Kursun v Paul Garreffa t/as Paul's Home Maintenance

JURISDICTION

1. The Tribunal is satisfied that the parties' disputes relate to "residential building work" within the meaning of the HB Act.
2. The application was brought within the time required under the HB Act.
3. In respect of residential building work, the Tribunal has jurisdiction to hear and determine any "building claim" (see s 48A of the HB Act) brought before it in which the amount claimed does not exceed $500,000.00: s 48K(1) of the HB Act.
4. The home owner's claim does not exceed $500,000.00. The nature of the application otherwise falls within the definition of "building claim" as set out in s 48A of the HB Act.
5. The Tribunal has jurisdiction under the HB Act to hear and determine the issues in dispute on the application.

EVIDENCE AND SUBMISSIONS

1. The home owner tendered evidence. Subject to objections made and considered, the evidence was admitted as follows: 1. JTB 131 - 224 - affidavit of Vincenza Kursun sworn 10 August 2015 (in evidence for the preliminary application); 2. JTB 225 - 228 - affidavit of Nusret Kursun sworn 30 September 2015 (in evidence for the preliminary application); 3. JTB 239 -302 - statement of Vincenza Kursun dated 7 April 2016; 4. JTB 303 - 311 - statement of Vincenza Kursun dated 21 June 2016; 5. JTB 459 - 559 - report of Mr Max Dietrich of John Worthington & Associates dated 6 April 2016 (the "Dietrich report"); 6. Affirmed oral evidence of Vincenza Kursun (subject to cross examination by the respondent's counsel); 7. Affirmed oral evidence of Mr Dietrich (subject to cross examination by the respondent's counsel).
2. The respondent, Mr Garreffa, tendered evidence. Subject to objections made and considered, the evidence was admitted as follows: 1. JTB 12 - 130 - Mr Garreffa's statement of events and annexures dated 27 August 2015 (in evidence for the preliminary application); 2. JTB 229 - 238 - affidavit of Paul Gareffa sworn 9 October 2015 (in evidence for the preliminary application); 3. JTB 312 - 322 - statement of Paul Gareffa dated 8 April 2016; 4. JTB 323 - 349 - statement of Benafsha Sahukar dated 30 May 2016; 5. JTB 461 - 511 - report of Mr Mario Bournelis of City Wide Building Consultants Pty Ltd dated 29 May 2015 (the "Bournelis report"); 6. Affirmed oral evidence of Paul Gareffa (subject to cross examination by the applicant's counsel); 7. Affirmed oral evidence of Benafsha Sahukar (subject to cross examination by the applicant's counsel); 8. Affirmed oral evidence of Mr Bournelis (subject to cross examination by the applicant's counsel).
3. At the direction of the Tribunal following the Conclave, an amended joint Scott Schedule ("Joint Scott Schedule") reflecting the record of the Scott Schedule completed and signed by the parties was provided and is found at JTB 512 - 521.
4. At the conclusion of the hearing of the evidence on 9 November 2016, the Tribunal made procedural directions for the parties to exchange written submissions, including the findings of fact and law for which each party contends. Both parties have provided written submissions pursuant to the said directions. Such written submissions supplement the written and oral submissions made by both parties' counsel on 9 November 2016.
5. To do justice to the issues posed by the parties' respective cases, the Tribunal has given consideration to all of the evidence presented and the submissions made by the parties before, during and after the formal hearing. However, the evidence presented and the submissions made (whether written or oral) are quite extensive. It is simply not practicable for the Tribunal to spell out in detail every step of its reasoning processes, or to refer to every piece of evidence. Moreover, the Tribunal's duty to give reasons does not require it to do so: see, for example, Moloney v Collins [2011] NSWSC 628 at [63] - [64]; cited with approval by the Tribunal's Appeal Panel in Akkari v Sartor [2015] NSWCATAP 79 at [48]. The Tribunal's focus, therefore, is on the material which it considers is central to the applicant's application for orders of the Tribunal. To the extent that the Reasons for Decision may not refer to a specific piece of evidence or singularly deal with a submission of one or other of the parties, it should not be assumed that the Tribunal has not taken into account such evidence or submission in making its findings of fact and law on this application.

RELEVANT LAW AS TO THE IDENTITY OF THE CONTRACTING PARTIES

1. The determination of the identity of the parties to a contract must be made in accordance with the objective theory of contract: Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65 at [262] - [266].
2. As the terms of a contractual arrangement are to be determined objectively, the key consideration is: "what each party by words and conduct would have led a reasonable person in the position of the other party to believe": Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 at [40].
3. It is necessary to consider the language used by the parties, the circumstances addressed by the contract, and the objects which it is intended to secure. An appreciation of the commercial purpose of the contract calls for an understanding of the genesis of the transaction, the background and the market: International Air Transport Association v Ansett Australia Holdings Ltd. (2008) 82 ALJR 419 [2008] HCA 3 per Gleeson CJ at 423 [8].
4. Where the language of an agreement is ambiguous or susceptible of more than one meaning, the factual matrix including the context and surrounding circumstances, its aim, object or commercial purpose may be taken into account in the construction of an agreement: Codelfa Construction Pty. Ltd. v State Rail Authority of NSW (1982) 149 CLR 337 per Mason J at 350-352.
5. While primacy must be given to the actual words used in a written contract, pre-contractual conduct is admissible on questions of construction if the contract is ambiguous and if the pre-contractual conduct casts light on the genesis of the contract, its objective aim or the meaning of any descriptive term: Codelfa supra at 347-352.
6. Further, the interpretation of the written contract involves the ascertainment of a meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract: Maggbury Pty. Ltd. v Hafele Australia Pty. Ltd. (2001) 210 CLR 181 per Gleeson CJ, Gummow and Hayne JJ at 188.

DECISION AS TO THE IDENTITY OF THE CONTRACTING PARTIES

1. The Tribunal's task is to determine the parties to the contract by asking what a reasonable observer would conclude from the objective evidence of the communications that led to the entry into the contract, together with the background facts known to the parties: Pethybridge v Stedikas Holdings Pty Ltd (2007) Aust Contract R 90-263, [2007] NSWCA 154 at [54].
2. Further, subsequent communications may legitimately be used against a party as an admission of the existence or non-existence of a subsisting contract: Tomko v Palasty [2007] NSWCA 258 at [63]- [68]. Relevant considerations in making such a determination include the name of the licensee recorded in the contractual documentation (Suncorp Metway Insurance Ltd v Owners Corporation SP 64487 [2009] NSWCA 223 at [76]); the letterhead used to make the requests for progress payments (Suncorp at [76]); the licence number recorded on requests for progress payment communications; account details into which payments were made, subject to such an account being used 'exclusively for transactions relating to the company' (Suncorp at [76]).
3. Therefore, the test to be applied is that on the objective evidence would a reasonable observer of the communications conclude who were the parties that intended to enter into the contract (Pethybridge).
4. The Tribunal finds that the terms of the contract for residential building work at the home owner's dwelling are recorded in the Quotation of Mr Garreffa prepared bearing date 28 January 2015 ("Quotation"), with a scope of works for 'full renovation of main bathroom, en-suite, powder room & separate toilet with no modifications to existing plumbing, electrical and fixtures' (JTB 183 - 185), and a final estimated price of $33,000.00 plus GST. There were no plans, sketches or drawings. The said Quotation is on the letterhead of Mr Gareffa's business name 'Paul's Home Maintenance & Renovations' and was received by the home owner on 29 January 2015 (JTB 133).
5. The Tribunal does not accept the respondent's case that the home owner entered into a home building contract knowing that the quoting party, Mr Garreffa, was not the person with whom she intended to contract. It is not in dispute that the initial contact by the home owner was with Mr Garreffa on or about 4 January 2015, and also that Mr Garreffa and Mr Haddadi attended the home owner's dwelling on or about 15 January 2015 to discuss a quotation for bathroom renovations.
6. The evidence establishes (JTB 186) that it was Mr Garreffa who contacted the home owner requesting a 10% deposit (i.e. the sum of $3,300.00) to secure Monday 16 March 2015 as the time for the commencement of the works the subject of the Quotation.
7. The Tribunal finds that the home owner accepted the Quotation and that on 17 February 2015 a home building contract ("Contract") was entered into between the home owner and Mr Garreffa. A deposit of $3,300.00 was paid in cash by the home owner to Mr Garreffa on or about 17 February 2015. Most of this cash was deposited into Mr Garreffa's account on 18 February 2015 (JTB 46).
8. The Tribunal is further satisfied that the weight of evidence following 17 February 2015 points to Mr Garreffa being the contracting party. On or about 7 March 2015 the home owner met with Mr Garreffa and Mr Haddadi for the purpose of selecting PC items and other materials. Mr Garreffa made notes about the home owner's selections. The home owner also paid $10,000.00 in cash to Mr Garreffa.
9. On or about 16 March 2015 the works commenced at the home owner's dwelling. The Tribunal accepts the evidence of the home owner (JTB 134) and the home owner's husband, Mr Nusret Kursan (JTB 226), that Mr Garreffa was present on site and carrying out works. Mr Garreffa arranged and instructed tradespeople to attend and carry out works at the home owner's dwelling (see, for example, JTB 110, 141, 142, 168)
10. The respondent also submits that on or about 20 March 2015 the home owner entered into a further agreement with Mr Haddadi only, and that such further agreement was for Mr Haddadi to do other work in the bathrooms, including extra plumbing, shower recesses, ceiling linings and electrical work. Such further agreement is said to be evidenced by the document at annexure G to the home owner's affidavit sworn 10 August 2015 (JTB 134, 198 - 200) and also by an 'updated invoice' (JTB 134, 201 - 203) on the letterhead of Mr Haddadi's business 'Better Homes' which is annexure H to the home owner's affidavit sworn 10 August 2015.
11. However, the Tribunal is not persuaded by the respondent's contentions that annexures G and H of the home owner's affidavit sworn 10 August 2015 are evidence of a separate contract between the home owner and Mr Haddadi, to the exclusion of Mr Garreffa. The documents referred to do not take the form of another contract. In any case, the Tribunal is satisfied that the works referred to in annexures G and H of the home owner's affidavit sworn 10 August 2015, can be characterised as a variation to the contract for works between the home owner and Mr Garreffa made on 17 February 2015.
12. The Tribunal finds that Mr Haddadi did not enter into a separate contract with the home owner. The works arising under the documents the home owner received on or about 20 March 2015 ("variation works") are ancillary to the works the subject of the Quotation and the Contract between the home owner and Mr Garreffa made on 17 February 2015. It is also clear on the evidence that Mr Garreffa undertook some of the variation works in person and that he arranged for subcontractors to do other parts of those works.
13. The home owner was cross examined about the variation works, the invoice on the letterhead of Mr Haddadi's business 'Better Homes", and also as to her awareness that Mr Garreffa and Mr Haddadi operated under different trading names. It was then put to her that in the events which had occurred in the period from January to May 2015, she must have known that Mr Garreffa could not be the contracting party for the works including the variation works at her dwelling. The home owner answered by saying: 'I do not know how builders work', or words to that effect.
14. The home owner also gave evidence to this effect: at all material times, the respondent never stated that he was not contracting with her, that he was unable to do so (because he was not licensed to do the work), or that he was a subcontractor or employee or doing work under the supervision of Mr Haddadi. To the extent that there are differences between the home owner and Mr Garreffa as to their recollection of material conversations during the period from in or about January 2015 to in or about May 2015, the Tribunal accepts the home owner's evidence.
15. The finding that the home owner's recollection of events is more reliable and accurate is supported by contemporaneous facts and matters which are already established in evidence; i.e. the home owner's initial contact with Mr Garreffa in January 2015, the Quotation provided by Mr Garreffa, the deposit paid to Mr Garreffa, the $10,000.00 paid to Mr Garreffa, Mr Garreffa's payment of trades and the purchase of materials, and Mr Garreffa coordinating the works with the home owner (JTB 137 - 171).

DECISION AS TO MR GAREFFA'S LIABILITY TO THE HOME OWNER

1. The Tribunal's finding is that Mr Garreffa contracted with the home owner to do residential building work for a contract price of $33,000.00 plus GST. As the contract price exceeds the threshold (i.e. $20,000.00), the licencing and insurance requirements of the HB Act and the Home Building Regulation 2014 (see clause 53) apply.
2. The Tribunal finds that Mr Garreffa was not licensed under the HB Act at the material times; that Mr Garreffa was aware that he was required to be licensed under the HB Act at the material times; and further that Mr Garreffa did not acquire home warranty insurance for the works at the home owner's dwelling, even though he was aware of the need to do so.
3. Although there are substantial differences of opinion between the experts in the Joint Scott Schedule prepared following the Conclave, there is, nevertheless, sufficient common ground between Mr Dietrich and Mr Bournelis to support a finding of the Tribunal that in significant respects, the residential building work carried out at the home owner's dwelling in 2015 was defective and incomplete, and not in accordance with the applicable Building Code of Australia and the relevant Australian Standards. Both experts prepared their reports in accordance with the Expert Witness Code of Conduct.
4. The differences of opinion between the experts bear upon the contractual responsibility of Mr Garreffa (which is a legal issue, already addressed in these Reasons), and also as regards the proper amount to rectify the defective and incomplete work (which is a further issue to be considered later in these Reasons). Such differences of opinion do not detract from a finding that the works carried out on the home owner's dwelling in 2015 were in breach of the statutory warranties contained in s 18B of the HB Act.
5. The Tribunal finds that the home owner is entitled to an order under s 48O(1) (a) of the HB Act for Mr Garreffa to pay money by way of damages for breach of the statutory warranties. Mr Garreffa is not a licensed contractor for the rectification works and cannot return to the applicant's dwelling to carry out the rectification works which are required: see s 48MA of the HB Act.
6. The applicant also puts a case for loss and damage under s 18 of the Australian Consumer Law NSW (ACL): see Schedule 2 of the Competition and Consumer Act 2010 (Cth), adopted in New South Wales on 1 June 2011 pursuant to s 28 of the Fair Trading Act 1987 NSW. The allegations are that Mr Garreffa, in trade or commerce, engaged in misleading and deceptive conduct or conduct likely to mislead and deceive, because he represented to the home owner that he was licensed and insured to do the work, and that 'the works would be completed in a proper and workmanlike fashion': see paragraph 16 of the applicant's Points of Claim.
7. The only allegation of misleading and deceptive conduct which might have caused the home owner to suffer loss, recoverable under s 236 of the ACL, is that Mr Garreffa failed to disclose that the work would be completed in a 'proper and workmanlike fashion'. In the Tribunal's view, there are inherent difficulties in that allegation as it is, in substance, an allegation of a duty to express an opinion about work yet to occur (as distinct from a misrepresentation as to a fact), and there is also nothing factual in the home owner's relationship to Mr Garreffa which left Mr Garreffa's 'silence' misleading, or which placed Mr Garreffa under a duty to the home owner to correct anything.
8. However, it is not necessary for the Tribunal to determine whether a case under the ACL is made out on the evidence. Given the finding of defective and incomplete work arising from the Joint Scott Schedule, the Tribunal is satisfied that the applicant's cause of action against the respondent is for breach of the statutory warranties in the HB Act; specifically, that the respondent's work was not done with due care and skill: see s 18B(1)(a) of the HB Act.

DECISION AS TO THE QUANTUM OF THE HOME OWNER'S DAMAGES

1. The home owner's damages for breach of contract and breach of the statutory warranties are calculated by putting her in the position she would have been in if the respondent, Mr Garreffa, had performed the contract with due care and skill, and otherwise in accordance with its terms, and had complied with the statutory warranties under s 18B of the HB Act. The home owner's damages are the costs reasonably required to rectify the works carried out at her dwelling in the period from March 2015 to July 2015, so that the home owner is in the position she would have been in had the defects not occurred: Bellgrove v Eldridge [1954] HCA 36; (1954) 90 CLR 613 at 617, 618.
2. It is a question of fact as to whether, in any particular case, rectification is necessary and reasonable: Tabcorp Holdings v Bowen Investments Pty Ltd [2009] HCA 8; (2009) 236 CLR 272.
3. There is a critical difference in quantum between the home owner's expert, Mr Dietrich, and Mr Garreffa's expert, Mr Bournelis. Such difference ($37,713.00 in Mr Dietrich's opinion, and $10,781.38 including a margin of 25% and GST, in the opinion of Mr Bournelis) is attributable largely to rectification costs in the bathrooms and the experts' differences of opinion as to the condition of the waterproofing membrane.
4. The home owner submitted that the quantum of rectification must be based upon Mr Dietrich's estimate because Mr Dietrich conducted a thorough and full inspection, and he holds qualifications as to the way to rectify the water proofing.
5. The Tribunal is not persuaded that the qualifications of Mr Dietrich are to be preferred to those of Mr Bournelis in assessing a proper and reasonable scope of works for rectification of waterproofing issues in the bathrooms of the home owner's dwelling.
6. Apart from his own experience as a building consultant and licensed builder, Mr Bournelis referred to Rawlinson's Construction Cost Guide: see paragraphs 5.6 and 5.7 of the Bournelis report.
7. Further, Mr Bournelis states (at paragraphs 9.8 and 9.9 of his report): "9.8 At the time of my inspection I looked for signs of water leaks to adjacent walls of wet areas, water leaks to carpets and doorways and any evidence of water leaks to the plaster board ceiling at the ground level under the level 1 wet areas with no leaks evident. 9.9 I placed a moisture meter to the adjacent walls of the wet areas where I had free access with zero reading which would indicate that no membrane failure has occurred except for the localised issue in the master en-suite shower recess and above the dining room which I have addressed. In particular I placed a moisture meter to the wardrobe of the bedroom adjacent to the main bathroom with zero moisture readings: see photograph 10 in Appendix C of this report".
8. Nor is the Tribunal convinced that the Waterproofing Certificate issued by the tiler, Qing Yi (Michael) Chen dated 22 April 2015 (JTB 615) carries no weight at all, as Mr Dietrich opined.
9. During his cross examination, the Tribunal found Mr Dietrich unconvincing in his answers to questions about the manner of calculation of the reasonable cost of rectification works (see Appendix A - Estimate and Scott Schedule to the Dietrich report). Mr Dietrich gave evidence that the Costs Guide he used, Cordell Housing Building Cost Guide NSW December 2012, did not cover some aspects of the cost of the proposed bathroom fit-outs in the home owner's dwelling, and further, that his estimates were based on his own personal knowledge and experience as a building consultant and licensed builder. Mr Dietrich did not obtain any quotations from independent contractors for the purposes of his estimations of the cost of the rectification works.
10. Having considered all the information and the photographs in the experts' reports, the Tribunal finds that in and around the floor waste of the shower in the en-suite bathroom, there are a number of defects which require rectification such as the puddle flange not recessed and poorly fixed, the membrane not correctly terminated, membrane peels, a weak sand/cement bed, penetration poorly cut and no inspection opening to the ceiling below.
11. The Tribunal, however, is not satisfied that the defects evident (see particularly photographs 4, 5, 6 and 7 in Appendix C of the Bournelis report at JTB 601 - 603) warrant a complete new fit out of the bathrooms. The Tribunal finds that the course of rectification recommended by Mr Dietrich, in the particular circumstances, is not the reasonable course to adopt. The Tribunal prefers the opinion of Mr Bournelis that a complete strip out of the main bathroom and the en-suite bathroom is not necessary, and further that to adopt such course of rectification would be an excessive response to a waterproofing problem that is isolated to the shower floor in the en-suite bathroom.
12. The Tribunal finds that the quantum of the home owner's damages is to be assessed in accordance with the opinion of Mr Bournelis.
13. Mr Garreffa's counsel argued that his client should be responsible only for defects in the bathroom areas within the scope of works dating to the Quotation of 28 January 2015 and not the work the subject of the later documents (annexures G and H to the home owner's affidavit). On that basis he argued that Mr Garreffa should pay $3,740.00 based upon a 25% margin.
14. The Tribunal does not accept that a lower amount (as set out in the submission of Mr Garreffa's counsel) is payable in the circumstances. For reasons already given, the Tribunal does not accept Mr Garreffa's submission that there was a separate agreement made in or about late March of 2015 which was between Mr Haddadi and the home owner to the exclusion of Mr Garreffa. In the Tribunal's opinion, the respondent's liability is in respect of all defects found in the Bournelis report arising out of the entirety of the works at the home owner's dwelling, including the variation works.
15. Therefore, the Tribunal finds that the home owner's damages are in the amount of $10,781.38.

ORDERS

1. Pursuant to s 48O(1) (a) of the HB Act, the home owner is entitled to an order for Mr Garreffa to pay money by way of damages in the amount of $10,781.38.
2. Further orders are made because the home owner's counsel has foreshadowed a desire to be heard on the question of the costs of the proceedings, including the preliminary application. D G Charles Senior Member Civil and Administrative Tribunal of New South Wales 17 January 2017 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: 17 February 2017