Sand Ground Engineering Pty Ltd v Super Render Pty Ltd

[2020] NSWSC 458

Supreme Court

New South Wales

Medium Neutral Citation:	Sand Ground Engineering Pty Ltd v Super Render Pty Ltd [2020] NSWSC 458
Hearing dates:	7 April 2020
Date of orders:	30 April 2020
Decision date:	30 April 2020
Jurisdiction:	Common Law
Before:	N Adams J
Decision:	(1) The appeal is dismissed. (2) The plaintiff is to pay the defendant’s costs on the ordinary basis.
Catchwords:	APPEAL — appeal from Local Court — contract dispute — terms of agreement — whether agreement breached waterproofing and rendering of basement — water leakage — shotcreting — whether error of law — terms of agreement as questions of fact — whether waterproofing negligent
Legislation Cited:	Civil Liability Act 2002 (NSW) Competition and Consumer Act 2010 (Cth) Local Court Act 2007 (NSW), 39, s 40
Cases Cited:	Attorney General for the State of New South Wales v X (2000) 49 NSWLR 653; [2000] NSWCA 199 Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321; [1990] HCA 33 Azzopardi v Tasman UEB Industries Pty Ltd (1985) 4 NSWLR 139 Carmichael v National Power Pie (1999) 1 WLR 2042; [1999] UKHL 47 Collector of Customs v Agfa-Gevaert Limited (1996) 186 CLR 389; [1996] HCA 3 Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 260 CLR 1; [2016] HCA Dranichnikov v Minister for Immigration and Multicultural Affairs (2003) 77 ALJR 1088; [2003] HCA 26 Kirk v Industrial Court of New South Wales (2010) 239 CLR 531; [2010] HCA 1 Kostas v HIA Insurance Services Pty Limited (2010) 241 CLR 390; [2010] HCA 32 Re Refugee Review Tribunal; Ex parte Aala (2000) 204 CLR 82; [2000] HCA 57 Sayed v Deng [2012] NSWSC 851 Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 State Super SAS Trustee Corp v Cornes [2013] NSWCA 257 Tolson v Roads and Maritime Services [2014] NSWCA 161 Yousif v Commonwealth Bank of Australia [2010] FCAFC
Category:	Principal judgment
Parties:	Sand Ground Engineering Pty Ltd (Plaintiff) Super Render Pty Ltd (Defendant)
Representation:	Counsel: A R Vincent (Plaintiff) A Djurdjevic (Defendant)   Solicitors: Equium Lawyers (Plaintiff) Hall and Wilcox (Defendant)
File Number(s):	2020/00000401

Judgment

Introductory remarks

1. By amended summons filed on 23 February 2020, the plaintiff, Sand Ground Engineering (“Sand Ground”), seeks leave to appeal under ss 39 and 40 of the Local Court Act2007 (NSW) against the whole of the decision of Magistrate Barko delivered on 4 December 2019. The proceedings before his Honour concerned a claim brought by Super Render Pty Ltd (“Super Render”) against Sand Ground for unpaid invoices in the amount of $38,212. Sand Ground defended the proceedings alleging breach of contract and cross-claimed alleging breach of contract and negligence. Sand Ground was unsuccessful in the Local Court.

2. Sand Ground alleges in this Court that Magistrate Barko erred in law in terms of the formation, terms and breach of the relevant contract. In the alternative, Sand Grounds asserts that the errors involve questions of mixed fact and law and leave ought to be granted in relation to them.

3. Appeals from judgments or orders made in the General Division of the Local Court to this Court are limited in their scope. Section 39(1) of the Local Court Act provides:

A party to proceedings before the Court sitting in its General Division who is dissatisfied with a judgment or order of the Court may appeal to the Supreme Court, but only on a question of law.

4. Section 40(1) of the Local Court Act provides:

A party to proceedings before the Court sitting in its General Division who is dissatisfied with a judgment or order of the Court on a ground that involves a question of mixed law and fact may appeal to the Supreme Court but only by leave of the Supreme Court.

5. Sand Ground can appeal as of right on a “question of law” and/or seek leave to appeal on a ground that involves a “question of mixed law and fact.” Sand Ground has no avenue of appeal against the decision of the Magistrate on a ground that involves a question of fact alone.

6. Sand Ground relied upon the following five grounds of appeal:

1. Ground One:   The learned Magistrate erred in the application of the legal principles concerning the formation of the contract between the plaintiff and the defendant and its terms entered into on 19 March 2017 (Contract).

2. Ground Two:   Further or alternatively, the learned Magistrate erred in failing to find that it was a term of the agreement between the plaintiff and the defendant that the defendant was required to waterproof the entirety of the walls of the three level basement carpark at 88 Anzac Parade, Kensington.

3. Ground Three:    The learned Magistrate erred in failing to determine the plaintiff's claim for breach of Contract.

4. Ground Four:    Further or alternatively, the learned Magistrate erred in failing to find that the defendant breached the Contract by its admitted failure to waterproof the entirety of the walls of the three level basement carpark at 88 Anzac Parade, Kensington.

5. Ground Five:    The learned Magistrate erred in failing to determine the quantum of the loss and damage suffered by the plaintiff.

7. For reasons I have set out below, I am satisfied that neither Grounds One or Two involved either a question of law alone or a question of mixed law and fact. They were directed at the learned Magistrate’s factual findings. The plaintiff’s complaints in this court were all to the same effect: the Magistrate ought to have made different factual findings. As for the remaining Grounds, they were not ultimately pressed.

Factual background

8. The evidence before me comprised the same material as was before Magistrate Barko as well as his Honour’s reasons and the parties’ written submissions on this appeal.

9. Super Render is a specialist contractor in the construction industry. Sand Ground provides excavation, piling and anchoring services. On 19 February 2017, Sand Ground was engaged as a subcontractor at a mixed residential and commercial development on Anzac Parade, Kensington (“the site”). Part of its works included the provision of a three level dry tanked basement car park.

10. In March 2017, the plaintiff had excavated the basement and constructed a pile wall. Shotcreting had also been carried out by a third party contractor. The purpose of this shotcreting was the subject of a factual dispute between the parties. In Super Render’s submissions filed 17 March 2020, it claimed that the shotcreting was intended to create a waterproof seal but failed to do so. Sand Ground, on the other hand, asserted that shotcreting of itself could never constitute a waterproof solution. In any event, after the shotcreting was carried out it became apparent that the walls of the basement were leaking and that rendering and waterproofing was required.

11. On 18 March 2017, a representative from Super Render attended the Anzac Parade site for the purposes of providing a quotation. It was common ground between the parties that there was a discussion as to the scope of the work on this date, which was followed up by emails on 18 and 19 March. The focus of the dispute in the Local Court was whether or not the oral discussions and the email exchanges formed the terms of the agreement between the parties or whether, as the plaintiff contended, the emails alone did.

12. After Sand Ground contracted Super Render to do work at the site, the latter carried out waterproofing and rendering works at the site. Sand Ground later paid some of the invoices amounting to $27,296.76 for this work but refused to pay the remaining invoices amounting to $38,212.

13. On 29 October 2018, Super Render commenced proceedings in the Local Court seeking payment of the outstanding $38,212. Sand Ground denied that payment was owed as alleged because Super Render’s work was defective and a breach of contract as the basement walls were not completely waterproofed. Sand Ground cross-claimed on the basis of breach of agreement and breach of statutory duty. It also claimed that, further and in the alternative, it had suffered damage caused by the negligence of Super Render. Super Render also relied upon res ipsa loquitur provisions of the Competition and Consumer Act 2010 (Cth) and disputed the terms of the agreement.

14. At the hearing before Magistrate Barko, Super Render relied upon the following evidence.

15. Mr Tiago Silva swore two affidavits (28 May and 18 July 2019) and gave evidence at the hearing. He was the Managing Director of Super Render, had visited the site several times and gave evidence about Super Render’s quoting practices.

16. Mr Bruce Leslie swore two affidavits (27 May and 20 August 2019) and gave evidence at the hearing. He is a qualified chemical engineer. As at March 2017 he was the sale and marketing manager for Scientific Waterproofing Products Pty Ltd. He was also present at a site meeting on 28 March 2017 with Mr Joao Paulo Ometto Franco from Super Render and, on his account, Mr Ahmad Alwan from Sand Ground. He gave evidence that the purpose of this meeting was to assess the work done by the plaintiff and the water leakage problem.

17. Mr Franco swore two affidavits (28 May and 16 August 2019) and gave evidence at the hearing. He was an employee of Super Render. He met with Mr Alwan on the site on 18 March 2017 and attended the subsequent site meeting with Mr Leslie.

18. Sand Ground relied upon three witnesses.

19. Mr Alwan was an employee of Sand Ground who engaged the services of Super Render. He denied attending the 23 March 2017 meeting. He provided two affidavits dated 30 May and 14 August 2019 and gave evidence at the hearing.

20. Sand Ground also relied upon an expert report from Mr Edgar Agda in relation to waterproofing standards and an affidavit from Mr Robert Hiatt, the Managing Director of Sand Ground, dated 5 June 2019.

The judgment of Barko LCM

21. His Honour commenced his Reasons by summarising the pleadings. He then summarised the evidence in some detail.

22. After summarising the parties’ submissions and relevant law, his Honour went on at [49] to make a number of preliminary factual findings. In relation to the meeting of 23 March 2017, his Honour found that the evidence of Mr Leslie and Mr Franco was preferable and that the meeting did take place with the two of them and Mr Alwan in attendance. He based this finding on a number of factors: they gave similar evidence and Mr Leslie was an independent witness and had diarised and taken photographs at the meeting.

23. In relation to what was said during the site visit of 18 March 2017, his Honour also preferred Mr Franco’s version. Mr Franco had given evidence that Mr Alwan had stated at the meeting that Sand Ground, “just wanted the gaps in the shotcrete walls to be filled in to make the walls look better”. He said that he had warned Mr Alwan that this would not stop the walls from leaking but Mr Alwan had said that the gaps needed to be filled simply to make them look better and “soften” their appearance. He deposed that Sand Ground wanted the work done by 24 March 2017. Mr Alwan, on the other hand, gave evidence that the meeting had been for the purpose of obtaining a quote. He deposed that he had told Mr Franco that “...we need to stop the water coming through the walls…as long as the water stops leaking we will be happy…give me a price.”

24. His Honour again preferred the evidence of Mr Franco. He had already rejected Mr Alwan’s evidence in relation to the 23 March meeting and the circumstances favoured Mr Franco’s version that Super Render was engaged to do “stop gap measure work and tidy the appearance of the walls for a quick handover as a renderer”. His Honour found that there was “an atmosphere of desperation on the part of Sand Ground to finish its role at the Site” as it only had two weeks to finish its contract with the head contractor. Furthermore, Sand Ground had only sought “some rendering done” (as evidenced by a text message) before the 18 March meeting. Additionally, Super Render’s quote was accepted quickly. His Honour was satisfied that there were emails which showed that Sand Ground agreed on the quote on 19 March with work to begin on 20 March. His Honour stated that:

“There is no evidence before me that any due diligence was conducted by Sand to ascertain the workmanship and reputation of Super and there is no evidence before me that Sand ensured that Super was licenced and/or insured for such an important task. Mr Alwan stated that Sand did not require Super to sign and subcontractor warranty and he knew nothing about Super before it commenced its work. In this day and age of regulation and litigation it strikes me as extraordinary that Super was permitted to do the work "sight unseen". A simple company search on Super would have revealed it was a $100 "one man band" that performed rendering work. These surrounding circumstances are more in keeping with Super's case that it was only engaged to do stop gap measure work and tidy the appearance of the walls for a quick handover as a renderer.”

25. His Honour noted that in his quotation of 18 March 2017, Mr Franco suggested a certain material "allows apply (which his Honour interpreted as 'application') over the wet surface". His Honour favoured Super Render’s contention that they were only engaged to waterproof parts of the wall, as at the time not all of the wall and shotcrete was wet. His Honour also noted that it seemed improbable that Sand Ground had intended to have the walls waterproofed but allowed Super Render to provide a relatively simplistic quotation and did not ask for further detail. His Honour held that:

“…I am satisfied and find that the nature of the quotation and the surrounding circumstances are more consistent with Super having been engaged in light of Mr Franco's conversation with Mr Alwan on 18 March 2017 on the basis that only specified gaps/patches of the existing works were to have waterproofing material applied to them and then cement render applied to make the wall cosmetically appealing.”

26. His Honour also noted that Mr Alwan had visited the site and signed off on site diaries which had referred to resin being applied to "all patches, around the top perimeter and expansion joints". The site diaries also made clear that Super Render was not purchasing enough resin to cover all of the wall. His Honour stated:

“Given the photos produced by Mr Franco of the progress of works at the Site it would have been obvious to a layperson let alone a project manager with the qualifications of Mr Alwan that the Resin was not being applied over the entirety of the walls but only in specific areas. The rubbery type appearance, texture, and colour of the Resin compared to the rest of the shotcrete made it stand out. I cannot accept that Mr Alwan attended the Site around twice a day and did not notice the absence of the Resin on the great bulk of the walls.”

27. On 23 March 2017, Mr Franco wrote to Mr Alwan and stated "[a]t this stage we are filling up the gaps...”, which was also taken into account by his Honour. After making his findings in respect of the terms of the agreement, his Honour addressed the expert evidence of Mr Agda. Mr Agda’s opinion was that Super Render had failed to engage an appropriate specialist to conduct due diligence of the water leaks and had also failed to use an expandable or epoxy injection grout to the soil mix wall prior to any rendering. His opinion was that the work was defective. His Honour was satisfied that this opinion was likely premised on the instructions provided by Sand Grounds' solicitors that Super Render was engaged to waterproof the entirety of the walls rather than to simply waterproof specific areas.

28. His Honour’s overall findings at [58] were that:

“Reasonable business persons in the positions of the parties would have understood that the terms and conditions of the agreement between the parties were that Super, as a cement renderer, was to treat isolated areas ("patches") of water leakage with a waterproofing membrane (in this case the Resin), fill in the missing shotcrete which was either incomplete or had been removed to identify the source of the water, and then apply further cement render to the walls to create a cosmetically satisfactory appearance all within 5 working days. If water was still leaking after this process then Super was to apply the Plug to the isolated areas still leaking;

Reasonable business persons in the positions of the parties of the parties would have understood that Super did not agree to make the walls waterproof but rather to simply apply the Drizoro products to the specific areas of the walls as directed. It was not a term and condition of the agreement between the parties that Super guaranteed or warranted that where ever it applied the Drizoro products there would no longer be any penetration of water;

It was not an express or implied term and condition of the agreement between the parties that Super would apply a waterproofing membrane to the entirety of the carpark basement walls;

It was not an express or implied term and condition of the agreement between the parties that Super would engage an engineer with specialised knowledge to determine the root of the water leakage issues or that Super itself would perform these engineering services;

It was not an express or implied term and condition of the agreement between the parties that Super would inject an expandable or epoxy material into the identified water leaks;

It was not an express or implied term and condition of the agreement between the parties that Super would remove all of the existing shotcrete before applying the Resin , the Plug, or further cement render;

The agreement between the parties was varied by consent (as evidenced by Mr Alwan and Mr Hiatt) to allow further time to better colour match the new cement render with the existing shotcrete and to apply a further skim coat for better cosmetic appearance. The time frame for the works was also extended by consent to address new water leaks as and when they appeared. Sand never sought to terminate the agreement by reason of this extension of time or remonstrate about it because Sand was aware that it was through no fault of Super that these variations were required.”

29. His Honour found that Mr Alwan had refused advice that a lengthier process was required, namely removing the existing render, addressing the water leakage (with expert advice) and then waterproofing the entirety of the walls. His Honour accepted the evidence of Mr Leslie that the wall leaked after Super Render’s work but that this was a result of water flow re-directing itself, by gravity or negative pressure, away from the areas treated with waterproofing to new, untreated, areas.

30. His Honour found that there had been payments by Sand Ground to Super Render because Super Render was performing work in accordance with the agreement. He found that Sand Ground then withheld payment from Super when it realised that it faced contractual sanctions from the head contractor. He concluded the Super Render had provided full consideration, had not breached the agreement and was entitled to the full amount of its claim.

31. In respect of the cross-claim, his Honour found that Super Render did in fact deliver the service agreed to and accordingly there was no breach of the consumer guarantees as alleged in the cross-claim. His Honour further noted that, at any rate, Sand Ground was likely excluded from the operation of the Australian Consumer Law because it was not a “consumer” as defined in s 3.

32. In relation to the negligence claim, his Honour found that Sand Ground may have suffered harm but that was not caused by Super Render’s negligence. As noted above, he found that Super Render did what it was contracted to do. It was not contracted to address leakage in the walls generally. In any respect, if negligence had been made out, his Honour would have reduced it by 100% on account of Sand Ground’s contributory negligence. He did not consider res ipsa loquitor because this was not raised in oral submissions and had no application to the circumstances of the case.

Sand Ground’s submissions

33. In relation to Grounds One and Two, Sand Ground conceded that the acceptance or rejection of evidence and questions of weight are “generally” matters of fact if they have rational support. However, it “defied common sense” that Sand Ground would engage a subcontractor to perform waterproofing and rendering works on a three level basement car-park for cosmetic purposes only. It was submitted that this was because any cosmetic fix would inevitably fail when there was rain and would require fixing. If a cosmetic fix was required, Sand Ground submitted, they would have had “the remaining walls shotcreted and then hoped for the best”.

34. Sand Ground noted the evidence before Magistrate Barko that suggested that Super Render was not engaged for a “temporary cosmetic finish only”. Reliance was placed on an email from Super Render dated 18 March 2017 in which it was stated that Drizoro Maxseal Flex should be used to prevent water proceeding through the wall from both directions, which, it was submitted, was inconsistent with merely cosmetic work.

35. It was further submitted that twenty-one 35 kg kits of Drizoro had been used and it required two coats on differing days. This product was inconsistent with the Magistrate’s findings about the nature of the contract, as a data sheet in evidence before the court stated that the product provided “a fully flexible coating which ensures complete waterproofing in the most sever conditions, even in high negative or positive water pressure” (sic).

36. In relation to Grounds Three and Four, Sand Ground submitted that the learned Magistrate erred by failing to find that Super Render’s waterproofing was defective. Sand Ground submitted that even if his Honour’s conclusion that Super Render was intended to waterproof “specified gaps/patches” was to be accepted, Sand Ground had been negligent. In this respect Sand Ground relied on the expert evidence of Mr Agda, whose evidence was that Super Render should have used a “multi-staged system of application” for the Drizoro product.

37. In relation to Ground Five, Sand Ground submitted that the Magistrate erred in failing to make findings about its loss and damage.

Super Render’s submissions

38. In relation to Ground One, Super Render relied on the fact that a party cannot appeal to this Court on a question of fact. Reliance was placed on the decisions in Yousif v Commonwealth Bank of Australia [2010] FCAFC 8 and Carmichael v National Power Pie (1999) 1 WLR 2042; [1999] UKHL 47 as authority for the proposition that whether a contract has been formed is a question of fact.

39. Super Render further submitted that even if Ground One involved a mixed question of fact and law, Sand Ground had not provided sufficient reasons as to why leave should be granted. Additionally, Super Render submitted that Magistrate Barko did give due weight to the relevant evidence when making his findings. Super Render submitted that “[t]he comprehensiveness of the reasons for decision, evident in the 21 reasons and 22 findings, and it being 62 pages in length, demonstrates that the learned Magistrate did not arrive at a finding as to oral terms lightly or without due consideration.”

40. Super Render’s position was that the learned Magistrate did not err in his findings as to the terms of the contract and he did so in accordance with settled principles of construction. It was submitted that the on-site conversation of 18 March 2017 was when the contract was formed: the parties agreed on the provision of labour, the nature and scope of works to be undertaken, timeframes and assumptions of responsibility. On that day Super Render also disclaimed any responsibility for “arresting the water ingress”. The subsequent emails of 18 and 19 March did not replace this agreement as they did not contain an entire agreement or address the essential terms of the bargain.

41. It was submitted that a reasonable person in the position of the parties would have viewed the content of the 18 March 2017 on-site conversation between Mr Alwan and Mr Franco as promissory due to the essential nature of the matters discussed.

42. As for Ground Two, it was submitted that it traversed the same issues as Ground One.

43. As for Ground Three, it was submitted that if its submissions regarding Grounds One and Two were correct, then Super Render did not breach the agreement. In the alternative, it repeated its submissions in reply in the Local Court, which were before me in evidence. Super Render submitted that these applied equally to Ground Four.

44. As for Ground Five, Super Render submitted that if its preceding submissions were correct, this issue was incapable of altering the outcome of the appeal.

Reply submissions

45. In submissions dated 3 April 2020, Sand Ground disputed several factual assertions in Super Render’s submissions relating to its characterisation of the cross-claim and description of the properties of Drizoro Maxseal Flex.

46. As to Ground One, Sand Ground submitted that Super Render had mischaracterised the ground of appeal. It was submitted that this ground was not limited to an error of formation of contract but also the “construction” of that contract which is “patently” an error of law.

47. Alternatively, if Ground One consisted of a mixed question of law and fact, Sand Ground submitted that, to the extent leave is required, such leave was appropriate because the terms of the agreement found by the Magistrate simply “def[ied] logic”. Sand Ground submitted that no reasonable builder would ever engage a party to provide a merely cosmetic waterproofing finish. In relation to Ground Three, Sand Ground submitted that the defendant had failed to deal with the “uncontroverted” evidence of Mr Alwan.

Oral submissions

48. At the hearing, counsel for Sand Ground accepted that a ground concerning the formation of a contract was a question of fact. Despite this, he relied upon the decisions in State Super SAS Trustee Corp v Cornes [2013] NSWCA 257 (“State Super”) and Tolson v Roads and Maritime Services [2014] NSWCA 161 (“Tolson”) as authority for the proposition that when a factual finding is so illogical and displays such a lack of logical reasoning, illogicality and reasoning, it can be relied upon as an error of law.

49. During oral submissions, counsel for the plaintiff conceded that the first ground of appeal (error as to the terms of the contract) was purely a matter of fact but submitted that Ground Two was an error of law based on this alleged “illogicality” argument arising from State Super and Tolson.

50. Ground Three was not pressed at the hearing. Nor was Ground Four in its current form pressed; rather, leave was sought to amend Ground Four so as to assert that the Magistrate failed to make any finding as to whether the defendant breached the contract by failing to waterproof in accordance with the expert evidence. It was conceded that Ground Four was conditional on the success of Ground Two, as was Ground Five.

Consideration

51. Before turning to consider the merits of each ground I must first be satisfied that it involves a question of law alone (or a question of mixed fact and law). When grounds concern the construction of a statute or error in the statement of relevant legal principles identifying a question of law may be straightforward. But often there can be a fine line between what is a question of law, and what is a question of fact. As the High Court observed in Collector of Customs v Agfa-Gevaert Limited (1996) 186 CLR 389; [1996] HCA 3 at 394:

“The distinction between questions of fact and questions of law is a vital distinction in many fields of law. Notwithstanding attempts by many distinguished judges and jurists to formulate tests for finding the line between the two questions, no satisfactory test of universal application has as yet been formulated.”

52. Similarly, Spigelman CJ stated the following in Attorney General for theState of New South Wales v X (2000) 49 NSWLR 653; [2000] NSWCA 199 at [28]:

“28. The determination of whether a particular alleged error in matters such as fact finding, the exercise of a discretion or a process of evaluation answers the description “question of law”, will depend on the scope, nature and subject matter of the statute, including the nature of the body making the relevant decision.”

53. A ground asserting that the decision maker should have made a different factual finding is a question of fact. Even a ground alleging that a finding of fact was "perverse" or "illogical” does not raise a point of law: Azzopardi v Tasman UEB Industries Pty Ltd (1985) 4 NSWLR 139 at 156 (Glass JA, Samuels JA agreeing, Kirby P dissenting) (“Azzopardi”):

“To say of a finding that it is perverse, that it is contrary to the overwhelming weight of the evidence, that it is against the evidence and the weight of the evidence, that it ignores the probative force of the evidence which is all one way or that no reasonable person could have made it, is to say the same thing in different ways. Upon proof that the finding of a jury is vitiated in this way, it will be set aside because it is wrong in fact. Since the Act does not allow this Court to correct errors of fact, any argument that the finding of a Workers' Compensation Commission judge is vitiated in the same way discloses no error of law and will not constitute a valid ground of appeal. It is also pointless to submit that the reasoning by which the court arrived at a finding of fact was demonstrably unsound as this would not amount to an error of law: R v District Court of the Metropolitan District Holden at Sydney; Ex parte White (1966) 116 CLR 644 at 654.”

54. On the other hand, a claim that there is “no evidence” to support a particular finding does raise a question of law: per Hayne, Heydon, Crennan and Kiefel JJ in Kostas v HIA Insurance Services Pty Limited (2010) 241 CLR 390; [2010] HCA 32 at [90] and Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 at 326; [1990] HCA 33 per Mason J.

55. Despite Ground One alleging error “in the application of the legal principles concerning the formation of the contract”, the nub of the submissions in support of this ground was that some of the factual findings made by the learned Magistrate in relation to the formation of the contract “beggar belief”. Similarly Ground Two alleged error in failing to make a particular factual finding, namely, that it was a term of the agreement that the defendant would waterproof the entirety of the walls over three levels.

56. The difficulty for Sand Ground is that Grounds One and Two involve questions of fact not law. It is well settled that questions as to the terms of any offer and any consensus reached, including the subject matter of any agreement, are questions of fact, Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 260 CLR 1; [2016] HCA 26 at [22]-[27] (French CJ, Kiefel and Bell JJ): see also Yousif v Commonwealth Bank of Australia at [42] (Kenny, Tracey and Jagot JJ) and Carmichael v National Power Pie at 2049 (Lord Hoffman).

57. Although Sand Ground’s written submissions in reply contended that construction of a contract is “patently” an error of law, at the commencement of the hearing counsel for Sand Ground accepted that grounds contending error of this nature involve questions of fact not law. It was then submitted that the decisions in State Super and Tolson referred to above are authority for the proposition that unreasonable factual findings could be an error of law. As I indicated to the parties at the hearing, I am satisfied that these authorities do not stand for that proposition.

58. In Tolson, the Court of Appeal considered a ground alleging error in the decision of a trial judge to accept valuation evidence from a certain witness. In that context Basten JA, with whom Beazley P and Preston CJ of the LEC agreed (on this point), observed at [53]:

“53.These challenges were directed to the fact-finding exercise undertaken by the trial judge. In order to demonstrate that they involved an erroneous decision on a question of law, the appellants were confronted with the authority of this Court that a finding of fact which could be characterised as "perverse" or "illogical" does not raise a point of law: Azzopardi v Tasman UEB Industries Pty Ltd (1985) 4 NSWLR 139 at 156-157 (Glass JA, Samuels JA agreeing). However, as the Court has subsequently noted, an erroneous finding of fact may demonstrate a basic misunderstanding of the case brought by the claimant, so as to demonstrate that the tribunal has failed to address and determine the issues before it and has thus failed to exercise its jurisdiction: State Super SAS Trustee Corporation v Cornes [2013] NSWCA 257 at [11]-[12]. It is therefore necessary to consider whether an error of this kind has been established in the present case.”

59. Earlier, in State Super at [10]-[12] Basten JA had similarly noted that:

“10. At the hearing of the appeal, the STC sought to add a further ground, identified as "ground 6", which, in effect, sought to recharacterise the primary complaints already made as constructive failures to exercise the jurisdiction of the court. As senior counsel for the STC accepted in the course of the hearing, the intention was to capture the proper formulation of the errors as errors in point of law, in accordance with the reasoning of the Court in Goodwin v Commissioner of Police [2012] NSWCA 379 at [18]-[25]. To the extent that it was merely a re-characterization of the existing grounds, the respondent did not object to the amendment.

11. Goodwin considered whether the rejection by the trial judge of a recusal application, based on a reasonable apprehension of bias, could give rise to a grievance with respect to a decision "in point of law". However, the Court also identified the possibility that a mistake in understanding the facts, applying the law and reasoning to a conclusion could amount to a constructive failure to exercise jurisdiction if it revealed "a basic misunderstanding of the case brought by an applicant, [so that] the resulting flaw is so serious as to undermine the lawfulness of the decision in question in a fundamental way": Dranichnikov v Minister for Immigration and Multicultural Affairs [2003] HCA 26; 77 ALJR 1088 at [88] (Kirby J), referred to in Goodwin at [20]. The reasoning also accepted the proposition that a failure by a tribunal to bring its own mind to bear on the issues before it was a constructive failure to exercise its jurisdiction: LVR (WA) Pty Ltd v Administrative Appeals Tribunal [2012] FCAFC 90; 203 FCR 166 (North, Logan and Robertson JJ) at [5], reasoning adopted in Secretary for Justice v Simes [2012] NZCA 459 (Randerson J, writing for himself, Stevens and French JJ) at [58]-[59], and SZRUI v Minister for Immigration, Multicultural Affairs and Citizenship [2013] FCAFC 80, in relation to an administrative tribunal, particularly at [2]-[5] (Allsop CJ).

12. Broad statements in Azzopardi v Tasman UEB Industries Pty Ltd (1985) 4 NSWLR 139 to the effect that a finding of fact which could be characterised as "perverse" or "illogical" does not raise a point of law should be understood as qualified in this way. It is not in doubt that merely to identify a finding of fact as in someway erroneous does not raise a question of law. However, if the finding has resulted from an error of the kind identified above, it may reveal a constructive failure to exercise jurisdiction and thus an error of law. The fact that the finding could also be fairly characterised as "perverse", or the process of reasoning by which it was reached "illogical", does not diminish the legal error so identified. The language of perversity or illogicality is neither sufficient nor necessarily inadequate to identify a point of law: some greater level of precision may be necessary.”

60. Both of these decisions contain statements by Basten JA clarifying the statements in Azzopardi to the effect that a ground alleging that a finding of fact was "perverse" or "illogical" does not raise a point of law. His Honour observed that those general statements need to be qualified to have regard to Dranichnikov v Minister for Immigration and Multicultural Affairs (2003) 77 ALJR 1088; [2003] HCA 26. In that case, the High Court held that a failure to engage with a party’s case might amount to jurisdictional error. Thus, as Basten JA observed in those cases, although an “illogical” finding of fact does not amount to an error of law, it might be relevant to the question of whether there has been a constructive failure to exercise jurisdiction in proceedings for judicial review.

61. When I indicated to counsel for Sand Ground during the hearing that this is what I considered to be the effect of these decisions, he accepted that they did not assist Sand Ground’s case because he was not contending that the learned magistrate had failed to understand or engage with the case that was brought; his Honour clearly considered both sides of the argument in his detailed reasons.

62. In circumstances where both Grounds One and Two alleged errors of fact those grounds are not competent and must be dismissed accordingly.

63. As stated above, Ground Three was not pressed and Ground Four was not pressed in its original form. Rather, Sand Ground sought leave to amend Ground Four to allege that the Magistrate had failed to consider Sand Ground’s allegation of breach of contract based on the expert evidence of Mr Agda. During submissions on the question of whether leave to amend Ground Four should be granted, I drew counsel’s attention to the passages in the Magistrate’s reasons where his Honour dealt with Mr Agda’s evidence at [54]–[57] which were as follows:

“54. There was no issue between the parties that Mr Agda opined that, on the basis of his instructions, the work performed by Super was defective. He stated that Drizoro was an appropriate waterproofing product if applied correctly. The difficulty with Mr Agda's evidence is that he inspected the Site in February 2018 after two other subcontractors had attended the Site and used what he considered to be appropriate methods of epoxy injection and yet water was still leaking through the walls. Further, Mr Agda was led to believe in his instructions that Super were engaged to apply the Resin over the entirety of the walls as opposed to being directed to apply it only to specific areas and that it was Super's duty to engage a civil engineer, particularly one specialising in such issues. There was no direct evidence from Mr Agda that the water or other material penetration that he sighted was in an area specifically treated by Super or any of the other two subcontractors

55. The essence of Mr Agda's opinion evidence was that no rendering, be it shotcrete or otherwise, should have been performed at the Site before expert testing and advice was provided by a specialist engineer as to the water issues. This makes sense. There was no evidence before me that Sand attended to this at any stage of its role in the construction process. I can infer that if Sand was engaged to construct a tanked/dry basement and Sand was aware of the high water table in the area then it ought to have engaged such a specialist. Mr Alwan was qualified as a civil engineer however he did not give any evidence about the opinion of Mr Agda or as to what was or was not done before Super'sinvolvement at the Site. When one reads "between the lines" of Mr Agda's report his opinion is to the effect that these proceedings would probably not have been necessary if such expert advice and involvement had been obtained at the outset.

56. It was not possible for Mr Agda to have identified the bulk of the areas treated by Super with the Resin and the Plug as all of the walls had been covered by cement render over the Drizoro products and/or the skim coat.

57. In my view Mr Agda's opinions that Super: failed to engage an appropriate specialist to conduct due diligence of the water leaks; failed to use an expandable or epoxy injection grout to the soil mix wall prior to any rendering; and that it's work was defective, are premised on the basis of the instructions provided to him by Sand's Solicitors as to the ambit of Super's contractual or other obligations. Another subcontractor had applied the shotcrete render and not Super. Super was not licensed or qualified (in Australia) to perform engineering services. Super had specific duties to perform under the overall supervision and direction of Mr Alwan. For reasons expressed above and hereunder Mr Agda's opinions hold little if any weight as far as my ultimate findings are concerned. I mean no disrespect to Mr Agda in this regard however his opinions have to be read in light of my findings as to the contractual relationship between the parties and the findings of fact as to what occurred between them post formation of the contract.”

64. His Honour later observed at 58(k):

“(k) It was impossible for Mr Agda to identify whether or not where leaking was occurring in February 2018 was in the specific areas where Super had applied the Drizoro products as the wall had been cement rendered and skim coated and two other subcontractors had intervened.”

65. Counsel for Sand Ground accepted that these portions of the Reasons did appear to address Sand Ground’s claim that Super Render’s waterproofing on the specific areas was negligent. That is, Magistrate Barko was not satisfied that Mr Agda’s evidence could establish negligence because his opinion was based on his instructions (Sand Ground’s version of what was agreed upon) which the learned Magistrate did not accept. Nor was Mr Agda able to examine the allegedly defective work for himself because by the time he was engaged it was a year later and other work had been done in those areas by then.

66. In these circumstances, counsel for Sand Ground did not press for leave to be granted to amend Ground Four and otherwise did not press Ground Four. Nor was Ground Five pressed as it relied upon the success of Grounds One and Two.

67. For these reasons the appeal raised no questions of law and must be dismissed.

68. This matter highlights the need to clearly identify questions of law in appeals from the General Division of the Local Court to this court. Sections 39 and 40 of the Local Court Act were intended to restrict the volume of appeals from the Local Court to the Supreme Court. In Sayed v Deng [2012] NSWSC 851 Beech-Jones J made the following observations in relation to an appeal from the Local Court from an interlocutory decision. His observations are apposite to the present appeal:

“28. Thus with an interlocutory decision of the Local Court a disaffected party must seek leave to appeal under s 40(2)(a) irrespective of the form of error that is asserted. If their application for leave is granted their appeal will nevertheless be restricted to an error of law under s 39(1), unless they obtain a further grant of leave under s 40(1) to raise a question of mixed fact and law.

29. In so far as the question of leave is concerned, in Coulter v R [1988] HCA 3; 164 CLR 350 at 359, Deane and Gaudron JJ noted that such a requirement:

‘... represents a constraint upon the overall cost of litigation by protecting parties, particularly respondents, from the costs of a full hearing of appeals, which should not properly be entertained by the relevant court either because they are hopeless or, in the case of a civil appeal to the second appellate court, because they do not possess special features which outweigh the prima facie validity of the ordinary perception that the availability of cumulative appellate processes can, of itself, constitute a source of injustice.’"

30. This statement was made in the context of an application for leave to appeal following a conviction by a jury in a criminal offence of assault occasioning actual bodily harm. However, the statement as to the purpose of the filter of leave to appeal operating to protect respondents in relation to the cost of appeals, applies to civil cases and with particularly strong force to interlocutory decisions.

31. This concern as to protecting parties from the costs of appeals is also evident from three matters in s 39 and s 40 of the Local Court Act.

32. First, it is evident from the restriction imposed by s 39 confining appeals only to questions of law. Secondly, it is evident on the restriction on the extension of such appeals to mixed questions of law and fact that follows from the need to obtain leave under s 49(1). Thirdly, it is reflected by the restrictions on leave imposed by s 40(2).

33. The Local Court has a limited monetary jurisdiction. Left unchecked, appeals from its decisions, especially interlocutory decisions, could lead to there being a significant risk that the overall costs of proceedings would be completely disproportionate to the matters in dispute.”

Orders

69. I make the following orders:

1. The appeal is dismissed.

2. The plaintiff is to pay the defendant’s costs on the ordinary basis.

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Decision last updated: 30 April 2020