Beechwood Homes v Kirkpatrick & Ors [2002] NSWSC 87

New South Wales Supreme Court

CITATION : Beechwood Homes v Kirkpatrick & Ors [2002] NSWSC 87 CURRENT JURISDICTION: Common Law Division FILE NUMBER(S) : SC 13049 of 2001 HEARING DATE(S) : 8 February 2002 JUDGMENT DATE : 25 February 2002

L.E.D. (South Coast) Pty Ltd Trading As Beechwood Homes (Plaintiff) PARTIES : v Ivone Kirkpatrick and Lynda Kirkpatrick (First Defendant) Fair Trading Tribunal - Department of Fair Trading (Second Defendant) JUDGMENT OF : Master Malpass

LOWER COURT Fair Trading Tribunal - New South Wales JURISDICTION : LOWER COURT BU 1999/2922 FILE NUMBER(S) : LOWER COURT Tribunal Member Ms D Barnetson JUDICIAL OFFICER :

Mr S A Kerr (Plaintiff) COUNSEL : Mr M Bloom (First Defendant) N/A (Second Defendant) Heard McEwan Lawyers (Plaintiff) SOLICITORS : David J Beattie (First Defendant) I V Knight - Crown Solicitor - Submitting appearance (Second Defendant) CATCHWORDS : Building contract - questions of statutory construction - non-compliance with statutory requirements - non-enforceability of remedies. LEGISLATION CITED : Home Building Act 1989, Division 1, s 7 (1), (2), (3), (4) and (5), s 7C, s 8 (1) and (2), s 10 (1) and (3), Part 2C s 18B. CASES CITED : N/A DECISION : Paragraphs 22 - 26.

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

Master Malpass

Monday 25 February 2002

13049 of 2001 L.E.D. (South Coast) Pty Ltd Trading As Beechwood Homes v Ivone Kirkpatrick & Ors

JUDGMENT 1 Master Malpass: The plaintiff is a builder. The first defendants are the owners of a property at Wilsons Road, Burrawang. These parties entered into a building contract on 29 September 1998. The court has been told that the contract came into being upon an exchange of contracts. 2 The subject matter of the contract was the construction of a dwelling house in accordance with certain plans and specifications for a contract sum of $163,286 (subject to variations). 3 Following disputes between the parties, the first defendants made application to the Fair Trading Tribunal (the Tribunal) seeking inter alia damages. In that application, the plaintiff brought what was in effect a cross-claim for monies said to be owing under the contract. 4 The matter came on for hearing before the Tribunal (Member Ms D Barnetson) on 28 August 2001. What followed was the determination of a preliminary question. A decision was made on this question. A Notice of Ruling issued by the Tribunal stated as follows:- "The Tribunal rules that the contract between the parties, of 29 September 1998, is not enforceable by the respondent; pursuant to Section 10 Home Building Act 1989." 5 On 28 September 2001, a Summons was filed in this Court by the plaintiff. It purports to bring an appeal against the ruling and seeks inter alia to have it set aside. There was issue between the parties as to whether or not the appeal had been brought within time. This led to the filing of an Amended Summons seeking leave if there in fact be a need to do so. 6 The hearing of the appeal took place on 8 February 2002. At the commencement of the hearing, after some argument, there was consent to the granting of leave if the plaintiff was in fact out of time. The court then proceeded to hear the merits of the appeal. 7 The Tribunal had received argument in relation to a number of provisions of the contract which were said not to comply with Division 1 of the Home Building Act 1989 (the Act). The ruling was founded on findings as to non-compliance. Shortly, I shall deal with the matters of non-compliance which were argued before the court. 8 However, firstly, it is convenient to set out certain of the relevant provisions to be found in Division 1. These are as follows:- " 7 Form of contracts (1) A contract must be in writing and be dated and signed by or on behalf of each of the parties to it. (2) A contract must contain: (a) the names of the parties, including the name of the holder of the licence shown on the licence, and (b) the number of the licence, and (c) a sufficient description of the work to which the contract relates, and (d) any plans and specifications for the work, and (e) the contract price if known, and (f) any statutory warranties applicable to the work. (3) The contract must comply with any requirements of the regulations. (4) If the contract price is known, it must be stated in a prominent position on the first page of the contract. (5) If the contract price is not known or may be varied under the contract, the contract must contain a warning to that effect and an explanation of the effect of the provision allowing variation of the price. The warning and explanation must be placed next to the price if the price is known. …………. 7C Arbitration clause prohibited A provision in a contract or other agreement that requires a dispute under the contract to be referred to arbitration is void. …………. 8 Maximum deposits (1) A person must not: (a) demand or receive a payment on account before work is commenced under a contract to do residential building work, or (b) enter into a contract under which the person is entitled to demand or receive a payment on account before residential building work is commenced, if the amount of the payment is prohibited by this section. Maximum penalty: 40 penalty units. (2) The amount of the payment is prohibited if: (a) the contract price is more than $20,000 and the payment is more than 5% of the contract price (or, where another percentage is prescribed by the regulations in respect of a particular kind of work, the percentage so prescribed), or (b) the contract price is $20,000 or less and the payment is more than 10% of the contract price (or, where another percentage is prescribed by the regulations in respect of a particular kind of work, the percentage so prescribed). …………….. 10 Enforceability of contracts and other rights (1) A contract to which the requirements of section 7 apply that is not in writing or that does not have a sufficient description of the work to which it relates is not enforceable by the holder of the licence against any other party to the contract. ………….. (3) A person who contracts to do work in contravention of this Division or who contracts to do work under a contract that does not comply with this Division: (a) is not entitled to damages or to enforce any other remedy in respect of a breach of the contract committed by any other party to the contract, but (b) is liable for damages and subject to any other remedy in respect of a breach of the contract committed by the person. …………." 9 It is now convenient to briefly refer to the structure of the contract itself. The front page of the documentation may perhaps be described as a cover or title page. It bears the title "BUILDING CONTRACT". Upon it, also appears the contract date, the name of the parties and the builder's licensing number. The second page of the documentation contains a heading "WARNING" and contains what may be read as a warning concerning a matter of termite attack. The balance of the documentation contains some seventeen pages which are numbered 1 – 17. These pages are either signed or initialled by or on behalf of the parties. The page numbered 1 commences with the words "BUILDING CONTRACT". It then proceeds with the words "THIS CONTRACT is made on the TWENTY NINTH day of SEPTEMBER 1998." The following matter contained on that page names the parties, sets out a recital, "PARTICULARS OF WORK" and "PARTICULARS OF LAND". The page numbered 2 commences "NOW IT IS HEREBY AGREED". These words are followed by two numbered paragraphs. The paragraph numbered 2 sets out the price or contract sum and provides that the price is a fixed price subject to such variation as may be applicable in accordance with the terms of the contract documents. This page concludes with the signatures of the parties. Pages 3 – 17 contain what purport to be "CONDITIONS OF CONTRACT". On page 17 there is a "SCHEDULE A" which sets out various payments (which are expressed to be in accordance with clause 18). These included a first payment as a security deposit in the sum of $1,000 and a second payment as an initial payment on exchange in the sum of $8,000. 10 I now turn to the matters that were argued by the parties. There were five of them. 11 There was argument as to non-compliance with subs (4) of s 7. The plaintiff put the argument that the contract price was indeed stated on the first page of the contract. The argument was founded on alleged ambiguity in subs (4) and the contract page bearing the number 2 being the first page of the contract because it was the page upon which the operative words appeared. Not only was it untenable, this argument was also inconsistent with another argument put in relation to alleged non-compliance with subs (2) (b) of s 7. 12 The language of subs (4) may be harsh in operation (it has been described as being draconian), but it does not seem to me to be ambiguous or uncertain. On any view, the page bearing the number 2 cannot be regarded as the first page of the contract. 13 It was argued that there was non-compliance with subs (2) (b) of s 7. The number of the licence appears only on the cover or title page. For the purposes of the plaintiff's submission on this question, this page has to be treated as the first page of the contract. In the light of what has already been said, it is unnecessary to determine this question. However, in deference to the submissions that have been made, it may be helpful to express a view. It seems to me that, in the circumstances of this case, this page does not form part of the contract itself. A similar view may be taken to the second page which contains the warning. In my view, the page bearing the number 1 should be regarded as the first page of the contract. 14 There was a question as to non-compliance with subs (5) of s 7. As has been earlier said, the contract price was subject to variations. It was submitted that what appears in the numbered paragraph 2 on the numbered page 2 satisfied this requirement. In my view, this submission also fails. 15 In my view, the numbered paragraph 2 does no more than set out what was the agreement between the parties. What appears therein cannot be construed as both a warning and an explanation. 16 The contract contained an arbitration clause. Such a clause is prohibited by s 7C of the Act. There was argument as to whether or not this was also non-compliance. 17 In my view, it is not a matter of non-compliance as contemplated by s 10. It contains a prohibition and expressly provides that any such provision is to be void. 18 There was a question as to non-compliance with s 8. Before the Tribunal, the first defendants relied on Schedule A (the operation of which depends on clause 18) and other material put in evidence. It may be that certain of this material was not before this Court. During the course of the hearing of the appeal, it was conceded by the plaintiff that work started in or about October 1998 and that a sum of $1,000 was paid on exchange and a cheque for a further sum of $8,000 was drawn on 30 August 1998. These concessions still left a somewhat unsatisfactory evidentiary position. The total of the two amounts would have exceeded 5% of the contract price (this being a case where the contract price was more than $20,000 and subs (2) of s 8 had application) and it seems likely that both amounts may have been paid before work was commenced. It may be added that clause 18 contains no provision for the making of these payments. 19 The section prohibits the conduct that is identified by the provisions of subsections (1) and (2). It seems likely that there has been prohibited conduct. There was argument as to whether such prohibited conduct attracts the operation of s 10. This question was not fully argued and this appeal can be decided without further pursuit of this question. Accordingly, I see no point in making further observations concerning it. 20 Finally, there was a question of whether or not the contract contained the statutory warranties applicable to the work as required by subs (2) (f) of s 7. The relevant statutory warranties are to be found in s 18B of Part 2C. 21 In my view, it is clear that there has been non-compliance with subs (2) (f) of s 7. 22 I now return to the ruling of the Tribunal. It seemed to be common ground that the actual ruling was erroneous. It seemed to be founded on some misunderstanding of the provisions of s 10. 23 Whilst this is a contract to which the requirements of s 7 apply, it is not a case where the contract is not in writing or does not have a sufficient description of the work to which it relates. It is in these instances that subs (1) renders the contract not enforceable by the holder of the licence. 24 For present purposes, it seems to me that second limb of subs (3) is a relevant provision (this being a case where a person has contracted to do work under a contract that does not comply with Division 1). In such a case, subs (3) provides that such person is not entitled to damages or to enforce any other remedy in respect of a breach of the contract permitted by any other party to the contract. 25 Accordingly, I set aside the ruling made by the Tribunal and substitute in lieu thereof a ruling that the plaintiff is not entitled to damages or to enforce any other remedy in respect of a breach of the contract committed by the first defendants. 26 For present purposes, this substitution may do little to change the position of the plaintiff. In substance, the appeal has failed. Therefore, unless the parties propose to make any submission to the contrary, I propose to order that the plaintiff pay the costs of the Summons.