Huxley Homes Pty Ltd v Alexander Augustyn and Rebecca Augustyn; Alexander Augustyn and Rebecca Augustyn v Huxley Homes Pty Ltd

[2015] NSWCATCD 17

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:	Huxley Homes Pty Ltd v Alexander Augustyn and Rebecca Augustyn; Alexander Augustyn and Rebecca Augustyn v Huxley Homes Pty Ltd [2015] NSWCATCD 17
Hearing dates:	16, 17 December 2014
Decision date:	03 February 2015
Jurisdiction:	Consumer and Commercial Division
Before:	Jeffery Smith, Senior Member
Decision:	Huxley Homes Pty. Ltd. shall pay Alexander Augustyn and Rebecca Augustyn, jointly, the sum of $1,929.92 immediately. The applications are otherwise dismissed. If the parties are unable to agree on the issue of costs, leave is granted for the parties to file and serve short written submissions on that issue only within 21 days of the date of these orders. If any party seeks a hearing on the issue of costs leave is granted to make that request in writing to the Divisional Registrar within 21 days of the date of these orders.
Catchwords:	Residential building work, mould, warranties as to residential building work, reasonably fit for occupation as a dwelling.
Legislation Cited:	Home Building Act 1989 (NSW), Consumer, Trader and Tenancy Tribunal Act 2001 (NSW), Civil and Administrative Tribunal Act 2013 (NSW).
Cases Cited:	The Owners Strata Plan 62930 v Kell and Rigby [2010] NSWSC 612, Jones v Bartlett [2000] HCA 56
Category:	Principal judgment
Parties:	Alexander Augustyn and Rebecca Augustyn, home owners, Huxley Homes Pty Ltd, builder
Representation:	Counsel: Mr Davie, for the homeowners Mr Phillips, for the builder Solicitors: Peter Merity Solicitor, for the homeowners Mahony Law, for the builder
File Number(s):	HB 13/16053 and HB 13/29645
Publication restriction:	Unrestricted

Reasons for decision

APPLICATION

1. The builder’s application (HB 13/16053) was lodged first in time on 19 March 2013 seeking orders for damages arising from the homeowners’ alleged breach of a contract for residential building work entered into between the parties. The homeowners filed a cross application (HB 13/29645) on 30 May 2013 seeking orders in respect of allegedly defective work.

2. The two applications were case managed by the Tribunal and proceeded to a number of directions hearings.

3. On 15 October 2014 the Tribunal set the matter down for a one day conclave of experts on site on 31 October 2014, followed by a two day hearing on 16 and 17 December 2014 to determine any remaining issues in dispute.

ISSUES

4. Pursuant to directions made by the Tribunal on 15 October 2014 the parties filed written submissions. As a result of those submissions, agreements reached by the experts in conclave and following discussion with counsel for the parties on the morning of 16 December 2014 the following matters were clarified.

1. The parties agreed that the builder owed the homeowners the sum of $26,985.00 in respect of agreed defects. To that sum it was agreed 15% for preliminaries, 20% for builder’s margin and 10% for GST should be added. The total therefore agreed to be owed by the builder on account of defective work was $40,963.23.

2. The parties further agreed that the sum of $39,033.31 was owed to the builder by the homeowners and should be set-off against the total sum found to be owed to the homeowners.

3. The remaining issue in dispute was whether the builder is liable for the cost of rectification of mould in the building. The parties agreed that if liability was found the cost of rectifying the mould problem was $185,000.00. It was agreed that it was necessary to add to that sum preliminaries, builder’s margin and GST, which resulted in the agreed sum in respect of remediation of mould in accordance with the scope of work suggested by Mr Lark, to be $280,830.00.

4. In addition the homeowners sought damages in the sum of $19,462.50 for supervision of the remedial work. That application was opposed by the builder.

5. The builder did not press the claim for a variation relating to air-conditioning grills or a claim for export of fill. The homeowners agreed that they did not press a claim for liquidated damages or for compensation in respect of rent.

ADJOURNMENT

5. Following tendering of all documentary material to be relied on by the homeowners the applications were adjourned until 11.30AM on the morning of 17 December 2014 due to counsel for the builder being unable to access his chambers as a result of a hostage taking incident on Martin Place.

JURISDICTION

6. There was no dispute that the Tribunal has jurisdiction to hear and determine both applications pursuant to the Home Building Act 1989 (NSW) s 48K, the transitional provisions set out in the Civil and Administrative Tribunal Act 2013 (NSW) Schedule 1, clause 7 and the Consumer, Trader and Tenancy Tribunal Act 2001 (NSW) s 21.

HOMEOWNERS’ CASE

7. The homeowners relied on the affidavits of Mrs Augustyn (dated 2 July 2014) and of Mr Augustyn dated 5 July 2014.

8. In addition the following documents were tendered by the homeowners as exhibits;

1. Report of Mr Price dated 28 February 2013,

2. Joint report of conclave dated 31 October 2014

3. Supplementary report of Mr Price dated 8 May 2013

4. Further supplementary report of Mr Price dated 10 June 2014

5. Report of Mr Lark dated 7 April 2013

6. Supplementary report of Mr Lark dated 9 December 2013

7. Further supplementary report of Mr Lark dated 9 March 2014

8. Tenders for remedial work from “Mycotox”, “Total Ventilation”, “Boongalla” and “Fischer’s Cleaning”.

9. Mr Lark, mycologist, was called by the homeowners and gave evidence on affirmation and was cross examined on that evidence.

10. The homeowners’ submissions were to the following relevant effect.

11. The parties entered into a standard form HIA building contract on or about 28 February 2011 for residential building work being the construction of a house by the builder for the applicants for the agreed sum of $337,298.69. Construction commenced in or about the first week of November 2011.

12. Particle board flooring was installed in early December 2011. In the period December 2011 to April 2012 there was very heavy rainfall. During that period the particle board flooring and timber framework provided by the builder remained uncovered and exposed to the elements. The homeowners’ concern in this regard was first communicated to the builder as early as 19 January 2012 with further concern being expressed in subsequent e-mails.

13. Following substantial agreement being reached between the parties on other issues the outstanding claim by the homeowners relates to the existence of mould in components of the dwelling including the particle board flooring and the timber frame arising from the extended exposure of the materials to the elements.

14. It was submitted that the evidence of the existence of the mould and its adverse effect on the health of the occupants of the house and of its threat to the structural integrity of the affected timbers was un-contradicted.

15. The evidence of Mr Price established that the exposure of the particle board flooring to rain over a period of four and a half months was a breach of AS/NZS 1860.2 and accordingly was a breach of the warranty provided by the Home Building Act 1989 (NSW) s 18B(c). Furthermore the Tribunal should draw the inference that exposure of the particle board flooring and structural timbers to the elements for such a long period did not amount to carrying out the work in a good and workmanlike manner and with due diligence, in contravention of the warranty provided by s 18B(a) and (d), respectively.

16. Having established the fact of the contamination by mould of the timber framing and particle board flooring it follows that the use of such materials was a breach of the warranty obligation under s 18B(b).

17. Further, the use of the mould affected timber framing and particle board flooring resulted in a dwelling that was unsafe to live in and therefore not fit for occupation as a dwelling, in breach of the warranty provided by s 18B(e).

BUILDER’S CASE

18. The builder made submissions to the following relevant effect.

19. In reply to the allegation that the particle board flooring and timber framing had been left exposed to the elements for a period in excess of that provided by the Australian Standards in breach of the warranty provided by the HBA s 18B(c), the builder acknowledged the obligation under AS/NZS 1860.2 to protect the particle board flooring from the weather and in any event not to expose it for a period in excess of three months. However, reliance was placed on AS 1860.2 cl 11 note (3) which provides that exposure for more than three months requires the builder to obtain the opinion of the manufacturer as to its condition, which was done.

20. It was submitted that there was no evidence provided by the home owners to support the inference relied on that the builder had failed to carry out the work in a proper and workmanlike manner in breach of s 18B(a). In particular there was no evidence of alternate means of construction that would have provided for covering of the timber framing and flooring prior to the roof installation or that any alternative is commonly used by builders.

21. Further, there was no evidence to support the proposition that the work had not been carried out with due diligence in contravention of the warranty provided by the HBA s 18B(d). To the extent of any delay in performance of the work, it was due to exceptionally heavy rainfall and not to any lack of diligence by the builder.

22. In response to the home owners’ submissions that the very presence of mould on the timbers used by the builder rendered the materials “unfit for purpose” in contravention of the warranty provided by the HBA s 18B(f) the evidence of Mr Lark established that all timbers used for framing and all particle board flooring has mould. The timbers/flooring used by the builder did not have any specific level of contamination at the time it was installed.

23. In response to the allegation that the house is “not fit for purpose” due to the mould in breach of the warranty provided by the HBA s 18B(e), it was the builder’s submission that there was no evidence that the home owners had expressly made known to the builder any purpose for which the house was to be used other than as a dwelling.

24. Reliance was placed by the builder on the decision of the Supreme Court in The Owners Strata Plan 62930 v Kell and Rigby [2010] NSWSC 612 in which it was said at para 10,

Insofar as thestatutory warranty of reasonableness for occupation as a dwelling, in the context of residential building works, seems akin to a warranty of reasonable fitness for habitation, the authorities in other areas (albeit not considering the meaning of the analogous expression in s 18B(e) of the Act), suggest that the test is whether the dwelling in question is in a condition (or has particular features) that would make it injurious to health.

and on the decision of the High Court in Jones v Bartlett [2000] HCA 56, where it was said

There is no such thing as absolute safety. All residential premises contain hazards to their occupants and to visitors. Most dwelling houses could be made safer, if safety were the only consideration. The fact that a house could be made safer does not mean it is dangerous or defective.

25. In regard to the expert evidence of Mr Lark, the mycologist relied on by the home owners, the builder’s submission was that it was shown in part to be false, the findings he made did not disclose significant mould levels justifying the proposed method of rectification and the opinions expressed were made without any proper basis.

26. That is, even if the evidence of Mr Lark establishes that there is some level of mould in the house that poses a potential health risk, based on the decision of the High Court referred to, the fact that the house can be made safer does not mean that it is defective or dangerous.

27. Lastly, the builder’s submission rejected the owners’ suggestion that there may be structural damage due to the mould on the basis that it was made without any evidentiary support.

28. In addition the following documents were tendered by the builder

Exhibit:

1. Guidelines on Ambient Intramural Airborne Fungal Spores; A Fairs, et al

2. Prevalence of residential determinants of fungi within homes in Melbourne, Australia; S Dharmage, et al

3. The medical effect of mould exposure; Robert Bush, et al

4. Worldwide exposure standards for mold and bacteria 9th edition; Brandys

FACTS

29. It was un-contested that the builder had failed to properly cover the particle board flooring and timber framing that had been delivered to the site in early December 2011 until mid-April 2012 and had left those materials exposed to the weather during that time.

30. It was uncontested that there was heavier than normal rainfall during the four and a half month period when the materials were exposed to the weather.

31. It was un-contested that the mould growth established to be present by the evidence of Mr Lark arose directly from the exposure of the timber materials to excessive moisture over an extended period followed by drying after the roofing of the premises.

32. However, the significance of the level of mould growth found by Mr Lark and the methodology and assumptions upon which his findings were based were hotly contested.

33. Mr Lark appeared to be a witness of considerable experience in the field of microbiology and mycology. That experience was supported by various academic credentials in the sciences and relevant accreditations. His evidence was in the form of a report dated 7 April 2013 and two supplementary reports dated 9 December 2013 and 9 March 2014 respectively.

34. Mr Lark gave evidence on affirmation in which he adopted the content of his reports without variation and he was cross examined on his evidence.

35. During cross examination Mr Lark conceded that a primary conclusion reached (at para 8.3 of his report) was inaccurate in that the reference he relied on (Brandys) contained no reference to surface mould being “high” or “very high”.

36. The moisture levels taken by Mr Lark were acknowledged to be normal (table 3.12.13 of his report) and unlikely to be elevated in the future. However, in re-examination Mr Lark pointed out that at times of high humidity that regularly occur in Sydney, there will be rapid growth of the mould. No subsequent measurements were provided to support the proposition that the mould and spores reached unacceptable levels in the property at such times of high humidity.

37. The levels of airborne mould detected by Mr Lark (table 4.1 of his report) were within normal range (in reference to the Fairs paper) or in the range described by Brandys as “low”. There was an exception being the reading for sample 16 in table 4.1 which was outside the normal range. However, Mr Lark acknowledged under cross examination that area was subject to high readings due to contamination.

38. The table at 4.1 of Mr Lark’s report also noted that none of the airborne mould readings reached levels above 4225/cu.m that necessitated (in Mr Lark’s opinion) further investigation and correction.

39. In reference to the “Biotape” surface testing shown at table 4.3 of Mr Lark’s report, Mr Lark acknowledged under cross examination that he has no medical qualification to express an opinion as to the potential risk associated with presence of mould and in that regard relies on the opinion of others. That statement was at odds with his response to a question on re-examination that not only the incidence of mould but also the pathogens that are identified is of relevance and was at odds with the conclusion reached (at para 8.11 of the report) that the mould in the property is a potential health hazard.

40. The builder’s representative attacked the basis of the opinions expressed by Mr Lark. I am satisfied there was justification for the concerns expressed.

41. As already mentioned, there was no basis by reference to the Brandys publication for the assertion that the airborne mould levels were “high” or “very high”. Further, there was no specification for the comparison of surface readings of what were described as “high”. It is therefore not possible to determine whether those readings are in comparison to normal or abnormal conditions.

42. The basis of the opinions expressed by Mr Lark and the significance of the results recorded and the interpretation of those results by reference to objective standards was severely impugned.

43. Mr Lark conceded under cross examination that in fact it was his perception of what is “normal” based only on his own experience, rather than objective standards based on scientific analysis that was the basis of his opinion yet his reports relied not on that experience but on standards provided by others.

44. Despite the claim that health risks are associated with inhalation of mould spores based on the publication by Bush relied on by Mr Lark, it was conceded under cross-examination that at no place in that publication was there any reference to direct infection by inhalation. It was further conceded that inhalation may cause an allergic response in about 10% of individuals but that outdoor exposure was a more relevant consideration to allergic response.

45. After careful consideration of the content of Mr Lark’s report and his answers under cross examination I am unable to conclude that his evidence supports the proposition that the mould levels currently detected are elevated to a level higher than normal due to the exposure of the flooring and timbers during the months of December 2011to April 2012. Nor am I able to conclude that the mould levels detected by Mr Lark present any specific health risks for the occupants of the property.

LEGISLATIVE FRAMEWORK

46. The Home Building Act 1989 (NSW) s 18B provides

18B Warranties as to residential building work

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 performed in a proper and workmanlike manner 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.

47. It goes without saying that in order for the applicants to recover damages for breach of one or other of the statutory warranties provided by s 18B that it must be demonstrated not only that there was a breach but that the breach led to the damage for which compensation is claimed.

Breach of warranty argument

48. The relevant Australian Standard (AS 1860.2) provides

“As soon as practicable after fixing, particleboard flooring shall be protected from the weather, preferably by the installation of roof covering and external wall cladding. The maximum exposure time shall not exceed 3 months”

49. I am satisfied, and it is not in dispute, that the particleboard flooring was not covered for a period of four and a half months. I am satisfied that failure amounts to a breach of the above standard because clearly, even if the weather conditions mitigated against installation of the roof and wall cladding, it is self-evident that other steps such as covering with a tarpaulin would have been open to the builder.

50. It is true that the builder called for the opinion of the manufacturer as suggested by note 3 to the standard. However, there is no evidence to suggest that the issue of mould growth was considered at that time.

51. Hence, I am satisfied it is reasonable to draw the inference that the builder was in breach of his obligations under s 18B(a) that the work be performed “in a proper and workmanlike manner” and further, because the work was not done in accordance with AS 1860.2 that the builder was in breach of the obligation under s 18B(c) that the work would be done in accordance with “any other law”.

52. However, for reasons that are expressed below I am not satisfied these breaches of obligation under the statutory warranty provided by s 18B(a) or (c) resulted in the builder being liable for the compensation claimed.

53. I am unable to be satisfied, on the evidence presented, that the builder was in breach of the obligation under s 18B(d) to do the work “with due diligence”. There was no evidence of delay occasioned by lack of diligence by the builder but simply a failure to take steps to protect the timber during a delay occasioned by the weather.

54. The argument about alleged failure to provide materials “reasonably fit for specified purpose” in breach of the obligation imposed by s 18B(f) does not advance the applicants’ case. Whilst I do not accept the proposition put in reply by the respondent that if the flooring and timber were “reasonably fit for purpose” at the time of installation they necessarily remained reasonably fit despite the exposure to the weather, I am satisfied the issue merges into the more relevant question of whether the house as completed by the builder resulted in a “dwelling that is reasonably fit for occupation as a dwelling”.

Is the house reasonably fit for occupation as a dwelling?

55. The real thrust of the home owners’ claim was that because of the failure of the builder to properly protect the flooring and timbers from the weather in breach of it’s various obligations under the warranties provided by s 18B, mould has developed in the flooring and timbers that now render the building unfit for its intended purpose.

56. There is no merit to the builder’s submission on this proposition that the owners at no time expressly made known to the builder any purpose that the house was to have other than use as a dwelling. There is no obligation on the home owners under the Home Building Act 1989 to expressly make known to the builder any purpose of the dwelling in order to rely on the warranty provided by s 18B(e). (cf the warranty provided under s 18B(f)).

57. The obligation under s 18B(e) is, if the work consists of the construction of a dwelling, that it will result in a dwelling that is reasonably fit for occupation as a dwelling.

58. The builder relied on two reported decisions in support of the proposition that, even if there is mould present at higher levels than would normally be expected due to the builder’s failures, it does not necessarily follow that the building is unsafe or defective. The two authorities (by which I am bound) may be paraphrased as

“…the test is whether the dwelling…is in a condition…that would make it injurious to health”, and

“The fact that a house could be made safer does not mean it is dangerous or defective”.

59. The findings at paragraph 45, above, do not support the proposition that the dwelling is not reasonably fit for occupation as a dwelling. The builder’s submission, that the owners have not discharged their onus of establishing that the mould levels are abnormally high or are capable of causing any significant health risks, is correct.

60. I am therefore not satisfied that the builder is in breach of the warranty provided by s 18B(e) or that it is otherwise liable for remediation of mould in accordance with the scope of work provided by Mr Lark.

61. The question of compensation for supervision of such work does not arise.

CONCLUSION

62. Setting the sum of $39,033.31, agreed by the parties to be owed to the builder, off against the sum of $40,963.23, agreed to be owed to the homeowners, I calculate that the builder should now pay the home owners the sum of $1,929.92. (I note this sum is slightly different to the sum mentioned in the builder’s final submissions and have based my calculation on my notes of the concessions made by counsel at the hearing on 16 December 2014).

COSTS

63. If the parties are unable to agree on the issue of costs I have made directions to deal with that issue.

Jeffery Smith

Senior Member

Civil and Administrative Tribunal of New South Wales

3 February 2015

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

Decision last updated: 29 April 2015