Dix Gardner Pty Ltd v The Owners – Strata Plan 82053

1. [1]

   HER HONOUR: These proceedings involve an appeal and cross appeal from two judgments of her Honour Magistrate Milledge. The plaintiff in the Local Court, The Owners – Strata Plan 82053 (“the Owners”), successfully claimed damages in the Local Court from the defendants, Dix Gardner Pty Ltd (“Dix Gardner”) and Lyall Dix (“Dix”), arising from the alleged negligence of Dix Gardner and Dix in carrying out certification of the construction of a residential strata development of 28 or more dwellings over a basement car park at XX Waterloo Road, Marsfield (“the development”). The development is located next to the M2 Motorway, Marsfield. The Owners was the subsequent purchaser of the development. The claim sought the costs of rectification of defects to the development that were alleged to have resulted from the alleged carelessness or incompetent performance of the certification.

Background facts

1. [2]

   The background facts are not in dispute.

2. [3]

   On 15 June 2004, development consent was obtained from Ryde Council in relation to the development. The development consent was given subject to specific conditions regarding noise. This included that an acoustical assessment report be prepared prior to the commencement of any work, and significantly, the following two conditions:

3. [4]

   Applications to modify the proposed development (but they are not relevant here) were consented to by Ryde Council.

4. [5]

   On 27 September 2007, Ferro Constructions Pty Ltd (“the builder”) retained Dix Gardner to provide private certification services in relation to the development for a fee of $14,000 plus GST. Mr Dix was an accredited certifier under the Building Professionals Act 2005 (NSW) and for the purposes of the Environmental Planning and Assessment Act 1979 (NSW). On 31 October 2007, he was appointed as the principal certifying authority (“PCA”) in respect of building work involved in the development pursuant to s 109E of the Environmental Planning and Assessment Act.

5. [6]

   On 23 October 2007, an acoustical assessment report was prepared in relation to the development by Vipac Engineers & Scientists Ltd (“Vipac”). This set out the noise criteria and the acoustical treatments required to be implemented for compliance with the relevant building standards.

6. [7]

   On 2 November 2007, Mr Dix issued a construction certificate for stage 1 of the development, following which building work commenced.

7. [8]

   On 6 December 2007, Mr Dix issued a construction certificate for stage 2, which related to the slab and the basement works. On 28 May 2008, Mr Dix issued a construction certificate for all of the remaining building work.

8. [9]

   On 7 August 2008, PKA Acoustics prepared an acoustic sound report setting out the requirements for the glazing of all windows and doors, to ensure acoustic sound compliance. On 6 March 2009, ASKA Aluminium Pty Ltd issued compliance certificates certifying that all glass supplied to aluminium windows met the relevant fire safety standards and acoustic sound standards.

9. [10]

   On 16 March 2009, Vipac sent a report (“the Vipac report”) with respect to acoustic sound compliance testing on the building. Further testing was also undertaken on 28 April 2009. On 3 April 2009, Mr Dix issued an interim occupation certificate in respect of the development. On 8 April 2009, Strata Plan 82053 was registered and legal title to the common property vested in the Owners and ownership of the townhouse complex was passed to the Owners.

10. [11]

    On 30 April 2009, a report, bearing the date 1 May 2009, was prepared by Vipac recording non-compliance with noise criteria for five units in the development and recommending installation of acoustic seals for glazing and proper installation of windows and frames.

11. [12]

    On 1 May 2009, Vipac provided a report setting out the requirements for acoustic compliance. The Vipac report made the following recommendations for all units in the development:

12. [13]

    On 16 November 2011, the Owners lodged a home warranty insurance claim with Wesfarmers Lumley Insurance (“Lumley”). Lumley commissioned an inspection report by Igentia Pty Ltd following the first claim on it. As a result of Lumley’s determination of that claim, the Owners sought to recover damages from Dix Gardner and Dix in the Local Court. The hearing took place on 2 September 2014, 16 April 2015 and 13 November 2015 before her Honour Magistrate Milledge.

Pleadings in the Local Court

1. [14]

   In summary, by statement of claim the Owners alleged that firstly, as a private certifier, Mr Dix owed a duty to the Owners to exercise reasonable care, skill and diligence in carrying out the certification; secondly, the occupation certificates for the development were not properly issued because the preconditions to their issue specified in the development consent had not been met and the building was not suitable for occupation; thirdly, a reasonably competent certifier would not have issued the occupation certificates until he or she was satisfied that the preconditions in the development consent had been met and the building was suitable for occupation; fourthly, Mr Dix breached his duty to the Owners by failing to exercise the degree of care, skill and diligence expected of a reasonably competent certifier in issuing the occupation certificate when he did; fifthly, the breach of duty of care by Mr Dix caused the Owners to suffer economic loss; and finally, quantum of damages.

2. [15]

   Also in summary, the defences and primary arguments raised by Dix Gardner and Dix were firstly, Mr Dix did not owe a duty of care to the Owners; secondly, as a private certifier, Mr Dix was a “public or other authority” within the meaning of Part 5 of the Civil Liability Act 2002 (NSW); thirdly, Mr Dix did not breach any duty of care owed to the Owners; fourthly, any loss suffered by the Owners was not caused by Mr Dix; and fifthly, pursuant to Part 4 of the Civil Liability Act, any liability of Mr Dix should be limited to an amount reflecting the extent of his responsibility for the Owners loss. It should be noted no mention was made as to whether Dix Gardner and Dix were separately liable or jointly and severally liable in the defence.

The hearing in the Local Court

1. [16]

   On 16 April 2015, her Honour Magistrate Milledge gave ex tempore reasons in relation to liability. She requested that the parties provide written submissions in relation to quantum and costs. These submissions were provided. On 13 November 2015, her Honour gave extempore reasons in relation to quantum and costs.

2. [17]

   At the hearing on liability, her Honour identified the issues in dispute as being whether Mr Dix, as principal certifying authority, owed a duty of care to the Owners to exercise reasonable care, skill and diligence in carrying out the certification, and whether the Owners suffered economic loss as a result of Mr Dix’s conduct. Other issues raised at the hearing included: whether Mr Dix was a public or other authority within Part 5 of the Civil Liability Act (therefore limiting his liability); whether a certifier owed a duty of care to a subsequent owner; whether a private certifier was a public authority governed by the provisions of Part 5 of the Civil Liability Act; whether, if a duty of care did exist, what was the measure of the duty, particularly as limited under Part 5 of the Civil Liability Act; whether Mr Dix acted outside the usual standards of diligence expected of a reasonable, competent certifier; and finally; whether Mr Dix failed to undertake statutory inspections. (J2.42-50; J3.1-5 - 16/04/2015). A further issue raised at the hearing was whether the statement of claim was defective in its pleading as to the windows.

3. [18]

   On 16 April 2015, her Honour Magistrate Milledge found Dix Gardner and Dix jointly and severally liable for some, but not all of the damages claimed by the Owners.

4. [19]

   On 13 November 2015, her Honour Magistrate Milledge assessed the Owners’ damages at $63,080 plus interest on and from 7 December 2012. A costs order was made in favour of the Owners.

The appeal and cross appeal

1. [20]

   By amended summons filed 22 April 2016, Dix and Dix Gardner seek firstly, an order to the extent that leave is required, leave to appeal from the whole of both decisions below; secondly, an order that the verdict and judgment made on 16 April 2015 (the liability judgment) be set aside and in lieu thereof verdict and judgment be entered in favour of Dix Gardner and Dix; and thirdly, an order that the verdict and judgment made on 13 November 2015 (the damages judgment) be set aside and in lieu thereof verdict and judgment be entered in favour of Dix Gardner and Dix.

2. [21]

   By cross appeal filed 13 January 2016, the Owners seeks firstly, an order to the extent leave is required, leave to cross appeal from the part of the decision below in relation to quantum; secondly, that the cross appeal be allowed; thirdly, the judgment of the Court below be set aside; and fourthly, in lieu thereof, judgment for the Owners in the sum of $73,080 plus interest pursuant to s 100 of the Civil Procedure Act 2005 (NSW) on and from 1 May 2009. I shall deal with the cross appeal after the appeal.

3. [22]

   The parties relied upon the material contained in the Court Books (5 volumes) and a blue folder containing the submissions made in both the Local Court and this Court. I should add that on appeal the parties raised complex legal arguments, some of which were not raised before the Magistrate.

The appeal

1. [23]

   Section 39(1) of the Local Court Act 2007 (NSW) provides that a party to proceedings who is dissatisfied with a judgment or order of the Local Court may appeal to the Supreme Court, but only on a question of law.

2. [24]

   Section 40(1) of the Local Court Act provides that a party to proceedings who is dissatisfied with a judgment or order of the Local Court on a ground that involves a question of mixed law and fact may appeal to the Supreme Court but only by leave of the Supreme Court.

3. [25]

   Section 41 of the Local Court Act provides that this Court may determine an appeal made under ss 39(1) or 40(1) either (a) by varying the terms of the judgment or order, or (b) by setting aside the judgment or order, or (c) by setting aside the judgment or order and remitting the matter to the Local Court for determination in accordance with the Supreme Court’s directions, or (d) by dismissing the appeal.

Should leave be granted?

1. [26]

   In Swain v Waverley Municipal Council (2005) 220 CLR 517; [2005] HCA 4, Gleeson CJ at [2] reiterated that:

2. [27]

   The parties have sought leave to appeal if necessary, but neither party identifies which grounds of appeal require leave. Leave to appeal is required if the appeal involves a question of mixed fact and law. Further, neither party provided any reasons as to why leave should be granted. No question of general public importance arises nor is there an injustice that is reasonably clear. The amount in dispute is $73,080 plus interest.

3. [28]

   I would not have granted leave to appeal except the parties agree that the Magistrate did not address the issues of proportionality and apportionment, so the matter has to be remitted to the Local Court to be determined according to law. Hence, I will briefly address the issues raised by the parties on appeal.

Dix Gardner and Dix’s grounds of appeal

1. [29]

   Dix Gardner and Dix appeal from the whole of the decision of her Honour Magistrate Milledge dated 16 April 2015. The grounds of appeal are firstly, that the Magistrate erred in finding both Dix Gardner and Dix jointly and severally liable; secondly, the Magistrate erred in her decisions dated 16 April 2015 and 13 November 2015 by failing to give consideration to Part 4 of the Civil Liability Act and Dix Gardner’s submissions as to apportionment; thirdly, the Magistrate erred in her decisions dated 16 April 2015 and 13 November 2015 by failing to give any reasons as to why Dix Gardner’s apportionment arguments were unsuccessful; fourthly, the Magistrate erred at law in her decision dated 16 April 2015 by failing to give any, or adequate, reasons as to why Dix, an employee of Dix Gardner, was jointly and severally liable; fifthly, the Magistrate erred in law in her decision dated 13 November 2015 as her assessment of quantum had no evidentiary basis; sixthly, in the alternative, such error relates to a mixed question of fact and law; seventhly, the Magistrate should have found that Dix Gardner and Dix did not owe the Owners a duty of care, were not negligent nor otherwise liable in damages; eighthly, or in the alternative, the Magistrate should have found that the Owners failed to prove its case as to quantum; and ninthly, in the alternative, the Magistrate should have applied the proportionate liability provisions of Part 4 of the Civil Liability Act to hold that Dix Gardner and Dix’s liability was nil, or some negligible percentage.

2. [30]

   For convenience, I have not dealt with these grounds of appeal in chronological order but rather grounds 1 and 4 (joint and several liability), ground 7 (duty of care), grounds 2, 3 and 9 (apportionment and proportionality), and finally, grounds 5 and 8 (damages).

Appeal grounds 1 and 4 - Were Dix Gardner and Dix jointly and severally liable?

1. [31]

   Ground 1 is that her Honour erred in her decision dated 16 April 2015 by finding both Dix Gardner and Dix jointly and severally liable. (J 6.22-24). Ground 4 is that her Honour failed to give any or adequate reasons as to why Mr Dix, an employee of Dix Gardner was jointly and severally liable.

2. [32]

   Counsel for Dix Gardner and Dix submitted that her Honour’s decision does not accord with the principles of vicarious liability and specifically s 3 of the Employees Liability Act 1991 (NSW). This submission was not made to the Magistrate in the Local Court.

3. [33]

   On appeal, counsel for the Owners drew this Court’s attention to University of Wollongong v Metwally (No 2) (1985) 59 ALJR 481 (“Metwally”). Metwally established that a party is bound by the conduct of its case and, except in exceptional circumstances, may not after the case has been decided adversely, raise a new argument which, whether deliberately or by inadvertence, was not put during the hearing when there was an opportunity to do so.

4. [34]

   Dix Gardner and Dix submitted that the Owners did not avail themselves of the opportunity to make any such argument in their written submissions. The Owners say that the Local Court transcript does show that an argument as to whether Dix Gardner or Dix should not be liable was raised at the hearing. The Owners submitted that in those circumstances, there is some difficulty in contending that her Honour made an error of law in determining this issue where there was no argument put to her Honour.

5. [35]

   I have read the opening addresses by the parties and their written submissions on liability. The Owners did mention the liability of Dix Gardner and Dix when they submitted that either Dix Gardner or Dix was retained as a private certifier to carry out the certification of the building of the development for the purposes of the Environmental Planning and Assessment Act.

6. [36]

   In the absence of any submissions by Dix Gardner and Dix on this issue and taking into account the short opening submissions by the Owners, her Honour was entitled to make a finding that Dix Gardner and Dix were jointly and severally liable.

Failure to give reasons

1. [37]

   The next issue is whether her Honour failed to give reasons. This issue arises here and in appeal grounds 2, 3, 4 and 9, in relation to different topics.

2. [38]

   It is not in dispute that a Magistrate is obliged to provide adequate reasons and to not do so may constitute an error of law.

3. [39]

   In Stoker v Adecco Gemvale Constructions Pty Ltd [2004] NSWCA 449 Santow JA at [41] said that:

4. [40]

   However, in Pollard v RRR Corporation Pty Limited [2009] NSWCA 110, McColl JA (with whom Ipp JA and Bryson AJA agreed) stated at [58]:

5. [41]

   In Beale v Government Insurance Office (NSW) (1997) 48 NSWLR 430 (“Beale”), Meagher JA at 442 stated:

6. [42]

   In Soulemezis v Dudley (Holdings) Pty Limited (1987) 10 NSWLR 247, McHugh JA stated at 281:

7. [43]

   Finally, in Whalan v Kogarah Municipal Council [2007] NSWCA 5, the Court of Appeal (Mason P, Ipp and Tobias JJA) stated at [1]:

8. [44]

   Once again, bearing in mind Dix Gardner and Dix did not make any submissions as to joint and several liability, I am of the view that her Honour provided adequate reasons as to why both Dix Gardner and Dix were jointly and severally liable when she stated:

9. [45]

   Her Honour based her finding on relevant indicia such as the fact that the Environment Planning and Assessment Act required an individual to be named as principal certifying authority and the fact that Mr Dix was a director of Dix Gardner and issued all correspondence using the Dix Gardner Pty Ltd letterhead. In the context of limited submissions on the part of Dix Gardner and Dix on this issue, it was open to her Honour to make the finding that Dix and Dix Gardner and Dix were jointly and severally liable. Both these grounds of appeal fail.

Appeal ground 7 – Do Dix Gardner and Dix owe a duty of care to the Owners?

1. [46]

   This is the most difficult issue raised on appeal. Appeal ground 7 is whether her Honour should have found that Dix Gardner and Dix did not owe the Owners a duty of care, were not negligent or otherwise liable in damages.

2. [47]

   The Owners at paragraphs [18] to [20] of the Statement of Claim set out a detailed pleading in relation to duty of care. It refers to reliance and vulnerability. These paragraphs read:

3. [48]

   The Owners submitted that when both parties were given the opportunity to lodge written submissions after the hearing in the Local Court, Dix Gardner and Dix chose to only submit one relevant paragraph stating that they “do not concede that a duty of care exists.” According to Dix Gardner, the Owners made no submissions about the “correct criteria”, did not provide an “examination of the relationship of the parties” and made no submissions in relation to whether the Owners were vulnerable. The Owners submitted that in the circumstances it is not surprising that the Magistrate did not provide detailed reasons on the issue of duty of care. Once again, the Owners submitted that it is not now open to Dix Gardner and Dix to raise on appeal arguments which they failed to advance before the Magistrate, or contend that the Magistrate made errors of law in those terms.

(i) Does the Civil Liability Act apply?

1. [49]

   The first issue that arises is whether Part 5 of the Civil Liability Act applies. On appeal Dix Gardner and Dix argued that ss 41 and 43 of the Civil Liability Act applied and that Mr Dix was performing a public function as a principal certifying officer.

2. [50]

   The Magistrate referred to Part 5, ss 41 and 43 of the Civil Liability Act. Section 41 of the Civil Liability Act relates to definitions and s 43 relates to breach of statutory duty in proceedings against public or other authorities. They read:

3. [51]

   On this topic, her Honour stated:

4. [52]

   Whether Part 5 of the Civil Liability Act is applicable depends upon on consideration of the relevant sections of the Environmental Planning and Assessment Act. I will examine these latter provisions prior to making such a determination.

Relevant provisions of Environmental Planning and Assessment Act

1. [53]

   The relevant provisions of the Environmental Planning and Assessment Act are ss 109C, 109D, 109 E and 109 H.

2. [54]

   They relevantly read:

3. [55]

   Also, Condition 84 of the development consent concerning noise criteria states:

4. [56]

   Counsel for Dix and Dix Gardner submitted that the activities that they carried out under Part 4A of the Environmental Planning and Assessment Act meant that they were “public or other authorities” under Part 5 of the Civil Liability Act (s 41(e1)). Council for the Owners submitted that, while there is not yet authority for whether or not a privately employed principal certifying authority under part 4A of the Environment Planning and Assessment Act is a “public or other authority”, under part 5 of the Civil Liability Act, the circumstances of the introduction of s 41(e1) suggests that the legislature did not have activities such as those carried out by Mr Dix in mind.

5. [57]

   Section 41(e1) was introduced in 2003, in response to the decision of Adams J in Presland v Hunter Area Health Service [2003] NSWSC 754. In Presland a psychiatrist conferred with the power to detain mentally ill persons under the Mental Health Act 1990 (NSW) was held liable in damages to a patient who was discharged from hospital by the psychiatrist and six hours later after discharge, killed his brother’s fiancé.

6. [58]

   Counsel for the Owners sought to distinguish between “very difficult decisions [in which] doctors as well as other decision-makers must be able to use their statutory discretion without the fear of litigation hanging over them” (see Hansard, Legislative Assembly, 13 November 2003, p 4992) and the present factual situation. The Owners submitted that “certification services for reward, although performing statutory functions, is not required to exercise any type of discretion that involves consideration of factors of a public nature. He or she simply determines whether or not certain proposed building work will comply with the law and whether or not certain matters have been satisfied in respect of that building work.”

7. [59]

   It is correct to say that Mr Dix’s role under the Environmental Planning and Assessment Act did not involve the exercise of a finely balanced discretion with public policy implications. His primary duty was to ensure that prior to the issue of the final occupation certificate, certain mandatory and easily ascertainable prerequisites were met. In relation to the acoustic certification, there was no discretion to be exercised by him. He undertook to discharge a duty and then failed to do so. In these circumstances, it is not necessary to decide whether Mr Dix is a “public or other authority” under the Civil Liability Act.

8. [60]

   It is my view that the Magistrate determined this issue under the correct legislation, namely, Part 4 of the Environmental Planning and Assessment Act together with Condition 84 of the compliance provision of the development consent. It is worth noting that this legislation was also applied in Chan v Acres [2015] NSWSC 1885 (“Chan”) which involved a certifying officer and is discussed under the next heading.

Duty of care to a subsequent purchaser

1. [61]

   The next issue is whether a principal certifying officer owes a duty of care to a subsequent purchaser. In the Local Court, her Honour was asked to consider Moorabool Shire Council v Taitapanui (2006) 14 VR 55 (“Moorabool”) by the Owners and Sydney Water v Asset Geotechnical Engineering [2013] NSWSC 1274 (“Sydney Water”) by Dix Gardner and Dix. On appeal, more recent cases including Brookfield Multiplex Ltd v Owners Corp Strata Plan 61288 [2014] HCA 36 (“Brookfield”) and Chan, which have been provided to me, were not provided to the Magistrate in the Local Court.

2. [62]

   The Magistrate’s reasons as to whether a principal certifying officer owes a duty of care to a subsequent purchaser, are as follows:

3. [63]

   Thus, her Honour was satisfied that the Owners were “always vulnerable when purchasing the development”. She accepted that some items would be difficult to inspect, such as where a certificate would be supplied to satisfy the compliance requirements. Her Honour decided that a principal certifying officer exercising reasonable care, skill and diligence, would have ensured the acoustic compliance certificate was submitted to the Council and was seen by him prior to issuing the final occupational certificate. In essence, the Magistrate analysed vulnerability as set out in Moorabool and applied it to the Owners factual situation.

Submissions on Magistrate’s findings

1. [64]

   Moorabool was an appeal to the Victorian Court of Appeal by a subsequent purchaser in relation to the incorrect issuing of a building permit by a certifier privately employed by the relevant council. The appeal in Moorabool raised issues of pure economic loss and consequential economic loss following the partial collapse of a dwelling due to structural flaws. Moorabool analysed the duty of care imposed by the Victorian statutory scheme. The majority in Moorabool per Maxwell P, Ormiston and Ashley JJA decided that the private certifier employed by the council did owe a duty to the subsequent purchaser.

2. [65]

   On appeal, Dix Gardner and Dix submitted that her Honour erred in relying on Moorabool and arriving at the decision that Dix Gardner and Dix owed the Owners a duty of care. They contended that the decision in Moorabool was decided largely based on reasons specific to the Victorian legislative scheme and this meant it was not relevant to the present case.

3. [66]

   The Owners submitted that it was open to her Honour to apply Moorabool because it answered the relevant question of whether an independent person who inspects and certifies building work pursuant to a statutory scheme but privately for reward, owes a duty to avoid pure economic loss to a subsequent owner. The Owners accept that in Moorabool the particular statutory scheme in operation was found to be a critical salient feature. They submitted that the relevant New South Wales statutory scheme is similar so as to support an argument for the decision in Moorabool being followed in the present case.

4. [67]

   The Owners’ argument does not accord with the view of McDougall J in Chan where his Honour stated at [129] and [132]:

5. [68]

   In Sydney Water, the plaintiff successfully claimed damages for property damage suffered when a boat shed, built by one of the defendants and certified as safe in geotechnical terms by another of the defendants, caused a sewer main to burst. Campbell J held that Sydney Water was owed a duty in relation to damage to property rather than to pure economic loss. I agree with the Magistrate that this case does not assist the resolution of the issue of duty of care to a subsequent purchaser for damages of pure economic loss.

Brookfield

1. [69]

   Brookfield involved serviced apartments, which were part of a commercial/residential development that were built under a design and construct contract and sold to investors. The contract between the builder and the developer contained significant protections such as indemnity clauses and requirements that the builder obtain insurance. The contract between the developer and the subsequent owners also contained protective clauses including a clause relating to quality of materials and a clause providing for the rectification of defects.

2. [70]

   The principal question was whether Brookfield, the builder, owed the Owners Corporation, as a subsequent purchaser, a duty of care to exercise reasonable care in the construction of the building to avoid causing the Owners Corporation to suffer pure economic loss. The High Court unanimously found that the builder was not liable to the subsequent owners for flaws in the building because:

3. [71]

   In Brookfield, Kiefel and Hayne JJ considered that both the developer and purchaser of the lot would be reliant on the builder to do the work properly but stated at [56] and [57]:

4. [72]

   In determining whether a party was vulnerable, Brookfield considers known reliance and an assumption of responsibility. Crennan Bell and Keane JJ stated at [150]:

5. [73]

   In determining whether a party was vulnerable, the judgment of Brookfield considers known reliance and an assumption of responsibility. French CJ noted at [22] that “special cases would commonly, but not necessarily, involve an identified element of known reliance or dependence on the part of the plaintiff, or the assumption of responsibility by the defendant, or a combination of the two.”

Chan

1. [74]

   In Chan, the plaintiffs, Ms Chan and Mr Cox purchased a house in Wahroonga from the first defendant Mr Acres. The property was found to have been defectively renovated. The plaintiffs alleged that the Council breached a common law duty of care in its capacity as principal certifying authority, in respect of inspections and certifications given by a council building surveyor and in respect of the occupation certificate issued by the Council. The facts in Chan are more analogous with the facts in this appeal.

2. [75]

   In Chan, McDougall J discussed reliance. His Honour stated at [125], [145]-[148]:

3. [76]

   In Chan McDougall J analysed the relationship between the Council, the principal certifying officer and the plaintiffs. His Honour concluded at [360], [361], [371] and [373].

4. [77]

   This current case on appeal does not appear to fall into an established category. The salient features such as “vulnerability” will be relevant to the determination of a duty of care.

5. [78]

   The Owners consist of persons who have purchased one or more of the (over) 28 apartments. On the facts pleaded, they are not commercial entities as was the case in Brookfield and Woolcock Street. Nor are they lone purchasers of domestic dwellings as was the case in Chan. Thus, the key question in a potentially novel case such as this is, did the Owners fall into a class of persons who “were not able to protect themselves” from the conduct of Dix and Dix Gardner? (Brookfield at [169]).

6. [79]

   In the present case, the Magistrate considered whether the Owners were vulnerable. It is clear that in circumstances where the principal certifying authority signed a final compliance certificate, either knowing there were acoustic rectifications outstanding, or that the Vipac report was outstanding, he put the Owners in a position where they were vulnerable. Despite being an owner’s corporation rather than an individual purchaser, each owner could not reasonably have been expected to look behind the occupation certificate at the time of purchase in order to determine whether it was properly issued. In my view, the Magistrate’s reasons, while minimal, were sufficient as they adequately reveal the basis of her decision and expressed findings that are critical to the determination of the proceedings. Her Honour gave reasons that were sufficient to establish a duty of care and a breach of duty of care by Dix Gardner and Dix. Hence, this ground of appeal fails.

Appeal grounds 2, 3 and 9 – apportionment and proportionality

1. [80]

   Grounds of appeal 2 and 3 are that the Magistrate erred in her decision by failing to give consideration and failing to give reasons as to why Dix Gardner and Dix’s apportionment arguments were unsuccessful.

2. [81]

   Section 35 of the Civil Liability Act reads:

3. [82]

   In both the defence and amended defence at [9] Dix Gardner and Dix pleaded that “the claim made an apportionment claim pursuant to s 34 of the Civil Liability Act and the Defendants nominated Drumalbyn Apartments Pty Limited and Ferro Constructions Pty Limited as concurrent wrongdoers.”

4. [83]

   I accept that Dix Gardner and Dix raised the issue of apportionment under Part 4 of the Civil liability Act in both their defence dated 16 August 2013 and their amended defence dated 8 November 2013, in oral submissions at hearing on 2 September 2014, in their primary submissions dated 23 September 2014 at [50] to [60], their further submissions as to quantum dated 13 October 2015 at [17] to [21] and again in their oral submissions on 13 November 2015. Counsel for Dix Gardner and Dix submitted that the Owners made a brief submission in relation to the topic of apportionment and made lengthier submissions on the topic of proportionality and that the Magistrate said nothing as to apportionment and moved on to assessing quantum. Both Dix Gardner and Dix submitted that the Magistrate failed to give any consideration to their apportionment argument and failed to give any reasons as to why their arguments were unsuccessful.

5. [84]

   Ground 9 is in relation to proportionality. Senior counsel for the Dix Gardner and Dix submitted that had if the Magistrate applied the proportionality provisions of Part 4 of the Civil Liability Act, her Honour would have held that, their liability was nil or some negligible percentage. Dix Gardner and Dix submitted that this is a matter where it is alleged that they were negligent for failing to ensure conditions as to acoustic requirements were complied with prior to issuing a final occupancy certificate.

6. [85]

   Both parties addressed the issue of proportionality at some length in their written submissions in the Local Court. They agree, as do I, that the Magistrate did not address the issue of proportionality. Her Honour did not provide any reasons on this topic. This is an error of law. To determine this issue, factual findings may need to be made. In these circumstances, this issue of proportionate liability is remitted to the Local Court to be determined according to law. There may only be a negligible apportionment as the Owners argue factual findings need to be made.

Appeal Grounds 5 and 8 – Damages and quantum and Grounds 1 and 2 of cross appeal

1. [86]

   The first ground of the cross appeal is whether the Magistrate erred in law in concluding that the statement of claim filed by the Owners did not claim damages for the costs of replacing windows that had glass of incorrect thickness with windows with glass of correct thickness.

2. [87]

   Grounds 2 and 3 of the cross appeal are that her Honour should have concluded that the damages in respect of that cost were sufficiently stated in and claimed by the Owners statement of claim for replacing windows that had glass of incorrect thickness with windows having glass of correct thickness The cost referred to in Ground 2 is the cost of replacing the windows with glass of incorrect thickness with glass of correct thickness.

3. [88]

   On appeal, the Owners argued that it was clear from the evidence that their case was related not only to damages arising from the acoustic seals but also from certain windows having glass of incorrect thickness.

4. [89]

   At the hearing Dix Gardner and Dix asserted that the Owners’ statement of claim did not claim for the replacement of windows with incorrect thickness. (LC T 15.10-18)

5. [90]

   On this topic the Magistrate stated:

6. [91]

   The Magistrate in her decision on liability dated 16 April 2015 agreed that the Owners failed to properly plead window thickness in its statement of claim. This portion of the claim relating to replacing windows which had been installed that were of a narrower thickness than the glass (10.38 mm thickness) that was meant to be installed affected five units. The Magistrate did not award damages which is consistent with her ruling that this part of the claim for damages was not properly pleaded. It should be noted the Owners could have sought to amend the statement of claim to include a claim for the incorrect thickness of the glass in the windows but it did not do so. In my view the Magistrate was entitled to make this finding. There is no error of law.

7. [92]

   Appeal ground 5 is that the Magistrate erred in law in her decision dated 13 November 2015 as her assessment of quantum had no evidentiary basis. Appeal ground 8 is whether her Honour should have found that the Owners failed to prove its case as to quantum.

8. [93]

   The damages claimed in the statement of claim are as follows:

9. [94]

   Biltbeta Pty Ltd (“Biltbeta”) was engaged by the Owner’s insurance company to inspect the property and provide tender quotations. Biltbeta submitted a tender quotation for $73,080 for the relevant defects and scope of rectification works in respect of “Acoustic Rating and sound insulation.”

10. [95]

    The Owners submitted that where four independent builders provided quotes in respect of the rectification work for the acoustics in excess of $70,000 in circumstances where those quotes were not given under the shadow of or in contemplation of proceedings, that evidence as to cost should be accepted.

11. [96]

    On appeal Dix Gardner and Dix submitted that firstly, the Owners failed to properly quantify their damages claiming that the only quantification of damages is that of Mr Goodwin’s who puts the remedial work at $15,000; and secondly, that the Owners failed to give the Court a schedule to allow the Magistrate to make a deduction on an evidentiary basis and her Honour relied on a figure that was plucked from the air.

12. [97]

    As the Magistrate did not allow damages for the incorrect thickness of the glass to be pleaded, the Owners claim of $73,080 needed to be reduced in order to take into account this deduction.

13. [98]

    Dix Gardner and Dix have interpreted that the Magistrate’s decision regarding the thickness of the windows to mean that the damages that should have been awarded were only for the cost of the seals. However, during the judgment regarding quantum, her Honour clarified that for the seals to be properly replaced the windows still needed to be taken out. At T 3.31-44 on 13 November 2015, the following exchange took place:

14. [99]

    On the topic of damages, the Magistrate continued:

15. [100]

    The Magistrate awarded the plaintiff $63,080 in damages plus interest from 7 December 2012. There was scant evidence as to the cost of the five windows that needed to be replaced. The Magistrate was entitled to rely on the report of damages. She was obliged to do the best she could in these circumstances. She had to make a deduction to reflect the cost of the replacement of five windows. She made that assessment and deducted the sum of $10,000. In my view she was entitled to do so. The Magistrate’s reasons for her decision on damages are sufficient. There is no error of law.

Cross appeal - Grounds 3 and 4

1. [101]

   Grounds 3 and 4 of the cross appeal are the same as grounds 1 and 2 of the cross appeal but expressed in slightly different ways. I have already dealt with these issues. For the reasons already given under cross appeal grounds 1 and 2 there is no error of law. Grounds 3 and 4 of cross appeal fail.

Cross appeal - Ground 5 and 6 – interest

1. [102]

   The date from which interest commences, be it either on the date of which the cause of action arose or from the date of judgment, are discretionary decisions and not ones that this Court would set aside on appeal. These grounds of cross appeal fail.

Conclusion

1. [103]

   The result is that the appeal is upheld. The decisions of her Honour Magistrate Milledge dated 16 April 2015 and 13 November 2015 are set aside. The proceedings are remitted to the Local Court to be determined according to law.

2. [104]

   Leave is granted to the parties to approach my associate in relation to costs within 14 days.

3. [105]

   It should be drawn to the parties’ attention that substantial legal costs have been incurred by both parties and a lot of Court time has been expended on what is after all a fairly modest claim. It would be prudent for the parties to attempt to settle the two related outstanding matters that have been remitted to the Local Court rather than incur even more costs in yet another Court hearing.