Sharkawi v AK Building Design and Construction PL

[2025] NSWCATCD 33

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:

Sharkawi v AK Building Design and Construction PL [2025] NSWCATCD 33

Hearing dates:

14 August 2024 with re-opening application 15 May 2025

Date of orders:

19 May 2025

Decision date:

16 May 2025

Jurisdiction:

Consumer and Commercial Division

Before:

G K Burton SC, Senior Member

Decision:

1.    On or before 11 July 2025 the respondent is to perform, by itself and/or by contractors engaged at its cost, the works identified in the report of Ken Winton dated 1 May 2024 in respect of the works the subject of these proceedings and all works reasonably incidental thereto including site preparation and protection, waste removal and disposal, site cleaning and remediation of consequential damage from the works (the building work), in accordance with requirements that include the following:

(a)    the building work is to be carried out with due care and skill and in accord with all applicable laws, codes, standards and requirements of regulatory authorities;

(b)    the building work is to be the subject of all required insurances including HBCF cover (to the extent not already the subject of coverage);

(c)    the building work is to be inspected and certified as required for compliance with all applicable laws, codes, standards and requirements of regulatory authorities;

(d)    the respondent is to carry out further work specified as required to obtain such compliance;

(e)    the respondent is at its cost to arrange and provide on completion to the applicants all certificates required by law, codes, standards, requirements of regulatory authorities and due care and skill relating to the building work.

2.    Grant leave to the applicant to renew these proceedings on or before 10 July 2026 in respect of any alleged non-compliance with order 1.

3.    Order that AK Building Design and Construction PL pay Andrew Sharkawi $86,310 on or before 13 June 2025.

4.    Dismiss the respondent’s application for leave to re-open filed 15 May 2025.

5.    Order that the respondent pay the applicant’s costs of the proceedings on the ordinary basis in the lump sum amount of $9,651.

Catchwords:

BUILDING AND CONSTRUCTION – HOME BUILDING – alleged breach of statutory warranties – successor in title – identity of builder - work order or money order – Home Building Act 1989 (NSW) ss 18B, 18D, 18E, 18G 48MA

Legislation Cited:

Civil and Administrative Tribunal Act 2013 (NSW)

Civil and Administrative Tribunal Rules 2014 (NSW)

Design and Building Practitioners Act 2020 (NSW)

Home Building Act 1989 (NSW)

Home Building Regulation 2014 (NSW)

Cases Cited:

Allen v TriCare (Hastings) Ltd [2017] NSWCATAP 25

Bajic v Paraskevopoulos [2018] NSWCATAP 205

Barwick v Shetab [2017] NSWCATAP 127

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

Blatch v Archer (1774) 1 Cowp 63, (1774) 98 ER 969

BNT Constructions PL v Allen [2017] NSWCATAP 186

Bonita v Shen [2016] NSWCATAP 159

Brennan Constructions PL v Davison [2018] NSWCATAP 210

Brooks v Gannon Constructions PL [2017] NSWCATCD 12

Catapult Constructions PL v Denison [2018] NSWCATAP 158

Clements v Murphy [2018] NSWCATAP 152

Colourrender (Australia) PL v Sarkis [2023] NSWCATAP 250

Cominos v Di Rico [No 2] [2016] NSWCATAP 138

Downer EDI Rail PL v John Holland PL [2018] NSWSC 326

DTR Nominees PL v Mona Homes PL (1978) 138 CLR 423

El-Wasfi v NSW; Kassas v NSW (No 2) [2018] NSWCA 27

Gabrielle v Abood [No 4] [2023] NSWCA 100

Galdona v Peacock [2017] NSWCATAP 64

GPM Constructions PL v Baker [2018] NSWCATAP 119

Hamod v NSW [2011] NSWCA 375

Hanave PL v Wine Nomad PL [2022] NSWCATAP 361; [2023] NSWSC 265

Hazeldene’s Chicken Farm PL v Victorian Workcover Authority (No 2) (2005) 13 VR 435, [2005] VSCA 298

Hyder Consulting (Australia) PL v Wilh Wilhelmsen Agency PL [2001] NSWCA 313

Johnson t/as One Tree Constructions v Lukeman [2017] NSWCATAP 45

Karakominakis v Big Country Developments PL [2000] NSWCA 313

Kaye v Owners SP 4350 [2022] NSWSC 1386

Kumar v Sabharwal [2017] NSWCATAP 200

Kurmond Homes PL v Marsden [2018] NSWCATAP 23

Latoudis v Casey (1990) 170 CLR 534

Marr v JCK Building Solutions PL [2018] NCATCCD, unreported, 4 December 2018, HB 16/43946

Megerditchian v Kurmond Homes Pty Ltd [2014] NSWCATAP 120

Oppidan Homes PL v Yang [2017] NSWCATAP 67

Oshlack v Richmond River Council (1998) 193 CLR 72

Owners SP 21563 v Rutherford [2023] NSWCATAP 326

Owners SP 63341 v Malachite Holdings PL [2018] NSWCATAP 256

Owners SP 76674 v Di Blasio Constructions PL [2014] NSWSC 1067

Owners SP 78465 v MD Constructions PL [2016] NSWSC 162

Redmyre Group PL v Stockman [No 2] [2023] NSWCATAP 342

Stevenson v Ashton [2019] NSWSC 1689

Tabcorp Holdings Ltd v Bowen Investments PL (2009) 236 CLR 272, [2009] HCA 8

TCN Channel 9 PL v Hayden Enterprises PL (1989) 16 NSWLR 130

Thompson v Chapman [2016] NSWCATAP 6

Unity Insurance Brokers PL v Rocco Pezzano PL (1998) 192 CLR 603

Vella v Mir [2019] NSWCATAP 28

Walker Group Constructions PL v Tzaneros Investments PL [2017] NSWCA 27

ZXJ v ZXK [No 2] [2023] NSWCATAP 76

Category:

Principal judgment

Parties:

Andrew Hatem Sharkawi (applicant)
AK Building Design and Construction PL (respondent)

Representation:

Counsel:
Mr J Light, solicitor (applicant)
Mr E Wong, solicitor (respondent)

Solicitors:
Jonathan Light, Lawyer; Allens (applicant)
Quantum Leap Legal (respondent)

File Number(s):

2024/00043424

Publication restriction:

Nil

DECISION

Outcome of proceedings

1. I have found, for the reasons below, that the applicant co-owner is entitled to a work order and a money order, as sought at final hearing, against the respondent for different aspects of the claim. I have found the respondent to be the builder for the defects and resulting loss from water damage to which the work order and the money order relate.

2. The parties asked me to deal with costs as part of my substantive decision but to look at it only after I have completed my substantive decision. Further material, closed until that point, was tendered on questions of costs to supplement the substantive tender.

Background and issues, procedure

3. The proceedings filed 4 February 2024 originally concerned a co-owner’s application for a money order against the respondent, initially for an estimated $150,000, to rectify alleged major defects, being water penetration, and compensate for resultant damage, from a defective concrete roof that was part of a renovation of a house in Beverley Park, in southern Sydney, NSW. An insurance assessor was reported as having said that the waterproof membrane on the roof had failed. The swimming pool was also said to be defective either in its construction or its plumbing because the pump did not run properly due to a likely water leak, with the consequence that a constant water level could not be maintained.

4. A building certifier had issued stamped complying development certificate (CDC) documentation for building work on 19 November 2021 which covered all items of work the subject of these proceedings as described above and discussed below. The works began in late 2021 and were completed in 2022. The respondent signed a certificate in relation to the works dated 21 April 2022 which was required to be lodged prior to applying for an occupation certificate (OC). The basis of signing that certificate and its scope were in contest.

5. Both parties appeared to work on the basis that there was, at least originally, a written cost-plus contract between the respondent and the previous owner who sold to the applicant, although a copy of that contract was not in evidence. Consistent with the basis on which the parties proceeded, the HBCF certificate obtained by the respondent dated 10 November 2021 expressly referred to a contract between the parties dated 3 November 2021 in respect of “Single Dwelling Alterations/Additions – Structural”. Under “Description of construction as advised by builder” there was stated “remove part of tile on roof && replace with concrete”. The HBCF certificate named the respondent as the builder. It was not in dispute that the previous owner had commissioned the renovation.

6. On 1 November 2022 the son of the previous owner emailed the principal of the respondent to the effect that the swimming pool construction included in the CDC but originally delayed was nearing completion, seeking to add the pool into the insurance description for OC purposes. A copy of the updated certificate of HBCF insurance was requested by the private certifier for his records on 12 May 2023 and again by the son of the previous owner. The respondent’s principal responded that he was not licensed for swimming pool work. There was no updating document in evidence.

7. On 20 November 2022 the applicant completed purchase from the previous owner. The applicant first noticed water ingress in January 2023, which recurred each time it rained. Following significant water ingress on 5 April 2024 and the emergence of mould, the applicant and his family vacated the property on 21 April 2024 to stay in temporary accommodation until the dwelling could be made sufficiently habitable. An insurer paid for temporary accommodation on the basis that it was to be reimbursed from any recovery in the claim.

8. The subject works were residential building work as defined in Sch 1 paras 2(1)(b)-(c), 2(3)(a) and 3(1), (2)(a) of the Home Building Act 1989 (NSW) (HBA) with Home Building Regulation 2014 (NSW) reg 12. The respondent was and remained licensed, so far as disclosed in the evidence.

9. The building work required homeowners’ warranty HBCF insurance since it exceeded $20,000 in the reasonable market cost of labour and materials involved: HBA ss 7(2)(f1), 92, 94; Home Building Regulation 2014 (NSW) reg 53.

10. The claim was brought within time for both major defects as alleged and other defects and was within the monetary limit for the Tribunal’s jurisdiction under HBA ss 18B, 18E and 48K. The alleged defects, if found, in my view clearly constituted major defects under the relevant definitions in s 18E: Vella v Mir [2019] NSWCATAP 28 at [43]-[63].

11. In that respect, waterproofing is an express “major element” in para (c) of the definition in HBA s 18E(4). The alleged defects if found are attributable (among other matters) to defective or faulty workmanship and a failure to comply with NCC structural performance requirements that (in accord with Australian Standards) require a building to be waterproofed. By allowing water flow as described below the alleged defects if found caused and were likely to cause (among other matters) the inability to use or inhabit part of the building for its intended purpose (in this case, originally the kitchen and progressively the entire dwelling). They accordingly meet the requirements in at least para (a) of the definition of “major defect” in HBA s 18E.

12. The alleged defective works were said to be in breach of the statutory warranties in HBA s 18B. The applicant had direct statutory rights against the contracted builder, in respect of alleged breach of statutory warranties in HBA s 18B, under HBA s 18D(1).

13. There was no issue raised of a break in the chain of causation between any found breach of statutory warranty and the applicant’s loss as subsequent owner – there was no suggestion that the applicant bought the dwelling with knowledge of the alleged defects. The applicant deposed to having received from the previous owner’s son the stamped approved plans when he requested information as to the renovation works. A primary complaint was that the works were not built in accordance with those plans.

14. The applicant relied upon an independent expert report by a qualified and experienced builder whose qualifications were not challenged. The report was dated 1 May 2024 and was based on an inspection made on 26 April 2024.

15. The respondent did not engage an independent expert so there was no expert conclave or conclave report.

16. The applicant initially resisted the statutory preference, in HBA s 48MA, for a work order for any found defects.

17. In closing submissions the applicant sought a work order in respect of the remediation works set out in the expert’s report and a money order for the cost of compensating for the consequential damage from the defects.

18. The respondent contended that it had been engaged as a consultant and that all works had been completed by licensed trades directly engaged by the previous owner, through her son, who had agreed to cancel her original building contract with the respondent.

19. On 1 March 2024, when directions were made to prepare the matter for final hearing, leave for legal representation was granted to both parties; at that point the respondent’s solicitor had been recently retained. The respondent was represented at this and the subsequent directions hearing, with the address for the notices of those hearings being the same respondent’s address as the notice for the final hearing. The respondent filed and served documents to be sought to be relied upon at final hearing.

20. At the beginning of the final hearing the respondent’s solicitor and the respondent initially did not appear. Attempts by telephone at my request by the applicant’s solicitor to contact the respondent’s solicitor, with whom he had been communicating, did not elicit an initial response. At my request the applicant’s solicitor sent an email that the proceedings would continue in the respondent’s absence. As that was about to occur, the respondent’s solicitor telephoned in via the Registry to say that he still represented the respondent and did not know of the hearing that day, despite the notice of hearing having the same address as the previous notices. After discussion with the applicant’s solicitor the upshot was that the hearing would proceed and there would be a short adjournment to enable the respondent and its solicitor to appear or to arrange an AVL link.

21. A further telephone call was reported as occurring between the solicitors about 35 minutes after the scheduled commencement time for the proceedings. The respondent was said to be in a remote location and would need to appear by telephone. For what appeared to be the first time it was said that the principal of the respondent, who was also its witness, required a mandarin interpreter for the final hearing. I asked the applicant’s solicitor to convey to the respondent’s solicitor that the matter would be stood down for an hour to enable the respondent’s solicitor to be present in person (travelling from inner western Sydney) and that the Registry would attempt to obtain an interpreter but that no promise could be made that such attempt would be successful, especially with the likely prospect that an interpreter would also be on a telephone.

22. During the adjournment I found a copy of an email of 4 July 2024 emailing the notice of final hearing to the respondent solicitor’s email address as requested by the solicitor at the first directions hearing when leave for legal representation was granted. I showed this to the solicitor on his arrival at about 10.30am and he apologised. He also advised that the principal of the respondent was now arriving in person in about 30 minutes. This facilitated finding a mandarin interpreter who could now more easily participate by telephone.

23. The hearing finally proceeded shortly after 11am. There was no objection to granting leave for the applicant’s tender of invoices served a week before hearing as demonstrating the cost of compensating for consequential loss, which was the preferred evidence: Hyder Consulting (Australia) PL v Wilh Wilhelmsen Agency PL [2001] NSWCA 313 at [19], [99]. The applicant relied upon the expert report for the cost of remediation of defective works. If a work order was granted then the applicant said that it should be for remediation of defective works as the scope of the statutory preference in HBA s 48MA, not to remediation of consequential loss.

24. Each of the applicant, the expert and the principal of the respondent was cross-examined and there were oral closing submissions. Before cross-examination of the respondent’s principal began, the applicant’s solicitor sought that the principal be warned and have the opportunity to consult with his solicitor before continuing to rely on his affidavits, saying that alleged serious offences under the HBA and the Design and Building Practitioners Act 2020 (NSW) (DBPA) were revealed to be committed by those affidavits. I outlined the procedure for issue of a certificate under s 128 of the Evidence Act 2005 (NSW). After further discussion between the parties’ solicitors and a private conference between the respondent’s solicitor and principal, the respondent continued to rely on its affidavit evidence. In the event no party raised the issue again or sought certificates.

25. Re-opening application by respondent 15 May 2025: The decision was completed on 15 May 2025 and was scheduled for delivery to the parties on 16 May 2025. On 16 May 2025, the Registry provided me with a letter from the respondent’s solicitor seeking leave to adduce further evidence to which was attached a statutory declaration made on 13 May 2025 by the respondent’s principal with five annotated photographs (with no date imprint), some schematic drawings and a copy of a document already in evidence (being the completion statement of 21 April 2022 discussed below). The respondent’s solicitor’s letter was dated 14 May 2025 and stamped as received at the Registry counter on 15 May 2025. There was no indication that any of the material had been served on the applicant.

26. The respondent’s principal’s statutory declaration acknowledged that the application being made had been advised by his solicitor to be not usual. He outlined the significance of the material as he saw it.

27. It was clear from the use to which the respondent sought to put the material and from a perusal of it that it ought to have been led as part of the respondent’s evidence in chief. As I have discussed below, there was no real explanation as to why the key person (the previous owner’s son) who was said to have provided the photographs had not provided evidence in chief well before the hearing in accordance with the directions made for that purpose. The principal’s statutory declaration seemed to indicate that the respondent considered that the individual could simply be called to give evidence once the hearing date was known (the circumstances surrounding the hearing date and the respondent’s attendance have been set out above).

28. The nature of the material on its face showed that it was reasonably available to the respondent well before hearing and in time to comply with the preparation directions, if the person who now provided it had been contacted in a timely fashion and had provided evidence either voluntarily, or on subpoena with an outline of the expected evidence to be led.

29. The alleged significance of the new material was unlikely to have altered the decision without significant amplification and explanation that in effect would have meant a broad re-opening and effective re-hearing of the matter.

30. In my view the interests of justice require that the application for leave is dismissed. I do not need to trouble the applicant with having to respond before coming to that conclusion.

Identity of the builder

31. In cross-examination the applicant said that he was aware that an occupation certificate (OC) had not issued at time of sale except for the swimming pool. The vendor told him that it was being obtained and consequently a clause in the sale and purchase contract required the vendor to obtain it. The applicant did not ask who did the work to complete the house. He bought the house based on what he saw and the online advertisement.

32. No document formally cancelling or varying the original building contract was in evidence. Documents that were submitted to have an effect on the scope of responsibility of the respondent are discussed below.

33. The respondent’s principal said that he understood the content of the building contract and the difference between lump-sum and cost-plus contracts, for some words with the help of a dictionary. The respondent undertook renovations and extensions and granny flats. Most such work used a certifier. The certifier for the present project spoke the same language as the previous owner and the principal. They knew each other and could be said to call each other friends. There was only a verbal quotation with a deposit of $3,500. The respondent had its own bank account into which monies from the previous owner were received. The only amount identified in the evidence as received by the respondent from the previous owner was that $3,500.

31. The principal said that he read all of the plans that he was sent by the previous owner’s son sufficiently to do the quotation, which was only for the concrete slab that he had been contracted by the previous owner to replace the existing roof with. He did not see other plans. The drainage was done by another sub-contractor to the previous owner. He checked his own work before he signed the certificate mentioned earlier and was asked by the previous owner to check the other work.

32. It was accepted by the respondent, including in closing submissions by the respondent’s solicitor, that the respondent by its principal had agreed to inspect the roofing work and sign a certificate that it was compliant even though the respondent maintained that another sub-contractor to the previous owner did that work.

33. The previous owner did not give evidence, nor did her son who had provided plans to the respondent’s principal. The previous owner was said by the respondent to have performed the work and was described in the respondent’s defence as a “friend” of the respondent. The respondent did not explain in evidence why a written contract of such significance was not cancelled in writing if the parties so agreed and whether the respondent had attempted to obtain confirmatory evidence of cancellation from the other party to that alleged cancellation. There were no invoices from sub-contractors in evidence so that the addressee (previous owner or respondent) could be seen.

34. As between the parties, these matters were evidence specifically within the knowledge of the respondent or the ability of the respondent to obtain and the respondent did not lead it, with the forensic consequence stated historically in Blatch v Archer (1774) 1 Cowp 63, (1774) 98 ER 969 per Lord Mansfield LCJ: “[i]t is certainly a maxim that all evidence is to be weighed according to the proof which it was in the power of one side to have produced, and in the power of the other to have contradicted”.

35. The furthest that the evidence went towards supporting the respondent’s contention was a letter “To whom it may concern” dated 5 November 2021 from the previous owner, emailed to the respondent’s principal on 7 November 2021, declaring that the principal was “a consultant of the property owner”, that the project was a “cost-plus system” and that “All tradesmanship and materials are provided by [the previous owner]. If any defects are found within duration of the project, [the principal] shall not bear any responsibilities. All quality defect claims within the home warranty period will be handled by [the previous owner] and not by [the principal]”.

36. A cost-plus contract is still with a nominated builder – it simply designates the basis on which matters will be charged. This is the case whether or not the owner paid all or some invoices to sub-contractors direct. An owner can provide some materials without becoming an owner-builder. The attempted exculpation of the principal in the letter does not affect the status and liability of the respondent itself, whether or not that attempt would be effective if the principal was found to be a supervisor or otherwise within other categories in para (d) of the definition of “construction work” in DBPA s 36(1) (there was no need to decide that issue since a claim under the DBPA was not litigated). If the respondent was otherwise found to be the builder and therefore liable under the statutory warranties in HBA s 18B, s 18G would render void any attempted exculpation of the respondent.

37. There had been a preceding document signed by the previous owner’s son and dated 30 October 2021 but not signed and dated by the respondent which was put into evidence by the respondent. This said, under the heading “Agreement”:

“This agreement is to relieve the builder of any issues which may arise during the construction of [the renovations] which does not relate to work conducted by the builder. The builder is to provide the client of [the property address], the insurance and license to conduct work. The builder will not be held liable for issues including formwork error, concrete pour leakages, and water proofing.”

41. I have given no weight to this document for the purposes of these proceedings. It was not signed by one apparent party being the respondent. It suffered from some similar difficulties to the letter of 5 November 2021, including the potential effect of HBA s 18G. If it had been signed by the respondent then that would have been under the designation “Builder”, in itself an admission. The text could be construed, when read with the other documents described below, as a builder lending a licence to an entirety of works but seeking to escape liability for all but work which the builder actually undertook.

42. The private certifier’s records in evidence on summons to produce showed the respondent as builder. The respondent’s principal was contended not to have known of or accepted that designation in the certifier’s notification.

43. Yet the respondent’s principal signed, as the registered building practitioner in his name and the respondent’s name, the DBPA “Contractor Document” (required to be lodged before an OC application) which named the respondent as the corporation responsible for the works with the respondent’s licence. Further, that document listed, “in accordance with” DBPA s 17(6), “a list of persons who have agreed under a contract or arrangement with the registered building practitioner to do any of the building work” (emphasis added), for each person a list of the work done by the person and the building element in relation to which the work was done. The list named trades including the waterproofer and plumber and the inspecting engineer.

44. As already said, the builder was listed as the builder on the HBCF certificate for the works with its licence number. There was no variation or cancellation of that certificate that could be expected to follow a significant change in who was responsible for the works. There was no evidence of the previous owner having obtained an owner-builder permit.

45. In my view the evidence conclusively supports that the respondent was the person responsible for any found defective work, including under the statutory warranties in HBA s 18B. To the extent that the letter of 5 November 2021 (or the document of 30 October 2021 if given any weight) is inconsistent with liability under the statutory warranties, it is voided under s 18G.

Principles governing loss arising from defective and incomplete work

46. The ordinary, natural and probable consequence of a breach of statutory warranties under HBA s 18B as to compliance with approved plans (and laws, codes or standards), due care and skill and fitness for purpose is remediation to achieve compliance, due care and fitness by doing of the remediation work or paying to have it done by others. As the High Court said in Bellgrove v Eldridge (1954) 90 CLR 613, [1954] HCA 36 at 617, cited with approval by the High Court in Tabcorp Holdings Ltd v Bowen Investments PL (2009) 236 CLR 272, [2009] HCA 8 at [15]:

“In the present case, the respondent was entitled to have a building erected upon her land in accordance with the contract and the plans and specifications which formed part of it, and her damage is the loss which she has sustained by the failure of the appellant to perform his obligation to her. This loss cannot be measured by comparing the value of the building which has been erected with the value it would have borne if erected in accordance with the contract; her loss can, prima facie, be measured only by ascertaining the amount required to rectify the defects complained of and so give to her the equivalent of a building on her land which is substantially in accordance with the contract.”

47. This is applicable unless disproportionate on the principles discussed below.

48. Under HBA s 48O(1)(c) the owner is required to specify action by the builder that is grounded in proof by the owner of, not only the defect, but also the manner of remediation: Catapult Constructions PL v Denison [2018] NSWCATAP 158 at [46]-[61] and the authority there cited. In my view as I set out in Marr v JCK Building Solutions PL [2018] NCATCCD, unreported, 4 December 2018, HB 16/43946 at [46]-[54] and in subsequent decisions, an element of the manner of remediation in certain circumstances may inherently require inspection, properly defined so as to be sufficiently specific, to establish the need for and required scope of remediation.

49. In Bellgrove v Eldridge (1954) 90 CLR 613, [1954] HCA 36, the High Court said that the scope of remedial works must not be disproportionate to the defect. The High Court has also stated that there is a high bar for unreasonableness or disproportion once a breach is established: Tabcorp Holdings Ltd v Bowen Investments PL (2009) 236 CLR 272, [2009] HCA 8 at [13]-[20]; see also Walker Group Constructions PL v Tzaneros Investments PL [2017] NSWCA 27 at [186]; Barwick v Shetab [2017] NSWCATAP 127 at [87]-[88].

50. The analysis in the paragraphs in the Tabcorp decision, and the authority there reviewed, also makes it clear in these passages that reinstatement, provided it is not extravagantly disproportionate, is the appropriate measure of relief.

51. Reinstatement means what the builder was obliged to build, namely, contract works with a certain standard of regulatory compliance, amenity and presentation which includes not being at risk of emergent problems returning or growing. It also means that the form and finish of remediation and rectification produces an outcome that matches other components of the contracted works in form and finish and makes the works of the originally-intended quality and integrity.

52. There is a co-ordinate focus on the conduct of the owner in assessing the form of relief. In ordinary principles of contract law imported into construction contracts, an owner’s claim for monetary compensation requires the owner to act reasonably in relation to the claimed monetary loss in order for the claimed loss to be recoverable: cp HBA s 18BA(1), (5). This includes giving the builder a reasonable opportunity to remediate or complete, or to minimise damages by remediating what it can and will do: cp HBA s 18BA(1), (3)(b), (5). The owner may be justified in a reasonable loss of confidence in the willingness and ability of the builder to do the remediation and completion.

53. The evidential onus is on the builder to prove that the owner acted unreasonably: Owners SP 76674 v Di Blasio Constructions PL [2014] NSWSC 1067 at [42]-[48], adopted in Owners SP 78465 v MD Constructions PL [2016] NSWSC 162 at [26]-[30] and GPM Constructions PL v Baker [2018] NSWCATAP 119 at [38]. This is consistent with the orthodox principles at general law: TCN Channel 9 PL v Hayden Enterprises PL (1989) 16 NSWLR 130 at 158; principles summarised in Downer EDI Rail PL v John Holland PL [2018] NSWSC 326 at [585] and authority there cited.

54. If the owner has acted reasonably then, since the builder is a wrongdoer, it will not defeat the owner’s claim that the builder can suggest other and more beneficial alternative methods of remediation: Unity Insurance Brokers PL v Rocco Pezzano PL (1998) 192 CLR 603 at 654; Karakominakis v Big Country Developments PL [2000] NSWCA 313 at [187].

55. HBA s 48MA does not seem to reverse or otherwise disturb this evidential onus. What s 48MA does, at most, on the authorities mentioned later in these reasons, is to require the decision-maker to have regard to the principle that rectification of the defective work by the responsible party is the preferred outcome.

56. In having regard to a principle that states a preferred outcome, the basis for the principle to operate still needs to be established. How that is established and when it is established is built on and derived from the rules just described about establishing measure of loss.

Alleged defective works and consequential water damage – consideration and conclusions

57. The building works that were undertaken were the subject of stamped CDC plans: construction of a flat concrete roof to replace the existing tiled roof, adjacent to an existing balcony with a parapet wall; associated installation of a 10,000-litre rainwater harvesting tank and associated plumbing to collect runoff from the roof; construction of a swimming pool and associated filtration and plumbing.

58. The applicant’s expert’s report identified, in summary, three sets of defects: the new concrete roof did not comply with the approved plans, leading to contravention of standards and codes concerning waterproofing, in particular AS 3500 and NCC vol 2 P 2.2.1 and 2.2.2; defective installation of the tank including its not being connected to the roof drainage; non-compliance of the swimming pool with the approved plans.

59. In relation to the concrete slab forming the new roof, contrary to the approved plans an access opening had been cut through the existing parapet wall with a stepdown to the balcony. The cut-out and step-down provided access onto the new roof, with a clear glass-panelled handrail around the roof. The wall cut-out and step-down allowed water overflow from the roof to access the balcony; the water then accessed the existing dwelling. Further, the approved plans specified 100mm diameter drainage outlets in the roof but only 40mm grates had been installed. In contravention of AS 3500 there were only 4 x 20mm overflows in the hob surrounding the new roof slab instead of 4 x 68mm overflows (one every six lineal metres). The undersized drainage exacerbated the risk of water entry to the building through the cut-out and step-down.

60. Amplifying the foregoing, the expert in cross-examination explained that there was inadequate provision for water overflow from the suspended concrete slab. Although this was not affecting the slab underside, the water entry was through the lower balcony sliding door. In re-examination he repeated the explanation in his report.

61. The remediation work and restoration of consequential damage was estimated to require six months of work in a vacated house. The water damage restoration comprised: replacing the entire first floor timber, skirtings, some door jambs, architraves and wardrobe kickboards; ground floor repair to extensive ceiling, wall, plasterboard and cornices; associated electrical work; replacement of the decorative panel to front entry and stairs. The roof remediation required reinstatement of the parapet wall and compliant drainage to be installed.

62. The respondent said that the levels of the roof had been raised by tiling after its principal signed the certificate that was required before applying for the OC. The cut-down in the balcony wall with step-down and glass balustrade also post-dated the certificate. The balustrade may have compromised the waterproof membrane. There was no evidence from other sources to support these contentions, particularly in the absence of the previous owner that has been raised earlier.

63. The expert said that the tank was not sited on a concrete slab and had not been connected to the drainage system for the balcony, as envisaged by the approved plans. The existing concrete blocks supporting the tank would puncture the tank base with the extra weight and pressure from filling. The tank needed to be removed, the concrete plinth constructed, the tank reinstated and the stormwater lines connected.

64. The applicant submitted that, even if the respondent’s work and responsibility was limited as it contended to the concrete slab, the roof and drainage were inseparable on the plans and in construction, the overflow drainage was inadequate and not in accordance with the relevant plans and the overflow tank was never connected. This meant that the respondent was obliged to look at the drainage plan as part of the roofing work and on its principal’s admission had not done so. The respondent’s principal had said in cross-examination that he had not seen the drainage plan.

65. I accept that submission on the state of the evidence that has been described. It would be impossible properly to construct, let alone certify, the roofing work without taking into account the drainage plans and adhering to them.

66. The following departures from the approved plans and engineer’s structural details were noted for the swimming pool: too narrow a radius at base (subject to an engineer’s opinion); depth greater than approved 1200mm; spa at wrong location; installation of pool pump enclosure at rear of pool rather than in the existing void under the stairs; skimmer box lid below tile level, creating a trip hazard; calcification and efflorescence on tiled surrounds. The pool required demolition and reconstruction.

67. To these the applicant added his observations: the pool did not retain water level; there was insufficient pressure able to be maintained by the filtration system so as to operate a cleaning system.

68. There was effectively no challenge to the expert’s conclusions on the swimming pool defects once the respondent was found to be responsible as the builder.

69. On the foregoing evidence the applicant has established the defects for which he claimed remediation and that such defects were a breach of the statutory warranties in HBA s 18B, at least in terms of non-compliance with applicable plans, standards and codes but also in terms of due care and skill and fitness for purpose.

70. The respondent has not established on the above authorities and evidence that the reinstatement to which the owner is entitled is less than an entire replacement of the balcony membrane system or that such solution is disproportionate. The same applies in respect of the recommended remediation of the tank defects and the swimming pool defects.

71. Accordingly, I find on the evidence that the respondent is liable to the applicant for all defects alleged by the applicant. I accept the owner’s expert’s assessment of scope of remedial work and uncontradicted costings which comprised trade cost of $52,423 for the roof works, $4,245 for the tank and $73,550 for the swimming pool, totalling $130,218. With preliminaries at 15% $19,532.70, margin at 20% $29,950.14 and GST $17,970.08 the total was $197,670.92.

72. I also accept the reasonableness in the absence of challenge to the scope of required consequential loss restoration and replacement and the quoted and invoiced costing for that work, in relation to the extensive water penetration damage. The total in evidence was $86,310, comprising $72,862 plus $13,448.34.

73. The applicant’s photographic record showed the water pouring into the home. The applicant’s expert reported on the extensive water damage to gyprock, skirting and floors and costed the required restoration work, including the cost of alternative accommodation. The respondent declined, in its then-solicitors’ letter of 13 June 2024, the offered opportunity to undertake the restoration work and said that the applicant was free to undertake those works at his risk, which the applicant did to mitigate the loss including ongoing alternative accommodation cost.

Work and money orders

74. Under HBA s 48MA, a work order is the preferred, not the mandatory, outcome for defective work: Galdona v Peacock [2017] NSWCATAP 64 at [65].

75. Personal animosity is not sufficient to displace the primacy of a work order for defective work, as the test is objective and the flexibility of s 48O permits an order that the builder fulfil a work order by engaging another party to carry out the work order on behalf of the builder. However, relational breakdown is an element in objective assessment, as can be the builder’s conduct in unrelated projects and as will be doubts about the builder’s capacity (including being licensed) or skills to undertake the required remediation, the builder’s attitude to the standard of work done and willingness to return, any history of attempted but ineffective remediation and the likelihood of further dispute not meaning that a work order would be a timely or cost-effective resolution: Brooks v Gannon Constructions PL [2017] NSWCATCD 12 (appeal not affecting s 48MA decision); Galdona at [64]; BNT Constructions PL v Allen [2017] NSWCATAP 186 at [33]-[36]; Kumar v Sabharwal [2017] NSWCATAP 200 at [29]-[30]; Clements v Murphy [2018] NSWCATAP 152 at [30], citing with approval Kurmond Homes PL v Marsden [2018] NSWCATAP 23 at [31]-[32], [46]; Brennan Constructions PL v Davison [2018] NSWCATAP 210 at [15]-[21].

74. I was inclined to find, on the applicant’s original claim, that a work order was not appropriate given the respondent’s vigorous denial of responsibility for any defective work, an absence of basis for relational trust a consequent high likelihood of further disputes over the required scope of remediation works.

75. However, the applicant has now sought a work order in respect of remediating the defects identified in the expert report, which I shall make.

76. Additionally, there will be a money order in favour of the applicant against the respondent by way of compensation for the applicant’s losses arising from the defects. These were established on uncontradicted evidence of the quoted costs of restoring or replacing the matters the subject of loss.

Costs principles

79. Section 60 of the Civil and Administrative Tribunal Act 2013 (NSW) (NCAT Act), together with rule 38 of the Civil and Administrative Tribunal Rules 2014 (NSW) (the Rules), provide that the ordinary costs rules apply, even in the absence of special circumstances required by s 60 of the NCAT Act, where “the amount claimed or in dispute in the proceedings is more than $30,000”.

80. In Allen v TriCare (Hastings) Ltd [2017] NSWCATAP 25 at [37]-[38], the Appeal Panel found that “[P]roceedings” refers to the process set in motion, or commenced, by lodging an application or notice of appeal. That process includes the steps taken by the Tribunal to hear and determine whether to grant the relief sought in the application or notice of appeal, as well as any interlocutory or ancillary steps. Proceedings are defined by the subject matter raised in the application or notice of appeal. The participants in proceedings are limited to the parties determined in accordance with [s 44 of the NCAT Act and the Rules].

81. In Owners SP 63341 v Malachite Holdings PL [2018] NSWCATAP 256 at [3]-[5] the Appeal Panel summarised the operation of r 38 as follows:

“[3] Rule 38(2)(b) applies to the following proceedings:

(1) Where the relief claimed in the proceedings is for an order to pay a specific amount of money, or an order to be relieved from an obligation to pay a specific amount of money, and that amount is more than $30,000;

(2) Where an order is sought in the proceedings for the performance of an obligation (such as to do work), and the Tribunal has power make an order to pay a specific amount of money, even if not asked for by the claimant, provided that

(a) there is credible evidence relating to the amount the Tribunal could award; and

(b) that evidence, if accepted, would establish an entitlement to an order for an amount more than $30,000.

[4] Rule 38(2)(b) may also apply to proceedings where the orders sought in the proceedings depend upon the claimant proving there is a debt owed in order to establish an entitlement to the relief sought, and that amount is in dispute and is more than $30,000.

[5] Rule 38(2)(b) does not apply to proceedings:

(1) Where a claim for relief in the proceedings (not being a claim for an order to be paid or be relieved from paying a specific sum) may, as a consequence of that relief being granted, result in the loss of any property or other civil right to a value of more than $30,000; or

(2) Where there is a matter at issue amounting to or of a value of more than $30,000 but:

(a) no direct relief is sought and no order could be made in the proceedings requiring payment or relief from payment of an amount more than $30,000; or

(b) the relief sought does not depend on there being a finding that a specific amount of money is owed.”

82. In Hanave PL v Wine Nomad PL [2022] NSWCATAP 361 at [40]-[42] the Appeal Panel expounded aspects of the above summary which were not the subject of findings in the partly-successful appeal to the Supreme Court on aspects of the substantive decision [2023] NSWSC 265:

“[40] As made clear in Malachite at [75] and following, r 38 is not concerned with the value of rights that might be in issue or any change in wealth. Unlike s 101(2)(r) of the Supreme Court Act 1970 (NSW), r 38 does not require consideration of whether the proceedings:

(1) involve a matter at issue amounting to or of a value of $30,000 or more, or

(2) involve (directly or indirectly) any claim, demand or question to or respecting any property or civil right amounting to or of the value of $30,000 or more.

[41] Rather, r 38(2)(b) applies where “the amount claimed or in dispute in the proceedings is more than $30,000”.

[42] The questions to be determined are what is the amount “claimed”, what is the amount “in dispute” and what are “the proceedings” in circumstances where there are two applications, the second in the nature of a cross-application (“cross application”).”.

83. Here it is clear that the threshold amount was exceeded on the test as explained in Allen, Malachite and Hanave; for analysis in respect of the cost or value of a work order if claimed, see Kaye v Owners SP 4350 [2022] NSWSC 1386 at [79]; Redmyre Group PL v Stockman [No 2] [2023] NSWCATAP 342 at [25].

84. The starting point for exercise of costs discretion on the usual principles is that costs follow the event. “The event” is usually the overall outcome of the proceedings – did the successful party have to go to the Tribunal (in this case) to get what it achieved, rather than being offered at least that relief. If there are distinct, separate or dominant issues on which the party seeking relief did not succeed, that may be taken into account in the exercise of costs discretion, either as an award of costs of those issues to the party who had success on them or as a discount of the costs of the overall successful party, or some other appropriate exercise of principled discretion. The exercise of the discretion involves impression and evaluation. Appeal Panel decisions have made no order as to costs (to the intent that each party paid its or their own costs of the appeal) where there has been a measure of success on both sides: Johnson t/as One Tree Constructions v Lukeman [2017] NSWCATAP 45 at [25]-[29]; applied in Oppidan Homes PL v Yang [2017] NSWCATAP 67.

85. Costs may include the assessed or agreed amount for the expenses on expert reports prepared for the purposes of the proceedings. This may include reports used in the proceedings (even if not commissioned predominantly for that purpose and so able to be claimed as part of damages). Such are sufficiently connected with the proceedings to be “costs of, or incidental to, proceedings” within the meaning of s 60 of the NCAT Act since they have been incurred in the preparation for litigation and were preparatory steps reasonably connected to the proceedings: Cominos v Di Rico [No 2] [2016] NSWCATAP 138 at [54]-[57]; Owners SP 21563 v Rutherford [2023] NSWCATAP 326 at [52], [67]-[68], [95]-[96].

86. Costs are usually ordered on the ordinary basis as agreed or assessed, unless the parties tender material and/or make submissions that justify an award of costs on the indemnity basis as agreed or assessed, in whole or part.

87. For an award of costs on other than the ordinary basis, a party’s conduct of the proceedings themselves, or the nature of the proceedings themselves (for instance, misconceived), or an outcome less favourable than an offer, are considered.

88. The above principles are authoritatively explored in Latoudis v Casey (1990) 170 CLR 534 and Oshlack v Richmond River Council (1998) 193 CLR 72 and followed and applied in this Tribunal in Thompson v Chapman [2016] NSWCATAP 6 and Bonita v Shen [2016] NSWCATAP 159, citing earlier consistent authority.

89. The principles on indemnity costs have resonance with at least some of the “special circumstances” in s 60(3) of the NCAT Act that are required to justify a costs order when rule 38 does not apply; special circumstances means out of the ordinary but not necessarily extraordinary or exceptional: Megerditchian v Kurmond Homes Pty Ltd [2014] NSWCATAP 120 at [11]. If special circumstances are required to be found to justify a cost order, it is logical that such an order would be on the ordinary basis unless there is something in extent or type beyond what justifies the finding of special circumstances in order to award costs on the indemnity basis. Otherwise the anomaly could arise that any special circumstance justified indemnity costs being ordered for the same reason as special circumstances were found.

90. Principles on offers are explored in Thompson v Chapman at [91] in reliance upon authority in the NSWCA and Supreme Court there cited, to which can be added Hazeldene’s Chicken Farm PL v Victorian Workcover Authority (No 2) (2005) 13 VR 435, [2005] VSCA 298 and El-Wasfi v NSW; Kassas v NSW (No 2) [2018] NSWCA 27, together with the effect of legal representation in Bajic v Paraskevopoulos [2018] NSWCATAP 205 at [27].

91. In summary: the offer must constitute a real and genuine compromise; rejection must be unreasonable in the circumstances; reasonableness of rejection is to be assessed at the time the offer is made, not with the armchair of hindsight; relevant factors in assessing unreasonableness include the stage of the proceedings when the offer was made, time allowed to consider the offer, extent of compromise in the offer, the offeree’s prospects in the litigation at the time the offer was made, clarity of terms of the offer, whether an application for indemnity costs was foreshadowed in the event of rejection and whether there was legal representation for the party considering the offer.

92. The criteria for a lump sum costs order set out in Hamod v NSW [2011] NSWCA 375 at [821]-[826] were adopted by the Appeal Panel in ZXJ v ZXK [No 2] [2023] NSWCATAP 76 at [11] et seq. Important elements, expressed in broad terms and informing also the appropriate discount (if any) on any gross lump sum assessment, were said to be the proportionality of the costs process and its associated time and cost to the substantive outcome, the length, complexity and nature of the proceedings, the nature of costs claimed, the parties’ respective responsibility for costs and capacity to satisfy costs orders and the quality of material available to make an impressionistic assessment.

93. In Gabrielle v Abood [No 4] [2023] NSWCA 100 at [6] it was said, citing Hamod and other authority, that the discretion to make a lump sum costs order “is not confined and may be exercised whenever circumstances warrant its exercise; it should only be exercised when the Court considers that it can do so fairly between the parties, and that includes having sufficient confidence in arriving at an appropriate sum on the materials available; courts have typically applied a discount in assessing costs on a gross sum basis; and the court is not required to undertake a detailed examination of the kind that would be appropriate to taxation or formal costs assessment”.

94. The applicant submitted, and I accept, that costs ought to follow the event of the applicant’s overall and effectively complete success in the proceedings. The applicant apparently had been represented pro bono and sought only reimbursement of $9,651 for the expert’s costs. This amount fits within the principles enunciated above for the making of a lump sum costs order.

Orders

95. I make the following orders:

1. On or before 11 July 2025 the respondent is to perform, by itself and/or by contractors engaged at its cost, the works identified in the report of Ken Winton dated 1 May 2024 in respect of the works the subject of these proceedings and all works reasonably incidental thereto including site preparation and protection, waste removal and disposal, site cleaning and remediation of consequential damage from the works (the building work), in accordance with requirements that include the following:

1. the building work is to be carried out with due care and skill and in accord with all applicable laws, codes, standards and requirements of regulatory authorities;

2. the building work is to be the subject of all required insurances including HBCF cover (to the extent not already the subject of coverage);

3. the building work is to be inspected and certified as required for compliance with all applicable laws, codes, standards and requirements of regulatory authorities;

4. the respondent is to carry out further work specified as required to obtain such compliance;

5. the respondent is at its cost to arrange and provide on completion to the applicants all certificates required by law, codes, standards, requirements of regulatory authorities and due care and skill relating to the building work.

2. Grant leave to the applicant to renew these proceedings on or before 10 July 2026 in respect of any alleged non-compliance with order 1.

3. Order that AK Building Design and Construction PL pay Andrew Sharkawi $86,310 on or before 13 June 2025.

4. Dismiss the respondent’s application for leave to re-open filed 15 May 2025.

5. Order that the respondent pay the applicant’s costs of the proceedings in the lump sum amount of $9,651.

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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: 27 June 2025