Nash v MPG Capital Partners Pty Ltd; Kevan Brown as Executor of the Estate of the Late Peter Mayoh v MPG Capital Partners Pty Ltd (Civil Dispute)
[2022] ACAT 95
•14 November 2022
ACT CIVIL & ADMINISTRATIVE TRIBUNAL
NASH v MPG CAPITAL PARTNERS PTY LTD; KEVAN BROWN AS EXECUTOR OF THE ESTATE OF THE LATE PETER MAYOH v MPG CAPITAL PARTNERS PTY LTD (Civil Dispute) [2022] ACAT 95
XD 219/2021
XD 263/2022
Catchwords: CIVIL DISPUTE – where the contract for sale of a unit off-the-plan provided for the seller to arrange for the Building Works to be undertaken by suitably qualified persons – where the contract provided that the Building Works would be undertaken in a proper and workmanlike manner – where the balcony waterproofing was not undertaken in a proper and workmanlike manner – where failure to do so caused one balcony to leak causing damage to the balcony below and created an unacceptable risk that bypass leaks may develop in the future during the intended lifespan of the waterproofing system –whether complete replacement of the balcony waterproofing is necessary and reasonable to achieve conformity with the contract – whether reasonable to use sheet membrane at a much higher cost compared with liquid membrane – assessment of damages
Legislation cited: ACT Civil and Administrative Tribunal Act 2008 s 48
Cases cited:Bellgrove v Eldridge [1954] HCA 36
Burton v Rojas Constructions Pty Ltd [2018] ACAT 117
Rialto Sports Pty Ltd v Cancer Care Associates Pty Ltd [2022] NSWCA 146
Sterling Estates Development Corporation Pty Ltd v Malouf [2003] NSWCA 278
Tosolini v Temperate Living Pty Ltd [2020] ACAT 94
Tribunal:Senior Member M Orlov
Date of Orders: 14 November 2022
Date of Reasons for Decision: 14 November 2022
AUSTRALIAN CAPITAL TERRITORY )
CIVIL & ADMINISTRATIVE TRIBUNAL ) XD 219/2021
BETWEEN:
PHILLIP NASH
First Applicant
PAMELA NASH
Second Applicant
AND:
MPG CAPITAL PARTNERS PTY LTD (ACN 163 050 842)
Respondent
AND:
MORRIS CONSTRUCTION CORPORATION PTY LTD (ACN 136 947 834)
Third Party
TRIBUNAL:Senior Member M Orlov
DATE:14 November 2022
ORDER
The Tribunal orders that:
The respondent must pay $23,080.96 to the applicants, comprising:
(a)compensation for breach of contract in the sum of $22,985.96;
(b)the ACAT filing fee of $77.00 and search fees of $18.00.
The third party must indemnify the respondent against its liability to the applicants in the sum of $23,080.96.
………………………………..
Senior Member M Orlov
AUSTRALIAN CAPITAL TERRITORY )
CIVIL & ADMINISTRATIVE TRIBUNAL ) XD 263/2022
BETWEEN:
KEVAN BROWN AS EXECUTOR OF THE ESTATE OF THE LATE PETER MAYOH
Applicant
AND:
MPG CAPITAL PARTNERS PTY LTD (ACN 163 050 842)
Respondent
AND:
MORRIS CONSTRUCTION CORPORATION PTY LTD (ACN 136 947 834)
Third Party
TRIBUNAL:Senior Member M Orlov
DATE:14 November 2022
ORDER
The Tribunal orders that:
The respondent must pay $20,120.42 to the applicant, comprising:
(a)compensation for breach of contract in the sum of $19,527.42;
(b)the ACAT filing fee of $593.00.
The third party must indemnify the respondent against its liability to the applicant in the sum of $20,120.42.
………………………………..
Senior Member M Orlov
REASONS FOR DECISION
Introduction
These proceedings concern principally alleged balcony waterproofing defects in two units in a multi-storey commercial and residential building developed by the Morris Property Group, known as ‘Mayfair Apartments’, which is located at the corner of West Row and Alinga Street.
The applicants in XD 219/2021, Phillip and Pamela Nash, are the owners of unit 160, which they purchased ‘off-the-plan’ from the respondent, MPG Capital Partners Pty Ltd (MPG), as the “Seller” under a contract for sale dated 23 March 2016.
The applicant in XD 263/2022, Kevan Brown, is the executor of the estate of the late Peter Mayoh and brings a claim for damages in a representative capacity on behalf of the estate. At relevant times Mr Mayoh was the owner of unit 176, which he purchased ‘off-the-plan’ from MPG under a contract for sale. The contract is not in evidence, but it is common ground that it is relevantly identical to the contract entered into by Mr and Mrs Nash in respects that are material to these proceedings.
Unit 176 is located on level 16, directly above unit 160.
Both contracts for sale included the following Special Conditions:
56.1 Subject to obtaining the Approvals, the Seller agrees to engage suitably qualified persons to undertake:
(a)the construction on the Land of the Building Works; and
(b)the installation of the Inclusions in the Unit.
56.2 The Building Works are to be undertaken in accordance with the Plan in a proper and workmanlike manner.
…
71.1 The Seller agrees to repair and make good at its expense and in a proper and workmanlike manner any Defects in the Unit if:
(a) A list of Defects are notified to the Seller in writing within the Defects Liability Period; and
(b) the Buyer makes the Unit available at the time or times notified to the Buyer by the Seller, its agents or contractors to enable rectification of the Defects to be completed in a prompt and timely manner.
Special condition 51 included the following definitions:
“Building Works” means the construction of the Residential Building on the Land in accordance with the Plan.
“Defect” means any defect, fault or omission in the construction of the Unit as assessed against the National Construction Code (NCC) at the time construction of the Unit is completed.
“Defects Liability Period” means the period of 90 days commencing on the day following Completion
“Land” means the part of Block 3 Section 2 City on which the Building Works are to be erected.
“Plan” means the Plan annexed to this contract and marked “B”.
“Residential Building” means the residential levels of the building to be constructed on the Land substantially in accordance with development application 201324307.
MPG engaged Morris Construction Corporation Pty Ltd (Morris) to design and construct the Mayfair Apartments. Morris subcontracted the design and construction of the waterproofing and tiling works to Saba Tiling (ACT) Pty Ltd (Saba).
The applicants claim that the waterproofing of their respective balconies was not undertaken in a proper and workmanlike manner, in breach of special condition 56.2, and that MPG is liable to them for damages, being the cost to rectify the defective waterproofing and carry out associated remedial works. Additionally, Mr and Mrs Nash claim that the waterproofing of the bathroom in their unit is defective.
At the relevant time, the construction of a building with more than 3 storeys was not classed as residential building work, so that the statutory warranties by the builder under Part 6 Division 6.2 of the Building Act 2004 do not apply. Hence, the applicants’ only recourse is to sue MPG for breach of the contract for sale.
MPG denies that any of the works were defective and disputes quantum, which it describes as “grossly exaggerated”.
In the event MPG is found liable to the applicants, it says Morris is liable to indemnify it on the grounds that the latter was responsible for the design and construction of the Mayfair Apartments. Morris accepts that it must indemnify MPG against any liability it may have to the applicants. MPG and Morris were jointly represented at the hearing by Mr Abdel-Massih, General Counsel for the Morris Property Group.
Morris brought a third-party claim against Saba, but this was settled before the hearing. The terms of settlement were not disclosed to the applicants or the Tribunal.
Pursuant to orders made on 31 March 2022, the applications were heard together, with evidence in one matter being evidence in the other.
The hearing
The applicant’s evidence
Mr and Mrs Nash relied on:
(a)a bundle of documents containing, among other things, extracts from the Building Code of Australia (BCA) applicable to Class 2 to Class 9 buildings in 2015 (exhibit A1) and extracts from various Australian Standards that the applicants contended were applicable to the works (exhibit A1);
(b)a witness statement dated 17 February 2022 by the tenant of unit 160, Gareth Davies, of which only parts were allowed as evidence
(exhibit A2);
(c)a witness statement dated 8 January 2022, by Mrs Nash, part of which was excluded because it referred to without prejudice communications
(exhibit A3);
(d)a bundle of colour photographs emailed to the tribunal on 24 May 2022 (exhibit A4);
(e)a special purpose inspection expert report by George Pudja, dated 3 March 2022 (exhibit A5);
(f)a supplementary letter from Mr Pudja dated 8 April 2022 referring to the cost to rectify unit 176 (exhibit A6).
Mr Davies was not required for cross-examination. Mrs Nash was
cross-examined. Mr Pudja gave oral evidence expanding on some of the issues discussed in his report and was cross-examined.
Mr Brown did not give evidence. He relied on the evidence in XD 219/2022, particularly the evidence by Mr Pudja.
The respondent’s evidence
MPG and Morris relied on:
(a)a bundle of documents comprising, among other things, the contract for sale of unit 160 (it being common ground that the contract for sale of unit 176 was identical in material respects) and the final 90-day list of defects provided by Mr and Mrs Nash (exhibit R1); and
(a)a witness statement dated 4 May 2022 by Edgar Sharp, the Senior Contracts Administrator of Morris Property Group, in which he responded to
Mr Pudja’s reports and gave his opinion about the cost of repair. Mr Sharp was cross-examined.
MPG’s obligations under clause 56.2
MPG and Morris accepted that whether the works were undertaken in a proper and workmanlike manner is a question of fact and that a failure to do so would be a breach of clause 56.2 by MPG.
MPG and Morris also accepted that in determining whether the works were undertaken in a proper and workmanlike manner, it is relevant to consider whether the works were carried out in accordance with applicable standards, among other things.[1]
[1] Transcript of proceedings, 28 June 2022, pages 40, 116
At common law, where a contract is one for the sale of land and the construction of a dwelling by the vendor, there is an implied term that the dwelling will be constructed in a proper and workmanlike manner, that proper materials will be used and that the house will be reasonably fit for human habitation.[2]
[2] Sterling Estates Development Corporation Pty Ltd v Malouf [2003] NSWCA 278 at [64] per McColl JA (Santow and Tobias JJA agreeing)
In this case, there was an express term essentially to that effect – namely, clause 56.2. Although the contract did not require MPG to undertake the Building Works itself and provided for MPG to engage suitably qualified persons to do the work, by clause 56.2 MPG warranted that the works would be undertaken in a proper and workmanlike manner. The obligation was not limited to using its best endeavours to achieve that result.[3] MPG did not contend otherwise.
[3] An argument to the effect that a similarly worded obligation required a developer to use its best endeavours to ensure that the building in which the subject unit is situated shall be constructed in a proper and workmanlike manner was rejected by the NSW Court of Appeal in Rialto Sports Pty Ltd v Cancer Care Associates Pty Ltd [2022] NSWCA 146 at [66]-[79]
Damages for breach of clause 56.2 must be assessed on the basis of the cost to make the defective waterproofing conform to the contract, subject to the qualification that the work necessary to produce conformity must be a reasonable course to adopt. What work is both necessary and reasonable in any particular case is a question of fact. [4]
The issues
[4] Bellgrove v Eldridge [1954] HCA 36 at [5]-[7]
The issues the Tribunal must determine in respect of each unit are:
(a)whether the balcony waterproofing and, in the case of unit 160, also the waterproofing at the bathroom threshold, was not undertaken in a proper and workmanlike manner;
(c)if so, what work is necessary and reasonable to achieve conformity with the contract; and
(d)what is the estimated cost of the remedial works.
Whether the works were not undertaken in a ‘proper and workmanlike’ manner
The balconies
Mrs Nash first noticed a problem with the balcony of her unit in about early October 2018. This was about two years after the defects liability period had expired. Moisture leaking through cracks in the balcony soffit – i.e., through the balcony slab of unit 176, which is located directly above unit 160 – had damaged the paintwork and resulted in the formation of calcium deposits and stalactites on the soffit, and calcium staining of the wall and balcony floor tiles.
In November 2018, Mr and Mrs Nash met on site with Gordon Smith, who was then the Defects Manager for Morris Property Group, and another person whom Mrs Nash believes was from Saba. Mr Smith advised them that the problem with the balcony of unit 176 would be rectified first and then the damage to their balcony would be repaired.
Several months went by with no action taken. Eventually, after Mrs Nash contacted Mr Smith by email on 20 August 2019, he replied that “the failed waterproof membrane leeching from the unit 176 above has been completed by Saba Bros Tiling”.[5] A week later Mr Smith emailed Mrs Nash asking her to contact him to organise a time for an inspection “to assess what is required for Saba Tiling to rectify soffit”.[6]
[5] Exhibit A3 at [9]
[6] Exhibit A3 at [10]
Again, nothing happened for several months. On 10 February 2020, Saba emailed Mrs Nash to let her know that it would take three days or so to complete the painting of the balcony. There were further email communications with Saba over the next couple of weeks about the extent of painting, but work did not start. In the meantime, the tenant reported that the bathroom entry threshold floor angle had “blown out”. This resulted in further correspondence by email with Morris Property Group. Still no work was done.
On 29 June 2020, Mr Smith inspected the unit again with a tiler and a painter present. On 13 August 2020, the tenant, Mr Davies, reported to Mrs Nash that the tiles to the entrance to the bathroom had been replaced. Mr Davies’ gave the following evidence, which was not challenged:
I observed that when the tiler pulled up the tiles there was moisture on/in the cement underneath and rusting of the door frame. He then used some sort of sealant where the floor tiles meet the wall tiles in the shower, on the opposite side to the shower screen, as Gordon [Smith] had previously stated something to the effect of this is where the water was getting under the tiles in the first place. The worker left the bare cement for a day to dry but when he came back it hadn’t changed so he left for a few more days to give it more time to dry. When he came back 1/3 time, he said it was dry enough, but I still observed visible discolouring from moisture on the cement.
About 18/08/2020, Gordon came with two workers to look at the Unit and take photos. Gordon explained that he disagreed that they should have done the bathroom tiles and then explained to the workers what work they needed to do with the balcony. He also explained a little about how the balconies were made and why the problem forms. He further spoke about the balcony problem being a known issue for a little while with several developments, but they’d fixed the issue from occurring in future developments now. Gordon informed me that he or one of the workers would send a text when the time was confirmed for them to come the next day and do work.[7]
[7] Exhibit A2 at [7] - [8]
Several months later the painting still had not been done. In response to a follow up email from Mrs Nash on 21 October 2020, Mr Smith replied that “the engineer has recommended an epoxy resin be injected to the affected area prior to paint finish”.[8] As far as Mr and Mrs Nash are aware, this was never done.
[8] Exhibit A3 at [26]
Morris Property Group advised Mr Nash on 1 December 2020 that Mr Smith had gone on extended sick leave. On 22 January 2021, Mr and Mrs Nash were advised that Mr Smith would be returning to work “next week” and would provide an update on their issues.
Having heard nothing further from Mr Smith or Morris Property Group, in early March 2021 Mr and Mrs Nash arranged for George Pudja, of Peak Consulting, to inspect the site and report on –
(a)the source of water ingress into the balcony soffit of unit 160 from unit 176 above;
(b)the cause of damage to the balcony floor tiling surface of unit 160; and
(c)the source of moisture uptake to the bathroom door jamb in unit 160.
Mr Pudja observed that the waterproofing up-turn and down-turn detailing on both balconies does not comply with the requirements of AS 4654.2 “Waterproofing membranes for external and above ground use”. Specifically, he observed that the balcony areas show no obvious waterproofing membrane
up-turn around the perimeter and no visible down-turn to the waterproofing membrane at the floor wastes. Photographs included in his report substantiate his observations.[9]
[9] Exhibit A5 page 9
Clause 2.8.1.1 of AS 4654.2 requires that “where the membrane termination is to prevent water entry, the finished height of the membrane above the finished surface level shall be sufficient to prevent water, including wind driven, flying over the top of the membrane. Termination heights are specified in Appendix A, Table A1. Mr Pudja assessed that the minimum requirement in accordance with the standard was for a 40mm up-turn for member termination above the finished tile level, which should be protected by skirting tiles or cut-in reglets. Commenting on image 1 and 2 in his report, Mr Pudja observed that if any membrane was applied it would be visible and would require protection in accordance with AS 4654.2 as detailed in images 2.2 and 2.3. As this was not done, he classified this as “non-compliant workmanship”.[10]
[10] Exhibit A5 page 9
He referred to figure 2.9 of AS 4654.2, which shows a typical detail of a membrane termination at wall openings where the internal and external finished floor levels do not allow for an up-turn. He explained that figure 2.9 illustrates the typical down-turn termination details of floor wastes, which requires the membrane to be mopped into the drain and visible when the grate is removed. Commenting on image 4 in his report, Mr Pudja stated that the floor wastes were inspected and no down-turn of the membrane can be seen. He concluded that the lack of adherence to acceptable standards for waterproofing detailing has created multiple bypass leakage points. He opined that the fact that there had not been more leakage was fortunate rather than the result of good management.[11]
[11] Exhibit A5 pages 9, 14 (comments on image 15)
Commenting on image 3 in his report, Mr Pudja noted that this shows the overflow provisions and that no waterproofing can be seen across the transition as required by AS 4654.2. He observed:
The biggest problem with this balcony design is that there is NO separation between units, as the membrane continues around the dividing walls, past the overflows to the next balcony.
This presents as an enormous problem should one balcony be renovated, as there is no compliant way to isolate one balcony from another, terminate the membrane and maintain the overflow provisions.
If an adjoining balcony shows no evidence of leakage, two rows of tiles adjoining the screen wall could be removed to allow the membrane to be wrapped around and terminated horizontally and at the correct height and mopped into the overflows. (See image #11 for horizontal termination detail).
Mr Pudja arranged for the balcony of unit 176 to be flood tested in accordance with industry guidelines. He observed water dripping onto the balcony of unit 160 below after only 2 hours. The location of the leak and the area affected by the previous soffit leakage and resulting tile staining is shown in a diagram on page 6 of his report and in image 13 and image 14. He noted that areas of previous leakage did not leak during the water testing, confirming that the previous attempt to remediate the waterproofing was partially successful.
Mr Pudja opined:
The correct execution of the waterproofing detailing at up-turns, down-turns, penetrations and waterbars is the difference between good waterproofing and poor waterproofing.
The lack of adherence to the relevant standards and details has resulted in potential bypass leakage points and despite previous repairs to the waterproofing and tiling of unit #176, water testing confirms continued leakage.
However, if the adjoining balcony also shows signs of leakage, then according to waterproofing code requirements, both need to be treated as one balcony and both renovated simultaneously.[12]
[12] Exhibit A5 at [8] on page 8
Mr Pudja observed that about 10% of the tiling for the balcony of unit 160 was drummy, mainly in a strip across the front of the balcony, with isolated loose and tenting tiles visible adjoining the dividing wall with the adjacent unit.[13] Staining of balcony tiles from the leakage from unit 176 was in the same area. He noted that any remediation of the balcony would require the stained tiles to be removed and replaced.
[13] Exhibit A5 at [12]. The area affected by loose and drummy tiling is shown shaded in magenta in the diagram on page 6 of Mr Pudja’s report.
Mr Pudja commented that while drummy tiling to less than 20% of the tiled area is not normally considered significant, the fact that there were some tiles that were loose and tenting, combined with the non-compliant waterproofing led him to recommend full remediation of the tiling and waterproofing to the balconies for unit 160 and 176 to eliminate potential bypass leakage points, achieve building code compliance[14] and eliminate current leakage and tiling defects present on both balconies.[15] The scope of the proposed remedial works is discussed later in these reasons.
[14] I understand this to be a reference to AS 4564.2
[15] Exhibit A5 at [29]-[34]
In oral evidence, Mr Pudja said that he has been a building consultant for about 24 years and, in that time, has done thousands of building inspections involving balcony defects involving waterproofing, tiling, corrosion, overflow and drainage issues. He has been engaged also to supervise and carry out witness point inspections of remedial works, to verify that the waterproofing membrane is installed in compliance with the manufacturer’s recommendations and applicable Australian Standards.[16]
[16] Transcript of proceedings, 28 June 2022, pages 50-51
He said:
I think the most common problem that I’ve found by far is that products themselves, they rarely fail. It is the application and the installation of the products. If it is incorrect it causes defects, which allow bypass leakage. The thickness of the membranes, I would say out of literally thousands of balconies I have inspected, I have probably found a handful that were compliant. The rest, they just don’t apply them according to the guidelines. They often don’t use primer. They don’t prepare the surface. No water testing is done on the substrate for the moisture content. They don’t allow enough time for the curing. The screeds, often you require seven days for a screed to cure, unless you use some sort of sealer. They rarely do that. Just numerous small detailing and application problems that result in failure.[17]
[17] Transcript of proceedings, 28 June 2022, page 51, lines 23 - 33
With respect to differences between liquid and sheet membranes, Mr Pudja explained:
… there are liquid membranes, essentially membranes either two part or single part that you can apply usually after a primer has been applied to the substrate to – it has to be applied to a correct thickness. It is rolled on or brushed on. You need to check that thickness while its still wet with a wet film comb and that will tell you if you’ve applied enough, because most of the specifications for liquid membranes they state a minimum dry film thickness, which is how thick the membrane has to be after it is dry. The only way to gauge that accurately is to test it while it’s wet, with a comb that gives you the correct depth that it should be…
… So usually, whether you put on two coats or three coats, it’s irrelevant how many coats you put on. At the end of the day you need to put on so that you exceed the minimum requirement. Most of the minimum recommendations that they state that they want – manufacturers generally want somewhere – depending on which product you use, they want 800 to 1200 microns, which is .8 of a millimetre, or 1.2 millimetres, minimum thickness after its dry.
So, you know, really, a good contractor should be shooting to exceed that, not just achieve a minimum. So with sheet membranes they are slightly different in that, as the name would suggest, they come in rolls and sheets. Some are cold fixed, some are fixed with heating.
… They have a – they use an adhesive and they’re rolled out over that adhesive. Some require heat treatment while that’s being done. Some are cold fixed and don’t require that sort of heat application. Nevertheless, sheet membranes generally prove to be more reliable if installed correctly. They have a greater elasticity to accommodate the anticipated shrinkage you get in concrete.[18]
[18] Transcript of proceedings, 28 June 2022, pages 51-52
Mr Pudja emphasised the importance of proper workmanship in achieving satisfactory waterproofing, whether liquid or sheet membrane is used:
… [O]ne of the critical aspects of waterproofing is in the Australian Standard for waterproofing – 4654.2 – they outline the guidelines how to achieve the correct upturn. Every membrane that meets a wall junction needs to have the correct upturn. And everywhere where it meets an edge or a drainage, puddle flange, it needs correct downturn. When those things aren’t achieved you could have a membrane that’s applied perfectly otherwise but if you don’t have the correct upturns and correct downturns, to occur…
…
Water – yes, water will find a way, if it can get around it will. So, the Australian Standard for that is quite clear in its detailing and in its drawings that it provides, how membranes should be installed. How they should be upturned. How to calculate how much upturn you need. That’s dependent on a lot of factors in your location, your exposure, your topography.
But in ACT generally, best case is you need a minimum of 40 millimetres upturn… So, where you don’t have that you’re just opening yourself up for potential problems down the road, liabilities…[19]
[19] Transcript of proceedings, 28 June 2022, page 53
In response to a question from Mr Abdel-Massih, representing the Morris Property Group interests, Mr Pudja said he did not know what waterproofing product was used on this project. He added:
I mean I didn’t do a forensic inspection. My inspection was a visual inspection. We conducted water testing and it was not a destructive inspection where I was to remove tiles to assess the membrane. All I could see from my inspection was that there was no upturns at the junctions where they should have been.[20]
[20] Transcript of proceedings, 28 June 2022, page 53, lines 37-41
Mr Pudja accepted that he could not say whether the waterproofing membrane had been applied correctly, in accordance with the manufacturer’s guidelines, specifically with respect to thickness. In his experience this was rarely done but he could not comment on the specifics of what was done in this case.
That led me to ask Mr Pudja what if any inference should the Tribunal draw from the fact that the membrane had leaked. He responded as follows:
… So, the fact that my understanding is from reading the documentation supplied to me is that two layers of membrane were applied in this instance. One below the screed, one above the screed. I also note that in one of the documents from Morris Group in the scope of works they expressly state that any upturn against the wall is to be cleaned off to tile level.
Which, is a little unusual. Again, that is not a practice which is compliant with the requirements of the Australian Standard for waterproofing. So, the fact we have two layers of membrane applied and that it’s failed. That it leaked. And that they repaired it and it still leaked tells me that there’s something wrong with the installation other than what I can see, which (is) they don’t have upturns, there’s something else wrong with the installation.
There’s either defects – it’s either not thick enough or it’s cracked. Something has occurred to allow moisture penetration to occur. So, I can’t offer an intelligent comment what that is. I don’t know what that is. But something has occurred to make it fail.[21]
[21] Transcript of proceedings, 28 June 2022, page 55
Where Mr Pudja’s evidence was to the effect that waterproofing membranes generally produce a satisfactory result if applied correctly, he agreed that in the absence of evidence that a particular product is not fit for purpose, the fact that the waterproofing has failed leaves open only two logical possibilities. The first is that the product has not been installed correctly. The other is that something has occurred to breach the membrane – for example, if excessive structural movement causes the slab to crack to an extent that exceeds the elastic capacity of the membrane to maintain its integrity.[22]
[22] Transcript of proceedings, 28 June 2022, page 56
Mr Pudja considered that the cracking he observed in the underside of the unit 176 balcony was typical of shrinkage cracking in the concrete, and not structural cracking. He said:
Most properly applied liquid membranes will cope with the sort of cracking I’ve seen under the soffit of unit 160. So in the Australian Standard 4654 it – basically nowhere in there does it say you need to apply two coats of the membrane. One done properly is sufficient. The fact that they’ve done two and it still leaked tells me that – and considering that level of cracking wasn’t really great, that somehow the membrane either failed or bypass leakage occurred. One of the two. It can only be one of those two things.[23]
[23] Transcript of proceedings, 28 June 2022, page 57
With respect to the tiling defects Mr Pudja accepted that this was an incidental problem he had recorded for the sake of completeness. The fact that some tiles were drummy and others were tenting on its own would not justify pulling up all the tiles and redoing the balconies. The real issue was waterproofing. If it is accepted that the waterproofing is defective and should be repaired, removal and replacement of the tiles is required even if they were otherwise laid perfectly.
Mr Sharp, the Senior Contracts Administrator of the Morris Property Group, gave evidence in response to Mr Pudja’s report. He described his area of expertise as “construction estimator”.[24] In cross-examination, Mr Sharp agreed that he had no waterproofing qualifications and did not hold a builder’s licence. In his witness statement, Mr Sharp said that it was not obvious to him from Mr Pudja’s reports that both balconies needed to be entirely replaced but, regardless of that, assuming essentially the same scope of work as detailed in Mr Pudja’s reports, he provided an alternative cost assessment. He did not dispute Mr Pudja’s observations about the lack of up-turns and down-turns, merely noting that Morris Property Group now uses a different waterproofing system for its balconies. Generally, I do not consider that Mr Sharp’s evidence had anything useful to say about whether the waterproofing had been undertaken in a proper and workmanlike manner. Nor did it cast doubt on this aspect of Mr Pudja’s evidence.
[24] Transcript of proceedings, 28 June 2022, page 91
I accept Mr Pudja’s evidence that correct execution of the waterproofing detailing at up-turns, down-turns, penetrations and waterbars is fundamental to achieving a satisfactorily long-term waterproofing solution. I also accept his opinion that the evident lack of adherence to relevant standards and the incorrect execution of waterproofing detailing at up-turns, down-turns, penetrations and waterbars in the respects he observed and documented in his report has resulted in the creation of potential bypass leakage points in both balconies – i.e., incorrect waterproofing detailing at the abovementioned locations has created a real and not insignificant risk that bypass leaks may occur during the intended lifespan of the waterproofing system, where that risk should be minimal if the work had been undertaken in a proper and workmanlike manner. The fact that the unit 176 balcony leaked, and continues to leak after being repaired once, is simply a manifestation of the risk. The fact that there is no evidence that any bypass leaks have developed in the balcony of unit 160 to date does not mean that bypass leaks may not develop in the future, nor that the risk of that happening during the intended service life of the waterproofing system is so minor that it would be reasonable to ignore it.
Considering the evidence as a whole, I am satisfied that the balcony waterproofing in unit 160 and unit 176 was not undertaken in a proper and workmanlike manner in the respects identified earlier. In the case of unit 176, the failure to do so has caused the balcony to leak even after an earlier attempted repair, causing damage to painted surface finishes and staining of tiles in the balcony of unit 160 below. Water penetration into the balcony slab of unit 176 creates a risk of corrosion of reinforcing steel which, if left unremedied, may cause long term structural damage to the slab. I am satisfied also that the failure to undertake the balcony waterproofing works in unit 160 in a proper and workmanlike manner has created an unacceptable risk that bypass leaks may develop in the future during the intended lifespan of the waterproofing system, where that risk should have been avoided or minimised if the work had been done properly as clause 56.2 required.
The bathroom of unit 160
Mr Pudja noted that repairs to the door threshold of the bathroom had been undertaken to address excessive bowing of the tile edge trim. He inspected the bathroom and found that a new aluminium trim had been installed using a polyurethane seal between the angle and the floor. It appeared to him that the threshold tiles had been raised slightly to angle back into the bathroom, away from the corroding steel door jams. Moisture meter readings to the bathroom floor revealed elevated moisture levels outside the shower cubicle, suggesting to Mr Pudja that some bypass leakage was occurring around the shower, allowing moisture into the screed of the bathroom floor. An examination of the shower screen revealed gaps that could potentially allow bypass leakage of the waterbar. He found no evidence of leakage into the carpeted area outside the bathroom.
Mr Pudja opined that the previously observed bowing of the aluminium threshold tile edge trim is consistent with water affecting the screed and the embedded steel door jams, the base of which is heavily corroded as shown in image 17. Moisture meter readings outside the shower area are higher than would be expected normally, even for a wet area. Together with gaps around the shower screen, the likely cause of corrosion to the steel door jams is bypass leakage around the shower screen waterbar. He also stated that the fact that the steel door jamb is embedded into the screed and is corroding suggests a lack of proper waterproofing detailing to embedded items as recommended by AS 3470 ‘Waterproofing of domestic wet areas’.
Mr Sharp disputed Mr Pudja’s opinion as to the causes of the issues in this area. He thought the rusted door jamb is due to insufficient wet seal specifically in that area. He speculated that this may be due to damage caused during the earlier rectification of the waterstop. He thought the bowed waterstop was due to it being kicked or hit, but accepted that the waterstop angle should not sit proud enough for this to happen and should be replaced with a slightly shorter angle at the same time as the doorjamb is repaired. He disagreed that moisture escaping from the shower was the likely cause, noting that water would always escape the shower cubicle as an occupant exits wet after showering.
The problem of the bathroom entry threshold floor angle “blowing out” was reported in February 2020 and was the subject of an attempted repair in August 2020. The tenant, Mr Davies, gave unchallenged evidence that the cement substrate was visibly wet when the tiles were removed and had to be left several days to dry out, which is consistent with Mr Pudja’s observation that moisture readings outside the shower area were higher than would be expected even for a wet area. Mr Davies also mentioned the rusting door frame,[25] which suggests that while Mr Sharp may be correct that insufficient wet seal in this area is likely to be the cause of corrosion, it is unlikely that this resulted from damage to the wet seal during the rectification work. The more likely explanation is lack of proper waterproofing detailing to embedded items when the work was done initially, as Mr Pudja has suggested.
[25] See paragraph 23 above
On balance, I think Mr Pudja’s explanation of the cause of the problem is more likely to be correct. I am satisfied therefore that the execution of the waterproofing detailing in the shower and adjacent to the bathroom threshold was not undertaken in a proper and workmanlike manner.
What work is necessary and reasonable to achieve conformity with the contract
The balconies
The proper execution of the waterproofing detailing to the balconies would have avoided the creation of potential bypass leakage points and minimised the risk of the balconies leaking during the intended service life of the waterproofing system.
Where I have found that the failure to undertake the balcony waterproofing works in a proper and workmanlike manner has cause bypass leaks to develop in the unit 176 balcony and created an unacceptable risk that bypass leaks may develop in the future during the intended lifespan of the waterproofing system in both balconies, I am satisfied that replacement of the waterproofing membrane in both balconies is both necessary and reasonable.
There are two possible methods for waterproofing the balconies after the existing tiles and screed is removed, and the surface of the slab is prepared. One method is to apply a liquid membrane to the balcony slab. The other is to apply a sheet membrane. Either method is likely to be equally effective provided the membrane is applied correctly in accordance with the manufacturer’s recommendation. However, using liquid membrane is likely to result in a significant saving in cost compared to sheet membrane. All things being equal, this would suggest that liquid membrane should be used.
Mr Pudja agreed that a properly applied liquid membrane would produce a satisfactory result at a reduced cost except for the following circumstance:
The only problems I saw were this, and I think I mentioned it in my report as well. The balconies are divided by intermediate walls which don’t extend all the way to the end. They are left short – I didn’t measure – approximately that far from the overflow provision which is essentially a gap between the soffit and balustrade. And the tiling then wraps around that…and goes to the next adjoining balcony. The problem with that is, when you’re renovating a balcony you need to – as I said to you before, usually if it’s a confined space a membrane is applied and its upturned around the edges and you can then protect that with reglets and skirting tiles.
The trouble in this instance is, how do you terminate a membrane that is flowing onto the next adjoining balcony? They’re essentially without a physical barrier just where you can stop a membrane and terminate it correctly that is in compliance with the waterproofing standards. It presents a challenge as to how you stop that. How do you stop this membrane and make it so water can’t bypass it? Because if you just paint it on and then just stop it on the line there and say, ‘Well, we’ll just cover that with tiles,’ that’s not compliant. That’s not good enough.
…
… it’s a complication that troubled me because when I was writing the report and we – they asked the other consultants in the firm just to peer review my ideas and we discussed it at length and it was a problem. We tried to perhaps introduce upturns, angles. Again, the correct or compliant way is to terminate membranes, whether they’re waterproofing or sheet, is that water could not just come up and just go underneath it. It needed – the upturns need to be protected. The downturns need to be covered.
...
Those areas where the tiling just flows from one balcony to another, even though it’s only small it presents a challenge. And after lengthy discussions with my colleagues, really, we decided that using a sheet would offer us an opportunity to take the sheet through that gap and the other side of that adjoining wall, perhaps half a metre or so, upturn it against that wall, run it and upturn it, and where it stops is to cut a groove in the slab and terminate it. They have an approved horizontal termination where you turn the membrane in and then polyurethane the joint and that is accepted as a good way of terminating something like that.
So that was the problem. It was a problem that even now, when I think about it, it still presents me a challenge as to – it would have been much simpler in hindsight to extend the intermediate walls all the way to the end, have the balcony stop either side of it, allow the overflow that way. But allowing the waterproofing and the tiles to just wrap around from one balcony to another, it just – in hindsight it’s a bad design. It’s not a good design if you have to renovate one balcony because it implicates all the adjoining balconies.[26]
[26] Transcript of proceedings, 28 June 2022, pages 59-60
Mr Pudja made a similar point at page 8 of his report. As I understand his evidence, liquid membrane would be suitable to use only if adjoining balconies are renovated simultaneously. As that is not the case here, Mr Pudja considered that the only way to be certain to achieve a compliant termination of the waterproofing membrane is to use sheet membrane terminated horizontally in the way he described. Mr Pudja said it was possible that a manufacturer of liquid membranes, like Ardex, might come up with an alternative solution, but clearly, despite his extensive experience, he was not aware whether, and if so, how it could be done. Mr Pudja’s evidence about this was not shaken in
cross-examination.[27]
[27] Transcript of proceedings, 28 June 2022, page 66, line 24 and page 68, line 9
Mr Sharp disputed the need for sheet membrane, describing it as an “excessive methodology” and proposing instead a double layer of liquid membrane.[28] Asked to comment on Mr Pudja’s reasons for specifying sheet membrane instead of liquid membrane, Mr Sharp said:
In between the balconies, if there was a requirement to allow for the balcony to be removed as an individual, I’m not aware of any requirements but I take it that that could be something that some people may want, I would probably get someone to advise me on that like Ardex. It seems to me quite likely that the detail required between this option of a sheet system or a membrane system would be very, very similar there. I would rely on the advice on the manufacturer for that. It could be a water stop bar, urethane sealant underneath it. That could be the start and stop point you could demolish up to it quite easily but, again, I would rely on the advice of a – of someone like Ardex as a manufacturer because they would be ultimately responsible for the warranty of their system.[29]
[28] Witness statement of Edgar Sharp dated 4 May 2022 at [5] and annexure A
[29] Transcript of proceedings, 28 June 2022, page 93
Mr Pudja explained why he considers it is reasonable to incur the additional cost of using sheet membrane in this case, where if the dividing wall separating balconies had been designed differently, liquid membrane would be a perfectly satisfactory and much cheaper waterproofing solution. The effect of Mr Pudja’s evidence is that having considered all the options and sought the views of his professional colleagues, he cannot see any technically feasible alternative solution to the problem of achieving a compliant termination of the waterproofing membrane at the junction of adjoining balconies.
Mr Pudja has specific expertise that is directly relevant to the resolution of this contested issue and has given detailed and reasoned evidence explaining the basis of his opinion. I find his evidence persuasive. In contrast, Mr Sharp’s evidence does little more than assert that using a sheet membrane is excessive (noting that he has no waterproofing qualifications and does not hold a builder’s licence)[30] and that he would rely on the advice of a manufacturer to determine whether there was a solution to the problem of achieving a compliant termination of a liquid membrane at the junction of adjoining balconies. There is no evidence that such a solution exists or is feasible.
[30] Transcript of proceedings, 28 June 2022, page 96
It must be kept in mind that all the applicants must do is establish, on the balance of probabilities, that it is reasonable in the circumstances to use a sheet membrane in preference to a liquid membrane, despite the difference in cost. I am satisfied on the basis of Mr Pudja’s evidence that the applicants have done so.
The bathroom of unit 160
Mr Pudja recommended that the shower screen should be removed, the waterstop bar detailing assessed and, depending on what was found, the shower screen could be repositioned inside the waterstop bar, or a different profile screen selected and installed. A cross-reference was provided to the “Cost Estimate and Scope of Works” at the back of the report for a detailed breakdown of the proposed rectification methodology. However, Mr Pudja overlooked to include that information in his report.
As a consequence, there was no evidence from Mr and Mrs Nash as to the detailed scope and estimated cost of the redial works recommended by Mr Pudja.
Mr Sharp said that all that needed to be done was to replace 3 tiles and the waterstop bar and to carry out incidental waterproofing, which he estimated would cost approximately $1000 and would be done by a tiler. The corroded door jamb would be repaired by a painter at an estimated cost of $400.
What is the estimated cost of the remedial works
The balconies
Mr Pudja provided an estimate of the combined cost of the remedial works to the balconies in unit 160 and 176 at $47,496.77.[31] He later clarified that the scope of works for each balcony was identical.[32] That is, the cost of the remedial works should be split evenly between unit 160 and unit 176. Thus, based on Mr Pudja’s costings, the amount claimed as the cost to rectify each balcony is $23,748.
[31] Exhibit A5 pages 18-21
[32] Exhibit A6
Mr Sharp provided an estimate of $23,183.05 for the combined cost to rectify both balconies.[33]
[33] Witness statement of Edgar Sharp dated 4 May 2022, annexure A
Key differences in the estimates are that Mr Sharp allowed:
(a)$1,000 for temporary fencing instead of $3,584, claiming that Mr Pudja’s method of calculation was unclear and appeared to be excessive;
(b)nil for portable toilet hire instead of $2,240, claiming that the rate Mr Pudja used was excessive and common area toilets should be used instead;
(c)$480 to install and remove floor and furniture protection and move and replace furniture for access instead of $2,640, claiming that Mr Pudja had used a cheap rate but vastly excessive hours. Mr Sharp estimated the work would require one man for four hours at the start and finish of the job;
(d)$800 for electrical decommissioning and recommissioning instead of $1,235, claiming that Mr Pudja had used a low labour rate, but the time allowed was excessive. Mr Sharp said that four hours per visit was the maximum that should be allowed;
(e)$1,960 for waterproofing instead of $7,180, based on using a double layer of liquid membrane instead of sheet membrane;
(f)nil for a building consultant to inspect the work instead of $880, claiming this was unnecessary because the work would be warranted, and that Mr Pudja was simply recommending further work for himself;
(g)$3,660 for re-tiling the balconies, including tiles and ancillary supply items instead of $11,673, claiming that Mr Pudja’s allowance of time and material rate was vastly excessive;
(h)$500 for a painter to patch the balcony ceiling instead of $1,560, commenting that it was unclear why it would require two men for an entire day to patch an area of less than a 1m2;
(i)$720 for cleaning on completion instead of $945, claiming that Mr Pudja had allowed an excessive rate, time and ancillary cost.
Considering these differences, Mr Sharp arrived at a trade cost of $13,165 compared to Mr Pudja’s estimate of $35,982.
Mr Pudja allowed for profit and overheads at 20%, adding $7,196.48 to the cost. Mr Sharp estimated that the work would take 2 weeks and allowed for the cost of a supervisor, administration and management inspection, plus profit at 5%, yielding a cost of $7,910.50.
The remaining difference is accounted for by different amounts of GST.
Mr Abdel-Massih suggested to Mr Pudja in cross-examination that the costings in his scope were not competitive. In response, Mr Pudja said:
No, so when we do costings, the reasons – so when I do costings I try to follow the – the following – if I use builder’s costs that’s – it’s inconsistent as to what materials and labour some builders can get. So, for instance, a large corporation like Morris Group or Geocon, they have a lot of buying power, they could buy things in large quantities for a much better price and obtain labour rates at a much better rate than say a small or medium builder who just hasn’t got access to that sort of influence, so when I do costings I don’t use builder’s trade rates. I just do retail prices so I always assume if somebody walked into Bunnings off the street and just bought the materials, what would they pay, what would it cost, and that’s how I assess material costs and labour costs.
Well, I was saying to Mr Morris earlier it’s becoming increasingly difficult to determine labour costs in the current environment as not only materials have gone – escalated in several areas, labour costs have as well, so where we used to allow, for instance, $75 for a carpenter or a skilled tradesman to do some work, there’s guys out there charging significantly more than that now, $110 for instance, but where do you put a cap? So we have raised our basic rates now to something like $85 instead of 75 but that still probably not really reflective of what’s going on in the market.[34]
[34] Transcript of proceedings, 28 June 2022, page 75
Mr Pudja was then asked to look at Mr Sharp’s comments on his estimate. Having obtained Mr Pudja’s agreement that he could see the significant differences between his estimate and Mr Sharp’s estimate (i.e., a matter simply of reading the document), the cross-examination continued as follows:
Q: Those costs, they are more competitive than your costs, aren’t they?
A: Significantly.
Q: Yes, and would you agree that some builders like Morris Property Group and Geocon and others could do the work for that reduced cost?
A: I have no doubt. I – to be honest with you, if Mr Morris said that he could do the whole rectification for a dollar I have no complaints, so he could go ahead and fix it. The actual amount attached to the rectification is almost irrelevant. If the work is done and it’s compliant and it is executed properly, that’s all that matters.
Q: But is it in your opinion that that’s a reasonable sum where ---
A: No, that’s not my opinion. My opinion is already in the report. My costings and my estimate is my costings and my estimate and I have no comment on Mr Morris’ costings, or whoever did this. That’s entirely their business what they want to charge, what they want to allow for. That’s entirely their business not – I’ve done my estimate and I’ve noted in there how many hours, how many men, how many days. If somebody else can do it cheaper and quicker and less, that’s terrific.[35]
[35] Transcript of proceedings, 28 June 2022, page 78
Despite the last answer, the issues raised in Mr Sharp’s assessment were not put to Mr Pudja.
Mr Sharp gave the following oral evidence-in-chief about his cost estimate:
Okay, well one of the points that Mr Pudja made in regards to buying products at Bunnings, he talked about that’s the Joe Bloggs off the street, that – I agree with that, that’s fine but you don’t need to apply 20 percent builder’s margin on top of that. Those prices, even if they were Bunnings prices, some of them like the tiles supply rate is quite – it’s quite high. Our tiles cost us at the moment about $22 a square metre. I’ve allowed $33 a square metre in here because I don’t actually know the type of tile that is on that balcony. Mr Pudja’s got $55 I think it is, so some of those rates are – I would consider them to be very safe rates.
Any construction works that are carried out, in my opinion, should be tested in the market. There is quite a number of companies that could tender all the works. They would tender on the basis of the scope prepared by Mr Pudja which is quite detailed. I see no problem with doing that for any company. There would be some minor differences in costs between the companies, of course, the scope would probably change between the companies. Some of them what I would consider preliminary costs like where you set up a compound for storing materials, some builders just wouldn’t have that at all.
They would just carry the materials they need from their ute straight up to site. But working on the basis of Mr Pudja’s scope, I assessed the costs as I saw them to be most likely and I do this on occasion for just various little tasks we have to do and I just work it out in what I see is the most accurate cost because we may end up having to fix this and if our fix was more than Mr Pudja’s we would just accept his price. In this event, I am very confident that we could construct it for significantly less than this. In fact, the price that I tend to work on, there’s a sub-total there, it’s called trade costs, so that would be our outgoings, its $13,000.
Significantly less than what we are saying that a builder would charge. The builder would actually be – if that was – is the cost, the builder would be making $7000 on top of that for profit and overheads. I worked it out in a very different – excuse me different manner to Mr Pudja but I ended up with a very similar answer and that’s the nature of renovation works. They’re expensive because they are very high in supervision, time and cost so you end up with a very low trade cost compared to the end contract price and I think that’s what my costings reflect.[36]
[36] Transcript of proceedings, 28 June 2022, pages 94-95
The difficulty with the way the respondent ran its case is that none of these matters were put to Mr Pudja.
Doing the best I can with the limited material available to me, I make the following findings in relation to the differences between Mr Pudja’s and Mr Sharp’s estimates.
Mr Pudja has assumed that the work will take 4 weeks. Mr Sharp has assumed the work will take 2 weeks, which may be optimistic given the run of wet weather Canberra has been experiencing. In the absence of any specific challenge to Mr Pudja’s estimate and noting that Mr Sharp has agreed that the cost of skip hire (which is based on a 4 week hire period) is reasonable, I am prepared to accept that 4 weeks is a reasonable basis for assessing time related hiring costs.
Mr Pudja has allowed $3,584 for 4 weeks hire of security fencing in the basement for material storage, WC and waste bin enclosure. Mr Sharp allowed $1,000 without explaining the basis of his estimate. The basis of Mr Pudja’s estimate was not tested in cross-examination and Mr Sharp’s assertion that the estimate “appears to be very excessive” was not put to Mr Pudja. Although the evidence is not particularly satisfactory, on balance I accept Mr Pudja’s figure.
I am not persuaded that it is necessary to include an allowance for portable toilet hire. I disallow the sum of $2,240 included for this.
On the face of it, there appears to be merit in Mr Sharp’s observation that an allowance of 48 hours for the labour scope described at page 18 of Mr Pudja’s report, consisting primarily of installing and removing dust covers and floor protection and repositioning stored items on completion, is grossly excessive. I note that there is no evidence explaining the necessity to remove or store any furniture to give access to the balconies and to allow the work to proceed. On that basis I allow the sum of $480 as estimated by Mr Sharp.
I agree with Mr Sharp’s comment that an allowance of 16 hours for electrical decommissioning and recommissioning appears to be excessive, particularly in the absence of evidence as to the nature of the electrical items likely to be affected by the works internally and externally. I allow the sum of $800 as estimated by Mr Sharp.
Mr Sharp prepared his estimate assuming that liquid membrane will be used. For the reasons stated earlier, I am satisfied that sheet membrane should be used. I therefore allow $7,180 for this in accordance with Mr Pudja’s estimate.
I accept Mr Pudja’s explanation why it is reasonable to include an allowance for a building consultant to carry out a witness point inspection of the waterproofing before the tiling is done.[37] I allow $880 for this in accordance with Mr Pudja’s estimate.
[37] Transcript of proceedings, 28 June 2022, Mr Pudja’s evidence at page 74, lines 5-13
Mr Pudja has allowed $11,673 for the tiling works. The labour hours, labour rates, and allowances for ceramic tiles and consumables are clearly set out in his estimate. Although Mr Sharp costed this item at $3,660, his ‘estimate’ is devoid of detail and his claim that Mr Pudja’s time and material rates are vastly excessive was not put to Mr Pudja. Accordingly, I allow $11,673 for this in accordance with Mr Pudja’s estimate.
Mr Pudja has allowed $1200 for labour and $360 for materials to clean and prepare the soffit lining where previous cracking and leakage has occurred and supply and apply matching textured paint to the soffit of unit 160 from wall to wall to ensure even appearance. Mr Sharp has allowed $500 for this item without explaining how he arrived at that figure. It appears from his comments on Mr Pudja’s estimate that Mr Sharp assumed the work involved patching and painting an area of less than 1 square metre. This is clearly a misunderstanding. It is plain that Mr Pudja’s proposed scope of work involves preparing and painting the soffit from wall to wall – i.e., the whole soffit – to ensure an even appearance. I note in that regard that Saba informed Mrs Nash that painting the soffit would take three days. Accordingly, I allow $1,560 in accordance with Mr Pudja’s estimate. As this work relates to unit 160 only, the cost should not be apportioned.
I allow $945 for full professional cleaning and disposal of debris on completion in accordance with Mr Pudja’s estimate. Mr Sharp allowed $720 without explaining how he arrived at that figure and his claim that Mr Pudja’s estimate was based on excessive rates, time and ancillary costs was not put to Mr Pudja in cross-examination.
I am not persuaded that it is inappropriate to include an allowance for overheads and profit calculated at 20% of trade costs as Mr Pudja has done. Mr Sharp has approached the issue of profits and overheads from a different direction but has arrived at a figure that is higher than Mr Pudja’s method produces. Accordingly, I allow profit and overhead at 20% of trade costs.
The trade costs (to be shared equally) to rectify the balconies are:
| 1. | Floor protection | 110.00 |
| 2. | Skip bins | 1,500.00 |
| 3. | Temporary fencing | 3,584.00 |
| 4. | Portable toilet hire | Nil |
| 5. | Install/remove floor and furniture protection | 480.00 |
| 6. | Electrical decommissioning/recommissioning | 800.00 |
| 7. | Demolish and dispose of existing tiling | 2,435.00 |
| 8. | Waterproofing | 7,180.00 |
| 9. | Building consultant | 880.00 |
| 10. | Supply and install tiling to balconies | 11,673.00 |
| 11. | Clean up on completion | 945.00 |
| TOTAL | $29,587.00 |
This equates to $14,793.50 per unit.
$1,560 must be added to the trade costs for unit 160 to cover the cost to clean, prepare and paint the soffit, bringing the total for that unit to $16,353.50.
The amount that should be allowed as the estimated cost to repair the balcony of unit 160 is:
Trade costs
16,353.00
Profit & overheads @ 20%
3,270.60
Sub-total (ex GST)
19,623.60
GST
1,962.36
TOTAL (incl GST)
$21,585.96
The amount that should be allowed as the estimated cost to repair the balcony of unit 176 is:
Trade costs
14,793.50
Profit & overheads @ 20%
2,958.70
Sub-total (ex GST)
17,752.20
GST
1,775.22
TOTAL (incl GST)
$19,527.42
The bathroom of unit 160
Ordinarily, where an applicant has established that a breach of contract has occurred but fails to prove their loss, the tribunal would award nominal damages only – something in the order of $10.00. In this case, the respondent supplied the evidence that was missing from the applicant’s case. As there is evidence upon which an assessment of damages can be made, it is appropriate to assess the cost of the remedial work Mr Sharp considered was necessary at the figure he gave – i.e., $1,400.
Disposition
XD 219/2021
The applicants in matter XD 219 of 2021, Mr and Mrs Nash, are entitled to an award of compensation for breach of contract by the respondent, MPG Capital Partners Pty Ltd, in the sum of $22,985.96.
As the applicants have been successful it is appropriate to make an order under section 48(2)(a) of the ACT Civil and Administrative Tribunal Act 2008 (ACAT Act) requiring the respondent to pay the applicants the ACAT filing fee, which according to the Tribunal’s records was charged at $77.00 instead of the usual $585.00, and search fees of $18.00, totalling $95.00.
Accordingly, the respondent must pay $23,080.96 to the applicants. The respondent is entitled to an order requiring the third party, Morris Construction Corporation Pty Ltd, to indemnify it against its liability to the applicants in the sum of $23,080.96.
XD 263/2022
The applicant in matter XD 263 of 2022, Mr Brown (in his capacity as executor of the estate of the late Peter Mayoh), is entitled to an award of compensation for breach of contract by the respondent, MPG Capital Partners Pty Ltd, in the sum of $19,527.42.
As the applicant has been successful it is appropriate to make an order under section 48(a) of the ACAT Act requiring the respondent to pay the applicant the ACAT filing fee of $593.00.
Accordingly, the respondent must pay $20,120.42 to the applicant. The respondent is entitled to an order requiring the third party, Morris Construction Corporation Pty Ltd, to indemnify it against its liability to the applicant in the sum of $20,120.42.
Expert costs
Mr and Mrs Nash also seek to recover the fees paid to Mr Pudja for preparing his reports and attending the hearing to give evidence. It is well established that the ACAT’s power to award costs do not permit an order for payment of fees charged by an expert witness.[38] Whilst it may be arguable that some amount should be allowed to cover the cost of Mr Pudja’s inspection of the premises and preparation of a scope of works for the remedial works, there is no evidence that would enable the fees charged by Mr Pudja to be apportioned in that way. Accordingly, I make no allowance for Mr Pudja’s fees.
[38] Tosolini v Temperate Living Pty Ltd [2020] ACAT 94 at [113], citing Burton v Rojas Constructions Pty Ltd [2018] ACAT 117 at [81]
………………………………..
Senior Member M Orlov
| Date of hearing: | 17 June 2022 |
| Applicant in XD 219/2022: | In person |
| Applicant in XD 263/2022: | In person |
| Respondent: | Mr R Abdel-Massih, authorised representative |
| Third Party: | Mr R Abdel-Massih, authorised representative |
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