Whittingham v Avid Homes Pty Ltd

Case •

[2024] NSWCATCD 55

•

24 September 2024

No judgment structure available for this case.

Civil and Administrative Tribunal


New South Wales

Medium Neutral Citation: Whittingham v Avid Homes Pty Ltd [2024] NSWCATCD 55
Hearing dates: 17 April 2024, 25 June 2024
Date of orders: 24 September 2024
Decision date: 24 September 2024
Jurisdiction:Consumer and Commercial Division
Before: D G Charles, Senior Member
Decision:

(1) A works-order is made pursuant to s 48O(1)(c) of the Home Building Act 1989 NSW, on the terms and conditions as set out in [100] of the Reasons.

(2)   If any party (costs’ applicant) 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 21 days of the date of these orders.

(3)   Leave is granted to the other party (costs’ respondent) to file and serve a short written submission in reply (no more than 5 A4 size pages) within 35 days of the date of these orders.

(4)   The costs’ applicant may file and serve any short written submission (no more than 3 A4 size pages) strictly in response to a costs’ respondent’s submissions within 42 days of the date of these orders.

(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 – defective residential building work - contractual terms for external cladding – reasonable and necessary scope of works for rectification of defects found – appropriate remedy – preferred outcome - works order made.

Legislation Cited:

Home Building Act 1989 NSW

Civil and Administrative Tribunal Act 2013 NSW

Civil and Administrative Tribunal Rules 2014 NSW

Cases Cited:

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

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

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

Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1992) 174 CLR 64

Westpoint Management Ltd v Chocolate Factory Apartments Ltd; Chocolate Factory Apartments v Westpoint Finance [2007] NSWCA 253

Owners SP 92450 v JKN Para 1 Pty Limited [2023] NSWCA 114

Brewarinna Shire Council v Beckhaus Civil Pty Ltd [2006] NSWCA 361

Galdona v Peacock [2017] NSWCATAP 64

Leung v Alexakis [2018] NSWCATAP 11

The Owners – Strata Plan No 76674 v Di Blasio Constructions Pty Ltd (2014) NSWSC 1087

Texts Cited:

None cited.

Category:Principal judgment
Parties:

David Michael Whittingham (First Applicant)

Janice Whittingham (Second Applicant)

Avid Homes Pty Ltd (Respondent)
Representation:

Counsel:

J Nathan (Respondent)

Solicitors:

Solve Legal (Applicants)

Blackwell Short (Respondent)
File Number(s): 2023/00412213 (previously HB 23/04229)
Publication restriction: Unrestricted

Judgment

Background Facts & Overview of the Matters in Dispute

  1. David Michael Whittingham and Janice Whittingham (referred to, as either the Owners or Mr & Mrs Whittingham) are the registered proprietors of residential property at Orange, NSW (Property).

  2. On or about 19 June 2020, Avid Homes Pty Ltd trading as ‘Green Homes Australia – Orange’ (Builder) by its director, Daniel Wilcox (Mr Wilcox), prepared a quote to construct a dwelling on the Property (Dwelling). The Quote provided for a cost of $7,700 for the ‘Approval Phase’ and a cost of $461,547 for the ‘Construction Phase’. The Quote included provision for Weathertex Cladding (Weathertex) to be installed by the Builder External to the Dwelling on the Property.

  3. There were conversations and correspondence (including exchanges of telephone text messages) between the Owners and Mr Wilcox during July 2020 about the Builder utilising, instead of Weathertex Cladding, a product called ‘Cemintel Barestone External Lining’ (referred to, as either Barestone or Barestone Cladding) for construction of the Dwelling on the Property.

  4. On 9 August 2020, the Owners signed a building contract (Contract) with the Builder for the Builder to construct the Dwelling on the Property. The Contract price was $461,547, including GST. Excluded from the scope of Contract works was the deck area and any landscaping or retaining wall works, and the installation of a solar panel system: see Schedule 3: Excluded Items and Clause 9 of the Contract (Exhibit 1 at pages 17 and 32).

  5. Construction works began on 21 October 2020. Installation of the Barestone to the External of the Dwelling began on 11 February 2021.

  6. On or about 10 June 2021, the Builder completed the Contract works and handed over possession of the Property to the Owners.

  7. Thereafter, the Owners notified various defects in the construction of the Dwelling to the Builder and provided defect lists. Some rectification works were undertaken by the Builder; but the parties disagree as to whether the defects were rectified or whether the rectification works that were undertaken by the Builder, were completed.

  8. On 30 January 2023, the Owners commenced proceedings in the Tribunal (Proceeding) and claimed an amount of $245,000 as an order to pay money under the Home Building Act 1989 NSW (HB Act), in s 48O(1)(a).

  9. For the hearing of the Proceeding, the Owners put a case against the Builder for an order to pay money in an amount of up to $234,951.11. Such amount was based upon calculations in a Scott Schedule prepared by the Builder’s expert witness, Jeffrey Halpin (Mr Halpin), and attached to Mr Halpin’s expert report dated 16 November 2022.

  10. While Mr Halpin’s Scott Schedule contained the costings for 18 trade items plus a builder’s margin of 30% (on the trade costs), as he came to the total of $234,951.11; in fact, the Owners’ case against the Builder at the hearing of the Proceeding was put as a claim of damages in that total amount (but apparently, not including GST). The Owners alleged that the Contract works carried out by the Builder at the Property to 10 June 2021, and thereafter as rectification works after receiving defects’ lists from the Owners, were defective, and otherwise in breach of the Contract, as well as in breach of s18B(1)(a) and s 18B(1)(f) (referred to, as either Statutory Warranties or Warranties). The Warranties are implied in every contract to do residential building work by reason of s 18B(1) of the HB Act.

  11. The Owners argued that the said breaches of the Contract and of the Statutory Warranties are contained in, and/or evidenced by, four (4) areas of dispute between the parties, referred to in these Reasons, as:

Breach 1 – Barestone Cladding

Breach 2 – Windows and Doors

Breach 3 – Overhanging Frame

Breach 4 – Termite Management System

The Hearing, the Parties’ Exhibits, and the Parties’ Written Submissions following the Hearing.

  1. The hearing of the Proceeding took place over two (2) days: on 17 April 2024, as an ‘in person’ hearing at Orange Courthouse (Day 1); and on 25 June 2024, as a virtual hearing conducted from Sydney by audio-visual link (Day 2).

  2. The hearing of the parties’ expert evidence, Mr Halpin for the Owners, and David John Dillon (Mr Dillon) for the Builder, occurred on Day 1. Mr Halpin and Mr Dillon gave oral evidence in joint session, subject to cross examination by the parties’ legal representatives, Mr Shamsabad, solicitor for the Owners, and Mr Nathan, counsel for the Builder.

  3. On Day 2 of the hearing, Mr & Mrs Whittingham gave oral evidence in the Owners’ case, subject to cross examination by Mr Nathan, and Mr Wilcox gave oral evidence in the Builder’s case, subject to cross examination by Mr Shamsabad.

  4. The following documents were tendered as Exhibits for the hearing and were relied upon by the parties in the Proceeding:

Exhibit 1 – Joint Tender Bundle (Court Book) comprising three (3) volumes and consisting of 1,196 pages.

Exhibit 2 – Affidavit of Mr Wilcox sworn 16 April 2024 (Mr Wilcox’s Fourth Affidavit, there being three (3) earlier affidavits of Mr Wilcox – as described, see below – and as contained in the Court Book). The Owners’ legal representative did not press an objection to the late service of this Affidavit.

Exhibit 3 – Affidavit of John Carpenter (Mr Carpenter) sworn 16 April 2024 (Mr Carpenter’s Second Affidavit, there being an earlier affidavit of Mr Carpenter – as described, see below – and as contained in the Court Book). The Owners’ legal representative did not press an objection to the late service of this Affidavit.

Exhibit 4 – Copy Extract from the National Construction Code (NCC) - the extract being Part 2.2 ‘Damp and Weatherproofing’ of the NCC.

Exhibit 5 – Photographs taken by Mr Carpenter at a previous inspection of the Property.

Exhibit 6 – Model prepared by Mr Wilcox (to be held by the Respondent’s solicitors, but to be made available to the Tribunal, if requested).

Exhibit 7 – Video as referred to in [10] of Mr Wilcox’s Third Affidavit.

Exhibit 8 – Copies of Customer Order dated 10 December 2020 and Tax Invoice dated 15 February 2021 of Bunnings’ Warehouse, Orange.

  1. As to the written lay and expert evidence for the Proceeding, the Court Book contained the following affidavits, statements, and reports:

  • Statement of Mrs Whittingham dated 17 May 2023 – in considering the Builder’s objection to [33] of the Statement, the Tribunal determined to admit the paragraph subject to relevance, noting the parties could address relevance in their closing written submissions,

  • Statement of Mr Whittingham dated 31 May 2023,

  • Affidavit of Mr Wilcox sworn 12 May 2023 (Mr Wilcox’s First Affidavit),

  • Affidavit of Mr Wilcox sworn 14 September 2023 (Mr Wilcox’s Second Affidavit),

  • Affidavit of Mr Carpenter sworn 21 September 2023 (Mr Carpenter’s First Affidavit),

  • Affidavit of Mr Wilcox sworn 4 October 2023 (Mr Wilcox’s Third Affidavit),

  • Expert Report of Mr Halpin dated 16 November 2022 (Mr Halpin’s First Report),

  • Scott Schedule prepared by Mr Halpin dated 16 November 2022 (Mr Halpin’s Scott Schedule),

  • Owners’ Letter of Instruction to Mr Halpin dated 6 November 2023,

  • Expert Supplementary Report of Mr Halpin dated 14 November 2023 (Mr Halpin’s Supplementary Report),

  • Expert Report of Mr Dillon dated 10 June 2023 (Mr Dillon’s First Report),

  • Expert Supplementary Report of Mr Dillon dated 3 October 2023 (Mr Dillon’s Supplementary Report),

  • Scott Schedule prepared by Mr Dillon dated 3 October 2023 (Mr Dillon’s Scott Schedule),

  • Joint Scott Schedule prepared by Mr Halpin and Mr Dillon dated 3 October 2023 (Experts’ Joint Report).

  1. Further, the Owners’ solicitors provided a Transcript of the hearing on Day 1 and Day 2 (hereinafter, collectively referred to as the Transcript). Transcript references in these Reasons will be indicated by the letter ‘T’ with either Day 1 or Day 2, and a page number and then a dot followed by the line numbers on the relevant page of the Transcript.

  2. On Day 1 of the hearing, the parties’ legal representatives made opening oral submissions, which, in the Builder’s case, augmented short written outline submissions provided at the beginning of the hearing by the Builder’s counsel.

  3. Furthermore, pursuant to directions made on 25 June 2024 at the conclusion of the evidence, the parties’ legal representatives provided their closing written submissions, as follows:

  • Owners’ Closing Submissions received 26 July 2024 (Owners’ Closing Submissions),

  • Builder’s Closing Submissions received 19 August 2024 (Builder’s Closing Submissions),

  • Owners’ Submissions in Reply received 3 September 2024 (Owners’ Reply Submissions)

  • Outline of Builder’s Response to Owners’ Reply Submissions (Builder’s Response) received 4 September 2024.

  1. In making my decision in relation to the Owners’ application for orders of the Tribunal under the HB Act, I have considered the entirety of the written material including the Exhibits, the Transcript, and the written submissions and supporting documents of the parties. In these Reasons for Decision (Reasons), I may focus on the material which I determine is central to the considerations of the application 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.

Jurisdiction

  1. It is not controversial that the works carried out by the Builder under the parties’ Contract, related to the construction of the Dwelling on the Property, and that as such, the works were “residential building work” within the meaning of the HB Act.

  2. Even though the points of claim may not articulate the precise relief sought by the Owners in the Proceeding, it is tolerably clear from the Owners’ written and oral evidence and submissions, and from the way the Owners’ solicitor conducted the case on his clients’ behalf, that the Owners seek an order for the Builder to pay them a sum of money on account of the costs to them of rectifying defects in the Dwelling on their Property, which are alleged in respect of Barestone Cladding, Windows and Doors, Overhanging Frame, and the Termite Management System.

  3. I am satisfied that the Tribunal has jurisdiction to hear and determine the Owners’ application in the Proceeding for orders under the HB Act.

The Primary Issues for the Tribunal’s Consideration and Determination

  1. Various factual and legal issues arise in the Proceeding, around these questions:

  1. What were the terms of the Contract in respect of the installation of Barestone Cladding on the External of the Dwelling?

  2. Was the Barestone Cladding as installed by the Builder, defective?

  3. If so, what is the necessary and reasonable method of rectification of the Barestone Cladding, and the cost of such method of rectification?

  4. Is rectification required in respect of the Windows & Doors, and if so, to what extent is rectification necessary and reasonable, and what is the cost of rectification?

  5. Is the Overhanging Frame a defect, and if so, what is the necessary and reasonable scope of works required to rectify it?

  6. Is the Termite Management System installed for the Dwelling defective, and if so, what is the necessary and reasonable method of rectification and the cost of such method of rectification?

  7. In respect of the defects found by the Tribunal, should it make a works- order (HB Act, s 48O(1)(c)), or an order to pay money (HB Act, s 48O(1)(a))?

  1. The issues for determination in respect of the first and second questions include whether, as the Owners advocate, the parties had agreed that Barestone Cladding would be applied to the External of the Property’s Dwelling, prior to 9 August 2020, being the date the parties signed the Contract, and whether, as the Owners further advocate, that the parties had agreed (whether before or after 9 August 2020) that the Barestone Cladding would be installed in accordance with the manufacturer’s Installation (or Product) Guide, as well as by reference to the method(s) used for other nearby homes (i.e., in Byng Street, Orange), which were cladded with the Barestone. product

  2. The Owners’ positions around the first and second questions are advocated in the context of their cases against the Builder for breach of contract and for breach of the Statutory Warranties. A key contention for the Owners is that they have been left with a Dwelling cladded in a product which is compromised, including ingress of moisture within cavities of the Cladding, and that the product as installed by the Builder, will (inevitably) fail. In this regard, the Owners allege that in (improperly) installing the Barestone Cladding, the Builder, in fact, deviated without authority from the methodology in the manufacturer’s Guide, and from (as previously agreed between the Owners and the Builder), the method(s) used for installation of Barestone Cladding in nearby homes.

  3. The third question involves determination of what the necessary and reasonable method of rectification of the Barestone Cladding is, applying the principles arising in cases such as Bellgrove v Eldridge (1954) 90 CLR 613 (Bellgrove v Eldridge) and Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8; (2009) 236 CLR 272 (Tabcorp Holdings v Bowen Investments). In making that determination, findings of fact are needed, which ultimately, will be guided and informed by the expert evidence.

  4. The fourth, fifth, and sixth questions, relating to the Windows and Doors, the Overhanging Frame, and the Termite Management System, respectively, also all require findings of fact, and the weighing of the expert evidence.

  5. The seventh question involves taking account of the various considerations pertaining to the ‘preferred outcome’ in s 48MA of the HB Act.

Breach 1 - Barestone Cladding

The Contractual Terms

  1. The most significant defect that is put in the Owners’ case, relates to the Builder’s installation of Barestone Cladding to the External of the Property’s Dwelling.

  2. In respect of the ‘External’ to the Dwelling, the Contract stated in ‘Schedule 4: Description of Work’ (Exhibit 1 at page 18):

External * Colorbond (from builder’s range) * Concrete path allowance up to 3 sqm from driveway to front entry * Ceiling to porch and/or verandah as shown on plan * Weathertex cladding as shown on plan * Aluminium window frames with locks to all windows/sliding doors (from builder’s range) * Flyscreens to all aluminium opening windows and sliding doors.

(Emphasis added)

  1. In fact, the plan annexed to the Contract, which the Builder had prepared, identified the External of the Dwelling to be ‘Brick Veneer Walls’, but without referring to Weathertex Cladding: see Exhibit 1, page 78.

  2. While the Barestone product is not expressly mentioned in the Contract, there is no dispute that the Builder used that product, and not Weathertex Cladding, during the build of the Dwelling.

  3. On or about 19 June 2020, the Owners received the Builder’s Quote, which contained a price of construction for the Dwelling with Weathertex Cladding (the said Quote being an annexure to the Contract of 9 August 2020 – see Exhibit 1, with the specific reference to Weathertex Cladding at page 58). At about that time, and having expressed the Owners’ interest in the style and appearance of Barestone Cladding, and having further expressed that Barestone Cladding is a finished product which does not require repainting or maintenance, Mr Whittingham also enquired of Mr Wilcox for the Builder as regards the price if the Builder installed the Barestone product to the External of the Dwelling: see Mr Whittingham’s Statement of Evidence at [8] (Exhibit 1, page 502). It was during this conversation that Mr Whittingham gave Mr Wilcox the addresses of properties in Byng Street Orange, where the Barestone product had been used.

  4. I infer that, following conversations with Mr Whittingham in or about June/July 2020, Mr Wilcox must have made enquiries about the Barestone product, because on 15 July 2020 at 12:28 pm, he sent a telephone text message to Mr Whittingham, in these terms:

“So the barestone doesn’t need finishing”

“So it will come in at around the same price as painted Weathertex painted”

  1. As indicated, the Contract did not refer to the installation of the Barestone product to the External of the Dwelling. Under cross examination by the Builder’s counsel, the Owners gave oral evidence at the hearing that they did not insist on the Barestone product being expressly stated in the Contract when they signed the Contract on 9 August 2020. Both said this was because they had relied upon the Builder’s telephone text message (as stated above), and because they had understood that there would be no price differential if the Builder used the Barestone product rather than the Weathertex product: see, for example, Mr Whittingham’s evidence at T Day 2 page 11.20-34. I accept that this was the position which became the mutual understanding of the parties when they signed the Contract, albeit without there being a variation to the Contract in writing signed by the parties to confirm a mutual understanding of the parties, as per the formal requirements of the Contract and of the HB Act. Nevertheless, I am satisfied, as evidenced by the Builder’s text message of 15 July 2020, and as evidenced by the parties’ subsequent course of conduct (i.e., including that the Builder began installation of Barestone Cladding to the External of the Dwelling on or about 11 February 2021, following the commencement of the Contract works on 21 October 2020), that the Builder understood the Owners wanted Barestone Cladding installed to the External of the Dwelling, and not Weathertex Cladding; but also, that Mr Wilcox on behalf of the Builder, had agreed to the use of the Barestone product, and that this would not affect the Contract price.

  1. However, other than the (normal) requirements for the Builder to comply with the Statutory Warranties, especially the Warranties as set out in s 18B(1)(a) and s 18B(1)(f) of the HB Act, in carrying out the installation of the Barestone Cladding to the External of the Dwelling, I do not find that the Contract contained specific terms meeting any of the expectations the Owners may have held to the following effect: that the Barestone product would be installed in accordance with the Barestone installation guide; that the Owners would be consulted if the Builder deviated from the installation methodology in the manufacturer’s guide; and that the product would be installed in the same manner as had occurred at nearby properties in Byng Street Orange.

  2. I accept that Mr & Mrs Whittingham may genuinely have had those expectations, or even assumed that insisting upon terms (whether in the Contract of 9 August 2020, or in subsequent Variations to the Contract) as regards the manner of installation of the Barestone product, was not necessary in the circumstances; but the evidence that the Owners may have had expectations and/or that they had made assumptions, in and of itself and without more, cannot support a finding that the Contract contained terms in or to the effect of those expectations and assumptions. The Builder’s text message of 15 July 2020, being a document, which speaks for itself, does not support such a finding and in my determination, there is no other evidence of the Builder having accepted the specifics of how it should install the Owners’ preferred product to the External of the Dwelling.

  3. I find that in installing the Barestone Cladding to the Dwelling on and from 11 February 2021, the Builder was required only to install it consistently with the requirements contained in the Statutory Warranties. In the absence of my finding that there were contractual terms agreed as to the specifics of installation of the Barestone, whether (or not) the Owners consented to the Builder’s methods of installation of the Barestone, including any alleged deviation from the methodology in the manufacturer’s guide, as well as the Owners’ evidence of their concerns expressed to Mr Wilcox during the installation of the Barestone Cladding (see Mr Whittingham’s Statement of Evidence at [15] – [19] – Exhibit 1, pages 503 and 504), and their evidence as to the cleaning of the Barestone after the Owners had moved into the Dwelling (see Mr Whittingham’s Statement of Evidence at [21] – [22] – Exhibit 1, pages 504 and 505), are material to the Tribunal’s enquiry, only insofar as they relate to alleged breaches of the Statutory Warranties.

  4. I draw the same conclusion from the Builder’s text messages as of 12 February 2021, including Mr Wilcox’s statement that he “will contact the [Barestone] rep now”: see Exhibit 1, at pages 310 and 311. I find that the text messages evidence no more than the Builder being aware at the time (i.e., when installation of the Barestone product on the External of the Dwelling, had begun), that the Owners expected the manufacturer’s guide would be followed by the Builder.

  5. Further, to the extent the Owners contended that the installation of the Barestone cladding was not in accordance with the instructions they had given with reference to other properties on Byng Street Orange, I find that the written and oral evidence of Mr & Mrs Whittingham was only that they had told the Builder they liked the style of the cladding installed at the two properties on Byng Street, but without providing any specifics as to how it was to be installed: see the Statement of Mrs Whittingham at [7] (Exhibit 1, page 232), T Day 2 18.39-43 (Mr Whittingham’s oral evidence), and T Day 2 pages 35 and 36 (Mrs Whittingham’s oral evidence).

  6. The evidence, therefore, falls well short of supporting the existence of any contractual terms in and to the effect of those contended for in the Owners’ Closing Submissions.

The Parties’ Competing Positions as regards a scope of works for rectification

  1. The expert report of Mr Halpin dated 16 November 2022 addresses the defects of the Barestone Cladding at paragraphs 8.1(a) – (d). Mr Halpin found in essence, that the Barestone “had not been correctly installed to the manufacturer’s installation guide”, listing at 8.1(b) of his report, the steps which had not been complied with: see Exhibit 1 at pages 834 – 851.

  2. Mr Dillon found that the Builder had installed the Barestone product in accordance with the NCC. He did not agree that the Builder’s divergence from the manufacturer’s guide in installing the product had the consequences as to rectification method, for which Mr Halpin contended: see, for example, Mr Dillon’s reasons in his report dated 10 June 2023 at [10] – [37] – Exhibit 1 at pages 1063 to 1066.

  3. Nevertheless, Mr Dillon accepted for other reasons, that there were defects in the Barestone product affixed to the External of the Dwelling, which required rectification or repair. He concluded there was, in respect of the Barestone Cladding for the Dwelling, no evidence that: “damage has resulted due to the method of installation” (see Mr Dillon’s report dated 10 June 2023 at [13] - Exhibit 1, page 1064). He found, however, that there were other matters (see Mr Dillon’s report dated 10 June 2023 at [15], & [18] – Exhibit 1 – page 1064) including base flashing which was required across the front areas of the Dwelling that come close to the external paving, and the removal and refixing of pan head screws or rivets, which did evidence defective work on the Builder’s part. Mr Dillon accepted that these matters constituted breaches of the Statutory Warranties and he concluded that rectification/remediation works within a limited scope only were warranted: see the opinions expressed in his expert report dated 10 June 2023. These opinions were confirmed in Mr Dillon’s later supplementary report and by his oral evidence given in joint session with Mr Halpin on Day 1 of the hearing.

  4. Materially, in answer to the core element of the Owners’ case, Mr Dillon did not find that the Builder’s failure to install the Barestone product in accordance with the manufacturer’s guide, evidenced a breach of the Statutory Warranties, especially the Warranties in s 18B(1)(a) and s 18B(1)(f), respectively, as to work being done with due care and skill, and work being reasonably fit for a specified purpose or result. In this regard, Mr Dillon considered, and I agree, that the manufacturer’s guide for the Barestone product purports to be a guide and no more. It states, relevantly (see Exhibit 1 at page 1139):

This Design and Installation Guide recommends good building practice methodology and has been prepared as a general guide of design considerations, system engineering information, and installation procedures for common external applications.

It assumes that the user has an intermediate knowledge level of building design and construction.

In no way does it replace the services of the building professionals required to design projects, nor is it an exhaustive guide of all possible scenarios. It is the responsibility of the architect, designer, and various engineering parties to ensure that the details in this Design and Installation Guide are appropriate for the intended application.

  1. Accordingly, the Builder’s case relies, substantially, on Mr Dillon’s written and oral evidence, which (as indicated) had accepted that there are defects in the Barestone Cladding affixed to the External of the Dwelling and requiring rectification or repair; but in respect of the defects he had found, Mr Dillon disagreed with the Owners’ method, and cost, of rectification. In the experts’ Joint Report (Exhibit 1, at pages 1184 – 1194), Mr Dillon provided a scope of works for rectification and repair (together with costings, in an amount of up to $21,162.34 including a builder’s margin of 20% but, apparently, not inclusive of GST) in schedule items 1 - 16, while Mr Halpin, for the same schedule items 1 – 16, provided a scope of works for the complete replacement and refitment of the Barestone Cladding (together with costings, in an amount of up to $218,055.50 including a builder’s margin of 30% but, apparently, not inclusive of GST).

  2. Before analysing the competing positions of the parties’ experts, it is helpful to state the relevant legal principles in the assessment of damages for breach of a building contract and breach of the Statutory Warranties.

Applicable legal principles as regards a scope of works for rectification

  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 [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. This fundamental principle in the assessment of damages for breach of contract was further elucidated by Mason CJ and Dawson J in Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54 at [24]; (1992) 174 CLR 64 at 80:

The award of damages for breach of contract protects a plaintiff’s expectation of receiving the defendant’s performance. That expectation arises out of or is created by the contract. Hence, damages for breach of contract are often described as ‘expectation damages’. The onus of proving damages sustained lies on a plaintiff and the amount of damages awarded will be commensurate with the plaintiff’s expectation, objectively determined, rather than subjectively ascertained. That is to say, a plaintiff must prove, on the balance of probabilities, that his or her expectation of a certain outcome, as a result of performance of the contract, had a likelihood of attainment rather than being mere expectation.

  1. The primary measure of damages in the case of defective building work was stated by the High Court of Australia in Bellgrove v Eldridge (at 618-619) to be “the amount required to rectify the defects complained of and to give to [the plaintiff] the equivalent of a building on [the plaintiff’s] land which is substantially in accordance with the contract”. The Court held (also at 618-619) that the building owner is entitled to the “reasonable costs” of the rectification work “necessary to produce conformity” with the building contract. The rule was qualified in that rectification must be a “reasonable course to adopt”.

  2. Subsequent to Bellgrove v Eldridge, the High Court has held that the test of “unreasonableness” is only to be satisfied “by fairly exceptional circumstances”, such as where the proposed rectification is out of proportion to the benefit to be obtained: see Tabcorp Holdings Ltd v Bowen Investments at [17]; see also Westpoint Management Ltd v Chocolate Factory Apartments Ltd; Chocolate Factory Apartments v Westpoint Finance [2007] NSWCA 253 at [42] – [48]; Owners SP 92450 v JKN Para 1 Pty Limited [2023] NSWCA 114 at [68] –[70].

  3. As to what remedial work is both “necessary” and “reasonable” in any case is a question of fact. Reasonableness is to be assessed by reference to the contract the subject of any proceedings and not at large. As Tobias JA said in Brewarinna Shire Council v Beckhaus Civil Pty Ltd [2006] NSWCA 361 at [89], McColl and Giles JJA concurring:

… whether the rectification work is a reasonable course to adopt is dependent upon a finding of fact that the proposed work was reasonable in order to achieve the contractual objective The rectification work would be unreasonable if it was out of all proportion to the achievement of that objective or to the benefit to be obtained therefrom.

(Emphasis added)

What is the necessary and reasonable scope of works for rectification?

  1. Applying those legal principles, I am satisfied that the scope of works proposed by the Builder’s expert, Mr Dillon, for rectification of the defects he had identified in the Barestone Cladding affixed to the External of the Dwelling, is reasonable and proportionate to the parties’ contractual objective. I found that Mr Dillon’s conclusions as to the appropriate method of rectification for the Barestone Cladding, were well informed and were soundly based. He presented as a credible witness in his area of expertise, who gave his evidence independently and objectively, including making concessions in his oral evidence, where appropriate, as he did in respect of Breach 4 - Termite Management System (as to which, see below).

  2. In contrast, the Owners’ expert, Mr Halpin, propounded a more extensive rectification methodology, which was underpinned by his conclusion that the integrity of the Barestone Cladding following its defective installation by the Builder, is irreparably undermined and has deteriorated to an extent that the complete removal and replacement of all the Barestone Cladding, is warranted.

  3. On the available evidence, I was not persuaded by Mr Halpin’s conclusion about the (compromised) integrity of the Barestone Cladding. I find that Mr Halpin’s scope of works for rectification of the Barestone Cladding is out of all proportion to the benefit to the Owners, objectively determined, from the Builder’s performance of the Contract.

  4. It is worth noting that Mr Halpin conceded in his oral evidence, that if I accepted the scope of works put by Mr Dillon as the appropriate scope for rectification, then he agreed with Mr Dillon’s costings as per the estimates which Mr Dillon gave for his scope of works: see T Day 1 page 96.37-41.

  5. Further and alternatively, I consider that Mr Halpin’s rectification methodology cannot be accepted because it is founded upon a series of misconceptions. Mr Halpin’s first misconception is that the manufacturer’s guide was prepared to yield the best performance with the Barestone Cladding; yet when he was cross examined on the subject, Mr Halpin conceded that such was his presumption only and that he did not actually know that to be the case. In fact, he conceded, correctly, that there is no requirement in the NCC for a builder to comply with an installation guide: see T Day 1 page 42.5-37. As already indicated, I construe the manufacturer’s Design and Installation Guide as a document which is no more than a guide and therefore a document that it is not mandatory for a building professional to follow to the letter. The consequence of this finding is that any departures from the Guide by a building professional, in and of themselves, do not evidence breach of the Statutory Warranties.

  6. Another misconception on Mr Halpin’s part, was his theory that the Builder had used the wrong screws in installing the Barestone Cladding and that this circumstance necessitates the complete replacement and reinstallation of the Barestone product to the External of the Dwelling. The theory in fact has no substance at all. Mr Dillon gave evidence (which I accept) that the screws specified by the manufacturer are larger than the screws said to have been ‘incorrectly’ installed by the Builder, such that a larger hole will need to be drilled anyway if the manufacturer’s specification is adopted in the rectification: see T Day 1 page 35.37-41 and page 60.36-40. Accepting Mr Dillon’s evidence, as I do, it follows that the Builder’s installation of the so called ‘incorrect’ screws is really of no moment in the circumstances of this case, and that in consequence, it cannot be said that the Builder’s action caused damage to an extent which now requires the complete replacement and reinstallation of the Barestone product.

  7. Moreover, when cross examined about the possibility of water ingress into the Barestone Cladding by reason of the wrong screws having been used in the installation of the Barestone Cladding, Mr Dillon opined that such a possibility was most unlikely, because the Builder (on his instructions) had used a sealant which was recommended by the manufacturer, and its purpose was clearly to prevent moisture ingress into or past the Barestone product: see T Day 1 page 69.34.48. In this regard, Mr Wilcox of the Builder confirmed during his oral evidence on Day 2 of the hearing (see T Day 2 page 57.20-27), that he had used the product referred to in the Bunnings’ Customer Order and Invoice (i.e., Exhibit 8), being the sealant recommended by the manufacturer.

  8. Significantly, I observed inconsistencies in Mr Halpin’s evidence, which on occasion, particularly during his oral evidence, brought me concerns that he had become too much of an advocate in the Owners’ case, and that at times, he had departed from the impartiality and independence required of an expert witness under the Expert Witness Code of Conduct. On Day 1 of the hearing (T Day 1 page 29.4-15), Mr Halpin, while at first suggesting that moisture “can” get through the screws in the Cladding (i.e., that there is a possibility of ingress), then put it to me later in his oral evidence, that there had, in fact, been ingress through moisture entering the cavity behind the cladding and that he had observed the boards are showing “a little bit of deformation”: see T Day 1 page 29.25-35. It seemed to me that this oral evidence was given by Mr Halpin to support assertions he made during cross examination by the Builder’s counsel, that the Builder’s failure to install the Barestone product in accordance with the manufacturer’s guide had resulted in adverse effects not only to the aesthetic of the product, but also to its quality and expected longevity. Both experts agreed (T Day 1 pages 36 and 37) that it was not possible to measure accurately with a meter, the amount of water ingress that may have made its way into the boards unless it was a “significant amount of moisture”, or words to that effect. Mr Halpin conceded (T Day 1 page 89.10-12) that the amount of moisture coming in “may be slight” but that it would be “continuous over a long period of time and that would cause damage”, or words to that effect. Unsatisfactorily, Mr Halpin could not be more specific about a timeframe for any such deterioration.

  9. In fact, Mr Halpin confirmed during his cross examination (T Day 1 page 35.43-47), there was no reference made by him to moisture ingress in either of his reports or in the Joint Report. Pertinently, Mr Dillon gave evidence (which I accept) that he did not see evidence of any moisture that had penetrated the Barestone Cladding when he inspected the Dwelling. Mr Dillon conceded during his cross examination (quite properly, in my view), that moisture ingress to the cavity behind the Cladding was at least a possibility, but that in his opinion, the risk of damage was slight: see T Day 1 page 78.35-39. To the extent the experts differed in this context, I preferred Mr Dillon’s evidence.

  10. Nor do I accept the proposition that water ingress to the cavity behind the Barestone Cladding is reasonably likely to occur (i.e., that it is not just a mere possibility), because all windows of the Dwelling will leak in the same way as the living room window which has had a consistent leak since about November 2021. This was the assumption made by Mr Halpin (T Day 1 page 47.34-45), but it is not supported by the facts. As is considered later under ‘Breach 2 – Windows and Doors’, the expert evidence establishes that only the one window (i.e., in the living room of the Dwelling) leaks and that the reason for the leak is defective flashing; being a circumstance which I find can be rectified in the manner proposed by Mr Dillon.

  11. Mr Halpin further contended that the Barestone Cladding had been installed by the Builder in a way that voids the manufacturer’s warranty. However, it is the Builder only who has the benefit of the manufacturer’s warranty, and not the Owners: see Exhibit 1 page 769 under the heading ‘Making a Claim’. This evidence establishes that there would be no loss to the Owners even if I had found (which I do not) that the manufacturer’s warranty had been voided.

  1. It was also apparent from Mrs Whittingham’s cross examination, that the Owners felt justified in maintaining the Proceeding against the Builder because they ‘understood’ that the manufacturer had recommended the removal and replacement of all Barestone Cladding affixed to the External of the Dwelling. In fact, there was no evidence that the manufacturer had recommended such course of action. In her cross examination on Day 2 of the hearing, when referred to correspondence she had with the manufacturer (Exhibit 1, at page 397), Mrs Whittingham conceded (T Day 2 page 45.30-34) that, in fact, the manufacturer had not recommended replacement of the Barestone Cladding affixed to the External of the Dwelling.

  2. Additionally, there was evidence during Mrs Whittingham’s cross examination (T Day 2, pages 49 and 50) that the Barestone Cladding may have been compromised by the actions of the Owners when they carried out decking and landscaping, which were actions clearly excluded from the Contract works. These matters affecting causation (i.e., the Builder’s responsibility to rectify all the defects identified in Mr Halpin’s report), were not taken account of by Mr Halpin. When it was brought to Mr Halpin’s attention during his oral evidence, that the Owners had installed screws to the Barestone Cladding, which was not in accordance with the manufacturer’s guide, Mr Halpin simply said that he was not aware of it: see T Day 1 page 39.15-27.

  3. Mrs Whittingham confirmed in her oral evidence that the Dwelling’s deck had been cut in below the Barestone Cladding, and there was no doubt that the deck had been installed by the Owners prior to the window leak appearing in the living room (T Day 2 49.24-28 and page 50.4-8). Mr Halpin conceded where the deck met below an external door to the Dwelling directly opposite the one leaking window, that the deck had been installed by the Owners after cutting into the Barestone product to allow the deck to meet the building: see Day 1 page 41.9-13.

  4. For those reasons, I conclude that it is Mr Dillon’s scope of works for rectification of the Barestone Cladding, and costings, which should be followed.

Breach 2 – Windows and Doors

  1. In respect of the windows and door openings of the Dwelling, the experts differed as to the nature and extent of defective work, and consequently, as regards the scope, and cost, of the rectification works required, to remediate any defects.

  2. In his report dated 16 November 2022, Mr Halpin at 8.1(e) (Exhibit 1, page 852) describes that the installation of the windows and doors do not comply with the Barestone product installation guide, particularly that the Barestone is not to protrude past windows and doors, and further, that the window frames do not have any, or any proper, flashing. Also, Mr Halpin opines that the windows do not comply with the NCC, especially in that the window frames do not resist external ingress of moisture: see also Mr Halpin’s supplementary report dated 14 November 2023 – Exhibit 1, at pages 1034 to 1038. In his oral evidence, Mr Halpin said that these defects have manifested in leaks in the living room and the master bedroom: see T Day 1 page 44.8-9.

  3. Relying upon Mr Halpin’s reasoning as regards defects in the windows and door openings of the Dwelling, and upon Mr Halpin’s rectification methodology and costings, the Owners argued, as they had for the Barestone Cladding, that the Builder had breached the Statutory Warranties by failing in its obligation of due care and skill in the installation of the windows and doors (HB Act, s 18B(1)(a)), and further, by failing to follow the Barestone installation guide, the aesthetic finish of the windows and doors in the Dwelling was inconsistent with the expected results disclosed in the guide, contrary to the s 18B(1)(f) of the HB Act.

  4. By contrast, Mr Dillon found that other than the absence of any, or any suitable, flashings, the Builder’s window and door installation for the Dwelling was fit for purpose: see Mr Dillon report dated 10 June 2023 at [38] – [41] – Exhibit 1, page 1066. Mr Dillon gave evidence both in his reports (see Mr Dillon’s Supplementary Report dated 3 October 2023, especially at page 1136 of Exhibit 1) and during his cross examination on Day 1 of the hearing (T Day 1 page 48.30 to page 49.4, but also generally pages 49 to 60), that suitable flashing could be installed retrospectively in compliance with the NCC. In doing so, he reiterated his previously expressed opinion that the Barestone installation guide was a document to guide building professionals and no more, and that departures from the installation methodology in the guide, per se, did not necessarily establish breach of the Statutory Warranties. I accept Mr Dillon’s evidence in this regard.

  5. I drew the following conclusions from the oral evidence (subject to cross examination) given by both experts in joint session on Day 1 of the hearing. The evidence established that one window only (i.e., in the living room) is leaking, and in fact, had been leaking since about November 2021, and that the reason for the leak is due to defective flashing. Mr Dillon described in his oral evidence how the flashing defect for the window could be resolved (T Day 1 page 48.30 to page 49.4, but also see, generally, pages 49 to 60). Mr Halpin indicated that the method of installation proposed by Mr Dillon to rectify the defect on the window was not sufficient to prevent further water ingress because the flashing must extend 150 mm past the edge of the window. However, under cross examination, Mr Halpin conceded that his requirement was not part of the NCC and that the NCC in fact only required that the flashing extend 110 mm past the edge of the window and only where practicable. Mr Dillon’s evidence was that extending the flashing in the way that Mr Halpin had indicated was not practicable because of the presence of architraves and because that would then require cutting a groove in the Barestone Cladding, which Mr Dillon observed would be contrary to the manufacturer’s installation guide: see, generally, pages 48 to 60 of the Transcript for Day 1 of the hearing.

  6. To the extent the experts differed, I preferred Mr Dillon’s evidence. I find that the leaking window in the living room should be rectified in accordance with Mr Dillon’s scope of works, and costings.

Breach 3 – Overhanging Frame

  1. In the process of construction, the Builder installed the wall frame at the rear of the Dwelling in several places in a manner that the frame overhangs the concrete slab. Both experts identified, and accepted, this circumstance, as a structural defect, which requires rectification/remediation, within a scope of works to be settled by an appropriately qualified structural engineer.

  2. Notwithstanding this agreement between the experts, the Builder by its legal representatives, then submitted (see the Builder’s Closing Written Submissions at [34] - [35]), that the Owners’ claim must fail, because the evidence is insufficient to identify the most reasonable method of rectification. I disagree. I am satisfied that there is sufficient evidence. As Mr Dillon puts it in his report dated 10 June 2023 at [45] (Exhibit 1, page 1067), the rectification of this defect requires the installation of “a suitably Engineered galvanised steel angle attached to the concrete edge to support the overhanging timber wall frame”. In their Joint Report at item 14 (see Exhibit 1, pages 1192 to 1193), the experts allowed a trade cost of $2,200 for a structural engineer to determine an appropriate method of rectification, and for the manufacture and installation of the engineered rectification.

  3. Taking account of the fact that the experts have clearly identified a defect in their written and oral evidence, I find that the overhanging frame is a structural defect in the construction of the Dwelling. I further find that the existence of this defect evidences a breach of the Warranty in s 18B(1)(a) of the HB Act, being a want of due care and skill on the Builder’s part. The consequence of the Builder’s submission at [34] – [35] of its Closing Written Submissions, if accepted by the Tribunal, would be that no order is made in respect of the Overhanging Frame. In my view, the Builder’s submission does not sit comfortably with its later submission that the Tribunal should, in respect of defects found in the construction of the Dwelling, direct the rectification/remediation of the defects by the Builder, as the ‘preferred outcome’ (HB Act, s 48MA(1)) under a works-order.

  4. Furthermore, in my opinion, for the Tribunal to make no order in respect of this defect, would be an outcome that is not consistent with the Tribunal’s guiding principle, which is to facilitate the just, quick, and cheap resolution of the real issues in the Proceeding: see the Civil and Administrative Tribunal Act 2013 NSW (NCAT Act) in s 36(1).

  5. For those reasons, I find that the Overhanging Frame should be rectified in accordance with the experts’ allowance of a trade cost of $2,200 for a structural engineer to determine an appropriate method of rectification, and for the manufacture and installation of the engineered rectification.

Breach 4 – Termite Management System

  1. For the Contract in Schedule 4: Description of Work under ‘Additional Inclusions’, the parties agreed that a termite management system would be installed for the Dwelling: see Exhibit 1 at page 18.

  2. In his report dated 16 November 2022 at 8.3 (Exhibit 1, pages 857 to 861) Mr Halpin observed that by comparison to the ‘HomeGuard Precision Termite Management Installation Manual’ (HomeGuard Manual), which is the product used on the Owners’ Dwelling, the methods adopted by the Builder in installing the system are defective, and in breach of the Warranty in s 18B(1)(a) of the HB Act. Specifically, the defect is in not ensuring that there is an adequate inspection zone for the Dwelling. Moreover, in respect of concreted areas at the front of the Dwelling, Mr Halpin observed that no system had been installed between the front of the Dwelling and the driveway, and further that there was not any, or any adequate, inspection space, between the unconcreted ground level perimeter and the Dwelling.

  3. Mr Dillon concurred with Mr Halpin that the termite management system which the Builder had installed to the Dwelling, was inconsistent with the HomeGuard Manual; but he did not, at least in his report, characterise the deviation by the Builder from the Manual, as a defect – see Mr Dillon’s report of 10 June 2023 at [46] – [55] (Exhibit 1 pages 1067 to 1070). In the report of 10 June 2023, Mr Dillon focused upon the necessity of the system, in circumstances where he said, referring to Part 3.4.1 (‘Requirements for termite management systems’) of the NCC, that the termite risk is otherwise addressed in the locality of the Dwelling, by the use (as had occurred in the build of the Dwelling) of H2 preservative treated timber.

  4. In his Scott Schedule dated 16 November 2022, at items 10 to 13, Mr Halpin set out a scope of works, and costings, for rectification/remediation of the termite management system. These do not appear in the experts’ Joint Scott Schedule, presumably because before Mr Dillon gave his oral evidence, he had maintained his position that no rectification was required other than the affixing of a Durable Notice to the Electrical meter box that states the method of termite management for the Dwelling.

  5. However, during his oral evidence in joint session with Mr Halpin on Day 1 of the hearing, Mr Dillon accepted that an inspection zone was necessary even if treated timber was utilised, and as such, that Mr Halpin’s scope of works, and costings, are appropriate: T Day 1 page 105.16-41. Mr Dillon further accepted that Mr Halpin’s measurements of the inspection zone required in respect of the unconcreted areas around the perimeter of the Dwelling were accurate, as they were taken at a time when landscaping had not been installed.

  6. I find that in breach of the Warranty in s 18B(1)(a) of the HB Act, the Builder did not install, and complete, a proper, and compliant, termite management system for the Dwelling, and that this is a defect, which must be rectified in accordance with Mr Halpin’s scope of works and costings.

What is the appropriate remedy?

  1. The Owners seek a money order (HB Act, s 48O(1)(a)) in respect of the defects, including incomplete work, referred to under Breaches 1, 2, 3, and 4, albeit a money order that is consistent with Mr Halpin’s scope of works and costings. They oppose any order that the Builder is to rectify defective or incomplete work on the Dwelling.

  2. On the other hand, the Builder argues for a works-order (HB Act, s 48O(1)(c)) in respect of the said defects, including incomplete work, preferably within the scope of works recommended by Mr Dillon, but in any event, within the scope of works found by the Tribunal for each defect. The Builder relies on s 48MA of the HB Act, which provides that the Tribunal is to have regard to the principle that rectification of the defective work by the responsible party (in this instance, the Builder) is the “preferred outcome”.

  3. 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]. While recognising that s 48MA is not, in terms, mandatory, but rather it is a factor to be taken account of in the exercise of a discretion about what orders should be made to resolve a building claim, the Appeal Panel observed, relevantly, in Leung v Alexakis [2018] NSWCATAP 11 at [140]:

Being expressed as a “preferred outcome”, [s 48MA] operates in the manner of a presumption. That is, unless the facts of the particular case make it inappropriate to order rectification of the defective work by the responsible party, an order should be made in terms that give effect to that principle.

  1. Likewise, Ball J said in The Owners – Strata Plan No 76674 v Di Blasio Constructions Pty Ltd (2014) NSWSC 1087 at [44]:

In the case of building contracts, it is also generally accepted that the owner must give the builder a reasonable opportunity to rectify any defects. Often, of course, the building contract itself requires the owner to repair defects or sets out a procedure by which defects are to be made good: see, eg, Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2009] NSWSC 1302; (2010) 26 BCL 335. But, even if it does not, the owner is required to give the builder an opportunity to minimise the damages it must pay by rectifying the defects, except where its refusal to give the builder that opportunity is reasonable or where the builder has repudiated the contract by refusing to conduct any repairs: see J Bailey, Construction Law, (Vol II, 2011, Informa Law) at [14.109]; Cassidy v Engwirda Construction Co (No 2) [1968] Qd R 159 (reversed on other grounds in Cassidy v Engwirda Construction Co (No 2) [1968] QWN 47 (HC); (1968) 42 ALJR 168). That obligation may be an aspect of the duty to mitigate, since it may be less expensive for the builder rather than a third party to rectify the defects, particularly if the builder is still on site. But the obligation is not simply an aspect of the duty to mitigate. The cost to the builder of undertaking the repairs is likely to be less than the amount that a third party would charge the owner for the same work. In that case, the owner is not mitigating its loss, but rather the builder’s damages.

  1. Accordingly, the Tribunal retains discretion as to whether (or not) in all the circumstances of a particular case, it is appropriate to make a works-order.

  2. On the available evidence, I am satisfied that this is not a case where the Tribunal should depart from the ‘preferred outcome’.

  3. In the Owners’ Closing Submissions received on 26 July 2024 at [123] – [127] reference is made to the Owners’ frustration with Mr Wilcox, who they say has been ‘delinquent’ in responding to, and rectifying, issues at the Dwelling, including the issues with the Barestone Cladding, the leaking window in the living room, the Overhanging Frame, and the Termite Management System. The Owners’ Closing Submissions further refer to Mr & Mrs Whittingham’s belief that they have no faith or trust that the Builder if ordered to return to the Property would complete rectification works directed by the Tribunal to the appropriate standard of care, skill, and proper workmanship. That belief was confirmed by them during Mr & Mrs Whittingham’s cross examination on Day 2 of the hearing: see T Day 2 page 29.1-11 (Mr Whittingham’s oral evidence) and T Day 2 page 44. 4-9 and page 47.11-28 (Mrs Whittingham’s oral evidence).

  4. While the relevant discretion of the Tribunal in the HB Act (s 48O(1)(c) and s 48MA) to make a works-order must be exercised objectively, and a relational breakdown between a homeowner and a builder is an element of the Tribunal’s objective assessment, it is also the case that personal animosities between a builder and a homeowner, in and of themselves, are not sufficient to displace the ‘preferred outcome’ in s 48MA. In my determination, the evidence does not support a conclusion that there has been a relational breakdown between the parties that is so severe, or even substantial, as would make the Builder’s return to the Property to carry out rectification works to the Dwelling as directed by the Tribunal, unviable.

  5. Pertinently also, Mrs Whittingham gave oral evidence on Day 2 of the hearing, that during the last several months she had received multiple emails from the Builder requesting permission to return to the Property to rectify defects: see T Day 2 page 45.1-5. Mrs Whittingham rightly conceded under cross examination, that if the Builder attended the Property with the intention to carry out rectification works, she would have no reason to refuse entry to the Builder, especially if the Builder was ordered by the Tribunal to carry out rectification works - see T Day 2 page 47.30-35.

  6. In all the circumstances of this case, I find that the appropriate remedy is to make a works-order for the Builder to do the rectification works, as required under these Reasons.

  7. In my opinion, a works-order of the Tribunal is a fair outcome for both parties, as well as an outcome which manages, efficiently and effectively, the competing interests, respectively, of the Owners and the Builder. Clearly, the Owners should have the defects in the Dwelling as identified in these Reasons, rectified, within the scope of works found by the Tribunal. as soon as practicable. For the Builder, a works-order allows it pursuant to the ‘preferred outcome’ (as referred to in the HB Act,) to rectify defects in the Dwelling, but at a cost to the Builder, which will be considerably less than if the Builder is ordered to pay money in an amount commensurate with the Owners’ expense of engaging a third party contractor. This is because a third party contractor would charge additional fees, like a builder’s margin (possibly as high as 30% on the aggregate of the trade costs), to carry out the rectification works.

  8. The Tribunal can facilitate a fair outcome for the Owners by making a works-order on terms including a reasonable time for compliance, comprehensive conditions for the Builder’s work, and inspection of the Builder’s work by the Builder’s expert, Mr Dillon, whom I find is the most suitable person considering that he is either the author of the required scope of works, or in the case of the rectification work for the Termite Management System, he is familiar with, and he agrees to, the Owners’ expert’s scope of works. As further protection of the interests of the Owners, a works-order made by the Tribunal under s 48O(1)(c) of the HB Act is subject to a right of renewal of the Owners under cl 8 of Sch 4 of the NCAT Act in the event of non-compliance with the works-order by the Builder.

  9. Additionally, a works-order for the Builder to carry out rectification works, as required under these Reasons, is reasonably likely, in my view, to be carried out efficiently, and effectively, and therefore, in accordance with the Tribunal’s guiding principle (NCAT Act, s 36(1)). In this respect, I am satisfied that the Builder and the Builder’s expert, Mr Dillon, are well appraised of what needs to be done to rectify the defects. This was certainly apparent from the oral evidence given by them during Days 1 and 2 of the hearing (see Transcript). Further, in viewing the video referred to in Mr Wilcox’s third affidavit, which became Exhibit 7 for the hearing, I observed the relative ease with which the defects identified by Mr Dillon in the Barestone Cladding affixed to the External of the Dwelling, can be rectified according to Mr Dillon’s scope of works.

Conclusion and Orders (including directions as to costs)

  1. For the above reasons, the Owners’ remedy for Breaches 1, 2, 3 and 4, is a works-order made pursuant to s 48O(1)(c) of the HB Act. The works-order is in the following terms and conditions:

  1. The Respondent is to undertake the rectification works set out in Annexure B and works required to comply with all applicable standards and codes as requested by the Inspector (together, referred to as the Rectification Works) in accordance with the terms and conditions set out in Annexure A, at its expense.

  2. The Respondent is to arrange at that party’s cost and expense, for Mr David John Dillon, (the Inspector) to inspect the performance of the Rectification Works as reasonably required to allow the Inspector to be satisfied that the Rectification Works have been performed satisfactorily.

  3. Should the Respondent not comply with these Orders, the Applicants are entitled to renew the Proceeding in accordance with clause 8 of Schedule 4 of the NCAT Act.

  1. The costs of the Proceeding are an issue I would expect the parties and their legal representatives to discuss cooperatively with a view to reaching agreement, noting that Rule 38 of the Civil and Administrative Tribunal Rules 2014 (NSW) applies to the Proceeding, and observing also that the Owners and the Builder have had, respectively, mixed success, and failure, on the various substantive issues in the Proceeding.

  2. However, if the parties are unable to reach agreement on the issue of costs, or there are circumstances of which I am unaware, I make further directions to deal with the issue of costs only, as follows:

  1. If any party (costs’ applicant) 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 21 days of the date of these orders.

  2. Leave is granted to the other party (costs’ respondent) to file and serve a short written submission in reply (no more than 5 A4 size pages) within 35 days of the date of these orders.

  3. The costs’ applicant may file and serve any short written submission (no more than 3 A4 size pages) strictly in response to a costs’ respondent’s submissions within 42 days of the date of these orders.

  4. 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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ANNEXURE A -   TERMS AND CONDITIONS TO WORKS-ORDER

  1. In this Annexure A, the following words and expressions have the following meaning:

  • Proceedings means proceedings numbered 2023/00412213 (formerly HB 23/04229) in the Tribunal.

  • Property means the Dwelling referred to in the Reasons situated at Orange, New South Wales.

  • Tribunal means the NSW Civil & Administrative Tribunal.

Quality of Construction

The Rectification Works will comply with:

  1. The National Construction Code of Australia,

  2. All relevant codes, standards, and specifications that the Rectification Works is required to comply with under any law,

  3. The statutory warranties contained in section 18B of the Home Building Act 1989 NSW.

Licencing Requirement

  1. The Respondent will maintain a valid contractor’s licence in accordance with the requirements of the Home Building Act 1989 NSW for the duration of the Rectification Works.

Statutory Approval

  1. If the approval of the local council or other statutory authority is required to complete the Rectification Works, and that approval has not been sought by the date of this Work Order, the Respondent must apply for such approval to complete the Rectification Works and the costs and fees associated with such approval are to be the sole obligation of the Respondent.

Time for Completion

  1. The Respondent must complete the Rectification Works within eight (8) weeks of the date of these Orders.

  2. The Respondent will be entitled to a reasonable extension of time in the event of delays to the Rectification Works where the cause of the delay is beyond the Respondent’s reasonable control. The Respondent must take all reasonable steps to minimise any delay to the Rectification Works. Any claims for extensions of time must be notified in writing to the Applicants within 7 days and any dispute as to extensions to be determined by the Inspector.

Completion of the Rectification Works

  1. When the Respondent considers that the Rectification Works have been satisfactorily completed, the Respondent will provide to the Applicants and the Inspector written notice that the Rectification Works have been satisfactorily completed in accordance with this Work Order and are ready for final inspection by the Inspector.

  2. The Rectification Works will not be considered complete until the Inspector is satisfied that the Rectification Works are complete in accordance with Annexure B and has informed the Respondent and Applicants that he agrees that the Rectification Works are complete.

Insurance of Work and Personal Injury

  1. Before the Respondent commences the Rectification Works at the Property, the Respondent must provide to the Applicants evidence of:

  1. Contractor’s all risk insurance incorporating public liability insurance to cover liabilities to third parties for death or personal injury or damage to property for an amount not less than $10,000,000.00.

  2. Workers compensation insurance in accordance with the applicable legislation.

Respondent’s Indemnity in Favour of Applicants

  1. The Respondent will indemnify the Applicants against any loss or liability for death, personal injury, or property damage and against any loss, cost, charge, or expense incurred or likely to be incurred or sustained by the Applicants, arising out of, or as a consequence of, the carrying out of the Rectification Works.

  2. If such liability, loss, cost, charge, or expense arises in whole or in part through the negligence of the Applicants, the extent of the Respondent’s indemnity will be reduced by the extent that the Applicants contributed to the liability, loss, cost charge or expense.

Damage to Property

  1. The Respondent is to make good any loss or damage to the Rectification Works or the Property of the Applicants, which is caused by the Respondent or the Respondent’s employees, agents, or subcontractors.

Access for Respondent

  1. The Applicants must provide access for the Respondent and any employee or subcontractor of the Respondent as and when required on two business days’ notice. The Respondent acknowledges that all Rectification Works must be carried between 7am and 5pm Monday to Friday, unless otherwise agreed in writing.

Maintaining Access, Minimal Disturbance and Cleaning Up

  1. The Respondent must ensure that the Rectification Works do not unreasonably interfere with access to the Property for the Applicants and occupiers of the Property.

  2. The Respondent must take all reasonable steps to minimise disruption to the Applicants and occupiers of the Property in the performance of the Rectification Works.

  3. On completion of the Rectification Works the Respondent must remove from the Property all plant and equipment and dispose of all rubbish, excavated materials, demolished or dismantled structures and surplus material relating to the Rectification Works. The Respondent must then clean and make good all work areas.

Defects in Rectification Works

  1. The Respondent must make good any omissions or defects in the Rectification Works or materials which become apparent within the period of 42 weeks from the date the Rectification Works are completed. The Applicants are to notify the Respondent in writing of any omissions or defects to be rectified and the Respondent is to promptly make good the work or materials at the Respondent’s expense. This does not affect the Applicants’ rights of renewal of these proceedings in the Tribunal.

Work Health and Safety

  1. The Respondent accepts the appointment as the “Principal Contractor” for the purposes of the Work Health and Safety Act 2011 NSW and the Work, Health, and Safety Regulation 2017 NSW in respect of the Rectification Works.

ANNEXURE B -   RECTIFICATION WORKS

With reference to the work order in [100] of the Reasons and the following reports, schedules, and transcript:

  1. Report prepared by Mr Jeffrey Halpin (Mr Halpin) dated 16 November 2022 (Halpin Report), at pages 828 to 875 of Exhibit 1,

  2. Scott Schedule prepared by Mr Halpin dated 16 November 2022 (Halpin Scott Schedule), at pages 876 to 890 of Exhibit 1,

  3. Report prepared by Mr David John Dillon (Mr Dillon) dated 10 June 2023 (Dillon Report), at pages 1058 to 1125 of Exhibit 1,

  4. Supplementary Report prepared by Mr Dillon dated 3 October 2023 (Dillon Supplementary Report), at pages 1126 to 1166 of Exhibit 1,

  5. Scott Schedule prepared by Mr Dillon dated 3 October 2023 (Dillon Scott Schedule), at pages 1167 to 1180 of Exhibit 1,

  6. Joint Scott Schedule prepared by Mr Halpin and Mr Dillon dated 3 October 2023 (Joint Scott Schedule) at pages 1181 to 1194 of Exhibit 1

  7. Transcript of Day 1 of the Hearing on 17 April 2024 (Day 1 Transcript).

The Rectification Works are set out as follows:

Item

Works Required

Item 1

Barestone Cladding, affixed to the External of the Dwelling

The works described in the Dillon report at [10] – [37] (Exhibit 1 pages 1063 to 1066) and in the Dillon Supplementary Report (Exhibit 1 pages 1126 to 1166), and as per the works set out in the Respondent Column under ‘Comments’ and ‘Estimates of Loss’ in the Joint Scott Schedule and in the Dillon Scott Schedule.

Item 2

Leaking window in the living room of the Dwelling

Flashing to be installed in compliance with the National Construction Code (NCC) to the leaking window in the living room of the Dwelling, as described in [38] – [41] of the Dillon Report (exhibit 1 page 1065), and in the Dillon Supplementary Report, especially at page 1136 of Exhibit 1, and as per item 6 of the Dillon Scott Schedule.

Item 3

Overhanging Frame

The installation of a suitably Engineered galvanised steel angle attached to the concrete edge to support the overhanging timber wall frame, as indicated in the Dillon report at [45] (Exhibit 1, page 1067), see also the Joint Scott Schedule item 14 (Exhibit 1, pages 1192 to 1193).

The Respondent must engage an appropriately qualified structural engineer to provide the specifications for the galvanised steel angle to be manufactured and installed to the Dwelling.

Item 4

Termite Management System

The works set out in the Halpin Scott Schedule as items 10, 11, 12, and 13, and as described in the Halpin report at 8.3 (Exhibit 1, pages 857 to 861); see also Day 1 Transcript page 105. 16-41.

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: 04 April 2025

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