Aleksander Gvozdenovic and Audrey Gvozdenovic v Greig Sparling

NCAT Consumer and Commercial|2014-12-19

reasons for decision

The Applicant filed proceedings against the Respondent in the Tribunal on 5 September 2014.
The Applicant is the owner of residential premises in Bellevue Hill NSW. The Respondent is a licenced builder. The Applicant alleges that in 2006 the parties entered into a contract for the Respondent to perform residential building work at the Applicants' residential premises, with such work being the construction of a first story addition to the premises comprising of 3 bedrooms, an ensuite, and a balcony (which housed 2 plantar boxes). The Applicant alleges the residential building work was not performed in a proper and workmanlike manner, and initially sought damages of $35,000.00 by way of the cost of rectification. By way of an amended application filed on 20 October 2014, the amount of damages sought by the Applicant was amended to $18,182.47.
The Respondent denied that the work was not performed in a proper and workmanlike manner, and asserted that the proceedings had been filed outside the limitation period under Section 48K of the Home Building Act 1989 ('the Act').
The matter was listed before the Tribunal on 29 September 2014 when it was adjourned with various directions made. The matter was again listed before the Tribunal on 29 October 2014, when the matter was set down for a hearing to determine the issue of jurisdiction only, and directions were made to the parties in respect of the filing and serving of evidence on the issue of jurisdiction.

APPLICANT'S WRITTEN SUBMISSIONS

The Applicant relied on an outline of submissions filed with his documents. The submissions can be summarised as follows: 1. Clause 8 of the written contract stated that when the builder ('contractor') believed the work was complete, the builder must notify in writing the owner "in writing certifying that work was complete under the contract". The Respondent had never notified the Applicant in writing that the work was complete; 2. No occupancy certificate had been issued by Woollahra Council; 3. Clause 8 of the written contract states that work is completed when the builder "has finished the work in accordance with the contract documents and any variations, it is free of defects, any damage of the kind referred to in Clause 19 has been repaired and all surplus material and rubbish has been removed from the site". The Respondent had not performed work free of defects and had not adequately repaired defects; 4. The builder engaged a plumber to do work in August 2008, and the contract was still on foot as of August 2008; 5. The builder performed work in September 2010 to enclose plantar boxes, which was not rectification work. Any limitation period must accordingly run from September 2010; 6. There had been "continued water leaks" from the balcony since September 2007, which had never been successfully rectified by the Respondent. Accordingly, Clause 8 of the contract had "never been satisfied", and any limitation period had not expired.

APPLICANT'S ORAL EVIDENCE AND SUMBISSIONS

At the hearing, the Applicant gave oral evidence consistent with his written submissions. The Applicant did not give any extensive evidence elaborating upon the defects nor the precise rectification work done by the Respondent (including the work of Megasealed Bathrooms Pty Ltd) and its effect on his ability to use the premises for its intended purpose. Rather, the Applicant relied upon the contemporaneous emails sent to the Respondent listing the problems, and further asserted that the work the Respondent performed in on the plantar boxes in 2010 meant the relevant limitation period had not expired.
The Applicant stated that he and his family had lived in the house throughout the work performed by the Respondent.

RESPONDENT'S DOCUMENTS, EVIDENCE, AND SUBMISSIONS

The Respondent filed and served a Statutory Declaration dated 9 December 2014, with attachments. The Respondent's evidence in the Statutory Declaration can be summarised as follows: 1. The written contract was signed on 6 September 2006; 2. The plans and specifications were not lodged by the Respondent with Woollahra Council. It was the responsibility of the Applicant, not the Respondent, to obtain an occupation certificate. The Respondent "suggested" an engineer, but the engineer was engaged by the Applicant, not the Respondent; 3. The date of practical completion was "the last week of May 2007" after the Respondent had completed various items set out in a written document of the Applicant dated 30 April 2007 (a copy of which was attached to the Statutory Declaration); 4. A "final cash payment" was made by the Applicant on 1 June 2007, which was noted and initialled at page 28 of the contract (a copy of this page was attached to the Statutory Declaration). The respondent denied receiving a further payment of $7,000.00 or a payment of $3,311.00 on 15 August 2008. Such amounts are listed on the payments made schedule in the contract, but not initialled by the Respondent. The payments of $7,000.00 and $3,311.00 are also referred to in the handwritten notes of the Applicant in the document from the Respondent to the Applicant dated 7 May 2007. 5. The tax invoice of the plumber dated 12 October 2007 was for plumbing work in respect of gas flow problems. The Respondent denied having arranged for the plumber to attend the site, and stated that any such work was engaged directly by the Applicant. The Respondent asserted by October 2007 he had been "off the site" for approximately 4 months; 6. The work performed in September 2010 in respect of the plantar boxes was not rectification work to the balcony, but was a separate agreement to move and cover the plantar boxes, which the Respondent quoted for separately and issued a tax invoice. According to the Respondent, the Applicant had "contacted me in August 2010 and requested that I remove the soil and fill in the plantar boxes"; 7. After 31 May 2007, the Respondent had entered into other contracts to perform residential building work, and was not still completing the work at the Applicant's residence.
In oral evidence, the Respondent asserted that he had attended the Respondent's premises over a number of years to perform rectification work regarding water leaks on the balcony at his own expense, but asserted that, other than the payment regarding work involving the plantar boxes, the last payment he received for work under the contract was 1 June 2007. The Respondent asserted that the work on the plantar boxes was minor; that such work had been requested by the Applicant; and that such work was "not part of the contract" to construct the balcony.

RELEVANT LEGISLATION AND LEGAL PRINCIPLES

The Applicant's claim against the builder is based upon alleged breach of the warranties implied into the contract to do residential building work under Section 18B of the Act. Section 18B states as follows: "18B Warranties as to residential building work The following warranties by the holder of a contractor licence, or a person required to hold a contractor licence before entering into a contract, are implied in every contract to do residential building work: (a) a warranty that the work will be performed in a proper and workmanlike manner and in accordance with the plans and specifications set out in the contract, (b) a warranty that all materials supplied by the holder or person will be good and suitable for the purpose for which they are used and that, unless otherwise stated in the contract, those materials will be new, (c) a warranty that the work will be done in accordance with, and will comply with, this or any other law, (d) a warranty that the work will be done with due diligence and within the time stipulated in the contract, or if no time is stipulated, within a reasonable time, (e) a warranty that, if the work consists of the construction of a dwelling, the making of alterations or additions to a dwelling or the repairing, renovation, decoration or protective treatment of a dwelling, the work will result, to the extent of the work conducted, in a dwelling that is reasonably fit for occupation as a dwelling, (f) a warranty that the work and any materials used in doing the work will be reasonably fit for the specified purpose or result, if the person for whom the work is done expressly makes known to the holder of the contractor licence or person required to hold a contractor licence, or another person with express or apparent authority to enter into or vary contractual arrangements on behalf of the holder or person, the particular purpose for which the work is required or the result that the owner desires the work to achieve, so as to show that the owner relies on the holder's or person's skill and judgment."
The limitation period for actions based on breach of statutory warranties is contained in Section 18E of the Act. The limitation period under Section 18E of the Act was amended by the Home Building Amendment Act 2011, which was proclaimed on 1 February 2012. However, the contract to perform residential building work the subject of these proceedings was entered into prior to the amendments to the Act arising from the Home Building Amendment Act 2011. Schedule 4 Clause 109 of the Act states that the amendments to Section 18E of the Act caused by the Home Building Amendment Act 2011 do not apply "in respect of a contract for residential building work entered into before the commencement of the amendment". Accordingly, Section 18E as it applies to contracts entered into prior to 1 February 2012 (i.e. including the contract the subject of this dispute) states: "18E Proceedings for Breach of Warranties (1) Proceedings for a breach of a statutory warranty must be commenced with 7 years after: (a) the completion of the work to which it relates, or (b) if the work is not completed: (i) the date for completion of the work specified or determined in accordance with the contract, or (ii) if there is no such date, the date of the contract."
The jurisdiction of the Tribunal to hear and determine building claims is set out in Section 48K of the Act. Relevantly, Section 48K states as follows: "48K Jurisdiction of the Tribunal in relation to building claims … (7) The Tribunal does not have jurisdiction in respect of a building claim arising from a breach of statutory warranty implied under Part 2C if the date on which the claim is lodged is after the end of the period within which proceedings for a breach of the statutory warranty must be commenced (as provided by section 18E)"
The Tribunal has no power under Section 81 of the Civil and Administrative Tribunal Act 2013 ('the NCAT Act') to extend the limitation period under Section 48K(7) of the Act, as Section 81 of the NCAT Act only operates when the Tribunal has jurisdiction, it does not give the Tribunal power to create jurisdiction when no jurisdiction exists. (Myers v Vero Insurance Ltd [2009] NSWCTTT 698; Owners Corporation SP 53127 v Fair Trading Administration Corporation [2005] NSWCTTT 230; Kizas v Lawteal Pty Ltd [2010] NSWCTTT 257.
To determine when the limitation period commences, the Tribunal must identify the date of the "completion of the work" under the contract. Section 3B of the Act was introduced by the Home Building Amendment Act 2011. Schedule 4 Clause 106(a) of the Act provides that Section 3B of the Act applies to all contracts of residential building work "commenced or completed" prior to 1 February 2012 (emphasis added). Unlike the amendments to the limitation period in Section 18E of the Act, the new Section 3B of the Act applies to these proceedings (Griffiths v Gates [2013] NSWCTTT 302 at [46]; The Owners Strata Plan No 78670 v Cavill Properties Pty Ltd [2014] NSWCATCD 218 at [16]). Further, the proceedings have been filed in the Tribunal after, rather than before, the introduction of Section 3B into the Act (Reeda Investments Pty Ltd v Tooma [2013] NSWCTTT 445 at [58] and Schedule 4 Clause 107 of the Act).
Section 3B of the Act states: "3B Date of completion of residential building work (1A) This section does not apply to residential building work to which section 3C applies. Note. Section 3C provides for the date of completion of new buildings in strata schemes. (1) The completion of residential building work occurs on the date that the work is complete within the meaning of the contract under which the work was done. (2) If the contract does not provide for when work is complete (or there is no contract), the completion of residential building work occurs on practical completion of the work, which is when the work is completed except for any omissions or defects that do not prevent the work from being reasonably capable of being used for its intended purpose. (3) It is to be presumed (unless an earlier date for practical completion can be established) that practical completion of residential building work occurred on the earliest of whichever of the following dates can be established for the work: (a) the date on which the contractor handed over possession of the work to the owner, (b) the date on which the contractor last attended the site to carry out work (other than work to remedy any defect that does not affect practical completion), (c) the date of issue of an occupation certificate under the Environmental Planning and Assessment Act 1979 that authorises commencement of the use or occupation of the work, (d) (in the case of owner-builder work) the date that is 18 months after the issue of the owner-builder permit for the work. (4) If residential building work comprises the construction of 2 or more buildings each of which is reasonably capable of being used and occupied separately, practical completion of the individual buildings can occur at different times (so that practical completion of any one building does not require practical completion of all the buildings). (5) This section applies for the purposes of determining when completion of residential building work occurs for the purposes of any provision of this Act, the regulations or a contract of insurance under the Home Building Compensation Fund."
In respect of the limitation period under Section 18E (1) of the Act (and concomitantly, the jurisdiction of the Tribunal under Section 48K (7) of the Act), the relevant 7 year limitation period must not have expired prior to 5 September 2014 for the Tribunal to have jurisdiction. The period of 7 years should calculated in the manner set out by Senior Member Meadows in The Owners Strata Plan No 78670 v Cavill Properties Pty Ltd [2014] NSWCATCD 218 at paras [25]-[28]. Accordingly, if the date of completion of the work under Section 3B of the Act is before 5 September 2007, the proceedings are out of time.

APPLICATION OF LAW TO FACTS

As Senior Member Smith stated in Griffiths v Gates [2013] NSWCTTT 302 at [66] in respect of Section 3B of the Act: "The section is clearly intended to explore which of a variety of possible dates can be established and applies the earliest of those dates as being the date from which the warranty runs".

Section 3B(1)-The Date That The Work is Complete Within the Meaning of the Contract

If Section 3B(1) is satisfied, and the relevant date is prior to 5 September 2007, it will be unnecessary to consider the provisions of Section 3B(2) and (3).
Clause 5 of the contract states that work must commence within 10 working days from the date of the contract or the date on which any relevant statutory authority gives written notification of approval or consent. Clause 6 of the contract states that the work must be completed within 24 weeks from the date of commencement of the work, subject to any extension of time under Clause 7. Clause 8 of the contract states that the work will be complete when the contractor has finished the work "…in accordance with the contract documents and any variations, it is free of apparent defects, any damage of the kind referred to in Clause 19 has been repaired and all rubbish and surplus material has been removed from the site".
Clause 8 of the contract also stipulates that when the contractor believes the work is complete, the contractor must notify the owner in writing that the work has been completed in accordance with the contract. The owner then has 10 business days from receipt of the written notice to advise the contractor in writing of any items that the owner believes are incomplete or defective. If no such notice is given by the owner, the work is taken to be complete. If such notice is given, the contractor must attend to completion promptly, and again give written notice to the owner. Unless the owner gives the contractor a further written notice about incomplete or defective work within 10 business days, the work is taken to be complete.
The Tribunal accepts the evidence of the Applicant that the Respondent never gave written notice of completion of the work in accordance with Clause 8 of the contract. The Tribunal does not accept that the document of the Respondent dated 7 May 2007 entitled "Extras and Variations" satisfies the requirements of Clause 8 of the contract, as it is simply in the form of an itemised account and makes no reference to the builder giving notice that the work is complete.
However, the Tribunal rejects the Applicant's argument that, because Clause 8 of the contract was not complied with by the Respondent, the limitation period has not expired. If this argument is correct, in all cases where there was a written contract and Clause 8 had not been complied with, the limitation period would never expire. Such a construction is illogical. Rather, the appropriate construction is that if Section 3B (1) cannot be satisfied (as is the case here), it is necessary to then consider when the date of "practical completion" under Section 3B (2) and (3) occurs.

Section 3B(2) and (3)-When Was Work Completed Except for Any Omissions or Defects That Do Not Prevent the Work Being Reasonably Capable of Being Used For Its Intended Purpose?

The Respondent's evidence is that the last payment made under the contract was 7 June 2007, consistent with the Respondent having attended to completion of items identified by the Applicant in May 2007. The Applicant asserts that a further payment was made on 15 August 2008 in respect of plumbing work. The Respondent denies that he engaged the plumber. In any event, even if there was plumbing work done in August 2008, there is no evidence that such work was an omission (or a defect) that prevented the second story addition being reasonably capable of being used for its intended purpose. The invoice of the plumber dated 12 October 2007 does not indicate that any work done on that occasion prevented the work being reasonably capable of being used for its intended purpose. Rather, from the end of May 2007, it appears that the second story addition to the house (and in particular the balcony) was reasonably capable of being used for its intended purpose.
There is no doubt that there has been water leaking issues with the balcony over a number of years. For example, in his email to the Respondent dated 17 July 2011, the Applicant states "Over the last 3 years the external balcony constructed by you has not been fit for purpose…the problem has been with us for over 3 years and the recent attempt to rectify the problem has been in progress for the last 3 months…". In that email, the Applicant gives notice that unless the defects are rectified, he will be "pursuing legal avenues". The Applicant also put the Respondent on notice of his intention to take legal proceedings in 2013 if satisfactory rectification work did not occur. It is clear the Respondent has performed rectification work to the balcony on a number of occasions over the years.
However, there was little evidence provided by the Applicant about the effect of the defective work on the Applicant's ability to use the structure for its intended purpose. There was no evidence that the Applicant and his family had to move out while rectification work was performed. There was no evidence that water leaks were of such severity that they caused damage to any furniture or belongings of the Applicant. Although there are photographs of significant damage to the gyprock ceiling of the premises in July 2013 (presumably in the living room below the balcony), which appear to have been taken in the course of the builder conducting rectification work, there is no evidence about how long those repairs took, or the effect upon the Applicant's ability to reasonably occupy the premises.
The Applicant refers to the Respondent conducting "structural work" in August 2009, being the replacement of the beam above the bi-fold doors. However, it is clear that such work was not the subject of a separate contract, and was rectification work. There being no evidence that if affected the Applicant's ability to reasonably occupy the premises, whether or not the work was structural or non-structural is irrelevant.
In respect of Section 3B (3) (c) of the Act, the Applicant points to the fact that no occupation certificate has been issued. However, as Senior Member Smith pointed out in Griffiths v Gates [2013] NSWCTTT 302 at [65]-[68], the date of practical completion is presumed under Section 3B(3)(c) to be the earliest, not the latest, of the relevant criteria set out in Section 3B(a)-(d), and the fact that an occupation certificate has not been issued does not mean that a date for practical completion of the work under Section 3B(a) or (b) has not been established. The provisions of Section 3B (d) clearly do not apply.
In respect of Section 3B (3)(a) of the Act and Section 3B(b) of the Act, the Tribunal finds that the date on which the contractor handed over possession of the work; and the date on which the contractor last attended the site to carry out work (other than work to remedy any defect that does not affect practical completion) was no later than 1 June 2007, when the Applicant paid the Respondent $7,700.00 after the Applicant had given the Respondent written notification in May 2007 of work required to complete the contract. Accordingly, the date of practical completion is no later than 1 June 2007, subject to the findings below about the plantar boxes.
The Tribunal rejects the argument of the Applicant that the work performed by the Respondent to the plantar boxes in September 2010 was a variation of the original contract, because the variation provisions under Clause 13 of the contract have clearly not been complied with, and the date of practical completion had long expired in any event.

SEPARATE CAUSE OF ACTION BASED ON TORT?

The application filed on 5 September 2014 was not drafted by a lawyer and contains no points of claim. The application appears to be solely based on breach of statutory warranties under Section 18B of the Act. However, for the sake of completeness, the Tribunal considers whether the Applicant could bring a claim in the tort of negligence in respect of the manner in which the rectification work was performed, or the work under the contract prior to completion of the work. The relevant limitation period under Section 48K (3) of the Act is 3 years from the date of supply of the building goods and services.
This issue, and the provisions of Section 48K (8) of the Act, were considered in detail by Senior Member Smith in Reeda Investments Pty Ltd v Touma [2013] NSWCTTT 445. In particular, Senior Member Smith discussed the Court of Appeal decision in Atkinson v Crowley [2011] NSWCA 194 and the decision of Senior Member Harrowell (as he then was) in Owners SP 69050 v Glenzeil Pty Ltd [2013] NSWCTTT 17. The Tribunal concurs with and applies the findings of Senior Member Smith at paras [92]-[94] and [103] in Reeda Investments Pty Ltd v Touma. Accordingly, the Applicant is also statute barred in the Tribunal (although not necessarily a Court, where the separate provisions of the Limitations Act 1969 apply) in respect of any claim in negligence.

THE WORK PERFORMED ON THE PLANTAR BOXES

The Respondent conceded that the work he performed on the plantar boxes in September 2010 (the subject of his tax invoice dated 8 September 2010) was not rectification work, and was the subject of a separate contract. Accordingly, there is a separate limitation period for that work, being 7 years from the date of completion of that work (as set out in Section 3B of the Act) in respect of the statutory warranties under Section 18B of the Act.
However, these proceedings are clearly based upon alleged water leaks from the balcony due to failure to adequately take waterproofing measures, with such issues being present well before September 2010. There is no evidence that any defective work performed in September 2010 to the plantar boxes has caused any water leaks. If such evidenced is adduced the Applicant may have an arguable cause of action in respect of the work performed in September 2010. There would be difficulties in proving that water leaks are attributable to the work performed in September 2010 rather than arising from the work completed before 1 June 2007 and the concomitant work to repair. However, no such evidence has been adduced in these proceedings, nor has the Applicant limited his claim to the work performed in September 2010 to the plantar boxes (which the Respondent says was minor work). If any such cause of action is agitated by the Applicant in the Tribunal, it must be the subject of separate proceedings.

CONCLUSION

For the reasons expressed above, the current proceedings are statute barred in the Tribunal and are dismissed. G.J. Sarginson General Member Civil and Administrative Tribunal of New South Wales 6 March 2015 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 May 2015

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