Laser Sonics Pty Limited v Prynew Pty Limited & Anor [2005] NSWSC 937 | Case summary

JUDGMENT 1 His Honour: The plaintiff and the first defendant entered into contractual arrangements on 9 May 2002. These arrangements required the plaintiff to perform waterproofing work at premises owned by the first defendant and known as 44 Mona Road Darling Point (the premises). The premises were the subject of a development involving four units. 2 The plaintiff came to perform further work (it seems this may have been done by way of variation). Dispute arose between the parties concerning payment for the work. 3 In June 2003, the plaintiff commenced proceedings in the Local Court. The defendant responded with a defence and cross-claim. Generally speaking, these pleadings sought to raise matters of either the variations falling within the scope of the contract or arising as a result of defective work. 4 The dispute was transferred to the Consumer Trader & Tenancy Tribunal (the Tribunal). On 28 January 2004, the plaintiff filed an application in the Tribunal. No process was filed by the first defendant at that stage. 5 The dispute came to a hearing. The plaintiff was represented by a solicitor (Miss Cleary). Mr Tsu (a director) represented the first defendant. A part of the hearing took place on 21 and 22 June 2004. 6 The first defendant relied on an expert (Mr Brincat). He prepared reports for it. His third report was dated 11 July 2004. It was placed before the Tribunal when the hearing resumed on 22 July 2004 and it seems that Mr Brincat may have attempted to perform a representational role. 7 The report contained the following:- To expand on that the respondent is the developer and not the builder on this project and this matter requires the applicant to hold and have issued for the project a Home Warranty Insurance for his contract works. It is my understanding that the applicant does not have the HWI in place for his contract works on this project. … … … In summary the applicant has no HWI and has not provided a warranty for the entire works completed by the applicant. It is my understanding that the ramifications for no HWI, does not entitle the applicant to claim for any outstanding money and that the respondent is left with a dwelling with no insurance to claim against in the event that the applicant disappears. 8 Further hearing took place on 22 and 23 July 2004. On 22 July 2004, the first defendant filed an application (it concerned allegations of defective work). It did not mention the matter of the plaintiff not having insurance. On 26 July 2004, the application was withdrawn by the first defendant. 9 On 2 August 2004, directions were made for the filing of final submissions. In accordance with the directions, submissions were filed by both parties but not exchanged. The Tribunal then gave its decision. 10 The Tribunal found in favour of the first defendant. It dismissed the plaintiff's claim but made no order as to costs (the orders). It provided the parties with written reasons for the decision which were dated 29 November 2004. 11 The reasons contain, inter alia, the following:- The respondent clung to a submission that it was a developer and another Company was the builder on site. That arrangement may well have existed at some time during the course of the construction of this building but it was clearly not the case in relation to the subject contract. … … … In my opinion there is no doubt that the respondent acted as a builder in relation to the contract it entered with the applicant. Further, as the respondent also owned the property it is my opinion the conduct of the respondent amounted to that of an owner builder. The respondent did not hold an owner builder's permit as required under the provisions of the Act [Home Building Act 1989] . I turn now to the issue of Home Warranty Insurance. The respondent submitted in both its primary evidence and in its final written submissions that the applicant had not arranged the necessary insurance as required by Section 92 of the Act. At the time these parties entered the contract that section provided:- (1) A person must not do residential building work under a contract unless: (a) a contract of insurance that complies with this Act is in force in relation to that work in the name of the person who contracted to do the work, and (b) a certificate of insurance evidencing the contract of insurance, in a form prescribed by the regulations, has been provided to the other party (or one of the other parties) to the contract. (2) Except as provided by section 94 (1A), a person must not demand or receive a payment under a contract for residential building work (whether as a deposit or other payment and whether or not work under the contract has commenced) from any other party to the contract unless: (a) repeated as in (1)(a) above and (b) repeated as in (1)(b) above. … … … Section 94 of the Act provides:- (1) If a contract of insurance required by section 92 is not in force, in the name of the person who contracted to do the work, in relation to any residential building work done under a contract (the uninsured work), the contractor who did the work: (a) is not entitled to damages, or to enforce any other remedy in respect of a breach of the contract committed by any other party to the contract, in relation to that work, and (b) is not entitled to recover money in respect of that work under any other right of action (including a quantum meruit). (1A) Despite section 92 (2) and subsection (1), if a court or tribunal considers it just and equitable, the contractor, despite the absence of the required contract of insurance, is entitled to recover money in respect of that work on a quantum meruit basis. (1B) Not relevant (1C) Without limiting the factors that a court or tribunal may consider in deciding what is just and equitable under subsection (1A): (a) in relation to any contract - the court or tribunal may have regard to the impact on the resale price of the property if no contract of insurance is provided, and (b) not relevant. … … … According to the provisions recited above I have a discretion which I may exercise in favour of the applicant to consider its claims for damages despite the lack of the required certificate of insurance. I decline to exercise that discretion in favour of the applicant because of the following:- 1. The applicant's very failure to comply with the requirements of the Act in relation to obtaining the certificate of insurance. 2. The applicant's failure to comply with the requirements of the Act in relation to obtaining the appropriate licence. 3. Should the Applicant Company for any reason cease to exist then without the necessary certificate of insurance the protection that Parliament intended the home owners to enjoy has evaporated. 4. In my opinion, the applicant's arrangement with a Mr Bowden constituted an attempt to evade the requirements of the Act in relation to licensing. 5. In my opinion the applicant's behaviour as recorded in points 1 to 4 above disentitles it from the exercise of any discretion in its favour. 12 The plaintiff made an unsuccessful application for rehearing. It then brought proceedings in this court. Relief is sought pursuant to ss65 and 67 of the Consumer Trader & Tenancy Tribunal Act 2001 (the CTTTA). 13 Section 65 of the CTTTA enables relief to be granted where there has been, inter alia, a denial of procedural fairness. Section 67 provides an avenue of appeal in those cases where the Tribunal decides a question with respect to a matter of law. 14 The latter section is intended to provide a narrow avenue of appeal. The avenue is not equivalent to an avenue of appeal available where there has been error in point of law. There is authority for the proposition that it should be confined to a pure question of law. There is also authority for the proposition that it has application where the Tribunal has applied a wrong principle of law. 15 The hearing took place on 13 September 2005. The court has received written submissions supplemented by oral argument. 16 Before proceeding further, I should briefly refer to what was propounded by the parties before the Tribunal. 17 The plaintiff has submitted that the claim that was sought to be ventilated was founded at least primarily on either quantum meruit or unjust enrichment (it was so pleaded in the Local Court process). The court has been informed that the plaintiff took this approach because of concerns had as to licensing problems. 18 The first defendant did not have insurance which complied with the Home Building Act 1989 (HBA). It presented itself as a developer (and not a builder) and as such was not required to have such insurance. The builder was said to be another company which did have insurance (N & T Consulting & Development Pty Limited). 19 Any issue that the plaintiff was required to have such insurance did not emerge prior to the third report of Mr Brincat being placed before the Tribunal. 20 Despite what appears in the reasons, there is dispute between the parties as to whether such a matter was ever raised as an issue for determination during the hearing. The plaintiff contends that it was unaware that it was a real issue until after the Tribunal gave its decision. It did not obtain a copy of the final submissions made by the first defendant before the Tribunal until after the Tribunal had handed down that decision. 21 The first defendant does not now dispute that it did building work (including supervision). But it submits that the finding that it acted as a builder has no relevance to the questions to be decided in this case. 22 It is common ground that the Tribunal erred in law in finding that the conduct of the first defendant amounted to that of an owner builder. This was seen by the Tribunal as the basis upon which it concluded that the first defendant did not have to take out insurance. Such an error will only be of significance if it justifies the disturbing of the decision of the Tribunal. In my view, the error did not have such significance in this case. 23 The issues in these proceedings concerned two areas. 24 What appears from the reasons (perhaps implicitly), brought about the result that the plaintiff was unsuccessful on what was described therein as the issue of home warranty insurance (the insurance issue). It seems that the Tribunal implicitly found that the plaintiff had entered into a contract with the first defendant pursuant to which it did residential building work. It appears that the result on the insurance issue was reached by the application of provisions contained in ss92 and 94 of the Home Building Act 1989 (the HBA). Further, it appears that the plaintiff's claim ultimately failed because the Tribunal declined to exercise what it described as a "discretion" (meaning thereby a remedy provided by s94(1A)) in favour of the plaintiff. 25 The plaintiff contends that error in relation to these matters fell within the ambit of appeal provided by s67 of the CTTTA. It also contends that there was a denial of procedural fairness in treating these matters as issues without giving it a reasonable opportunity to present its case in relation to them. 26 Largely, the relevant statutory provisions may be found in Part 6 of the HBA (which is headed "Insurance"). Part 6 comprises ss90 - 103E. 27 The primary position of the plaintiff was that ss92 and 94 did not have application and it looked to s98 of the HBA to exclude it from the obligation to obtain insurance in respect of the work done by it. The section was not the subject of submissions before the Tribunal. It is in the following terms:- 98 Employees and others not required to insure (1) Nothing in this Part: (a) requires a person who carries out work for a person required by this Part to obtain insurance in respect of that work to obtain insurance, or (b) makes the first-mentioned person liable for an offence for failing to do so. (2) Subsection (1) does not apply in the case of a person who contracts to do owner-builder work on behalf of an owner-builder. Such a person must insure that work if otherwise required to do so by section 92.

The plaintiff was a sub-contractor and contends that the requirements of (1)(a) thereof were satisfied in this case. 28 The plaintiff relied on dicta to be found in a judgment of Hunter J in Australasian Concrete Services v Multiplex Constructions [1999] NSWSC 1140 (paragraphs 31 and 50). The first defendant contended that such dicta needs to be read in context with other dicta therein (paragraph 44). 29 Paragraphs 31 and 44 are as follows:- 31 In the written submissions on behalf of Multiplex reliance was placed upon the heading to the section as evidencing a legislative intention to restrict the ambit of s98 to employees "and others of that ilk, such as consultants", relying upon the operation of s35(4)(b) of the Interpretation Act 1987. However, during the course of oral submissions that proposition was abandoned, that is, to the extent that it relied upon the terminology of the heading to the section. However, in my view, whether one has regard to the heading or not, the section should not be construed to have the limited operation advanced on behalf of Multiplex. It is wide enough to embrace a sub-contractor for works in respect of which the head contractor is required to obtain insurance pursuant to Pt 6 of the Act. However, I do not think that it follows that s92 has no application to sub-contractors generally. … … … 44 It is my view that it is not necessary to construe Pt 6 of the Act as having no application to a sub-contractor. Clearly Pt 6 of the Act is designed to ensure that in the performance of residential building work there is in place a contract of insurance complying with the provisions of the Act and while the primary responsibility for effecting that insurance will, in nearly all such cases, fall upon the shoulders of the head contractor, nevertheless, it remains the obligation of a sub-contractor not to contract to do any residential building work under a head contract, without being satisfied that a contract of insurance is in place. 30 The first defendant maintained its stance that it was a developer and was not required to obtain insurance in respect of the work performed by the plaintiff. 31 In support of that stance, the first defendant relied on various sections of the HBA (including ss3A, 96 and 99) and, inter alia, an explanatory note and second reading speeches relevant to 1999 and 2000 amendments. The object of certain of the amendments was to, inter alia, remove the requirement placed on developers to arrange insurance cover and to overcome a decision of this court (HIH v Jones [2000] NSWSC 359). 32 The term "builder" has no relevance in the context of present considerations. It is not a part of the structure of Pt 6. The fact that the first defendant acted as a builder in relation to the contract does not assist the plaintiff in this case. 33 In the circumstances of this case, it seems to me that the first defendant fell within the category of a developer (by reason of what has been described as the deeming provisions of s3A of the HBA) and as such was not required by Pt 6 to obtain insurance for the work carried out by the plaintiff. In such circumstances, the plaintiff is unable to satisfy the requirements of s98(a) of the HBA. Accordingly, I do not consider that the section assists the plaintiff in this case. 34 Save for what appeared in the report of Mr Brincat (which appears to be comment that may be thought to have little probative value), there does not seem to be any dispute that the insurance issue was not otherwise ventilated in the proceedings prior to the making of final submissions by the first defendant. The issue was not the subject of any exchange between the Tribunal and the parties during the hearing. The final submissions were made independently. The plaintiff did not see the final submissions of the first defendant and had no opportunity to respond to them prior to the making of the Tribunal's decision. 35 These were submissions that put forward, inter alia, a primary position of the first defendant. This was a position that presented the plaintiff as being unlicensed and having a claim (falling under the HBA) which had not been made out. 36 However, any denial of procedural fairness in relation to this issue is of no consequence. It seems to be common ground that the plaintiff did not have the relevant insurance. In these circumstances, it could not have either led further evidence or made further submissions of any substance on the issue. 37 In contrast, the issue raised by s94(1A) falls into a different category. Under that provision, the contractor is entitled to recover money in respect of work on a quantum meruit basis, if the Tribunal considers it just and reasonable. 38 Whilst the Tribunal did purport to undergo the exercise of the plaintiff's entitlement to this statutory relief, the plaintiff could be expected to have been unaware that the Tribunal would be dealing with that matter. The question of entitlement to such statutory remedy was also not canvassed during the hearing. It was not the subject of any submissions made by the first defendant. In the circumstances, the plaintiff could not have been expected to either lead evidence or make submissions on the matter and did not do so. 39 It seems to me that the Tribunal fell well short of satisfying the requirements of s35 of the CTTTA (which deals with "Opportunity for parties to present case"). Apart from the duties imposed by that provision, the concept of procedural fairness dictates that a party should be given a reasonable opportunity to adduce evidence and make submissions. 40 I consider that the matter has to be remitted back to the Tribunal so that the question of the statutory remedy can be revisited. 41 When addressing the consideration to be made pursuant to s94(1A) of the HBA, regard is to be had to all of the relevant circumstances of the particular case before the Tribunal. A reading of what was briefly said by the Tribunal in the making of its consideration reveals that this was not done. It also reveals that irrelevant circumstances were taken into account. 42 Relevant circumstances include the matters that work had been done by the plaintiff, that the first defendant had benefit from that work and that no payment had been made in respect of it. These circumstances appear not to have been taken into account. Curiously, it seems that such circumstances were only considered to be relevant on the question of costs. 43 What has just been said should not be misconstrued as indicating that the Tribunal has otherwise had regard to all relevant circumstances. It only had regard to four matters (including the irrelevant circumstance of failing to obtain insurance). 44 What relevant circumstances may be can be expected to depend on, inter alia, the evidence (including whether or not any further evidence is led on the question) and the submissions that are made by the parties. They will include the circumstances in which the failure to insure arose. 45 Accordingly, I am satisfied that the orders of the Tribunal should be set aside and I so order. The proceedings are remitted to the Tribunal for determination according to law of the question of the plaintiff's entitlement (if any) to the statutory relief provided by s94(1A) of the HBA. The costs of the proceedings are reserved. The exhibits may be returned. **********

Laser Sonics Pty Limited v Prynew Pty Limited & Anor

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