Asasi Enterprises Pty Ltd v Department of Finance and Services

NCAT Occupational|2013-07-16

reasons for decision 1These matters were commenced in the General Division of the Administrative Decisions Tribunal ("the ADT") pursuant to the Administrative Decision Tribunal Act 1997 ("the ADT Act"). On 1 January 2014, the ADT was abolished and its functions were taken over by the Civil and Administrative Tribunal of New South Wales ('NCAT'). The present decision is therefore a decision of NCAT. However, because the proceedings to which it relates are 'part heard proceedings' as defined in clause 6(1) of Schedule 1 of the Civil and Administrative Tribunal Act 2013, they are to be determined as if that Act had not been enacted (see clause 7(3)(b) of this Schedule). 2These matters relate to determinations by a delegate of the Director-General under the Home Building Act 1989 ("the HBA"). 3Nasser Asasi was the holder of a contractor licence under the HBA. He is a director of and was the nominated supervisor for Asasi Enterprises Pty Ltd ("the company") a corporate licensee under the HBA. 4In May 2013 the delegate of the Director-General determined to cancel Mr Asasi's individual contractor licence and disqualify him for a period of 2 years. The delegate also determined to disqualify the company from holding a licence for two years. 5This action by the Director-General followed on two complaints made to Fair Trading about work undertaken by the company. The first of these concerned allegedly defective building work carried out in early 2010 by the company at residential premises in Bronte ("No. 65") and consequential damages to the house next door ("No. 63"). The second concerned allegedly defective work in the course of construction of a block of residential units at Maroubra ("Maroubra"). 6Following these complaints, the Respondent's Inspectors, Norman Foster and Patrick Daley, conducted separate site inspections at the relevant properties; met with the Applicants and consumers to discuss the issues in dispute. The Inspectors then issued Rectification Orders on the Applicants. 7The Applicants failed to comply with the Rectification Orders. Inspector Foster prepared a Building Inspection Report for the No. 63 and No. 65 properties and Inspector Daley prepared a report for the Maroubra property. 8The Building Inspection Reports set out findings on: (1)breach of statutory warranty under the HBA; (2)defective/incomplete work; and (3)the Applicants' responsibility; and (4)how the defective work at the No. 65 property caused consequential damage to the No. 63property. 9In relation to No. 65 and No. 63 it is alleged that the Initial demolition, excavation and underpinning works to the foundations of the common wall between No. 65 and No. 63 ("the common wall") resulted in failure of the foundations to the common wall footing. That work was undertaken by the company's engaged subcontractor, Precision Piling ("Precision"). Rotation of a section of the footing resulted in subsequent cracking and failure of a section of the wall and foundations, to the hallway and the adjoining walls at No. 63. It is also alleged that the Applicants failed to accept responsibility for the failure of the foundation to the common wall. 10The Respondent's allegations can be summarised as follows: No. 65 Incomplete Items - Incomplete gutter system allowing continual water ingress into No. 65 and No. 63. - Failure to address and rectify footing failure due to underpinning works resulting in delays to construction of No. 65 and extensive consequential damages to No. 63. Non compliance with Rectification Orders 5954 (No. 63) and 5955 (No. 65) - Failure to install tie downs to garage and loft area at rear as per AS 1684 - Failure to complete works as per contract documents with practical completion of 8 February 2010 and failure to comply with Rectification Order no. 5955 - make good damage to common wall and provide engineer's scope and certification of work and new program for completion of all works by compliance date of 18 June 2010. No. 63 Defective items - Failure of foundation and footing caused by demolition, excavation and underpinning works to No. 65 resulting in substantial structural damages to No. 63 and failed masonry walls to internal and external of dwelling along with water ingress and damages to roof. - Failure by the company to complete roofing and guttering system modifications to No. 63 necessary to allow construction works at No. 65 has allowed water ingress into bathroom of No. 63 with water damage to walls, ceiling and vanity. The builder failed to attempt even temporary repairs to prevent continual water ingress and damages from occurring over an extended period. - External consequential damages to No. 63 caused by the company as a result of residential building works at No. 65. Maroubra Defective items - There is evidence of elevated moisture readings indicating water penetrating town houses 1, 3 and 4, above the internal access stairs to the basement garage resulting in damage to the walls and paintwork. - The masonry gate post to unit 1 has separated from the adjoining masonry fence due to inadequate allowance for movement in the masonry fence. - The render to front elevation unit 2 has become drummy and cracked due to missing or inadequate control/movement joints being fitted. - The render to court yard return wall adjacent water tank unit 2 has become drummy and cracked due to missing or inadequate control/movement joints being fitted. - There is evidence of water penetration to bedrooms 1 and 2 of unit 3 under the sliding doors causing damage to carpet due to inadequate or missing sill flashings. - The render to front elevation unit 3 has become drummy and cracked due to inadequate control/movement joints being fitted. - The render to front elevation unit 4 has become drummy and cracked due to control/movement joints not being fitted. - The repaired rendering over the water tank in the court yard unit 4 has not matched the finish of existing render finish creating a rough unsightly appearance against the original smoother rendered finish. - The render has cracked and is drummy to several locations in the common area due to inadequate or missing control/movement joints. - There is evidence of the basement car park roof slab leaking in 4 locations due to a probable failure of a waterproofing membrane. This has potential to result in corrosion of the steel reinforcement in the concrete slab which could result in failure of the slab if not rectified. Incomplete items - The contractor has not completed rectifying the external court yard walls of each unit where he carried out investigative works and repairs. 11In proceedings conducted in the Consumer, Trader and Tenancy Tribunal the owners of No. 65 obtained an order against the company for an amount of $214,674.67. Mr Asasi said that the order had not been satisfied but there was no indication as to whether it had been the basis of an insurance claim. 12The following reports were considered: No. 65 property - Inspector Foster's Building Inspection Report dated 20 July 2010 - T.O.P. Consulting Group Pty Ltd dated 22 December 2009 and supplementary report dated 5 February 2010 - Zimmerman Engineers dated 3 June 2010 - Core Project Consulting Pty Ltd dated 30 November 2011 and 17 November 2011 No. 63 property - Inspector Foster's Building Inspection Report dated 20 July 2010 Maroubra property - Inspector Daley's Building Inspection Report dated 18 November 2011 - Integrated Consultancy Group Building Inspection Report dated 2 December 2009 - Integrated Consultancy Group Supplementary Building Inspection Report dated 4 February 2010 13The delegate of the Director-General determined that the Applicants were guilty of improper conduct within section 51(1)(c) the HBA for: (1)breach of a statutory warranty to perform work in a proper and workmanlike manner and in accordance with plans and specifications at the Maroubra and the No. 65 properties; and (2)consequential damage to the No. 63 property. 14The delegate determined that the grounds for taking disciplinary action against the individual and company under section 56(c) of the HBA were established and the determinations were made. 15Both Mr Asasi and the company have applied to the Tribunal for external review of those determinations. Both applications were heard together before Senior Member Molony, over three days of hearing, The Director-General was represented by Ms Burke, while Mr Asasi represented the company and himself. During the hearing considerable attention was paid to the nature and severity of the alleged defective work. 16However after the initial hearing of the matter, Senior Member Molony became unavailable. The President of NCAT determined to substitute the Senior Member for myself as permitted under section 52 of the Civil and Administrative Tribunal Act 2013 (the NCAT Act) and sought the parties' views in accordance with the provisions of section 52. 17The Registrar of the Tribunal wrote to the parties in respect of the section 52 'substitution' issue. Neither party objected to me determining the matter. In the absence of any submission to the contrary, the Tribunal was reconstituted in accordance with section 52 (3) of the NCAT Act. 18I have had the benefit of examining the full transcript of the hearings held before Senior Member Molony. I have read those transcripts and I have also listened to the recordings of the hearings. I have considered the material provided by both parties. I have taken that into account even though I may not specifically refer to all of the evidence, material and submissions in these reasons.

Mr Asasi's bankruptcy 19In the course of final submissions Mr Asasi disclosed for the first time that he is bankrupt. He also said that the company was under control of a trustee. 20This led to Ms Burke conducting an ASIC search which revealed that the company was still registered, but that application for voluntary deregistration had been lodged on 15 February 2011. The search also showed that Mr Asasi had resigned as a director and secretary of the company on 20 April 2012. A Bankruptcy search also showed that Mr Asasi is an undischarged bankrupt. 21The results of this search were discussed with the parties as part of the hearing. Mr Asasi remained insistent that the company was under external management. This led to Senior Member Molony giving Mr Asasi an opportunity to put on material from his accountant concerning the status of the company, and for the Director-General to make consequential submissions. 22Mr Asasi subsequently provided a letter dated 21 October 2013 from VLC Partners, Chartered Accountants, who advised that the company "is not under external administration nor has it been deregistered." Mr Asasi also provided a letter from his trustee in bankruptcy advising that he had been appointed on 20 August 2012.

The consequences of Mr Asasi's bankruptcy 23Section 22(1)(c) of the HBA says that the Director-General must disqualify the holder of a contractor licence if that person becomes bankrupt. It says: 22 Cancellation of contractor licences (1) The Director-General 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: (c) the holder of the contractor licence or, in the case of a holder that is a partnership, any partner of that holder, becomes bankrupt, applies to take the benefit of any law for the relief of bankrupt or insolvent debtors, compounds with his or her creditors or makes an assignment of his or her remuneration for their benefit, 24This means that irrespective of the merits or otherwise of the Director-General's decision to cancel Mr Asasi's contractor licence on the grounds of defective works and breach of warranty, section 22 requires that Mr Asasi's contractor licence be cancelled. A further consequence of Mr Asasi's bankruptcy is that he will become ineligible to hold a contractor licence - but not a tradesperson certificate -for a period of 3 years after he is discharged from bankruptcy: see section 20 of the HBA and clause 25(1)(a)(xii) and (xiii) of the Home Building Regulation 2004 ("the Regulations"). This is greater than the two years disqualification imposed by the Director-General.

Background concerning No 65 and No 63 issues 25On 13 September 2009 the company entered into a contract with the owners of the house to make additions and alteration for a contract price of $460,138.56. The house is one of a duplex. Work commenced that month. 26In March 2010 Fair Trading received a complaint that the house at No 63 was indanger of collapse as a result of being undermined by foundation work at number 65. Inspector Foster inspected No 63 on 25 March 2010 and again on 29 March 2010. He found considerable damage to the property which he considered to be the result of foundation failure of the common wall due to underpinning works carried out at No 65. At that stage no remedial works had been undertaken at No 63. Mr Foster explained that No 63 was usually occupied by a 95 year old woman who had to move out to live with family, because she could no longer live inher house. 27An examination of the material filed by the Respondent pursuant to section 58 of the ADT Act reveals that by the time Mr Foster first attended at No 63 there was already an established and investigated dispute concerning the consequences of underpinning works undertaken by Precision at No 65. 28On 14 December 2009 the Principal Certifying Authority (PSA) for the works at No 65 , Anthony Patti, issued the following instructions to the owners of No 65 and to the builder: Further to telephone conversations and email correspondence earlier today having regard to concerns of structural damage and adequacy of the adjoining property at 63 ..., we now issue the above listed owners and the builder the following instruction: Engage a suitably qualified practising engineer to inspect and report on property damage to the subject premise in order to ascertain the following:

Damage to the adjacent masonry walls at 63 ...is or is not or are likely to be or not likely to be a direct result of excavation / underpinning works carried out adjacent to the property boundary at 65 ...
Should damage be or is likely to be the result of works at 65, the consulting engineer is required to certify that the damaged walls are structurally adequate and likely to remain in place until such time as an insurance claim is processed with remedial works undertaken; or produce a list of remedial works to be undertaken within a time frame as specified by the consulting engineer to ensure structural adequacy.
We are aware that both the builder for and owner's of No.65 have concerns with regard to the extent of liability by virtue of engaging a consulting engineer, and advise that this instruction is issued for the safety of building occupants living at the subject premise, and that the consulting engineers report be submitted to circumvent an Order being issued pursuant to the Table of Orders set out in Section 121 of the Environmental Planning & Assessment Act 1979.
We note that Mr Asasi, builder has verbally refused to engage a consulting engineer unless engaged on behalf of the property owner.
We have spoken with the owner's representative of the adjacent property at No.63 who are satisfied with a consulting engineer inspecting the subject premise on Wednesday 16 December 2009.
Please arrange for the consulting engineer to telephone or otherwise contact me on Wednesday 16 December 2009 in order to give me his findings having regard to the structural adequacy of damaged masonry walls to 63 ....
You are also encouraged to discuss an action plan as to who will carry out any immediate repairs or recommendations as reported by the consulting engineer should their recommendations require immediate action.
Please note that failure to act within the consulting engineer's specified time frame may result in Emergency Orders being issued pursuant to the Table of Orders set out in Section 121 of the Environmental Planning & Assessment Act 1979. 29Mr Vadim Topolinsky, a consulting structural engineer, inspected numbers 63 and 65 on 16 December 2009. His report is dated 22 December 2009. In it he advised that he had discussed the process used in undertaken the underpinning works with the sub-contractor who had been retained by the builder to do them. He reported considerable structural damage, cracking and resultant damage to No 63 as a result of movement. 30When discussing causes of movement he noted that:

The demolition by the builder of all cross walls with the building and the removal of all roof and ceiling framing had - ...exposed the cross-walls supporting the Southern Wall within the site to detrimental tensile stresses, which contributed to premature displacement and rotation initiated by footing settlements
Underpinning related movement - Mr Topolinski noted that the design called for "a vertically monolithic mass concrete pour to the full existing footing width with top 75, being grouted." Instead what was put in place were"sequential horizontal underpinning belts approximately 300-400mm in depth and to a partial existing footing width." He noted that there were 20-30mm gaps between belt layers which was said to be filled and dry packed with shrink compensated grout mix. Mr Topolinski wrote" I would question the Precision's ability to successfully dry pack a 20mm wide joint to depth of 400mm, as I would question the Precision's ability to produce a 32MPa hand batched and mixed concrete. It is also very likely that localised settlements would occur with each horizontal joint installation whilst the grout was gaining its compressive strength. This is consistent with larger amounts of damage observed in the Southern Wall where underpinning works using contiguous piling was not undertaken. The effects of the existing footing rotation due to an incomplete underpinning width or an incomplete joint grouting remains undetermined at this stage. This aspect must be further examined to establish the correct extent of required remedial works. 31Mr Topolinski suggested some further investigations and a broad outline of necessary remedial works. 32After Mr Topolonski's inspection the PSA wrote to the owners and builder on 21 December 2009 advising, inter alia, that:
the builder had been refused access to number 63 by the owners representative without a contract for the rectification works;
Mr Asasi has not agreed to enter into a contract for remedial works at this time;
the owner had vacated No 63; and
Mr Asasi was asked to advise in writing of: ...what action he now proposes to take with regard to the resolution of the structural damage likely to be caused as a direct result of building works where he is the principal contractor.

Applicable legislation 33Section 63 of the ADT Act says that in determining an application for review the Tribunal is to make the correct and preferable decision having regard to the material before it, and any applicable written or unwritten law. It is well established that in considering an application for review the Tribunal is not constrained to have regard only to the material that was before the Commissioner, but may have regard to any relevant material before it at the time of the review: Drake v Minister for Immigration and Ethnic Affairs (1979) 46 FLR 409. 34Section 3 of the HBA defines an "officer", in relation to a corporation, to have the same meaning as it has in the Corporations Act 2001 of the Commonwealth. Section 3 also defines "Director-General" to mean the Commissioner for Fair Trading, Department of Commerce. 35Section 18B(a) of the HBA provide: "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. " 36Section 18E of the HBA provides: 18E Proceedings for breach of warranties (1) Proceedings for a breach of a statutory warranty must be commenced in accordance with the following provisions: (a) proceedings must be commenced before the end of the warranty period for the breach, (b) the warranty period is 6 years for a breach that results in a structural defect (as defined in the regulations) or 2 years in any other case, (c) the warranty period starts on completion of the work to which it relates (but this does not prevent proceedings from being commenced before completion of the work), (d) if the work is not completed, the warranty period starts on: (i) the date the contract is terminated, or (ii) if the contract is not terminated-the date on which work under the contract ceased, or (iii) if the contract is not terminated and work under the contract was not commenced-the date of the contract ... 37Clause 71 of the Regulations provides: 71 Meaning of "structural defect" (1) For the purposes of sections 18E (1) (b) and 103B (2) of the Act, "structural defect" means any defect in a structural element of a building that is attributable to defective design, defective or faulty workmanship or defective materials (or any combination of these) and that: (a) results in, or is likely to result in, the building or any part of the building being required by or under any law to be closed or prohibited from being used, or (b) prevents, or is likely to prevent, the continued practical use of the building or any part of the building, or (c) results in, or is likely to result in: (i) the destruction of the building or any part of the building, or (ii) physical damage to the building or any part of the building, or (d) results in, or is likely to result in, a threat of imminent collapse that may reasonably be considered to cause destruction of the building or physical damage to the building or any part of the building. ... 38Section 48E of the HBA provides: 48E Inspector may make rectification order (1) If, after completing an investigation under section 48D, an inspector is satisfied: (a) that any residential building work or specialist work contracted to be done by the contractor is incomplete, or (b) that any residential building work or specialist work done by the contractor is defective, or (c) that the contractor, in the course of doing any residential building work or specialist work, has caused damage to any structure or work, or (d) that, as a consequence of any defective residential building work or specialist work done by the contractor, a structure or work has been damaged, the inspector may serve a written order on the contractor requiring the contractor to take such steps as are specified in the order to ensure that the work is completed or the defect or damage rectified, as the case requires. ... (3) A rectification order: (a) may specify conditions (including conditions with respect to the payment of money) to be complied with by the complainant before the requirements of the order must be complied with, and (b) must specify a date by which the requirements of the order must be complied with, subject to the complainant's compliance with any condition referred to in paragraph (a), and (c) must indicate that the order will cease to have effect if the matter giving rise to the order becomes the subject of a building claim before the date specified in accordance with paragraph (b). 39Section 48F of the HBA provides: 48F Effect of rectification order (1) Except as provided by section 51, a rectification order does not give rise to any rights or obligations. (2) Subject to section 48I, a rectification order ceases to have effect for the purposes of section 51 if the matter giving rise to the order becomes the subject of a building claim before the date specified in accordance with section 48E (3) (b). 40Section 48I of the HBA provides: 48I Application for determination of building claim (1) Any person may apply to the Tribunal for the determination of a building claim. (2) A building claim may be withdrawn by the claimant at any time. (3) If, immediately before a building claim was made, the claimant was subject to the requirements of a rectification order under Division 2, the building claim may not be withdrawn except with the leave of the Tribunal. (4) When granting leave to the withdrawal of a building claim referred to in subsection (3), the Tribunal may restore the rectification order referred to in that subsection. 41Part 4 of the HBA, comprising sections 49 to 83, contains provisions relating to disciplinary proceedings under the HBA.Section 51(l)(c) of the HBA 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: ... (c) breaches a statutory warranty," 42Section 52 of the HBA provides: 52 Improper conduct: assisting others The holder of a contractor licence, or of a supervisor or tradesperson certificate, is guilty of improper conduct if the holder aids or abets, or is knowingly concerned in any way in, the doing of any thing by another person in connection with residential building work or specialist work if the thing done: (a) constitutes improper conduct on the part of the person who did it, or (b) would constitute such conduct if the person who did it was authorised, by a contractor licence or certificate, to contract to do, or to do, the work concerned. 43Section 53(l)(b) of the HBA provides: "53 Improper conduct: nominated supervisors (1) The holder of an endorsed contractor licence or a supervisor certificate who has control over the carrying out of residential building work or specialist work of any kind is guilty of improper conduct if: ... (b) a breach of a statutory warranty occurs in the course of doing that work," 44Section 54 of the HBA provides: "54 Improper conduct: members of partnerships or officers of corporation (1) An individual who is a member of a partnership or an officer of a corporation that is the holder of a contractor licence or a building consultancy licence is guilty of improper conduct if the holder does any of the things referred to in section 51 or 52. ... (3) It is a sufficient defence to a complaint that an individual who is a member of a partnership, an officer of a corporation that is a member of a partnership or a director of a corporation (being a partnership or corporation that is the holder of a contractor licence) has been guilty of improper conduct if the individual proves to the satisfaction of the Director-General that: (a) the improper conduct occurred without the individual's knowledge, or (b) the individual was not in a position to influence the conduct of the other members of the partnership or other officers of the corporation, of which the individual was a member or an officer, so as to prevent the occurrence of the improper conduct, or (c) the individual, being in such a position, used all due diligence to prevent the occurrence of the improper conduct. (4) Disciplinary action for improper conduct may be taken against an individual who is a member of a partnership, an officer of a corporation that is a member of a partnership or an officer of a corporation (being a partnership or corporation that is the holder of a contractor licence) whether or not any such disciplinary action has been taken against the partnership or corporation. (5) Division 2 [of Part 4] applies to disciplinary action taken against an individual referred to in subsection (4) in the same way as it applies to disciplinary action taken against the holder of an authority, and references in that Division to the holder of an authority extend to an individual so referred to." 45Section 55 of the HBA defines "authority" in Division 2 of Part 4 to the HBA relating to disciplinary proceedings to mean a contractor licence, a supervisor certificate, a tradesperson certificate, or a building consultancy licence. 46Section 56 of the HBA relevantly provides: "56 Grounds for taking disciplinary action against holder of a contractor licence The Director-General may take disciplinary action under section 62 against the holder of a contractor licence on any of the following grounds: ... (c) that the holder is guilty of improper conduct," 47Section 61 of the HBA provides that where the Director-General is of the opinion that there are reasonable grounds for believing that there are grounds for taking disciplinary action under section 62 against the holder of an authority, a notice in writing may be served on the holder of the authority inviting the holder to show cause why disciplinary action should not be taken against the holder. 48Section 62 of the HBA relevantly provides: 62 Disciplinary action that may be taken by Director - General If, after compliance with this Division, the Director - General 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 Director - General 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 Director - General, 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, an officer of a corporation that is the holder of an authority. 49Section 103 of the HBA provides for professional indemnity and other insurance. Section 103B of the HBA provides: 103B Period of cover (1) A contract of insurance must provide insurance cover for loss arising from non-completion of the work for a period of not less than 12 months after the failure to commence, or cessation of, the work the subject of the cover. (2) A contract of insurance must provide insurance cover for other loss insured in accordance with this Act for a period of not less than: (a) in the case of loss arising from a structural defect within the meaning of the regulations-6 years after completion of the work, or (b) in the case of loss arising otherwise than from any such structural defect-2 years after completion of the work.

The Respondent's case 50The cancellation of the individual licence and the disqualification period for the company and the contractor licence are based on the alleged breach of statutory warranties under section 18B of the HBA and that the work done at No.s 63 and 65 and work done at four Maroubra apartments was not done in a proper and workmanlike manner and was also not done in accordance with plans and specifications. As Mr Asasi was the director of the company at the time he was responsible for the breaches by the company. 51The Respondent has provided a schedule in relation to the work done at number 65 and the Maroubra property which sets out the alleged defects or incomplete items. The schedule also sets out the consequential damage at number 63. It summarises the findings and explains the basis of the Respondent's contention that the Applicants are to be held responsible. 52Mr Daley attended the hearing and was cross-examined in relation to his inspection of the Maroubra property and in particular, the issuing of his rectification order and his follow-up inspection with respect to the items in the rectification order and with respect to his report. 53The Rectification Order in relation to the Maroubra property issued on 7 June 2011 required compliance by 26 August 2011 but was extended to 19 September 2011. 54The Respondent contends that the Applicants did not comply with the rectification order within the time specified. In response to Mr Asasi's assertion that rectification work at the Maroubra property was all completed by December 2011, Ms Bourke referred to a May 2012 letter from the solicitor for the Maroubra property owners' corporation to the company. The letter alleged that a number of defects remained and requested that neither the company nor its subcontract agents or servants enter the property for any purpose whatsoever. 55Mr Foster, Manager of the Respondent's Building Dispute Resolution and Inspection Branch, also attended the hearing and was cross-examined in relation to his inspection of the No. 63 and 65 properties and in particular, the issuing of rectification orders in relation to those properties, his follow-up inspection with respect to the items in the rectification orders and with respect to his reports. 56The Rectification Order in relation to the No. 65 property issued on 27 May 2010 required compliance by 18 June 2010. The rectification order in relation to the No. 63 property issued on 19 April 2010 required compliance by 30 June 2010. 57Both of Mr Foster's reports relate to the alleged consequence of the footing failure and movement to the sandstone foundations due to the building works at No. 65. The reports identified substantial damage to the No. 63 property said to be caused by the work at No.65. Mr Foster's evidence was that there were 50 millimetres wide cracks to the back wall of the No. 63 property. Cracks of that size are regarded as being at the "catastrophic" end of the scale which requires demolition. They prevent an occupant inhabiting the house for safety reasons. 58Both Mr Daley and Mr Foster gave evidence consistent with their reports and with limited exception their evidence was not varied under cross-exception. Mr Foster did make a concession that tie downs would not have been required on the concrete beam at the roof level because of the stage of the work. 59Mr Foster also conceded that the owner of No. 65 had delayed the roof construction. The roof tiling was scheduled for January 2010, but the owner instructed Mr Asasi to proceed with partial roof installation only, and to complete the rest later. Several weeks later building work had progressed to the stage that roofing had to be completed before other works in the house could be carried out. The owner would not agree to completion of the roof tiling. 60The owner and Mr Asasi then agreed that the company would start building a garage and a studio over on top of the garage. However, by May 2010 the work had reached a stage where the whole project came to a halt because of the incomplete roofing to the house. 61However, Mr Foster said that he had advised Mr Asasi that as the principal contractor the company was responsible for trying to mitigate its losses and he outlined the steps that ought to be taken in that situation. He had advised Mr Asasi that if the company had put a tarp over the roof it would have had a good claim for compensation. Mr Asasi declined to adopt that approach. He said that the tarp would only protect brick and concrete work and so was unnecessary. 62Mr Foster's evidence was that by not putting the tarp on the company was also delaying other inside work because the roof at No. 65 was incomplete. 63It was Mr Foster's evidence that the gutter had not been replaced at No. 63 and a downpipe had not been installed and so as a result there was water running down between the two properties. His evidence was that it was not difficult for a competent builder to rectify this issue. 64As the principal contractor the company is responsible for all defects and consequential damage. The Respondent contends that the company had sufficient time to comply with the rectification orders and that it did not have any reasonable excuse for non-compliance. 65The Respondent contends that the company did not carry out the underpinning work to the common wall to No. 63 and No. 65 in accordance with the plans and specifications. It points to a report from T.O.P. Consulting Group Pty Ltd which refers to the method of underpinning that was undertaken by the sub-contractor was not that provided for by the original engineering design. 66Further, Ms Bourke submitted that the company did not implement a plan devised by T.O.P. Consulting Group to stabilise the common wall and therefore failed to take reasonable steps to rectify or prevent further damage resulting in substantial detriment to both the No.65 property and the No.63 property. 67Accordingly, the Respondent submits that the company breached a statutory warranty under section 18B(a) of the HBA. 68Ms Bourke submitted that the relevance of that breach is that it made the No.65 property uninhabitable and the consequential damage also had the effect of the No.63 property being uninhabitable. 69Ms Bourke submitted that while it is clear that an insurance claim had been lodged in relation to the No.63 property, there was nothing to indicate that the insurance claim had been accepted or rejected by the 30 June 2010 deadline for compliance with the rectification order. She said that the only evidence before the Tribunal indicates that the owner of the No.63 property only refused access to the company from going onto the property to deal with the common wall on 1 September 2010. That is, well after the deadline for compliance with the rectification order. 70In relation to the Maroubra property the Respondent contends that Mr Daley's report identified a number of defective items. Mr Daley's report is based on an inspection conducted about two months after the time given for compliance with the rectification order. 71The Integrated Consultancy Group report was provided following an inspection on 1 December 2009. Inspector Daley issued a rectification order on 7 June 2011 and the company had over three months in which to rectify those defects. The deadline was not met. 72Whilst the Respondent concedes that the company had undertaken some rectification work, it contends that the initial work carried out by the company had not been carried out in a proper and workmanlike manner. It argues that the work needed to have been carried out in accordance with the requirements of the Building Code of Australia and applicable Australian Standards in the first instance. By its failure to do so, the company breached a statutory warranty under section 18B(a) of the HBA in respect of the building work that it had performed. 73The Respondent contends that Mr Asasi is guilty of improper conduct within section 54(1) of the HBA in his capacity as a director of the company in respect of its breach of a statutory warranty under section 18B(a) of the HBA. Further, The Respondent contends that Mr Asasi is guilty of improper conduct within section 53(1)(b) of the HBA as the holder of an endorsed contractor licence who had control over the carrying out of residential building work when breaches of a statutory warranty under section 18B(a) of the HBA occurred in the course of doing that work. 74Accordingly, the Respondent submits that each of the Applicants is guilty of improper conduct for: (1)breach of a statutory warranty to perform work in a proper and workmanlike manner and in accordance with plans and specifications at the Maroubra property and at No.65; and (2)consequential damage to the No. 63 property. 75Ms Bourke submitted that the fact that the owner of No. 63 had lodged an insurance claim should not be regarded as a reasonable excuse for failure to comply with a rectification order. The consumer should not be subject to further detriment by needing to wait until an insurance claim is determined. Ms Bourke further submitted that the disciplinary action was not taken on the basis of failure to comply with rectification orders. It was taken on the basis of a breach of the statutory warranty due to improper workmanship and, consequently, improper conduct under the HBA. 76In relation to Mr Asasi's licence, Ms Bourke submitted that it is significant that Mr Asasi is still subject to his bankruptcy. The bankruptcy commenced on 20 April 2012 and he has not been discharged. It is possible that he could enter into an arrangement with his creditors and have the bankruptcy annulled but if he does not do so earlier, he will be subject to his bankruptcy until 20 April 2015. Because Mr Asasi is bankrupt his licence must be cancelled. Therefore, she submitted, his application insofar as it concerns the cancellation of his licence must fail at this stage. 77However, she also submitted that the Tribunal should address the issue of his disqualification. If Mr Asasi is disqualified he will be subject to the provision in clause 25(1) of the Regulations which provides: 25 General requirements for obtaining certain authorities under Act (1) Before an authority (other than an owner-builder permit) is issued, the Director-General must be satisfied that: (a) each relevant person in relation to the application for an authority: (i) is not disqualified from holding the authority or an authority of the kind applied for, or from being a member of a partnership or a director of a corporation that is the holder of the authority or an authority of the kind applied for, and has not been so disqualified within 3 years before the date of the application, and ... (xiii) except in relation to an application for a tradesperson certificate-within the period of 3 years before the date of the application, was not an undischarged bankrupt and was not a director of, or a person concerned in the management of, an externally-administered body corporate (within the meaning of the Corporations Act 2001 of the Commonwealth) except in a case of a voluntary winding up of the body corporate, ... 78In relation to the CTTT determination Ms Bourke also noted that clause 25(1)(vi) of the Regulations provides that before the company could be granted a licence the Director-General would need to be satisfied that the order of the Tribunal had been satisfied. 79As at the last day of hearing the company was still in operation. No administrator had been appointed but there were no directors of the company. Mr Asasi resigned as director of the company on the same day as his bankruptcy. As a bankrupt Mr Asasi can no longer be a director of the company but it could operate under someone else. Ms Bourke submitted that it is therefore important that the issue of disqualification of the company be determined. 80Ms Bourke submitted that the correct and preferable decision is to affirm the determinations under review.

The Applicants' cases 81Mr Asasi appeared on behalf of both himself and the company. He gave evidence, was cross-examined and made submissions. 82Mr Asasi conceded that he is an undischarged bankrupt. However, he submitted that as a consequence of clause 39 of the Regulations the Director-General has some discretion and is not required to cancel the licence. 83The company developed the four Maroubra town houses, which were completed in December 2005. Mr Asasi disputes that he failed to comply with the rectification order relating to the Maroubra property. He said that he communicated regularly with Mr Daley and informed him of work progress, and unforseen obstacles which caused delays for completing the works on time. 84He submitted that the items identified as defective were rectified. He said that any delay other than wet weather was caused by others not by the company. He noted that on one occasion all materials stored in the basement area were completely removed by others, and the company had to start ordering and purchase new materials. He said that Mr Daley had expected, unreasonably, that the rectification works to be completed no matter what circumstances arose. However, he said that Mr Daley never responded to any emails requesting that he intervene or resolve any problems that had interrupted the rectification works. 85His evidence is that the work was completed by December 2011 but that there were further leaks after that date and so further rectification work was needed. 86In relation to the rectification order relating to the No. 63 property he contends that he was denied access to carry out the rectification work. He further contends that, in late 2009, he was informed that the owner of No. 63 had filed an insurance claim in relation to the cracked common wall. Mr Asasi said that the owner of the No. 63 property subsequently received an insurance payout in relation to the consequential damage and he submitted that therefore the company was not required to carry out the work. He did not provide any other evidence to support this contention. 87In relation to the rectification order relating to the No. 65 property Mr Asasi said that an insurance claim had been lodged in relation to the damage to the common wall and that he should not have been required to carry out the rectification work until the insurance claim had been determined. In any event, a dispute with the owner of the property meant that the work could not be completed. 88A number of reports are in evidence and give opinions on the common wall issue. Mr Asasi points to a report from M. Zimmerman & Associates Pty Ltd that provides the following information in regard to the common wall issue which he says shows that the wall was stable. The Zimmerman report stated: Observation: The wall was found to be a single storey double skin brick wall, rendered and painted, supported on a stone footing with the boundary being the centre of the wail. Several cracks to the common wall were noted opposite bed room 2, including the archway at the midpoint of the hall way. Further to this wall segment and up to the commencement of a new wall, a tiled wall was noted, having only a limited number of smaller cracks. The boundary wall was partly underpinned and partly supported by contiguous piers in the lateral direction. Findings: We understand that the cracks appeared during the installation of the underpinning/shoring. The cracks are diagonal in nature and appear to have been caused by the work carried out below the footing level. The wall appears to have remained in a vertical position and no crack extends from top to bottom of the wall. Conclusion: We are satisfied that the cracking of the wall relates directly to the work carried out below the footing level. The stone footing moved causing the wall above to crack. Since the underpinning work was completed it also appears that the existing wall remained stable. The cracking, although unsightly creates at present no structural impairment, with the wall being capable to support the roof structure above. The cracks to the hallway should be carefully repaired by stripping back the render and replacing any broken bricks, damaged bed and perpent joints. The area must then be covered with a metal lath and re-rendered. A finish coat will be required to match the smoothness of the existing render. The tiled wall to the rear should be lined with gyprock. It is not advisable to remove tiles and render in view of the damage caused previously. Summary: It is our opinion that the skin of brickwork, being part of the common double wall is structurally adequate to carry the existing roof loads. To prevent any structural deterioration from its present status, the wall must be repaired as described above. 89Mr Asasi said that the owners of No. 65 did not accept the Zimmerman report as satisfactory. He said that the owners continually queried the work that was being undertaken, made unauthorised access to the site including performing variation work to make savings. The company suspended the work at No. 65 from 26 August 2010, due to the owners' failure to pay in accordance with the provisions of the contract. 90He also said that during August 2010 he engaged three separate engineers to access No. 63 to provide advice. However, he said that two refused to proceed due to the difficult relationship between the company and the owners of No. 65 and No. 63. Following a letter from the company's solicitor access the third engineer was ultimately granted to No. 63. 91Further, in relation to the common wall Mr Asasi contends that on 1 September 2010, the owner of the No. 63 property refused the company access to rectify the wall; and refused to cooperate with the company to arrange for the timely rectification of the common wall. By letter dated 2 November 2010, the Owners of the No. 65 property purported to terminate the Contract. 92Mr Asasi submitted that the company was precluded from carrying out any rectification work by: (a)being denied access to the No. 63 property by the owner of the property; and (b)being instructed by the owners of the No. 65 property not to carry out the rectification work. 93In relation to the allegation that the company should have taken steps to deal with water from the removed downpipe, Mr Asasi said that when he first looked at the drawings he noted the issue of water ingress and brought is to the attention of the owners of the No. 65 property. He also included special conditions in relation to the issue as part of contract documents. His evidence was that the downpipe was never connected to the stormwater and so even if it had been left in place the issue would have remained. He said that because of the state of the relationship with the owners of the No. 65 property, it would have not been possible to negotiate a variation of the contract with them to address the issue. 94In relation to the allegation that the company should have installed a security fence between No. 65 and No. 63 Mr Asasi said that the fence was not necessary as the company had control over No. 65 and No. 63 was unoccupied. 95Mr Asasi denied that he had left asbestos sheeting uncovered and also denied that the company had caused damage to the box gutter or that it had been used as a walkway. 96In essence, Mr Asasi's argument is that either the work required to be completed by the rectification orders had been completed or it was not possible for the company to complete the work because of circumstances that were outside of its control. In the circumstances he seeks an order that the determinations be set aside.

Consideration 97As I have noted above, I have considered the transcript and recording of the hearings and the material relied on by each of the parties. 98I am satisfied that the Respondent is correct in its assertion that the company failed to comply with each of the rectification orders in the time allowed for the work to be done. I also agree with the Respondent that the company did not have a reasonable excuse for that failure. 99I accept that in each case there was some delay caused by circumstances that were outside of the company's control. However, I am also of the view that, with the extensions of time that were granted, the time allowed was reasonable. 100There is no doubt that the relationships between Mr Asasi and the owners of No. 65 and No. 63 had seriously deteriorated to the extent that there was no cooperation between them. I also accept that it is likely that the owner of the No. 63 property had refused to allow access to the property well before the company was given official notice of this fact. 101In relation to the failure to deal with water from the removed downpipe, I note Mr Asasi's evidence that it was the subject of special conditions in the contract. However, that does not remove the obligation on the company to perform work in a proper and workmanlike manner. The inclusion of the special conditions simply meant that it would be necessary to negotiate a variation of the contract to address the issue. This in effect set the contract up to fail if the variation could not be negotiated. 102In my view, if the company had handled the situation differently, it is likely that these issues would not have arisen. 103I accept that the damage to the common wall resulted from work that was undertaken by a sub-contractor and not by the company. However, as the head contractor, the company is responsible for that damage. In my view it was incumbent upon the company to take all reasonable steps to identify the cause of the problem and to resolve it and to take steps to rectify the consequential damage that had been caused to the No. 63 property. 104While I appreciate that this requirement places a heavy burden on the company, I do not accept that the company was entitled to await the outcome of the insurance claim in relation to the damage before acting. At a minimum the company should have undertaken temporary work to secure the property immediately. 105There is no doubt that the owner of No. 63 was not a party to the contract between the company and the owners of No. 65 in relation to work to be undertaken at No. 65. It is not reasonable to expect the owner of No. 63 to be left with an uninhabitable residence while the company waited for its insurance claim to be processed. A reasonable builder in the position of the company would have taken immediate action to address the issues. 106In my view, the seriousness of this issue far outweighs that of the other examples of defective work and it warrants action against the Applicants. 107I do not need to discuss those other issues in detail. However, with the exception of the items that the Respondent conceded did not require rectification, I am satisfied that the work did not satisfy the requirements of section 18B(a) of the HBA. 108I do not agree with Mr Asasi's view that it was not necessary to install a security fence between No. 65 and No. 63. The company had control over No. 65 but did not have control over No. 63. This is not altered by the fact the No. 63 was unoccupied. Therefore precautions should have been taken to prevent persons accessing No. 63 from being injured. A temporary security fence between No. 65 and No. 63 would have achieved that. 109While I accept Mr Asasi's evidence that he had not left asbestos sheeting uncovered, there is no doubt that the sheeting was easily removed. The company should have taken appropriate steps to ensure that that could not happen. 110Section 18B(a) of the HBA implies a warranty in every contract to do residential building work 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. Section 18B(d) of the HBA provides that the work will be done with due diligence and within a reasonable time. 111I am not satisfied that the items identified in the rectification order for the Maroubra property are all structural issues. However, the items are nevertheless of concern because they indicate that the work had not been done in a proper and tradesman-like manner. There is evidence of water penetration to the site and this has the potential for long term serious consequences. Given that the Maroubra town houses were completed in December 2005 and on Mr Asasi's evidence the rectification work was not completed by December 2011, it cannot be argued that the work was done with due diligence and within a reasonable time. In fact it is apparent that as late as May 2012 the owners' corporation was asserting that a number of defects remained. 112I am satisfied that the render finish was not done in a proper and tradesman-like manner. I am also satisfied that as a result of the incorrect installation of flashing, water was directed into the units rather than to the outside. The warranty provided by section 18B(b) is that all materials supplied will be good and suitable for the purpose. It is no answer to the alleged breach that the materials were supplied to the company with the flashing wrongly installed. Further, the company had responsibility that the units and the basement car park did not have any water leaks. 113In the circumstances I am satisfied that the company breached the statutory warranties provided under section 18B of the HBA and that the work done at No 65 (with the consequential damage to No. 63) and the work done at the Maroubra apartments was not done in a proper and workmanlike manner and was also not done in accordance with plans and specifications. 114As Mr Asasi was the director of the company at the time he was responsible for the breaches by the company. The most concerning aspect of these matters was the lack of any insight by Mr Asasi into the gravity of his inaction for the owner of No. 63. 115The question then arises as to what, if any, action should be taken against each of the Applicants in relation to these matters. 116As noted in Woolley v Commissioner for Fair Trading, Office of Fair Trading [2005] NSWADT 127, the purpose of disciplinary action is not to punish the Applicants, but to protect the public. The purpose, and application, of the sanctions provisions in section 62 of the HBA were discussed by Acting Deputy President Handley in Pilipczyk & Anor v Commissioner for Fair Trading [2007] NSWADT 85: "... it should be noted that the object of sanctions under the legislation is to protect the consumers of home building services and not to punish. However, as the Commercial Tribunal acknowledged in Building Services Corporation v McIlveen (Commercial Tribunal of NSW, unreported, 18 February 1997), at p 29 "[t]he concept of public protection is wide; it embraces fitness, the maintenance of public standards, public confidence and deterrence both of the particular builder and others in the same occupation". Other relevant factors in considering an appropriate penalty were identified by the Fair Trading Tribunal, comprising Judge KP O'Connor, Chairperson, in Director-General, Department of Fair Trading v Cohen [2000] NSWFTT 3 ('Cohen (2000)'), at par 45: "a) the nature, width and extent of the contraventions b) the loss or damage and prejudice in consequence of the contraventions c) the circumstances in which the contraventions took place d) whether the licensee has been found to have engaged in any similar conduct e) the presence of fraudulent or dishonest intent and deliberation on the part of the licensee f) the extent of carelessness or wilfulness of the conduct g) the efforts made to correct the situation and what measures have been taken by the licensee h) what consciousness the licensee (a) had (b) displayed, of its obligations under the relevant statute and to the owners i) the effect upon the licensee j) antecedents k) attitude, building history and future compliance l) the penalty range." 117In Ng & anor v Commissioner for Fair Trading, NSW Office of Fair Trading & anor [2007] NSWADT 259 Judicial Member Molony noted: 72 To that list I would add two factors which were outlined in a list of relevant factors, which a court might take into account in determining the amount of a civil penalty, that were proposed by the Australian Law Reform Commission in Principled Regulation: Federal Civil and Administrative Penalties in Australia (2002) ALRC 95 in recommendation 29-1: see Calcaro v Chief Commissioner of State Revenue [2004] NSWADT 158. These are: - any gain made as a result of the contraventions - the degree of cooperation with the authorities. 118There is no suggestion of fraudulent or dishonest intent and deliberation on the part of the Applicants. However the consequences of the contraventions are significant - particularly in the case of the owners of No. 65 and No. 63. Mr Asasi appears to lack insight into this fact. In fact he has been very critical of those owners. 119There is no suggestion that the company disputed its obligation to perform the work required by the rectification orders but the work was not completed within the allowed time. In regard to the work at No. 65 and No. 63 Mr Asasi sought to explain the delay, to some extent, by reference to the time taken to determine the insurance claim. This falls within factor numbered (g) identified in Cohen. Consideration of the delay also involves consideration of the degree of cooperation with the authorities in that failure to complete the work required by the rectification orders was effectively lack of cooperation with the Respondent. 120Nevertheless, I am not satisfied that there was any lack of good faith in regard to completion of the work. However, the lack of insight and the apparent inability to cope with the circumstances in which he found himself raise questions about Mr Asasi's ability to manage projects of this kind. 121I note that Mr Asasi is an undischarged bankrupt. He submitted that pursuant to clause 39 of the Regulations there is discretion as to whether his licence is to be cancelled. Clause 39 provides: 39 Cancellation of contractor licence not compulsory in certain cases The Director-General is not required to cancel a contractor licence under section 22 (1) (c) of the Act if: (a) the licence authorises its holder to do residential building work or specialist work of the kind prescribed by clause 46 (clause 46 (1) (a) and (b) excepted) but not of any other kind, and (b) the Director-General is of the opinion that there is no evident risk to the public that the licensee will be unable to complete any building contract (whether an existing contract or a contract in the future) for the doing of residential building work or specialist work of that kind, or both, and (c) the licence is subject to a condition that the holder not contract to do work: (i) if the contract price exceeds $20,000 (inclusive of GST), or (ii) if the contract price is not known, where the reasonable cost of the labour and materials involved in the work exceeds $20,000 (inclusive of GST). 122Clause 46 of the Home Building Regulation provides: 46 Categories of residential building work or specialist work (1) For the purposes of sections 21 (1) (a) and 27 (1) (a) of the Act, the following categories of residential building work are prescribed: (a) general building work, (b) swimming pool building, ... 123It is not in dispute that Mr Asasi's licence authorises him to do general building work. Accordingly, the licence is not subject to the exception provided for by clause 39 of the Regulations. It follows therefore that Mr Asasi is not eligible to hold a licence under the HBA. The licence must therefore be cancelled. 124I consider that Mr Asasi's failure to respond adequately to the circumstances in which he found himself warrants some form of disciplinary action. In the circumstances I consider that the approach adopted by the Respondent is reasonable in the interests of public confidence and deterrence. 125In my view, the Respondent's determination to cancel Mr Asasi's individual contractor licence and disqualify him for a period of 2 years and the determination to disqualify the company from holding a licence for two years both are reasonable. They therefore should be affirmed.

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: 03 December 2014

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Judgment (9 paragraphs)

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Cases Cited (3)