Perth Central Holdings Pty Ltd and Doric Constructions Pty Ltd - [2007] WASAT 239

JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL

STREAM: COMMERCIAL & CIVIL

ACT: BUILDERS' REGISTRATION ACT 1939 (WA)

CITATION: PERTH CENTRAL HOLDINGS PTY LTD and DORIC CONSTRUCTIONS PTY LTD [2007] WASAT 239

MEMBER: MR C RAYMOND (SENIOR MEMBER)
MR P McNAB (MEMBER)
MR R AFFLECK (SENIOR SESSIONAL MEMBER)

HEARD: 18 MAY 2007

DELIVERED : 13 SEPTEMBER 2007

FILE NO/S: CC 1337 of 2006

BETWEEN: PERTH CENTRAL HOLDINGS PTY LTD
Applicant
AND
DORIC CONSTRUCTIONS PTY LTD
Respondent

Catchwords:

Builders' Registration Act 1939 (WA) - Application for leave and review heard together - Whether decision of Building Disputes Tribunal miscarried - Whether Disputes Tribunal misconceived evidence, failed to analyse expert evidence and wrongly rejected unchallenged expert evidence of applicant's witness - Whether respondent obliged to carry out core sampling of substrate

Legislation:

Builders' Registration Act 1939 (WA), s 12A(1)

Result:

Application for leave to review granted
Application for review upheld on merits but adjourned for further hearing on appropriate remedy

Category: B

Representation:

Counsel:

Applicant: Mr M Hotchkin
Respondent: Mr R Shaw

Solicitors:

Applicant: Hotchkin Hanley
Respondent: Lavan Legal

Case(s) referred to in decision(s):

Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 210 CLR 181
Schenker and Co (Aust) Pty Ltd v Maplas Equipment and Services Pty Ltd [1990] VR 834
State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in liq) (1999) 160 ALR 588
Tangent Nominees Pty Ltd and Edwards & Anor [2005] WASAT 119
Warren v Coombes (1979) 142 CLR 531

REASONS FOR DECISION OF THE TRIBUNAL:

Summary of Tribunal's decision

The applicant applied for leave to review and to review a decision of the Building Disputes Tribunal which had dismissed the applicant's claim against the respondent for alleged failure to install a waterproof membrane in a proper and workmanlike manner, such that the building work was faulty or unsatisfactory.
As there existed no dispute on the facts, the proper determination of the matter depended on the proper inferences to be drawn from those facts. The Tribunal found that the Building Disputes Tribunal had erred in a number of respects. A proper analysis of the opposing expert evidence had not been carried out and the effect of the contract documentation was misconstrued. As a result, the Building Disputes Tribunal wrongly concluded that the builder could rely on the drawings and was not alerted by the drawings to the existence of an underlying porous lightweight concrete.
On a proper analysis of the expert evidence, and the undisputed factual evidence, the Tribunal found that the cause of failure of the membrane was that moisture had become trapped in a layer of porous lightweight concrete which formed part of the substrate of the roof and the builder had failed to ensure that the substrate was thoroughly dry before applying the membrane, as the specifications of the contract required it to do. Accordingly, the Tribunal determined that leave to review the decision should be granted, the review should be upheld, but adjourned for later hearing, the question of the appropriate remedy to be granted in substitution for the order made by the Building Disputes Tribunal.

The application and background

On 28 August 2006, the applicant (the owner) lodged an application seeking leave to review and the review of a decision of the Building Disputes Tribunal (Disputes Tribunal) made on 1 August 2006. Both the application for leave and the review were heard together on 18 May 2007. As the Tribunal required the parties to file written submissions on certain issues subsequent to the hearing, an order was made on 18 May 2007 making provision for further submissions and for certain documents to be filed, with the last step to be taken by 14 June 2007. The decision was reserved with effect from that date.
The dispute between the builder and respondent (the builder) concerns allegations made by the owner that building work carried out by the builder in the renovation of the building known as the "Target Store", located at 720 Hay Street, and also described as Lot 31 Murray Street, Perth, was carried out in a faulty and unsatisfactory manner. There is no contractual relationship between the parties. The works were carried out pursuant to a building works contract in the standard JCC‑D 1994 Without Quantities Form entered into between the builder and the then owner of the property, Coles Myer Properties Ltd (Coles Myer). The owners purchased the property from Coles Myer and settlement of that purchase occurred in August 1998, some eight months after practical completion of the works.
The complaint related specifically to the failure of a waterproof membrane which was applied to the upper level roof of the building. Initially, the owners sought an order that the builder remedy the defective work, but by the time of the hearing before the Disputes Tribunal, an election had been made to seek an order to pay compensation in an amount of $230 524 plus GST. The Disputes Tribunal had jurisdiction to deal with that claim under s 12A(1) of the Builders' Registration Act 1939 (WA) (BR Act). Notwithstanding reliance upon this statutory cause of action, the terms of the contract are relevant because they define the responsibilities and work to be performed by the builder. The Disputes Tribunal found, and it is accepted, that the contract is one for the execution of works in accordance with the contract, not a contract to produce a result. The distinction is important because there is no issue that the membrane has failed, and if the contract was to produce a result, the builder would be liable. However, as the contract is one for the performance of work in accordance with the contract, the builder is liable only if it can be shown that the work carried out was carried out in a manner which was faulty or unsatisfactory. In other words, the builder is not responsible if the failure is due to any inadequacy in the design of the works. All of this is common cause between the parties. The builder contends that it installed the membrane in a proper and workmanlike manner in accordance with the specifications but that the specification was inadequate, and in particular, that the membrane specified was unsuitable for the application.

The Disputes Tribunal hearing and reasons for decision

The hearing before the Disputes Tribunal was conducted over two days on 1 and 2 June 2006. Evidence was given for the owner by Ivan Humich, a director of the owner company; Timothy Leonard Fisher, a structural engineer in the capacity of an expert; and Ivan Ruefli, a director of a company trading as Central Systems, remedial waterproofing contractors, also in the capacity of an expert witness. The respondent called evidence from Anthony Francis Metcalfe, a consultant project manager, who was the designated client representative under the building contract; Alex Frederick Hollenberg, who was a project manager employed by the builder and acted in that capacity in respect of the building works, but who was also qualified as an expert on building practices; Trevor John Pond, who, at the relevant time, was the State representative of Dunlop Membranes, the supplier of the membrane; Peter Grant Airey, an engineer, who gave evidence in the capacity of an expert; and Dr Anthea Airey, a chartered chemist who gave evidence in the capacity of an expert.
In its reasons for decision, the Disputes Tribunal referred to the work to be undertaken under the contract, and in particular, to the work involved in the removal of the existing waterproofing to three roof areas of the building and its replacement with a new waterproofing system, as shown in the drawings and in accordance with the specifications. Reasons were given as to why it was concluded that the contract was one for the doing of specific work, rather than to produce a result. As stated, this is not in issue. The work to be undertaken was then examined more closely and reference was made to the specifications, relating to the roof, which required that the substrate be thoroughly dry prior to the application of the membrane. Reference was also made to the product instruction sheet which requires that all surfaces be structurally sound and totally dry. The Disputes Tribunal then stated:
"11, that if it were to be established that the substrate was not thoroughly dry at the time the membrane was installed and that is the reason for failure of the membrane, then the Owner would have made out its case."
After a discussion of the evidence to which it will be necessary to advert in greater detail below, it is concluded at par [19] that there was no evidence to show that the substrate was not thoroughly dry at the time of application of the membrane. Further, that the membrane applied by the builder "is bubbling is equally consistent with water having got in because of the failure of the membrane rather than the membrane failing because the substrate was not thoroughly dry". It is concluded that the builder might well have had knowledge of the presence of water, but not of the existence of a porous substrate into which that water had moved, thereby wetting the substrate (par [18]). Further, that it was for the owner to establish that the work done by the builder was faulty, that the builder was required to apply the membrane in accordance with the specifications and the Tribunal was not satisfied that the builder had not done so "and that such failure caused the membrane to fail". We understand this to convey that if the conclusion was wrong and the builder had not complied with the specification, then in any event, the learned Chairperson and Members were not satisfied that any such failure had caused the membrane to fail.
The Disputes Tribunal set out its conclusions in relation to the expert witnesses, which led to the above ultimate finding. In relation to Mr Ruefli, it was stated that his conclusion:
"[I]s that water moisture entered the membrane at or before the time of the initial application. The conclusion is not based on a scientific analysis but on his observation of the characteristic of the membrane (paste like) which he has previously observed on substrates exposed to perpetual dampness or constant immersion, and the observation of numerous repair patches on this membrane 'that appear to be' of a consistent age to the original membrane." (Par [13])
Based on this, Mr Ruefli's evidence was found to be less than persuasive. Further, that his evidence was characterised by unsupported opinions based on un‑tested assumptions after an inspection carried out six to seven years after the application of the membrane.
Reference is made to the evidence of Mr Pond, the representative of the supplier of the membrane, that he had undertaken three spot checks during the application to ensure that the product used was what was supplied, and that it had been applied according to the manufacturer's instructions, which included that the specification be applied to a thoroughly dry surface. Mr Pond endorsed Mr Righton, the subcontractor who carried out the application, as a long‑time approved applicator. It was recorded that Mr Pond had said that he had visited the site probably four to five times and that he had approved the Dunlop warranty "which leads to an inference that he was satisfied with every aspect of the application of the product". The Disputes Tribunal went on to state that Mr Pond's evidence was very powerful, given that he had observed the work as it was being undertaken.
The question is then addressed whether or not any testing had been undertaken by the builder, or in particular, by the subcontractor, and to the evidence which Mr Ruefli had given on that issue. At par [16] of the reasons for decision, there is a summary of the steps which Mr Ruefli said that he and other waterproofers would need to undertake in order to be fully informed as to the structural makeup of the substrate and the likely condition of the substrate if it had been infiltrated by water. This was to be achieved by communication with the builder to ascertain details of construction design, details of the substrate including additives, curing compounds and form release agents, the nature of the substrate and the history of the substrate in respect of the exposure to weather. Further, that if Mr Ruefli suspected that there might be a lightweight topping that a core test would be taken and that a moisture meter would be used to ensure dryness. If rising water was suspected (which was not suggested), Mr Ruefli indicated that he would test through a 20 centimetre hole (the reasons for decision obviously refer in error to a "20 m" hole) to the required depth. Finally, Mr Ruefli opined that if the substrate was not thoroughly dry, he would not install the membrane.
It is then indicated that, in considering Mr Ruefli's evidence, it was necessary to take into account a number of factors, amongst them, that he was a specialist "troubleshooter" and not an "everyday applicator"; that there was no evidence as to the testing practices of an "everyday applicator"; and that the process described was triggered by Mr Ruefli's knowledge that the substrate had been infiltrated with water. Further, that his evidence as to the cause of the membrane degradation, being due to a large amount of water being trapped in the lightweight topping and topping screed between the structure slab and the membrane, "is hypothesising" (par [16]).
It is then outlined that while the builder was aware that the building had been subject to water ingress for some time, as the underneath of the slab and the interior of the building showed water damage, the builder did not know the makeup of the surface onto which the membrane was to be applied. Further, the builder had properly relied on the architectural drawings which describe the task to be done (par [17]). Further, that the drawings did not identify or in any way alert the builder to an underlying porous lightweight concrete, other than to state that the layout of roof plan and details were based on existing drawings and subject to conservation on‑site.
In relation to the other expert evidence which had been given, the Tribunal stated that other causes for the failure of the membrane, being cracking, necking and condensation, had been raised in the evidence from the expert witnesses, Mr Airey and Dr Airey. That while each of the "theories was challenged by Mr Fisher", the difficulty which the experts had in coming to any absolute determination was understandable by reason of the delay "since the application and the nature of the problem, [that is,] the breaking down of the membrane". The Disputes Tribunal concluded that if it were the responsibility of the builder to establish the cause of the failure, it might be that the speculative nature of the evidence (if the Disputes Tribunal agreed with the owner's submission that the evidence was speculative) might be of significance. But that it was not for the builder to establish the cause of the breakdown.
As the Disputes Tribunal was not satisfied that it had been established that the builder's obligation to perform the work as specified had not been carried out, the complaint was dismissed.

The grounds of review

On 1 February 2007, the builder filed and served substituted grounds of appeal [sic]. By order made on 15 February 2007, the applicant was granted leave to rely thereon. On the day prior to hearing, the builder filed a document providing a further ground of appeal [sic]. The owner did not object to reliance thereon at the hearing and the Tribunal will accordingly incorporate an order granting leave to rely thereon as well.
The grounds of review, including the further ground, are detailed and comprise some 10 pages. For the sake of brevity, they will not be set out in full. We summarise the grounds as follows.
1)The grounds for review of the decision that the builder had not engaged in faulty or unsatisfactory workmanship within the meaning of that expression in the BR Act are as follows:
i)The Disputes Tribunal erred in finding that there was no evidence to suggest that the builder had not met its obligation to install the waterproof membrane when the substrate was thoroughly dry in that:
a)There was evidence that justified a finding that the substrate was moist before the waterproof membrane was installed. Particulars are provided which included references to the history of leaking known by the builder which made the provision of a new waterproof membrane necessary; the level of rainfall during the carrying out of the works which required the work to stop "for quite a while"; that it would ordinarily take some months for the substrate to dry after rain; that in around March 1998 to as late as October 1998, the membrane had bubbled and/or blistered. Further, that the expert evidence of Mr Fisher was that the initial failure of the membrane was caused by the vaporisation of moisture trapped within the substrate (and the facts upon which that opinion was based are also particularised). Further, that the expert opinion of Mr Ruefli concurred with that of Mr Fisher.
b)There was evidence that rebutted other explanations for possible causes of the failure of the waterproof membrane that suggested the substrate became moist after the installation of the waterproof membrane, which evidence is detailed.
c)There was evidence to suggest that the builder knew, or ought to have known, of the presence of the porous substrate prior to the installation of the waterproof membrane. Particulars are provided which include references to variations which had been raised to replace the porous substrate on the lower roof areas. Reference is also made to the drawings which required the builder to vet and review all the contract documents, including the specifications and drawings, and to confirm the actual circumstances on site.
ii)The Disputes Tribunal erred in law by failing either to:
a)accept the un‑contradicted expert evidence of Mr Fisher, on identified issues;
b)accept the un‑contradicted expert evidence of Mr Ruefli that, given the existence of the porous substrate, the respondent should have checked the moisture levels in the substrate;
c)"give reasons as to why the evidence of Dr Airey, postulating alternative hypotheses (but not expressing an opinion as to the most probable of causes of membrane failure) to the effect that the substrate was moist before the installation of the waterproof membrane and that this caused its failure [sic]";
1A)It is asserted that the Disputes Tribunal erred in finding the evidence of Mr Trevor Pond gave rise to an inference that the substrate was thoroughly dry before the membrane, as a result of failing to have regard to various aspects of the evidence, which are detailed, and which it is asserted contradicted any such inference.
2)The Disputes Tribunal should have:
i)found that the builder applied the waterproof membrane when the substrate was not thoroughly dry and in doing so failed to comply with the specification for its installation and thereby engaged in faulty or unsatisfactory workmanship in the meaning of that expression in the BR Act;
ii)found that, either of itself, or by virtue of the history of the leaking roof making it necessary to install a new waterproof membrane and the rainfall experienced during the work, that it would take some months for the substrate to dry after rain and because of the matters raised in (i)(c) above, the builder ought to have checked the moisture levels in the substrate prior to the installation of the waterproof membrane, and by failing to do so, engaged in faulty or unsatisfactory workmanship within the meaning of that expression in the BR Act.

Legal principles for leave and the review

The principles for the grant of leave are set out in Tangent Nominees Pty Ltd and Edwards & Anor [2005] WASAT 119. While the Tribunal has a broad discretion to grant or withhold leave, generally leave will not be granted unless it is shown:
1)That the decision in respect of which leave is sought is wrong, or at least attended with sufficient doubt to justify the grant of leave; and
2)That substantial injustice would be done by leaving the decision unreversed.
Leave will generally not be granted if there is a discernable basis for the decision.
In order to demonstrate that the decision under review is wrong or attended with sufficient doubt, having regard to the issues raised in the grounds of the proposed review, it is obviously necessary to consider the evidence upon which the decision is based. It was for that reason that the application for leave and the review were heard together.
In this matter, there is very little direct conflict on the evidence. The facts established by that evidence are not disputed. In such circumstances, an appellate court, or review Tribunal, is in as good a position as the original adjudicator to decide on the proper inferences to be drawn from facts which are undisputed or which, having been disputed, are established by the findings of the original adjudicator: see the principles discussed in Warren v Coombes (1979) 142 CLR 531 at 551 and State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in liq) (1999) 160 ALR 588.

The issues for determination

Both parties have made comprehensive written and oral submissions, and we intend no disrespect to counsel in not attempting to summarise those submissions. We do not think it is necessary to do so, because, in our view, a determination of the following issues will resolve the proceedings, and in addressing those matters, we shall necessarily cover the substantive submissions made. As the issues are interrelated, we shall discuss the issues and then draw them together in the final topic under the heading "Conclusions".
1)Was the builder obliged to test that the substrate was thoroughly dry before applying the membrane?
a)The contractual provisions;
b)The Ruefli evidence;
c)What is the substrate?
2)Was the substrate thoroughly dry before the membrane was applied?
a)The factual evidence;
b)The expert evidence.
3)Should the builder have been alerted to the risk that the substrate might have suffered water ingress and that the roof included a layer of porous lightweight concrete?
4)Did the builder apply the membrane in accordance with the specification?
a)The evidence of Power;
b)the evidence of Fisher;
c)The effect of the contract and likelihood of moisture testing having been carried out.
5)Conclusions.
In the discussion which follows, we shall refer to the documentation which was before the Disputes Tribunal, and provided to this Tribunal, by using the following abbreviations:
•RFD – the Disputes Tribunal's reasons for decision;
•ABOD Vol 1, 2 or 3 – the three volumes of documents provided by the applicant; and
•T – the transcript of evidence before the Disputes Tribunal.

Was the builder obliged to test that the substrate was thoroughly dry before applying the membrane?

a) The contractual provisions

ABOD Vol 2 contains the relevant contractual provisions, commencing with the standard form building works contract – JCC‑D 1994 without quantity at page 77. We will not set out those provisions relevant to the Disputes Tribunal's finding, which is accepted, that the contract is one for the performance of the works in accordance with the contract documents.
Clause 1.02.04 contains a definition of the Works to be carried out under the contract in the following terms.
"1.02.04The Works – the whole of the work to be executed in accordance with the Drawings and Specifications and in accordance with this Agreement, namely the work as described in Item B.4 of the Appendix as shown, described or referred to in this Agreement and including preparation of the Site and including all Variations provided for by this Agreement and all other work whether mentioned in the Agreement or not which is necessary to carry out the works so described and the removal and disposal of rubble and other materials from the Site and the making good of all damage thereto incidental to the execution of the Works."
Clause 2.3 provides that the builder acknowledges that it has vetted and reviewed all the Contract Documents, including the Specifications and Drawings forming part of the contract documents and is satisfied with their sufficiency for the purposes of carrying out its obligations and for setting a price.
The Specification commences at ABOD Vol 2 page 222 and incorporates the Conditions of Tendering. Section A deals with preliminaries and at ABOD Vol 2 page 227, general requirements are set out in relation to materials and components. The relevant provision provides that in relation to manufacturers' or suppliers' recommendations, the builder must select, if no selection is given, transport, deliver, store, handle, protect, finish, adjust, prepare for use, and use material and components in accordance with the current written recommendations and instructions with the manufacturer or supplier.
The specifications in relation to the installation of the membrane are set out under of the section B Roof Waterproofing and Repairs commencing at ABOD Vol 2 page 228. At page 229, the following is provided:
"FLEXIBLE REINFORCED MEMBRANE
LOCATION: after preparation of substrates, apply a flexible reinforced membrane to the roofs where shown on the Drawings. Extend the membrane over up stands, under flashings and around new penetrations in roof for services undertaken under the Head Contract Works (refer to clause PROGRAMMING – PRELIMINARIES).
...
PROPRIETARY ITEM: SHELTERCOAT by DUNLOP MEMBRANES
APPLICATOR: The membrane shall be installed by personnel conversant with and specialising in the supply and installation of this material and approved by the membrane manufacturer and/or distributor.
WORKMANSHIP: Give particular attention to the neatness of the finished work consistent with obtaining full integrity of the waterproofing system.
SUBSTRATE PREPARATION: Substrate shall be thoroughly dry before applying the membrane. Remove dust, oil and other contaminants. Kill moss if applicable. Clean surfaces to be waterproofed by water blasting to remove construction detritus and laitance and to provide a lightly profiled surface ready for application. Patch all holes and pre‑treat cracks by cleaning out, filling with an approved epoxy mortar for minor holes, or a suitable gauged patch mortar for larger irregularities.
...
MEMBRANE APPLICATION: Install the membrane as recommended by the manufacturer as follows:
... (and thereafter a number of specific requirements for application on vertical and horizontal surfaces, and relating to drying time and the application of a third coat are set out.)"
The Drawings relevant to the roofing works was supplied by the owner after the hearing and that is Drawing No ABOD 2 revision 0, dated 19 June 1997. The Drawing reflects firstly the roof layout and secondly, cross‑sectional details relating to the parapet wall, changes of roof level, roof penetrations and the lift motor room roof. The Drawing also includes a number of notes and note No 3 reads as follows:
"3.Layout of roof plan and details is based on existing drawing and is subject to confirmation on‑site."

b) The Ruefli evidence

The evidence of Mr Ruefli was consistent with the report which he provided by facsimile, dated 27 June 2005, to the owner and which appears at ABOD Vol 1 page 9 and following. Reference will be made later to further aspects of Mr Ruefli's evidence, but relevant to this issue is his evidence that, subject to any contrary contractual provisions, the applicator of a waterproofing membrane must ensure that the substrate, at the time of application, is in a suitable condition for application. He stated that his firm's policy and that of other professional waterproofing subcontractors is to communicate with the builder to ascertain the details of the construction design including lightweight toppings or screeds, details of the substrate, including any additives, curing compounds and form release agents used during construction and details as to the history of the substrate in respect of exposure to the weather, particularly if works have been carried during the winter rainy season. Mr Ruefli also stated that it was his firm's practice and that of professional builders and waterproofing contractors to inform themselves by conducting the following tests:
1)a core test in the presence of or if suspicious of the presence of lightweight toppings screed (because of its propensity to absorb moisture);
2)moisture testing using an electronic moisture meter; and
3)if rising water is suspected, by attaching an extension probe to the meter which is lowered through a drill hole to the required depth for testing.
This evidence was given little heed by the Disputes Tribunal on the basis that it considered that Mr Ruefli was a contractor involved in "troubleshooting" and that his evidence was not representative of practices followed by what the Disputes Tribunal referred to as an "everyday applicator". We accept the submissions made on behalf of the builder that this conclusion does not reflect the evidence of Mr Ruefli. It is true that he acknowledged that he specialised in carrying out remedial work but under cross‑examination on this issue, the following exchange reflects what he meant.
"Shaw:The yeah, you go in for rectification works, don't you? Isn't that your speciality?
Ruefli:Yes, that's correct
Shaw:You come in and someone says we've got a building and you're effectively specifying what's required to fix it up, aren't you?
Ruefli:No, when I say we're doing remedial works it means that in this case, this would've ... if we were invited to come and look at his job we would consider it a remedial project.
Shaw:Yep.
Ruefli:And so it's not new construction. It's been there for 20 years." (T:[84])
This evidence was not challenged. Mr Ruefli's evidence of the practice of testing for moisture was corroborated by one of the owner's witnesses, Mr Hollenberg. Although Mr Hollenberg was called as a witness of fact as the project manager for the builder, he was also qualified as an expert witness, as he testified under examination in chief that he held an engineering type qualification, falling short of a full engineering degree, but which qualified him as a builder, project manager. This was a qualification obtained in New Zealand and which he described as "a NZE civil". He also outlined that he had 28 years experience in the building industry and had worked in Perth for a number of construction companies for some 18 to 19 years. His experience all related to commercial building work. After leading evidence from Mr Hollenberg on a number of topics relating to the administration of the contract, Mr Shaw turned to the question of whether a moisture meter had be used (obviously to test for suitability for laying the membrane). The following exchanged then occurred:
"Shaw:Now are you able to tell us, do you have any personal knowledge as to whether moisture meters or anything like that was used?
Hollenberg:                  It's standard practice in industry you use moisture meters from carpet layers, floor board people who put floor boards over concrete and roof waterproofing contractors, they all use them.
Shaw:Are you able to tell us here whether you witnessed it being used?
Hollenberg:                  I didn't witness it being used in this instance but I have no doubt that it was done.
Shaw:And why do you say that?
Hollenberg:                  Because everyone does it. It's standard practice." (T:[112/113])
Based on the above evidence, the Disputes Tribunal should have found that it was common practice for roofing contractors, whether remedial contractors or "everyday applicators", to use moisture meters to test for the presence of moisture before applying a waterproof membrane. This is necessary because the expert witnesses all acknowledged that moisture trapped within the substrate will vaporise when heated, will seek to escape, and in doing so will create pressure which might result in the surface cover, whatever it may be, or membrane in this case, delaminating from the surface to which it is applied.
Whether it is sufficient for a contractor simply to use a moisture meter or whether, in the circumstances outlined by Mr Ruefli, it is necessary to carry out core testing, or use a probe, is a different matter.
It is common cause that the roof in question had an existing cement screed, described as a "dense topping screed" 15‑20 millimetres in thickness, above a lightweight porous aerated concrete topping 150‑200 millimetres in thickness above a concrete structural slab. The unchallenged evidence of Mr Fisher, although with some apparent hesitancy, was that he would have expected a moisture meter applied to the dense topping screed to pick up any moisture in the lightweight concrete below it. He explained this in cross‑examination as follows, having referred to checking the substrate for moisture using either a moisture meter, or by taking core samples:
"Shaw:That's right. But your average moisture meter, if you put it to the top of this particular screed, we know now we've got a core sample to the dense part, you're not going to pick up moisture underneath are you?
Fisher:I can't tell you that for sure. It's not ... it's not my understanding. My understanding is that if you are taking moisture meter readings that you're getting a measure of the moisture within the homogenous element. So to the extent that there's moisture below it will be presenting moisture to the underside of the screed. So you would still think you'd have a pretty good chance of picking up moisture." (T:[54/55])
In this instance, one of the difficulties in the case is that the roofing contractor, Mr Righton, is deceased, so there is no direct evidence as to whether or not a moisture meter or any other testing method was used. As canvassed further below, the Disputes Tribunal found that the membrane had been applied in accordance with the manufacturer's instructions, which include that the specification be applied to a thoroughly dry surface. In any event, whether that finding goes far enough depends upon whether the builder's obligation is simply to ensure that the surface is dry, or whether the obligation goes further, to ensure that the material below the surface is also dry. This depends upon the meaning to be given to the term "substrate" as used in the contract.

c) What is the substrate?

This is a matter in relation to which directions were issued after the hearing for the parties to file supplementary submissions. The owner's counsel, Mr Hotchkin, objected to the builder attaching to its submissions extracts from "industry texts". The basis of that objection is that expert witnesses were not referred to the material and not asked to comment about its meaning or relevance. We do not accept that submission. Whether we can have regard to this extrinsic material depends upon whether the contract is ambiguous and whether regard can be had to extrinsic materials, including the manner in which the term is used in the industry. Ultimately, it is a matter of construction of the documents, and the materials supplied speak for themselves, so that we do not consider it would be appropriate for expert witnesses to attempt to explain the meaning to the Tribunal.
Mr Hotchkin also submits that no issue was taken during the hearing before the Disputes Tribunal as to the meaning of the substrate and both parties conducted their cases on the basis that the substrate included the material below the surface. After careful consideration of the transcript, we accept that this is so. Clearly, that was the basis upon which Mr Fisher was cross‑examined in relation to moisture testing. Nevertheless, a review hearing is a hearing de novo and we are bound to arrive at the correct and preferable decision having regard to the substantial merits of the matter. We can see no reason why any valid argument could not be raised relating to this issue which is essentially a matter of construction of the contract documents. The Tribunal should not be bound by what may be an erroneous construction by one or both parties. We turn, therefore, to consider the contract provisions, as set out above.
The specification requires preparation "of substrates" as referred to under the heading "LOCATION". Under the heading "SUBSTRATE PREPARATION" it provides that the substrate shall be thoroughly dry before applying the membrane. The general requirements of the specification under the heading "MANUFACTURER'S OR SUPPLIER'S RECOMMENDATIONS" requires use of materials and components in accordance with the current written recommendations and instructions of the manufacturer or supplier. Any such documents are, in our view therefore, incorporated and regard may be had to them regardless of whether or not any ambiguity is apparent in the contract. In any event, we consider that the term "substrate" is ambiguous. In directing the parties to provide submissions on this issue, the Tribunal pointed to a number of dictionary definitions. The Macquarie Concise Dictionary (4^th ed) Macquarie University Library, Sydney, 2004 referred to "substrate" as a noun meaning "substratum". Substratum was in turn defined as:
"1.something that is spread or laid under something else; a stratum or layer lying under another.
2.Also, substrate. Something which underlies, or serves as a basis or foundation."
The Australian Oxford Dictionary (2^nd ed) Oxford University Press, London, 2004 gave the meaning of "substrate" as:
"1.substratum.
2.A surface to be painted, printed etc, on ..."
Substratum was defined as:
"1.An underlying layer or substance.
2.A layer of rock or soil beneath the surface ..."
The Short Oxford Dictionary Volume 2 (5^th ed) defined "substrate" as:
"1.substratum
2.An underlying layer or substance; the basis or foundation of a structure, condition, activity etc.
3.An underlayer of soil or earth."
The "industry" extracts provided by the builder with its further submission are consistent with the above dictionary definitions and show that the word "substrate" is used to either mean the surface to which a material or product is applied or a background material or layer. See, for instance, the extract from the Australian and Building Construction Definitions Handbook which under the definition of background refers to a substrate. Substrate is referred to in the same publication as a surface, while substrates are referred to as any material used as a base. The extract supplied from the Experimental Building Station – Department of Housing and Construction, dealing with paint systems, refers in par 2.01 to a paint system being the sum of all paint coats which together make up the material necessary for the protection or decoration of the substrate. We read that as meaning more than simply the surface. In par 2.02, concrete, concrete masonry, trowel plaster and mortar joints are referred to as substrates and that again suggests more than simply the surface. The diagram on the following page is consistent with that understanding. In the result, this material provides little assistance other than to demonstrate that the meaning to be given to the term will depend upon its context.

This specification requires "substrate shall be thoroughly dry before applying the membrane. ... Clean surfaces to be waterproofed ...". The manufacturer's instructions appear in ABOD Vol 1 page 13. Under the heading "Acceptable Substrates" is listed:
"ACCEPTABLE SUBSTRATES
•Concrete, renders and screeds
•Masonry, concretes and AAC blocks
•Fibre cement sheets (external grade only)
For use over existing paints, membranes, covering materials and any other substrates contact Norcros Building Products for advice."
The instructions then further state:
"BASIC APPLICATION INSTRUCTIONS
•Ensure all surfaces are structurally sound and totally dry. All sheet substrates must be securely fixed in accordance with the manufacturers instructions,
•..."
It is noted that the instruction sheet also contains details in relation to application to vertical and horizontal surfaces. The details provided are not as extensive as those set out in the specification relating to applications for vertical and horizontal surfaces. In the specifications, the coating rate per square metre is stated. The finished thickness of the paint in microns is also given. There is no corresponding detail in the manufacturer's instructions.
It is clear on the evidence of Messrs Ruefli, Fisher and Hollenberg that roofing contractors should carry out moisture testing as a matter of course in order to ensure that, to use a neutral term, "the material" to which the particular product is fixed is not moist, because the moisture will cause delamination. The moisture meter reads the moisture within the material, not simply the surface. The evidence from all the experts shows that moisture trapped within the material will vaporise into a gaseous form, which will exert pressure to any applied surface, causing delamination. Those involved in the roofing industry, or other industries such as those mentioned by Mr Hollenberg "carpet layers, floorboard people who put floorboards over concrete", while not necessarily being aware of the scientific reasoning, would be aware that moisture trapped within the material will cause failure.
We accept Mr Hotchkin's submissions for the owner that a proper interpretation involves applying the meaning which the clause would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation they were in at the time of the contract: Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 210 CLR 181. Further, that the Tribunal must consider "what would reasonable business people in the position of the parties have taken the clause to mean": Schenker and Co (Aust) Pty Ltd v Maplas Equipment and Services Pty Ltd [1990] VR 834. In dealing with the substrate preparation, the specifications deal separately with the substrate being required to be thoroughly dry and the need for the surface to be clean. The different terminology used within the same clause suggests a different meaning be given to the words "substrate" and "surface". It is clear that if the requirement was simply that the surface be dry, that no protection against future failure would be provided because of moisture present in the material as a whole. We note that the manufacturer's instructions refer only to the surface being dry. It may be that this can be explained simply by poor drafting, given that an acceptable substrate identified therein is stated to include concrete, rendering and screeds, and the expert evidence demonstrates quite clearly that one could not measure the surface of such a substrate without detecting moisture within it. In any event, the specification is more detailed than the manufacturer's instructions and, as stated, deals with the substrate differently to the surface.
We accordingly find that the substrate means the underlying substance or material and in the context of the work is to be undertaken, the substance or material includes that which, if not dry, would result in failure of the membrane.

Was the substrate thoroughly dry before the membrane was applied?

a) The factual evidence

The Disputes Tribunal explained the difficulty which Mr Airey and Dr Airey had in coming "to any absolute determination" was understandable by reason of the delay. We understand that to refer to coming to a conclusion based on what was the most probable cause of failure. In any event, in the circumstances where different hypotheses for failure might be advanced a considerable time after the relevant failure event, the observations of those who observed the failure, or the early symptoms of failure, become of some significance in providing an indication as to the likely cause, on a balance of probabilities.
The Disputes Tribunal concluded that the builder might well have had knowledge of the presence of water, but not the existence of a porous substrate into which the water had moved, thereby wetting that substrate. The finding is stated somewhat tentatively. The evidence establishes that the new waterproof membrane was necessary as a result of leaks to the existing roof and the substrate (T:[96/97]). The membrane was installed between September and November 1997 as evidenced by the applicator workmanship warranty at ABOD Vol 2 page 241. There was evidence that substantial rain had fallen in September and October 1997 and that at one stage work on the roof had to stop for quite a while because of rain (T:[129]).
Mr Humich, a director of the owner, gave evidence that the owner had settled the purchase of the Target store in August 1998. He had inspected the building in about April or May of that year and had walked across the roof. He noticed that the membrane appeared to be, as he described it, "bubbling". Having read the expert reports, Mr Humich accepted that it would be better described as a blistering. As all of the expert evidence establishes, this is consistent with moisture within the substrate vaporising and exerting pressure on the membrane.
There was also evidence that on 12 October 2998, Dunlop Membranes, the manufacturer of the membrane, wrote to the builder dealing with the state of the membrane on the roofs concerned. The letter which appears at ABOD Vol 3 page 19 reflects that repairs had been carried out on the main roof. While the nature of the repairs was not specifically identified in relation to the roof, the next paragraph refers to the south frontage lower roof repairs and stated that they "appear to be affected with no visible signs of water vapour blisters".
Mr Hollenberg was taken to this correspondence during the cross‑examination. He was also informed that Mr Humich had walked on the roof in April or May 1998 and that he had not observed any cracks in the membrane, or indeed any repairs. It was confirmed through the cross‑examination of Mr Hollenberg that practical completion occurred in January 1998 and that there was a one year maintenance period. Although there was a good degree of confusion in Mr Hollenberg's evidence, once he was taken through this correspondence and Mr Humich's observations, he conceded that the repairs to cracks in the membrane occurred after the maintenance period had expired in about January 1999. As will be seen, this evidence has a considerable impact on the hypotheses put forward by Mr Airey and Dr Airey.

(b) The expert evidence

Mr Airey carried out an inspection of the building on 2 June 2004. Central to his conclusions was the effect of temperature differential between the area of the roof exposed to the sun and the soffit. He stated that the temperature differential can be from 65 degrees Celsius at the surface to the air conditioned level of 24 degrees Celsius on the soffit. This temperate gradient generates significant tension within the concrete slabs at right angles to beams supporting the slabs. Further, the placement of a topping on a pre‑existing concrete slab is likely to result in cracking within the topping because the concrete of the topping is shrinking at a much greater rate than the pre‑existing concrete roof structure. He considered that ultraviolet light to which the topping was exposed would add to the degradation of the membrane causing loss of elasticity, leading to a vulnerability to tension induced stress snapping over time. The forces generated by moisture vaporising in the change from the liquid to gaseous state are very large. For this reason, the inclusion of moisture within any form of reservoir in the construction would cause membrane distress. In drawing conclusions he rated repeated membrane splitting related to movement of the substrate beneath that to which it is adhered and there being no expansion joints or bond breakers in the un‑reinforced screed as being the most significant factors leading to failure of the membrane. Next, he rated delaminations in the repairs going to increase of water through splits reappearing and the difficulty of mating a three to four layer membrane patch to its surroundings and finally, degradation in the membrane due to no roof falls being specified, although re‑emulsification generated by water building was seen in only two areas, one a small pooling area and one a drain.
Dr Airey's evidence and report was in response to the Wood and Grieve report prepared by Mr Fisher, although various other reports from CBM Laboratory, Structerre, a firm of consulting engineers and from Central Systems (Mr Ruefli) were also commented upon. Dr Airey dealt with a number of possible causes. Firstly, that moisture was entering into stretched areas of membrane over areas of structural movement (referred to as "necking"). Further, that this had resulted in splitting over cracks and structurally moving areas. The mechanism of blistering was explained on the basis that it was consistent with the horizontal movement of water through any one of several of the four to five layers of the membrane.
Dr Airey's report relied upon a note of an interview with the manufacturer's technical representative, Mr David Pullen, in relation to the ability of the membrane to stretch across a developing crack when bonded to the surface. Objection was taken to reliance on that note, both before the Disputes Tribunal and this Tribunal, on the basis that it was central to the matters in issue and should not be accepted without being tested by cross‑examination. Particularly, as if true, it raised real issues as to the suitability of the membrane for waterproofing roofs. The Disputes Tribunal accepted Dr Airey's report without striking out the offending portion on the basis that it would be given the appropriate weight. The Disputes Tribunal's RFD give no indication of the weight, if any, which was given to the statement. We consider that it should be given no weight at all on the basis that the objection is well founded.
Dr Airey did not fare well in cross‑examination. She conceded that she did not have a lot of expertise in relation to concrete and moisture content. Mr Hotchkin outlined in his submissions many criticisms of Dr Airey's evidence. Included amongst these was the adoption of Mr Airey's view that the temperature gradient was as great as stated by him due to air conditioning affecting the temperature of the soffit. That could not be supported, because the evidence was that the room below had not been used at all since completion of the building works and was not air conditioned. A theory advanced that moisture in the substrate may have been caused by condensation was also effectively abandoned under cross‑examination. Dr Airey could express no opinion as to the point to which the membrane would have to stretch before moisture could enter through an area weakened by the process of stretching or "necking". We do not address this in any greater detail because Mr Shaw, for the builder, in our view quite correctly, conceded that Dr Airey's evidence went outside her area of expertise in some respects and that most of her evidence is immaterial (SAT T:[59]).
Mr Fisher was the author of the Wood and Grieve report, dated 27 February 2006, and he gave evidence consistent with it. There is no engineering principle expressed by Messrs Fisher and Airey which reflect any disagreement between them. Differences in their opinions arise from application of engineering principles to the facts. Mr Fisher described the damage evident at the time of his inspection on 24 November 2005. He described the nature of the repairs that had been undertaken as indicative of a combination of localised blister failures and linear failures. The linear failures were, he opined, associated with cracking in the substrate immediately below the membrane, whilst the localised blister failures occurred both at intersections with cracks in the substrate and within otherwise competent panels of substrate. Mr Fisher's evidence was, however, more detailed in relation to the various hypotheses which had been put forward. He observed that there was no displacement of the perimeter parapet walls. This, he said, indicated that there had been little or no build‑up of incompressible materials within the cracks in the substrate over some 30 years of cyclic movement of the cracks. Consequently, he concluded, the topping slab "has remained dimensionally stable notwithstanding the significant overall shrinkage and expansion strains that it has experienced due to thermal changes over its life".
Further, Mr Fisher explained that the extent of cracking could be calculated scientifically. He applied a coefficient of thermal expansion within the longest continuous section of the roof. He adjusted that calculation by taking the time lag between heating the top of the topping slab to achieving the same temperature at the bottom of the topping slab. Because the floor space below the roof had not been occupied or air conditioned, he was able to calculate the maximum width of the cracking on the basis that the structural slab would be expected to lag the topping slab by approximately two to three hours only. The nett result was a maximum crack movement of 0.9 millimetres. Based on the performance of the membrane over apparent cracks where it had not failed, he concluded that it is likely that this width crack represents a reasonable estimate of the crack widths experienced within the topping slab. Mr Fisher pointed out that the dimensions relied on by Mr Airey were wrong in relation to the lower roofs and that area identified as having a maximum dimension of 7 metres in fact had a maximum dimension of 15 metres. Consequently, the assertion that the smaller roofs were small enough that shrinkage or thermal cracking of the topping slab would not occur, he concluded, is not supported by the theory or the evidence on‑site which shows crack locations beneath the apparently un‑split membrane on these smaller roofs. This is significant because Mr Fisher demonstrated that it could be expected that cracking on the smaller roofs would be similar to that of the upper roof, yet the membranes on the lower roofs had performed adequately (T:[33]), by which we understand that there was no cracking of the membrane.
Having discounted any cracking of the topping as being a cause of membrane failure, Mr Fisher referred to the factual history of the 1998 repairs. He notes in his report that his assessment is based on information provided from a number of sources. Included amongst those sources is the correspondence from Dunlop Membranes, dated 12 October 1998, to which reference has been made above. He also relied upon an email from Central Systems (Mr Ruefli), dated 2 February 2006, regarding the nature of the first repairs performed to the roof membrane. That email expressed the view that the patch repairs to the roof membranes had occurred prior to the crack repairs evidenced by their colour, condition and method used to make the repairs, compared to the patch repairs. Reference was also made to the other roof levels where it was observed that cracks, which are visible through the original membrane, have not resulted in splitting and are still water tight.
The real difference between the evidence of Mr Fisher and Mr Airey is one of cause and effect. Mr Airey says that the topping cracking occurred first and that this has caused the membrane to crack allowing water to enter. When this water has vaporised, the membrane is placed under greater stress. Mr Fisher has reversed that order, with moisture trapped in the substrate being the initial source of the water which once in a gaseous state caused the membrane to fail, taking the path of least resistance where there are cracks in the topping, causing linear cracks, or blisters, in areas where the substrate is competent. Mr Airey did not carry out the calculations as to crack width undertaken by Mr Fisher. Mr Airey was not aware that the soffit, or room below the main roof, had not been air conditioned. It appears that Mr Airey was not aware of the nature of the repairs undertaken in 1998. He was not aware that the soffit had not been subjected to air conditioning.

Should the builder have been alerted to the risk that the substrate might have suffered water ingress and that the roof included a layer of porous lightweight concrete?

The builder applied for and was granted a variation to the contract to entirely clean, prime and re‑screed the topping to the second floor roof because the subcontractor, Righton's Waterproofing, had identified that the two deck areas comprising the floor had a lightweight concrete mixed with foam beads layer below the topping screed and because there were incorrect falls with holes and voids in the topping (ABOD Vol 2 page 233/234). The builder therefore knew that the floor detail was not consistent with the drawing AD 02 revision 0 which did not depict the lightweight concrete layer.
The Disputes Tribunal expressed the view that the builder properly relied on the drawings and that the drawings did not identify, or in any way alert, the builder to an underlying porous lightweight concrete. With respect, the Disputes Tribunal appears to have overlooked the Note 3 on the drawing AD 02 to which we have already referred to the effect that the layout and details of the roof were based on an existing drawing and "is subject to confirmation on site".
In light of the builder identifying that the substrate of the lower floors was a lightweight porous concrete, it was incumbent on the builder to carry out whatever investigation was necessary to ascertain the true nature of the substrate of the upper floor.
In addition, the evidence to which we have already referred, shows that water ingress over an extended period was the reason for requiring a new waterproof membrane to be installed, the original screed for the upper roof had to be repaired, that there had been a substantial rainfall in the preceding months and that work on the roof had to stop for a period because of the rain. In those circumstances, there can be no doubt that the builder was alerted to the risk that the substrate might have suffered water ingress.

Did the builder apply the membrane in accordance with the specification?

a) The evidence of Pond

As outlined above, the Disputes Tribunal concluded that the membrane had been applied according to the manufacturer's instructions, which included that the specification be applied to a thoroughly dry surface. That conclusion was based on the evidence of the representative of the supplier of the membrane, Mr Pond. The Disputes Tribunal inferred that Mr Pond was satisfied with every aspect of the application of the product because the evidence showed that he had visited the site probably four to five times. The Tribunal considered Mr Pond's evidence to be "very powerful".
The very terms of the Dunlop Membranes' Sheltercoat warranty ABOD Vol 2 page 242, reflect that Dunlop Membranes, Mr Pond's employer, did not accept that the specification and recommendations (manufacturer's) had been carried out because that was one of the conditions placed upon the operation of the warranty. Mr Pond stated clearly during his evidence in chief that it was not his role to check with respect to the state of the substrate. Under cross‑examination he agreed with a proposition put to him that by signing the warranty Dunlop Membranes was not guaranteeing that the job had been carried out (in accordance with the Specifications and manufacturer's recommendations) but was conveying that if the job had been properly carried out, they would stand by the product (T:[137] & [139]).

It is apparent that the Disputes Tribunal has misconstrued Mr Pond's evidence and placed greater reliance on it than was justified.

b) The evidence of Fisher

We have already referred to evidence that the new waterproof membrane was necessary as a result of leaks in the existing roof, that substantial rain fell in September and October 1997 and that work was stopped on the roof for some time because of rain. It is common cause, and reflected in Mr Fisher's report, that most of the original roof topping was retained, in respect of the roof in question although it was not in good condition in some areas and had to be repaired. It is also common cause that there was a lightweight concrete topping below the dense topping screed.
Mr Fisher testified that it would take some months for a topping of that kind to dry out (T:[62]). He also testified, as referred to above, that he would expect that a moisture meter applied to the topping screed to pick up any moisture in the lightweight concrete below it (T:[54/55]).

c) The effect of the contract and likelihood of moisture testing having been carried out

As found by the Disputes Tribunal, this was a contract for the builder to carry out the works in accordance with the contract, which included the obligations described in the drawings. That included the obligation to ensure that the substrate was thoroughly dry. How the builder is to do that is not specified, but the obligation to ensure is clearly stated and that leaves it open to the builder to determine its own methodology. Clause 1.02.04 of the contract (ABOD Vol 12 page 84) describes the works to be carried out as set out above. After describing that the works comprises the whole of the work to be executed in accordance with the drawings, specifications and the agreement, it concludes "and all other work whether mentioned in this Agreement or not which is necessary to carry out the work so described ...".
While the owner is responsible for design, in order to apply the membrane in accordance with the contract, the builder was obliged to ensure that the substrate was dry.
Mr Shaw, for the builder, submits that it can be inferred that the builder carried out moisture testing, because he was a specialised contractor approved by the membrane manufacturer. Further, the visits of Mr Pond to the site showed nothing out of the ordinary to suggest that the membrane was not being properly applied.
There was some exchanges between the Tribunal and Mr Hotchkin for the owner, as to whether such an inference could be drawn, particularly as it appeared that the lower roof areas had performed adequately. Counsel responded by pointing out that the entire topping screed had been removed, which would have allowed better evaporation of moisture from the porous lightweight concrete, before the new screed and membrane was applied. We now observe that the premise upon which that question was raised is incorrect. Mr Pond gave evidence that in October 1998 he had observed small blisters on one of the small (lower) roofs (T:[137‑138]). That portion of the roof was repaired and it was those repairs are referred to in the letter of 12 October 1998 (ABOD Vol 3 page 19). There was, therefore, obviously some moisture present in what is there described as the south front lower roof. This at least raises some doubt as to whether a moisture meter was used on that roof, but without more detailed evidence as to the performance of a moisture meter in the particular circumstances, we can make no finding either way.
However, on the evidence as a whole, showing the likelihood of water ingress into the roof, that it would take some time to evaporate, and on Mr Fisher's evidence, that he would expect a moisture meter applied to the original topping screed on the upper roof to identify the presence of moisture, we can and do conclude that there was moisture present in the substrate and that it was not thoroughly dry. We observe that the original roof topping on the upper roof, which was not removed and only repaired in part, had been in place for some considerable number of years, so that damp trapped within the porous lightweight concrete would have presented to the face of the screed for a considerable period. This adds credence to Mr Fisher's evidence. It must also be remembered that while Mr Pond observed small blisters on the lower south frontage roof, Mr Humich had testified to the bubbling evident when walking on the upper roof. He described this as the membrane having lifted in parts "so that you, as you walked on you ... there's a sponge effect and it was in patches" (T:[21]).
Immediately prior to the above evidence, Mr Humich had testified about the "experience underfoot" of walking on the membrane and to the "visual observation, or a physical observation as we walked on". Although he classified this as bubbling, he adopted the terminology used by the experts of "blistering" later in his evidence, where he said "the bubbling, sorry, the blistering for want of a better word is what we discovered and ..." (T:[21]).
In these circumstances, while the evidence is somewhat vague, if any inference is to be drawn, it is that a moisture meter was not used by the builder's subcontractor. After careful consideration, and with some reservations because of the vagueness of the evidence, we consider that inference is justified, at least in respect of the main roof which is the subject of the dispute. In relation to the lower roofs, without evidence as to the time which it would take for moisture transfer from the porous concrete to the new screed, as stated above, we can make no finding either way.
In any event, the contract did not prescribe what tests needed to be undertaken to ensure that the substrate was dry. We accept the evidence of Mr Ruefli in relation to what constituted good practice for a specialist roofing contractor carrying out this type of work. In the circumstances, that required that core testing be carried out. In the result, the choice of what form of testing to make was a matter for the builder, but whatever test was or was not used, the builder could not proceed with the works unless and until it had ensured that the substrate was thoroughly dry. By applying the membrane before doing so, the builder did not apply the membrane in accordance with the specification.

Conclusions

We consider that the Disputes Tribunal erred in rejecting Mr Ruefli's evidence, both as to the cause of the membrane failure and as to the usual procedures to be followed a waterproofing contractor. Little turned on the rejection of Mr Ruefli's evidence in relation to cause, because the owner quite correctly relied upon the expert evidence of Mr Fisher to support its case. Nevertheless, the criticisms of Mr Ruefli were not justified, accepting the limited capacity within which he could give expert evidence. His evidence was not based on assumptions, but on the information provided by Mr Humich and his own observation of the repairs. Based on the evidence of Mr Humich, that of Mr Pond, the correspondence referring to repairs carried out in October 1998 and the evidence of Mr Fisher, we find that moisture was trapped in the porous lightweight concrete substrate, which vaporised and exerted pressure on the underside of the membrane causing it to blister and also suffer linear failure over cracks in the substrate. Once that finding is made, the premise upon which the evidence of Mr Airey and Dr Airey was founded, that cracking of the topping caused the membrane to crack and allow moisture to enter, is demonstrated to be wrong. The evidence that similar sized cracks had occurred on the lower roofs without the membrane failing is significant.
We reject the builder's submissions that it installed the membrane in a proper and workmanlike manner in accordance with the specification, but that the specification was inadequate and, in particular, that the membrane specified was unsuitable for the application. There is nothing to suggest that the membrane would not have functioned perfectly adequately if the substrate was thoroughly dry. It is true that if it had been identified by the builder, as it was obliged to do, that the substrate was not thoroughly dry, that the owner would have had to consider either delaying completion of the works, to allow the substrate to dry, or to contemplate then varying the design possibly to something akin to that which is now proposed as a remedial measure. The owner was never given that choice because the builder did not comply with its obligation to ensure that the substrate was thoroughly dry.
We find on the balance of probability that the builder's subcontractor did not carry out moisture testing on the upper roof in question. We make that finding with a degree of hesitation because of the relatively imprecise nature of the evidence on which we must determine the matter. However, if there be any doubt as to the adequacy of testing by the use of a moisture meter, we accept the evidence of Mr Ruefli that, if it was suspected that a lightweight porous concrete had been used, it would have been prudent to carry out a core test. We find that the builder should have been, and was, alerted to the possibility of the roof having a layer of porous lightweight concrete and further, that there probably had been water ingress, so that core testing should have been conducted, to ensure that the substrate was thoroughly dry. Ultimately, we accept the submission made on behalf of the owner, that the builder's obligation to ensure that the substrate was thoroughly dry is an absolute one. It was for the builder to determine how to ensure that the substrate was dry and pursuant to cl 1.02.04 of the contract to do whatever work was necessary to carry out the works described.
We find that the Disputes Tribunal fell into error by misconstruing the builder's obligations under the contract, in the manner outlined above, which in turn led to a failure to appreciate the significance of the evidence of Mr Humich and Mr Pond which demonstrated that vaporised moisture was endeavouring to escape from the substrate, causing bubbling or blistering to occur before any linear failure or cracking occurred. On our findings, the only way in which that moisture could have been present in the substrate was because it was there before the membrane was applied. The Disputes Tribunal also failed to carry out any adequate analysis of the expert evidence. Mr Fisher's specific evidence as to his calculation of crack size and his observations in relation to the membrane spanning cracks of a similar size on the lower decks could only have led to his evidence being preferred to that of Mr Airey and Dr Airey. In effect, as Mr Hotchkin submitted, Mr Airey and Dr Airey hypothesised, but provided little factual evidence, compared to the detailed evidence provided by Mr Fisher, to support their hypotheses. For all the above reasons, we find that the installation of the membrane without determining that the substrate was thoroughly dry means that the builder did not carry out such work in a proper and workmanlike manner and constituted faulty and unsatisfactory building work, for which the builder is liable under s 12A of the BR Act.
Accordingly, although on a reading of the reasons for decision it might be thought that there is a logical and discernable basis for the decision, an examination of the contract and evidence demonstrates the contrary, that the decision is wrong, and that in the exercise of the Tribunal's jurisdiction, there would be a substantial injustice if leave to review the decision were not to be granted and the review upheld.

Orders

During the course of the review hearing, counsel for the owner advised that because of the amount of time which had elapsed, the cost of remedial repairs is likely to have increased substantially. There was some discussion as to whether the owner might wish to seek an order to remedy or an order to pay compensation. It was foreshadowed that there would be a contest between the parties as to the appropriate remedy, and consequently the costs of carrying out of such work, if an order to pay were to be claimed.
In the circumstances, the Tribunal will issue orders in the following terms, which include that a directions hearing be held on 25 October 2007. We have provided some time prior to the directions hearing so that the parties are able to properly consider their positions and deal with the matter definitively on that date, and so that the matter can be programmed to a further hearing on the appropriate remedy.
It is noted that one of the orders sought by the applicant is an order that the respondent pay the costs of the application in any event. As the starting point in the Tribunal is that each party should pay their own costs, the Tribunal will need to be persuaded it is appropriate to make an order for costs in this matter. The applicant's intentions should be made clear at the directions hearing, and if it is intended to proceed with an application for costs, appropriate directions can then be made.
As foreshadowed above, we shall also make orders permitting reliance on the further ground of review filed on the day prior to the hearing.
The Tribunal will accordingly issue orders as follows:
1.The applicant is granted leave to rely on the further ground of review filed on 17 May 2007.
2.The applicant is granted leave to have the decision of the Building Disputes Tribunal made on 1 August 2006 reviewed.
3.The application for review is upheld and the decision under review is set aside.
4.The review hearing will be adjourned to a later date for the determination of the appropriate remedy to be granted in substitution for the order made by the Building Disputes Tribunal.
5.The application is otherwise adjourned to a directions hearing on 25 October 2007 in order to address any application for costs and to program the matter to final hearing for an order to be made in substitution of that made by the Building Disputes Tribunal.
I certify that this and the preceding [91] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
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MR C RAYMOND, SENIOR MEMBER