Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Soo Lim v Zelezo Pty Ltd and Alexander Ribarovski [2014] NSWCATCD 80 Hearing dates: 13 May 2014 Decision date: 20 May 2014 Before: Jeffery Smith, Senior Member Decision: The first respondent, Zelezo Pty Ltd shall pay to the applicant, Soo Lim of the sum of $24,730 on or before 30 May 2014. The sum of $3,589.63 is not due or owing by Soo Lim to Zelezo Pty Ltd pursuant to a contract entered into between the parties on or about 20 December 2012. The application is otherwise dismissed. Catchwords: Defective residential building work, loss arising, loss of rent, costs, transitional provisions Legislation Cited: Home Building Act 1989 (HBA), Civil and Administrative Tribunal Act 2013 (NCAT Act) Consumer Trader and Tenancy Tribunal Act 2001, Consumer Trader and Tenancy Tribunal Regulations 2009 Cases Cited: Hadley v Baxendale [1854] 156 ER 145 Latoudis v Casey [1990] 170 CLR 534 Category: Principal judgment Parties: Soo Lim (applicant) in person Alexander Ribarovski (respondent) on behalf of Zelezo Pty Ltd and on own behalf File Number(s): HB 13/43961 reasons for decision APPLICATION 1This application was filed in the Home Building Division of the Consumer, Trader and Tenancy Tribunal (CTTT) on 19 August 2013. 2The application sought orders for payment to the applicant in the sum of $46,944.13 and orders for the relief of payment by the applicant in the sum of $3,589.63. The matter came before the CTTT for directions on 16 September 2013 and on 15 November 2013. 3On the abolition of the CTTT on 1 January 2014 the application continued before the Civil and Administrative Tribunal (NCAT) pursuant to the transitional provisions of the Civil and Administrative Tribunal Act 2013, Schedule 1. 4On 3 February 2014, and on request of the applicant, Alexander Ribarovski was joined by the NCAT as a second respondent to the proceedings. 5The application was listed for hearing before me on 13 May 2014 and the parties were represented as noted above. ADJOURNMENT 6The procedure was explained to the parties who agreed that they understood and were ready to proceed. Neither party requested an adjournment for any purpose. JURISDICTION 7There was no dispute that the contract between the parties was for the supply and installation of goods by the first respondent to a residential home. Accordingly I am satisfied the contract was for residential building work as defined under the HBA s 3 and that the Tribunal has jurisdiction pursuant to the HBA s 48K. ISSUES 8There were a number of relevant issues for determination by the Tribunal. What were the terms of the contract entered into between the parties for supply of building goods and services, Whether the respondent was licensed to carry out the work and whether there was a contract in place between the parties complying with the HBA s 7, Whether there was statutory insurance in place in accordance with the HBA s 92, As a consequence of the above, whether the respondent is entitled to be paid the balance of the contract sum, Whether the work was defective and if so what loss was sustained by the applicant, Whether the applicant is entitled to be compensated for loss of rent, Whether the second respondent is liable in respect of any work found to be defective, APPLICANT'S CASE 9The applicant advised that he had approached the first respondent in late 2012 for a quote to manufacture and install a number of steel framed windows and doors to a house under renovation. The parties had agreed on a price and a 50% deposit was paid to ensure the first respondent would commence construction. The quotation was prepared based on sketch drawings provided by the applicant. 10No written contract complying with the HBA was provided and no statutory insurance in respect of the agreed works was obtained. On or about 6 March 2013 the first respondent requested a further payment of 40% of the contract sum, which was paid by the applicant. 11In or about March 2013 the first respondent delivered materials to the site and commenced installation. By the 24 March the works were far from complete, the respondent was not on site and the applicant was unable to contact him by phone or e-mail. 12On or about 24 June 2013 there was heavy rain which resulted in substantial damage to the flooring due to water penetration through the windows and bi-fold doors provided by the first respondent. 13Subsequently the parties engaged in discussions to try to resolve the dispute, but as those discussions were unsuccessful this application was filed in the Tribunal on 19 August 2013. 14The applicant then engaged the services of Mr Tony Gramlick of Australian Window Association to prepare an expert report which was filed with the applicant's other material on 30 September 2013. 15Although there had been no application to amend the application, the applicant claimed compensation in the sum of $66,779.70 made up of Loss of rent between May and October 2013, due to the premises being incomplete $20,000.00 Estimated cost of removal of the defective windows $ 2,150.00 Refund of the sum paid for the defective works $32,306.70 Cost of replacement over and above the contract sum $ 8,943.00 Rectification cost of water damage to floors $ 2,000.00 Cost of report from Gramlick $ 1,380.00 16The applicant further claimed relief of payment of the balance of the contract sum, being $3,589.63. 17The applicant relied on the following relevant documents; A Scott Schedule prepared by Mr Gramlick, A written statement by Mr Soo Lim dated 27 September 2013, Quotation provided by first respondent dated 10 December 2012, Records of payments made by the applicant, Photographs of the subject works and sketch drawings prepared by the respondent, Report of Mr Gramlick dated 27 July 2013, Records of telephone calls and e-mail correspondence between the parties. 18Part of the applicant's claim related to loss of rent for the period between May and October 2013. No explanation of why those dates were chosen was given by the applicant. However, the applicant claimed the residence in question was previously tenanted and that the respondent's failure to complete the work or correct the defects had resulted in practical completion not being reached and the loss of rent calculated at $20,000.00 based on the opinion of a real estate agent that the premises would rent for $1,100.00 per week. 19Documents filed out of time by the applicant on 6 May 2014, 9 April 2014 and 14 March 2014 were not admitted due to the prejudice to the other side and in any event did not add to the evidentiary weight of the applicant's case. 20The applicant also claimed compensation in the sum of $2,000.00 for repair of the flooring damaged by ingress of water. No evidence was provided to support the quantum of damage claimed. RESPONDENT'S CASE 21The respondents' position was that the contracting parties were the applicant and the first respondent. All payments had been made to Zelezo Pty Ltd and quotes and invoices prepared in that company's name. 22The contract between the parties did not call for a completion date and the works remain incomplete. The respondent had attempted to return to the site to complete the work but had been denied access. 23The respondent attempted to respond to the expert report by Mr Gramlick both orally and by a filed response to the Scott Schedule. However, the response was from Mr Ribarovski and no independent expert evidence at all was provided by the respondents. 24The responses were that some of the downpipes had not been installed and there was a slope in the ground towards the house at the rear, both of which may have contributed to the water ingress. Further, the applicant in more than 12 months has done nothing to protect the premises from water ingress. 25The respondent confirmed that neither respondent holds a valid license under the HBA to carry out the work, no written contract (other than the quote) was provided, no statutory insurance was in place and that 90% of the contract sum was paid before any goods were delivered or installed. The respondent's explanation was that his business normally engages in fabrication and installation of steel windows for commercial premises. 26The respondent claimed that he had been denied access to return to the site after the end of March 2013 and when he made telephone contact with the applicant on 15 July 2013 he was informed the applicant had "lost confidence" and was not prepared to allow the respondent to complete the works. 27The applicant's claim for loss of rent was refuted on the basis that the applicant had done nothing to progress the completion of the job since the respondent had left the site in March 2013. Accordingly any delay in completion was of the applicant's own making. FACTS 28The facts are largely undisputed and are as follows. 29The parties entered into a contract on or about 20 December 2012 whereby the first respondent, Zelezo Pty Ltd agreed to fabricate and install a number of steel framed windows and bi-fold doors in a house owned and being renovated by the applicant. The contract sum was $35,896.30, of which the applicant has paid $32,306.70. 30There was no written contract signed by the parties and complying with the provisions of the HBA and the contractor did not hold a license under the HBA to carry out the work. No statutory insurance was in place in respect of the subject work as required by the HBA s 92. 31The agreement between the parties called for installation of the windows in or about March 2013, with no specific completion date. Although the works commenced at that time, it is not disputed that by 24 March 2013 the works remained incomplete and that no further work has been done by the respondent since that date. 32The parties are in substantial disagreement about the reason for the works being incomplete. 33The applicant claims that the respondent left the site on about 24 March 2013 after completion of most of the work and, despite many attempts by telephone messages and e-mail contact the respondent has failed to return to complete the work and to correct defects in the work. The applicant does not dispute that by 15 July 2013 he advised the respondent that he had "lost confidence" in the respondent and that the respondent was not to do any further work. 34The respondent claims that he telephoned the applicant several times after 24 March 2013 but was unable to contact him. Further, he had contacted the builder but was unable to find a date convenient to both for him to return to the site to complete the works. 35On the whole I am persuaded that the applicant's version of events is more plausible. The respondent's version changed several times during his testimony but even after he was given an opportunity to consult his records he was unable to provide a cogent sequence of events that demonstrated he had been denied access before 15 July 2013. On the other hand the applicant provided telephone records of his unsuccessful attempts to contact the respondent. Further, the applicant gave evidence on affirmation that was not contested by the respondent that there were attempts by the applicant via e-mail to get the respondent to return to the site. 36The respondent's warranty obligation, pursuant to the HBA s 18B(d) is to carry out the work with due diligence. 37I am satisfied the first respondent did not carry out the work with due diligence and in fact did not complete the work at all. 38The applicant provided expert evidence in relation to the quality of the subject works. I am satisfied that the report was prepared by Mr Anthony Gramlick, who provided ample evidence of his qualification to give the opinions expressed in the report. Further, Mr Gramlick acknowledged he had read, and was bound by, the code of conduct for expert witnesses for the (then) CTTT. Mr Gramlick also provided his opinion in respect of the expected remedial costs in the Scott schedule he prepared. I accept the expert opinion of Mr Gramlick and give that evidence full weight. 39On the other hand the respondent provided no independent expert evidence at all. Insofar as Mr Ribarovski's evidence is concerned I give it no weight as expert opinion. I do however, acknowledge the comments made in respect of drainage and other matters that relate purely to observations. 40For the above reasons I accept that the subject works are defective in a number of serious respects as set out in the Gramlick report. 41The evidence of Mr Gramlick, as set out in his Scott schedule, is that the defective works can be put right by expending the sum of $23,350.00. I am satisfied that although Mr Gramlick in his report expressed some reservation about the suitability of the works even if remedial works were carried out, the Scott Schedule at point 1.8 sufficiently described the work necessary to overcome the reservation expressed in the report. APPLICATION OF RELEVANT LAW 42The HBA s 10 provides 10 Enforceability of contracts and other rights (1) A person who contracts to do any residential building work, or any specialist work, and who so contracts: (a) in contravention of section 4 (Unlicensed contracting), or (b) under a contract to which the requirements of section 7 apply that is not in writing or that does not have sufficient description of the work to which it relates (not being a contract entered into in the circumstances described in section 6 (2)), or (c) in contravention of any other provision of this Act or the regulations that is prescribed for the purposes of this paragraph, is not entitled to damages or to enforce any other remedy in respect of a breach of the contract committed by any other party to the contract, and the contract is unenforceable by the person who contracted to do the work. However, the person is liable for damages and subject to any other remedy in respect of a breach of the contract committed by the person. (2), (3) (Repealed) (4) This section does not affect the liability of the person for an offence against a provision of or made under this or any other Act. 43It follows, from the above findings of fact in relation to the contracting to perform works for which a license is not held and in relation to the contract not complying with the requirements of s 7, that the respondent is not entitled to pursue any remedy in regard to the unpaid sum under the contract. 44The respondent does not dispute that the work is incomplete but has not filed a cross claim in quantum meruit when given the opportunity by the Tribunal to do so. 45In any event there was no statutory insurance in place in respect of the subject work and the respondent is precluded by the provisions of s 94 from claiming damages in respect of the works performed. Section 94 provides 94 Effect of failure to insure residential building work (1) If a contract of insurance required by section 92 is not in force, in the name of the person who contracted to do the work, in relation to any residential building work done under a contract (the "uninsured work"), the contractor who did the work: (a) is not entitled to damages, or to enforce any other remedy in respect of a breach of the contract committed by any other party to the contract, in relation to that work, and (b) is not entitled to recover money in respect of that work under any other right of action (including a quantum meruit). (1A) Despite section 92 (2) and subsection (1), if a court or tribunal considers it just and equitable, the contractor, despite the absence of the required contract of insurance, is entitled to recover money in respect of that work on a quantum meruit basis. (1B) A contractor who applies to a court or tribunal for a remedy under this section, or who is awarded money under this section, is not guilty of an offence under section 92 (2) by virtue only of that fact. (1C) Without limiting the factors that a court or tribunal may consider in deciding what is just and equitable under subsection (1A): (a) in relation to any contract--the court or tribunal may have regard to the impact on the resale price of the property if no contract of insurance is provided, and (b) in relation only to a contract entered into before 30 July 1999--the court or tribunal is not to be limited by the fact that the required contract of insurance was not obtained until after the date of the contract. (2) However, the contractor remains liable for damages and subject to any other remedy in respect of any breach of the contract committed by the contractor. (3) Residential building work that is uninsured work at the time the work is done ceases to be uninsured work for the purposes of this section if the required contract of insurance for the work is subsequently obtained. (4) If a person commenced residential building work before 30 July 1999 and entered into a contract of insurance that complies with this Act in relation to that work after the contract for the residential building work was entered into, that contract of insurance is, for the purposes of this section or any previous version of this section, taken to have been in force in relation to the residential building work done under the contract for the residential building work whether that work was done before or after the contract of insurance was entered into. If a contract of insurance is in force in relation to part of the residential building work, this section applies only in relation to the part of the work that is not insured. 46For these reasons I am satisfied the applicant is entitled to orders for relief of payment of the sum of $3,589.63 outstanding under the contract. 47The HBA s 18B 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, (b) a warranty that all materials supplied by the holder or person will be good and suitable for the purpose for which they are used and that, unless otherwise stated in the contract, those materials will be new, (c) a warranty that the work will be done in accordance with, and will comply with, this or any other law, (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, (e) a warranty that, if the work consists of the construction of a dwelling, the making of alterations or additions to a dwelling or the repairing, renovation, decoration or protective treatment of a dwelling, the work will result, to the extent of the work conducted, in a dwelling that is reasonably fit for occupation as a dwelling, (f) a warranty that the work and any materials used in doing the work will be reasonably fit for the specified purpose or result, if the person for whom the work is done expressly makes known to the holder of the contractor licence or person required to hold a contractor licence, or another person with express or apparent authority to enter into or vary contractual arrangements on behalf of the holder or person, the particular purpose for which the work is required or the result that the owner desires the work to achieve, so as to show that the owner relies on the holder's or person's skill and judgment. 48For the reasons expressed above I am satisfied the works are defective and that the work performed by the respondent has, to the extent of that work, resulted in a dwelling that is not reasonably fit for occupation as a dwelling in breach of the warranty provided under s 18B(e). Further, I am satisfied that the work performed by the respondent was not performed in a proper and workmanlike manner in breach of the warranty provided by s 18B(a) and that it does not comply with the Australian Standards in breach of the warranty provided by s 18B(c). 49The applicant was unable to advance any basis for his claim against the second respondent except to say that as the company did not hold a valid licence then its director must be responsible. 50I do not accept that argument. Whilst the performance of residential building work in the absence of a valid licence may be a breach of the HBA and it may be true that a director has some responsibility in respect of the breach and any penalty arising therefrom, there is no reason to suppose that the warranties imposed on the contracting party by the HBA transfers to a third party in the absence of a licence. The applicant's claim in respect of the second respondent cannot be maintained. 51The undisputed evidence of the respondent was that the applicant had failed to take adequate or in fact any steps to finish the premises. 52There was no evidence about the over-all building contract under which the renovations were being performed by others. There was no evidence about when the works were to be completed under that contract or why the works were delayed. If the works were otherwise complete, there is no evidence of any steps taken by the applicant to mitigate his loss. He knew, at least by 15 July 2013 and probably well before that date that the respondent was not returning to site. There is no evidence as to why the applicant did not engage others to complete the work. 53Hence, the applicant's claim for loss of rent cannot succeed. Furthermore, the decision in Hadley v Baxendale [1854]156 E.R. 145 sets out the law (still current) in respect of remoteness of damage in contract cases. That decision at p 151 stated, "Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally ie., according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it." 54It was not suggested that the parties would have reasonably contemplated loss of rent as a head of damage in the event of a breach by the respondent and in my view loss of rent does not flow naturally from such breach. 55In respect of the applicant's claim for compensation for damage to the flooring, I am satisfied that there was damage and that it arose from the failure of the first respondent to complete the work and to fulfil its warranty obligation. However, there is no evidence to support the quantum of $2,000.00 claimed and no award of damages is made for that item. CONCLUSION 56Clearly the work was done by the first respondent and is defective and the first respondent is in breach of its warranty obligations. 57On the evidence provided by the applicant's expert witness, Mr Gramlick, I am satisfied the loss suffered by the applicant is $23,350.00. 58The applicant is therefore entitled to compensation in that sum together with the order for relief already mentioned. COSTS 59The applicant claimed the sum of $1,380.00 for the cost of obtaining expert opinion. 60The Tribunal has discretion in respect of the award of costs. This is a matter that was filed in 2013 and accordingly has been dealt with by NCAT pursuant to the transitional provisions under the NCAT Act Schedule 1, Subdivision 2 as though it was before the CTTT with the same laws applying as were in place before 1 January 2014. 61Prior to 1 January 2014 the Consumer Trader and Tenancy Tribunal Act 2001, generally provided that parties are to pay their own costs. viz; 53 Costs (1) Subject to this section and the regulations, the parties in any proceedings are to pay their own costs. (2) The Tribunal may, in accordance with the regulations, award costs in relation to any proceedings. (3) If costs are to be awarded by the Tribunal in accordance with the regulations, the Tribunal may: (a) determine by whom and to what extent costs are to be paid, and (b) order costs to be assessed on the basis set out in Division 11 of Part 3.2 of the Legal Profession Act 2004 or on any other basis. (4) In this section, "costs" includes the costs of, or incidental to, proceedings. (5) This section does not apply in relation to proceedings under the Strata Schemes Management Act 1996 or the Community Land Management Act 1989. 62However, Regulation 20 provided, 20 Costs generally (1) This clause applies to the awarding of costs by the Tribunal as provided by section 53 of the Act. (2) The Tribunal may award costs in relation to proceedings in respect of which the amount claimed or in dispute is not more than $10,000, or in respect of which no amount is claimed or in dispute, only if the Tribunal is satisfied that there are exceptional circumstances that warrant the awarding of costs. (3) In any proceedings in respect of which the amount claimed or in dispute is more than $10,000 but not more than $30,000, the Tribunal may award costs in relation to the proceedings only if: (a) the Tribunal is satisfied that there are exceptional circumstances that warrant the awarding of costs, or (b) the Tribunal has made an order under section 30 (2) of the Act in relation to the proceedings. (4) In any proceedings in respect of which the amount claimed or in dispute is more than $30,000, the Tribunal may award costs in relation to the proceedings in such circumstances as it thinks fit. (5) Despite any other provision of this clause, the Tribunal may order: (a) that the costs of proceedings on an application for rehearing of a matter are, if the applicant fails to attend the hearing of the application, to be paid wholly or in part by the applicant, or (b) that the costs of any proceedings that the Tribunal considers to be frivolous, vexatious, misconceived or lacking in substance, or that otherwise should not be heard or proceeded with, be paid wholly or in part by the person who instituted the proceedings. (6) The amount of any costs under subclause (5) is to be substantiated in accordance with directions given by the Chairperson or, in the absence of such directions, in such manner as the Tribunal thinks fit. 63This was always a claim for an amount in excess of $30,000.00 and accordingly the Tribunal has a discretion to award costs. 64The underlying principle for awarding costs was set out by the High Court in Latoudis v Casey [1990] 170 CLR 534, at 566,7 where it was said, per McHugh J. "An order for costs indemnifies the successful party in litigious proceedings in respect of liability for professional fees and out-of-pocket expenses reasonably incurred in connection with the litigation: Kelly v Noumenon Pty. Ltd. (1988) 47SASR 182. The rationale of the order is that it is just and reasonable that the party who has caused the other party to incur the costs of litigation should reimburse that party for the liability incurred. The order is not made to punish the unsuccessful party. Its function is compensatory. Thus, in civil proceedings an order may, and usually will, be made even though the unsuccessful party has nearly succeeded or has acted reasonably in commencing the proceedings." 65In these proceedings the applicant found it necessary to pursue the matter by litigation. In doing so he necessarily expended the sum of $1,380.00 on obtaining expert evidence. I am satisfied the applicant is entitled to recover that sum in addition to the compensation already awarded. Jeffery Smith Senior Member Civil and Administrative Tribunal of New South Wales 20 May 2014 I hereby certify that this is a true and accurate record of the reasons for decision of the New South Wales Civil and Administrative Tribunal. Registrar ********** 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: 31 July 2014