Pindolia v Casagrande Homes Pty Ltd

Case •

[2024] NSWCATCD 46

•

02 July 2024

No judgment structure available for this case.

Civil and Administrative Tribunal


New South Wales

Medium Neutral Citation: Pindolia v Casagrande Homes Pty Ltd [2024] NSWCATCD 46
Hearing dates: 15 February 2024
Date of orders: 02 July 2024
Decision date: 02 July 2024
Jurisdiction:Consumer and Commercial Division
Before: G Sarginson, Senior Member
Decision:

(1) The Respondent Casagrande Homes Pty Ltd is to pay the Applicants Mahendra Pindolia and Deepika Pindolia the sum of $242,640.22 by 28 days from the date of this decision.

(2) The issue of costs is to be determined as follows:

(a) The Applicants are to file with the Tribunal and serve on the Respondent, by person or by post and additionally by email, any further costs submissions and documents by 7 days from the date of this decision.

(b) The Respondent is to file with the Tribunal and serve on the Applicants, by person or by post and additionally by email, any costs submissions and documents by 21 days from the date of this decision.

(c) The Applicants are to file with the Tribunal and serve on the Respondent, by person or by post and additionally by email, any costs submissions in reply by 28 days from the date of this decision.

(d) The costs submissions of the parties are to include whether or not the consent to the Tribunal determining the issue of costs without a further oral hearing, and if not, why not.

(e) Subject to consideration of the costs submissions of the parties the Tribunal may determine the issue of costs on the basis of the written materials and without further oral hearing under s 50(2) of the Civil and Administrative Tribunal Act 2013 (NSW).

(f) If a party seeks an extension of time in respect of costs submissions, an application should be made in writing to the Tribunal no later than the day prior to the date the submissions are due to be filed and served.

(g) Each party must file their costs submissions and documents with the Tribunal in hard copy.

Catchwords:

BUILDING AND CONSTRUCTION---Home building---building defects---extent of defects---whether work order or damages are the appropriate remedy

Legislation Cited:

Civil and Administrative Tribunal Act 2013 (NSW)

Civil and Administrative Tribunal Rules 2014 (NSW)

Home Building Act 1989 (NSW)

Cases Cited:

Bellgrove v Eldridge [1954] HCA 36; (1954) 90 CLR 613

BKB Constructions Pty Ltd v Sawan [2022] NSWCATAP 103

Catapult Constructions Pty Ltd v Denison [2018] NSWCATAP 158

Cornucopia (Young) Pty Ltd v Ward t/as Newcastle Model Autosports and Hobbies [2024] NSWCATAP 109

Deacon v National Strategic Constructions Pty Ltd; National Strategic Constructions Pty Ltd v Deacon [2017] NSWCATAP 185

Fisher v N Phillips and M Phillips t/as Arise Building Services [2022] NSWCATCD 80.

Kurmond Homes Pty Ltd v Marsden [2018] NSWCATAP 23

Leung v Alexakis [2018] NSWCATAP 11

Pollock v NSW Trustee and Guardian [2022] NSWSC 923

Repfix Industries Pty Ltd v FBD Group [2020] NSWDC 514

Robinson v Hindmarsh Construction Australia Pty Ltd [2021] NSWCATAP 51

Ruxley Electronics and Construction Ltd v Forsyth [1996] AC 344

Shakiri v Holland [2024] NSWCATAP 28

Sleiman t/as Perfect Kitchens v Dempsey [2020] NSWCATAP 26

Tabcorp Holdings Pty Ltd v Bowen Investments Pty Ltd [2009] HCA 8 [17]; (2009) 236 CLR 272

Touma v Colantuono [2021] NSWCATAP 152

Walker Group Constructions Pty Ltd v Tzaneros Investments Pty Ltd [2017] NSWCA 27

Wheeler & Anor v Ecroplot [2010] NSWCA 61

Texts Cited:

None cited

Category:Principal judgment
Parties:

Mahendra Pindolia and Deepinka Pindolia (Applicants)

Casegrande Homes Pty Ltd (Respondent)
Representation:

M Pindolia and D Pindolia, self-represented (Applicants)

R Jhala, director (Respondent)
File Number(s): 2023/00399828 (formerly HB 23/18785)
Publication restriction: Nil

REASONS FOR DECISION

  1. In this decision, the applicants are referred to as the owners, and the respondent is referred to as the builder. Mr Jhala is the director of the builder.

  2. This is a dispute pertaining to allegedly defective residential building work in breach of the statutory warranty provisions of s 18B of the Home Building Act 1989 (NSW) (HB Act).

  3. The owners and the builder entered into a residential building contract in the standard form issued by NSW Fair Trading dated 9 November 2020. The contract price, subject to variations and adjustments for provisional some items and prime cost items was $525,000. The house is a two story four bedroom freestanding house with an internal two car garage.

  4. On 1 June 2022, an Occupation Certificate was issued by the private certifier.

  5. According to the builder, the builder allowed the owners to take possession of the property in June 2022, as the lease on their rental property had ended. However, according to the builder, the owners had not paid the final progress payment. The builder’s tax invoice for the final progress payment was $18,422.49, pursuant to a tax invoice issued by the builder dated 9 August 2022.

  6. The builder asserts that the owners provided lists of defects in July 2022, August 2022, and a September 2022. The documentary evidence of the owners contains lists of defects sent to the builder on 10 July 2022 (152 items); 5 August 2022 (12 items); and 20 September 2022 (5 items).

  7. There are conflicting versions of events between the parties as to whether or not there remains any monies owed under contract.

  8. According to the builder, there was, after an inspection by a NSW Fair Trading Building Inspector and a rectification order which the builder complied with in about April 2023, an agreement that the owners would pay the builder $4,422.49 to settle disputes involving delay and rectification of defects. According to the builder, this amount was never paid.

  9. According to the owners, there had been discussions between the parties regarding the issues of defects, incomplete work, and delay. According to the owners, there was an agreement that the builder would waive the amount outstanding in respect of the final progress payment.

  10. The owners pointed to a tax invoice of the builder dated 9 August 2022 which described the invoice as being in respect of “practical completion and final occupation certificate”. That invoice was for the amount of $52,500 (which was the final progress payment under the payment schedule in the contract, less any adjusted amounts), with a “amount credited” of $34,077.51. That gave a balance of $18,422.49.

  11. On 20 September 2022, the builder issued a “receipt” referring to the invoice of 9 August 2022, and showing the “invoice amount still owing” as zero. According to the owners, this occurred after a meeting with the builder in mid-September 2022, where the builder had agreed that the owners could withhold payment under clause 12 (a) of the contract in respect of defective and incomplete works.

  12. The documents of the owners did not include a NSW Fair Trading Building Inspector rectification order. The documents of the builder also did not contain such an order. However, the documents of the builder included an email from Mr Wong, Senior Building Inspector of NSW Fair Trading dated 12 April 2023 stating that “it has been determined that the rectification order has been complied with”. From this document, the Tribunal infers that there was a rectification order under s 48E of the HB Act, and that it was complied with.

  13. However, that is a separate issue as to whether or not there remains defective work in breach of the statutory warranties under s 18B of the HB Act.

  14. The owners commenced proceedings in the Tribunal on 23 April 2023.

  15. The application filed by the owners asserts that the builder had performed defective work, and there was incomplete work. Although the application asserts that there was no claim because of a breach of a statutory warranty, it is clear from the substance of the document that the owners were asserting that there were significant defective works breach of the statutory warranties in s 18B of the HB Act.

  16. The application clearly identifies that the owners are seeking an award of damages, rather than a work order. The application asserts, for various reasons, the owners oppose the Tribunal ordering the builder to return to side and rectify defects. Rather, they seek an award of damages for the cost of engaging a new builder to rectify defects.

  17. Although there is reference in the application to “incomplete work,” the Tribunal is satisfied the work reached practical completion, and a critical issue for determination is whether that work was defective.

  18. Throughout the proceedings, both parties have been self-represented.

  19. The matter was listed for a procedural directions hearing in the Tribunal on 30 May 2023. The Tribunal made procedural directions regarding the parties filing and serving documentary evidence. The Tribunal also made an order that Mr Jhala be removed as a respondent from the proceedings. No procedural directions were made for the owners to file and serve Points of Claim for the builder to file and serve Points of Defence.

  20. It was noted in the procedural directions of 30 May 2023 that:

  1. The builder opposed any awarded damages, and asserted that it would comply with any work order made against it.

  2. The builder intended to file a cross application in respect of the monies it alleged the owners owed to it in respect of the failure to pay the final progress payment under the contract.

  1. Despite asserting that it would file a cross application, the builder never did so.

  2. Both parties obtained expert evidence from building consultants. The owners engaged Mr O’Donnell, and the builder engaged Mr Melick.

  3. Prior to the hearing, Mr O’Donnell and Mr Melick participated in a conclave meeting and prepared a joint expert report in the form of a Joint Scott Schedule setting out their areas of agreement and disagreement. The evidence of the building consultants will be discussed in more detail later in this decision.

  4. In respect of the joint report, Mr O’Donnell asserted that the defective work items would cost $369,471.31 to rectify. Mr Melick asserted that the defective work items would cost $151,598.84 to rectify.

  5. Many of the defect items, method of rectification, and cost of rectification were agreed upon by Mr O’Donnell and Mr Melick.

  6. However, there were disagreements in respect of the following items (which will be discussed in more detail later in the decision):

  1. Exterior brickwork. Mr Melick agreed there was some defects but there was a difference in respect of the cost of rectification.

  2. Balcony overflows. There was a disagreement in respect of whether a stormwater overflow facility should have been installed, and a difference in costings of approximately $850.

  3. Carpentry (External). Mr Melick and Mr O’Donnell agree as to the defect and method of rectification, but there is a narrow disagreement about cost of rectification. Mr O’Donnell states the appropriate amount is $10,465.99. Mr Melick states the appropriate amount is $8,509.99.

  4. Carpentry (Framework). Mr Melick agreed there were some defects but there was a difference between the experts regarding the extent of the defects; the scope of work to rectify and the cost to rectify. The difference in costings was approximately $16,000.

  5. Roof flashing. Mr Melick asserted there was insufficient evidence to establish any defect with the roof flashing. Mr O’Donnell asserted that there were defects, and the cost of rectification was $18,078.04.

  6. Roof sheeting and capping. Mr Melick asserted there were no defects, and evidence of dents could have been caused by any person walking on the roof after settlement, rather than an employee or subcontractor of the builder. Mr O’Donnell asserted the cost of rectification was $9,010.34.

  7. Bathroom floors. Mr Melick asserted there was no defects in the floor tiling, which had compliant falls to drains.

  8. External paving. Mr Melick asserted there were no defects.

  9. Rendering. Mr Melick asserted that there were no defects in the rendering.

  10. Painting. Mr Melick asserted there were some painting defects, but significantly less than those asserted by Mr O’Donnell. Mr O’Donnell asserted that extensive repainting was required, and a total cost of $33,322.40. Mr Mellick asserted that the only sanding and re-sealing was required was to the internal stairs, at a cost of $3,206.48.

  11. Relay turf and pebbles. Mr Melick asserted there were no defects. Mr O’Donnell asserted that turf and pebbles needed to be relayed around the service and water mains at a cost of $1,029.70.

  12. Waste disposal when rectification works are being performed. Mr O’Donnell asserted that the cost would be $7954.40 . Mr Melick asserted that the appropriate cost was $2,440.

  13. Preliminaries. Mr O’Donnell Included 10% for Preliminaries. Mr Melick asserted that this amount should be included in Overheads/Profit Margin.

  14. Contingencies. Mr O’Donnell asserted there should be a 10% contingency allowance due to the work being remedial work rather than new construction work. Mr Melick asserted that no contingency allowance was necessary in circumstances where a competent remedial builder could perform the work without allocation of a contingency amount.

  1. In the period shortly before the hearing, the owners also filed and served documents in respect of the costs incurred for engaging Mr O’Donnell to prepare a report and attend the Tribunal hearing, as well as printing and stationery costs; postage; and ASIC search fee. Mr O’Donnell’s invoices were provided with the documents.

  2. The disbursement costs of the owners were identified as a total of $24,308.33. The owners identified that this was the quantification of the costs they were seeking against the builder in the proceedings.

  3. The matter was listed for hearing at the Tribunal on 15 February 2024. The owners appeared in person. Mr Pindolia presented the case for the owners. Mr Jhala attended the Tribunal, and presented the case for the builder.

  4. The owners had arranged for Mr O’Donnell to attend the Tribunal hearing to be available for cross examination.

  5. The builder stated that Mr Melick was not available to be questioned at the hearing. According to the builder, it had informed Mr Melick of the hearing date two days prior to the hearing. When queried as to why the builder had left it so late, the builder responded that this was due to “pressure of work” and the builder had not realised that it needed to arrange for Mr Melick to be available. According to the builder, Mr Melick was not available to give evidence on 15 February 2024, including evidence by telephone or audio-visual link.

  6. According to the owners, they had complied with procedural direction 9 of the Tribunal dated 29 August 2023, and had made it clear that Mr Melick was required to attend the Tribunal hearing for the purpose of questioning.

  7. The builder sought an adjournment of the hearing so that Mr Melick could attend and be questioned. The owners opposed the adjournment application. The owner submitted that they had complied with procedural directions and arranged for their expert to attend the hearing. According to the owners, an adjournment would cause undue delay; and they were of the strong opinion that hearing should proceed.

  8. After considering the arguments and submissions of the parties on the issue an adjournment, the Tribunal refused the adjournment application.

  9. The principles regarding adjournment applications are concisely summarised by the Appeal Panel of the Tribunal in Touma v Colantuono [2021] NSWCATAP 152 at [56]-[59].

  10. The Tribunal did not regard it as appropriate to adjourn the hearing in circumstances where the owners had complied with procedural directions; the builder had failed to comply with procedural directions; it was the obligation of the builder to arrange the Mr Melick to be available to give evidence at the hearing; no reasonable explanation had been given for the failure to arrange for Mr Melick to be available; and the adjournment of the hearing would cause additional expense and stress to the owners.

  11. However, the Tribunal made clear to the parties that, although Mr Melick was not available to give evidence, the Tribunal would not simply discount the evidence contained in his report, or the Joint Scott Schedule, simply because he was not available for cross examination. His non-attendance at the hearing would affect the weight given to his evidence, but not the admissibility of his evidence.

  12. Further, it is the owners who bear the onus of proving relevant factual matters, including whether works are defective, the scope of works to rectify, and if damages are awarded rather than a work order made, the cost of rectification. The mere fact that Mr O’Donnell attended the hearing and was questioned by the builder did not automatically mean the Tribunal would accept his evidence on every issue. In other words, it remained open to the Tribunal not to be satisfied on Mr O’Donnell’s evidence that defects are established; the appropriate method of rectification; or the cost of rectification.

  13. The hearing proceeded. The builder did not seek to cross examine the owners. However, the builder did cross examine Mr O’Donnell. On occasions, the Tribunal member also asked questions of Mr O’Donnell to better understand the basis of Mr O’Donnell’s opinion on some of the defect items. Mr Pindolia cross-examined Mr Jhala. The parties then made submissions, and the hearing concluded.

Evidence of the Parties

Applicant

  1. The owners lay evidence was filed on 11 July 2023. It comprised of a witness statement of the owners, with documents attached. The witness statement comprised of 15 pages, plus the attachments.

  2. Without disrespect to the owners, who are self-represented litigants, much of the information contained in the witness statement did not clearly engage with the real factual issues in dispute. Importantly, however, there is information in the witness statement relevant to the complaints about defects made by the owners to the builder; the disputed final progress payment; and the reasons why the owners assert the Tribunal should depart from the “preferred outcome” under s 48 MA of the HB Act and award damages for the cost of rectification of defects, rather than make a work order under s 48O of the HB Act.

  3. The owners expert evidence was the expert report of Mr O’Donnell dated 8 July 2023.

  4. That report contained a Scott Schedule, and attached voluminous documents, including the contract and plans and specifications of the dwelling; as well as extracts from Australian Standards referred to in the report, and the NSW Fair Trading Guide to Standards and Tolerances 2017 edition. Mr O’Donnell also attached photographs he took at his inspection.

Respondent

  1. The respondents lay evidence was an affidavit of Mr Jhala dated 17 September 2023. In addition to the matters referred to previously regarding, in particular, the disputed final progress payment, Mr Jhala asserts that the builder is “ready willing and able” to return to the site and rectify any defects ordered by the Tribunal and also indicated that position at the directions hearing.

  2. The respondents expert evidence is a report by Mr Melick dated 18 August 2023.

  3. That report contains a Scott Schedule and documents relied upon by Mr Melick. Mr Melick also attaches photographs taken during his inspection of the premises

Joint Expert Report/Joint Scott Schedule

  1. As discussed previously, Mr O’Donnell and Mr Melick conferred with each other prior to the hearing and prepared a joint expert report.

  2. That report is dated 11 December 2023, and was filed with the Tribunal on 14 February 2024.

CONSIDERATION

  1. The Tribunal is satisfied that the date of completion of the residential building work for the purpose of s 3B(2) and (3) of the HB Act is 1 June 2022. As proceedings in the Tribunal were commenced on 23 April 2023, the proceedings have been commenced within two years of the date of completion of the residential building work for the purpose of the limitation period for bringing proceedings in the Tribunal for breach of statutory warranties under ss 48K and 18E of the HB Act (Fisher v N Phillips and M Phillips t/as Arise Building Services [2022] NSWCATCD 80).

  1. Accordingly, the Tribunal does not need to distinguish between “major defects” and “non-major defects.” The salient issues are

  1. Whether work is defective in breach of the statutory warranties under s18B of the HB Act?

  2. If so, what is the appropriate scope of works to rectify the defects so that the owners are put in the position they should have been had builder complied with its contractual and statutory obligations?

  3. After findings have been made in respect of defects, and the scope of works to rectify, whether the owners should be awarded damages for the cost of rectification; or whether the Tribunal should order the builder to rectify defects (ss 48 MA and 48O of the HB Act).

Legal Principles Applicable to Breach of Statutory Warranty

  1. Section 18 B of the HB Act states as follows:

18B Warranties as to residential building work

(1) The following warranties by the holder of a contractor licence, or a person required to hold a contractor licence before entering into a contract, are implied in every contract to do residential building work—

(a) a warranty that the work will be done with due care and skill and in accordance with the plans and specifications set out in the contract,

(b) a warranty that all materials supplied by the holder or person will be good and suitable for the purpose for which they are used and that, unless otherwise stated in the contract, those materials will be new,

(c) a warranty that the work will be done in accordance with, and will comply with, this or any other law,

(d) a warranty that the work will be done with due diligence and within the time stipulated in the contract, or if no time is stipulated, within a reasonable time,

(e) a warranty that, if the work consists of the construction of a dwelling, the making of alterations or additions to a dwelling or the repairing, renovation, decoration or protective treatment of a dwelling, the work will result, to the extent of the work conducted, in a dwelling that is reasonably fit for occupation as a dwelling,

(f) a warranty that the work and any materials used in doing the work will be reasonably fit for the specified purpose or result, if the person for whom the work is done expressly makes known to the holder of the contractor licence or person required to hold a contractor licence, or another person with express or apparent authority to enter into or vary contractual arrangements on behalf of the holder or person, the particular purpose for which the work is required or the result that the owner desires the work to achieve, so as to show that the owner relies on the holder’s or person’s skill and judgment.

(2) The statutory warranties implied by this section are not limited to a contract to do residential building work for an owner of land and are also implied in a contract under which a person (the principal contractor) who has contracted to do residential building work contracts with another person (a subcontractor to the principal contractor) for the subcontractor to do the work (or any part of the work) for the principal contractor.

  1. The principles applicable to whether a breach of the statutory warranties has occurred under s 18B of the HB Act were summarised by the Appeal Panel of the Tribunal in Deacon v National Strategic Constructions Pty Ltd; National Strategic Constructions Pty Ltd v Deacon [2017] NSWCATAP 185 (Deacon) as follows (at [46]):

Although objective standards such as Australian Standards, the Building Code of Australia and the Guide are of significant relevance in establishing whether work has been performed in a proper and workmanlike manner (Wheeler v Ecroplot Pty Ltd [2010] NSWCA 61 at [10]), the absence of such evidence does not automatically mean a homeowner has failed to establish breach of statutory warranty. In our view, the relevant principle was succinctly stated by Senior Member Goldstein in G MacFayden and Anor v G Tadrosse [2014] NSWCATCD 194 at [46] as follows:

…[E]vidence that work does not comply with the Building Code of Australia would establish a basis for a finding that sub section 18B(c) of the Act has been breached. Evidence of the details in which work does not comply with the contractual plans and specifications would form the basis for a finding that sub section 18B(a) of the Act has been breached. Evidence of work not being carried out in a proper and workmanlike manner would in my view involve identification of the work in question, a statement of how the expert would expect it to be carried out in in a proper and workmanlike manner and then identification of the factors which establish that the way in which the work has been carried out falls short of it being carried out in a proper and workmanlike manner. Evidence of this nature, if accepted, would form the basis for a finding that sub section 18B(a) of the Act has been breached.

  1. As was also set out in Deacon, the Tribunal when considering whether breach of s 18B of the HB Act has been established must consider and make findings in respect of:

  1. Whether the owner has established on the balance of probabilities that works have not been performed in accordance with s 18B of the HB Act.

  2. If a ‘defect’ (in the sense of failure to comply with s 18B of the HB Act) is established, what is the appropriate method to rectify that defect.

  1. The owners bear the onus of proving that the work is defective (i.e. that one of the statutory warranties has been breached, applying the tests set out in Deacon); the method of rectification necessary to achieve compliance and which is a reasonable course to adopt; and (if damages are awarded) the cost of rectification. When considering the exercise of its discretion to make a work order under s 48O of the HB Act, it must also consider the principles of certainty, practicality and enforceability (Catapult Constructions Pty Ltd v Denison [2018] NSWCATAP 158 at [59]-[60]).

  2. Additionally, in the context of determining whether damages or a work order is the appropriate remedy for defective work, the Tribunal must consider that an order that the builder rectify defective work is the “preferred outcome” under s 48MA of the HB Act.

  3. The appropriate method to rectify is considered in the context of the nature and degree of the relevant defect (Deacon at [57]-[59]). The method of rectification is the work necessary to achieve compliance with the contract, provided that method is a reasonable course to adopt (Bellgrove v Eldridge [1954] HCA 36; (1954) 90 CLR 613 at 617-618).

  4. 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…”

  1. In Tabcorp Holdings Pty Ltd v Bowen Investments Pty Ltd [2009] HCA 8 [17]; (2009) 236 CLR 272 the High Court 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’.”

  1. Further, when assessing whether the proposed method of rectification is reasonable, the Tribunal must consider whether the cost (i.e. the cost of the proposed method of rectification in the context of assessing damages for contractual breach) is “out of all proportion to the achievement of the contractual objective” of the particular contract (Ruxley Electronics and Construction Ltd v Forsyth [1996] AC 344 (Ruxley); Walker Group Constructions Pty Ltd v Tzaneros Investments Pty Ltd [2017] NSWCA 27 at [186]-[187]; Wheeler & Anor v Ecroplot [2010] NSWCA 61 at [81]; Repfix Industries Pty Ltd v FBD Group [2020] NSWDC 514 at [174]-[179]).

  2. It is the owners who bear the onus of proving relevant factual matters on the balance of probabilities. To prove a fact, the Tribunal must feel actual persuasion on the basis of all of the evidence before it (Pollock v NSW Trustee and Guardian [2022] NSWSC 923 at [74]-[75] and the authorities discussed therein).

  3. Further, the mere fact that Mr O’Donnell attended the Tribunal and was cross examined by the builder but Mr Melick did not attend is not of itself, the basis of accepting everything in Mr O’Donnell’s report. The Tribunal still has to assess the evidence (including any deficiencies in the expert evidence), in the context of the legal issues summarised above (Shakiri v Holland [2024] NSWCATAP 28 at [88]-[111]).

  4. As discussed previously, there are a number of defect items upon which Mr O’Donnell and Mr Melick agree in respect of the issues of defect, method of rectification, and cost of rectification.

  5. Those items are summarised as follows:

ITEM

NATURE OF DEFECT

COST

9.01

Electrical Mains connection

$1,184.56

Item 9.02

NBN Conduit

$1,915.16

Item 9.04.01

External plumbing works

$726.16

Item 9.04.04

Rainwater management

$946.80

Item 9.09

Windows

$5,560.24

Item 9.10

First floor frame

$8,866.86

Item 9.11

Bulk heads and coffered ceilings

$7,129.60

Item 9.12

Feature shadow walls

$5,562.96

Item 9.15

Internal drainage points

$3,462

Item 9.16

Stairs

$2,908.52

Item 9.17

General carpentry work

$4,691.48

Item 9.18

General plastering work

$5,234.40

Item 9.19

General plumbing work

$2,475.20

Item 9.20

General tiling work

$4,232.80

Item 9.21

Joinery works

$13,054.34

Item 9.23

Concrete paving and garage floor

$6,555.40

Item 9.24

Electrical works

$12,320.28

Item 9.26

Construct Chowky

$3,144.80

Item 9.28

Not pressed

$Nil

Item SS4

Final clean plus large site clean

$1,786.97

SUB-TOTAL (exclusive of preliminaries; profit margin; contingencies and GST)

$91,758.53

  1. Having considered the information and opinions contained in the reports of Mr O’Donnell and Mr Melick; and the Joint Scott Schedule, the Tribunal is satisfied that the items set out in the above table are defective work in breach of the statutory warranties in s 18B of the HB Act; the method of rectification is reasonable; and the cost of rectification agreed upon by the experts is reasonable.

Defects In Dispute-Factual Findings   

  1. The Tribunal will now move on to consideration of the purported defect items in the Joint Scott Schedule whether there is disagreement between Mr O’Donnell and Mr Melick.

Exterior Brickwork

  1. Mr O’Donnell asserts that the brickwork of the residence does not comply with Australian Standard AS 3700:2018 because there are insufficient functioning weep holes.

  2. Further, he asserts that the brickwork has not been performed with due care and skill because there are areas which have not been cleaned. He further asserts that a brick column adjacent to the front door had been moved outwards to allow a stormwater downpipe to be constructed. This aspect of the building did not comply with the plans. The column has been tiled over, but tapping the column with the handle of a screwdriver revealed that the area behind emitted a hollow sound.

  3. There are two aspects to Mr O’Donnell’s remedial work. The first is $10,411.44, which involves two workers for three days clearing weep holes and installing new weep holes; brick cleaning; and scaffolding cost.

  4. The second aspect is the cost of rebuilding the front column to comply with the plans and specifications (including engineering details). Mr O’Donnell identifies this cost as $4,260.16 in the Joint Scott Schedule.

  5. Mr Melick agrees that the brickwork does not comply with the relevant applicable Australian Standard because there are insufficient functioning weep holes. He also agrees with Mr O’Donnell that some brickwork has not been properly cleaned, and this work has not been performed with due care and skill.

  6. Mr Melick disagrees with the costings of Mr O’Donnell in respect of brick cleaning and installation of weep holes. He assesses an appropriate cost as $3,315.20, in respect of one bricklayer performing three days of work; and two days of brick cleaning. Mr Melick’s costings are set out in the Joint Scott Schedule.

  7. Mr Melick does not agree that the brick column is constructed in a manner that did not comply with the plans and specifications is a defect, because he believes it is structurally sound and has been adequately built. Mr Melick does not respond to Mr O’Donnell’s costings for this aspect of the work.

  8. The Tribunal is satisfied that the brickwork does not comply with Australian Standards because there are insufficient functioning weep holes; and has additionally not been performed with due care and skill because the builder has not performed brick cleaning on significant parts of the brickwork.

  9. Essentially, Mr O’Donnell and Mr Melick agree on a scope of works regarding rectification, but disagree on cost. Considering the limited amount of photographs in Mr O’Donnell’s report, and his limited explanation as to why it will require two workers performing three days of work to install weep holes and performed brick cleaning, the Tribunal accepts the costings of Mr Melick as constituting an appropriate reasonable cost for performing the work necessary to achieve compliance with the contract.

  10. In respect of the column that was moved by the builder, this work does not comply with the plans and specifications under the contract. There is no evidence that the builder obtained variation for this work. Accordingly, the work is defective under s 18B of the HB Act. The Tribunal does not accept the opinion of Mr Melick that the work is not defective. Work being done with due care and skill and being structurally sound is not sufficient, if the work has been performed in a manner that departs from the plans and specifications under the contract, and there has been no contractual variation to change the scope of works under the contract.

  11. As Mr Melick has not provided an opinion responding to Mr O’Donnell’s costings of this aspect of the remedial work, the Tribunal accepts Mr O’Donnell’s scope of work and costings. Accordingly, in respect of the brick column, the cost of rectification is $4,260.16.

  12. When the two amounts for cost of rectifying brickwork are added together, the total cost of rectification is $7,575.36.

Balcony Overflows

  1. Mr O’Donnell asserts in his report that the drains to balcony floors have “a high degree of risk of blocking and for this reason and overflow device or free flow outlet must be installed to allow excess rainwater to evacuate the balcony area should the drainage outlet become blocked.”

  2. In the Joint Scott Schedule, Mr O’Donnell expands upon this by asserting that this is a performance requirement under Part 2.2.1 of the National Construction Code should the floor waste in the balcony floor become blocked during heavy rain.

  3. Both experts agree that there is a tap which needs to be tightened (which is work not performed with due care and skill by the builder) at a cost of $36.70.

  4. In respect of installing the balcony overflow, (including tightening the loose tap) Mr O’Donnell asserts that the cost of performing both aspects of the work is $891.70.

  5. Mr Melick disagrees that failure to install a balcony overflow is breach of Australian Standards. However, Mr Melick does not provide any detailed explanation for this opinion in his report.

  6. Irrespective of whether or not the failure to install the balcony overflow is a breach of Australian Standards (which are incorporated into the National Construction Code), the Tribunal is satisfied that a builder exercising due care and skill would have installed a balcony overflow to assist in the drainage from the balcony and prevent potential water ingress into the dwelling.

  7. The Tribunal accepts the opinion of Mr O’Donnell on the issue of defect; method rectification; and the cost of rectification. Accordingly, cost of rectification is $891.70.

External Carpentry; and Carpentry Framework

  1. Mr O’Donnell and Mr Melick agree that the first floor and ground floor corbels are coming away from the building; the builder used untreated timber; and the external carpentry has not been performed using materials compliant with Australian Standards or performed with due care and skill by the builder.

  2. In his report, Mr O’Donnell identified the cost of rectification as $8,509.99. Mr Melick agrees with Mr O’Donnell’s method of rectification, and cost of rectification in the amount of $8,509.99. However, in the Joint Scott Schedule after conclave, Mr O’Donnell revised his opinion to increase the amount to $10,465.99 to include an amount for scaffolding. Mr Melick disagrees that there should be an additional allowance for scaffolding which is not otherwise been taken into account.

  3. In circumstances where there has not been a clear explanation by Mr O’Donnell as to why he has revised upwards his costings, the Tribunal accepts that the appropriate amount for the cost to rectify the external carpentry is $8,509.99.

  4. There is a second aspect of carpentry work which has been dealt with separately by the experts. That involves the framework of the residence.

  5. Mr O’Donnell asserts that, on the basis of photographic evidence provided by the owners, holes that have been drilled by the builder in the floor joists in the first floor bathroom floor and first floor balcony floor which a diameter of 50 mm.

  6. Mr O’Donnell states that this work does not comply with Australian Standard AS 1684.2-2010 and as a result, the floor joists have been “significantly weakened and must be supported”.

  7. Mr O’Donnell also states that the framework to the roof had not been built in accordance with Australian Standard AS 1684.2-2010 as the builder had failed to install collar ties and metal brackets.

  8. Mr Melick states in his report that the photographs supplied by the owner show oversized holes in the floor joists, but that Mr O’Donnell did not create an inspection opening to confirm these photographs when given the opportunity to inspect the joists. Mr Melick agrees that the roof framework is defective because the builder had failed to install collar ties and rafter plates. Mr Melick identifies this aspect of the rectification cost as $3,228.80.

  9. Mr O’Donnell asserts that the total cost of rectification for the framework is $19,366.91. His costings are set out on pages 21 and 22 of his report. He uses Cordell’s Cost Guide as a basis for costings. He asserts that, in addition to disconnecting and reconnecting electrical works, it would take two men 10 days to install floor joints; metal brackets to the rafters; and collar ties in the roof.

  10. In the Joint Scott Schedule, Mr O’Donnell stated to Mr Melick that he was informed by the owner that the engineers frame inspection was performed on 12 July 2021, before the plumber drilled holes into the floor joists and installed drainage pipes, which occurred about 10 September 2021. The experts measure the height above the floor to the stack pipe and the measurements confirmed the pipes were installed at the same height as the floor joists. Mr Melick agreed with the measurements, but was of the opinion the builder “may have carried out remedial works to overcome the defect prior to the ceiling lining is being installed.”

  1. Considering the ambiguous response by Mr Melick in the joint conclave, and that Mr Melick agreed that the photographs provided by the owner showed oversized holes in the floor joists, the Tribunal accepts the evidence of Mr O’Donnell regarding the extent of the defects.

  2. Mr Melick has not provided an alternative costing regarding work to the floor joists in the first floor bathroom floor and first floor balcony, and has only commented upon the framework to the roof in respect of providing a costing.

  3. Accordingly, the Tribunal is satisfied that Mr O’Donnell’s costing accords with his scope of works, and that scope of works is appropriate to rectify the defect to both the framework involving the floor joists, and the framework involving the roof.

  4. Consequently, the Tribunal finds that the appropriate cost of rectification of the framework is $19,366.91.

  5. As discussed previously, rectification of the framework is a separate item to the rectification of external carpentry.

Roof Flashings

  1. Mr O’Donnell asserts that he was instructed by the owners that they experienced rain water leaking into the kitchen and family area in the proximity under where the first floor south brick wall ended, and the ground floor south roof met. His report attached photographs supplied by the owners which, according to the owners, showed water ingress events in July 2022, January 2023, and March 2023. The owners stated that the builder had attended the site after the water ingress events, and installed flexible sealant to the joint between the “apron or soaker” flashing and the wall.

  2. Mr O’Donnell asserts that the flashing builder installed where the south ground floor roof meets the first floor brick wall and where the garage roof meets the west first floor roof fails to comply with Australian Standard AS 3700:2011. This is not only based on the photographs supplied by the owners, but Mr O’Donnell’s inspection. Mr O’Donnell states that his inspection “revealed that no cavity or overflashings were present and this work is defective.” Mr O’Donnell believes that flashing should be fitted into the area, but rather than demolish the brickwork to install the flashing may be practicable to retrofit the flashing from inside of the home. He provides costings at p25 of his report in the amount of $18,078.04.

  3. Mr Melick asserts that the photographs provided by the owner are undated and do not clearly show water ingress attributable to inadequate flashings. Mr Melick states that he “inspected the area visible within the ground floor living in kitchen spaces and could find no evidence of water staining or water ingress.” Mr Melick does not believe there are inadequate roof flashings in breach of Australian Standards.

  4. In the Joint Scott Schedule Mr O’Donnell and Mr Melick and maintain their positions. Mr Melick comments that there was “insufficient evidence and lack of invasive inspection to determine the cause of the leak. This defect identification is based on assumptions.”

  5. The Tribunal accepts the opinion of Mr O’Donnell on the issue of defect in respect of inadequate roof flashings. Although the Tribunal accepts that the photographs do not provide clear or compelling evidence of significant water ingress, it is not correct to say that Mr O’Donnell’s opinion is based solely on the photographs provided by the owners. Mr O’Donnell, in his report, refers to his own inspection and how his opinion was drawn from both his own inspection, and the photographs provided by the owners.

  6. Mr Melick has not provided any alternative costing to that provided by Mr O’Donnell should the Tribunal accept Mr O’Donnell’s scope of works as appropriate to rectify the defect identified by Mr O’Donnell. In those circumstances, the Tribunal accepts the evidence of Mr O’Donnell on the issue of cost of rectification, and the reasonable amount for rectification is $18,078.04.

Roof Sheeting and Capping

  1. This issue is dealt with at pages 25 to 27 of Mr O’Donnell’s report. Mr O’Donnell refers briefly to the National Construction Code and Australian Standard AS 1562.1-2018. However, Mr O’Donnell does not state that the roof flashings are non-compliant with Australian Standards.

  2. Rather, Mr O’Donnell refers to the manufacturers guidelines regarding the installation of flashings on metal roofs, and states that the flashings had not been installed at 500 mm centres, and additional fixings throughout the roof must be installed. He also observed that the end of the ridge to the main roof was left void, and it is possible birds and vermin could enter the building through the void. Mr O’Donnell further asserts that the parapet flashings had not been installed in accordance with the Standards Australia Handbook SA HB 39:2015.

  3. Mr O’Donnell asserts that roof flashings and capping need to be installed. He does not refer to dents on roof sheets as being a reason why parapet flashing and capping needed to be installed.

  4. Mr O’Donnell costs the rectification work as $9,010.34.

  5. Mr Melick asserts that he does not believe any breach of or the National Construction Code has been identified by Mr O’Donnell; he did not believe the flashings were defective; and Mr O’Donnell was simply relying upon “an external document that recommends the spacing of the fixings to flashings and therefore assumes the flashings are defective.”

  6. Mr Melick states that the garage lower roof had three dents to the roof sheets, but that was insufficient to show any defect, and in any event, that could have been caused for reasons other than the work of the builder or its subcontractors.

  7. Mr Melick does not provide an alternative costing should the Tribunal accept the evidence of Mr O’Donnell on the issue of defect and method of rectification. Rather, he simply asserts that there is no defect.

  8. Both experts maintained their position at the conclave.

  9. The Tribunal accepts the evidence of Mr O’Donnell on the issue of defect, method of rectification, and cost of rectification. The defect, as identified by Mr O’Donnell, is not failure to comply with Australian Standards or the National Construction Code. Rather, it is that the flashings and cappings have not been installed in accordance with the manufacturers guidelines, and from this it can be inferred that the builder did not perform work with due care and skill.

  10. As Mr Melick has not provided an opinion on the costings of Mr O’Donnell, there is no reason not to accept Mr O’Donnell’s evidence regarding the cost of rectification as $9,010.34.

Bathroom Floors Tiling

  1. Mr O’Donnell states in his report that during his inspection:

“I observed water ponding in the master bedroom shower cubicle (refer photos P085 and P086), the main bathroom shower cubicle (refer photos P087) and to a greater degree the main bathroom floor area (refer photos P088, P089 and P090). I also observed that the waste pipe from the bathroom vanity basins in all bathrooms permeated the bathroom floor and the floor was not sealed around the pipe (refer photo P091 typical)”.

  1. On the basis of this, Mr O’Donnell asserts that the floors in the ensuite shower in the whole of the master bedroom are defective because they do not comply with the National Construction Code and Australian Standard AS3740-2010. Mr O’Donnell asserts the cost of removing tiles and fixtures; removing and replacing waterproofing; re-tiling; and reinstalling fixtures is $7,126.43.

  2. Mr Melick deals with this issue at pages 41 to 47 of his report. Mr Melick states that he measured the fall to the tiles, and there was sufficient fall to comply with Australian Standards. Mr Melick did not believe the tiling work was defective, nor commented that there were unreasonable water ponding issues.

  3. Both experts maintain their position at the conclave.

  4. The Tribunal does not accept the evidence of Mr O’Donnell that the bathroom floor tiling does not comply with Australian Standards, or is otherwise defective. The information contained in Mr O’Donnell’s report to support his conclusions is very brief, and is not clearly detail what measurements he had taken to establish that the fall to the tiles did not meet Australian Standards. There is inadequate information in Mr O’Donnell’s report to prove this aspect of the building work is defective.

External Paving

  1. This item is referred to the pages 36 to 37 of Mr O’Donnell’s report. Mr O’Donnell asserts that the front porch floor and pavement; and first floor balcony floor showed evidence of ponding, and Mr O’Donnell did not believe the tiling had sufficient falls in accordance with Australian Standard AS3727.1:2016.

  2. Mr O’Donnell provided three photographs in his report.

  3. On this basis, Mr O’Donnell asserts that the front porch and first floor balcony tiles need to be removed and re-laid, with associated waterproofing works, at a cost of $4,017.71.

  4. Mr Melick deals with this issue at pages 48 to 54 of his report. Mr Melick states that the front porch is entirely covered by a roof, which is the soffit of the balcony above. It is not an external pavement, and no water ingress to the house was apparent, with no physical evidence of water damage. Mr Melick did not agree that the front porch tiling was defective.

  5. In respect of the first floor balcony, Mr Melick states that he had performed measurements and the falls were found to be compliant. He provided a number of photographs of the measurements.

  6. As with the bathroom tiling, the Tribunal does not accept the evidence of Mr O’Donnell in respect of defective tiling to the front porch area and first floor balcony. Mr O’Donnell’s report does not contain any detailed explanation of the measurements he took to establish that the falls were insufficient and non-compliant with Australian Standards, and the Tribunal is not satisfied that there are water ponding issues. Accordingly, the owners have failed to prove the works are defective in respect of this item.

Render Work

  1. This issue is dealt with at pages 49 to 50 of Mr O’Donnell’s report. The issue is not that the rendering work does not comply with Australian Standards, but that the finish is not a smooth finish. Mr O’Donnell states that the owners informed him that it was the position of the owners that the render should be a smooth finish, and referred to an email provided by the owners to the builder. He further asserts that in the scope of works under the contract rendering was referred to being “acrylic rendering to front elevation – TBA.” Mr O’Donnell asserts that, in his opinion, this means that the owner could choose the type of render.

  2. Mr O’Donnell asserts that the cost of re-rendering and repainting the house is $7,038.88.

  3. Mr Melick states that the render that had been applied was acrylic render, and refers to the manufacturers website. Mr Melick did not believe there was any defect, or any failure to perform the rendering in accordance with the plans and specifications under the contract.

  4. Both experts maintain their position at the conclave.

  5. The Tribunal is not satisfied that any defect has been established in respect of the rendering. The emails that Mr O’Donnell refers to (pages 374 to 377 of Mr O’Donnell’s report) involve Mr Pindolia emailing the builder in May 2022 “a couple of weeks” before handover complaining that the render finish was not sufficiently smooth.

  6. The mere fact that the owners complained that the rendering finish was not sufficiently smooth is not sufficient to establish a defect, or that the builder failed to comply with the terms of the contract. The Tribunal is not satisfied that the reference in the scope of works to “acrylic finish” and “TBA” is sufficient to establish, objectively, that it was a term of the contract that the owners could stipulate a particular smoothness in the acrylic rendering or that the rendering applied by the builder was in breach of the contract.

  7. No breach of statutory warranty under s 18B of the HB Act is established in respect of this item or breach of contract.

Painting

  1. This issue is dealt with at pages 54 to 55 of Mr O’Donnell’s report. Mr O’Donnell asserts that the scope of works in the contract was that the builder would apply three coats of heavy duty paint throughout. Mr O’Donnell did not believe that the builder had applied three coats of paint. Further, Mr O’Donnell asserts that there were areas of the dwelling that were not painted, such as lintels; and walls and doors had been sprayed rather than had three coats of heavy duty paint applied. Mr O’Donnell does not believe that the pain work was performed with due care and skill.

  2. Mr O’Donnell asserts that the whole of the dwelling needs to be repainted. He assesses the cost of doing so as three painters for 15 days, plus paint and equipment, at a cost of $29,410.40.

  3. Mr Melick states on page 72 of his report that he agrees the stairs are poorly finished and are in need of sanding and re-coating in their entirety, but he does not agree that the entire house needs to be repainted. He does not believe that O’Donnell has provided evidence to indicate that there was “picture framing” during painting, and any overspray can simply be cleaned.

  4. Mr O’Donnell’s report provided a number of photographs regarding painting, but it was difficult to discern from these photographs that the house had been inadequately painted. At the hearing, Mr O’Donnell maintained his opinion that the house had not been painted with three coats of heavy duty paint.

  5. At the conclave, both experts maintain their position.

  6. The Tribunal has taken into account that Mr O’Donnell attended the hearing and that he gave a further explanation regarding his opinion in respect of painting, and the cost of repainting the entire house.

  7. However, even taking that into account, the evidence in Mr O’Donnell’s report and the photographs do not provide sufficient detail for the Tribunal to be satisfied, on the balance of probabilities, that the builder failed to perform the painting work with sufficient due care and skill and in accordance with the terms of the contract that the entire house needs to be repainted.

  8. Rather, the Tribunal accepts the opinion of Mr Melick regarding the stairs. The Tribunal is satisfied that this work has been not performed in accordance with the statutory warranty provisions under s 18B of the HB Act.

  9. The Tribunal is satisfied that the cost of rectification is $3,206.48. The Tribunal notes that in the Joint Scott Schedule Mr O’Donnell referred separately to the staircase, and his costings (which is separate to the issue of painting) are consistent with Mr Melick’s costings in respect of the staircase.

Relay Turf and Pebbles

  1. This item is referred to at page 56 of Mr O’Donnell’s report. Mr O’Donnell asserts that the turf to the front and pebbles to the east side of the home will need to be replaced and/or made good on completion of the remedial works. He provides costings in the total amount of $1,029.70.

  2. Mr O’Donnell asserts that there is no evidence of any defect in respect of the landscaping, and any remedial works that have the possibility of damaging the landscaped areas should be protected by a competent tradesperson when doing the remedial work. Mr Melick does not accept that it will be necessary to remove and replace the turf to the front of the dwelling and pebbles to the east side of the home to perform rectification works.

  3. The Tribunal is not satisfied that any defect has been identified in respect of the landscaping works; nor has it been established, on the balance of probabilities, that after rectification works are performed turf and pebbles will need to be replaced.

  4. Accordingly, the owners have failed to establish that the works are defective, or in the alternative, that there will be consequential damage caused during rectification works such that the turf and pebbles needs to be replaced or made good.

Waste Disposal

  1. This issue is not dealt with in any detail in either of the expert reports. Mr O’Donnell’s costing is contained at page 143 of his report. Mr O’Donnell is of the view that hiring 10 m³ bins for 8 weeks at a cost of $7,954.40 is appropriate for waste disposal, and states that his costing comes from Cordell’s Cost Guide.

  2. Mr Melick stated in the Joint Scott Schedule that two 6 m³ bins would be sufficient at a total cost of $2,440.

  3. Considering the extent of the defect works that have been referred to in both expert reports, and in determination of the disputed items, the Tribunal is persuaded that costings of Mr O’Donnell are more appropriate than the costings of Mr Melick in respect of this issue.

  4. Accordingly, $7,954.40 is accepted as the reasonable cost of hiring waste a waste disposal bin for the duration of the rectification work.

Preliminaries

  1. This issue is discussed below.

Contingency Allowance

  1. This issue is discussed below.

Summary

  1. The Tribunal summarises the findings regarding the disputed defect items as follows:

ITEM

NATURE OF DEFECT

COST

9.03

External brickwork

$7,575.36

9.04.09

Balcony overflow

$891.70

9.05

External carpentry

$8,509.99

9.06

Carpentry framework

$19,366.91

9.07

Roof Flashings

$18,078.04

9.08

Roof Sheeting and Capping

$9,010.34

9.13

Bathroom floors

Nil

9.14

External paving

Nil

9.22

Render work

Nil

9.25

Staircase re-sanding and re-coating

$3,206.48

9.27

Relay turf and pebbles

Nil

40

Waste disposal bin

$7,954.40

SUB-TOTAL

$74,592.92

  1. In addition to the above, if damages are awarded for the cost of engaging another builder to rectify defects rather than the respondent being ordered to rectify defects, additional costs in respect of obtaining insurance; profit margin; and GST must be factored in.

  2. In respect of those issues, and having considered the opinions expressed by Mr O’Donnell and Mr Melick in their reports and the Joint Scott Schedule, the Tribunal is satisfied that the following is appropriate:

  3. Insurance: 2% of total cost (this is agreed upon by Mr O’Donnell and Mr Melick).

  4. Profit Margin. The Tribunal is satisfied that 30% is an appropriate profit margin inclusive of preliminaries and contingencies.

  5. Mr O’Donnell and Mr Mellick agree that 20% is an appropriate profit margin. Where they disagree is whether that includes preliminaries and a contingency allowance. Mr Melick asserts that his profit margin includes preliminaries, and that no contingency allowance is appropriate, because a competent remedial builder would be able to perform the works without factoring in an allowance for unexpected future events.

  6. In essence, if profit margin, preliminaries and contingencies are considered together, Mr O’Donnell says 40% total margin is appropriate and Mr Melick says a 20% total margin is appropriate.

  7. Considering the extent of the defects; the uncertainties of obtaining a builder to perform remedial work rather than a new construction; and the uncertainties regarding matters such as future price increases, the Tribunal regards Mr Melick’s assessment of a ‘flat’ 20% profit margin as overly conservative.

  8. In all the circumstances, it is appropriate to assess a profit margin (including preliminaries and contingencies) of 30%, which is the mid-point between Mr O’Donnell and Mr Melick.

  9. Accordingly, the Tribunal summaries its findings regarding the cost of rectifying defects as follows:

ITEM

TOTAL

Defects Agreed By O’Donnell and Melick

$91,758.53

Tribunal’s Findings on Defects In Dispute (set out previously)

$74,592.92

SUB-TOTAL

$166,351.45

Insurance-Add 2%

$3,327.03

SUB-TOTAL

$169,678.48

Profit Margin (inclusive of preliminaries and contingencies)-Add 30%

$50,903.54

SUB-TOTAL

$220,582.02

GST-Add 10%

$22,058.20

TOTAL

$242,640.22

Are Damages or Work Orders The Appropriate Remedy?

  1. By reason of s 48MA of the HB Act, the Tribunal must have regard to the principle that rectification of defective work by the responsible party is the preferred outcome.

  1. Section 48MA of the HB Act applies to existing defective work by the builder, not incomplete work. This dispute involves defective work.

  2. In Kurmond Homes Pty Ltd v Marsden [2018] NSWCATAP 23 at [41]-[46] the Appeal Panel stated as follows:

While not appropriate to seek to define all circumstances that might justify a court or tribunal making an order that departs from the preferred outcome, it is necessary to give some consideration to the nature of the obligation imposed on the court or tribunal by s 48MA.

First, the principle, by its terms, only applies “in determining a building claim involving an allegation of defective residential building work or specialist work.” It is not expressed to apply where, for example, the building claim only involves an allegation of incomplete residential building work or specialist work. That is not to suggest s 48O does not otherwise permit a work order in respect of work found to be incomplete.

Second, s 48MA is directed towards the remedy or “outcome” to be provided by the court or tribunal where a claimant establishes the responsible party has carried out defective residential building work or specialist work. In this sense, it is not properly described as a “presumption.” Rather, it is a remedy to be “preferred” to other forms of order which the court or tribunal might make.

Third, while s 48MA provides the court or tribunal “is to have regard to the principle that rectification of the defective work by the responsible party is the preferred outcome”, the section does not mandate that a work order must be made in all cases. Further, the section does not confine the form of orders that may be made under s 48O, including an order that defective work be rectified by the responsible party engaging another person to carry out that work on behalf of the responsible party.

Fourth, the term “preferred” is not defined. The HB Act and Regulations do not specify circumstances in which the preferred outcome is not to be adopted. However, guidance as to the meaning of “preferred” and the circumstances that would justify an order for a different outcome is found in the second reading speech where the Minister for Fair Trading makes clear that the purpose of the amendment was to:

(1) prevent a homeowner from unreasonably refusing a builder access to a building site to rectify defective work;

(2) permit a builder to return to carry out necessary rectification work if they are willing; and

(3) support the timely and cost-effective resolution of disputes.

That is, in deciding what order should be made, a court or tribunal may consider whether there is a reasonable basis for any objection raised by the homeowner to the builder being permitted to rectify the defective work, the terms of any order, whether the builder is willing to return and whether such an order would support a timely and cost effective resolution of the dispute.

  1. Whether the Tribunal departs from the “preferred outcome” that the builder who performed the defective work rectify it involves the exercise of discretion (Leung v Alexakis [2018] NSWCATAP 11 at [139]; Robinson v Hindmarsh Construction Australia Pty Ltd [2021] NSWCATAP 51 at [66]).

  2. The builder asserts that it is suitably licensed to perform rectification work and its ready, willing and able to rectify defects in compliance with any work order. The owners oppose a work order being made, for reasons that include the length of time the builder took to complete the original building works; the number of defects in the residence; and the existence of significant and substantial defects despite the builder attending site previously to rectify defects. The owners assert their relationship with the builder has broken down due to the conduct of the builder, and they have no faith the builder will adequately rectify the extensive defects they complain of.

  3. The Tribunal is satisfied that the “preferred outcome” of the builder returning to the site and rectifying defects should be departed from in the circumstances of this matter.

  4. The Tribunal accepts that there is no evidence to indicate the builder is not suitably licensed to perform rectification work, and has indicated that it is ready, willing, and able to return to site and perform any works ordered by the Tribunal.

  5. However, the defective work in the dwelling is extensive. On the builder’s own independent expert evidence from Mr Melick the cost of rectifying the defects is approximately $150,000. For reasons that have been explained in detail previously in this decision, the Tribunal is satisfied that the cost of rectifying the defects as found by the Tribunal is approximately $242,000.

  6. Considering that the original contract price to construct the dwelling was $525,000 (and there is no evidence to indicate any significant variation to the scope of works by either the builder or the owners), the cost of rectifying the found defects is approximately 46% of the original contract price.

  7. The nature and extent of the defects in the dwelling do not give the Tribunal confidence that a rectification order will be complied with, and that the parties will not be involved in further disputes regarding performance of rectification work.

  8. There is no sufficient evidence to establish the owners have unreasonably refused the builder access when the builder has sought to return to the site to rectify defects.

  9. The Tribunal notes that the builder asserts that it has attended site previously and rectified defects, and has complied with a NSW Fair Trading rectification order. Compliance with the rectification order is not given extensive weight, when the Tribunal has not been provided with a copy of the original order, as distinct from a letter from NSW Fair Trading stating that the rectification order has been complied with.

  10. However, even if a NSW Fair Trading rectification order has been complied with, there remains very significant and extensive defects in the dwelling which have not been rectified by the builder. A mere assertion by the builder that it is prepared to return to site and rectified defects needs to be considered in the context of the history of disputation between the parties, and the extensive remaining defects in the residential premises.

  11. Further, the Tribunal notes that despite the builder asserting that it was “ready willing and able” to rectify defects, there was no evidence that it had made any offer to the owners to rectify the defects that Mr Melick had agreed with Mr O’Donnell, as set out in Mr Melick’s report of 18 August 2023.

  12. Whilst there were disputed items between Mr O’Donnell and Mr Melick, that were further explored in the conclave and joint expert report, Mr Melick’s report of 11 August 2023 agreed with Mr O’Donnell on a large number of defect issues. There is no reason why the builder could not have offered to attend the site and rectify those defects, and there is no evidence that the builder has done so. Rather, the builder has chosen to await determination by the Tribunal of all of the defect items.

  13. The builder has also not offered to rectify defects under the supervision or approval of an independent expert engaged to confirm that rectification works have been done with due care and skill by the builder.

  14. The Tribunal notes that the owners, in the context of making submissions as to why the builder should be ordered to pay damages rather than to attend the site and rectified defects, has referred to a number of Google reviews of the builder, and made various assertions about the manner in which the builder does business. The Tribunal has given no weight to the Google reviews, nor has it given any weight to the subjective assertions of the owners that the builder does not conduct business in a diligent manner.

Are Any Monies Still Owned By the Owners for the Building Works?

  1. When assessing damages for the cost of rectifying defects, the Tribunal must also take into account the amount owing to the builder under contract for the works performed. This is consistent with the principle that damages are assessed on the basis of putting a party back into the position that it would have been had the contract been performed, and not in a better position (Sleiman t/as Perfect Kitchens v Dempsey [2020] NSWCATAP 26 at [79]-[85]; BKB Constructions Pty Ltd v Sawan [2022] NSWCATAP 103 at [77]).

  2. The contractual assessment of damages to the owners is a different issue to the builder taking its own proceedings in the Tribunal seeking damages for outstanding monies owed under contract, or in the alternative, principles of quantum meruit.

  3. The Tribunal is not satisfied that the owners owe the builder any monies under contract; nor was any issue raised in the proceedings that quantum meruit principles should apply to the assessment of damages by way of any set-off. The evidence regarding the negotiations between the parties, and whether or not there was some agreement as to the final payment is so vague and indeterminate that no findings can be made.

  4. However, there is a receipt of the builder in September 2022 stating that the owners have a “nil balance”. The basis of that documentary evidence, no monies are owed to the builder under contract.

  5. Accordingly, no deduction is made for the amount of monies owed to the builder from the assessment of damages for the cost of rectifying defects, as the Tribunal is not satisfied that any monies are owed.

The Issue of Costs

  1. As discussed previously, the owners provided their assessment of costs in the total amount of approximately $25,000. That assessment included not only the invoices of Mr O’Donnell, but photocopying expenses. Photocopying expenses were said to exceed $2,144.93.

  2. The amount claimed or in dispute in the proceedings clearly exceeds $30,000. Consequently, r 38 of the Civil and Administrative Tribunal Rules 2014 (NSW) applies, and the owners do not have to show “special circumstances” under s 60(2) of the Civil and Administrative Tribunal Act 2013 (NSW) (NCAT Act) to be awarded costs.

  3. The owners are the successful party in the proceedings, and the amount claimed appears to relate to disbursements in bringing the proceedings. In those circumstances, it is open to the Tribunal to make a lump sum order for costs (Cornucopia (Young) Pty Ltd v Ward t/as Newcastle Model Autosports and Hobbies [2024] NSWCATAP 109).

  4. However, the Tribunal must also give the builder a reasonable opportunity to be heard on the issue of costs (s 38(5)(c) of the NCAT Act).

  5. The Tribunal is not satisfied that it is appropriate to make a costs order in this decision. Rather, the issue of costs is to be determined separately. The Tribunal’s orders contain procedural directions as to how the issue of costs is to be determined.

ORDERS

  1. The respondent Casagrande Homes Pty Ltd is to pay the applicants Mahendra Pindolia and Deepika Pindolia the sum of $242,640.22 by 28 days from the date of this decision.

  2. The issue of costs is to be determined as follows:

  1. The applicants are to file with the Tribunal and serve on the respondent, by person or by post and additionally by email, any further costs submissions and documents by 7 days from the date of this decision.

  2. The respondent is to file with the Tribunal and serve on the applicants, by person or by post and additionally by email, any costs submissions and documents by 21 days from the date of this decision.

  3. The applicants are to file with the Tribunal and serve on the respondent, by person or by post and additionally by email, any costs submissions in reply by 28 days from the date of this decision.

  4. The costs submissions of the parties are to include whether or not the consent to the Tribunal determining the issue of costs without a further oral hearing, and if not, why not.

  5. Subject to consideration of the costs submissions of the parties the Tribunal may determine the issue of costs on the basis of the written materials and without further oral hearing under s 50(2) of the Civil and Administrative Tribunal Act 2013 (NSW).

  6. If a party seeks an extension of time in respect of costs submissions, an application should be made in writing to the Tribunal no later than the day prior to the date the submissions are due to be filed and served.

  7. Each party must file their costs submissions and documents with the Tribunal in hard copy.

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I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.


Registrar

Decision last updated: 20 December 2024

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Cases Citing This Decision

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Cases Cited

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Statutory Material Cited

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Bellgrove v Eldridge [1954] HCA 36
Bellgrove v Eldridge [1954] HCA 36
Fisher v N. Phillips and M. Phillips t/as Arise Building Services [2022] NSWCATCD 80