Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Little v J & K Homes Pty Ltd [2017] NSWCATAP 84 Hearing dates: 29 March 2017 Date of orders: 21 April 2017 Decision date: 21 April 2017 Jurisdiction: Appeal Panel Before: M Craig QC, Principal Member DAC Robertson, Senior Member Decision: 1. Appeal allowed. 2. Set aside orders made by the Tribunal on 9 November 2016 and 8 February 2017. 3. Remit the proceedings to the Consumer and Commercial Division of the Tribunal for determination in accordance with these reasons. 4. The Respondent pay the Appellants' costs of the appeal. 5. Costs of the proceedings at first instance to be determined by the Tribunal Member hearing the remitted proceedings. Catchwords: CONTRACT – Home Building contract – contract not terminated at time of hearing – whether appellants could maintain claims for performance of work required under the contract – whether appellants could maintain claim in respect of alleged breach of statutory warranties while contract remained on foot Legislation Cited: Civil and Administrative Tribunal Act 2013 (NSW) Civil and Administrative Rules 2014 (NSW) Home Building Act 1989 (NSW) Suitors Fund Act 1951 (NSW) Cases Cited: Berger v Boulder Projects [2015] NSWCATAP 274 Brewarrina Shire Council v Beckhaus Civil Pty Ltd [2005] NSWCA 248 Gaynor v Burns [2015] NSWCATAP 150 at [61] Category: Principal judgment Parties: Nicholas Little & Renee Brancato-Little (Appellants) J & K Homes Pty Ltd (Respondent) Representation: Counsel: S Jacobs (Appellant) M Ohlson (solicitor) (Respondent) Solicitors: Manfred Legal (Appellant) Michael Ohlson (Respondent) File Number(s): AP 16/53392 Decision under appeal Court or tribunal: NSW Civil and Administrative Tribunal Jurisdiction: Consumer and Commercial Division Date of Decision: 9 November 2016 Before: J Smith, Senior Member File Number(s): HB 16/04988 REASONS FOR DECISION 1. This appeal is from a decision of a Senior Member of the Tribunal made on 9 November 2016. The decision recorded by the Member was in the following terms: The application is dismissed for reasons given orally at the hearing. If the parties cannot agree on the issue of costs, leave is granted to file and serve a short written submission within 14 days of today's date. Leave is granted to file and serve a short written submission in reply within a further 14 days. In any submissions on costs filed by the parties must advise whether they consent to the issue being determined on the papers without further hearing. The absence of recorded reasons: no impediment to determination of the Appeal 1. Neither party sought written reasons for the decision pursuant to s 62 of the Civil and Administrative Tribunal Act 2013 (NSW) (the NCAT Act). Although, for the most part, the hearing on 9 November 2016 was recorded and a transcript of that recording made available to us, as the parties accepted, neither the recording nor the transcript includes the oral reasons given by the Senior Member later that day. This regrettable circumstance could not be explained by the parties. The absence of reasons from the recording was not appreciated by either party until after the time allowed by s 62 to request written reasons had expired. 2. At the commencement of the hearing we asked counsel for the appellants, Mr S Jacobs, to identify how his clients sought to establish the reasons for the decision below in the absence of any statement or recording of those reasons. The Notice of Appeal alleged legal error on the part of the Senior Member in making his decision, founded upon the manner in which he arrived at that decision. Mr Jacobs had appeared for the appellants at the hearing before the Member. 3. Mr Jacobs pointed to a number of passages in the transcript of the hearing which he submitted disclosed the basis for the Senior Member's decision. Mr Jacobs also relied upon the Member's written reasons for his decision in respect of the costs of the proceedings, published on 8 February 2016 (the Costs Decision). In particular, Mr Jacobs pointed to [6] of the Costs Decision in which the Senior Member stated: "The application was dismissed at hearing on the basis that the contract was still on foot and that the applicants could not maintain their application for orders to rectify allegedly defective work as a result of a decision by the New South Wales Court of Appeal in Brewarrina Shire Council v Beckhaus Civil Pty Ltd [2005] NSWCA 248". 1. Mr Ohlson, solicitor, who appeared for the respondent before us and who had also appeared at first instance for the respondent, accepted that [6] of the Costs Decision accurately reflected the essence of the oral reasons given by the Senior Member on 9 November 2016. As Mr Ohlson also accepted, an essential aspect of the case argued by him on behalf of the respondent below, apparently accepted by the Senior Member, was that the appellants could not, in law, sustain their claim as the contract founding their claim had not, at the date of hearing, been terminated. Reliance was placed by him on the decision in Brewarrina Shire Council v Beckhaus Civil to support that contention. 2. The transcript records that the debate and submissions, directed to the principle derived from Brewarrina and its application to the orders sought by the appellants, occurred before any of the evidence foreshadowed by the parties had been tendered. Those submissions proceeded on the basis of uncontentious facts identified by the parties' advocates, relevantly (for present purposes) the existence of the contract, the fact that defects and incomplete work were alleged by the appellants and the fact that the contract had not, by then, been terminated by them. The transcript also records that immediately following those submissions a short adjournment was taken by the Senior Member. Both parties accept that upon resumption of the hearing following that adjournment, the Senior Member proceeded to deliver his reasons for decision and made the orders that we have earlier recorded. A formal record of the orders made at that time was subsequently provided to the parties. 3. It must be remembered that it is the decision of the Senior Member on 9 November 2016, rather than the reasons for it, that founds the entitlement to appeal under s 80(1) of the NCAT Act. Although orthodoxy would require that contemporaneous reasons for the oral decision given on 9 November be available for the purpose of determining an appeal in which legal error in reasoning to that decision is asserted, on the basis of the transcript references given by Mr Jacobs, the reasons expressed by the Senior Member in the Costs Decision and the concession fairly made by Mr Ohlson, as earlier recorded, we are satisfied that the decision under appeal was made for the reason identified in [6] of the Costs Decision. It is appropriate that the appeal be determined on that basis. The appeal grounds pursued by the appellants 1. Mr Jacobs acknowledged that, in the absence of a complete record of the Senior Member's reasons, one ground stated in the Notice of Appeal, that the Senior Member erred in not granting the appellants an adjournment, could not be maintained. The appellants withdrew that ground of appeal and the appeal proceeded on the remaining grounds of appeal. Those grounds, as stated in the Notice of Appeal, were: 1. Wrong legal criteria for standing applied. The substance of this ground was expressed in the following terms: "5. The learned Member erred in law, by applying the wrong legal criteria to whether there [sic] the Appellants had standing to make their claim. In amplification of this ground, the Appellants rely on one, more or all of the following: The reason given by the learned Member for the dismissal was that as the home building contract had not been terminated, the Appellants did not have standing to bring the proceedings for breach of statutory warranties and that the proceedings had been improperly commenced. In so holding, the learned Member relied on Brewarrina Shire Council v Beckhaus Civil Pty Ltd & 1 Or [2005] NSWCA 248 ("the Brewarrina Case"). However, Section 18E(1)(d)(ii) of the Home Building Act 1989 (NSW) provides that one circumstance when the statutory warranties are engaged is where the work has "ceased"; and in that circumstance, Sec 18 E HBA displaces the Brewarrina Case." 1. Denial of natural justice 2. This ground states: "6. The learned Member erred in law by denying the Appellants natural justice, in that he failed to understand (and thus to deal with) the pleaded building claim." 1. Case dismissed on basis not pleaded 2. This ground states: "14. The learned Member erred in law in dismissing the proceedings on a basis that had not been pleaded by the Respondent." 1. Mistake that appellants never from the inception had standing This ground was expressed as follows: "20. The learned Member fell into error, in finding either expressly or impliedly, that the appellants lack standing from inception of the proceedings." 1. Those grounds, as elucidated both in the Notice of Appeal and in the appellants' submissions, really state the one proposition in four different ways. That proposition is that, in circumstances where: 1. the applicants had sought orders pursuant to s 48O of the Home Building Act 1989 (NSW) (the HBA) that the respondent builder carry out work to rectify identified defects and to complete construction of their dwelling by performing identified works, and 2. in so doing alleged and relied upon breaches of statutory warranty arising under s 18B of the HBA, 3. the Senior Member erred in law in concluding that the decision of the Court of Appeal in Brewarrina Shire Council v Beckhaus Civil Pty Ltd prevented the appellants from maintaining their claim, so long as the contract remained on foot. The primary orders sought in the appellants Amended Points of Claim filed on 2 September 2016 and identified before the Senior Member were, in fact, for rectification of defects and completion of dwelling construction (referred to in the appellants' submissions as "orders for specific performance"). 1. Pursuant to s 80(2)(b) of the NCAT Act, an internal appeal may be brought to the Appeal Panel as of right on a question of law. The present appeal is an appeal of that kind. Each of the four grounds of appeal that we have identified raises a question of law. 2. For the reasons that follow, we consider that the ground of appeal, as distilled by us from the appellants stated grounds of appeal, is established. The Senior Member did err in law when he reasoned that the appellants were not able to maintain an application for orders that the respondent rectify defective work and also complete construction of their dwelling while their home building contract remained on foot. The Senior Member's decision must therefore be set aside and the proceedings remitted to the Consumer and Commercial Division of the Tribunal for determination. Background to the appeal 1. The facts stated by way of background are not controversial. They are either founded upon documents filed by the parties in the proceedings below and included in the papers before us or are founded upon events that the parties accept to have occurred and were referred to in submissions before us. 2. On 16 October 2013, the appellants entered into a contract with the respondent for the construction by the respondent of a new home on land owned by the appellants at Pottsville, New South Wales (the contract). The contract price was stated to be $335,328 inclusive of GST. 3. Under the contract, the respondent, as builder, was required to reach practical completion of the home no more than 120 days after the contract period commences, subject to extension of time for various reasons including adverse weather (Schedule 1, Item 12 and clauses 8 and 9 of the contract). It appears to be accepted that home building work commenced in about February 2014. Further, it also appears to be uncontentious that work on construction of the home, by the respondent or its subcontractors, ceased on 15 September 2015. 4. The appellants subsequently referred their concerns regarding the respondent's building work to NSW Fair Trading. On 12 October 2015, a building inspector appointed under the HBA issued a rectification order pursuant to s 48E of that Act, recording that residential building work was incomplete and requiring the respondent to carry out work identified in the Schedule to the order. As no work was done by the respondent in response to the order, the appellants filed the Home Building Application commencing proceedings in this Tribunal on 25 January 2016. 5. On 10 June 2016, the respondent purported to issue three documents to the appellants: a notice of intention to terminate the contract; a notice of suspension of building work, and a claim for extension of time. The justification alleged by the respondent in each document for taking these steps is that the appellants had failed to comply with obligations under clauses 33(2)(d) and 33(2)(e) of the General Conditions of the contract, in that the owners had "erected an illegal boulder rock retaining wall" at the site. The wall was said to be illegal because it was allegedly erected without council approval, having the claimed consequence that: "the illegal boulder rock retaining wall prevents the principal certifying authority (PCA) from issuing the builder with a final occupation certificate for the dwelling house which thereby prevents the builder from obtaining the final payment under the building contract." 1. Clauses 33(2)(d) and (e) of the contract provided that a substantial breach of the contract by the owner included but was not limited to, if the owner "(d) interferes with or obstructs the progress of the building works; [or] (e) fails to give or interferes with the builder's possession of the site." 1. 18 The legal effect, if any, of the documents issued by the respondent on 10 June 2016 does not appear to have been the subject of any substantial debate at the hearing before the Senior Member on 9 November 2016. Neither party before us suggested to the contrary. 1. As we have earlier recorded, it was common ground between the parties both at the hearing below and at the hearing of the appeal that the contract had not been terminated at the time of the hearing before the Senior Member. It is apparent from the reasons expressed in the Costs Decision at [13] that Mr Jacobs sought, on behalf of the appellants, to terminate the contract in the course of the Senior Member delivering his reasons, once it became apparent from those reasons that the appellants' application would be dismissed, by making an announcement to that effect from the Bar table before delivery of the reasons had been completed. It is also apparent from a document filed with the Notice of Appeal that the builder purported to terminate the contract by a letter dated 24 November 2016. 2. Having determined that the matter should be remitted for hearing and as no argument was advanced to us on the hearing of the appeal concerning the efficacy or validity of the actions of either party in purporting to terminate the contract, we express no view as to the legal effect of any of those actions. Our focus has been upon the position that pertained when the matter was heard and determined by the Senior Member, that being the determination upon which the appeal is founded. Consideration The Brewarrina principle was wrongly applied 1. The leading judgment of the Court of Appeal in Brewarrina Shire Council v Beckhaus Civil Pty Ltd was delivered by Ipp JA (Hodgson and McColl JJA agreeing). At [65] – [69] his Honour said: "65 No provision of the Contract prevented the Council from suing Beckhaus for damages for breach of contract under common law; but that is not to say that, simply by reason of a failure, by the date for practical completion, to complete the work to the standard required, the Council would be entitled to damages for defective or incomplete work. 66 An important part of the Council's case at trial was that Beckhaus at no stage achieved practical completion of either Separable Portion A or B. Master Macready upheld this assertion and, for reasons that I later set out, I have come to the same conclusion. 67 Accordingly, as at the judgment date, the Council rightly denied that practical completion had been achieved. But, it continued - at that stage - to hold Beckhaus to its contractual obligations to perform the work. Thus, on the Council's contention, at the date of judgment, the work remained in Beckhaus' possession; the Council, in effect, having refused to accept possession. 68 While, on this assumption (the Contract still being on foot), the Council may have been entitled to claim damages for delay arising out of Beckhaus' failure to achieve practical completion by the date for practical completion, it could not sue Beckhaus for defective or incomplete work. As long as the Council maintained that the Contract was alive and had not been terminated, and held Beckhaus to its obligation to complete the work in accordance with the specification, on its contention the work remained lawfully in Beckhaus' possession. In other words, it was an inevitable incident of the Council's argument that the work had not been delivered to and accepted by the Council (Beckhaus - on the Council's argument - being in possession of and obliged to complete the work). While the work was in Beckhaus' possession, the Council suffered no loss by reason of defective or incomplete work; the work, not being in the Council's possession, did not at that stage form part of its patrimony. 69 This situation would have changed when the Contract was terminated. When that occurred, the work (in its defective and incomplete state) was handed over to the Council. At that stage, the Council suffered loss by being in possession of defective and incomplete work." 1. Mr Jacobs rightly submitted that the conclusions stated in the quoted passage are expressed in the context of claims for damages made by the appellant Council for defective work. As Ipp JA pointed out, the obstacle to a claim for damages for defective work, while the contract remains on foot, is that as long as the builder remains in possession of the site it cannot be said that it has failed to fulfil its contractual obligations to deliver the work free of defects. While the contract remains on foot, it is open to the builder to rectify any defect, at least as long as the owner maintains that practical completion has not been achieved, with the consequence that an entitlement to damages has not yet accrued. 2. The principle for which the decision of the Court of Appeal stands can have no application to a claim seeking orders that a building contractor perform work required to be undertaken by the terms of a building contract ("specific performance"), or, in relation to work governed by the HBA, to a claim pursuant to s 48O(1)(c) of the HBA for orders that the builder carry out work. A claim for "specific performance" of a building contract can only be brought while the contract remains on foot. Neither the statement of principle set out in [65] to [69] of Brewarrina Shire Council v Beckhaus Civil nor the logic underlying that principle precludes the Tribunal from determining a claim for work orders pursuant to s 48O(1)(c) of the HBA while the contract remains on foot. 3. As we understood the submissions of the respondent, it had not focused upon the context in which the principle stated by the Court of Appeal had been articulated nor had it focused upon so much of the appellants' amended claim as sought the performance of work as their primary orders. That, with respect, would seem to be the same error into which the Senior Member had fallen. While in their Amended Points of Claim the appellants did seek, in the alternative, an order for the payment of damages, they accepted that until such time as the contract was terminated, such an order, other than the payment of damages for delay (Brewarrina at [68]), was not open. The application of s 48O(1) of the Home Building Act 1. If a builder wrongfully refuses to complete building work governed by the HBA, the Tribunal has jurisdiction pursuant to s 48O(1)(c)(i) to direct the builder to complete that work. The work required to be undertaken by the respondent was work to which the HBA applied. By dismissing the appellants' claim, including the claim for work orders pursuant to s 48O(1)(c), on the basis that the contract remained on foot, the Senior Member was in error. 2. The respondent submitted that the Tribunal could not have made any orders pursuant to s 48O(1)(c) as, at the time of the hearing, the respondent's building licence had lapsed and the Tribunal could not order an unlicensed builder to carry out building work. We accept that it would not be appropriate to make orders requiring an unlicensed builder to carry out building work. Such a builder could not, consistently with the HBA, carry out such work. At the very least, it would involve an inappropriate exercise of discretion to order an unlicensed builder to carry out home building work when the HBA had the effect of proscribing the unlicensed builder's actions in so doing. 3. However, s 48O(1)(c) is not limited to the making of orders requiring the building contractor to carry out the building work. Section 48O(1)(c) provides: "(1) In determining a building claim, the Tribunal is empowered to make one or more of the following orders as it considers appropriate: … (c) an order that a party to the proceedings: (i) do any specified work or perform any specified service or any obligation arising under this Act or the terms of any agreement, or (ii) do or perform, or refrain from doing or performing, any specified act, matter or thing." 1. In light of our decision that there was legal error by the Senior Member in applying the Brewarrina principle to the appellants' application, it is strictly unnecessary that we express a concluded view on the point arising under s 48O(1)(c) of the HBA. However, it does seem to us that s 48O(1)(c)(i) would permit the making of an appropriately framed order, requiring the respondent builder to perform its obligation to complete the works required by and in accordance with the contract. That obligation could be fulfilled by the respondent retaining a licensed builder to carry out the work. 2. Alternatively, s 48O(1)(c)(ii) is clearly intended to authorise the making of orders having wider operation than requiring the performance of building work by the builder. That provision would authorise an order that the builder cause specified work to be completed. Although not necessarily indicative of the Senior Member's concluded view, we note from the transcript his statement in the course of argument that he could make such an order. The Brewarrina principle: overridden by s 18E(1) of the Home Building Act? 1. The appellants' alternative argument was that s 18E(1)(d)(ii) of the HBA has the effect of overriding the principle enunciated by Ipp JA in Brewarrina for claims brought in respect of breaches of statutory warranties under the HBA. Section 18E(1) relevantly provides: "(1) Proceedings for a breach of a statutory warranty must be commenced in accordance with the following provisions: (a) proceedings must be commenced before the end of the warranty period for the breach, (b) the warranty period is 6 years for a breach that results in a major defect in residential building work or 2 years in any other case, (c) the warranty period starts on completion of the work to which it relates (but this does not prevent proceedings from being commenced before completion of the work), (d) if the work is not completed, the warranty period starts on: (i) the date the contract is terminated, or (ii) if the contract is not terminated—the date on which work under the contract ceased, or (iii) if the contract is not terminated and work under the contract was not commenced—the date of the contract …". 1. Mr Jacobs submitted that as s 18E(1) had been amended after the decision in Brewarrina Shire Council v Beckhaus Civil, the subsection should be construed as having altered the law stated in that decision. Section 18E(1)(d)(ii), in its present form, was inserted into the HBA by an amending Act of 2011. The decision in Brewarrina was delivered in 2005. 2. While it is clear that s 18E(1)(d)(ii) does contemplate a claim for breach of a statutory warranty being brought without the contract having been terminated, we note that a claim for damages for delay, that is for breach of the implied warranty in s 18B(1)(d) "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", would be a claim for breach of statutory warranty. However, as we have earlier noticed, the right to maintain a claim for damages for delay prior to termination of the building contract was acknowledged, in terms, as being available by Ipp JA at [68] in Brewarrina Shire Council v Beckhaus Civil. Thus, the mere reference in s 18E(1)(d)(ii) to a claim arising where the contract has not been terminated is not necessarily inconsistent with the application of the principle stated by Ipp JA to claims for breach of statutory warranties which seek compensation for defective works. 3. In the result, it is unnecessary for us to determine the ambit of s 18E(1)(d)(ii) in order to resolve the present appeal. As it is apparent that this submission was not raised before the Senior Member, with the result that we do not have the benefit of his reasoning concerning the issue, we prefer not to express any view upon it. Conclusion 1. For the reasons stated, the appeal will be allowed. The orders made by the Senior Member, including the orders in relation to costs made on 8 February 2017, will be set aside. The proceedings will be remitted to the Consumer and Commercial Division of the Tribunal for determination consistently with these reasons. 2. The significance of the fact that both parties have now purported to terminate the contract will be a matter to be determined by the Consumer and Commercial Division at any further hearing of the proceedings. Likewise, any amendment of both the appellants' claim and the respondent's response, to reflect events that have occurred since the decision of the Senior Member, will be a matter for the presiding Member in that Division. Costs 1. The parties agree that Rules 38 and 38A of the Civil and Administrative Tribunal Rules 2014 (NSW) are applicable to these proceedings. As the amount in issue in the proceedings is more than $30,000 and the appeal is brought from the Consumer and Commercial Division, it is not necessary for us to find special circumstances before making an order in respect of the costs of the appeal. 2. The respondent sought to uphold the Senior Member's decision upon the reasoning apparently applied by the Senior Member. The respondent has been unsuccessful in so doing. In the circumstances, it is appropriate that the costs of the appeal follow the event, with the consequence that the respondent must pay the appellants' costs of the appeal. The costs of the hearing below should be determined by the Tribunal at the hearing of the remitted proceedings. 3. The Notice of Appeal sought an order that the appellants' costs of the hearing on 9 November 2016 and of the appeal "be paid under the Suitors Fund Act 1951 (NSW) if applicable". Understandably, that application was not pressed in the appellants' final submissions on the hearing of the appeal. Section 6 of the Suitors Fund Act does not authorise an Appeal Panel of the Tribunal to award certificates under that Act (Gaynor v Burns [2015] NSWCATAP 150 at [61], and Berger v Boulder Projects [2015] NSWCATAP 274 at [43]). Orders 1. For all the reasons expressed, we make the following orders: 1. Appeal upheld. 2. Set aside orders made by the Tribunal on 9 November 2016 and 8 February 2017. 3. Remit the proceedings to the Consumer and Commercial Division of the Tribunal for determination in accordance with these reasons. 4. The respondent pay the Appellant's costs of the appeal as agreed or assessed. 5. Costs of the proceedings at first instance to be determined by the Tribunal when hearing the remitted proceeding. *********************** 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: 21 April 2017