Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Steele & Associates Pty Ltd v Heath [2015] NSWCATAP 239 Hearing dates: 9 September 2105 Date of orders: 10 November 2015 Decision date: 10 November 2015 Jurisdiction: Appeal Panel Before: A Coleman SC, Senior Member P Boyce, Senior Member Decision: 1. Appeal dismissed 2. There be no order as to costs of the appeal. 3. The limited stay granted by order 4 made on 7 May 2015 is lifted with the intent that there is no stay of the Tribunals original orders. Catchwords: CONTRACT- whether repudiation or non-performance of contractual obligations precludes claim under warranties implied by Home Building Act. PROCEDURE- procedural fairness- right to cross-examine – whether party denied procedural fairness. HOME BUILDING ACT – implied warranties. Legislation Cited: Home Building Act 1989 (NSW) Civil and Administrative Tribunal Act 2013 Cases Cited: Bellgrove v Eldridge [1954] HCA 36; (1954) 90 CLR 613 Britannia v Parkline Constructions Pty Ltd [2009] NSWSC 1302 Collins v Urban [2014] NSWCATAP 17 Gallo v Duflou [2014] NSWCATAP 115 John Prendergast & Vanessa Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 Keith v Gal [2013] NSWCA 339 The Owners Strata Plan No 76674 v Di Blasio Constructions Pty Ltd [2014] NSWSC 1067 Category: Principal judgment Parties: Steele Associates Pty Ltd (Appellant) Timothy Heath (Respondent) Representation: Counsel: Ms Clarke (Appellant) Mr De Buse (Respondent) Solicitors: Melanie J Palmer & Associates (Appellant) Watson & Watson, Solicitors (Respondent) File Number(s): AP 15/07259 Decision under appeal Court or tribunal: NSW Civil & Administrative Tribunal Jurisdiction: Consumer & Commercial Division Citation: Timothy Heath v Steele Associates Pty Ltd [2015] NSWCATCD 8 Date of Decision: 13 January 2015 Before: S Thode, Senior Member File Number(s): HB 13/5555; HB 13/51291 REASONS FOR DECISION Overview 1. This is an internal appeal from the Consumer and Commercial Division. Two proceedings were heard together. In proceedings HB 13/5555 the appellant, the respondent below, was ordered to pay the sum of $88,510.00 to Mr Heath, the applicant (the Owner's Proceedings). Separate proceedings, being proceedings HB 13/51291 commenced by the appellant seeking the release and payment of retention moneys were dismissed (the Builder's Proceedings). 2. A company known as Steele Associates Construction Pty Ltd had undertaken building works at Mr Heath's property. The building works were for the construction of a residence and relevantly included a swimming pool located above the entrance to the residence. The parties had entered into a contract for residential building work for approximately $3.2 million, such contract dated 14 August 2008. 3. The Builder's Proceedings related to a claim by the appellant that Mr Heath pay to it the sum of $48,000.00 as a debt accrued pursuant to terms of the contract. The Owner's Proceedings related to defective work, particularly with respect to defects arising out of and in relation to the construction of the swimming pool. 4. The appellant appeals from the orders the Tribunal on several bases. They are set out in an attachment to the Notice of Appeal. At the hearing of the appeal many of the grounds of appeal were abandoned. 5. The respondent owner filed a "Notice of Contention". There is no scope for the filing of such a document within the Civil and Administrative Tribunal Act 2013 or the Civil and Administrative Tribunal Regulations. However, at the hearing of the appeal, Mr De Buse, counsel for the respondent informed the Appeal panel that the matters listed in the "Notice of Contention" were not pressed. 6. For the reasons set out below, we would dismiss the appeal. The Proceedings Below 1. In the reasons for its decision, the Tribunal set out several factual findings which were not in dispute. They included; 1. the appellant and respondent entered into a contract for residential building work on 14 August 2008; 2. that the work on the building project commenced in about November 2008; 3. that a Notice of Practical Completion was issued by the architect on 20 August 2010 4. that the defects liability period expired on 14 August 2011; and 5. that on 15 August 2011 the owner, the appellant and Steele Associates Construction Pty Ltd entered into a deed of novation. 1. The deed of novation substituted the appellant for the original builder as the party to the building contract. By the deed of novation the appellant accepted all of the original builder's liabilities and obligations under the contract. Similarly, Mr Heath accepted that the appellant was the party in place of the original builder responsible for the performance of the obligations of the original builder and released the original builder from all obligations under the contract and any claims or demands in respect to it. The appellant agreed to perform all of the obligations of the original builder pursuant to the contract which had not been performed as at the date of the deed and to be bound by the terms of the contract as if it had originally been applied to it. Similarly, Mr Heath agreed to perform his obligations under, and are bound by, the original contract as if the appellant was originally a party to it. The deed contained a clause 4 in the following terms: 4. The parties acknowledge and agree that: (i) [Mr Heath] has paid the [original builder] $3,143,891 being all amounts due to the [original builder] from [Mr Heath] under the Contract at the date of this deed; and (ii) [Mr Heath] will pay the [appellant] $120,936 in respect of [Mr Heath's] outstanding obligations under the Contract. 1. In reaching its decision, the Tribunal found that by reason of clause 4 of the deed of novation, Mr Heath was obliged to pay as a debt the sum of $120,936.00 to the appellant. As matters transpired, only the sum of $90,621.00 was paid by Mr Heath to the appellant leaving the sum of $30,315.00 to be paid in accordance with the terms of the deed of novation. 2. The Tribunal considered the claim by Mr Heath for defective work and for compensation pursuant to the statutory warranties implied into the contract pursuant to section 18B of the Home Building Act 1989 (NSW) (the HB Act). The Tribunal in a detailed and well-reasoned decision found that Mr Heath was entitled to damages for defects in the sum of $128,860.00. Because Mr Heath had failed to pay the full amount due to the appellant as required by the deed of novation, the Tribunal allowed interest on the unpaid amount such that the total due to the appellant was $40,350.00. This amount was then set off from the damages the Tribunal found payable to Mr Heath. The net result was that the appellant was held liable to pay Mr Heath the sum of $88,510.00. 3. In both the proceedings below, and in the appeal, there was a significant time spent on argument going to issues which were said to arise from an alleged repudiation of the contract by Mr Heath and conduct of the parties after the expiry of the defects liability period. The Tribunal found that such issues were "a distraction" to the real issues in the proceedings, being the owners claim for compensation for breach of the implied warranties. We agree with that assessment. The Material Before the Appeal Panel 1. There was a significant amount of material filed before the hearing of the appeal. As well as submissions served by each of the parties dealing with the appeal, all (or almost all) of the material that was before the Tribunal was also filed in the appeal. Much of this material was not referred to in argument. In that sense the Appeal Panel (and the registry) was burdened with an unnecessary amount of material. Whilst the marshalling of relevant material in the nature of "appeal books" is very useful to the Appeal Panel, it will be a rare case where it may be necessary on appeal to refer to all of evidence that was before the Tribunal. Where, as here, a very limited amount of material from that copied and served is referred to, additional and unnecessary cost burdens are placed on the parties. In an appropriate case, this may lead to a finding of special circumstances warranting the award of costs. 2. We will only refer to so much of the material placed before us as is necessary for us to dispose of the appeal. Is Leave to Appeal Required? 1. In so far as the question of leave to appeal is concerned, we are of the view that the grounds of appeal as pressed raise the proper construction of the building contract, the legal effect on the contractual relations of the parties by supposedly repudiatory conduct and the proper application of the statutory warranties. These raise questions of law and leave to appeal is therefore not required: see s 80(2)(b) of the Civil and Administrative Tribunal Act 2013. 2. There are also grounds that the appellant was denied procedural fairness by reason of an asserted failure to allow cross-examination and the manner in which the hearing was conducted. A denial of procedural fairness raises a question of law and leave to appeal is not required: John Prendergast & Vanessa Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 at [13] and the authorities there cited. 3. Further, the grounds pressed allege that the Tribunal erred by failing to give proper reasons for the rejection of evidence led by the appellant and the acceptance of evidence led by the respondent. A failure to give proper reasons raises a question of law and leave is not required: John Prendergast & Vanessa Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 at [13] and the authorities there cited. Grounds of Appeal 1. As we have observed above, many of the grounds of appeal were abandoned at the hearing of the appeal, although some of those grounds were not abandoned until well into the argument of the appeal itself. We will deal with the individual grounds of appeal separately using the numbering in the Notice of Appeal. If a ground of appeal is not referred to, that ground has been abandoned. Ground 2 1. Ground 2 is in the following terms: The Tribunal erred at law in its decision that the owners were entitled to be paid monies by the builder on account of breaches of statutory warranty, as defined by section 18 (sic) of the Home Act, in that: (a) The Tribunal found that the alleged repudiation by the owners of the building contract with the builder was irrelevant to the consideration of whether the owners were entitled to damages for breach of statutory warranty; (b) The Tribunal found that the failure on the part of the owners to mitigate their loss under the contract with the builder was irrelevant to the consideration of whether the owners were entitled to damages for breach of statutory warranty; (c) The Tribunal found that despite the fact that the owners had failed to follow the correct contractual procedure under the contract with the builder to set off any alleged cost for defective workmanship against monies owed to the builder under the contract, the owners were still entitled to damages for breach of statutory warranties 1. We reject each of these grounds of appeal in so far as they raise separate issues. 2. As we have recounted above, the Tribunal held (at [83]) that the "contractual issues" raised by the builder at the hearing were an unnecessary distraction from what was essentially Mr Heath's claim for damages pursuant to the statutory warranties arising from the defective work. At [84]-[111] the Tribunal set out, in so far as it understood them, the contractual issues raised by the builder. 3. Relevantly, the Tribunal found that by 14 August 2010 the contract had been completed and the architect issued a certificate of practical completion on 20 August 2010. The defects liability period then commenced in accordance with the contractual terms. That defects liability period was for 12 months. It expired on 14 August 2011. We do not understand the appellant to challenge those factual matters. 4. The Tribunal held, correctly in our opinion, that the completion of the parties' obligations under the contract did not prevent Mr Heath from seeking to recover any damages in respect of the statutory warranties, so long as such an action was commenced (as it was) within the time period set down by the HB Act. 5. The Tribunal referred to negotiations which took place between the parties after the expiry of the defects liability period in an attempt to resolve the issue of rectification of the alleged defects in the work. There was, however, no concluded agreement between the parties as to how any rectification work ought to be completed. We can find no error in the Tribunal's reasoning in this regard. 6. Further, the Tribunal (at [109]) held that even if it erred and the owner did repudiate the contract, such repudiation did not disentitle him from commencing proceedings to recover damages pursuant to any breach of the statutory warranties. We agree with that finding. 7. As can be seen, contrary to ground 2(a) set out above, the Tribunal did not find that the alleged repudiation of the contract by Mr Heath was irrelevant to his entitlement to claim compensation for breach of the statutory warranties. In fact, the Tribunal found that there was no repudiation, but even if there was, it did not disentitle Mr Heath from making such claim. 8. This ground of appeal must be rejected. 9. Ground 2(b) must be rejected for similar reasons. The Tribunal did deal with the allegation by the appellant that Mr Heath had failed to mitigate any loss suffered by him. It did so expressly in [111] of the reasons and by reference to its consideration of all of the evidence led by each of the parties, including the expert evidence. It held that, having regard to that evidence, preferring the expert evidence tendered by Mr Heath, it was reasonable for the owners not to accept the method of rectification proposed by the builder and its expert and not to allow the builder to undertake that work. We discuss this matter in more detail below. 10. The Tribunal also correctly applied the principle that any damages awarded to Mr Heath must only be those necessary to produce conformity with the contract and be as a result of him acting reasonably (Reasons [114] citing Bellgrove v Eldridge [1954] HCA 36; (1954) 90 CLR 613). We can find no error in the Tribunal's reasoning or conclusions on this issue. 11. Insofar as counsel for the appellant sought to challenge the Tribunal's assessment of the expert evidence, as we discuss below there is no substance to such a challenge. Properly considered, the Tribunal set out in some detail the evidence led by each party and explained why it preferred the evidence expert evidence led by Mr Heath (see [110]-[113] of the reasons). 12. Ground 2 (c) also must be rejected. It is clear from the Tribunal's reasoning that it did set off the amount due to be paid to the appellant pursuant to the deed of novation from the damages that it found were to be awarded to Mr Heath. The fact that Mr Heath did not originally pay to the appellant the amount that was required by the deed of novation did not disentitle him from relying on the statutory warranties. The Tribunal (from [112]-[131] of the reasons) considered and dealt with Mr Heath's claim for breach of those warranties. Having considered and made findings as to the amount of compensation he was entitled to, it set off the amount owed to the appellant pursuant to the deed of novation, together with an amount for interest (see [118]). 13. Ground 2 is rejected. Ground 3 1. Ground 3 is in the following terms: And in making the findings referred to in [ground] 2 above, the Tribunal erred at law, in that: the fact that the owners had repudiated by unlawfully terminating the contract with the builder, the owners were not entitled to any damages for breach of statutory warranty as their loss was occasioned by their own conduct; the fact that the owners had failed to mitigate their loss by refusing to allow the builder to remedy the defect to the glass panels of the swimming pool, meant that the owners' loss was occasioned as a result of their own conduct and not the conduct of the builder… 1. As to ground 3(a), we have already held that there is no error in the Tribunal's findings that there was no repudiation of the contract. As the Tribunal found, following practical completion in August 2010, the defects liability period ran for 12 months expiring on 14 August 2011. After that period expired, there was no relevant contractual mechanism by which the owner's architect could give any notices under the contract. Indeed, as we understood the position advanced by counsel for the appellant at the hearing of the appeal, the notice purportedly given by the architect to the builder on 20 November 2012, being after the expiry of the defects liability period, was invalid. It follows that any purported notice to terminate the contract based upon the failure to comply with such a notice could not have been effective. As the Tribunal found, the obligations of each party under the contract had been performed. 2. The negotiations between the parties in an attempt to reach agreement as to the method of rectification of the defects in the swimming pool, which negotiations took place after the expiry of the defect liability period, were discussed by the Tribunal at [ 96 ]-[105 ]. It found that those negotiations did not result in any agreement. Failing such agreement, there was no bar to the owner seeking compensation for breach of the statutory warranties. This is what occurred and there is no error of law or otherwise of the type asserted in ground 3(a). That ground is rejected. 3. In respect to ground 3(b), we have discussed the Tribunal's approach to mitigation in [27] above. We discuss it further below. We do not find any error in the Tribunal's approach. 4. The appellant argued that the Tribunal was in error in failing to hold that Mr Heath acted unreasonably and thereby did not mitigate his loss by not allowing the builder to undertake the rectification work. For the reasons that follow, we reject that argument. 5. Counsel for the appellant referred us to two decisions which she submitted bore upon the issue of mitigation and indicated that because the owner failed to allow the builder to rectify the defects he had acted unreasonably. The first decision is Britannia v Parkline Constructions Pty Ltd [2009] NSWSC 1302. In that case White J considered whether the Court should adopt a referee's report arising from a building dispute. 6. As we understood her submissions, counsel for the appellant submitted that this case was authority for the proposition that unless the builder was allowed to follow the contractual procedures to rectify the defects, the owners could not recover under the statutory warranties. We do not accept that this authority stands for this proposition. In any event, the case is distinguishable on its facts. 7. In that case, there had been a repudiation of the building agreement by the owner/developer which was not accepted by the builder. As such the contract remained on foot. Despite this, the owner did not allow the builder to rectify the defects and the owner sought damages for breach of the statutory warranties implied by the HB Act. The contract in that case contained a clause (clause 6.11) which provided that during the Defects Liability Period, upon the issuing of an instruction by the architect, the builder was obliged to promptly make good any defects by appropriate rectification work. In those circumstances, the Court held (at [71]) that because the contract remained on foot and the defects liability period had not expired, the builder was entitled to make good the defects in accordance with clause 6.11. The Court held that the owner would only be entitled to have the work of making good carried out by someone else and claim the cost of doing so in accordance with the procedures set out in clause 6.11. 8. The Court rejected the argument that the contractual provisions prevented the owner from relying on the statutory warranties. It noted that such a finding would be contrary to s 18G of the HB Act. That section provides that a provision of an agreement or other instrument that purports to restrict or remove the rights of a person in respect of any statutory warranty is void. The Court said, however, (at [81]): [81] Even though it was open to the plaintiffs to seek damages for defective work which was the result of the breach of statutory warranties, notwithstanding that they did not pursue the procedures for rectification under clause 6.11, it was still necessary for the plaintiffs to show that the carrying out of rectification work by a third party was necessary and reasonable (Bellgrove v Eldridge (1954) 90 CLR 613 at 619; Westpoint Management Ltd v Chocolate Factory Apartments Ltd [2007] NSWCA 253 at[45]). Moreover, if the defective work was included on one of the lists given by the architect pursuant to clause 6.11, Parkline was both obliged and entitled to do the work. It is one thing to say that s 18G precludes the plaintiffs from being compelled to follow the procedures in clause 6.11 in the case of a breach of statutory warranty. It is another to say that the section enables the plaintiffs to ignore procedures in clause 6.11 once they have been invoked. 1. The court held in the case that the referee did not err in his conclusion as to the plaintiff's entitlement to damages. 2. An important distinguishing factor of the present case to the facts considered in Brittania is that here the issue of the remedy of the defects in the swimming pool arose after the expiry of the defects liability period. There was thus no contractual provision which required Mr Heath to allow the builder to make good the defects. 3. The relevant provision of the contract in this case is clause M13. That clause provides: Contractor's obligations during and after defects liability period 1 If there is any remaining *defect or incomplete work, or the contractor becomes aware by instruction from the architect or from its own observations of any *defect or incomplete work during the defects liability period, it must *promptly return to the *site and correct the defect or finalise the incomplete work. This obligation continues until the *defect is rectified all the incomplete work is finalised, and does not come to an end when the defects liability period is over. 2 The architect cannot give the first instruction to correct an outstanding *defect or to finalise any incomplete work after the end of the defects liability period, unless it is for the rectification of a latent *defect and the final certificate has not been issued." (bold emphasis added) 1. As has already been observed, by the time the relevant defect in the swimming pool had come to the attention of the owner and architect, the defects liability period under the contract had expired. Although the architect purported to give an instruction to the builder to correct the defect, such an instruction was invalid by reason of clause M 13.2 set out above. It was accepted by counsel for the appellant that the architect's instruction was invalid. These matters were considered by the Tribunal at [89]-[91]. 2. It can be seen, therefore, that this case is distinguishable from Brittania. In this case, the owner was entitled to rely upon the statutory warranties in order to seek to recover damages for the defect without regard to the contractual provisions as they had no application. Of course, the owner was still obliged to have regard to the principles of mitigation and reasonableness. 3. The second authority referred to by counsel for the appellant in relation to the issue of mitigation of damage was The Owners Strata Plan No 76674 v Di Blasio Constructions Pty Ltd [2014] NSWSC 1067. That was a case where the owner sought to recover damages for breach of s 18B of the HB Act. The issue was whether the owner's conduct was reasonable when the builder had initially refused to rectify the defects and the owner having lost confidence in the builder, rejected the builder's later offer to rectify the defects. 4. After setting out the relevant factual matters, Ball J also set out the relevant legal principles at [42]-[48]. Relevantly, the Court said (omitting citations to authorities where indicated): [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 builder to repair defects or sets out a procedure by which defects are to be made good: see, e.g., Brittania Pty Ltd v Parkline Constructions Pty Ltd… 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 whether builder has repudiated the contract by refusing to conduct any repairs (references omitted). The 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 mitigate its loss, but rather the builders damages. [45] The question of what is reasonable depends on all the circumstances of the particular case. One relevant factor is what attempts the builder has made to repair the defects in the past and whether, in the light of the builder's conduct, the owner has reasonably lost confidence in the willingness and ability of the builder to do the work (references omitted). [46] It is for the defendants to prove that the plaintiff has acted unreasonably. It is not for the plaintiff to prove it acted reasonably.(references omitted). [47] The obligation not to act unreasonably does not come to an end once court proceedings are commenced. But the existence of court proceedings is relevant to the content of the obligation. Once there is a dispute concerning whether the plaintiff failed to mitigate it's lost, or failed to act reasonably in some other respect, the plaintiff is entitled to have a question tested in court; in the mid fact that it does so is not itself evidence that it has failed to act reasonably (references omitted). [48] In the present case, the claim is for breach of the warranty is implied by the Act. However, it was not suggested by the party the different principles apply for that reason. 1. In that case the Court found that, in the circumstances, the owner did not act unreasonably by refusing to allow the builder to undertake the works to rectify the defects. 2. In this case, the Tribunal set out the relevant factual matters dealing with the negotiations between the parties about rectifying the defect to the swimming pool and their failure to reach an agreement at [94]-[105] of the reasons. It dealt with the issue of mitigation and the reasonableness of the conduct of the owner at [110]-[116]. Those findings must also be considered in the context of the earlier passages of the reasons of the Tribunal where it detailed the evidence relied upon by each of the parties. 3. In our opinion, there is no error in the Tribunal's approach to, or conclusions on, these matters. It is clear from the factual matters recited by the Tribunal that there were bone fide attempts to reach a solution whereby the builder could attend to rectify the defect, but no agreement could be reached. Once of the reasons why no agreement could be reached was that there was a genuine disagreement about the manner in which the builder proposed to rectify the defect. The owner's architect regarded that method as unsatisfactory. The owner was not acting unreasonably in relying on the architect's opinion that the builder's proposed method of rectification was unsuitable. As in Di Blasio here the owners did not have confidence that the builder's proposed method of rectifying the defects was the correct method. As it turns out, this opinion was validated by the expert evidence. 4. The appellant had the onus to prove that Mr Heath acted unreasonably in refusing to let it undertake the work to correct the defects. Clearly the Tribunal did not accept that it had discharged that onus. Nor do we. 5. We reject this ground of appeal. Ground 4 1. Ground 4 is on the following terms: 4. The Tribunal ended at law in that it found: (a) That the contract was not repudiated by the owners but that the contract was finalised by each party completing its obligations under the contract, when there was still extant obligations of both parties under the contract; (b) That both parties were in breach and therefore the contract was not repudiated by either party, when this proposition was never argued by either party, the Tribunal gave no notice that it will be deciding the matter on this point of law, and where this finding is against the authorities on what is relevant to obtaining damages for breach of statutory warranty. 1. In relation to ground 4(a), during the hearing of the appeal the Appeal Panel asked counsel for the appellant to identify, by reference to the contract, what contractual obligations remained outstanding following the issue of the certificate of practical completion and the expiry of the defects liability period. No contractual provisions could be identified. No other extant contractual obligations were specified. We find no error in the Tribunal's conclusion that, having regard to the fact that the defects liability period had expired prior to any notice by the architect being issued, the contract had already been relevantly performed. 2. As we have emphasised above, counsel for the appellant accepted, indeed asserted, that the purported notice given by the architect to the appellant to rectify the defects in the swimming pool period was invalid because it was issued after the expiry of the defects liability period. As noted, she could not point to any provision of the contract which imposed any "extant obligation" on the parties. 3. Counsel for the appellant was also asked whether it was the appellant's case that the defect in the swimming pool was a latent defect so as to bring into operation clause M13.2 of the contract. She did not submit that the defect was a latent defect. In such circumstances, clause M 13 .2 referred to above, can have no operation. 4. We reject this ground of appeal. 5. In respect to ground 4 (b) we do not accept that the Tribunal made any such finding as set out in this ground. The Tribunal's primary finding, with which we agree and have mentioned several times, was that the contractual issues raised by the appellant below were "a distraction". In other words, the Tribunal held that those matters were not relevant to the disposition of the proceedings before it. The comment by the Tribunal at [105] the reasons that, alternatively to the finding that the contract had been performed as at October 2013, "neither party complied with the terms of the contract" must be taken in context of the remainder of that paragraph and the paragraphs which follow. We do not find within paragraph [105] of the reasons any finding that there was no repudiation because both parties were in breach of the contract. 6. We reject this ground of appeal. Ground 5 1. Ground 5 is in the following terms: 5 The Tribunal erred at law in that it denied the builder procedural fairness, and acted in excess of jurisdiction, in that: (a) Made a ruling that the parties be limited in their capacity to cross examine expert witnesses; (b) Allow the builder limited time at the hearing to put its case; (c) Made a finding that the builder had not contested the expert evidence of the owner when the builder had contested that evidence but was limited in his capacity to cross-examine the owners' (sic) experts or put its own case by the previous rulings of the Tribunal limiting cross examination and by the Tribunal limiting the amount of time available to the builder to present its case. 1. The substance of this ground of appeal is that by reason of things that were said to him at directions hearings, Mr Steele took the view that there was no utility in cross-examining witnesses called by Mr Heath and that if he did there would be adverse cost consequences to the appellant. It was submitted that Mr Steele was dissuaded from cross-examining and that the Tribunal therefore accepted the expert evidence called by Mr Heath. It was submitted that, in the circumstances, the Tribunal had a duty to advise Mr Steele that he was entitled to cross-examine the witnesses called by Mr Heath. 2. Reference was made by counsel for the appellant to various authorities which established that, in some circumstances, failure to allow a party an opportunity to cross examine would constitute a denial of procedural fairness. Further, in some circumstances, where a party is unrepresented, a court or tribunal has a common law duty to ensure that a party understands that they may cross-examine the other party and that party's witnesses (subject to any contrary statutory provision). These principles apply to proceedings in this Tribunal: Gallo v Duflou [2014] NSWCATAP 115 at [21]-[42] and the cases there cited. It was submitted that, in this case, the Tribunal denied the appellant procedural fairness by reason of dissuading him from cross examining the opposing parties witnesses and not informing him that he was entitled to do so. 3. For the reasons which follow, we reject this ground of appeal. 4. The genesis of this ground arises not wholly from the conduct of the presiding member of the Tribunal below but also from earlier directions hearings. There were several directions hearings which occurred prior to the hearing the subject of this appeal. We have been provided with transcript of directions hearings on 22 October 2013, 17 February 2014, 31 March 2014 and 20 May 2014. We have also been provided with the transcript of the hearing on 1 July 2014, and 18 August 2014. Mr Steele was a self-represented at each of those directions hearings as was Mr Heath. 5. It was submitted that the relevant directions hearing was that of 31 March 2014 at which Senior Member Meadows presided. It was submitted that at T5-T6.22, Senior Member Meadows made comments which effectively dissuaded Mr Steele from cross-examining the opposing parties witnesses at the subsequent hearing. A review of the transcript of these pages, and indeed of the directions hearing of 17th February 2014 (see CB834) plainly shows that Senior Member Meadows fully and fairly explained the procedures which would most likely happen at the subsequent hearing of the matter and, in our opinion, in no way dissuaded either party from cross-examining the opposing party's witnesses. 6. The passage to which we were taken by counsel for the appellant is at CB 841-842. We set out the passage in full. It occurred after the Senior Member had asked the parties how many witnesses each would have: MEMBER MEADOWS: All right (sic). Now, you both need to understand that you don't call your own witnesses, strangely enough. They have given statements or reports and you rely on those. You only need to have that witness available if the other side requires them for cross-examination, otherwise all the evidence just goes in and the tribunal makes its mind up. So if you know that your witness is not required for cross-examination then you don't have to call that weakness, you just file their evidence, that's all that's needed. Okay. You don't put him in the box-you can't get new evidence out of them, it's too late, and there's no point going through their report to say, "you said it's worth 10,000. Did you mean that?" You are just repeating what's in there. So do you follow that? So you may not need all the witnesses that you have unless someone wants to cross-examine them on their evidence. MR STEELE: If I may ask about that, the cross-examining being the other side asking questions. MEMBER MEADOWS: Yes MR STEELE: does that mean it's up to me to call the other side's weaknesses advice first or I nominate witnesses to appear if I think the other side would want to cross-examine them. MEMBER MEADOWS: No, the order will be that you will write to the other side and say, "I want to cross-examine witness X and witness Y". MR STEELE: Yes MEMBER MEADOWS: The other side then arranges for them to be present, and by reverse if they want to cross-examine your witnesses they write to you and the tribunal saying that, and you arrange for the witness to be present. If the other side requires a witness for cross-examination and the witness is not present a cross-examination, you won't be able to rely on the evidence so it's an important issue. But you decide of (sic) the other side's witnesses who you want. Of your own, you are just going to put in their documents, and if they are not required for cross-examination then you will only do that if you know you have got something that you think they are-not telling lies, but if you think they are weak on something. MR STEELE: If you think something, kind of in the logic of it can be clarified really or changed through cross-examination, rather than just, as you say, saying, you know, "Do you really support that?" MEMBER MEADOWS: Yes. You can't just say, "Did you really mean that?" You have got to have something that you really are going to be relying on. MR STEELE: Yes. MEMBER MEADOWS: If you require someone for cross-examination and you don't cross-examine them all your cross-examination is just a waste of time, then the other side may request the cost of that (indistinct) and the like. So that's an important issue. So the matter is adjourned for today… 1. The text highlighted in bold in the immediately preceding paragraph is said to be the conduct of the Tribunal that dissuaded Mr Steele from cross-examining. When taken in context of with the rest of the passage we have extracted (or even on its own), it can be seen that there is no substance to the suggestion that, as the ground of appeal indicates, the parties were limited in their capacity to cross-examine expert witnesses. The whole passage indicates, in our opinion, a good example of the Tribunal explaining to unrepresented parties the nature of the procedures they can expect at a hearing, including that as to cross examination. The passage extracted more than complies with the tribunal's obligations pursuant to S 38(5) of the Civil and Administrative Tribunal Act 2013. 2. In relation to the allegation in this ground of appeal that Mr Steele was not given time to deal with the expert evidence and was thus denied procedural fairness, we were taken to the transcript of the hearing of the matter on 1 July 2014 (CB 857-982) and 18 August 2014 (CB 983 et. seq.) In particular, were taken to T 118 (1/7/14 CB975) where the Tribunal, towards the end of the days hearing, asked Mr Steele how long he thought it would be necessary for him two complete his case. He suggested another 2 to 4 hours. The Tribunal then propose that the remainder of the proceeding would be disposed of in half a day divided up into two hours for Mr Steele to present his case and one hour for Mr Heath to reply. This proposal was accepted by Mr Steele. 3. We were then taken to the transcript of the resumed hearing on 18 August 2014, where Mr Steele appeared for the appellant and a Mr Watson appeared for Mr Heath. There was debate about additional evidence ought to be tendered by Mr Watson for Mr Heath, to which Mr Steele objected. Mr Steele (at T 10.40 - CB 992) indicated that if the documents were to be received he would require an adjournment. Mr Steele noted, at T 15 (CB997) that the purpose of that day's hearing, set down for three hours, was for oral submissions. The Tribunal agreed with that. 4. Eventually, the matter was adjourned and the Tribunal gave reasons for the adjournment (T 34.15-37.43, CB 1016-1019). After those reasons, and a further exchange between the Tribunal and Mr Watson, the following is recorded: MR STEELE: May I please make the point that my clear recollection from the last hearing was that we were going to run out of time regardless of the quantum meruit issue, and it was agreed that we come back for a half day, the first two hours of which would be devoted to giving me the opportunity to make verbal submissions, as Mr Heath had spent a large part of the first day, and then the final hour would be for Mr Heath to make a reply to my verbal submissions. SENIOR MEMBER THODE: Only because we've run out of time. MR STEELE: Sure. So my written submissions will be made in lieu on all issues that we would have covered in verbal submissions? SENIOR MEMBER THODE: Yes. I think that-I have had time to go off the bench, reflect on my own notes, and reflect on the history of the file, and I'm quite comfortable that the proceedings have finished, and that we were coming back for submissions…. 1. The appellant now complains that it should have been given the opportunity at that hearing to make verbal submissions. We reject this contention. Each of the appellant and the respondent filed written submissions which were considered by the Tribunal in reaching its conclusions. The written submissions dealt with the additional matters that were brought forward by Mr Heath on the second day of the hearing. By allowing Mr Steele to consider that material and provide submissions on it, the Tribunal complied with its obligations to allow the appellant a reasonable opportunity to be heard on all matters before it. 2. The Tribunal's obligations with respect to its practice and procedure is set out in s 38 of the Civil and Administrative Act 2013. That section provides: 38 Procedure of Tribunal generally (1) The Tribunal may determine its own procedure in relation to any matter for which this Act or the procedural rules do not otherwise make provision. (2) The Tribunal is not bound by the rules of evidence and may inquire into and inform itself on any matter in such manner as it thinks fit, subject to the rules of natural justice. (3) Despite subsection (2): (a) the Tribunal must observe the rules of evidence in: (i) proceedings in exercise of its enforcement jurisdiction, and (ii) proceedings for the imposition by the Tribunal of a civil penalty in exercise of its general jurisdiction, and (b) section 128 (Privilege in respect of self-incrimination in other proceedings) of the Evidence Act 1995 is taken to apply to evidence given in proceedings in the Tribunal even when the Tribunal is not required to apply the rules of evidence in those proceedings. Note. Section 67 also prevents the compulsory disclosure of certain documents in proceedings in the Tribunal that would, in proceedings before a court, be protected from disclosure by reason of a claim of privilege. (4) The Tribunal is to act with as little formality as the circumstances of the case permit and according to equity, good conscience and the substantial merits of the case without regard to technicalities or legal forms. (5) The Tribunal is to take such measures as are reasonably practicable: (a) to ensure that the parties to the proceedings before it understand the nature of the proceedings, and (b) if requested to do so—to explain to the parties any aspect of the procedure of the Tribunal, or any decision or ruling made by the Tribunal, that relates to the proceedings, and (c) to ensure that the parties have a reasonable opportunity to be heard or otherwise have their submissions considered in the proceedings. (6) The Tribunal: (a) is to ensure that all relevant material is disclosed to the Tribunal so as to enable it to determine all of the relevant facts in issue in any proceedings, and (b) may require evidence or argument to be presented orally or in writing, and (c) in the case of a hearing—may require the presentation of the respective cases of the parties before it to be limited to the periods of time that it determines are reasonably necessary for the fair and adequate presentation of the cases. 1. In making the direction that it did at the end of the first day of the hearing limiting the time available to the parties to address it, the Tribunal was acting within the scope of ss38(5)(c) and (6)(c). Further, having regard to the intervening events on the second day of the hearing, by making the directions that each party file and serve written submissions dealing with all outstanding issues, the Tribunal was acting within the scope of ss38(5)(b) and (c). We do not accept that the appellant was denied procedural fairness in the manner alleged or at all. 2. The final aspect of ground five is that it is asserted that the appellant was denied procedural fairness as the Tribunal made a finding that the builder had not contested the expert evidence of the owner when in fact it had contested that evidence but was limited in its capacity to cross-examine the owner's experts, or put its own case, by reason of previous rulings of the Tribunal limiting cross-examination and by limiting the amount of time available to the builder to present its case. We have already dealt with, and rejected, the submission that there was some previous ruling or direction of the Tribunal which limited the time or capacity for cross-examination of witnesses. We have also rejected the submission that the appellant was denied procedural fairness by reason of the direction for it to file written submissions dealing with all outstanding issues or by any direction limiting the time by which the parties could address the Tribunal. 3. In so far as it is necessary, we also reject the submission implicit in this ground of appeal that there was some error in the Tribunal's reasons dealing with the parties respective expert evidence. The reference to the expert's "uncontested sworn evidence" (at [112]) is a reference to the fact that those experts were not cross-examined by Mr. Steele. As we indicate below, we find no error in the Tribunal's reasoning in preferring the expert witnesses put forward by Mr Heath to those put forward by the appellant. 4. There is no substance to ground 5 and it is rejected. Ground 6 1. Ground 6 (also numbered 5 in the Notice of Appeal) is in the following terms: 6. The Tribunal erred at law in that: (a) It accepted the owners' (sic) experts, Mr. Jacobs and Mr. Barnes, in respect of the cause of the defect to the swimming pool, and it rejected the builders expert evidence as to the cause of the defect without giving any reasons for doing so; (b) It accepted the owners' expert evidence on the quantum of loss incurred, and rejected the builders expert evidence on quantum, without giving any reason for doing so; (c) It disclosed no logical basis for the acceptance of the owners' expert evidence on the cause of the defects and the quantum of loss and why the Tribunal rejected the builders evidence on these issues. 1. The obligation of Tribunal to give adequate reasons for its decisions was considered in Collins v Urban [2014] NSWCATAP 17 at [43]-[57]. We will not set out in details the principles from those paragraphs. The obligation to provide adequate reasons was also dealt with in Keith v Gal [2013] NSWCA 339 at [109]-[119] (see, in respect to expert evidence, [127]-[131]). 2. In respect to expert evidence, the Tribunal has a duty to properly expose its reasons for preferring one expert over another including canvassing the issues raised by the experts and explaining why one expert is accepted over the other. Where an expert is not cross-examined, the Tribunal is still required to find a reasonable basis as to why that expert evidence is accepted and other evidence is not. Of course, the expert evidence if based upon assumptions, can only be accepted if the evidence otherwise proves the assumptions on which the opinion is based. 3. The Tribunal set out the detail of each of the parties evidence (see for example in respect to Mr Heath's case at [31]-[45] and in respect to the appellant's case that [54]-[66]). The Tribunal made findings with respect to preferring the evidence of the respondents experts relevantly at [110]- [121]. Included in those passages is a finding that the evidence put forward by the builder (the appellant) as to the method of rectification should be rejected by reason of a consideration of the expert evidence put forward by the respondent. 4. As indicated above, the reference to the "uncontested sworn evidence" of the respondent's experts is to the fact that those experts were not cross-examined. The experts put forward by the builder were cross-examined and then re-examined by Mr Steele. The Tribunal had the benefit of seeing those experts in the witness box. Of importance is the finding by the Tribunal at [110] that: The builder's method of rectification was rejected by both experts as the builder was unable to establish that the old sealant and the new sealant were able to bond satisfactorily to rule out new leaks. This is a reasonable conclusion to draw in light of all of the evidence and it was therefore reasonable by the owner to adopt a more costly repair method. 1. As we have said, the findings we have referred to above must also be seen in the context of the reasons as a whole, including those passages where the Tribunal refers to the expert evidence of each party. Of particular relevance to this ground of appeal is [59] where the Tribunal refers to an admission by the appellant's expert Acity Pty Ltd (Mr Davies – who was also cross-examined) that the seal on the swimming pool had failed and leaked and that: He also stated that "in all joint sealant replacement repairs the surfaces must be cleaned and be free of the old sealant material and any laitance"… 1. This passage ties in with the Tribunal's findings at [111] that the respondent's evidence was to be preferred as the builder could not establish that the old sealant and the new sealant would be able to bond satisfactorily to rule out any further leaks. 2. In all the circumstances, we are not satisfied that the appellant has established that the Tribunal has failed to give adequate reasons in preferring the expert evidence of the respondent to that of the appellant. 3. It follows, in our opinion, that the complaint that the Tribunal erred in failing to give adequate reasons for preferring the respondent's evidence as to quantum must also be rejected. Once the respondent's evidence as to the method of rectification of the defects is accepted, so must its evidence as to quantum be accepted. The evidence of the appellant on this issue was premised on the method of rectification of the defect proposed by the appellant being accepted. 4. We reject ground 6. Conclusion 1. The order we therefore make is that the appeal be dismissed. 2. The appellant submitted that it should be awarded its costs of the appeal on an indemnity basis. The respondent made no written submission in regard to costs. As the appellant has been wholly unsuccessful on the appeal, there is no basis for it to be awarded its costs. As the respondent made no submissions with respect to costs, we will simply order that there will be no order as to costs of the appeal. 3. On 7 May 2015 the Appeal Panel constituted by the Deputy President varied a previous order made on 13 January 2015 which granted a stay of the Tribunal's orders. The Deputy President ordered that the stay be lifted except to the extent that the Tribunal's orders required payment of an amount in excess of $80,000.00. In light of the result of the appeal, that order should be discharged so that there is no stay of the Tribunal's original orders. ********** 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 Amendments 26 November 2015 - Final paragraph quoted in paragraph 66 highlighted in bold. 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: 26 November 2015