Ibrahim v Paragon Constructions

NCAT Consumer and Commercial|2016-04-13

Application

The parties in HB 15/52616 and HB 15/67446 are the same persons and entities.
In his application HB 15/52616 filed with the Tribunal on 15 September 2015 the applicant home owner ("owner") seeks an order against the respondent building contractor ("builder") that it pay $423,973.00 by way of compensation because of a breach of a statutory warranty under the Home Building Act 1989 ("HBA") for residential building work completed in September 2010.
In its application HB 15/67446 filed on 18 December 2015 the same builder, as applicant, seeks an order that the same owner, as respondent, pay an amount of $52,651.00 being invoices raised by the builder between 2 July 2010 and 21 September 2010 on the basis that those amounts are a reasonable remuneration for building work done by the builder for the owner on a quantum meruit basis.
In the preliminary hearings of the applications, the builder has raised a jurisdictional issue claiming that the provisions of s 18E of the HBA that apply are those provisions as s 18E now stands. That is, s 18E provides a statutory warranty for a period of 6 years for a major defect and otherwise 2 years. If so, the owner would be within time to make his claim for major defects and out of time for all other defects.
The Tribunal has raised a further jurisdictional issue with the parties; the question of whether the Tribunal has jurisdiction in respect to the builder's claim in circumstances in which an oral contract was entered into in 2008 and the invoices, the subject of the claim, were issued in 2010.
This judgement is only in relation to the two issues of jurisdiction.

Owner

The owner contends that by virtue of cl 109 of Schedule 4 of the HBA that he has the benefit of section 18E as it was before the commencement of the 2011 Amendments to the HBA which came into effect on 1 February 2012.
That is, proceedings for a breach of statutory warranty must be commenced within 7 years after completion of the work to which it related.
It is common ground between the parties that the building works were completed in September 2010. The owner contends that, on his interpretation, proceedings must be brought before September 2017.
The 2011 Amendments do not distinguish between structural and other defects.
Clause 109 provides: The amendment made to section 18E by the amending Act does not apply in respect of a contract for residential building work entered into before the commencement of the amendment
The 2011 Amendments to s18E replaced subsection (1) and amongst other things provided that the warranty period is 6 years for a breach that results in a structural defect (as defined in the regulations) or 2 years in any other case
The 2014 Amendments to s 18E came into effect from 15 January 2015. The effect of those amendments redefined the type of breaches covered by the statutory warranties as a warranty period for 6 years for a breach that results in a major defect in residential building work or 2 years in any other case. The amendments also include provisions to define the meaning "major defect" and "major element". The 2014 amendments replaced the term "structural defect" with the term "major defect".
Part 20, Clause 121(1)(b) of Schedule 4 of the HBA extends the operation of the 2014 amendments to contracts entered into before the commencement of the amendments, 15 January 2015.
The owner submits that as the only effect of the retrospective provision is to substitute the "major defects" for "structural defects" there is no relevance to the contracts entered into before 1 February 2012. The pre-2012 version of s 18E by virtue of clause 109, the definitional change introduced by the amendment made on 15 January 2015, has no effect on such contracts. The owner notes that cl 109 was not repealed or amended upon the introduction of the amendment's taking effect on 15 January 2015.
Clause 105 and cl 120 each state that Parts 19 and 20 respectively prevail to the extent of any inconsistency. The title to Part 19 is "Provisions consequent on enactment of Home Building Amendment Act 2011". The title to Part 20 is "Provisions consequent on enactment of Home Building Amendment Act 2014". Cl 109 was not repealed or amended with the amendments that took effect on 15 January 2015 allowing a conclusion to be drawn that it was the intention of the legislature to preserve the 7 year warranty period for contracts entered into before 1 February 2012.
The owner answers the builder's contention that clause 120 has a role to play in overriding the savings effect of clause 109. The owner submits that the intent of both clauses, when read in conjunction with the titles, is that Part 19 prevails in respect of the amendments having effect on 1 February 2012 and Part 20 prevails in respect of the amendments that have effect from 15 January 2015. That is, if Clause 121(1)(b) is read to apply to the 2011 Amendments then Clause 109 will prevail.
The owner supports his argument that the 7 year warranty period applies by referring to decisions of this Tribunal, Lavery v Dimension Tilers Pty Ltd [2015] NSWCATCD and Gray v QBE Insurance (Australia) Limited [2015] NSWCATCD 124. In Gray, Member Holwell states at [10]: There is some ambiguity about whether the 2014 amendments retrospectively alter the situation that existed before February 2012. I am of the view that whilst that there may be some retrospective changes to other instances there have been no retrospective change to the time limits in regards to claiming against a builder for breach of statutory warranty. I am satisfied that the applicant had seven years from the completion of building work to bring a claim against the builder.
The owner submits this is the correct interpretation.

Builder

The builder contends that the Tribunal does not have jurisdiction to determine the owners application as the claim has not been brought within the statutory time limit under ss18E and 48K(7) of the HBA.
The builder submits that the amendments made to s 18E of the HBA effective from 15 January 2015 were intended to have effect so that a 2 year warranty period that now appears in the HBA applies to claims for breaches of statutory warranties under building contracts entered into before the commencement of the amendments. That is, s 18E imposes a 2 year limit for claims in respect of defects other than major defects. The builder submits that relying on the expert report filed in these proceedings by the builder, the defects identified do not fall in the class of major defects.
The builder contends that the owners claim is a claim for breach of the statutory warranties implied under s 18B of Part 2C of the HBA.
Section 48K(7) relevantly provides that the Tribunal does not have jurisdiction in respect of a building claim arising from a breach of statutory warranty implied under Part 2C if the date on which the claim is lodged is after the end of the period within which proceeding's for a breach of the statutory warranty must be commenced (as provided in s18E). S41 of CATA has no effect in extending that time as in order for the jurisdiction to be vested in the Tribunal the claim must comply with that time limit: Vero Insurance v Buckle [2008] NSWSC 73; S & G Homes Pty Ltd t/a Pavilion Homes v Owen [2015] NSWCATAP.
On and from 15 January 2015 the warranty period is 6 years for a breach that results in a "major defect" in residential building work or 2 years in any other case. "Major defect" is defined in s 18E(4).
Before the amendments became effective on 15 January 2015 s18E provided that the warranty period of 6 years for a breach that results in a "structural defect" or 2 years in any other case. Part 19 of Schedule 4 of the HBA sets out savings provisions relating to the amendments to the HBA that had effect from 1 February 2012. Clause 109 provides that the amendment made by s 18E does not apply in respect of a contract for residential building work entered into before the commencement of the amendment.
Part 20 of Schedule 4 to the Act sets out the provisions consequent on the amendments having effect from 15 January 2015, with Cl 120(1) stipulating that Part 20 prevails to the extent that any inconsistency with any other provision of the Schedule. Cl 121 (1)(b) that except where otherwise provided by Part 20 or the regulations, an amendment made relevantly having effect from 15 January 2015 extends to a contract to do residential building work entered into before the commencement of the amendment. Cl 121(2)(a) provides that an amendment made having effect from15 January 2015 does not apply to or in respect of "proceedings commenced before the commencement of the amendment".
The builder submits further that it is well established that nothing prevents parliament from making laws with retrospective operation: R v Kidman (1915) 20 CLR 425. However, the general rule is that statutes are assumed to not have retrospective operation in the absence of clear statement to the contrary, the presumption may be misplaced where there are clear words or necessary intendment to the contrary: Kidman. The Interpretation Act 1987 provides at ss5 and 30 that the effect of amendment or repeal of Acts and statutory rules do not apply where the contrary intention appears.
The builder contends that the transitional provisional provisions of the amending Act in 2014 evince a clear legislative intention that s 18E operates retrospectively, in that: 1. Cl 121 (1)(b) of Part 20 expressly provides that the amendments effected by the 2014 Amendments apply to contracts entered into before the amendments came into effect, except as otherwise provided; 2. There is no provision in the transitional provisions which "otherwise provides" (ie which provides for the amendments to s 18E not to operate retrospectively); 3. In contrast, specific provision has been made in Part 20 in respect of other provisions which were amended by the 2014 Amending Act, including s 18B (ie Cl 124- "Deposits and progress payments- An amendment of ss 8, 8A or 16E by the amending Act does not apply in respect of a contract entered into before the commencement of the amendment") 4. Giving the words of Part 20 their natural and ordinary meaning, read in the statutory context in which they appear, this suggests that the Parliament turned its mind to which provisions were intended not to operate retrospectively and made specific provision for these circumstances, not including s 18E; 5. This interpretation is also reinforced by the specific "grandfathering" provisions contained in Part 19 in respect of amendments effected by the Home Building Amendment Act 2011 specifically providing for the amendments to s18E not to be retrospective; cl109; 6. The second reading speech of the Home Building Act Amendment Bill 2014, the Minister for Fair Trading expressly stated that various amendments (other than s 18E) did not apply to contracts entered into before the amendment, and did not make any similar statements in respect of s 18E;
The builder refers the Tribunal to the decision of the Tribunal, Gray v QBE Insurance (Australia) Limited [2015] NSWCATCD 124 where it was held: There is some ambiguity about whether the 2014 amendments retrospectively alter the situation that existed before February 2012. I am of the view that whilst there may be some retrospective changes to other instances there has been no no retrospective change to the time limits in regard to claiming against a builder for breach of statutory warranty.
The builder contends that there was no detailed reasoning provided in Gray to support the conclusion reached by the Tribunal. In that case the Tribunal found that "major defects" regime did not operate retrospectively. The builder adopts the Member's comments in Gray regarding the ambiguity associated with the 2014 amendments, but says that the proper interpretation of Parliament's intention was that the amendments to s 18E would apply to all contracts, not just those entered into after the commencement of the 2011 amendments.
The builder relies on the expert report of Mr George Zakos dated 26 February 2016 in which he expresses an opinion that on his understanding of s18E none of the alleged defects by the owner are "major defects" within the meaning of that section.

Findings as to retrospectivity of Section 18E to pre-1 February 2012 building works

The Tribunal has considered both the builders and the owner's submissions.
The builder and the owner have identified the two contentious interpretations as a result of the 2014 Amendments to s 18E.
The differing views of the owner and the builder respectively of the correct interpretation of the application of the retrospectivity of the 2014 Amendments is an issue that has not, so far as the Tribunal is aware, until now been the subject of any definitive findings of this Tribunal, except for Gray. Although the finding was made in Gray that the 2014 Amendments did not affect the 2011 Amendments, the decision is challenged by the builder on the basis that there were no detailed reasons to support the finding that the "major defects" regime introduced by the 2014 Amendments did not operate retrospectively before the 2011 Amendments.
However, the builders contention is that, effectively, the 2014 Amendments, apply to all contracts retrospectively. That is, Cl 109, inserted by the 2011 Amendments, conflicts with Cl 121, inserted by the 2014 Amendments.
Clause 121(1)(d) amends the HBA so that it applies to a loss, liability, claim or disputes that arose before the commencement of the amendment and therefore the amendments to section 18E apply to any loss, liability, claim or dispute prior to 1 February 2012.
It is the builder's contention that this supports its claim that the limitation period of seven years for all defects no longer applies to building works undertaken on or before 31 January 2012 and instead there is a six year limitation period for structural defects and two years for all other defects.
The effect of the 2014 Amendments being also to change and redefine "structural defect" as "major defect". The builder argues that the amendments have the effect that the change to the limitation period applies because the dispute arose before the commencement of the 2014 Amendments and Cl 121(1)(a) and (b) extends the operation of the amendments to building work commenced or completed before the commencement of the 2014 Amendments.
The perceived conflict between the savings provisions of cl109 of the 2011 Amendments and the combined effect of cll120 and 121(1) of the 2014 Amendments must be examined to allow the Tribunal to make a finding as to interpreting the intent of the amendments.
Clause 120 provides that Part 20 (Provisions consequent on enactment of Home Building Amendment Act 2014) prevails to the extent of any inconsistency with any other provision of Schedule 4.
Clause 121(1) provides that the amendments made by the 2014 Amendments extend to a residential building work commenced or completed before the commencement of the amendment.
The 2014 Amendments at [28] and [29] amended s 18E(1)(b) by replacing "structural defect (as defined in the regulations)" with "major defect" and inserted s18E(3) and (4), defining the term "major defect".
By cl 121 the 2014 Amendments apply to all losses, liabilities, claims or disputes arising before the commencement of the 2014 Amendments in respect of residential building work commenced or completed before the commencement of the amendment.
Clause 109 remains in the HBA. It was not repealed by the 2014 Amendments. The general rule in Kidman that statutes are assumed not to have retrospective operation was clearly stated by cl 109. It was open to Parliament to amend cl109. It did not. As submitted by the builder, Ss5 and 30(1) of the Interpretation Act provide that the effect of amendment or repeal of Acts and statutory rules do not apply where the contrary intention appears.
Clause 105 in Part 19 (Provisions consequent on enactment of Home Building Amendment Act 2011) is in similar terms to cl120 in Part 20. It provides that Part 19 prevails to the extent of any inconsistency with any other provision of Schedule 4.
Parliament did not repeal or amend Part 19 with the 2014 Amendments. Cl 105 and cl 120 regard must be had to their respective titles, that is, Part 19 relates to the 2011 Amendments and Part 20 relates to the 2014 Amendments. Without such an interpretation the cl105 and cl 120 create an ambiguity and conflict between them.
The purposive test of statutory interpretation supports an interpretation that the 2014 Amendments dealt with the change of "structural defect" in s 18E(1)(b) to "major defect" and adding the definition of "major defect" as s 18E(3) and (4). Before the 2011 Amendments s18E did not distinguish between "structural defects" and "other defects". Part 20 c121 is intended to operate retrospectively from the date of the 2014 Amendments to the date of the 2011 Amendments.
The Tribunal is satisfied there is no amendment to the limitation period and no conflict with Cl109. In the case of a loss, liability, claim or dispute arising up to 31 January 2012, the claim should be considered in terms of a defect and there is no effect on the seven year limitation period then, and still, applying for residential building work from the date it was completed, that is, September 2010.
Clause 109 has the effect that the warranty period for residential building work in any contract entered into before 1 February 2012 (the commencement of the amendment) remains at seven years from the date of completion of the work.
The 2014 Amendments did not repeal or amend Cl 109.
The Tribunal is satisfied that the owner has brought his application within 7 years of the completion of the building work and that the Tribunal has jurisdiction to hear and determine the owners application.

Builder's quantum meruit claim

The builder's cross application seeks to recover the amount of unpaid invoices on the basis that it is entitled to recover fair and reasonable costs for work performed.
The Tribunal raised the issue of jurisdiction in relation to the builders claim.
The parties have made submissions in regard to that issue and sought submissions from both.
The builder submits that: 1. S10(1)(b) of the HBA relevantly provides that a person who contracts to do any residential building work or specialist building work and who contracts under a contract to which the requirements of section 7 apply that is not in writing is not entitled to damages or to enforce any other remedy in respect of a breach of contract committed by any other party to the contract; 2. S48K(1) grants to the Tribunal jurisdiction to hear and determine any building claim brought before it in accordance with Part 3A of the HBA in which the amount claimed does not exceed $500,000; 3. A "building claim" is defined in s48A of the HBA and includes a claim that arises from a supply of building goods or services whether under a contract or not. 4. S48K(3) provides that the Tribunal does not have jurisdiction in respect of a building claim relating to building goods or services that have been supplied unless the claim is brought not more than 3 years after the supply. The builder concedes that s48K(3) is not applicable to its claim. 5. S48K(8)(a) provides that the Tribunal does not have jurisdiction in respect of a building claim relating to the supply of goods or services to which none of subsections (3), (4), (6) and (7) apply if the date on which the claim was lodged is more than three years after the date on which the contract was entered into. The builder concedes that s48K(8) is not applicable to its claim; 6. The builder admits that it is precluded by s10 of the HBA from bringing a claim in contract. It brings its claim in quantum meruit. It submits that s10 does not preclude a claim by a builder otherwise than on the basis of contract: Warren v K Kavanagh t/as Local Fencing [2015] NSWCATD 140 at [51]; Xu v Jinhong Design & Constructions Pty Ltd [2011] NSWCA. 7. The builder contends that its claim is a "building claim" within the meaning of s48K(1) as it is a claim for the payment of a specified sum of money arising from a supply of building goods or services "whether under a contract or not". 8. The builder submits that its claim does not fall within any specific statutory provisions which provide for a 3 year limitation period, it is appropriate for the Tribunal to have regard to the position under the Limitation Act 1969 ("LA"). 9. As such, the builder contends that a 6 year limitation period applies to its claim on the basis that it falls within the "(now disused) rubric of "quasi-contract" in s14(1) of the LA and therefore the builder says that the cause of action arose less than 6 years before the filing of the cross-application and the Tribunal has jurisdiction to determine the quantum meruit claim.

Owner submissions on builders claim

The owner submits that where the contract was entered into in 2008 and the invoices the subject of the builders claim were issued in 2010, the onus is on the builder to prove that its claim has been brought in time.
The owner agrees with the builder's submissions that it is not entitled to enforce the oral contract starting in 2008 by virtue of sections 10 and 7 and that it is out of time to enforce a contract pursuant to ss48K(3) and 48K(8)(a).
The only avenue open to the builder is to satisfy the Tribunal that it is entitled to bring its claim in quantum meruit. Further, even if the builder is able to establish that the Tribunal has jurisdiction for the claim to be heard, the owner disputes the facts attaching to the builders entitlement to payment of the invoices its claim seeks to enforce.

Findings as to Builders quantum meruit claim

Section 48K(1) grants to the Tribunal jurisdiction to hear and determine any building claim brought before it under the Part 3A "Resolving building disputes and building claims".
A "building claim" is defined by s 48A(1) and includes a claim that arises from a supply of building goods or services whether under a contract or not.
Section 48K(2) provides that jurisdiction to hear and determine any building claim whether or not the matter to which the claim relates arose before or after the commencement of the Division, except as provided by s 48K.
Section 48K(3), (4), (5), (6), (7) and (8) excludes from the jurisdiction of the Tribunal certain building claims.
Relevantly, the jurisdiction is excluded in respect of building goods and services: 1. That have been supplied to or for the claimant if the date on which the claim was lodged is more than 3 years after the date on which the supply was made; (s 48K(3)), 2. That are required under a contract to be supplied to or for the claimant on or by a specified date or within a specified period but which have not been so supplied if the date on which the claim was lodged is more than 3 years after the date on which the supply was required under the contract to be made; (s 48K(4)), 3. That relates to a contract for the supply of goods or services to which none of s 48K(30, (4), (6) and (7) applies if the date on which the claim is lodged is more than 3 years after the date on which the contract was entered into.
It is common ground between the parties that that it is not entitled to enforce the oral contract starting in 2008 by virtue of sections 10 and 7 and that it is out of time to enforce a contract pursuant to ss48K(3) and 48K(8)(a).
The builder's contention is that its claim does not fall within any of the specific statutory provisions which provide a 3 year limitation and any limitation period is therefore determined by the LA and a limitation period of 6 years applies under s14 of the LA.
The Tribunal is satisfied that the builder has established that the limitation period for the builders claim is 6 years from the date of the cause of action arising (between 2 July 2010 and 21 September 2010). The builder's application was filed on 18 December 2015 and therefore the application has been brought in time and the Tribunal has jurisdiction to hear and determine the builder's claim. P Boyce Senior Member Civil and Administrative Tribunal of New South Wales 1 July 2016 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: 06 October 2016

At a glance

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Decision date

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Judgment (8 paragraphs)

Parties

Cases Cited (3)