Administrative Decisions Tribunal New South Wales Medium Neutral Citation: Pastrovic & Co Pty Limited v Department of Services, Technology and Administration [2012] NSWADT 177 Hearing dates: 30 March 2012 Decision date: 29 August 2012 Jurisdiction: General Division Before: S Montgomery, Judicial Member Decision: 1. In matter No. 113235 Mr Pastrovic is reprimanded. 2 In matter No. 113236 Pastrovic & Co Pty Ltd is to pay to the Director - General, as a penalty, the amount of $1000. Catchwords: Breach of statutory warranty - improper conduct - defective work - incomplete work - disciplinary action Legislation Cited: Administrative Decisions Tribunal Act 1997 Home Building Act 1989 Cases Cited: Pobjie v Commissioner for Fair Trading, NSW Office of Fair Trading (No 2) [2008] NSWADT 39 Category: Principal judgment Parties: Joseph Pastrovic (Applicant in 113235) Pastrovic & Co Pty Limited (Applicant in 113236) Department of Services, Technology and Administration (Respondent) Representation: MBA Lawyers (Applicants) Department of Finance and Services (Respondent) File Number(s): 113235, 113236 REasons for decision 1GENERAL DIVISION (S MONTGOMERY, (JUDICIAL MEMBER)): Mr Pastrovic is a director and nominated supervisor of Pastrovic & Co Pty Ltd ("the Company"). The Company undertook residential building work at 26 Wilma Avenue, Warrawong New South Wales ("the site"). The Respondent issued show cause notices calling on both Mr Pastrovic and the Company to show cause why disciplinary action should not be taken against them on the ground that they were each guilty of improper conduct under Home Building Act 1989 ("the Act"). 2Section 51(1)(c) of the Act provides that a licensee, and the holder of a supervisor certificate, is "guilty of improper conduct" if they breach a statutory warranty. Section 53(1)(c) provides that the nominated supervisor of residential building work is "guilty of improper conduct" if "a breach of a statutory warranty occurs in the course of doing that work." Section 54(1) provides that an officer of a corporation which is the holder of contractor licence "is guilty of improper conduct if the holder does any of the things referred to in section 51 or 52" of the Act. 3The Respondent subsequently determined that the Company had breached a statutory warranty under section 18B(a) of the Act in respect of work it had undertaken at the site because the work was not performed in a proper and workmanlike manner. It determined that the Company was guilty of improper conduct within section 51(1)(c) of the Act in respect of the breach. The Respondent also determined that Mr Pastrovic, in his capacity as a director and nominated supervisor of the Company, was guilty of improper conduct within sections 54(1) and 53(1)(b) of the Act. 4The decision was taken to take disciplinary action against both the Company and Mr Pastrovic, under section 62(c) of the Act. The Company was required to pay to the Director - General, Department of Services, Technology and Administration ("Director - General"), as a penalty, the amount of $5,000. Mr Pastrovic was required to pay, as a penalty, the amount of $2,000. 5Both the Company and Mr Pastrovic have applied to the Tribunal for review of the determinations and successfully sought a stay of the decisions. Relevant Legislation 6Section 18B of the Act provides: 18B Warranties as to residential building work The following warranties by the holder of a contractor licence, or a person required to hold a contractor licence before entering into a contract, are implied in every contract to do residential building work: (a) a warranty that the work will be performed in a proper and workmanlike manner and in accordance with the plans and specifications set out in the contract, ... (d) a warranty that the work will be done with due diligence and within the time stipulated in the contract, or if no time is stipulated, within a reasonable time, ... 7Section 48E of the Act provides: 48E Inspector may make rectification order (1) If, after completing an investigation under section 48D, an inspector is satisfied: (a) that any residential building work or specialist work contracted to be done by the contractor is incomplete, or (b) that any residential building work or specialist work done by the contractor is defective, or (c) that the contractor, in the course of doing any residential building work or specialist work, has caused damage to any structure or work, or (d) that, as a consequence of any defective residential building work or specialist work done by the contractor, a structure or work has been damaged, the inspector may serve a written order on the contractor requiring the contractor to take such steps as are specified in the order to ensure that the work is completed or the defect or damage rectified, as the case requires. ... (3) A rectification order: (a) may specify conditions (including conditions with respect to the payment of money) to be complied with by the complainant before the requirements of the order must be complied with, and (b) must specify a date by which the requirements of the order must be complied with, subject to the complainant's compliance with any condition referred to in paragraph (a), and (c) must indicate that the order will cease to have effect if the matter giving rise to the order becomes the subject of a building claim before the date specified in accordance with paragraph (b). 8Section 48F of the Act provides: 48F Effect of rectification order (1) Except as provided by section 51, a rectification order does not give rise to any rights or obligations. (2) Subject to section 48I, a rectification order ceases to have effect for the purposes of section 51 if the matter giving rise to the order becomes the subject of a building claim before the date specified in accordance with section 48E (3) (b). 9Section 48I of the Act provides: 48I Application for determination of building claim (1) Any person may apply to the Tribunal for the determination of a building claim. (2) A building claim may be withdrawn by the claimant at any time. (3) If, immediately before a building claim was made, the claimant was subject to the requirements of a rectification order under Division 2, the building claim may not be withdrawn except with the leave of the Tribunal. (4) When granting leave to the withdrawal of a building claim referred to in subsection (3), the Tribunal may restore the rectification order referred to in that subsection. 10Part 4 of the Act, comprising sections 49 to 83, contains provisions relating to disciplinary proceedings under the Act. Section 51(1)(c) of the Act provides: " 51 Improper conduct: generally (1) A holder of a contractor licence who is authorised by the contractor licence to contract to do residential building work or specialist work, or a holder of a supervisor or tradesperson certificate, is guilty of improper conduct if the holder: ... (c) breaches a statutory warranty ..." 11For the purposes of Division 2 of Part 4 to the Act section 55 of the Act defines "authority" to mean a contractor licence, a supervisor certificate, a tradesperson certificate, or a building consultancy licence. 12Section 56 of the Act relevantly provides: "56 Grounds for taking disciplinary action against holder of a contractor licence The Director - General may take disciplinary action under section 62 against the holder of a contractor licence on any of the following grounds: ... (c) that the holder is guilty of improper conduct, ..." 13Section 61 of the Act provides that where the Director - General is of the opinion that there are reasonable grounds for believing that there are grounds for taking disciplinary action under section 62 against the holder of an authority, a notice in writing may be served on the holder of the authority inviting the holder to show cause why disciplinary action should not be taken against the holder. 14Section 62 of the Act relevantly provides: 62 Disciplinary action that may be taken by Director - General If, after compliance with this Division, the Director - General is satisfied that any ground on which disciplinary action may be taken against the holder of an authority has been established in relation to the holder, the Director - General may do any one or more of the following: (a) determine to take no further action against the holder, (b) caution or reprimand the holder, (c) make a determination requiring the holder to pay to the Director - General, as a penalty, an amount not exceeding $11,000 (in the case of an individual) or $50,000 (in the case of a corporation) within a specified time, (d) vary the authority held by the holder, by imposing a condition on the authority, including a condition requiring the holder to undertake a course of training relating to a particular type of work or business practice within a specified time, (e) suspend the authority for a period not exceeding its unexpired term, (f) cancel the authority, (g) disqualify the holder, either temporarily or permanently, from being any one or more of the following: (i) the holder of any authority, or any specified kind of authority, (ii) a member of a partnership, or an officer of a corporation that is a member of a partnership, that is the holder of an authority, (iii)an officer of a corporation that is the holder of an authority. Notices to Show Cause 15Notices to Show Cause were issued to the Applicants. The Notice to Show Cause issued to the Company sets out a chronology of relevant events as follows: "1. GROUND FOR DISCIPLINARY ACTION 1.1 Pastrovic is guilty of improper conduct - section 56(c) of the Act. 2. PARTICULARS 2.1 Pastrovic is guilty of improper conduct within section 51(1)(c) of the Act as a result of its breach of a statutory warranty section 18B(a) of the Act to perform work in a proper and workmanlike manner under a contract that it had entered into with Jan Siuchnicki and Bozena Siuchnicki on 2 April 2007 to do residential building work at 26 Wilma Avenue, Warrawong, New South Wales. 3. BACKGROUND MATERIAL AND EVIDENCE SUPPORTING GROUND(S) FOR DISCIPLINARY ACTION SPECIFIED IN THIS NOTICE TO SHOW CAUSE 3.1 On 16 October 2001, Pastrovic was issued with a contractor licence (number 129531C) under section 20 of the Act. The licence authorises it to do residential building work within the category of "general building work". The licence remains in force until 16 October 2010. 3.2 On 2 April 2007, Pastrovic entered into a contract with Mr and Mrs Siuchnicki to demolish an existing dwelling and to construct a new dwelling at 26 Wilma Avenue, Warrawong, New South Wales. The contract price was $280,000.00. The work commenced in or around May 2007. 3.3 On 2 May 2008, Mr and Mrs Siuchnicki made a complaint to NSW Fair Trading ("Fair Trading") alleging that the residential building work Pastrovic had done at 26 Wilma Avenue, Warrawong was defective. 3.4 After receiving the complaint from Mr and Mrs Siuchnicki, Fair Trading conducted an investigation into the matter. On 4 August 2008, Mr David Gibbs, Building Inspector, Home Building Service, conducted a site inspection of the property to investigate into the matters complained of. 3.5 Following the site inspection, Mr Gibbs issued a rectification order to Pastrovic under section 48E of the Act on 13 August 2008, requiring it to rectify defective work specified in the order by 19 September 2008. The rectification order was posted to Pastrovic on the same day. 3.6After the time specified in the rectification order for the defective work to be rectified had lapsed, Mr Gibbs conducted a follow - up inspection of the property on 4 November 2008 to ascertain whether Pastrovic had complied with the requirements of the rectification order. Mr Gibbs observed that although Pastrovic had made some attempt to rectify the defective work specified in the rectification order, the work was not performed in a proper and workmanlike manner, and remained defective. A building inspection report prepared by Mr Gibbs following his inspection of the property on 4 November 2008 identifies the defective work that had not been rectified or remained defective notwithstanding rectification work undertaken by Pastrovic. ..." The material before the Tribunal 16The matter proceeded on the basis of material filed by the parties and submissions in regard to penalty. 17The Respondent has filed material in relation to each of these matters pursuant to section 58 of the Administrative Decisions Tribunal Act 1997 ("the ADT Act"). Documents relevant to each of the items referred to in the Show Cause notices are included in that material. These include the complaint lodged with the Respondent by Contract between Applicant Company and Mr Siuchnicki and Ms Siuchnicka; Rectification Orders; a Building Inspection Report by Mr David Gibbs ("the Gibbs Report") in relation to work undertaken at the site; a Report by Mr Peter Stubbs, Principal Building Inspector with the Respondent ("the Stubbs Report") in relation to work undertaken at 5 Cockatiel Court Blackbutt; a Report by Illawarra Building Appraisal Services ("the IBAS Report") in relation to work undertaken at the site; Show Cause notices to Mr Pastrovic and the Company and correspondence between the parties in relation to those notices; Inspection Reports by Bullivant & Associates Pty Ltd in relation to work undertaken at the site and correspondence between the parties in relation to the reports. 18It is common ground that some of the material contained in the Respondent's filed material is not relevant to these matters. 19The Applicants rely on the statement of Mr Joseph Pastrovic, dated 22 November 2011, and a statement provided by Mr Stewart Bullivant, a building consultant. Annexed to Mr Pastrovic's statement is a report by Mr John Phan, a Senior Engineer with Mi - Tek Australia Limited ("the Mi - Tek Report") The Mi - Tek report is dated 29 September 2008. 20The statement of Mr Bullivant is dated 22 November 2011. It annexed a copy of his report dated 9 December 2008 ("the Bullivant Report"). The Bullivant Report addressed the issues raised in the Gibbs Report. 21As is apparent from the Show Cause notices these matters primarily arise from allegations concerning the work at the site and identified in the Gibbs Report. The Gibbs Report 22A Building Inspection Report dated 21 November 2008 by David Gibbs is in evidence. The report identified a number of items as defective and in relation to each of those items Mr Gibbs indicated why he considered the item to be defective and why he considered it to be the contractor's responsibility. 23A reasonable summary of the Gibbs Report is provided in the internal review reasons for decision in relation to the Company. It stated: "Item 1- Timber roof framing does not comply with Australian Standards AS 1684 and AS 4440 Mr Gibbs identified 4 areas of concern in the timber roof framing. These were: (i) Saddle trusses at heel are cantilevered up to 400mm over supporting truss top chord and are not fully supported by timber ledger. (ii) Diagonal bracing not fitted to requirements of AS 4440. (iii) Poor truss connection. The connection of jack truss to hip truss only had two flat head nails and did not comply with AS 4440 which requires three 65mm flat head nails. Jack top chords were also inadequately fixed as AS 4440 requires a framing anchor bent to suit, with a minimum of four 2.8mm x 30mm reinforced head nails. (iv) Trusses not plumb in areas. At the time of inspection, a 1200mm height section of truss was measured to be 32mm out of vertical, AS 4440 - 2004 allows a tolerance of height of truss divided by 50. ... Item 2 - Excessive dampness in sub - floor area due to poor drainage and lack of ventilation Mr Gibbs found that there was inadequate site drainage and ventilation in the sub - floor area. Mr Gibbs referred to the Building Code of Australia ("BCA") requirement of a minimum sub - floor ventilation of 6000 mm2 per metre of wall, and noted that the ventilation area as installed measured approximately 1500 mm2 per metre of wall. ... Item 3 - Termite barrier does not comply in many areas with requirements of AS 3660 & BCA 3.1.3 Mr Gibbs pointed out that AS 3660 requires joints and cuts in metal sheeting to be riveted, fully soldered, brazed or welded at joints, and that termite shielding is required to project 40mm from walls, but noted that Pastrovic & Co had used flexible caulking to seal joints and the termite shield did not project sufficiently in areas. Mr Gibbs also pointed out that notwithstanding the CSIRO Technical Assessment 216 requirement that the Kordon system be installed in a continuous physical barrier to comply with AS 3660, Pastrovic & Co had attempted to create a barrier by using two different types of barrier - metal sheeting and Kordon barrier, but the work was not installed to either the Standard or manufacturer's requirements. ... Item 4 - Masonry does not comply with AS 3700 & BCA Mr Gibbs identified 4 areas of concern in the masonry. These were: (i) Insufficient clearance allowed for windows. (ii) Windows installed without weepholes. (iii) Excessive bed joints and voids in mortar. (iv) Defective control joints. ... Item 5 - Waterproofing to wet areas does not comply with BCA 3.8.1 Mr Gibbs observed that the wet areas not constructed in compliance with the BCA were the hobless shower recess, waterproofing to shower area and door jamb and architraves not finishing above the floor tiling. ... Item 6 - Ceramic tiling in bathrooms & laundry does not comply with AS 3958 Mr Gibbs observed that the ceramic tiles in the bathrooms and laundry were not laid in accordance with the requirements of AS 3958. ... Item 7 - Timber veranda and staircase at rear of building poorly constructed Mr Gibbs found the riser openings in the rear deck staircase exceeded 125mm and therefore did not comply with clause 3.9.1.3(e) of the BCA. He also observed that the timber posts supporting the rear deck were overcut and projected through to be used as balustrade posts. The posts were nominally 90mm x 90mm, however, Mr Gibbs found, upon checking out the joint, that Pastrovic & Co had left only 45mm x 45mm of timber to support the balustrade post which had been further weakened by drilling two 9mm holes to provide for coach bolts. ... Item 8 - Rumpus room floor not level Mr Gibbs measured the floor at the base of the stairs in the rumpus room and found it to be 12mm out of level over 1200mm. ... Item 9 - Kitchen ceiling not level Mr Gibbs observed that the ceiling and cornice of the kitchen were out of level. The Bullivant report agreed that this was a defect and Pastrovic & Co was to rectify. On his follow - up inspection, Mr Gibbs found that Pastrovic & Co had replaced the cornice but the ceiling was still out of level. ... Item 10 - Timber flooring in living room cupped and buckled ... 24The Respondent has conceded and does not press item 10. Schedule of Agreed and Disputed Defects 25Prior to the hearing the parties entered discussions with a view to limiting the issues in dispute. As a result of those discussions they prepared a schedule of Agreed Defects and those that remained in dispute. The schedule was in the following terms: Agreed Defects Item 2 - Excessive dampness in sub - floor area due to poor drainage and lack of ventilation Item 3 - Termite barrier does not comply in many areas with requirements of AS 3660 & BCA 3.1.3 Item 4 - Masonry does not comply with AS 3700 & BCA - sub - items (i) to (iii) Item 5 - Waterproofing to wet areas does not comply with AS 3958 Item 6 - Ceramic tiling in bathrooms & laundry does not comply with AS 3958 Item 7 - Timber Veranda and staircase at rear of building poorly constructed Disputed Defects Item 1 - Timber roof framing does not comply with Australian Standards or AS 1684 and AS 4440 (i) Department - Saddle trusses not fully supported Builder - Incomplete work (ii)Department - Diagonal bracing not as per AS4440 Builder - Incomplete work (iii)Department - Poor truss connection Builder - Incomplete work (iv)Department - Trusses not plumb in areas Builder - Relied on engineer inspection Item 4 - Masonry does not comply - with AS 3700 & BCA (iv) Department - Defective control joints Builder - Incomplete work Item 8 - Rumpus room for not level Department - Floor at base of stairs 12mm out of level over 1200mm Builder - No fall standard prescribed Item 9 - Kitchen ceiling not level Department - Deviation of 8mm over a 1.8 ceiling spam Builder - Kitchen not installed by builder and could have made adjustments The Bullivant Report 26In his statement Mr Bullivant provided a summary of his conclusions in relation to the items raised in the Gibbs Report. He stated: Item 1 - Timber roof framing does not comply with Australian Standards or AS 1684 and AS 4440 5. (i) I do not believe that this is defective work. I am of the view that this was incomplete work and I discussed this with the Builder and advised him that it was requiring completion. (ii) I do not believe that this is defective work. I am of the view that this was incomplete work and I discussed this with the Builder and advised him that it was requiring rectification completion. (iii) I do not believe that this is defective work. I am of the view that this was incomplete work and I discussed this with the Builder and advised him that it was requiring rectification completion. (iv)I do not believe that this is defective work as the Mi - Tek Engineer inspected the works and provided a report detailing any items of rectification and did not provide any comment with regards to the roof truss units being out of plumb. I believe the scope of the inspection/instruction provided to the MiTek Engineer by the Builder prior to his inspection was to inspect the premises and provide comment on the items identified in the Fair Trading report. Item 3 - Termite barrier does not comply in many areas with requirements of AS 3660 & BCA 3.1.3 6. I recommended to the applicant to obtain a certificate from a suitably qualified pest inspector. This certificate was obtained and relied on by both the applicant and myself. Item 4 - Masonry does not comply with AS 3700 & BCA 7. (i) Clearance for windows - I agree that this is a defect. The Builder did not leave a sufficient clearance and the sills needed to be removed and replaced. (ii) Weep holes - I agree that there were not sufficient weepholes and that this did not comply with the Building Code of Australia. I am aware that the Builder carried out some rectification work in relation to this but did not complete it. However, this defect is of a minor nature and easily rectified at minimum cost. (iii) Not relevant. (iv) Control joints - This could be incomplete work as they can be done at a later time. Item 7 - Timber Veranda and staircase at rear of building poorly constructed 8. I do not believe that this is defective work. I am of the view that this was incomplete work. As stated in my report of 9 December 2008 I had recommended that the Builder install hoop iron strapping and additional bugle screws to complete. This work is of minimum cost. Item 8 - Rumpus room floor not level 9. I do not believe that this is defective work. This is not a wet area and therefore no fall standard is prescribed. The fall does not affect the use and is not noticeable. Item 9 - Kitchen ceiling not level 10. This is a very minor defect. The kitchen was not installed by the Builder and the installer could easily have made adjustments to the level of the kitchen to match and minimise the effect. The Mi - Tek Report 27The Mi - Tek Report indicated that the timber roof trusses of the site had been inspected on 26 September 2008 and the Report set out the observations made and recommendations in relation to the observations. In general trusses were found in good order and most fixing was found to be sufficient. Some issues were identified and recommendations were made in regard to how to address the inadequacies. The Mi - Tek Report concluded that: "in completion of the above items, the installation of the timber roof trusses can be considered structurally adequate." Mr Pastrovic's evidence 28It is not in dispute that proceedings before the Consumer, Trader & Tenancy Tribunal ("CTTT") dealt with many of the items that were the subject of the Show Cause Notices. In relation to the CTTT proceedings Mr Pastrovic stated: 9. The Owners made multiples changes and requested many extras to the original scope of works. Variations were directed by the Owners but because of my personal relationship with them they were not documented. 10. The Owners spent more money than they had budgeted for and consequently ran out of funds part way through the job. By this time it was the end of 2007. 11. The Owners filed an application in the Consumer, Trader & Tenancy Tribunal ("CTTT") on 8 August 2008 alleging defective work. ... 12. The Builder filed a cross - application on or about 10 November 2008 for outstanding moneys under the contract. ... 13. The Builder claimed in its (amended) cross - application the amount of $67,791.31 being the contract price of $280,000.00 plus the costs of the variations, less the costs to complete. 14. In the alternative the Builder claimed $71,525.70 being the value of the work performed less the amount paid by the Owners ... 18. I was not prepared to attend the site to rectify all defects with such a large amount of money outstanding and whilst I had suspended works due to non - payment. It was my intention that all incomplete work including alleged defects would be addressed as part of the CTTT proceedings. 19. After lengthy legal proceedings in the CTTT extending over two and a half years, I decided to settle the matter on a purely cost basis of continuing the proceedings. ... 20. Both parties withdrew their applications on a walk away basis. 29Mr Pastrovic set out his position in relation to the items in issue as follows: Item 1 - Timber roof framing does not comply with Australian Standards or AS 1684 and AS 4440 25. I consider this to be incomplete work. I relied on the advice and expertise of Mr Phan of Mi - Tek and Stewart Bullivant, a building consultant l engaged to assist with this job. ... 26. During 2008 I instructed my subcontractor Peter McDonald to attend at the site and carry out rectification works as identified by Stewart Bullivant. ... [Peter McDonald] completed all carpentry work on the site as per the instructions from Stewart Bullivant and the consulting engineer from the truss manufacturer. Item 2 - Excessive dampness in sub - floor area due to poor drainage and lack of ventilation 27. I admit there was inadequate site drainage and ventilation in the sub - floor area. At the time of this work taking place I was ill with cancer and not on the site as often as I normally would have been. 28. At the time the site was under the supervision of my son George and subcontractor Peter McDonald, both licensed and qualified to oversee building work. I relied on their skill and diligence in supervising the works. 29. However I do not consider this to be a major issue as it was something that would have come to my attention and been rectified prior to completion of the works had the building contract been allowed to run its course. 30. Nevertheless, rectification work in relation to this matter was carried out. I attended at the site in late 2008 with my subcontractor Peter McDonald after I received the rectification order. Peter McDonald attended to a number of items which had been identified in the rectification order. Item 3 - Termite barrier does not comply in many areas with requirements of AS 3660 & BCA 3.1.3 31. For all work in relation to termites I engage a specialist sub - contractor, as I did on this site, to do the work and to advise me if any further work is necessary. 32. The sub - contractor certified the work and supplied a certificate of compliance... 33. After the Fair Trading inspection I attended at the site and carried out minor rectification work to address the issues that were raised in the Gibbs report. I do not consider the issues to have been major and in any event they have all been duly rectified. I believe I am entitled to rely on the expertise and skill of my subcontractors to the extent that their experience and knowledge supersedes mine. Item 4 - Masonry does not comply with AS 3700 & BCA 34. (i) Clearance for windows - I consider this to be incomplete work which would have been addressed in the usual way had the building contract been allowed to run its course. (ii) Weep holes - I am uncertain of the details of this allegation. In any event I am of the same view with regard to this matter as I have stated in subparagraph (i). I have not seen such weepholes in my experience. (iii) Not relevant. (iv) Control joints - incomplete work. It is not unusual for bricklayers to go back and cut in the control joints at a later stage. Item 5 - Waterproofing to wet areas does not comply with AS 3958 35. This is a defect caused by the tiling sub - contractor, an issue which l was aware of prior to the inspection by Fair Trading. By that time there was a dispute with the Owners, primarily to do with variations and the payment of a substantial amount of money, and access to the site was intermittent. It was my intention that if the dispute could be resolved then I would have the subcontractor attend the site and rectify and if the dispute could not be resolved then an appropriate credit could be given. 36. The Owners requested at the time to receive a credit rather than having rectification works carried out, despite the fact that we were ready, willing and able to fix the defect. Item 6 - Ceramic tiling in bathrooms & laundry does not comply with AS 3958 37. I refer to my explanation of Item 5. 38. The Owners requested at the time to receive a credit rather than having rectification works carried out, despite the fact that we were ready, willing and able to fix the defect Item 7 - Timber Veranda and staircase at rear of building poorly constructed 39. These defects are admitted and were partly attended to at the time that the dispute arose with the Owners. Again access became difficult and intermittent and I decided to wait for a resolution to the entire dispute before the Tribunal, especially considering that the rectification work was very small and of little cost and a very large amount of money was owing to me. 40. At the time of construction the engineer Peter Lockhardt from Goodmans acknowledged that the posts had been overcut however noted that the issue could be resolved by simple adjustments rather than removing and re - doing the whole balcony. 41. I explained this method of rectification to the Owners at the time however they did not agree to any further work being carried out and indicated to me that it did not bother them. As such, I was unable to finalise this issue. Item 8 - Rumpus room for not level 42. This alleged defect is very minor and of little cost to rectify. I do not consider it to be a defect. I have not had an opportunity to inspect it and base my view on the Gibbs report. Item 9 - Kitchen ceiling not level 43. This alleged defect if found is very minor and of little cost to rectify. In any event I do not consider it to be a defect. 44. I arranged for the gyprocking subcontractor to return to the site to rectify the kitchen ceiling in 2008. I am of the view that the kitchen ceiling was within tolerances and that the Gibbs report was incorrect. 45. ... I do not agree with the contents of [the letter from Fair Trading dated 2 December 2008 to the Owners noting their advice that the Builder had not complied with the rectification order dated 13 August 2008] and state that I did return to the site to attend to a number of items that had been raised by both the Owners' expert Andrew Connor and the rectification order. Item 10 - not relevant. 30Mr Pastrovic raised issues concerning his own personal circumstances that impacted on the way the work was conducted on the site. He set out his opinion in regard to how the matter should be determined as follows: 46. I am of the view that the defects which formed the basis of the Show Cause Notices dated 11 March 2010 and the subsequent decisions of Fair Trading dated 21 February 2011 and 29 June 2011 are all items which would have been duly rectified had the building contract been allowed to run its course. 47. I do not feel I should be penalised for failing to comply with a rectification order which referred to defects the subject of CTTT proceedings and a genuine dispute between the Builder and the Owners. Section 48F(2) of the Home Building Act 1989 (NSW) provides that a rectification order ceases to have effect if the matter giving rise to the order becomes the subject of a building claim before the date specified for compliance. ... 48. The Fair Trading rectification order is dated 13 August 2008. The CTTT proceedings were commenced 8 August 2008 and were not settled and discontinued until 17 March 2011. Annexed and marked "J" is a copy of the front page of the Owners' application. Annexed and marked "K" is a copy of the CTTT Notices of Order dated 17 March 2011 concerning the withdrawal of the application and the cross - application. As such, a final determination in relation to the alleged defects and moneys owed was pending for a period of two years and nine months. Had the matter been resolved earlier I would have had the opportunity to carry out rectification work and/or deduct compensation from the outstanding moneys and enter into a Deed of Release or similar with the Owners. 49. Once the CTTT proceedings had commenced it became more and more difficult to arrange access to the site. On one occasion after the issue of the rectification order in August 2008 I attended at the site with Peter McDonald with the intention of carrying out rectification work. Upon our arrival at the site the alarm went off and the neighbours telephoned the Owner to ask him to return home to switch it off. 50. Finally, given the minor nature of the majority of the defects, a position which is supported by my expert Stewart Bullivant, together with the convoluted nature of the dispute with the Owners, I do not feel the penalties imposed by Fair Trading are justified or warranted. Submissions 31As noted above, it is common ground that some defects existed in the works undertaken at the site. Both parties made submissions in regard to the appropriate orders to be made in the matter. 32The Respondent contends that the Applicants had an obligation to perform good work and that the rectification order was based on the defective work. The Gibbs Report identifies the failures to do good work and several items are agreed to be defects. 33Mr Maynard submitted that at best, the defects must be seen as significant. He says that it is important that work is done properly on the first attempt. 34Mr Maynard said that the Respondent concedes that some issues raised in the notices are not relevant to these proceedings. 35The Respondent also concedes issues relating to Mr Pastrovic's personal circumstances but Mr Maynard submitted that those issues are not to be taken into account. 36Mr Collings made submissions on behalf of the Applicants. He submitted that the penalty is excessive. He conceded that some of the items in issue constituted defective work but maintains that the remainder were incomplete work. The Applicants relied on expert evidence in disputing the alleged defects. Mr Collings referred to the CTTT proceedings and submitted that the Applicants had a reasonable basis for non-compliance with the rectification order. He further submitted that the Applicants were not required to complete the work as the result of an agreement reached between the parties to those proceedings. The Applicants had difficulty in gaining access to the site to perform any further work. Mr Collings submitted that the Applicants are not to be held responsible for that aspect of the work. He further submitted that the owners were far better off financially as a result of the agreement reached between the parties to the CTTT proceedings and that the Applicants incurred considerable loss. 37Mr Collings submitted that there were no structural defects and that the defects were not apparent to the owners until experts became involved. In his submission the defects are minor in nature and that the cost of the work reflects the minor nature of those defects. Discussion 38I note that the parties have agreed that some of the items identified in the Gibbs report are correctly classified as defects. I accept the Applicants' submission that the defects are not structural in nature. I also accept that the defects are relatively minor. 39I agree that in regard to disciplinary proceedings a builder is generally entitled to rely on expert advice and the certification provided by specialist subcontractors in regard to those aspects of work where specialist qualifications and experience is required. 40With two exceptions, I also accept the Applicants' submission that the remaining items can be correctly categorised as incomplete work. As a result of the agreement reached between the parties to the CTTT proceedings, there was no obligation to complete that work. 41The two exceptions are Item 8 - Rumpus room for not level and Item 9 - Kitchen ceiling not level. In each of those matters it is my view that the work is defective. However, I accept that those defects are very minor. I also accept that rectification work was not carried out because of the agreement reached between the parties to the CTTT proceedings. 42As noted above, section 48F(2) of the Act provides that a rectification order ceases to have effect if the matter giving rise to the order becomes the subject of a building claim before the date specified for compliance. I am satisfied that the CTTT proceedings were commenced prior to the date specified for compliance with the rectification order. In any event, I accept that the owners prevented the Company from undertaking the work. I therefore consider that no fault can be attributed to the Applicants in regard to non-compliance with the rectification order. 43However, I agree with the Respondent's submission that the Applicants had an obligation to perform the work in a proper and workmanlike manner. The Gibbs Report identifies defective work that is clearly a breach of that obligation. In my view, that issue remains notwithstanding the agreement reached between the parties to the CTTT proceedings. 44The question to be determined is then one of the appropriate actions to be taken against the Applicants in regard to that issue. 45I agree that the determination is excessive. However, I consider that some disciplinary action is warranted. 46Judicial Member Molony considered the approach taken to determining what disciplinary action to take in the matter of Pobjie v Commissioner for Fair Trading, NSW Office of Fair Trading (No 2) [2008] NSWADT 39. The Judicial Member stated: 144 In considering what disciplinary action to take I am cognisant of the fact that the purpose of disciplinary action is not to punish Michael Pobjie but to protect the public: Clyne v NSW Bar Association [1960] HCA 40; (1960) 104 CLR 186 at 201. The Commissioner has disqualified Michael Pobjie from obtaining a licence for a period of ten years and submits that this is the appropriate penalty given the seriousness of Pobjie Agencies conduct and Michael Pobjie's role in that corporate licensee. 145 In Director-General, Department of Fair Trading v. Cohen [2000] NSWFTT 3 (see also Younan v Commissioner of Fair Trading [2007] NSWADT 170 at [26]; and Harb v Commissioner of Fair Trading [2007] NSWADT 175 at [60]) the Fair Trading Tribunal outlined a series of factors which might be relevant to the assessment of an appropriate penalty. They were: (a) the nature, width and extent of the contraventions, (b) the loss or damage and prejudice in consequence of the contraventions, (c) the circumstances in which the contraventions took place, (d) whether the licensee has been found to have engaged in any similar conduct, (e) the presence of fraudulent or dishonest intent and deliberation on the part of the licensee, (f) the extent of carelessness or wilfulness of the conduct, (g) the efforts made to correct the situation and what measures have been taken by the licensee, (h) what consciousness the licensee (a) had (b) displayed, of its obligations under the relevant statute and to the owners, (i) the effect upon the licensee, (j) antecedents, (k) attitude, building history and future compliance, and (l) the penalty range. In Ng and Anor v Commissioner of Fair Trading [2007] NSWADT 259 at [72]. I expressed the view that two further factors may be relevant. These are: (a) any gain made as a result of the contraventions , (b) the degree of cooperation with the authorities. 47In my view, consideration of the factors referred to in Pobjie do not support the severity of the penalties imposed by the Respondent. 48To the extent that those factors are applicable, they have been referred to above. There is no evidence to suggest a history of non-compliance by the Applicants. I accept that the Applicants have suffered financially as a result of the settlement of the CTTT proceedings. 49I also accept that Mr Pastrovic has experienced very difficult personal circumstances. However, those factors are not relevant to my consideration of this issue. 50As I have noted, some work was not done in a proper and workmanlike manner. Some disciplinary action is warranted. The Company was guilty of improper conduct within section 51(1)(c) of the Act in respect of that breach. As a director and nominated supervisor of the Company Mr Pastrovic was also guilty of improper conduct within sections 54(1) and 53(1)(b) of the Act. However, as I have also noted, those breaches were relatively minor in nature. 51In my view, the appropriated disciplinary action to be taken under section 62(c) of the Act is that the Company is required to pay to the Director - General, as a penalty, the amount of $1000. Mr Pastrovic should be reprimanded. Orders 1. In matter No. 113235 Mr Pastrovic is reprimanded. 2 In matter No. 113236 Pastrovic & Co Pty Ltd is to pay to the Director - General, as a penalty, the amount of $1000. ********** 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: 29 August 2012