and served Points of Defence. Relevantly, Arden' s Points of Defence: 1. Admits it entered into a settlement agreement on 31 July 2018 with the applicant. 2. Denies that it was obliged pursuant to that agreement to arrange for and pay a builder to perform any rectification works. 3. Asserts the remedial works are not sufficiently particularised.
On about 12 January 2021, NSW Fair Trading issued a Notice of Intention to Issue a Building Work Rectification Order on Arden under s 33 of the Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 (NSW) ('the RAB Act'). The identified defect and rectification work involved inadequate waterproofing membranes in the roofs of the strata buildings. Pursuant to the RAB Act Notice, rectification work was to be completed by 10 June 2021.
On 26 March 2021 the matter was listed for a further directions hearing before Rosser PM. Directions were made that relevantly included extension of the timetable to file and serve evidence; all parties being granted leave to be legally represented; leave being granted to issue Summons to Produce Documents on "third party sub-contractors, suppliers, and consultants". The applicant was also directed to "include an estimate of quantum/confirmation that the quantum is not likely to exceed $500,000".
The applicant's filed and served a brief statement from Mr Kavanagh dated 6 May 2021 stating that the total amount of work to rectify defects contained in his report was likely to be approximately $1,000,000; with the cost of replacing water proofing membranes to the roofs of the strata buildings likely to be "alone" a cost of approximately $800,000.
On 3 August 2021, the matter was listed for procedural directions in the Tribunal. The matter was set down for hearing, with an extension for In-Style and Arden to file and serve evidence to 3 November 2021.
Order 3 was for Arden to file and serve an affidavit setting out the timeframe proposed for repair of the roof membrane, setting out the scope of work and proposed contractor by 24 August 2021 to ascertain whether the quantum is likely to exceed the jurisdictional limit of the Tribunal or whether a transfer to a Court of competent jurisdiction is necessary and the hearing date should be vacated.
The procedural directions noted: 1. There may be an application to transfer proceedings to a court if the roof membrane remained part of the application.. 2. The applicant sought a work order rather than an award of damages for the cost of performing rectification work. 3. The Building Commissioner (sic) ordered the roof membrane to be replaced by 10 June 2021, but Arden was unable to complete that work due to Covid restrictions and public heath orders.
On 27 January 2022, NSW Fair Trading issued a further Notice of Intention to Issue a Building Work Rectification Order under the RAB Act against Arden.
The Notice of intention was issued under s 45 of the RAB Act in respect of an order under s 33 of the RAB Act.
The draft order specified 26 June 2022 as the date upon which compliance with the Order is required.
The draft order refers to water ingress and inadequate waterproofing in respect of a number of bathrooms of Lots; and additionally the roofs of the strata buildings in the strata scheme.
Relevantly, the draft order under the RAB Act refers to various inspections of the strata building by NSW Fair Trading in January 2021 and December 2021. The draft order identifies 2 defects as follows: 1. Defect 1 (Bathrooms)-The installation of waterproofing which permits water to penetrate into linings and concealed spaces. 2. Defect 2 (Roofs)-The installation of substrate with an inadequate fall, allowing water to be reattained on the finished surface, the installation of substrate with protrusions and voids and the installation of waterproofing membrane which permits water penetration.
The draft order provides reasons and explanation as to why Defects 1 and 2 involve failure to comply with waterproofing standards under the Building Code of Australia and Australian Standards.
The draft order contains the following scope of work to be performed (or caused to be performed on behalf of) Arden:
Remediate Defect 1 in the bathrooms of units 8, 20, 108, 218 and 318 by: 1. Remove shower screen, fixtures and fittings. 2. Remove the wall and floor tiles to the bathroom. 3. Remove tile screed and wall adhesive. 4. Repair and prepare substrate to receive new waterproofing application. 5. Install waterproofing system in accordance with manufacturer's specifications and Australian Standard requirements. 6. Reinstall tile screed, install wall and floor tiles, install waterproof silicone sealant and reinstall shower screen, fixtures and finishes. 7. Make good consequential damage.
Remediate Defect 2 in all roofs of the strata buildings by: 1. Adjust plant, equipment and ancillary fittings to ensure continued operation throughout remedial works. 2. Survey the roof top substrates to determine high/low spots. 3. Prepare the substrate by abrasive means to remove contaminants and promote a compliant surface for adhesion. 4. Top low spots and locally grind to ensure the substrate directs surface water to drainage outlets. 5. Prepare the substrate and apply new waterproofing system including all termination detailing, angles, flashings, capping etc 6. Reposition and secure the roof top plant, equipment and ancillary fittings and recommission to original condition. 7. Make good any consequential damage.
The matter was listed for hearing on 9 February 2022.
Neither In-Style or Arden filed and served any evidence in accordance with Tribunal directions. However, an affidavit of Mr Thurlow from Arden dated 23 August 2021 was filed electronically with the Tribunal, which dealt with the issue regarding replacement of waterproof membranes for the roof. Mr Thurlow stated that Arden had selected a contractor to perform the work, but the works had not progressed partly due to Covid-19 restrictions.
The only purported "evidence" of In-Style and Arden were comments in a Scott Schedule. The Scott Schedule is in respect of Mr Kavanagh's report of 15 January 2021. Neither In-Style or Arden served any expert evidence by a building consultant or other suitably qualified expert responding to the evidence of the applicant's experts (most pertinently, the report of Mr Kavanagh dated 15 January 2021).
On 7 February 2022 In-Style filed an affidavit of Mr Frangieh, director, dated 7 February 2022. That affidavit was brief (1 page, comprising of 7 paragraphs) and contained no documents annexed to the affidavit.
The affidavit of Mr Frangieh stated, in essence, that In-Style had submitted a "quote in the form of a signed contract and a home building warranty certificate prepared in advance on the presumption the quote would be accepted" to Arden; Arden "requested" In-Style perform "some immediate and minor remediation work at the site"; Arden "introduced" In-Style to Ronson Group who Arden "often sub-contracts work to"; Arden "reached an agreement with Ronson Group to carry out the balance of "all works required in the scope of works indicated originally" by Arden to In-Style and "which formed the subject of the home building contract provided by In-Style to Arden". Mr Frangieh stated that "at no time" did In-Style perform any work at the site; and did not receive any payments from Arden.
Although it is appropriate to refer to the contents of Mr Frangieh's affidavit to provide context to the conduct of the hearing and the submissions of the parties, it did not form part of the evidence. At the hearing, In-Style did not seek leave to extend the previous procedural timetable so that it could rely on the affidavit, and at the hearing Counsel for In-Style stated that it did not seek to read and rely upon the affidavit of Mr Frangieh.
Prior to the hearing, the applicant and In-Style filed and served a written outline of submissions. The applicant's outline of submissions was prepared by Mr Blackwell, Solicitor. In-Style's outline of submissions was prepared by Mr Puttick of Counsel. No outline of submissions was filed and served by Arden.
In-Style's outline of written submissions assert: 1. In-Style was not contracted to carry out any work other than "minor remediation works" which In-Style sub-contracted to Ronson Group. 2. In-Style was not "awarded" a contract for the "substantive remediation works" and did not sub-contract to Ronson Group to perform any work other than the "minor remediation works". 3. Of the defect items (253 in total); many of items 1-173 involve either the roofs to the buildings or are defects "consequential to the defective roof membrane" (sic). Several other items in items 1-173 "relate to alleged defective water membranes or balconies". 4. The value of the works sought by the applicant would far exceed $500,000, and proceedings should be transferred to a Court because: 5. Whether the Tribunal made a work order or money order was at the discretion of the Tribunal. It was not sufficient for the applicant to assert it was only seeking a work order. 6. The Tribunal does not have jurisdiction under ss 48K and 48O of the HB Act to make work orders to a value exceeding $500,000. If it did so, it would have unlimited jurisdiction; and if the orders were not complied with and proceedings were renewed under Sch 4. Cl. 8 of the NCAT Act it would have the power to award more than $500,000. This is contrary to the legislative intent regarding the jurisdiction of the Tribunal. The Explanatory Memorandum to the Bill for the Home Building Legislation Amendment Act 2001 (NSW) states that the Tribunal only had the power to "make orders" for building claims involving no more than $500,000. 7. The Tribunal only has the power to make work orders not exceeding a value of $500,000. If the Tribunal made orders above that amount "then it is possible that such an order may later be found to have been made ultra vires". 8. Refusing to transfer proceedings may have the effect of limiting the applicant's remedy to a sum significantly less than the likely rectification costs. 9. There would be no prejudice to the applicant in transferring the proceedings to a Court, in circumstances where the applicant would be able to recover legal costs (including the costs of the Tribunal proceedings) if successful.
At the hearing on 9 February 2022, Mr Blackwell Solicitor appeared for the applicant; Mr Puttick of Counsel appeared for In-Style; and Mr Thurlow, General Manager, appeared for Arden.
Mr Puttick made an application for the transfer of proceedings to a Court. There was also a potential adjournment application depending upon whether leave was granted for In-Style to rely on Mr Frangieh's affidavit. However, it is unnecessary to further explore that issue because when the application to transfer proceedings was refused and the hearing proceeded, In-Style ultimately did not seek to read and rely on Mr Frangieh's affidavit it any event.
The applicant opposed the application to transfer the proceedings. The applicant submitted that:
It was ready to proceed and had filed and served evidence in accordance with Tribunal directions. Transferring proceedings would only likely cause further delays and costs.
The applicant was only seeking a work order, and the Tribunal had jurisdiction under the HB Act to make a work order irrespective of the value of work contained in the work order. The applicant relied upon the authorities of Ericon Building Pty Limited v The Owners-Strata Plan No 96597 [2020] NSWCATAP 265 ('Ericon') and Owners SP 92648 v Binah Constructions Pty Ltd and Anor [2021] NSWCATAP 68 as authority that the Tribunal had jurisdiction to make work orders to the value of above $500,000.
The applicant understood that if a work order was made (irrespective of the value of the work to be performed) and the applicant renewed the proceedings in the Tribunal under Sch. 4 Cl. 8 of the NCAT Act then the applicant would not be able to obtain an award of damages in excess of $500,000 if it was seeking damages for the cost or performing work that was not performed in compliance with Tribunal orders. The applicant submitted that, in any such renewal proceedings, it would not be submitting that the Tribunal had power to award damages of in excess of $500,000.
The Tribunal refused the transfer application by In-Style, and stated that it would give written reasons in its decision in the substantive application.
To transfer proceedings to a Court (either on application of a party or at the behest of the Tribunal) there needs to be a sufficiently good reason (or reasons) to do so.
Section 48K of the HB Act states: 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. …
In Ericon the Appeal Panel stated as follows at [19]-[26]: The owners corporation had sought a work order in the Tribunal pursuant to s 48O(1)(c)(i) of the Home Building Act 1989 (HBA), in the alternative to its damages claim. It is uncontroversial that s 48K of the HBA provides that the Tribunal has jurisdiction to determine a building claim in which the amount claimed does not exceed $500,000. The issue is whether a work order is a building claim under s 48A of the HBA, and therefore whether the $500,000 cap is applicable also to a work order. The appellants submitted that the expression the amount claimed in s 48K must encompass a work order as well as a damages claim, so that the $500,000 limit applied to both. Otherwise "absurd consequences" would result. Firstly, a claimant could seek a work order in the Tribunal for say, $100 million. Secondly, it was submitted that the power to make a work order is discretionary, and the Tribunal may make an order for damages even where a work order only is sought. Thirdly, if work orders for more than $500,000 were not satisfied, and a renewal application is made, damages can be awarded by the Tribunal, which would again be subject to the $500,000 limit. The appellants' alternative submission was that, on its proper construction, a work order is a building claim under s 48A(b) of the HBA. That sub section provides that a building claim includes: (b) the supply of specified services, and they submit that this subsection is intended to refer to a claim for work to be performed in the nature of a work order. The expression the amount claimed is not found in the definition of building claim in s 48A of the HBA, but only in s 48K and thus these words in s 48K do not assist us in construing that definition. In relation to the second submission, s 48O(1)(c)(i) refers to work orders in the following terms: (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 Section 48O(1)(c)(i) refers to both specified work and specified service, but the definition in s 48A(b) refers only to specified services. Work orders are within the ambit of building claims, s48O(1)(c)(i) and have been adopted in the definition in s 48A(b). For these reasons our preliminary view is that the Tribunal does have the power to make a work order for an amount greater than $500,000. The relevant cap of $500,000 only applies to building claims, as defined, made under the HBA. There is no general limit in the NCAT Act or elsewhere, on the amounts recoverable in the Tribunal.
The Appeal Panel's comments regarding the jurisdiction of the Tribunal to make a work order exceeding the total value of $500,000 was a "preliminary view", and not part of the ratio decidendi of the appeal decision, as the appeal involved an interlocutory decision of a Principal Member not to make orders sought by a builder (who was conceding that the Tribunal should make an order against it to pay damages of $500,000, and asserting the proceedings should otherwise be dismissed) , but to instead list matter before the Tribunal to for the parties to be head on a transfer application and make procedural directions to facilitate the determination of the issue of transfer.
However, although the Appeal Panel's "preliminary view" does not strictly bind the Tribunal, principles of comity in decision making mean that the Tribunal must give it weight, and if the Tribunal takes a different view must set out in a detailed way why it takes a different view.
The Tribunal has to consider its jurisdiction to make orders under the HB Act in any event, as the issue of jurisdiction is central to the determination of legal disputes by the Tribunal.
The decision of the Appeal Panel in Ericon has been referred to in a number of decisions of the Tribunal that deal with issues involving costs applications and the principles applicable to the appeal of an interlocutory decision to the Appeal Panel, but the Tribunal is not aware of any decisions (nor were any referred to in submissions by the parties) that specifically deal with whether or not its "preliminary view" on jurisdiction under the HB Act is correct.
The Tribunal agrees with the reasoning of the Appeal Panel in Ericon at [19]-[26]. Additionally, the Tribunal adds the following reasons as to why it has jurisdiction under s 48K of the HB Act (subject to separate jurisdictional issues, such as time limits) includes making work orders under s 48O of the HB Act unrestrained by the value of the work order: 1. The Tribunal must interpret all the words of a statute to give them meaning, in the context of the purpose of the statute and the provisions of the statute as a whole (Project Blues Sky v Australian Broadcasting Authority (1998) 194 CLR 355 at [69}-[78]). In respect of a grant of power, it is inappropriate to read words conferring jurisdiction or making powers to a Court (or Tribunal) by making implications or imposing limitations that are not found in the express words (Owners of "Shin Kobe Maru" v Empire Shipping Company Inc [1994] HCA 54; (1994) 181 CLR 404 at 421). Extrinsic materials (such as second reading speeches or explanatory memorandums) may be referred to for the purpose of confirming the ordinary meaning of words; to assist in determining the meaning if the words allow different interpretations; or the words are ambiguous; or the plain meaning of the words would lead to a result that is manifestly absurd or unreasonable. However, the extrinsic materials cannot be substituted for the text of the statutory provision where the words have a clear literal meaning (Re Bolton; Ex parte Beane [1987] HCA 12; (1987) 162 CLR 514 at 158; Harrison v Melham [2008] NSWCA 67; (2008) 72 NSWLR 380 at [159]-[173] 2. Section 48K (1) of the HB Act uses the phrase "the amount claimed" in a "building claim". It does not use the phrase "the amount claimed or in dispute"; nor does it use the phrase "the value of the orders sought". The plain and logical meaning of "the amount claimed" is that there must be a claim for damages for there to be an "amount claimed"; rather than seeking that a builder of developer perform work to rectify defects. 3. Section 48O of the HB Act is the provision which allows the Tribunal to award a remedy in a "building claim" (as defined in s 48A of the HB Act). Section 48O does not determine (or restrict) the causes of action the Tribunal has the power to consider. Although the Tribunal has the discretion under s 48O to award damages or a work order, it would be entirely inappropriate other than in exceptional circumstances to make an award of damages for the cost of rectifying defective work when an applicant has explicitly stated that it is not seeking such an order. In adversarial litigation, it is a matter for the applicant to set out what remedies it seeks; and if it explicitly states it is not seeking an award of damages and is only seeking a work order it is not for the Tribunal to fetter the party (nor would it likely be procedurally fair to allow an applicant to only seek a work but award damage for the cost of rectification of defective work when no such order was sought). 4. Section 48L of the HB Act states that if a party commences proceedings in a Court; the claim is a building claim for building goods and services within the jurisdiction of the Tribunal; and a defendant seeks the proceedings be transferred to the Tribunal the Court must transfer the proceedings. This provision is consistent with the Tribunal being chiefly responsible for resolving home building claims. 5. There is no basis to fetter or restrict the Tribunal's power to make work orders under s 48O of the HB Act. If there were, Parliament would have said so in the words of the statute. 6. Interpreting the s 48K (1) of the HB Act as allowing the Tribunal to have jurisdiction to make remedial work orders under s 48O of the HB Act to any value is not inconsistent with any other provision of the HB Act; nor does it lead to irrational or absurd results; nor inconsistencies with other legislation. For example, the Tribunal has the power under ss 106; 232 and 241 of the Strata Schemes Management Act 2015 (NSW) to order an owners corporation repair common property irrespective of the cost or value of the repairs. The reference to "the amount claimed" in s 48K (1) simply reflects that if there is a claim for damages, the Tribunal cannot award more than $500,000 and there is no basis for extrapolating that onto the power of the Tribunal to make a work order in a manner that would restrict the jurisdiction of the Tribunal when there are no words in the statute imposing such a restriction. 7. The renewal provision powers under Sch 4. Cl. 8 of the NCAT Act only arise if a work order has been made and has not been complied with within 12 months of the date that compliance was required pursuant to the order. If an applicant then renews proceedings in the Tribunal and makes a "claim" for an "amount" (i.e. damage for the cost of engaging another builder to perform work) then the jurisdiction restriction of $500,000 operates by reason of s 48K (1) of the HB Act. That, however, is an entirely separate issue to the power of the Tribunal to make a work order in the original proceedings, and principles of statutory interpretation do not permit the issues to be conflated when interpreting s 48K (1) of the HB Act in the original proceedings.
After the Tribunal refused the transfer application, In-Style sought the proceedings be stayed until it appealed the decision of the Tribunal.
The stay application was opposed and the Tribunal refused to grant a stay (or adjournment) of the proceedings for In-Style to appeal. The overriding principle in an application for a stay is to ask what the interests of justice require: New South Wales Bar Association v Stevens [2003] NSWCA 95 at [83]; Penrith Whitewater Stadium Ltd v Lesvos Pty Ltd [2007] NSWCA 103 at [18].
In circumstances where In-Style can appeal any orders made against it at the end of the proceedings including on grounds that (a) the Tribunal should have granted the transfer application; and/or (b) the Tribunal had no jurisdiction to make work orders to a value above $500,000, it was not in the interests of justice to grant a stay, because there was no prejudice or unfairness to In-Style to allow the hearing to proceed and be determined in the Tribunal; and there would be unfairness or prejudice to the applicant because the proceeding would be delayed until an appeal on an interlocutory decision was determined.
The hearing then proceeded.
The documentary evidence relied upon by the applicant was contained in a Tender Bundle filed on 7 February 2022, which was admitted into evidence subject to weight and relevance.
The applicant's Tender Bundle relevantly included the following documents: 1. Expert reports of Mr Binnington (Engineer) of Integrated Building and Engineering Consultancy (IBC) dated 5 April 2018; 2 December 2020; and 7 January 2021. 2. Expert report of Mr Kavanagh (Building Consultant) of IBC dated 15 January 2021. 3. Scott Schedule of Mr Kavanagh dated 15 January 2021 4. Expert report of Mr Davies (Building Consultant) of Acity Pty Ltd dated 29 May 2017. 5. Expert report of Dr Zhong (Fire Safety Engineer) of Acor Consultants (undated); but arose in the context of inspections of the strata buildings by Dr Zhong on 21 April 2021; 28 April 2021; 14 May 2021 and 19 May 2021. 6. Affidavit of Mr May dated 22 July 2021. 7. Draft Building Works Orders and Notice of Intention to Issue Building Works Order by NSW Fair Trading. 8. Settlement Agreement between applicant and Arden dated 31 July 2018. 9. Written contract between applicant and In-Style dated 28 September 2018. 10. A Scott Schedule at Tab 14 of the Tender Bundle setting out in detail the Items of defects and method of rectification of each defect, including comments by In-Style and Arden regarding a number of the alleged defects.
At the hearing, the only witnesses who gave evidence (being required for cross examination) were Mr May and Dr Zhong.
Mr May was cross examined by Mr Puttick regarding the agreement between the owners corporation and Arden to rectify defects; and the subsequent written document between the owners corporation and In-Style. Most of the cross examination involved whether the owners corporation had contracted with In-Style; and whether In-Style had performed any work.
Mr May agreed that the contractual value amount of $100,000 in the written contract was not a matter he had turned his mind to, because Arden were primarily responsible for identifying an appropriate remedial builder and ensuring that remedial budling works were performed. Mr May stated that his "understanding" was that In-Style was the builder with whom the owners corporation contracted, and that Ronson Group was were sub-contracting to In-Style rather than having any direct contractual arrangement with Arden. Mr May agreed that he could only recall Mr Frangieh attending the site on one occasion.
Dr Zhong was cross examined by Mr Thurlow. Dr Zhong agreed that his report was based on visual inspections of common property that did not include fire dampeners located within internal walls; and stated that his report had set out in detail the standards for compliance for fire safety and the areas he believed the building was deficient.
After the conclusion of the hearing the decision was reserved, and all parties provided written submissions.
No party provided a written transcript of the hearing with their submissions.
There was a delay in submissions because Arden wrote to the Tribunal to indicate the parties were in settlement discussions. However, Arden subsequently wrote to the Tribunal to state that the dispute had not resolved. The Tribunal granted the parties additional time to file and serve submissions.
The written submissions of the applicant refer to NSW Fair Trading (as delegate of the Building Commissioner) having issued a final order under the RAB Act dated 1 March 2022 against Arden to rectify the defects identified in the draft order of 22 January 2022 (i.e. the waterproofing membranes of the roofs of the strata buildings; and the bathrooms of some of the Lots).
However, that final order is not part of the evidence given at the hearing; and there was no application by any party to re-open the evidence and re-list the matter before the Tribunal for final hearing.
Accordingly, the Tribunal cannot take into account the final order issued against Arden under the RAB Act. In any event, the jurisdiction of the Tribunal is under the HB Act. Whether or not Arden has caused for works to be done to items that have been claimed as defective by the owners corporation in these proceedings and for which the owners corporation seeks a work order is relevant to whether an order should be made under s 48O of the HB Act in respect of those defects, because there is no point in making a work order to rectify a defect that has been rectified.
However, the Tribunal cannot speculate on matters to which are not part of the evidence, irrespective of the submissions of the applicant.
Accordingly, the Tribunal has not considered whether a final order was made against Arden under the RAB Act; or whether that order has been complied with.

SUBMISSIONS OF THE PARTIES

By the time of written submissions, Arden had re-engaged the lawyers who were acting for it in the proceedings up to a short period of time prior to the hearing on 9 February 2022.
The written submissions of the parties are summarised as follows:

Applicant-Submissions in Chief

The applicant's submissions in chief are summarised as follows:
Both respondents have breached the statutory duties under s 18B of the HB Act because defective work has not been rectified.

Liability of Arden

Arden is the "developer" under the HB Act and is liable to rectify all "major defects" under the original building contract pursuant to the applicable provisions of the HB Act.
Arden is also, jointly and severally, liable to rectify "the same rectification work that the application contracted with the first respondent (In-Style) to rectify" by reason of Clauses 2 and 5.4. of the Settlement Agreement dated 31 July 2018, because:
Under the Settlement Agreement the Second Respondent (Arden) agreed to rectify the defective work which was the same Rectification Work that the Applicant contracted with the First Respondent (In-Style) to rectify. Arden is therefore directly liable to the Owners (sic) for all defects and breaches of the statutory warranties under Section 18B of the HB Act under the Settlement Agreement and the Remedial Works Contract and is jointly and severally liable with the First Respondent.
Arden is "liable to rectify" all defects set out in Mr Kavanagh's Scott Schedule, being Items 1-253, with the exception of Items 179 and 215-242 inclusive which are withdrawn and not pressed. Items 1-148 are "the same items being the 'Items identified with the original 31/05/18 Integrated Report" which is a report originally undertaken by Mark Kavanagh. These are the same items that are the subject and form part of the scope of works under the Home Building Contract which are the responsibility of the First Respondent".
The basis that Arden is liable to rectify Items 1-148 is breach of the Settlement Agreement dated 31 July 2018, for which Arden agreed to indemnify the owners corporation for failure of the "Remedial Builder" (i.e. In-Style) to rectify defects pursuant to Clause 5.4.
Arden is liable to rectify Items 149 to 215 (except Item 179 which is withdrawn) of the Scott Schedule as those items are "major defects" under s 18E of the HB Act. The applicant relies on the report of Mr Kavanagh dated 15 January 2021 that such items are "major defects" because they relate to water penetration and waterproofing defects; and Dr Zhong dated 3 June 2021 as they are fire safety system defects.
Arden is liable to rectify Items 243-253 on the basis that the same items are the subject of "draft Building Commissioner Rectification Orders" (sic) and by reason of s 43 of the RAB Act a building rectification order must be considered by NCAT for the purpose of determining a building claim under Part 3A of the HB Act.
Arden's Points of Defence admitted at paragraph 18 that it had entered into the Settlement Agreement with the applicant.
Arden's responses to the Scott Schedule of Mr Kavanagh should be given little or no weight; and the evidence of Dr Zhang accepted. Dr Zhang's evidence was that the fire defects in his report do not comply with the standards applicable at the date of issue of a Construction Certificate for the strata building; and it is irrelevant that an Interim Occupation Certificate was subsequently issued for occupation of the building.

Liability of In-Style

The owners corporation and In-Style entered into a contract for In-Style to perform remedial works, and the IBC reports dated 5 April 2018 and 31 May 2018 form the scope of works under the contract.
In-Style has not performed work; or if work has been performed, has performed work defectively in breach of contract and s 18B of the HB Act.
Mr Kavanagh's report dated 15 January 2021 (a) summarises at pp 6-11 the scope of work contained in the IBC report dated 31 May 2018 that have not been satisfactorily rectified by In-Style; (b) sets out in a more detailed for at pp 23-384 the items that have not been satisfactorily rectified and the scope of works to rectify; (c) the Items contained in Mr Kavanagh's report are the same items contained in the IBC report of 31 May 2018 (and part of the contractual scope of works with In-Style); (e) Mr Kavanagh's report of 15 January 2021 deals with Scott Schedule Items 1-148; and (d) Mr Binnington's report dated 7 January 2021 deals with Item 173.
In-Style is liable to rectify Items 1-148; and Item 173 by reason of breach of contract and breach of s 18B of the HB Act.
The assertions contained in the Points of Defence of In-Style should be disregarded, because In-Style submitted no evidence to verify or support those assertions.
The evidence of Mr May was sufficient to find that (a) there was a contract between the owners corporation and In-Style; (b) In-Style, either directly or through a sub-contractor (Ronson Group) performed some work.
The fact that the owners corporation did not make any payments to In-Style did not mean there was no contract between the parties. Under the special conditions of the contract, Arden was liable for any monies owing to In-Style. In-Style provided no evidence in the proceedings, including to whom it issued invoices. Mr May's evidence was that he was not concerned about In-Style not issuing invoices to the owners corporation, as his belief was that Arden had not only organised the remedial builder, but was responsible for payment.

Proposed Work Orders

The applicant provided, in its submissions, proposed work orders that it sought against Arden and In-Style.

In-Style's Submissions in Chief

In-Style's submissions are summarised as follows:
In Style referred to the matters pleaded in its Points of Claim; being that it was "approached" by Arden to quote on remedial works; it "submitted a quote in the form of a signed contract and home warranty insurance certificate; it was "ultimately not engaged to undertake Remedial Works for the full extent of the Agreed Rectification Plan"; it did not "complete Remedial works for the full extent of the Agreed Rectification Plan" and "it was not paid for any such works".
The owners corporation must prove that "In Style made a relevant promise" which was breached to establish breach of contract; and must prove "the scope of works in the In Style contract extended to all of the Remedial Works, and not a small component of those works".
There is insufficient evidence to establish "the necessary scope of the In-Style Contract" and that the "totality of the evidence" is that In-Style "never contracted to undertake Remedial Works under the full extent of the Agreed Rectification Plan (sic)".
The written contract between In-Style and the owners corporation was for "only a small component of the overall works, and which component In Style satisfactorily completed".
The contract price was $100,000 and the evidence of Mr Kavanagh is the cost of rectification works is substantially greater than that amount.
Mr May's "assumption" that In Style contracted with the owners corporation (after being identified as the remedial builder by Arden) for "the full scope of the Remedial Works under the Agreed Rectification Plan was "erroneous".
Mr May's evidence about Mr Frangieh of In-Style being on site for a limited period of time; his dealings with Ronson Group; and his subjective belief that Ronson Group were the sub-contractor to In-Style are not inconsistent with In-Style only being contracted to perform minor remedial works.
There was nothing in the written contract between the owners corporation and In-Style that set out plans or specifications incorporated into the contract. The reference to "earlier experts reports" in Clause 1 of the written contract is insufficient for them to form the basis of a scope of works under the written contract.
The contemporaneous evidence contained in emails and the documentary evidence supported a finding that In-Style had only contracted to perform a small part of the remedial works; and had completed that work (paras [52]-[67] of the submissions); and in cross examination all Mr May stated in substance was that he was generally unaware of what the arrangement was between In-Style; Ronson Group; and Arden. Mr May's evidence in chief in his affidavit and in cross examination was that he was he "took the lead role" on the strata committee in respect of the remedial work; and his evidence is deficient in respect of what work was performed; when it was performed; and who performed it.

Arden's Submissions in Chief

Arden's submissions are summarised as follows:
The task of the Tribunal is to "decide matters on the Briginshaw standard" and should be "cautious" of accepting the evidence of the owners corporation.
The owners corporation has adopted a "cookie cutter approach" of obtaining expert reports dealing with all purported defects; rather than the works that Arden was responsible for under the Settlement Agreement.
The expert evidence of the owners corporation does not distinguish between major and non-major defects; nor set out how the purported failure of Arden to comply with the Settlement Agreement caused the defects.
Arden does not dispute that it and the owners corporation entered into the Settlement Agreement. Both parties are bound by the terms of the Settlement Agreement.
The Settlement Agreement did not allow the owners corporation to bring a separate claim for breach of s 18B of the HB Act against Arden. Arden referred to the Appeal Panel decision of Bardon v Occhiuto Enterprises Pty Ltd [2016] NSWCATAP 191. Only defects that formed part of the Settlement Agreement can be the basis of a claim by the owners corporation against Arden.
Since entering into the Settlement Agreement, Arden had "attended to the rectification work"
Mr May had emailed Arden on 28 September 2019 acknowledging that "the work had been done in good faith in the main, the result has been a vast improvement on the state of the property before the program started".
The Settlement Agreement was "accord and satisfaction", with the owners corporation having knowingly compromised any causes of action available against the owners corporation; and the owners corporation could not revert to the state of affairs prior to entering into the Settlement Agreement. Arden relied on the NSW Court of Appeal decision of El-Mir & 1 Or v Risk [2005] NSWCA 215. The only cause of action that the owners corporation could rely upon against Arden was breach of the Settlement Agreement.
The applicant's submissions regarding Clause 5.4 of the Settlement Agreement were misconceived. That indemnity clause "relates to any and all actions of the Remedial Builder" against the owners corporation (i.e. if the Remedial Builder were to take legal action against the owners corporation for matters such as obtaining payment for work, Arden would indemnify the owners corporation). It was not a Clause that Arden would rectify any defect in the strata scheme buildings.
What the owners corporation is attempting to do is to have the Tribunal "set aside" or "ignore" the terms of the Settlement Agreement.
Had the owners corporation pleaded a case or led evidence as to what had been done under the Settlement Agreement, Arden could have met that case. Rather, the owners corporation had "elected to run its case as if it were dealing solely with a breach of the HB Act; and it is not possible for the owners corporation to change its position.
The Tribunal "cannot issue a works order as the proceedings relate to a claim for breach of contract". Further, the Settlement Agreement provided the parties with a detailed dispute resolution mechanism in the event of a dispute under the Settlement Agreement.
On 28 September 2018 the owners corporation "entered into an agreement with In-Style for In-Style to carry out the rectification of the defects in Red 1's workmanship. To the extent this was done, or not done satisfactorily, the owners corporation's rights are against In-Style, not Arden.
If the owners corporation is able to bring a claim for breach of statutory warranties in s 18B of the HB Act against Arden, many of the defects claimed are out of time under s 18E of the HB Act. The defects that Arden regards as out of time are "indicated" in Arden's comments in the applicant's Scott Schedule.
In respect of the claim for fire safety defects, they did not form part of the Settlement Agreement. It is "very clear" the owners corporation has been obtaining annual fire safety certifications; and in Interim Occupation Certificate was issued in respect of the strata buildings. The owners corporation had to prove fire safety defects and had failed to show why the strata buildings could not now obtain fire safety certification. This could be due to (a) the owners corporation's experts not applying standards in existence at the date of practical completion (rather than current standards); (b) the owners corporation failing to perform maintenance; or (c) the owners corporation having altered the building from the time it was completed. Arden does not bear the onus of proof and the owners corporation has not discharged its onus.
The owners corporation had advanced a "global claim" and not distinguished between "major" and "non-major" defects.
The owners corporation's claim included a number of items that were not defective but had fallen into a state of disrepair due to inadequate maintenance.
At the time the building was completed in 2016, it complied with building standards.

Applicant-Submissions in Reply

The owners corporation's submissions in reply are summarised as follows:
In-Style cannot make submissions that are materially different to what is contained in its Points of Defence.
The written contract signed by In-Style; the home warranty insurance certificate; and the emails of Mr Frangieh are all evidence that the owners corporation and In-Style entered into a contract. In-Style has provided no evidence that the scope of works was not as set out in Clause 1 of the contract.
Clause 10 of the written contract with In-Style "lists the whole of the defect items… as "Provisional Sums" and so subject to adjustment. There was no evidence by In-Style as to what work it did, who it issued invoices to, or how much was paid. The identification of the contract amount as $100,000 does not provide evidence that In-Style had only contracted to perform a limited amount of work.
Mr May's evidence was that invoices from In-Style were to be sent to and paid for by Arden, not the owners corporation.
In-Style provided no evidence the contact was varied.
Mr May's evidence was that the owners corporation had not contracted with Ronson Group.
Mr May's evidence was that the owners corporation had not terminated the contract with In-Style.
The Tribunal should draw a Jones v Dunkel inference regarding Mr Frangieh failing to give evidence.
The Settlement Agreement with Arden was signed on 31 July 2018 and proceedings were taken in the Tribunal on 5 November 2020. The Settlement Agreement is a "building claim" for "building goods and services" under ss 48A and 48MA of the HB Act, and proceedings have been brought within the 3 year period from the date of the contract under s 48MA (8) of the HB Act. The owners corporation is within time to seek enforcement of the terms of the Settlement Agreement.
Arden's submission regarding "betterment" (i.e. that repairs will put the owners corporation than it would have been but for the breach) was not pleaded and should be rejected in any event.
Arden's submission that there was no evidence distinguishing between "major defects" and "non-major defects" is incurred. Mr Kavanagh identifies the "major defect" items at pages 12 and 417 of his report.
The expert reports provided by the applicant are sufficient to prove building defects.
It is irrelevant that the owners corporation chose not to pursue the original builder by making an application to the Supreme Court to have the builder reinstated under the Corporations Act 2001 (C'th).
The Settlement Agreement with Arden did not settle all claim for breaches of statutory warranties under the HB Act. It did not contain any clause purporting to settle and release Arden or any other party from responsibility. Further, s 18G of the HB Act precludes contracting out of statutory warranty obligations.
Arden has breached the Settlement Agreement in any event by failing to undertake the Scott Schedule Items 1-148.
The provisions of s 18E (2) of the HB Act do not apply in respect of the Settlement Agreement, as that provision only applies in respect of a second set of legal proceedings involving the same defects, where the first set of proceedings has been determined. There were no earlier legal proceedings determined against Arden (Bardon v Occhuito Enterprises Pty Ltd [2016] NSWCATAP 191 at [31] (although the submission erroneously quotes the decision at first instance rather than the Appeal Panel decision).
Further defects have become apparent as "other deficiencies" under s 18E (2) of the HB Act, as set out in the most recent report of Mr Kavanagh.
Paragraph [38] of Arden's submissions is an admission that it was bound by the Settlement Agreement. Consequently, it is bound to rectify defects 1-148 of the Scott Schedule.
The Settlement Agreement with Arden does not fall within the principles of "accord and satisfaction". The owners corporation did not give up its rights under s 18B of the HB Act. Arden failed to perform its promise to rectify defects under Clause 2 of the Settlement Agreement and is liable to rectify the defects in Items 1-148 of the Scott Schedule.
The Tribunal has jurisdiction under ss 48A and 48K of the HB Act to make remedial orders for Arden's breach of the Settlement Agreement.
The Tribunal should accept the evidence of Dr Zhong regarding fire safety defects. No evidence was provided by In-Style or Arden to dispute Dr Zhong's evidence.

Jurisdiction of the Tribunal.

The Tribunal has jurisdiction to consider and determine a "building claim" (s 48I and 48K of the HB Act) subject to relevant limitation periods.
A "building claim" is defined in s 48A of the HB Act as follows: (1) In this Part - building claim means a claim for - (a) the payment of a specified sum of money, or (b) the supply of specified services, or (c) relief from payment of a specified sum of money, or (d) the delivery, return or replacement of specified goods or goods of a specified description, or (e) a combination of two or more of the remedies referred to in paragraphs (a)-(d), that arises from a supply of building goods or services whether under a contract or not, or that arises under a contract that is collateral to a contract for the supply of building goods or services, but does not include a claim that the regulations declare not to be a building claim. building dispute means a dispute that has been notified as referred to in section 48C. building goods or services means goods or services supplied for or in connection with the carrying out of residential building work or specialist work, being goods or services - (a) supplied by the person who contracts to do, or otherwise does, that work, or (b) supplied in any circumstances prescribed by the regulations to the person who contracts to do that work. goods, services and supply have the same meanings as in Part 6A of the Fair Trading Act 1987. (2) Without limiting the definition of building claim, a building claim includes the following - (a) an appeal against a decision of an insurer under a building cover contract required to be entered into under this Act, (b) a claim for compensation for loss arising from a breach of a statutory warranty implied under Part 2C. (3), (4) (Repealed)
Section 48K of the HB Act has been referred to in part previously in the decision, but the complete provision states: 48K Jurisdiction of Tribunal in relation to building claims (1) The Tribunal has jurisdiction to hear and determine any building claim brought before it in accordance with this Part in which the amount claimed does not exceed $500,000 (or any other higher or lower figure prescribed by the regulations). (2) The Tribunal has jurisdiction to hear and determine any building claim whether or not the matter to which the claim relates arose before or after the commencement of this Division, except as provided by this section. (3) The Tribunal does not have jurisdiction in respect of a building claim relating to building goods or services that have been supplied to or for the claimant if the date on which the claim was lodged is more than 3 years after the date on which the supply was made (or, if made in instalments, the date on which the supply was last made). (4) The Tribunal does not have jurisdiction in respect of a building claim relating to building goods or services that are required under a contract to be supplied to or for the claimant on or by a specified date or within a specified period but which have not been so supplied if the date on which the claim was lodged is more than 3 years after the date on or by which the supply was required under the contract to be made or, if required to be made in instalments, the last date on which the supply was required to be made. (5) The fact that a building claim arises out of a contract that also involves the sale of land does not prevent the Tribunal from hearing that building claim. (6) The Tribunal does not have jurisdiction in respect of a building claim arising out of a building cover contract required to be entered into under this Act if the date on which the claim was lodged is more than 10 years after the date on which the residential building work the subject of the claim was completed. (7) The Tribunal does not have jurisdiction in respect of a building claim arising from a breach of a statutory warranty implied under Part 2C if the date on which the claim is lodged is after the end of the period within which proceedings for a breach of the statutory warranty must be commenced (as provided by section 18E). (8) The Tribunal does not have jurisdiction in respect of a building claim relating to - (a) a contract for the supply of goods or services to which none of subsections (3), (4), (6) and (7) applies, or (b) a collateral contract, if the date on which the claim was lodged is more than 3 years after the date on which the contract was entered into. (9) This section has effect despite clause 5 (Relationship between Tribunal and courts and other bodies in connection with Division functions) of Schedule 4 to the Civil and Administrative Tribunal Act 2013.
In respect of the statutory warranty provisions under the HB Act, s 18B of the HB Act states: 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. (2) The statutory warranties implied by this section are not limited to a contract to do residential building work for an owner of land and are also implied in a contract under which a person (the principal contractor) who has contracted to do residential building work contracts with another person (a subcontractor to the principal contractor) for the subcontractor to do the work (or any part of the work) for the principal contractor.
The principles applicable to whether a breach of the statutory warranties in s 18B of the HB Act were summarised by the Appeal Panel of the Tribunal in Deacon v National Strategic Constructions Pty Ltd; National Strategic Constructions Pty Ltd v Deacon [2017] NSWCATAP 185 as follows (at [46]): Although objective standards such as Australian Standards, the Building Code of Australia and the Guide are of significant relevance in establishing whether work has been performed in a proper and workmanlike manner (Wheeler v Ecroplot Pty Ltd [2010] NSWCA 61 at [10]), the absence of such evidence does not automatically mean a homeowner has failed to establish breach of statutory warranty. In our view, the relevant principle was succinctly stated by Senior Member Goldstein in G MacFayden and Anor v G Tadrosse [2014] NSWCATCD 194 at [46] as follows: …[E]vidence that work does not comply with the Building Code of Australia would establish a basis for a finding that sub section 18B(c) of the Act has been breached. Evidence of the details in which work does not comply with the contractual plans and specifications would form the basis for a finding that sub section 18B(a) of the Act has been breached. Evidence of work not being carried out in a proper and workmanlike manner would in my view involve identification of the work in question, a statement of how the expert would expect it to be carried out in in a proper and workmanlike manner and then identification of the factors which establish that the way in which the work has been carried out falls short of it being carried out in a proper and workmanlike manner. Evidence of this nature, if accepted, would form the basis for a finding that sub section 18B(a) of the Act has been breached.
As was also set out in Deacon, the Tribunal when considering whether breach of s 18B of the HB Act has been established must consider and make findings in respect of: 1. Whether the owner has established on the balance of probabilities that works have not been performed in accordance with s 18B of the HB Act. 2. If a 'defect' (in the sense of failure to comply with s 18B of the HB Act) is established, what is the appropriate method to rectify that defect.
The benefit of statutory warranties in s 18B of the HB Act include successors in title, and apply to developers. Section 18C of the HB Act states: 18C Warranties as to work by others (1) A person who is the immediate successor in title to an owner-builder, a holder of a contractor licence, a former holder or a developer who has done residential building work on land is entitled to the benefit of the statutory warranties as if the owner-builder, holder, former holder or developer were required to hold a contractor licence and had done the work under a contract with that successor in title to do the work. (2) For the purposes of this section, residential building work done on behalf of a developer is taken to have been done by the developer.
Section 18D of the HB Act also deals with the extension of statutory warranties and the enforcement of statutory warranties as follows: 18D Extension of statutory warranties (1) A person who is a successor in title to a person entitled to the benefit of a statutory warranty under this Act is entitled to the same rights as the person's predecessor in title in respect of the statutory warranty. (1A) A person who is a non-contracting owner in relation to a contract to do residential building work on land is entitled (and is taken to have always been entitled) to the same rights as those that a party to the contract has in respect of a statutory warranty. (1B) Subject to the regulations, a party to a contract has no right to enforce a statutory warranty in proceedings in relation to a deficiency in work or materials if the warranty has already been enforced in relation to that particular deficiency by a non-contracting owner. (2) This section does not give a successor in title or non-contracting owner of land any right to enforce a statutory warranty in proceedings in relation to a deficiency in work or materials if the warranty has already been enforced in relation to that particular deficiency, except as provided by the regulations
In respect of remedial powers of the Tribunal, s 48O of the HB Act states: 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.
Section 48O (1) (c) of the HB Act states that the Tribunal has the power to perform work, or perform services that not only arise under the Act, but also "the terms of any agreement". Thus, provided there is an agreement between parties that involves residential "building goods and services"; proceedings are commenced within the relevant limitation period under s 48K of the HB Act; and the agreement is not inconsistent with the provisions of the HB Act in such a manner that it is unenforceable, the Tribunal has jurisdiction to enforce agreements, separate to its powers to determine a "building claim" that arises under the provisions of the HB Act, such as breach of the statutory warranties under s 18B of the HB Act.
In respect of statutory warranty claims, the HB Act distinguishes between "major defects" and "non-major defects".
Section 18E of the HB Act states as follows: 18E Proceedings for breach of warranty (1) Proceedings for a breach of a statutory warranty must be commenced in accordance with the following provisions - (a) proceedings must be commenced before the end of the warranty period for the breach, (b) the warranty period is 6 years for a breach that results in a major defect in residential building work or 2 years in any other case, (c) the warranty period starts on completion of the work to which it relates (but this does not prevent proceedings from being commenced before completion of the work), (d) if the work is not completed, the warranty period starts on - (i) the date the contract is terminated, or (ii) if the contract is not terminated - the date on which work under the contract ceased, or (iii) if the contract is not terminated and work under the contract was not commenced - the date of the contract, (e) if the breach of warranty becomes apparent within the last 6 months of the warranty period, proceedings may be commenced within a further 6 months after the end of the warranty period, (f) a breach of warranty becomes apparent when any person entitled to the benefit of the warranty first becomes aware (or ought reasonably to have become aware) of the breach. (1A) If a building bond has been lodged for building work under Part 11 of the Strata Schemes Management Act 2015, the period of 2 years specified for commencing proceedings for a breach of a statutory warranty for that work is extended until the end of 90 days after the end of the period within which a final inspection report on the building work under that Part is required. (1B) Subsection (1A) does not limit any other law that permits the period for commencement of proceedings to be extended. (2) The fact that a person entitled to the benefit of a statutory warranty specified in paragraph (a), (b), (c), (e) or (f) of section 18B has enforced the warranty in relation to a particular deficiency in the work does not prevent the person from enforcing the same warranty for a deficiency of a different kind in the work (the other deficiency) if - (a) the other deficiency was in existence when the work to which the warranty relates was completed, and (b) the person did not know, and could not reasonably be expected to have known, of the existence of the other deficiency when the warranty was previously enforced, and (c) the proceedings to enforce the warranty in relation to the other deficiency are brought within the period referred to in subsection (1). (3) The regulations may prescribe defects in a building that are not (despite any other provision of this section) a major defect. (4) In this section - major defect means - (a) a defect in a major element of a building that is attributable to defective design, defective or faulty workmanship, defective materials, or a failure to comply with the structural performance requirements of the National Construction Code (or any combination of these), and that causes, or is likely to cause - (i) the inability to inhabit or use the building (or part of the building) for its intended purpose, or (ii) the destruction of the building or any part of the building, or (iii) a threat of collapse of the building or any part of the building, or (b) a defect of a kind that is prescribed by the regulations as a major defect, or (c) the use of a building product (within the meaning of the Building Products (Safety) Act 2017) in contravention of that Act. Note - The definition of major defect also applies for the purposes of section 103B (Period of cover). major element of a building means - (a) an internal or external load-bearing component of a building that is essential to the stability of the building, or any part of it (including but not limited to foundations and footings, floors, walls, roofs, columns and beams), or (b) a fire safety system, or (c) waterproofing, or (d) any other element that is prescribed by the regulations as a major element of a building
In Fisher v N. Phillips and M. Phillips t/as Arise Building Services [2022] NSWCATCD 80 the Tribunal summarised the applicable principles as to whether a defect was a "major defect" as follows (at [41]-[43]): The Appeal Panel in Ashton v Stevenson; Stevenson v Ashton [2020] NSWCATAP 233 ('Ashton') considered the applicable principles for whether or not a defect was a "major defect" under Section 18E (1) (b) and (4) of the HB Act. Such principles are summarised as follows: (a) The test under s 18E (4) of the HB Act has two parts. The first is that there must be a defect in "a major element of the building" attributable to one of the specified mattes. The second is that the defect must "cause" or "is likely to cause" (a) the inability to inhabit or use the building (or part of the building) for its intended purpose; or (b) the destruction of the building or any part of the building; or (c) a threat of collapse of the building or any part of the building (Ashton at [63]); (b) Expert evidence may be necessary to establish the fact of the defect and the likely effect on the ability to inhabit the building or cause the destruction of the building. However, the homeowner may also give lay evidence on such issues, including matters such as observations about the absence of relevant elements of the work; the location of water staining; the fact of water ingress during a rain or flooding event; photographs of such matters; or other observations about which a non-expert could give evidence and which could rationally affect the determination of what is likely in the future (Ashton at [68]). (c) Whether a particular defect is likely to cause the relevant consequences in the future is evaluated in the context of (a) how long the defect has existed; and (b) whether the defect has resulted in any damage that might indicate the likelihood the premises will become uninhabitable or destroyed in the future by reason of the defect (Ashton at [69]). (d) The design life of the structure and materials used may be relevant considerations (Ashton at [70]). (e) Determination of the matters in s 18E (4) (a) (i)-(ii) are questions of fact (Ashton at [130]-[131]). Evidence is required from which it can be concluded the defects will likely cause the specified outcome (Ashton at [134]). (f) Defects in the drainage system (and the roof structure) designed to keep rainwater from entering the dwelling is a major element under s 18E (4) (c) of the HB Act; and evidence may establish defects are likely to cause the premises to become uninhabitable in the future due to flooding, even if such a rain event has not yet occurred (Ashton at [169]-[170]). Further, the Appeal Panel stated in Ashton at [135]: Whilst it is inappropriate to try and catalogue all evidence that might be relevant to resolving the issue of whether the defects are likely to cause the building to become uninhabitable or to be destroyed in whole or in part, it can be readily accepted that the fact of water ingress arising from one or more of the defects would be relevant even though such an outcome had not presently manifested itself. The nature, location and extent of the defects would also be relevant in assessing the likelihood of the prescribed outcome. Lastly, expert evidence assessing the likelihood of the particular defects causing the prescribed outcome would be relevant, it being noted that the evidence must be of a type which is "comprehensible and reach conclusions that are rationally based" in order to "furnish the trier of fact with criteria enabling the evaluation of the validity of the expert's conclusion" .
In Stevenson v Ashton [2019] NSWSC 1689, the Supreme Court (Harrison AsJ) stated at [74]-[76] that the legal test for whether the defect in s 18E (4) of the HB Act is a "major defect" does not require proof that the defect is "presently manifested and dire" or "imminent".
In respect of "completion of work", ss 3B and 3C of the HB Act are of relevance. Section 3B does not apply to the construction of new buildings in strata scheme developments, but applies to other residential building work.
Section 3B of the HB Act states as follows: Date of completion of residential building work (1A) This section does not apply to residential building work to which section 3C applies. Note - Section 3C provides for the date of completion of new buildings in strata schemes. (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. (4) If residential building work comprises the construction of 2 or more buildings each of which is reasonably capable of being used and occupied separately, practical completion of the individual buildings can occur at different times (so that practical completion of any one building does not require practical completion of all the buildings). (5) This section applies for the purposes of determining when completion of residential building work occurs for the purposes of any provision of this Act, the regulations or a contract of insurance under Part 6.
Section 3C of the HB Act states as follows: 3C Date of completion of new buildings in strata schemes (1) This section applies to residential building work comprising the construction of a new building in a strata scheme (within the meaning of the Strata Schemes Management Act 2015) where the issue of an occupation certificate is required to authorise commencement of the use or occupation of the building. Note - Section 3B provides for the date of completion of other residential building work. (2) The completion of residential building work to which this section applies occurs on - (a) the date of issue of an occupation certificate that authorises the occupation and use of the whole of the building, unless paragraph (b) applies, or (b) the occurrence of some other event that is prescribed by the regulations as constituting completion of the work. (3) If a contract to do residential building work (the primary contract) comprises the construction of 2 or more separate buildings, the date of completion of that work is to be determined as if there were a separate contract for each separate building (with each contract on the same terms as the primary contract) so that the work for each building will have a separate completion date. For the purposes of this section, a building is separate if it is reasonably capable of being used and occupied separately from any other building. Note - Separate buildings can still have the same completion date if they are completed at the same time. (4) This section applies for the purpose of determining when completion of residential building work occurs for the purposes of any provision of this Act, the regulations or a contract of insurance under Part 6. (5) In this section - building means any structure that, as a new building, requires the issue of an occupation certificate to authorise its use and occupation. occupation certificate means an occupation certificate under the Environmental Planning and Assessment Act 1979. Note - A swimming pool, tennis court or detached garage can be a building for the purposes of this section if an occupation certificate is required to authorise its use and occupation. If a structure in a strata scheme does not require an occupation certificate, section 3B will apply to it instead of section 3C.
In these proceedings, there is no factual dispute that the only occupation certificate for the strata building issued was an interim occupation certificate which was issued more than 2 years, but less than 6 years, before proceedings were commenced in the Tribunal. The owners corporation is not taking proceedings against the original builder, but it is able to take proceedings against the developer (Arden) for breach of statutory warranties under s 18B of the HB Act in respect of construction of the original strata building for any "major defects" under s 18E of the HB Act.
That is a separate issue to any liability imposed on Arden by the July 2018 Settlement Agreement"; and any liability imposed on In-Style that arises from the October 2018 written contract.

Liability of In-Style

The starting point for determining the liability of In-Style is the written contract between the owners corporation and In-Style.

Was There a Contract Between the Owners Corporation and In-Style?

As discussed previously, that contract was in NSW Fair Trading standard form; was signed by Mr Frangieh for In-Style on 28 September 2018; and Mr May on behalf of the owners corporation on 24 October 2018.
A party who executes a document in the form of a contract is generally bound by the document unless it can establish that its execution of the document was induced by fraud, mistake or misrepresentation, or it has a statutory remedy. The written document is assessed objectively from the perspective of a reasonable person who entered into the contract, rather than the subjective belief of the parties who entered into the written contact, and pre-contractual negotiations are of limited relevance in assessing the terms of the contract.
Such contractual principles are well established (see, for example, Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165; Cherry v Steele-Park [2017] NSWCA 295).
The Tribunal is satisfied there was a contact between the owners corporation and In-Style. The terms of the written agreement are clear. There is a contract price ($100,000). There is consideration between the parties; with In-Style promising to perform work; and the owners corporation promising to make payment for that work.
The fact that there is no evidence that the owners corporation paid any monies to In-Style does not mean there was no consideration for the contract, or that there was no contractual term for payment. The evidence of Mr May was that Arden (arising from its obligations under the Settlement Agreement) had not only agreed to find a remedial builder, but pay that builder for the works and so the owners corporation did not make any payments, or concern itself regarding the issue of payment. That does not, however, negate that there was a written contract between the owners corporation and In-Style which contained clear terms and bound the parties to the contract.
In Style submits that the written contract was only a "quote" (i.e. an offer or an invitation to treat) rather than a contact.
The Tribunal does not accept this submission. The submission in not only inconsistent with the comprehensive terms of the written agreement that was signed by both parties, but inconsistent with the fact that In-Style took out home warranty insurance in respect of the contact identifying itself as the builder and the owners corporation as the owner.
It is a statutory requirement under the HB Act that builder take out home warranty insurance in respect of contracts to a value of above $20,000, and that such insurance be in place before works are performed (s 92 HB Act).
If the written contract was a mere "quote" then there is no apparent reason why In-Style would take out home warranty insurance in respect of the contract. The fact that home warranty insurance was taken out by In-Style (irrespective of the fact it was issued by the home warranty insurer on 9 November 2018) is evidence that supports the finding that there was a valid written contract between the owners corporation and In-Style.
In respect of the contract price, In-Style argues that the amount of $100,000 is manifestly inadequate for the value of the works. However, it was In-Style who agreed to the contract price. The value was for more than a mere nominal amount. The fact that Mr Kavanagh has subsequently expressed a view that the total cost of performing rectification work as set out in his report and Scott Schedule is in the vicinity of $1,000,000 has no bearing on whether the owners corporation and In-Style entered into a valid contract on or about 24 October 2018.
Further, as the owners corporation has pointed out in its submissions, Clause 10 of the contact (which refers to "Provisional Sums") identifies in the Provision sums schedule "All defect items" with the provisional sum amount identified as "$100,000". A provisional sum under Clause 10 of the contract is an amount for which the contractor cannot give a definitive price, and allows the contract price to be adjusted if the actual cost of the provisional sum item is higher, or lower, than the amount identified in the provisional sum schedule. Thus, if the actual cost to In-Style for the works was above $100,000, the contract amount could be adjusted in favour of In-Style (subject to the fact that the contract does not identify in Clause 10 a contractor's margin percentage).
The submissions of In-Style refer to the email correspondence of Mr Frangieh on 6 November 2019 asserting that there were no defects that In-Style were responsible for rectifying, and that In-Style had only agreed to perform a small amount of works for which it had completed.
However, that email is entirely inconsistent with the terms of the written contact entered into between the owners corporation and In-Style.
In-Style (and Arden) have chosen not to adduce any evidence in the matter, and their submissions rely heavily on the assertion that the onus is on the owners corporation to prove its case, and that it has failed to do so.
The owners corporation bears the onus of proving the factual matters necessary to establish is causes of action (and any remedy) on the balance of probabilities, but having regard to the gravity of the questions to be determined: Briginshaw v Briginshaw (1938) 60 CLR 336 at 362; [1938] HCA 34. As Dixon J observed in Briginshaw at 361, "The truth is that, when the law requires the proof of any fact, the tribunal must feel an actual persuasion of its occurrence or existence before it can be found."
Where material evidence is peculiarly within a party's knowledge, it may be sufficient for the opposing party to adduce slight evidence of a matter in issue (Blatch v Archer (1774) 1 Cowp 63; (1774) 98 ER 969 at 970; Gerard Cassegrain & Co Pty Ltd v Cassegrain (2013) 87 NSWLR 284; [2013] NSWSC 453 at [26]; BCI Finances Pty Ltd (In Liq) v Binetter (No 4) [2016] FCA 1351; (2016) 348 ALR 227 at [125].
An unexplained failure of a party to give evidence, tender documents or call witnesses may lead to an inference that the uncalled evidence would not have assisted the party (Jones v Dunkel (1959) 101 CLR 298 at 320). However, that inference does not extend to an inference that the missing evidence would have damaged the party's case, nor fill in gaps in the evidence of the other party, as compared to enabling inference to be drawn more comfortably: Jagatramka v Wollongong Coal Ltd [2021] NSWCA 61 at [49]; Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361 at [64].
In this matter, the evidence of Mr May and in particular the written contract and certificate of home warranty insurance is sufficient for the Tribunal to be satisfied on the balance of probabilities that the owners corporation entered into a written contract with In-Style on 24 October 2018. The absence of evidence from In-Style (and Arden) has been taken into account consistently with the evidentiary principles set out above, but without the Tribunal finding that such evidence would not have assisted the case of In-Style (and Arden).

What Was the Scope of Works Under the Written Contract Between the Owners Corporation and In-Style?

The Tribunal is satisfied that the scope of works that In-Style was required to perform is as set out in Clause 1 of the written contract.
Clause 1 of the written contract incorporates "other documents" as forming the scope of works under the contract. The specific reference is as follows: Integrated Consultancy Group Technical Report-Defects 31/5/18 Ditto-Pool Plantroom 5/4/18 A City Report 29/5/17
The evidence of Mr May does not indicate that there was any agreement between the owners corporation and In-Style to vary or reduce the scope of works. As discussed previously, In-Style has not provided any evidence to indicate that there was a variation under the terms of the contract; or a reduction of the scope of works under the terms of the contract.
Accordingly, In-Style was bound to complete the works set out in the reports referred to in Clause 1 of the contract in a manner that was compliant with the statutory warranties under s 18B of the HB Act.

Has In-Style Completed, or Completed Adequately, the Scope of Work Under the Contract With the Owners Corporation?

Items 1 to 148 of Mr Kavanagh's report of 15 January 2021 (and which form the same items in the Scott Schedule) are the same as Items 1-148 of his report of 31 May 2018.
As discussed previously, In-Style was obliged under the terms of the contract with the owners corporation to rectify those Items, noting that Mr Kavanagh's report of 31 May 2018 contain a scope of works to rectify the defects (with such scope of works falling within the contractual obligation of In-Style).
Mr Kavanagh's report of 15 January 2021 sets out what was the "status" of each of the defect items as December 2020; and sets out whether the rectification methodology set out in the report of 31 May 2018 remained applicable, or was modified.
The Scott Schedule (and the reports of Mr Kavanagh dated 31 May 2018 and 15 January 2021) set out the nature of the defect and a scope of works to rectify the defect.
The Tribunal is satisfied that such evidence sufficiently proves breach of the statutory warranties under s 18B of the HB Act by In-Style. The Tribunal is further satisfied that the evidence contained in the Scott Schedule sets out a scope of works that is necessary to achieve compliance with the contract and a reasonable course to adopt (Bellgrove v Eldridge [1954] HCA 36; (1954) 90 CLR 613 at 617-618).
In respect of Item 173 of the Scott Schedule (which involves minor cracks in the South Perimeter Wall to be rectified by grinding the cracks to form a slot width to a depth of 5 mm and seal with sealant) the submissions of the applicant do not refer to how that item was part of the scope of works being an item referred to in one of the 3 reports set out in Clause 1 of the contract dated 24 October 2018. The Scott Schedule refers to Item 173 being "referred to in the technical report dated 7 January 2021 prepared by Daniel Binnington of Integrated Building Consultancy". However, that is not sufficient to establish that it fell within the scope of works of the contract between the owners corporation and In-Style.
The Tribunal notes that the Item clearly involves only moderate works to rectify; that Arden in its comments to the Scott Schedule appear to agree to rectify (although those comments are not sworn evidence); and In-Style in its comments do not accept liability.
The Tribunal is not satisfied that the owners corporation has proved on the balance of probabilities that Item 173 falls within the scope of works of the contract between the owners corporation and In-Style dated 24 October 2018. Accordingly, In-Style cannot be held liable to rectify that defect.

Have Proceedings for Breach of Statutory Warranty Been Taken Within the Appropriate Limitation Period by The Owners Corporation Against In-Style

In-Style entered into a contract with the owners corporation to perform work. It is not the "original builder" of the strata buildings and the relevant time period applicable in respect of breach of statutory warranties is the time period set out in ss 48K (7); 18E and 3B of the HB Act.
By reason of s 3B (1A) and s 3C (1) of the HB Act, the date of completion of work involves the provisions of s 3B of the HB Act.
No date of completion was identified in Clause 6 of the contract. In-Style has also failed to comply with Clause 8 of the contract by writing to the owners corporation to certify that the work has been completed in accordance with the contract.
None of the provisions of s 3B (3) (a), (c), or (d) of the HB Act apply.
Section 3B (3) (b) of the HB Act is the applicable provision for determining when work was complete for the purpose of ascertaining the commencement of the statutory warranties limitation period.
As discussed previously, there is little evidence as to when In-Style was last on site. The evidence of Mr May and the emails of Mr Frangieh are sufficient to establish that In-Style was on site and was performing work. Mr Frangieh's email of 5 November 2019 refers to In-Style having been "recent" (sic) on site.
Proceedings were commenced in the Tribunal on 5 November 2020.
Accordingly, if the last date In-Style was on site performing work (other than rectifying its own defective work) later than 5 November 2018 then by reason of s 18E (1) (b) of the HB Act the owners corporation can bring proceedings for rectification of defective work (and incomplete work that constitutes a defect) for all defects, irrespective of whether the defect is a "major defect" or "non-major" defect.
Further, in respect of work that was not performed at all the proceedings have clearly been commenced within 3 years of the date of the contact, irrespective of having to make a determination as to whether the provisions of s 48K (5) or (8) applies.
Neither the owners corporation or In-Style argues that the contract between the parties is still on foot.
Accordingly, the Tribunal is not required to make any factual findings as to whether Items 1-148 of the Scott Schedule are "major defects" or "non-major defects" under s 18E of the HB Act.
In Style is liable to perform works to rectify and/or complete Items 1-148 of the Scott Schedule.

Liability of Arden

The first issue to consider is whether the Dispute Resolution clauses of the Settlement Agreement (Clauses 7.1-7.3) preclude the owners corporation from taking legal action in circumstances where there is no evidence of dispute resolution under those clauses prior to the commencement of litigation in the Tribunal.
Clauses 7.1-7.3 of the Settlement Agreement do not state that parties "shall" or "must" engage in dispute resolution in the manner set out in the contractual clauses prior to commencing litigation. There is no contractually agreed upon mandatory step prior to the commencement of litigation, with applicable principles discussed in decision including Aiton v Transfield [1999] NSWSC 996 and Bouffard v CDM Australasia Pty Ltd [2021] NSWDC 124.
Accordingly, the owners corporation can litigate in the Tribunal against Arden for breach of the agreement irrespective of whether the parties have engaged in dispute resolution under Clauses 7.1-7.3 of the Settlement Agreement.
There are two potential types of liability applicable to Arden, the developer of the strata scheme.
The first is under the Settlement Agreement.dated 31 July 2018. Arden does not submit that it did not validly enter into the Settlement Agreement or that the Settlement Agreement is not binding. Accordingly, it unnecessary to make findings regarding the formation of a contract of whether the Settlement Agreement was in the form of a Deed.
The second is under the statutory warranty provisions of ss 18B and 18E of the HB Act separate and distinct from the terms of the Settlement Agreement

Settlement Agreement

The terms of the Settlement Agreement have been referred to previously, but it is appropriate to set out Clause 2 and Annexure A verbatim.
Clause 2 states: Remedial Works to be Performed by Arden 2. Arden is to rectify the defective works as per the Rectification Work which shall be the sum of: A. The Agreed Rectification Scopes of Work being the rectification scopes of work agreed by the Owners and Arden's experts in the joint expert reports ("Annexure B") and the; B. The Joint Expert Determined Scopes of Work, being the rectification scopes of work determined by the Joint Expert in relation to the Defects and which were not otherwise agreed in the joint expert reports. (collectively known as the "Rectification Work").
Annexure A identifies "Defects" as 1. Integrated Consultancy Group-Expert report on Pool Plant Room & Associated Underlying and Adjacent Building Elements dated 5 April 2018. 2. Integrated Consultancy Group-Technical Report dated 31 May 2018. 3. Acity Defects report dated 29 May 2017
Further Clause 8 of the Settlement Agreement states: 8. Each of the Parties shall take all steps, execute all documents and do everything reasonably required to give full effect to the terms of this Agreement.
As the parties did not engage a joint expert, there was not "otherwise agreed" scopes of work to rectify defects. The defects, and the scope of works to rectify area as set out in Annexure A.
As discussed previously, the Tribunal is satisfied that Items 1-148 of the Scott Schedule is the same Items as 1-148 in the report of Mr Kavanagh dated 31 May 2018.
The submissions of the owners corporation do not establish how Item 173 is within the reports referred to in Annexure A to the Settlement Agreement; and the Scott Schedule simply refers to that Item being "referred to in technical report prepared by Daniel Binnington" of 7 January 2021.
The Tribunal is not satisfied that Item 173 falls within the terms of the Settlement Agreement.
The submissions of the owners corporation refer to Clause 5.4 of the contract to argue that Arden is liable to indemnify the owners corporation for any failure of the remedial builder (i.e. In-Style) to perform work; or perform work in a manner that complies with s 18B of the HB Act. The Tribunal rejects that submission. Clause 5.4 clearly provides an indemnity by Arden to the owners corporation (and Lot owners) for any actions taken against the owners corporation by the remedial builder. An example would be failure to pay monies to the remedial builder for the contract works. The indemnity under Clause 5.4 does not extend further than that.
However, the relevant clauses regarding Arden being responsible to ensure the work was performed under the Settlement Agreement and performed in a manner compliant with s 18B of the HB Act are Clauses 2 and 8. Arden is responsible "to rectify the defective works" and take "all steps" to ensure the defective works are rectified. Pursuant to those clauses of the Settlement Agreement, Arden is liable for breach of contract if the defects that fall under the Settlement Agreement are not rectified.
Proceedings were commenced by the owners corporation against Arden for breach of the Settlement Agreement within 3 years of the date of it being executed by Arden and the owners corporation. It clearly involves "building goods and services" under s 48A of the HB Act. By reason of s 48K (8) of the HB Act, the proceedings have been brought within the applicable limitation period, being within 3 years from the date of the agreement.
Arden has breached the agreement because the defective works in Annexure A have not been rectified in accordance with the scope of works set out in the reports contained in Annexure A.
Under s 48O of the HB Act, the Tribunal is empowered to make orders to enforce agreements. The Tribunal has previously made findings regarding it being appropriate that Items 1-148 be rectified and completed in accordance with the Scott Schedule, and the same findings apply to Arden.
The Tribunal is satisfied it is appropriate that In-Style and Arden be jointly and severally liable to perform the works set out in the scope of works in Items 1-148 of the Scott Schedule.

Breach of Statutory Warranties

Arden submits that it cannot have liability for anything other than breach of the Settlement Agreement by reason of the principles of accord and satisfaction.
The NSW Court of Appeal referred to the applicable principles for accord and satisfaction in El-Mir & 1 Or v Risk [2005] NSWCA 215 ('Risk') as follows at [48] - [52]: "48 The "essence of accord and satisfaction 'is the acceptance by the plaintiff of something in place of his cause of action', … the accord is the agreement or consent to accept the satisfaction … upon provision of the satisfaction, there is a discharge which extinguishes the cause of action": Federal Commissioner of Taxation v Orica Ltd [1998] HCA 33; (1998) 194 CLR 500 per Gummow J at [116] citing Dixon J in McDermott v Black at 183 - 185; see also British Russian Gazette & Trade Outlook Ltd v Associated Newspapers Ltd [1933] 2 KB 616 at 643 per Scrutton LJ. In Thompson v Australian Capital Television Pty Ltd and Other [1996] HCA 38; (1996) 186 CLR 574 at 610, Gummow J emphasised that accord and satisfaction "requires acceptance of something in place of the full remedy to which the recipient is entitled". (emphasis added) 49 Where there is an agreement to accept a promise in satisfaction of the cause of action, "the original cause of action is discharged from the date when the promise is made": McDermott v Black per Starke J (at 176); Dixon J (at 183 - 185); see also British Russian Gazette & Trade Outlook Ltd v Associated Newspapers Ltd (at 644) per Scrutton LJ. 50 The consequences of the discharge of the original cause of action by accord and satisfaction were explained by Phillips JA (with whom Winneke P and Charles JA agreed) in Osborn & Bernotti t/as G04 Productions v McDermott t/as RA McDermott & Co & Karmine Pty Ltd [1998] 3 VR 1 at 8, in a passage referred to with apparent approval by Gummow and Hayne JJ in Baxter v Obacelo Pty Ltd [2001] HCA 66; (2001) 205 CLR 635 at [56]. Phillips JA said: "Where there is an accord and satisfaction, the agreement for compromise may be enforced, and indeed only that agreement may be enforced , because ex hypothesi the previous cause of action has gone; it has been 'satisfied' by the making of the new agreement constituted by abandonment of the earlier cause of action in return for the promise of other benefit." (emphasis added) 51 In other words, the role of an accord is to replace the former contract with a new one (eodem modo quo oritur, eodem modo dissolvitur): Professor Brian Coote, Common Forms, Consideration and Contract Doctrine, (1999) 14 Journal of Contract Law 116 at 123. Accord and satisfaction provides the means whereby a cause of action which a plaintiff has can be rendered unenforceable: Illawong Village Pty Ltd v State Bank of New South Wales [2004] NSWSC 18, at [262] - [263] per Campbell J. 52 If the promisor fails to perform the promise, the promisee's only remedy is to sue for breach of the promise. There cannot be a return to the original obligation or claim: see Anson's Law of Contract, 27th Ed at 492; see also Koutsourais & Anor v Metledge & Associates [2004] NSWCA 313 at [49] - [51] per Bryson JA (Hodgson JA, with whom Beazley JA concurred, agreed (at [7]) with Bryson JA's consideration of the issue of accord and satisfaction, although disagreeing with his Honour's ultimate conclusion)."
Further, the question of whether there has been accord and satisfaction (or the closely related concept of accord executory) is a question of fact to be assessed objectively (Risk at [54])
In this matter, the principle of accord and satisfaction cannot apply to Items 1-148 as they were the very Items that Arden agreed to rectify under the terms of the Settlement Agreement.
In respect of any liability under the statutory warranty provisions of the HB Act for the principle of accord and satisfaction does not apply; or applies in a manner that does not extinguish the owners corporation's rights under s 18B of the HB Act against Arden.
Section 18G of the HB Act states as follows: 18G Warranties may not be excluded A provision of an agreement or other instrument that purports to restrict or remove the rights of a person in respect of any statutory warranty is void.
The issue of whether a release of a right to enforce a claim for breach of statutory warranty is, or is not, void by reason of s 18G of the HB Act remains open (Warburton v County Construction (NSW) Pty Ltd [2022] NSWSC 941 at [142]). However, it is unnecessary to consider that issue in the context of the Settlement Agreement between the owners corporation and Arden.
The Settlement Agreement does not contain a clause that the owners corporation is releasing its rights to take legal proceedings against Arden in respect of any other breach of statutory warranties under s 18B of the HB Act. Accordingly, the parties have not purported to 'contract out' of the statutory warranty provisions.
Rather, the Settlement Agreement is that certain defects will be rectified in accordance with the terms of the Settlement Agreement; not that rectification of such defects will be in full and final settlement of any statutory warranty rights that the owners corporation may have against Arden.
Accordingly, the owner corporation still has the benefit of the statutory warranty provisions of the HB Act against Arden. As discussed previously, however, the owners corporation is only within time to claim for "major defects" under s 18E of the HB Act.
Arden submits that any defects (in particular, the 'fire safety defects') should have been apparent to the owners corporation, and may have arisen after construction of the building. Arden also submits that the Settlement Agreement constitutes an "enforcement" of statutory warranty rights
Such submissions are not accepted. The owners corporation has not "enforced" its statutory warranties against Arden previously in respect of a particular deficiency and s 18E (2) of the HB Act does not apply. Merely entering into an agreement with a developer that the developer will cause the rectification of some defects in the strata building is not an "enforcement of a warranty in respect of a particular deficiency" under s 18E (2) of the HB Act in respect of other defects, and as discussed previously Arden is bound to rectify Items 1-148 because it breached the Settlement Agreement. The owners corporation does not advance a claim against Arden under Items 1-148 other than in respect of the Settlement Agreement in any event.
Further, there is no evidence that any of the defects claimed by the owners corporation (other than Item 179 which is not pressed) arise from any alteration or modification of common property by the owners corporation since the completion of the strata building.

Defect Items 149-172 in Scott Schedule

The manner in which the Scott Schedule at Tab 14 of the applicant's Tender Bundle is set out and cross referenced to earlier reports is confusing.
Items 149-172 of the Scott Schedule are the same Item as set out in Items 288-311 of Mr Kavanagh's report of 15 January 2021 and the Scott Schedule set out in that report.
In his report of 15 January 2021, Mr Kavanagh states that such items are "new 'major defect' classification items identified during December 2020 status inspection (at page 12 of the report) and Mr Kavanagh states in his report he was instructed to identify and comment upon "major defect" items under s 18E of the HB Act. Mr Kavanagh states at the heading to the schedule for those items (starting at p 385 of his report of 15 January 2021)
It is clear from the identification of the nature of the defect and the method of rectification contained in Mr Kavanagh's report of 15 January 2021 (and the Scott Schedule contained in that report) and the Scott Schedule at Tab 14 that the identified defects either involve water ingress; or damage to the strata building caused by water ingress.
The Tribunal is satisfied on the basis of the information contained in Mr Kavanagh's report of 15 January 2021 that Items 149-172 are defects in breach of the statutory warranties in s 18B of the HB Act; and such defect are "major defects" as defined in s 18E (4) of the HB Act. The defects are to a "major element" of the strata buildings involving waterproofing; and cause, or are likely to cause, the matters set out in s 18E (4) (a) (i) and (ii) of the HB Act.
As discussed previously, neither respondent served their own independent expert evidence to rebut or contradict the opinion of Mr Kavanagh.
The Tribunal is also satisfied that the method of rectification identified in the Scott Schedule (and Mr Kavanagh's report of 15 January 2021 with its Scott Schedule) are necessary to achieve contractual compliance, and a reasonable course to adopt.

Defect Item 173

A discussed previously, Item 173 involves minor cracking to the south perimeter wall and was discussed in the report of Mr Binnington dated 7 January 2021. The cracking identified only requires minor work to rectify and the evidence contained in Mr Binnington's report is insufficient for the Tribunal to be satisfied that it is a "major defect" under s 18E of the HB Act.

Items 174-214 Fire Safety Defects

Items 174-214 of the Scott Schedule at Tab 14 of the Tender Bundle replicates Items 1-42 of the defects identified in the report of Dr Zhong of Acor Consultants, which was filed with the Tribunal on 7 February 2022.
As discussed previously, Item 179 is not pressed. Consequently, discussion of the fire safety defects does not include that Item.
Dr Zhong's report clearly sets out the provision of the Building Code of Australia and Australian Standards that the items of work fail to comply with, and provide a sufficiently detailed scope of works for rectification. Items 174-214 of the Scott Schedule replicate the information contained in Dr Zhong's report.
Clearly, any failure to provide adequate fire safety involves a "major element" of a building, and the Tribunal is satisfied that the defects identified cause, or are likely to cause, the inability to use the building (or part of the building) for its intended purpose. An "intended purpose" of any strata building is that the persons who reside in the building can do so safely. Fire is a danger to life and property. The report setting out the opinion of Dr Zhong (which was not deleteriously affected by the limited cross examination of Dr Zhong at the hearing) sets out in detail why there is deficient fire safety in the strata buildings.
Arden submits that because the building was given an interim occupation certificate means it was compliant with fire safety standards at the time. The Tribunal does not accept that the mere issue of an interim occupation certificate means that the building does not contain defects in breach of s 18B and 18E of the HB Act.
Further, even if there is no evidence that the local Council has taken any action, or proposes to take any action, against the owners corporation, regarding fire safety inspections or compliance, that does not mean that the building does not contain fire safety defects in breach of ss 18B and 18E of the HB Act. Arden also refers in submissions to the possibility that relevant BCA and Australian Standards may have changed, but there is no evidence to support this. The Tribunal does not accept that Dr Zhong has not referred to applicable standards pertinent to whether the statutory warranties under s 18B of the HB Act has been breached; and Arden did not file any expert evidence to rebut or contradict the evidence of Dr Zhong.
The Tribunal is satisfied on the evidence contained in the report of Dr Zhong that the Items set out in Items 174-214 of the Scott Schedule at Tab 14 of the Tender Bundle are defects in breach of the statutory warranties in s 18B of the HB Act; that the defects are "major defects" and the method of rectification identified is necessary to achieve contractual compliance and a reasonable course to adopt.

Items 215-242

Items 215-242 are referred to as "Further Defects". The submissions of the owners corporation assert that they form part of the expert reports of the owners corporation, but do not clearly identify where they are located in such reports.
Most of the Items refer to water leaks entering into Lots. However, it is unnecessary for the Tribunal to explore whether such Items are defective works under s 18B and 18E of the HB Act.
The reason for this is that the scope of works to rectify the purported defects is simply identified as "further investigation/scope to be provided" (other than in respect of Item 240, which refers to incorrect lift signage for which the proposed rectification is to "investigate and replace relevant signage in accordance with the BCA").
The Tribunal is not satisfied that it is appropriate to make an order under s 48O of the HB Act that Arden "investigate and provide a scope of works" in respect of defects. The onus is upon the owners corporation not only to prove that work is defective in breach of s 18B of the HB Act and has been brough within the applicable limitation period, but the appropriate work to rectify the defect (Catapult Constructions Pty Ltd v Denison [2018] NSWCATAP 158 at [54]-[61] 'Catapult Constructions'). Orders of the Tribunal that there merely be further experts engaged to "investigate" and provide a proposed scope of works are too broad and uncertain to form the basis of an appropriate work order under s 48O of the HB Act in the circumstances of this matter, where the owners corporation (who is legally represented) have had ample time to obtain expert evidence that sets out a scope of works.
Notably in the context of the Strata Schemes Management Act 2015 (NSW) the Supreme Court has also been critical of purported work orders that compel a party to "investigate" and then perform future work in accordance to that expert investigation, rather than clearly set out orders that will rectify purported defects and finalise the dispute (Glenquarry Park Investments Pty Ltd v Hegyesi [2019] NSWSC 425 at [104]; [113]-[114]).
The Tribunal does not hold the view that in no circumstances would it be appropriate to make a work order under s 48O of the HB Act that a respondent engage an expert to inspect a building and prepare a scope of works for consideration. However, it is not satisfied that it is appropriate to do so in the circumstances of this matter.
Having failed to establish any appropriate method of rectification to form the basis of a work order under s 48O of the HB Act, the Tribunal dismisses the owners corporation's application in respect of Items 215-242.

Items 243-253

Items 243-253 are said to arise from "Building Commissioner Audit Report 8 February 2021". Most of those items involve structural issues in the building where the Scott Schedule identifies a method of rectification involving a structural engineer and mechanical engineer being engaged to "investigate" and/or "monitor".
According to the applicant's submissions, the Building Commissioner Audit Report of 8 February 2021 is contained in the Tender Bundle at "Tabs 19,20, 21 and 22".
However, the Tender Bundle does not contain a copy of the report of 8 February 2021. The purported defects identified are also not referred to in the other expert reports relied upon by the applicant.
In circumstances where the Tribunal does not have in evidence before it a copy of the Building Commissioner Audit Report dated 8 February 2021, it cannot make findings that such items are defects under s 18B of the HB Act to which Arden is liable to rectify. Further, as discussed previously, it is only in limited circumstances where the Tribunal would regard it as appropriate to make a work order under s 48O of the HB Act that Arden engage an expert merely to "investigate" or "monitor".
The Tribunal dismisses the owners corporation's application in respect of Items 243-253. In doing so, the Tribunal is cognizant that its jurisdiction is only under the HB Act, and the owners corporation may have other rights against Arden (or the Building Commissioner may take further action) under the RAB Act.

Building Work Rectification Order Under s 33 of the RAB Act in Respect of Inadequate Waterproofing to Roofs and Bathrooms

Although it is not referred to in the Scott Schedule at Tab 14 of the Tender Bundle (which referred to in the applicant's written submissions and submissions in reply by a different Tab number to the Tab number contained in the Tender Bundle filed and admitted as evidence), the owners corporation also seeks a work order under s 48O of the HB Act against Arden for the works referred to in the draft order under the RAB Act discussed at paragraphs [85]-[97] of this decision.
The Tribunal accepts that the draft order and attached report by Mr Whitton are evidence that must be considered by the Tribunal in respect of whether there is defective work, and if so, what is the appropriate work order against Arden.
The Tribunal has previously discussed in detail the principles applicable to liability for Arden to rectify "major defects" under ss 18B and 18E of the HB Act, and does not propose to repeat that discussion.
The Tribunal is satisfied that the waterproofing deficiencies in the roofs of the strata building and bathrooms of various Lots identified in the draft Building Work Rectification Order are major defects under ss 18B and 18E of the HB Act for which Arden is liable to rectify, and that the scope of works identified is necessary to achieve contractual compliance and a reasonable course to adopt.
Accordingly, the Tribunal makes a work order against Arden in the same terms as the draft RAB Act order discussed at paragraphs [85]-[97] of this decision.

Details of the Work Order

The applicant has put forward various proposed work orders in its submissions. The Tribunal does not make work orders in the manner proposed by the owners corporation. The proposed work orders include a number of contingencies and uncertainties which the Tribunal does not regard as appropriate to include in it work order, taking into account the principles of clarity and certainty discussed in Catapult Constructions at [61].
The Tribunal has formulated a work order under s 48O of the HB that it regards as appropriate.

Events Since the Hearing

Despite the parties being legally represented, the Tribunal has received no correspondence since the hearing to indicate any work has been done or the parties have resolved any issue.
Considering the involvement of the Building Commissioner, it is possible that work has been done by or on behalf of Arden since the hearing. However, in the absence of any correspondence from the parties providing proposed consent orders or seeking to re-open the hearing, the Tribunal must work on the basis that its orders reflect the status of the evidence at the hearing.
If there has been either a resolution of the matter (in whole or part) or works have been done and all parties agree to variation of the orders of the Tribunal, the parties may provide signed proposed consent orders that vary or set aside the orders of the Tribunal in these proceedings under Regulation 9 (1) (a) of the Civil and Administrative Tribunal Regulation 2022 (NSW).
Considering the extent of the work orders the Tribunal regards a period of up to 6 months from the date of these orders as a sufficient time to comply with the orders.

The Issue of Costs

Considering the factual findings that have been made in this decision and that the owners corporation was seeking a work order rather than an award of damages (having commenced the proceedings seeking an order for damages as an alternative order) it is appropriate that the parties have the opportunity to be heard on the issue of costs before a costs order is made.
The Tribunal does not regard it as appropriate in the circumstances of this matter to express a preliminary view on the issue of costs; or make a costs order but allow a party to apply to have the costs order varied or set aside.
The Tribunal's orders provide procedural directions for the parties to be heard on the issue of costs. Costs submissions are to refer to s 60 of the NCAT Act; Regulation 38 of the Civil and Administrative Tribunal Rules 2014 (NSW) and applicable authorities on the issue of costs.
If the parties are able to agree to a costs order, they are to file with the Tribunal proposed consent orders signed by the parties.

ORDERS 1. The first respondent (In-Style Developments Pty Ltd) and the second respondent (Arden CH (NSW) Pty Ltd are to perform, or cause the performance of, the works set out in the scope of works in Items 1 to 148 of the Scott Schedule contained at Tab 14 of the Tender Bundle filed in these proceedings by 30 July 2023. 2. The second respondent is to perform, or cause the performance of, the works set out in the scope of works in Items 149 to 172 of the Scott Schedule contained at Tab 14 of the Tender Bundle filed in these proceedings by 30 July 2023. 3. The second respondent is to perform, or cause the performance of, the works set out in the scope of works in Items 174 to 215 (other than Item 179) of the Scott Schedule contained at Tab 14of the Tender Bundle filed in these proceedings by 30 July 2023. 4. The second respondent is to perform, or cause the performance of, the works set out in the scope of works in paragraph 9 of the Draft Building Work Rectification Order of Mr Whitton of NSW Fair Trading under s 33 of the Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 (NSW) contained at Tab 20 of the Tender Bundle filed in these proceedings by 30 July 2023. 5. The application for work orders under Section 48O of the Home Building Act 1989 (NSW) is otherwise dismissed. 6. The work in Orders 1, 2, 3 and 4 is to be performed by suitably licensed and insured persons exercising due care and skill. 7. The issue of costs of these proceedings is to be determined in the following manner: 1. The costs applicant is to file with the Tribunal and serve on the costs respondent all written submissions and documents relied upon in the costs application by 14 days from the date of this decision. 2. The cost respondent is to file with the Tribunal and serve on the costs applicant all written submissions and documents relied upon by the costs respondent within 28 days from the date of this decision. 3. The costs applicant is to file with the Tribunal and serve on the costs respondent all submissions in reply by 35 days from the date of this decision. 4. The costs submissions of the parties are to include whether a party seeks an oral hearing on the issue of costs or consents to the issue of costs being determined on the papers. 5. Subject to the submissions of the parties and consideration of those submissions, the Tribunal may determine the issue of costs without further oral hearing under s 50 (2) of the Civil and Administrative Tribunal Act 2013 (NSW). 6. Any party may apply to vary the timetable for costs submissions. 7. All costs submissions and documents must be filed with the Tribunal in hard copy.

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: 06 June 2024

Home Building Legislation Amendment Act 2001(NSW)

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Judgment (31 paragraphs)

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Legislation Cited (7)

Cases Cited (48)