Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Champion Homes Sales Pty Ltd v Commissioner for Fair Trading, Office of Finance, Services and Innovation [2017] NSWCATAP 15 Hearing dates: 7 September 2016 Date of orders: 25 January 2017 Decision date: 25 January 2017 Jurisdiction: Appeal Panel Before: L P Robberds QC Senior Member L Pearson Principal Member Decision: (1) Leave is granted to the Appellant to amend the notice of appeal to add the following ground of appeal: The Tribunal Member failed to give proper reasons for his decision that "in relation to the Appellant the decision is set aside and in its place the decision made to caution the Appellant in regard to the failure to construct in accordance with the contract." (2) The notice of appeal will be treated as if that amendment has been made. (3) The appeal is allowed. (4) The proceedings are remitted to the Tribunal as originally constituted for the appropriate disciplinary action (if any) to be determined in accordance with these reasons. Catchwords: Appellant company holder of contractor licence under Home Building Act 1989 – disciplinary action by an acting director, Department of Finance Service and Innovation against appellant and four office bearers for breach of statutory warranty under s18 (B) (1) (a) of the Act – appellant required to pay a penalty of $3,500 – appellant and office bearers lodged applications for administrative review of decisions – orders that determinations against office bearers set aside and decisions made that no action be taken – order that determination against appellant be set aside but appellant cautioned – appeal by appellant – failure by Tribunal to give reasons why the appellant should be cautioned Legislation Cited: Home Building Act 1989 (NSW) Cases Cited: Beale v Government Insurance Office of NSW (1997) 48 NSWLR 430 Housing Commission of New South Wales v Tatmar Pastoral Co Pty Ltd [1983] 3 NSWLR 378 John Prendergast & Vanessa Prendergast v Western Murray Irrigation Limited [2014] NSWCATAP 69 Stoker v Adecco Gemvale Constructions Pty Ltd [2004] NSWCA 449 Tesco Supermarkets Limited v Nattrass [1972] AC 153 Category: Principal judgment Parties: Champion Homes Sales Pty Ltd (Appellant) Commissioner for Fair Trading, Office of Finance, Services and Innovation (Respondent) Representation: Solicitors: Kedron Legal (Appellant) Fair Trading Legal Services (Respondent) File Number(s): AP 16/30267 Decision under appeal Court or tribunal: Civil and Administrative Tribunal Jurisdiction: Occupational Division Date of Decision: 20 April 2016 Before: S Montgomery Senior Member File Number(s): 1620019 REASONS FOR DECISION 1. At all relevant times, Champion Homes Sales Pty Ltd (the Appellant) has held a contractor licence under the Home Building Act 1989 (the Act). 2. On 14 April 2015 a notice to show cause was issued to the Appellant inviting it to show cause why disciplinary action should not be taken against it on the grounds that it was guilty of improper conduct under s 56 (c) of the Act. 3. The Appellant's solicitors provided written submissions in answer to that notice. 4. On 18 December 2015 the Acting Director, Mediation Services and Compliance, Home Building Service of the Department of Finance Service and Innovation, gave the Appellant notice of decision which included: 1. The Appellant had breached a statutory warranty under s18 B (1) (a) of the Act to do work with due care and skill in accordance with plans and specifications at the relevant premises. The Acting Director was satisfied that the Appellant was guilty of improper conduct within s 51 (1) (c) of the Act, in respect of the breach, constituting a ground for taking action under s 56 (c) of the Act. 2. The Acting Director noted that no previous disciplinary action had been taken against the Appellant and in the circumstances she made a determination pursuant to s 62 (c) of the Act requiring the Appellant to pay to the Commissioner, as a penalty, the amount of $3,500 within a period of 28 days. 1. On 19 January 2016 the Appellant lodged with the Tribunal an application for administrative review of that decision. 2. For present purposes it is unnecessary to list the seven grounds for the application, one of which was that the disciplinary action taken under s 62 of the Act was not warranted having regard to the minor nature and all the circumstances of the alleged breaches. 3. On 20 April 2016 the Tribunal heard the application. At the same time, it also heard four other applications which related to the same building work carried out by the Appellant. It was not in dispute in the proceedings that there had been a failure to construct in accordance with the relevant contract and that this had resulted in each of the five applicants failing to comply with the statutory warranty in s 18 (b) (1) (a) of the Act to do the work with due care and skill and in accordance with the relevant plans and specifications. 4. The other four applicants were described as "office bearers" in the Tribunal Member's reasons for decision and as "directors and supervisor of the work" in the Appellant's written submissions to the Appeal Panel dated 25 July 2016. 5. It is unnecessary for the Appeal Panel to make a finding as to exactly the connection between the Appellant and the other four applicants. The Tribunal's reasons 1. Included in the statements made by the Tribunal Member in his reasons were the following: Whichever way I look at it, the failures are minor defects. We have a shower screen that is 30 centimetres shorter than what was provided for by the contract. We have a vanity basin that was above the vanity rather than embedded in the vanity. These are defects that were identified by the builder very early in the piece; a long time before the Department became involved. There was an effort made at that stage by the builder to resolve the issue ………. In the matter that is before me, I think that the penalties that have been imposed are excessive. On my reading of it, it is purely punitive. That is not the intention of the Act. The purpose of taking action is to protect the public from future misconduct. I cannot see that there is any benefit to the public in taking this action against the builder in circumstances where the builder recognised the defects and took some steps to resolve the matter. While the builder had not complied with the rectification order within the time, I think the time difference is fairly insignificant in the terms of the total time for the contract. I cannot see that there is benefit to the public in the determination that has been made. If the purpose of taking action is to protect the public from future conduct, the conduct of the builder or those officers responsible for the building work would warrant no more than a reprimand. In my view there should not be any monetary penalty. As I cannot see that the imposition of a monetary penalty is going to achieve any benefit to the public, I set aside the decision in that regard for each of the applicants. I would take no action against the office bearers. I think probably the person who was in charge of the project would have been the person who identified the errors in the first place and attempted to resolve them, the managing director. I think that was a reasonable approach to be taken at that stage – to identify the defects and offer to try to resolve it. In the circumstances I determine to take no action against any of the individuals involved there. In relation to each of the individual applicants the decision is set aside and in its place the decision is made to take no action. In relation to Champion Homes Pty Limited the decision to set aside and in its place the decision made to caution the applicant in regard to the failure to construct in accordance with the contract. Notice of appeal 1. In the notice of appeal filed in the Tribunal by the Appellant, there are the following four grounds of appeal: 1. Having regard to the findings by the Senior Member in relation to the company office bearers that they did not engage in conduct that requires protection for the benefit of the public the Tribunal erred in cautioning the Appellant. 2. The Tribunal erred in cautioning the Appellant in circumstances where there was no further action taken against the office bearers of the Appellant company. 3. The determination of the Tribunal is contrary to the findings made by the Senior Member that the office bearers (and by extension the Appellant company) "recognised the defects and took some steps to resolve the matter". 4. In the circumstances the determination to caution the Appellant is tantamount to being punitive in nature having regard to (a) the consideration of reasonable proportionality of the penalty to the defects and the range of penalties and (b) the lack of need for public protection. 1. During the hearing of the appeal a further question arose namely whether there had been a failure by the Tribunal Member to give proper reasons for his decision. Mr Maynard, the solicitor who appeared for the Respondent, after a brief adjournment, informed the Appeal Panel that his client did not have any objection to the Appellant being granted leave to appeal on this additional ground and the hearing then continued on the basis that leave was granted to the Appellant to proceed with this additional ground. Disciplinary action 1. Section 62 of the Act makes provision for the disciplinary action that may be taken by the Secretary, where the Secretary is satisfied, that a ground on which disciplinary action may be taken against the holder of an authority, has been established in relation to the holder. ("Authority" is relevantly defined by the Act to mean a contractor licence.) The disciplinary action includes the following three actions: 1. A determination to take no further action against the holder; 2. A caution or reprimand of the holder; 3. A determination requiring the holder to pay to the Secretary, as a penalty, an amount not exceeding $50,000. The parties' submissions 1. In its written submissions the Appellant submitted that the decision to caution it was erroneous on two bases. The first related to the actions of the controlling mind of the company. If it (the controlling mind) was not culpable then neither could the company be culpable. The second was based on the principle of parity. 2. The Appellant submitted that when a corporation acts it does not do so in its own right. It operates through the actions of its principal officers as its controlling mind. Reference was made to Tesco Supermarkets Limited v Nattrass [1972] AC 153 at 170 – 171. 3. The written submissions expanded upon those submissions and the "controlling mind" submissions concluded as follows: If the directors and supervisor of (the Appellant), in concert or individually, were found to have acted reasonably and did not warrant any sanction there can be no imputation to the company for any sanction either directly as in Hamilton v Whitehead or indirectly because of any vicarious liability, especially in circumstances where protection of the public is not warranted by the course of conduct undertaken by the company's director and supervisor. In the present circumstances all parties which could possibly be construed as the controlling mind of the company have been excused, or at the very least did not require there to be any sanction for the protection of the public. The Tribunal having found that the facts did not warrant any action for protection of the public against the controlling mind of the company it follows that the company should be afforded the same finding as for its office bearers and no action taken. 1. One of the oral submissions made on behalf of the Appellant was to the effect that if the officers of the Appellant were not liable, then as a matter of law, neither was the Appellant. 2. The Respondent's response to these submissions included a submission that the argument as to the controlling mind was erroneous in the context of the Act. It was submitted that the Act was consumer protection legislation where the issue of the mind of the Appellant was irrelevant. It was submitted that it was not in dispute that there was a breach of a statutory warranty to build in accordance with the contract. It was said that it must be that an officer, employee or subcontractor of the Appellant erred in that regard. 3. The Appeal Panel is of the view that the Appellant's "controlling mind" submissions should be rejected. Simply because no penalty has been imposed on the directors and supervisor of the Appellant does not mean that those persons were not culpable and does not mean that no penalty should be imposed on the Appellant. What is the appropriate penalty for the Appellant can only be decided by applying the relevant law to the relevant conduct of the Appellant. The party to the proceedings who held the relevant licence under the Act to contract was the Appellant, and that was the party liable in the first instance to consumers under that contract. 4. There was no finding made by the Tribunal Member that the supervisor and the directors did not have guilty minds (cf par 7 of the Appellant's submissions where it was submitted that logic would dictate that if there is no guilty mind then there can be no guilt on the part of the company). There was no finding by the Tribunal Member that the supervisor and directors were not culpable. He only determined that no penalty should be imposed upon them. The Tribunal Member's reasoning process 1. In his reasons for decision the Tribunal Member made the points that the failures were minor defects which were identified by the builder (the Appellant) very early in the piece before the Department became involved and there was an effort made at that stage by the Appellant to resolve the issue. The Member determined that the imposition of the penalties were purely punitive and that was not the intention of the Act. Importantly for present purposes the Tribunal Member made a finding that he could not see that there was any benefit to the public in taking this action against the builder in circumstances where the builder recognised the defects and took some steps to resolve the matter. However he gave no explanation as to what his reasoning process was to conclude that the appropriate penalty was to caution the Appellant. That conclusion is to be compared with the determination that he made that no action be taken against any of the individuals. 2. As we have mentioned, in his reasons, the Tribunal Member stated: "If the purpose of taking action is to protect the public from future conduct, the conduct of the builder or those officers responsible for the building work would warrant no more than a reprimand." However when the Tribunal Member came to deal specifically with the Appellant he gave no reason why the Appellant should be cautioned or reprimanded. There was alternative action available to the Member which included that a determination be made that no further action be taken against the Appellant. 3. The duty to give reasons is a necessary incident of the judicial process. Without adequate reasons, justice has not been seen to be done so that failure to give adequate reasons may be an error of law (Stoker v Adecco Gemvale Constructions Pty Ltd [2004] NSWCA 449 at [41]). Reasons need to be given by the Tribunal to indicate to the parties why the decision was made and to allow them to exercise such rights as may be available to them in respect of it (Housing Commission of New South Wales v Tatmar Pastoral Co Pty Ltd [1983] 3 NSWLR 378 at 386F). 4. It was apparently the carrying out of the building work by the other four applicants which resulted in the Appellant's failure to comply with the warranties in s 18B of the Act. The Tribunal Member determined that no further action be taken against those four applicants. One then asks the question why did the Tribunal Member determine that the Appellant should be cautioned. In our view the Tribunal Member's reasons do not give an answer to that question. As a result we are of the view that the Tribunal Member failed to provide adequate reasons for his decision to caution the Appellant. 5. In Beale v Government Insurance Office of NSW (1997) 48 NSWLR 430, Meagher JA raised the question whether the failure to provide reasons or the provision of inadequate reasons constitutes an error of law or some other appealable error. His Honour stated that it was sufficient to note that most cases have assumed the error is one of law (see also John Prendergast & Vanessa Prendergast v Western Murray Irrigation Limited [2014] NSWCATAP 69 at [13] and [14]). We propose to proceed on the basis that the failure of the Tribunal Member to provide adequate reasons for the decision is an error of law. Disposal of the proceedings 1. Towards the conclusion of the hearing of the appeal there was a discussion between the Appeal Panel and the solicitors for the parties as to what the Appeal Panel should do if it found that the Tribunal Member had not given proper reasons. Both solicitors were of the view that the Appeal Panel should remit the matter to the Tribunal Member for further hearing. The principle of parity 1. During the hearing submissions were made by the solicitor for the Appellant which appeared to raise an argument based on the principle of parity. After the Appeal Panel reserved its decision, it sought clarification from the Appellant as to whether it was submitting that there had been a breach of the principles of proportionality and parity. On 18 January 2017 the solicitors for the Appellant wrote to the Tribunal stating that the Appellant was making a submission to the effect that there was a breach of the principles of proportionality and parity, relying on its written submissions. Those submissions were to the effect that in determining what penalty to impose on the company for a minor breach of the s18B warranties, it should be subjected to the same considerations as each of the individuals. That submission was opposed by the Respondent, submitting that there was no need to establish a parity in relation to each applicant, and that in relation to the Appellant the Tribunal had determined to impose the minimum penalty on the party responsible at law for the work not built in accordance with the contract. 2. The Appeal Panel is of the view that it is inappropriate for it to express any views about those principles having regard to the fact that the appeal will be allowed and the proceedings remitted. Orders 1. The Appeal Panel makes the following orders: 1. Leave is granted to the Appellant to amend the notice of appeal to add the following ground of appeal: The Tribunal Member failed to give proper reasons for his decision that "in relation to the Appellant the decision is set aside and in its place the decision made to caution the Appellant in regard to the failure to construct in accordance with the contract." 1. The notice of appeal will be treated as if that amendment has been made. 2. The appeal is allowed. 3. The proceedings are remitted to the Tribunal as originally constituted for the appropriate disciplinary action (if any) to be determined in accordance with these reasons. ********** 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: 25 January 2017