Walsh v Sandeberg & Anor

NCAT Appeal Panel|2016-10-07

on David Walsh (Appellant) Rick Sandeberg and Jackie Sandeberg (Respondents) Representation: Counsel: Mr McCall (Appellant) Mr C. Simpson (Respondent)

Solicitors: SP Lawyers (Appellant) Baker Mannering & Hart (Respondent) File Number(s): AP 16/29910 Publication restriction: Unrestricted Decision under appeal Court or tribunal: NSW Civil and Administrative Tribunal Jurisdiction: Consumer and Commercial Division Date of Decision: 31 May 2016 Before: Senior Member Thode File Number(s): HB 15/32899

Reasons for Decision

The proceedings the subject of this appeal were heard in Lismore on 30 November and 1 December 2015 and on 28 January 2016. Detailed and lengthy Reasons for Decisions were given on 31 May 2016.

Ground 1

'The Senior Member failed to take into account, or in the alternative incorrectly applied, case management principles, the requirements of section 36 and 38 of the Civil and Administrative Tribunal Act 2013 and the requirements for procedural fairness when deciding (on a precise date unknown) to admit into evidence the report of Northern Rivers Building Consultancy Services Pty Ltd dated 25 November 2015.'
We agree that a failure to afford procedural fairness will constitute an error of law. Italiano v Carbone [2005] NSWCA 177 at [5]; Prendergast v Western Murray Irrigation [2014] NSWCATAP 69 at 13.
The builder's submissions point out that the tender of the Northern Rivers Building Consultancy Services Pty Ltd supplementary report dated 25 November 2015 ('report') was considered and rejected on the first day of the hearing. At the end of the second day of the hearing when it was clear that a further day of hearing was required, the owners sought to tender the report. The tender was opposed by the builder. The Tribunal Member reserved her decision which due to registry error was not communicated to the parties before the commencement of the third day of the hearing which was 28 January 2016.
The Tribunal Member's decision concerning the admissibility of the report was published as annexure D to her decision of 31 May 2016. It is set out below: 'ANNEXURE D Further directions 1. The applicant builder shall file and serve any evidence in response to the expert reports of Mr Oke dated 17 November and 25 November 2015 respectively by no later than 21 January 2016. 2. The builders costs of and incidental to order one above, incurred by reason of the additional evidence now permitted, shall be paid by the homeowners. The parties sought leave to adduce further expert evidence at the hearing. Initially leave was refused as the late service of the reports dated 17 and 25 November respectively was prejudicial to the other side. However, as it transpired the hearing could not be finalised in the two day allocated on 30 November and 1 December 2015 and through no fault of the parties, the hearing was adjourned for a further one day hearing on 28 January 2016. When this became apparent the owners renewed their application for leave to rely on the reports filed out of time. The additional reports go to the proposed methods of rectification in relation to the two well ventilated defects, the termite barrier and the retaining wall. The defects have been particularised since the matter commenced and the experts retained by the builder are well across the issues relating to the methods of ratification of both the retaining wall and the termite barrier. There is no need to retain fresh experts as there is no reason why the builder's current expert, who is local to the area, cannot respond to the reports between now and 28 January 2015. The experts already retained will have to attend the hearing and be available for cross examination in any event and regardless of the additional evidence. On the other hand, if the new material is not permitted, this may cause two major issues in dispute between the parties to remain untested and unlitigated. This is not desirable in view of the overarching principal that the proceedings between the parties be resolved justly, quickly and cheaply. It is desirable to have all issues in dispute resolved during the hearing to give finality to the parties. I am of the view that in light of the necessary adjournment, any prejudice to the builder may now be cured by the appropriate costs order and that any costs incurred in connection with the additional reports should be borne by the owners. Accordingly I make the orders and directions in paragraphs one and two above.'
The report is referred to at [98] of the Tribunal Member's decision. The Reasons show at [98] that the report was admitted into evidence on the third day of the hearing, namely 28 January 2016. At paragraphs [111] - to [114] of the Reasons for Decision the Tribunal Member described the circumstances, namely a Tribunal Registry administrative error, which led to her ruling on the admissibility of the report not being provided to the builder before 28 January 2016.
The builder submits at [10] of his submissions that the decision of the Tribunal Member allowing the report was so unreasonable or unjust to suggest that there was an error of legal principle, a material error of fact, failure to take into account or give sufficient weight to a relevant matter.
The builder's submissions accept the fact that the decision of the Tribunal Member regarding the admissibility of the report was an interlocutory matter and that leave of the Appeal Panel is required under section 80(2)(a) of the Civil and Administrative Tribunal Act.
The report dealt with a contentious issue in the proceedings, namely the builder's failure to construct the slab without a rebate which was shown on the contract drawings. The owners' expert in a report dated 24 June 2015 had identified this issue stating that such a failure was a latent defect. He also stated that rectification was not possible. This state of affairs apparently affected a retaining wall and a timber frame internal wall both constructed pursuant to the contract as explained by the Tribunal Member at [96] and [99] of the Reasons. The owners' expert's position changed as described in the report insofar as he stated that rectification was possible in that the retaining wall could be demolished. He assessed the cost of demolishing the retaining wall at $94,921.00.
The builder attacks the decision of the Tribunal Member admitting the report (extracted above) as failing to give sufficient weight to case management principles and to the fact that there was in place joint evidence from the experts. Before the admissibility of the report the experts position was that the amount claimed for the failure to provide a rebate in the slab was 'nil' because the owners' expert thought that rectification was not possible. The builder also makes the point that the admission of the report undermined the joint expert report and process by allowing new expert evidence late in the proceedings which significantly changed the owners' case. In addition it is submitted that the decision to admit the report was contrary to sections 36 and 38 of the Civil and Administrative Tribunal Act.
So far as section 36 was concerned the builder submits that the 'real' issues in the proceedings had been identified in the proceedings by the filing of a statement of issues in which no amount had been claimed for item 62 (which dealt with the retaining wall). So far as section 38 was concerned, the builder submits that the decision allowing the report was procedurally unfair.
The owners' submissions point out that first, any appeal against the Tribunal Member's decision regarding the report, which was an interlocutory decision, should have been brought within 28 days of 28 January 2016 and that as a result the builder requires an extension of time pursuant to section 41 of the Civil and Administrative Tribunal Act. As stated the Notice of appeal was dated 28 June 2016. Secondly, they point out leave is required for this ground of appeal. Thirdly, they refer us to the Appeal Panel decisions in Jackson v NSW Land and Housing Corporation [2014] NSWCATAP 22 as regards the principles relevant to an extension of time and to Collins v Urban [2014] NSWCATAP 17 as regards the principles to be applied to applications for leave.
In Jackson v NSW Land and Housing Corporation the Appeal Panel set out the principles relevant to granting an extension of time to an application for leave to Appeal. The Appeal Panel stated at [18] - [22]: 'Under s 41, the Appeal Panel has power to grant an extension of time in which to appeal in the present matter. The discretion to grant an extension of time is unfettered under that section but it must be exercised judicially. It must also be exercised having regard to the statutory command in s 36 of the Act that the guiding principle for the Act "is to facilitate the just, quick and cheap resolution of the real issue in the proceedings". An informative exposition of the role and nature of provisions which permit a Court or Tribunal to extend the time limits established for the orderly conduct of proceedings, including the time in which to lodge an appeal, is found in the decision of McHugh J sitting as a single justice of the High Court in Gallo v Dawson [1990] HCA 30, 93 ALR 479 at [2]: The grant of an extension of time under this rule is not automatic. The object of the rule is to ensure that those Rules which fix times for doing acts do not become instruments of injustice. The discretion to extend time is given for the sole purpose of enabling the Court or Justice to do justice between the parties: see Hughes v. National Trustees Executors and Agency Co. of Australasia Ltd. [1978] VicRp 27; (1978) VR 257, at p 262. This means that the discretion can only be exercised in favour of an applicant upon proof that strict compliance with the rules will work an injustice upon the applicant. In order to determine whether the rules will work an injustice, it is necessary to have regard to the history of the proceedings, the conduct of the parties, the nature of the litigation, and the consequences for the parties of the grant or refusal of the application for extension of time: see Avery v. No.2 Public Service Appeal Board (1973) 2 NZLR 86, at p 92; Jess v. Scott (1986) 12 FCR 187, at pp 194-195. When the application is for an extension of time in which to file an appeal, it is always necessary to consider the prospects of the applicant succeeding in the appeal: see Burns v. Grigg [1967] VicRp 113; (1967) VR 871, at p 872; Hughes, at pp 263-264; Mitchelson v. Mitchelson (1979) 24 ALR 522, at p 524. It is also necessary to bear in mind in such an application that, upon the expiry of the time for appealing, the respondent has "a vested right to retain the judgment" unless the application is granted: Vilenius v. Heinegar (1962) 36 ALJR 200, at p 201. It follows that, before the applicant can succeed in this application, there must be material upon which I can be satisfied that to refuse the application would constitute an injustice. As the Judicial Committee of the Privy Council pointed out in Ratnam v. Cumarasamy (1965) 1 WLR 8, at p 12; (1964) 3 All ER 933, at p 935: "The rules of court must prima facie be obeyed, and in order to justify a court in extending the time during which some step in procedure requires to be taken there must be some material upon which the court can exercise its discretion." The Courts have identified in numerous cases various factors that should be considered in deciding whether to grant an extension of time in which to appeal. Substantially the same principles have also been applied by the Appeal Panel of the Administrative Decisions Tribunal (ADT), one of the predecessors of the Tribunal, in relation to appeals in the ADT - Opera Australia Ltd v Carr [1999] NSWADTAP 6 at [16], Chand v Rail Corporation of New South Wales No 3 [2010] NSWADTAP 11 at [20]. These authorities provide useful guidance on the principles that are to be applied by the Appeal Panel in this regard. 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 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 quoted above 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. The considerations that will generally be relevant to the Appeal Panel's consideration of whether to grant an extension of time in which to lodge a Notice of Appeal include: (1) The discretion can only be exercised in favour of an applicant upon proof that strict compliance with the rules will work an injustice upon the appellant - Gallo v Dawson [1990] HCA 30, 93 ALR 479 at [2], Nanschild v Pratt [2011] NSWCA 85 at [38]; (2) The discretion is to be exercised in the light of the fact that the respondent (to the appeal) has already obtained a decision in its favour and, once the period for appeal has expired, can be thought of as having a "vested right" to retain the benefit of that decision - Jackamarra v Krakouer (1998) 195 CLR 516 at [4], Nanschild v Pratt [2011] NSWCA 85 at [39] and, in particular, where the right of appeal has gone (because of the expiration of the appeal period) the time for appealing should not be extended unless the proposed appeal has some prospects of success - Jackamarra at [7]; (3) Generally, in an application for an extension of time to appeal the Appeal Panel will be required to consider: (a) The length of the delay; (b) The reason for the delay; (c) The appellant's prospects of success, that is usually whether the applicant has a fairly arguable case; and (d) The extent of any prejudice suffered by the respondent (to the appeal),'

Determination

The Tribunal Member found in her interlocutory decision that there was always an issue between the parties as regards the retaining wall as noted at item 62 of the Joint Experts Report, no doubt prepared from their respective reports. In any event it is common ground that the owners' expert's report of 24 June 2015 dealt with the defect but stated that rectification was not possible. That position changed on 25 November 2015 with the owners' expert produced the report. The submissions of the parties confirm that. The builder's submissions confirm that the builder and we assume its experts had the report by 30 November 2015, if not a few days earlier.
The report did not introduce a new defect item in to the owners' case. What it did was change the previously held view that rectification of the defect described at item 62 could not be rectified and provided a rectification cost. In our view it is important to note that the Tribunal Member stated at [95] that: 'It appears not to be in dispute that the wall was not built in accordance with the plans and specifications'.
The builder does not seek leave to appeal against that finding.
The Tribunal member rejected the application to tender the report at the commencement of the hearing on 30 November 2015 when no doubt it was the hope of all concerned that the hearing would be finalised within the two day period allocated. There is no complaint about that ruling. At the end of the second day of the hearing when it was clear that the hearing required a further day, the application to tender the report was renewed.
One of the objects of the Civil and Administrative Tribunal Act as referred to in sections 3(d) and 36(1) is to: 'resolve the real issues in proceedings justly, quickly, cheaply and with as little formality as possible'
The issue of the lack of a rebate in the slab and the concrete block retaining wall constructed above was always an issue in the proceedings. At first it was described as a latent defect for which the builder was responsible given that at the time of the 24 June report rectification was not considered to be possible. Later on 25 November 2015 as described, the owners' expert's position changed in that a rectification methodology was put forward with an associated cost.
In our view as at 1 December 2015 knowing that the proceedings were to be adjourned to 28 January 2016, the Tribunal Member properly heard the renewed application to tender the report and reserved her decision. In doing so she was in our view moving to resolve a real issue in the proceedings, as she was required to do.
In our view as at 1 December 2015 the Tribunal Member was not, given the adjourned hearing, constrained by the orders that had been made before the hearing commenced in making further orders regarding item 62 since that the subject matter of item 62 had always been before the parties. In our view she was obliged to act in accordance with sections 3(d) and 36(1) of the Civil and Administrative Tribunal Act, subject to allowing the builder procedural fairness. The fact that the hearing was adjourned for approximately 2 months allowed the builder adequate time to deal with the issues raised in the report.
The Tribunal Member referred to these considerations in her interlocutory decision.
In our view if the builder was of the view on 28 January 2016 that the admission into evidence of the report took him by surprise, or required an adjournment of the hearing for that day, or perhaps for a shorter period, to consider its content or to prepare a considered response, his counsel should have made such an application. As stated by the Tribunal Member, there was no adjournment application.
In Nayak v Rockwall Constructions Pty Ltd [2017] NSWCATAP 18 one of the appellant's grounds of appeal was that there was a denial of procedural fairness because at the commencement of the hearing the respondent introduced claims based on estoppel and quantum meruit which had not been pleaded in Points of Claim. The Appeal Panel stated at [50]: 'The Appeal Panel is of the view that these submissions should be rejected. Page 10 of the transcript shows that counsel for the contractor stated that the contractor was relying upon estoppel and quantum meruit. Counsel for the owners did not seek an adjournment of the hearing. He did not state that he was not in a position to answer a claim made on quantum meruit. The Tribunal Member invited him to state whether he was taken by surprise by anything. Counsel for the owners did not state that he was taken by surprise and he did not object to the hearing proceeding with the calling of the first witness nor did he object at any other time to the hearing continuing.'
In our view similar approach should be taken in connection with the facts in issue in these proceedings.
Importantly the Tribunal Member stated at [113] of the Reasons that on the third day of the hearing, 28 January 2016 the builder did not seek an adjournment of proceedings and that the builder's expert stated that 'he did not require further time to consider' the report 'and was in a position to express an opinion and to be cross examined.'
At [115] the Tribunal Member stated: 'The Tribunal asked whether any application was brought in light of the evidence and no application was brought. In light of Mr Nolan's ability to comment and provide an opinion, I am not of the view that the builder's case was disadvantaged and the Oke report was admitted into evidence'
We are of the view that by disclosing the position to the parties and in the absence of any objection or application for an adjournment from the builder's counsel and having regard to the builder's expert stating that he was in a position to deal with the report, the Tribunal Member was in fact implementing the guiding principle referred to in section 36 by proceeding with the hearing and allowing the builder's expert to give evidence in relation to the report.
There has been no explanation of the delay by the applicant in seeking leave to appeal the interlocutory decision given on 28 January 2016. In our view given that when the interlocutory decision was brought to the appellant's attention and he was asked if he wished to apply for an adjournment, but did not do so, he has poor prospects of success in arguing that he was denied procedural fairness. The facts are that in full knowledge of the circumstances he chose to proceed with the hearing when the prospects of an adjournment were very favourable. For these reasons, we decline to grant the appellant an extension of time to bring his application for leave to appeal against the interlocutory decision given on 28 January 2016.
It follows that leave to appeal is refused and this ground of appeal is dismissed.

Ground 2

'The appellant was denied procedural fairness by only being advised on 28 January 2016, being the third and final day of the hearing, of the Senior Member's decision to admit into evidence the report of Northern Rivers Building Consultancy Services Pty Ltd dated 25 November 2015.'
This ground of appeal is dismissed for the same reasons as stated in relation to ground 1.

Ground 3

'The Senior Member, misdirected herself, and by so doing applied an incorrect principle of law, when determining damages for the absence of a recess in the slab for the western retaining wall, in accordance with the principles stated in Bellgrove v Eldridge (1954) 90 CLR 613 and the requirement that the proposed rectification works 'be a reasonable course to adopt.'
The builder submits that that the Tribunal Member misdirected herself in applying the principles for the calculation of damages for breach of a building contract as stated by the High Court in Bellgrove v Eldridge.
It was submitted that the Tribunal Member erred in the application of the requirement that the proposed rectification works be a reasonable course to adopt. It is said that the error was that the Tribunal Member required exceptional circumstances to exist for proposed works to be unreasonable and when determining that there were no exceptional circumstances at that point stopped her consideration of the issue of reasonableness and in fact made no real assessment as to whether the proposed rectification works were a reasonable course to adopt.
The builder also submitted that the assessment of the requirement of reasonableness for proposed rectification works required a consideration of the contractual objective of the subject contract, relying on Brewarrina Shire Council v Beckhaus Civil Pty Ltd [2006] NSW CA 361 at [89].
In assessing the damages that flowed from the builder's breach of contract in not constructing the slab in accordance with the plans and specifications, the Tribunal Member had regard to the decisions of the High Court in Bellgrove v Eldridge (1954) 90 CLR 613 and in Tabcorp Holdings Pty Limited v Bowen Investments Pty Limited [2009] HCA 8.
The reasoning process adopted by the Tribunal Member was to have regard to the builder's breach of contract which was in the form of a failure to provide a rebate in the slab under a concrete block wall. At [96] she identified and stated the purpose of the rebate as being to contain moisture that may seep through the wall from entering habitable areas. She also records that the wall was waterproofed before backfilling but 'uncertainty about future waterproofing caused by lack of the rebate will always be an item of concern to the owners and is considered a latent defect'.
The Tribunal Member at [99] referred to the builder's expert's evidence which was the wall did not require replacement and the reasons supporting that opinion.
At [101] the Tribunal Member described the finding which she was required to make as: 'The findings the Tribunal has to make is whether the work was built in accordance with the terms of the contract and if it was not built in accordance with the plans and specifications, the Tribunal must enquire whether the owner is entitled to the reasonable cost of correcting the defective work (Craftsmen Restoration & Renovations Pty Ltd v Boland [2011] NSWCA 147). Mr Oke clearly states in his report that the work is defective, and Mr Nowlan does not dispute this. However, the damages allowed must be necessary to produce conformity with the contract and also a reasonable course to adopt. Bellgrove v Eldridge [1954] HCA 36;'
At [103] the Tribunal member considered the builder's position that the rectification work which the owners proposed carrying out was not reasonable because there was no evidence of leaking, despite the concession that 'the wall does not comply with the plans'. More accurately it was the slab underneath the wall that did not comply with the plans due to the lack of the rebate. It was at that point that the Tribunal Member considered the High Court decision in Tabcorp Holdings Pty Limited v Bowen Investments Pty Limited and what was said about unreasonableness.
In Bellgrove v Eldridge the High Court stated that the normal measure of damages was that an owner would be entitled to the cost of rectification of defective building work.
At page 617 the Court stated: 'In the present case, the respondent was entitled to have a building erected upon her land in accordance with the contract and the plans and specifications which formed part of it, and her damage is the loss which she has sustained by the failure of the appellant to perform his obligation to her. This loss cannot be measured by comparing the value of the building which has been erected with the value it would have borne if erected in accordance with the contract; her loss can, prima facie, be measured only by ascertaining the amount required to rectify the defects complained of and so give to her the equivalent of a building of her land which is substantially in accordance with the contract'
The court also stated at page 617 - 618: 'Subject to a qualification to which we shall refer presently the rule is, we think, correctly stated in Hudson on Building Contracts, 7th ed. (1946), p. 343. "The measure of the damages recoverable by the building owner for the breach of a building contract is, it is submitted, the difference between the contract price of the work or building contracted for and the cost of making the work or building conform to the contract, with the addition, in most cases, of the amount of profits or earnings lost by the breach". Ample support for this proposition is to be found in Thornton v. Place [1832] EngR 767; (1832) 1 M & Rob 218 (174 ER 74) ; Chapel v. Hickes [1833] EngR 95; (1833) 2 C & M 214 (149 ER 738) and H. Dakin& Co. Ltd. v. Lee (1916) 1 KB 566 . (See also Pearson-Burleigh Ltd. v. Pioneer Grain Co. (1933) 1 DLR 714 and cf. Forrest v. Scottish County Investment Co. Ltd. (1915) SC 115 and Hardwick v. Lincoln (1946) NZLR 309). But the work necessary to remedy defects in a building and so produce conformity with the plans and specifications may, and frequently will, require the removal or demolition of some part of the structure. And it is obvious that the necessary remedial work may call for the removal or demolition of a more or less substantial part of the building. Indeed - and such was held to be the position in the present case - there may well be cases where the only practicable method of producing conformity with plans and specifications is by demolishing the whole of the building and erecting another in its place. In none of these cases is anything more done than that work which is required to achieve conformity and the cost of the work, whether it be necessary to replace only a small part, or a substantial part, or, indeed, the whole of the building is, subject to the qualification which we have already mentioned and to which we shall refer, together with any appropriate consequential damages, the extent of the building owner's loss. (at p618) The qualification, however, to which this rule is subject is that, not only must the work undertaken be necessary to produce conformity, but that also, it must be a reasonable course to adopt. No one would doubt that where pursuant to a building contract calling for the erection of a house with cement rendered external walls of second-hand bricks, the builder has constructed the walls of new bricks of first quality the owner would not be entitled to the cost of demolishing the walls and re-erecting them in second-hand bricks. In such circumstances the work of demolition and re-erection would be quite unreasonable or it would, to use a term current in the United States, constitute "economic waste". (See Restatement of the Law of Contracts, (1932) par. 346). We prefer, however, to think that the building owner's right to undertake remedial works at the expense of a builder is not subject to any limit other than is to be found in the expressions "necessary" and "reasonable", for the expression "economic waste" appears to us to go too far and would deny to a building owner the right to demolish a structure which, though satisfactory as a structure of a particular type, is quite different in character from that called for by the contract'
The Tribunal Member at [104] in our view takes the above passage into account by stating that where there is a breach of contract as was conceded so far as the failure to incorporate the rebate was concerned, the owners were entitled to the cost of making the work conform to the contract, subject to the qualifications referred to by the High Court.
Importantly the Tribunal Member at [104] found that the demolition and rebuilding of the retaining wall in order to achieve conformity with the contract was not 'an exercise of futility or betterment as the example provided in in Bellgrove v Eldridge'. In our view this statement is an indication that the Tribunal Member was of the view that the work proposed by the owners to produce conformity with the contract (by providing for a rebate in the slab underneath the retaining wall as shown on the drawing) was also a reasonable course to adopt.
At [105] the Tribunal Member referred again to the 'test of 'unreasonableness' as referred to by the High Court in Tabcorp Holdings Pty Limited v Bowen Investments Pty Limited and at [106] stated: 'In my view there is nothing exceptional in an owner of a new residence requiring a builder to construct the retaining wall in compliance with contractual terms and in accordance with an Australian Standard which is admitted by the builder to be relevant to the question of water proofing.'
Although the builder criticizes this paragraph of the Reasons, we are of the view that it is to be understood as stating that in the Tribunal Member's view the course proposed by the owners was reasonable, and certainly could not be regarded as exceptional and therefore an unreasonable course to adopt.
Having regard to [104] - [106] of the Reasons we conclude that the Tribunal Member found that the rectification work proposed by the owners was a reasonable course to adopt and certainly not exceptional in the sense described in Tabcorp Holdings Pty Limited v Bowen Investments Pty Limited.
For the reasons provided in connection with Ground 4, we find that there is no requirement that in considering whether a proposed rectification method is reasonable, there must be an examination of whether the rectification work was out of all proportion to the achievement of the contractual objective or to the benefit to be obtained therefrom and therefore unreasonable.
We are unable to agree with and reject the builder's submissions under this ground of appeal. In our view the Tribunal Member considered the relevant authorities, correctly formulated the issues to be determined, made the necessary findings of fact, including that the owners proposed rectification work ensured conformity with the contract and was a reasonable course to undertake.
This ground of appeal is dismissed.

Ground 4

'The Senior Member, failed to consider, and by doing so applied an incorrect principle of law, whether the proposed rectification works of demolishing and reconstructing the western retaining wall due to the absence of a recess in the slab for the wall was out of proportion to the contractual objective of the subject building agreement or to the benefit to be obtained therefrom.'
The builder has stated that the Tribunal Member failed to consider the passage set out below extracted from Brewarrina Shire Council v Beckhaus Civil Pty Ltd at [89]: 'In summary, the authorities to which I have referred stand for the proposition that whether the rectification work is a reasonable course to adopt is dependent upon a finding of fact that the proposed work was reasonable in order to achieve the contractual objective. The rectification work would be unreasonable if it was out of all proportion to the achievement of that objective or to the benefit to be obtained therefrom.' (emphasis added).
The case of Tabcorp Holdings Pty Limited v Bowen Investments Pty Limited was decided after the decision in Brewarrina referred to above. The High Court did not refer to Brewarrina in it reasons. The Court's reference to 'unreasonableness' in Tabcorp was as stated by the Tribunal Member.
Having regard to the High Court's statement that: 'That tends to indicate that the test of "unreasonableness" is only to be satisfied by fairly exceptional circumstances. The example given by the Court aligns closely with what Oliver J said in Radford v De Froberville, that is, that the diminution in value measure of damages will only apply where the innocent party is "merely using a technical breach to secure an uncovenanted profit."' We are of the view that the matter stated in the passage emphasized in Brewarrina was not a mandatory issue that had to be considered in order for there to be a proper consideration of whether the rectification course proposed by the owners was a reasonable course to adopt.
The decision of the Court of Appeal in Wheeler & Anor v Ecroplot Pty Ltd [2010] NSWCA 61 concerned damage to a residential dwelling caused by issues relating to the preparation of the site and the construction of the footings. In his judgement Macfarlan JA, with whom McColl and Bastan JJA agreed, by way of conclusion stated at [7]: 'The primary component of the balance of the rectification costs claimed was the cost of underpinning to embed the footings into the natural soil to the depth required by the contract (see [5] above, and [18] below, as to the breach found in this respect). The appellants did not contend that the observed damage was caused by the breach as to the footings but asserted that they were entitled to have footings embedded to the contractual depth to attempt to ensure the stability of their home. I have concluded that they were so entitled and that it is reasonable for the appellants to incur the cost of underpinning to rectify the respondent's breach.'
In that section of his judgement entitled 'Damages' Macfarlan JA dealt with the question of the appellant's claim in greater detail stating at [77]: 'The appellants' position is that they have a home which, in the respect under consideration, does not conform with the stability-related requirements considered appropriate by the consulting engineer acting in relation to the construction of the dwelling, or by the relevant Australian Standard. Their claim being in contract, the amount of the damages to which they are entitled is the sum of money necessary to be paid to them to put them in the position that they would have been in if the contract had been performed. I see no reason why in the circumstances of this case the cost of underpinning should not be regarded as the reasonable measure of damages to which the appellants are entitled as a result of the breach in question. I say this notwithstanding that, having considered the character of the natural soils under the fill, Mr Speechley expressed the view that he did "not expect that the strength of the founding soils would be inadequate even with the [footings not being placed as far into the natural soils as the contract required]" (Report paragraph 8.4.4). The existence of such an expectation on the part of one expert does not render it unreasonable for a party to seek to achieve what he or she has bargained for so as to make the house more stable. This is especially so when other experts gave evidence that the underpinning was the appropriate step to take for the purpose of rectification.'
Macfarlan JA did not discuss in any detail whether the proposed rectification was out of proportion to the contractual objective of the subject building agreement or to the benefit to be obtained therefrom. He did however consider the issue of whether the proposed rectification was a reasonable course to adopt and concluded that there was no radical disproportion to the benefits to be obtained stating at [81]: 'In Tabcorp Holdings Ltd v Bowen Investments Pty Ltd the High Court commented in relation to this qualification that the example given in Bellgrove of a situation where rectification would be unreasonable "tends to indicate that the test of 'unreasonableness' is only to be satisfied by fairly exceptional circumstances" (at [17]). Another example of unreasonableness is a situation where the cost of the "proposed rectification is out of all proportion to the benefit to be obtained" (Brewarrina Shire Council v Beckhaus Civil Pty Ltd [2006] NSWCA 361 at [82] - [88] citing South Parklands Hockey & Tennis Centre Inc v Brown Falkiner Group Pty Ltd [2004] SASC 81 at [90]; see also: Westpoint Management Ltd v Chocolate Factory Apartments Ltd [2007] NSWCA 253; Kirkby v Coote [2006] QCA 61; Gagner Pty Ltd v Canturi Corporation Pty Ltd [2009] NSWCA 413; (2009) 262 ALR 691; and Building Insurers' Guarantee Corporation v The Owners - Strata Plan No 57504 [2010] NSWCA 23).' and concluding 'There is in my view no such radical disproportion in this case, nor any other factor, which would lead to the appellants' desire to have their home accord with the contractual standard concerning footings being regarded as unreasonable in the relevant sense.'
The passage quoted above confirms in our view that while the proposed cost of rectification being out of proportion to the benefit to be obtained may be an example of unreasonableness, it is not an issue that must be addressed in considering whether rectification is a reasonable course to adopt.
We also note that in its final written submissions to the Tribunal Member the builder did not raise the issue of the proposed cost of rectification being out of proportion to the contractual objective of the building contract or to the benefit to be obtained therefrom.
We find that the Tribunal Member was under no requirement to consider the proposed cost of rectification being out of proportion to the benefit to be obtained, particularly when the builder's written submissions did not raise that issue. This ground of Appeal is dismissed.

Ground 5

'The Senior Member, failed to take into account a relevant consideration, when assessing damages for the absence of a recess in the slab for the western retaining wall that the recess was a secondary method of waterproofing and that the wall had in fact been waterproofed and that it was unlikely that water would penetrate the wall. In the alternative, the Senior Member failed to give proper reasons for the finding that those issues did not prevent the demolition and reconstruction of the western retaining wall from being a reasonable course to adopt.'
The Reasons for Decision at [96], [97], [99], [100] and [103] indicate that the Tribunal Member took into account the matters that the builder submits that she failed to take into account, namely: 1. the recess in the slab for the western retaining wall was a secondary method of waterproofing; 2. the retaining wall was waterproofed prior to backfilling; and 3. the builder's expert considered that water penetration of the wall was unlikely.
We reject the builder's Ground of Appeal that the Tribunal member failed to take into account the issues referred to. It is plain in our view that she did not.
In the alternative the builder submits that there was a failure to provide reasons for the finding that the issues said not to have been taken into account did not prevent the demolition and reconstruction of the western retaining wall from being a reasonable course to adopt.
In our view the Tribunal Member gave detailed and adequate reasons to support her findings.
In Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280 at 287 (Neaves, French and Cooper JJ), albeit in a case concerned with judicial review, the Full Court of the Federal Court said "[t]he reasons for the decision under review are not to be construed minutely and finely with an eye keenly attuned to the perception of error". This language was repeated with approval by the High Court in Minister for Immigration and Ethnic Affairs v Wu Shan Liang [1996] HCA 6; (1996) 185 CLR 259 at 272. In our view a similar approach should be taken in connection with this aspect of Ground 5 of the Appeal.
The submission of the builder under this Ground of Appeal does, with respect, bring to mind the approach which the authorities state ought not be followed.
We have found that the Tribunal Member made appropriate findings that the rectification course proposed was a reasonable course to adopt and was not in the circumstances unreasonable.
For these reasons we dismiss this Ground of appeal.

Ground 6

'The Senior Member erred in law by failing to take into account a relevant consideration being the appellant's submission that the recess in the slab for the western retaining wall was a secondary method of waterproofing and that the wall had been waterproofed and that other works performed made it unlikely that the water would penetrate the wall. In the alternative, the Senior Member failed to provide proper reasons for the rejection of that submission.'
The Reasons for Decision at [96], [97], [99], [100], [101] and [103] indicate that the Tribunal Member took into account the matters that the builder submits that she failed to take into account. Our reasons relating to Ground 5 apply equally to this ground of appeal.
This ground of Appeal is dismissed.

Ground 7

'The Senior Member erred by finding that the recess in the slab for the western retaining wall was required by "an Australian Standard" when there was no evidence to that effect.'
The builder has submitted that there was no evidence to support the Tribunal Member's reference to 'an Australian Standard' at [106] of the Reasons for Decision. The owners have not referred to any evidence which would support such a reference being made.
We do not think that an incorrect reference to the Australian Standard at [106] of the Reasons is in itself enough to justify setting aside the decision.
At [108] of the Reasons, the Tribunal Member expressly made a finding that: 'On the evidence of the builder in cross examination, I am satisfied that there is no longer any dispute between the parties that the rebate was not built in accordance with the plans and specifications. The builder conceded that the wall was not built to plans and specs'
Even if as we accept the Tribunal Member erred in referring to an Australian Standard at [106], her Reasons at [108] make it clear that she has made a finding that the breach consisted of the rebate not being built in accordance with plans and specifications, as conceded by the builder.
In our view it is clear having regard to the Reasons as a whole and particularly from [95] to [115] that the reference to the Australian Standard was an incorrect reference and played no part at all in the Member's reasoning process. In addition the nature of the breach was admitted by the builder. There was no real issue regarding an Australian Standard and the first sentence of [106] is clear, ignoring the reference to the Australian Standard.
We dismiss this Ground of Appeal for these reasons.

Ground 8

'The Senior Member failed to take into account a relevant consideration, namely that there was an alternative method of determining compensation for the absence of a recess in the slab for the western retaining wall, being the cost of waterproofing treatment to the internal walls if there was in fact water penetration of the wall'
In his submissions the builder refers to his expert's evidence given before the Tribunal Member and referred to in final written submissions. The Ground of Appeal is that the Tribunal Member did not address the issue in her Reasons for Decision.
In Quan Pham v Legal Services Commissioner [2016] VSCA 256 at [88] the Court stated in connection with the requirement to give reasons: 'The principles relating to the obligation of a judge, or judicial officer, to provide adequate reasons for a decision, are well established and are not in dispute. In essence, the reasons must be sufficient to enable the parties to understand the extent to which their arguments have been understood, and either accepted or rejected, and to understand the basis of the judge's decision. In addition the reasons must be sufficient to enable an appeal court to ascertain the reasoning upon which the decision has been made.[41] However, that obligation does not require the judge to expressly deal with each and every argument that might have arisen in the course of the case'
In Mifsud v Campbell (1991) 21NSWLR 725 at 728 Samuels JA stated: 'Similarly, in my opinion, it is an incident of judicial duty for the judge to consider all the evidence in the case. It is plainly unnecessary for a judge to refer to all the evidence led in the proceedings or to indicate which of it is accepted or rejected. The extent of the duty to record the evidence given and the findings made depend, as the duty to give reasons does, upon the circumstances of the individual case. Accordingly, a failure to refer to some of the evidence does not necessarily, whenever it occurs, indicate that the judge has failed to discharge the duty which rests upon him or her.'
The authorities referred to above indicate that there was no obligation for the Tribunal Member to refer to some of the evidence or to address each and every submission.
Given that we have found that the Tribunal Member made appropriate findings that the rectification course proposed was a reasonable course to adopt and was not in the circumstances unreasonable, we find that the Tribunal Member did not fail to take into account a relevant consideration by reason of the fact that she did not specifically deal with the evidence and submission that the builder has referred us to.
This Ground of Appeal is dismissed.

Ground 9

'The Senior Member took into account an irrelevant consideration when considering damages for the absence of a recess in the slab for the western retaining wall, namely that the appellant had every opportunity to supervise the construction of the slab.'
The observation by the Tribunal Member in the last sentence of [106] of the Tribunal Member's Reasons are relevant to findings of breach of contract, although most probably unnecessary, since as we have stated, the builder conceded the breach of contract the subject of this appeal.
In Lo v Chief Commissioner of State Revenue [2013] NSWCA 180 Basten JA at [9] described an irrelevant consideration as follows: 'Further, a matter traditionally described as an "irrelevant consideration" is one which is prohibited because, having regard to the subject matter, scope and purpose of the power being exercised, it can be seen to reflect an extraneous or improper purpose or to render the decision arbitrary or capricious'
In Minister For Aboriginal Affairs v. Peko-Wallsend Ltd (1986) 162 CLR 24 Mason J stated at 15(d) although in relation to an administrative decision: 'I say "generally" because both principle and authority indicate that in some circumstances a court may set aside an administrative decision which has failed to give adequate weight to a relevant factor of great importance, or has given excessive weight to a relevant factor of no great importance. The preferred ground on which this is done, however, is not the failure to take into account relevant considerations or the taking into account of irrelevant considerations, but that the decision is "manifestly unreasonable".'
While [106] of the Reasons combines two distinct issues, first the issue of the 'reasonableness' of the proposed rectification and secondly issues relevant to the breach in issue, we do not regard that mixture to demonstrate that the second issue has affected the first issue. Nor do we think that the Tribunal Member has given excessive weight to the breach issue thus affecting the reasonableness issue, or making the Tribunal Member's finding on reasonableness arbitrary or capricious.
For these reasons we dismiss this ground of appeal.

Ground 10

'The Senior Member, in awarding the respondents the sum of $94,921 for damages for the absence of a recess in the slab for the western retaining wall, has made a decision that is so unreasonable that no reasonable decision maker would make it.'
The builder's submissions in respect of this ground of appeal raise factual issues that are mentioned in many of its grounds of appeal and are also mentioned in the Tribunal Member's Reasons for Decision.
For us to find that the Tribunal Member's decision was so unreasonable that no reasonable decision maker would make it, would require as Lord Greene MR stated in Associated Picture Houses Limited v Wednesbury Corporation [1948] 1 KB 223 at 230 'something overwhelming'
In Marrickville Metro Shopping Centre Pty Limited v Marrickville Council [2010] NSWCA 145, Tobias JA referred to the Wednesbury formulation in the following terms at [104] - [106]: 'Finally, as her Honour noted at [115], in Murrumbidgee Groundwater Preservation Association Inc v Minister for Natural Resources [2005] NSWCA 10; (2005) 138 LGERA 11 Spigelman CJ, with whom Beazley JA and myself agreed, stated at [129]: "Perhaps the most appropriate formulation [of Wednesbury unreasonableness] is whether the decision is 'illogical, irrational or lacking a basis in findings or inferences of fact supported on logical grounds' ". This formulation was adopted by myself in Westfield Management Ltd v Perpetual Trustee Co Ltd [2006] NSWCA 245 at [71]. It was also adopted and applied by myself, with the agreement of Mason P and Hodgson JA, in Notaras v Waverley Council [2007] NSWCA 333; (2007) 161 LGERA 230 at [122]. In Notaras I cited (at [124]) [31] of the judgment of Biscoe J in Save Our Streets Inc v Settree [2006] NSWLEC 570; (2006) 149 LGERA 30 where his Honour drew a distinction between a decision which the court considers is unreasonable and a decision which the court considers is so unreasonable that no reasonable body could have come to it. The latter required "something overwhelming": Minister for Immigration and Multicultural Affairs v Eshetu [1999] HCA 21; (1999) 197 CLR 611 at [44]. In Wednesbury itself, Lord Greene MR at 229 referred to the relevant unreasonableness as "something so absurd that no sensible person could ever dream that it lay within the power of the authority". In Bromley London Borough Council v Greater London Council [1983] 1 AC 768 at 821, Lord Diplock defined Wednesbury unreasonable decisions as those which "looked at objectively, are so devoid of any plausible justification that no reasonable body of persons could have reached them". In Puhlhofer v Hillingdon London Borough Council [1986] UKHL 1; [1986] 1 AC 484 at 518, Lord Brightman said that the unreasonableness must be "verging on an absurdity".
We are unable to agree with the builder's submissions that the decision of the Tribunal Member was so unreasonable that no reasonable decision maker would make it. Nor would we agree that the decision was illogical, irrational or lacking a basis in findings or inferences of fact supported on logical grounds.
In Aavelaid v J.A. Hayek t/as Laing & Simmons [2015] NSWCATAP 130 the Appeal Panel stated at [57] in connection with Wednesbury principles: 'Further, courts have repeatedly found that where there might be "mere preference for a different result, when the question is one on which reasonable minds may come to different conclusions, this is not a sufficient reason for overturning a judicial decision on review", see Minister for Aboriginal Affairs v Peko-Wallsend Ltd [1986] HCA 40; (1986) 162 CLR 24 at 48.'
The Tribunal Member's decision was based on the consequences of the builder's admitted breach of contract in the form of omitting a construction detail, namely the provision of a rebate in the slab, which was shown on the contract drawings.
It was accepted that the detail was a secondary method of waterproofing. Reasons [99]. Nonetheless it was a method of waterproofing that the owners' engineer had seen fit to incorporate into the drawings.
The Tribunal Member applied High Court authority of long standing to deal with the question of the assessment of the damage caused by the admitted breach of contract. As stated by MacFarlan JA in Wheeler & Anor v Ecroplot Pty Ltd at [80]: 'the principle to be derived from Bellgrove v Eldridge [1954] HCA 36; (1954) 90 CLR 613 that in the case of a building contract such as the present the prima facie measure of damages is the "amount required to rectify the defects complained of and so give to [the plaintiff] the equivalent of a building on [his or her] land which is substantially in accordance with the contract" (at 617 per Dixon CJ, Webb and Taylor JJ). A qualification to that principle was stated in Bellgrove to the effect that "not only must the work undertaken be necessary to produce conformity [with the contract], but that also, it must be a reasonable course to adopt" (at 618).'(Emphasis added)
The Tribunal Member was applying the prima facie measure of damages applicable to the facts.
There is no dispute that the provision of a rebate in the slab would produce conformity with the contract. The Tribunal Member referred to the evidence that the rebate was a secondary method of waterproofing. The builder's expert did not categorically exclude the possibility of leaking. He stated that he thought that water penetration of the wall was 'unlikely' [99]. The issue the subject of the Appeal is whether it was open to the Tribunal Member to find that the rectification proposed was reasonable in the circumstances of the case, She so found.
In our view such a finding cannot be described as so 'devoid of any plausible justification that no reasonable body of persons could have reached' the conclusion that she did. In Wheeler & Anor v Ecroplot Pty Ltd Macfarlan JA found that it was reasonable for home owners to claim for underpinning to be embedded to the contractually required depth, when there was no damage observed from the builder's failure to do that. The Tribunal Member's finding in these proceedings may be described as analogous to that outcome. The finding which the builder seeks to overturn was not in our view so unreasonable that no reasonable decision maker would make it. It was one which we think may be characterized at the highest, as one on which reasonable minds might come to different conclusions and thus not capable of being overturned under this Ground of Appeal.
For the reasons provided we dismiss this Ground of Appeal.

Conclusion

We have found against the appellant on all grounds. The Appeal is dismissed.
On 19 July 2016 the Appeal Panel stayed the orders made on 31 May 2016 until further order of the Tribunal. Orders were also made for the parties to file and serve submissions in relation to the builder's application for a stay. The orders contemplated the determination of the stay application on the papers. Such a determination was never made. The builder has been unsuccessful in his appeal. The order staying the proceedings made on 19 July 2016, published on 20 July 2016, is now discharged.
In anticipation of success in his appeal, the builder filed and served an affidavit sworn 17 August 2016 from Mr Richard Crandon. The builder proposed that the Appeal Panel should deal with the appeal by way of a new hearing under section 80(3)(a) of the Civil and Administrative Tribunal Act and that Mr Crandon's evidence be admitted as fresh evidence under section 80(3)(b) of the Civil and Administrative Tribunal Act. The builder has been unsuccessful in his appeal. We have had no regard to Mr Crandon's evidence in considering the builder's grounds of appeal.

Costs

In the event a party wishes to apply for costs, we make the following orders.
Any costs application must be lodged in the Appeal Division of the Tribunal and served on the costs respondent within 21 days of the date of these orders either attaching or referring to any documents relied upon in support of the application.
The costs respondent will have 21 days after the date it receives the application referred to in the preceding paragraph to lodge in the Appeal Division of the Tribunal and serve on the costs applicant its submissions in response to the cost applicant's costs application, such submissions either attaching or referring to any documents relied upon.
The cost applicant will have 14 days after the date it receives the cost respondent's submissions to lodge in the Appeal Division of the Tribunal and serve on the costs respondent its submissions, if any, in reply, such submissions either attaching or referring to any documents relied upon.
Subject to the right of the parties to make submissions under section 50(3) of the Civil and Administrative Tribunal Act, the Appeal Panel will determine any costs application on the basis of the papers lodged in the Appeal Division of the Tribunal. 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: 23 February 2017

(2007) 161 LGERA 230

At a glance

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Decision date

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Judgment (16 paragraphs)

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Cases Cited (41)