Petropoulos v CPD Holdings Pty Ltd t/as the Bathroom Exchange

[2019] NSWSC 897

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Petropoulos v CPD Holdings Pty Ltd t/as The Bathroom Exchange [2019] NSWSC 897

Hearing dates:

22 March 2019

Date of orders:

16 July 2019

Decision date:

16 July 2019

Jurisdiction:

Common Law - Administrative Law

Before:

Harrison AsJ

Decision:

The Court orders that:

(1) The plaintiff is granted an extension of time to file an appeal to 12 November 2018.
(2) Leave to appeal is refused.
(3) Leave to cross appeal is refused.
(4) Each party is to pay for her/their own costs.

Catchwords:

APPEALS – Judicial review – Application for leave to appeal and cross appeal from a decision of the Appeal Panel of the New South Wales Civil and Administrative Tribunal – Civil and Administrative Tribunal Act 2013 (NSW), s 83 – Appeal on a question of law – Contract for a bathroom renovation – Whether an oral variation is effective despite a clause requiring variations to be in writing – Whether the plaintiff waived her right to insist upon the contractual specifications – Whether the builder breached statutory warranties under the Home Building Act 1989 (NSW) s 18B – Whether rectification is an unreasonable remedy where the plaintiff had agreed to the variations

Legislation Cited:

Civil and Administrative Tribunal Act 2013 (NSW), ss 83, 84
Civil Procedure Act 2005 (NSW), ss 58, 60
Home Building Act 1989 (NSW), ss 7, 10, 18B, 18E, 48K, 48MA, 48O

Cases Cited:

Amaca Pty Ltd v Dougan [2011] NSWCA 169
Angas Securities Ltd v Small Business Consortium Lloyds Consortium No. 9056 [2016] NSWCA 182
Autodesk Inc v Dayson (No 2) (1993) 176 CLR 300
Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139
Bacon v Purcell (1916) 22 CLR 307
Batterham v Maekig [2010] NSWCA 86
Be Financial Pty Ltd as Trustee for Be Financial Operations Trust v Das [2012] NSWCA 164
Borcherdt v Scott [2014] NSWCA 339
Boreland v Docker [2007] NSWCA 94
Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304
Cherry v Steele-Park [2017] NSWCA 295; 351 ALR 521
Craine v Colonial Mutual Fire Insurance Company Ltd (1920) 28 CLR 305
Embrey v Earp (1890) 6 WN (NSW) 130
Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Marketing Pty Ltd (2013) 250 CLR 303
Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89
Friend v Brooker (2009) 239 CLR 129
Gallo v Dawson (1990) 93 ALR 479; [1990] HCA 30
House v The King (1936) 55 CLR 499
International Finance Trust Company Ltd v New South Wales Crime Commission (2009) 240 CLR 319
Lahoud v Lahoud [2009] NSWSC 623
Lee v New South Wales Crime Commission (2012) 224 A Crim R 94; [2012] NSWCA 262
Perri v Coolangatta Investments (1982) 149 CLR 537
Petropoulos v CPD Holdings Pty Ltd t/as The Bathroom Exchange [2018] NSWCATAP 72
Petropoulos v CPD Holdings Pty Ltd t/as The Bathroom Exchange (No 2) (2018) NSWCATAP 233
Robinson v Harman (1848) 1 Exch 850
Satellite Estate Party Ltd v Jacquet [1968] 2 NSWLR 340
Segal v Waverley Council (2005) 64 NSWLR 177
Seltsam Pty Ltd v Ghaleb [2005] NSWCA 208
SMK Cabinets v Hili Modern Electronics Pty Ltd [1984] CR 391
Solar Tube Australia Pty Ltd v Solar Bridge International Pty Ltd [2017] FCCA 657
State of New South Wales v Stevens [2012] NSWCA 415
Steak Plains Olive Farm Pty Ltd v Australian Executor Trustees Limited [2015] NSWSC 289
Swain v Waverley Municipal Council [2005] HCA 4; (2005) 220 CLR 517
Tabcorp Holdings Ptd Ltd v Bowen Investments Pty Ltd [2009] HCA 8
Wright v Foresight Constructions Pty Ltd [2011] NSWCA 327

Category:

Principal judgment

Parties:

Thea Petropoulos (Plaintiff/Cross Defendant)
CPD Holdings Pty Ltd t/as The Bathroom Exchange (First Defendant/First Cross Claimant)
James Morphett (Second Defendant/Second Cross Claimant)

Representation:

Counsel:
M McMahon (Plaintiff/Cross Defendant)
M F Newton (First & Second Defendants/First & Second Cross Claimants)

  Solicitors:
Daniel Massey Solicitor & Associates (Plaintiff/Cross Defendant)
Gerald Aronstan (First & Second Defendants/ First & Second Cross Claimants)

File Number(s):

2018/346788

Publication restriction:

Nil

Background

Appeal and cross appeal to the Appeal Panel

Decision of Appeal Panel dated 27 March 2018 – Petropoulos (No 1)

Decision of Appeal Panel dated 8 October 2018 – Petropoulos (No 2)

The appeal to this court

Leave to appeal

The plaintiff’s application for leave to appeal

(1) Misleading or deceptive conduct

The plaintiff’s submissions

The defendants’ submissions

Consideration

The plaintiff’s submissions

The defendant’s submissions

Consideration

(3) Remedy

The plaintiff’s submissions

The defendant’s submissions

Consideration

The defendant’s application for leave to cross appeal

(1) Construction of the building contract

The defendant’s submissions

The plaintiff’s submissions

Consideration

(2) Waiver of a contractual term

The defendant’s submissions

Plaintiff’s submissions

Consideration

(3) No breach of statutory warranty

Defendant’s submissions

Plaintiff’s submissions

Consideration

(4)-(5) Waiver of entitlement to claim a remedy

Defendant’s submissions

Consideration

(6) Remedy

Defendant’s submissions

Plaintiff’s submissions

Conclusion

(7) Non-payment relevant to work order

Defendant’s submissions

Consideration

Costs awarded in the Tribunal

Costs of these proceedings

The Court orders that:

Judgment

1. HER HONOUR: This is an appeal and an amended cross appeal of part of the decisions of the Appeal Panel of the Civil and Administrative Tribunal of New South Wales (“the Tribunal”) dated 27 March 2018, 8 October 2018 and the costs decision dated 13 March 2019.

2. The plaintiff is Thea Petropolous. The first defendant/first cross claimant is CPD Holdings Pty Ltd t/as The Bathroom Exchange (“CPD Holdings”). The second defendant/second cross claimant is James Morphett, who is the director of the first defendant company and a builder. The parties relied upon 7 volumes of joint court books. For convenience, I refer to CBD Holdings as the defendant throughout this judgment, except with respect to the issue of costs as they relate to the second defendant.

3. By summons filed 12 November 2018, the plaintiff seeks firstly, an order pursuant to s 83 of the Civil and Administrative Tribunal Act 2013 (NSW) (“CAT Act”) that the plaintiff be granted leave to appeal to this Court; secondly, that pursuant to s 84(2)(b) of the CAT Act, time be extended to permit the plaintiff to appeal; thirdly, an order that order 6 of the decision dated 27 March 2018 and orders 1 and 2 of the decision dated 8 October 2018 be set aside and in lieu thereof, that orders be made that the defendants pay the plaintiff’s damages in the sum of $19,167.07 on a joint and several basis, and that the first defendant pay the plaintiff delay damages as determined by the Court on a joint and several basis.

4. On 22 March 2019, the defendants filed an amended cross appeal seeking firstly, an order that leave be granted to cross appeal from the part of the decisions in relation to orders 2, 3, 4 and 5 made on 27 March 2018 and orders numbered 1 and 2 made on 8 October 2018; secondly, that the cross appeal be allowed; thirdly, that orders 2, 3, 4 and 5 of the Appeal Panel made on 27 March 2018 and 1 and 2 made on 8 October 2018 be set aside; and fourthly, in lieu thereof, ground 4(a) of the cross defendant’s appeal to the Appeal Panel be dismissed and that order 2 made by the Appeal Panel on 13 March 2019 be set aside and in lieu thereof ground 4(a) of the cross defendant’s appeal be dismissed and the cross defendant pay the costs of the cross claimants of proceeding number AP 17/45447 in the Appeal Panel; or in the alternative, in lieu of order (2) of the Appeal Panel made on 13 March 2019, the cross defendant to pay the costs of the second cross claimant of proceedings number AP 17/45447 in the Appeal Panel and the cross defendant to pay such costs of the cross claimant of proceedings number AP 17/45447 in the Appeal Panel.

Background

5. On 30 June 2014, the plaintiff and the first defendant entered into a contract for the renovation of main and ensuite bathrooms in the plaintiff’s home. The contract sum was $39,786.40. The work under the contract was performed in 2014.

6. In 2016, the plaintiff brought proceedings in the Tribunal against the defendants. The plaintiff made numerous allegations of defective work and of misleading or deceptive conduct.

7. The first defendant brought an application in the Tribunal alleging that the plaintiff had repudiated the contract and seeking an order for payment of $4,761, referable to an outstanding amount under the contract. The two applications were heard together.

8. On 22 September 2017, a Tribunal Member of the Tribunal issued a decision in Petropoulos v CPD Holdings Pty Ltd & Morphelt; CPD Holdings Pty Ltd v Petropoulos [2017] NSWCATCD, unreported. All of the plaintiff’s claims were dismissed except for one. The first defendant was ordered to repair a chip in a bath and the plaintiff was ordered to provide reasonable access to allow that to occur. It had never been in contest that the chip required repair. The Tribunal found that the first defendant had sought access to do so, but that access had been denied by plaintiff.

9. The defendants’ application was upheld; it was determined that the plaintiff had repudiated the contract and she was ordered to pay $952.20 to the first defendant.

Appeal and cross appeal to the Appeal Panel

10. The plaintiff appealed to the Appeal Panel of the Tribunal. The plaintiff appealed substantially the whole of the decision of the Tribunal Member. The first defendant lodged a cross appeal. The appeal and cross appeal generated two separate decisions, Petropoulos v CPD Holdings Pty Ltd t/as The Bathroom Exchange [2018] NSWCATAP 72 (“Petropoulos (No 1)”) and Petropoulos v CPD Holdings Pty Ltd t/as The Bathroom Exchange (No 2) (2018) NSWCATAP 233 (“Petropoulos (No 2)”).

11. The Appeal Panel dismissed the appeal except on one ground, where it found that the defendant breached the statutory warranty in s 18B(1)(a) of the Home Building Act 1989 (NSW) in relation to the size of the shower screens in the bathrooms. It was found that the contract required shower screens of 900 mm x 900 mm in size, but that CPD Holdings had constructed the bathrooms with showers of 850 mm x 850 mm in size. It was common ground that this size difference was 11%.

12. The Appeal Panel ordered the parties to provide further written submissions on the appropriate remedies, if any, in relation to the breach of statutory warranty by the defendants. That occurred and, in its second decision, the Appeal Panel decided the question of remedy on the papers. It ordered the defendants to perform work to make the showers support 900 mm x 900 mm custom shower screens and ordered the plaintiff to provide access to enable that to occur. The plaintiff had argued that there should be a compensation order made, including for claimed “consequential loss”, but the Appeal Panel declined to make such orders: see Petropoulos (No 2) at [31], [39]-[41].

13. In the course of its second decision, the Appeal Panel observed that the sole defect, other than the very minor damage to the bath, was that the ensuite and shower recess areas were 850 mm x 850 mm rather than 900 mm x 900 mm.

Decision of Appeal Panel dated 27 March 2018 – Petropoulos (No 1)

14. The Appeal Panel, in its decision dated 27 March 2018, refused the plaintiff leave to appeal on the grounds other than a question of law. Part of the appeal was upheld. The Appeal Panel set aside the Tribunal Member’s decision that the defendant did not breach any of the statutory warranties in the Home Building Act in relation to the size of the shower screen, and in lieu thereof, made an order that the defendant breached the statutory warranty in s 18B(1)(a) of the Home Building Act in relation to the size of the shower screen. The Appeal Panel ordered the parties to provide further written submissions on the appropriate remedies, if any, in relation to that breach and further written submissions in relation to costs of the appeal.

Decision of Appeal Panel dated 8 October 2018 – Petropoulos (No 2)

15. The Appeal Panel in its decision dated 8 October 2018 made orders that the defendant was to perform the following work (“the rectification work”) using suitably licensed tradespersons and with due care and skill at the residence of the plaintiff on or before 7 weeks from the date of its decision. The defendant was to remove necessary tiles, bedding and screed adjacent to the water angle of the ensuite and shower recess areas; remove and replace the water angles and any necessary water bars of the ensuite and shower recess areas to ensure the dimensions of the ensuite and shower recess areas supported the installation of 900 mm x 900 mm x 200 mm custom glass shower screens; ensure that any waterproof membrane affected by the work was adequately repaired so that it functioned effectively as a waterproofing mechanism and that the area was adequately waterproofed; replace all necessary bedding, screed and tiles, which were to be of the same colour, dimensions and type as the tiles which had been removed, or if no identical replacement tiles were available, of a colour that most closely matched them; install 900 mm x 900 mm x 200 mm custom glass shower screens; repair the chip on the bath; and remove all debris and leave site in a clean condition. The plaintiff was ordered to provide reasonable access so that the rectification work could be performed.

The appeal to this court

16. The parties now seek the leave of this Court to appeal the decisions of the Appeal Panel. In effect, they seek to agitate for the third time claims which have been heard and determined at length by the Tribunal Member and Appeal Panel. The plaintiff has twice agitated claims of misleading or deceptive conduct against the defendants, and twice been wholly unsuccessful in that regard. It is doubtful whether the proposed appeal raises any question of law. It does not raise any question involving real prospects of success. There is no doubt that there is a disproportion between costs and the importance of the dispute in relation to both parties, leaving aside that it has occupied court time and resources.

17. The plaintiff seeks an extension of time to appeal. The appeal was filed seven days out of time.

18. In Gallo v Dawson (1990) 93 ALR 479; [1990] HCA 30 (“Gallo”), McHugh J stated at [2]:

“ …The grant of an extension of time under this rule is not automatic. The object of the rule is to ensure that those Rules which fix times for doing acts do not become instruments of injustice. The discretion to extend time is given for the sole purpose of enabling the Court or Justice to do justice between the parties: see Hughes v National Trustees Executors and Agency Co. of Australasia Ltd [1978] VR 257 at 262. This means that the discretion can only be exercised in favour of an applicant upon proof that strict compliance with the rules will work an injustice upon the applicant. In order to determine whether the rules will work an injustice, it is necessary to have regard to the history of the proceedings, the conduct of the parties, the nature of the litigation, and the consequences for the parties of the grant or refusal of the application for extension of time: see Avery v No 2 Public Service Appeal Board [1973] 2 NZLR 86 at 92; Jess v Scott (1986) 12 FCR 187 at 194-5. When the application is for an extension of time in which to file an appeal, it is always necessary to consider the prospects of the applicant succeeding in the appeal: see Burns v Grigg [1967] VR 871 at 872; Hughes, at 263-4; Mitchelson v Mitchelson (1979) 24 ALR 522 at 524. It is also necessary to bear in mind in such an application that, upon the expiry of the time for appealing, the respondent has ‘a vested right to retain the judgment’ unless the application is granted: Vilenius v Heinegar (1962) 36 ALJR 200 at 201. It follows that, before the applicant can succeed in this application, there must be material upon which I can be satisfied that to refuse the application would constitute an injustice. As the Judicial Committee of the Privy Council pointed out in Ratnam v Cumarasamy [1965] 1 WLR 8 at 12; [1964] 3 All ER 933 at 935:

‘The rules of court must prima facie be obeyed, and in order to justify a court in extending the time during which some step in procedure requires to be taken there must be some material upon which the court can exercise its discretion.’”

19. The plaintiff submitted that firstly, the delay was not lengthy; secondly, there is no evidence of prejudice to the defendant; and finally, the defendant has a cross appeal on foot. The defendant does not oppose the granting of this application. In these circumstances, in the exercise of my discretion, I grant an extension of time for the plaintiff to file an appeal to 12 November 2018.

Leave to appeal

20. Both parties seek leave to appeal pursuant to s 83 of the CAT Act. It reads:

“83 Appeals against appealable decisions

(1) A party to an external or internal appeal may, with the leave of the Supreme Court, appeal on a question of law to the Court against any decision made by the Tribunal in the proceedings.

(2) A person on whom a civil penalty has been imposed by the Tribunal in proceedings in exercise of its enforcement or general jurisdiction may appeal to the appropriate appeal court for the appeal on a question of law against any decision made by the Tribunal in the proceedings.

(3) The court hearing the appeal may make such orders as it considers appropriate in light of its decision on the appeal, including (but not limited to) the following:

(a) an order affirming, varying or setting aside the decision of the Tribunal,

(b) an order remitting the case to be heard and decided again by the Tribunal (either with or without the hearing of further evidence) in accordance with the directions of the court.

…”

21. Two cases which deal with the principles governing leave to appeal are Be Financial Pty Ltd as Trustee for Be Financial Operations Trust v Das [2012] NSWCA 164 (“Das”) and Lee v New South Wales Crime Commission (2012) 224 A Crim R 94; [2012] NSWCA 262 (“Lee”).

22. In Das, the Court of Appeal set out the principles to be considered in deciding whether leave to appeal should be granted. At [32]-[33], [35], Basten JA stated:

“[32] The principles governing cases such as these have recently been restated in Zelden v Sewell; Henamast Pty Ltd v Sewell [2011] NSWCA 56. As Campbell JA noted (with the agreement of Young JA) at [22]:

‘It is of some importance to reiterate the principles that were stated in Carolan v AMF Bowling Pty Limited [1995] NSWCA 69, where Sheller JA said that an applicant for leave must demonstrate something more than that the trial judge was arguably wrong in the conclusion arrived at. Cole JA relied on a principle that where small claims are involved, it is important that there be early finality in determination of litigation, otherwise the costs that will be involved are likely to swamp the money sum involved in the dispute.’

[33] In Jaycar Pty Ltd v Lombardo [2011] NSWCA 284 Campbell JA, with the agreement of Young and Meagher JJA, expanded on his summary of Carolan, noting that Kirby P had recognised ‘that ordinarily it was appropriate to grant leave to appeal only concerning matters that involve issues of principle, questions of general public importance or an injustice which is reasonably clear, in the sense of going beyond [what is] merely arguable’: at [46].

…

[35] In Coulter v The Queen [1988] HCA 3; 164 CLR 350, dealing with a challenge to a refusal of the South Australian Full Court to grant leave to appeal in a criminal matter, the majority noted that a leave requirement was a preliminary procedure ‘recognised by the legislature as a means of enabling the court to control in some measure the volume of appellate work requiring its attention’: at 356 (Mason CJ, Wilson and Brennan JJ). That statement is clearly applicable to civil, as well as criminal, appellate jurisdiction.”

23. Similarly, in Lee, Bathurst CJ at [12] outlined the principles relevant to the granting of leave as follows:

“[12] The principles upon which leave to appeal is granted are well established. Ordinarily it is only appropriate to grant leave concerning matters that involve issues of principle, questions of general public importance or where it is reasonably clear there has been an injustice in the sense of going beyond it being reasonably arguable that the primary judge was in error: Carolan v AMF Bowling Pty Ltd [1995] NSWCA 69; Zelden v Sewell [2011] NSWCA 56 at [22]; Jaycar Pty Ltd v Lombardo [2011] NSWCA 284 at [46]; GKD v Director of Department of Family & Community Service [2012] NSWCA 219 at [10]; Be Financial Pty Ltd v Das [2012] NSWCA 164 at [32]-[34].”

See also Steak Plains Olive Farm Pty Ltd v Australian Executor Trustees Limited [2015] NSWSC 289 at [19]-[21].

24. The nature of the proposed appeal is of relevance in an application for leave to appeal. Where, as here, an appeal can only be on a question of law, then the absence of identifiable questions of law will obviously be fatal to a leave application. There should be some specification of the questions of law which are the subject of the proposed appeal.

25. The importance of finality in small claims is also relevant to the question of leave, because:

“Where small claims are involved, it is important that there be early finality in determination of litigation, otherwise the costs that will be involved are likely to swamp the money sum involved in the dispute” (Das at [32]).

26. This is also reflected in s 60 of the Civil Procedure Act 2005 (NSW). Consequently, where the costs of the trial are disproportionate to the amount in dispute, the incurring of additional costs, for a potentially uncertain return, will be a factor weighing heavily against a grant of leave. That principle must apply with even more force where there has already been a trial and a first appeal.

27. Section 58 of the Civil Procedure Act, requiring a court to act in accordance with the dictates of justice, applies in respect of a leave application. One of the factors to be taken into account pursuant to s 58 is “the degree of injustice that would be stifled by the respective parties as a consequence of any order or direction”: s 58(2)(b)(vi). That provision recognises that questions of injustice are relative. The delay and cost of further litigation constitutes a form of injustice to the successful party below, whatever the outcome of the appellate process.

28. Finally, in considering whether to grant leave to appeal, I adopt the approach that this Court should not read the Appeal Panel’s reasons “with an eye finely tuned for error”: McGinn v Ashfield Council [2012] NSWCA 238 per McColl JA at [17] (Sackville AJA and Gzell J agreeing); Walsh v Parramatta City Council [2007] NSWLEC 255; (2007) 161 LGERA 118 at [67] per Preston CJ citing Minister for Immigration and Ethnic Affairs v Wu Shan Liang [1996] HCA 6; (1996) 185 CLR 259 at 291.

29. I also bear in mind that what constitutes sufficient reasons for a Tribunal Member (and Appeal Panel) differs from that of a court. In Wingfoot Australia Partners Pty Ltd v Kocak (2013) 252 CLR 480; (2013) 303 ALR 64 (“Wingfoot”), the High Court stated at [54]-[56]:

“[54] The objective, within the scheme of the Act, of requiring the medical panel to give a written statement of reasons for that opinion can therefore be seen to be that persons affected by the opinion automatically be provided with a written statement of reasons adequate to enable a court to see whether the opinion does or does not involve any error of law. There is an obvious benefit in requiring a written statement of reasons for an opinion always to meet that standard. The benefit is that it enables a person whose legal rights are affected by the opinion to obtain from the Supreme Court an order in the nature of certiorari removing the legal effect of the opinion if the medical panel in fact made an error of law in forming the opinion: an error of law in forming the opinion, if made, will appear on the face of the written statement. To require less would be to allow an error of law affecting legal rights to remain unchecked. To require more would be to place a practical burden of cost and time on decision-making by an expert body for no additional legal benefit and no identified systemic gain.

[55] The standard required of a written statement of reasons given by a medical panel under s 68(2) of the Act can therefore be stated as follows. The statement of reasons must explain the actual path of reasoning by which the medical panel in fact arrived at the opinion the medical panel in fact formed on the medical question referred to it. The statement of reasons must explain that actual path of reasoning in sufficient detail to enable a court to see whether the opinion does or does not involve any error of law. If a statement of reasons meeting that standard discloses an error of law in the way the medical panel formed its opinion, the legal effect of the opinion can be removed by an order in the nature of certiorari for that error of law on the face of the record of the opinion. If a statement of reasons fails to meet that standard, that failure is itself an error of law on the face of the record of the opinion, on the basis of which an order in the nature of certiorari can be made removing the legal effect of the opinion.

[56] The Court of Appeal considered that a higher standard was required of a written statement of reasons given by a medical panel under s 68(2) of the Act. On the premise that Brown held that the opinion of a medical panel must be adopted and applied for the purposes of determining all questions or matters arising under or for the purposes of the Act, the Court of Appeal analogised the function of a medical panel forming its opinion on a medical question to the function of a judge deciding the same medical question. Accordingly, it then equated the standard of reasons required of a medical panel with the standard of reasons that would be required of a judge giving reasons for a final judgment after a trial of an action in a court. The application of that judicial standard in circumstances where an affected party had provided to the medical panel opinions of other medical practitioners and had sought in submissions to rely on those opinions, and where the opinion formed by the medical panel itself did not accord with those opinions, meant that “it was incumbent on the [P]anel to provide a comprehensible explanation for rejecting those expert medical opinions or, if it be the case, for preferring one or more other expert medical opinions over them”. Rejection of the premise and the analogy, for reasons already stated, entails rejection of the conclusion that the higher standard is required. A medical panel explaining in a statement of reasons the path of reasoning by which it arrived at the opinion it formed is under no obligation to explain why it did not reach an opinion it did not form, even if that different opinion is shown by material before it to have been formed by someone else.”

30. While Wingfoot refers to a medical panel under the Accident Compensation Act 1985 (Vic), the standard for written reasons set out at [54]-[56] above apply equally to the Tribunal Member and Appeal Panel under the CAT Act in this case.

The plaintiff’s application for leave to appeal

31. Counsel for the plaintiff submitted that this appeal raises matters of public importance. It is the plaintiff’s position that the Appeal Panel ordered a work order outlining the work that the defendant must perform, and that that order is unworkable. The issues raised in this appeal are therefore of public importance for plaintiffs and builders.

32. The appeal is raised on many grounds. They can be broadly identified as involving three topics: the first is the remedy, the second is misleading or deceptive conduct and the third is repudiation. Most of the grounds of appeal do not raise questions of law but rather seek to re-litigate factual findings. In Swain v Waverley Municipal Council [2005] HCA 4; (2005) 220 CLR 517 at [2], Gleeson CJ reiterated that in the common law system of civil justice, the trial process determines the issues between the parties. The system does not regard the trial as merely the first round in a contest destined to work its way through the judicial hierarchy until the litigants have exhausted either their resources or their possibilities of further appeal. This is one such case.

33. Both parties relied upon expert reports. The plaintiff relied upon the report of Mr Coombes and the defendants relied upon the report of Mr Gray.

34. I will deal with the three topics of the plaintiff’s grounds of appeal in turn.

(1)   Misleading or deceptive conduct

35. On the ground of misleading or deceptive conduct, counsel for the plaintiff referred to Solar Tube Australia Pty Ltd v Solar Bridge International Pty Ltd [2017] FCCA 657, where the legal principles in relation to ss 18 and 29 of the Australian Consumer Law are set out. I shall only reproduce the three principles which are relevant to the plaintiff’s argument. They are firstly, to protect the public from deception; secondly, to identify the class of consumers to whom the conduct is directed; and thirdly, in relation to advertising, to attribute significance to the “dominant message” of the advertisement when assessing whether it is misleading or deceptive.

The plaintiff’s submissions

36. It is the plaintiff’s position that the website representations induced her to enter the contract and that the tiling representations induced her to allow Mr Morphett and his labourer, Joshua Wilde, to personally carry out the tiling in lieu of their usual tiler, Mark Groves. She did not stray from this position during cross examination.

37. The plaintiff argued that as the evidence unfolded at first instance, it became clear that:

1. The standard of the work carried out by the builder or Mr Morphett was not “premium” or “quality”. The builder’s own expert stated that the work was “average or above average”. The plaintiff noted that the expert expressed this opinion after the builder had already returned twice to rectify the defects.

2. The tiles used on the walls were cheap Chinese-made tiles of inferior quality and price to those chosen by the plaintiff at Living Tiles in Drummoyne. This evidence was not disputed at hearing. The builder's expert annexed an invoice said to be for the wall tiles. However, during cross examination, it was conceded that the invoice was not as represented.

3. The builder did not only use his usual tiler, Mr Groves, on every job. He also did some tiling himself, with the help of Andi Bodini and his labourer, Mr Wilde.

4. Further, it emerged that Mr Groves would never have been available to carry out the tiling for the works, as he had undergone back surgery in China in May 2014, rendering him incapable of work for almost one year.

5. While Mr Groves deposed that he was a qualified licensed tiler with over 25 years of experience in both the UK and Australia, he failed to depose that he did not obtain a tiling licence in Australia until January 2014. As such, his work for CPD Holdings when he began in 2012 was as an unlicensed tiler. Similarly, he failed to give evidence of his qualifications or training from the UK.

6. Mr Wilde, the labourer who assisted Mr Morphett with the tiling, had just started work with the builder. Mr Morphett conceded during cross examination that he had never seen any of Mr Wilde's work prior to him starting the job on the plaintiff's property.

7. Although the website stated that Mr Morphett had 21 years of experience in the home building industry and that he was a fully licensed builder and carpenter, it failed to disclose that:

1. Mr Morphett did not obtain any formal building qualifications until 2011;

2. Mr Morphett obtained his own personal builders licence in 2011, only three years before he commenced work on the plaintiff's bathrooms;

3. Mr Morphett's supervisor certificate only enabled him to supervise minor maintenance and cleaning between 12 March 2002 and 15 February 2012. He was only able to supervise building work from 15 February 2012, a little over two years before work commenced on the plaintiff’s property;

4. Prior to 2002, Mr Morphett held no licence whatsoever for any type of home building work; and

5. Mr Morphett was not a licensed tiler nor had he undertaken any formal training in tiling.

8. Essentially, Mr Morphett had only held a formal licence for 12 years before he carried out the works on the plaintiff’s property. Nine out of those 12 years had been spent merely cleaning and performing minor maintenance.

9. The additional 13 years for which Mr Morphett claimed to have been working in the building trade were only in various capacities as an unlicensed tradesperson or labourer.

38. It was the plaintiff’s case that given the evidence, the website and tiling representations were misleading and deceptive on any objective view.

39. At first instance, the plaintiff set out the relevant authorities on misleading and deceptive conduct. While the Tribunal Member agreed with the authorities cited, she did not apply them to the circumstances of the case.

40. The Tribunal Member’s findings were:

1. Mr Gray’s evidence related to the agreed price being commensurate with an “average” installation. It was not evidence that the work carried out by the builder was merely “average”.

2. The word “premium” was a descriptive word not capable of being assessed as meaning any more than that the builder was capable of carrying out premium work. The Tribunal Member accepted that the builder had reasonable grounds for making the representation, given his experience in the building industry.

3. Although Mr. Morphett had only held a builder’s licence since 2011, the Tribunal was satisfied that Mr Morphett had 21 years of experience in the building industry.

4. The builder had been using another tiler since May 2014.

5. There was no evidence that the plaintiff entered into the contract in reliance on the representations that the UK tiler, Mr Groves, would be the only tiler used.

41. The plaintiff appealed these findings, primarily on the grounds that the Tribunal Member failed to examine the representations made from the perspective of the ordinary or reasonable members of a class, being in this case, the plaintiff.

42. The Appeal Panel agreed that the test was as stated by the plaintiff in her point of appeal. It stated at [57] of its decision:

“[57] The Tribunal stated correctly at [96] that the test for misleading and deceptive conduct is an objective question of fact. It follows that the correct perspective is that of the ordinary reasonable consumer, not for example the perspective of either of the parties.”

43. The plaintiff submitted that it was unclear how the second proposition could reasonably follow the first. Notwithstanding its statement at [57], the Appeal Panel referred to the builder's own belief about the standard of work it was capable of achieving, and again referred to findings made by the Tribunal about Mr Morphett's representations about his experience. The Appeal Panel made no reference whatsoever to the class of people to whom the representations were made, and how those persons might interpret them.

44. The plaintiff argued that in light of its statements, the Appeal Panel also failed to apply the correct test.

45. It is the plaintiff's position that the website representations induced her to enter the contract with the builder, as the representations specifically included words and phrases that promised to deliver a particular standard of work, namely that the finish would be “premium” or “quality”.

46. Specifically, the reference to Mr Groves’ qualifications and training in the UK, and the statement that he was the best tiler the builder had worked with, were representations clearly made to set that tiler apart as being better than Australian tilers.

47. The plaintiff argued that the representations about Mr Morphett having 25 years of experience in the building industry were misleading or apt to mislead, given that 13 of those years were as an unlicensed person and that a further nine years were for cleaning and minor maintenance only.

48. It was the plaintiff’s position that a reasonable member of the class of persons to whom those representations were made would, in conjunction with the terms “premium” and “quality”, have expected Mr Morphett to have worked for at least 25 years as a licensed tradesperson.

49. The builder’s own expert gave evidence that the works were not premium quality, but were merely average or above average. The plaintiff suggested that this evidence was unsurprising, given that Mr Morphett had no qualifications or training in tiling and had never held a tiling licence. Similarly, Mr Wilde, the young labourer, was totally unlicensed for any trade.

50. With respect to a number of the defects which the plaintiff alleged, the Tribunal Member referred to complaints as concerning aesthetic rather than technical defects. These included:

1. The unsightly traverse cuts in the shower enclosures. When questioned about these, Mr Gray first refused to comment, but later said they were the best that could be done under the circumstances. However, these cuts could have been avoided if the builder had advised the plaintiff that smaller tiles would alleviate the need for such cuts, particularly given the small dimensions of the bathrooms. The 300 x 300mm tiles which were nominated, supplied and installed by the builder, compromised a quality or premium finish of the works.

2. The large movement joint in both bathrooms, which the relevant standard says could have been eliminated if aesthetics were an issue.

3. The uneven grout lines, which were excused on the basis that the NSW guide to standards and tolerances states that they are to be viewed from a distance of 1.5 m. The plaintiff unsuccessfully tried to argue that this guide was not useful or relevant in her case, given the small size of both bathrooms.

51. In essence, while a number of the defects alleged were not found to be technical defects, their finished appearance was not of a quality or premium standard. Again, the builder's own expert said that to achieve that sort of finish would require additional time and costs. On the basis of this evidence, it was open to the Tribunal and indeed to the Appeal Panel to find that the representations as to quality or premium work were misleading.

52. The plaintiff argued that the rectification method proposed by Mr Coombes would not only provide an adequate fix for the shower enclosures, but would give an opportunity for the rectifying builder to provide the level of finish to the bathrooms that the plaintiff expected when she engaged the defendant in the works.

53. The plaintiff claimed the cost of rectification in contract and/or, alternately, pursuant to s 236 Australian Consumer Law, arising out the misleading and deceptive conduct of the builder, as well as Mr Morphett on a joint and severable basis.

The defendants’ submissions

54. The Appeal Panel at [53]-[56] recorded the ground of challenge brought by Ms Petropoulos in relation to her misleading or deceptive conduct claim. She contended that the Tribunal had applied an incorrect legal test to determine whether statements made on the defendant’s website were misleading or deceptive.

55. The Appeal Panel observed at [57], [61] that the test for misleading and deceptive conduct is an objective question of fact. That principle of law is well-established: see Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at [102] per Gummow, Hayne, Heydon and Keifel JJ. The Appeal Panel was not satisfied that Ms Petropoulos had established any error of law in respect of the test applied by the Tribunal in determining whether the website statements were misleading or deceptive, or likely to mislead or deceive ([61]).

54. There was no factual finding that the alleged oral or “additional tiling” representations were ever made.

55. The defendant submitted that any appeal must proceed based on the facts as found, whatever might have been the evidence of Ms Petropoulos. As to the website statements, there was no finding that Ms Petropoulos was induced to enter the contract by misleading or deceptive conduct. As to the tiling representations, the factual findings were inconsistent with Ms Petropoulos’ submission that she was induced to allow something to occur.

56. The defendant argued that it was unnecessary to address the plaintiff’s submissions that certain facts should have been found, such that, given the evidence, the defendants’ representations were misleading and deceptive on any objective view. Even assuming that all of the alleged representations had been found, which they were not, all of the plaintiff’s submissions were directed to questions of fact.

57. The defendants referred to the judgment of Glass JA in Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139. In that case, his Honour said that there is no error of law in a factual finding that is perverse or contrary to the overwhelming weight of the evidence, or against the weight of the evidence, or which is a finding that no reasonable person could have made. Further, it is pointless to submit that the reasoning by which the Tribunal Member arrived at a finding of fact was demonstrably unsound, as this does not amount to error of law. Once the factual findings have been made by the Tribunal Member, or on appeal by the Appeal Panel, that is the end of the matter so far as facts are concerned: see Borcherdt v Scott [2014] NSWCA 339 at [34] per Tobias AJA.

58. The defendants submitted that although Ms Petropoulos attempted to set out some factual findings of the Tribunal Member, she mistook the finding. The finding was actually that there was little evidence that Ms Petropoulos entered into the contract on the basis that she understood Mr Groves to be the tiler. Her best evidence was found to suggest that she may have been induced by the fact that CPD Holdings used only one tiler, who was experienced.

59. The first appeal by Ms Petropoulos was on the ground that an incorrect legal test had been applied when finding whether conduct was misleading or deceptive. It appears that she has now pressed the same ground of appeal.

60. As to the plaintiff’s submission that the Appeal Panel’s proposition at [57] is illogical, the defendant argued that there is no difficulty in seeing how the Appeal Panel's second proposition follows the first. The Appeal Panel explained at [59] how Ms Petropoulos had misunderstood the Tribunal's reasoning with regard to the words “premium bathroom renovation”. The Appeal Panel noted that the correct perspective for assessing whether conduct was misleading or deceptive was that of an ordinary reasonable consumer. It said it was not satisfied that Ms Petropoulos had established that a wrong test was applied.

61. The plaintiff failed to identify anything approaching a contention that the Appeal Panel erred in law. The defendant noted that the wording of the plaintiff’s submissions betrayed a fundamental misunderstanding of the nature of any appeal to this Court from the Appeal Panel. It simply does not matter what was “open” to the Tribunal or the Appeal Panel to find. Submissions of that nature do not give rise to a valid ground of appeal.

62. These statements of what Ms Petropoulos “says” and what she “claims” do not seem to be directed to any ground of appeal. Further, factual findings have been made about the opinion of Mr Coombes.

63. Nothing submitted by Ms Petropoulos in relation to her misleading or deceptive conduct claims properly identifies any contended error of law, let alone a ground that has any, or any substantial, prospects of success on appeal. For that reason alone, the defendant submitted, the Court should refuse leave to appeal on this ground.

Consideration

66. In the primary proceedings, the Tribunal Member stated at [73]:

“[73] As set out above, the test as to whether the website representations were misleading and deceptive is an objective one as against the ordinary or reasonable members of the class, being, relevantly, plaintiffs.”

67. The Tribunal Member continued at [89]:

“[89] The Tribunal is not satisfied that the use of the word ‘Premium’ in the builder’s website amounts to misleading or deceptive conduct. The word ‘Premium’ in a website advertisement for a business is simply a descriptive word that is not capable of being assessed as meaning any more than the builder is capable of carrying out premium work. The Tribunal accepts the builder’s submissions that the use of the word ‘premium’ demonstrates an expression of an opinion and does not constitute misleading or deceptive conduct unless it is demonstrated that the opinion was not honestly held or not held upon rational grounds. The Tribunal is satisfied that the builder had reasonable grounds for making the representations, having regard to the builder’s experience in the building industry.”

68. In its judgment, the Appeal Panel stated at [57], [61]:

“[57] We agree with Ms Petropoulos that, ‘[T]he tendency of the conduct or representation to mislead or deceive is to be considered or tested against the ordinary or reasonable members of the class to whom the representation was made or the conduct directed’: Australian Olympic Committee, Inc v Telstra Corporation Limited [2016] FCA 357 at [132]. But the Tribunal cannot be criticised for failing to expressly state every legal principle associated with the law of misleading or deceptive conduct. As the Tribunal observed at [95], there is ‘an enormous body of case law in relation to whether conduct is misleading or deceptive’. The Tribunal stated, correctly at [96], that the test for misleading and deceptive conduct is an objective question of fact. It follows that the correct perspective is that of an ordinary reasonable consumer, not, for example, the perspective of either of the parties.

…

[61] We repeat in relation to these representations that the Tribunal stated, correctly, that the test for misleading and deceptive conduct is an objective question of fact. It follows that the correct perspective is that of an ordinary reasonable consumer. We are not satisfied Ms Petropoulos has established any error of law in respect of the test applied by the Member in determining whether the representations were misleading or deceptive, or likely to mislead or deceive, prior to the execution of the contract.”

69. The majority of the plaintiff’s submissions on this ground are directed towards challenging findings of fact, upon which there is no right to an appeal. Furthermore, her allegation that the Tribunal and Appeal Panel applied the wrong test for misleading or deceptive conduct is misconceived. The Tribunal Member and the Appeal Panel stated correctly that the test for misleading and deceptive conduct is an objective question of fact, to be determined from the perspective of an ordinary reasonable consumer, not the perspective of the plaintiff. The plaintiff has failed to demonstrate that the decision of the Appeal Panel is arguably wrong. The plaintiff has failed to demonstrate that any of these grounds of appeal are arguably raised.

(2)   Repudiation

70. The plaintiff submitted that the finding of the Appeal Panel that she had repudiated the contract was against the weight of evidence. The defendant noted that it was the Tribunal Member, not the Appeal Panel, which made the finding that the plaintiff had repudiated the contract. The Appeal Panel found that it was not persuaded that the finding of the Tribunal Member was against the weight of evidence. The defendant argued that this ground of appeal is therefore not addressed to the Appeal Panel, which made no discernible error of law.

The plaintiff’s submissions

71. When the plaintiff sent a notice to the defendant in 2015 asking it to rectify the defects in accordance with the scope outlined by Mr Coombes, the builder responded by stating that the plaintiff’s notice was invalid, given the builder had issued a suspension notice on 26 August 2014.

72. On 26 August 2014, the defendant sent two emails to the plaintiff. The first was an offer to resolve the matter by financial resolution and the other an email saying that works will be suspended. It is worth noting that this was at a time when the builder had been back twice to rectify the defects.

73. Pursuant to cl 26 of the contract for works, the defendant could give a notice to suspend works if the owner met any of the criteria set out in that clause. In the email sent to the plaintiff, it is unclear which of the factors in cl 26 the defendant relied upon in issuing his suspension notice.

74. The plaintiff further noted that the suspension email failed to refer to cl 26, and that an email did not constitute proper service under cl 28. In any event, the defendant failed to follow up on this notice by way of a termination notice.

75. When a rectification order was issued to the defendant in October 2014, the builder failed to comply. There is no evidence of any further notice under the contract requesting access to complete the works in accordance with the rectification notice. It is therefore unclear how, under the circumstances, the builder could maintain that the suspension notice dated 26 August 2014 could remain in force.

76. It is the plaintiff’s position that her notice on 31 August 2015 was valid as was her termination notice in February 2016.

77. The plaintiff argued that the Appeal Panel’s finding that the homeowner repudiated the contract was against the weight of evidence.

78. Further, that finding was made without taking into account relevant considerations, such as:

1. the terms of the contract;

2. the fact that the homeowner had twice allowed the builder back to rectify the defects;

3. that the homeowner was correct to insist that the builder change the size of the shower dimensions;

4. that the builder had offered a monetary settlement in lieu of returning to finish the work; and

5. that the defendant had made representations as to “quality” or “premium” work.

79. The plaintiff’s bathroom remains unfinished almost five years after the builder commenced work. While there was no liquidated damages clause in the contract, she claims consequential damages for having two bathrooms that are incomplete and which have no finished shower recess. She claims $100 per week for that delay cost.

80. In the alternative, she claims delay costs pursuant to s 236 of the Australian Consumer Law.

The defendant’s submissions

81. The defendant argued that the plaintiff was wrong in stating that the Appeal Panel did not find that the plaintiff had repudiated the contract. That was the Tribunal Member’s finding. The Appeal Panel at [76] found it was not persuaded that the Tribunal Member’s findings were against the weight of the evidence.

82. The Appeal Panel made that finding because it recognized that whether a contract has been repudiated is a question of fact. It followed that the Appeal Panel could only give leave to appeal against the Tribunal Member’s finding of repudiation if it was satisfied that the plaintiff may have suffered a substantial miscarriage of justice because the decision was not fair and equitable or was against the weight of the evidence. The Appeal Panel stated at [76] that it was not so satisfied. It refused leave for the plaintiff to appeal on grounds other than a question of law.

83. It is quite plain that in this regard, there is a fundamental disconnect between the Appeal Panel’s decision and the plaintiff’s proposed ground of appeal. The proposed ground is not addressed to the decision of the Appeal Panel. No error of law can be discerned in what the Appeal Panel decided on this question.

84. Even if the Appeal Panel had made a finding for itself that Ms Petropoulos had repudiated the contract, its finding would have been one of fact which could not be challenged on appeal to this Court.

85. For these reasons, the defendant argued that it is unnecessary to address the plaintiff’s submissions in relation to repudiation, except to note that some of these matters were not raised before the Appeal Panel.

86. The plaintiff argued that the Appeal Panel’s finding that the homeowner repudiated the contract was against the weight of evidence. The defendant noted that the Appeal Panel did not make any asserted finding of this kind, and in any event, the plaintiff was not entitled to appeal to this Court on the ground that a factual finding was against the weight of the evidence.

87. The plaintiff further provided a list of relevant considerations which the Appeal Panel failed to take into account. The defendant argued that this submission was also misdirected. At [75], the Appeal Panel accurately characterised Ms Petropoulos's “repudiation” ground of appeal as asserting that the evidence supported a finding that she was fully justified in terminating the contract, because CPD Holdings had repudiated the contract by failing to rectify and complete the works. In that context, the Appeal Panel addressed the relevant considerations in [76]. Those were whether the ground raised a question of law and, if not, whether the Appeal Panel was satisfied that the decision was against the weight of the evidence such that Ms Petropoulos may have suffered a substantial miscarriage of justice.

88. As to the plaintiff’s submissions in relation to consequential damages, the defendant argued that they raise an issue of claimed “delay” unrelated to the submissions on repudiation. The defendants presumed they were directed to [4g-i] in the summons, which also seemed to raise a separate ground from the remainder of [4] of the summons. Moreover, the defendant argued that the grounds were not directed to the Appeal Panel’s actual decision.

89. The Appeal Panel refused leave to appeal on a question of fact relating to the claim of delay, giving reasons at [70] of its decision. It noted that the plaintiff raised a “no evidence” ground for the first time in oral submissions on appeal, but concluded there was evidence to support the Tribunal's finding at [71]-[72]. The Appeal Panel at [73] also dismissed grounds relating to the Tribunal’s findings about mitigation, because they were made in the alternative and because the primary finding that the delay in contract completion was caused by Ms Petropoulos was not being appealed.

90. Contrary to [4g] of the summons, the Appeal Panel did not find that no damages for delay were due to the matters stated there. The defendant argued that for these reasons, no error of law can be discerned in what the Appeal Panel decided on the question of delay.

Consideration

91. The Appeal Panel stated at [3], [4], [70]-[76]:

“[3] Ms Petropoulos has appealed to the Appeal Panel of the Tribunal from this decision. She is entitled to appeal “on a question of law” but must obtain the Appeal Panel’s permission before she can appeal on any other ground: Civil and Administrative Tribunal Act 2013 (NSW) (NCAT Act), s 80(2)(b).

[4] The circumstances where the Appeal Panel will give an appellant permission to appeal on a question, other than a question of law, are set out in Schedule 5, cl 12(1) to the NCAT Act. The Appeal Panel may only grant permission if it is satisfied that Ms Petropoulos “may have suffered a substantial miscarriage of justice because:

(a) the decision of the Tribunal under appeal was not fair and equitable, or

(b) the decision of the Tribunal under appeal was against the weight of evidence, or

(c) significant new evidence has arisen (being evidence that was not reasonably available at the time the proceedings under appeal were being dealt with).”

…

[70] We are unable to identify a question of law in relation to this ground of appeal. If Ms Petropoulos is requesting permission for this ground of appeal to go ahead, she would have to establish that she has suffered a substantial miscarriage of justice because, for example, the decision of the Tribunal under appeal was against the weight of evidence. The Tribunal set out the evidence and gave reasons for its findings. We are not persuaded that those findings were against the weight of the evidence.

[71] Ms Petropoulos’s final point was that there was no evidence to support the Tribunal’s finding at [113], that she did not allow the builder to access the site to carry out rectification work and complete the building works. This was a new ground made for the first time in oral submissions on appeal. Making a finding of fact based on “no evidence” is an error of law. To establish an error of law Ms Petropoulos must demonstrate that there “is no evidence of a primary fact” and that this fact is “crucial to [the Tribunal’s] decision”: Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139, Kirby P at 151.

[72] The evidence that Ms Petropoulos did not allow the builder to access the site to carry out rectification work can be found in the Appellant’s Bundle at pp 314, 326, 329, 361, 363, 367-369. There was evidence to support the Tribunal’s finding.

[73] Grounds 4(d)(ii) and (iii) relate to the Tribunal’s findings about mitigation of loss. As this finding was made in the alternative, and no challenge has been made to the primary finding that the delay in the contract being completed has been caused by the homeowners act or omissions, this ground of appeal is dismissed.

Tribunal’s findings and reasoning

[74] The Tribunal found at [116] that the contract was validly terminated by the builder on 22 February 2016 by relying on the repudiation of the home owner. That finding was significant when determining the builder’s claim and the Tribunal’s order that the plaintiff pay the builder $952.20 in loss of bargain damages.

Grounds of appeal

[75] At [104] to [119] of her submissions in chief, Ms Petropoulos sets out the history of the communications with the building company and makes a series of assertions in support of her argument that it was the building company who repudiated the contract. The ‘repudiation’ ground of appeal is that the evidence supports a finding that she was fully justified in terminating the contract because the builder had repudiated the contract by failing to rectify and complete the works.

Consideration

[76] We are unable to identify a question of law in relation to this ground of appeal. If Ms Petropoulos is requesting permission for this ground of appeal to go ahead, she would have to establish that she has suffered a substantial miscarriage of justice because, for example, the decision of the Tribunal under appeal was against the weight of evidence. The Tribunal set out the evidence and gave reasons for its findings. We are not persuaded that those findings were against the weight of the evidence.”

92. In Batterham v Maekig [2010] NSWCA 86, Young JA (with McColl JA agreeing) referred to the decision of Walsh JA in Satellite Estate Party Ltd v Jacquet [1968] 2 NSWLR 340, and concluded at [86] that “[t]he question of repudiation is a question of fact”. There is no right to appeal on a question of fact. This ground of appeal is therefore misguided and must fail. Even if I am wrong, it cannot be said that the opinion of the Appeal Panel is arguably wrong.

(3)   Remedy

The plaintiff’s submissions

93. So far as the remedy is concerned, the plaintiff had submitted to the Appeal Panel that she should be awarded damages for costs of completely reconstructing the ensuite and bathroom with 900 mm x 900 mm shower recess areas. The defendants submitted that the plaintiff should not receive damages because the rectification work proposed by the plaintiff was clearly unreasonable, and a work order should be made to make the shower recesses bigger, in accordance with the evidence given by its expert.

94. The works have remained defective and incomplete. The plaintiff stated that by 2016, she had lost total confidence in the defendant to remedy or complete the work. She ultimately came to the view that the defendant was not able to complete the works to the quality advertised, and that it had evinced an intention not to be bound by the contract. The plaintiff sent a notice of termination to the defendant on 9 February 2016.

93. The defendant claimed the termination notice was invalid, treated the notice as repudiation, and accepted the same.

The defendant’s submissions

96. The Appeal Panel ordered the parties to provide further written submissions on the appropriate remedies, if any, in relation to the found breach of statutory warranty by the defendant. That occurred and, in its second decision, the Appeal Panel decided the question of remedy on the papers. It ordered the defendant to perform work to make the showers 900 mm x 900 mm in size and ordered the plaintiff to provide access to enable that to occur. The plaintiff had argued that there should be a compensation order made, including for claimed “consequential loss”, but the Appeal Panel declined to make such orders: see Petropoulos (No 2) [31], [39]-[41].

97. In the course of its second decision, the Appeal Panel in Petropoulos (No 2) at [33] observed that the sole defect, other than the very minor damage to the bath, was that the ensuite and shower recess areas were 850 mm x 850 mm rather than 900 mm x 900 mm.

Consideration

98. The powers of the Tribunal are set out in s 48O(1) of the Home Building Act. It reads:

“48O Powers of Tribunal

(1) In determining a building claim, the Tribunal is empowered to make one or more of the following orders as it considers appropriate:

(a) an order that one party to the proceedings pay money to another party or to a person specified in the order, whether by way of debt, damages or restitution, or refund any money paid by a specified person,

(b) an order that a specified amount of money is not due or owing by a party to the proceedings to a specified person, or that a party to the proceedings is not entitled to a refund of any money paid to another party to the proceedings,

(c) an order that a party to the proceedings:

(i) do any specified work or perform any specified service or any obligation arising under this Act or the terms of any agreement, or

(ii) do or perform, or refrain from doing or performing, any specified act, matter or thing.”

99. Section 48MA refers to the rectification of defective work. It reads:

“48MA Rectification of defective work is preferred outcome in proceedings

A court or tribunal determining a building claim involving an allegation of defective residential building work or specialist work by a party to the proceedings (the ‘responsible party’) is to have regard to the principle that rectification of the defective work by the responsible party is the preferred outcome.”

100. The Appeal Panel concluded (Petropoulos (No 2)) at [31] and [38]:

“Should the Tribunal award damages, rather than making a work order?

[31] We must have regard to the principle that rectification of the defective work by the responsible party is the preferred outcome. There are no reasons why the builder should not be permitted to rectify the defective work. The builder is licensed and is prepared to return and perform rectification work if ordered to do so. There is no history of intimidation on either side or any other reason which would make this option impractical, unfair or inequitable.

Is the work proposed by the plaintiff necessary to produce conformity with the contract?

[32] Based on Mr Coombes’ evidence, the plaintiff submits that the bathrooms should be totally removed, that there should be re-waterproofing, re-tiling, reconstruction of the shower recess areas and installation of new components. Mr Coombes expresses the opinion in his report of 14 July 2015, that the defect “can only be rectified by removing the floor tiles, waterstop, bedding mix and waterproofing in each room and relaying all to the correct set out and dimensions”. He does not explain why such extensive work is necessary. The majority of Mr Coombes’ reports, and his evidence involved alleged defects (such as defective tiling) that were rejected by the Tribunal at first instance and by the Appeal Panel on appeal.

[33] The sole defect (other than very minor damage to a bath) is that the ensuite and shower recess areas are 850 mm x 850 mm rather than 900 mm x 900 mm. We are not satisfied that the scope of works identified by the plaintiff’s expert is necessary to produce conformity with the contract.

Is altering the size of the shower recess areas unreasonable, impractical, unfair or inequitable?

[34] Firstly, the builder submits that the rectification work proposed by the plaintiff is unreasonable because increasing shower recess areas to 900 mm x 900 mm would have the consequential effect of reducing the space between the showers and the toilets, detracting from the “fitness for purpose” of the ensuite and bathroom. The plaintiff did not submit that an increase in the size of the shower recesses would make the bathrooms unfit for purpose. In those circumstances, we do not accept the builder’s submission.

[35] Secondly, the builder submitted that the plaintiff agreed to the installation of shower recess areas with the smaller dimensions. There was a factual dispute between the parties as to whether or not the plaintiff had orally agreed to vary the size of the shower recesses from 900 mm x 900 mm to 850 mm x 850mm. Any oral agreement made by the plaintiff and the builder is irrelevant to the question of whether the size of the shower recess areas should be modified. The Appeal Panel has found that the alteration to the size of those areas constitutes a breach of a statutory warranty.

[36] Thirdly, the builder submitted that the current 850 mm x 850 mm shower recess areas were of adequate size, and “there cannot be any suggestion that this is an impracticably small shower area”. The builder’s opinion about the adequacy of the size of the existing shower area is irrelevant.

Is a limited work order a reasonable course to adopt?

[37] We are satisfied that the appropriate method of rectification is the method set out in the oral evidence of Mr Gray given in cross-examination. Although the plaintiff has submitted the proposed method of rectification is a “patch job” with potential further problems regarding the waterproofing membrane, there is no evidence to support that submission. We accept that it may be difficult for the builder to obtain precisely matching tiles, but even if they cannot be obtained, it is reasonable to attempt to match the tiles rather than ordering that each bathroom be completely re-tiled.

[38] We are satisfied that an appropriate time frame for the builder to perform the rectification work is 7 weeks from the date of this decision.”

101. Section 48MA of the Home Building Act states that rectification of defective works is the preferred outcome in proceedings. The Appeal Panel accepted on the available evidence that the defendants were capable of completing the works in compliance with the contractual warranties. In my view, the plaintiff has failed to demonstrate that under the circumstances, the decision of the Appeal Panel is more than arguably wrong. I am also not satisfied that these grounds of appeal in the plaintiff’s application for leave to appeal involves a matter of principle or a question of public importance, especially in circumstances where the costs of lengthy appeals have swamped the sum involved in the dispute: see Zenden v Sewell per Campbell JA at [22]. For these reasons, in the exercise of my discretion, I refuse leave to appeal.

The defendant’s application for leave to cross appeal

102. The cross appeal contains seven grounds of appeal. They are firstly, the proper construction of the building contract in relation to the shower screens; secondly, the waiver of a contractual term; thirdly, no breach of statutory warranty; fourthly and fifthly, waiver of entitlement to claim a remedy; sixthly, remedy; and finally, non-payment relevant to the work order. I shall deal with each topic in turn, considering grounds four and five together.

103. The defendants submitted that they should be granted leave to cross appeal on the following grounds. They are:

“1. The Appeal Panel failed to address or deal at all with submissions advanced by the first cross-claimant on matters the subject of the proposed cross-appeal and which, if accepted, would have altered the outcome on appeal. The first cross-claimant has thereby been deprived of its entitlement to have those submissions fairly considered and disposed of, particularly in circumstances where it had succeeded at first instance.

2. The Appeal Panel failed to apply well-established principles for the construction of contracts, which…were set out in case law which the Appeal Panel itself referred to in the March 2018 decision.

3. In some cases, the errors of law made by the Appeal Panel are clearly demonstrable.

3A. By the March 2019 decision, the Appeal Panel deprived the second cross-claimant, a wholly successful party, of any of his costs of the appeal on a misunderstanding of the nature of the proceedings against the second cross-claimant and without giving him any opportunity to address the grounds on which that decision was made.

3B. The burden of the costs order imposed on the first cross-claimant by the March 2019 decision will be disproportionate to the cross-defendant's limited success in the appeal and the remedy she achieved, having regard to the fact, as was found, that the cross-defendant failed on eleven of twelve grounds of appeal and that many of those grounds were weak

4. The cross-defendant has sought leave to appeal the Work Order and other parts of the March 2018 decision in relation to which the cross-defendant's appeal had been dismissed. If the cross-defendant obtains that leave, there will be argument about the Work Order and findings made in the March 2018 decision in any event.”

(1)   Construction of the building contract

The defendant’s submissions

104. Counsel for the first defendant referred to various findings of the Appeal Panel concerning conversations between the parties about the size of the shower screens. The ground of appeal is that the Appeal Panel erred in its construction of the contract in that it erroneously concluded that the works specified thereunder required the installation of 900 x 900 mm frameless shower screens in the bathrooms (Petropoulos (No 1), [30]-[31]), and that in doing so, it failed to construe the language of the contract as a whole and failed to give proper weight to surrounding circumstances known to the parties.

105. The first defendant submitted that the High Court case of Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 (“Codelfa”) indicates the relevance of surrounding circumstances when construing contracts. In Codelfa at 353-354, Mason J held that it was permissible to have regard to “discussions between the parties which proceeded entry into the contract” as evidence of the parties’ common understanding or assumption about performance.

106. In its decision, the Appeal Panel also referred to a number of well-known authorities on the subject of statutory construction, including the Court of Appeal decision of Cherry v Steele-Park [2017] NSWCA 295; 351 ALR 521 (“Cherry”). The Appeal Panel noted Leeming JA’s observation in Cherry at [72] that a court must construe a contract by having regard to both the contract as a whole and the background circumstances known to both parties, although “very often, nothing in the context will come close to displacing the ordinary grammatical meaning of the legal text”.

107. In Cherry, Leeming JA made reference to several other cases which illustrate the legitimate use of surrounding circumstances when construing a contract. The first defendant provided detailed submissions of the relevance of those cases in these proceedings. In one, Boreland v Docker [2007] NSWCA 94 at [61], the Court of Appeal held that conversations between parties prior to a letter of offer could be used to inform its meaning and effect. In that case, Beazley JA said, quoting the decision Mason J in Codelfa, that the content of that conversation informed “the objective framework of facts” surrounding the contract.

108. The first defendant also made reference to the decision of Lahoud v Lahoud [2009] NSWSC 623, in which Ward J made use of a pre-contractual conversation in order to construe Terms of Settlement and a Deed of Settlement.

109. Finally, the first defendant referred to Angas Securities Ltd v Small Business Consortium Lloyds Consortium No. 9056 [2016] NSWCA 182 (“Angas”). In Angas, Sackville AJA noted at [112] that, pursuant to the decision in Codelfa, discussions between contracting parties which demonstrated a common understanding as to how work under the contract was to be performed could be considered when construing the contract.

110. The first defendant submitted that the relevant surrounding circumstances to the contract in this case include a conversation that was found at [86] of the Primary Member’s decision to have occurred between Mr Morphett and Ms Petropoulos. Ms Petropoulos told Mr Morphett that she wished for the shower screens to be as large as possible. Mr Morphett replied, “The rooms are rather small, so it will depend on the fittings that you select and what I find when we do the demolition. I suggest that I allow for custom made 900 x 900 mm screens and if you decide to go ahead with my quote, we can figure out the exact size during the job.” It was also found at [87] that the bathroom vanities had not been selected at the time of the quotation to which Mr Morphett referred.

111. The quotation given by the first defendant provided for works including “Installation of plumbing fittings listed in roughly the same locations”. The “FITTINGS INCLUDED” in the quote listed “Custom 900 x 900 x 200 mm frameless shower screens”, consistent with the discussion between the parties. The quotation was not itself a contract, although it was subsequently incorporated into the contract. The first defendant submitted that the written quotation reflected the verbally quoted price, on the basis of the earlier conversation in which Mr Morphett suggested that he “allow for custom made 900 x 900 mm screens” and then determine the exact sizing during the job. The first defendant argued that the word “custom” further suggested that the screens might have needed to be non-standard.

112. The first defendant submitted that the Appeal Panel failed to give adequate consideration to several clauses within the contract which reflect the conversation between Mr Morphett and Ms Petropoulos, including the following:

“WORKMANSHIP BATHROOM AND ENSUITE

…

•   Installation of plumbing fittings listed in roughly the same locations.

…

•   Installation of bath, vanities and all accessories on fit out.

…

FITTINGS INCLUDED

•   Custom 900 x 900 x 200mm frameless shower screens.

…

QUOTED WORKS

The quoted works are detailed within the quotation and the works contract with the quotation being annexed as a contract document within said contract. Upon visual inspection and subsequent quotation no physical and or intrusive investigations were carried out on the property and as such all assumptions have been made on an “as seen” basis as is common place in the building industry.

…

DECISIONS AND INFORMATION FROM CLIENT

During the building process decisions may be needed from the client at the request of the builder in terms of items such as, but not limited to placement of items, setting out of tiles, grout colour and claims for variation being in addition to or in reduction of the contract price. For the progression of the process to happen within the contractual timeframe, the client needs to provide these decisions to the builder within a workable timeframe. At certain times this may need to be on the day or even on the spot as tradesman will be on site at that time to carry out the works. Should the client be unable to provide a response the client accepts the builders [sic] decision to carry out this item in ‘his best judgment and in accordance with the Home Building Act and Works Contract’.

…

VARIATIONS TO THE CONTRACT

Variation to the contract in terms of matter such as cost or specification will be advised to the client in writing. As the project is small in its timeframe this can cause delays to the progress of the renovation. Variations that cause an increase to the contract value are to be invoiced and therefore payment is to be made within the progress period to which the varied works were carried out.”

113. Clause 9 of the contract contained express warranties consistent with those provided for in s 18B of the Home Building Act, including a provision that no other provision of the contract could reduce or restrict the express warranties. In addition, s 18B of the Home Building Act had the effect of implying warranties into the contract, but from 1 March 2015 did so according to the form of s 18B in force from that date, which was applicable to contracts made before that date: see Sch 4, cls 121, 125.

114. In light of the conversation between the parties, as well as these excerpted clauses in the Terms and Conditions of Trade of the contract, the first defendant submitted that the contract does not contain an unqualified promise by CPD Holdings to install 900 x 900 mm frameless shower screens in the bathrooms.

115. Specifically, the first defendant attributed significance to the “QUOTED WORKS” provision of the contract. This provision agreed that no physical investigations of the site had been carried out, and that as such, the quotation forming part of the contract had been prepared on an “as seen” basis. The first defendant submitted that reasonable persons in the position of the parties would have understood this provision to mean that the quotation was not to be understood as an unqualified promise that the quoted works would be performed precisely as quoted. The first defendant submitted that the word “assumption” under the “QUOTED WORKS” provision referred to the assumption that 900 x 900 mm frameless shower screens would be able to be approximately accommodated in the bathrooms with the other fittings selected or to be selected for those rooms.

116. The first defendant further submitted that the Tribunal’s findings at [29]-[30] reveal an objective framework of facts:

1. that the known and communicated desire of Ms Petropoulos was for the shower screens to be as large as possible;

2. that CPD Holdings had communicated to Ms Petropoulos that it did not know how large it could make the shower screens until the bathroom fittings had been selected and the existing bathrooms demolished; and

3. that CPD Holdings communicated to Ms Petropoulos that its quotation would allow for 900 x 900 mm screens, with the exact sizing to be determined when the works were underway.

117. The first defendant submitted that the common understanding of the parties was that the size of the shower screens would not be finally specified in the quotation. The object of the discussion at the time of the quoting of the works was to accommodate, as far as possible, Ms Petropoulos’ desires with regard to the showers and, as in Codelfa, to enable CPD Holdings to “inform itself of what was involved in the work and to cost it so as to arrive at a price for inclusion” in its quotation: see Codelfa at 354. The common contemplation of the parties was that the exact size of the shower doors would be determined during the works.

118. The first defendant further submitted that the Appeal Panel failed to adequately take into account the context provided by the “DECISIONS AND INFORMATION FROM CLIENT” provision of the contract. This provision referred to (but was not limited to) a possible need for decisions as to the placement of items during the performance of the works. It recognised that a bathroom reasonably fit for use as a bathroom would require consideration of the placement of items so as to afford reasonable access to each other amenities of the bathrooms. It would also extend to decisions about the sizing of items during the performance of the works.

119. Finally, the first defendant submitted that the express and implied warranties in the contract required the work and materials to be reasonably fit for the specified purpose or result, which was the use of the bathrooms and fittings for their intended purpose. That obligation could not be restricted by other terms of the contract. The provision of a bathroom reasonably fit for use as a bathroom would include reasonable access to each of the amenities of the bathrooms, including fixtures such as toilets. In that context, sizing and location of other items would need to be considered in the context of the physical limitation of the room sizes.

187. There is no doubt that s 48O of the Home Building Act provides the Tribunal with remedial discretion in determining a building claim, however, that does not mean that the claimant is not invoking a right by making a building claim in the Tribunal. The Appeal Panel’s error may be illustrated in the following way: as mentioned, the Tribunal does not have jurisdiction in a building claim where the amounts claimed exceed $500,000. Such claims will not therefore be determined by an exercise of any power or discretion under s 48O of the Home Building Act. If the Appeal Panel’s reasoning were correct, the person with the claim exceeding $500,000 may have a right which can be waived, but a person with a building claim of less than $500,000 cannot. This cannot be, and is not, correct.

188. The Appeal Panel erred in concluding that CPD Holdings’ waiver contention could not succeed because of s 48O of the Home Building Act.

189. Finally, the defendant submitted that there had been a waiver by Ms Petropoulos. On the Tribunal’s factual findings, during the performance of the work, Ms Petropoulos informally agreed to or approved of the supply and installation of showers of 850 x 850 mm, a size which was smaller than provided for in the specification. CPD Holdings did what Ms Petropoulos agreed it should do, which was to perform the work on that basis. It obtained and paid for custom screens of 850 x 850 mm and constructed the bathrooms for showers of that dimension. Ms Petropoulos then made a claim in the Tribunal complaining about that work.

190. The defendant argued that if there was a contractual promise by CPD Holdings to install 900 x 900 mm shower screens in the bathrooms, then what occurred after the contract was made is best described as Ms Petropoulos not insisting upon a term of the contract which was to her sole benefit. What occurred during the performance of the works was that Ms Petropoulos acted in a manner inconsistent with any right to later claim against CPD Holdings in reliance upon the 900 x 900 mm shower specification.

191. The defendant argued that to allow Ms Petropoulos a remedy on facts as found in this case would work a stark injustice, for the same reasons the law does not allow a person to recover damages for what he or she herself has caused: see SMK Cabinets. The Appeal Panel should have found that Ms Petropoulos had waived any right to claim a remedy for breach of the statutory warranty implied into the contract and founded upon the specification of 900 x 900 mm shower screens.

Consideration

207. In Petropoulos (No 2), the Appeal Panel stated at [5]-[7]:

“[5] The builder submitted that, based on the factual findings made at first instance, the homeowner ‘informally agreed to or approved the supply and installation of showers 850 mm x 850 mm’. According to the builder, that conduct constituted waiver of any right to damages: Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd [2013] HCA 46; (2013) 250 CLR 303 at 315; Agricultural and Rural Finance Pty Ltd v Gardiner [2008] HCA 57; (2008) 238 CLR 570 at 599-600.

[6] Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd is a case about whether client legal privilege had been waived by a firm of solicitors disclosing documents to the solicitors for an opposing party. Waiver in that context is about abandoning a right or privilege. Similarly, in the context of contractual obligations, a right such as the right to terminate a contract for breach or repudiation, may be waived: Agricultural and Rural Finance Pty Ltd v Gardiner [2008] HCA 57; (2008) 238 CLR 570 at 599-600. The waiver has to be carried out by an intentional act whereby a person abandons a right by acting inconsistently with that right. The builder identified the right to damages as being the right which the homeowner has waived.

[7] Section 48O of the HBA gives the Tribunal a discretion to make certain orders if the builder has breached a statutory warranty. Neither that provision, nor any other written or unwritten law, gives the homeowner a right to a remedy for breach of a statutory warranty. Consequently, the doctrine of waiver does not apply.”

208. At [7], the Appeal Panel stated that because the doctrine of waiver only applies to rights and privileges, and s 48O of the Home Building Act does not grant a right to a remedy for breach of a statutory warranty, the doctrine of waiver does not apply in this case. The Appeal Panel’s logic is flawed. Although s 48O empowers the Tribunal with the discretion to make various orders, it does not dictate whether parties to a contract have waived their rights and entitlements such that they are not entitled to a remedy for breach.

209. Be that as it may, it is my view that the Court should not intervene to disturb the Appeal Panel’s decision with regards to this ground of appeal. For the reasons I gave in relation to the defendant’s second ground, I came to the view that the defendants had failed to demonstrate something more than that the that the Appeal Panel was arguably wrong in failing to find that the plaintiff waived her right to claim for breach. The same can be said of her right to claim a remedy.

(6)   Remedy

Defendant’s submissions

210. The defendant submitted that this ground identifies a further and alternative reason why Ms Petropoulos should not have received any remedy for reconfiguration of the bathrooms with 900 x 900 mm showers. This ground assumes that CPD Holdings is found to have breached the contract by not installing showers with these dimensions. The question in a case such as the present is whether the reconfiguration of the bathrooms with 900 x 900 mm showers was a reasonable course to adopt in the circumstances: see Bellgrove v Eldridge.

211. The defendant argued that it was not reasonable for the following reasons. Firstly, on the Tribunal’s factual findings, the consequence of having 900 x 900 mm shower screens in the bathrooms would be an uncomfortably narrow passage through to the toilets, thereby detracting from the bathrooms’ fitness for purpose. There would be a risk that the works would not satisfy the warranty as to their fitness for purpose. On the factual findings of the Tribunal, the homeowner would be required to turn sideways to access the toilet. The defendant argued that such a configuration would clearly not be reasonable.

212. The defendant made the same submission to the Appeal Panel, but it was not accepted, seemingly because Ms Petropoulos had not submitted that an increase in the size of the shower recess would make the bathrooms unfit for purpose. The defendant submitted that that reasoning is legally erroneous. Whether or not Ms Petropoulos had made any such submission is irrelevant. It is clear from the statement of principle in Bellgrove v Eldridge that the test of reasonableness is an objective one. The Tribunal made a finding of fact about the consequence of having 900 x 900 mm shower screens. The question for the Appeal Panel was whether that fact, in combination of others, made it objectively unreasonable to make an order which would bring about that consequence.

213. Secondly, the conclusions of the Tribunal indicated that it accepted that the existing shower areas were 850 x 850 mm. The Tribunal preferred the evidence of CPD Holdings, which was that during the performance of the works, Ms Petropoulos agreed to make the showers the same or roughly the same as before. It was then found that this amounted to agreement during the contract that CPD Holdings would install 850 x 850 mm showers in the bathrooms. Further, the expert called by CPD Holdings, Mr Gray, also concluded that the existing shower areas were 850 x 850 mm. The Tribunal accepted his evidence both generally and in relation to the showers.

214. Hence, the existing shower areas were the same 850 x 850 mm size as CPD Holdings was installing with the informal agreement or approval of Ms Petropoulos. There was nothing in the evidence to suggest that this is an impractically small shower area. Mr Gray, whose evidence was accepted, gave evidence that 850 x 850 mm is a normal and comfortable size for a shower enclosure.

215. Materially the same submission was made to the Appeal Panel. The Appeal Panel treated the submission as a statement of CPD Holdings’ opinion about the adequacy of the size of the existing shower area and dismissed that opinion as irrelevant. That treatment of that submission was legally erroneous. As is apparent from the restatement of the submission above, it was founded upon expert opinion evidence given by the expert whose opinion was accepted both generally and in relation to the showers. In effect, the Appeal Panel failed to address the submission that was put to it.

216. Nor is this the question of the practicability of showers of size 850 x 850 mm irrelevant to the question of whether the proposed rectification is a reasonable course to adopt. The Appeal Panel erred in law in dismissing this as a consideration, as may be demonstrated by authority. In Ruxley Electronics & Construction Ltd v Forsyth [1996] AC 344 (“Ruxley”), under the contract the swimming pool was to have a maximum depth of seven feet, six inches. After the work was completed, the maximum depth was found to be six feet, nine inches. There was no adverse effect on the safety, utility or aesthetic quality of the pool. That is, the pool as constructed was “perfectly serviceable”. This was a relevant consideration as to whether rectification to achieve the specified depth would be reasonable.

217. The judgment in the leading case of Bellgrove v Eldridge also demonstrates why the Appeal Panel erred in treating the practicality of showers of size 850 x 850 mm as irrelevant. The well-known example given by the Court at 618 was of the construction of a home with “first quality” bricks when the contract had provided for second-hand bricks. On the question of whether it would be reasonable to demolish the home and rebuild it with second-hand bricks, it was highly relevant that it had in fact been constructed with first quality bricks. It is, with respect, impossible to see how the assessment of reasonableness can be made without regard to the qualities and characteristics of what has in fact been constructed.

218. For these reasons, the defendant submitted that installing 900 x 900 mm showers would objectively result in an overall loss of amenity and detract from the bathrooms’ fitness for purpose, thereby diminishing, or risking a diminution of, the value of the property. Materially the same submission was made to the Appeal Panel, which it failed to address. That may have been a consequence of its erroneous rejection of the submission upon which it was found, discussed above.

219. Thirdly, the defendant argued that although it is true that the High Court in Tabcorp Holdings at [17] stated that the test of unreasonableness is only to be satisfied in fairly exceptional circumstances, the circumstances of this case answer that description.

220. Moreover, a remedy based on reconfiguration of the bathrooms would have CPD Holdings either undo, or compensate Ms Petropoulos for undoing, work which, on the factual findings, Ms Petropoulos informally agreed to or approved of CPD Holdings doing following a specific discussion about the matter. The Appeal Panel referred to this matter and said that there was a factual dispute about what had occurred. There had been, but the dispute had been resolved in CPD Holdings’ favour by the Tribunal’s factual findings referred to above. The Appeal Panel erred in law by treating this as if it remained in dispute. In circumstances where there was no challenge to those factual findings, the Appeal Panel was obliged to determine the appeal by reference to the facts as found by the Tribunal.

221. The Appeal Panel also stated that the fact of any oral (or informal) agreement would be irrelevant to the question of whether it is reasonable for a party to seek to have work undone. The Appeal Panel therefore erred in law in proceeding as if the matter could be excluded from consideration. As submitted, the qualities and characteristics of what has in fact been constructed are not irrelevant to the question and neither, as a matter of principle, is the objective reason why it has been so constructed.

222. It was also submitted to the Appeal Panel that, in making its determination on the question of remedy, the Appeal Panel was required to be satisfied that the orders would be fair and equitable to all parties to the claim: see the Fair Trading Act 1987 (NSW) at s 79U. It was submitted that, for the reasons stated, it would be neither fair nor equitable for a remedy to be fixed by reference to undoing the work which Ms Petropoulos informally agreed or approved to be done with regard to showers of 850 x 850 mm, and then installing showers of 900 x 900 mm.

223. The Appeal Panel erred in law in excluding the fact that Ms Petropoulos’ informal agreement or approval from its consideration of what order would be fair and equitable as between Ms Petropoulos and CPD Holdings.

224. To use the language referred to by the High Court in Tabcorp Holdings at [17], this was a case which fairly answers the description of a party “merely using a technical breach to secure an uncovenanted profit”. That is a situation in which the High Court considered that the test of unreasonableness would apply.

225. For the reasons submitted above, the Appeal Panel should have found that it would not be a reasonable course to adopt in the circumstances for bathrooms to be reconfigured with 900 x 900 mm showers. It would have followed from that finding that any remedy was not to be determined by reference to such reconfiguration. If there was to be a remedy, the proper result on the evidence would have been an award of nominal damages to reflect the technical breach of contract and the fact that, on the findings of the Tribunal, having 900 x 900 mm showers would almost certainly result in a loss of amenity and, perhaps, value. The current conventional amount for nominal damages is $100: see State of New South Wales v Stevens [2012] NSWCA 415 at [37]. It should be noted that recovery of, in effect, nominal damages was the result in Ruxley.

Plaintiff’s submissions

226. The defendant argued that if it had constructed the bathrooms with the 900 x 900 mm shower screens, it would have rendered the bathrooms “not fit for purpose”. The plaintiff argued that even if this were the case, which it denies, a homeowner can still insist on strict compliance with the terms of a contract. If the builder had concerns about complying with the contractual terms, it needed only issue a notice under s 18F of the Home Building Act to shield itself from any complaint. No notice under s 18F was ever given to the plaintiff.

227. Additionally, the plaintiff noted that when she pointed out that the shower enclosures would be too small, the defendant said:

“The screens being slightly smaller than 900 x 900 does not make any measurable difference to the cost of the screens. Should this be of concern to you I will have the shower screen people prepare the costing on a 900 x 900 screen and the screens to be installed” (Aff Thea Petropoulos 15 Feb 2019, p 157).

228. The defendant made no mention of screens this dimension rendering the bathrooms unfit for purpose.

Conclusion

229. As reproduced earlier, 48MA of the Home Building Act states that rectification is the preferred outcome in proceedings where the builder’s work is found to be defective. The defendant submitted that despite this preference, rectification is unreasonable for several reasons.

230. The first is that the order will require the builder to construct a shower which renders the surrounding space unfit for purpose. In Petropoulos (No 2) at [34], Appeal Panel addressed the defendant’s submissions as to fitness for purpose as follows:

“…The homeowner did not submit that an increase in the size of the shower recesses would make the bathrooms unfit for purpose. In those circumstances, we do not accept the builder’s submission.”

231. This statement does not properly address the defendant’s submission. Whether the increase in size of the showers would render the bathrooms unfit for purpose, such that the remedy is unreasonable, is an objective determination not dictated by the submissions of the plaintiff. However, the fact that the increased shower size might affect the functionality of the surrounding bathroom is also not determinative of the reasonableness of that course, especially where s 48MA states that rectification is to be preferred.

232. The defendant further argued that in making its determination, the Appeal Panel failed to properly consider the expert evidence of Mr Gray that an 850 x 850 mm shower was “a normal and comfortable size for a shower enclosure”. Once again, although Mr Gray’s evidence is not “irrelevant” as the Appeal Panel stated at [36], neither is it determinative of the reasonableness of an order for rectification of the works.

233. In Bellgrove v Eldridge at 606, Dixon CJ, Webb and Taylor JJ addressed the circumstances in which damages for rectification of defective works are an appropriate remedy as follows:

“…not only must the work undertaken be necessary to produce conformity, but that also, it must be a reasonable course to adopt….Many examples may, of course, be given of remedial work, which though necessary to produce conformity would not constitute a reasonable method of dealing with the situation and in such cases the true measure of the building owner's loss will be the diminution in value, if any, produced by the departure from the plans and specifications or by the defective workmanship or materials.

As to what remedial work is both “necessary” and “reasonable” in any particular case is a question of fact…”

234. In Tabcorp Holdings at [17], the Court of Appeal held that the test for reasonableness outlined in Bellgrove v Eldridge:

“…tends to indicate that the test that the test of ‘unreasonableness’ is only to be satisfied by fairly exceptional circumstances. The example given by the court aligns closely with what Oliver J said in Radford, that is, that the diminution in value measure of damages will only apply where the innocent party is ‘merely using a technical breach to secure an uncovenanted profit’.”

235. In relation to the above passage, the defendant submitted that when assessing the “reasonableness” of an order for rectification, the Appeal Panel failed to consider the plaintiff’s conduct. The defendant argued that by agreeing to the smaller shower screens and then suing for breach of a statutory warranty, the plaintiff sought to exploit a technical breach to secure an uncovenanted profit. However, in this case, the plaintiff has not been awarded damages for the cost of rectification, but rather a work order securing its completion (see Ruxley, where the Court at AC 354–5 was not satisfied that the plaintiff would actually reconstruct the works if awarded their cost). Moreover, the Appeal Panel had found that the plaintiff was entitled to insist upon compliance with the statutory warranty that the defendant build to the contract’s written specifications.

236. In these circumstances and in light of s 48MA of the Home Building Act, it is my view that the Appeal Panel’s decision that a rectification order is reasonable is not more than arguably wrong.

(7)   Non-payment relevant to work order

Defendant’s submissions

237. It was common ground that the works were substantially complete by 25 June 2014. It was also common ground that the remaining work was the installation of shower screens in both bathrooms. Although it seems Ms Petropoulos may have sought to resile from these facts in final submissions, the Tribunal made a factual finding that CPD Holdings had purchased the shower screens and that all that remained for the completion of the works was their installation. Those findings were not challenged on appeal.

238. The Tribunal at first instance found that Ms Petropoulos did not allow CPD Holdings reasonable access to complete the works and thereby repudiated the contract. These findings were not disturbed by the Appeal Panel. It was in consequence of these findings that Ms Petropoulos was ordered to pay CPD Holdings $952.20. CPD Holdings had claimed loss of bargain damages of $4,761.00, being the unpaid balance of the contract price of $4,980.00 less a small credit of $219.00. The Tribunal reasoned that CPD Holdings should only have its profit on the amount claimed, which was calculated at 20% of that amount.

237. It was not a case in which the work order made by the Appeal Panel would, when performed, bring about a contractual “completion” discharging CPD Holdings from further contractual performance. Rather, CPD Holdings had been discharged when it accepted Ms Petropoulos’ repudiation and termination of the contract. However, the order would have the practical effect of bringing about the completion of the work that had been specified in the contract and for which CPD Holdings had not been fully paid.

238. In those circumstances, where the Appeal Panel was making a work order in favour of Ms Petropoulos, then the order should have been conditioned upon Ms Petropoulos paying for the works she had already received under the contract and paying for any further works she had received because of the Appeal Panel’s orders. If there had been a compensation order that would have been appropriately brought to account as part of the damages calculation and the position should be no different merely because the Appeal Panel exercised its discretion to make a work order instead of a compensation order.

239. The defendant argued that this was a failure by the Appeal Panel to take into account a material consideration in making an order under s 48O of the Home Building Act: see House v The King (1936) 55 CLR 499 at 504-505.

Consideration

242. In Petropoulos (No 1), the Appeal Panel ordered the parties to provide further written submissions on the appropriate remedies, if any, in relation to CPD Holdings’ breach of the statutory warranty in s 18B(1)(a) of the Home Building Act in relation to the shower screen.

243. The defendants filed their further submissions on appeal on 18 June 2018 (CB5, Tab 22). The bulk of those submissions reiterated the defendants’ position that Ms Petropoulos was not entitled to a remedy of any kind [3], for the same reasons outlined in these proceedings.

244. At [28]-[33] of its submissions on appeal, the defendants submitted:

“[28] …

(a) The builder’s primary position is that Ms Petropoulos is not entitled to a remedy.

(b) Alternatively, because, in accordance with well established principle, it would not be a reasonable course to adopt in the circumstances for the bathrooms to be reconfigured with 900 x 900 mm showers, then any remedy is not to be determined by reference to rectification. The proper result on the evidence would be an award of no more than nominal damages to reflect the technical breach of contract and the fact that having 900 x 900 mm showers would almost certainly result in a loss of value. The current conventional amount for nominal damages is $100.

(c) If, despite the above, a remedy is determined by reference to rectification, then the appropriate remedy is for the making of an order under s 48O of the Home Building Act for the builder to do specified work, having regard to the preferred outcome set out in s 48MA: Appeal Reasons [13]-[15].

[29] The following submissions relate to the last alternative above.

[30] The Tribunal below accepted the evidence of Mr Gray both generally and in relation to the showers: Division Reasons [32], [92]. He gave persuasive evidence that there would be a simple and inexpensive way of altering the tile work to accommodate 900 mm x 900 mm showers… This was not contradicted by any evidence from Mr Coombes, whose evidence was not favoured over that of Mr Gray in any event.

[31] Despite seeking a money order, Ms Petropoulos does not, in AFS, make any submissions at all about why the preferred outcome under s 48MA should not be adopted for the purpose of any order under s 48O. It is for Ms Petropoulos to demonstrate some proper reason for departing from the preferred outcome under s 48MA of the Home Building Act. She has not done so.

[32] Although having the builder performing any reification work may not be the preferred outcome of Ms Petropoulos, a party’s subjective statement of her preferred outcome, unsupported by any objective evidence, would be given little or no weight against Parliament’s statement of its preferred outcome. If a party could defeat Parliament’s preferred outcome merely by saying it is not the party’s preferred outcome, it would make an absurdity of s 48MA. This is not a case where there is objective evidence tending against the preferred outcome (if rectification is appropriate). Such evidence is not supplied by the fact that the parties have fallen into dispute, because s 48MA is predicated on the existence of a dispute. Moreover, as submitted above, the Appeal Panel could not be satisfied that Ms Petropoulos really intends to carry out the rectification which she claims is necessary. Concerns of that kind were no doubt part of the motivation for the enactment of s 48MA.

[33] If, despite what is submitted above, it is appropriate to determine a remedy by reference to rectification, Parliament’s preferred outcome, and not Ms Petropoulos’s subjective preferred outcome, should be give effect in this case. On the evidence before the Tribunal below, it could be done simply and inexpensively and according to the scope identified in Mr Gray’s oral evidence” (footnotes omitted).

245. Nowhere in their further submissions on appeal do the defendants state that a work order, if ordered, should be conditioned upon Ms Petropoulos paying for the works received under the contract or for the rectification works. The defendants merely submitted that if rectification were the appropriate remedy, then it should be ordered in accordance with s 48MA of the Home Building Act. That is, in effect, the nature of the work order which the Appeal Panel has made.

246. In these circumstances, where the defendants failed to submit that an order for rectification be conditioned on the plaintiff paying for the works, it is my view that the Appeal Panel’s decision in relation to this ground of review is not more than arguably wrong.

247. Overall, it is my view that the Court should not intervene in the exercise of its discretion for several reasons. In addition to my view that the Appeal Panel is not more than arguably wrong, I am not satisfied that this ground of appeal involves a matter of principle or a question of public importance. Moreover, as above in relation to the plaintiff’s grounds of appeal, I consider that the interests of finality in litigation have been swallowed in this case, where the costs of lengthy appeals have long since swamped the sum involved in the dispute. For these reasons and in the exercise of my discretion, I refuse leave to appeal in relation to the cross claim.

248. If I am wrong, I would not remit this matter to NCAT on the basis that the costs already expended by both parties far outweigh the amount in dispute.

Costs awarded in the Tribunal

249. The final issue is whether to grant leave to appeal concerning the 13 March 2019 decision of the Appeal Panel in relation to costs (Petropoulos v CPD Holdings Pty Ltd [2019] NSWCATAP 53). The Appeal Panel made an order that any application for costs was to be reconsidered and re-determined by the Tribunal as originally constituted, if that Member is available, either with or without further evidence. The Appeal Panel dismissed both the homeowner’s application for costs of the costs appeal, and the builder’s application for the costs of the homeowner’s withdrawn stay application. While the parties in these proceedings made lengthy submissions on the Appeal Panel’s costs order, I have refused leave on all grounds in both the plaintiff’s appeal and the defendants’ cross appeal. The costs order of the Appeal Panel in its 13 March 2019 decision is therefore not one which this Court would exercise its discretion to disturb.

Costs of these proceedings

250. The costs of the applications for leave to appeal in these proceedings are discretionary. As neither party has been successful, the appropriate order for costs is that each party is to pay his/their own costs.

The Court orders that:

(1)   The plaintiff is granted an extension of time to file an appeal to 12 November 2018.

(2)   Leave to appeal is refused.

(3)   Leave to cross appeal is refused.

(4)   Each party is to pay for her/their own costs.

**********

Amendments

19 September 2019 - Para [216] typo "fix" to "six"

Decision last updated: 19 September 2019