Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Lane Cove Council v The Owners – Strata Plan No 88649 [2018] NSWCATAP 171 Hearing dates: 22 May 2018 Date of orders: 17 July 2018 Decision date: 17 July 2018 Jurisdiction: Appeal Panel Before: M Harrowell, Principal Member Dr R Dubler SC, Senior Member Decision: 1. The appeal is dismissed. 2. The appellant is to pay the costs of the first respondent, such costs to be as agreed or assessed on an ordinary basis. 3. As between the appellant and the second respondent there is no order for costs. 4. If any party seeks a different costs order to that in order (2), the following directions apply: (1) The applicant for costs ("costs applicant") must file and serve any costs application, including submissions and any evidence in support, within 7 days of the date of these orders. (2) Any respondent to the costs application is to file and serve any submissions and evidence in reply within 14 days from the date of these orders. (3) The costs applicant is to file any submissions in reply within 21 days from the date of these orders. (4) Any submissions are to include submissions on the issue of whether an order should be made pursuant to s 50(2) of the Civil and Administrative Tribunal Act 2013 (NSW), dispensing with a hearing of the costs application. 5. In the event an application is made pursuant to order (4), order (3) shall cease to have effect. Catchwords: HOME BUILDING CLAIM – defects and statutory warranties – no evidence or no reasonable basis for conclusion – failure to provide proper reasons – whether rectification work was a necessary and reasonable course to adopt – failure to provide procedural fairness Legislation Cited: Civil and Administrative Tribunal Act 2013 (NSW) Home Building Act 1989 (NSW) Cases Cited: Allen v TriCare (Hastings) Ltd [2016] NSWCATAP 216 Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 Beale v Government Insurance Office of NSW (1997) 48 NSWLR 430 Bellgrove v Eldridge [1954] HCA 36; (1954) 90 CLR 613 Collins v Urban [2014] NSWCATAP 17 Commonwealth of Australia v Amann Aviation Pty Ltd (1992) 174 CLR 64 DAG Aviation Pty Ltd v Kirk [2017] NSWCATAP 4 Duncan v Independent Commission Against Corruption [2016] NSWCA 143 Kostas v HIA Insurance Services Pty Ltd (2010) 241 CLR 390 Peisley v Maddrell Management Pty Ltd [2010] NSWSC 1477 Category: Principal judgment Parties: Lane Cove Council (Appellant) The Owners – Strata Plan No 88649 (First Respondent) New South Wales Self-Insurance Corporation (Second Respondent) Representation: Counsel: D. Moujali (Appellant) J. Young (First Respondent) L. Corbett (Second Respondent) Solicitors: McCulloch & Buggy (Appellant) Grace Lawyers (First Respondent) Moray & Agnew (Second Respondent) File Number(s): AP17/54131 Decision under appeal Court or tribunal: Civil and Administrative Tribunal of New South Wales Jurisdiction: Consumer and Commercial Division Citation: N/A Date of Decision: 12 December 2017 Before: I Bailey AM SC, Senior Member File Number(s): HB15/50239 reasons for decision Introduction 1. The First Respondent ("the Owners") is the Owners Corporation of a mixed use strata scheme development comprising 6 residential lots, a child care centre, a meeting house and common property ("the Building") in Lane Cove. In home building proceedings, the Owners complained of defects in the construction of the Building. 2. The claim was made against: 1. the Appellant in its capacity as the developer, for damages arising from alleged breaches of statutory warranties implied by s.18B of the Home Building Act 1989 (NSW) ("the HB Act"); and 2. the Second Respondent, upon the insolvency of the Builder, for an indemnity under a home warranty insurance policy. 1. On 12 December 2017, the Tribunal determined the Owners' claim, which resulted in orders for the payment of moneys on 27 February 2018. 2. By its Notice of Appeal, the Appellant makes complaint about two aspects of the Tribunal's Decision and Orders. First, it complains about the order for the payment of $109,710 in respect of defects found pertaining to the floating timber flooring placed in the six residential units. Second, it complains about the award made for design and professional fees. The Second Respondent joined with and supported the Appellant's Notice of Appeal and Grounds of Appeal. 3. The Appellant's contentions in this regard were set out in 7 grounds of appeal which we deal with in turn. No leave to appeal was sought. It was contended that each of the grounds of appeal involved errors of law. Ground 1 1. Ground 1 is in the following terms: "The Tribunal erred in concluding at [18] of the Reasons that the movement in the floating timber floor existed in all units in circumstances where there was no evidence or no reasonable basis for such a conclusion." The Appellant's and Second Respondent's submissions 1. The Appellant and the Second Respondent (which, for convenience, we will refer to collectively as "the Appellants") in respect of this ground rely on the principles in Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 at 355; Kostas v HIA Insurance Services Pty Ltd (2010) 241 CLR 390 at [91]; Duncan v Independent Commission Against Corruption [2016] NSWCA 143 at [278]; and Allen v TriCare (Hastings) Ltd [2016] NSWCATAP 216 at [183]-[184] (Allen's case). As made clear by the Appeal Panel in Allen's case, the "no evidence ground" involves the proposition that there was no evidence to support the factual finding in question, and the "unreasonableness ground" involves the proposition that the decision was so unreasonable that no reasonable decision maker could have come to it. 2. The alleged defect in question was that the concrete subfloor of each of the six residential units had not been appropriately levelled. This, it was claimed, resulted in the timber floating floors exhibiting excessive undulations or movement. The Appellants submitted that there was unanimity among the building experts that the acceptable tolerance for the movement of a floating timber floor is within the range of +/- 2mm. 3. The Tribunal had expert evidence from two surveyors before it. Mr Milligan was the surveyor expert qualified by the Owners and Mr Bentley was the expert qualified by the Appellant. The surveyors produced reports following their inspection and testing of the floors in units 3 and 4. They did not survey any other units. Their conclusion was that when comparing unweighted and weighted levels to determine any movement in the flooring, there were two locations in unit 3 where there was movement in excess of 2mm and unit 4 did not reveal any movement in excess of 2mm. The tests were only carried out in four locations in each of units 3 and 4. 4. The Appellants contended that whilst there was some additional observational evidence by the building experts about "excessive" movement and undulations in all six units, this evidence was inherently unreliable or so lacking in probative value it could not properly or rationally support the conclusion that there was a defect in each of the six units. 5. The Appellants contended that the evidence before the Tribunal only rationally or reasonably established that the defect to the timber floating floors exists in unit 3. Accordingly, the Tribunal was in error in concluding that the defect in respect of the floating timber floors was "systemic" and existed in all 6 units. The Owners' Submissions 1. The Owners submit that the decision involved a finding based on "first-hand observations" that the timber flooring defect existed in all the units. The Owners referred to such evidence and submitted that the decision was correct as there was ample evidence of the systemic nature of the timber flooring defect. As the Owners submitted: "Put simply, the experts clearly stated at the Tribunal hearing that their observations in relation to the flooring defect extended across all the units … There was evidence to support, and it was not illogical, irrational or so unreasonable to make, the finding of a systemic timber flooring defect." Summary of the evidence 1. To determine this claim, consideration of the evidence referred to by the parties is required. The Owners and the Tribunal relied in particular on the evidence of Mr Kavanagh and Mr Madden. 2. Mr Mark Kavanagh was the building expert engaged by the Owners. He inspected all of the units. In his report of 11 August 2015 he stated that he measured a gap between the timber skirting and the floating timber floor to a width of 2mm and when pressure was applied, the gap opened up to a width of 5mm. His stated that the acceptable tolerances for the levels of timber floors set out in the Office of Fair Trading standards is only a guide and that the manufacturer's recommendation should be followed rather than the guide. This refers to a tolerance of 2mm variance over a 1 linear metre. His report included photographs of his measurement and observation. He stated: "The flooring has been laid directly over the top of the concrete floor slabs; however it would appear that the floor slabs were not checked for level as there are numerous areas within each of the units where the flooring will move up and down excessively due to the base floor slab not being level." 1. He regarded the defect as being "systemic". He further stated: "This is creating both physically felt defects as well as a visual defect as the flooring can be seen to move up and down and it is especially obvious where this occurs next to skirting and kickboards. Cause: The original concrete floors were not checked for level prior to the flooring installation and all dips and hollows filled in to prevent excessive movement of the flooring after installation." 1. Mr Kavanagh at Tscp 86(41)-87(1) was asked for his response to the opinion of Mr Waddell, building consultant engaged by the Appellant, that only two areas in unit 3 require rectification and such rectification can be localised to around those two areas. His response was as follows: "It's my reading of the report of Mr Waddell that he has basically said, "We have movement in those two areas" which is up near the kitchen and I think adjacent to the entrance hall coming in and he's accepted those two areas have to be addressed. My consideration is that, yes, okay, that's fantastic. They've got to be addressed, but we still have the basic undulations in the remainder of the floor which aren't being addressed." 1. Mr Kavanagh was then asked for his view of the method of localised rectification proposed by Mr Waddell on the assumption that there were only two points in unit 3 that were defective in terms of movement of the floorboards. His evidence continued at Tscp 87(14) as follows: "Mr Young: And your proposed method of rectification from your previous report was removal of the floorboards throughout the entire unit. Mr Kavanagh: Yes. Mr Young: Do you maintain that opinion? Mr Kavanagh: I still maintain that opinion; to sort out what both Mr Waddell has agreed to in regards to the movement and the undulations. . . . Member: … in fact, his view is that having regard to the extent of what we'll call the undulations, as you refer, that by undertaking a partial repair in areas which are identified doesn't deal with the problem of undulations and that if you in fact adopt this – Mr Waddell is it – the piecemeal approach – you might as well extend it and do the job properly. Is that the summary of what you're saying? Mr Kavanagh: Yes. Effectively, I'm saying, yes, what Mr Waddell is saying depicts those areas, yes, on paper – anything can be done nicely on paper, but in the practical real world damage will occur and it's still not addressing the other issues further into the floor where we have the undulations that I said for me to rectify the undulations, you can't do it, in your words, piecemeal fashion. It's quicker, easier, more economical to strip it off and redo it. Member: Right. Mr Young: And in relation to unit 4, there are some other survey readings that you've seen in relation to those readings done by Mr Milligan. You've previously provided the supplementary report and now you've seen some readings carried out by Mr Bentley. Do those readings change your opinion as previously expressed in relation to unit 4 and its method of rectification? Mr Kavanagh: They change my opinion of what the actual findings are in unit number 5 [sic], per se, as in when I was in there, there was still movement in the boards, in some individual boards, that you could physically feel and see. From the time that I was there to the time the latter survey was done, the boards could have dropped slightly and found their own level, so you're not getting the movement in those individual boards. It still hasn't addressed the undulations within the unit. Mr Young: And in terms, therefore, of the method of rectification, does that mean your opinion hasn't changed or has changed? Mr Kavanagh: No, it hasn't changed. Mr Young: All right. Now, Mr Waddell says in his report, his supplementary report, at page – can you just turn to it – page 7 at paragraph 8.1.19: I do not consider this to be a systemic defect simply because two locations close to and parallel to the direction of laying the flooring in one of six units require minor rectification. Do you see that? Mr Kavanagh: Yes I do. Mr Young: Now, having regard to the specific words there, that is, two locations close to and parallel to the direction of laying in one of six units and requiring minor rectification, would you agree with him? Mr Kavanagh: I'm trying to think of the words. I can't necessarily talk for Mr Waddell as to how he's got his findings in relation to that. I know when I was first out there doing inspections, there was movement physically able to be felt, seen, in the boards in each of the units and you could physically feel the undulations in each of those six units. Yes, there's only been a survey done on the two units, so as I see it, for Mr Waddell's words to describe that, I can't see how he's come up with that. I don't necessarily agree. I'm not saying that my findings are based on units 3 and 4, I'm saying my findings are based on units 1 through 6." 1. Mr Kavanagh explained that his reference to "undulations" was a reference to differences in levels in particular areas of the floor, meaning that "you could feel yourself moving "up and down" and such differences in levels have resulted in the flooring moving up and down": Tscp 89-90. 2. Mr Madden, building cost consultant called by the Owners, gave evidence that "we have this movement when you walk on them … yes. So you do feel that": Tscps 94(45)-95(5.) 3. Mr Waddell in his report of 9 June 2016 at paragraph 9.11.3, gave evidence that with the exception of units 1 and 4, the occupants of the other units directed Mr Waddell's attention to locations generally against skirting boards within the living room or the kitchen cabinetry where the timber floating flooring was able to be pushed downwards with light pressure by the foot or hand. Mr Waddell confirmed that the occupants of units 2, 3, 5 and 6 directed Mr Waddell's attention to areas of their apartments where they had concerns with the floorboards and their movements: Tscps 108.39-.43. 4. Mr Waddell in his report at paragraph 9.11.4 stated, "In all such locations I tested the gapping, I found it to be less than 4mm". Mr Waddell stated that in his opinion, such amount of deviation of the floating floor was not greater than the limits described by section 14.08 of the Office of Fair Trading Guide to Standards and Tolerances 2007, and therefore was not a relevant defect. The Office of Fair Trading's tolerance is 4mm over a 2m length. 5. Mr Oates, building consultant engaged by the Second Respondent, in his report of 29 September 2016 stated that he was not able to locate any areas in units where the bamboo floating timber flooring exceeded a deviation of more than 5mm over a 1m length span. In his opinion, such amount of deviation of the floating floor was not a defect. He also referred to the Office of Fair Trading Guide to Standards and Tolerances 2007 as being the relevant standard. 6. Mr Oates in his report of 1 December 2015 referred to the Guide to Standards and Tolerances 2007 at 2.08 Levelness of Timber and Concrete Floors as follows: "Except where documented otherwise, new floors are defective if within the first 24 months they differ in level by more than 10mm in any room or area, or more than 4mm in any 2m length. The overall deviation of floor level to entire building footprint shall not exceed 20mm." 1. Mr Kavanagh in his report of 16 February 2017 referred to installation manuals and specifications of manufacturers and suppliers in the case of timber strip flooring. The Boral Product Guide required the concrete slab to be flat with no more than +/- 3mm deviation in a 3m radius and in the case of bamboo flooring, the installer states that: "Using a 1m straightedge, the subfloor should not exceed +/- 2mm over 1 linear metre in any direction. Remember, uneven floors may lead to movement and noise, so it is necessary to assess the levelness and get it right." 1. The Tribunal at [24]-[25] concluded that the manufacturer's installation instructions or specifications, including those quoted by Mr Kavanagh, set the standard by which the performance of work is to be performed with due care and skill. The Tribunal referred to the statement from the Office of Fair Trading Guide that "the manufacturer's installation instructions take precedence over this Guide". 2. There was no evidence led of any Australian Standard setting an acceptable tolerance for actual movement of floorboards in a vertical plane or how it was measured. However, Mr Waddell and Mr Oates gave evidence that a tolerance of 2mm was acceptable, but in excess of that it was not: Tscp 121(20-26). Mr Kavanagh said "a bounce of 2mm was a totally different feeling in itself, walking over a floor like that, as opposed to walking on a normal floating floor": Tscp 122(37). 3. The experts also gave oral evidence by way of a joint session. This comprised the four experts Mr Oates and Mr Waddell along with Mr Kavanagh and Mr Madden. Unfortunately, the transcript was not always able to identify the expert in question, but their identity can be inferred by the context. The relevant evidence in this regard was as follows: "Mr …: … Look, you've got your normal feeling of a floating floor as you walk in, that is a floating floor as opposed to a top-fixed direct stick, however we had movement at the ends of the boards and you could physically feel as you walked through the units that, look, you know, I've gone in a little dip. I'm up over a little crest. I'm back in a little dip." [This is likely to be Mr Kavanagh: Tscp 104(11-15)] "Mr …: I'm more of a lay observer because I'm a quantum expert as a quantity surveyor--- Member: But you're a human being. Mr …: Yes, I'm a human being and I've walked these floors and the floors did – particularly when you were in the main part of the unit – so, sorry, all the units were very similar to each other in regards to the – undulation is the word we've been using and you can feel that. You can feel it in a carpeted floor as well in offices, but you can feel it and I found the experience less so particularly on floating floors because normally the board, being a length evens that out, but you could feel undulation, as well as you could hear the sound when you walked inside with boots on – you could hear the sound differences as you went from some of these area as well. And on some of the joints, there was movement between these joints." [This is likely to be Mr Madden: Tscp 104(20-35)] 1. Next there was evidence from two surveyors. Mr Milligan, surveyor engaged by the Owners, conducted a survey of units 3 and 4, the results of which were produced in his report of 31 January 2017. In unit 3 at two out of four locations tested there was found to be movement of 4mm and 5mm when weighted with approximately 90kg. In unit 4, Mr Milligan determined that there was no movement when weighted with approximately 90kg at four locations tested. He also measured the levels of the floors at 1 m intervals which he plotted on a grid. He found that the floor in both units 3 and 4 slopes from the balcony towards the front door. In unit 3 the level adjacent to the balcony was in the order of 100.00m, and at the front door it was 99.978m. In respect of unit 4, he found that the level adjacent to the balcony was in the order of 100.01m and near the front door the level was 99.984m. 2. Mr Milligan, in his report, stated that at one point in unit 4 there was movement of "-2mm" when weighted with approximately 90kg. In his oral evidence he explained that this meant that when the weight was placed at that point, the level was 2mm higher than the surrounding area: Tscp 43. 3. Mr Bentley, engaged by the Appellant, carried out a survey in respect of the floating bamboo flooring within units 3 and 4 by his report dated 11 May 2017. He found in respect of the four test locations, that apart from two points identified in unit 3, there was no appreciable vertical movement when weighted to approximately 90kg. At the two points identified otherwise in unit 3, there was vertical movement in the order of 4-5mm. He also measured differences between the unweighted floor levels at the 73 points common with the survey of Mr Milligan. Of those 73 points, ten points were found to show differences of +/- 3-6mm. This was the case in both units 3 and 4. 4. There was then the oral evidence of the surveyors. Mr Milligan gave evidence that where there were points measured with a movement of 4mm, it was discernible when you physically walked over it in that you could feel it move and you could see it move, and that was in two spots in unit 3: Tscp 43-44. Further, that in unit 3 the difference between the highest and lowest points, according to his survey, was 31mm. Mr Milligan confirmed that his survey took measurements at 1m intervals set out in a grid in respect of units 3 and 4. Mr Bentley performed a similar exercise in his survey. Mr Milligan agreed that at one point the difference in the levels was about 7mm over a distance of slightly more than 1m, being the diagonal across the 1m sides of the 1m grid. 5. Mr Bentley agreed that his survey "largely married up with the levels that Mr Milligan came up with": Tscp 48(30). 6. Mr Waddell, when questioned by the Tribunal in joint conclave before him, accepted that the measurements on Mr Milligan's report showed large deviations across a metre, and that was also the case with Mr Bentley's survey where they showed, for example, a 5m deviation across a metre: Tscp 110(27-36). 7. The survey reports show not merely that the levels vary by more than 2mm over 1m; they show that the differences in levels vary. In other words, the floor "undulates" by moving up and down as one moves along the length of the floor. This proposition was pointed out by the Tribunal in the joint session of the experts before him and was a proposition that Mr Waddell appeared to accept at Tscp 115(13-17). He certainly did not dispute the proposition when it was raised by the Tribunal. 8. The Owners, in its final submissions to the Tribunal, marked up the surveys to demonstrate that in unit 4 there was a 31mm deviation across a marked distance of approximately 9.5m and an 8mm deviation across a 1m distance, and in unit 3 there was a 34mm deviation across a marked distance of 7m and a 10mm deviation across a 1m distance. The surveys thereby also established that the deviations were greater than 10mm over the length of the room. Consideration 1. The above recitation of the evidence before the Tribunal makes it plain that there was evidence that the defective concrete slab and resultant defective timber floorboards was present in all units. In particular, this was the evidence of Mr Kavanagh. Accordingly, it cannot be established that there was "no evidence" to support the conclusion of the Tribunal that the defect was systemic to all floors. Hence, the submission was that the evidence was not sufficiently cogent or precise to rationally or reasonably permit the Tribunal to make the finding that the defect existed beyond unit 3, particularly given the survey evidence. In this regard, the Appellant placed particular emphasis upon paragraph [33] of the Decision, which was as follows: "The Tribunal accepts that there is an inherent difficulty in proving a defect in an element within a building which is not at the surface. The Tribunal also accepts that the assessment of whether this part of the Claim should succeed has to be a deal more sophisticated than merely accepting that the degree of the perceptibility of movement is an appropriate yardstick." 1. In the end, however, the Tribunal was satisfied that the evidence before it supported the conclusion that the problem existed in all units, and, in this regard, stated the following: "18. The evidence of Mark Kavanagh and David Madden in their Reports and in their evidence during the hearing was that the problem existed in all units. The Tribunal was impressed by their certainty and the manner in which they expressed themselves in the course of cross-examination. For several reasons explained at [21] and [31] the Tribunal accepts that the movement caused by the breach by the builder, see [27] exists in all units, to varying degrees. … 31. Further, although there is an understandable degree of imperfection in the precision with which the extent and precise location of "excessive" vertical movement has been established, the Tribunal accepts the description of the defect as being systemic is correct. The degree and frequency of the occurrence of movement, even if of variable magnitude, leads to that conclusion." 1. We note that no leave to appeal the finding that the defect was systemic throughout all units was sought. What has been pursued in the Notice of Appeal is the question of law as to whether or not this conclusion was so unreasonable that no reasonable tribunal could have come to it. In light of the evidence as a whole, as presented to us on appeal and summarised above, we are not satisfied that the finding that the defect was systemic was so unreasonable that no reasonable tribunal could have reached this conclusion. 2. Our reasons are as follows. 3. First, there was the evidence of Mr Kavanagh and Mr Madden as described above that the floors in each unit was defective and exhibited excessive movement. It was reasonably open to the Tribunal to accept their evidence, particularly in light of some of the other evidence led. 4. Second, there was the survey evidence that in unit 3 there was perceptible and measured movement in the floorboards in excess of 2mm. All experts accepted that the extent of the movement in unit 3 represented a defect and was beyond the acceptable level of tolerances in this regard. While the surveys to unit 4 did not show movement, this was only at 4 test locations. 5. Further, the experts for the Appellant and the Second Respondent, being Mr Waddell and Mr Oates, from their examination of all the units, were not in a position to dispute the proposition put by Mr Kavanagh that the extent of the problem of movement was the same in all of the units, and in particular was similar to that in unit 3. For example, the most Mr Waddell was prepared to say was that the other units were not worse than unit 3: Tscp 105(8). Mr Oates simply stated that the timber flooring did not exceed a deviation of more than 5mm over a 1m length span which is not inconsistent with the floors being defective based on the standards before the Tribunal. 6. Third, there is the evidence, particularly from Mr Kavanagh, that the floors in all units undulated, were not level and led to noise when walked upon. All of the standards in respect of this potential defect refer to uneven levels over a lineal distance and not just movement in a vertical plane up and down. 7. We are satisfied that the survey evidence established a breach of these standards in both units 3 and 4. The Tribunal concluded in respect of the survey evidence as follows at [29]: "The Tribunal has carefully examined the survey evidence to try to assess the extent of high and low points which could be assumed to exist in the concrete floor surface. This examination leads to a confident conclusion that there are deviations in the surface of the concrete which considerably exceed those set out in the manufacturer's specifications and, further, that they were not corrected." 1. This conclusion of the Tribunal and that this defective concrete floor surface existed in all units was reasonably open to it. The Second Respondent in its oral submissions in reply contended that the issue of "undulations" was not properly before the Tribunal as it was not part of the Owners' claim as originally formulated. It submitted that only the issue of excessive movement in the vertical plane was properly before the Tribunal. In passing, we note the Second Respondent did not raise this issue in its reply to the Appellant's Notice of Appeal nor did the Second Respondent address this issue in its written submissions. 2. The problem with this oral submission is that it would mean that the Tribunal was in error in treating the evidence about undulations, or 'high and low points', as evidence that could be relied upon by the Tribunal in making findings about the existence of a systemic defect in the floor and its concrete slab throughout the units. 3. Further, and in any event, the submission seeks to dissect and categorise evidence and in some way tie this analysis to a failure to properly plead a case. As the provisions of the Civil and Administrative Tribunal Act 2013 (NSW) ("NCAT Act") such as ss.36 and 38, make clear, the procedure of the Tribunal is informal. That is, the Tribunal is not bound by pleadings and the rules of evidence do not apply. 4. The ultimate issue to be decided was whether the Tribunal was correct in its conclusion that there was a defect, what that defect was and whether the defect existed in all of the units about which complaint was made. 5. Only limited extracts of the evidence have been provided to us. However, on the evidence that has been placed before us, it would appear that an uneven concrete slab may cause movement in or undulations in the flooring, or both. For example, the Boral Product Guide states "uneven floors may lead to movement and noise, so it is necessary to assess the levelness and get it right." Mr Kavanagh also explained that "you could feel yourself "up and down" and such differences in levels have resulted in the flooring moving up and down": Tscp 89-90. 6. All experts were aware of and looked at both issues. In these circumstances, it could not be said the evidence of undulations in the timber floorboards could not or should not have been taken into account by the Tribunal in making findings about the uneven slab levels and the existence of this defect. To the contrary, the evidence of undulations was probative of a matter of fact to be determined, any issue with this evidence being limited to one of weight. 7. Consequently, it was open to the Tribunal acting reasonably to conclude that the defect in question was systemic and existing in all of the units. Accordingly, we reject this ground of appeal. Ground 2 1. Ground 2 is in the following terms: "The Tribunal failed to provide reasoning or adequate reasoning for the conclusion at [31] of the Reasons that the movement in the floating timber flooring is a systemic defect." 1. Paragraph [31] of the Decision is as follows: "Further, although there is an understandable degree of imperfection in the precision with which the extent and precise location of "excessive" vertical movement has been established, the Tribunal accepts the description of the defect as being systemic is correct. The degree and frequency of the occurrence of movement, even if of variable magnitude, leads to that conclusion." Appellants' Submissions 1. The nub of the submission of the Appellants was that "the Senior Member failed to provide reasons for the conclusion that the defect was systemic in circumstances where there was no survey evidence in relation to units 1, 2, 5 and 6". Consideration 1. In our view, sufficient reasons were provided to support the conclusion that the defect was systemic. In particular, the Tribunal at [18] stated: "The evidence of Mark Kavanagh and David Madden in their Reports and in their evidence during the hearing was that the problem existed in all units. The Tribunal was impressed by their certainty and the manner in which they expressed themselves on the course of cross-examination. For reasons explained at [21] and [31], the Tribunal accepts that the movement caused by the breach by the builder, see [27] exists in all units, to varying degrees." 1. The evidence of Mark Kavanagh and David Madden formed the basis for the statement at [31] that "The degree and frequency of the occurrence of movement, even if of variable magnitude, leads to that conclusion". Further, so far as the survey evidence is concerned, the Tribunal explained at [29] that the survey evidence in both units 3 and 4, in measuring the extent of high and low points in the timber floor, leads to a confident conclusion that there are deviations in the surface of the concrete. This supports the conclusion of Mr Kavanagh and Mr Madden that there were undulations and movement in all units. 2. Accordingly, we reject this ground of appeal. Ground 3 1. Ground 3 is in the following terms: "The Tribunal failed to apply the correct legal principle in considering whether the rectification of the floating timber flooring in all units is a necessary and reasonable course to adopt, especially in the absence of expert or lay evidence as to the condition of the floors in units 1, 2, 5 and 6." Appellants' Submissions 1. The Appellant referred to the principles in Bellgrove v Eldridge [1954] HCA 36; (1954) 90 CLR 613 at 617 to the effect that to order rectification work, this must be necessary to produce conformity with the contract or relevant standard, and also, such a course must be reasonable to adopt. The Appellant submitted that, first; there was no evidence of any complaints or reports from the occupants of the units in respect of any movement in the flooring. Second, there was also no evidence of any loss of amenity, use or enjoyment of the units. 2. In those circumstances, the Appellant submitted that, consistently with the legal principle derived from Bellgrove v Eldridge, the Tribunal should have considered whether the removal and replacement of the entire flooring in all six units was a reasonable and necessary course to adopt. The Appellant submitted that the Tribunal failed to consider this question and the correct application of the legal principle should have resulted in rejecting the claim for rectification. Consideration 1. First, there was the evidence led in Mr Waddell's report of 9 June 2016 at paragraph 9.11.3 that the occupants of units 2, 3, 5 and 6 did point out concerns about movement in the floors in their units: see also Tscps 108.39-.43. Second, both Messrs Kavanagh and Madden referred to there being excessive or noticeable movement along with noise and undulations in the floorboards underfoot: see paragraphs [14]-[19] above. Having regard to this evidence and to the failure to comply with the Boral Product Guide set out above, it can be readily inferred that if this is the case, this leads to a loss of amenity. The Tribunal dealt with this question at [32] of the Decision as follows: "The Tribunal accepts that whilst the movement in the floating flooring does not involve an issue of safety, it nevertheless is clearly an impediment to the level of amenity which ought be present within the units and which, but for the breach by the builder of the statutory warranty at [34] would [sic – not] be present." 1. Further, the Tribunal at [35] expressly considered and found the rectification work ordered was a reasonable means by which the defective work can be rectified. 2. In our opinion, the Tribunal did not fail to apply the correct legal principle in considering whether or not rectification work to each unit was reasonable and necessary. We accordingly reject this ground of appeal. Ground 4 1. Ground 4 is in the following terms: "Alternatively to 3 above, the Tribunal failed to provide reasoning or adequate reasoning for the conclusion that rectification in the floating timber flooring in all units is a necessary and reasonable course to adopt." 1. This ground of appeal can be disposed of shortly. As explained above in respect of ground 2, the Tribunal provided reasoning for its conclusion that there was excessive movement in all units and a defective concrete subfloor in all units. Further, as already explained by us in respect of ground 3, the Tribunal concluded that this led to a loss of amenity. This constituted the provision of adequate reasons for the conclusion that rectification to the timber flooring in all units was a necessary and reasonable course to adopt. 2. Consequently, this ground of appeal fails. Ground 5 1. Ground 5 is in the following terms: "The Tribunal denied procedural fairness to the Appellant in failing to determining [sic] its contention that localised repairs were sufficient as opposed to replacing the entire floating timber flooring." Appellants' Submissions 1. The Appellant relied upon the principle in Peisley v Maddrell Management Pty Ltd [2010] NSWSC 1477 at [84]-[85] to the effect that as a matter of procedural fairness, a party is entitled to have its contentions determined on its merits. One of the issues between the parties was that the Appellants submitted that in the event that there should be rectification to the timber flooring, this could be done by localised repairs to any specifically affected area. 2. In the result, the Tribunal awarded an amount based upon Mr Madden's evidence which was for rectification to the entire timber flooring in each of the units. The Appellants contended that the Tribunal had failed to consider and determine the contention that any rectification could be achieved by localised repairs, as opposed to replacing the entire flooring. Consideration 1. We do not accept this contention. At [35] of the Decision, the Tribunal stated "that the rectification work contended for by the Applicant [i.e., replacing of the entire flooring in each unit] is a reasonable means by which the defective work can be rectified". Accordingly, it is plain that the Tribunal rejected the contention that localised repairs would be the reasonable means by which the defective work can be rectified. The Appellants' more substantive submission is contained in the next ground, ground 6, to which we now turn. 2. Accordingly, we reject ground 5 of the Notice of Appeal. Ground 6 1. Ground 6 is in the following terms: "Alternatively to 5 above, the Tribunal failed to provide reasoning or adequate reasoning for the conclusion that it was reasonably necessary to replace the entire floating timber flooring as opposed to localised repairs." 1. As stated above, the Tribunal's conclusion with respect to the issue of the rectification work was contained at [35], which was in the following terms: "The Tribunal further concludes that the rectification work contended for by the Applicant is a reasonable means by which the defective work can be rectified." 1. A failure to provide reasons or adequate reasons is an error of law. However, the nature and extent of the reasons required are variable, depending on the circumstances of the particular case: Beale v Government Insurance Office of NSW (1997) 48 NSWLR 430; Collins v Urban [2014] NSWCATAP 17 at [57]; DAG Aviation Pty Ltd v Kirk [2017] NSWCATAP 41 at [28]. 2. In the present case, the different methods of rectification contended for by the parties involved a substantial difference in terms of quantum. In total, this was a significant aspect in the proceedings. In such circumstances, there is much force in the Appellants' submission that the bare statement of acceptance of the Applicant's case at [35] of the Decision does not explain adequately the reasoning process behind the conclusion made. 3. Nevertheless, we have come to the conclusion that even if the reasons could be regarded as inadequate, this ground of appeal should not lead to a different result or the matter being remitted back to the Tribunal. The Owners' case emerges from the clear and direct evidence of Mr Kavanagh and Mr Madden, including in a joint expert session where the Tribunal tested the contentions of the different experts on both sides. 4. It seems clear to us that the Tribunal accepted the evidence from Mr Kavanagh and Mr Madden. At [18] of the Decision, the Tribunal stated it was impressed by them as witnesses. 5. Mr Kavanagh and Mr Madden gave evidence stating that there were difficulties associated with the performance of localised repairs for two reasons 6. First, there was the difficulty of matching old and new floorboards; the time consuming nature of removing specific floorboards in isolation to the rest; and the high risk of damage to surrounding floorboards extending the job to further areas. As a result, localised repairs would not necessarily be more economical or likely to lead to an adequate result. (see, for example, tscp 94-95) Second, Mr Kavanagh gave evidence that localised repairs did not address the undulations in the floors' levels, the underlying slab finish being the defect causing the problem with the floor. See, for example tscp 92(7-13). 7. It follows from their evidence when considered as a whole and from the reasons of the Tribunal that the Tribunal must have accepted that: 1. For the reasons provided by Mssrs Kavanagh and Madden, localised repairs were not a reasonable course and that removal of the floorboards generally was both reasonable and necessary in the circumstances; 2. The identified defects as described by those experts were present in all units, some measured by survey and some measured by observational assessments by the experts based on their experience in assessing floors with these types of problems; and 3. The defect was systemic, being the deviations in the surface of the concrete considerably exceeded those set out in the manufacturer's specifications which needed to be refinished to a consistent level in each unit. 1. In this regard, it has not been contended, nor made the subject of a ground of appeal, that it was not reasonably open to the Tribunal to accept the evidence of Mr Kavanagh and Mr Madden that localised repairs were not appropriate. 2. In Beale, Meagher JA said at 444: It does not automatically follow that because reasons for decision are inadequate then an appealable error has occurred. Examination of nearly any statement of reasons with a fine-tooth comb would throw up some inadequacies. Indeed, an appeal court will reserve intervention to those situations in which it is left with no choice: where no reasons have been given in circumstances where there is an obligation to provide them and in circumstances where a statement of reasons is so inadequate as to constitute a miscarriage of justice. In other words, the statement of reasons must be looked at as a whole and the material inadequacies identified and considered. 1. His Honour then continued in the last paragraph at 444: Lastly, it is noted that an appealable error arising from inadequate reasons does not necessarily mean that a new trial is required. An appeal court is entitled to consider the matter and, if appropriate reasons are given, may itself decide the matter. Thus, if the only conclusion open on the evidence available at trial was the conclusion reached by the trial judge, then, notwithstanding an inadequate statement of reasons, the matter need not go to a new trial: NSW Insurance Ministerial Corporation (formerly GIO of New South Wales) v Mesiti (Court of Appeal, 1 December 1994, unreported). 1. Having regard to the matters to which we have referred above, it seems to us that even if the reasons might be described as inadequate, when looked at as a whole there is no identifiable miscarriage of justice or a reason for us to otherwise reach a different factual conclusion or to order a new hearing. 2. Consequently, this ground of appeal is not made out. Ground 7 1. Ground 7 is in the following terms: "The Tribunal erred in concluding at [77] of the Reasons that an allowance of 10% of the total cost of rectification should be allowed for design and professional fees in circumstances where there was no evidence or no reasonable basis for such a conclusion." 1. The Tribunal dealt with this claim at [75]-[77] as follows: "75. The amount claimed in Mr Madden's report dated 14 April 2016 C4 is a total of $37,800, including fees of $5,000, for a project manager $10,000 for "Design Documentation" and $3,000 for a quantity surveyor for Tender Documents. Post Tender fees of $5,000, Construction Period fees of $12,800 and Post Construction fees of $2,000. 76. Mr Oates in his report dated 29 September 2016 R2/2 paragraph disputes the necessity for design documentation or a quantity surveyor for the performance of rectification works. 77. The Tribunal understands that the extent of contract administration and professional services for such contracts, to a large degree, depends upon the actual scope of work found to be necessary. The Tribunal accepts to the general contentions of Mr Oates as to the means of assessing such potential costs. The Tribunal concludes that an allowance should be included calculated at 10% of the total cost of rectification." Appellants' Submissions 1. The Appellants submitted that Mr Oates had been of the opinion in his report of 29 September 2016 that a rate of 7% was appropriate for contract administration. Subsequently, however, the Appellants referred to the fact that Mr Waddell and Mr Oates in the joint report before the Tribunal did not consider that any cost for design and professional fees was appropriate. It was submitted that in such circumstances there was no evidence, expert or otherwise, that 10% was appropriate. Further, and in any event, the opinion, which Mr Oates had expressed in his earlier report, was not his opinion as recorded in the joint report. Consideration 1. The contention of the Appellants essentially was that while the evidence of Mr Madden before the Tribunal may have supported an award under this item, there was no evidence which supported an award of 10%, being the quantum selected by the Tribunal. As we understand the submission of the Appellants, it was contended that there was no basis for a percentage approach which selected 10% as the quantum based on the evidence before it. 2. When it comes to making an award of damages, we note the observations of the High Court in Commonwealth of Australia v Amann Aviation Pty Ltd (1992) 174 CLR 64 at [31] where Mason CJ and Dawson J pointed out that mere difficulty in estimating damages does not relieve a court from the responsibility of estimating them as best it can. Further, that the assessment of damages does sometimes of necessity involve what is guesswork rather than estimation. Where precise evidence is not available, the Court must do the best it can. 3. In this regard, we note that Mr Madden, whilst he had put forward specific figures in his report, did accept in his oral evidence before the Tribunal that "the extent to which they're required could be debated": see Tscp 130(26). Further, in his oral evidence before the Tribunal, Mr Oates at Tscp 134(31) and following did again express his opinion that 7% for contract administration was appropriate and that applying a percentage approach for contract administration was appropriate. 4. The figures expressed by Messrs Kavanagh and Madden for this head of costs can be seen to be well in excess of 10% of the trade costs allowed for by them in their expert reports. Accordingly, there was evidence before the Tribunal that a percentage approach is appropriate and 10% for contract administration or this head of costs fell between the two figures put forward by the experts. Further, Mr Madden expressed the view that there could be some tolerance for different figures in this regard. 5. In such circumstances, it was reasonably open to the Tribunal to arrive at a figure between those presented by the experts by applying a percentage of 10%. Accordingly, we reject this ground of appeal. Costs 1. Our preliminary view is that: 1. r 38 of the Civil and Administrative Tribunal Rules, 2014 (NSW) applies in respect to costs of the appeal because of the operation of r 38A. 2. the first respondent succeeded against the appellant and should receive its costs, assessed on an ordinary basis; 3. there should be no order as between the appellant and the second respondent, the second respondent supporting, but not going beyond, the appellant's appeal. Orders 1. The Appeal Panel makes the following orders: 1. The appeal is dismissed. 2. The appellant is to pay the costs of the first respondent, such costs to be as agreed or assessed on an ordinary basis. 3. As between the appellant and the second respondent there is no order for costs. 4. If any party seeks a different costs order to that in order (2), the following directions apply: 1. The applicant for costs ("costs applicant") must file and serve any costs application, including submissions and any evidence in support, within 7 days of the date of these orders. 2. Any respondent to the costs application is to file and serve any submissions and evidence in reply within 14 days from the date of these orders. 3. The costs applicant is to file any submissions in reply within 21 days from the date of these orders. 4. Any submissions are to include submissions on the issue of whether an order should be made pursuant to s 50(2) of the Civil and Administrative Tribunal Act 2013 (NSW), dispensing with a hearing of the costs application. 1. In the event an application is made pursuant to order (4), order (3) shall cease to have effect. ********** I hereby certify that this is a true and accurate record of the reasons for decision of the New South Wales Civil and Administrative Tribunal. Principal Registrar ********** 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: 17 July 2018