Honeywood v Munnings

CATCHWORDS : Appeal decision of CTTT - can a party bring more than one claim against a builder

Consumer Trader and Tenancy Act 2001 (NSW) - s 67 LEGISLATION CITED : Home Building Act 1989 (NSW) Supreme Court Rules 1970 (NSW) - Part 51A

Bropho v State of Western Australia (1990) 171 CLR 1 Chapman v Taylor & Ors; Vero Insurance Ltd v Taylor & Ors [2004] NSWCA 456 Coco v R (1994) 120 ALR 415 Conquer v Boot [1928] 2 KB 336 Gifford v Strang Patrick Stevedoring (2003) 214 CLR 269 CASES CITED : Kalokerinos & Anor v HIA Insurance Services P/L & Anor [2004] NSWCA 312 Macquarie Bank Ltd v National Mutual Life Association of Australiasia Ltd (1966) 40 NSWLR 543 Onerati v Phillips Constructions Pty Ltd (1989) 16 NSWLR 73 Project Blue Sky v Australian Broadcasting Authority (1998) 194 CLR 355 Swain v Waverley Municipal Council [2005] NSWCA 4

Beverley Anne Honeywood as executrix of the estate of the late Neville Honeywood (Plaintiff)

Craig Stephen Munnings (First Defendant)

Kylie Gaye Munnings PARTIES : (Second Defendant)

Builders' Insurers Guarantee Corporation (Third Defendant)

Registrar of CTTT (Fourth Defendant)

Dr R J Desiatnik (Plaintiff)

Mr R Glasson COUNSEL : (First and Second Defendant)

Submitting Appearance (Third and Fourth Defendants)

Ross A Derham & Associates (Plaintiff)

A C Knibb Kaine & Associates (First & Second Defendants) SOLICITORS : Holding Redlich (Third Defendant)

Crown Solicitor (Fourth Defendant)

LOWER COURT JURISDICTION : Consumer Trader and Tenancy Tribunal of NSW

LOWER COURT JUDICIAL OFFICER : Senior Member R Connolly

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION ADMINISTRATIVE LAW LIST

30101/2004 - BEVERLEY ANNE HONEYWOOD as executrix of the estate of the late NEVILLE HONEYWOOD v CRAIG STEPHEN MUNNINGS & 3 ORS

JUDGMENT (Appeal decision of CTTT - can a party bring more than one claim against a builder) 1 MASTER: By summons filed 19 November 2004 the plaintiff seeks: firstly, an order pursuant to Part 51A r 3(1) of the Supreme Court Rules 1970 (NSW) (SCR) extending the time to appeal from the decision of the Consumer Trader and Tenancy Tribunal (CTTT) dated 27 September 2004; secondly, an order setting aside that decision; and thirdly, an order that the proceedings be dismissed. On 14 December 2004 Registrar Howe granted a stay of the CTTT decision until the determination of this appeal. 2 The plaintiff is Beverley Anne Honeywood as executrix of the estate of the late Neville Honeywood. The first defendant is Craig Stephen Munnings. The second defendant is Kylie Gaye Munnings. The third defendant is the Builders' Insurers Guarantee Corporation. The fourth defendant is the Registrar of the CTTT who has filed a submitting appearance. The plaintiff relied on three affidavits of Elisabeth Ann Houston sworn 26 November 2004, 8 February 2005 and 15 March 2005. 3 The plaintiffs have commenced two proceedings in the CTTT: one in the CTTT and one in its predecessor, the Fair Trading Tribunal (FTT). The FTT proceedings have been finalised. The first proceedings were determined on 11 June 1999. It is the second proceedings, commenced on 30 September 2001, which is the subject of this appeal. The main issue in this appeal is whether the Tribunal Member was correct in not applying the principles expounded in Onerati v Phillips Constructions Pty Ltd (1989) 16 NSWLR 730 (Onerati).

The appeal 4 Section 67 of the Consumer Trader and Tenancy Act 2001 (NSW) (the Act) allows for an appeal to be made to this court on a question with respect to a matter of law. A reference to a matter of law includes a reference to a matter relating to the jurisdiction of the Tribunal. The onus lies on the plaintiff to demonstrate that there has been an error with respect to a matter of law. 5 The width of s 67 was discussed in Chapman v Taylor & Ors; Vero Insurance Ltd v Taylor & Ors [2004] NSWCA 456. Hodgson JA (with whom Beazley and Tobias JJA agreed) stated succinctly: 33. "… in my opinion, to establish an error or law by the Senior Member, it was necessary to show that he applied a wrong principle of law. That could be shown either from what he said, or because the ultimate result, associated with the facts that he expressly or impliedly found, indicates that he must have applied the wrong principle of law". 6 See also Kalokerinos & Anor v HIA Insurance Services P/L & Anor [2004] NSWCA 312 at paragraphs [39], [40], [41], [47] and [59]. 7 Section 67(3) of the Act provides that, after deciding the question of the subject of an appeal, the court may affirm the decision of the Tribunal or it may make an order in relation to the proceedings in which the question arose as, in its opinion, should have been made by the Tribunal, or it may remit its decision on the question to the Tribunal and order a rehearing of the proceedings before the Tribunal. 8 Recently in Swain v Waverley Municipal Council [2005] HCA 4 the Chief Justice at paragraph [2] reiterated that in the common law system of civil justice, the issues between the parties are determined by the trial process. The system does not regard the trial as merely the first round in a contest destined to work its way through the judicial hierarchy until the litigants have exhausted either their resources or their possibilities of further appeal.

Grounds of appeal 9 The plaintiff appeals from the whole of the decision of the CTTT made on 27 September 2004. There are three grounds of appeal of all which involve the Tribunal Member's application of Onerati. It is an appeal with respect to a matter of law.

Leave for an extension of time to lodge an appeal 10 The plaintiff applies for leave for an extension of time. The first and second defendants neither consent nor oppose leave being granted. Proceedings were required to be commenced within 28 days of the material date. The material date is 27 September 2004 - see Pt 51A r 2(b) SCR. The time to commence these proceedings expired on 26 October 2004. The proceedings were commenced on 19 November 2004. 11 The explanation for delay was that the plaintiff's solicitor received a copy of the Tribunal's decision on 6 October 2004, but counsel was absent from chambers until 10 November 2004. On 19 November 2004 the appeal was filed. There is no prejudice caused to the defendants. In these circumstances leave is granted to extend the time to file the appeal.

The first proceedings in the CTTT 12 On 26 April 1998, Mr Craig and Mrs Kylie Munnings entered into a contract with NC Honeywood Builders in order to have their home built. In March 1999, Mr and Mrs Munnings brought an action against Mr Honeywood in relation to the building work done by Mr Honeywood. 13 Mr and Mrs Munnings' relevant claims concerned the provision of a spoon drain at bottom of retaining wall and rectifying the roof or pipe leak. The Tribunal found that claims relating to plumbing, internal stair and handrails were successful. The claims in relation to spoon drains and roof or pipe leak were unsuccessful. Orders were made accordingly.

The second proceedings in the CTTT 14 On 20 September 2001 Mr and Mrs Munnings instituted proceedings in the FTT against the late Mr Honeywood and the insurer for alleged defective work by the former in respect of waterproofing the house. The second respondent (Honeywood) sought an order that the proceedings herein against the estate of the Late Neville C Honeywood be dismissed on the following bases: firstly, that the application of the principle in Onerati having regard to the first proceedings brought by the applicants against the late Neville C Honeywood in the Consumer Claims Tribunal at Gosford (No. BSY 99/45) (the Onerati ground); and secondly, that the applicants were estopped from bringing any proceedings, having regard to the said proceedings in the Consumer Claims Tribunal. The Tribunal Member dismissed the notice of motion with costs. The appellant did not challenge the Tribunal Member's decision in relation to estoppel. 15 A convenient starting point is Onerati. In Onerati Giles J decided four relevant principles. Only three apply here. They are: "1. In curial proceedings, for the purposes of the principle of res judicata there is but one cause of action for breach of contract founded upon breach of a promise such as to carry out the work in a good and workmanlike manner. There is not a number of causes of action according to particular defects or classes of defect resulting from the breach.

2. Accordingly, judgment in one proceedings will be a bar to second proceedings to recover damages with respect to defects or classes of defect not the subject of the first proceedings.

3. This will be so even where the defects or classes of defects the subject of the second proceedings were not apparent to the plaintiff at the time of the first proceedings." 16 At paragraph [19] Tribunal Member made a finding that the Munnings "did not have the requisite knowledge of water penetration of the basement entry and garage until 5 May 2001." That is, the Munnings did not have knowledge of the water penetration until nearly two years after the conclusion of the first proceedings. The Tribunal Member acknowledged that the Tribunal was bound by the precedent set in Onerati but held that the Tribunal accepted the applicants' submission and in the absence of the requisite knowledge (of the applicants at the time of the first proceedings), did not consider itself bound by the decision in Onerati in the facts of the case before the Tribunal [26]. 17 Both in Onerati and in this case the critical issue was the state of the claimant's knowledge. In Onerati Giles J made a finding that the Oneratis "had the opportunity of recovering in the arbitration with respect to the defects of which they now complain" [748 G]. His Honour made a finding that after Mr Katris carried out the inspections, it was open to the Oneratis "to have taken steps to claim in the arbitration for whatever defects were causing the penetration" [749 A]. Giles J found that the Oneratis were alive to the fact of the dampness penetration and alive to the possibility that there was some underlying cause to be revealed by an exploratory investigation, but made a judgment for the purpose of the conduct of the arbitration not to conduct that investigation [749 C]. In Onerati, the owners submitted that the cause of action which the award determined was the cause of action for breach of contract in relation to the defects itemised in the Scott schedule and did not extend to breach of contract in relation to defects discovered in and after April 1988. In Onerati, his Honour made findings as to when the defects were in existence, and more importantly, when those defects or indicia of those defects became apparent to the proprietors. The Tribunal Member did not make a finding as to when the defects complained about or indicia of them were in existence. 18 Next Giles J (as he then was) had to decide whether the cause of action raised earlier had merged into judgment. Giles J analysed the case of Conquer v Boot [1928] 2 KB 336, and in the light of subsequent judicial criticism had to determine whether it was still considered good law. In Conquer Sankey LJ and Talbot J upheld the defence of res judicata notwithstanding that items particularised in the second proceedings were not apparent at the time of the first proceedings. Both stated that such lack of knowledge of the items was in effect, irrelevant. Giles J stated that although Conquer was not binding upon him that case had stood for a long time and is accepted in standard text and it accords with the policy behind the principle of res judicata [746]. 19 Giles J concluded [748] that the third principle in the summary (referred to earlier in this judgment) was correct but not beyond question. His Honour stated: "As a matter of principle, if a cause of action "passes into judgment" it must do so regardless of the state of mind or knowledge of the plaintiff. Where the cause of action upon which the plaintiff proceeds is determined by judgment, it does not matter that the plaintiff chose to conduct his case in a particular way or to limit the evidence which he called; subject to the possibility of leave to call fresh evidence on appeal, it does not matter that he may have conducted his case in a particular way because he did not know of some relevant evidence, or that the result might have been different had he known of, and called, that evidence. As Fitter v Veal shows, it does not matter that after judgment further consequences of the injury done to him appear. The only question is whether or not he has a separate cause of action upon which he can proceed in a second proceedings." 20 Giles J in Onerati decided that Conquer was correctly decided. It is my view that this principle now espoused in Onerati (as outlined in Conquer) applies. Thus, it does not matter that after judgment further defects appear. This cause of action, namely, breach of contract has passed into judgment regardless of the state of mind of the plaintiff. Hence, it is my view that the Tribunal Member erred. 21 The next submission by the plaintiff is that the Tribunal made an error of law by making a finding that the third of the three principles enunciated in Onerati was distinguishable from the proceedings before the Tribunal because it was obiter dictum and therefore not binding on the Tribunal. The Tribunal Member did not say that principle three was obiter dicta. 22 In any event the defendant submitted that Onerati has stood unchallenged since 1989. In Macquarie Bank Ltd v National Mutual Life Association of Australasia Ltd (1966) 40 NSWLR 543, Clarke JA said [560]: "Although I would wish to reserve my opinion on the question whether the estoppel extends to prevent the maintenance of a second action in respect of defects unknown at the time of the first judgment, speaking generally, I would agree with his Honour." 23 Macquarie Bank was not a case involving building defects so is of little assistance. The consequences that flowed from the Oneratis' state of mind was a critical issue in that case. The third proposition in Onerati determines what consequences flow from a state of knowledge as to defects and therefore forms part of the ratio decendi in Onerati. Hence, I disagree that principle three in Onerati was merely obiter dictum.

Onerati and the effect of Part 2C of the Home Building Act 1989 24 Finally, and more importantly the plaintiff submitted that the Tribunal erred in deciding that it was not bound by the principles laid down in the decision of Onerati and by making a finding that the provisions of Part 2C of the Home Building Act 1989 (NSW) (HBA) were inconsistent with that decision. The plaintiff submitted that the Tribunal by characterising the statute in the way it did and thereby allowing the defendants to succeed erred in law. 25 In Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 the High Court stated that the primary object of statutory construction is to construe the relevant provision so that it is consistent with the language and purpose of all the provisions of the statute. The meaning of the provision must be determined "by reference to the language of the instrument viewed as a whole" and the legislative instrument must be construed on the prima facie basis that its provisions are intended to give effect to harmonious goals. Reconciling conflicting provisions will often require the court "to determine which is the leading provision and which the subordinate provision, and which must give way to the other". Only by determining the hierarchy of the provisions will it be possible in many cases to give each provision the meaning which best gives effect to its purpose and language while maintaining the unity of the statutory scheme. Furthermore, a court construing a statutory provision must strive to give meaning to every word of the provision. 26 Part 2C of the HBA is entitled "Statutory warranties". It came into effect on 1 May 1997. This phrase is not defined in the Act. Section 18B contains a list of warranties that are implied in residential construction contracts and which cannot be excluded (s 18G). A breach of any of these statutory warranties would give rise to an action for damages.

27 The relevant portions of Part 2C are reproduced below for ease of reference:

"18A Time from when Part applies This Part applies to residential building work only to the extent that it is done or to be done under a contract made on or after the commencement of this section.

18B Warranties as to residential building work The following warranties by the holder of a contractor licence, or a person required to hold a contractor licence before entering into a contract, are implied in every contract to do residential building work:

(a) a warranty that the work will be performed in a proper and workmanlike manner and in accordance with the plans and specifications set out in the contract,

(b) a warranty that all materials supplied by the holder or person will be good and suitable for the purpose for which they are used and that, unless otherwise stated in the contract, those materials will be new,

(c) a warranty that the work will be done in accordance with, and will comply with, this or any other law,

(d) a warranty that the work will be done with due diligence and within the time stipulated in the contract, or if no time is stipulated, within a reasonable time,

(e) a warranty that, if the work consists of the construction of a dwelling, the making of alterations or additions to a dwelling or the repairing, renovation, decoration or protective treatment of a dwelling, the work will result, to the extent of the work conducted, in a dwelling that is reasonably fit for occupation as a dwelling, (f) a warranty that the work and any materials used in doing the work will be reasonably fit for the specified purpose or result, if the person for whom the work is done expressly makes known to the holder of the contractor licence or person required to hold a contractor licence, or another person with express or apparent authority to enter into or vary contractual arrangements on behalf of the holder or person, the particular purpose for which the work is required or the result that the owner desires the work to achieve, so as to show that the owner relies on the holder's or person's skill and judgment." 28 The sections in Part 2C are to be read having regard to the operation of each section therein. Section 18B specifies the warranties; 18C and D enable warranties to be given where there is no privity of contract; 18E sets a time limit for the bringing of proceedings (7 years); 18F offers a defence in proceedings and 18G states the warranties may not be excluded. 29 Critically s 18D provides:

"18D Extension of statutory warranties A person who is a successor in title to a person entitled to the benefit of a statutory warranty under this Act is entitled to the same rights as the person's predecessor in title in respect of the statutory warranty, except for work and materials in respect of which the person's predecessor has enforced the warranty."

"18D by the words "..except for work and materials in respect of which the person's predecessors had enforced the warranty "infers more than one claim may be made in respect of the warranties given at least in respect of a successor title." 31 I agree that s18D contemplates a later claim being made by a successor in title despite a previous claim being made by the predecessor in title so long as the claim has not already been the subject of earlier proceedings. But does s 18D give the original owner a right to bring another claim for defects other than work and materials that has already been the subject of enforcement of the warranty? 32 The Tribunal member's reasoning continued [17]: "It is difficult to accept the parliament in legislating Part 2C of the HBA intended that it may have little or no effect if a situation such as outlined in Onerati existed. Equally it is difficult to accept that the legislators intended successors in title to have additional rights in respect of claims against the warranties in Part 2C as compared to the original home owners in a residential building contract. By implication at least a claim in respect of statutory warranty, where the claim did not relate to an earlier claim which had been enforced, could also be made by the original homeowners." 33 The Second Reading Speech Mr Merton (Member for Carlingford) said that this bill had two vital aspects, firstly, for the licensing of builders; and secondly, insurance provisions to protect members of the public. [Hansard, 24 October 1989 11674]. 34 Mr Murray (Member for Drummoyne) specifically stated:

"One of the reasons for the need for that tribunal is the intention to provide a cheap and speedy alternative to commercial arbitration. I cannot bypass the opportunity to put before the Minister for Housing once again in this House the problems a constituent of mine, Mrs Irene Onorati (sic), has had as a consequence of her dealings with commercial arbitration. I know that the general manager of the corporation understands the case fully. In the past, he has assured me that legislation will be brought forward to overcome those difficulties. I am particularly pleased that that has now happened." [Hansard 11681] 35 From this passage it is not clear what the exact nature of the problems that Mrs Onerati had experienced as a consequence of her dealings with commercial arbitration. The Member, Mr Merton made these comments in the context of a "cheap and speedy" alternative to commercial arbitration. 36 The implied warranty under s 18B(a) directs that work is to be performed in a "proper and workmanlike manner" and in accordance with the plans and specifications set out in the contract. In the current proceedings the warranty forms an implied term of the contract pursuant to Pt 2C s 18B. [In Onerati the equivalent warranty was an express term of the contract (Onerati at 6: "good and workmanlike manner")]. 37 Section 18D extends to a successor in title the "same rights" of benefit from the statutory warranties in the Act to which the predecessor in title was "entitled". The defendant submitted that "[t]he clear intention of Pt 2C of the Act is to permit an owner [in title] to make claims under the statutory warranties for a period of up to seven years". While it is true that a period of seven years is prescribed for the owner or successor in title to enforce the statutory warranties under s 18E, does s 18E support the proposition that multiple claims may be made during this period by way of various separate actions as opposed to one action comprising all the various claims? 38 There is a presumption in the rules of construction that clear and unambiguous statutory words are required to abolish or modify fundamental common law principles or rights (see discussion in Bropho v State of Western Australia (1990) 171 CLR 1 at 17-18). The High Court said in Gifford v Strang Patrick Stevedoring (2003) 214 CLR 269 at [36]: "The presumption of non-interference is strong when the right is a fundamental right of our legal system; it is weak when the right is merely one to take or not take a particular course of action. Courts should not cut down the natural and ordinary meaning of legislation evincing an intention to interfere with these lesser rights by relying on a presumption that the legislature did not intend to interfere with them." 39 In Gifford, the High Court considered the right to bring an action for psychiatric injury to be an ordinary legal right, not a fundamental right of our society or legal system.

40 The object of statutory warranties provided for in Part 2C of the HBA is to protect home owners and their successors. In particular, section 18D extends the owner's right to take action against the builder for defective material and workmanship to his/her successor. Such a right cannot be considered to be a fundamental common law right. Furthermore, the Part operates to increase the rights of owners and their successors afforded by common law rather than abolishing or limiting these rights.

41 The High Court recognised that there could be circumstances in which the presumption could be displaced by implication. Such an implication may be made if it is necessary to prevent the statutory provisions from becoming inoperative or meaningless (see Coco v R (1994) 120 ALR 415 at 418). If the principles in Onerati were to apply, then s 18D would be rendered inoperative.

42 Further, by interpreting s 18D, in the manner that the Tribunal did, the owners and the successors in title have equal rights. That is, their rights are consistent. It is my view that the Tribunal Member's interpretation of Part 2C of the HBA is correct. There is no error of law. The appeal is dismissed. The decision of the CTTT dated 27 September 2004 is affirmed. The summons filed 19 November 2004 is dismissed. 43 Costs are discretionary. Costs normally follow the events. The plaintiff is to pay the defendants' costs as agreed or assessed. 44 On a final note, I agree with the comments of the Tribunal Member where he referred to the ongoing difficulty with the decision in Onerati and its apparent conflict with Part 2C of the HBA. It is a matter of importance to builders and consumers. The Tribunal Member suggested that much would be gained if the legislators saw fit to revisit the matter and clarify once and for all the legislature's intention in respect of the statutory warranties contained in Part 2C of the HBA [J 31]. I respectfully agree with his suggestion.

(2) The decision of the CTTT dated 27 September 2004 is affirmed.

(3) The summons filed 19 November 2004 is dismissed.

(4) The plaintiff is to pay the defendants' costs as agreed or assessed. **********

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