Vanmail v Davina International Pty Ltd

NCAT Consumer and Commercial|2023-06-01

REASONS FOR DECISION

These proceedings involve two applications under the Home Building Act 1989 (the HB Act).
In proceedings HB 22/54343, Mrs Vanmali and Mr Vanmali (together the homeowners) seek monetary compensation for residential building work performed on their home by Davina International Pty Ltd (the builder).
In proceedings HB 23/05398, the builder seeks a money order that the homeowners pay to the builder amounts said to be outstanding and due to the builder.
Both matters were heard together on 1 June 2023 and 25 July 2023.
The evidence concluded at the hearing on 1 June 2023. The Tribunal made directions for the filing of submissions. In due course 25 July 2023 was set down for completion of the hearing of the matters.
On 25 July 2023, when the matter resumed, the homeowners sought to adduce further evidence that had been filed since the hearing on 1 June 2023. I did not permit the further evidence to be adduced due to the fact that the evidence had concluded on 1 June 2023, the builder would be prejudiced by the Tribunal receiving the further evidence unless given an opportunity to respond, the builder objected to the receipt of the further evidence and some of the evidence comprised recordings of conversations made without the consent of all parties to the conversation.
At the hearing the homeowners represented themselves.
Ms Pan, a director of the builder, represented the builder. Mr Gao, also a director of the builder, assisted Ms Pan in representing the builder.

Findings

The Tribunal makes the following findings of fact.
The homeowners are the owners of a two-storey detached residential premises at ** Yaringa Road, Castle Hill, NSW, 2154. They purchased the house in 2022.
After purchasing their home the homeowners were interested in renovating the kitchen.
On 8 September 2022 the homeowners attended the builder's showroom.
Ms Vanmali says that during their attendance at the builder's showroom a conversation to the following effect took place (Ex 3, p. 68, para 47): Ms Vanmali: "We had drawers in our old kitchen that have been broken, so we are looking for something that will last many years." Mr Gao: "We only use Blum for all hinges and drawers. Only European hardware. European is stronger. We no use Chinese products."
Ms Pan says that on 8 September she had a conversation with Mr Vanmali and Ms Vanmali and said words to the following effect (Ex B, p. 29, para 5): "The runners we use are very durable"
Ms Pan also deposes that she "did not specify that the runners used in the showroom soft close drawers are of the 'Blum' brand" (Ex B, p. 29, para 5).
There was no cross examination as to the conversations in the builder's showroom referred to above.
For completeness, Mr Goa did not deny the words attributed to him by Ms Vanmali. Consequently, Ms Vanmali's conversation with Ms Pan may have been in terms as deposed by Ms Pan, but that does not mean that Mr Gao did not say the words attributed to him.
Having regard to the above matters, I find that Mr Gao did say "We only use Blum for all hinges and drawers. Only European hardware. European is stronger. We no use Chinese products."
On 9 September 2022 Mr Gao sent an email to Mr Vanmali in which he provided a description of work that the builder proposed to perform and the builder's price for that work (the Work) (Ex 1, p. 12). The total quote was $35,300.00 plus GST. The Work was described as follows: As per our discussion, as quoted: 1) polyurethane doors, colour to be chosen 2) 16 HMR white board as the cupboards internal, Australian made materials 3) European hardware, soft close doors, soft close drawers, "Blum" hinges 4) Ceaserstone benchtops and splash back, extra for the waterfall 5) we organise to remove existing kitchen cupboards 6) we disconnect the plumbing works 7) we disconnect the electrical works 8) not allow for the appliances 9) we reconnect the plumbing works, Labour only 10) we reconnect the electrical works Labour only, Lights under the overhead cupboards beside the rangehood (to be ducted out) 11) supply deliver and install 12) time frame 4-6 weeks after deposit 13) 10 years warranty 14) we fix the cornice if there was damage or change shape, not allow for the painting.
On 10 September 2022 Mr Gao sent an SMS to Mr Vanmali which recorded (Ex 1, p. 12): …There was a mistake of the project price that I have estimate yesterday, it should be $31,800 + gst, also contains brushed aluminium kicker.
Between 10 and 13 September 2022 some further discussions occurred between the parties which also concerned work to the laundry.
On 13 September 2022 Mr Gao sent an email to Mr Vanmali Gao (Ex 1, p. 13), relevantly, as follows: As per our discussion, we have agreed the following: The kitchen with: 1) polyurethane doors, colour to be chosen 2) 16 HMR white board as the cupboards internal, Australian made materials 3) European hardware, soft close doors, soft close drawers, "Blum" hinges 4) Ceaserstone benchtops and splash back, extra for the waterfall 5) we organise to remove existing kitchen cupboards 6) we disconnect the plumbing works 7) we disconnect the electrical works 8) not allow for the appliances 9) we reconnect the plumbing works, Labour only 10) we reconnect the electrical works Labour only, Lights under the overhead cupboards beside the rangehood (to be ducted out) 11) supply deliver and install 12) time frame 4-6 weeks after deposit 13) 10 years warranty 14) we fix the cornice if there was damage or change shape, not allow for the painting 15) brush aluminium kicker Project Price: $31,800 + gst The laundry with the same materials as the kitchen, but in 20mm stone bench tops Price $7,950 + gst
Over the course of the following weeks further communications led to an agreement for the builder to also perform work in the downstairs bathroom of the house and an ensuite upstairs.
The price for the work for the downstairs bathroom and the laundry was originally agreed at $16,200 plus GST (Ex 1, p. 13). However, by about mid-October, due to further negotiations and variations, the total agreed price for work on the kitchen, downstairs bathroom and laundry was $75,000 including GST (see Ex B, p. 40, paras 21, 22).
The price for the upstairs ensuite was $25,000, including the builder providing skip bins (see Ex 1, p. 13 and Ex A, p. 55).
Consequently, the total price agreed for the Works was $100,000 including GST.
Most of the Works were undertaken in October and November 2022.
In relation to the upstairs ensuite, $3,000 of the price of $25,000 was attributed to building two extended cavities (Ex 1, p. 13; Ex A, p. 41). It is common ground, and the Tribunal finds, that these cavities have not been built.
Apart from emails and SMS messages there was no written document comprising the contract between the parties in respect of the Work. Consequently, there was no document that recorded the statutory warranties implied by s 18B of the HBA, the details as to progress payment entitlements, or a statement in accordance with s 7(2)(i) of the HB Act.
It is common ground that the builder did not insure the Work. Had the contract recorded a statement in accordance with s 7(2)(i) of the HB Act, the amount recorded as the cost of insurance would presumably be nil because the builder did not effect insurance cover.
The builder holds a licence to undertake joinery work. It is common ground that the builder is only licenced to carry out joinery and carpentry work and does not hold a contractor licence to carry out plumbing, waterproofing or tiling work.
There was no evidence of the diminution in the value of the residential premises by reason of the Works being uninsured.
It is common ground, and the Tribunal finds, that the homeowners have already paid the builder $82,500.
In proceedings HB 23/05398 the builder claims the balance of the contract price, subject to some concessions including the cost of the two ensuite cavities, which it is conceded were not built.
In proceedings HB 22/54343 the homeowners make claims in respect of numerous alleged defects. The amount of their claim exceeds $60,000. I will deal with the alleged defects individually in more detail below.

Jurisdiction

Section 48A of the HB defines a building claim as follows: 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.
The homeowners' claim is for "the payment of a specified sum of money". That claim arises from the supply of building goods or services, specifically, a claim for the payment of a specified sum of money for breach the statutory warranties prescribed by s 18B of the HB Act and/or breach of s 92 of the HB Act. Consequently, it is a building claim within the meaning of section 48A of the HB Act and the Tribunal has jurisdiction under s 48K to hear and determine the matter.
Similarly, the Tribunal has jurisdiction to hear and determine the builder's claim for amounts outstanding under a contract to perform residential building work.

Builder's claim

It is convenient to first deal with the builder's claim.
The builder's initial was $17,500, being the difference between the gross sum agreed of $100,000, inclusive of GST, and the total amount paid to date of $82,500, inclusive of GST. Following a number of concessions, the builder's claim in final submissions was $13,597 (see 3.16 of builder's Submissions in Chief filed 23 June 2023) or $13,854.13 (see 7.4 of builder's Submissions in Reply filed 6 July 2023). The concessions made by the builder do not take into account the failure to install/build the two cavities in the upstairs ensuite: see 3.18 of builder's Submissions in Chief filed 23 June 2023.
It is common ground that the builder failed to insure the residential building work performed for the homeowners.
Section 94 of the HB Act provides as follows: 94 Effect of failure to insure residential building work (1) If a contract of insurance required by section 92 is not in force, in the name of the person who contracted to do the work, in relation to any residential building work done under a contract (the uninsured work), the contractor who did the work - (a) is not entitled to damages, or to enforce any other remedy in respect of a breach of the contract committed by any other party to the contract, in relation to that work, and (b) is not entitled to recover money in respect of that work under any other right of action (including a quantum meruit). (1A) Despite section 92(2) and subsection (1), if a court or tribunal considers it just and equitable, the contractor, despite the absence of the required contract of insurance, is entitled to recover money in respect of that work on a quantum meruit basis. (1B) A contractor who applies to a court or tribunal for a remedy under this section, or who is awarded money under this section, is not guilty of an offence under section 92(2) by virtue only of that fact. (1C) Without limiting the factors that a court or tribunal may consider in deciding what is just and equitable under subsection (1A) - (a) in relation to any contract - the court or tribunal may have regard to the impact on the resale price of the property if no contract of insurance is provided, and (b) in relation only to a contract entered into before 30 July 1999 - the court or tribunal is not to be limited by the fact that the required contract of insurance was not obtained until after the date of the contract. (2) However, the contractor remains liable for damages and subject to any other remedy in respect of any breach of the contract committed by the contractor.
The relevant issue is whether it is just and equitable that the builder be permitted to recover the amounts that it claims on a quantum meruit basis pursuant to s 94(1A). During the hearing the builder did not seek to identify any difference between a claim made under contract for the balance of the contract price or a quantum meruit claim, being a claim for reasonable sum. The claim was simply propounded on the basis of the balance owing less some concessions, mainly for work not completed.
To date the builder has been paid $82,500. The gross contract price was $100,000. The difference is $17,500. The builder has conceded some further items so that its claim is reduced to $13,854 (or $13,597). However, it is also common ground that the two cavities in the upstairs ensuite were not installed. The agreed value attributed to these was $3,000. This would reduce its contractual claim to about $10,800 or $10,500.
The effect of the builder's concessions and the $3,000 attributable to the two cavities for the upstairs ensuite mean that the contract sum outstanding would, at best, amount to $93,300 ($82,500 plus $10,800).
Consequently, the question is whether the Tribunal is satisfied that it is just and equitable for the Tribunal to order that an amount of $10,800 (or $10,500) is a reasonable sum for the work undertaken by the builder in circumstances where it has already been paid $82,500.
Section 94(1)(b) reflects the importance of residential building work being insured. A departure from s 94(1)(b) and to order that a monetary sum be paid by the homeowner pursuant to s 94(1A) requires that the Tribunal be satisfied that it is just and equitable to do so.
It is clear that the situation in these proceedings is not one in which a homeowner has paid a only small proportion of the contracted price but received all the work referrable to that price. The homeowners have paid $82,500 out of an 'adjusted' contract price of $93,300 which is a very significant proportion of the total contract price (adjusted for concessions).
The builder's submissions seek to attribute the amounts claimed by it to specific items of work which are said to be completed but for which the homeowners have not paid (see builder's submissions filed 23 June 2023 at p. 5). Assuming that the attribution of the amounts claimed by the builder was in accordance with the builder contentions, there remains the issue of the relationship between the amounts claimed and the total amounts already paid. That is because a consideration of whether it was just and equitable to order further payment on a quantum meruit basis would also require some understanding of the profit already made by the builder from the payments already received (or indeed any loss incurred, if that be the case). However, that assessment cannot be undertaken on the evidence before the Tribunal.
I am not satisfied that it is just and equitable that the homeowners be ordered to pay any further amounts to the builder. I take into account as the starting point that the work undertaken was not insured by the builder. As will be set out below, there is also, unsurprisingly, no certificate or warranty for the bathroom and ensuite waterproofing. The builder has already been paid the overwhelming proportion of the contract price and the evidence does not establish that it is out of pocket or even that it did not make a reasonable return for its work. In light of these matters, I am not satisfied it would be just and equitable to order that the homeowners pay any further amounts.
Consequently, there will be an order dismissing proceedings HB 23/05398.
During the hearing the homeowners stated that items that they claimed as damages which were orally characterised as "incomplete work" were not pressed unless monetary orders were made in favour of the builder in proceedings HB 23/05398. It follows that in determining the homeowners' claims it will not be necessary to make determinations as to all the homeowners' claims that were characterised as "incomplete work".
The items which fell into the category of "incomplete work" in terms of the homeowners' claims by reference to the Scotts Schedule at Ex 1, pp. 56-57 are items 2-7 and 11.

Homeowners' claims

The homeowners complain of a number of matters. In terms of the HB Act, they complain: 1. that the Works were not insured in breach of s 92 of the HB Act; 2. that the builder performed the Works without a licence for work that was not joinery or carpentry work in breach of s 4 of the HB Act; 3. that there was no written contract as required by s 7 of the HB Act; 4. that the Work, or elements of it, breached the warranties implied by s 18B of the HB Act.
Section 4 of the HB Act provides as follows: 4 Unlicensed contracting (1) A person must not contract to do - (a) any residential building work, or (b) any specialist work, except as or on behalf of an individual, partnership or corporation that is the holder of a contractor licence authorising its holder to contract to do that work. Maximum penalty - 1,000 penalty units in the case of a corporation and 200 penalty units in any other case. (2) The holder of a contractor licence who has contracted to do any residential building work must not contract with another person for the other person to do the work (or any part of the work) for the holder unless the other person is the holder of a contractor licence to do work of that kind. Maximum penalty - 1,000 penalty units in the case of a corporation and 200 penalty units in any other case. (3) The holder of a contractor licence must not contract with another person for the other person to do any work (or part of any work) for the holder for which insurance is required under this Act unless the other person is the holder of a contractor licence to do work of that kind. Maximum penalty - 1,000 penalty units in the case of a corporation and 200 penalty units in any other case. (4) A developer in relation to residential building work must not contract with another person for the other person to do that residential building work on behalf of the developer unless the other person is the holder of a contractor licence authorising the other person to do work of that kind. Maximum penalty - 1,000 penalty units in the case of a corporation and 200 penalty units in any other case. (5) A person is not guilty of an offence against subsection (2), (3) or (4) if the person establishes that the person did all that could reasonably be required to prevent the contravention of the subsection. (6) An individual who is convicted of a second or subsequent offence under a provision of this section is liable to a penalty not exceeding 500 penalty units or imprisonment for a term not exceeding 12 months, or both.
In these proceedings there is no dispute that some of the work undertaken in the bathroom and ensuite involved waterproofing work and plumbing. There is no dispute the builder is not licenced to carry out that work.
At least some of the waterproofing and plumbing work was undertaken by Mr Hou, who is a contractor retained by it (Ex B, p. 43, para 57). There is no evidence as to whether Mr Hou was licenced to do the work.
There is some evidence that indicates Ms Pan and Mr Gao undertook some of the waterproofing work (Ex 3, p. 65, para 24). The builder is not licenced to undertake waterproofing in bathrooms.
There is also evidence that Mr Vanmali intended to apply a third coat of waterproofing himself (Ex A, p. 56). However, the homeowners say that they did not perform any waterproofing in the bathroom and I am not satisfied on the balance of probabilities that Mr Vanmali did perform any waterproofing.
There is no dispute that the builder has not provided a waterproofing certificate in respect of the waterproofing work undertaken for the homeowners (see Ex B, p. 47, paras 95-96; Ex 3, p. 65, paras 18-19).
The work in the bathrooms also involved new tiling. The builder does not hold a licence for such work.
Section 7(2) of the HB Act provides that written contract for work in excess of the amount prescribed by the regulations must set out the following information: (2) A contract must contain - (a) the names of the parties, including the name of the holder of the contractor licence shown on the contractor licence, and (b) the number of the contractor licence, and (c) a sufficient description of the work to which the contract relates, and (d) any plans and specifications for the work, and (e) the contract price if known, and (f) any statutory warranties applicable to the work, and (f1) the cost of cover under Part 6 or 6B (if insurance is required under Part 6), and (g) in the case of a contract to do residential building work - a conspicuous statement setting out the cooling-off period that applies to the contract because of section 7BA, and (h) in the case of a contract to do residential building work (other than a construction contract to which the Building and Construction Industry Security of Payment Act 1999 applies) - details of any progress payments payable under the contract, and (i) in the case of a contract to do residential building work - a statement that the contract may be terminated in the circumstances provided by the general law and that this does not prevent the parties agreeing to additional circumstances in which the contract may be terminated, and (j) any other matter prescribed by the regulations for inclusion in the contract.
Clause 5 of the Home Building Regulation 2014 prescribes that the sum is $20,000. The Work the subject of these proceedings exceeded $20,000.
In these proceedings there was a breach of s 7(2) of the HB Act because there was no written contract recording the statutory warranties implied by s 18B of the HB Act, there was no written contract recording progress payment details, and there was no statement in accordance with s 7(2)(i) of the HB Act. There was also no written contract recording the cost of insurance cover, which, of course, was nil because the builder did not effect insurance cover.
In addition to the finding in the preceding paragraph, the Tribunal finds that the terms of the contract between the parties were partly in writing and partly oral. The written communications, whether in the form of emails or SMS messages did not evince an intention to supersede or displace all conversations. I make this finding for a number of reasons. First, some of the written communications refer to discussions. Second, the written communications, particularly the SMS messages, form part of the overall factual matrix of the matters agreed through negotiations which included discussions. Third, a number of important matters were said during, for example, the homeowners visit to the builder's showroom such as the use of Blum drawers. Fourth, none of the written communications record that the agreement is wholly contained in the written communications (or some of them).
Section 18B of the HB Act provides as follows: 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.

The alleged defects

I now turn to the task of determining each alleged defect.
The homeowners rely on an expert's report dated 10 February 2023 authored by Doug Coombes of Doug Coomes & Associates Pty Ltd (the Coomes Report) (Ex 1, pp. 17-50).
I will consider the defects in the order in which they arise in the Coombes Report. I will then consider alleged defects not in dealt with in the Coombes Report.
The builder relies on an expert's report dated 16 March 2023 authored by Grant Zhou of ADC Design Group Pty Ltd (the ADC Report) (Ex A, pp. 83-104).
Neither expert was cross examined.
The first alleged defect relates to the kitchen floor chasing and in particular the electrical wiring running to an island unit in the kitchen. The electrical wiring has not been installed into a protective conduit (Ex 1, p. 23, para 2.1.1).
The ADC Report appears to concede that this is a defect (Ex A, p. 84, para 1).
The Tribunal finds that the failure to install the electrical wiring into a protective conduit breached the requirement in s 18B(1)(a) that the work be performed with due care and skill.
The Coombes Report assesses the cost of rectification at $875, not including preliminaries (15%), builders margin (25%) and GST.
The ADC Report assesses the cost of rectification at $765. The ADC Report does not record any separate itemisation of preliminaries, builders margin or GST so that those components are incorporated in the ADC Report estimates.
The parties did not make any submissions as to the difference.
The Coombes Report sets out how the rectification work needs to occur in more detail than the ADC Report.
I am satisfied that $875 is an appropriate amount for the rectification of this defect.
The second alleged defect relates to the Blum hinges. Blum is a well known manufacturer of hinges and drawer runners. The Coombes Report records that the product installed by the builder were unbranded drawers rather than Blum soft close drawers (Ex 1, p. 24, para 2.1.2).
The builder points out that the email only referred to "Blum" hinges, not drawers.
The builder's evidence is that that it used Blum hinges, albeit not with Blum drawers (Ex A, p. 18, para 3). The homeowners concede that Blum hinges were used (ex 2, p. 18, para 1.6). The Tribunal finds that Blum drawers and Blum runners were not used.
There is also a related issue, namely, whether the builder used "European hardware, soft close doors [and] soft close drawers". The builder submitted "The word "European" refers to the style, not the source of the product" (builder's submissions in reply, para 3.11).
I do not accept that the words "European hardware" referred to a style of hardware, as distinct from the source of the product. I have come to this conclusion for the following reasons: 1. The ordinary meaning of a product described as being "European" refers to the source of the product; 2. Construing the words "European hardware" as referring to a style of hardware described as "European" implies that there is some known style that fits such a description. There was no evidence that a style referred to as "European" for "hardware" was commonly known or that the background circumstances known to the parties would provide a foundation for a finding that the parties were referring to that style. In fact, it is more likely that there are many styles whose origin is European. If the term "European hardware" referred to a style the agreement of the parties in that respect would almost lack meaning.
Further, to the extent that the phase "European hardware" is ambiguous, resolution of that ambiguity is assisted by the surrounding circumstances including the words spoken by Mr Gao at the showroom on 8 September 2022. Mr Gao's words were "We only use Blum for all hinges and drawers. Only European hardware. European is stronger. We no use Chinese products." Those words speak to the place of origin of the product.
The builder also submits that the Blum hinges are manufactured in China with the consequence that it would not have been possible to comply with a requirement that the hardware be sourced from Europe and to supply Blum hinges. This is said to support an interpretation of "European hardware" as being a reference to a style (builder's submissions in reply, para 3.11). I do not accept that submission. The evidence did not establish that Blum hinges are only manufactured in China. Even if were the case that Blum hinges are only manufactured in China, the parties agreed to the utilisation of "European hardware". Consequently, it would have been possible to supply Blum hinges and any other hardware products were to be of European provenance. I would favour that construction of the parties' intention, construed objectively, to a construction that "European hardware" referred to a product style rather than a product provenance.
The Tribunal finds that parties agreed that the hardware to be used for the homeowners' kitchen renovation would be of European provenance or manufacture. The Tribunal also finds that the builder did not provide hardware products sourced from Europe. On the basis of the words spoken by Mr Gao, the Tribunal also finds that the parties agreed that the drawers would be Blum products. The drawers were provided by Artia, an Australian company (see Ex A, pp. 28-29).
The ADC Report states that there is no defect with the drawers that have been installed.
The ADC report does not engage with the issue of whether the drawer runners are Blum. This is not surprising as that issue is resolved by ascertaining the terms of the parties' agreement which is not a matter on which the Tribunal would have been assisted in the circumstances of this case by expert opinion evidence from an engineer or building expert.
The Tribunal finds that the failure to use "European hardware" breached the requirement in s 18B(1)(a) that the work be performed in accordance with the contractual specifications.
The Coombes Report assesses the cost of rectification as $3,548, not including builders margin and GST. There is no contrary evidence because the ADC Report did not provide an estimate in the event the defect was established.
For completeness, I note that a complaint in the Coombes Report in respect of the drawers is that sections of the sides of the drawers are said to be missing. Photographs of the sides of the drawers show gaps which Mr Coombes characterised as showing that the drawers are incomplete (Ex 1, p.45).
The ADC Report states that the gaps in the sides of the drawers is because that is the style of drawer. A photograph of drawers with gaps, albeit not very similar in appearance to the drawers supplied to the homeowners, we exhibited to the ADC Report (Ex A, p. 90).
On balance I am not satisfied that the gaps in the sides of the drawers constitute incomplete work or defects.
The third alleged defect relates to the downstairs bathroom. The defect is the builder's failure to install a water stop angle (Ex 1, p. 25, para 2.1.3).
The Coombes Report estimates the cost of rectification, before preliminaries, builders margin and GST, at $4,835.
The ADC Report concedes this defect (Ex A, p. 84, item 3, described on p. 85 as "Defective work (3) mentioned above").
The ADC Report estimates the total cost of rectification at $2,465. Some of the items in the ADC Report seem unrealistic. For example, the estimate to install a shower screen is said to require 2 hours for a total cost of $270. That amount includes GST and incorporates builders margin. Similarly, the estimate to uninstall the shower and store for re-use is $270. These amounts appear unrealistically low.
The ADC Report's estimate for the cost of tiles also appears incorrect. The ADC Report estimates that the supply of 24 tiles would be necessary at a "rate" of $35. The total cost is then calculated at $75.60. The calculation is incomprehensible.
Consequently, I prefer the cost of rectification estimated in the Coombes Report.
The fourth alleged defect relates to the upstairs ensuite. The defects are the failure to install a water stop angle and an insufficient fall of the tiled floor (Ex 1, p. 26, para 2.1.4).
The ADC Report concedes the failure to install a water stop angle is a defect (Ex A, p. 84, item 4, described on p. 85 as "Defective work (4) mentioned above").
The ADC Report does not engage with the issue of the fall in the floor.
The Coombes Report records that the fall in the tiled floor is 0.5 degrees. In respect of the fall in the gradient of the tiled floor the Coombes Report points to AS 3740:2021.
The relevant Australian standard prescribing the required fall in wet areas within residential buildings is AS 3740. The Building Code of Australia (the Code), Volume 2, Part 2.4.1 deals with health and amenity requirements for wet areas in various classes of building. Part 3.8.1.0 of the Code provides that Part 2.4.1 is deemed to be satisfied if the wet area in various classes of buildings, including residential houses, complies with Australian standard AS 3740.
Australian standard AS 3740 provides that the fall in showers to be between 1:60 and 1:80 and the fall in wet areas other than the shower to be 1:100.
The fall in the tiled floor in the ensuite therefore does not comply with AS 3740.
In those circumstances, I am satisfied that the defects alleged in the Coombes Report in respect of the upstairs ensuite relating the failure to install water stop angles and the insufficient fall in the tiled floor have been established and that these defects constitute breaches of the warranty implied by s 18B(1)(a) of the HB Act.
The Coombes Report estimates that the cost of rectification would be $7,311, before the cost of preliminaries, builders margin and GST. That seems reasonable.
The balance of the alleged defects were not dealt with by the Coombes Report or the ADC Report.
The next alleged defect relates to a shattered shower screen in the downstairs bathroom.
The builder alleged that the reason the shower screen shattered was that the positioning of the shower head meant the shower door would impact on the shower head if it were opened inwards. It was contended that would lead to the shower screen shattering.
The builder's case was the homeowners were advised of this risk but insisted on the positioning of the shower head. There was no written advice to this effect from the builder to the homeowners so that the fact that the builder advised the homeowners of this risk would have been of no assistance to the builder in terms of its obligations under s 18B of the HB Act.
The homeowners denied that the shower door had impacted on the shower head or that the shower screen shattering had anything to do with the positioning of the shower head. The homeowners contended that the measurements for the purposes of installation were incorrect.
The homeowners relied on a video in which a tradesperson that installs showers and who is depicted as using a laser measuring device discusses with the homeowners the shower screen shattering was due to possibly incorrect measurement issues.
I am not satisfied that the homeowners have established that the shower door or shower screen measurements led to the shower screen shattering. There was no explanation of the how the measurements were incorrect or the extent to which the measurements were incorrect.
I am however satisfied that the shower screen shattered because of the shower door's impact with the showerhead. I find that the builder breached its obligation under the warranty implied by s 18B(1)(a) to undertake the work with due care and skill. The builder's own submissions indicate that it was foreseeable that the shower door or possible the shower screen could shatter because of impact with the shower head. Even if the builder advised the homeowners of this risk, the absence of any advice in writing prior to installation of the showerhead, shower screen and shower door means that the builder cannot rely on that advice in a manner that would result in it not being liable for breach of s 18B(1)(a).
The cost of a replacement shower screen is $1,850.00.
The next alleged defect relates to carpet edge. The cost of the damage is said to be $217.80. There was insufficient evidence identified during the hearing of how this damage occurred to satisfy me that it was attributable to a breach of the statutory warranties.
The next alleged defect relates to the need to paint various areas of the home due to the state in which the home was left as a consequence of the work of the builder. The claim is for $3,600. Some of the damage includes a hole in a surface (Ex 1, p. 79). I am satisfied some damage occurred for which the builder was liable (Ex 1, p. 79; see also Ex A, pp. 23 and 138). I am not satisfied that all the amount claimed has been shown to be attributable to the builder. Doing the best I can to estimate the likely cost, I will allow $1,200 for this claim including painting supplies.
The next alleged defect relates to a toilet in a downstairs bathroom. This claim is for damage allegedly caused by workers of the builder. It is said that they cracked the toilet bowl. There was no evidence of the state of the toilet bowl or explanation as to what occurred. The homeowners evidence was to the effect they do not know what happened. They say the toilet was working before the workers arrived and was broken afterwards.
I am not satisfied on the balance of probabilities that the homeowners have established a breach of a warranty implied by s 18B of the HB Act. The Tribunal is not in a position to be satisfied of what occurred so as to then determine whether there a breach of a statutory warranty has occurred.
The homeowners claim that waterproof material was spilled onto their outside surfaces and that the cost of removal will be $1,650. There is a quote to this effect. The builder disputed this item. There are photographs showing the presence on outside surfaces (Ex 1, p. 80). The builder says that there is no evidence that it caused the waterproof material spillage. The homeowners state "Prior to Davina International starting renovation work the outside area was freshly painted" (Ex 1, p. 80). Although the matter is finely balanced, I am satisfied that the spillage of the waterproof material was caused by the builders workers or contractors. At the time of the renovations the homeowners had purchased their home relatively recently and would likely be conscious of such matters. I am satisfied that the homeowners are honest in their allegation.
The quote to remove the waterproof material is $1,650.00.
The homeowners also claim $150.00 for an absence of hot water for two days. I am not satisfied that claim has been established to be referrable to a breach of the warranties implied by s 18B of the HB Act.
There is a claim for damage to laminate. The claim is for $120.00. There was insufficient evidence identified during the hearing of how this damage occurred to satisfy me that it was attributable to a breach of the statutory warranties.
There is a claim for damage to the kitchen sink. The claim is for $326.00. The damage is relatively minor. I am not satisfied that the damage amounts to $326.00.
There is also a claim for floor coverings because, apparently, the builder did not provide enough and so the homeowners bought additional protective floor coverings. The Tribunal is not satisfied that there the builder did not provide enough protective floor coverings.
There is also a claim for legal costs and cost of expert reports. Although the homeowners represented themselves there is some evidence that legal advice was obtained by the homeowners at some point. This claim is a question of the appropriate costs order.

Money order or work order

Section 48MO of the Act provides as follows: A court or tribunal determining a building claim involving an allegation of defective residential building work or specialist work by a party to proceedings (the "responsible party") is to have regard to the principle that rectification of the defective work by the responsible party is the preferred outcome.
Section 48MA was recently considered by Senior Member Burton in Culina v Timilty Constructins Pty Ltd [2022] NSWCATCD 109. In that case Senior Member Burton relevantly said: [14] Under HBA s 48MA, a work order is the preferred, not the mandatory, outcome for defective work: Galdona v Peacock [2017] NSWCATAP 64 at [65]. Personal animosity is not sufficient to displace the primacy of a work order for defective work, as the test is objective and the flexibility of s 48O permits an order that the builder fulfil a work order by engaging another party to carry out the work order on behalf of the builder. [15] However, relational breakdown is an element in objective assessment, as can be the builder's conduct in unrelated projects and as will be doubts about the builder's capacity or skills to undertake the required remediation, the builder's attitude to the standard of work done and willingness to return and the likelihood of further dispute not meaning that a work order would be a timely or cost-effective resolution: Owners SP 78465 v MD Constructions PL [2016] NSWSC 162 at [47]-[48]; Brooks v Gannon Constructions PL [2017] NSWCATCD 12 (appeal not affecting s 48MA decision); Galdona at [64]; BNT Constructions PL v Allen [2017] NSWCATAP 186 at [33]-[36]; Kumar v Sabharwal [2017] NSWCATAP 200 at [29]-[30]; Clements v Murphy [2018] NSWCATAP 152 at [30], citing with approval Kurmond Homes PL v Marsden [2018] NSWCATAP 23 at [31]-[32], [46]; Brennan Constructions PL v Davison [2018] NSWCATAP 210 at [15]-[21]. [16] A work order is always available as one of the range of choices under HBA s 48O, even though there is no statutory preference for it in respect of incomplete work and it would be unusual to direct a builder to complete work under a work order where the builder's performance is the reason for acceptance of repudiation or termination of the building contract: Clements at [22]-[33]. It would be otherwise where the owner repudiated or provided the grounds for termination of the contract: White v Sunrise Pools Aust PL [2017] NSWCATAP 216 at [5], [70]. [17] The ultimate litmus test for whether a work order should be made, and formulating its content, is whether it is appropriate, having regard to the fact that HBA s 48O(3) imports the requirement in s 79U(1) of the Fair Trading Act 1987 (NSW) that the orders will be fair and equitable to all the parties to the claim: Petropoulos v CPD Holdings PL t/as The Bathroom Exchange (No 2) [2018] NSWCATAP 233 at [28], [30], citing with approval Kurmond Homes PL v Marsden [2018] NSWCATAP 23 at [25]. [18] A work order must focus on the particular defect to be rectified and must be certain, practical and enforceable: Catapult Constructions PL v Denison [2018] NSWCATAP 158 at [46]-[61] and authority there cited. The evidentiary onus is on the homeowner to set out the appropriate method of rectification: ibid, at [59]. [19] The parties are also under an obligation under Civil and Administrative Tribunal Act 2013 (NSW) (CATA) s 36(3) to co-operate to achieve the guiding principle in CATA s 36(1) which extends to the necessary co-operation, including provision of access, to ensure that work orders can be implemented in an orderly manner: Maiolo v Chiarelli [2016] NSWCATAP 81 at [40]-[46], [55]. This reinforces the express obligation in HBA s 18BA(3)(b), (5). [20] There is a co-ordinate focus on the conduct of the owner in assessing the form of relief. In ordinary principles of contract law imported into construction contracts, an owner's claim for monetary compensation requires the owner to act reasonably in relation to the claimed monetary loss in order for the claimed loss to be recoverable: cp HBA s 18BA(1), (5). This includes giving the builder a reasonable opportunity to remediate or complete, or to minimise damages by remediating what it can and will do: cp HBA s 18BA(1), (3)(b), (5). The owner may be justified in a reasonable loss of confidence in the willingness and ability of the builder to do the remediation and completion. The evidential onus is on the builder to prove that the owner acted unreasonably: Owners SP 76674 v Di Blasio Constructions PL [2014] NSWSC 1067 at [42]-[48], adopted in Owners SP 78465 v MD Constructions PL [2016] NSWSC 162 at [26]-[30] and GPM Constructions PL v Baker [2018] NSWCATAP 119 at [38]. This is consistent with the orthodox principles at general law: TCN Channel 9 PL v Hayden Enterprises PL (1989) 16 NSWLR 130 at 158; principles summarised in Downer EDI Rail PL v John Holland PL [2018] NSWSC 326 at [585] and authority there cited. [21] If the owner has acted reasonably then, since the builder is a wrongdoer, it will not defeat the owner's claim that the builder can suggest other and more beneficial alternative methods of remediation: Unity Insurance Brokers PL v Rocco Pezzano PL (1998) 192 CLR 603 at 654; Karakominakis v Big Country Developments PL [2000] NSWCA 313 at [187]. [22] HBA s 48MA does not seem to reverse or otherwise disturb this evidential onus. What s 48MA does, at most, on the authorities mentioned in preceding paragraphs, is to require the decision-maker to have regard to the principle that rectification of the defective work by the responsible party is the preferred outcome. In having regard to a principle that states a preferred outcome, the basis for the principle to operate still needs to be established. How that is established and when it is established is built on and derived from the rules just described about establishing measure of loss.
In these proceedings I have concluded that a money order in favour of the applicants, rather than a work order, is the appropriate remedy for the following reasons: 1. The builder is not licenced to carry out plumbing, waterproofing work or tiling work. That work would be required to rectify the bathroom and ensuite defects. 2. The builder failed to effect home warranty insurance for the work in breach of s 92 of the HB Act. 3. The applicants have lost confidence in the builder. This was evident throughout the hearing. There are good grounds for this loss of confidence. Firstly, the builder did not effect insurance for the Work. Secondly, insofar as the Work related to the bathroom and ensuite the builder's licence did not permit it to undertake, at the very least, substantial aspects of that Work. Thirdly, the disputation as to the terms of the parties' agreement and the substantial allegations levelled by each party against the other as to their honesty throughout the materials adduced by the parties during the hearing demonstrates a mutual lack of trust between the parties. This is not uncommon when disputes between builders and homeowners arise but in these proceedings the allegations impugning the opposing side's honesty loomed large.
Section 48O(3) of the HB Act imports the requirement in s 79U(1) of the Fair Trading Act 1987 (NSW) that the orders will be fair and equitable to all the parties to the claim: Culina v Timilty Constructins Pty Ltd [2022] NSWCATCD 109 at [17]; Petropoulos v CPD Holdings PL t/as The Bathroom Exchange (No 2) [2018] NSWCATAP 233 at [28], [30]. I consider that it would be fair or equitable to all parties to the claim that the builder pay the damages which have been established.

Money orders summary

The quantum referrable to the first four defects is quantified in the Coombes Report, including preliminaries, builders margin and GST, at $26,202 (Ex 1, p. 27). I add to that the following items: 1. Shower screen, downstairs bathroom - $1,850; 2. Painting (as allowed) - $1,200; 3. Removal of spilt waterproofing material - $1,650.
The total of the amounts in the preceding paragraph is $30,902.
Consequently, there will be an order that the builder to pay the applicants, within 14 days, $30,902.

Costs

Rule 38(2)(b) of the Civil and Administrative Tribunal Rules 2014 provides that the Tribunal may award costs even in the absence of special circumstances if "the amount claimed or in dispute in the proceedings is more than $30,000".
The amount claimed in these proceedings exceeded $30,000 with the consequence that rule 38(2)(b) applies. I also note that the amount that the Tribunal will order the builder to pay the homeowners is slightly higher than $30,000.
In Nguyen v Perpetual Trustee Company Ltd; Perpetual Trustee Company Ltd v Nguyen [2015] NSWCATAP 264 the Appeal Panel said at [94] - [95]: "[94] Rule 38 gives the Tribunal (or the Appeal Panel when making a decision in substitution for the decision under appeal), a discretion to award costs. While unfettered that discretion must be exercised judicially. [95] While the discretion to award costs under rule 38 is unfettered, in our view costs should generally "follow the event", recognising however that factors may exist that militate against the successful party recovering all of its costs: Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72 at [134]. Fairness dictates that the unsuccessful party typically bears the liability for costs unless it is demonstrated that some other order is appropriate: Currabubula and Paola v State Bank NSW. Currabubula v State Bank NSW [2000] NSWSC 232. We find no reason to depart from the "usual rule" in this case."
In the circumstances of these proceedings, including the circumstance that rule 38 applies, I see no reason to depart from the usual rule that costs follow the event. I consider it appropriate that the builder pay the homeowners' costs on the ordinary basis, as agreed or assessed.

Orders

The Tribunal makes the following orders: 1. Dismiss proceedings HB 23/05398. 2. Davina International Pty Ltd pay Munisha Vanmali and Jayesh Vanmali the sum of $30,902.00 within 14 days. 3. Davina International Pty Ltd pay the costs of Munisha Vanmali and Jayesh Vanmali on the ordinary basis, as agreed or assessed.

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: 08 August 2024

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Judgment (12 paragraphs)

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Cases Cited (22)