Tanios v Baserite Constructions Pty Ltd

Case •

[2021] NSWCATCD 85

•

10 August 2021

No judgment structure available for this case.

Civil and Administrative Tribunal


New South Wales

Medium Neutral Citation: Tanios v Baserite Constructions Pty Ltd [2021] NSWCATCD 85
Hearing dates: 14 December 2020 and 20 May 2021
Date of orders: 10 August 2021
Decision date: 10 August 2021
Jurisdiction:Consumer and Commercial Division
Before: D Charles, Senior Member
Decision:

1.    In the proceeding constituted by File No HB 20/33320, within 28 days of the date of these orders, the Respondent, Baserite Constructions Pty Ltd is to pay to the Applicant, John Tanios, the sum of $180,144.00.

2.    The proceeding constituted by File No HB 20/40203 is dismissed.

3.    If any party in either proceeding or in the proceeding constituted by File No AP 19/49553 seeks an order for costs leave is granted to file and serve a short written submission (no more than 5 A4 size pages) on that issue only within 28 days of the date of these orders.

4.    Leave is granted to the other party to file and serve a short written submission in reply (no more than 5 A4 size pages) within a further period of 28 days.

5. In any such submissions the parties are to address the matter of whether pursuant to the provisions of the Civil and Administrative Tribunal Act 2013 NSW, s 50(2), the Tribunal should dispense with a hearing on the issue of costs so that the issue is decided on the papers lodged with the Tribunal and with appearances of the parties not required.

Catchwords:

BUILDING AND CONSTRUCTION — Home Building Act 1989 (NSW) — Whether a building works agreement arose out of a compromise of prior proceedings — Whether a consent work order in the prior proceedings was beyond the Tribunal’s jurisdiction — Renewal application by home owner on remitter from Appeal Panel — Oral variation of building works agreement alleged by builder – Whether oral variation is enforceable — Cross application by builder for quantum meruit sum in respect of some building works performed following compromise of prior proceedings

Legislation Cited:

Home Building Act 1989 (NSW)

Civil and Administrative Tribunal Act 2013 (NSW)

Civil and Administrative Tribunal Rules 2014 (NSW)

Cases Cited:

Baserite Constructions Pty Ltd v Tanios [2020] NSWCATAP 77 (6 May 2020)

Bondarek v NSW Land and Housing Corporation [2018] NSWCATAP 299 (14 December 2018)

Robert Symes and Kim Louise Filmer v Mick Fabar Constructions Pty Ltd [2015] NSWCATCD 77 (30 June 2015)

Mann v Paterson Constructions Pty Ltd (2019) 267 CLR 560

Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95; [2002] HCA 8

Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 [1982] HCA 24

Royal Diamonds Pty Ltd v Buttle [2016] NSWCATAP 230

Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165

International Air Transport Association v Ansett Australia Holdings Ltd. (2008) 82 ALJR 419 [2008] HCA 3

Maggbury Pty. Ltd. v Hafele Australia Pty. Ltd. (2001) 210 CLR 181

Robinson v Harman [1848] EngR 135; (1848) 1 Exch 850; [1848] 154 ER 363

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

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

Galdona v Peacock [2017] NSWCATAP 64

Texts Cited:

Nil

Category:Principal judgment
Parties:

In proceedings HB 20/33320:
John Tanios (Applicant)
Baserite Constructions Pty Ltd (Respondent)

In proceedings HB 20/40203:
Baserite Constructions Pty Ltd (Applicant)
Jon Tanios (Respondent)
Representation:

Counsel:
R Jedrzejczyk (for John Tanios)
M McMahon (for Baserite Constructions Pty Ltd)

Solicitors:
White Knight Lawyers (for John Tanios)
File Number(s): HB 20/33320; HB 20/40203
Publication restriction: Nil

REASONS FOR DECISION

The Proceedings, the Parties and the Background Facts

  1. These are Reasons for Decision in proceedings brought in the Tribunal’s Consumer and Commercial Division and constituted by File No HB 20/33320 (Owner’s Claim) and by File No HB 20/40203 (Builder’s Claim).

  2. Mr John Tanios (hereinafter referred to as either Mr Tanios or the Owner) is the registered proprietor and home owner of residential premises at Concord NSW (Property).

  3. The Owner is the successor in title of the Property having purchased from prior owners in or about June 2015.

  4. On 23 April 2012, Baserite Constructions Pty Ltd (Builder) had entered into an agreement with the prior owners of the Property pursuant to which the Builder constructed a new two-storey dwelling on the Property (Building Contract).

  5. It is the Builder’s case that it had completed its part of the works under the Building Contract on or about 18 November 2013 when it sent its final invoice to the prior owners. The Builder says that the prior owners then continued building works on the Property.

  6. On or about 2 November 2015, Construction Certifiers Pty Ltd issued the final occupation certificate to the prior owners.

  7. On or about 1 December 2015, the Owner and his family commenced living in the dwelling on the Property.

Procedural History (including Jurisdiction)

Statutory Warranties under the HB Act

  1. The work which the Builder performed at the Property pursuant to the Building Contract was “residential building work” within the meaning of the Home BuildingAct1989 (NSW) (HB Act).

  2. Accordingly, the provisions of the HB Act applied to the Building Contract and this included statutory warranties as to residential building work as set out in subparagraphs (a) – (f) of s 18B(1) (Statutory Warranties).

  3. Further, by reason of the operation of s 18D of the HB Act, the Owner as successor in title of the Property became entitled to the benefit of the Statutory Warranties.

Original Proceedings

  1. On 19 December 2018, the Owner commenced proceedings against the Builder in the Tribunal as file no HB 18/53832 (Original Proceedings) for breach of the Statutory Warranties. The Owner’s application stated as the ‘Dispute Details’:

Have been trying to contact builder for 2.5 years about defects in the house. He can put a couple of times to have a look but haven't seen or heard from him for close to 2 years. Work includes external rock coat cracking and flaking. Illegal wiring to main electrical board and insufficient fuse loads used. Huge cracks to internal render and more.

The granite tiles on the driveway have now also cracked and it was brought to our attention that an allegation was made stating that there was no steel in the concerted driveway. We obviously can not confirm nor deny this. Just recently, we've had more render fall off and after the huge storms in Sydney, we've had water leak from the alfresco roof structure and warp the Gyprock. I engaged a Remedial Construction Expert, he advised me that waterproofing was failing around the whole house and that certain parapets walls required capping which wasn't installed. This has caused water to deep through the brick work and dislodge the render in certain areas around the house. He advised me to engage a building consultant in order to know what has and has not been built to code and what needs to be rectified. I'm currently trying to engage somebody but this time of year, tradies have been difficult to find.

I was advised by the Remedial Construction expert that costs could reach between $200-300k

  1. In the lead-up to the first directions hearing in the Tribunal, the Owner relied upon an expert report of Mr Ken Winton of Ken Winton Building Consultants Pty Ltd (Mr Winton) dated 30 December 2018 (First Winton Report). The First Winton Report identified seven (7) items of defective work said to be in contravention of the Statutory Warranties.

  2. The date of the final occupation certificate is 2 November 2015 which is when the warranty period for a breach of the Statutory Warranties begins to run – 6 years in the case of “major defects” and 2 years for other defects: s 3B and s 18E of the HB Act. On that basis the Original Proceedings brought by the Owner for breach of the Statutory Warranties could only be with respect to “major defects” as defined in s 18E(4).

Consent Orders of 8 February 2019

  1. The Original Proceedings were listed for a directions hearing before Senior Member S Thode on 8 February 2019.

  2. On 5 February 2019, the Owner, Mr Winton, and the Builder’s director and nominated supervisor, Milad Ayoub (Mr Ayoub), had attended the Property for an on-site meeting. The parties there discussed the Builder remedying four (4) of the seven (7) defects which had been identified in the First Winton Report, including the manner of rectification, in consideration of the Owner forbearing from further prosecuting his application in the Original Proceedings against the Builder. Subsequent to the on-site meeting, Mr Winton drafted and then circulated to the parties a document (Winton Minutes) describing the scope of rectification works for items 1, 2, 3 and 5 of the First Winton Report. The Winton Minutes which were signed and dated 8 February 2019 by Mr Tanios and Mr Ayoub, respectively, state, relevantly:

A site meeting was convened … the purpose of the meeting was to meet with the builder … to discuss items raised in my Expert Witness report of the 30th December 2018.

The following items were agreed to be remediated by Mr Ayoub:

Issue 1:

In relation to the lack of weep holes at ground and 1st floor levels, Mr Ayoub will remove bricks at 1.2 m intervals to expose the damp course and provide weep holes with the render reinstated to match existing including repainting to match existing. If the Alcor damp course is cut or punctured during brick removal it is to be sealed using a compatible sealer such as Sikafex.

Issue 2:

Cracking to rendered masonry internally and externally, Mr Ayoub will identify where vertical articulation has been covered up with render and expose the joints, joints will be sealed with Sikafex, finished flush with rendered surface. Areas of external corners where vertical cracking is from floor to ceiling height will be saw cut to create a 10 mm articulation joint with articulation ties fitted every 5th course. Areas of render sheer cracking which are drummy are to be removed and the render reinstated to match existing. Areas of sheer cracking which are not drummy and are less than 1 mm in width to be filled with a flexible tiler.

Walls are to be repainted to match existing to comply with the Office of Fair Trading Guide to Standards and Tolerances.

Issue 3:

Alfresco area and pool sump room colour bond metal roofs, Mr Ayoub is having his roofer/carpenter inspect the roofs and confirm remediation to take place prior to this coming Friday 5 February Tribunal attendance.

Issue 5:

Driveway drummy tiles and efflorescence, it was agreed Mr Tanios will provide new tiles at his expense with Mr Ayoub having his contractors remove the existing tiles and laying the new tiles. The sand and cement tile bed is to contain an inhibitor to prevent efflorescence leaching with the mix complying with AS 3958.1-2007 i.e. stronger than 5:1. The tile adhesive is to have an inhibitor added tro prevent efflorescence leaching. A gap of approximately 20 mm is to be left between the face of the retaining walls and the edge of the tiles to allow water to drain to the lower grated drain.

  1. Mr Tanios and Mr Ayoub attended the directions hearing on 8 February 2019. The Winton Minutes were handed up to the Tribunal. After satisfying herself that the Tribunal was being asked to make orders by consent, Senior Member Thode made the following orders (Consent Orders):

1. By consent, the Tribunal orders that the respondent(s): BASERITE CONSTRUCTIONS PTY LTD C/- John P Natoli & Associates 153 Victoria road DRUMMOYNE NSW 2047 Australia is to carry out the following work on or before 17-May-2019 in a proper and workmanlike manner:

Details of Work Order:

The respondent shall perform the work as set out in the agreed scope of work as set out by Ken Winton Senior Building Consultant dated 5 February 2019 signed and dated by both parties and placed with the papers.

2. The applicant is granted leave to renew the proceedings in accordance with clause 8 schedule 4 of the CAT Act within 12 months of today.

  1. While there had been contact between the Builder and the Owner (via SMS text message) on or about 1 May 2019, the Builder did not attend the Property or perform the work the subject of the Consent Orders by 17 May 2019.

  2. On or about 20 May 2019, the Owner sent a loss notification form to Home Warranty Insurer, HBCF, who was the Builder’s Insurer under the Home Warranty Insurance Policy dated 21 May 2012 taken out by the Builder in respect of the original residential building work for the Property under the Building Contract with the prior owners. The loss notification form provided the text of the Consent Orders made on 8 February 2019. This had the effect of preventing the Builder from obtaining a renewal of its insurance.

The Renewal Proceedings, the Builder’s Further Works, the Payment of $11,000 to the Painter, and the Owner’s Letter of 16 September 2019

  1. By application lodged with the Tribunal on 22 May 2020 as file no HB 19/23891 (Renewal Proceedings), the Owner renewed the Original Proceedings in accordance with the leave given by the Consent Orders.

  2. There was a directions hearing on 1 July 2019 when the Builder as respondent in the Renewal proceedings appeared. The Tribunal noted:

This is a Renewal proceeding. The parties are working towards completing the work order before the hearing date. If the applicant is satisfied the work has been performed he will withdraw the proceedings. If the work order is not complied with the parties must comply with the following directions.

  1. The orders and directions then made were for the Renewal Proceedings to be set down for a formal hearing. The parties were directed to exchange the documents relied upon in their respective cases including for the Builder to file and serve its documents in reply to the Owner’s documents.

  2. Prior to and after the directions hearing the parties communicated by SMS text messages and from on or about 11 July 2019 to on or about 16 September 2019 the Builder and/or its contractors attended the Property from time to time.

  3. Sometime during the week ended Friday 13 September 2019 Mr Ayoub of the Builder attended the Property and had a conversation with the Owner about the Builder’s home warranty insurance following the loss notification form the Owner had sent to HBCF on or about 20 May 2019. Mr Ayoub asked the Owner to sign a letter to the effect that the works in the Consent Orders had been carried out. The request for the letter was made so that the Builder could then renew its home warranty insurance as this was required for the Builder to perform other jobs.

  4. During their conversation Mr Ayoub said to the Owner that the Builder accepted some rendering and painting of the membrane had not been done but that the Builder would pay for a painter whom the Owner could choose subject to the Builder approving the painter and the quote provided by the painter. On or about 13 September 2019, the Builder paid the Owner by electronic transfer the sum of $11,000, which the Builder directed the Owner to pay to Andrew Ryan (Mr Ryan) of AJR Painting Pty Ltd. Mr Ryan was the painter the Owner had chosen and who had been approved by the Builder.

  5. On or about 16 September 2019, the Owner then provided the Builder with a letter signed by him and bearing date 16 September 2019 (Letter of 16 September 2019) which stated, relevantly:

To whom it may concern

Please accept this letter as confirmation that the work required to be carried out at (the Property) by (the Builder) has now been completed.

The following submissions have now been removed:

Fair Trading File No HB 18/53832

NCAT HB 19/23891

  1. While carrying out work at the Property on or about 27 September 2019 Mr Ryan told the Owner that there were issues with the patchwork performed by the Builder.

  2. On 30 September 2019, the Owner sent an SMS text message to Mr Ayoub as follows:

Milad, we really going to go through another week of rain without sealing the driveway? It’s come to my attention the hearing wasn’t in September, it’s in October. We’ve got three weeks to complete this thing.

  1. In fact, the hearing of the Renewal Proceedings was on 29 October 2019 before Senior Member D Goldstein, and there was no appearance for or on behalf of the Builder at the hearing.

  2. On 12 August 2019, the Owner had filed and served a Scott Schedule of Mr Winton in compliance with the directions of 1 July 2019 to provide documents in support of his case for orders of the Tribunal in the Renewal Proceedings.

  3. At the formal hearing, the Tribunal ordered that the Builder pay the Owner in lieu of the work order contained in the Consent Orders of the Original proceedings, the amount of $175,750.25 (29 October 2019 Order). The Senior Member gave the following Reasons:

1. The applicant appeared in person. There was no appearance by the respondent.

2. This is a renewal application brought by the applicant in connection with work orders made by the Tribunal on 8/2/2019 in HB 18/53832.

3. The respondent did not appear at the hearing.

4. There appears on the Tribunal file a copy of a notice of hearing addressed to the respondent dated 29 July 2019 advising of the time and location of the hearing.

5. I am aware of the Registrar's standard practices in notifying parties of the time and place of hearing as set out in the statutory declaration of the Divisional Registrar of the Consumer and Commercial Division sworn the 29th day of July 2014.

6. Having perused the Tribunal file I am satisfied that in accordance with the Registrar's usual practices the notice of hearing of today's proceedings was posted to the respondent, that it has been given notice of the hearing today and that the hearing notice has not been returned to the Tribunal unopened.

7. Further, I am satisfied that the justice of the case requires the matter to proceed in the absence of the respondent having regard to the fact that the respondent has failed to attend on this occasion without putting any explanation before the Tribunal; and the applicant has attended the hearing today and prepared his case in accordance with the Tribunal's directions and is ready to proceed.

8. I have also formed the view that the justice of the case requires the matter proceed in the absence of the respondent because the guiding principle in section 36(1) of the CAT Act could not be implemented if a hearing was adjourned because a party to the proceedings was not present at the hearing with no explanation being provided for its absence.

9. The applicant has provided a scott schedule filed on 12 August 2019 which the applicant has stated under oath was prepared by his expert Mr Winton and that he has sent a copy to the respondent.

10. That scott schedule sets out the work that the applicant states has not been completed properly or at all by the respondent. The scott schedule is exhibit B. The applicant also produced 3 photographs which were marked as exhibit A which show unsatisfactory rectification work carried out by the respondent.

11. The scott schedule assesses the cost of carrying out the necessary rectification work which which is described and priced in detail. The pricing includes an allowance for preliminaries at 15% which I find is reasonable and in line with allowances for preliminaries frequently contained in expert reports for building work tendered in Tribunal proceedings. GST has also been allowed for.

12. The total of $175,750.25 has not been contradicted by the respondent. In that regard I note that Tribunal directions made on 1 July 2019 required it to provide all evidence on which it intended to rely by 23 September 2019. The respondent has therefore had ample opportunity to file its own evidence and also to contradict the content of the applicant's scott schedule filed on12 August 2019.

13. I find that the respondent has not complied with the Tribunal work order dated 8/2/2019 in HB 18/53832 to the extent referred to in the scott schedule which is exhibit B.

14. I will therefore make an order in the applicant's favour in the sum of $175,750.25 being the reasonable and necessary cost to undertake the rectification of the defective work referred to in the scott schedule.

The Appeal Proceedings and the Remitted Proceedings

  1. On 5 November 2019, the Builder lodged a Notice of Appeal and an application for stay of original decision pending appeal in respect of the 29 October 2019 Order, as File no AP 19/49553 (Appeal Proceedings).

  2. On 6 May 2020, the Appeal Panel of the Tribunal made and published its Orders and Reasons for Decision in the Appeal Proceedings: see Baserite Constructions Pty Ltd v Tanios [2020] NSWCATAP 77 (Appeal Decision). In the Appeal Decision, the Appeal Panel granted leave to the Builder for its appeal to the extent leave was required, allowed the Builder’s Appeal, remitted the matter to the Consumer and Commercial Division of the Tribunal for hearing with directions to be made by the Division to permit the lodgement and service of further evidence, and ordered that the costs of the Appeal proceedings follow the outcome of the further primary hearing.

  3. The Owner’s Claim in File no HB 20/33320 is the Remitted Proceedings.

The Owner’s case against the Builder in the Remitted Proceedings

  1. The Owner’s primary claim in the Remitted Proceedings is for breach of contract; specifically, the non-performance by the Builder of remedial works that were the subject of an agreement of the Owner and the Builder made on 8 February 2019 as recorded in the Winton Minutes and as evidenced by the making of the Consent Orders (Work Agreement).

  2. The Owner relies on the expert evidence of both parties, Mr Winton in the Owner’s case and Max Dietrich (Mr Dietrich) in the Builder’s case to establish that, firstly, the majority of the work required to be done by the carrying into effect of order 1 of the Consent Orders has not been performed at all, and secondly, such work that has been performed by the Builder has not been done in accordance with the scope of works that was agreed between the parties as recorded in the Winton Minutes. The Owner also relies on his own lay evidence as to what occurred at the on-site meeting on 5 February 2019, what was recorded by Mr Winton in the Winton Minutes, and what transpired at the directions hearing in the Original Proceedings before the Tribunal on 8 February 2019.

  3. The alternative case put by the Owner in the Remitted Proceedings is that he is entitled to relief under Clause 8 of Schedule 4 of the Civil and Administrative Tribunal Act 2013, NSW (NCAT Act) as the party who brought the Renewal Proceedings and within a scope of enquiry consistent with earlier authorities: see, for example, Bondarek v NSW Land and Housing Corporation [2018] NSWCATAP 299 at [44] – [45], [54]; see also, in the context of a case where the original proceedings were settled, or partly settled by consent orders, Robert Symes and Kim Louise Filmer v Mick Fabar Constructions Pty Ltd [2015] NSWCATCD 77 at [61]. In this respect, the Owner’s alternative case points to the Consent Orders in the Original Proceedings, where it is submitted that the Tribunal made a work order pursuant to s 48O(1)(c) of the HB Act (Work Order). It is then submitted that the Work Order has not been complied with by the Builder. Just as the Owner relies on his lay evidence and the expert evidence to establish the Builder’s breach of the Work Agreement, so also the Owners relies on that evidence to prove the fact of the Builder’s non-compliance with the Work Order.

  4. According to the Owner’s expert, Mr Winton, the quantum of the Owner’s loss and damage for breach of the Work Agreement, or alternatively for non-compliance with the Work Order, is an amount of up to $180,144, being the costs of rectifying defect items 1, 2, 3 and 5.

The Builder’s Defence to the Owner’s Claim and the Builder’s Claim against the Owner

  1. The Builder submitted in respect of the Owner’s case based upon a Work Agreement that no contract was entered into which sets out formal terms, including relevantly, the contract price, date of commencement, time for completion and determination of the contract. Rather, it is said that the Owner “conflates” the Consent Orders with the contention that there is a new contract (the so called Work Agreement); that this is wholly misconceived because any case based on breach of the Work Agreement cannot proceed by way of renewal proceedings; and that fresh proceedings in respect of the Work Agreement are required.

  2. In respect of Item 1 – the weepholes and the flashings – part of the Builder’s case is that there was a variation of the works the subject of the Consent Orders; specifically, that in lieu of the works in Item 1 the Owner chose to have his entire dwelling on the Property repainted with a waterproof coating. These ‘alternate’ works, according to the Builder’s submission, did not involve the Builder carrying out the repainting but instead providing a sum of money ($11.000) to the Owner so that the Owner could have his own contractor (Mr Ryan) do the repainting work. On that basis, the Builder argued that any issue or defect said to be outstanding with the repainting does not fall under the responsibility of the Builder in the Owner’s Claim. The Builder further relied on the 16 September 2019 Letter also referred to as the ‘satisfaction letter’. The Builder argued that the letter of 16 September 2019 is an acknowledgment of the Owner’s satisfaction that the works required to be done under the Consent Orders had been completed by the Builder.

  3. In regard to that part of the Owner’s Claim which is based on the Builder’s non-compliance with the Work Order, the Builder submitted that the Tribunal’s orders were ultra vires; that it did not have the jurisdiction to make any orders by consent on 8 February 2019 because the items of work for remediation in the Winton Minutes which became the subject of the Work Order (order 1 made on 8 February 2019) were not “major defects” for the purposes of s 18E(4) of the HB Act.

  4. The Builder then submitted that because jurisdiction cannot be conferred by consent, the consent made by the parties on 8 February 2019 is of no effect and cannot be enforced; that in those circumstances, the Builder carried out works following 8 February 2019 which it was not legally required to do, by mistake of fact or law; that as a result of such work, the Owner has had the benefit of building works that he otherwise would not have been entitled to; and that the Builder is accordingly entitled to be paid for the work undertaken on a quantum meruit basis: s 94(1A) of the HB Act. The Builder’s relies on the quantum meruit costs (up to a value of $109,380.85 including Builder’s margin) as determined by the expert evidence.

The Owner’s Defence to the Builder’s Claim

  1. In answer to the Builder’s Claim generally, the Owner relied on the submissions in his claim against the Builder (i.e. File no HB 20/33320) that the Builder had not performed the works in the Winton Minutes or to the extent there had been any performance, such performance was defective and required remediation.

  2. As regards the legal basis of the Builder’s Claim (i.e. relying upon a claim based on quantum meruit principles), the Owner’s defence was that he had entered into the Work Agreement and/or consented to the Work Order in the Consent Orders made on 8 February 2019 because he was forbearing from proceeding with his building claim against the Builder in the Original Proceedings; in essence, that the Owner’s forbearance was the valuable consideration and that the contract price for the Work Agreement was nil dollars payable by the Owner, or to put it another way, that the Builder would do the work under the Work Agreement at its own cost.

  3. In those circumstances and also relying on the High Court authority of Mann v Paterson Constructions Pty Ltd (2019) 267 CLR 560, the Owner submitted that any claim founded on quantum meruit principles must fail because to the extent it can be said that there is a contract price for the Work Agreement, in the events which occurred, it is capped at nil dollars.

Court Book, Other Exhibit, Transcript and Written Submissions

  1. The parties were granted leave to have legal practitioners representing them at the hearing on 14 December 2020 (Day 1) and 20 May 2021 (Day 2).The parties appeared by their respective counsel.

  2. Pursuant to prior directions of the Tribunal, the parties produced a Joint Tender Bundle (also known as “the Court Book”) which became Exhibit 1 in the proceedings, comprising two volumes being pages 1 – 610 (volumes 1 and 2) & 633 – 654 (volume 2).

  3. The Court Book contained the Owner’s pleadings, written evidence and opening outline submissions as follows:

  • The Owner’s Application in File No HB 18/53832;

  • The Owner’s Points of Claim in File No HB 20/33320;

  • The Owner’s Points of Defence in File No HB 20/40203;

  • The Affidavit of Mr Tanios, with annexures, sworn 1 October 2020;

  • The Statutory Declaration of Mr Ryan made on 1 October 2020;

  • The Affidavit of Mr Tanios, with annexures, sworn 13 November 2020;

  • The Expert Report of Mr Winton dated 30 December 2018;

  • The Expert Report of Mr Winton dated 31 December 2019;

  • The Supplementary Expert Report of Mr Winton sworn 1 October 2020;

  • The Supplementary Expert Report of Mr Winton dated 29 October 2020;

  • Joint Expert Report dated 17 November 2020;

  • Owner’s Outline of Submissions dated 7 December 2020.

  1. The Builder’s pleadings, written evidence and opening outline submissions as set out in the Court Book, Exhibit 1, comprised:

  • The Builder’s Points of Claim in File No HB 20/40203;

  • The Builder’s Points of Defence in File No HB 20/33320;

  • The Statement of Mr Ayoub, with annexures, dated 21 September 2020;

  • The Statement of Mr Ayoub with annexures dated 30 October 2020;

  • The Affidavit of Mr Ayoub made on 12 November 2020;

  • The Expert report of Mr Dietrich dated 29 September 2020;

  • The Joint Expert Report dated 17 November 2020; and

  • The Builder’s Outline Opening Submissions dated 7 December 2020.

  1. Mr Tanios (on Day 1) and Mr Ryan (on Day 2) each gave sworn evidence in the Owner’s case, subject to cross examination by the Builder’s counsel, and Mr Ayoub (on Day 2) gave sworn evidence in the Builder’s case, subject to cross examination by the Owner’s counsel. Mr Winton and Mr Dietrich each gave sworn oral expert opinion evidence (on Day 2) subject to cross examination by counsel.

  2. The Roofing and Walling Installation Manual for Design and Installation Professionals 2017 Edition was also tendered into evidence and marked as Exhibit 2.

  3. The Owner’s solicitors provided, by email sent to the Tribunal’s Registry on 20 July 2021, a transcript of both Day 1 and day 2 of the hearing (Transcript).

  4. Furthermore, pursuant to directions made on 20 May 2021, with extensions of time, the parties’ legal representatives provided closing written submissions, as follows:

  • The Owner’s Closing Submissions dated 25 June 2021;

  • The Builder’s Closing Submissions dated 24 June 2021;

  • The Owner’s Closing Submissions in Reply dated 9 July 2021;

  • The Builder’s Closing Submissions in Reply dated 9 July 2021; and

  • The Builder’s Findings of Fact and Law Sought dated 9 July 2021.

  1. In making my decision in relation to the applications of the Owner and the Builder, respectively, for orders of the Tribunal, I have considered the entirety of the written material in the Court Book, Exhibit 2, and the written submissions and supporting documents of the parties. In these Reasons for Decision, I may focus on the material which I consider is central to the considerations of the applications for orders of the Tribunal; but to the extent that the Reasons may not refer to a specific piece of evidence or singularly deal with a submission, it should not be assumed that I have ignored that evidence or submission.

  2. As in any civil proceedings, applicants for orders of the Tribunal bear the legal onus of presenting sufficient evidence to satisfy the Tribunal, on the balance of probabilities, that the orders sought in the application must be made.

The Lay Evidence

  1. The lay evidence in the Owner’s case was from Mr Tanios and Mr Ryan, and as indicated, each was cross examined by the Builder’s counsel. I am satisfied that the Owner’s lay witnesses were credible and reliable witnesses of fact. Mr Tanios was cross examined thoroughly on the real issues in dispute. I observed that he was prepared to make concessions when propositions were put to him which were not consistent with the Owner’s case theory and I was satisfied that he gave his evidence in a forthright and candid manner.

  2. Similarly, I found Mr Ryan to be an honest and forthright witness of fact when he was challenged about why he did not finish the repainting work in 2019.

  3. By contrast, I did not think Mr Ayoub presented as well as the other lay witnesses. My impression was that at times I could not be entirely satisfied he had given full and frank answers to the questions put to him, particularly when the questions were adverse to his or the Builder’s interests. He made few, if any, real concessions during his cross examination even when facts or propositions which could not be denied were put to him.

  4. For example, when asked about the circumstances surrounding his signing of the Consent Orders on 8 February 2019 and then when asked to confirm as had already been stated by him in his written evidence (see his Affidavit sworn 12 November 2020 at [11] - Exhibit 1, p 426) that he did not expect to be paid for carrying out the work in items 1, 2, 3 and 5 of the Winton Minutes, he disagreed that was his expectation: see Transcript, 20 May 2021, T 44.42 – T 45.14.

  5. Mr Ayoub was taken to the part of the transcript of the directions hearing on 8 February 2019 before Senior Member S Thode (Exhibit 1, pages 365 – 366) where the Senior Member outlined to the parties the effect of her making a Work Order including the “right to come back and renew the proceedings if the work is not done at all or if it’s done defectively”. Given his responses to the Senior Member as recorded in the transcript of 8 February 2019, I have to say that I found his answers during the hearing on 20 May 2021 most unsatisfactory particularly when he was asked about whether he understood the effect of the earlier Consent Orders: see Transcript, 20 May 2021, T 33.24 – T34.29.

  6. Another indicator of the unreliability of Mr Ayoub as a witness of fact is demonstrated by the two almost identical invoices (both styled “Tax Invoice NO 1”) which the Builder raised to the Owner in respect of work done at the Property; one invoice dated 20 November 2019 in the amount of $73,680.53 (Exhibit 1, p 418) and the other invoice dated 24 July 2020 in the amount of $96,714.97 (Exhibit 1, p 130). In the (second) invoice dated 24 July 2020, the description of the work in item 8 is expressed more elaborately than in the first invoice and in a way which is consistent with the Builder’s contention about an oral variation in respect of the weepholes and further the amounts charged differ significantly (i.e. $8,400 for item 8 in the first invoice, while $25,700 for item 8 in the second invoice). However, the reasons for the differences in description and charge for item 8 were not explained by the Builder to the Owner: see Transcript, 20 May 2021, T43.31–53, and all of this in circumstances where, as referred to above, the initial (written) evidence of Mr Ayoub was that he did not expect to be paid for the work the subject of the Consent Orders.

  7. Further, under cross-examination, Mr Ayoub deposed (Transcript, 20 May 2021, T23.43 and T 44.52 – 53) that he and the Builder did not have any legal representation or advice at the time of the making of the Consent Orders and that he did not understand the effect of the Consent Orders. However, this oral evidence is not at all consistent with contemporaneous documents: see the SMS text message of 18 January 2019 sent by Mr Ayoub to Mr Tanios (Exhibit 1, p 285) which refers to “my barrister”, and the further SMS text message, also sent on 18 January 2019 by Mr Ayoub to Mr Tanios (Exhibit 1, p 286), which states: “I’ve been advised not to respond until we personally meet and discuss the matter”.

  8. In his evidence-in-chief and under cross examination, Mr Ayoub alleged that the works in items 1, 2, 3 and 5 of the Winton Minutes “started shortly afterwards” (i.e. meaning after the directions hearing on 8 February 2019) – see statement of Mr Ayoub dated 21 September 2020 at [12], Exhibit 1, p 31 and Transcript, 20 May 2021, T 27.43-48. However, when pressed under cross examination about, in fact, attending the Property in July 2019 for the first time after the directions hearing almost 5 months before, Mr Ayoub gave evidence as follows: “Well, shortly afterwards I wasn’t given access to the premises”: Transcript, 20 May 2021, T 28.11. Once again that oral evidence is inconsistent with contemporaneous documents: see the SMS text messages that were exchanged by Mr Tanios and Mr Ayoub: Exhibit 1 pages 264 – 311.

  9. To the extent there are inconsistencies between the evidence of Mr Tanios and the evidence of Mr Ayoub I prefer the evidence of Mr Tanios. I find that Mr Ayoub and the Builder did not commence any of the works required under the Consent Orders until at least July 2019.

Was there a Variation in respect of Item 1?

  1. The Builder’s case is that in carrying out the works for item 1, specifically, when the render was exposed to reveal the flashings and the weepholes, the Owner had approached someone who worked for the Builder and asked for the weepholes to be covered up. However, the employee of the Builder was not identified and did not give evidence in the Builder’s case. Mr Ayoub’s evidence was that the Owner told him the weepholes had to be covered up for aesthetic reasons, because they “look terrible”: see Exhibit 1 pages 31 – 32 at [13] – [14], & 425 at [2].

  2. The Owner’s evidence (Exhibit 1, pages 413 and 414 at [25] and [28]) was that it was the Builder who, in fact, approached the Owner and said words to this effect:

Don’t worry. I know what needs to be done. I’m going to make it perfect. I am going to stop the water from going in, so we don’t need to stop it from going out.

…

The painting of the house is not about the looks, it is about keeping the water out by applying a membrane.

This is why we don’t need to uncover the weepholes it’s all about the membrane.

  1. During his cross examination, the Owner did not depart from the tenor of his conversations with Mr Ayoub about the weepholes, as Mr Tanios had put those conversations in his written evidence: Transcript, 14 December 2020, T66.18-26 & T73.13-53; see also, in re-examination, Transcript, 20 May 2021, T58.31-38.

  2. In respect of the conflicting evidence of Mr Ayoub and Mr Tanios on this matter, I preferred the evidence in the Owner’s case. As noted in the prior paragraph, Mr Tanios’ oral evidence about the material conversations was consistent with his written evidence. Also, for the reasons articulated above, I generally preferred Mr Tanios to Mr Ayoub as a witness of fact. For those reasons I find that it was the Builder who approached the Owner about substituting a membrane for exposing weepholes and further, that it was the Builder who represented to the Owner that stopping water from entering the structure or cavities would be as effective as exposing weepholes; i.e. that the membrane would be of similar waterproofing functionality or effect.

  3. Regardless of my findings on matters of fact, even if I had accepted the Builder’s case on the alleged request to cover up the weepholes (which I do not), there is no legal basis for a variation in respect of Item 1. Insofar as the variation purported to vary the Work Agreement, the Work Agreement does not contain an express provision facilitating variations. Accordingly, the HB Act and the general law apply to govern the legality and operation of the purported variation. In this regard, the Builder did not give the Owner any notice in writing signed by both parties in respect of the variation contended for in the Builder’s case: see HB Act, s 7, s 7E & s 10. Nor did the Owner give to the Builder (c.f. the prior owners who had issued and signed a written variation dated 26 November 2012, in numbered paragraph 4, for a similar non-compliant variation of “block(ing) for aesthetic look” of weepholes – Exhibit 1, p 99) any written advice that the Owner’s alleged request to cover up the weepholes were instructions by the Owner causing the deficiencies or breaches in the Statutory Warranties (HB Act, s 18F).

  1. Nor am I satisfied that the Builder has made out a case based upon an oral agreement to substitute the membrane for the weepholes. It is not supported by fresh consideration. The express terms of the Work Agreement were that Item 1 would “be remediated by” the Builder, such that if the membrane was a substitute for exposing weepholes, it would have achieved nothing more than what the Builder was already obliged to do under the Work Agreement. Alternatively, if the consideration is the application of the membrane around the perimeter of the dwelling on the Property, I am satisfied on the available evidence it has not occurred (in this regard, see the observation of the Builder’s counsel on Day 2 of the hearing that the application of the membrane is “not finished” – Transcript, 20 May 2021, T59.19-20), or to the extent work was done but not finished, the work did not remediate Item 1. On that basis, the purported consideration for any oral agreement failed.

  2. I was also not persuaded by Mr Dietrich’s evidence that the existence of a waterproof membrane justified the absence of weepholes. Mr Dietrich advanced the position that on the language of AS 3700 - 2011 Masonry Structures at paragraph 4.7.2, weepholes are only required wherever it is necessary to drain moisture and that because there is no evidence of moisture and because the walls are allegedly protected by render and waterproof coating (even though, as indicated, the Builder’s counsel had acknowledged the application of the membrane was not finished), weepholes are not needed: see Transcript 20 May 2021 T 116-117; see also Exhibit 1 pages 510 – 511.

  3. I do not accept Mr Dietrich’s analysis. His position does not take account of the words in paragraph 4.7.2 of AS 3700 – 2011 which state that weepholes are required wherever flashings are incorporated (Exhibit 1 p 508), which on the Builder’s own evidence were so incorporated: Transcript, 20 May 2021, T45.37; even though Mr Winton’s evidence was that, in fact, compliant flashings had not been installed allowing water to accumulate: Transcript, 20 May 2021, T77.19-23.

  4. Therefore even if I was to accept that there was an enforceable oral agreement to substitute the membrane for the weepholes (which I do not) there is no evidentiary foundation to support the Builder’s position. The Owner is entitled to the benefit of the Statutory Warranties as regards the weepholes being exposed as per the requirements of paragraph 4.7.2 of AS 3700 – 2011. The application of the waterproofing membrane is not finished and the rock coat render is not properly applied. Mr Dietrich’s preconditions to justify an absence of weepholes are, therefore, not satisfied.

  5. Even if there was evidence to support findings of fact as to the existence of an oral agreement or variation in respect of the weepholes (which there was not), I find that there is no agreement or variation effective at law.

  6. Insofar as it is said that the oral variation purported to vary the Work Order, it would have no effect unless and until the Tribunal so ordered.

The Owner’s Primary Claim for breach of contract

The Tribunal’s Jurisdiction

  1. The Builder submitted the Owner’s primary claim that a new contract (the Work Agreement) came into being on 8 February 2021 “is wholly at odds” with the HB Act and that it cannot be the case “rectification works under the statutory warranties can become new building works, as this would create new statutory warranties for each item … (I)n effect, it would result in never-ending cascading warranties”: see Builder’s Closing Submissions dated 24 June 2021 at [7]; see also the Builder’s submission at [11] that the works the subject of the Consent Orders were beyond the scope and bounds of a renewal application and therefore should not be entertained in these proceedings (File No HB 20/33320) remitted to the Tribunal’s Consumer and Commercial Division by the Appeal Panel in the Appeal Decision.

  2. I do not accept the Builder’s submission as to absence of jurisdiction in the Owner’s primary claim and as to the Tribunal’s inability to deal with the primary claim in the context of the Renewal Proceedings (before me now as the Remitted Proceedings). In this regard, I respectfully adopt what was said by the Appeal Panel in the Appeal Decision as regards the Builder’s submissions to the Appeal Panel about an absence of jurisdiction:

[45] There was no need for the primary member, or for us, to consider the question of jurisdiction for the primary work order.

[46] Although characterised as a consent work order, and the primary proceedings as renewal proceedings, and even if the Tribunal lacked jurisdiction to make a consent work order, and to grant leave for a renewal application, on the basis that the works in that consent order did not constitute major defects (which we address below), the important fact is that the scope of work to be addressed by the builder resolved a dispute between the parties on an agreed basis and itself formed a contract for building work as set out in the scope of works, irrespective of whether or not it also was the subject of a consent order and irrespective of the context (in the Tribunal precincts where parties were present for a hearing with likely contests including on jurisdiction): cp Yuen v Thom [2016] NSWCATAP 243 at [45].

[47] The claim for a money order for alleged non-performance of the agreed scope of remedial work on the contract formed on 8 February 2019 was clearly in itself a "building claim" as it is broadly defined in HBA s 48A to include general law claims: Atkinson v Crowley [2011] NSWCA 194 at [16], [22]-[24]. The relief sought was of the type provided for in HBA s 48O. The claim for that relief was clearly in time under HBA s 18E as a claim for defective work under the statutory warranties attaching to the 8 February 2019 contract and also within s 48K. CATA s 59 is not applicable in that characterisation because there is no reliance upon the original consent work order. The money order reflected the expert evidence of the amount to compensate for the non-performance of the works agreed on 8 February 2019 to be carried out by the builder.

[48] The primary member did not mention the renewal context. He appeared simply to treat the claim in the substantive manner in which it has just been characterised. He had evidence before him of breach of the relevant agreement in the owner's expert's Scott schedule setting out what had been agreed on 8 February 2019 to have been done and what was either not done or defectively done. He made the money order on the basis of that expert assessment of monetary relief. There is no allegation by the builder that he ought to have granted the opportunity for work to be done as the appropriate relief, under HBA s 48MA or otherwise under s 48O. Even if the primary decision had referred to the form of the proceedings as a renewal of proceedings respect of a consent work order, the substance of what was sought did not change and should be what governs: CATA ss 3(d), 36(1), 38(4).

[49] The builder in submissions sought to challenge, by way of setting aside the agreement reflected in the consent work orders, for mistake. This was not part of the grounds of appeal. The form of mistake was not fully articulated. It seems to us that there is no basis for the mistake to be established. It would contradict the other grounds of appeal where the builder set out the basis for agreeing to the scope of works reflected in the consent work orders of 8 February 2019, in which the builder indicated no indication of mistake and raised the absence of jurisdiction.

[50] If we were wrong on the foregoing substantive characterisation of the primary proceedings, then we consider that the builder would be entitled to raise the challenge to jurisdiction at this point even though the builder did not appeal the consent work order at all, was out of any potentially applicable time period to challenge the consent work order and put forward nothing to justify the favourable exercise of an applicable (if any) power to extend time. The requirement for the only available time period of six years was that the alleged defects were major. That is a jurisdictional fact which can be raised at any time since it renders the applicable decision void if it is material in the sense identified in Hossain, discussed earlier, which it clearly is since it possibly would lead to a different outcome if we were wrong on our characterisation of the primary proceedings that we have already given. The builder's challenge to the money order was the relevant challenge, founded on that jurisdictional fact, and was within time.

[51] Further, we consider that there is no agreement in the consent work orders that would fall within the category of a fact, or facts, able to be agreed between the parties as facts which would then form the basis for a finding that the relevant jurisdictional fact (major defects) was present. The parties cannot effectively confer jurisdiction on the Tribunal by in effect agreeing that the alleged defect was major. Even if experts agreed that a particular defect is major or the expert evidence on that topic is all one way, the Tribunal must weigh that evidence against any other available evidence to make a finding on the character of the alleged defect: Vella v Mir [2019] NSWCATAP 28 at [47]-[49], [58]-[63]; Stevenson v Ashton [2019] NSWSC 1689 at [74], [87], [92].

[52] We turn then to the characterisation of the alleged defects in the original consent work orders that were the subject of the original application.

[53] In our view none of those alleged defects was in respect of a "major element of a building" or a "major defect" as defined in HBA s 18E(4). There is no applicable regulation varying the definition. This is whether or not the defective weep holes or defective roof slope come within the meaning of "waterproofing", which we doubt at least for the roof slope but which could be the case for the waterproofing.

[54] In particular, each of lack of weep holes, defective rendering, defective roof slope and drummy driveway tiles with efflorescence does not cause and is not likely to cause any of: the inability to inhabit or use the building for its intended purpose, the destruction of the building or a threat of collapse of the building. The evidence on the potential effect of water ingress in producing the conducive environment for mould and the potential health effects of mould is too generalised and speculative to establish (by lay or expert evidence as appropriate) the significant actual or potential impact on habitability and amenity in this dwelling that is required to satisfy the statutory test: Stevenson v Ashton at [67], [73]-[76], [87], [92]. It may have been that with appropriate evidence the roof slope and water drainage defects could have come within those requirements but the evidence does not extend so far.

[55] Even if, for instance, the absence of weep holes qualified as a defined major defect, it would not confer jurisdiction in respect of the other alleged defects.

[56] Accordingly, the jurisdictional challenge fails but only on the first basis that we have identified.

  1. The Builder did not appeal that part of the Appeal Decision in respect of the characterisation of the Work Agreement.

  2. On Day 1 of the hearing I ruled that the Owner did not need to lodge a fresh application with the Tribunal for defects relating to works the subject of the Work Agreement. The reasons for my ruling are recorded in the Transcript, 14 December 2020, at T39.23-36 and at T42.28-38.

  3. Accordingly, and consistently with the language of the Appeal Panel in the Appeal Decision at [46] – [48], I find that the Tribunal has jurisdiction to hear and determine the Owner’s primary claim for breach of contract.

Whether the Work Agreement was a binding contract

  1. The Builder raised a series of issues about whether the Work Agreement was valid and binding and/or liable to be set aside.

  2. I am satisfied that the Tribunal did not “force or oblige” the parties to enter into the Work Agreement as suggested by the Builder in its Closing Submissions at [8]. On the contrary, the evidence clearly establishes that the parties already had a meeting of minds at the site meeting on 5 February 2019 and then at the directions hearing on 8 February 2019. It is apparent on reading the transcript of the directions hearing (Exhibit 1, pages 358 – 369) that the presiding Tribunal Member was satisfied before she made the Consent Orders, that the parties had freely signed the Winton Minutes and that they understood their meaning and effect.

  3. Nor do I accept any argument that the Work Agreement is liable to be set aside on the grounds of unilateral mistake.

  4. There is no evidence that the Owner was mistaken as to a term of the Work Agreement. However, even if that was the case, there is no evidentiary foundation to support a finding of any unconscionable conduct on the part of the Owner; i.e. that the Owner was aware of the Builder’s mistake and took steps to prevent the Builder from becoming aware of its mistake before entering into the Work Agreement: see the statement of principles summarised by the Appeal Panel in Royal Diamonds Pty Ltd v Buttle [2016] NSWCATAP 230 at [26] – [31].

  5. The absence of any new home warranty insurance in respect of the Work Agreement is a failure in statutory compliance on the Builder’s part, and not the Owner’s part (HB Act, s 92) and notwithstanding uninsured work, the Builder remains liable for damages and subject to any other remedy in respect of any breach of the contract committed by it (HB Act s 94(2)).

  6. The subjective positions of Mr Tanios and Mr Ayoub, respectively, as to their understanding of the meaning and effect of the Winton Minutes which each of them signed, are not determinative of whether, or not, the parties agreed to be bound by the Work Agreement. The legal position is determined objectively, having regard to communications between the parties in their context and the parties’ dealings over time leading up to the making of the contract: see, for example, Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95; [2002] HCA 8 at 105 - 106; [24] – [25].

  7. I find that the parties agreed to be bound by the Work Agreement because of the following facts and matters:

  1. The parties being in a commercial relationship (i.e. ‘at arm’s length’);

  2. The fact that the Owner, firstly, had brought a “building claim” within s 48A of the HB Act in the Original Proceedings which was against the Builder arising from alleged defective residential building work at the Property and secondly, had then served an expert report (i.e. the First Winton Report) with a Scott Schedule setting out the alleged defects and scopes of work required to rectify the defects;

  3. The language of the Winton Minutes, which stated, relevantly, that “(t)he following items were agreed to be remediated by Mr Ayoub”;

  4. The parties’ conduct in signing a copy of the Winton Minutes on 8 February 2019;

  5. The fact that both parties consented to the making of the Consent Orders before the Tribunal at the directions hearing of the Original Proceedings on 8 February 2019, which had the effect of finalising the Original Proceedings, subject to the Owner’s right of renewal;

  6. The fact that the terms of the Consent Orders of the Tribunal on 8 February 2019 reflected the terms of the Work Agreement.

The Terms of the Work Agreement

  1. The terms of a contractual arrangement are ascertained objectively, the key consideration is: “what each party by words and conduct would have led a reasonable person in the position of the other party to believe”: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 at [40].

  2. It is necessary to consider the language used by the parties, the circumstances addressed by the contract, and the objects which it is intended to secure. An appreciation of the commercial purpose of the contract calls for an understanding of the genesis of the transaction, the background and the market: International Air Transport Association v Ansett Australia Holdings Ltd. (2008) 82 ALJR 419 [2008] HCA 3 per Gleeson CJ at 423 [8].

  3. Further, the interpretation of the written contract involves the ascertainment of a meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract: Maggbury Pty. Ltd. v Hafele Australia Pty. Ltd. (2001) 210 CLR 181 per Gleeson CJ, Gummow and Hayne JJ at 188.

  4. I am satisfied on the available evidence that the express terms of the Work Agreement are as set out in the Winton Minutes signed by Mr Tanios and Mr Ayoub, respectively. The Winton Minutes refer expressly to the First Winton Report. During his cross examination, Mr Ayoub agreed that he had read the First Winton Report prior to attending the site meeting on 5 February 2019: Transcript, 20 May 2021, T23.10-37. Accordingly, the First Winton Report formed part of the surrounding circumstances that were known to the parties at the time that they entered into the Work Agreement, and may be used to construe the express terms of that Agreement.

  5. The weight of evidence supports a finding that the Builder agreed to remediate the defects identified as Item 1, Item 2, Item 3 and Item 5 in the First Winton Report. Insofar as concerns Item 3, I am satisfied that the express terms of the Work Agreement were such that the Builder was obliged to have its roofer/carpenter attend the Property and inspect the Owner’s roofs and confirm remediation to take place before Friday 8 February 2019. In this regard, I find that there is a typographical error in the Winton Minutes which refer to ‘Friday 5 February Tribunal attendance’ but should read ‘Friday 8 February Tribunal attendance’.

  6. Further the words:: “The following items were agreed to be remediated” which refer to each Item of the Winton Minutes and therefore precede the opening words of Item 3: “Alfresco area and pool pump room colour bond metal roofs”, also read with the detail in [85] – [89] of the First Winton Report (Exhibit 1 p 456), particularly as regards the roof pitch, all support a finding of the Tribunal that it was an express term of the Work Agreement that the Builder remediates the alfresco area and pool pump room colour bond metal roofs.

  7. While it is the case that other than in respect of the date of inspection of the roofs in Item 3, the Winton Minutes do not expressly provide the date by which the Builder is to perform the works, I do not think this means there is no binding contract between the parties. I am satisfied that the Winton Minutes when read with the Consent Orders (requiring compliance with the Work Order by 17 May 2019), support a finding that 17 May 2019 is the date for completion of the works in Items 1, 2, 3 and 5. Even if there is no express term in the Work Agreement for completion of the works by 17 May 2019, I find that there is an implied term for completion of the works within a reasonable time. The finding of an implied term gives business efficacy to the Work Agreement: Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 [1982] HCA 24.

  8. In the Appeal Decision, the Appeal Panel at [47] proceeded on the basis that the primary claim on appeal to it was a claim for defective work under the Statutory Warranties attaching to the Work Agreement. I respectfully agree.

  9. I am also satisfied that the Work Agreement contained a further implied term that the remediation work was to be done at the Builder’s cost.in exchange for the Owner forbearing from his claim against the Builder in the Original Proceedings. In the Appeal Decision, the Appeal Panel at [46] proceeded on that basis. In my view, it would make no sense for the Owner to compromise his claims in the Original Proceedings by agreeing to cover the cost of rectifying defects for which he was suing the Owner. The implied term is therefore necessary to give effect to the commercial purpose of the Work Agreement. Nor does such implied term contradict the express terms of the Work Agreement, as recorded in the Winton Minutes. In fact, the language of the Winton Minutes supports the existence of the implied term because it states, in relation to Item 5, that the Owner “will provide new tiles at his expense”. There was no need to specify that the new tiles would be provided at the Owner’s expense if the Owner had agreed to cover the cost of all of the remediation works. The existence of the implied term is also consistent with the Builder’s conduct in transferring the amount of $11,000 to the Owner to cover the cost of repainting.

Whether the Builder breached the Work Agreement

  1. I find that the Builder breached the Statutory Warranties attaching to the Work Agreement.

  2. Insofar as concerns Item 1 (weepholes), the lay witnesses agreed that the work was not performed. The experts also agreed that weepholes have not been installed in accordance with the agreed scope, although Mr Dietrich expresses the opinion that the absence of weepholes “is not a defect”: Exhibit 1 p 510 at [10.5.8]. However, that matter is of no moment to the Owner’s breach of contract claim, because as I have found, the Builder agreed in the Work Agreement to rectify Item 1 in accordance with the scope of works set out in the Winton Minutes.

  3. For the reasons already given, any purported oral variation of Item 1 is of no effect. Further, the Letter of 16 September 2019 (the so-called ‘satisfaction letter’) does not assist the Builder’s case. Regardless, as conceded by the Builder’s counsel, the membrane to be applied as an alternative to the weepholes under the purported oral variation was not completed: Transcript, 20 May 2021, T59.19-20. Materially, this circumstance was not apparent when Mr Tanios was asked by Mr Ayoub to compose the Letter of 16 September 2019. Moreover, the evidence of the painter, Mr Ryan, which I accept, was that work other than, simply, the application of the waterproofing membrane needs to be performed if the oral variation, as contended for by the Builder, is to be carried into effect: Transcript, 20 May 2021, T10.47-11.14.

  4. Even if I had found that the oral variation was effective, this would not have assisted the Builder’s case in respect of its liability for Item 1. This is because the evidence established that the problem of water penetration has continued since the Letter of 16 September 2019 and that there have been internal elevated moisture readings leading to blistering paint at the internal ground floor stairs, even after the waterproofing membrane had been partly applied: Transcript, 20 May 2021, T59.47-50.

  5. The expert evidence in cross examination further highlighted that applying the waterproofing membrane was not of similar waterproofing effect to exposing weepholes. For instance, Mr Winton said it was not a permanent solution and every 2 or 3 years the coating needs redoing whereas weepholes and a damp course are a permanent solution: Transcript, 20 May 2021, T137.7-13. Mr Dietrich also accepted that the Owner “should be on the lookout sort of every three to five years, to just make sure that no problems have arisen”: Transcript, 20 May 2021, T136.29-30.

  6. On that basis, I find that even the supposed substituted waterproofing of applying the membrane has failed or not worked so that the Builder breached the terms of the purported variation, or the consideration underlying the purported variation has failed.

  7. Furthermore, by the time (i.e. in or about July 2019) the Builder had commenced any work on Items 1, 2, 3 and 5 of the Winton Minutes, I am satisfied that it had already breached the Work Agreement by not completing works on or before 17 May 2019, and/or by failing to perform the works within a reasonable time.

  8. As regards Item 2 (cracked rendering), Mr Winton’s evidence was that the works had not been performed in accordance with the scope of works in the Winton Minutes: Exhibit 1 pages 474 - 478. Mr Dietrich also accepted that “none of the joints had been filled with a sealant”, that there is an unfilled gap in the vertical joint in the western end of the southern elevation ground floor wall, and that “some of the control joints are defective” Exhibit 1 p 512 at [10.6.3] – [10.6.5].

  9. Accordingly, I find that works for Item 2 have not been carried out in accordance with the agreed scope under the Work Agreement.

  10. Insofar as concerns Item 3 (metal roofs), the experts agreed that no work had been carried out to the metal roofs covering the alfresco area and pool equipment room: Exhibit 1 p 605 – Experts’ Joint Report at p 3. While Mr Dietrich also expressed the opinion that the roofs have not been installed in a defective manner (Exhibit 1 p 519 at [10.7.7], this opinion is immaterial to the real issues for determination given my finding that the Builder agreed to do the work within the scope recorded in Item 3 of the Winton Minutes.

  11. As regards Item 5 (driveway tiles), the experts disagreed whether the works were performed in accordance with the Work Agreement. In his expert report dated 31 December 2019, Mr Winton attached two photographs (Exhibit 1 pages 393 and 394) taken during his site inspection on 30 December 2019 which depicted cement staining and discolouration on the driveway tiles. Mr Winton further stated that the staining and discolouration was “still evident” during the experts’ conclave inspection on 13 November 2020 (Exhibit 1, p 606 - Experts’ Joint Report, the comments attributed to Mr Winton at p 4 of the Joint Report). On the other hand, Mr Dietrich’s opinion was that the tiles “have been laid with due care and skill and in a workmanlike manner” and that “variations in colour” are attributable to the choice of natural stone (Exhibit 1 p 521 at [10.8.5]; see also Exhibit 1 p 606 – Experts’ Joint Report, the comments attributed to Mr Dietrich at p 4).

  12. However, Mr Dietrich has approached the issue on the basis of whether or not the original works were defective when the real issue for determination is whether the Builder carried out work for Item 5 in accordance with the scope agreed in the Work Agreement.

  13. I prefer Mr Winton’s evidence and find that the Builder has failed to comply with its obligations under the Work Agreement in respect of Item 5.

Quantum of the Owner’s Loss

  1. In respect to damages at common law for breach of contract, there is the classic statement of Parke B in Robinson v Harman [1848] EngR 135; (1848) 1 Exch 850 at 855 [1848] 154 ER 363 at 365]:

The rule of the common law is that where a party sustains a loss by reason of breach of contract, he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed.

  1. The general principle on which damages are recoverable by a building owner for breach of a building contract is the cost of making the work or building conform to the contract, subject to the qualification that not only must the work be necessary to produce conformity, but it must also be a reasonable course to adopt.

  2. In the context of residential building work under the HB Act, the measure of damages is the loss sustained by the failure of a contractor to comply with statutory warranties, being the cost of putting a dwelling into the condition in which it would have been if the warranties had been complied with: Bellgrove v Eldridge [1954] HCA 36; (1954) 90 CLR 613 at 617-618; Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272, [2009] HCA 8 at [15]. In Tabcorp Holdings v Bowen Investments, the High Court indicated that the test of unreasonableness is only to be satisfied by fairly exceptional circumstances: at [17].

  3. I find that the appropriate measure of the Owner’s loss and damage for breaches of the Work Agreement is the value of the work that should have been performed under the Work Agreement.

  4. The Owner relied upon the quantification of loss and damage prepared by Mr Winton in the sum of $180,144 for Items 1, 2, 3 and 5 of the Winton Minutes including preliminaries, builder’s margin and GST: see Exhibit 1, p 561. This updated the evidence, including Scott Schedule in the amount of $175,750.25, on which the Tribunal had made the 29 October 2019 Order in the Renewal Proceedings.

  5. The $175,750.25 awarded to the Owners in the Renewal Proceedings included the sum of $142,186 for Item 1. This calculation was based upon trade costs of $95,000 (being the component ‘56’ for installing ground floor and first floor flashings), $5,400 (being the component ‘57’ for removing windowsills) and $12,000 (being the component ‘58’ for scaffolding in respect of the first floor works) with a total of all components ‘59’ being $112,400; so that when preliminaries, builder’s margin and GST are added to the $112,400, the grand total sum for all components of Item 1 is $142,186. During his cross examination, Mr Winton was challenged to substantiate the trade cost amount of $95,000 for installing the ground floor and first floor flashings: Transcript, 20 May 2021, T 89.36 – T90.51. While he conceded that a detailed breakdown of costs had not been provided and that he had not referred to Costs Guides such as Rawlinsons’ or Cordells’, his evidence was that he had made his estimates to come to the figure of $95,000 as the reasonable trade cost based upon his industry experience. I accept Mr Winton’s evidence generally as to quantum of all of Items 1, 2, 3 and 5 of the Winton Minutes which express the scope of works to be undertaken by the Builder under the Work Agreement. I consider that Mr Winton is credentialed to give his opinion without the need to refer to Costs Guides which are not normally used to guide and inform the cost of remediation works. There is no doubt that Mr Winton has the knowledge skills and experience to give his estimates based on industry experience. It is also the best available evidence. Mr Dietrich assessed (see Exhibit 1, pages 514 – 515) the reasonable cost of rectifying the control joints (Item 2) as $8,235.31, which is an amount not dissimilar to that which was assessed by Mr Winton, but other than that, no alternative costing within the scopes of work for Items 1, 3 and 5 of the Winton Minutes was provided in the Builder’s case.

  6. To the extent that the Builder argued a work order in lieu of an order to pay money is the appropriate remedy (see s 48MA of the HB Act), I do not agree. The language of s 48MA makes clear that a work-order is the “preferred outcome”, but not a “mandatory outcome”:Galdona v Peacock [2017] NSWCATAP 64 at [65]. The Tribunal retains discretion as to whether or not, in all the circumstances of a particular case, it is appropriate to make a work-order.

  7. I am satisfied that this is a case where the Tribunal should depart from the “preferred outcome”. The Builder did not comply with the Consent Orders. It has vigorously disputed the factual and legal basis, both as to liability and as to quantum, of the Owner’s claim of damages for breach of contract. Given all of those circumstances, as well as the disputes between the parties’ experts as to scopes of work, including as to whether or not particular items are defects, I surmise the inevitability of a further renewal application, and therefore doubt the utility of a work order, because I cannot be confident at all that the Builder will comply with a work order of the Tribunal.

  8. Accordingly, as damages in a monetary amount is the appropriate remedy, the Owner’s loss and damage for breach of the Work Agreement is assessed at $180,144.

The Owner’s Alternative Claim arising from the Builder’s failure to comply with the Consent Orders

  1. In the alternative, the Owner claimed that he is entitled to relief by reason of the Builder’s failure to comply with the Work Order (Order 1 of the Consent Orders) made on 8 February 2019.

  2. As indicated, the Builder’s principal contention in answer to the Owner’s alternative claim is that the Tribunal did not have the jurisdiction to make Order 1 because the defects the subject of it were not “major defects” for the purposes of s 18E(4) of the HB Act. I do not think that the Appeal Panel in the Appeal Decision went as far as making a finding of fact to support the Builder’s contention, so I accept that it was open, as indeed the Appeal Panel by its remitter of the Renewal Proceedings had contemplated, for the Owner to raise the alternative claim in these Remittal Proceedings and for the Owner to adduce, as he has done, evidence in support of the alternative claim, even though it is essentially the same evidence as the Owner relies upon in his primary claim for breach of contract.

  3. Nevertheless, it is the case that the observations of the Appeal Panel as set out in the Appeal Decision at [53] – [55], cast doubt upon whether the remediation works required in Order 1 made on 8 February 2019 related to rectification of defects which were “major defects” within the meaning of the HB Act.

  4. Whether (or not) the Consent Orders of 8 February 2019 were valid and within the Tribunal’s jurisdiction, is a question I will leave open. I make no findings as regards the parties’ competing submissions based on the expert evidence; i.e. as to whether (or not) there were “major defects” in respect of each of Items 1, 2, 3 and 5, respectively, of the Winton Minutes. It is not necessary, and there is no utility in me doing so, because the Owner has already made a case for damages in the amount of $180,144 based upon his primary claim for breach of contract. The Owner’s alternative case based on non-compliance with the Work Order of 8 February 2019 was always a fall-back position for the Owner in the event he did not establish a factual and legal basis for his primary claim.

The Builder’s Claim in HB 20/40203

  1. I am not persuaded that the Builder has made out a case whether in fact or in law, for a quantum meruit sum of $109,308.85, or in any lesser amount.

  2. The Builder’s claim fails because it arises out of the same work that was done pursuant to the Work Agreement. The Builder’s arguments, for instance, that Items 3 and 5 of the Winton Minutes were not defects requiring to be remediated, are not to the point, because I have found those Items were part of the works required under the terms of the Work Agreement

  3. I also found that a term of the Work Agreement was for the Builder to perform the works at its own cost. If the price of the Work Agreement was nil (i.e. because the consideration for the Agreement was the Owner forbearing on pursuing his claim in the Original Proceedings), then it must follow as a matter of law that the Builder’s claim founded in quantum meruit principles is capped at the contract price: Mann v Paterson.

  4. On that basis, it is not necessary to consider Mr Dietrich’s costing of the Builder’s quantum meruit claim.

  5. Further, as regards the Builder’s submission at [21] of its Closing Submissions dated 24 June 2021 that: “it is the evidence of the builder that he can obtain retrospective home warranty insurance for these works” there was no supporting Transcript or Exhibit reference for that submission. I could find no such evidence. Even if it was in evidence, in the events which have occurred and given my earlier findings, the Builder’s submission appears contrary to the just and equitable requirement which the Builder must satisfy in s 94(1A) of the HB Act.

  6. For these reasons, the Builder’s claim in the proceeding constituted by File no HB 20/40203 must be dismissed.

Orders (including costs)

  1. The Owner seeks an order that the Builder should pay his legal costs in both proceedings in this Division and in respect of the Appeal Proceedings.

  2. The matter of any orders for costs in the proceedings and in the Appeal Proceedings is an issue upon which I would expect the parties, and their legal representatives (consistent with their statutory obligation in s 36(3) of the Civil and Administrative Tribunal Act 2013 NSW), to liaise cooperatively in an attempt to reach compromise and agreement. In this respect, I observe that both the proceedings and the Appeal proceedings, respectively, are proceedings to which Rules 38 and 38A of the Civil and Administrative Tribunal Rules 2014 (NSW) apply.

  3. However, if the parties are unable to reach agreement on all matters of costs, or there are circumstances of which I am unaware, I have made further directions as to costs.

  4. The Tribunal’s orders and directions in both proceedings are:

  1. In the proceeding constituted by File No HB 20/33320, within 28 days of the date of these orders, the Respondent, Baserite Constructions Pty Ltd is to pay to the Applicant, John Tanios, the sum of $180,144.00.

  2. The proceeding constituted by File No HB 20/40203 is dismissed.

  3. If any party in either proceeding or in the proceeding constituted by File No AP 19/49553 seeks an order for costs leave is granted to file and serve a short written submission (no more than 5 A4 size pages) on that issue only within 28 days of the date of these orders.

  4. Leave is granted to the other party to file and serve a short written submission in reply (no more than 5 A4 size pages) within a further period of 28 days.

  5. In any such submissions the parties are to address the matter of whether pursuant to the provisions of the Civil and Administrative Tribunal Act 2013 NSW, s 50(2), the Tribunal should dispense with a hearing on the issue of costs so that the issue is decided on the papers lodged with the Tribunal and with appearances of the parties not required.

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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: 22 September 2021

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Cases Citing This Decision

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Cases Cited

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Statutory Material Cited

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Robert Symes and Kim Louise Filmer v Mick Fabar Constructions Pty Ltd [2015] NSWCATCD 77
Mann v Paterson Constructions Pty Ltd [2019] HCA 32
Mann v Paterson Constructions Pty Ltd [2019] HCA 32