Boyd trading as Kalana Homes v Commissioner for Fair Trading

Jurisdiction

1. The Tribunal has jurisdiction to review the Commissioner's decision to impose a penalty for disciplinary proceedings under section 83B(3) of the Act, section 9 of the Administrative Decisions Review Act 1997 (NSW) and section 30 of the Civil and Administrative Tribunal Act 2013 (NSW).
2. In the present case, the Tribunal must decide with respect to the grounds for disciplinary proceedings alleged by the Respondent: 1. Whether or not the Applicant was guilty of improper conduct; and 2. If disciplinary action against the Applicant is warranted, what is the appropriate disciplinary action in the circumstances?
3. 'Improper Conduct' under the Act relevantly encompasses the following: 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: … (b) in the course of doing any work that the licence or certificate authorises the holder to do, fails to comply with the requirements applicable to the work made by or under this or any other Act in respect of the work, or (c) breaches a statutory warranty, or (d) in the case of specialist work, does the work otherwise than with due care and skill or knowingly uses faulty or unsuitable materials in the course of doing the work, or … (2) The holder of a contractor licence is guilty of improper conduct if the holder: (a) without reasonable cause, breaches a contract to do any work that the contractor licence authorises the holder to contract to do, or (b) without reasonable cause, does not comply with the requirements of a rectification order under Division 2 of Part 3A, or (c) does not comply with an order of the Tribunal or with an order of a court in respect of a building claim as referred to in Part 3A, …
4. The relevant statutory warranties are: 18B Warranties as to residential building work (1) 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 done with due care and skill 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. (2) The statutory warranties implied by this section are not limited to a contract to do residential building work for an owner of land and are also implied in a contract under which a person (the principal contractor) who has contracted to do residential building work contracts with another person (a subcontractor to the principal contractor) for the subcontractor to do the work (or any part of the work) for the principal contractor.
5. Rectification orders at section 48E in Division 2 of Part 3A of the Act specify: (3) A rectification order: (a) may specify conditions (including conditions with respect to the payment of money due under the contract for the work or the supply of the kit home) to be complied with by the complainant before the requirements of the order must be complied with, and (a1) may be made as a staged rectification order (being an order that specifies stages in which 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 (or a date by which the requirements of each stage of the order must be complied with in the case of a staged rectification order), 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. (4) A rectification order may be amended by a further order of an inspector on the application of the person on whom the rectification order was served. (5) It is a condition of every contractor licence that the contractor must comply with the requirements of a rectification order.
6. Section 51(3) provides a defence to improper conduct: (3) It is a sufficient defence to a complaint that the holder of a contractor licence has been guilty of improper conduct as referred to in subsection (1) (b), (c) or (d) in connection with work undertaken by the holder, if the holder proves to the satisfaction of the Secretary that the holder did all that could reasonably be required to ensure that a nominated supervisor for that work would exercise such degree of control over the doing of the work as would be necessary to prevent the occurrence of the improper conduct.
7. Section 62 sets out the disciplinary action that may be taken against the holder of an authority: Section 62 Disciplinary action that may be taken by Secretary If, after compliance with this Division, the Secretary is satisfied that any ground on which disciplinary action may be taken against the holder of an authority has been established in relation to the holder, the Secretary may do any one or more of the following: (a) determine to take no further action against the holder, (b) caution or reprimand the holder, (c) make a determination requiring the holder to pay to the Secretary, as a penalty, an amount not exceeding $11,000 (in the case of an individual) or $50,000 (in the case of a corporation) within a specified time, (d) vary the authority held by the holder, by imposing a condition on the authority, including a condition requiring the holder to undertake a course of training relating to a particular type of work or business practice within a specified time, (e) suspend the authority for a period not exceeding its unexpired term, (f) cancel the authority, (g) disqualify the holder, either temporarily or permanently, from being any one or more of the following: (i) the holder of any authority, or any specified kind of authority, (ii) a member of a partnership, or an officer of a corporation that is a member of a partnership, that is the holder of an authority, (iii) an officer of a corporation that is the holder of an authority.
8. The Tribunal's approach in determining whether disciplinary action should be taken and, if so, what form it should take, considers that the object of sanctions under the legislation is to protect the consumers of home building services and not to punish contractors: see Lotus Constructions Pty Limited v Director -General, Department of Finance and Service, NSW Fair Trading [2013] NSWADT 260 and Pilipczyk & anor v Commissioner for Fair Trading, NSW Office of Fair Trading [2007] NSWADT 85.
9. In Ng & anor v Commissioner for Fair Trading, NSW Office of Fair Trading & anor [2007] NSWADT 259, Judicial Member Molony referred at [71] to [72] to the series of factors which might be relevant to the assessment of an appropriate penalty: 71 In Director-General, Department of Fair Trading v. Cohen [2000] NSWFTT 3 (cited in Younan [2007] NSWADT 170 at [26]; and Harb [2007] NSWADT 175 at [60]) the Fair Trading Tribunal outlined a series of factors which might be relevant to the assessment of an appropriate penalty. They were: - the nature, width and extent of the contraventions - the loss or damage and prejudice in consequence of the contraventions - the circumstances in which the contraventions took place - whether the licensee has been found to have engaged in any similar conduct - the presence of fraudulent or dishonest intent and deliberation on the part of the licensee - the extent of carelessness or wilfulness of the conduct - the efforts made to correct the situation and what measures have been taken by the licensee - what consciousness the licensee (a) had (b) displayed, of its obligations under the relevant statute and to the owners - the effect upon the licensee - antecedents - attitude, building history and future compliance - the penalty range. 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

Consideration

1. The Applicant submitted generally that with respect to each alleged breach of the Act resulting in disciplinary proceedings, he had either rectified work or paid compensation to the owner. He submitted that the rectifications or payment of compensation meant that there were currently no outstanding breaches of warranty, therefore no improper conduct, and no reason to take disciplinary action.
2. The Applicant also submitted that he had reasonable cause for any non-compliance with the time limits imposed by the rectification orders because of two reasons: an inability to find suitable tradespersons to complete the tasks, and the scope of works increasing due to further defects being discovered during rectification works.
3. There were factual disputes between the parties concerning each of the grounds for disciplinary action alleged by the Respondent. Works done by the Applicant at four properties were involved: 1. 21 Wharf Street, Wyee Point NSW 2259 ("Property 1"); 2. 29 Kenilworth Street, Mannering Park NSW 2259 ("Property 2"); 3. 172A Bridge Street Morisset NSW 2264 ("Property 3"); 4. 81 Vales Road Mannering Park NSW 2259 ("Property 4").
4. Disciplinary Action 1 related to Property 1, Disciplinary Action 2 related to Property 2, Disciplinary Actions 3, 4, and 5 related to Property 3, and Disciplinary Action 6 and 7 related to Property 4. Disciplinary Action 5 was not affirmed on internal review, however this did not alter the penalty imposed by the Respondent as a result of its findings.
5. The Applicant submitted that because the reviewable decision relied on four building reports for the properties in question, which contained serious errors and information that was incorrect, that decision cannot be relied upon and the penalty should be dismissed.
6. It is convenient for the Tribunal to address the factual basis for the disciplinary actions, and any disputes arising, for each property in turn.

Property 1: 21 Wharf Street Wyee Point NSW 2259

1. Practical completion for the contract at Property 1, at 21 Wharf Street Wyee Point NSW 2259, involving the construction of a two storey brick veneer residence with metal roof and enclosed swimming pool, occurred on or around 28 September 2012. Shortly after completion, the homeowner provided the Applicant with a list of alleged defective items and the Applicant began attempts at various rectifications. On 21 October 2014 the work was inspected by the Respondent's Building Inspector Sharwood. A rectification order was issued on 15 January 2015, for completion by 26 February 2015. Inspector Sharwood inspected the rectifications on 12 May 2015, and issued a Building Inspection Report on 23 May 2015 noting that Item 20 of the rectification order, "Damage caused to the centre of the ceiling of the swimming pool room where water has entered the room from the upper floor patio", remained outstanding.
2. On 4 June 2015 and 18 September 2015, Property 1 was re-inspected by Building Inspector van Keimpema, and a Building Inspection Report for "Rectification Order not complied with" was issued on 19 September 2015. Using the list of 25 defects identified in the Schedule to the 15 January 2015 Rectification Order, Inspector van Keimpema identified nine defects that had not been rectified and an additional three new defects.

Item 1: removal of floor tiles and preparation of substrate

1. Item 1, which was formerly Item 3 in the previous Building Inspection report, concerned the removal of floor tiles and preparation of substrate not being carried out in accordance with the adhesive manufacturer's instructions. The Applicant's evidence was to the effect that tiles were removed because the owner was dissatisfied with the lippage of the tiles, not because they had been chipped during installation as reported; and that they had not been replaced because the owner had wanted all the tiles removed and replaced, which he refused as unreasonable. The Applicant also gave evidence that a floor sander had been hired for the purpose of sanding the floors, and that there was sufficient chemical underlay product (Optima Ardex) purchased for the job to provide a thick slurry to the entire floor. The Applicant accepted that he was ultimately responsible for the work.
2. I accept the Applicant's evidence but agree with the Respondent's submission that the Applicant's evidence doesn't result in a conclusion that the floor was actually sanded, or that the chemical underlay product was applied correctly. The Applicant's evidence was that there were two different tilers involved in the tiling work. There is no evidence from those individuals, or evidence from the Applicant that he supervised their work while they were working or inspected it on its completion to ensure that the correct methodology and materials were used or the job was completed to the appropriate standard.
3. The Building Inspection Report refers to Ardex Technical Bulletins TB168.003 dated 16 April 2012, which requires sanding of the surfaces before application of the adhesive and specific application of the adhesive. In contrast, the Applicant has stated that the manufacturer's instructions, provided in evidence by him as a product information document said to have been used by the tilers, do not require sanding of the surface or the use of bond breaker tape, and further stated that the use of bond breaker tape was irrelevant. In circumstances where there is no evidence that the Applicant has any knowledge of or expertise in the particular products used, and no direct evidence of the tiling having been done to the requisite standard or in accordance with the manufacturer's instructions, I accept the Respondent's evidence and findings regarding Item 1, that the Applicant has failed to do the work with due care and skill, as required by s18B(1)(a) of the Act..

Item 2: leak into swimming pool ceiling

1. Item 2, which was formerly items 4 and 20 in the previous Building Inspection report, concerned the identification and rectification of a leak into the swimming pool ceiling from the upper floor patio. The Applicant disputed the location of water damage but gave evidence that: The mould is adjacent to a crack in the cladding to the edge of the deck. That crack has been rectified and ingress of water has now been prevented. The further growth of mould on the surface, is caused due to the initial ingress of water onto the plaster, and now due to the continuous moist environment of the room containing a heated swimming pool.
2. The Applicant's evidence included an admission that "due to work being undertaken on the deck the waterproofing membrane was damaged. The membrane has been repaired, and the plaster join to the pool ceiling has been repaired", however he also noted that the ceiling has "severe glancing light", which exaggerates the join.
3. The Applicant gave detailed evidence of his own method of installing waterproofing to the balustrading post as an alternative to the common practice referred to by the building inspector of fixing the balustrade posts to the structural flooring prior, then applying waterproofing membrane to ensure a proper seal has been achieved prior to installing the tiling system. The Applicant explained: I agree with the inspector that this is common practice, however it is not best practice. I have used this method and have had the membrane crack at the base of the post due to movement which caused a leak in the deck. The method that I have used is superior to this method of construction. I created a plinth out of the flooring, the size of the balustrading post on the deck. The waterproofing membrane was then created over the plinth, and the balustrading post then fixed to the plinth. The fixings through the plinth were then sealed on top. When it was first suggested that the balustrading post was causing a leak in the deck I cut out the plaster ceiling sheet and inspected the area. My findings were that the balustrading post is not situated above the affected area, and that there was no ingress of water at, or near the balustrading post. I informed Fair Trading that I had inspected the area and that the inspectors evidence was incorrect. Fair Trading responded to me by stating that the inspector's argument was logical. While his argument may be logical it is not based on facts, and is therefore irrelevant.
4. I accept that the Applicant believes his method of waterproofing the balustrading post is superior to the method referred to by the Building Inspector. However, the Tribunal has insufficient evidence on which to base an objective finding as to whether or not this is the case, or whether the issue has been rectified by the Applicant. As is admitted by the Applicant, damage to the waterproofing membrane was caused by work being undertaken on the deck above. Whilst the Applicant claims this has been repaired, the statutory warranty in question is not concerned with the rectification of faulty works, but the quality of care and skill used to do the work in the first place. The evidence supports a finding that the Applicant has failed to do the work with due care and skill, as required by s18B(1)(a) of the Act.

Item 3: scratch to ensuite door

1. Item 3, which was formerly Item 6 in the previous Building Inspection Report, concerned a scratch to the surface of the ensuite cavity door. There is no evidence or submission from the Applicant to the contrary. I therefore accept the Respondent's findings in relation to this item that the Applicant has failed to do the work with due care and skill, as required by s18B(1)(a) of the Act.

Item 4: paint preparation and finishes

1. Item 4, which was formerly items 7, 8, and 11 in the previous Building Inspection Report, concerns paint preparation and finishes. There is no evidence or submission from the Applicant to the contrary. I therefore accept the Respondent's findings in relation to this item that the Applicant has failed to do the work with due care and skill, as required by s18B(1)(a) of the Act.

Item 5: aluminium sliding door operation

1. Item 5, which was formerly item 12 in the previous Building Inspection report, concerned an upward bow to the aluminium sliding door sill which restricted its operation. There is no evidence or submission from the Applicant to the contrary. I therefore accept the Respondent's findings in relation to this item that the Applicant has failed to do the work with due care and skill, as required by s18B(1)(a) of the Act.

Item 6: quad gutter and leaf guard system to upper deck

1. Item 6, which was not in the previous Building Inspection report, concerned the installation of a quad gutter and leaf guard system to the external perimeter of the upper deck. The Respondent identified flaws and defective installation on inspection which the Applicant accepted, but claimed their cause was because the installation of the gutter was a variation, that was prepared, accepted and completed, after the tiling had been completed.
2. Variation 57, dated 7 February 2013, adds "provide gutter to rear deck including leafguard" for an additional cost of $2500 including GST. The acceptance of a variation does not allow for the work subject to the variation to be in breach of the statutory warranties provided by the Act. I therefore accept the Respondent's findings in relation to this item that the Applicant has failed to do the work with due care and skill, as required by s18B(1)(a) of the Act.

Item 7: bathroom floor waste smell

1. Item 7, which was formerly Item 17 in the previous Building Inspection report, involved an unpleasant smell emanating from the floor waste in the main bathroom. The respondent's inspection revealed that a thick plastic sleeve had been used to block any odours, rather than the cause of the odour being identified and removed by the Applicant. The Applicant gave evidence that he had investigated the cause of the smell by speaking with plumbers: I did investigate the cause of the smell. I spoke with two plumbers other than the original plumber, and the plumbing supplies store. Both plumbers told me that the installation was correct. The plumbing supplies store said they often get complaints about it and that there was device that I could buy to rectify the problem… It is my understanding the issue arises from the build up of body fat in the pipe between the vanity and the floor waste.
2. The Applicant's evidence provides a possible generalised cause for an unpleasant waste smell, but doesn't provide evidence of the cause of this particular smell. There is no evidence that the Applicant physically investigated the cause of the smell in question, instead suggesting that this was the Inspector's obligation: The inspector has suggested that it is building waste in the drain that is causing the smell, but has not shown any evidence of building waste in the drain, nor has he shown any evidence that building waste in the drain would cause the smell.
3. In the absence of any evidence to the contrary, I accept the Respondent's findings in relation to this item that the Applicant has installed a quick fix method to block the smell rather than investigating and removing the cause of the smell and has therefore failed to do the work with due care and skill, as required by s18B(1)(a) of the Act.

Item 8: stairs with inconsistent riser heights

1. Item 8, which was not in the previous building inspection report, concerns the installation of external stairs with inconsistent riser heights, which creates a stumbling hazard. In evidence at hearing the Applicant agreed they didn't comply with the requisite standard. I therefore accept the Respondent's findings in relation to this item that the Applicant has failed to do the work with due care and skill, as required by s18B(1)(a) of the Act.

Item 9: fitting of PVC joiner strip

1. Item 9, formerly item 24 of the previous Building Inspection report, concerns PVC joiner strip not fitted into sheeting. The Applicant's evidence was that the eave lining sheet join had moved because of work done by an external contractor. In the absence of evidence to the contrary, I accept the Applicant's evidence of the cause for this defect and so find that there is no breach of s18(1)(a) of the Act with respect to this item.

Item 10: excess moisture at lower bathroom door frame

1. Item 10, which was not in the previous building inspection report, concerned waterproofing issues resulting in excess moisture around the door frame to the lower bathroom. The Applicant's evidence was that he had tested the waterproofing but concluded that there was no leak. He said: The door to the shower cubicle is very close to the door jamb. If usage of the bathroom allows excess water on the bathroom floor at this location, it will cause the door frame to get wet and over an extended period of time cause damage to the door frame.
2. Excess water on the bathroom floor near the shower is reasonably unlikely to cause the damage pictured in the building inspection report unless it is pooling there for an extended period of time. This is also unlikely because there is damage to the timber door jamb and the architrave, which is shown in the pictures to the building inspection report to be set lower than the bathroom tiles. Regardless of whether the excess moisture causing damage to the door frame is because of a waterproofing leak or because excess water is on the bathroom floor, neither should be occurring if the Applicant has constructed the bathroom properly. I accept the Respondent's findings in relation to this item that the Applicant has failed to do the work with due care and skill, as required by s18B(1)(a) of the Act.

Item 11: misalignment of external windows

1. Item 11, which was not in the previous building inspection report, concerns the misalignment of external windows. This issue seemingly was not identified until the 18 September 2015 building inspection report, some three years after practical completion. In the absence of evidence to the contrary, I accept the Respondent's findings in relation to this item that the Applicant has failed to do the work with due care and skill, as required by s18B(1)(a) of the Act

Item 12: balcony tiles

1. Item 12, which was not in the previous building inspection report, concerns the laying of tiles on the balcony with the grain/texture to the surface of the tile at 90° to the fall of the balcony. The Applicant gave evidence that the fall on the balcony runs in both directions, so the texture of the tiles was going to catch pine needles and dirt no matter which way they were laid. In the absence of evidence to the contrary, I accept the Applicant's evidence of the cause for this defect and so find that there is no breach of s18(1)(a) of the Act with respect to this item.

Property 2: 29 Kenilworth Street, Mannering Park NSW 2259

1. Practical completion for the contract at Property 2, at 29 Kenilworth Street Mannering Park NSW 2259, occurred in November 2009. On 4 August 2014 the homeowner contacted the applicant about the upstairs ensuite leaking. An Inspector visited the site in the absence of the Applicant on 3 September 2015 and on 7 September 2015 the Respondent issued a rectification order for defective works, to be repaired by 19 October 2015.
2. On 30 October 2015 a Building Inspection Report was issued by Inspector Steve Masters, addressing the outstanding items at the end of the compliance period of the Rectification Order. The Building Inspection Report included: The contractor was contacted on 21 October 2015 for an explanation why these items were not completed. Trader states that he feels he was not given the opportunity to respond to the rectification order nor was he given sufficient time to carry out the rectification work. NOTE: The contractor was given 6 weeks to carry out rectification work and at no time during the rectification period did the contractor make contact with fair trading disputing the rectification order or requesting additional time due to access issues or inclement weather.
3. The Building Inspection Report made no findings as to whether there were any specific breaches of statutory warranties in relation to Property 2.
4. The homeowner was dissatisfied with the repairs made by the Applicant and consequently made an application to NCAT for a Home Building Dispute in May 2016. This was settled on 29 June 2016.
5. It is undisputed that the Applicant did make attempts to rectify the defects but, for various reasons including difficulties obtaining access to the site, the rectification order was not complied with in the time allocated by the Inspector. The question is whether there is a reasonable cause for the Applicant failing to comply with the rectification order in the time allocated.
6. The Applicant submitted the following three causes for his failure to comply with the rectification order: 1. During the rectification process the owner was undergoing medical treatment so the times he was able to access the property were limited; 2. The owner undertook his own, unauthorised testing of the Applicant's waterproofing membrane after it had been laid, and left water on the uncured product for an extended period of time. This destroyed the product which then had to removed and new product placed, which caused delays; 3. After dealing with the problem, the Applicant became aware of possibility that the leaking of the membrane was outside the area he was focusing on, and requested removing tiles from another part of the bathroom to investigate. The owner refused to give permission.
7. Evidence at hearing from Inspector Masters confirmed that there had been no contact from the Applicant during the time allocated for rectification of the defects, and I agree with the Respondent's Delegate's findings, that: …there was no substantial evidence before the Delegate to suggest a reasonable cause for your failure to comply with the requirements of the Rectification Order issued. When access to property is restricted or denied or permission is withheld to carry out your investigations, you should have communicated this in writing to Fair Trading during the Rectification Order period. There is no evidence before me to substantiate what difficulties you experienced in trying to complying with the Rectification Order or that you required more time to comply with it, Further if you had evidence that the defect was caused by the owner, you should have provided it to Fair Trading. No such evidence has been provided.
8. Unsuccessful attempts to comply with a rectification order are not sufficient cause for failure to comply where no contact is made to express difficulties regarding compliance with the terms of the order. The defective works, which were supposed to be fixed by 19 October 2015, were still an issue in May 2016 when the homeowner applied to NCAT for assistance in dealing with them. This demonstrates to me that the Applicant's failure to comply with the requirements of the rectification order was not caused by limited time or access.
9. I therefore find that the Applicant failed, without reasonable cause, to comply with the requirements of a Rectification Order issued on 7 September 2015.

Property 3: 172A Bridge Street Morisset NSW 2264

1. The property at 172A Bridge Street Morisset was purchased during construction and the new homeowner made additional payments to the Applicant for contractual variations to have upgraded items installed. Completion was on 24 September 2015.
2. Prior to and following completion, the new homeowner raised a number of issues with the Applicant which culminated in a rectification order for 17 incomplete and defective works, issued by Inspector Phill Ward on 27 January 2016, for completion by 15 February 2016. On 18 and 21 February 2016 the Inspector inspected the site and subsequently contacted the Applicant for his explanation regarding the items identified in the Rectification Order. The Building Inspection report was issued on 29 February 2016 and noted that items 3, 5, and 9 of the Rectification Order remained outstanding. The Applicant did not attend at the time of the Inspector's site inspections.
3. On 2 May 2016 the homeowner commenced NCAT proceedings and orders were made on 16 December 2016 for the Applicant to pay the homeowner $1500 as compensation for Items 3 and 9 identified in the Building Inspection report, and to complete the rectification works for Item 5.
4. Dealing with the Applicant's general submissions first, the Applicant submitted in his defence that: 1. He did not enter into a contract with the new homeowner, and all variations were put through the original owner; 2. He was unable to attend the site inspections arranged by the Inspector. An alternative time should have been arranged; 3. He was unable to communicate effectively with the new homeowner due to her poor English;
5. I agree with the finding in the reviewable decision that it is irrelevant whether or not the Applicant had entered into a residential building contract with the new homeowner. The incomplete and defective works identified by the new homeowner were required by the Inspector's rectification order of 27 January 2016 to be actioned. The failure of the Applicant to comply with the rectification order and his breaches of the statutory warranties occurred irrespective of the contracted party.
6. I accept that the Applicant was unable to attend the site inspection arranged by the Inspector for 21 February 2016 but consider that any prejudice this resulted in was rectified by the Applicant and Inspector communicating after that site inspection in relation to the relevant defects. There is no evidence before me of a request by the Applicant for an additional site inspection he could attend, or of any such request being denied. By the time the Inspection report was written by the Inspector, 14 of the 17 defects or incomplete works identified for rectification had been resolved. The remaining three items are addressed below.
7. I do not accept that the new homeowner's poor English is a reasonable excuse for the applicant's breach of the statutory warranties or failure to comply with rectification orders. There is no evidence of any misunderstandings as a result of poor communication by the new homeowner. The communication failures are, on the evidence, entirely the Applicant's fault on the basis that he did not seek clarifications or attempt to express any difficulties he had with the required rectifications according to the Building Inspection report, to the Inspector or anyone else working for the respondent, until after NCAT proceedings were instituted.

Item 3: Complete the installation of the skylights to the laundry and adjacent toilet

1. Item 3 of the rectification order identified that no shaft or external opening to provide daylight had been installed for the skylights in the laundry and adjacent toilet. The Inspection report noted that whilst installation had been completed in accordance with the rectification order, the skylights as they had been installed were "not fit for purpose as the rooms are not effectively illuminated by the skylights as installed".
2. The Applicant submitted four reasons why the skylights did not illuminate the rooms: 1. The direction and angle of the roof; 2. The ducting is too long; 3. The angle of the ducting; 4. Overcast weather on the date of inspection.
3. I accept that the rectification order was technically complied with in relation to this Item, and I also accept the reasons provided by the Applicant as to why the skylights did not work effectively. I do not accept the Applicant's submission that the relevant warranty was fulfilled by rectifying issues and providing compensation to the homeowner following NCAT proceedings. The homeowner should not need to institute proceedings with NCAT to obtain compensation for works completed by the Applicant, and the Applicant's compliance with NCAT orders does not absolve him of breaching the Act.
4. I find that the work completed by the Applicant in relation to Item 3 demonstrates a breach of section 18B(1)(a) of the Act, on the basis that his installation of ineffective skylights demonstrates a failure to complete work with due care and skill.

Item 5: Rectify the roof tile installation

1. Item 5 of the rectification order required the Applicant to ensure that all missing, loose and damaged roofing tiles were replaced to form a watertight roof, and that all builder's materials, waste and debris was removed from the roof gutters. The Building Inspection report noted that the eaves gutters continued to be partially filled with builders waste and debris, and there were displaced roof tiles on either side of the valley gutter at the front of the residence.
2. The Applicant submitted that he did not understand what the problem was in relation to Item 5, and that he could not "identify the area of the tile roof that the inspector stated needed attention". The Applicant rectified the Item 5 issue following conclusion of the NCAT proceedings. He agreed in evidence that he did not personally inspect the roof to identify where the problems were, and did not speak to the Inspector to clarify any part of the rectification order.
3. I don't accept the Applicant's submission that he couldn't identify the relevant area. There is evidence that he did not attempt to do so, and there is no evidence of any specific difficulties he had which prevented him from doing so. The pictures in the Building Inspection report clearly show the debris and waste, and displaced tiles. In my view an inspection by the Applicant would have quickly identified the issues for the purpose of rectification, and the Applicant could have contacted the Inspector at any time to clarify if he was unable to understand directions from the homeowner.
4. I find that the defect in relation to Item 5 identifies a breach of section 18B(1)(a) of the Act, on the basis that photos show that the work was not done with due care and skill.
5. I reject the Applicant's submission that the compliance with NCAT orders fulfils his statutory obligations under the Act in relation to compliance with rectification orders. I find that the Applicant, without reasonable cause, did not comply with Item 5 of the rectification order issued 27 January 2016.

Item 9: Remove and replace the installed tapware over to the contracted "PORCHER" tapware

1. Item 9 of the rectification order required the Applicant to remove the "Posh" branded tapware he had installed in the shower and main bathroom and to install the "porcher" branded tapware which the homeowner had required as a contractual variation.
2. The new homeowner had paid $600 for the variation to contract to fit owner supplied tapware. The owner supplied tapware, branded "porcher", was delivered to the Applicant by the new homeowner, and the Applicant took them to the building site. The box of porcher tapware was later found by the homeowner in the garage.
3. There is no dispute that the owner supplied Porcher tapware was not, in fact, installed as contracted. The Applicant seeks to explain this by: 1. Distinguishing between flickmixer taps and non- flickmixer taps; 2. Stating he doesn't know where the second box of taps came from; 3. Stating that he thought he had installed the owner supplied taps.
4. The Applicant also explained at hearing that he did not know that the brand of tapware supplied by the owner was "porcher" branded, because the variation did not specify the brand.
5. The evidence demonstrates that the Applicant made assumptions about which taps were installed after providing the owner supplied taps to the plumber on site. The Applicant did not actually install any of the taps himself, or supervise this being done. He also did not pay enough attention to the tapware when it was supplied by the owner to him, to ensure that someone working under his direction would install them as per the contract variation. Nor did he check that the contract variation was carried out.
6. The Applicant refused to remove the existing tapware to install the porcher tapware as part of the rectification works. The NCAT proceedings awarded compensation to the homeowner for the Applicant's refusal to do so. At hearing the Applicant explained that removal and installation of the porcher tapware would necessitate removal, waterproofing, and retiling the walls in which the tapware was installed. That may be so, but that is what the rectification order required, and there was no specific evidence from the Applicant of his inability to do this.
7. I find that the installation of incorrect tapware demonstrates a breach of section 18B(1)(a) of the Act, on the basis that the Applicant did not work with due care and skill and in accordance with the plans and specifications set out in the contract. Had he done so, the wrong taps would not have been installed. I also find that the applicant has failed, without reasonable cause, to comply with Item 9 of the rectification order issued on 27 January 2016.

Property 4: 81 Vales Road Mannering Park NSW 2259

1. Notification of practical completion of Property 4 at 81 Vales Road, Mannering Park for the construction of a new single storey brick veneer and tile roofed residence constructed on a concrete slab occurred on 30 November 2015. On 12 January 2016 the homeowner notified the Applicant of a number of defects and a meeting between the homeowner and the Applicant to discuss the defects allegedly resulted in the Applicant contacting police.
2. The respondent conducted an inspection on 4 February 2016 which resulted in a rectification order issued on that date requiring staged rectification works by 12 February 2016 and 4 March 2016. The rectification order noted that the owner had disputed completion as a result of the listed defects, and had withheld the balance of the contracted payment sum, but the Inspector's opinion was that "the contract building works are reasonably complete with a number of defects as identified". According to the rectification order, there were 20 items to complete by 12 February 2016, and a further 5 items to complete by 4 March 2016.
3. Noted in the rectification order was the following: Note - 12/02/2016: the contractor is to complete the rectification of items 1 - 20 as listed above by Friday 12/02/2016. On the same day both the complainant and the contractor are to arrange a joint inspection of the completed rectification of those items. Note - 16/02/2016: The complainant and the contractor are to meet on site again on Tuesday 16/02/2016 to hand over the contract works. During that meeting the complainant will make payment of the outstanding contract sum and identify in writing any remaining defects or issues resulting from the contract works that are not already identified in items 21 to 25 above inclusive and for which the contractor is responsible to rectify under the contract. The contractor will hand over the keys to the contract works and all written warranties, instructions, operation manuals and the required certificates (including, but not limited to electrical, plumbing, waterproofing, termite systems, Basix etc.) to reasonably allow the complainant to lawfully take occupation of the property.
4. The Applicant engaged subcontractors to work on the items identified in the rectification order and the homeowner paid the final contract sum. There were delays for various reasons, including damage to the vanity requiring a replacement which took 2 weeks to be restocked, difficulties obtaining access, and unavailability of subcontractors. The homeowner continued to inspect and provide additional lists of defects for rectification on 14 March 2016, 3 May 2016, 19 May 2016, 22 July 2016, and 21 September 2016.
5. The Building Inspection report dated 16 June 2016 notes a number of outstanding defects involving items 2, 3, 4, 6, 7, 9, 10, 11, 21, and 22 of the defects identified in the rectification notice. The photos showing those defects are all dated 3 May 2016 and identify the defects as breaches of s18B(1)(a) of the Act.
6. The Applicant gave evidence regarding each of the identified defects, including (but not limited to) that he agreed that items 1, 2, 3, and 4 demonstrated a breach of the statutory warranties but explained that the "taps were under, in a cupboard and the plumber missed it". Defect 7 was explained as having been "built according to plans". The defects relating to concrete colours were explained by the Applicant as being "inconsistent colour because drying rates were different". There is no evidence, however, of these explanations being given to the Inspector at any time.
7. The Applicant submitted generally that: 1. The new homeowner continuously gave him lists of additional issues and defects which he attempted to resolve; and 2. Access to the site was limited by the homeowner;
8. The Applicant has provided evidence of the additional defects lists received from the homeowner, the dates on which subcontractors were working on site according to his wages records, and some information about the limited accessibility to the site. In the absence of evidence to the contrary and on the available material I accept that evidence.
9. I also accept the limited hearsay evidence provided by the respondent, in the form of findings in the Delegate's decision, of communications between the Applicant and Inspector Ward on 11 February 2016 and 23 March 2016 to the effect that the Applicant was having difficulties complying with the rectification order because of unavailability or replacement parts, site access difficulties and continuous disputes with the homeowner, but that nevertheless he persisted in attempting to complete the rectifications requested.
10. The reviewable decision does not specifically address the Delegate's findings in relation to Property 4, which were: I accept that the homeowner must provide reasonable access to the site in accordance with the rectification order. I however again emphasise that you did not inform the Inspector of the issues of delays and therefore the Inspector was not aware if there were any issues. You only advised the Inspector of the issues once the time had expired in the Rectification order and the Inspector made contact with you to follow up why it had not been complied with. It is imperative for you to comply with the Rectification order unless there was a reasonable cause. There is no substantial evidence before me to suggest a reasonable cause for your failure to comply with the requirements of the rectification order issued.
11. I disagree with those findings. The Applicant's response to the Respondent's Notice to Show Cause, dated 22 February 2017, included wage records demonstrating his attempts to have subcontractors complete the rectification works, and specific evidence from the Applicant of his difficulties in complying with the rectification orders as a result of limited access to the property and continuous disputes with the homeowner. The Respondent also accepted, and I find, that the Applicant had contacted the Inspector on 11 February 2016 to notify him of an anticipated delay in complying with the rectification order because of the unavailability of a replacement part. This was prior to the expiry of the rectification order timeframe. The respondent did not amend the rectification order as a result of that contact.
12. I accept that the Applicant failed to comply with the rectification order dated 27 January 2016, however on the basis of the evidence before me I find that the Applicant had reasonable cause for this failure.
13. On the evidence, I find that the defects identified in the Building Inspection report dated 16 June 2016 also constitute breaches of s18B(1)(a) of the Act.

Improper Conduct

1. I have found that the Applicant failed to comply with rectification orders for Properties 2 and 3, without a reasonable cause. This constitutes two instances of improper conduct pursuant to section 51(2)(b) of the Act.
2. I have also found that the Applicant breached the statutory warranties pursuant to section 18B(1)(a) of the Act with respect to: 1. Items 1, 2, 3, 4, 5, 6, 7, 8, 10 and 11 identified in the Building Inspection report of 18 September 2015 for Property 1; 2. Each of the items identified in the Building Inspection report of 29 February 2016 for Property 3; and 3. Each of the items identified in the Building Inspection report of 16 June 2016 for Property 4.
3. The breach of these statutory warrantied under section 18B(1)(a) are an offence of Improper Conduct under section 51(c) if the Applicant does not provide a suitable defence under section 51(3). The defence must: …prove[s] to the satisfaction of the Secretary that the holder did all that could reasonably be required to ensure that a nominated supervisor for that work would exercise such degree of control over the doing of the work as would be necessary to prevent the occurrence of the improper conduct.
4. In determining whether the Applicant's defences are valid, the correct and preferable decision would have the Tribunal being satisfied to the same standard as the Secretary.
5. The Applicant submitted a number of defences: 1. Any breach of statutory warranties is not due to lack of competence or supervision, but rather is due to poor quality of tradesmen; 2. He was not given the opportunity to question the qualifications or opinion of the person providing the Building Inspection reports; 3. Instead of complying with orders for rectification that he didn't agree with, he relied on those orders being questioned and determined at NCAT; 4. A warranty is only breached if he refuses to rectify a defect or compensate the owner for that defect; 5. He disagreed with some of the evidence supporting the breaches of statutory warranty, but was unable to obtain evidence to the contrary because he did not have access to the properties.
6. The evidence provided by the Applicant of his efforts at supervising his subcontracted tradesmen is minimal. In evidence and submissions he stated, "I don't believe I can watch every tradesman do every bit of his work… but I agree that ultimately I am responsible". There is a large gap between watching every tradesman do every bit of his work, and what the Applicant actually did. He was able to identify the dates on which he had engaged subcontractors for Property 4 only by the wage records, and no evidence was provided supporting what tasks each subcontractor did or when they did those tasks, and in what respects they were of "poor quality". Similarly the Applicant gave evidence that he had hired a sander and purchased materials for a subcontractor to use in the rectification works for Property 1, but there was no evidence of what the subcontractor did, how he did it, when it was done, or of the Applicant inspecting the work. The level of supervision at Property 3 was so minimal that the Applicant was not aware that the contracted plumber had not installed the taps he gave him, and provided no evidence of when the owner supplied taps were provided to the Plumber, or any instructions given.
7. The Applicant submitted that it was difficult to hire and maintain available subcontractors in a competitive market, and whilst I accept that as fact, I do not consider it relevant to the defence for improper conduct in these circumstances. This is because the statutorily available defence focuses on the Applicant's actions in controlling the "doing of the work" to ensure that it is of requisite quality, rather than the availability of suitable persons to do that work. The latter would possibly be relevant to a failure to comply with a timeframe, but is not relevant in these circumstances to the subject offences.
8. I therefore reject the submission that the Applicant did all that he reasonably could do to exercise such degree of control over the doing of the work as would be necessary to prevent the occurrence of the improper conduct in relation to Properties 1, 3 and 4.
9. That the Applicant disputed the qualifications or opinion of the inspector, or disagreed with some of the evidence supporting the breaches of statutory warranty is not relevant to the determination of whether the Applicant had a valid defence. I have taken those submissions into consideration in making my findings about whether or not there was a breach of the statutory warranty in the first place, but consider them of little weight.
10. The final two defence submissions made by the Applicant, that a warranty is only breached if he refuses to rectify a defect or compensate the owner for that defect, and that he relied on the outcome of NCAT proceedings as the determining factor for whether there was a breach of statutory warranty, are wrong at law. The Applicant submitted that because Property 1 had been the subject of NCAT proceedings which settled, that there was no basis upon which to determine improper conduct. However, as noted by the Respondent, the ground for disciplinary action was based on breaches of the statutory warranty under section 18B(1)(a) of the Act, to do work with due care and skill and in accordance with the plans and specifications set out in the contract. It was not based on the Applicant's compliance or non-compliance with rectification orders or the issue of NCAT proceedings. It is not the case that NCAT must determine a building dispute between the Applicant and a homeowner before a finding of improper conduct can be made by the Respondent. The Respondent is empowered to deal with complaints and make findings on improper conduct pursuant to Part 4 of the Act.
11. I therefore find that the Applicant is guilty of improper conduct pursuant to section 51(1)(c) of the Act with respect to the previously identified breaches of statutory warranty under section 18B(1)(a of the Act.

Conclusion

1. Having found that the Applicant is guilty of improper conduct, the Tribunal must determine whether and to what extent disciplinary action is taken pursuant to section 62 of the Act.
2. The Tribunal's approach, as referred to above, considers that the object of sanctions under the legislation is to protect the consumers of home building services and not to punish contractors. The correct and preferable decision in the circumstances should have the effect of ensuring protection of consumers where the Applicant's improper conduct failed to do so.
3. The respondent noted its concern in its reviewable decision and in submissions at hearing that the Applicant was unperturbed by the imposition of a financial penalty, but did not identify any specific alternative penalties which would have the desired effect. I agree that, on the evidence, the imposition of a financial penalty by itself will not have the desired effect of protecting the consumer from the Applicant continuing to breach statutory warranties or failing to comply with rectification orders. He is of the unwavering opinion that his work is of sufficient quality, and his supervision of subcontractors of sufficient control, that he has not engaged in improper conduct, even when faced with evidence and findings to the contrary.
4. Having regard to the relevant principles expressed above, in determining the appropriate penalty I take into account the following factors: 1. the nature, extent and circumstances of the contraventions demonstrate that the issues were systemic to the applicant's work practices; 2. as a consequence of the contraventions the homeowners were often required to pursue NCAT proceedings in order to obtain a satisfactory resolution; 3. there is no fraudulent or dishonest intent or deliberation on the part of the Applicant, but his attitude demonstrates a level of carelessness, and wilfulness in refusing to comply with rectification orders; 4. whilst the Applicant made some effort to correct the situation at the relevant times, the effort was limited to engaging subcontractors without adequate supervision and did not include personally ensuring that issues were rectified appropriately; 5. the Applicant seems to have a fundamental misconception of his obligations under the Act in relation to statutory warranties and compliance with rectification orders; 6. there is no evidence of gain made as a result of the contraventions; 7. the Applicant demonstrated a laissez-faire attitude to the Respondent's attempts to protect the consumer from his breaches of statutory warranties; 8. the Applicant has provided some limited evidence that he has changed his workplace practices and method of operation, including employing workers directly, in an attempt to ensure adequate availability of tradespersons.
5. The monetary penalty imposed by the Respondent in its reviewable decision of $4000 is in the middle of the range of monetary penalties available for each ground of disciplinary action established, pursuant to section 62(c) of the Act, where the maximum penalty is $11,000 for an individual. I find that monetary penalty appropriate in the circumstances where there is more than one ground made out in these reasons for decision, but fewer than the Respondent applied. However, the imposition of a monetary penalty is not sufficient to have the desired effect of protecting consumers from the Applicant's conduct. The correct and preferable decision is therefore to vary the Respondent's decision to impose the following condition on the Applicant's authority pursuant to section 62(d) of the Act: 1. The completion of appropriate courses on supervision, statutory warranties and compliance with rectification orders, within 3 months.

Orders

1. The following orders are made: 1. The Respondent's decision is varied to include the Tribunal's reasons for decision, and the following findings: 1. The applicant is guilty of improper conduct under s51(1)(c) of the Act as a result of his breach of statutory warranties under s18B(1)(a) of the Act that work will be done with due care and skill in accordance with the plans and specifications set out in the contract to do residential building work at: 1. Property 1: 21 Wharf Street, Wyee Point NSW 2259; 2. Property 3: 172A Bridge Street Morisset NSW 2264; 3. Property 4: 81 Vales Road Mannering Park NSW 2259. 1. The applicant is guilty of improper conduct under s51(2)(b) of the Act as a result of his failure, without reasonable cause, to comply with the requirements of the Rectification Orders issued on: 1. 7 September 2015, requiring him to rectify defective work specified in the order by 19 October 2015, in relation to residential building work that he had done at Property 2: 29 Kenilworth Street, Mannering Park NSW 2259; and 2. 27 January 2016 requiring him to rectify incomplete and defective work specified in the order by 15 February 2016, in relation to residential building work that he had done at Property 3: 172A Bridge Street Morriset NSW 2264; 1. The Applicant is ordered to pay a monetary penalty of $4000 in accordance with section 62(c) of the Act within 28 days; 2. The following condition is imposed on the Applicant's authority pursuant to section 62(d) of the Act: 1. Requirement to complete appropriate courses on supervision, statutory warranties and compliance with rectification orders, within 3 months. 1. The Respondent is to provide the Applicant with a list of the required courses to be completed, within 7 days. ​​

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: 28 March 2018