Sand Ground Engineering Pty Ltd v Super Render Pty Ltd

By amended summons filed on 23 February 2020, the plaintiff, Sand Ground Engineering (“Sand Ground”), seeks leave to appeal under ss 39 and 40 of the Local Court Act 2007 (NSW) against the whole of the decision of Magistrate Barko delivered on 4 December 2019. The proceedings before his Honour concerned a claim brought by Super Render Pty Ltd (“Super Render”) against Sand Ground for unpaid invoices in the amount of $38,212. Sand Ground defended the proceedings alleging breach of contract and cross-claimed alleging breach of contract and negligence. Sand Ground was unsuccessful in the Local Court.

Sand Ground alleges in this Court that Magistrate Barko erred in law in terms of the formation, terms and breach of the relevant contract. In the alternative, Sand Grounds asserts that the errors involve questions of mixed fact and law and leave ought to be granted in relation to them.

Appeals from judgments or orders made in the General Division of the Local Court to this Court are limited in their scope. Section 39(1) of the Local Court Act provides:

Section 40(1) of the Local Court Act provides:

Sand Ground can appeal as of right on a “question of law” and/or seek leave to appeal on a ground that involves a “question of mixed law and fact.” Sand Ground has no avenue of appeal against the decision of the Magistrate on a ground that involves a question of fact alone.

Sand Ground relied upon the following five grounds of appeal:

For reasons I have set out below, I am satisfied that neither Grounds One or Two involved either a question of law alone or a question of mixed law and fact. They were directed at the learned Magistrate’s factual findings. The plaintiff’s complaints in this court were all to the same effect: the Magistrate ought to have made different factual findings. As for the remaining Grounds, they were not ultimately pressed.

The evidence before me comprised the same material as was before Magistrate Barko as well as his Honour’s reasons and the parties’ written submissions on this appeal.

Super Render is a specialist contractor in the construction industry. Sand Ground provides excavation, piling and anchoring services. On 19 February 2017, Sand Ground was engaged as a subcontractor at a mixed residential and commercial development on Anzac Parade, Kensington (“the site”). Part of its works included the provision of a three level dry tanked basement car park.

In March 2017, the plaintiff had excavated the basement and constructed a pile wall. Shotcreting had also been carried out by a third party contractor. The purpose of this shotcreting was the subject of a factual dispute between the parties. In Super Render’s submissions filed 17 March 2020, it claimed that the shotcreting was intended to create a waterproof seal but failed to do so. Sand Ground, on the other hand, asserted that shotcreting of itself could never constitute a waterproof solution. In any event, after the shotcreting was carried out it became apparent that the walls of the basement were leaking and that rendering and waterproofing was required.

On 18 March 2017, a representative from Super Render attended the Anzac Parade site for the purposes of providing a quotation. It was common ground between the parties that there was a discussion as to the scope of the work on this date, which was followed up by emails on 18 and 19 March. The focus of the dispute in the Local Court was whether or not the oral discussions and the email exchanges formed the terms of the agreement between the parties or whether, as the plaintiff contended, the emails alone did.

After Sand Ground contracted Super Render to do work at the site, the latter carried out waterproofing and rendering works at the site. Sand Ground later paid some of the invoices amounting to $27,296.76 for this work but refused to pay the remaining invoices amounting to $38,212.

On 29 October 2018, Super Render commenced proceedings in the Local Court seeking payment of the outstanding $38,212. Sand Ground denied that payment was owed as alleged because Super Render’s work was defective and a breach of contract as the basement walls were not completely waterproofed. Sand Ground cross-claimed on the basis of breach of agreement and breach of statutory duty. It also claimed that, further and in the alternative, it had suffered damage caused by the negligence of Super Render. Super Render also relied upon res ipsa loquitur provisions of the Competition and Consumer Act 2010 (Cth) and disputed the terms of the agreement.

At the hearing before Magistrate Barko, Super Render relied upon the following evidence.

Mr Tiago Silva swore two affidavits (28 May and 18 July 2019) and gave evidence at the hearing. He was the Managing Director of Super Render, had visited the site several times and gave evidence about Super Render’s quoting practices.

Mr Bruce Leslie swore two affidavits (27 May and 20 August 2019) and gave evidence at the hearing. He is a qualified chemical engineer. As at March 2017 he was the sale and marketing manager for Scientific Waterproofing Products Pty Ltd. He was also present at a site meeting on 28 March 2017 with Mr Joao Paulo Ometto Franco from Super Render and, on his account, Mr Ahmad Alwan from Sand Ground. He gave evidence that the purpose of this meeting was to assess the work done by the plaintiff and the water leakage problem.

Mr Franco swore two affidavits (28 May and 16 August 2019) and gave evidence at the hearing. He was an employee of Super Render. He met with Mr Alwan on the site on 18 March 2017 and attended the subsequent site meeting with Mr Leslie.

Sand Ground relied upon three witnesses.

Mr Alwan was an employee of Sand Ground who engaged the services of Super Render. He denied attending the 23 March 2017 meeting. He provided two affidavits dated 30 May and 14 August 2019 and gave evidence at the hearing.

Sand Ground also relied upon an expert report from Mr Edgar Agda in relation to waterproofing standards and an affidavit from Mr Robert Hiatt, the Managing Director of Sand Ground, dated 5 June 2019.

His Honour commenced his Reasons by summarising the pleadings. He then summarised the evidence in some detail.

After summarising the parties’ submissions and relevant law, his Honour went on at [49] to make a number of preliminary factual findings. In relation to the meeting of 23 March 2017, his Honour found that the evidence of Mr Leslie and Mr Franco was preferable and that the meeting did take place with the two of them and Mr Alwan in attendance. He based this finding on a number of factors: they gave similar evidence and Mr Leslie was an independent witness and had diarised and taken photographs at the meeting.

In relation to what was said during the site visit of 18 March 2017, his Honour also preferred Mr Franco’s version. Mr Franco had given evidence that Mr Alwan had stated at the meeting that Sand Ground, “just wanted the gaps in the shotcrete walls to be filled in to make the walls look better”. He said that he had warned Mr Alwan that this would not stop the walls from leaking but Mr Alwan had said that the gaps needed to be filled simply to make them look better and “soften” their appearance. He deposed that Sand Ground wanted the work done by 24 March 2017. Mr Alwan, on the other hand, gave evidence that the meeting had been for the purpose of obtaining a quote. He deposed that he had told Mr Franco that “...we need to stop the water coming through the walls…as long as the water stops leaking we will be happy…give me a price.”

His Honour again preferred the evidence of Mr Franco. He had already rejected Mr Alwan’s evidence in relation to the 23 March meeting and the circumstances favoured Mr Franco’s version that Super Render was engaged to do “stop gap measure work and tidy the appearance of the walls for a quick handover as a renderer”. His Honour found that there was “an atmosphere of desperation on the part of Sand Ground to finish its role at the Site” as it only had two weeks to finish its contract with the head contractor. Furthermore, Sand Ground had only sought “some rendering done” (as evidenced by a text message) before the 18 March meeting. Additionally, Super Render’s quote was accepted quickly. His Honour was satisfied that there were emails which showed that Sand Ground agreed on the quote on 19 March with work to begin on 20 March. His Honour stated that:

His Honour noted that in his quotation of 18 March 2017, Mr Franco suggested a certain material "allows apply (which his Honour interpreted as 'application') over the wet surface". His Honour favoured Super Render’s contention that they were only engaged to waterproof parts of the wall, as at the time not all of the wall and shotcrete was wet. His Honour also noted that it seemed improbable that Sand Ground had intended to have the walls waterproofed but allowed Super Render to provide a relatively simplistic quotation and did not ask for further detail. His Honour held that:

His Honour also noted that Mr Alwan had visited the site and signed off on site diaries which had referred to resin being applied to "all patches, around the top perimeter and expansion joints". The site diaries also made clear that Super Render was not purchasing enough resin to cover all of the wall. His Honour stated:

On 23 March 2017, Mr Franco wrote to Mr Alwan and stated "[a]t this stage we are filling up the gaps...”, which was also taken into account by his Honour. After making his findings in respect of the terms of the agreement, his Honour addressed the expert evidence of Mr Agda. Mr Agda’s opinion was that Super Render had failed to engage an appropriate specialist to conduct due diligence of the water leaks and had also failed to use an expandable or epoxy injection grout to the soil mix wall prior to any rendering. His opinion was that the work was defective. His Honour was satisfied that this opinion was likely premised on the instructions provided by Sand Grounds' solicitors that Super Render was engaged to waterproof the entirety of the walls rather than to simply waterproof specific areas.

His Honour’s overall findings at [58] were that:

His Honour found that Mr Alwan had refused advice that a lengthier process was required, namely removing the existing render, addressing the water leakage (with expert advice) and then waterproofing the entirety of the walls. His Honour accepted the evidence of Mr Leslie that the wall leaked after Super Render’s work but that this was a result of water flow re-directing itself, by gravity or negative pressure, away from the areas treated with waterproofing to new, untreated, areas.

His Honour found that there had been payments by Sand Ground to Super Render because Super Render was performing work in accordance with the agreement. He found that Sand Ground then withheld payment from Super when it realised that it faced contractual sanctions from the head contractor. He concluded the Super Render had provided full consideration, had not breached the agreement and was entitled to the full amount of its claim.

In respect of the cross-claim, his Honour found that Super Render did in fact deliver the service agreed to and accordingly there was no breach of the consumer guarantees as alleged in the cross-claim. His Honour further noted that, at any rate, Sand Ground was likely excluded from the operation of the Australian Consumer Law because it was not a “consumer” as defined in s 3.

In relation to the negligence claim, his Honour found that Sand Ground may have suffered harm but that was not caused by Super Render’s negligence. As noted above, he found that Super Render did what it was contracted to do. It was not contracted to address leakage in the walls generally. In any respect, if negligence had been made out, his Honour would have reduced it by 100% on account of Sand Ground’s contributory negligence. He did not consider res ipsa loquitor because this was not raised in oral submissions and had no application to the circumstances of the case.

In relation to Grounds One and Two, Sand Ground conceded that the acceptance or rejection of evidence and questions of weight are “generally” matters of fact if they have rational support. However, it “defied common sense” that Sand Ground would engage a subcontractor to perform waterproofing and rendering works on a three level basement car-park for cosmetic purposes only. It was submitted that this was because any cosmetic fix would inevitably fail when there was rain and would require fixing. If a cosmetic fix was required, Sand Ground submitted, they would have had “the remaining walls shotcreted and then hoped for the best”.

Sand Ground noted the evidence before Magistrate Barko that suggested that Super Render was not engaged for a “temporary cosmetic finish only”. Reliance was placed on an email from Super Render dated 18 March 2017 in which it was stated that Drizoro Maxseal Flex should be used to prevent water proceeding through the wall from both directions, which, it was submitted, was inconsistent with merely cosmetic work.

It was further submitted that twenty-one 35 kg kits of Drizoro had been used and it required two coats on differing days. This product was inconsistent with the Magistrate’s findings about the nature of the contract, as a data sheet in evidence before the court stated that the product provided “a fully flexible coating which ensures complete waterproofing in the most sever conditions, even in high negative or positive water pressure” (sic).

In relation to Grounds Three and Four, Sand Ground submitted that the learned Magistrate erred by failing to find that Super Render’s waterproofing was defective. Sand Ground submitted that even if his Honour’s conclusion that Super Render was intended to waterproof “specified gaps/patches” was to be accepted, Sand Ground had been negligent. In this respect Sand Ground relied on the expert evidence of Mr Agda, whose evidence was that Super Render should have used a “multi-staged system of application” for the Drizoro product.

In relation to Ground Five, Sand Ground submitted that the Magistrate erred in failing to make findings about its loss and damage.

In relation to Ground One, Super Render relied on the fact that a party cannot appeal to this Court on a question of fact. Reliance was placed on the decisions in Yousif v Commonwealth Bank of Australia [2010] FCAFC 8 and Carmichael v National Power Pie (1999) 1 WLR 2042; [1999] UKHL 47 as authority for the proposition that whether a contract has been formed is a question of fact.

Super Render further submitted that even if Ground One involved a mixed question of fact and law, Sand Ground had not provided sufficient reasons as to why leave should be granted. Additionally, Super Render submitted that Magistrate Barko did give due weight to the relevant evidence when making his findings. Super Render submitted that “[t]he comprehensiveness of the reasons for decision, evident in the 21 reasons and 22 findings, and it being 62 pages in length, demonstrates that the learned Magistrate did not arrive at a finding as to oral terms lightly or without due consideration.”

Super Render’s position was that the learned Magistrate did not err in his findings as to the terms of the contract and he did so in accordance with settled principles of construction. It was submitted that the on-site conversation of 18 March 2017 was when the contract was formed: the parties agreed on the provision of labour, the nature and scope of works to be undertaken, timeframes and assumptions of responsibility. On that day Super Render also disclaimed any responsibility for “arresting the water ingress”. The subsequent emails of 18 and 19 March did not replace this agreement as they did not contain an entire agreement or address the essential terms of the bargain.

It was submitted that a reasonable person in the position of the parties would have viewed the content of the 18 March 2017 on-site conversation between Mr Alwan and Mr Franco as promissory due to the essential nature of the matters discussed.

As for Ground Two, it was submitted that it traversed the same issues as Ground One.

As for Ground Three, it was submitted that if its submissions regarding Grounds One and Two were correct, then Super Render did not breach the agreement. In the alternative, it repeated its submissions in reply in the Local Court, which were before me in evidence. Super Render submitted that these applied equally to Ground Four.

As for Ground Five, Super Render submitted that if its preceding submissions were correct, this issue was incapable of altering the outcome of the appeal.

In submissions dated 3 April 2020, Sand Ground disputed several factual assertions in Super Render’s submissions relating to its characterisation of the cross-claim and description of the properties of Drizoro Maxseal Flex.

As to Ground One, Sand Ground submitted that Super Render had mischaracterised the ground of appeal. It was submitted that this ground was not limited to an error of formation of contract but also the “construction” of that contract which is “patently” an error of law.

Alternatively, if Ground One consisted of a mixed question of law and fact, Sand Ground submitted that, to the extent leave is required, such leave was appropriate because the terms of the agreement found by the Magistrate simply “def[ied] logic”. Sand Ground submitted that no reasonable builder would ever engage a party to provide a merely cosmetic waterproofing finish. In relation to Ground Three, Sand Ground submitted that the defendant had failed to deal with the “uncontroverted” evidence of Mr Alwan.

At the hearing, counsel for Sand Ground accepted that a ground concerning the formation of a contract was a question of fact. Despite this, he relied upon the decisions in State Super SAS Trustee Corp v Cornes [2013] NSWCA 257 (“State Super”) and Tolson v Roads and Maritime Services [2014] NSWCA 161 (“Tolson”) as authority for the proposition that when a factual finding is so illogical and displays such a lack of logical reasoning, illogicality and reasoning, it can be relied upon as an error of law.

During oral submissions, counsel for the plaintiff conceded that the first ground of appeal (error as to the terms of the contract) was purely a matter of fact but submitted that Ground Two was an error of law based on this alleged “illogicality” argument arising from State Super and Tolson.

Ground Three was not pressed at the hearing. Nor was Ground Four in its current form pressed; rather, leave was sought to amend Ground Four so as to assert that the Magistrate failed to make any finding as to whether the defendant breached the contract by failing to waterproof in accordance with the expert evidence. It was conceded that Ground Four was conditional on the success of Ground Two, as was Ground Five.

Before turning to consider the merits of each ground I must first be satisfied that it involves a question of law alone (or a question of mixed fact and law). When grounds concern the construction of a statute or error in the statement of relevant legal principles identifying a question of law may be straightforward. But often there can be a fine line between what is a question of law, and what is a question of fact. As the High Court observed in Collector of Customs v Agfa-Gevaert Limited (1996) 186 CLR 389; [1996] HCA 3 at 394:

Similarly, Spigelman CJ stated the following in Attorney General for the State of New South Wales v X (2000) 49 NSWLR 653; [2000] NSWCA 199 at [28]:

A ground asserting that the decision maker should have made a different factual finding is a question of fact. Even a ground alleging that a finding of fact was "perverse" or "illogical” does not raise a point of law: Azzopardi v Tasman UEB Industries Pty Ltd (1985) 4 NSWLR 139 at 156 (Glass JA, Samuels JA agreeing, Kirby P dissenting) (“Azzopardi”):

On the other hand, a claim that there is “no evidence” to support a particular finding does raise a question of law: per Hayne, Heydon, Crennan and Kiefel JJ in Kostas v HIA Insurance Services Pty Limited (2010) 241 CLR 390; [2010] HCA 32 at [90] and Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 at 326; [1990] HCA 33 per Mason J.

Despite Ground One alleging error “in the application of the legal principles concerning the formation of the contract”, the nub of the submissions in support of this ground was that some of the factual findings made by the learned Magistrate in relation to the formation of the contract “beggar belief”. Similarly Ground Two alleged error in failing to make a particular factual finding, namely, that it was a term of the agreement that the defendant would waterproof the entirety of the walls over three levels.

The difficulty for Sand Ground is that Grounds One and Two involve questions of fact not law. It is well settled that questions as to the terms of any offer and any consensus reached, including the subject matter of any agreement, are questions of fact, Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 260 CLR 1; [2016] HCA 26 at [22]-[27] (French CJ, Kiefel and Bell JJ): see also Yousif v Commonwealth Bank of Australia at [42] (Kenny, Tracey and Jagot JJ) and Carmichael v National Power Pie at 2049 (Lord Hoffman).

Although Sand Ground’s written submissions in reply contended that construction of a contract is “patently” an error of law, at the commencement of the hearing counsel for Sand Ground accepted that grounds contending error of this nature involve questions of fact not law. It was then submitted that the decisions in State Super and Tolson referred to above are authority for the proposition that unreasonable factual findings could be an error of law. As I indicated to the parties at the hearing, I am satisfied that these authorities do not stand for that proposition.

In Tolson, the Court of Appeal considered a ground alleging error in the decision of a trial judge to accept valuation evidence from a certain witness. In that context Basten JA, with whom Beazley P and Preston CJ of the LEC agreed (on this point), observed at [53]:

Earlier, in State Super at [10]-[12] Basten JA had similarly noted that:

Both of these decisions contain statements by Basten JA clarifying the statements in Azzopardi to the effect that a ground alleging that a finding of fact was "perverse" or "illogical" does not raise a point of law. His Honour observed that those general statements need to be qualified to have regard to Dranichnikov v Minister for Immigration and Multicultural Affairs (2003) 77 ALJR 1088; [2003] HCA 26. In that case, the High Court held that a failure to engage with a party’s case might amount to jurisdictional error. Thus, as Basten JA observed in those cases, although an “illogical” finding of fact does not amount to an error of law, it might be relevant to the question of whether there has been a constructive failure to exercise jurisdiction in proceedings for judicial review.

When I indicated to counsel for Sand Ground during the hearing that this is what I considered to be the effect of these decisions, he accepted that they did not assist Sand Ground’s case because he was not contending that the learned magistrate had failed to understand or engage with the case that was brought; his Honour clearly considered both sides of the argument in his detailed reasons.

In circumstances where both Grounds One and Two alleged errors of fact those grounds are not competent and must be dismissed accordingly.

As stated above, Ground Three was not pressed and Ground Four was not pressed in its original form. Rather, Sand Ground sought leave to amend Ground Four to allege that the Magistrate had failed to consider Sand Ground’s allegation of breach of contract based on the expert evidence of Mr Agda. During submissions on the question of whether leave to amend Ground Four should be granted, I drew counsel’s attention to the passages in the Magistrate’s reasons where his Honour dealt with Mr Agda’s evidence at [54]–[57] which were as follows:

His Honour later observed at 58(k):

Counsel for Sand Ground accepted that these portions of the Reasons did appear to address Sand Ground’s claim that Super Render’s waterproofing on the specific areas was negligent. That is, Magistrate Barko was not satisfied that Mr Agda’s evidence could establish negligence because his opinion was based on his instructions (Sand Ground’s version of what was agreed upon) which the learned Magistrate did not accept. Nor was Mr Agda able to examine the allegedly defective work for himself because by the time he was engaged it was a year later and other work had been done in those areas by then.

In these circumstances, counsel for Sand Ground did not press for leave to be granted to amend Ground Four and otherwise did not press Ground Four. Nor was Ground Five pressed as it relied upon the success of Grounds One and Two.

For these reasons the appeal raised no questions of law and must be dismissed.

This matter highlights the need to clearly identify questions of law in appeals from the General Division of the Local Court to this court. Sections 39 and 40 of the Local Court Act were intended to restrict the volume of appeals from the Local Court to the Supreme Court. In Sayed v Deng [2012] NSWSC 851 Beech-Jones J made the following observations in relation to an appeal from the Local Court from an interlocutory decision. His observations are apposite to the present appeal:

I make the following orders: