Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Shaw v 3D Design and Build Pty Ltd [2015] NSWCATAP 117 Hearing dates: On the papers Date of orders: 23 June 2015 Decision date: 23 June 2015 Jurisdiction: Appeal Panel Before: N Hennessy LCM, Deputy President R Titterton, Senior Member Decision: 1. Leave is refused for the appellants to appeal on grounds other than questions of law. 2. The appeal is dismissed. Catchwords: CIVIL AND ADMINISTRATIVE TRIBUNAL dispute under Home Building Act 1989 (NSW) – error of law – asking the wrong question – error of law identified – new hearing on facts found by Tribunal below – same decision - appeal dismissed. Legislation Cited: Civil and Administrative Tribunal Act 2013 (NSW) Environmental Planning and Assessment Act 1979 (NSW) Home Building Act 1989 (NSW) Cases Cited: Craig v State of South Australia (1995) 184 CLR 163 Minister for Immigration and Multicultural Affairs v Yusuf (2001) 206 CLR 323 Texts Cited: Dr Damien Cremean and others, Brooking on Building Contracts (5th ed, Lexis Nexis Butterworths Australia) Philip Bambagiotti, Building Disputes and the Home Building Act 1989 (NSW), (2012, Law Book Co) Category: Principal judgment Parties: Leonie Shaw and Rodney Curry (Appellants) 3D Design and Build Pty Ltd (Respondent) Representation: Solicitors: Macquarie Legal Centre (Appellants) CA Williams Legal (Respondent) File Number(s): AP 14/47303 Decision under appeal Court or tribunal: Civil and Administrative Tribunal Jurisdiction: Consumer and Commercial Division Date of Decision: 3 September 2014 Before: C Paull, Senior Member File Number(s): HB 14/10675 REASONS for decision Introduction 1. Ms Leonie Shaw and Mr Rodney Curry (the homeowners) have appealed from a decision of the Consumer and Commercial Division of the Tribunal (the Tribunal) dated 3 September 2014. In that decision the Tribunal dismissed the application brought by the homeowners against 3D Design and Build Pty Ltd (the builder). 2. For the reasons that follow we consider that the Tribunal failed to ask itself the right questions. When the correct questions were asked and answered, the Appeal Panel came to the same conclusion as the Tribunal. For that reason the appeal is dismissed. The Tribunal's reasons 1. The Tribunal found that on 3 November 2013 the homeowners entered into a written contract pursuant to which the builder was to carry out residential building work as defined under the Home Building Act 1989 (NSW). This work consisted of the builder constructing a residential dwelling, including excavating, levelling and laying a slab on which the house was to be constructed. The contract did not include excavating, levelling and laying a slab on which a shed adjacent to the house was to be constructed. 2. The development consent issued by Camden Council on 11 October 2013 included levels for both sites. The Tribunal found that after a subcontractor, which we understand is SRC Contracting Pty Ltd, finished work on the house site it was 590 mm higher than the Council approved levels under the development consent. On 19 December 2013 the Council issued notices under the Environmental Planning and Assessment Act 1979 (NSW) requiring the removal of the fill laid by "Mr Scott" (presumably a reference to Mr Scott Russell, who we understand is the managing director of SRC Contracting Pty Ltd) and the removal of the concrete slab laid by another person. The cost of the removal of the fill and the concrete slab formed the bulk of the homeowners' claim. 3. The builder denied that it was liable for the homeowners' damages and sought the costs it had incurred for unpaid work together with loss of profits and interest. The Tribunal noted that the builder had not filed a cross-claim and, for that reason, did not consider the builder's claim. The builder has informed the Appeal Panel that it has now filed a cross-claim, but that claim has been stayed pending the Appeal Panel's decision in this matter. 4. The Tribunal found that on 2 December 2013 Mr Scott Russell and his father attended the premises and the builder employed "Mr Russell" (presumably a reference to Mr Scott Russell) as a sub-contractor, to carry out the excavation and building work on the house site pursuant to the contract. In addition, the homeowners "directly engaged Mr Russell", on the same date, to carry out the excavation and levelling work on the shed site, for $300.00. 5. Mr Scott Russell's evidence was that he imported three truck or trailer loads of fill onto the site on 2 December 2013 and proceeded to use the fill to raise the level of the house site by 590 mm at the request of Ms Shaw, one of the homeowners. Mr Russell conceded that on 11 November 2013 the builder had forwarded him a copy of the development consent showing the required level of the house site, but stated that Ms Shaw asked for the change in the levels. Mr Russell said that he acquiesced to Ms Shaw's request because of his concern for her health and because access would be easier for her as her health deteriorated if the house (and shed) sites were raised. 6. Mr Russell assumed that the builder was aware of Ms Shaw's request, but clarified in cross examination that although a representative of the builder was around on the site on 2 December 2013, he was not a party to the conversation with Ms Shaw. 7. Ms Shaw gave sworn evidence denying that this conversation took place. The homeowners conceded that they instructed Mr Russell to raise the shed levels as they considered them too low and wanted the levels raised for easier access and aesthetic reasons. In relation to the house site their position was that either Mr Russell and/or the builder took it upon themselves to act in breach of the development consent, by raising the house site levels without their knowledge or consent. 8. The builder's case was that, unbeknown to it, one of the homeowners, Ms Shaw, instructed Mr Russell to raise the levels of the house site with imported fill. The reasons record at [29] that "the builder gave sworn evidence that he had no knowledge of the change in the house site levels" until he returned the next day. He said that the appearance of the foreign soil and the increase in height level were immediately apparent. 9. The Tribunal found, having heard the evidence of the parties, that on 2 December 2013, Ms Shaw, without the builder's consent, instructed Mr Russell to import and lay the soil fill on the house site. The Tribunal found that it was implausible that Mr Russell would raise the house site levels for no apparent reason, and that the only plausible, "indeed the only reason" provided to explain this was that it was at the homeowners' request. The Tribunal found that it was "somewhat disingenuous for [the homeowners] to contend that while they took it completely upon themselves to request the shed site levels be raised by foreign soil fill on 2 December 2013, they remained oblivious to what took place on the house site levels on that date". The Tribunal further found that the homeowners' action was consistent with having requested Mr Russell to do that work. 10. The Tribunal identified the 'pivotal' factual issue as "[W]hy did Mr Russell fail to comply with the Consent?" In answer to that question the Tribunal found that "the cause of the problem" was "the fill which Mr Russell imported and placed on the house site." The Tribunal concluded that, "It is this that raised the house site levels beyond that approved by Council. Thus when the concreter came to prepare and pour the slab, the breach had already occurred." 11. The summary findings make it clear that the breach to which the Tribunal refers is the breach of the Council's development consent. The Tribunal found, as a matter of fact, that the building works did not comply with the Council's development consent and concluded that the builder had breached that consent. In summary, the Tribunal found that: "On 2 December 2013 the homeowners instructed the excavator, Mr Russell, to raise the house site levels by importing foreign soil onto that site. As a result of these instructions the house site levels were raised in breach of the Consent. The homeowners gave these instructions to Mr Russell without consulting or seeking the builder's advice." 1. Finally, The Tribunal considered the effect of s 18F of the Home Building Act which provides a defence in proceedings for a breach of statutory warranty. It found that that provision does not apply in this case. 2. Without further explanation, the Tribunal concluded that, as a result of the three factual findings listed above: "The homeowners cannot therefore claim that this breach is a deficiency for which the builder is liable." 1. On that basis, the Tribunal dismissed the home owners' application. Application for extension of time to lodge evidence 1. For the following reasons we did not extend time for the homeowners to file and serve parts of the transcript of the proceedings below as evidence on appeal. 2. The Notice of Appeal was filed on 3 September 2014. On 18 November 2014 the Appeal Panel made directions for the homeowners to file and serve submissions or other material by 14 December 2014 and for the builder to file and serve its submissions or other material by 16 January 2015. The appeal was to be heard 'on the papers' after 16 January 2015. 3. In their Notice of Appeal the homeowners stated that they were waiting on a sound recording of the proceedings before the Tribunal. The homeowners wrote in a letter to the Tribunal of 19 February 2015, that: "We are awaiting [the] sound recording therefore we must paraphrase Mr Russell's answer to the Member's pivotal question that the Member implies is the essence of the case and the Decision. Mr Russell's testimony for the respondent states words to the effect, 'this uncertified fill came from one of my other sites'." 1. Assuming that the homeowners must have ordered the transcript but that it had not yet been received, the Tribunal wrote to the parties on 19 February 2015 stating that: "If the [homeowners] wish to file the sound recording of the hearing and make submissions limited to this issue (namely Mr Russell's testimony as to the uncertified fill) the appellant has leave to do so on or before 6 March 2015." 1. The homeowners replied saying that they did wish to file the sound recording and make further submissions but requested an extension of time to do so. It is apparent from that submission that the homeowners had not ordered the transcript and there was insufficient time before 6 March 2015 for them to obtain the transcript and make submissions. The homeowners applied for the transcript on 25 February 2015. They said that the transcript would not be available until at least 20 March 2015. 2. The builder opposed the application for extension of time making the point that the homeowners had had ample time to apply for the transcript. We agree with that submission and also accept the builder's submission that the source and certification of the fill is not relevant to any issue on appeal. The builder also submitted, and we accept, that as its application against the homeowners in the Tribunal had been stayed pending the Appeal Panel's decision, it would be prejudiced by a further delay of six weeks. 3. The Appeal Panel took into account the fact that Ms Shaw was experiencing severe medical issues and would be unable to give further instructions for at least six business days. However, in all the circumstances, it was not in the interests of justice for an extension of time to be granted. Accordingly, the application was refused. Grounds of appeal 1. The Civil and Administrative Tribunal Act 2013 (NSW) (the NCAT Act) sets out the basis upon which appeals from decisions of the Consumer and Commercial Division may be brought. Section 80(2)(b) states that an appeal may be made as of right on any question of law or with leave of the Appeal Panel on any other grounds. 2. Under Schedule 4, cl 12 of the NCAT Act appeals from decisions of the Consumer and Commercial Division, other than on questions of law, can only be brought if the Tribunal is satisfied that the appellant may have suffered a substantial miscarriage of justice for various reasons: "12 Limitations on internal appeals against Division decisions (1) An Appeal Panel may grant leave under section 80 (2) (b) of this Act for an internal appeal against a Division decision only if the Appeal Panel is satisfied the appellant may have suffered a substantial miscarriage of justice because: (a) the decision of the Tribunal under appeal was not fair and equitable, or (b) the decision of the Tribunal under appeal was against the weight of evidence, or (c) significant new evidence has arisen (being evidence that was not reasonably available at the time the proceedings under appeal were being dealt with). Note : Under section 80 of this Act, a party to proceedings in which a Division decision that is an internally appealable decision is made may appeal against the decision on a question of law as of right. The leave of the Appeal Panel is required for an internal appeal on any other grounds. (2) Despite section 80 (2) (b) of this Act, an internal appeal against a Division decision may only be made on a question of law (as of right) and not on any other grounds (even with leave) if: (a) the appellant is a corporation and the appeal relates to a dispute in respect of which the Tribunal at first instance had jurisdiction because of the operation of Schedule 3 to the Credit (Commonwealth Powers) Act 2010 , or (b) the appeal is an appeal against an order of the Tribunal for the termination of a tenancy under the Residential Tenancies Act 2010 and a warrant of possession has been executed in relation to that order." Grounds of appeal other than on questions of law 1. The Notice of Appeal states that the homeowners may have suffered a substantial miscarriage of justice because the decision of the Tribunal was not fair and equitable and was against the weight of the evidence. However, in their written submissions of 4 December 2014, the homeowners advised that that these grounds of appeal were to be "dispensed with", on account of Ms Shaw's ill health. They said that they wished to avoid applying for leave to appeal and therefore wished to appeal only on the basis of there being an error of law. 2. Despite abandoning the appeal on grounds other than questions of law, both parties purported to file fresh evidence. We assume that that evidence was filed on the basis that it was significant new evidence which had arisen since the Tribunal hearing and which was not reasonably available at the time of those proceedings: NCAT Act, Sch 4, cl 12(1)(c). We refuse leave to appeal on that ground for the following reasons. 3. The homeowners filed voluminous materials in the appeal. In particular, they filed what they described as "new" expert evidence of Mr Tony Ransley of Tyrells Property Inspections Pty Ltd. Mr Ransley had prepared a report dated 2 December 2014 Apparently Mr Ransley had prepared an earlier report dated 11 February 2014, to which he refers and which we assume was relied on by the homeowners in the proceedings below. 4. The report of 2 December 2014 refers to "further documents you [i.e. the homeowners] have been provided with." These documents appear to include fresh evidence filed in the appeal by the builder. But the materials also include documents dated November and December 2013. 5. To the extent that the report of 2 December 2014 responds to materials which were available at the time of the hearing, no reason has been advanced as to why the new evidence is significant or why it was not reasonably available at the time the proceedings under appeal: NCAT Act, Sch 4, cl 12(1)(c). 6. To the extent that the new report responds to fresh evidence now relied on by the builder, as we indicate below, we do not consider that the builder's evidence should be considered in the appeal. Accordingly, we have paid no regard to the report of Mr Ransley of 2 December 2014. 7. The homeowners also seek to rely on a statutory declaration of Michael Shanahan of 11 November 2014. Mr Shanahan rebuts an assertion made by the builder in its submissions that he was approached by the homeowners "to continue with the certifying [of] the construction". That evidence does not comply with the requirements of Sch 4, cl 12(1)(c) and we have not taken that statutory declaration into account. 8. On 11 February 2015 the builder filed over 150 pages of materials on which it wished to rely. Those materials include an affidavit of Mr Scott Russell, an affidavit of Mr Rob Russell and an affidavit of Mr Steven Pohl all dated 10 February 2015. These affidavits were prepared by the builder for the cross-claim against the homeowners (proceedings HB 14/47069). As we have said, these proceedings have apparently been stayed pending the Appeal Panel's decision. 9. It is unclear whether the documents attached to the affidavits were before the Tribunal below. Mr Scott Russell gave evidence before the Tribunal, and no reason has been advanced by the builder as to why the affidavit evidence of Mr Scott Russell filed by the respondent in proceedings HB 14/47069 and in this appeal, or the evidence of Mr Rob Russell, should now be read by the Appeal Panel. It is not significant new evidence that was not reasonably available at the time of the proceedings before the Tribunal. 10. Mr Pohl states at [2] of his affidavit that he was first contacted by the homeowners with respect to building their home on or about 26 January 2013. We infer that he is the owner of the builder, although his affidavit does not state this to be the case. He says that his affidavit is "supplementary" to an affidavit sworn on 6 November 2014. Presumably he relies on that affidavit in proceedings HB 14/47069. However, that affidavit has not been provided to us by either party. It is not clear whether or not Mr Pohl gave evidence at the hearing below. 11. In the affidavit Mr Pohl refers (among many other matters) to a site visit on 16 December 2014 and conversations he had with Ms Shaw. No reason has been advanced by the builder as to why Mr Pohl's affidavit evidence is significant or why it was not reasonably available at the time of the proceedings under appeal. 12. Leave is refused for the appellants to appeal on grounds other than questions of law. Grounds of appeal on questions of law 1. The homeowners submit that, by asking why Mr Russell imported the fill onto the site and whether the builder had breached the Council's development consent, the Tribunal failed to appreciate that the claim against the builder was based on a breach of a contractual duty or a statutory warranty under s 18B of the Home Building Act. The homeowners submit that the question the Tribunal should have asked was: "Did the [builder] breach the contractual obligations it owed in favour of the [homeowners] through the actions of Mr Russell (the sub-contractor)?" The homeowners submit that if the Tribunal had asked the correct question, the builder, "according to the express terms of the contractual agreement, and under the general principle of vicarious performance," would have been found liable for the loss suffered by the homeowners. 2. Secondly, the Notice of Appeal states that the Tribunal made an error of law, in that the homeowners had no contractual relationship with Mr Russell, and that Ms Shaw had no authority to instruct Mr Russell. 3. In addition to the Notice of Appeal, the homeowners filed a folder of materials titled "Appeal Panel – Question of Law – Submissions." That folder contains undated submissions prepared by the Home Building Advocacy Centre of Macquarie Legal Centre. Relevantly those submissions state that the Tribunal erred in law by "asking the wrong question." 4. The builder's submissions can be summarised as follows: 1. The builder relies on cls 11.1, 11.3 and 23.1 of the contract. Clause 11.1 provides that the owner gives the builder exclusive possession of the site to carry out building works. Clause 11.3 provides that the homeowners must not issue directions to, or give instructions to, the builder's workers or subcontractors. The builder submits that by "failing to give the [builder] exclusive possession of the site and by issuing instructions to [the subcontractor] Ms Shaw breached cls 11.1 and 11.3, and therefore all of the losses suffered by the homeowners flowed directly from these breaches of the contract by Ms Shaw." Thus, the builder submits, any relevant breach of the contract was a breach by the homeowners. 2. Clause 23.1 relevantly provides that the builder is responsible for loss or damage to the building works except to the extent that the loss or damage is caused or contributed to by an act or omission of the homeowners. The builder submits that, as the homeowners breached the contract by issuing instructions directly to the subcontractors, they "broke the chain of causation under which the [builder] would be vicariously liable for the acts of its subcontractors." 3. The homeowners should not have carte blanche to breach the contract and do as they like in relation to the site and the workers on it and then attempt to make the builder responsible for the consequences. 4. The contractual relationship between the builder and subcontractor is irrelevant. 5. The homeowners "consciously bargained away" the rights they might otherwise have had under the statutory warranty when they gave instructions to the excavators that were contrary to the contracted plans. 6. Section 18F of the Home Building Act is of no relevance. 7. In summary, any liability which was owed by the builder under cl 22.2, which provides that the builder may subcontract any part of the building works but remains responsible for the building works, was obviated by cl 23.1 and the homeowners' breaches of cls 11.1 and 11.2; and the builder's liability should be read as contingent upon the builder having control over the site and sole authority to instruct subcontractors. To read the contract otherwise results in an absurdity where a proactive and fully involved homeowner can carry out modifications on the site (or give contrary instructions to contractors) and then claim the builder is liable to compensate them for their own deliberate actions. Consideration Identification of question of law 1. The question of law in this case is whether the Tribunal identified the wrong issue or asked the wrong question: Craig v State of South Australia (1995) 184 CLR 163 at 179; Minister for Immigration and Multicultural Affairs v Yusuf (2001) 206 CLR 323 at [82]. 2. The question the Tribunal asked itself was "[W]hy did Mr Russell fail to comply with the Consent?" That was not the correct question. 3. The questions the Tribunal should have asked itself were: 1. What were the terms of the contract between the homeowners and the builder which the homeowners allege the builder has breached? 2. What is the legal effect, if any, of the instruction by the homeowner to the subcontractor and the subcontractor's decision to comply with that instruction? In particular, did that instruction vary the contract between the homeowners and the builder? 3. Has the builder breached any of the terms of the contract and if so, does it have a defence to that breach? 4. If the builder has breached a term of the contract, are the homeowners entitled to a remedy? 1. We consider that failing to identify the correct issues amounts to an error of law. We must decide whether to rehear the matter ourselves or direct the Tribunal to reconsider it. As the Tribunal made relevant findings of fact which we have not disturbed on appeal, we have decided to deal with the internal appeal by way of a new hearing based on those factual findings: NCAT Act, s 80(3). The parties have been given a reasonable opportunity to make submissions as to the decision the Appeal Panel should make: NCAT Act, s 38(5)(c). Terms of the contract 1. The written contract in this case was a standard NSW Residential Building Contract for New Dwellings. The homeowners' claim was based on a breach of a term of the contract or a breach of statutory warranty by the builder. 2. The contract contains various "mandatory conditions" in cl 43. One of those conditions is that the building work must comply with the conditions of any relevant development consent or complying development certificate. "43.1 To the extent required by the Home Building Act and subject to sub-clause 43.2 the building works will comply with: … (c) the conditions of any relevant development consent or complying development certificate." 1. This mandatory condition reflect the requirement in ss 6 and 7E of the Home Building Act that certain terms are imported into contracts for residential building work. 2. As well as the terms of the contract imported by s 7E of the Home Building Act (and included in the contract as "mandatory conditions"), the builder must comply with the statutory warranties implied into every contract to do residential building work: Home Building Act, s 18B. The warranties that are relevant to these proceedings are those in s 18B(1)(a) and (c): "18B Warranties as to residential building work (1) The following warranties by the holder of a contractor licence, or a person required to hold a contractor licence before entering into a contract, are implied in every contract to do residential building work: (a) a warranty that the work will be done with due care and skill and in accordance with the plans and specifications set out in the contract. … (c) a warranty that the work will be done in accordance with, and will comply with, this or any other law." 1. The reference to the "law" in s 18B (1)(c) includes a reference to the planning laws that require compliance with various approvals and consents: Philip Bambagiotti, Building Disputes and the Home Building Act 1989 (NSW), (2012, Law Book Co) at 81. 2. These statutory warranties are also implied in a contract under which the builder has contracted to do residential building work but then contracts with a "subcontractor" for the subcontractor to do the work (or any part of the work): s 18B(2). 3. The homeowners case is that the builder breached either the mandatory term in cl 43.1(c) of the contract or the statutory warranty in s 18B(1)(a) or (c) because, when the slab was built, the house site was 590 mm higher than the Council approved levels under the development consent. Effect of instruction by homeowner to change the level of the house site 1. As well as the terms of the written contract, it is relevant to consider whether the contract has been varied by the instruction given by the homeowners to the subcontractor to raise the level of the house site and the subcontractor's compliance with that instruction. 2. Clause 17.1 of the written contract provides that either the owner or the builder may ask for a variation but that any variation "must be in writing and signed by or on behalf of each party." In addition, under cl 17.2, if the owner asks for a variation, the builder must reply in writing as soon as is reasonable. 3. In this case, the homeowners did not ask the builder for a variation, either orally or in writing. Rather, the homeowners instructed or directed the subcontractor to change the level of the house site. Clause 11.3 of the contract with the builder states that the homeowner "must not make inquiry of; issue directions to; or give instructions to, the builder's workers or subcontractors. Communication must only be with the builder's nominated person." Given these terms of the contract, the instruction or direction that the homeowner gave to the subcontractor and the subcontractor's decision to comply with the instruction, did not have the effect of varying the contract between the homeowners and the builder. Has the builder breached any of the terms of the contract? 1. As with most contracts for the construction of dwellings, the builder in this case has contracted with various specialist contractors for the vicarious performance of parts of the work: Dr Damien Cremean and others, Brooking on Building Contracts (5th ed, Lexis Nexis Butterworths Australia) at 297. 2. Under cl 22.2 of the contract between the homeowners and the builder: "The builder may subcontract any part of the building works but remains responsible for all of the building works." 1. Clause 23.1 applies to loss or damage to the building works. It provides that: "While carrying out the building works to and including the date of practical completion, the builder is responsible for loss or damage to the building works except to the extent that it is caused or contributed to by an act or omission of the owner." 1. In this case, the builder is not responsible for the building works carried out by the subcontractor because, contrary to clause 11.3 of the contract, the homeowners issued a direction to the sub-contractor rather than communicating directly with the builder's nominated person. It was the fact that the homeowner gave that instruction and the subcontractor agreed to it that caused part of the building works to be constructed in a way which did not comply with the plans or the development consent. 2. Clause 22.2, which makes the builder responsible for the work of subcontractors, is to be read in the context of other relevant contractual provisions. It does not, we consider, impose an absolute liability on the builder for any defect in the building works. That construction is supported by cl 23.1 of the contract makes it clear that the builder's responsibility "for loss or damage to the building works" does not extend to damage caused or contributed to by the owner. In this case, we are satisfied that the builder has not breached the contract because it was the homeowners' instruction and the subcontractor's acceptance of that instruction that caused the change in the level of the house site. 3. In those circumstances, the builder has not breached the term of the contract or a statutory warranty that the building works will comply with the conditions of any relevant development consent or that they be built in accordance with the plans and specifications set out in the contract. 4. Having reached that conclusion, there is no need to consider whether the builder has a defence under s 18F of the Home Building Act. 5. Following a new hearing on the papers, we have reached the same conclusion as the Tribunal below. Consequenlty, the appeal is dismissed. Orders 1. The Appeal Panel makes the following orders: 1. Leave is refused for the appellants to appeal on grounds other than questions of law. 2. The appeal is dismissed. 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 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: 23 June 2015