Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Shehata v Department of Fair Trading; Visual Building v Department of Fair Trading [2019] NSWCATOD 93 Hearing dates: 6 September 2018, 1 March 2019 Date of orders: 13 June 2019 Decision date: 13 June 2019 Jurisdiction: Occupational Division Before: J McAteer, Senior Member Decision: 1. In proceedings 201800129363 the Decision of the Respondent is affirmed. 2. In proceedings 201800085313 the Decision of the Respondent is affirmed. Catchwords: ADMINISTRATIVE Law – administrative review – home building - fit and proper person -– weight of evidence – adverse findings Legislation Cited: Administrative Decisions Review Act 1997 Civil and Administrative Tribunal Act 2013 Home Building Act 1989 Cases Cited: AJO v Director General Department of Transport [2012] NSWADT 101 Austin v Commissioner of Fair Trading & Anor [2016] NSWCATAP 179 Australian Broadcasting Tribunal v Bond [1990] HCA 33 Bournelis v Building Services Corporation Commercial Tribunal of New South Wales, unreported 9 June 1995 Hughes and Vale Pty Ltd v New South Wales (No 2) [1955] HCA 28 Hutchings Electrical Pty Limited & Anor v Director General Department of Fair Trading [2004] NSWADT 23 Ng & anor v Commissioner for Fair Trading, NSW Office of Fair Trading & anor [2007] NSWADT 259 Sobey v Commercial and Private Agents Board (1979) 22 SASR 70 Category: Principal judgment Parties: Proceedings 201800129363 Youssef Shehata (Applicant) Department of Fair Trading (Respondent) Proceedings 201800085313 Visual Building Construction Pty Ltd (Applicant) Department of Fair Trading (Respondent) Representation: Solicitors: Proceedings 201800129363 Self represented (Applicant) Proceedings 201800085313 Y Shehata (Director obo Company) S Robosa Solicitor Fair Trading Legal (Respondent) File Number(s): 201800129363 and 201800085313 Publication restriction: Section 64 of the Civil and Administrative Tribunal Act 2013 applies to the material filed by the respondents on a confidential basis, namely Bundle 1 filed by the respondent on 29 June 2018 and documents filed by the respondent on 31 July 2018. That material is not to be released to the public. Decision under appeal File Number(s): 201800129363 and 201800085313 REASONS FOR decision Introduction 1. The applicant was a Director of a construction company Visual Building Constructions Pty Ltd which engaged in residential building work. On 28 July 2017 a Notice to Show Cause was issued by the respondent against Mr Shehata inviting him to show cause as to why disciplinary action should not be taken against him under the Home Building Act 1989 (the HB Act). The Notice asserted that he was guilty of improper conduct under s 56 (c) of the HB Act. A similar Notice to Show Cause was issued against the company Visual Building Constructions Pty Ltd (Visual Building) also on 28 July 2017. Both Notices were issued under s- 61 of the HB Act. 2. In respect of the company (Visual Building), on 10 January 2018 the respondent decided the matter and made a decision under s-62 (f) of the HB Act to cancel Visual Building's authority. In addition under s-62 (g) of the HB Act Visual Building was disqualified from holding any kind of authority, being a member of a partnership or an officer of a corporation that is a member of a partnership, that is the holder of an authority or an officer of a corporation that is the holder of an authority, for a period of 12 months. 3. In respect of the individual (Mr Shehata) on 10 January 2018 the respondent decided the matter and made a decision under s-62 (c) of the HB Act to require Youssef Shehata to pay a penalty to the Commissioner for Fair Trading in the sum of $9,000 within 28 days. 4. After considering all of the evidence and material, the Tribunal finds that the correct and preferable decision is to affirm the decisions of the respondent in each matter, for the reasons outlined below. Background 1. The activities of Visual Building (the Company) and Mr Shehata had come to the respondent's attention due to complaints and associated disputes arising from construction work carried out at an address in Riverstone New South Wales. The origins of the dispute relate to a contract between the Company and the owner Mr M Alexander on 15 May 2015. The contract was for residential building work with a contract price of $170,000 signed by Mr Shehata on behalf of the Company. In mid December 2015 Mr Alexander exchanged contracts to sell the Riverstone property to S and L Chaloner. The sale completed in late January 2016, however arising from that transaction on 17 March 2016 the Chaloner's conveyancer wrote to the vendors solicitors seeking a copy of the Home Owners Warranty Insurance for the construction work. 2. On 26 May 2016 Mr Shehata completed an application for insurance on behalf of the Company where he indicated that the estimated start date was 1 June 2016 and stated that the contract was signed on 15 May 2016. (The stated date of the contract on the insurance application being one year later than the actual contract. 3. The Chaloners complained to Fair Trading about the quality of the construction work, and following a site inspection on 25 August 2016 Fair Trading issued a Rectification Order requiring certain defects to be rectified by 14 October 2016. The defects related to internal fit out, doors, waterproofing, roof flashing, brick levels and render defects. On 16 January 2017 a Fair Trading Building Inspector issued a Building Inspection Report which confirmed that the matters under the Rectification Order had not been completed. 4. The owners (Mr and Mrs Chaloner) lodged an application with the Tribunal (NCAT Consumer and Commercial Division) on 9 February 2017 against the Company. The Tribunal made the following findings: * The home was constructed, or partially constructed by the first respondent builder, Visual Building Construction Pty Ltd. * Mr Youssef Shehata is the 'builder's principal'. * There is evidence that supports the claim that the builder only completed part of the subject works. * There were five items from the Scott Schedule of uncompleted work which were items under the contract. * The cost of rectification of those items of work is $8,750. The defective work consisted of: * Front Portico Roof * Kitchen Window sill * Cleaning of brick work (noted twice) * Flashing 1. On 10 May 2018 the Tribunal ordered the Company to pay the Chaloners the sum of $8,750. on or before 7 June 2018. 2. Visual Building appealed the Tribunal's decision to the Internal Appeal Panel of NCAT. The appeal was dismissed on 9 August 2018. Respondent's basis for making decision under review against Visual Building and legislative provisions 1. The respondent after issuing the Notice to Show Cause and noting the lack of any submissions from the Company made various findings. The respondent found that the Company was guilty of improper conduct under s 56 (c ) of he HB Act as it had breached s 51(2) (b) by failing to comply with the requirements of a Rectification Order (for the Riverstone property) by the relevant date (14 October 2016). The section provides: 51 Improper conduct: generally (1) … (1A) (Repealed) (2) The holder of a contractor licence is guilty of improper conduct if the holder: (a)…, or (b) without reasonable cause, does not comply with the requirements of a rectification order under Division 2 of Part 3A, or 1. The second ground which resulted in an adverse finding by the respondent also related to the defects. The respondent found that because of the incomplete and poor quality of the defective work, the Company had breached the statutory warranty under s 18B (1) (a) of the HB Act that required work to be performed with due care and skill in accordance with the plans and specifications as set out in the contract. This breach (of s-51 (1) (c ) ) also equates to a finding of improper conduct against the Company. That section provides: 51 Improper conduct: generally (1) A holder of a contractor licence who is authorised by the contractor licence to contract to do residential building work or specialist work, or a holder of a supervisor or tradesperson certificate, is guilty of improper conduct if the holder: (a) .. (b).., or (c) breaches a statutory warranty, or 1. There was a third ground resulting in adverse findings against the Company. This related to a finding that there had been an offence under s 103EA of the HB Act in that in connection with an application for insurance under the Home Building Compensation Fund (HBCF). The finding was based on the evidence that Mr Shehata had made a false statement by stating that the date of the contract was 12 months later than it actually was. The section provides: 103EA False or misleading applications for insurance (1) A person must not, in connection with an application to a licensed insurer for insurance under this Part, make a statement (whether orally, in a document or in any other way) knowing that, or being reckless as to whether, the statement: (a) is false or misleading, or (b) omits any matter or thing without which the statement is misleading. Maximum penalty: 200 penalty units. (2) Subsection (1) does not apply as a result of subsection (1) (a) if the statement is not false or misleading in a material particular. (3) Subsection (1) does not apply as a result of subsection (1) (b) if the statement did not omit any matter or thing without which the statement is misleading in a material particular. (4) The burden of establishing a matter referred to in subsection (2) or (3) lies on the accused person. 1. As a result this finding of conduct under 103EA constitutes improper conduct under s 51 (1) (a) of the HB Act. 51 Improper conduct: generally (1) A holder of a contractor licence who is authorised by the contractor licence to contract to do residential building work or specialist work, or a holder of a supervisor or tradesperson certificate, is guilty of improper conduct if the holder: (a) commits an offence against this Act or the regulations or section 307A or 307B of the Crimes Act 1900, whether or not an information has been laid for the offence, or 1. The respondent exercised their powers under s 62 (f) of the HB Act, the respondent cancelled Visual Building's authority. In addition to the cancellation of the existing authority, under s 62 (g) the respondent imposed a disqualification period of 12 months on Visual Building preventing the Company from holding any authority or specified kind of authority, being a member of a partnership or officers of a corporation that is a member of a partnership that holds an authority, or being an officer of a corporation that is the holder of an authority. Respondent's basis for making decision under review against Youssef Shehata and relevant legislative provisions 1. The respondent after issuing the Notice to Show Cause and after making the findings against the Company under s 51 (2) (b) found that Mr Shehata was guilty of improper conduct within s 54 (1) of the HB Act in his capacity as an officer of a corporation. The section provides: 54 Improper conduct: members of partnerships or officers of corporations (1) An individual who is a member of a partnership or 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 or 52. 1. A further ground related to a breach of s 51 (1) (c) being the second ground against the Company. This breach equated to improper conduct as defined under s 56 (c ) of the HB Act, and constitutes a finding that Mr Shehata is guilty of improper conduct under s 54 (1) of the HB Act. 2. The final ground (in the decision under review) relates to the Company offence under s 103E of the HB Act concerning the false information provided when applying for insurance. This constitutes improper conduct under the HB Act and under s 54 (1) Mr Shehata is guilty of improper conduct under that Act as a Director, being an officer of the corporation. Proceedings before the Tribunal 1. The application on behalf of Visual Building Pty Ltd was lodged on 13 March 2018. The application on behalf of Youssef Shehata was lodged on 24 April 2018. Both applications were lodged out of time as the decisions under review were made on 10 January 2018. However the applicant did not nominate a date on which he was notified of the decisions. In any event the Tribunal extended time for both applications to proceed. As there was no application for internal review of the decisions the Tribunal also allowed the applications to proceed under the provisions of s 55 (4) of the Administrative Decisions Review Act 1997 (the ADR Act). The section provides: 55 Making of applications (1) An application for an administrative review under this Act of an administratively reviewable decision may only be made by an interested person. (2) Subject to enabling legislation, an application is to be made in the time and manner prescribed by the procedural rules. Note. The fees payable for applications are also prescribed by the regulations under the Civil and Administrative Tribunal Act 2013. (3) If the interested person was entitled to seek an internal review of the administratively reviewable decision, an application may not be made unless the person has duly applied for such an internal review and the review is taken to have been finalised under section 53 (9). (4) However, the Tribunal may deal with an application for the administrative review of an administratively reviewable decision even though the applicant has not duly applied for an internal review to which the applicant was entitled if the Tribunal is satisfied that: (a) the applicant made a late application for the internal review in circumstances where the person dealing with the application unreasonably refused to consider the application and the application to the Tribunal was made within a reasonable time following the administratively reviewable decision of the administrator concerned, or (b) it is necessary for the Tribunal to deal with the application in order to protect the applicant's interests and the application to the Tribunal was made within a reasonable time following the administratively reviewable decision of the administrator concerned. The Issue to be decided 1. The issue before the Tribunal in these applications is whether the applicant and the Company is deemed to be a fit and proper person (on the available evidence before the Tribunal) to hold a licence under s 56 (b) of the HB Act. The other grounds, whether the applicant's are guilty of improper conduct and have breached statutory warranties are the preliminary findings which determine the main issue. As set out from the Background and Decision paragraphs ([5] – [18]) above, the respondent relied on certain factual; findings as a result of their investigations to take disciplinary action against both the Company and Mr Shehata. The hearing 1. The applicant was self represented and filed some material in support of his application. The respondent filed a large amount of material including documents under s 58 of the ADR Act, detailed written submissions, and further documents being copies of material obtained by summons issued in these proceedings. Most of the summons material was obtained during the lengthy interval between the two full days of hearing, in part brought about by both parties request and the applicant's prior travel arrangements in late 2018. 2. The applicant's material was quite brief and related to statements asserting his view that the background dispute (between the Chaloner's and the Company) was none of Fair Trading or any other person or entity's business and was a matter between the consumer / customer and the Company. Where clients had taken legal action against the Company over matters related to these proceedings, Mr Shehata filed documents verifying that he was defending or appealing those matters and pursuing his legal avenues vigorously. 3. The Tribunal explained the procedure of the hearing to the applicant and explained the basis of administrative review proceedings, s- 38 (5) Civil and Administrative Tribunal Act 2013 (the NCAT Act). Evidence and submissions at hearing 1. The applicant set out the history of the matters that had occurred since the decisions under review. The Chaloner's had been successful in the Tribunal as per [9] and [10] above and on appeal. The Respondent submitted that the nominated supervisor (Mr Malis) had withdrawn his licence from Visual Building on 13 October 2017. 2. Mr Shehata gave evidence at the hearing about the Chaloners Riverstone job. Mr Shehata submitted in evidence that Fair Trading took action without talking to anyone else other than Mr L Chaloner about the job. His evidence was that he did the actual work in 2015 under the $170,000 contract. The work involved building a house, but only the basic elements being: foundations, bricks, some frames, some of the roof. The contract gave the owner the right to complete the construction and Mr Shehata's evidence was that the then owner (Mr Alexander) said that he would finish the rest of the construction himself. 3. On this point the respondent advised that they were no longer pressing the s 51 (2) (b) issues concerning the failure to comply with the rectification order. 4. The respondent referred to the various court and tribunal orders against the applicants that had arisen in more recent times. In NCAT proceedings a further order for the sum of $23,690 had issued on 10 May 2018 for the rectification of defective works on the basis of expert evidence concerning the necessary costs involved in completing the rectification. 5. In cross-examination Mr Shehata was asked about the Riverstone job and said that he believed that he would have started work soon after signing the contract (on 15 May 2015). He did not recall how long the job took. 6. The applicant referred to the owner supervising the work on the site in addition to his company (Visual Building's) nominated supervisor (Mr George Moshi). Mr Shehata advised that Mr Moshi was not paid to perform this role as he was not working full time for Visual Building. In evidence the applicant agreed when asked that he did not possess the relevant home warranty insurance for the Riverstone job when he signed the contract on 15 April 2015. In respect of that insurance Mr Shehata advised that he applied for that insurance later into the job. He clarified this and said that he applied on 26 May 2016. When asked about the application form his evidence was that 'I think something wrong with the writing … Where it says '16' it should say '15'. .' 1. Again when pressed on the date or whether he applied for the insurance before or after starting the job, Mr Shehata advised: 'Yes, I applied for the insurance after I started the work'. 1. The applicant's further evidence was that he completed the work on the Riverstone job in August 2016. Mr Shehata said that he went to the insurance broking office in Ryde New South Wales and the officer there helped him fill in the form. He stated that he did not mean it and that: the main thing was the work, not the paper thing. The Tribunal understood these statements to mean that Mr Shehata was concerned or focussed on the building work and not on the paperwork. Mr Shehata was asked about the Occupation Certificate for the building and whilst acknowledging knowledge of those matters, advised that they were not his concern, in that he did not know what had happened about those issues, only that he had played his part and did the (building) work. It is clear from the material produced by the respondent that this 'broking office' was the Housing Industry Association (HIA) Office. 1. Mr Shehata gave the following further evidence about the Riverstone job. When the owner paid me money to start the job we did. Had not finished the job before the form was filed in. I obtained the insurance from an officer at the HIA. 1. Between the two hearing dates the respondent had obtained further material under summons and Mr Shehata was recalled to be examined about matters arising from that material. 2. Mr Shehata made a submission about the import of the action taken by the respondent against him personally and his Company. In his view the respondent could not take action against him personally but only the company. He elaborated the submission further stating that in respect of action against the Company, Fair Trading was limited in its inquiries and action to matters involving fraud. The issue of building defects was not (in Mr Shehata's view) a matter for Fair Trading but essentially only a matter to be addressed by insurance. 3. The respondent took Mr Shehata to the findings of fact by the Tribunal in proceedings HB 17/07322 and the reasons of 10 May 2018. In those reasons there was reference to Mr Shehata wishing to claim that further items were excluded from the Riverstone job than the seven identified. The Scott Schedule for the construction items identified 12 items seven of which were excluded. The other five (incomplete) items were not excluded and as a result part of the contract for which Visual Building was liable to complete the work. Those items are listed at [8] above. 4. The Tribunal observed the following about this point in the reasons for decision: I find those 5 items were not part of the excluded works. (the remaining items in the Scott Schedule were part of the excluded works.) Mr Shehata had no other evidence to support his assertions that he is not responsible for those works. On the basis that the 5 items were part of the building contract (because they were not excluded) I maintain my previous findings that Visual is liable for those items. There is no evidence or even submission disputing the applicants' experts costing set out in the Scott Schedule. 1. Mr Shehata gave evidence that he was the sole owner of the Company and the sole Director. He stated that he used an accountant to manage all of the financial affairs of the Company. He also advised that Fair Trading's role in his view was to only protect the customers and that they had no business in involving themselves in quality or completeness of construction matters. In Mr Shehata's view these matters were solely within the authority of certifiers and local councils. 2. Whilst he conceded that he filed two review applications with the Tribunal, in respect of the application in his own name Mr Shehata maintained that Fair Trading had no ability to move against him individually, only the Company. He had lodged the second application in order to correct that issue. He said that as he is not a company then there is no basis to pursue him. 3. In cross-examination Mr Shehata was asked to confirm that he was a sole Director, which he did. He was taken to Exhibit 'R-5' where the respondent had produced a copy of Fair Trading application form concerning the Business Licence application. Mr Shehata was asked whether he filled in the form and if so whether he read it prior to signing it. His attention was drawn to the attestation information in the declaration section on page 5 of the form. 4. However Mr Shehata's further evidence on this point was that he went to the office for help, and he did not complete these forms in isolation. 'R-5' also contained a Business Registration ASIC Certificate dated the day prior to the licence application. Mr Shehata confirmed that the signatures at the bottom of the other forms in 'R-5' being the forms nominating a qualified supervisor, were his and that he had read the explanatory notes, but had help with the forms. 5. When questioned about the relevant nominated supervisors for the Company Mr Shehata re-iterated his earlier evidence that these persons were never employed by the Company. His evidence was that they helped him out for free. When questioned about having ticked the boxes on the forms indicating that the supervisors were employees (pages 8 and 10 of 'R-5) Mr Shehata advised that was a mistake and was incorrect. 6. Mr Shehata was questioned about the Home Warranty Insurance application. He confirmed that it was his signature on the form and stated that the form was filled in at the HIA Office with his writing and office assistance. Mr Shehata confirmed that the nominated dates on the form were wrong, but said that he: ' ..got help from the man there. The forms are incorrect.' 1. Mr Shehata was asked whether he knew that Penrith City Council refused to issue a construction certificate in respect of another job which the respondent had summonsed and served material about. Mr Shehata knew of this development and that they (the Council) subsequently issued a demolition notice / certificate requiring demolition. This matter related to construction at Cadar in Penrith Local Government area. That matter had been subject to litigation in the District Court of New South Wales where the owners Messrs Armistead and Patisso had obtained judgment in the sum of $651,536 in addition to costs. Visual Building Constructions Pty Ltd was the builder and defendant in that matter. 2. Mr Shehata outlined how he had appealed to the Court of Appeal about the matter. (That matter is currently before the Court where a security for costs decision had been made in the owners favour on 29 April 2019). 3. Mr Shehata was questioned about the matter of the construction certificate. His understanding was from the advice of Fair Trading that it was the owner's responsibility not the builder's responsibility to obtain the certificate. Respondent's submissions at hearing 1. The respondent submitted that the Tribunal had authority to vary the decision. In respect of the evidence concerning the HIA office and the assistance that Mr Shehata was given, their inquiries has identified a Mr T Butler as the broker who dealt with Mr Shehata at the time. Mr Butler no longer worked for HIA. 2. Then respondent also submitted that Mr Shehata and Visual Building carried out building without a construction certificate irrespective of any debate about who was responsible for obtaining the certificate. The carrying out of work without the certificate is a breach of the statutory warranty and this resulted in the requirement for the owner to demolish the construction. 3. The respondent replied in submissions to Mr Shehata's argument that the dispute is not finalised due to the Court of Appeal proceedings. In the absence of any stay and the fact that there are other disciplinary grounds, the Court of Appeal matters do not have any impact of these current proceedings. Those proceedings relate to contractual disputes and matters relating to orders of the District Court and the Tribunal. These Occupational Division proceedings are concerned with the disciplinary action taken in respect of both Mr Shehata and the Company. 4. The respondent's main concern with the applicant at the conclusion of the evidence was his apparent lack of insight and understanding of his obligations in respect of licenced building. Applicant's submissions 1. Mr Shehata's case is that he is not responsible for any of the issues, but that the Company is. He restated his position that he is not the Company. His understanding was that action could only be taken against the Company, not himself. In addition his submission was that the only action that could be taken against the Company was in relation to fraud – nothing else. 2. Mr Shehata submitted that he sought assistance with all of the forms. In respect of the Fair Trading forms he completed those at a Fair Trading office with their officer's assistance. In respect of the HIA insurance forms these were completed with the assistance of the broker. His position was that Fair Trading were trying to destroy him and this was not what they were allowed to do. 3. Mr Shehata disputed certain facts. As an example he referred to the issue as to when a construction certificate can be obtained. His submission was that it could be obtained at anytime, before, during or after construction had taken place. In addition the certificate was the owners responsibility not the builders. 4. Mr Shehata provided brief written submissions after the hearing as he requested some time to clarify his final arguments in the case. He took no responsibility for the content of the various regulatory forms that he submitted. In earlier submissions the central disputes were characterised as matters between the contracting parties. Various remedies were suggested by Mr Shehata as being the most appropriate method of redress instead of disciplinary action. A consumer could claim against the insurance or they could go to NCAT (Consumer and Commercial Division). If the later is the case then Mr Shehata believes that the consumer should not also approach Fair Trading about matters, as they have their course of redress already and should not get two goes at it. 5. On the reoccurring issue of supervision and oversight by Fair Trading, it was clear from his repeated submissions that Mr Shehata objected to this aspect. In support of his position he advised in closing submissions that he has a diploma in construction so he has the right to build unsupervised, and that not every builder has this. I note that the respondent has not raised any issue with Mr Shehata's qualifications, and to the extent that they are relevant I also note that whilst he was a Director of the Company, the Company contractor licence nominated a qualified supervisor (someone other than Mr Shehata). It therefore appeared that his industry-based role was not a matter that Fair Trading was dealing with, but rather his actions in respect of his Company. Respondent's written submissions 1. The respondent submitted that there were a number of irregularities with how Mr Shehata and the Company had operated in the residential home building area in New South Wales. 2. The problems began with the lack of a nominated supervisor which gave the respondent grounds to cancel the contractor licence for the Company where 30 days had elapsed without a nominated supervisor. The legislation provides: 22 Cancellation of contractor licences (1) The Secretary must, subject to the regulations, cancel a contractor licence that authorises its holder to contract to do residential building work or specialist work, or both (whether or not it also authorises the holder to contract to supply kit homes for construction by another person) if: (a) a period of 30 days (or any longer period that has been agreed on between the holder of the contractor licence and the Secretary) expires during which there has not been a nominated supervisor for the contractor licence, 1. The respondent submitted that the evidence indicated that Visual Building had not had a nominated supervisor since 13 October 2017. This itself was grounds to cancel the contractor licence under s 22 (1) of the HB Act. 2. The respondent also submitted that the evidence indicates that Mr Shehata had made a false or misleading application for insurance in dated 26 May 2016 where he stated that the work commenced 12 months later than it actually had. The respondent submitted that the matter of the insurance was only attended to after the new owner's conveyancer had raised it after the purchase had completed. This submission related to the s 103EA HB Act breaches as set out at [13] and [14] above. 3. The respondent also submitted that the findings by NCAT in the Consumer and Commercial proceedings should be adopted in these proceedings. Those findings (concerning the Company and Mr Shehata's role in the Riverstone construction job), if adopted establish that the Company had breached its statutory warranties. 4. The respondent also submitted that the failure of the Company (and Mr Shehata) to comply with the orders of the Tribunal (to pay the Chaloner's $8750.00) constituted a breach of s 42A (2) of the HB Act. 42A Automatic suspension of licence for failure to comply with order to pay money in relation to building claim (1) In this section: building claim has the same meaning as in Part 3A, and includes a claim for the payment of an unspecified sum of money that arises from a supply of building goods or services as referred to in section 48A. licence means a contractor licence (whether or not an endorsed contractor licence). (2) If the holder of a licence fails to comply with an order of a court or the Tribunal to pay an amount of money in respect of a building claim by the due date, the licence is, subject to this section, suspended until such time as the Secretary is satisfied that the order has been complied with. 1. Other breaches related to the District Court proceedings where the respondent submitted that the Company failed to notify Fair Trading of the order to pay $651,536 within seven days of the order in August 2018. This was a breach of s 48V (1) of the HB Act. 48V Requirement to notify Secretary of court order to pay money in relation to building claim (1) If the holder of a licence within the meaning of section 42A is ordered by a court to pay an amount of money in respect of a building claim, the licence holder must, within 7 days after the order is made, notify the Secretary in writing of the following particulars: (a) the amount of money ordered to be paid, (b) the date on which the money is due to be paid if such a date is specified in the order, (c) the name of the person to whom the money is to be paid, (d) such other particulars as may be prescribed by the regulations. Maximum penalty: 40 penalty units in the case of a corporation and 20 penalty units in any other case. 1. The respondent submitted that the Tribunal should receive the findings of the District Court in the cases of Armistead and Patisso as evidence in these proceedings in accordance with s 38 (2) of the NCAT Act. 2. The respondent referred to a number of cases concerning why Mr Shehata (and Visual as the Company) was not a fit and proper person to hold the licence under s 56 (b) of the HB Act. 56 Grounds for taking disciplinary action against holder of a contractor licence The Secretary may take disciplinary action under section 62 against the holder of a contractor licence on any of the following grounds: (a) .., (b) that the holder is not a fit and proper person to hold the contractor licence, 1. The case of Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 (Bond), was referred to as a lead case on determining some of these questions as to fit and proper. The case of Sobey v Commercial and Private Agents Board (1979) 22 SASR 70 was also referred to in submissions as was the case of the case of Hughes and Vale Pty Ltd v New South Wales (1995) 93 CLR 127. 2. Reference was also made to the relevant principles from the above cases as summarised in the case of AJO v Director General Department of Transport [2012] NSWADT 101. (AJO). These principles from AJO were further refined in Austin v Commissioner of Fair Trading & Anor [2016] NSWCATAP 179 where the Appeal Panel observed at [58]: 58. The passages from the authorities set out by the Tribunal (at [26]-[30]) emphasised: (1) The very purpose of the words "fit and proper" is to give the widest scope for judgment and for rejection on that ground. (2) "Fit" with respect to an office is said to involve honesty, knowledge and ability. (3) The expression "fit and proper" person, standing alone, carries no precise meaning. It takes its meaning from its context, from the activities in which the person is or will be engaged and the ends to be served by those activities. (4) Depending on the nature of the activities, the question may be whether improper conduct has occurred, whether it is likely to occur, whether it can be assumed it will not occur, or whether the general community will have confidence that it will not occur. (5) In certain contexts, character (because it provides indication of likely future conduct) may be sufficient to ground a finding that person is not fit and proper to undertake the activities in question. (6) The expression meant that an applicant needed to show not only that he has the requisite knowledge of the duties and responsibilities of the holder of the particular licence but also that he is possessed of sufficient moral integrity and rectitude to be accredited to the public as a person to be entrusted with the work the subject of the licence. 1. The respondent submitted that in the Home Building regime the concept of fit and proper can be further construed having regard to the statutory objects of the HB Act and the consumer confidence and protection elements. In Hutchings Electrical Pty Limited & Anor v Director General Department of Fair Trading [2004] NSWADT 23. In that matter the Administrative Decisions Tribunal (the ADT) set out the following matters: 118… In determining whether a person is fit and proper to hold a licence, the Tribunal does not consider this in isolation. The whole of the conduct of the appellant is taken into account. Proper regard must be had of the context also of the regulatory regime: Young Taek Chong Hongv Tomazin (1994) ASC 56-283 at 58,984. As already noted above, the intention of the Act is consumer protection. The accreditation of a person as a building contractor (or a qualified supervisor) under the Act means that a person can be held out to the public as being not only possessed of acceptable building expertise, irrespective of size or complexity, but is a person of integrity and honesty: Hughes & Vale Pty Limited v State of New South Wales 93 CLR This jurisdiction has recognised the significance of the consumer protection aspect of licensing in a number of cases. In Bournelis v Building Services Corporation, Commercial Tribunal of New South Wales, 9 June 1995, unreported at 5, it is stated: "Members of the public must have confidence in builders both from the perspective of standard of work and honesty. Consumers place their trust and their money in builders and often rely on their advice at times which are often stressful, that is, the renovating, extension or building of a home. Consumers must be sure that the confidence they place in builders is not abused. They should be able to assume that builders adhere to the proper standards of trust and honesty." 1. Further submissions were made on the issue of whether Mr Shehata himself was guilty of improper conduct under s 54 (1) of the HB Act as a member of a partnership or corporation, by being a Director of the Company. The respondent submitted that the evidence establishes that Visual as the holder of a contractor licence no. 246868C, is guilty of improper conduct, and that Mr Shehata as the sole Director of Visual is guilty of improper conduct under s 54(1). 2. In closing submissions the respondent addressed whether Mr Shehata had any defence to the s 54 (1) matters under s 54 (3) being a lack of knowledge of the conduct, and not being in a position to influence the outcome, or had undertaken all due diligence to prevent such an outcome. The respondent submitted that as he was the sole Director and the Company principal and the signatory to the relevant instruments, then such a defence is not available to Mr Shehata. Consideration and findings 1. On the question of 'fit and proper' the cases set out the relevant considerations. When assessing conduct based on a decision and action the case of Bond referred to such a decision as being a 'value judgement … by the decision maker..' . Did Mr Shehata make a clear decision to do the things of which he is accused? The process of determining fit and proper is an imprecise description and derives its meaning from 'its context, from the activities in which the person is or will be engaged and the ends to be served by those activities' (from Bond). 2. Consistent with the general principles of determining fitness and propriety the cases often refer to the three characteristics of: character, honesty and integrity. These matters are also addressed in the case of Hughes and Vale Pty Ltd v New South Wales (1995) 93 CLR 127. 3. In the case of Bournelis v Building Services Corporation Commercial Tribunal of New South Wales, unreported 9 June 1995 in addressing the consumer protection aspects of the building licencing regime in NSW the Tribunal stated: ".. the public must have confidence in builders both from the perspective of standards of work and honesty .. they should be able to assume that builders adhere to the proper standards or trust and honesty." 1. I note that Bournelis was also referred to by the ADT in Hutchings. 2. It is clear from a consideration of the evidence in these proceedings that the applicant seeks to illustrate and explain his conduct in a manner which attempts to justify his actions. The exchanges by the applicant in both his oral and written testimony (the signed statements Exhibit 'A-2' 15 June 2018, Exhibit 'A-3' 3 September 2018, Exhibit 'A-4' 27 February 2019 and a post hearing unsigned written submission filed on 29 March 2019) show a somewhat discursive position. At other times his evidence is dismissive of facts and the role of the regulator. Mr Shehata appears to take issue with the actions of Fair Trading who he is dismissive of and reluctant to engage with. 3. However whilst on the one hand he characterises their role and function as solely related to dealing with consumers, at other times he defers to their role and function as being responsible for assisting him with his various applications and assuming responsibility for any omissions on his behalf. This is clearly illustrated in his evidence about the completion of the details of the contractor licence application in behalf of the Company. It is clear to me that Mr Shehata was responsible for completing the form (either with or without independent advice). His evidence indicates that a number of matters were not properly attended to, such as the nomination of the supervisors as employees. There was a further matter raised concerning a March 2012 application where an individual was nominated as Director of Visual when they were not nor had they ever been a Director. 4. A further matter concerning the home warranty insurance was addressed by Mr Shehata with a similar approach to his earlier matters concerning the contractor licence forms. In my view the evidence indicates that Mr Shehata lays the blame for the inclusion of the incorrect date on the HIA application form with the broker. However an alternate version is that Mr Shehata needed to include the 2016 date rather than the correct 2015 date about the Riverstone construction job, as to do otherwise would have established that he was applying for the insurance retrospectively. 5. In respect of the Court matters Mr Shehata offered no evidence as to why he had not notified the regulator of the orders against the Company. His evidence was that these matters are still pending (due to appeals and ongoing matters awaiting finalisation), and if these matters resolved in his favour then all the adverse matters would fall away. Such a position does not relieve Mr Shehata from his obligations under 48 (1) of the HB Act. Nor do his appeals (in the absence of any stay) relieve him of the position created by s 42A (2) of the HB Act suspending his licence for failure to pay a penalty or judgement order or otherwise comply with an order of a court or the Tribunal. 6. On my assessment of the evidence it is clear that Mr Shehata and Visual have failed to comply with those orders and as such by operation of the HB Act the licence is deemed suspended. It is therefore open to the regulator (the respondent) to take action to give effect to that provision. 7. I make the following findings on the evidence before me in respect of the applicant Company Visual Building and the sole Director Mr Y Shehata: * The Company has not had a nominated supervisor since 13 October 2017. * The applicant submitted an application of nominated supervisor consent declaration form dated 23 August 2013 containing inaccurate information. * The applicant submitted an application for contractor form dated 20 September 2013 containing inaccurate information. * The applicant submitted an application of nominated supervisor consent declaration form dated 18 July 2017 containing inaccurate information. * The applicant gave false or misleading information in a Home Building Compensation Fund Project Application for insurance dated 26 May 2016. * The applicant entered into a contract for residential building work and received payments in respect of that work at 31 Grantham Street Riverstone NSW before obtained home warranty insurance. * The applicant failed to comply with the Tribunal Order in HB17/07322 * The applicant did not comply with the order of the District Court in proceedings No 2016/384392 and 2016/384311. * The applicant failed to notify Fair Trading of the order of the District Court in proceedings No 2016/384392 and 2016/384311. * The applicant carried out construction / residential building works at 33 Cadda Ridge Drive Cadar without a construction certificate. Fit and proper considerations 1. As mentioned earlier in these reasons, the respondent referred to the lead cases on this issue. 2. In Hughes and Vale Pty Ltd v New South Wales (No 2) [1955] HCA 28 at paragraph 9 sets out the considerations which make up the meaning of the expression. Dixon CJ, McTiernan and Webb JJ said at paragraph 9 that: The expression "fit and proper person" is of course familiar enough as traditional words when used with reference to offices and perhaps vocations. But their very purpose is to give the widest scope for judgment and indeed for rejection. "Fit" (or "idoneus") with respect to an office is said to involve three things, honesty knowledge and ability: "honesty to execute it truly, without malice affection or partiality; knowledge to know what he ought duly to do; and ability as well in estate as in body, that he may intend and execute his office, when need is, diligently, and not for impotency or poverty neglect it" - Coke. 1. The Tribunal was also taken to the case of Australian Broadcasting Tribunal v Bond [1990] HCA 33 where Toohey and Gaudron JJ at paragraph 36 of the decision addressed the issue. 36. The expression "fit and proper person", standing alone, carries no precise meaning. It takes its meaning from its context, from the activities in which the person is or will be engaged and the ends to be served by those activities. The concept of "fit and proper" cannot be entirely divorced from the conduct of the person who is or will be engaging in those activities. However, depending on the nature of the activities, the question may be whether improper conduct has occurred, whether it is likely to occur, whether it can be assumed that it will not occur, or whether the general community will have confidence that it will not occur. The list is not exhaustive but it does indicate that, in certain contexts, character (because it provides indication of likely future conduct) or reputation (because it provides indication of public perception as to likely future conduct) may be sufficient to ground a finding that a person is not fit and proper to undertake the activities in question. 1. As is usually the case, the regulator's position is that the import of these cases is that the Tribunal should note that the notions of 'fitness' etc. take their meaning from the context. 2. I note the case of Ng & anor v Commissioner for Fair Trading, NSW Office of Fair Trading & anor [2007] NSWADT 259 is relevant in showing that a lack of consciousness that an applicant has for their actions is a relevant consideration. At paragraph 71 the Tribunal observed: (Emphasis added) 71 In Director-General, Department of Fair Trading v. Cohen [2000] NSWFTT 3 (cited in Younan [2007] NSWADT 170 at [26]; and Harb [2007] NSWADT 175 at [60]) the Fair Trading Tribunal outlined a series of factors which might be relevant to the assessment of an appropriate penalty. They were: - the nature, width and extent of the contraventions - the loss or damage and prejudice in consequence of the contraventions - the circumstances in which the contraventions took place - whether the licensee has been found to have engaged in any similar conduct - the presence of fraudulent or dishonest intent and deliberation on the part of the licensee - the extent of carelessness or wilfulness of the conduct - the efforts made to correct the situation and what measures have been taken by the licensee - what consciousness the licensee (a) had (b) displayed, of its obligations under the relevant statute and to the owners - the effect upon the licensee - antecedents - attitude, building history and future compliance - the penalty range. 1. It is unclear from some of the evidence to hearing whether Mr Shehata is conscious of all of the failings, or had signed off those matters as legitimate due to either his misunderstanding of the provision or deliberate disregard for them. In the current matter the respondent relied on a number of grounds to take the disciplinary action that they took, notwithstanding Mr Shehata's position that no action should have been taken against him individually. 2. I have carefully considered all of the material submitted by the parties in these proceedings. It is clear from the evidence and submissions that the applicant was ultimately responsible for the matters referred to in my findings above. 3. In my view as one of the requirements to be considered fit and proper includes knowledge, I have difficulty in accepting the submission that the applicant genuinely believed that he was attending to the necessary matters, and that others had to accept culpability for any errors or omissions. I reject that submission. 4. The provisions of the Legislation require the holder of the relevant licence to be conversant with certain matters. 5. Many cases of the ADT and this Tribunal have found that the holder or applicant of a licence or authority is not a fit and proper person where their conduct equates to a breach of a legislative provisions including a criminal provision. I see no reason on the available evidence and the seriousness of the breaches as to why I should depart from such an approach. 6. The decisions of the respondent in respect of both Visual Building and Mr Y Shehata were in my view open to then on the available evidence. However following the receipt of further evidence at hearing it appears that there is more evidence or evidence by way of admissions to which greater weight can be applied, 7. I therefore make a finding that both the Company (for the purpose of the HB Act provisions) , and Mr Shehata are not fit and proper persons or entities to hold the relevant authority having regard to my assessment of the evidence following the findings, and noting the principles as set out in the main authorities on this point. 8. Section 62 of the HB Act sets out the nature of disciplinary action available to the respondent. 62 Disciplinary action that may be taken by Secretary If, after compliance with this Division, the Secretary is satisfied that any ground on which disciplinary action may be taken against the holder of an authority has been established in relation to the holder, the Secretary may do any one or more of the following: (a) determine to take no further action against the holder, (b) caution or reprimand the holder, (c) make a determination requiring the holder to pay to the Secretary, as a penalty, an amount not exceeding $11,000 (in the case of an individual) or $50,000 (in the case of a corporation) within a specified time, (d) vary the authority held by the holder, by imposing a condition on the authority, including a condition requiring the holder to undertake a course of training relating to a particular type of work or business practice within a specified time, (e) suspend the authority for a period not exceeding its unexpired term, (f) cancel the authority, (g) disqualify the holder, either temporarily or permanently, from being any one or more of the following: (i) the holder of any authority, or any specified kind of authority, (ii) a member of a partnership, or an officer of a corporation that is a member of a partnership, that is the holder of an authority, (iii) an officer of a corporation that is the holder of an authority. 1. In my view the applicable penalties were clearly within the available range, and there is no application to vary the penalty by either party. The applicant clearly wants the penalties set aside. I decline to do so. In declining that aspect of the application I have regard to the findings that I have made. Again I note that the evidence against both Mr Shehata and the Company appears greater following the receipt of further evidence and testing of the available evidence during the hearing process. Having regard to the fact that Mr Shehata is not on notice of any adverse variation, I impose no additional matters. Conclusion 1. For the reasons set out above, the Respondent's decision that Visual Building and Mr Y Shehata are not fit and proper persons to hold a contractor licence under the HB Act will be affirmed. Orders 1. The decision of the respondent in each matter is affirmed. 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: 13 June 2019