Chief Dispute Resolution Officer, Domestic Building Dispute Resolution Victoria

Excellent Homes Pty Ltd v Domestic Building Dispute Resolution Victoria (Building and Property) [2022] VCAT 699

1. The decision of the respondent to issue the dispute resolution order dated 28 October 2020 requiring the applicant to pay the joined party $30,997.45 is affirmed.

2. There is liberty to apply on the question of costs. Any application for costs must be accompanied by a written submission (limited to 6 pages) and affidavit in support. If an application for costs is made, I direct the principal registrar to list the matter for a one hour hearing before Senior Member Kirton.

1. The respondent must pay to the applicant $30,997.45.

2. Having regard to sections 115B and 115C of the Victorian Civil and Administrative Tribunal Act 1998 and being satisfied that the applicant has substantially succeeded in the claim, the Tribunal orders that the respondent must reimburse the filing fee paid by them of $487.30.

1. The applicant is the builder of a dwelling house in Boronia. The joined party is one of the owners of the dwelling. The respondent is the Chief Dispute Resolution Officer of Domestic Building Dispute Resolution Victoria (DBDRV).

2. On 28 October 2020 the Deputy Chief Dispute Resolution Officer issued a dispute resolution order (Order) requiring the applicant builder to make a payment to the owners of $30,997.45. The Order was made pursuant to section 49C(1)(ab) of the Domestic Building Contracts Act 1995 (Vic) (the Act).

3. In this proceeding, the applicant builder has applied to the Tribunal for a review of the Order.

4. The owners also commenced an application to the Tribunal, being proceeding BP1160/2021. The respondent to that proceeding is the builder. The owners seek an order against the builder for the amount of $30,997.45, as assessed by DBDRV.

5. Part 4 of the Act establishes a process for the conciliation and resolution of domestic building disputes by DBDRV. In very general terms, all domestic building work disputes (as defined in the Act) must be referred to DBDRV before they can proceed in the Tribunal. A proceeding (unless in the nature of an injunction) issued at VCAT without a 'certificate of conciliation' will be stayed until a certificate is provided.[1]

6. The first step in DBDRV's process is that an officer will first assess whether the dispute falls within the scheme, and if so, then assess whether the dispute is suitable for conciliation. If it is not suitable, they will issue a 'certificate of conciliation - not suitable'.[2]

7. If accepted, a dispute resolution officer will conciliate the dispute. If an agreement is reached at conciliation, a written 'record of agreement' will confirm the settlement. If no agreement is reached, the Chief Dispute Resolution Officer will issue a 'certificate of conciliation - not resolved' and the parties may issue at VCAT.[3]

8. An assessor may be appointed to assess whether the building work is defective or incomplete. An assessor has wide powers, including to enter a building site, to require production of documents, to conduct tests and to obtain expert advice.[4] After conducting an examination of domestic building work, the assessor must give a report in writing.[5]

9. If the Chief Dispute Resolution Officer (or their delegate) is satisfied that the dispute relates to a breach of a warranty as set out in s 8 of the Act, or a failure to comply with the contract, the Chief Dispute Resolution Officer may issue a 'dispute resolution order' (Order) to a builder or owner if:

1. the parties have not resolved the dispute; or
2. they agree to an Order being made; or
3. there has been a record of agreement which has been breached by one party.

10. The Order may require a party to pay money, put money in trust or to carry out works. It may include findings by DBDRV which then are evidence in any subsequent proceedings.[6]

11. A person who is required to comply with an Order may apply to VCAT for review of the decision.[7]

12. If an Order is not complied with, then the Chief Dispute Resolution Officer may issue a 'breach of dispute resolution order notice'. That may be used as evidence in any subsequent proceedings and also is grounds on which an owner or builder may end the contract. A builder has the right to apply to VCAT for a review of the decision to issue a 'breach of dispute resolution order notice'.[8]

13. The intention and purpose of the scheme was explained by the Minister in the Second Reading Speech of the bill to amend the Act[9]:

Part 2 of the bill sets out new procedures for more timely and less costly resolution of domestic building work disputes.

The bill creates a new process for the conciliation and resolution of disputes to be delivered by a new service to be known as Domestic Building Dispute Resolution Victoria. It is modelled on similar bodies, such as those used in workers compensation disputes and retail tenancy disputes to resolve disputes in a quick and fair manner.

The bill introduces a new measure to resolve disputes where the parties cannot reach agreement through conciliation - dispute resolution orders. Dispute resolution orders will be able to be issued by the new chief dispute resolution officer to require rectification of defective or incomplete work, or payment to a builder, or payment into a trust fund pending completion of rectification work. The bill also provides for the establishment of the trust fund for this purpose.

In the most extreme cases, a dispute resolution order will also be able to be used to compel a builder to meet the cost of rectification by an alternative builder where the building work is so poor that it would not be reasonable to allow the original builder to attempt rectification.

While a party who is required to comply with a dispute resolution order will have a right to seek review of the order at VCAT, there will be strong incentives to both parties to accept the outcomes of conciliation and the dispute resolution order, if one has been issued. VCAT will have the power to make costs orders if it finds the review application frivolous or lacking in substance, or if the party seeking review does not get a better outcome compared to that achieved through conciliation and the dispute resolution order. As a further incentive, breach of a dispute resolution order by a builder will also be a ground for disciplinary action.

14. The present application concerns an application by the builder for VCAT to review the decision of the Chief Dispute Resolution Officer to issue a dispute resolution order requiring the builder to pay $30,997.45 to the owners. The Order was made under s 49C and the application for review is made under s 63.

15. Prior to the Order being made, the following steps had taken place:

1. the owners noticed water leaking into their dwelling, from the balcony above;
2. they referred the dispute to DBDRV;
3. an assessor, Eric Scott, was appointed by the Chief Dispute Resolution Officer under s 48B of the Act to inquire into the dispute and to provide an assessment report under s 48O of the Act, which he did dated 7 November 2018 (the 'Assessment Report');
4. in his Assessment Report Mr Scott found ten defects attributable to the builder and recommended that the builder rectify them;
5. at a conciliation held by DBDRV on 20 May 2019, the builder and owners agreed that the builder would rectify a number of items, including the balcony leak (including engaging a leak specialist to identify the cause). The agreement was recorded in a record of agreement;
6. the owners alleged that the builder failed to comply with the record of agreement and notified DBDRV in accordance with s 49G of the Act;
7. the Chief Dispute Resolution Officer directed the assessor Eric Scott to carry out a further examination of the building work and to provide a further report under s 48O(4). Mr Scott did so and provided a 'Domestic Building Assessment Report - Compliance with record of agreement' dated 10 February 2020 (the 'Compliance Report');
8. in the Compliance Report, Mr Scott found there was outstanding defective building work attributable to the builder;
9. the builder failed to attend both inspections carried out by Mr Scott;
10. the Chief Dispute Resolution Officer offered the builder the opportunity to make submissions on the Assessment Report and the Compliance Report under s 48O(6), but they chose not to do so;
11. the owners confirmed that they wished only to pursue items 2, 3 and 7(d) of the Compliance Report and provided two quotations to DBDRV for the cost to rectify those defects;
12. Mr Scott appraised the quotations and assessed that the lower amount, quoted by QSE Builders, $30,997.45, was a reasonable price for the cost to rectify those items of defective work; and
13. the Chief Dispute Resolution Officer accepted that appraisal and made the Order dated 28 October 2020 for the builder to pay the owners that amount, under s 49C of the Act.

ab) a builder to pay an amount of money to the building owner for completion or rectification of the domestic building work under the contract or any part of the contract;...

Pursuant to section 49C(1)(ab) of the Domestic Building Contracts Act 1995 (the Act), I order the Builder to:

1. Pay to the Owner the total sum of $30,997.45 for the domestic building work identified as being defective and attributable to the Builder in the Domestic Building Assessment Report - Compliance with Record of Agreement dated 10 February 2020 (Compliance Report) in relation to Items 2, 3 and 7 of the Compliance Report.

2. Payment is to be made to the following account within 35 days of the date of the Order ...

3. Pursuant to section 49Q of the Act, the Builder must notify the Chief Dispute Resolution Officer (CDRO) and the Owner that this Order has been complied with within two business days of payment being made under the Order.

4. Pursuant to section 63 of the Act, a person who is required to comply with a dispute resolution order may apply to the Victorian Civil and Administrative Tribunal for review of the decision to issue the dispute resolution order, within 20 business days after being given a copy of the order, or if a statement of reasons is requested under the Victorian Civil and Administrative Tribunal Act 1998, 20 business days after the day on which the statement is received, or 20 business days after the applicant is informed that the statement of reasons will not be given.

18. Section 63 of the Act gives the Tribunal jurisdiction to review a decision to issue a dispute resolution order and to make any order it considers fair in relation to the domestic building contract to which the dispute relates. The section provides as follows:

(1) A person who is required to comply with a dispute resolution order may apply to VCAT for review of the decision to issue or amend the dispute resolution order.

(2) An application under subsection (1) must be made within 20 business days after the later of -

a) the day on which the applicant was given a copy of the dispute resolution order or the amendment to the dispute resolution order (as the case requires); or

b) if under the Victorian Civil and Administrative Tribunal Act 1998 the applicant requests a statement of reasons, the day on which the applicant receives that statement of reasons or the applicant is informed under section 46(5) of that Act that a statement of reasons will not be given.

(3) An application under subsection (1) must be made on the ground that -

a) the description in the dispute resolution order of the domestic building work that is defective or incomplete is incorrect; or

b) the period specified in the dispute resolution order for carrying out the rectification or completion work is not reasonable; or

c) a requirement in the dispute resolution order to take a specific action or to refrain from taking action is not necessary or is not reasonable.

(4) In determining an application for review of a dispute resolution order, VCAT may also make any order it considers fair in relation to the domestic building contract to which the dispute relates.

(5) Without limiting subsection (4), VCAT may do one or more of the following -

a) vary any term of the domestic building contract (including the completion date, the contract price, a provisional sum or the amount to be paid for a prime cost item);

b) declare that a term of the domestic building contract is, or is not, void under section 132;

c) declare void any unjust term of the domestic building contract, or otherwise vary the domestic building contract to avoid injustice.

19. It is important to note that there are only three grounds for review available to an applicant for review under ss (3): that the description in the order of the domestic building work that is defective or incomplete is incorrect; or that the period specified for carrying out the rectification or completion work is not reasonable; or a requirement to take a specific action or to refrain from taking action is not necessary or is not reasonable.

20. In the present case, the Order requires the builder to take a specific action, namely the payment of money. Accordingly, the only relevant ground on which they may appeal is that the requirement for the builder to pay money is not necessary or is not reasonable.

21. The functions and powers of the Tribunal in exercising its review jurisdiction are set out in s 51 of the Victorian Civil & Administrative Tribunal Act 1998. In exercising its review power, the Tribunal, amongst other things:

1. reviews decisions on the merits;
2. 'stands in the shoes' of the original decision-maker and makes the 'correct or preferable' decision having regard to the material before it;
3. conducts the review without any presumption as to the correctness of the decision under review;
4. conducts its own independent assessment and determination of the matters necessary to be addressed;
5. must make its own findings of fact and is not bound by the original decision-maker's findings of fact;
6. has regard to the legislative scheme, the evidence and the facts at the time of the hearing, subject to the statutory requirements;
7. acquires at the time of its decision all of the powers of the decisionmaker relevant to the decision under review; and
8. may either affirm the decision or alter it.[10]

22. The Chief Dispute Resolution Officer's role is to assist the Tribunal in the review of the primary decision. The Tribunal stands in the shoes of the primary decision-maker and decides what is the 'correct or preferable decision' on the material before it. The decision made by the Tribunal then becomes, for all purposes, the decision of the primary decision-maker. [11]

23. The issue for the Tribunal on review is whether the Tribunal, standing in the shoes of the Chief Dispute Resolution Officer, is satisfied that it is appropriate to issue an Order that the builder pay the owners $30,997.45.

24. The builder filed a document headed Statement of Reasons and provided submissions orally. Their main contention can be summarised as follows:

1. they agreed there was a leak in the property;
2. DBDRV provided an Assessment Report, and the builder was happy to fix the items identified by the assessor;
3. in a conciliation held by DBDRV on 20 May 2019 the owners and builder reached an agreement by which the builder was to complete certain rectification work;
4. the builder completed that work by 30 June 2019, and this included fixing the leak on the balcony;
5. there was a second leak at the balcony which was not part of the first agreement;
6. the owners requested DBDRV to provide a second assessment report, which it did. That report identified no leak on the balcony but some moisture on the bulkhead top left side of the door;
7. the owners' claim to DBDRV and in these proceedings is for the new leak, and the builder has not been given the opportunity to investigate and rectify the second leak;
8. the builder wants the opportunity to find out where the new leak is coming from and to assess the cost to fix the leak. They propose engaging a third party to carry out an independent assessment and said they had been asking to be able to do that since mid 2021.

25. The builder did not call any expert evidence. Nor did they give any lay evidence about the defects or the cost to repair. At its highest, the builder's case was that they want to be given a further opportunity to find out where the current leak is coming from and to provide an alternate costing to fix.

26. There is no question that the dispute between the builder and the owner was a domestic building work dispute and that its reference to the Chief Dispute Resolution Officer for conciliation was permitted. Further, it is not contentious that the dispute concerned an alleged breach of a warranty given by the builder under the Act, nor that the Chief Dispute Resolution Officer was satisfied that the parties had not resolved the dispute.

27. In those circumstances, the Chief Dispute Resolution Officer is empowered to make a payment order under s 49C for 'a builder to pay an amount of money to the building owner for completion or rectification of the domestic building work under the contract or any part of the contract.'

28. The Chief Dispute Resolution Officer provided a Statement of Reasons for the making of the Order and submitted that the Tribunal ought to affirm the decision to issue the Order and find that it should not be characterised as 'not necessary or not reasonable', having regard in particular to:

1. the assessor's opinion, as set out in the Assessment Report, that there were a number of defects in the building work;
2. the assessor's opinion as set out in the Compliance Report, especially that Items 2, 3 and 7(d) represented outstanding defective building work that was attributable to the builder and as regards Item 7(d), that the defective work also amounted to a contravention of the Building Act 1993 (Vic);
3. the builder's decision not to avail itself of the entitlement under s 48O(6) of the Act to make submissions on the Assessment Report and the Compliance Report;
4. the QSE Builders quotation for the cost to rectify; and
5. the functions of the Chief Dispute Resolution Officer under s 52D of the Act.

29. Mr Scott, the assessor gave evidence at the hearing, and was cross examined by the builder. He confirmed his opinion as set out in the Assessment Report and the Compliance Report. Mr Scott is qualified and experienced in the areas on which he gave evidence and I accept his opinion. His opinion was not altered by the propositions put to him by the builder.

30. The builder does not dispute the defects identified in the Assessment Report, nor that they agreed to undertake the works set out in the record of agreement. The builder's contention is that the defects set out in the Compliance Report are new defects, and were not the subject of the Assessment Report and/or the record of agreement.

31. Mr Scott did not agree with that proposition. He explained that his role was to assess whether the builder had complied with the record of agreement, and that in respect of Items 2, 3 and 7(d), he assessed that the builder had not complied. It was not a question of there being new defects.

32. In respect of each of those items, Mr Scott set out what the builder had agreed to do in the record of agreement and then gave his evidence as to why he formed the view it had not been carried out or completed.

1. The Builder will install a storm-proof door seal to the main front door, at the Builder's cost.
2. In relation to the location identified and marked in red at Annexure 3, the Builder:
   1. will remove the quad skirting;
   2. will remove all silicone filling applied between the quad skirting and the laminate flooring; and
   3. will install new quad skirting.

1. The Builder will apply a timber floorboard filling agent to the separation of the laminate boards marked points one and two in red at Annexure 4, to match the colour of the laminate floor.

34. Mr Scott's evidence was that he inspected the item, found that while the builder had carried out some work, it was not completed and the item remained defective.

35. In respect of item 3, the parties agreed that the builder:

1. will remove the silicone applied to the connection of the trap and waste underneath the basin in the top floor bathroom; and
2. will also remove the existing plug and washer to the trap and waste and supply and install a new plug and washer.

36. Mr Scott's evidence was that he inspected the item, found that the builder had not carried out this work and the item remained defective.

The Builder will rectify the cause of the leak, reinstate the plaster or rectify any other work which may have been affected or destroyed while determining and rectifying the water leak.

38. Mr Scott's evidence was that although the builder had carried out some work, leaks remained. He carried out moisture testing and found three leaks in the same locations as previously identified in the record of agreement, which indicated to him the previous leaks had not been rectified. He did not agree with the builder's suggestion that these were new leaks.

39. Mr. Scott observed that the builder had carried out some "superficial" work, and was unable to comment on any work that the builder may have carried out underneath the plasterboard. However he was satisfied that as the leaks remained, whatever work may have been carried out had not rectified the defects.

40. The owners provided a written response in this proceeding and oral submissions at the hearing. They also issued proceeding BP1160/2021 against the builder, seeking damages of $30,997.45 based on the factual matters in this proceeding.

41. They relied on the two DBDRV assessment reports and the quotation which was assessed by DBDRV as being a reasonable price for the cost to rectify the defective work.

42. They disputed that there was a new leak. Instead, they submitted that in the Record of Agreement dated 20 May 2019, the builder agreed to rectify the cause of the balcony leak (including engaging 'Find a Leak' specialist), to reinstate the plaster or rectify any other work which may have been affected or destroyed while determining and rectifying the water leak.

43. The builder was unable to accurately locate all the leaks and rectify them. Moreover, the builder did not engage 'Find a Leak' or any other specialist trades to carry out further testing to determine the cause of the leak.

44. The owners rely on the DBDRV assessor's opinion and paragraph 23 (B) of the Statement of Reasons which stated:

"The building assessor was not confident that the Applicant had the necessary skill to competently rectify the defective works represented by Item 7, and the Applicant has had more than two years to rectify the Item 7 issues".

45. They say that the builder was given uninterrupted access to the property, including being given a spare key between 2018 and 2020. The owners should not be required to give the builder further access after May 2021, given the builder's previous failed attempts and ongoing delays.

46. Photos and videos taken in June 2021 demonstrate the continued leaks.

47. They provided quotations to DBDRV to rectify the defects, which total $30,997.45. These were accepted by the assessor as being a reasonable price for the cost to rectify the defective work.

48. As set out above (see paragraphs 19-20), for the builder to succeed in this review they must establish that the requirement in the Order that they pay the owners $30,997.45 was 'not necessary or not reasonable'.

49. Subject to s 49 of the Act, the Chief Dispute Resolution Officer has a wide discretion as to whether to issue a dispute resolution order. In the present case she was satisfied that it was appropriate to issue the Order to the builder having regard to the matters set out at paragraphs 26-28 above.

50. The Tribunal's role in this review is to reach its own decision on the merits of the matter before it rather than reviewing the propriety or legality of the decision made by the initial decision-maker. In the words of Senior Member Lothian:

Under s 51(1)(a) of the VCAT Act the Tribunal in exercising its review jurisdiction has all the functions of the decision- maker. In other words, the nature of the review is a hearing de novo. In this context a de novo hearing is one from the beginning; as if the [original] decision had not been made. Accordingly, the conduct of the assessor is not relevant to the decision of the Tribunal.[12]

51. Having said that, I must also have regard to the legislative scheme, including its purpose (as described at paragraphs 5-13 above) and the fact that the Chief Dispute Resolution Officer has administrative responsibility for Part 4, Division 6 of the Act.

52. Accordingly, when considering whether the requirement in the Order that the builder must pay the owners $30,997.45 was 'not necessary or not reasonable', I take into consideration not only the information before the Chief Dispute Resolution Officer but also the evidence and the facts at the time of the hearing before me. I also take into consideration the function and powers of the Chief Dispute Resolution Officer under the Act and the limited grounds for review available under s 63(3)(c).

53. Having regard to Mr Scott's oral evidence, his written reports, the record of agreement, the photographs tendered, the evidence of each of the builder and the owners, and the history of the dispute at DBDRV, I am satisfied of the following matters:

1. there were originally defects in the building works, as described at Items 2, 3 and 7(d) of the Assessment Report;
2. the builder agreed to carry out the work described in the record of agreement;
3. the builder failed to comply with the record of agreement;
4. the items identified by Mr Scott in the Compliance Report are outstanding;
5. the builder had been given the opportunity to comply with the record of agreement and to dispute the Compliance Report but failed to do so;
6. the quotation for $30,997.45 to rectify the three items is a reasonable amount.

54. The builder has provided no evidence to support a conclusion that it would be 'not necessary or not reasonable' to order the builder to pay the owners the sum of $30,997.45. As stated above, I accept Mr Scott's opinion evidence. The builder provided no evidence to contradict Mr Scott (either expert or lay evidence). At its highest, the builder's case was that they want to be given a further opportunity to find out where the current leak is coming from and to provide an alternate costing to fix, There is no evidence to support a contention that the requirement in the Order to pay the owners money was not necessary and/or not reasonable.

55. Accordingly the decision of the Chief Dispute Resolution Officer is affirmed. As a consequence, the owner's claim in proceeding BP1160/2021 should succeed. I will make the following orders. The parties in proceeding BP1160/2021 are not legally represented and so I have not made any provision for any application for legal costs to be made. If that is incorrect a party may advise the Tribunal and a procedural order will be made in line with proceeding BP1896/2020.

1. The decision of the respondent to issue the dispute resolution order dated 28 October 2020 requiring the applicant to pay the joined party $30,997.45 is affirmed.

2. There is liberty to apply on the question of costs. Any application for costs must be accompanied by a written submission (limited to 6 pages) and affidavit in support. If an application for costs is made, I direct the principal registrar to list the matter for a one hour hearing before Senior Member Kirton.

1. The respondent must pay to the applicant $30,997.45.

2. Having regard to sections 115B and 115C of the Victorian Civil and Administrative Tribunal Act 1998 and being satisfied that the applicant has substantially succeeded in the claim, the Tribunal orders that the respondent must reimburse the filing fee paid by them of $487.30.

[1] Section 56 DBC Act; Warren's Plumbing and Drainage Services Pty Ltd v Sharma [2018] VCAT 883.

[9] Victoria, Parliamentary Debates, Legislative Assembly, 10 December 2015, pages 5541-5542. The amending bill was the Building Legislation Amendment (Consumer Protection) Act 2016.

[10] LPI & OGW v DHHS [2019] VCAT 1651 at [26] per Judge Millane, Vice President.

[11] Macedon Ranges Shire Council v Romsey Hotel Pty Ltd [2008] VSCA 45; (2008) 19 VR 422 at paragraphs 29, 37.

[12] Liu v Building Practitioners Board [2014] VCAT 1588 at [13].