Kumar v Trustee for the Diskoros FT t/as Diskoros Building Certifiers

Tribunal jurisdiction

1. The supply of private certification services is clearly within the Tribunal's subject-matter jurisdiction under the HBA for reasons canvassed by the Appeal Panel and the authority it cited in Bajimaya v Reward Homes PL [2021] NSWCATAP 297 at [52]-[64], explaining definitions in HBA s 48A and Sch 1 para 2(1) as they applied in s 48K. In the manner there described, the services are clearly involved in the alterations or additions to a dwelling to be "residential building work", were in connection with such work so as to be building services and the owner's claim arises out of the terms of the contract for supply of such services so as to be a defined building claim, which is under the monetary limit.
2. HBA s 48K(7) with s 18E prescribes the time limit within which proceedings such as these must be brought since the claim is appropriately characterised as one for breach of a statutory warranty in s 18B(1)(a) that the building services supplied were not rendered with due care and skill. It is likely that the relevant alleged breach occurred when (if the owner's claim is made out) the certifier issued the IOC in April 2018. That is not a "major defect" as defined in s 18E(4) so the present proceedings were commenced outside the two-year time limit for all other defects.
3. However, the claim is also within the definition of a "consumer claim" in Pt 6A of the FTA for relief in respect of professional certification services which were supplied in NSW by the certifier to the owner and is under the $40,000 monetary limit as explained below: FTA ss 79D-79G, 79K, 79S. Specific and monetary relief is available under FTA s 79N. The owner relied upon this head of jurisdiction as well as initially claiming home building jurisdiction.
4. FTA s 28 incorporates as part of the law of NSW the Australian Consumer Law (ACL) which contains consumer guarantees for the supply of services, described below.
5. The time limit in FTA s 79L in Pt 6A is three years from when the cause of action accrued. When a cause of action or other right to relief accrues is a matter of fact to be determined in the circumstances of the case and having regard to the nature of the ingredients of the right to relief: Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 esp at 533-534.
6. Accrual in the case of a consumer guarantee allegedly breached occurs when the guarantee is breached and the damage that triggers a right to seek a remedy is suffered. That point appears to be after July 2022 when the owner incurred new expense for work required by the Council alleged to be not previously required and already described.
7. The current proceedings are accordingly brought within time for as a consumer claim.

Applicable consumer guarantees and remedies

1. Under ACL s 64 consumer guarantees cannot be excluded; however, s64A permits the contractual limitation of the remedies for breach of a consumer guarantee if the goods or services are of a kind not ordinarily acquired for personal, domestic or household use or consumption. That exception does not apply to the services in question here.
2. The ACL provides, in respect of the supply of services to a consumer, guarantees that the services were supplied with due care and skill (ACL s 60) and were reasonably fit for any expressly or implicitly disclosed purpose or result (s 61). Where these guarantees are not complied with, the consumer has rights pursuant to ACL ss 267-270.
3. Under s 267(2), if the failure is not major and can be remedied, the consumer may require remediation within a reasonable time or, if such request is not complied with, otherwise have the failure remedied and recover all reasonable costs of remediation from the supplier or terminate the contract.
4. If the failure cannot be remedied or is major, the consumer may terminate the contract or recover by action from the supplier any reduction in the value of the services below the price paid or payable for the services: s 267(3).
5. Additionally, under s 267(4) the consumer may recover by action from the supplier damages for any reasonably foreseeable loss or damage suffered by the consumer because of the failure.
6. A major failure occurs under ACL s 268 if: the services would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure; or the services are substantially unfit for a purpose for which services of the same kind are commonly supplied and they cannot, easily and within a reasonable time, be remedied to make them fit for such purpose; or the services and any product resulting from the services are unfit for a particular purpose made known to the supplier and the services and product cannot easily and within a reasonable time be remedied to make them fit for such purpose; or the services and any product are not of such a nature, quality, state or condition that they might reasonably be expected to achieve a result desired by the consumer made known to the supplier and the services and product cannot easily and within a reasonable time be remedied to achieve such a result.
7. In Safi v Heartland Motors PL t/as Heartland Chrysler [2016] NSWCATAP 80 at [85]-[107] the Appeal Panel analysed the case law on what constituted a major failure in respect of a supply of goods, summarising its conclusions at [99]-[102]. The concepts have relevance to a major failure in supply of services. The Panel rejected the view that any breach of the guarantee of acceptable quality is a major failure. Under s 260(a), the test is objective. A series of individual or specific defects taken as a whole may constitute a major failure. The cost of repairs relative to purchase price and the nature of the defect are factors. Of particular significance is whether the defects are "teething problems" or go beyond that in terms of extent, timing and frequency of repair: that is, whether or not the defects can be remedied easily and in a timely manner. Overall, the test is whether, faced with advance knowledge of the problems and what was needed in terms of time, costs and degree of difficulty to fix them, a reasonable consumer would have bought the goods (or engaged the supply of services) or bought nothing or something else. Thus, for a major failure constituted by chronic or repetitive defects taken as a whole, such a period is likely to be longer than for a single catastrophic defect.
8. ACL ss 269 and 270 regulate refunds and termination of services contracts and return of goods and refunds under any connected services contract.
9. There is additional specific relief in ACL ss 232-235 and a right of action for damages in s 236 that also apply to contraventions of the consumer guarantees since the guarantees are within ACL Ch 3 to which these rights of relief apply (they also apply to Ch 2).
10. If a defect is established, a respondent has failed to remediate within a reasonable time and an applicant has obtained quotations for remediation by another supplier and seeks that amount as the reasonable cost of remediation, then that reasonable cost would also be the measure of loss in an action under ACL s 267(4). In these circumstances, it also would be the reduction in the value of the services below the price paid or payable for the services in an action for major failure (s 267(3)).
11. The right of action for damages under the ACL has its own six-year time limit starting the day after the cause of action that relates to the conduct accrued. The reference to cause of action appears to include the rights of action for damages in ss 259(4) and 267(4) and the rights of action for reduction in value in s 259(3) and s 267(3). There are similar time limits on compensation orders under ss 237 and 239. These time limits are longer than those that govern the Tribunal's jurisdiction, already discussed.

The defence arising from previous proceedings

1. The certifier said that the alleged breaches and claims for relief had already been resolved by consent in previous proceedings HB 20/16065 filed 7 April 2020. At the first directions hearing on 28 July 2020 consent orders to the following effect had been made: 1. The application was withdrawn in accordance with the Civil and Administrative Tribunal Act 2013 (NSW) (NCAT Act) [the relevant provision is s 55(1)(a)]. 2. "By consent, it is noted that the Applicant will engage another supplier to issue an occupation certificate and that the Respondent agrees to release the said work and to not pursue any unpaid invoices against the Applicant on the basis that he has no further work to do. It is also noted that the relevant file has already been lodged with council by the respondent. 3. This agreement represents full and final settlement of all issues in dispute."
2. The owner said that he had taken on trust in agreeing to the consent orders that the certifier had provided the information to the Council. He said that on 10 February 2021 the council had requested specific documents which had not been supplied by the certifier. The owner also said that the orders related only to outstanding work not completed work.
3. Later in these reasons I have set out material that infers that the certifier had provided the file to the Council.
4. In any event, there was no application mentioned to set aside all or part of the consent orders or to enforce the consent orders for alleged non-performance.
5. In Grant v John Grant & Sons PL (1954) 91 CLR 112 at 123-124, 129-130 the High Court referred to the principle that: "a releasee must not use the general words of a release as a means of escaping the fulfilment of obligations falling outside the true purpose of the transaction as ascertained from the nature of the instrument and the surrounding circumstances including the state of knowledge of the respective parties concerning the existence, character and extent of the liability in question and the actual intention of the releasor." unless the intent is clear that the release is a general peace between the parties irrespective of potential bases of dispute not presently known to the parties.
6. The same principle is applicable to interpretation of the consent orders which in substance operate as a release by compromising in the settlement agreement whatever disputed rights are covered by the wording of the orders in return for what is done under the orders.
7. In my view it is clear on the face of the consent orders (without having to go to the underlying material in the evidence) that they were intended to operate as a complete resolution of all aspects of the dispute by performance of specific acts in relation to past and future aspects of the dispute. The certifier gave up claims to payment for work done and to be done in return for not being bound to undertake further work within the contract scope and for the withdrawal of the proceedings. Unlike in Grant, there was only one transaction between the parties being the certification work for the owner's alterations and additions. The reference to fully and finally settling "all issues in dispute" was not time-limited and could have referred only to the single transaction between the parties.
8. Accordingly, the owner no longer after the consent orders (unless successfully set aside or enforced for alleged breach, neither of which has been claimed) had a right to pursue the certifier for the matters alleged in the current proceedings and the proceedings must be dismissed on this ground.

The substantive dispute - parties' contentions and evidence

1. In the event that I am later found to be wrong on the above, I deal with the substantive dispute.
2. The owner identified the agreement as made on 8 February 2018 by accepting the certifier's quote, which included the following as part of the contracted scope of works and which he said had not been supplied: "Assess the documentation provided by the client including drawings and all relevant consultant reports and ensure that all the design documents have been provided and prepared to comply with the relevant consultant's recommendations and DA conditions of consent conditions. Forward copies of the determinations and other documents to the Council."
3. It was common ground that the IOC issued by the certifier was for the granny flat only. The owner said that the IOC specifically certified the fire-rated cladded wall and skylight but these were not in accord with the development consent (DC). The certifier requested on 5 August 2018 an engineer's certification and on 17 August 2018 raised the absence of minimum setback. Otherwise the certifier did not review drawings on 27 June 2018 and in an email said specifically that a design certificate by the carport sub-contractor was acceptable.
4. The owner said that there was then silence until the Council gave notice of intention to make an order about non-compliant works on 29 July 2019. The certifier then falsely told the Council that there had been no inspection since issue of the IOC and in an email said a consent modification needed to be sought under s 4.55 of the Environmental Planning and Assessment Act 1979 (NSW) (EPA). The owner paid $1,527 for the 4.55 modification application to a third party, the Council inspected on 10 December 2019 and information was sent to the certifier's office on 8 January 2020 for an FOC. There was no response from the certifier despite reminders on 3 and 17 February and 2 March 2020. The certifier then sought, before the FOC was released, payment of two invoices of $4,275 and $1,200 each plus GST and $2,800 plus GST for the 4.55 modification. The owner said that he had already paid the certifier $2,640 in advance on 8 February 2018 and a further $476 on 25 June 2018 and there was no evidence the certifier did more work.
5. The owner said that the certifier was mixing up two separate topics. The Council had approved the later carport and garage and its issue was with the fire-rating of a wall in the granny flat which was the only item subject to the IOC.
6. The owner said that the 4.55 modifications to design had been approved by Council. He was not claiming for those modification costs.
7. The owner's particularisation of his claimed losses was supported by a Council fee receipt for the certification fee and a builder's quotation for compliance work and period of vacancy. The builder's quotation comprised $8,866 for the fire-rated cladding, $3,840 for the most expensive alternative skylight that required extensive surrounding work (two alternative skytubes were respectively $950 and $1,900) and three weeks for the work.
8. The terms of the certifier's engagement were placed into evidence by the certifier. The total price of $2,400 plus GST for scope of services was noted as required by legislation to be paid in advance. Variations outside the quoted scope of works were subject to additional cost. These costs relevantly included the following: additional quotation for further certificates including an IOC and additional site inspections; $285 per hour plus GST for "Time spent investigating complaints including inspections, research and any contact with the complainant or relevant authorities"; the prescribed fee for document lodgements with Council.
9. The certifier said as follows: 1. The certifier expended significant effort in obtaining correct documents from the owner to enable the construction certificate (CC) to be issued by him on 12 March 2018. Inspections were carried out in March and April 2018 and a list of requirements for issue of an IOC was provided on 28 May 2018. 2. The IOC was then issued for the granny flat which was suitable at that point for occupation but all Council requirements had to be completed before issue of an FOC. The DC was for one development of granny flat with structurally-linked carport and garage. 3. After issue of the IOC, the owner made changes to the carport/garage that were not in accord with the DC without advising the certifier and without a survey check. These included walls in the wrong location. When this was discovered, the certifier sent an email dated 1 June 2018 requiring rectification to achieve compliance or to lodge a 4.55 modification to obtain approval, which the owner initially refused to do. The FOC was therefore not issued. 4. The owner sought that the certifier issue the FOC anyway which he refused to do because that would be illegal. The owner then sought to discredit the certifier including by complaint to Fair Trading which was dismissed. 5. The owner applied for and on 19 December 2019 was granted a 4.55 modification after the Council issued its notice of intention to make an order on 29 July 2019. He advised the owner that a modified CC was required as a consequence of the 4.55 modification and what he required in order to issue it. 6. He sent all documents to Council and to the owner as required by law and had a receipt for lodgements. 7. He referred to the role of the certifier as set out on the Fair Trading website: "The certifier does not manage or supervise builders or tradespeople or certify that the builder has met all requirements of the [owner's] contract with the builder. If the principal certifier becomes aware of a non-compliance with the development approval, the certifier must, by law, issue a direction to [the owner] and/or the builder, requiring the non-compliance to be addressed. If it is not, the certifier must notify the council which may take further action." 1. He further said that a certifier relies upon certificates of the owner's appointed consultants provided by the owner and is not permitted to be involved in the preparation of the supporting certificates, with statutory penalties under the EPA for contravention. 2. He did no further work because the owner changed certifiers to the Council. 3. A skylight was never on the approved plans. 4. If he had still been certifier he would have done exactly the same thing as the Council including the proposed order.
10. The schedule of documentation required to issue the IOC that was attached to the IOC referred, among other documents, to a smoke alarm certificate dated 23 May 2018, a firerated certificate dated 15 June 2018, firerated wall certification dated 29 May 2018 and a survey report and plan dated 23 May 2018.
11. The Council inspector's email of 18 October 2021 put into evidence by the owner did not in itself comment on the work of the certifier. Rather, it said that any letter given by the Council as requested by the owner would lead to enforcement of an "upgrade" with a fire wall on the outside and an extra smoke detector inside.
12. The owner's evidence also contained emails between the Council inspector and the certifier. In response to the Council request for specific information (referred to by the owner as indicating non-provision in 2020 prior to the consent orders), the certifier gave specific responses. He attached emails from his file (which were not in the owner's evidence) and said: "In summary, the client had not completed the works as per the DA approval, and had refused to lodge a modification application with council and also refused to provide the necessary consultant certification requested and also refused to pay for the processing of the OC application, and hence it was not processed."
13. The Council inspector acknowledged receipt in terms that could infer that he already had the attachments and information, which would support earlier provision by the certifier of the file as he claimed. The certifier then also confirmed that he had not carried out a final inspection and had no alternative performance solution that he relied upon when issuing the original CC. This email chain was forwarded by Council to the owner - any email response was not in evidence. The certifier's quotation stated, under conditions of the fee proposal, "There are no alternative solutions to the BCA in the existing building or proposed as part of this application".
14. There was no witness statement in evidence from the builder that supported the owner's allegation about what the builder allegedly told him about building to the certifier's instructions and not the approved plans.

The substantive dispute - conclusion

1. The weight of evidence outlined above in my view strongly favours the certifier's version of events. The owner made allegations about the certifier's conduct that were simply unsupported by evidence, including from a third party (the builder about alleged instructions contrary to the approved plans) and the emails of and with the Council inspector. The emails between the certifier and the Council inspector showed that the certifier's version of events was not a recent invention and was consistent with what he said contemporaneously. The contract terms in evidence gave a contractual basis for the certifier's extra charges.
2. Further, the schedule of documentation attached to the IOC showed that the certifier had a basis for its issue even if subsequent developments meant that the Council after considerable delay raised further requirements before it would issue an FOC for the entire development as opposed to an IOC for part of the development. If the certifier's version of events is supported by other evidence as I have indicated, then he was not responsible for the delay.
3. Even if the certifier was liable, the owner can only claim extra expense arising from the certifier's providing a defective IOC based on inadequate assessment. If the IOC had been properly assessed and not issued until the work now required by the Council as replacement certifying authority was done, the quoted amounts for a fire-rated wall and skylight would have been required to be paid by the owner in any event. There is no evidence to support that such work if initially done would have taken less than a total three further weeks or by how much less time. The quotations did not dissect the cost of removing the existing non-compliant wall and skylight and related access work.
4. The only additional cost potentially established in evidence appears to be the Council application fee said to be $2,777.80, but I have not found the certifier liable for conduct that led to the owner's choosing to replace him.
5. There is insufficient basis to claim lost rental for delay. There is inadequate evidence that the certifier was made aware or ought to have known that at least the granny flat was to be rented out, particularly if there was occasional use by family members. There was no proper evidence of the rental likely to be obtained or the period of delay in being able to rent because the work was not done prior to issue of the IOC, if the IOC was sufficient to permit rental which also was not established. The AirBnB document in the owner's evidence appeared simply to be a booking for 6 nights at $844 plus a cleaning fee (presumably one-off for whatever booking length was made) of $70 less a service fee of $30.16. This gave no proper indication of the frequency of likely bookings or their value. There was no other quantification evidence offered by the owner.
6. The owner's claim would accordingly have failed even if it could be litigated in the present proceedings.

Certifier's claims including for costs

1. Given the terms of the previous consent orders, there is no basis for the claim in the certifier's material to be paid an outstanding invoice and there was in any event no separate claim by the certifier in that respect.
2. The certifier claimed his costs of preparing his defence on the ground that the owner's claim was frivolous, vexatious and doomed to fail and that this constituted special circumstances under s 60 of the NCAT Act. There was no particularisation of the "witness expenses" (there was no witness called apart from the certifier) or amount of photocopying costs; the other amounts claimed were the filing fee and the certifier's time.
3. I do not consider that the owner's claim reached the threshold of hopelessness required to establish special circumstances. The previous consent orders required consideration of their interpretation. The other arguments failed after comprehensive consideration of the available evidence.
4. There is in any event no legal basis for the certifier to claim for his time in preparing for and conducting the proceedings.
5. I decline to make a costs order which means that each party bears his own costs of the proceedings.

Order

1. I make the following order: 1. Application dismissed.

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: 26 August 2022