Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Ultra Construction Pty Ltd v Commissioner for NSW Fair Trading [2014] NSWCATOD 76 Hearing dates: 26 November and 23rd December 2013 Decision date: 18 July 2014 Jurisdiction: Occupational Division Before: A Scahill, Senior Member Decision: 1. In matter number 133240 the tribunal finds that Ultra Construction Pty Ltd is guilty of improper conduct and is subject to a monetary penalty of $2,500; 2. In matter number 133241 the tribunal finds that Mr Abousleiman is guilty of improper conduct and is subject to a monetary penalty of $1000. 3. In matter number 133242 the tribunal finds that Ms Farag is guilty of improper conduct and is subject to a monetary penalty of $1000. The tribunal understands that the original penalties have already been paid. Legislation Cited: Administrative Decisions Tribunal Act 1997 Home Building Act 1989 Home Building Regulation 2004 Cases Cited: Briginshaw v Briginshaw (1938) 60 CLR 336 Calcaro v Chief Commissioner of State Revenue [2004] NSWADT 158 Clyne v NSW Bar Association [1960] HCA 40; (1960) 104 CLR 186 at 201 Director General, Department of Fair Trading v Cohen [2000] NSWFTT 3 Drake v Minister for Immigration and Ethnic Affairs (1979) 46 FLR 409 Giann v Department of Finance and Services (Commissioner for Fair Trading) [2013] NSWADT 129 Harb v Commissioner for Fair trading, Office of Fair Trading [2005] NSWADT 171 Harb [2007] NSWADT 175 Ng v Commissioner of Fair Trading [2007[ NSWADT 259 Pastrovic & Co Pty Limited v Department of Services Technology and Administration [2012] NSWADT 17 Pilipczyk & anor v Commissioner for Fair Trading, NSW Office of Fair Trading [2007] NSWADT 85 Shorten v David Hurst Constructions Pty Ltd [2008] NSWCA 134 Saboune v Department of Finance and Services [2013] NSWADT 71 TQM Design and Construct Pty Ltd v Department of Services Technology & Administration [2011] NSWADT 144 TQM Design and Construct Pty Ltd v Department of Finance and Services [2013] NSWADT 249 Category: Principal judgment Parties: Ultra Construction Pty Ltd, (Applicants) Commissioner for NSW Fair Trading (Respondent) Representation: Counsel Mr Young (Applicant) G & S Law Group (Applicant) B Bourke, Commissioner for NSW Fair Trading (Respondent) File Number(s): 133240,133241, 133242 reasons for decision Introduction 1The Applicants - Ultra Construction Pty Ltd, Assaad Abousleiman and Josephine Farag have applied to the Tribunal to review a disciplinary decision of the Department of Finance and Services ("the Agency") made on 1 August 2013. The Agency found that Ultra Construction Pty Ltd, (the licence holder), Assaad Abousleiman (the nominated supervisor) and Josephine Farag (the sole director) were guilty of improper conduct with respect to residential building and construction works at 102 Sturt Street Kingsford NSW("the works") - the home of Mr and Mrs Kargas (the homeowners). 2That improper conduct consisted of breaches of the statutory warranties implied by s18B (a) of the Home Building Act 1989 ("the Act") to perform work in a proper and workmanlike manner. This related to 3 items of work identified in a Building Inspection Report prepared by Mr Norman Foster, Coordinator Building Disputes with the Home Building Service dated 2 February 2010 ("the inspection report"). The Agency determined that as a result of the finding of improper conduct, Ultra Construction Pty Ltd, Assaad Abousleiman and Josephine Farag should pay penalties respectively of $3000, $1500 and $1500. 3Mr Assaad Abousleiman is the supervisor and contractor licence holder for Ultra Construction Pty Ltd. Ms Josephine Farag is the sole director of Ultra Construction Pty Ltd. 4On 28 February 2013, the Respondent had issued to the Applicants a Notice to Show Cause as to why disciplinary action should not be taken against them on the grounds that they were guilty of improper conduct. The Applicants' solicitors responded on 26 March 2013 to the Notice to Show Cause. 5The Agency issued Notices of Decision pursuant to section 64 of the Home Building Act dated 13 June 2013. These decisions determined that the Applicants' conduct warranted the taking of disciplinary action against them and imposed monetary penalties against each of them. 6The Applicants' solicitors sought Internal Review of the Decisions on 11 July 2013. However the Respondent affirmed its decisions on 1 August 2013 - prompting the current Applications to this Tribunal. Jurisdiction of ADT 7These applications to review the decisions of 1 August 2013 are made pursuant to Section 63 of the Administrative Decisions Tribunal Act 1997 (the ADTA). The section provides that in determining an application for review, the Tribunal is to make the correct and preferable decision having regard to the material before it, and any applicable written or unwritten law. It is well established that in considering an application for review the Tribunal is not constrained to have regard only to the material that was before the Commissioner, but may have regard to any relevant material before it at the time of the review: Drake v Minister for Immigration and Ethnic Affairs (1979) 46 FLR 409. 8The 3 applications were heard together. The disciplinary proceedings against each of the 3 Applicants arose out of the same set of circumstances. Mr Abousleiman was the nominated supervisor for the licence holder Ultra Construction Pty Ltd. The factual allegations relating to improper conduct of the licence holder relate to Mr Abousleiman as well. The Act provides that a director of the company, Ms Farag, will also be guilty of improper conduct where the licence holder has been guilty of improper conduct. The Act offers defences for the director. 9Material before the Tribunal 10The following documents were put before the Tribunal: * The section 58 documents filed by the Agency. This included the report of Mr Foster dated 2 February 2010. * The Affidavit and submissions of Josephine Farag, the sole director of Ultra Construction Pty Ltd, dated 25 November 2013, with attachments - including the report of Mr Bournelis, expert, dated 14 November 2013. * The Affidavit of Assaad Abousleiman dated 11 November 2013 * Written submissions made to the Agency by the Applicants' legal representatives * An extract from Standards Australia titled AS 1684.2-2010 SECTION 7 ROOF FRAMING. 11During the hearing that took place on 9 and 23 December 2013 the Tribunal heard sworn evidence from - * Josephine Farag, * Assaad Abousleiman * Mario Bournelis, and * Norman Foster. 12The 3 applications were heard together and the evidence received related to all 3 cases. 13The Applicants were represented at the hearing by Mr Young of Counsel while the Agency was represented by Ms Brenda Bourke. Circumstances surrounding the construction of the works 14To understand the issues in dispute in this case properly it is necessary to consider the circumstances relating to the contract for the construction of the works. On 13 October 2008 Randwick Council issued approval for Development to Mr and Mrs Kargas for "ground level alterations, and additions to existing dwelling, new car port at front and shed at rear and fencing and part side boundary". The Approval was issued with the requirement to satisfy a range of conditions. These conditions are relevant to the Respondent's decision to pursue disciplinary action against the Applicants. 15The section 58 documents also include: * An undated copy of part of the standard form HIA contract made between Ultra Construction Pty Ltd as builder and Mr and Mrs Kargas on 1 March 2009 * a Quotation dated 1 March 2009 from Ultra Construction Pty Ltd setting out the works proposed; * a Site Plan dated 14 August 2008; and * 8 variation documents issued by the Builder between 6 April and 10 June 2009. 16It is relevant to note that on 1 April 2009 Ultra Construction Pty Ltd provided Mr and Mrs Kargas with a "Quote" to "Supply and fix the existing bow in the existing roof". This document is included in the documents before the Tribunal. 17The commencement date for the work was nominated in the Contract as 4 March 2009, however it appears that work commenced around 23 March 2009. The projected length of building time was 13 weeks from commencement - approximately the end of June 2009. 18The relationship between Mr and Mrs Kargas and the Builder appears to have deteriorated quickly. On 10 and 27 April and 1 June 2009 Ultra Construction Pty Ltd sent Mr and Mrs Kargas letters requesting that they not interfere with the builder's workers on site. On 17 August 2009 Ultra Construction Pty Ltd wrote to Mr and Mrs Kargas advising that they had suspended the carrying out of works in accordance with the Contract due to non-payment of a progress payment by due date. 19On 4 November 2009 Mr Kargas wrote to the Builder setting out 13 issues of dissatisfaction with the works undertaken and seeking their rectification. Thereafter Mr Kargas lodged a complaint with the Home Building Service on 19 November 2009. On 2 February 2010 Mr Norm Foster Coordinator Building Disputes with the Home Building Service, inspected the work at the Kargas' address and produced a report of that inspection which was referred to in these proceedings. 20On 23 March 2010, Mr Foster issued a Rectification Order to the Builder requiring the Builder to take 15 actions prior to 30 April 2010. There was interaction between Mr Foster and the Builder and Mr Foster and the Builder's legal representative, Mr Georges. These interactions became heated. Mr Georges made a written complaint about Mr Foster's involvement in the matter by facsimile dated 15 April 2010. This enmity continued during the hearing of the matter. 21The Builder then made an application to the Home Building Division of the CTTT on 19 April 2010 to resolve the dispute with Mr and Mrs Kargas in relation to non-payment of scheduled payments. This Application had the effect of "staying" the Rectification Order. A settlement of this and the Builder's Local Court action against Mr and Mrs Kargas was reached and orders made by the CTTT on 30 May 2010.The settlement included agreement by the Builder to take a number of actions to rectify and complete the job, with Mr and Mrs Kargas to allow access to the site and pay certain amounts to the Builder. 22Mr Abousleiman returned to the site to undertake a number of actions in June 2010. In the interim, the homeowners had engaged other tradespersons to undertake work at the site. The Respondent's case 23The Respondent's case was set out in the Notices of Decision on Internal Review dated 1 August 2013 sent to each of the 3 Applicants. The reasons in relation to each were the same relying on the finding that Ultra Construction Pty Ltd breached a statutory warranty by failing to perform the work in a proper and workmanlike manner and in accordance with the plans and specifications in respect of the work. On the basis of the breach of statutory warranty the decision maker determined that Ultra Construction Pty Ltd was guilty of improper conduct under section 51 (1) (c) of the Act. 24Mr Abousleiman was guilty of improper conduct under section 53 (1) (b) as the holder of an endorsed contractor licence who had control over carrying out of the residential building work when the breaches of statutory warranty occurred. He was the sole nominated supervisor of Ultra Construction Pty Ltd. 25Ms Farag was guilty of improper conduct under section 54 (1) as the sole director of Ultra Construction Pty Ltd. As a director she was required to ensure that the work done by Ultra Construction Pty Ltd was done in a proper and workmanlike manner. This had not occurred. 26The Respondent relied upon the report of Mr Foster as evidence that Ultra Construction Pty Ltd had breached the statutory warranty that it would undertake the work in a proper and workmanlike manner and in accordance with the plans and specifications. The Applicants' Arguments 27The Applicants had written a number of times to the Respondent contesting the matters. Their submissions were set out both in their application dated 11 July 2013 for an internal review of the decision made by the delegate and orally at hearing. 28The arguments on internal review included the following: (1)The Department had not particularised the facts relied upon. The Applicant was left to assume that the Department had relied on Mr Foster's report which in turn relied on the owners' evidence. The problem with relying on the owner's evidence was that the owners' complaints had been withdrawn and so they could not be relied upon further. (2)The Department has power to take into account that the CTTT member considered and approved the settlement agreement and made orders in accordance with the settlement. It was open to the CTTT to make a finding that there was improper works and refuse to make orders. The CTTT agreed to make the orders and did not make findings against the Applicants. (3)The rectification order had no relevance to the issue of whether the Applicants had breached statutory warranties. 29The only evidence of the works from the Department is in the report of Mr Foster. Therefore since the delegate correctly found that the rectification order was of no effect and that the Applicants were entitled to stop work - then those works were incomplete and they could not be said to be "not done in a proper and workmanlike manner" at the time of Mr Foster's report. 30Other tradespeople had been brought on site by the homeowners and the builder was therefore not responsible for all of the items noted in Mr Foster's report. 31Statutory warranties only applied to work done or to be done under contract and the Applicants could not be held liable for work which was not required under the contract. 32Mr Abousleiman and Ms Farag were not contracting parties. An employee can only follow directions of their employer and cannot be held personally responsible for alleged breaches by the employer in relation to the work. 33The contract between Ultra Construction Pty Ltd and the homeowners was varied by the terms of settlement entered by the parties in the CTTT proceedings. It is a varied contract that sets the parameters for the work undertaken and to be undertaken by Ultra Construction Pty Ltd, and the reasonable time frame in which it is to be undertaken following the homeowners' amelioration of breaches including the payment of money owed and provision of site access. Accordingly this also altered implied statutory warranties that the Applicants must adhere to.Mr Foster had demonstrated bias against the Applicants in his dealings with them and hence his evidence could not be relied upon. Further Mr Foster's bias against the Applicants had affected the Department's decision-making process and its decision to take action against the Applicants. 34The Respondent dealt with each of these arguments in its reasons for decision on Internal Review dated 1 August 2013. 35In short the Respondent had relied on Mr Foster's report which did not rely on the owners' complaints - but rather his own observations. Withdrawal of the complaint did not mean that the work was not defective. The CTTT proceedings had a different focus to disciplinary proceedings. Therefore settlement of the CTTT proceedings did not terminate the disciplinary proceedings. The fact of the making of the Rectification Order was not relevant to the disciplinary hearings. The disciplinary action against Mr Abousleiman and Ms Farag was on the basis of their roles as holder of endorsed contractor licence and supervisor and sole director respectively. This placed an obligation on them each to ensure that the work was performed in a proper and workmanlike manner and in accordance with the plans and specifications. Issues for determination 36The main issues for the Tribunal to determine are: * Were Ultra Construction Pty Ltd, Assaad Abousleiman and Josephine Farag obliged to comply with the statutory warranty under s 18B(a) of the HBA to perform work in a proper and workmanlike manner and in accordance with the plans and specifications set out in the contract ? * If so, with respect to each of the categories of defect and work not done in a proper and workmanlike manner relied on by the Agency, whether Ultra Construction Pty Ltd, Assaad Abousleiman and Josephine Farag have breached the statutory warranty implied by s 18B(a) of the HBA? * If so, whether Ultra Construction Pty Ltd, Assaad Abousleiman and Josephine Farag are guilty of improper conduct as a result? * If there has been improper conduct, what, if any, penalties should be imposed on each of the Applicants? Relevant Law Statutory warranties 37Section 18B(a) of the HBA implies a warranty into all contracts for residential building works 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. Section 18G provides that those warranties may not be excluded. Rectification order 38Section 48I of the Act appears to provide that where a Rectification Order is made before a building claim is lodged, the rectification order is suspended by the making of the claim and it must specifically be restored by the CTTT once a claim is withdrawn for it to be reinstated. However the tribunal does not understand that the rectification order itself is the basis for the disciplinary action in this matter. Improper conduct 39Section 51 of the Act makes a breach of a statutory warranty improper conduct by the holder of a contractor licence. This is the section that relates to Ultra Construction Pty Ltd, the holder of a contractor licence. 40 Section 53 of the Act makes the holder of an endorsed contractor licence or a supervisor certificate who had control over the carrying out of the work when the alleged breach of statutory warranty occurred, guilty of improper conduct. This is the section that relates to Mr Abousleiman as nominated supervisor and holder of an endorsed contractor licence. 41Section 54 of the Act makes a director of a corporation that is the holder of a contractor licence guilty of improper conduct if the holder breaches a statutory warranty. The section provides a defence for the director of a corporation if: (a) the improper conduct occurred without the individual's knowledge, or (b) the individual was not in a position to influence the conduct of the other members of the partnership or other officers of the corporation, of which the individual was a member or an officer, so as to prevent the occurrence of the improper conduct, or (c) the individual, being in such a position, used all due diligence to prevent the occurrence of the improper conduct. 42This is the section that relates to Ms Farag as the sole director of Ultra Construction Pty ltd. Disciplinary Action 43Section 56 of the Act sets out the grounds under which disciplinary action may be taken against the holder of a contractor licence - in this instance Ultra Construction Pty Ltd. Sections 54(4) and (5) provide that disciplinary action may be taken against the nominated supervisor, Mr Abousleiman and the officer of the corporation, director, Ms Farag on the ground that the relevant person is guilty of improper conduct. Outcomes of Disciplinary action 44Section 62 sets out the actions which the Director General can take against the holder of an authority once satisfied that the ground for disciplinary action, improper conduct, has been established. The Respondent's Case 45The Respondent's case was that the Applicants had breached the statutory warranty to undertake work in a proper and workmanlike manner and in accordance with the plans and specifications. 46The Respondent's case was based on the conclusions in Mr Foster's report dated 2 February 2010. Mr Foster is the Co-ordinator Building Disputes. His role includes responsibility for undertaking inspections of residential building works, assessing their compliance with standards and reporting on these inspections. 47Mr Foster's report identifies a number of issues in the work undertaken at the property. However not all of the matters raised in his report are pressed against the builder. Not all of the work on the site was undertaken by the builder - other tradespersons undertook work at the request of the homeowners. 48Mr Foster's report is divided into sections A, B and C. Section A is labelled "Defective items". Two items were pressed by the Department in Section A as the basis of improper conduct. They were: * subfloor ventilation issues; and * roof framing issues. 49Section C of Mr Foster's report is headed "Not in a proper and Workmanlike Manner". One item was pressed by the Respondent - "failure to install timber trim at junction of eave sheets to house." 50Mr Foster gave evidence and was cross examined about these matters. Item 1 - Subfloor ventilation and access 51Item number one in Section A of Mr Foster's report is described as: "No allowance has been made for subfloor ventilation or access to new timber floor area of family room at rear. There is no provision for cross ventilation or access for termite inspection." 52Mr Foster refers to reference material in relation to subfloor ventilation from the Building code of Australia (BCA), barriers to suspended floors and drainage requirements. He concludes that the works as provided by the builder do not meet the performance requirement for sub-floor ventilation and drainage requirements. He concludes that they are therefore considered to be a defect and the builder's responsibility. Item 2 of the defective items refers to expansion and cupping of the new timber floor which Mr Foster determines was caused by failure of the builder to provide access to new timber subfloor area for pest inspection and cross ventilation as required by the BCA. 53The Respondent did not press the issue of expansion and cupping of the new timber floor at hearing. Mr Bournelis' evidence 54Mr Bournelis was called by the Applicants. He presented as an expert well qualified to comment on building standards. He had attended at the Kargas's property to conduct an inspection on 2 November 2013. He was able to make a visual inspection internally and externally. He did not have access to the roof cavity. His opinions to the tribunal were based on his inspection and a reading of the architectural drawings. 55In relation to the subfloor ventilation issues he noted that the builder had provided both a hatch and ventilation vents. He considered the work had been incomplete work at the time of Mr Foster's inspection. Subfloor ventilation and access - Mr Abousleiman's evidence 56In relation to the issue of subfloor ventilation Mr Abousleiman said that at the time of Mr Foster's inspection in February 2010 that the works had been suspended since the previous August 2009 and that the works were incomplete. Mr Abousleiman said that vents and access hatch are normally cut out after works are complete. He had offered to do so after the owners had done the concrete for the side paths. This in fact was done after and as part of the CTTT settlement agreement reached in May 2010. Mr Abousleiman's evidence was that he had put in two brick louvres each 25 x 25 in the area in which he had worked, although the building code only required one to be put in. He said he had done so at the start of the work. 57At hearing, however, Mr Abousleiman's evidence was that he didn't see why he should be required to install the access hatch as it was not in the contract and it should not be done at his expense. His work sat on a concrete slab and did not require an access hatch. He further told the Tribunal that inspection for termites can be undertaken in different ways, such as by camera, and that an access hatch was not necessary for this. On this basis I find that Mr Abousleiman did not intend to install the access hatch as part of the works. Item 2 - Alleged undulations in roofline due to non-compliant roof framing to AS 1684. 58Mr Foster's evidence was that he had obtained access into the roof cavity when he undertook his inspection in February 2010. He explained his photographed observations as having shown the intersection of new roof work - over the new area constructed at the rear of the house by the builder- with the older part of the house. The accompanying photographs of the rook cavity clearly showed newer, younger wooden members and older darker coloured wooden members. 59Mr Foster found that there were undulations in the roofline at the rear of the house directly above the junction of the roof extension. These undulations were due to non-compliant roof framing to the extension and to the existing roof framing having been cut back to allow for the new roof and ceiling framing. Mr Foster found that a counter beam/strutting beam had not been installed to support hanging beams and roof framing, leading to the roof framing being unsupported. This had led to undulations in the roof. The new roof framing had been cut into the existing roof at the hip without any under purlin support. Mr Foster concluded that this roof and ceiling framing did not comply with AS1684. 60In his evidence Mr Foster was firm in his view that photograph 4 in his report showed undulations in the roof at the rear of the building in the area where the builder had been working. He denied as put to him by the Applicants that it showed old roof where the builder had not been working. 61Mr Bournelis' evidence was that he was unable to gain roof cavity access as Mr Foster had in February 2010. 62Mr Bournelis attested to having observed undulations in the roof at the front of the house - the area in which the builder had not been working. 63Mr Bournelis' evidence was that the photograph 4 at page 5 of Mr Foster's report was a photo depicting the front of the house, where the Builder had not undertaken work and that the undulations depicted were within acceptable range limits. 64Mr Abousleiman noted that he had provided the homeowners with a quotation on 1 April 2009 at the beginning of the works "Supply and fix the existing bow in the existing roof." This demonstrated that the roof problems identified in Mr Foster's report were as a result of old, prior work - not the work undertaken by the builder. He had installed an extra beam in June 2010 when he returned to the site even though there were already support beams bolted in. Item 3 - Random installation of eve sheeting to rear deck area. 65Mr Foster's report identified that there had been random installation of eve sheeting. This was evidence of poor set out, framing and workmanship. The resulting finish will reduce the value of the dwelling. No timber trim has been installed at junction of eve sheets to house. Photographs were provided in the report with comments attached "random size eve sheeting"; "Sheets and PVC joiners were misaligned and irregular;" and "there was no timber trim installed to the eve sheeting front or rear areas." 66Mr Bournelis' evidence was that this was not included in the plans as part of the builder's scope. It was not a job for the builder. It could be dealt with by the painter applying a mastic sealant. The misaligned eaves sheeting was an aesthetic matter and not a defect. 67Mr Abousleiman said that the owners had agreed in the CTTT settlement that the builder was not responsible for this. He had however installed a timber quad on additional payment from the homeowners when he returned in June 2010. Evidence of Ms Farag 68Ms Farag's evidence was that she was a director and also an employee of Ultra Construction Pty Ltd and the wife of the licensed supervisor, Mr Abousleiman. She is an architect with her own practice. She had helped draft the contract for the work and had sent a variation to the homeowners relating to the existing bow in the roof. She had written the stop work notice due to non-payment which at that point was an amount of $20,087. She had attempted to obtain access to the site for the builder to continue work. This had been refused by the homeowners. She understood from her husband that the homeowners had been responsible for engaging the certifier. She considered that the" manhole" could not be achieved because of the lack of clearance and in any event, it was not in the plans. 69It is not her practice to go to sites - so she had not viewed this site. She had given instructions in relation to the mediation and the resolution of the matter. She agreed that there were no detailed specifications and that the engineering plans had not been put before the tribunal. She acknowledged that the quotation on which the work was based undertook that all timber work is to be carried out according to Australian standards a S1684. The Applicants' submissions 70The Applicants submitted that the Respondent had not pressed the issue about the cupping of the timber floor in the area of additions and that this should be disregarded. 71Mr Bournelis was a highly credentialed expert. He had assisted the tribunal. He had not been partisan and he had made concessions. Mr Foster was not similarly qualified and he had been partisan. 72Mr Foster had acted as an advocate for Mr and Mrs Kargas. His scoring of the show cause recommendation had been done to ensure that further action against the Applicants would ensue. 73The builder was not responsible for the existing roof and the undulations in the roof were not his responsibility. Mr Abousleiman had not been cross-examined about the roof issues. He had not been questioned about the photos produced by Mr Foster. There was conflict of evidence about the roofing problems between Mr Foster and Mr Bournelis and Mr Bournelis' evidence should be preferred. The Respondent had not made out its case that the undulations in the roof had been caused by the lack of compliance by the builder with standard 1684. 74The issues in relation to the access hatch had not been made out. An access hatch was not in the contract nor was there room for one to be installed in the area in which the builder was working. There was no requirement for the builder to give advice outside of the scope of his works. There was no breach of statutory warranty. There had been much supposition by Mr Foster as to what was present in the existing house. Even though there was an agreement reached by the parties in relation to the CTTT matter that an access hatch would be installed by the builder, this did not function as an admission to having breached the statutory warranty. Again this particular had not been made out by the Respondent. 75The Applicant relied on Mr Bournelis' report in relation to the eaves sheeting issue. Mr Abousleiman had not been cross examined on this issue. The plans did not indicate that the eve sheeting was part of the builder's work. The home owners had not complained about the eve sheeting. Mr Bournelis had said that it was an issue for the painter who could apply a mastic sealant. Timber quad was not necessary. It was a matter of aesthetics - not a defect. Further it was not clear what the point was about misaligned joints or random sheeting. This particular had not been made out. 76There was no challenge to Mr Bournelis' evidence in relation to the undulations in the roof at the front of the house where the builder had not been working. 77Neither Mr Bournelis' nor Mr Abousleiman's evidence had been seriously challenged. The certifier had provided a certification in August 2009 and there were no issues relevant to this matter raised by the certifier. Mr Foster had not provided his contemporaneous notes. There was a presumption that these did not exist. 78The Respondent's case had not met the demands of the Briginshaw principles given the gravity of the outcome of the finding of improper conduct. 79The case in relation to Ultra Construction Pty Ltd and Mr Abousleiman was the same. However in relation to Ms Farag it was clear that as a director she had taken the appropriate level of concern in the matter. She was involved in the process of contracts and dealing with complaints. She had given her evidence in a straightforward way. She confirmed that Mr Abousleiman had been denied access to the property in order to undertake the work. She took all reasonable measures to ensure the Company was not involved in a contravention of the Act. It was not reasonable to think that she would inspect the work that had been done. 80The penalty in relation to any findings of contraventions should be minor. It was Mr Foster's evaluation of the breaches which caused the matter to be escalated. It would be more appropriate for them to have been given a warning. The Company had not previously been subject to misconduct findings. Respondent's submissions 81The Respondent relied on the decision it had made under internal review. Accordingly the Company was guilty of improper conduct as it had breached the statutory warranty in terms of section 51. The nominated supervisor Mr Abousleiman was guilty of improper conduct in that he had breached statutory warranty in terms of section 53. Ms Farag was guilty of improper conduct in terms of section 54 given that the Company had breached a statutory warranty. 82The relevant statutory warranty was set out under section 18B of the Act and it was that the work would be performed in a proper and workmanlike manner and in accordance with the plans and specifications set out in the contract. Mr Foster was experienced and well qualified to make his conclusions. Mr Foster's report of 2 February 2010 set out the actions that had not been performed in a proper and workmanlike manner. It was not possible for the work to be done in accordance with the specifications as none had been provided. The builder should have documented the specifications. 83It was not Mr Foster's decision as to whether disciplinary action should be undertaken. The Applicants had not provided evidence that contradicted Mr Foster's report although they had had opportunity since 2010 to do so. 84It appeared that no critical stage inspections had been undertaken or prompted by the builder. The letter from the certifier Fitzgerald dated 9 February 2010 at Folio 83 confirmed that action in relation to cross ventilation and the roof was required. 85It appeared that the parties were looking at different parts of the roof. Mr Bournelis had most likely looked at the front of the house and observed roof undulations. He had agreed however when shown the photograph taken by Mr Foster of the roof in the area in which the builder had been working at the rear of the house that there was a beam missing. He had not viewed the roof from the same position as Mr Foster and not been able to get into the roof. 86It was open to the builder to submit variations to deal with matters such as ventilation. He had not done so. The lack of specifications also meant that the builder had not been able to demonstrate what material was contemplated in relation to the roof sheet eaves. 87As the nominated supervisor, Mr Abousleiman should have been able to manage the building site and to deal with any interference from the homeowners. The fact that the Company had been in operation for 7 years prior to any complaint having been made did not mean that the complaint was not justified now. 88The penalties were appropriate as the conduct the subject of the proceedings was in the low to mid-range of the spectrum of seriousness. The penalties that have been imposed by the Respondent were appropriate. They met the test of proportionality set out in the Cohen case. See Director General, Department of Fair Trading v Cohen [2000] NSWFTT 3. Findings 89The tribunal has considered the Applicants' submissions to the Respondent in the process leading to these applications and the Respondent's replies. The tribunal accepts the Respondent's reasoning in relation to each of the arguments raised by the Applicants in their response to the Internal Review reasons. 90The Applicants alleged that Mr Foster had shown bias against the Applicants. It was clear to the tribunal that the process leading up to the hearing had been fraught and hotly contested. However the tribunal observes that the basis of the Respondent's case was in the report provided by Mr Foster - accompanied by photographs. The tribunal considers this was objective evidence of the matters raised. The Applicants did not produce objective evidence contesting this. The tribunal does not consider that the allegations of improper conduct were based on bias. 91The Tribunal finds that the Applicants' work was subject to the statutory warranty that it would be performed in a proper and workmanlike manner and in accordance with the plans and specifications. 92A full copy of the contract for works was not put before the tribunal nor were the engineering plans. It was difficult for the tribunal to make findings in relation to matters which may have been set out in the contract. 93The tribunal, however, accepts the Applicants' contention that during the suspension of works pursuant to the contract for alleged failure of the homeowners to make progress payments and to provide access to the Builder to the site, the Builder was under no obligation to compete the contract works. The suspension did not however, operate to relieve the Builder of the obligations imposed by the statutory warranty to perform work in a proper and workmanlike manner and in accordance with the plans and specifications set out in the contract. 94It was during this suspension that Mr Foster conducted his inspection and produced his report. It was a few days later in February 2010 that the certifier noted the necessity for ventilation and roofing issues to be addressed. 95The appropriate standard of proof is that set out in Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336. The effect of this is that the Tribunal must be comfortably satisfied, on the balance of probabilities, in finding that the allegations have been made out in light of the seriousness of the facts to be proved and the consequences for the person against whom the finding is made. 96In respect of the alleged defect of failure to provide sub-floor ventilation and access hatch in the new area of work, the Applicants' submission was that both of these items would be completed at the end of work and that at the time of Mr Foster's inspection it should not have been considered as a breach of statutory warranty as the work wasn't finished. However Mr Abousleiman's evidence was specifically that he didn't see why he was obliged to provide this access hatch. 97The Tribunal notes that the quotation provided to the homeowner does not include provision for ventilation or an access hatch. Mr Abousleiman said in his affidavit that he offered to install these after the concrete path was finished. However he also said in his evidence that he installed 2 brick ventilation louvres at the beginning of the work even though he was only required to install one. The builder had ceased work on site in mid-August 2009. The homeowners' letter to the builder in 4 November 2009 noted at point 11 that there were no ventilation hatches by this time. The CTTT settlement annexure "A" specifies the installation of vents as work to be undertaken by the builder. Mr Foster's evidence was that he didn't see these brick louvres in his February 2010 inspection. On this basis, the Tribunal accepts that the brick louvres providing subfloor ventilation in the area in which Mr Abousleiman had worked were not installed at the time of Mr Foster's inspection report in February 2010. 98The tribunal accepts Mr Foster's view that no allowance has been made for sub-floor ventilation or access to new timber floor area and that this is in breach of BCA requirements. 99In relation to the installation of an access hatch, the Applicants' representatives had argued that this was something which would be installed at the end of a project and that therefore the Applicants had not been in breach of the statutory warranty in failing to install this initially and by the time of Mr Foster's inspection in February 2010. 100The tribunal accepts that an access hatch should have been planned by the builder- either within the area in which the builder was working or in the pre-existing area. The builder's quote did not include the access hatch. 101In the circumstances, I accept Mr Foster's evidence and the Agency's contention that the provision of subfloor ventilation and an access hatch are necessary aspects of performing the work contracted in a proper and workmanlike manner. Failure to have done so in each respect is a breach of statutory warranty and constitutes improper conduct. 102In respect of the allegation that "the Builder has failed to install beam at old pitching line to support framing" as set out at page 5 of Mr Foster's report, I accept Mr Foster's evidence that the photographs 4-8 on pages 5, 6 and 7 of his report are of the area in which the Builder was working at the rear of the house. I accept Mr Foster's conclusion that the undulations in the roofline were due to non-compliant roof framing to the extension. I also accept Mr Foster's conclusion that the work was non-compliant with AS 1684. I accept that this occurred as a result of the Builder's work and that it is the Builder's responsibility. I accept that failure to comply with AS 1684 constitutes failure to perform work in a proper and workmanlike manner and in accordance with the plans and specifications set out in the contract. This constitutes a breach of statutory warranty and constitutes improper conduct. 103The tribunal finds that it is likely that there were at least 2 points at which there were undulations in the roof. One site pre-existed the builder's work and may have been that identified by Mr Abousleiman and Mr Bournelis in their evidence. The tribunal is satisfied that Mr Foster's report and findings relate not to the pre-existing area of roof, but to the area in which the builder was working. 104In relation to the failure to install timber trim (or quad) at junction of eave sheets to house as set out in photo 25 of Mr Foster's report at page 17, the tribunal is not satisfied to the requisite standard that this also was the responsibility of the Builder. Mr Foster's and Mr Bournelis' evidence differs on this issue. Findings on Statutory Warranty 105The tribunal finds that Ultra Construction Pty Ltd and Mr Abousleiman have breached the statutory warranty to conduct the work in a proper and workmanlike manner. 106The tribunal has considered Ms Farag's role as a director of Ultra Construction Pty Ltd. She did not raise any of the defences available to her as a director of the company in relation to allegations of improper conduct under section 54. Accordingly having made findings of improper conduct in relation to Ultra Construction Pty Ltd, the tribunal also makes a finding of improper conduct against Ms Farag. Findings in relation to improper conduct 107As I have found Ultra Construction Pty ltd, Assaad Abousleiman and Josephine Farag breached the statutory warranty in two respects, they are therefore guilty of improper conduct with respect to those breaches. This is a ground for taking disciplinary action against Ultra Construction Pty Ltd, Assaad Abousleiman and Josephine Farag. What disciplinary action is appropriate? 108Section 62 of the Act specifies what disciplinary action may be taken by the Agency. It provides - 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. 109The purpose of disciplinary action is not to punish but to protect the public: Clyne v NSW Bar Association [1960] HCA 40; (1960) 104 CLR 186 at 201. 110That analysis has been subsequently applied by the Tribunal in a number of cases including Giann v Department of Finance and Services (Commissioner for Fair Trading) [2013] NSWADT 129, Saboune v Department of Finance and Services [2013] NSWADT 71 and Pastrovic & Co Pty Limited v Department of Services Technology and Administration [2012] NSWADT 17. 111In the Pilipczyk & anor v Commissioner for Fair Trading, NSW Office of Fair Trading [2007] NSWADT 85, Acting Deputy President Handley observed: "The Tribunal must therefore consider the second issue, whether disciplinary action should be taken and, if so, what form that should take. In doing so, it should be noted that the object of sanctions under the legislation is to protect the consumers of home building services and not to punish. However, as the Commercial Tribunal acknowledged in McIlveen, at p 29 "[t]he concept of public protection is wide; it embraces fitness, the maintenance of public standards, public confidence and deterrence both of the particular builder and others in the same occupation". 112In Ng v Commissioner of Fair Trading [2007[ NSWADT 259 Judicial Member Moloney wrote - 71 In Director-General, Department of Fair Trading v. Cohen [2000] NSWFTT 3 (cited in Younan [2007] NSWADT 170 at [26]; and Harb [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: - the nature, width and extent of the contraventions - the loss or damage and prejudice in consequence of the contraventions - the circumstances in which the contraventions took place - whether the licensee has been found to have engaged in any similar conduct - the presence of fraudulent or dishonest intent and deliberation on the part of the licensee - the extent of carelessness or wilfulness of the conduct - the efforts made to correct the situation and what measures have been taken by the licensee - what consciousness the licensee (a) had (b) displayed, of its obligations under the relevant statute and to the owners - the effect upon the licensee - antecedents - attitude, building history and future compliance - the penalty range. 72 To that list I would add two factors which were outlined in a list of relevant factors, which a court might take into account in determining the amount of a civil penalty, that were proposed by the Australian Law Reform Commission in Principled Regulation: Federal Civil and Administrative Penalties in Australia (2002) ALRC 95 in recommendation 29-1: see Calcaro v Chief Commissioner of State Revenue [2004] NSWADT 158. These are: - any gain made as a result of the contraventions - the degree of cooperation with the authorities. 113Having considered all these factors I agree with the Agency that the protection of the public interest, in the circumstances of this case, requires that a disciplinary penalty be imposed on each of the Applicants. 114The tribunal has found that 2 of the 3 bases of the Agency's original decision should be affirmed. The tribunal agrees with the Respondent's submission that the conduct the subject of these proceedings is in the low to mid-range of the spectrum of seriousness. 115The Tribunal has considered the factors set out above. The impact of these matters on the homeowners appears to have been of great concern. The roof issues were treated as a matter of urgency by the Respondent. The tribunal understands however that Mr Abousleiman acted to correct the ventilation and roofing issues. While the Applicants' representatives appear to have contested the matter vigorously with the Respondent, the tribunal understands that Mr Abousleiman himself did co-operate with the Respondent - meeting with Mr Foster at the Penrith office to discuss the matters. 116Ms Farag is a qualified architect. She is the sole director. Ms Farag undertook administrative work for the company and dealt with some aspects of the complaints in this matter. It is not clear to the tribunal that Ms Farag was fully aware of her obligations as a director of the company in relation to its conduct. Conclusion 117In the light of the above, the tribunal varies the internal review decision such that the Applicants are guilty of improper conduct as a result of breach of the statutory warranty in 2 respects. 118As 2 of the initial 3 matters of improper conduct are affirmed the tribunal determines that the monetary penalties should be varied and reduced accordingly. Decisions 119In matter number 133240 the tribunal finds that Ultra Construction Pty Ltd is guilty of improper conduct and is subject to a monetary penalty of $2,500; 120In matter number 133241 the tribunal finds that Mr Abousleiman is guilty of improper conduct and is subject to a monetary penalty of $1000. 121In matter number 133242 the tribunal finds that Ms Farag is guilty of improper conduct and is subject to a monetary penalty of $1000. 122The tribunal understands that the original penalties have already been paid. ********** I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 18 July 2014