Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Krolczyk v Winner t/as J Winner Building Services (No 2) [2022] NSWCA 241 Hearing dates: On the papers Date of orders: 29 November 2022 Decision date: 29 November 2022 Before: White JA at [1] Kirk JA at [2] Griffiths AJA at [3] Decision: (1) The appeal be allowed in part. (2) There be no order as to costs of the appeal. (3) The orders dated 9 August 2021 and 20 October 2021 of the District Court be set aside and replaced by the following orders: (a) Judgment for the plaintiffs against the first defendant. (b) The first defendant pay the plaintiffs $25,790.43 by way of damages. (c) The plaintiffs pay two-thirds of the costs of the first defendant. Catchwords: JUDGMENTS AND ORDERS – Orders to give effect to reasons in principal judgment Legislation Cited: Civil Procedure Act 2005 (NSW) Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: Krolczyk v Winner t/as J Winner Building Services [2022] NSWCA 196 Category: Consequential orders Parties: Ted Peter John Krolczyk (First Appellant) Janice Margaret Muir (Second Appellant) Jarad Keith Winner trading as J Winner Building Services (Respondent) Representation: Counsel: D O'Connor with C Langford (Appellants) M Klooster (Respondent) Solicitors: Adams & Partners Lawyers (Appellants) Michael Atkinson & Associates (Respondent) File Number(s): 2021/00243855 Publication restriction: Nil Decision under appeal Court or tribunal: District Court Jurisdiction: Civil Citation: NA Date of Decision: 9 August 2021 and 20 October 2021 Before: Olsson SC DCJ File Number(s): 2018/00133146 [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] Judgment 1. WHITE JA: I agree with Griffiths AJA. 2. KIRK JA: I agree with Griffiths AJA. 3. GRIFFITHS AJA: These reasons for judgment relate to the making of final orders arising from the Court's reasons for judgment published on 5 October 2022 (see Krolczyk v Winner t/as J Winner Building Services [2022] NSWCA 196) (Appeal Judgment). The two sets of reasons should be read together. 4. In the Appeal Judgment, the Court made orders which required the parties to seek to agree proposed short minutes of order giving effect to those reasons including as to the costs of the appeal and the costs below. The parties were given an opportunity to file short written submissions on their respective positions if they were unable to agree those matters. The parties were advised that final orders would then be made on the papers and without a further oral hearing. 5. Having regard to the history of the proceedings, it is perhaps unsurprising (but nevertheless regrettable) that the parties were unable to reach agreement on the final orders. 6. It is unnecessary to summarise at any length the Appeal Judgment. It is relevant, however, to note the following relevant features of both the proceedings below and the appeal. 7. The appellants' primary case both below and on appeal was that the respondent was the builder and/or supervisor of the building works carried out at the Windsor property. The appellants alleged that the respondent had failed to carry out certain works with due care and skill, that the works were defective and required rectification. The appellants sought damages, primarily in contract and negligence. 8. The primary judge gave verdict for the respondent (the first defendant below) in respect of the claims against him and, in a separate judgment, ordered the appellants to pay his costs on an indemnity basis. 9. The appellants raised 11 grounds of appeal. The primary issue was again whether the respondent was the builder and/or supervisor of the works (grounds 1 and 2). The appellants failed on these grounds, as they also did on all the other grounds of appeal apart from enjoying some success in respect of the following matters: 1. the respondent's responsibility for defective wall framing and related work (constituting items 1, 4 and 5), and noting that in oral address in the appeal the respondent conceded his liability in respect of item 4 (see Appeal Judgment at [176] to [177]); 2. mitigation of the appellants' losses (ground 6); and 3. the primary judge's award of indemnity costs against the appellants below (ground 11). 1. As was observed at [222] of the Appeal Judgment, the appellants enjoyed only "limited success on the appeal and the issue of indemnity costs". The parties' respective positions on final orders 1. The appellants sought the following final orders: 1. Allow the appeal. 2. The orders made by Olsson SC DCJ on 9 August 2021 (Krolczyk v Winner t/as J Winner Building Services (District Court (NSW), unrep) and on 20 October 2021 (Krolczyk v Winner t/as J Winner Building Services (District Court (NSW), unrep) are set aside and in their place the following orders are made: 1. Verdict for the plaintiffs against the first defendant. 2. First defendant to pay to the plaintiffs $83,490 by way of damages. 3. First defendant to pay the plaintiffs' costs on the ordinary basis as agreed or assessed. 1. The respondent pay 70% of the appellants' costs of the appeal on the ordinary basis. 1. In contrast, the respondent sought the following final orders: 1. Judgment in favour of the Appellants in the amount of $25,992.83. 2. That there be no Order to costs with respect to the Appeal. 3. The plaintiffs pay the first defendant's costs below or, alternatively, there be no order as to costs (see [42] of the respondent's outline of submissions on final orders). It might be noted that earlier in his written outline of submissions on final orders, the respondent said at [3(c)] and [35] that there should be no order as to costs below). 1. In the following reasons I shall explain why I consider the following final orders to be appropriate: 1. The appeal be allowed in part. 2. There be no order as to costs of the appeal. 3. The orders dated 9 August 2021 and 20 October 2021 of the District Court be set aside and replaced by the following orders: 1. Judgment for the plaintiffs against the first defendant. 2. The first defendant pay the plaintiffs $25,790.43 by way of damages. 3. The plaintiffs pay two-thirds of the costs of the first defendant. Reasons for final orders 1. It is important to emphasise at the outset that, in the proceedings below, the appellants sought total damages (by way of rectification costs) in the amount of $145,450 (including GST). They also sought relocation costs in the amount of $54,000 (being the difference between their stated total claim below of $199,450 (including relocation costs) and their claim for rectification costs in the amount of $145,450), in relation to which they were unsuccessful and this ruling was not appealed by them. 2. The appellants' success with relation to specific defective items related to items 1, 4 and 5 (wall framing and related issues) raised by their aide memoire (see the Appeal Judgment at [176]). It is convenient to first address the quantum of damages in respect of Items 1 and 5, which concern demolition of the upper floor, wall and roof and construction of the same respectively. As noted, in the Appeal Judgment at [178] the Court determined that an amount of $4,110 (excluding preliminaries, margin and GST) should be awarded in respect of item 4 (construction of wall framing). Item 1 1. As to item 1, in their Joint Expert Building Report the parties' respective experts gave estimates of the cost of demolishing the roof, wall and first floor framing. As the respondent pointed out, the appellants' costings for this Item included the cost to demolish the particleboard flooring and plywood floor framing which cannot be attributed to the respondent. The appellants' expert (Mr Bruce Frizzell) estimated the cost of demolishing the roof, wall and first floor framing to be $23,491.38 (excluding preliminaries, margin and GST). The respondent's expert (Mr Stefan Iskowicz) estimated the cost of a partial demolition to be $10,420.00 (excluding preliminaries, margin and GST). 2. With respect to the costs to demolish the roof framing, the experts used different methodologies: 1. Mr Iskowicz assessed the number of hours to carry out the demolition of the roof framing manually and allowed $2,080.00. 2. Mr Frizzell identified the total square meterage of the roof framing and then applied a rate from Cordell Building Cost Guide (Cordell Guide) and arrived at a figure of $9,087.00. 1. Similar approaches were adoped by the experts in estimating the cost of demolishing the wall framing with Mr Iskowicz allowing $2,080.00 and Mr Frizzell allowing $1,297.54. 2. The methodology of Mr Iskowicz is preferred for the following reasons: 1. Mr Frizzell acknowledged that there was nothing wrong with the methodology used by Mr Iskowicz and acknowledged that sometimes such an approach had to be taken because the Cordell Guide does not have enough detail [Black 269D-F]. He also accepted that sometimes the Cordell Guide "require[s] an adjustment of some kind". 2. The methodology used by Mr Iskowicz was not challenged in cross-examination. 3. Mr Iskowicz's methodology provides a more accurate assessment of the likely cost to carry out the work in circumstances where his costings are: 1. true based on his 40 years' building and construction experience and supervising and administering remedial building works; and 2. cross-referenced and consistent with published rates. 1. Mr Frizzell relied on Cordell Guide rates alone, which he frankly conceded are used for estimating purposes and require adjustments accurately to reflect real construction costs. 2. For example, Mr Iskowicz has allowed for the cost of 6 waste bins at $160.00 each to deposit and remove the particleboard flooring. Each waste bin can hold 6 cubic metres of material. The approach adopted by Mr Iskowicz provides more detailed costings on individual components, such as for waste bins and scaffold hire. This provides the Court with a basis properly to determine whether the expenditure of money on the proposed rectification is reasonable. 1. There was a further contest between the experts as to the use of a crane. Mr Iskowicz allowed for a crane for one day at a cost of $1,360.00 to lower the steel beams from the first floor level. Mr Frizzell allowed the use of a crane for 16 hours (ie roughly two days) at a cost of $3,600.00 and stated that such cost is to "remove steel beams". Mr Frizzell has allowed for a crane to remove all steel beams, which must include the 6 steel beams that form part of the particleboard flooring and plywood floor framing for which the respondent has no liability (Appeal Judgment at [182]). His responsibility extends only to the 4 steel beams that form part of the roof. Accordingly, Mr Iskowicz's costings for the crane are preferred. 2. An amount of $9,335.70 should be allowed for item 1, calculated as follows: Mr Iskowicz's total costings $10,420.00 Less demolition costs of particleboard flooring (item 4) -$2,080.00 Less 6 skip bins at $160.00 each (item 5) -$960.00 Sub Total 1 $7,380.00 Margin at 15% $1,107.00 Sub Total 2 $8,487.00 GST $848.70 Total $9,335.70 Item 5 1. In relation to item 5, Mr Frizzell estimated that the cost of reconstructing the roof framing was $28,626.30. That estimate included the costs of: bearers and rafters; crane hire to install steel beams and roof framing; labour; miscellaneous materials; site welding of steel beams; and assessment by an engineer." Again, Mr Frizzell allowed for 16 hours' crane hire and indicated that he relied on the rates published in the Cordell Guide (this item totalled $3,600.00). 2. Mr Iskowicz, by contrast, estimated the cost of the roof framing reconstruction in the amount of $15,610.00. He allowed one day's crane hire (totalling $1,360.00) which for reasons given above is preferred. 3. As to the experts' specific costings: 1. Mr Frizzell's costing of $8,766.00 in respect of "Labour for miscellaneous works" is rejected. The figure is not explained and there is no proper basis for the Court to assess whether it is reasonable. 2. Mr Frizzell's crane hire charge must include installation of steel beams that form part of the flooring for which the respondent has no liability. The costing of Mr Iskowicz for the crane is preferred. 3. Mr Iskowicz's square meterage (which is less than the meterage allowed by Mr Frizzell) is preferred in circumstances where Mr Frizzell's total square meterage for certain items exceeds the total area of the roof on Mr Frizzell's own evidence e.g. "Rafters – LVL" (180m2) which is more than the total area of the roof framing (156m2). 1. Mr Iskowicz gave unchallenged evidence that materials that were salvageable comprised approximately 57% of the construction costs of the floor, wall and roof frame. This figure should be accepted. The appellants' contention that the figure should be reduced because the Court should assume that the materials have deteriorated even further since March 2018 when Mr Iskowicz gave his first report (erroneously recorded as March 2017). But this was never put to Mr Iskowicz in cross-examination and there is no evidence to guide the Court in calculating a figure to reflect any such further deterioration. 2. An amount of $11,255.58 should be allowed for Item 5, calculated as follows: 57% of Mr Iskowicz's costings to allow for salvageable items $8,897.70 Margin at 15% $1,334.65 Sub Total 2 $10,232.35 GST $1,023.23 Total $11,255.58 1. For these reasons, judgment should be entered in favour of the plaintiffs below in the amount of $25,790.43 calculated as follows: Item 4 plus margin at 15% and GST $5,199.15 Item 1 $9,335.70 Item 5 $11,255.58 Total $25,790.43 Costs of the proceedings below and the appeal 1. The parties were in broad agreement as to the broad principles relating to the exercise of discretion under ss 60 and 98 of the Civil Procedure Act 2005 (NSW) and Uniform Civil Procedure Rules 2005 (NSW) r 42.1 (UCPR). 2. The appellants have enjoyed "only limited success". They lost on most of their grounds of appeal, which took up a large amount of time at the hearing and also dominated their written submissions. This is reflected in the fact that the grounds of appeal on which the appellants succeeded were the subject of approximately 20% of their outline of written submissions in chief and less than 10% of their written submissions in reply. It is also well to bear in mind that the appellants' damages will be assessed at approximately $26,000, which is to be contrasted with the amount of $145,450 sought by them in respect of rectification works. There is considerable force in the respondent's submission that there is a significant disproportion between this relatively modest amount of damages and the costs of the proceedings. These matters are relevant for the purposes of ss 60 and 98 of the Civil Procedure Act. 3. Insofar as the costs of the proceeding below are concerned, the respondent has pointed to the fact that, if the appellants obtain an award of damages less than $40,000, there would be no automatic entitlement for them to obtain an order for costs in their favour on a "costs follow the event basis", having regard to UCPR r 42.35 (in those circumstances, the appellants would need to persuade the Court that the commencement and continuation of proceedings in the District Court, rather than the Local Court, was warranted). 4. As noted above, the respondent's outline of written submissions on final orders contained inconsistent statements regarding costs of the proceedings below. Assuming, however, that the respondent's preferred position is that there be some award of costs in his favour for the proceedings below, it is relevant to note that the respondent (as the first defendant below) enjoyed substantial success in those proceedings, most of which has not been disturbed on appeal. 5. It should also be noted that the appellants' failure below included matters which were not the subject of the appeal. This included their claims in relation to alleged negligent misstatement (which were alternatively framed as misleading and deceptive conduct), as well as their unsuccessful claim for the costs of relocation, which again was not pursued on the appeal. 6. Taking all these matters into account, I consider that the plaintiffs should pay two-thirds of the first defendant's costs below. 7. As to the costs of the appeal, many of the matters described above also favour there being no order as to costs. The appellants failed on far more grounds than they won. Moreover, the grounds on which they failed took up considerably more time and resources than those on which they succeeded. There should be no order as to costs of the appeal. Conclusion 1. For all these reasons, the following final orders should be made. 1. The appeal be allowed in part. 2. There be no order as to costs of the appeal. 3. The orders dated 9 August 2021 and 20 October 2021 of the District Court be set aside and replaced by the following orders: 1. Judgment for the plaintiffs against the first defendant. 2. The first defendant pay the plaintiffs $25,790.43 by way of damages. 3. The plaintiffs pay two-thirds of the costs of the first defendant. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 29 November 2022