Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Younan v Commissioner for Fair Trading [2016] NSWCATOD 12 Hearing dates: 27 January 2016 Date of orders: 27 January 2016 Decision date: 27 January 2016 Jurisdiction: Occupational Division Before: J Lucy - Senior Member Decision: 1. The Commissioner's decision is set aside and, in substitution for that decision, the Tribunal decides that there are no identified grounds for taking disciplinary action against the applicant under s 62 of the Home Building Act 1989. 2. Applicant's application for costs is to be determined on the papers. Catchwords: HOME BUILDING – Disciplinary action – Whether applicant guilty of improper conduct – Whether company of which applicant was a director failed, without reasonable cause, to comply with the requirements of two rectification orders STATUTORY CONSTRUCTION –Amendment to s 48F which provides for when a rectification order ceases to have effect - Savings and transitional provisions – Whether a rectification order, made before 2015, ceases to have effect after the 2015 amendments to the Home Building Act, where the matter giving rise to the order became the subject of a building claim after the date for compliance with the order – Whether the Commissioner may take disciplinary action in respect of non-compliance with such an order – Finding that rectification order ceases to have effect and Commissioner may not take disciplinary action in respect of failure to comply with it STATUTORY CONSTRUCTION – Whether an order purporting to require a contractor to remedy a defect which does not specify the steps the contractor must take is a "rectification order" – Whether the Commissioner may take disciplinary action in respect of a failure to comply with such an order – Finding that such an order is not a "rectification order" and that non-compliance with such an order is not a ground for the taking of disciplinary action Legislation Cited: Home Building Act 1989 (NSW) Civil and Administrative Tribunal Act 2013 (NSW) Administrative Decisions Review Act 1997 (NSW) Home Building Amendment Act 2014 (NSW) Civil and Administrative Tribunal Rules 2014 (NSW) Cases Cited: Rylands Bros (Australia) Ltd v Morgan (1927) 27 SR (NSW) 161 Gittany Constructions P/L v Director General, Department of Services Technology and Administration [2010] NSWADT 164 Project Blue Sky v Australian Broadcasting Authority (1998) 194 CLR 355 Category: Principal judgment Parties: Wardy Younan (Applicant) Commissioner for Fair Trading (Respondent) Representation: Solicitors: Sachs Gerace Lawyers (Applicant) NSW Government – Finance, Services and Innovation (Respondent) File Number(s): 1520194 REASONS FOR DECISION 1. In these proceedings, the applicant is seeking a review of a decision of the Commissioner for Fair Trading ("Commissioner") made on 9 June 2015 under s 62 of the Home Building Act 1989 ("Act") to require him to pay the amount of $3,000 as a penalty. The Commissioner imposed the penalty on the ground that the applicant is guilty of improper conduct under s 54(1) of the Act. 2. Section 54(1) of the Act relevantly provides that an individual who is an officer of a corporation that is the holder of a contractor licence is guilty of improper conduct if the holder does any of the things referred to in section 51. Section 51(2)(b), on which the Commissioner relies, provides that the holder of a contractor licence is guilty of improper conduct if the holder, without reasonable cause, does not comply with the requirements of a rectification order under Division 2 of Part 3A of the Act. 3. The Commissioner found that Nazero Constructions Pty Ltd ("Nazero"), the holder of a contractor licence, had failed to comply with the requirements of two rectification orders within time and that Nazero was therefore guilty of improper conduct under s 51(2)(b) of the Act. The Commissioner also found that the applicant, as a director of Nazero, was guilty of improper conduct under s 54(1) of the Act. 4. An internal review, affirming the Commissioner's decision, was sent to the applicant on 2 September 2015. 5. The applicant applied to the Tribunal for review of the Commissioner's decision pursuant to s 83B(3) of the Act on 1 October 2015. 6. The Tribunal has jurisdiction to determine the application for review pursuant to s 30 of the Civil and Administrative Tribunal Act 2013 (NSW), s 9 of the Administrative Decisions Review Act 1997 (NSW) and s 83B(3) of the Act. 7. The notice of the internal review decision appears, on its face, to have been posted to the applicant and no submission was made to the effect that the application to the Tribunal was out of time. It was lodged 29 days after the date of the internal review decision. The applicant stated on his application form that it was lodged within time. It is reasonable to infer that it was received at least a day after being posted. I find that the application was lodged within 28 days of the day on which the applicant was notified of the outcome of the review and was thus lodged within time (see Administrative Decisions Review Act, s 53(9)(a) and Civil and Administrative Tribunal Rules 2014 (NSW), r 24(4)(a)). 8. As indicated above, there are two rectification orders or purported rectification orders with which the Commissioner claims that Nazero did not comply. One relates to a property at Manly and the other relates to a property at Gosford. For convenience, I will refer to the rectification order relating to the property at Manly as the "Manly rectification order" and the rectification order relating to the property at Gosford as the "Gosford rectification order." Hearing 1. A hearing was held in this matter on 27 January 2016. At the hearing, I heard submissions from the parties and provided the parties with reasons in respect of a threshold issue arising in relation to the Manly rectification order. These reasons are substantially produced below under the heading "Manly rectification order," with some minor changes which do not affect the substance of the reasons. 2. Having determined the threshold issue, at my invitation, the parties then made submissions on the issue of whether the Gosford rectification order is a "rectification order" within the meaning of the Act. I gave my decision and provided reasons to the parties on the day of the hearing, including a decision as to the outcome of the application for review. Those reasons are substantially produced below under the heading "Correct and preferable decision," with some minor changes which again do not affect the substance of the reasons provided to the parties. Manly rectification order 1. An issue arises in relation to whether the Commissioner may rely upon any alleged failure to comply with the Manly rectification order as a basis for taking disciplinary action. The parties referred to this as the "threshold issue" and I will adopt the same language. 2. It was accepted by the parties that if the version of s 48F(2) of the Act which came into effect on 15 January 2015 applies, the Commissioner was not entitled to take disciplinary action in respect of any failure to comply with the Manly rectification order. The Commissioner submits that an earlier version of the provision applies (meaning that non-compliance with the Manly rectification order was a proper ground for the taking of disciplinary action) and the applicant submits that the current version of the provision applies. Facts relevant to threshold issue 1. The Manly rectification order was made on 17 April 2013 and states that compliance with the order is required by 18 May 2013. On 19 March 2014, the owner of the property at Manly applied to this Tribunal, naming Nazero as respondent to the application, in relation to the works described in the Manly rectification order. 2. It is not in dispute that this was a "building claim" as that expression is used in relevant provisions of the Act. Relevant legislative provisions in respect of threshold issue 1. Section 48E of the Act provides for an inspector to make rectification orders. At the time the rectification order was made and at the time the owner of the Manly property commenced Tribunal proceedings, s 48E(3)(b) and (c) of the Act provided that a rectification order: "(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)." 1. At these times, s 48F provided: "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)." 1. On 15 January 2015, amendments were made to the Act by the Home Building Amendment Act 2014 (NSW) ("Amendment Act"). Following these amendments, s 48E(3)(b) and (c) provided (as they continue to provide) that a rectification order: "(b) must specify a date by which the requirements of the order must be complied with (or a date by which the requirements of each stage of the order must be complied with in the case of a staged rectification order), 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." 1. After the amendments, s 48F provided (as it continues to provide): "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." 1. The transitional provisions consequent on the amendments made by the Amendment Act are contained in Sch 4 to the Act. Relevantly, cl 121(1) of Sch 4 provides: "121 General operation of amendments (1) Except as otherwise provided by this Part or the regulations, an amendment made by the amending Act extends to: … (d) a loss, liability, claim or dispute that arose before the commencement of the amendment, and …" 1. Clause 129 of Sch 4 provides: "129 Rectification orders An amendment of section 48E by the amending Act does not apply to an order under that section made before the commencement of the amendment." Parties' submissions on threshold issue 1. Ms Robosa, for the Commissioner, submitted that, notwithstanding that cl 129 of Sch 4 only refers to s 48E, its application should be extended to s 48F. As a result, she submitted, s 48F and the other provisions relating to rectification orders, as in force before 15 January 2015, apply to disciplinary action taken by the Commissioner after January 2015 in relation to the Manly rectification order and so apply in these proceedings. 2. Ms Robosa submits that the express reference to s 48E in the savings provision in cl 129 does not exclude s 48F as these two provisions relate to the same scheme of resolving building disputes – that is, they both relate to the issue of rectification orders. In her submission, it is unnecessary for s 48F to be expressly referred to in cl 129 because it is related to and consistent with the requirement to indicate the effect of a building claim lodged before the date specified for the order to be complied with under s 48E(3)(b). 3. Ms Robosa relied upon a passage from Rylands Bros (Australia) Ltd v Morgan (1927) 27 SR (NSW) 161 at [168]-[196] to the effect that the canon of construction summarised in the maxim "expressio unius exclusio alterius" (the express mention of one or more things of a particular class may be regarded as impliedly excluding others) should be applied with caution. 4. Ms Robosa also relied upon a passage from Project Blue Sky v Australian Broadcasting Authority (1998) 194 CLR 355 at [69] to the effect that the meaning of a provision is to be interpreted in the context of the instrument as a whole. 5. Finally, Ms Robosa relied upon Gittany Constructions P/L v Director General, Department of Services Technology and Administration [2010] NSWADT 164, a case in which Higgins DP said at [27]: "As the proceedings in the Consumer Trader and Tenancy Tribunal were initiated after the date for completion of the rectification work as per the Rectification Order, Gittany Constructions' conduct in failing to comply with the Order remained subject to a possible finding under section 51 of the HBA". 6. In oral submissions, Ms Robosa submitted that to construe cl 129 as not applying to s 48F would lead to an absurdity. Accordingly, she contended, it should be given the construction contended for by the respondent. 7. Mr Johnson, for the applicant, submitted that cl 129 of Sch 4 to the Act should be given effect according to its terms. That is, it applies on its face to s 48E and there is no basis for extending its application to s 48F. 8. He said that the basis for the amendment of s 48F(2), omitting the words "before the date specified in accordance with section 48E(3)(b)," was to avoid subjecting the builder to double jeopardy. That is, it would be unjust to penalise the builder twice: once by an order made against him in the proceedings brought by the home owner, and again in a penalty imposed by the Commissioner. In response to a question from the Tribunal about the purpose of the imposition of a penalty being protective of the public not punitive, Mr Johnson submitted that there was always an element of punishment in the imposition of a penalty. 9. Mr Johnson submitted that the amendment demonstrated that the legislature had decided for the new provision (that is, s 48F) to come into effect immediately. Consideration of threshold issue 1. On their face, the provisions in cl 121(1)(d) and cl 129 of Sch 4 to the Act have the effect that the amended s 48F applies from 15 January 2015 and is the applicable provision in these proceedings. 2. In my view, the words "claim or dispute" in cl 121(1)(d) of Sch 4 are capable of applying the matters in dispute in these proceedings, meaning that the amended provisions apply unless there is any provision to the contrary in Sch 4 or the regulations. I have not found, nor was I referred to, any provision to the contrary in the regulations. 3. The issue turns, then, on the application of cl 129 of Sch 4 to the Act. 4. I do not accept Ms Robosa's submission that cl 129 can be read so as to apply to s 48F. It clearly does not do so on its terms. This appears to be an expression of a legislative change of policy, which is reflected in the terms of s 48F itself. The new policy is that a rectification order ceases to have effect upon the making of a building claim, irrespective of when that building claim is commenced. 5. I do not accept Ms Robosa's submission that the plain words of clause 129 give rise to absurdity. 6. The case of Gittany Constructions P/L v Director General, Department of Services Technology and Administration [2010] NSWADT 164, relied upon by Ms Robosa, does not relate to the amendments made in 2015, so is not relevant to the construction of cl 129 of Sch 4. 7. Whilst I accept that a provision gains meaning in the context of a construction of an Act as a whole, as Ms Robosa submitted, this is not determinative of the interpretation of cl 129. 8. For these reasons, I find that s 48F, as in force from 15 January 2015, applies in these proceedings. The effect of this is, as the respondent conceded, that the Manly rectification order ceased to have effect for the purposes of s 51 as of 15 January 2015. The Commissioner was therefore not entitled to rely on the Manly rectification order as a basis for disciplinary action in June 2015. Correct and preferable decision 1. I now consider whether the decision of the Commissioner under s 62 of the Act to require the applicant to pay a penalty of $3,000 is the correct and preferable decision. 2. In the notice to show cause served by the Commissioner on the applicant under s 61(2) of the Act, the Commissioner relied upon alleged failures by Nazero to comply with the Manly rectification order and the Gosford rectification order, without reasonable cause. The notice stated that the ground for disciplinary action was that the applicant was guilty of improper conduct relying on ss 54(5) and 56(c) of the Act. The applicant was a director of Nazero at the relevant times. 3. The same grounds for finding that the applicant was guilty of improper conduct were relied upon in the Commissioner's decision requiring the applicant to pay a penalty of $3,000, purportedly made pursuant to s 62(c) of the Act. Gosford rectification order 1. The Gosford rectification order stated that the contractor is required to "rectify the items listed under the heading 'Defective Work.'" Under that heading, it is stated in the Gosford rectification order: "Rectify water ingress coming from shower recess area in main bathroom." No further details of the work required are provided in the order. 2. The applicant submitted in written submissions, filed before the hearing, that the Gosford rectification order did not specify what works were required to rectify the water ingress. He said that, given the lack of clarity in the order, in order to comply with it, he needed to conduct testing and identify and rectify the cause of the problem, which was difficult in the time available. 3. The applicant also submitted in those written submissions that he had reasonable cause for not complying with the rectification order because it did not identify the cause of the leak or how to rectify it, and simply required that a solution be achieved within a limited time period. 4. Having considered the applicant's written submissions, I raised with the parties at the hearing the question whether the Gosford rectification order was, in fact, a "rectification order" as defined in s 48B of the Act. I explained that the main reason I considered this to be an issue was that a rectification order, as defined in s 48B, was, relevantly an order under s 48E(1). Section 48E(1) refers to an order "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." As I said to the parties' legal representatives at the hearing, the Gosford rectification order does not appear to specify any steps which had to be taken to ensure that the defects were rectified. 5. After explaining my reasons for considering that the Gosford rectification order may not be a "rectification order" within the meaning of the Act, I adjourned the hearing to give the parties time to consider this issue. Parties' submissions as to status of Gosford rectification order 1. After the adjournment, I checked with Ms Robosa, who appeared for the Commissioner, that she had had sufficient time to consider the issue, and she indicated that she had. 2. Ms Robosa submitted that the words "requiring the contractor to take such steps as are specified in the order" in s 48E(1) should be interpreted as discretionary, not mandatory. She said that if they were interpreted as being mandatory, this would create an absurdity and an impracticality. 3. Ms Robosa submitted that the context was that an inspector was dealing with licensed builders, who are deemed to be competent to identify a defect, to ascertain the cause of the defect and to apply the appropriate method of rectification in accordance with the Building Code of Australia. 4. Ms Robosa said that, if the words quoted above in s 48E(1) were construed as mandatory, an inspector would be placed in the difficult situation of having to identify the relevant defect. She submitted that it is a matter for the contractor who has come to an agreement with the owners to ascertain the cause of the defect and to determine the appropriate method of rectification. If this were not the case, Ms Robosa submitted, it would be very expensive for the Department to carry out a full investigation of the work. Ms Robosa also submitted that if an inspector set out the steps a contractor had to take, this might not be effective to fix the defect and that the onus should be on the contractor to determine the method of rectification. 5. Mr Johnson submitted that in order to be a rectification order, in relation to which a penalty may be imposed, an order must identify both a defect (where a defect is relied upon) and the steps which must be taken to rectify it. Mr Johnson said that the Gosford rectification order does neither. While it refers to "water ingress," this is not a defect but rather a symptom of a defect. 6. In response to Ms Robosa's submission that it would be expensive and difficult for inspectors to identify the defect, Mr Johnson said that he did not know about that, but if the inspector had identified the steps required to be taken by his client, his client would not be in the position he is in now. 7. Mr Johnson also submitted that a rectification order was an executive order, made without evidence being presented by the builder, and that it was only reasonable that the defect and the steps to be taken by the builder should be identified in the order. 8. Ms Robosa submitted in reply that the applicant had participated in an ocular inspection of the Gosford property with the building inspector in which the defect had been identified. She said he was also on notice from a report and from emails and other documents that the cause of the leak was a defective waterproof shower membrane. 9. Ms Robosa referred to the warranty in s 18B(1)(a) of the Act that work be carried out in a "proper and workmanlike manner" or with "due care and skill" (as that provision stood before and after the 2015 amendments, respectively) and said that, given the existence of this warranty, it was sufficient for a rectification order to identify the defect, and that it did not have to identify the steps to be taken to remedy it. She said further that the rectification order did identify the defect, being water ingress coming from the shower at the Gosford property. 10. Mr Johnson submitted that any documents other than the rectification order were not relevant as they were not part of the rectification order. He repeated his submission that "water ingress" is not a defect but a symptom which could have a number of causes. Consideration of statutory construction issues in respect of Gosford rectification order 1. Section 48B of the Act provides, relevantly, that a "rectification order" means an order referred to in section 48E(1) or (2). The relevant provision in this case is s 48E(1). 2. Section 48E(1) empowers an inspector, if satisfied of certain matters, to "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. In my view, there is no scope to interpret these words in s 48E(1) as giving an inspector a discretionary power to specify the steps a contractor must take in an order made under that provision. Rather, a rectification order is an order "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". An order which does not require the contractor to take steps to complete work, or rectify a defect or damage, is not an order under s 48E(1) and so is not a "rectification order". 4. The difficulties an inspector may face in identifying a defect and the steps required to fix it, and the consequent expense to the Department, are not reasons to interpret s 48E(1) differently. The legislative purpose, which is apparent from that provision, is that the inspector is to identify clearly what the contractor has to do to comply with the order by specifying "steps." Disciplinary action may then be taken if the contractor has not undertaken the steps specified in the order. This greatly reduces the prospect of any dispute as to whether the contractor has complied with the order or not and provides a clearer basis for taking disciplinary action if the contractor does not comply. 5. I agree with Mr Johnson's submissions that the emails and documents sent to the applicant and the applicant's presence at an inspection of the property are not relevant to the question of whether the order purportedly made under s 48E(1) in relation to the Gosford property is a "rectification order." 6. I do not consider that the statutory warranty in s 18B(1)(a) is relevant to the construction of s 48E(1) in circumstances where the latter provision is unambiguous. 7. I find that the order served upon the applicant's company, Nazero, purportedly pursuant to s 48E(1) in respect of the Gosford property was not a "rectification order" because it did not specify the steps that Nazero was required to take to ensure that the defect was remedied. 8. In these circumstances, I do not need to consider the applicant's further submissions that it is necessary for a rectification order to identify a defect and that the Gosford rectification order did not do so. 9. I am not satisfied that "that any ground on which disciplinary action may be taken against the [applicant] has been established in relation to the [applicant]" (Act, s 62). The ground relied upon in s 51(2)(b) to establish improper conduct, that "without reasonable cause" Nazero has not complied "with the requirements of a rectification order under Division 2 of Part 3A" has not been established. The Commissioner is not entitled to have regard to any non-compliance with the Manly rectification order for reasons given earlier. In the case of the Gosford rectification order, it is not "a rectification order under Division 2 of Part 3A" of the Act, for reasons given above. 10. Accordingly, the correct and preferable decision is to set aside the decision of the Commissioner to require the applicant to pay a penalty of $3,000 and to decide, in substitution for that decision, that there are no identified grounds for taking disciplinary action against the applicant under s 62 of the Home Building Act 1989. Costs 1. At the conclusion of the hearing, Mr Johnson indicated that the applicant wishes to apply for costs. I have set down a timetable for both parties to make submissions and provide evidence relevant to that application. I made an order dispensing with a hearing in relation to the costs application, as I was satisfied that the issues for determination could adequately be determined in the absence of the parties by considering any written submissions or any other documents or material lodged with or provided to the Tribunal, and the parties consented to this (see Civil and Administrative Tribunal Act, s 50(2)). 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 ********** 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: 02 February 2016