There are two (2) related appeals before the Appeal Panel. One is an appeal by homeowners in proceedings they commenced in the Tribunal claiming compensation for defective building works against their builder (File No. AP 18/15483). The other is the present appeal (File No. AP 18/17113), involving a claim for indemnity for any liability that the builder (the appellant in the present appeal) had to the homeowners against the civil, structural and geotechnical engineer (the respondent in the present appeal) who classified the site for the homeowners and designed the footings and the slab for the homeowners' residence. As both proceedings involved common factual and legal issues, the Tribunal heard them at the same time. The appeals in both proceedings were also heard at the same time by the Appeal Panel. These are Reasons for Decision in the present appeal, i.e. the appeal in respect of the builder's indemnity claim against the engineer.
Tom v Jenkins [2019] NSWCATAP 74 | Case summary | Zoe
The appellant in the present appeal, Mr Tom ("the Builder"), built a brick veneer house in Townsend, in northern New South Wales ("the House") for Mr Marc Webster and Ms Deidree Webster ("the Owners"). The engineer who classified the site and designed the footings and slabs for the House is the respondent in the present appeal, Mr Jenkins ("the Engineer"). The construction of the House was "residential building work", and the statutory warranties in s 18B(1) of the Home Building Act 1989 (NSW) ("the Act") applied.
The Builder agreed to construct the House for the Owners under the terms of a written building contract, dated 20 May 2009 ("the Contract"). Clause 38 of the Contract contained express warranties by the Builder which reflected the implied statutory warranties in s 18B(1) of the Act, namely:
(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.
Clause 43.1 of the Contract required the Builder to ensure the works complied with:
(a) the Building Code of Australia (to the extent required under the Environmental Planning and Assessment Act 1979, including any regulations or other instrument made under that Act);
(b) all other relevant codes, standards and specifications that the building works are required to comply with under any law; and
(c) the conditions of any relevant development consent or complying development certificate.
By clause 43.2 of the Contract the Owners and the Builder agreed that the Builder would not be liable if the building works did not comply with clause 43.1 if the failure related solely to:
(a) a design or specification prepared by or on behalf of the owner (but not by or on behalf of the builder); or
(b) a design or specification required by the owner if the builder has advised the owner in writing that the design or specification contravenes sub-clause 43.1
The Contract comprised:
1. The Builder's tender for the construction of the House dated 20 May 2009 ("the Tender"); and
2. a Specification titled (NSW version revised August 2005) ("the Specification").
By the terms of the Tender, the Builder agreed: "To construct footings to engineers detail and pour. (Owner to obtain plans)" and by clause 3.1 of the Specification the Builder and the Owners agreed that:
If the contract so indicates, the Owner shall at the Owner's expense provide the Builder with reports and recommendations (including soil classification) as to the foundations and/or footings requirements for the works prepared by an engineer.
In these circumstances, if the Builder instructs any party to provide such recommendations, the Builder does so only as an agent for the Owner.'
Construction of the House occurred in 2009. The Builder achieved practical completion of the House on or about 4 December 2009.
To assist the Engineer to prepare that design, the Engineer had to assess the House site's soil conditions as required by AS 2870. He considered the site to be a Class S site (a slightly reactive clay site with only slight ground movement from moisture change), then adding a Class P classification (containing soft soils, such as soft clay or silt or loose sands, and includes reactive sites subject to abnormal moisture conditions). On the Engineer's assessment of the relevant ground conditions, the Engineer designed and prepared structural drawings, strip footings and an in fill slab on piers.
In the Owners' proceedings against the Builder, File No. HB 15/64016 ("the Owners' Claim"), the Owners alleged that the Engineer got the classification very wrong. They argued that the Engineer misclassified the site for the House, and that it should have been classified as an H Site (a highly reactive clay site which could experience moderate ground movement from moisture changes). Their case was that the Engineer's structural design was inadequate, and caused the House to crack both internally and externally, with an ongoing future risk of further significant movement and cracking. The Owners claimed compensation from the Builder, on the basis that the House was unfit for use as a residential dwelling, and had to be demolished and rebuilt at a cost of $350,167.33.
The Engineer was not a party to the Owners' proceedings.
On 2 August 2016, the Builder commenced proceedings against the Engineer ("HB 16/35212") claiming indemnity from the Engineer for any liability found against him in the Owners' proceedings ("the Builder's Claim"). The Builder based his claim for indemnity in negligence and in misleading conduct in breach of s 42 of the Fair Trading Act 1987 (NSW) ("the FT Act").
The Engineer denied any liability to indemnify the Builder and alleged that the claim was statute barred, in any event. On the limitation issue, the Engineer argued that:
1. the Builder's loss was pure economic loss, and accordingly accrued when the Builder incurred that damage, not when the Builder became aware that he had suffered damage;
2. the Builder incurred damage when the Engineer provided the allegedly deficient structural design to the Builder, namely, on or about 8 May 2009; and
3. as the Builder had only commenced proceedings on 2 August 2016, rather than before 8 May 2014, the claim was commenced outside the applicable six-year limitation period.
In response, the Builder argued that the time period for economic loss claims commenced when damage was known, and as the structural defects only became manifest in August 2014, the indemnity claim was commenced within the relevant six-year limitation period.
The Tribunal heard both the Owners' Claim and the Builder's Claim together on 2 May, 3 May, 29 November and 30 November 2017. The Tribunal handed down its decision in both matters on 8 March 2018, delivering separate decisions in each matter.
In the Owners' Claim, the Tribunal rejected the primary claim that the House had to be demolished and rebuilt. Instead, the Tribunal found the Builder liable to pay compensation to the Owners for breach of the statutory warranties under s 18(1)(a) of the Act, and clause 38 of the Contract, for specific building defects identified in a Joint Expert Report of Mr John Tozer, Mr Craig Nowlan and Mr John Niland (the Owners' experts), Mr Bruce Hammond (the Builder's expert) and the Engineer ("the Joint Report").
The Tribunal made the following findings in deciding the Owners' Claim in File No. HB 15/64016:
1. on a proper construction of the Tender, and clause 3.1 of the Specification the Owners were responsible for the provision of the site classification and the Engineer's structural drawings for the footings and slab design: [35] - [43] of the Reasons in HB 15/64016;
2. having regard to the Tribunal's finding that the Owners were responsible for providing the site classification, the Builder's scope of works did not include the classification of the site for the House, the Builder did not breach either s 18B(1)(a) of the Act, or its contractual equivalent in clause 38, by any error in the Engineer's misclassification of the site for the House: [80] of the Reasons in HB 15/64016;
3. the alleged deficiencies in the Builder's site classification and inadequate structural design caused only 2 or perhaps 3, category 3 cracks ([30] of the Reasons in HB 15/64016), and to the extent they caused category 1 and category 2 cracks, these cracks were merely normal maintenance so that the Owners were not entitled to compensation for any category 1 and category 2 cracks: [103] of the Reasons in HB 15/64016;
4. the evidence did not establish that any future cracking in the House would be significant, and the evidence did not enable the Tribunal to find how widespread or serious any future cracking would be: [32] and [73] of the Reasons in HB 15/64016; and
5. the Owners had not established to the Tribunal's satisfaction that the Engineer's design of the slab and footing system was structurally inadequate to support the loads for the House, and therefore the Owners had not established any breach of s 18B(a) of the Act on the part of the Builder: [81] and [91] of the Reasons in HB 15/64016.
The Tribunal made the following findings in the Builder's Claim, File No. HB 16/35212:
1. based on the evidence, the damage only became manifest in August 2014;
2. the Engineer had carried out his site assessment and prepared the structural drawings for the House on 8 May 2009: [10] of the Reasons in HB 16/35212;
3. the provision of the geotechnical assessment report and the structural drawings on, or before, 8 May 2009 were "building services" in connection with the construction of the House, within the meaning of s 48A of the Act: [16] of the Reasons in HB 16/35212;
4. the Engineer provided those "building services" to the Builder, even though the Owners were responsible for the provision of the site classification and the Engineer's structural drawings for the footings and slab design: [16] of the Reasons in HB 16/35212;
5. the Builder received the structural drawings, in accordance with the Specification and the Tender: [16] of the Reasons in HB 16/35212;
6. the Builder's Claim related to those building services: [17] of the Reasons in HB 16/35212, and therefore it was a "building claim" within the definition of s 48A of the Act.
The Tribunal held that the Builder's Claim was captured by s 48K(3) of Act. At the time the Builder filed the application for indemnity with the Tribunal, s 48K(3) of the Act stated:
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).
On the basis of these findings the Tribunal held that it did not have jurisdiction to hear and determine the Builder's Claim and dismissed the Builder's application for indemnity.
The Tribunal's decision to dismiss the Builder's Claim on the basis of s 48K(3) of the Act was not raised at the hearing.
On 13 April 2018, the Builder filed a Notice of Appeal (dated 11 April 2018) to appeal the Tribunal's decision. The Builder's written submissions to the Appeal Panel accept that the Notice of Appeal was filed three (3) days outside the time period specified in r. 25(4) of the Civil and Administrative Tribunal Rules 2014 (NSW) ("the NCAT Rules").
[2]
Extension of time
The Builder therefore sought an order extending time for the filing of the Notice of Appeal. In Jackson v NSW Land and Housing Corporation [2014] NSWCATAP 22, the Appeal Panel examined and set out the law and principles to be considered in granting an extension of time. The Appeal Panel said at [18]:
The discretion to grant an extension of time is unfettered under [s 41 of the Civil and Administrative Tribunal Act 2013 (NSW) (the NCAT Act)] but it must be exercised judicially. It must also be exercised having regard to the statutory command in s 36 of the (NCAT) Act that the guiding principle for the Act "is to facilitate the just, quick and cheap resolution of the real issue in the proceedings".
At [21] the Appeal Panel said:
Time limits, including the specification of the time within which an appeal from an internally appealable decision to the Appeal Panel of the Tribunal must be lodged, are established by legislation for the purpose of promoting the orderly and efficient conduct of proceedings in the Tribunal, providing certainty for the parties to proceedings, especially the party in whose favour orders have been made, and achieving finality in litigation. For these reasons, these time limits should generally be strictly enforced. That is not to say, however, that exceptions should not be made where the interests of justice so require. The express power in s 41 of the (NCAT) Act to grant extensions of time allows the Tribunal to prevent the rigid enforcement of time limits becoming an instrument of injustice. As the decision in Gallo v Dawson … makes clear, it is generally the case that in order for the power to extend time to be exercised in an appellant's favour there must be material upon which the Appeal Panel can be satisfied that to refuse the application for an extension of time would work an injustice.
In the case of Mesiha v Murrell [2017] NSWCATAP 1 the Appeal Panel at [45] set out various matters that the Tribunal had to consider in an application to extend time:
1. the just resolution of proceedings remains the paramount consideration;
2. what is a just resolution needs to be understood in the context of the purposes and objectives of the power granted to the Tribunal to resolve disputes and involves a weighing of all relevant matters;
3. speed and efficiency, in the sense of minimum delay and expense are seen as essential to the just resolution of proceedings;
4. a party should be afforded a reasonable opportunity to present its case;
5. there are limits to what is necessary in providing a reasonable opportunity to be heard, which may involve the consideration of delay and cost both to the other party and to the Tribunal;
6. the nature of the case and its importance to the party seeking an extension of time needs to be considered;
7. reasons for failure to comply will generally need to be provided and must be weighed against the effect any delay will have both on the other party and upon the Tribunal;
8. an award of costs may not always be adequate to deal with issues of prejudice, which include wasted time and strain imposed upon litigants;
9. there is no absolute entitlement to an extension of time, even if the consequence of the refusal effectively prevents a party from presenting relevant evidence in support of its case.
In [11] to [14] of the Builder's written submissions for the present appeal, the Builder puts forward a number of considerations as to why the Appeal Panel should exercise its discretion to grant the short extension of time required by the Builder. The Engineer does not submit any prejudice to him from the grant of the extension of time. He submits that the Builder has not provided any evidence explaining the delay and that there is no sufficient basis to grant the extension.
Having considered these submissions, the Appeal Panel accepts the Builder's submissions as to why the Appeal Panel should extend time, and exercises its discretion to extend the period for the filing of the Notice of Appeal to 13 April 2018.
[3]
Determination of the Appeal
The Builder raises two errors of law, which are made as of right: see s 80 (2) of the Civil and Administrative Tribunal Act 2013 (NSW) ("the NCAT Act"):
1. the Builder was denied procedural fairness because the Tribunal did not give the Builder an opportunity to make submissions on the application of s 48K(3) of the Act to the Builder's Claim; and
2. the Tribunal made an error in applying the limitation period in s 48K(3) of the Act because:
1. "goods or services" supplied to a builder (as against goods or services supplied by a builder) are not "building services" within the definition of s 48A of the Act;
2. the services provided by the Engineer were provided to the Owners, and were not "to or for the claimant" for the purposes of s 48K(3) of the Act; and
3. the claim for indemnity was governed by the 7-year limitation period in s 48K(7) of the Act, and therefore the Builder's Claim was commenced within time.
[4]
Ground 1 of the Appeal - Procedural Fairness
The Engineer agrees that the application of s 48K(3) of the Act was not raised as an issue at the hearing. The Appeal Panel agrees with [21] to [24] of the Builder's written submissions for the present appeal. The Builder was denied procedural fairness in not having the opportunity to make submissions as to how s 48K of the Act applied to the Builder's Claim.
The Builder's second ground relates to the application of s 48K(3) and s 48K(7) of the Act to the Builder's Claim. The Builder's written submissions and the Engineer's written submissions fully develop and deal with that ground of appeal. There is no suggestion by either party that the Appeal Panel does not have all of the relevant material before it to deal with that ground of appeal. Accordingly, the Builder's denial of procedural fairness is simply addressed by the Appeal Panel's decision on the Builder's second ground of appeal.
[5]
Ground 2 of the Appeal - Application of s 48K(3) and s 48K(7) of the Act
S 48A of the Act defines "building claim" to mean 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.
S 48K of the Act sets out the limits of the Tribunal's jurisdiction in dealing with "building claim". The New South Wales Court of Appeal decision in Grygiel v Baine [2005] NSWCA 218 at [47] to [63] considered the concept of a "building claim" falling within the jurisdiction of the Consumer Trader and Tenancy Tribunal of NSW. In that case, the Court determined that even the provision of legal advice relating to the preparation of a building contract might come within the definition of that term. The case is often referred to as suggesting the definition of "building claim" should be construed widely and generously.
There is no challenge to the Tribunal's finding that the Builder's Claim was a "building claim".
S 48K(3) of the Act refers to "a building claim" relating to "building goods or services", which are defined in s 48A of the Act as meaning:
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.
It is common ground that paragraph (b) of the definition of "building goods and services" in s 48A of the Act has no application here.
The Builder and the Engineer both submit that the "residential building work" for this purpose was the construction of the House by the Builder. The Engineer is correct to submit that the Tribunal's determination that the Builder's Claim is a "building claim" also amounts to a finding by the Tribunal that the Builder's Claim "arises from the supply of building goods or services" by the Builder to the Owners "for or in connection with the carrying out of residential building work".
The Builder draws attention to the expression "supplied by the person who contracts to do, or otherwise does, that work" in paragraph (a) of the definition of "building goods and services" in s 48A of the Act. The thrust of the Builder's submission is that although the site classification and structural drawings were "goods or services supplied for or in connection with the carrying out of residential building work or specialist work", s 48K(3) of the Act applies only to a more limited class of goods and services, namely "goods or services supplied for or in connection with the carrying out of residential building work or specialist work", supplied by the Builder, and therefore does not apply to "goods or services supplied for or in connection with the carrying out of residential building work or specialist work" provided by anyone else.
However, any liability that the Builder had for the inadequacies of the structural drawings or the site's classification was because the Builder built to those drawings, and effectively the product of the Engineer's misclassification of the site, and the structural inadequacy of the structural drawings were supplied in connection with the construction of the House. The effect of s 48K(3) of the Act is to limit the Tribunal's jurisdiction to any building claim resulting from the supply of those "goods and services".
In our opinion, it is of no consequence that the geotechnical classification and the structural drawings were not provided to the Builder, as the Builder submitted. S 48K(3) of the Act applies because the Builder supplied the structural drawings of the Engineer by way of the construction of the House.
The Appeal Panel considers the Engineer's submissions on the issue of s 48K(3) of the Act to be correct.
S 48K(7) of the Act states:
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).
The Builder submits that the word "arising" in s 48K(7) of the Act is so broad that the indemnity claim, made on the basis of the Engineer's alleged negligence and misleading conduct under the FT Act is "arising" from a breach of statutory warranty.
The Appeal Panel accepts the Engineer's submissions. We agree that the words "arising from a breach of a statutory warranty" in s48K(7) of the Act mean just that. In this instance, the Builder's claim for indemnity against the Engineer could not arise from a breach of statutory warranty. As alleged in the Builder's case, it arose from the Engineer's negligence or misleading conduct.
[6]
Conclusion
The Appeal Panel finds no error in the Tribunal's decision, and accordingly dismisses the Appeal.
As the claim is for an amount of indemnity greater than $30,000.00 (the Owners' Claim against the Builder exceeded $350,000.00), r. 38 of the NCAT Rules applies to the costs of this appeal in consequence of r.38A. As the Engineer has been successful in having the appeal dismissed, in the exercise of our discretion on costs, we have decided to make an order that the Builder pays the Engineer's costs of the present appeal on the ordinary basis as agreed or as assessed in accordance with the applicable costs assessment legislation.
[7]
Orders
1. Leave is granted to extend time to file the Notice of Appeal to 13 April 2018.
2. Appeal dismissed.
3. The appellant is to pay the respondent's costs of this Appeal on the ordinary basis as agreed or as assessed in accordance with the applicable costs assessment legislation.
[8]
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: 02 April 2019