Webster v Tom

[2018] NSWCATCD 6

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:

Webster v Tom [2018] NSWCATCD 6

Hearing dates:

2 and 3 May and 29 and 30 November 2017

Date of orders:

08 March 2018

Decision date:

08 March 2018

Jurisdiction:

Consumer and Commercial Division

Before:

D. Goldstein, Senior Member

Decision:

1.   Andrew Rolf Tom must pay Deidree Webster and Marc Webster the sum of $6,643.49 immediately.

 

2.   The parties have leave to bring an application for costs.

 

3.   Any costs application must be lodged in the Tribunal and served on the costs respondent within 14 days of the date of this order either attaching or referring to the documents relied upon in support of the application.

 

4.   The costs respondent will have 14 days after the date it receives the application to lodge in the Tribunal and serve on the costs applicant its submissions, if any, in response to the cost applicant’s costs application, such submissions either attaching or referring to the documents relied upon.

 

5.   The cost applicant will have 14 days after the date it receives the cost respondent’s submissions to lodge in the Tribunal and serve on the costs respondent its submissions, if any, in reply, such submissions either attaching or referring to the documents relied upon.

 

6.   The parties must state in their submissions whether they consent to the costs application being determined on the basis of the parties written submissions and attached documents, if any, without the need for a hearing.

 7.   The Tribunal will determine any costs application on the basis of the papers lodged in the Tribunal should the parties so agree.

Catchwords:

Reasonably fit for occupation as a dwelling

Legislation Cited:

Fair Trading Act 1987
Home Building Act 1989
Home Building Regulation 2004

Cases Cited:

Bruno Pisano -v- Georgia Dandris [2014] NSWSC 1070
Gray v Queensland Housing [2004] QSC 276
Huxley Homes Pty Ltd v Alexander Augustyn and Rebecca Augustyn; Alexander Augustyn and Rebecca Augustyn v Huxley Homes Pty Ltd [2015] NSWCATCD 17
Jennings v Taverner [1955] 1 W.L.R. 932; [1955] 2 All E.R. 769
Miller v Cannon Hill Estates [1931] 2KB 113
Nguyen v Cosmopolitan Homes [2008] NSWCA 246
The Owners Strata Plan 62930 v Kell & Rigby Holdings Pty Ltd [2010] NSWSC 612
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; 219 CLR 165

Category:

Principal judgment

Parties:

Applicant: Deidree Webster and Marc Webster
Respondent: Andrew Rolf Tom

Representation:

Counsel:
Mr T. Davie for the applicants
Mr C. Simpson for the respondent

  Solicitors:
Peter Merity for the applicants
Conroy Stewart Spagnolo for the respondent

File Number(s):

HB 15/64016

Publication restriction:

Nil

Reasons for Decision

1. These proceedings relate to the applicants’ claim for the cost of demolishing and rebuilding their residence at Townsend (the ‘residence’) which was constructed for them by the respondent. They say that demolition and rebuilding their residence is necessary because, among other things, the residence constructed by the respondent was not fit for purpose as a residential dwelling. The total amount of their claim is $350,167.33.

2. The position of the respondent is, if I may summarise it, that while there may be minor defects present and repairs required which form part of routine maintenance, the demolition and rebuilding of the residence is not warranted.

3. In these Reasons for Decision I will refer to the applicants as the owners and to the respondent as the builder.

4. There is no dispute between the parties that the owners’ claim is a building claim for the purposes of the Home Building Act 1989 (the ‘Act’) and that the Tribunal has the jurisdiction to hear and determine the claim.

5. The proceedings were heard in Lismore over 4 days in May and in November 2017.

6. Both parties were legally represented. Counsel appeared on their behalf at the hearing.

7. The evidence in the proceedings was:

1. Exhibit A, 2 volume bundle of documents;

2. Exhibit B, AS 2870 – 1996;

3. Exhibit C, photograph of drain;

4. Exhibit D, Curriculum Vitae Mr J Niland;

5. Exhibit E, construction inspection report;

6. Exhibit G, resume Mr Hammond;

7. Exhibit H; QCAT Board of Professional Engineers v Hammond and

8. Exhibit I, photographs of premises (formerly ‘MFIA’).

The Building Contract

8. The parties entered into a ‘HIA NSW Residential Building Contract for NEW DWELLINGS’ dated 20 May 2009 (the ‘contract’). The contract price was $226,139.00.

9. The building contract included as express terms at clause 38, the warranties that are referred to in section 18B of the Act. The contract also included at clause 43 mandatory conditions requiring the building works to comply with various codes and standards. Clause 43.2 contained an exemption from liability for the builder in certain circumstances.

10. Clause 1 of the contract defined the expression ‘contract documents’ to mean ‘these general conditions, any special conditions, the plans, the specifications and other documents specified in Item 14 of Schedule 1’.

11. Item 14 of Schedule 1 referred to the builder’s quotation, plans and engineers details which were stated to be contract documents.

12. As regards the specification, I find that a document titled General Housing Specifications (Revised November 2000) was attached to the contract and initialled by the owners and the builder and signed by the owners and the builder on page 12, and also dated 20 May 2009. A Specification titled (NSW version revised August 2005) was also attached to the contract, not initialled but signed by the parties on page 13 and also dated 20 May 2009. I will have regard to the latest version of the specification.

13. The works achieved practical completion on 4 December 2009.

Development consent

14. The Notice of Determination of Application DA2009/0353 issued by the Clarence Valley Council in relation to the construction of the residence stated as condition of consent 1, that the development was to be completed in conformity with, among other things, the Building Code of Australia (‘BCA’).

The owners’ case

15. In Points of Claim dated 27 June 2016 the owners claimed that the contact documents included drawings by Mr Biddle and structural drawings prepared by Mr Jenkins (the ‘engineer’). They claim that the builder engaged the engineer to carry out a geotechnical investigation of the site and to prepare the structural drawings.

16. The owners further allege that the building works were completed on 4 December 2009.

17. At paragraph 12 of the Points of Claim the owners allege that the builder has, in breach of the contract, carried out defective work, particulars of which are provided. It is further alleged that in breach of contract the builder constructed a dwelling which was not fit for habitation as a dwelling.

18. It is also alleged that the dwelling constructed by the builder was not fit for purpose as a dwelling.

19. The procedure of the Tribunal does not make the use of pleadings mandatory. However when a party who is legally represented files and serves Points of Claim I will, subject to what is stated later in these Reasons, proceed on the basis that such Points of Claim set out the essential basis of the claim against the respondent.

20. There are a number of complaints made by the owners. However the main issues raised by them are that :

1. The site material was incorrectly classified as class S when the site should have been classified as class H2;

2. There is substantial and ongoing cracking both internally and externally;

3. The slab and footings have failed; and

4. Doors and windows are sticking in their tracks or have dropped from their original placement.

21. The owners also filed submissions in the Tribunal which state that the slab and footings are contrary to the BCA requirements and are not fit for purpose because they are unlikely to provide acceptable levels of serviceability and safety of the residence during its design life. The relevant BCA provisions said to have been breached were not identified.

22. The issue of who contracted with the engineer to carry out the geotechnical inspection and to prepare the structural drawings is identified in the owners’ submissions as an important issue.

23. The owners’ technical case is based on reports from Messrs Nowlan, Niland and Tozer. Mr Niland prepared 2 geotechnical reports in which he assessed subsurface conditions and provided comments on the engineer’s site classification in accordance with AS 2870 – 2011 and AS 2870 – 1996. Mr Tozer prepared two reports which give an opinion on the engineer’s footing and slab design with some reference to AS 2870. Mr Nowlans’ reports address the defects with reference to AS 2870 and the Guide to Standards and Tolerances and provides a scott schedule on behalf of the owners.

The builder’s case

24. The builder did not file points of defence. However in written submissions the builder submits that he is not liable to the owner because the design and the construction of the foundations are not defective. If he is found liable the builder has brought separate proceedings claiming that the engineer is liable to indemnify him against any amount he may be ordered to pay to the owners.

25. The builder relied upon the expert evidence of Mr Hammond contained in three reports.

Conclaves

26. In accordance with Tribunal orders the experts for the parties met in 2 conclave sessions to seek to narrow the technical issues in dispute between them as regards the geotechnical and structural engineering issues in dispute in these proceedings. At the hearing, the results of the conclaves and what was agreed at the conclaves was given little importance. Despite the fact that the parties’ representatives placed little importance on the conclaves, I will have regard to agreements reached at the conclaves that may be relevant to matters in issue in these proceedings.

27. The first conclave took place on 5 October 2016. A Joint Expert Report was prepared signed by Mr Nowlan and Mr Hammond. The first page appears to be a summary and is not entirely clear as the column titled ‘Cost’ does not at least in relation to item 1 relate to the other columns. I have proceeded on the basis that the most relevant column on page 1 is that titled ‘Cost’. The Experts agree 3 categories of repair cost. The description of the first category is not clear. I doubt that the agreed amount relates to ‘Preliminaries’ as stated. A second conclave took place on 28 November 2016 which seemed to have as its purpose obtaining a measure of engineering consensus from the experts. So far as I can ascertain that conclave did not produce any meaningful agreements or clarifications. The conclave did not deal with quantum issues.

Overview

28. The owners claim relates primarily to a geotechnical report and an engineering design prepared by Mr Jenkins, the engineer. There is a dispute about who engaged the engineer. I have found below that that the owners were responsible for engaging the engineer by reason of contractual provisions which had that effect. Despite the fact that their claim relates to the engineering design, the owners have not taken action against the engineer. They chose to pursue the builder alleging that he was in breach of warranties which are to be found both in clause 38 of the contract and in section 18B of the Act. In addition the owners allege that the builder breached an implied term that the dwelling would be fit for human occupation. The warranties and implied term relied upon by the owners do not in my view impose a design obligation on the builder. As such the warranties and implied term do not in my view constitute an appropriate vehicle in these proceedings for a critical examination of the engineer’s design, especially since the owners do not bring a claim against him.

29. Despite the fact, as found, that the owners engaged the engineer, the builder will be responsible for a breach of the warranties even if the cause of the breach is the engineer’s design, absent the builder raising a defence under section 18F of the Act, which he has not done, or clause 43.2 of the contact having effect which I find below, that it does not.

30. The owners’ complaints regarding the engineering design arise primarily out of physical damage to the residence in the form of cracking. The evidence is that while there are a number of cracks, both external and internal, the number of external cracks that are to be considered as going beyond normal maintenance are only 2, possibly 3, in number. This is a significant matter since it is only cracking to external masonry that could possibly justify the demolition and reconstruction of the residence as contended for by the owners. At its highest the owners’ case is that the engineer’s site classification was wrong and his engineering design was inadequate for the site leading to the cracking that I have referred to with the prospect of future cracking.

31. As previously stated I regard the fact that the owners served Points of Claim prepared by their solicitors as a significant matter. For the reasons that follow I have found that the owners are unsuccessful on their claim that the builder breached the warranties implied by section 18B (c), (e) and (f) of the Act or that the builder breached the implied term contended for, namely that the dwelling should be reasonably fit for human occupation.

32. I have found that there are 2, possibly 3, category 3 cracks and that there is a prospect of future cracking. I do not accept the evidence that the future cracking will be significant. I am unable on the evidence to make a finding how widespread or serious it will be.

33. The owners pleaded case relating to section 18B(a) of the Act does not give cracking as a particular of the breach of the warranty. However I regard the cracking as evidence of the breach of the warranty. I will treat the owners’ case in this way to ensure that the justice of the case is served as required by section 79U(1) of the Fair Trading Act 1987 as referred to is section 48O(3) of the Act.

34. In so doing I can see no disadvantage or unfairness to the builder since the issues of cracking and the prospect of future cracking were always an issue in the proceedings and considered by his expert.

Who engaged the engineer ?

35. The question of which party engaged the engineer is identified in the parties’ submissions as a matter which is in dispute.

36. The owners’ evidence is that they engaged Mr Biddle to draw up house plans for the proposed residence that they intended to have constructed on their land. They say they provided the builder with Mr Biddle’s plans and that the builder passed on those plans to the engineer. They further state that they did not give the plans to the engineer, that they had no contact with the engineer and that they did not engage the engineer. The owners agree that they paid the engineer’s invoice which related to his geotechnical report and footings and slab plan.

37. The builder’s evidence is that Mr Biddle’s plans were provided to the engineer at the owners’ request. He also states that it is his usual practice to refer clients to engineers and to architects or draftsmen. The builder does say that he has a working relationship with the engineer and that the engineer usually sends him a bill with his name on it, for reasons that he is unaware of.

38. The invoice from the engineer in connection with his services for his geotechnical report and footings and slab plan was addressed to the builder. As stated it was paid by the owners.

39. Mr Biddle’s evidence was that:

‘I completed the plans and from my memory provided the Webster's with six (6) copies and when they had informed me as to the engineer they had chosen, I would have delivered the plans to Colin Jenkins, Engineer.’

40. The evidence of the owners and the builder is that neither of them intended to enter into a contractual relationship with the engineer for him to prepare a geotechnical report and a footings and slab plan. Each party submits it was the other party who contracted with the engineer.

41. The contract included as a contract document, the builder’s tender dated 20 May 2009. Relevantly, that document addressed the issue in the following way in item 2 of the tender:

‘To construct footings to engineers detail and pour. (Owner to obtain plans)’

42. The Specification titled (NSW version revised August 2005) provided under the heading Owners Obligations in clause 3.1;

‘If the contract so indicates, the Owner shall at the Owner’s expense provide the Builder with reports and recommendations (including soil classification) as to the foundations and/or footings requirements for the works prepared by an engineer.

In these circumstances, if the Builder instructs any party to provide such recommendations, the Builder does so only as an agent for the Owner.’

43. I find that the contract properly construed created a state of affairs to the effect that the owners were responsible for the provision of the engineer’s geotechnical report and his footings and slab plan. This was the result of the provisions of the tender and the specification to which I have referred.

44. To the extent that findings of fact are necessary about how the engineer came to provide a geotechnical report and a footings and slab plan, the evidence is that the owners deny giving the engineer Mr Biddle’s plans, as does the builder. The engineer states that he can’t recall who retained him. Mr Biddle states that:

‘I completed the plans and from my memory provided the Webster's with six (6) copies and when they had informed me as to the engineer they had chosen, I would have delivered the plans to Colin Jenkins, Engineer.’

45. Mr Biddle’s evidence suffers from the fact that in part he states what he would have done, rather than what he actually recalls having done. Nonetheless his evidence is the only evidence there is regarding how his plans were provided to the engineer leading him to go to the site, to prepare his geotechnical report and prepare the footings and slab plan. On the basis that the owners and the builder deny giving the engineer Mr Biddle’s plans, that the engineer cannot recall who gave him the plans and Mr Biddle is of the view that he delivered the plans to the engineer, I find on the evidence available that Mr the owners told Mr Biddle that they had chosen the engineer and then Mr Biddle actually delivered his plans to the engineer. I also find contrary to the owners evidence, that the builder did not give Mr Biddle’s plans to the engineer.

46. As stated above, I find that item 2 of the builder’s tender combined with clause 3.1 of the specification had the contractual effect that the owners were responsible for the provision of the footings details to be provided in a plan and also for the provision of a geotechnical report relating to the foundations and footings. I find that the engineer was instructed to provide that information on behalf of the owners when Mr Biddle, the owners’ draftsman, delivered his plans to the engineer.

47. If I am wrong and the builder engaged the engineer, then I find that the builder did so as agent for the owners pursuant to clause 3.1 of the specification as signed by the owners. I find that the intention of the owners as to whether they engaged the engineer is not relevant once they signed the contract and the specification. Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; 219 CLR 165 at [35] – [36] and [47].

Clause 43.2 of the contract

48. Clause 43.2 of the contract stated:

‘The builder is not liable if the building works do not comply with the requirements of subclause 43.1 if the failure related solely to:

(a) a design or specification prepared by or on behalf of the owner (but not by or on behalf of the builder); or

(b) a design or specification required by the owner if the builder has advised the owner in writing that the design or specification contravenes sub-clause 43.1’

49. The builder’s submissions point out that clause 43.1 is subject to clause 43.2, relying on Schedule 2 clause 2(2) of the Act to submit that the Act expressly allows a clause like clause 43.2.

49. As at 20 May 2009 (the date the contract was signed) Schedule 2 of the Act had been repealed.

50. As at 20 May 2009 section 7E of the Act stated:

‘(1)  The regulations may make provision for or with respect to:

(a)  clauses or matter that must be included in a contract or a class of contracts, or

(b)  clauses or matter that must not be included in a contract or a class of contracts.

(2)  If the regulations require a contract or class of contracts to contain a clause in prescribed terms, a contract of the kind to which the prescription relates is taken to include the clause in the terms prescribed. A contract that contains a term that is inconsistent with any such clause is unenforceable to the extent of the inconsistency.

(3)  If the regulations provide that any matter must not be included in a contract or a class of contracts any contract that contains that matter is unenforceable to the extent that it includes or applies to that matter.

(4)  Any regulations made under this section do not apply to a contract in force at the time that the regulations commence.

(5)  This section does not limit section 7 (3).’

52. As at 20 May 2009 regulation 12(1) of the Home Building Regulation 2004 stated:

‘Pursuant to section 7E of the Act, a contract to do residential building work must include each of the conditions set out in Part 1 of Schedule 2.’

53. Part 1 Schedule 2, section 2 of the Home Building Regulation 2004 stated in connection with conditions to be included in certain contracts:

‘Quality of construction

(1)  All work done under this contract will comply with:

(a) the Building Code of Australia (to the extent required under the Environmental Planning and Assessment Act 1979, including any regulation or other instrument made under that Act), and

(b)  all other relevant codes, standards and specifications that the work is required to comply with under any law, and

(c)  the conditions of any relevant development consent or complying development certificate.

(2)  Despite subclause (1), this contract may limit the liability of the contractor for a failure to comply with subclause (1) if the failure relates solely to:

(a)  a design or specification prepared by or on behalf of the owner (but not by or on behalf of the contractor), or

(b)  a design or specification required by the owner, if the contractor has advised the owner in writing that the design or specification contravenes subclause (1).’

54. The owners have filed supplementary submissions in connection with this issue pursuant to leave granted to them at the hearing. Those submissions raise section 18F of the Act which concerns itself with defences available in proceedings for a breach of a statutory warranty. I do not regard section 18F of the Act as being relevant for the reason that the builder has not at any time sought to rely on it. The owners submission stated at [7] that statutes should be read as a whole and then stated :

‘It is submitted that clause 43.2 should be read so that it applies where the builder places reasonable reliance by the defendant on instructions given by a person who is a relevant professional acting for the person whom the work was contracted to be done and who is independent of the defendant, being instructions given in writing before the work was done or confirmed in writing after work was done.’

55. I do not accept that submission because it places a construction on the section that goes beyond its literal or plain meaning.

56. The owners’ further state that they have no claim against the builder by reference to the matters raised in clause 43.1 of the contract and that their claims against the builder are for breach of the statutory warranties and for breach of an implied term that the dwelling would be reasonably fit for purpose. The owners make other submissions which I have had regard to, however I do not intend to set them out in detail. They will be referred to if relevant.

57. The builder’s submissions regarding this issue are that the owners case was conducted almost entirely on the design being non-compliant with AS 2870 and therefore a breach of the warranty in 18B(c) of the Act.

58. In interpreting clause 43(2) of the contract I find that it is necessary to commence with a consideration of clause 43(1) since clause 43(2) commences with the words ‘The builder is not liable if the building works do not comply with the requirements of subclause 43.1 if the failure related solely to’.

59. Clause 43.1 makes it mandatory for the building works to comply with:

‘(a) the Building Code of Australia (to the extent required under the Environmental Planning and Assessment Act 1979, including any regulations or other instrument made under that Act);

(b) all other relevant codes, standards and specifications that the building works are required to comply with under any law; and

(c) the conditions of any relevant development consent or complying development certificate.’

60. While the owners case is based on alleged breaches of the warranties in clause 38 of the contract or those implied by section 18B of the Act, essentially the same, and an implied term, the technical evidence in support of their case does not, I find, allege or depend upon, non-compliance with the BCA.

61. Clause 43.2 of the contract will have effect if a law requires the building works in these proceedings to comply with AS 2870. The fact is that there is no law which has been referred to that required the builder to comply with AS 2870. In addition, I find that an Australian Standard does not operate as a law in New South Wales. In In Bruno Pisano -v- Georgia Dandris [2014] NSWSC 1070 at paragraph 91 Hammerschlag J stated:

‘Australian Standards are published by a non-government standards organisation and are guidance documents to ensure quality over a wide spectrum of activities including construction and engineering.

62. I have referred to the Notice of Determination of Application DA2009/0353 issued by the Clarence Valley Council. While the conditions of that document required compliance with the BCA, I find that they do not mention AS 2870 or applicable Australian Standards. Moreover I have not been referred to any provision of the BCA or any law applicable in New South Wales which makes compliance with AS 2870 mandatory.

63. Because of the findings and reasoning in the preceding paragraphs, I find that clause 43.2 has no application to relieve the builder from liability in these proceedings despite the fact that I have found that the owners were responsible for the provision of the engineer’s geotechnical report and the footings and slab plan.

The experts

64. I find that the experts to whom I have referred are all appropriately qualified to give opinion evidence in the Tribunal. There was no challenge to their expertise.

The damage to the residence

65. The owners Points of Claim allege that:

1. There is substantial and ongoing cracking both internally and externally;

2. The slab and footings have failed; and

3. Doors and windows are sticking in their tracks or have dropped from their original placement.

66. The evidence of cracking and doors and windows sticking in their tracks or having dropped from their original placement is found in the evidence of Mrs Webster and the experts retained by the owners.

67. Mr Niland’s evidence is that when he carried out his investigation there were some cracks up to about 5mm aperture within the masonry of the owners residence. Mr Nowlan’s report of 24 March 2016 stated that the following cracks were observed by him:

1. Between the infill panel mould and brickwork to study window opening, 2mm in width;

2. In the northern wall of the lounge room through 2 courses of brickwork, 5 – 6mm in width;

3. In the sill brick to the northern window of the lounge room through 1 course of brickwork, 2 mm in width;

4. In the external brickwork of the eastern wall of the lounge room below the window through 2 courses of brickwork, 1 – 2mm in width;

5. In the brickwork of the eastern wall of the lounge room through 3 courses of brickwork, 5 – 8mm in width;

6. In the external brickwork of the patio on the eastern side through 4 courses of brickwork, 1 – 2mm in width;

7. In the southern wall above the window head through 2 courses of brickwork, 2 – 4mm in width;

8. To the bottom left hand side of the bathroom window through 7 courses of brickwork, 1 – 3mm in width;

9. In the external brickwork above the toilet window through 2 courses of brickwork, 2mm in width; and

10. To the brickwork in the external wall of the laundry through 2 courses of brickwork, 2mm – 5mm in width.

68. Mr Hammond for the builder undertook a detailed examination of the cracks after his examination of the residence on 16 May 2016. As regards, external masonry wall damage he stated that there were 2 cracks of 6mm width, 1 crack of 4mm width, 1crack of 1.2mm width and 6 cracks of 0.1 – 0.8mm width.

69. Appendix C of AS 2870 – 1996 dealt with ‘Classification of Damage with reference to Walls’. Table C1 dealt with Classification of Damage with Reference to Walls. The following table is set out.

Description of typical damage and required repair	Approximate crack width limit	Damage category
Hairline cracks	<0.1mm	0
Fine cracks which do not need repair	<1mm	1
Cracks noticeable but easily filled. Doors and windows stick slightly	<5mm	2
Cracks can be repaired and possibly a small amount of wall will need to be replaced. Doors and windows stick. Service pipes can fracture. Weather tightness often impaired	5mm to 15mm (or a number of cracks 3 mm or more in one group)	3

70. I find having regard to Mr Hammond’s evidence which was compiled after a later site visit than Mr Nowlan’s inspection, that there were:

1. 2 category 3 cracks;

2. 2 category 2 cracks; and

3. 6 category 1 cracks.

71. I have also had regard to Appendix B of AS 2870 – 1996 which relates to ‘Performance criteria and Foundation Maintenance’. The following passages are in my view relevant to the issues to be determined in these proceedings.

‘B1 General

Some minor cracking and movement will occur in a significant proportion of houses, particularly those on reactive clays, and the various levels of damage are discussed in paragraph B3.’

‘B3 Performance Criteria For Walls

For most situations category 0 or 1 should be the limit. However under adverse conditions, Category 2 should be expected although such damage should be rare. Significant damage is defined as Category 3 or worse.

For Category 1 or 2 damage, remedial action should consist of stabilizing the moisture conditions of the clay and paying attention to repairing or disguising the visual damage. This should be regarded as part of the normal maintenance of houses on reactive clays.

Even significant masonry cracking with widths over 5mm often has no influence on the function of the wall and only presents an aesthetic problem.’

72. The fact that the experts recorded two category 3 defects which were of 6mm width is of significance and must in my view be taken into account in the determination of the owners’ claim, along with all other issues and evidence. Appendix B of AS 2870 – 1996 suggests that the rectification of the balance of the cracking to the external masonry, as observed, namely the category 1 and 2 cracks, 8 cracks in all should be regarded as normal maintenance.

73. Having regard to the above evidence and the extracts from AS 2870 – 1996, I reject the owners pleaded position that there is substantial cracking externally and in particular to the external masonry. As stated the evidence is that that there are 2 category 3 cracks both of which are on the low side of the category 3 crack width. I find that the fact that there are only 2 such cracks counts against a finding of substantial cracking to the external masonry.

The breaches of the statutory warranties relied upon

74. When I use the term the statutory warranties I intend to refer to the warranties that are implied by section 18B of the Act, which are identical to the express warranties contained in clause 38 of the contract.

75. I will consider each of the claims made by the owners as set out in their points of claim.

76. I will discuss the experts’ evidence as it relates to each alleged breach relied upon by the owners. I have decided not to consider the experts’ evidence as a subject in itself as that will be time consuming and inefficient particularly if an expert’s evidence, or disputes about an expert’s evidence, goes beyond the case of the party who had called him. In this regard I am aware that there is a significant controversy between the experts. However as I have stated I can see no utility on embarking upon an analysis of every issue upon which they disagree. My function is to determine the owners’ building claim. To the extent necessary the differences between the experts will be resolved in the course of determining that claim.

Breach of Section 18B(a) of the Act

77. Section 18B(a) of the Act implied a warranty at the time the contract was signed:

‘that the work will be performed in a proper and workmanlike manner and in accordance with the plans and specifications set out in the contract,’

78. The owners allege that there has been a breach of section 18B(A) stating that the builder has carried out defective building work and work which is contrary to the requirements of the plans and specifications, the BCA and applicable Australian Standards

79. The particulars to paragraph 12 of the Points of Claim raise the following matters:

1. The site material was incorrectly classified as Class S when the site should have been classified as Class H2;

2. The slab and footing system was structurally inadequate to support loads from the dwelling; and

3. the piers to the dwelling if they have been constructed, have failed, and do not support the structure.

80. I find that the matters raised in (a) do not fall within the above warranty. The builder’s scope of work was not to classify the site material. I have found that the contract provided that the owners were responsible for that being undertaken and they discharged that responsibility by the engagement of the engineer. Additionally, I find that the builder did not actually classify site material and did not engage the engineer to do it on his behalf.

81. I find that the matters raised by the owners in (b) and (c) would, if established, be persuasive evidence that the builder breached the warranty in section 18B(a) of the Act.

Slab and footing system structurally inadequate to support loads from the dwelling

82. If the slab and footing system was structurally inadequate to support loads from the dwelling, that may constitute a failure on the part of the builder to perform the work in a proper and workmanlike, despite the fact that the design was prepared by the engineer engaged by the owners.

83. In his report of 1 June 2016 Mr Tozer states at (A) second paragraph, that the engineer assessed the soil conditions as Class S. He states that the strip footing detail does not comply with AS 2870 which requires footings for a house such as the one that was being constructed to be 400mm deep, not 250mm deep as shown on the engineer’s design. He states that the footings are well under designed.

84. The preface to AS 2870-1996 states that the purpose of the standard is to establish performance requirements and specific designs for footing systems and for foundation conditions. Section 1 of AS 2870-1996 states, among other things, and as emphasized by the engineer, that it shall not be used to prevent the use of locally proven designs or alternative designs in accordance with engineering principles.

85. Section 3 of AS 2870-1996 provides standard designs which are deemed to comply with the performance expectations in clause 1.3 of the standard.

86. Section 4 of AS 2870-1996 deals with Design by Engineering Principles. It states that slabs or footings designed in accordance with engineering principles are to be designed in accordance with the clauses that followed in that section and in accordance with AS 3600. The experts have not referred to AS 3600 in their respective reports.

87. The engineer’s evidence is that in designing the slab and footings for the owners’ residence he used locally proven designs and alternative designs in accordance with engineering principles, as permitted by section 4 of AS 2870 - 1996.

88. Mr Hammond on behalf of the builder on 12 September 2016 replied to Mr Tozer’s report. He states in connection with Mr Tozer’ comments, as referred to above, that AS 2870 does not designate as a requirement the footing sizes asserted by Mr Tozer. In that regard the dimensions referred to by Mr Tozer are ‘deemed to comply’ dimensions contained in section 3 of AS 2870. As stated the engineer’s evidence is that he did not prepare the footings and slab design on a ‘deemed to comply’ basis. He states that his design was based on locally proven designs and alternative designs in accordance with engineering principles, an approach permitted by AS 2870.

89. I find that Mr Tozer’s 1 June 2016 evidence is wrong insofar as it states or infers that the builder was required to and failed to construct footings to a depth of 400mm. I accept Mr Hammond’s evidence in that regard. I also find that Mr Tozer’s 1 June 2016 evidence does not establish that the slab and footing system was structurally inadequate to support loads from the dwelling. Mr Tozer does not give an opinion about the slab being inadequate. In that regard he states that the slab edge beam and footing detail is structurally adequate (albeit barely) to span 2.5m between pier centres. At its highest his evidence is that:

‘the cracking to the house indicates that either the slab or footings are inadequate for the soil, or the proposed piering has not been undertaken or not been completed sufficiently well.’

90. The above statement is a conclusion that is not supported by analytical reasoning process. To the extent that it is based on the fact that footings are not 400mm in depth it is flawed. It seems to be a conclusion that is based on the fact cracks exist and the footings are stated, incorrectly, not to comply with AS 2870 as regards depth.

91. I find that the owners have not established by evidence that gives me a sense of actual persuasion in favour of their contention, that the slab and footing system was structurally inadequate to support loads from the dwelling. At best the owners have established that the footing system was inadequate to prevent 2 category 3 cracks, 2 category 2 cracks and 6 category 1 cracks in the external masonry. The category 1 and 2 cracks should I find based on the statement in B3 of Appendix B of AS 2870 – 1996 be regarded as normal maintenance issues.

92. In addition Mr Tozer raises another issue which, if accepted, would establish a breach of this warranty. That is that the footings are only 200mm deep, not 250mm deep as shown on the engineer’s drawing.

93. Mr Hammond addresses this issue in his 12 September 2016 report. He states that he had an excavation undertaken adjacent to the footing at the point where Mr Tozer had nominated a 200mm footing depth and no piers. He also states that he undertook excavations at 4 other locations along the eastern side of the house to check footing depths and pier locations. He states that he found minimum footing depths of 250mm and maximum depths of 300mm.

94. I accept Mr Hammond’s evidence in connection with issue of footing depth. As a result I reject Mr Tozer’s evidence that footings are only 200mm deep. Mr Hammond indicated that he examined this issue by the undertaking of excavations along the eastern side of the house. Mr Tozer’s evidence was that he dug adjacent to the footings and probed with a metal rod. I prefer and accept Mr Hammond’s evidence since in my view he went about the investigation of these issues in a more systematic and careful way.

95. In addition, witnesses from the Clarence Valley Council were called as witnesses regarding their inspections of footings and slab. I find based on their evidence that they checked the footing and piers and that the work that the builder had carried out in the construction of the footings, piers and slab complied with the details shown on the engineer’s drawing. Exhibit E confirms this evidence.

90. I find that the owners have not established that contrary to the engineer’s drawing the footings were only 200mm deep.

The piers to the dwelling if they have been constructed, have failed, and do not support the structure

97. Mr Tozer states that he dug adjacent to the footings and probed with a metal rod leading him to state that was no sign of any piers.

98. Mr Hammond also addresses this issue in his 12 September 2016 report. He states that he had an excavation undertaken adjacent to the footing at the point where Mr Tozer had nominated a 200mm footing depth and no piers. He states that he undertook excavations at 4 other locations along the eastern side of the house to check footing depths and pier locations. He states that at each location there was a pier under the footing.

99. I accept Mr Hammond’s evidence in connection with issue of the existence of piers. As a result I reject Mr Tozer’s evidence that there is no sign of any piers. Mr Hammond indicated that he examined this issue by the undertaking of excavations along the eastern side of the house. Mr Tozer’s evidence was that he dug adjacent to the footings and probed with a metal rod. I prefer and accept Mr Hammond’s evidence since in my view he went about the investigation of this issue in a more systematic and careful way.

100. For the reasons provided above I do not accept that the owners have established that the builder was in breach of section 18B(a) as regards piers.

Cracking and other defects

101. The owners have not pleaded their section 18B(a) case to encompass cracking. However as stated above I have formed the view that to ensure the orders I make will be fair and equitable as required by section 79U(1) of the Fair Trading Act that it is appropriate to consider cracking under this particular statutory warranty. The issue of the cracking of the residence was the central feature of the case so far as manifestation of damage was concerned. I have also taken this approach because the owners reliance on cracking (among other things) in their section 18B(e) and 18B(f) claims has not been successful with the result that on their pleaded case they have not been awarded rectification costs in connection with internal and external cracking or miscellaneous defects. However the parties experts have agreed on a number of internal and external cracking items and what I describe as miscellaneous defects.

102. So far as external cracking is concerned I have found that the evidence establishes that there are 2 category 3 cracks, 2 category 2 cracks; and 6 category 1 cracks in the residence.

103. As stated above at [90], I have found that the category 1 and 2 cracks should, based on AS 2870 – 1996, be regarded as normal maintenance issues. Normal maintenance issues are I find not breaches of the section 18B implied warranties, but matters which home owners are ordinarily required to attend to at their own cost. As a result I have decided that no order for compensation should be made in the owners’ favour in connection with category 1 and 2 cracks.

104. The Joint Experts Report indicates a substantial measure of agreement between the experts. It contains 19 items which may be broken up into the following categories. Internal defects, cracking and binding of doors, items 1 – 9. Items 10 -15 relate to external cracking and items 16 – 19 relate to miscellaneous issues raised by the owner at the time of the inspection.

105. The issue of internal cracking to the residence received slight if any attention in the evidence given at the hearing. It is referred to in Mr. Nolan's report of 24 March 2016 in which he identifies a number of matters which would be described as building defects. As regards cracking to internal plasterboard, Mr. Nolan refers to the Guide to Standards and Tolerances 2007. He states that he noted numerous cracks to the internal plasterboard wall linings, binding of doors and windows preventing closure, and cracking between building elements which he states was indicative of differential movement of the floor slab. He further refers to clauses 10. 1 and 9.15 of the Guide to Standards and Tolerances and states that the cracking that he refers to are defects which breach the guidelines detailed in the Guide to Standards and Tolerances. Mr Nowlan also noted exposed steel to the entry slab as a defect

106. Mr Hammond for the builder noted internal gyprock wall damage and states that the cracking is within the performance guidelines in AS2870.

107. As to internal cracking I prefer the evidence of Mr Nowlan. The experts agree that there are cracks to internal plasterboard. Mr Hammond does not address binding of doors and windows preventing closure, and cracking between building elements in his reports. I prefer Mr Nowlan’s evidence because he refers to the Guide to Standards and Tolerances 2007 whereas Mr Hammond does not. A further reason for preferring Mr Nowlan as to internal cracks is that the Guide deals specifically with internal linings and fixings, whereas AS 2870 is primarily concerned with masonry walls, although I have had regard to the fact that the note 3 to Appendix C of AS 2870 – 1996 refers to plasterboard.

108. The Joint Experts Report signed by Messrs Nowlan and Hammond indicates a substantial measure of agreement between them as regards the items which may be described as internal defects, namely items 1 – 9. There is some minor disagreement between the experts in connection with some items. However, I prefer Mr Nowlan’s evidence for the reasons stated. Helpfully the experts have agreed the repair costs. Where there is a disagreement, I prefer Mr Nowlan’s repair cost. The amount to be found in the owner’s favour in connection with items 1 – 9 is therefore $2,471.19. The Joint Experts Report states that no builder’s margin or GST has been applied to the costing. I will therefore allow a 15% builder’s margin, being a common margin used by experts in the Tribunal and allow GST. This increases the amount found in the owner’ favour in connection with items 1 – 9 to $3,126.06 ($2,471.19 + $370.68 =$2841.87 + $284.19 = $3,126.06.)

109. As regards items items 10 -15, the category 3 cracks remain to be considered as well as eaves soffit mould, items 10 and 15.

110. Having regard to the evidence of the experts in these proceedings I find that the residence has sustained 2, possibly 3, category 3 external cracks as a result of the performance of the footings built on a site which the engineer classified as S, being slightly reactive and P which includes soft soils and reactive sites subject to abnormal moisture conditions on site which cannot be classified. The owners’ geotechnical engineer classifies the site as class H, highly reactive. I find that the fact that there are 2, possibly 3, category 3 cracks which AS 2870-1996 Appendix B, paragraph B3 describes as significant damage, but damage which may have no influence over the function of a wall and only presents an aesthetic problem, indicates a failure to carry out the building work in a proper and workmanlike manner in breach of section 18B(a) of the Act.

111. The category 3 cracks are referred to in in items 11 and 12 of the Joint Experts Report signed by Messrs Nowlan and Hammond. The agreed cost of the repair of these items is $406.16 + $65. 84 = $472.00. Item 14 of the Joint Experts Report refers to a crack approximately 2 -5mm wide. It is possibly relevant despite Mr Hammond stating that he observed only 2 category 3 cracks. I will find in favour of the owners in connection with item 14 since the agreed repair cost is only $65.84.

112. Items 10 and 15 have been agreed by the parties’ experts as to liability and quantum. The amounts agreed are $104.32 and $208.64.

113. The total amount found in the owners favour in connection with items 10 -15 of the Joint Experts Report is $472.00 + $65.84 + $104.32 + $208.64 = $850.80. After adding a 15% builder’s margin and GST, the total is $1,076.26.

114. Miscellaneous items 16 – 19, are with the exception of items 17 and 19 agreed between the experts. Item 17 relates to cracks in brickwork of 0.6 mm and 1.2mm. Consistent with previous findings I regard these cracks to come within normal maintenance. As a result I will not make an order in the owners favour in connection with item 17.

115. Item 18 relates to the entry patio slab. The experts agree that it represents defective work, but disagree on the rectification cost. I will allow the higher figure to ensure that the necessary work can be undertaken without the risk of the quote obtained by Mr Hammond not being available due to the passage of time. The amount found in the owners favour in connection with items 16 – 19 is $1,929.77. After adding a 15% builder’s margin and GST, the total is $2,441.17.

116. The total amount found in the owners favour under this head of claim is $6,643.49.

Breach of 18B(c) of the Act

117. Section 18B(c) of the Act implied a warranty at the time the contract was signed:

‘that the work will be done in accordance with, and will comply with, this or any other law,’

118. The owners rely on the same particulars for this head of claim as are relied upon for their section 18B(a) claim, namely:

1. The site material was incorrectly classified as Class S when the site should have been classified as Class H2;

2. The slab and footing system was structurally inadequate to support loads from the dwelling; and

3. the piers to the dwelling if they have been constructed, have failed, and do not support structure.

119. I find that the owners have not made out their claim that the builder has failed to do the work with any other law. Insofar as the owners allege that the builder has failed to deal with any other provision of the Act, I will deal with such other claims of breach of the Act separately.

120. As regards the particular that the site material was incorrectly classified as Class S when the site should have been classified as Class H2, I have found that the classification of the site material was done by the engineer on behalf of the owners and was never an item of work for which the builder was responsible.

121. In any event, I find that the classification of site material was required to be undertaken in accordance with AS 2870 which of itself does not constitute a legal requirement. As stated above, in Bruno Pisano -v- Georgia Dandris at paragraph 91 Hammerschlag J stated:

‘Australian Standards are published by a non-government standards organisation and are guidance documents to ensure quality over a wide spectrum of activities including construction and engineering.

122. At [55] I have found that the Development Consent did not require the building work to be constructed in accordance with AS 2870 or any Australian Standard.

123. Moreover there has been no submission, or evidence, that a particular provision of the BCA requires adherence to AS 2870 so far as the classification of site material is concerned.

124. There is also no evidence that apart from AS 2870, a requirement of law dealt with the structural adequacy of the slab and footing system or the piers to the dwelling.

125. For the reasons provided, I find that the owners have not established a breach of section 18B(c) of the Act.

Section 18B(e) of the Act

126. Section 18B(e) of the Act implied a warranty at the time the contract was signed:

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

127. The owners allege that in breach of this section the builder has constructed a dwelling that is not fit for occupation as a dwelling.

128. The owners rely on the following particulars of this head of claim:

1. There is substantial and ongoing cracking both internally and externally;

2. The slab and footings have failed; and

3. Doors and windows are sticking in their tracks or have dropped from their original placement.

129. I have rejected the owners claim that there is substantial cracking to the external masonry. To the extent that a formal finding is required, on the basis of the evidence that I have referred to at under the heading ‘The damage to the premises’, I find that the owners have failed to prove that there is substantial cracking to the external masonry. The evidence establishes to my satisfaction that at the time the proceedings were heard, there were 2, possibly 3, category 3 cracks in the residence, which I have found counts against there being substantial cracking to the external masonry.

130. The evidence does establish that there are a number of internal cracks to the residence and that the doors and windows are sticking in their tracks or have dropped from their original placement. The experts have agreed that the cost of rectifying these matters is in the vicinity of, on my calculations, $2,471.19 excluding overhead and GST. So far as I am aware, the owners’ experts do not say that the residence should be demolished and rebuilt on account of these defects.

131. As regards the assertion that the slab and footings have failed, there is no evidence of a failure of the slab. I have found that the builder did construct the footings to the depth required by the engineer’s drawing, contrary to Mr Tozer’s suggestion. I further find that there is no evidence of a failure of the footings. The owners’ experts assert that the footings are inadequate and under designed. However that is a different matter to asserting that they have failed. In support of this finding, I note that Mr Tozer states on 20 February 2017 ‘the damage so far to the house is not at the point of risking some dangerous structural failure’. This indicates to me that it is unlikely that the footings have failed when the dwelling is not at the point of risking a dangerous structural failure.

Ongoing cracking

132. The owners rely on the evidence of their expert Mr Tozer that there will be ongoing cracking to the residence.

133. In paragraph (F) of his report dated 1 June 2016 Mr Tozer states that the engineer’s footing and slab design is inadequate for the soil classification and that rectification would require ‘gutting’ the house and installing reinforced concrete footings through the slabs. His rectification methodology while not requiring the total demolition of the residence would nonetheless be a highly destructive process. It is after making those remarks he states that:

‘I would expect this house to exhibit more and more signs of distress over time’

134. In the final paragraph of his report, Mr Tozer states that his opinion is that the only practical option is to demolish the residence which I understand him to mean is a better option than the repair that he refers to in paragraph (F) of his report.

135. Considering the remark referred to above in context of the paragraph which it concludes, I find that Mr Tozer’s opinion to be somewhat superficial and lacking a reasoning process. The reasons for this finding follow. First, it is in my view important to consider this remark in context of the facts that I have found, namely that even if one has regard to Mr Nowlan’s report, there were only 3 category 3 cracks present. Secondly there is a lack of a reasoning process by Mr Tozer to give credence to his expectation of more signs of distress. Thirdly, he does not address the fact that only 2 or 3 category 3 cracks appeared in the external masonry in a period of 7 years after the date of practical completion and as at the date of his report.

136. Mr Hammond prepared a report dated 12 September 2016 which addresses Mr Tozer’s 1 June 2016 report and paragraph (F). He states that the building, with some minor repairs, will exhibit normally acceptable levels of damage as described in AS 2870 – 1996.

137. In his report dated 20 February 2017 Mr Tozer states:

‘In my opinion the damage so far to the house is not at the point of risking some dangerous structural failure, although it might in the future but it does create a significant problem aesthetically to non Engineers and in particular to ordinary home Owners or prospective purchases, or Insurers. Such damage in my opinion is likely to increase in the future given the footings are barely strong enough for a Class S stable site let alone a Class H highly reactive site.’

138. Mr Tozer expands upon this in that section of his report under the heading Additional Information. He states:

‘If the footings problems are not rectified, the ground will continue to heave up and down significantly during changes in moisture content due to wet and dry spells, as highly reactive clays do, over its 50 year design life.

This constant up and down cycling of the soil with future changes in weather and soil moisture content, will in my opinion, continue to create more cracks in this relatively brittle structure on this highly reactive site in the future as the ground will change where it rises up and down across the profile of this house each time. Moisture changes across soils and sites are never the same each year or even intra year, in the same location over periods of time. It can be as random as rainfall and runoff.

Particularly when the footings are so under designed as barely Class S footings on what is clearly a site that is behaving as a Class H site. If the footings had been designed as Class M it may have been manageable but the footings are so inappropriate for the site, further cracks and continually re cracking of the walls even if repaired, is inevitable in my opinion….’

It has been argued that the cracks seen now are all that is likely to be experienced in the buildings lifetime, now that the soil moisture content has most likely stabilized under the slab but it is the external soil adjacent the footings that is equally important in affecting a future footing movement

When a relatively brittle brick veneer house like this cracks it is true it can relieve some of the stress built up in the walls due to differential movement of the foundations but it can also make the building more flexible and the ability of the building to move even more flexibly, can create even more and larger cracks in the future.’

139. I find that the above passages clearly expose the reasoning process which underpins Mr Tozer’s opinion that cracking damage will be ongoing and may create more numerous and larger cracks.

140. Mr Hammond does not specifically address future cracking in his 11 August 2016 report. However he states that once stable moisture conditions are reached, differential movements cease. He states that the slab has been down for approximately seven years. It is his opinion that stable moisture conditions beneath the slab have most likely been reached. Mr. Hammond states the trees adjacent to the residence possibly continue to create abnormal foundation moisture conditions along the eastern side of the building. He recommends action be taken to have the trees removed. He also states that perimeter drainage around the building needs to be maintained so that no ponding adjacent to the building can occur. In that regard, he points out that the ground outside the rear bathroom does not drain away from the building creating a wet area at that location and the drainage needs to be repaired at that point.

141. Mr Hammond has prepared a report dated 20 March 2017 which addresses Mr Tozer’s 20 February 2017 report. He does not agree with Mr Tozer’s comments including those made under the heading ‘Additional Information’. He states that given the slab covering has been down for greater that 7 years and the site was seasonally wet at the time of construction, then very little if any soil swell or shrinkage will occur beneath the slab except within a 1 metre edge distance of the building perimeter. He recommends stabilising the strip footings along the eastern and north eastern sides of the building using properly designed piers, a method which he states is a commonly used methodology.

142. The builder’s submissions refer to a CSIRO document ‘Foundation Maintenance and Footing Performance’ which is referred to and attached to Mr Niland’s report. The builder relies on a passage from this document which states:

‘With repeated cycles once the cracking is established, if there is no other complication it is normal for the incidence of cracking to stabilize as the building has the articulation it needs to cope with the problem. This is by no means always the case however and monitoring of cracks in walls and floors should always be treated seriously.’

143. The engineer instructed Mr Eric Fox to prepare a report on his behalf. The report is included in exhibit A at tab 35. Exhibit A was tendered without objection. Counsel for the engineer made the forensic decision not to call Mr Fox. Thus he was not available for cross examination. I stated that his report was nonetheless in evidence and that I would refer to it if appropriate. In his closing submissions counsel for the owner objected to all of Mr Fox’s evidence except [59]. The basis of the objection was not stated. I will have regard to Mr Fox’s evidence, making appropriate findings as to weight if need be due to the fact that he was not available for cross examination.

144. Mr Fox’s report does address the issue of ongoing cracking. I have decided that I will have regard to the report in connection with that issue. In his executive summary at point 8 of 9, Mr Fox states:

‘Significant damage is expected to occur during the protracted dry periods that are expected to occur during the life of the residence due to normal drying of a reactive foundation exacerbated by the drying effects of the nearby trees.’

145. Mr Fox deals with this issue at section 6 of his report having regard to expected periods of dry weather which he states is more relevant than ‘wetting’ of the foundation. He has had regard to long term rainfall records from which he has produced appendix E to his report. Mr Fox’s opinion is that dry periods can be expected to occur every 10 years and that significant dry periods may be expected every 18 years or so. He states that the residence will suffer ‘significant damage’ a couple of times during its design life if the footing/slab system is not modified. He also states that the prospect of damage would be markedly reduced if the trees on neighbouring land to the east were removed. So far as rectification is concerned, Mr Fox states that the footings should be underpinned. He provides details of the location of the underpinning he recommends and details of the underpins.

146. Both Mr Hammond and Mr Fox were of the opinion that roots from trees on an adjacent property have an adverse impact on the issue of ongoing cracking. However those trees are not the owners’ property and I find that they have no ability to remove them. There was no evidence of what the owners might do on their own property to destroy the roots of those trees.

147. Mr Tozer and Mr Fox both state that ongoing cracking is likely. The causes are stated to be:

1. constant up and down cycling of the soil with future changes in weather and soil moisture content, Mr Tozer;

2. the under design of the footings, Mr Tozer

3. Future drying events, Mr Fox.

148. Mr Tozer does acknowledge that once cracking has occurred, that will relieve some of the stress built up due to differential movement of foundations. However he then states that if the building becomes more flexible this can create even more and larger cracks.

149. Mr Tozer’s evidence is in part in harmony with the CSIRO report referred to by the builder in his submissions, namely the document ‘Foundation Maintenance and Footing Performance’. This document states that once the cracking is established, if there is no other complication it is normal for the incidence of cracking to stabilize as the building has the articulation it needs to cope with the problem.

150. Mr Hammond’s evidence is that once stable moisture conditions are reached, which is likely given that the slab has been in place for approximately 7 years, differential movements cease. He recommends management of the land by removal of the neighbouring trees, maintaining perimeter drainage and repair of drainage conditions outside the rear bathroom.

151. The owners must establish on the balance of probabilities that there will be ongoing cracking. Making a finding about what will occur in the future is fraught with difficulty. I have had regard to the decision of Nguyen v Cosmopolitan Homes [2008] NSWCA 246 at [55] that a rational choice between competing hypotheses, informed by a sense of actual persuasion in favour of the choice made, will support a finding, on the balance of probabilities, as to the existence of the fact in issue.

152. I have had regard to the expert’s evidence. The difference between the experts is I find that Messrs Tozer and Fox take into account future weather events on the soil conditions whereas Mr Hammond does not.

153. I have had regard to the fact that the cracking of the external masonry of the residence seven years after practical completion is minimal which gives support to Mr Hammond’s opinion that moisture conditions under the slab may be normal. I have also taken into account the CSRIO report that it is normal for the incidence of cracking to stabilize which I find seems to have occurred. These factors lead me to conclude that the prospects of ongoing cracking appear to be slight. Against of these considerations is the possibility of future weather events. I find that the effect of future weather events cannot be ruled out. In that regard I have placed weight on Mr Fox’s evidence as he has considered rainfall patterns, while acknowledging that to be an informal process Mr Tozer states that it is possible that there may be more and larger cracks in the future. Mr Fox states that the damage might be significant. I regard both of those opinions to be speculative. However the evidence and opinions regarding future weather events do not provide a compelling scenario that it is inevitable that the residence will be subject to future cracking of a serious and significant nature.

154. The evidence of Messrs Tozer and Fox as to the inevitability of larger cracks and significant future damage does not give me a sense of actual persuasion such that I am able to accept their evidence in order to make a finding on the balance of probabilities that there will occur in the future larger cracks and significant damage to the residence, although I cannot exclude that there will be some minor cracking at some point in the future. The evidence does give me a sense of actual persuasion that moisture conditions under the slab have stabilised and that the incidence of cracking to the residence has stabilized.

155. As a result while I find that there is a possibility of minor future cracking to the owners’ residence I also find that moisture conditions under the slab have stabilised and that the incidence of cracking to the residence has stabilized.

156. I have awarded damages to the owners for breach of section 18B(a) of the Act. Since I have not accepted the owners’ experts’ evidence that larger cracks and significant damage to the residence will occur in the future, I find that it is not necessary for me to consider whether the owners should be awarded damages for the demolition and reconstruction of the residence. To award such damages in these circumstances would not I find be necessary to ensure conformity with the contract. Nor would it be a reasonable course to adopt.

The test for finding not reasonably fit for occupation as a dwelling

157. In his supplementary submissions the builder has referred to The Owners Strata Plan 62930 v Kell & Rigby Holdings Pty Ltd [2010] NSWSC 612 a case in which Ward J. considered section 18B(e) of the Act and the factors which may be relevant to ascertaining whether a matter complained of would render a dwelling not reasonably fit for occupation as a dwelling.

158. The owners evidence has established that:

1. There are 2 category 3 cracks to the external masonry of the premises;

2. There is cracking to the interior of the premises;

3. There may be further cracking to the premises in the future; and

4. Doors and windows are sticking in their tracks or have dropped from their original placement.

159. The owners have failed to establish that the slab and the footings have failed or that there is substantial cracking to the external masonry.

160. To decide whether the owners will be successful in establishing a breach of section 18B(e) of the Act it is necessary for me to decide whether the work as constructed by the builder will result in a dwelling that will not be reasonably fit for occupation as a dwelling.

161. Having regard to The Owners Strata Plan 62930 v Kell & Rigby Holdings Pty Ltd, the following propositions might be drawn from that decision. First, it is not necessary for the owners to establish that the residence is rendered inhabitable by the defects which have been established [97]. Secondly, insofar as the s.18B(e) warranty is akin to a warranty of reasonable fitness for habitation, the authorities suggest that the test is whether the dwelling is in a condition that would make it injurious to health [100]. Thirdly, a similar meaning was given to the term ‘reasonably fit for habitation’ in Gray v Queensland Housing [2004] QSC 276 when the court in that case held that ‘if the state of the of repair of a house is such that injury is to be expected, or will naturally occur from the ordinary use of the premises they cannot be regarded as fit for human habitation.’ [105]. Fourthly, assistance may be derived from tenancy cases in considering whether there has been a breach of s.18B(e) of the Act [107]. Fifthly, at [108] Ward J. considered the period of time the affected persons in the strata scheme had been able to occupy their respective premises without injury to their health being posed by the defects under discussion in those proceedings.

162. In Huxley Homes Pty Ltd v Alexander Augustyn and Rebecca Augustyn; Alexander Augustyn and Rebecca Augustyn v Huxley Homes Pty Ltd [2015] NSWCATCD 17 Senior Member Smith stated at [57] – [60]:

‘The obligation under s 18B(e) is, if the work consists of the construction of a dwelling, that it will result in a dwelling that is reasonably fit for occupation as a dwelling.

The builder relied on two reported decisions in support of the proposition that, even if there is mould present at higher levels than would normally be expected due to the builder’s failures, it does not necessarily follow that the building is unsafe or defective. The two authorities (by which I am bound) may be paraphrased as

“…the test is whether the dwelling…is in a condition…that would make it injurious to health”, and

“The fact that a house could be made safer does not mean it is dangerous or defective”.

The findings at paragraph 45, above, do not support the proposition that the dwelling is not reasonably fit for occupation as a dwelling. The builder’s submission, that the owners have not discharged their onus of establishing that the mould levels are abnormally high or are capable of causing any significant health risks, is correct.

I am therefore not satisfied that the builder is in breach of the warranty provided by s 18B(e)’

163. The decision in Huxley Homes Pty Ltd v Alexander Augustyn & Ors confirms in my view that in considering the warranty in section 18B(e) of the Act and in particular whether the builder has breached the warranty, the test is whether the defects complained of will cause the dwelling to be in a condition which would make it dangerous to health, or to paraphrase what was said in Gray v Queensland Housing whether the dwelling is in a condition such that injury is to be expected, or will naturally occur from the ordinary use of the premises.

164. I find that the owners have resided in the dwelling constructed by the builder since 4 December 2009 without any fact of or complaint of injury to their health with the defects that I have found, namely the 2 category 3 cracks, the cracking to the interior of the premises, doors and windows sticking in their tracks or having dropped from their original placement and with the possibility of future cracking.

165. I also find that the prospect of on-going cracking such that I have found will not of itself be sufficient to support a finding that the dwelling is not reasonably fit for occupation as a dwelling. The reason for this finding is that there is no evidence that anticipated ongoing cracking will cause the owners dwelling to be in a condition which would make it dangerous to health.

166. As a result I find that the owners have not demonstrated that the builder is in breach of section 18B(e) of the Act.

Section 18B(f) of the Act

167. Section 18B(f) of the Act implied a warranty at the time the contract was signed:

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

168. In their Points of Claim, the owners allege that in breach of this section the builder has constructed a dwelling that is not fit for occupation as a dwelling.

169. In his closing submissions counsel for the owners stated that the dwelling was not fit for purpose on the basis that the footings were unsatisfactory because they will not support the house.

170. The owners rely on the following particulars of this head of claim:

1. There is substantial and ongoing cracking both internally and externally;

2. The slab and footings have failed; and

3. Doors and windows are sticking in their tracks or have dropped from their original placement.

171. I have made relevant findings in connection with these particulars of claim in determining the owners section 18B(e) claim. Those findings are:

1. The owners have failed to establish substantial cracking to the external masonry;

2. The owners have failed to establish failure of the slab and footings;

3. There is a prospect of ongoing cracking;

4. Doors and windows are sticking in their tracks or have dropped from their original placement; and

5. The parties agree that there is internal cracking;

172. The first issue to decide in connection with this head of claim is whether the owners made known to the builder the particular purpose for which the work was required. The owner’s evidence does not directly address this issue, although it is to the effect that she and her husband sought out the builder and were promised by him a house that would not look like a standard display home.

173. I accept that evidence which is not contradicted by the builder. It is true that the owner’s evidence does not dwell on what was said by her or her husband to the builder to make known the particular purpose they wished to achieve by engaging him to construct their house. The builder’s evidence does not address what was said by the parties before they signed the contract.

174. A warranty for fitness for purpose for a particular item, as was the case in The Owners Strata Plan 62930 v Kell & Rigby Holdings Pty Ltd in connection with an air conditioning system [109], is more susceptible to analysis as to whether the warranty was fulfilled, rather than an alleged warranty that a dwelling would be fit for occupation as a dwelling.

175. As regards the warranty as described in closing submissions, I have found at [91] that the owners have not established that the slab and footing system was structurally inadequate to support loads from the dwelling. At best the owners have established that the footing system was inadequate to prevent 2 category 3 cracks.

176. As regards the owners position that there is a breach of fitness for purpose warranty because the builder has constructed a dwelling that is not fit for occupation as a dwelling, I find that such an argument must fail for the same reasons as were given in connection with the section 18B(e) case. I find that there is no evidence that the owners’ dwelling is in a condition such that it is dangerous to health.

177. In closing oral submissions counsel for the owners placed reliance on [11] of his written closing submissions. I prefer the decision of Ward J. in The Owners Strata Plan 62930 v Kell & Rigby Holdings Pty Ltd if it differs from the passage quoted from the judgement of Swift J. in Miller v Cannon Hill Estates [1931] 2KB 113. I should also add that I do not believe that there is any substantial difference between the authorities. The point is that the owners have not established that their dwelling is not fit for human habitation as referred to in the passage quoted from Miller v Cannon Hill Estates.

178. It follows from the preceding reasons that I reject the owners case as pleaded and as put in closing that the builder breached Section 18B(f) of the Act

Implied term that the dwelling should be reasonably fit for human occupation

179. The builder has not filed Points of Defence, or taken the point that there is no basis for the implication of such a term.

180. The term contended for by the owner in paragraph 14 of its Points of Claim is almost identical to the warranty contained in section 18B(e) of the Act, namely:

‘that, if the work consists of the construction of a dwelling, the work will result, to the extent of the work conducted, in a dwelling that is reasonably fit for occupation as a dwelling,’

181. The owners have cited Jennings v Taverner[1955] 1 W.L.R. 932; [1955] 2 All E.R. 769 where it was held that when a house in course of construction is sold there is an implied warranty that when completed it will be fit for human habitation, and this warranty extends to the provision of proper foundations built in a place where they will not settle or collapse. By a contract in writing dated February 22, 1950, the plaintiff's deceased husband agreed to buy from the defendant a bungalow which he was then in course of building, according to plans prepared by an architect, but without an architect's assistance. After the plaintiffs and her husband had gone into occupation cracks appeared in the walls, caused by the withdrawal of moisture from the clay soil of the site by the roots of poplar trees some 30 to 40 feet away. The plaintiff, as her husband's administratrix, sued for breach of contract, alleging that the bungalow was unfit for habitation. It was held that the defendant had failed to guard against the well-recognised danger that a site may be unfit for building because of the extraction of moisture by the roots of quick-growing trees and had failed to provide a bungalow fit for habitation. Accordingly, the plaintiff was entitled to succeed

182. I find that there is no basis for the implication of such a term contended for by the owners as it seeks to replicate the warranty implied by section 18B(e) of the Act. The implication of such a term when there is an express term in the contract to a similar effect, is not necessary in order to give business efficacy to the contract.

183. If I am wrong about that and such a term is to be implied, I would find for the same reasons as provided in connection with the section 18B(e) warranty that there has been no breach of the warranty because the owners have not established that the dwelling is in a condition which would make it dangerous to health, or the dwelling is in a condition such that injury is to be expected, or will naturally occur from the ordinary use of the premises.

184. To the extent that these findings, based as they are on what was stated in The Owners Strata Plan 62930 v Kell & Rigby Holdings Pty Ltd and Huxley Homes Pty Ltd v Alexander Augustyn & Ors, differ from what was said in Jennings v Taverner, I prefer those authorities to the decision in Jennings v Taverner made in 1955

Determination of the owners claim

185. The owners have been successful in their case for damages for breach of the implied warranty contained in section 18(B)(a) of the Act, but unsuccessful in their case for damages for breach of the implied warranties contained in sections 18B(c) (e) and (f) of the Act. Their case for breach of an implied term that that their dwelling should be reasonably fit for human occupation has also been unsuccessful.

Section 48MA of the Home Building Act

186. Section 48MA of the Act states:

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

187. The owners’ evidence is that the builder is no longer appropriately licensed under the Act to carry out rectification work and that they have lost faith in him since he has in the past not been willing to carry out rectification work.

188. Neither the builder’s evidence nor his submissions address this issue.

189. Given that there is a very limited amount of rectification work to be undertaken coupled with the fact that the builder is no longer licensed to carry out the remedial work, and has indicated no desire to do so, I have decided not to make a work order requiring the builder to carry out the remedial work associated with the section 18B(a) defects found in the owners’ favour.

Costs

190. The parties have leave to bring an application for costs.

191. Any costs application must be lodged in the Tribunal and served on the costs respondent within 14 days of the date of this order either attaching or referring to the documents relied upon in support of the application.

192. The costs respondent will have 14 days after the date it receives the application to lodge in the Tribunal and serve on the costs applicant its submissions, if any, in response to the cost applicant’s costs application, such submissions either attaching or referring to the documents relied upon.

193. The cost applicant will have 14 days after the date it receives the cost respondent’s submissions to lodge in the Tribunal and serve on the costs respondent its submissions, if any, in reply, such submissions either attaching or referring to the documents relied upon.

194. The parties must state in their submissions whether they consent to the costs application being determined on the basis of the parties written submissions and attached documents, if any, without the need for a hearing.

195. The Tribunal will determine any costs application on the basis of the papers lodged in the Tribunal should the parties so agree.

D Goldstein

Senior Member

Civil and Administrative Tribunal of New South Wales

8 March 2018

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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: 02 July 2018