Allcastle Homes Pty Ltd v Wilkinson

Background and decision of the Tribunal at first instance

1. Mr and Mrs Wilkinson entered into a tender agreement with Allcastle for the construction of a home known as the "Grandview 48.5." The tender agreement provided for the base price for the construction of the home together with site and custom variation costs, making a total tender price for the construction of the home of $449,000. The tender agreement provided as follows: The base price can be fixed subject to the following conditions: Our company receiving a non-refundable initial Plan Preparation Fee of the balance of four thousand dollars ($4000) within seven (7) calendar days from the original tender date. The client completing all external colour selections and structural variations within forty (40) calendar days from the original tender date. Payment of an additional $4000 is requested at this meeting. The HIA building contract being signed by the owner(s) within sixty (60) calendar days from the original tender date and the balance of 5% deposit paid. Final plans with your variations will then be prepared for lodgement to approving authorities. Commencement of construction commences no later than 30th September, 2014, one hundred and fifty (150) calendar days from the original tender date. Note: Allcastle Homes Pty Ltd reserves the right to increase pricing to current pricing and current base price if all of the above conditions are not met.
2. There were further terms and conditions as follows: This offer supersedes all previous offers or advertised or promoted offers and is not transferable to other parties. No legal obligation or liability exists between either party until the HIA building contract has been signed by the owner(s). If the acceptance of tender conditions [on] have not been complied with, the base price will become current list price or aligned with current list price. Other items may also change to reflect current prices. All your selections and specifications will be fully set out in the building contract, which the contract tender forms part of. Previous negotiations, representations or advertised offers, whether written or verbal, that are not set out in the written contract when signed do not form part of the selections, specifications or inclusions of that contract. The tender and home designer subject to the requirements of all approving authorities. Approving authorities frequently change conditions: every effort is made to obtain approval but it is not guaranteed. Approving authorities may require design and specification changes at additional cost.
3. Mr and Mrs Wilkinson accepted the tender agreement on 5 May 2014 and paid various amounts to Allcastle as specified. They completed their colour selections and on 29 August 2014 Allcastle submitted a contract to Mr and Mrs Wilkinson which they say was submitted late but, more importantly, was in breach of the tender agreement. The Wilkinsons contended that the contract submitted was not in accordance with the HIA Plain Language Edition 6 building contract, as contemplated by the tender agreement, as it was substantially amended. Mr and Mrs Wilkinson refused to sign the contract and, after protracted negotiations, commenced proceedings in the Tribunal.
4. After considering the submissions of the parties, including the cases referred to by both parties which have also been the subject of submission in this appeal, the Tribunal concluded as follows: I find that the applicants claim as pleaded currently (albeit in a draft form) is a building claim within the meaning of section 48O of the Home Building Act 1989 and it follows that the Tribunal has jurisdiction to determine it.
5. The Tribunal relied on the decision of Basten JA in the NSW Court of Appeal decision of Grygiel v Baine [2005] NSWCA 218.
6. The reference to s 48O was in error. The Tribunal clearly intended to refer to s 48A, which is the relevant provision containing the definition of "building claim." There was no dispute about this at the hearing of the appeal.

Legislative framework

1. The Tribunal has jurisdiction to hear and determine any "building claim" brought before it in which the amount claimed does not exceed $500,000 (s 48K of the HB Act). The definition of "building claim" is set out in s 48A of the HB Act.
2. Given the issue in dispute is the construction of s 48A, it is convenient to set out the relevant legislative provisions.
3. Section 48A(1) relevantly provides as follows: "building claim" means a claim for: (a) the payment of a specified sum of money, or (b) the supply of specified services, or (c) relief from payment of a specified sum of money, or (d) the delivery, return or replacement of specified goods or goods of a specified description, or (e) a combination of two or more of the remedies referred to in paragraphs (a)-(d), that arises from a supply of building goods or services whether under a contract or not, or that arises under a contract that is collateral to a contract for the supply of building goods or services, but does not include a claim that the regulations declare not to be a building claim. "building goods or services" means goods or services supplied for or in connection with the carrying out of residential building work or specialist work, being goods or services: (a) supplied by the person who contracts to do, or otherwise does, that work, or (b) supplied in any circumstances prescribed by the regulations to the person who contracts to do that work.
4. Section 3 of the HB Act provides that the definitions for the HB Act are set out in Sch 1, Cl 2(1) of sch 1 provides as follows: (1) In this Act, "residential building work" means any work involved in, or involved in co-ordinating or supervising any work involved in: (a) the construction of a dwelling, or (b) the making of alterations or additions to a dwelling, or (c) the repairing, renovation, decoration or protective treatment of a dwelling.
5. Clause 2(2) provides for certain work to be expressly included as "residential building work" and cl 2(3) provides for certain work to be expressly excluded. Neither provision includes feasibility or preparatory work other than cl (3)(d) (site preparation work for a moveable dwelling) and cl (3)(j) (demolition work).

Grounds of appeal and submissions of the parties

1. Allcastle submitted that the Wilkinsons' claim for damages was not a "building claim" within the meaning of s 48A of the HB Act because it was not a claim "that arises from a supply of building goods or services." The term "building goods or services" has been considered by the Supreme Court in a number of cases and those cases have determined that this phrase means the physical construction or alteration of a dwelling. It does not include preliminary or ancillary work, such as feasibility studies, design work or work relating to approvals. The claim by Mr and Mrs Wilkinson arises from their complaints about breach of the tender agreement, which is "self-evidently preparatory to the carrying out of physical construction work." It therefore does not arise from the supply of building goods or services.
2. Allcastle relied on the Supreme Court decisions of Woolfe v Alexander Sussman t/as Sussman Construction Consulting Services Pty Ltd [2001] NSWSC 702; Collings Homes v Head & ors [2002] NSWSC 1219 and Provincial Homes v Doyle & ors [2004] NSWSC 624 and distinguished the decision in Grygiel v Baine, being the decision relied on by the Tribunal at first instance. It is contended that the Tribunal erred in failing to follow Woolfe and Provincial and by misapplying Grygiel v Baine and AIM Partnership v Rathchime [2010] NSWSC 860. It was submitted that the claim is therefore not a building claim and the decision should be set aside.
3. Mr and Mrs Wilkinson submitted that the tender agreement included obligations under a plan preparation agreement which required Allcastle to do certain works, including the preparation of a contour survey, soil tests, and architectural plans. Based on Grygiel v Baine, which has been followed by the former Consumer, Trader and Tenancy Tribunal and by this Tribunal, a claim for damages for breach of the tender agreement is a claim for payment of a specified sum of money that arises from a supply of building goods or services, being those goods or services that were supplied under the tender agreement. This includes work that is preparatory to construction of a dwelling. The Tribunal did not err in following Grygiel v Baine and was in fact bound to do so. The Tribunal was therefore correct in finding that Mr and Mrs Wilkinson's claim was a "building claim." The Tribunal has jurisdiction to determine the application under the HB Act and the appeal should be dismissed.
4. In written submissions, the Wilkinsons submitted that the second limb of s 48A applied because this was a claim under the tender agreement which was collateral to a contract for the supply of building goods or services. However, this ground was not pressed at the hearing, presumably because no building contract was subsequently entered into.

Consideration

1. As noted by McDougall J in AIM Partnership v Rathchime [2010] NSWSC 860 at [15] the definition of building claim "draws attention to the confused and circular definitions within the relevant provisions" in the HB Act. A building claim includes a claim for the payment of a specified sum of money that arises from a supply of building goods and services. Building goods and services, among other things, includes goods or services supplied for or in connection with the carrying out of residential building work by the person who contracts to do the work. Residential building work means, among other things, any work involved in the construction of a dwelling.
2. The Supreme Court has considered the definition of "building claim" in a number of cases over the years.
3. In Provincial Homes, Wood CJ focused on the necessity for physical construction work and found that the services supplied in respect of which the claim arose were not services that fell within the meaning of building services as defined by s 84(1) of the HB Act (which was in identical terms to the current s 48A).
4. The claim which was the subject of dispute in Provincial Homes was not dissimilar to the claim made in the current proceedings. It was a claim for damages arising out of a tender agreement which encompassed the preparation of plans and specifications, the submissions of plans to relevant authorities, the procurement of a survey and engineering designs and certificates, and the construction of a home, subject to the parties entering into a formal HIA contract. The claim was for financial loss caused by the alleged failure of Provincial Homes to prepare the necessary drawings, specifications, and drainage plans for submission to Council in a competent manner and obtain approval within a reasonable time leading to delays, which was said to entitle the Doyles to terminate the contract and to recover damages.
5. Relevantly, Wood CJ concluded (following Woolfe and Collings Homes): 57 In my view they did not fall within the meaning of that expression, which is defined to mean "services supplied for or in connection with the carrying out of residential building work". In this regard the authorities previously mentioned have, in my view correctly, confined the services that fall within that definition to those that relate to the carrying out of physical construction work. Preparatory design and approval work has been excluded, even though its performance was a necessary precursor to a potential home owner having a dwelling constructed. 58 The present case is not on all fours with Collings Homes or Woolfe, however the interpretation of the legislation there adopted seems to me to bring about the same result. That follows from the circumstance that it is the categorisation of the claim, which must be one that "arises from a supply of building...services" that determines jurisdiction. 59 While it may be relevant to refer to any contractual arrangement between the parties to determine what services were to be supplied, the mere fact that the contract includes a commitment to construct a dwelling will not, of itself, be enough to attract jurisdiction. As I have observed, the touchstone for jurisdiction depends upon the services supplied from which the claim arises. 60 I do not consider that the words "supplied for or in connection with" the carrying out of residential building work, can properly be regarded as extending jurisdiction to claims that arise in relation to services that were supplied in relation to feasibility, design, procurement of approvals, and similar preliminary work, prior to the commencement of building. The legislative intent, in my view, was to regulate the building or construction phase and those services which are directly supplied for or in connection with its performance.
6. In contrast, Basten JA in Grygiel v Baine at [58] observed that "the carrying out of residential building work" should be treated as descriptive of the building services and therefore contemplated that there may be building goods and services within the meaning of s 48A where no residential building has been carried out. His Honour referred to Woolfe and Collins Homes, although not Provincial Homes, and while not expressly overruling those cases, observed: 57 It is not necessary to determine whether, in relation to the first limb of the definition, services can be supplied "for or in connection with" the carrying out of residential building work, for the purposes of the definition of "building goods or services", where no residential building is in fact carried out. On one view, the definition of "residential building work" is not limited to activities, such as laying foundations and painting a building, on site, but extends to work of a preparatory nature. Alternatively, preparatory work could be said to have a sufficient connection with the carrying out of building work because its purpose was to give rise to residential building work and it had a sufficient causal nexus with such work: see generally, Technical Products Pty Ltd v State Government Insurance Office (Qld) [1989] HCA 24; (1989) 167 CLR 45 at 47-48 (Brennan, Deane and Gaudron JJ). Accordingly, it is at least arguable that project management arrangements, of the kind address in both Collings Homes cases, would fall within the definition of "building claim". Were that not the case, distinctions would need to be drawn which might have an arbitrary result, at least from the perspective of the homeowner. Thus, where an architect or project manager provides plans and designs, locates a builder and coordinates and supervises the actual building work, any loss suffered as a result of inadequate coordination and supervision would fall within the building claim, but other conduct would not. 58 That is not to say that the jurisdiction of the Tribunal under the Home Building Act should be expanded beyond the proper construction of the terms used in Part 3A. The fact that the Tribunal has a jurisdiction under that Part up to $500,000, whereas its current jurisdiction under the Consumer Claims Act is limited to $25,000, demonstrates the need to maintain proper limits on the jurisdiction. Nevertheless, to the extent that the statutory terminology permits, those limits should not be arbitrary, nor should an unduly restrictive construction be given to the words of the statute, especially to the extent that they mirror the terminology of the Consumer Claims Act. Of particular concern would be a construction which meant that services of a project manager might fall within the definition of "building claim" where residential building works actually eventuated, but not otherwise. Such a distinction can be avoided if the phrase "the carrying out of residential building work" is treated as adjectival, in the sense that it is descriptive of the services with which a connection must be established, rather than being treated as a factual pre-condition to the necessary connection. [emphasis added]
7. Grygiel v Baine was an appeal from the decision of Master Malpass, which dismissed an appeal from the decision made by the former Consumer, Trader and Tenancy Tribunal refusing the joinder of a party on the ground it had no jurisdiction. One of the issues for determination by the Court of Appeal was whether the claim against a solicitor, alleging negligent advice in relation to a building contract, was a building claim for the purposes of the HB Act. Basten JA, with whom Mason P agreed, found the claim was a building claim because it related to the terms on which the builder supplied building services.
8. This issue was considered in AIM Partnership and, while accepting the analysis in Woolfe and Provincial Homes at [17] to [19] and noting the comments of Basten JA in Grygiel v Baine at [20] to [21], McDougall J stated that the services which were the subject of dispute were of a different nature to the earlier cases. His Honour stated at [22]: The question in this case is one that requires consideration with a full understanding of the nature of the works undertaken by AIM. It does not seem to me to be possible to say, in some a priori way, that works that could be described as demolition, sewer diversion, bulk excavation and associated works are simply incapable of being residential building work. If that is so, then it cannot be said, again a priori, that the claim is not a building claim.
9. And further at [23]: A number of architectural drawings was identified, as was a number of structural and civil drawings. The Court did not have the benefit of seeing those drawings. If, on examination, it appeared that the work described in them comprised work that could be residential building work then it might be possible to conclude that, following the statutory chain of definitions, there was in this case an underlying building claim.
10. Allcastle submitted that the observations made by Basten JA were obiter dicta, and therefore not binding. Physical construction work had been undertaken in Grygiel v Baine and it was not necessary for the Court to determine the question of whether there was a building claim where no residential building was carried out. The present case was on all fours with Provincial Homes, related to preparatory work where no physical construction work was undertaken and therefore did not come within the definition of building goods or services. Allcastle submitted that it was relevant that the Court of Appeal did not refer to Provincial Homes and did not overrule Woolfe.
11. Allcastle also relied on AIM Partnership, which was said to accept the reasoning and findings in Woolfe and Provincial Homes. According to Allcastle, even if it is accepted that the phrase "the carrying out of residential building work" is adjectival, the Wilkinsons' claim does not arise out of a contract to supply goods or services for the carrying out of residential building work but rather arises out of a contract to supply goods or services which are preliminary to the carrying out of such work.
12. The Wilkinsons submitted that the observations made by Basten JA at [57] were not obiter because the issue for determination was whether the legal advice claim constituted a building claim. As such, the construction of s 48A was central to the dispute. When closely analysed, AIM Partnership was not saying that the comments of Basten JA in Grygiel v Baine were wrong. In any event, the decision was necessarily limited because it was dealing with joinder and costs. In summary, it was submitted by the Wilkinsons that Grygiel v Baine was authoritative and there was no new statement of principle in AIM Partnership that would diminish the relevance and principles laid out by the Court of Appeal.
13. The difficulty with the definition of "building claim" is that it contains a number of definitions within one provision and is circular if interpreted literally. Furthermore, the authorities are not definitive in that Grygiel v Baine does not expressly overrule the earlier cases and AIM Partnership is somewhat equivocal. Nonetheless, both cases focus on the nature of the claim and the characterisation of the services from which the claim arises.
14. In Grygiel v Baine the claim which was said to enliven jurisdiction was a claim for negligence against the solicitor related to the terms on which the builder supplied building services. It was found that such a claim could properly be described as a claim for payment that arises from a supply of building services. While Basten JA noted the width of the provision, his Honour also described the boundaries as follows at [62] and [63]; 62 The question is whether each of these cases gives rise to a "building claim" for the purposes of s 48A. In my view, the cases in which the section is satisfied include those which specifically involve the terms of the contract between the homeowner and the builder. The case where the negligence of the solicitor was in failing to comply with a request to search the title to see if the occupant having the work done was in truth the homeowner, would not involve a "building claim" because, whilst the supply of building services provides the occasion on which the builder suffers a loss, the claim against the solicitor gives rise to no substantial dispute about the nature of the supply or the terms on which the building services were supplied. In such a case the claim should not be characterised as a claim for a specified sum arising from the supply of building services. This construction may be understood to flow from a reading of the definition of "building claim" as a whole and adopting a purposive approach, consistent with the objects and scheme of the Home Building Act. 63 Whilst such a line must be drawn in an appropriate case, in my view the claim in the present case is a building claim because, as pleaded, it related to the terms on which the builder supplied building services.
15. His Honour referred to Woolfe and Collings Homes, but not Provincial Homes, because the Court of Appeal was considering the arguments raised on the appeal about the jurisdiction of the Tribunal. The Tribunal had concluded, relying on Woolfe and Collings Homes, that it did not have jurisdiction to hear the claim as a building claim. While Basten JA did not expressly overrule those cases, it is clear his Honour did not accept their narrow construction of s 48A, finding that a building claim could include "preparatory work" and that "it is at least arguable that project management arrangements, of the kind address(ed) in both Collings Homes cases, would fall within the definition:" Grygiel v Baines at [57].
16. We accept the submission of the Wilkinsons that, based on the authority of Grygiel v Baine, the definition of building claim should be "read widely and generously" (refer Philip Bambagiotti, Building Disputes and the Home Building Act 1989 (NSW) (1st ed 2012, Law Book Co.) at 125). This decision is authoritative. Basten JA, with whom Mason P agreed, specifically opined on the meaning and scope of s 48A. We also accept the submissions of the Wilkinsons that there is no real inconsistency between this decision and the later decision of AIM Partnership. Both decisions focus on the nature of the claim and how it arose and both conclude that "the carrying out of residential building work" is not confined to physical construction. The words "for or in connection with" are wide enough to extend to preparatory work that has the purpose to give rise to residential building work (see Grygiel v Baine at [57] and AIM Partnership at [20] to [23]).
17. Accordingly, the critical issue is the characterisation of the claim and whether it "arises from" the supply of "building goods or services," which is a definition that should be given broad application.
18. The claim which is the subject of the proceedings arises from rights said to have accrued under the tender agreement, namely the alleged entitlement to be provided with an HIA contract in a certain form for the construction of a project home at a fixed price by a certain date. The claim does not arise from any allegation about services provided under the tender agreement, unless it can be alleged, and this was not raised during the hearing of the appeal or in submissions before the Tribunal at first instance, that the obligation to provide an HIA contract in particular form is a "service."
19. The current claim, as pleaded, is a cause of action that arises under a contract that contains obligations to provide, based on a wide construction, "building goods or services." The question is whether s 48A is wide enough to cover such a claim or whether a distinction should be made because the claim arises out of a contract, which includes the supply of building goods or services, rather than a claim that arises out of the supply itself. This issue turns on the meaning of "arises from."
20. As noted by Malpass AsJ when considering the meaning of "building claim" in Vero Insurance Ltd v Buckle [2008] NSWSC 73 at [49], The relevant dictionary meanings attributed to the word "arising" invoke the concepts of "to come into being", "to originate", "to emerge" or "to result from".
21. The phrase "arises from" is broad but relies on there being a sufficient causal relationship between the claim and the relevant supply.
22. It is clear that the preparatory work under the tender agreement had the purpose of giving rise to contemplated residential building work and, as already noted, should therefore be characterised as a supply of building services. The provision of these services under the tender agreement was inextricably connected with the obligation of Allcastle to proffer, and the Wilkinsons to accept, an HIA contract covering an agreed scope of residential building works at an agreed price. Accordingly, the claim arising out of the tender agreement has a sufficient causal nexus with the preparatory work supplied under the tender agreement to be a building claim within the meaning of s 48A.
23. It does not matter that a building contract was not subsequently entered into or that physical construction was not commenced or completed. Allcastle is correct in contending that the contract for the supply of goods or services under the tender agreement was preliminary to the carrying out of residential building work but, for the reasons we have already outlined, the supply was nonetheless "for or in connection with the carrying out of residential building work" which was in contemplation. As observed by Basten JA at [57] and particularly at [58], to construe s 48A otherwise would be unduly restrictive and arbitrary.
24. We therefore find that there was no error of law made by the Tribunal in following Grygiel v Baine and determining it had jurisdiction to hear the claim under s 48K of the HB Act. The appeal is dismissed.

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: 05 January 2016