Greenhill Homes P/L v Domestic Building Tribunal [1998] VSC 34

Supreme Court of Victoria|1998-08-14|Before: Byrne, J.

The application before this Court is for judicial review pursuant to Order 56 of the decision of the Tribunal dismissing the amended summons of Greenhill Homes and the Directors to which I have referred. The parties were content to treat the ruling as not being a determination of the Tribunal from which appeal lies to the Court of Appeal pursuant to s.110 of the Act and I have proceeded on this basis. The Tribunal did not participate in the review application indicating that it would abide the result.

In his submissions, counsel for Greenhill Homes and the Directors raised a number of matters in respect of which the Tribunal was said to have fallen into error:

2. The Tribunal had no jurisdiction to hear and determine a claim for damages for breach of collateral warranty alleged against a person who is not a party to the building contract.

3. The Tribunal ought not to have permitted the Directors to be joined as parties as they were not a "builder" within s.54 or "another person" within s.56 of the Act.

As it was originally formulated, this claim included allegations based on breaches of the Trade Practices Act 1974. In its amended form the particulars of demand omitted these references on the basis, I was told, that the Tribunal could not exercise federal judicial power. The claim then depended upon the Victorian Fair Trading Act. The relevant parts of the particulars of demand are short and I will set them out in full.

22. Further, the First Respondent at all material times represented that it had and held itself out as having the necessary professional qualifications, skill and competence to:

22.2 give advice as to the design and construction of the Works.

23. The Second and Third Respondents at all material times represented that they had and held themselves out as having the necessary professional qualifications, skill and competence to:

23.2 give advice as to the supervision, design and construction of the Works.

24. Prior to the execution of the Agreement, the First Respondent, the Second and Third Respondents recommended, advised, warranted and represented to the Applicants:

24.1 that they had the necessary professional qualifications, skill and competence to supervise, design and construct the Works; and

24.2 that they had the necessary professional qualifications, skill and competence to supervise, design and construct the Works in a good and tradesmanlike manner and with due diligence.

25. At all material times, the First Respondent and the Second and Third Respondents knew or ought to have known that the Applicants would place reliance on the said recommendations, advices, warranties and representations. 26. Acting and relying upon the recommendations, advices warranties and representations and induced thereby, the Applicants entered into the Agreement. 27. The First Respondent and the Second and Third Respondents were under a duty of care in the making of the recommendations and in the giving of the advices and the making of the warranties and representations to the Applicants. 28. In truth and in fact the said recommendations, advices, warranties and representations were false and untrue. 29. In the circumstances, the First Respondent engaged in conduct that was misleading or deceptive or likely to mislead or deceive in breach of section 11 of the Fair Trading Act 1985. N. LOSS AND DAMAGE/SECTION 37 FAIR TRADING ACT 1985 30. In consequence of the matters aforesaid in paragraphs 22 to 29 hereof, the Applicants have suffered loss and damage.

PARTICULARS

The Applicants refer to and repeat paragraphs 13 and 14 hereof. O. AID AND ABETT/SECTION 31 FAIR TRADING ACT 1985 31. Further, in breach of section 31 Fair Trading Act 1985 the Second and Third Respondents were directly and knowingly concerned in, and aided and abetted the breach of section 11 of the Fair Trading Act by the First Respondent. P. LOSS AND DAMAGE/SECTION 37 FAIR TRADING ACT 1985 32. By reason of the matters aforesaid in paragraph 31 above, the Applicants have suffered loss and damage.

His Honour observed that, notwithstanding that the Tribunal is not a court of pleading the function of these particulars of demand is to communicate and define the issues between the parties. With respect, I agree. The Tribunal is given extensive powers for the purposes of determining the matters referred to it. Insofar as the matter is a domestic building dispute referred to it for resolution pursuant to s.55, these powers are set out in s.53. The Proprietors seek an order for damages pursuant to s.53(2)(b)(ii). Their entitlement to this relief must, of course, depend upon their satisfying the Tribunal that they have a legal right to this remedy. Notwithstanding the flexibility and informality with which the Tribunal is obliged and empowered by s.77 to conduct its proceedings, natural justice requires that the respondent know what is put against it. Moreover, proper management of the dispute resolution process will normally demand that the Tribunal itself know what are the issues between the parties.

The misleading and deceptive conduct allegation is put primarily against Greenhill Homes. It is alleged that this company represented that it was competent to carry on business as a builder; to supervise, design and construct the works; and to do so in a good and tradesmanlike manner and with due diligence. Next, it is said that the Proprietors were induced by these representations to enter into the building contract. In paragraph 28 it is said that these representations were false and untrue. No particulars are given. I would expect that, when given, these would allege a want of training, experience or competence in Greenhill Homes or its staff at the time the representations were made before the work was commenced. The Proprietors then allege that they have suffered loss and damage and they particularise these as the same loss as they suffered because of the breaches of the building contract by Greenhill Homes. For my present purposes I must assume that these allegations will be proved and entitle the Proprietors to the relief they seek. By so doing, however, I would not like it to be taken that this assumption is necessarily correct. The question for me is to whether such a claim is within the jurisdiction of the Tribunal.

It was submitted on behalf of the Builder that a claim based on misleading and deceptive conduct is not a domestic building dispute as this expression is defined in s.54(1). The relevant part is paragraph (a) which is in these terms:

(1) A `domestic building dispute' is a dispute or claim arising -

(a) between a building owner and -

(i) a builder; or

(ii) a building practitioner (as defined in the Building Act 1993); or

(iii) a sub-contractor; or

(iv) an architect -

in relation to a domestic building contract or the carrying out of domestic building work; or..."

It was put, correctly in my view, that representations as to qualifications prior to the contract form the background to the building contract and to the work carried out under it. Accordingly, it was said that a claim arising out of them is not a claim "in relation to a domestic building contract or the carrying out of domestic building work".

The Tribunal was correct in rejecting this submission. What is required in order to attract jurisdiction is that the subject matter of the claim has the appropriate nexus with the building contract or with the building work. I will not go through the cases which his Honour analysed in his comprehensive reasons. It is sufficient that I refer to PMT Partners Pty Ltd (In liquidation) v. Australian National Parks and Wildlife Service [1995] HCA 36; (1995) 184 C.L.R. 301. In this case, the High Court had to consider whether the primary judge could exercise the power conferred by s.48 of the uniform Commercial Arbitration Act to extend time. Under this provision, power was granted to extend time "for doing an act or taking a proceeding in or in relation to an arbitration". The question was whether the court had power to extend the time prescribed in a building contract for a party to submit the matter in issue to the superintendent, a precondition to the right to arbitrate. The High Court upheld the primary judge's conclusion that he did have that power. Brennan CJ, Gaudron and McHugh JJ were of opinion that the remedial nature of the power "to relieve against agreed time limits which might otherwise interfere with the fair and proper processes of arbitration" suggested that the power should be construed liberally: 184 C.L.R. at 313. Toohey and Gummow J accepted that the expression "in and in relation to" in s.48 required that the Act in question be to some extent connected with the arbitration. That the second event did not exist at the time of the first did not prevent the two events from having such a connection. At p. 184 of their judgment their Honours approved a dictum of Gray J in Newbury v. Smith [1991] FCA 146; (1991) 29 F.C.R. 246 at 252-3 which included the following:

"The premise that an event which occurs before an election begins cannot be `in relation to' that election is wrong. It is obviously possible to do an act `in relation to' an event, before that event takes place. Acts preparatory to an event will usually be regarded as being performed `in relation to' that event."

These considerations point to the conclusion contended for by counsel for the Proprietors. The representations are connected both to the building contract and to the building works because, as it is alleged, these events occurred only because the Proprietors were induced by the representations to enter into this building contract. It may be that there is also a point of contact with the building works because the damages claimed are assessed by reference to the costs of completion and rectification of those works, matters which are to be determined also in the claim for breach of the building contract.

Some guidance on this question is to be found in the cases in which the courts have considered the power of an arbitrator under a private arbitration agreement to entertain a claim such as that under consideration. There are decisions which show that such a claim is not referred to arbitration by an agreement where the jurisdiction of the arbitrator is over a "controversy or claim arising out of or relating to the agreement": Allergan Pharmaceuticals Inc v. Bausch & Lomb Inc (1985) 3 B.C.L. 61; A.T.P.R. 40-636, per Beaumont J; or "any dispute between the parties hereto arising under the agreement": Paper Products Pty Ltd v. Tomlinsons (Rochdale) Ltd [1993] FCA 346; (1993) 43 F.C.R. 439, per French J; or "any dispute or difference between the parties hereto of any kind relating to the construction of the works or as to the materials or workmanship used or employed therein or as to the construction, meaning or effect of this agreement or any part or parts thereof": Tropeano v. Monogram Pty Ltd [1992] 2 Qd.R. 324, per Mackenzie J. See too: Laminex (Australia) Pty Ltd v. Coe Manufacturing Company (1998) A.T.P.R. 4-610, where an exclusive jurisdiction clause in a contract directing the parties to litigate in Multnomah County in the State of Oregan "any actions arising hereunder" did not oblige them to litigate in that jurisdiction misleading and deceptive conduct claims made under the Trade Practices Act 1974. On the other hand, there have been, recently, a series of strong judgments which would accept the jurisdiction of an arbitrator over these misleading and deceptive conduct claims where the terms of the arbitration agreement cover "any controversy or claim arising out of or related to this agreement or the breach thereof": IBM Australia Ltd v. National Distribution Services Ltd (1991) 22 N.S.W.L.R. 466; "any dispute arising from this charter or any bill of lading issued hereunder": Hifert Pty Ltd v. Kiukang Maritime Carriers Inc (unreported, Federal Court of Australia, Tamberlin J, 4 December 1996, BC 9605908); "any dispute or difference arising out of this agreement": Francis Travel Marketing Pty Ltd v. Virgin Atlantic Airways Ltd (1996) 39 N.S.W.L.R. 160.

In this case, the text in question is found in a statute and in one which sets up a tribunal with broad powers to resolve domestic building disputes: s.1. It is a statute and which empowers the parties or one of them to require that the dispute be taken from the courts to this specialist tribunal. In such a case, the courts should not approach its construction in a grudging way; they should be no less liberal in their identification of the matters which might be referred to this tribunal.

A further consideration is that the evident purpose of this part of the Act is to establish a forum to resolve domestic building disputes. Counsel for the Proprietor said that the Tribunal was intended to be a "one stop shop" for this purpose. To adopt the words of the Attorney-General on 24 October 1995 in her second reading speech "the Tribunal is to be established as a single point for the resolution of all domestic building disputes": Hansard Legislative Assembly vol 426 p.695. I mention, too, that in the context of the law of private arbitrations, judges now are very much inclined to construe agreements to give effect to the same principle of one stop dispute resolution: Harbour Assurance Co. (UK) Ltd v. Kansa General International Insurance Co Ltd [1993] 1 QB 701 at 724-5, per Hoffmann J; Continental Bank NA v. Aeakos Campania Naviera SA [1994] 1 W.L.R. 588 at 592, per Steyne LJ; Francis Travel Marketing Pty Ltd v. Virgin Atlantic Airways Ltd (1996) 39 N.S.W.L.R. 160 at 165, per Gleeson CJ, Meagher and Sheller JJA concurring. In this way, the parties are spared the trouble, expense and risk of essentially sterile and technical jurisdictional arguments. See, too, Mansell v. Cumming (1989) 86 A.L.R. 637 at 643, per Northrop J, Aafjes v. Kearney [1976] HCA 5; (1976) 180 C.L.R. 199 at 206, per Gibbs J. It is not likely that Parliament creating a tribunal such as the Domestic Building Tribunal would have been less inclined to avoid this difficulty for the disputants its tribunal was to serve. To my mind, the court should strive to construe the Act wherever possible to give effect to this objective. It would be regrettable indeed if, in a given case, disputants were obliged to submit part of their claim to the Tribunal, part to the court and, perhaps subject to s.14 of the Act, a third part to arbitration.

In my opinion his Honour was correct in rejecting the submission put on behalf of Greenhill Homes that a claim against it for damages for misleading and deceptive conduct as alleged in this case is not within the jurisdiction of the Tribunal.

The Proprietors' other claim concerning misleading and deceptive conduct is that the Directors aided and abetted or were directly and knowingly concerned in the contravention of s.11 by Greenhill Homes. Pursuant to the Fair Trading Act s.31 this makes them equally liable to pay damages pursuant to s.37. Again, I assume for present purposes that the allegations will be made out and that the legal consequence follows. The question is as to the jurisdiction of the Tribunal to entertain them. Counsel for the Proprietors sought to bring this claim within the definition of domestic building dispute in s.54(1)(a)(i) or (ii) by asserting that the Directors or perhaps Mr Zumpano was a builder within the definition of that expression in s.3 of the Act, or a building practitioner within the definition of that expression in s.3 of the Building Act 1993. I will not proceed on that basis for there is no evidence that either of the Directors satisfied the factual requirements of these provisions. In my opinion this claim against the Directors falls to be considered under s.56 of the Act and I shall deal with it in this context.

Next, it was submitted on behalf of Greenhill Homes and the Directors that, even if the misleading and deceptive conduct claim fell within s.54(1), the Tribunal was nevertheless not empowered to make an award of damages under the Fair Trading Act 1985 s.37. The submission, put shortly, was that the Tribunal is not a court and therefore cannot make an order under that section which confers the power on a court. Section 37 is in these terms:

(1) A person who suffers loss or damage by conduct of another person that was done in contravention of a provision of Part II may recover the amount of the loss or damage by proceeding against that other person or against any person involved in the contravention."

My attention was drawn to s.131(3) of the Building Act 1993. This sub-s. which was introduced by the Domestic Building Contracts and Tribunal Act 1996 specifically includes the Tribunal within the expression "court" for the purposes of that section.

It will be noted immediately that the provision makes no reference to a court. It creates a right to recover the amount loss suffered in certain circumstances without, in terms, specifying how this right is to be determined and enforced. In this respect s.37 may be contrasted with ss.34 and 35 of the Fair Trading Act.

As I have mentioned, the power of the Tribunal to order payment of a sum by way of damages under s.53(2)(b) of the Act arises where there has been found some legal obligation to pay them. Section 37 of the Fair Trading Act creates such an obligation. Unless there is some indication in the statute to the contrary effect, there is no reason to exclude its determination or enforcement from the Tribunal. Indeed, given the very inconvenient consequence of requiring a party to a domestic building dispute to pursue in different tribunals a claim for damages depending upon whether it is founded upon a breach of s.11 of the Fair Trading Act or on some other statutory or common law basis, I would expect the indication to be very clearly expressed. The heading to Division 3 of Part III of the Fair Trading Act does not constitute such an indication. This is perhaps not surprising because when s.37 of the Fair Trading Act was originally enacted the Tribunal did not exist.

Again, some assistance in this question is to be gained from cases dealing with the application of powers conferred by statute upon a court to private arbitrators. In Government Insurance Office of New South Wales v. Atkinson-Leighton Joint Venture [1981] HCA 9; (1981) 146 C.L.R. 206 at 235, Stephen acknowledged that an arbitrator had the power to award interest, which power was conferred upon "the Court" by the New South Wales Supreme Court Act 1970 s.94. In IBM Australia Ltd v. National Distribution Services Ltd (1991) 22 N.S.W.L.R. 446 and Francis Travel Marketing Pty Ltd v. Virgin Atlantic Airways Ltd (1996) 39 N.S.W.L.R. 160, the powers of the court to grant relief for misleading and deceptive conduct were held to be available to a private arbitrator.

This claim is set out in paragraphs 18, 19, 20 and 21 of the particulars of demand in the following terms:

18. Further, in order to induce the Applicants to enter into the Agreement, the Second and Third Respondents warranted and represented to the Applicants prior to the execution of the Agreement, that in consideration of the Applicants entering into the Agreement, the Second and Third Respondents would ensure that the First Respondent carried out the Works in accordance with the terms and conditions of the Agreement (`the Collateral Warranty').

PARTICULARS

Prior to the execution of the Agreement, there were numerous discussions between the Applicants and the Second and Third Respondents wherein the Collateral Warranty was made. Both the Second and Third Respondents assured the Applicants on numerous occasions that the Works would be of a high standard, further, that the finishes therein would be of the quality requested by the Applicants prior to entering into the Agreement. In this respect, before the Agreement was executed the Applicants produced and provided the Second and Third Respondents with a video tape and excerpts from numerous magazines demonstrating the manner in which they desired the Works to be finished. 19. Acting and relying upon the Collateral Warranty and induced thereby, the Applicants entered into the Agreement with the First Respondent. K. BREACH OF COLLATERAL WARRANTY 20. In breach of the Collateral Warranty, the Second and Third Respondents failed to ensure that the First Respondent carried out the Works in accordance with the terms and conditions of the Agreement.

PARTICULARS

The Applicants refer to and repeat paragraphs 8 and 9 hereof. L. LOSS AND DAMAGE 21. By reason of the matters aforesaid in paragraph 20 hereof, the Applicants have suffered loss and damage.

PARTICULARS

The Applicants refer to and repeat paragraphs 13 and 14 hereof.

Again, I assume for present purposes that the allegations are made out and that the legal consequence flows. Again, the question is one of justiciability.

Much of what I have written with respect to the misleading and deceptive conduct claims is equally applicable to this claim. It is not uncommon in claims arising out of a written contract including a building contract that a party alleges a collateral agreement. In such a case the facts concerning this collateral agreement are often intertwined with the principal contract as are those concerning breach and loss and damage. For reasons already explained, it is reasonable to suppose that Parliament did not wish to force the parties to litigate a claim based on a collateral contract in a forum which is different from that chosen by it for the dispute under the principal contract.

The collateral warranty relied on by the Proprietors in this case is alleged to have been given, not by Greenhill Homes but by the Directors. Accordingly, since they are not parties to the building contract or persons mentioned in s.54(1)(a) the justiciability of the claim against them falls to be determined, not by a construction of that section, but by an examination of the power to join them under s.56 as parties to the dispute before it. I shall now turn to this question.

Section 56 of the Act permits the Tribunal to require other persons to take part in the proceeding. It is in these terms:

"56. Tribunal may require other people to take part in a proceeding

At any time the Tribunal may order that a sub-contractor, insurer, supplier or another person be joined as a party to any domestic building dispute before it."

Strictly speaking, therefore, the procedure adopted by the parties before the Tribunal was not correct. It will be recalled that the Proprietors in their application, simply included their claims against the Directors in the application first made. The Directors responded by seeking a ruling that they should be removed from the proceeding. The correct procedure should have been for the Proprietors to seek an order under s.56 for the joinder of the Directors and to amend their particulars of demand accordingly. This essentially procedural matter, naturally enough, did not distract the parties or the Tribunal from addressing the real point in contention and I shall say nothing further about it.

The question for consideration is whether the Directors were "another person" within the meaning of s.56 so that the claims against them for damages, for aiding and abetting and misleading conduct of Greenhill Homes and for damages for breach of collateral warranty might be entertained and determined by the Tribunal.

I start from the position that there exists between the Proprietors and Greenhill Homes a domestic building dispute which is justiciable in the Tribunal. This includes the claim in contract and that for misleading and deceptive conduct. I refer to these claims as the primary claims, claims which the Proprietors are entitled to bring before the Tribunal pursuant to s.55 of the Act. The claims against the Directors can be added to the primary claims only by order made under s.56. It should be remarked at this stage that what the Tribunal is empowered to do by s.56 is to join the Directors as parties "to the domestic building dispute before it". I suppose that the consequence of such an order is that the person thereupon becomes a "party to the proceeding" within the meaning of that expression where it appears throughout the Act, especially in Part 5 Division 4.

His Honour in paragraph 6 of his reasons appeared to construe the words "another person" as "a person who would be likely to be directly affected by the determination of the dispute". This was criticised by counsel for the Directors as being an expression more appropriate to s.63 of the Act. Again, I note that the power conferred by s.63 is to join such a person, not to the dispute before the Tribunal, but as a party to the hearing of the application. Again, I would suppose that, notwithstanding the different terminology the person so joined becomes thereby a "party to the proceeding".

In approaching this question it is necessary to consider two discrete matters. The first is what persons are included in the expression "another person"; the second is whether the other person should be joined. The first involves the construction of the section; the second an examination of the discretion which is conferred on the Tribunal by that section.

On the first matter, counsel for the Directors submitted that the words should be construed eiusdem generis, so that they should be read down by reference to the class common to the preceding list: sub-contractor, insurer, supplier. It was said that each of the persons in that list is directly involved with the domestic building works in question and that the general words which follow should be read down to conform with that class. Counsel for the Proprietors, on the other hand, submitted that the words should be given their full meaning so that attention should rather be focused on the nature of the discretion rather than upon its object.

As I have already demonstrated, my general attitude to this legislation is that it should be construed liberally where this is necessary or convenient to ensure that all domestic building disputes and associated disputes are before the Tribunal. There are indications within the Act itself which suggest that Parliament intended this result, not only in the context of the definition of "domestic building dispute". The functions of the Tribunal are not limited to hearing and resolving only those disputes. Section 52 of the Act certainly includes this function, but it provides that the Tribunal is to hear and determine "matters referred to it under the Act" including domestic building disputes. Further, where the Tribunal is entertaining the review of the decision of the insurer it may join as a party "any person who may be affected by the application": s.63. Further, where a proceeding in a court "arises wholly or predominantly from a domestic building dispute" and the party so applies, s.57(2) directs that the court must dismiss the proceeding and in such a case a party to the dismissed action may apply to the Tribunal "for an order with respect to the dispute on which the action was based". If, for example, the present claim of the Proprietors had been commenced in the Supreme Court and dismissed pursuant to s.57 because it arose not wholly but predominantly from a domestic building dispute, the Proprietors would be entitled to refer to the Tribunal, not only the domestic building dispute against Greenhill Homes, but the subsidiary claims against the Directors. If this were not the correct construction of s.57(3) the consequence would be that they would be barred from bringing their claim against the Directors in the court and yet unable to bring it in the Tribunal. Finally, s.131 of the Building Act 1993 requires the Tribunal to give a separate judgment against each defendant who is found jointly and severally liable for the claimant's damages. It may be supposed that s.56 of the Act would be available to ensure that any party who is entitled to join a person to the proceeding as a defendant might bring all those persons before the Tribunal to enable this to be done. Compare Robak Engineering and Construction Pty Ltd v. Boral Resources (Vic) Pty Ltd (unreported, Gillard J, 30 April 1998, Wimmera-Mallee Rural Water Authority v. FCH Consulting Pty Ltd (unreported, Gillard J, 3 June 1998).

I return, then, to the text of s.56. I am unable to conclude that an insurer as such can be described as directly involved with the domestic building work so that the class suggested by counsel for the Directors does not exist. Nor does it seem to me that the class comprises only those persons with whom a party may have a domestic building dispute under s.54 because, surprisingly, a supplier is not such a person. No other class suggests itself. The words "another person" should be given their plain meaning. In any event, a case such as the present demonstrates the utility of a very wide definition of persons who might be, in the appropriate case, joined. It would be very inconvenient if the Proprietors were required to bring their misleading and deceptive conduct claim against the company before the Tribunal, but were precluded from seeking damages from the Tribunal against persons who aided and abetted the conduct complained off. Other examples readily come to mind. To my mind, there is no warrant to read down the general words "another person" in s.56.

No submission critical of the exercise of the discretion of the Tribunal was made. This is not surprising given the nature of the application before me. I reject, therefore, the attack upon the exercise of the s.56 joinder power. In my opinion the criticisms of the decision and of the reasons of the Tribunal are without foundation. The application will be dismissed with costs including reserved costs and the costs of transcript.

Domestic Building Contracts and Tribunal Act 1995

Domestic Building Contracts and Tribunal Act 1996

At a glance

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