Timilty Constructions Pty Ltd v Culina

NCAT Appeal Panel|2022-10-17

; (1989) 193 CLR 72. Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 Ryan v BKB Motor Vehicle Repairs Pty Ltd [2017] NSWCATAP 39 Texts Cited: None cited Category: Principal judgment Parties: Timilty Constructions Pty Ltd (Appellant) Dean Culina (Respondent) Representation: Counsel: D Southwood (Appellant)

Solicitors: WMD Law (Appellant) Snelgroves Solicitors (Respondent) File Number(s): 2022/00213343 Publication restriction: Nil Decision under appeal Court or tribunal: Civil and Administrative Tribunal Jurisdiction: Consumer and Commercial Division Citation: N/A Date of Decision: 23 June 2022 Before: G Burton SC, Senior Member File Number(s): HB 21/19975

Background

The appellant ('Timilty') undertook the construction of a duplex for a developer in a southern suburb of Sydney pursuant to a Housing Industry Association [HIA] form of contract dated 10 July 2018 for a sum of $1,311,848.34. Practical completion was 3 April 2019 and a Final Occupation Certificate was dated 7 May 2019.
Mr Culina ('the respondent') and his wife purchased one of the dwellings ('the Premises') from the developer and occupied the Premises in about November 2019. The respondent's wife was not joined as a co-applicant as observed by the Tribunal in its Reasons for Decision ('Reasons') at [3].
The respondent lodged a Home Building Application ('Application') on 6 May 2021 raising 8 items of defective work involving alleged breaches of the statutory warranties in Part 2C of the Home Building Act 1989 ('HBA').
The respondent is a successor in title to a person (the developer) entitled to the benefit of the statutory warranties in Part 2C of the HBA and is entitled to the same rights in respect of the HBA warranties as the predecessor in title.

The Tribunal's Decision

The Tribunal ordered Timilty to pay $61,012.08 in respect of the defective works, observing that there were only 2 defects about which the parties' experts could not agree. Generally, the Tribunal preferred the costings for rectification of the respondent's expert over the expert engaged by Timilty.
On appeal, Timilty only challenged the Tribunal's findings in respect one of those defects, being described by the Tribunal as "water ingress from north wall of kitchen, dining and living areas". The parties referred to this as "Item 4" (referrable to the Schedule of Defects and the Expert's Joint Report before the Tribunal). The Tribunal's findings in respect of the Item 4 defect are at [66]-[70] of the Reasons. The Tribunal awarded $3,101 for this defect.
The other challenge to the Tribunal's findings relates to the amounts allowed for "contingency" in the rectification works, in addition to allowances for preliminaries and the builder's margin. The Tribunal's findings are at [80]-82] of the Reasons.
The Tribunal allowed the following percentages referrable to the $61,012.08 awarded to the respondent: 1. 11% for preliminaries; 2. 25% for margin; 3. 15% for contingency; 4. 1.5% for warranty insurance.
The Tribunal summarised the outcome of the money order as follows at [83]: The total net trade cost, if a money order is made, is $34,247.29. With preliminaries at 11% this becomes $38,014.49; with margin at 25% this becomes $47,518.12; with GST the total is $52,269.93; with contingency of 15% this becomes $60,110.42; with warranty insurance of 1.5% ($901.66) this becomes $61,012.08

Grounds of appeal

Timilty lodged its Notice of Appeal on 20 July 2022. Timilty contended in its written submissions lodged on 31 August 2022 at [7] that the Tribunal's finding in relation of Item 4 constituted an error on a question of law because: a. There was a failure to make a finding on an ingredient issue required to make out the entitlement to relief; and b. Not providing adequate reasons for finding Timilty liable for the Item 4.0 Defect.
This position represented a departure from the Notice of Appeal in which Timilty stated that it was asking for leave to appeal under Sch. 4 Cl. 12 of the Civil and Administrative Tribunal Act 2013 (NSW) ('NCAT Act') rather than on the basis of an error on a question of law under s 80 of the NCAT Act.
In relation to decision of the Tribunal on preliminaries and margin, Timilty accepts that leave is required to appeal those findings by the Tribunal: written submissions at [8].
The other departure from the Notice of Appeal is that in Section B of its Notice of Appeal, Timilty challenged the Tribunal's findings for "contingencies, preliminaries and builder's margin". In support of its application for leave to appeal in the Notice of Appeal, Timilty contended that the Tribunal's decision was not fair and equitable because the "evidence showed that the appellant builder [Timilty] charged a total of 16% on new build contracts which included allowances for preliminaries, builder's margin and contingencies".
Timilty's written submissions only challenged the Tribunal's allowance for "15% for contingency costs": [2.b]; also [12] and [15]. We have approached the appeal on that latter basis in accordance with Timilty's written submissions.

Reply to Appeal

The Reply to Appeal was lodged on 2 August 2022. Written submissions were lodged on behalf of the respondent on 19 September 2022.
The respondent opposed the appeal on the basis that were was no demonstrated error by the Tribunal, no error of law and the Tribunal preferred the respondent's expert evidence over that of Timilty's expert.

Evidence

The evidence relied upon by both parties on the appeal was the evidence before the Tribunal contained in a folder of documents comprising 323 pages lodge by the appellant with the Tribunal lodged on 29 July 2022. For convenience this has been referred to in these Reasons as the "document bundle".

Statutory basis of the appeal

Section 80(2) of the NCAT Act provides that an internal appeal (which this is) may be made as of right to the Appeal Panel on a question of law and otherwise with the leave (that is, with the permission) of the Appeal Panel.
An internal appeal is not a re-hearing of the original proceedings or a mere opportunity for a party dissatisfied with the outcome in the original proceedings to re-argue its case. In Ryan v BKB Motor Vehicle Repairs Pty Ltd [2017] NSWCATAP 39, the Appeal Panel said at [10]: An appeal does not provide a losing party with the opportunity to run their case again except in the narrow circumstances which we have described. Mr Ryan has not satisfied us that those circumstances apply to his case and we refuse permission for him to appeal.
In Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 at [13], the Appeal Panel set out a non-exclusive list of questions of law including whether there has been a failure to provide proper reasons, whether there was a failure to afford procedural fairness, and whether the Tribunal failed to consider relevant (i.e., mandatory) considerations.
An error on a question of law of law will also occur where there is a material failure by the Tribunal to respond to a "substantial, clearly articulated argument relying upon established facts" that may be characterised either as a failure to afford natural justice or as a constructive failure to exercise jurisdiction: Dranichnikov v Minister for Immigration and Multicultural Affairs [2003] HCA 26; (2003) 77 ALJR 1088 at [24]-[25] (Gummow and Callinan JJ; Hayne J agreeing at [95]); DVE18 v Minister for Home Affairs [2020] FCAFC 83; (2020) 276 FCR 401 at [34]; followed by the Appeal Panel in Goncalves v Bora Developments Pty Ltd [2021] NSWCATAP 231 (Goncalves) at [9(2)].
A failure to deal with evidence may also in certain circumstances be characterised as a failure to have regard to a relevant consideration or a failure to have regard to critical evidence. By s 38(6)(a) of the NCAT Act, the Tribunal "is to ensure that all relevant material is disclosed to the Tribunal so as to enable it to determine all of the relevant facts in issue in any proceedings." This obligation includes an obligation to have regard to material which has been disclosed to the Tribunal and which is relevant to the facts in issue, at least where that material is of some significance: Goncalves at [28]; Croghan v Rees [2021] NSWCATAP 328 at [40].
In the absence of any question of law raised by an appeal, the circumstances in which the Appeal Panel may grant leave to appeal from decisions made in the Consumer and Commercial Division are limited to those set out in cl 12(1) of Sch 4 of the NCAT Act. In such cases, the Appeal Panel must be satisfied that the appellant may have suffered "a substantial miscarriage of justice" on the basis that: 1. the decision of the Tribunal under appeal was not fair and equitable; or 2. the decision of the Tribunal under appeal was against the weight of evidence; or 3. there was significant new evidence that was not reasonably available at the time the proceedings under appeal were being dealt with.
In the Appeal Panel's decision in Collins v Urban [2014] NSWCATAP 17 (Collins), the Appeal Panel stated at [76] that a substantial miscarriage of justice for the purposes of cl 12(1) of Sch 4 may have been suffered where "there was a significant possibility", or "a chance that was fairly open", that a different and more favourable result would have been achieved for the appellant had the relevant circumstances in cl 12(1)(a) or (b) of Sch 4 not occurred or if the "new" evidence under cl 12(1)(c) had been before the Tribunal at first instance.
Further, even if an appellant from the decision of the Consumer and Commercial Division has satisfied the requirements of cl 12(1) of Sch 4 of the NCAT Act, the Appeal Panel must still consider whether it should exercise its discretion to grant leave to appeal. In Collins, the Appeal Panel at [84(2)] stated that ordinarily it is appropriate to grant leave to appeal only in certain matters. Those types of matters include issues of principle, questions of public importance, an injustice which is reasonably clear so that it would be unjust to allow the finding to stand, a factual error that was unreasonably arrived at and clearly mistaken, or where the Tribunal went about the fact-finding process in such a way that it was likely to produce an unfair result so that it would be in the interests of justice for it to be reviewed.

Is There an Error on a Question Of Law?

The purported "errors of law" referred to above were explained in Timilty's written submissions as: 1. Ignoring evidence and failing to make findings about the evidence adduced by Timilty that the ground level on the northern boundary was finished 100mm below the FFL [i.e. Finished Floor Level] of the concrete slab and that the original owner imported fill to raise the external ground level higher than the concrete slab in contravention of cl 3.1.2.3 (b)(i) of the National Construction Code (NCC). 2. A failure to provide reasons for discounting or not considering Timilty's evidence.
Timilty contended that if the Tribunal had "accepted Timilty's evidence about these matters, then Timilty would not be liable for the Item 4.0 defect": [34]

Consideration

As we have set out above, the legal principles as to what constitutes a question of law are not in dispute. The issue for our determination on appeal is whether a "question of law" properly arises: s 80(2)(b) of the NCAT Act and whether an error has occurred
We reject the submission that the Tribunal ignored Timilty's evidence as to the construction of the slab and the actions of the original owner.
At [25] of its written submissions, Timilty identified three causes of the water ingress, namely: 1. That the ground level of the exterior to the northern side of the Premises was higher than the concrete slab; 2. Inadequate drainage around the exterior wall; and 3. inadequate waterproofing/flashing of the northern wall.
At [66] of its Reasons, the Tribunal expressly referred to the evidence of Mr Timilty and his instructions to Timilty's expert that the original owner "took it upon himself to [raise?] (sic) the ground level post practical completion of the property".
However, in the summary contained in the Joint Expert Report at pp 272-273 of the appellant's bundle, Timilty's expert does not refer to these instructions and instead relies upon two matters for challenging the defect, namely: 1. The defect appears to have been previously rectified; and 2. There was no evidence of water ingress during spray testing.
Therefore, the primary position adopted by Timilty's expert was that there was no defect, not that there was a defect but there was no causal nexus with the work performed by Timilty (or sub-contractors on behalf of Timilty). The Tribunal preferred the evidence of the respondent's expert to the effect that there was a defect causing water ingress: [69]
We do not accept the submission that if the Tribunal accepted Timilty's evidence as to the construction of the slab and the actions of the original owner, it would have found no defect in relation to Item 4. No alternative finding was made to that effect by the Tribunal. There is no evidentiary support for inferring that would be the outcome either. The submission incorrectly presumes that the Tribunal would have accepted that evidence or found that it was determinative of the issue. The Tribunal was aware of that evidence in relation the placement of the fill as we have set out above. The Tribunal did not accept that matter as determinative of the issue by preferring the evidence relied upon by the respondent's expert summarised in the Joint Expert Report.
There were two significant findings based on the evidence that were adverse to Timilty (and that the respondent's expert said were contraventions of the NCC) at [69]: 1. The defect was "inadequate drainage under the pebbles" causing "the water retention by the clay base" (emphasis in the original). The pebbles were apparently placed on the path by the original owner; and 2. The defect was also a failure to install base flashing of the external wall.
We are satisfied that irrespective of the issue of the ground level being raised by the original owner, a matter of which the Tribunal was well aware, the Tribunal found that there were other and more relevant causes of the ingress of water. Those findings were open to the Tribunal on the evidence. The Tribunal did not make a finding without any evidence; nor did it approach the process of making factual findings in an unorthodox or unreasonable manner.
We also reject Timilty's submission that there was a failure to provide adequate reasons in finding that there was a defect and discounting Timilty's evidence. The reasons are clearly sufficient to adequately explain the basis of the Tribunal's finding that Item 4 involved defective work in breach of the statutory warranties in s 18B of the HBA; the appropriate method of rectification; and the cost of rectification. The reasons satisfy the applicable test set out in New South Wales Land and Housing Corporation v Orr [2019] NSWCA 231 at [66]-[77].
We find that when properly considered, no question of law arises in relation to Timilty's challenge to the Item 4 defect.

Leave to appeal

Accordingly, Timilty is required to establish grounds for leave to appeal the findings in respect of Item 4.
Timilty's written submissions did not separately address the alternate grounds for leave to appeal that Timilty is required to establish under cl 12 of Sch 4 of the NCAT Act, to which we have referred above.
For present purposes in considering whether leave to appeal should be granted, we are prepared to treat Timilty's written submissions referred to above to support a submission to the effect that the Tribunal's decision was against the weight of the evidence.
For the reasons we have set out above, we are of the view that it was open to the Tribunal to prefer the evidence of the respondent's expert summarised in the Joint Expert Report to that of Timilty's expert who said there was no defect. We are also satisfied that it was open to the Tribunal to find that at least two of the three identified causes of the water ingress referred to in the Reasons were matters for which Timilty was responsible and that these were the cause of the water ingress.
Quite properly, there was no submission to the effect that the decision in respect of Item 4 was "not fair or equitable". Therefore, we are satisfied that the decision was not against the weight of the evidence and that there has been no "substantial miscarriage of justice" within the meaning cl. 12(1)(c) of Sch 4 of the NCAT Act to warrant the granting of leave to appeal to challenge the Tribunal's findings in respect of the Item 4 defect applying the principles set out in Collins at [76]-[84].

New evidence

Timilty sought to adduce "new" evidence on the appeal being an affidavit of Matthew Timilty dated 30 August 2022, in which Mr Timilty deposed in some detail to matters concerning the Item 4 defect at [16]-[17].
We are not satisfied that the affidavit constitutes "significant new evidence" within the meaning of cl. 12(1)(c) of Sch 4 of the NCAT Act, which requires such evidence to be "new" in the sense that it "was not reasonably available at the time the proceedings under appeal were being dealt with". This is to be made by an objective assessment: Al-Daouk v Mr Pine Pty Ltd t/as Furnco Bankstown [2015] NSWCATAP 111 at [23].
The affidavit of Mr Timilty contains matters wholly within the knowledge of Mr Timilty who represented Timilty as the sole director of the company at the hearing before the Tribunal. Mr Timilty presumably had every opportunity to adduce that evidence from his own knowledge or by way of oral or written submissions to the Tribunal. There has been no suggestion that Mr Timilty was prevented from giving the evidence that is now in his affidavit, if he sought to do so.
We reject the application to adduce the new evidence.

Ground 2: Preliminaries, builder's margin and contingency

Leave to appeal

Timilty does not contend an error of law by reason of the wrongful exercise of the Tribunal's discretion in awarding the percentage amounts it did for preliminaries, builder's margin and contingencies: e.g. House v King [1936] HCA 40; 55 CLR 499. At its highest, the appellant contended that the Tribunal's fact finding was so unorthodox so as to create an unfair result by allowing an inflated money order so that leave to appeal should be granted "in the interests of justice" to enable a review of the Tribunal's decision: at [23] citing Collins.
Timilty accepts that leave to appeal is required in relation to this ground of appeal. For the reasons that follow, we have decided to grant leave to appeal the contingency findings by the Tribunal. However, if we had not granted leave, we would have been inclined to consider this issue as raising a question of law on the basis that the Tribunal failed to provide sufficient reasons for allowing a contingency and then accepting an allowance of 15% for contingency when the position of Timilty's expert was that there should be no amount allowed for contingency.
Since Timilty approached Ground 2 as requiring leave (although we note that in its Reply to Appeal, the respondent stated that leave was not necessary for either ground of appeal), we will deal with the matter in the way contended by Timilty.
Timilty described the Tribunal's decision to allow an uplift of 15% for contingencies in addition to adopting higher trade rates for remedial works as "not fair and equitable" (within the meaning of cl 12(1)(a) of Sch 4 of the NCAT Act). The written submissions discuss the relevant principles that pertain to the granting of leave at [10]-[11].
The written submissions at [12] contend that the finding by the Tribunal amounted to "double counting" and "was not reasonable in the circumstances of the case". That appears to be an acknowledgment of the principles outlined by the Appeal Panel in Collins at [84] that the "injustice" is to be "reasonably clear" and that "it would be unjust to allow the finding to stand".
It is apparent that the amounts allowed by the Tribunal have a significant impact on the amount that Timilty was ordered to pay the respondent. Of the total amount of $34,247.29 found in respect of defective works, the balance of the $61,012.08 awarded was $26,764.79 for preliminaries, margin, contingencies and warranty insurance.
We are satisfied that given the significance of this challenged finding to the overall amount that Timilty has been ordered to pay the respondent, that leave to appeal should be granted on the grounds that Timilty may have suffered a substantial miscarriage of justice by reason of the finding being "not fair and equitable" (cl 12 (1)(a) of Sch 4) and against the interests of justice (per Collins).

Consideration

Timilty's challenge to the findings in the Notice of Appeal is based on the contention to which we have referred above, that the Tribunal should have accepted evidence that Timilty charged 16% for "new build contracts" that includes allowances for preliminaries, builder's margin and contingencies. The evidence in support of this is clause 13 of Timilty's contact with the original owner: p 42 of the document bundle.
That contention was not pursued in Timilty's written submissions or at the hearing of the appeal.
Timilty's submissions rely upon to the Tribunal's findings at [52] of its Reasons: To avoid repetition, I have preferred, unless indicated otherwise in respect of a particular costing, the owner's expert's costings. They were comprehensively explained as based on the relevant Rawlinson cost guide adjusted for remedial work by the owner's expert's long experience, discussions with remedial builders and in light of the location, site access and perceived risk with remedial work. It was accordingly a significant uplift in costings from Rawlinson's rates …
It is apparent from the above and also from [83] of the Tribunal's Reasons in relation to amounts for preliminaries, margin and contingency, that the Tribunal preferred and accepted the costing evidence of the respondent's expert.
The Tribunal's findings in the Reasons at [80]-[82] are short.
Timilty's expert contended for a builder's margin and preliminaries of 15%: p 280 of the document bundle. The Tribunal proceeded on the basis that "builder's expert originally combined preliminaries and margin at 15%" but then explained further at [80] of its Reasons: In cross-examination on the range in Rawlinson [Timilty's expert] accepted that 8-9% would be fair to consider the necessary equipment (i.e. preliminaries). This was still at the lower end of the Rawlinson range of 8-14%. He also appeared to accept that a margin of 15% would be reasonable.
Due to the absence of a transcript of the hearing being provided by the appellant as part of the documents for the appeal, we are unaided in considering this any further. However, Timilty does not challenge the Tribunal's description of the evidence given by its expert in cross examination at [80].
The Tribunal found that "the combined percentage (preliminaries and margin) in the builder's expert's assessment was significantly low at 15%, which justified the builder's expert's proper concessions that moved his opinion closer to that of the owner's expert": [82]. Yet paragraph [80] set out above suggest the position of Timilty's expert was a combined allowance of 23-24%.
So although the experts were relatively close in relation to the allowance for preliminaries, at 8-9% for Timilty and 11% for the respondent's expert, there was a large disparity in their respective opinions about builder's margin: 15% for Timilty's expert and 25% for the respondent's expert. This disparity was increased by the fact that Timilty's expert offered no allowance for contingencies and the respondent's expert added a further 15% for contingencies. That was consistent with the position of the respective experts recorded in the Joint Expert Report: p 280 of the document bundle.
Timilty does not challenge the findings made by the Tribunal in relation to preliminaries, margin and warranty insurance. It is the Tribunal's allowance of 15% for contingencies on top of those amounts allowed for preliminaries and margin that is raised by Ground 2 of the appeal.
It is clear from the Joint Expert Report and the Tribunal's Reason's that Timilty's expert did not regard any sum for contingencies as necessary or reasonable. The Tribunal had regard to the view expressed by the respondent's expert of "the need for contingency given the risks of further required work in the course of the remedial work": [81] The cost for preliminaries, margin and contingency was described by the Tribunal as "market-driven" and "a competitive market, will make these items higher and the potential for discovering further issues will increase the cost to justify a contingency: [82].
We do not accept the written submission by Timilty at [15] that the Tribunal allowed two sets of contingencies, the first being the higher trade rates and the second being a further contingency allowance.
The proper characterisation of the Tribunal's findings is that the higher rates were because of extra costs usually charged by remedial contractors to accommodate the perceived risk of undertaking remedial works. In other words, taking on the risk of rectifying some other builder's works.
The actual contingency relates to a different risk. As observed by the Tribunal and referred to above, the Tribunal had regard to the contingency allowance to accommodate the risk of unforeseen further works or new issues arising during the course of a contractor undertaking the remedial work.
We are satisfied in those circumstances that it was open to the Tribunal to allow a separate percentage for contingency even after allowing that for the higher remedial rates for preliminaries and margin. These are separate considerations.
However, the builder's margin allowed by the Tribunal is 10% more than the amount finally suggested by the respondent's expert. Adding the contingency of 15%, the difference between the experts is 25%. Although the Tribunal preferred the evidence of the respondent's expert evidence, the Tribunal was not critical of Timilty's expert evidence, stating in relation to the costings at [53] - [54]: 53. The builder's expert's report was thorough and comprehensive on defects and methodology, comparable with the owner's expert report on these aspects. 54. However, the builder's expert costings appeared mostly to follow Rawlinson rates without reasoned consideration of why uplift was not justified. This is an important matter when dealing with remedial rather than new work. In cross examination the builder's expert accepted he had omitted some elements in the remediation works.
Without the transcript of the hearing we cannot determine whether Timilty's expert accepted that he overlooked a contingency allowance. It appears unlikely based on the fact that the Tribunal is referring to Timilty's expert not providing an "uplift" in the Rawlinson rates and not a contingency sum. Also, there is no reference in the Reasons to the position of the Timilty expert being any different to that in the Joint Expert report for which there was no contingency allowed by Timilty's expert.
It was open to the Tribunal to accept the 15% contingency in the absence of a competing allowance offered by Timilty's expert subject to being satisfied that it was reasonable and necessary to allow a contingency sum and that the percentage allowed was fair and reasonable. Beyond simply accepting the allowance suggested by the respondent's expert on the basis that Tribunal was satisfied that there may be a risk of further issues being uncovered, the Tribunal does not engage with the issue and explain why after allowing such a significant figure in the allowance for the builder's margin to that suggested by Timilty's expert, the Tribunal added another 15% without assessing (even in broad terms) the type of risk this was intended to cover or discussing why no contingency was allowed by Timilty's expert.
As we have stated above, there were 8 defects dealt with in the Reasons: 1. Item 1 was a leaking planter box that required a new subsoil drainage system to be installed around the perimeter of the planter box. 2. Item 2 was a leak from a louvered window requiring it to be waterproofed with a sill flashing to be installed. 3. Item 3 was water ingress from a sliding stack door requiring it to be waterproofed with a window flashing to be installed. 4. Item 4, as explained above, related to the need for proper drainage to the external path. 5. Item 5 was a leaking planter box requiring proper waterproofing with a new waterproofing membrane. 6. Item 6 was water ponding on the roof sheeting. The Tribunal accepted Timilty's method of rectification by reducing the height of the timber stud frame at the outer edge of the roof sheeting and a connection to a downpipe and gutter. 7. Item 7 was the northern box gutter not being installed to the full length required by the hydraulic plans and the need for it to be angled and have two rainwater heads instead of the single rainwater head that was installed. 8. Item 8 concerned a very minor matter of a wet area infill tiled strip drain needing the grate to be trimmed by 10mm.
None of the 8 items of defective work or the means of rectification described above were considered by the Tribunal before allowing the global 15% contingency.
As discussed previously, we do not accept that it was incumbent upon the Tribunal to separately consider the contingency required for each defect individually: Timilty written submissions at [22]. However, it is an accepted approach to allow a global sum for contingency, the only requirement being that it is appropriate to do so in the circumstances of each case: Blackhall v Fine Cut Building Pty Ltd [2021] NSWCATCD 43 at [66].
The Joint Expert Report (p 268 of the document bundle) did not identify any possible risks associated with the agreed methods of rectification.
We observe too that in the expert report of Mr Capaldi, the respondent's expert, he does not refer to the issue of contingency in his "Report Summary" setting out his costings but he does refer to including preliminaries, builder's margin, GST and warranty insurance: Section L.10 at p 151 of the document bundle. Based on the summary of the total cost of the rectification he proposed, and comparing that to his Schedule of Costings, it is an apparent oversight. The Schedule of Costings allows 15% for contingency: Item H on p 200 of the document bundle. However, no reasons are provided in the report for allowing a 15% contingency. No risks associated with undertaking the proposed rectification works is identified.
As can be discerned from the summary above, the defective works requiring rectification were not complex. They were each very much stand-alone items that would seem unlikely to create a series of further or consequential issues during rectified. The scope of the rectification work was reasonably well defined and largely agreed in the Joint Expert Report. The more certain the rectification scope, particularly where the means of rectification is mostly agreed between the experts, as in this case, the less the risk for unexpected issues to arise during the works and therefore the need for any contingency.
Rather than remit the matter for re-determination by the Tribunal on the question of contingency in light of these reasons, in accordance with s 36 of the NCAT and the overriding principle to resolve the parties' dispute in a "just, quick and cheap" way, as well as having regard to the resolution of these issues so that the cost to the parties is proportionate to the importance and complexity of the dispute, we have exercised our discretion under s 81 of the NCAT Act to vary the Tribunal's decision.
In our opinion, the high rate for the builder's margin and the amount for preliminaries does not warrant any additional sum to be allowed for contingencies: 1. Given the relatively simple nature of the rectification works; and 2. Where there is an agreed scope for that rectification work; and 3. Where there has been no concern raised by the experts in their agreed scope or the Tribunal identifying the likelihood of possible further risks when undertaking the agreed work; 4. Where the Tribunal's reasons did not canvas Timilty's expert not allowing any contingency amount and the respondent's expert report did not identify why a contingency amount was allowed.
We uphold that part of the appeal raised by Ground 2. Having regard to the Tribunal's calculations by reference to the Reasons at [83], we vary the Tribunal's decision by making an overall deduction of $7,840.49 from the Tribunal's order that the appellant pay the respondent $61,012.08 as follows: 1. $52,269.93 (for costs of rectification, preliminaries at 11%, builder's margin at 25% and GST) plus $901.66 (warranty insurance) = $53,171.59.

Change from money order to a work order

Timilty seeks to change the money order already made by the Tribunal to a work order. This was not claimed in the Notice of Appeal. The written submissions by Timilty refer to the appellant seeking a work order at [4.a] and [38.a]. However, Timilty has made no written submission in support of that application and advanced it without significant elaboration in its oral submissions at the hearing. This matter was perhaps left subject to the admissibility of the "new" evidence in the affidavit of Mr Timilty at [5]-[15] were he now expresses regret that he conceded at the hearing that an award of damages rather than a work order was appropriate and now expresses a desire to rectify the defects found by the Tribunal. For the reasons we have discussed above, we have refused the appellant leave to rely on that "new" evidence in the form of Mr Timilty's affidavit.
The application was opposed by the respondent.
As it was not identified as a ground of appeal and not addressed in written submissions, it is not properly the subject of the appeal without leave to amend the appeal being granted. The Appeal Panel cannot simply make a work order because a party orally submits at the appeal hearing such an order should be made unless it has established: 1. An error on a question of law; or 2. An error exists for which leave to appeal should be granted under cl. 12 of Sch. 4 of the NCAT Act in respect of the Tribunal at first instance awarding damages for the cost of rectification rather than a work order that the builder return to site and rectify the found defects.
One of the matters relied upon by Mr Timilty in his affidavit in support of the appellant's new application for a work order is a series of texts between himself and Mr Culina on 14 June 2022, to purportedly show that the relationship between the parties remains amicable. This is said by Mr Timilty in his affidavit to be contrary to what he first thought when agreeing to the making of a money order instead of a work order at the hearing on 21 January 2022.
At [14]-[24] of its Reasons, the Tribunal went to some lengths to discuss and to justify the making of a money order in lieu of the preferred (but not mandatory) outcome for claims for defective work under the HBA, which is a work order: s 48O. The reasoning of the Tribunal is consistent with the principles regarding s 48MA of the HBA in Kurmond Homes Pty Ltd v Marsden [2018] NSWCATAP 2 and Leung v Alexakis [2018] NSWCATAP 11. Even if leave was granted to the appellant to amend the grounds of appeal to challenge the failure to make a work order under s 48O of the HBA, no error on a question of law or error of a type that we would grant leave to appeal would have been established.
The application for a work order under s 48O of the HBA is refused.

Costs

Timilty does not seek its costs of the appeal in the orders sought at [38] of its written submissions.
The respondent seeks its costs on the presumed basis that the appeal would be dismissed.
The failure of Timilty to identify that it would seek an order as to costs if successful in the appeal may have been an oversight.
Timilty has had partial success in the appeal, although the variation of the monetary amount of the Tribunal's order is less than $10,000.
In the circumstances, we believe it is appropriate and consistent with s 38 (5) (c) of the NCAT Act to give both parties an opportunity to be heard of the issue of costs.
We have made procedural directions to deal with determination of a costs application if either party makes such an application. The costs submissions of the parties are to include reference s 60 of the NCAT Act; r 38A of the Civil and Administrative Tribunal Rules 2014 (NSW) and applicable authorities on the issue of costs, including whether the amount claimed or in dispute in the appeal exceeds $30,000.

Orders

We make the following orders: 1. Leave to appeal is granted. 2. The appeal is allowed in part. 3. Vary the Tribunal's decision dated 23 June 2022 by ordering the appellant to pay the respondent the sum of $53,171.59 within 28 days of the publication of these Reasons for Decision. 4. Lift the stay granted on 14 September 2022. 5. Any costs application is to be made in the following manner: 1. Costs applicant is to file with the Appeal Panel and serve on the costs respondent submissions and documents on the issue of costs by 14 days from the date of this decision. 2. Costs respondent is to file with the Appeal Panel and serve on the costs applicant submissions and documents on the issue of costs by 28 days from the date of this decision. 3. Costs applicant is to file with the Appeal Panel and serve on the costs respondent submissions in reply on the issue of costs by 35 days from the date of this decision. 4. The costs submissions are to refer to whether a party seeks an oral hearing on the issue of costs or whether the party agrees to the issue of costs being determined on the papers in accordance with s 50 (2) of the Civil and Administrative Tribunal Act 2013 (NSW). 5. All costs submissions and documents must be filed in hard copy with the Appeal Panel. 6. Both parties may apply in writing to the Appeal Panel to vary the procedural directions regarding determination of any costs application, but an application to vary must be filed with the Tribunal and served on the other party no later than the day prior to the date of compliance with the applicable order. 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: 03 February 2023

At a glance

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Judgment (18 paragraphs)

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Legislation Cited (3)

Cases Cited (17)

Cited By (1)