Solicitors:
Blackwell Short Lawyers (Appellants)
File Number(s): AP 15/51531
Decision under appeal Court or tribunal: Civil and Administrative Tribunal
Jurisdiction: Consumer and Commercial Division
Date of Decision: 19 July 2015
Before: G Meadows, Senior Member
File Number(s): HB 14/35459
[2]
Background
This appeal is against an order made by the Consumer and Commercial Division of the Tribunal (the Tribunal), requiring Ike Issac Comer (the respondent) to pay to Simon Lauer and Rachel Ng (the appellants) the sum of $26,040.00 within 28 days of 19 July 2015. The appellants claim that the amount of the award in their favour should have been $52,040.00, the additional $26,000.00 representing an amount which the Tribunal found had been paid by them to the respondent.
In a separate appeal AP 15/56013, the respondent sought to overturn the orders made against him. That appeal was formally withdrawn and such withdrawal was confirmed by Mr Gledson, counsel for the respondent, when the hearing of this appeal commenced.
The dispute between the parties concerned building work carried out for the appellants in respect of their home. The work originally contemplated was extensive, and one estimate given by the respondent was that it would cost in the order of $155,000.00.
The respondent had initially introduced himself to the appellants following their entry on a website called Home Improvements Pages. As the Tribunal below found, the respondent made a number of false and misleading representations to the appellants, including that he was National Sales and Marketing Manager for Satisall Pty Ltd, National Sales and Marketing Manager for S & J Construction and National Sales and Marketing Manager (Australia and New Zealand) for Inter Marketing Knit (PVT) Ltd, that he had "insurance cover" for the work he performed, that he or the company for which he worked was licensed under the Home Building Act, that tradesmen who worked on the job were appropriately licensed, and that he was capable of organising the work and ensuring its quality.
The appellants put their case before the Tribunal below on the basis that the respondent breached s 18 of the Australian Consumer Law; alternatively they put the case on the basis of breach by the respondent of a number of provisions of the Home Building Act 1989. As the Tribunal based its findings and orders on the Home Building Act, it is unnecessary to refer in any detail to the provisions of the Australian Consumer Law.
Provisions of the Home Building Act (the Act) relevant to this case include:
4 Unlicensed contracting
(1) A person must not contract to do:
(a) any residential building work, or
(b) any specialist work, except as or on behalf of an individual, partnership or corporation that is the holder of a contractor licence authorising its holder to contract to do that work.
Maximum penalty: 1,000 penalty units in the case of a corporation and 200 penalty units in any other case.
(2) The holder of a contractor licence who has contracted to do any residential building work must not contract with another person for the other person to do the work (or any part of the work) for the holder unless the other person is the holder of a contractor licence to do work of that kind.
Maximum penalty: 1,000 penalty units in the case of a corporation and 200 penalty units in any other case.
(3) The holder of a contractor licence must not contract with another person for the other person to do any work (or part of any work) for the holder for which insurance is required under this Act unless the other person is the holder of a contractor licence to do work of that kind.
Maximum penalty: 1,000 penalty units in the case of a corporation and 200 penalty units in any other case.
(4) A developer in relation to residential building work must not contract with another person for the other person to do that residential building work on behalf of the developer unless the other person is the holder of a contractor licence authorising the other person to do work of that kind.
Maximum penalty: 1,000 penalty units in the case of a corporation and 200 penalty units in any other case.
(5) A person is not guilty of an offence against subsection (2), (3) or (4) if the person establishes that the person did all that could reasonably be required to prevent the contravention of the subsection.
(6) An individual who is convicted of a second or subsequent offence under a provision of this section is liable to a penalty not exceeding 500 penalty units or imprisonment for a term not exceeding 12 months, or both.
5 Seeking work by or for unlicensed person
(1) An individual, a member of a partnership, an officer of a corporation or a corporation must not represent that the individual, partnership or corporation is prepared to do:
(a) any residential building work, or
(b) any specialist work,
if the individual, partnership or corporation is not the holder of a contractor licence authorising its holder to contract to do that work.
(2) A person must not represent that an individual, partnership or corporation is prepared to do:
(a) any residential building work, or
(b) any specialist work, if the person knows that the individual, partnership or corporation is not the holder of a contractor licence authorising its holder to contract to do that work.
(3) An individual who is convicted of a second or subsequent offence under this section is liable to a penalty not exceeding 500 penalty units or imprisonment for a term not exceeding 12 months, or both.
Maximum penalty: 1,000 penalty units in the case of a corporation and 200 penalty units in any other case.
7 Form of contracts (other than small jobs)
Note. Section 7AAA applies to contracts for small jobs.
(1A) This section applies to a contract only if the contract price exceeds the prescribed amount or (if the contract price is not known) the reasonable market cost of the labour and materials involved exceeds the prescribed amount. The prescribed amount is the amount prescribed by the regulations for the purposes of this section and is inclusive of GST.
(1) A contract must be in writing and be dated and signed by or on behalf of each of the parties to it.
(2) A contract must contain:
(a) the names of the parties, including the name of the holder of the contractor licence shown on the contractor licence, and
(b) the number of the contractor licence, and
(c) a sufficient description of the work to which the contract relates, and
(d) any plans and specifications for the work, and
(e) the contract price if known, and
(f) any statutory warranties applicable to the work, and
(g) in the case of a contract to do residential building work - a conspicuous statement setting out the cooling-off period that applies to the contract because of section 7BA, and
(h) in the case of a contract to do residential building work (other than a construction contract to which the Building and Construction Industry Security of Payment Act 1999 applies) - details of any progress payments payable under the contract, and
(i) in the case of a contract to do residential building work - a statement that the contract may be terminated in the circumstances provided by the general law and that this does not prevent the parties agreeing to additional circumstances in which the contract may be terminated, and
(j) any other matter prescribed by the regulations for inclusion in the contract.
(3) The contract must comply with any requirements of the regulations.
(4) If the contract price is known, it must be stated in a prominent position on the first page of the contract.
(5) If the contract price is not known or may be varied under the contract, the contract must contain a warning to that effect and an explanation of the effect of the provision allowing variation of the price. The warning and explanation must be placed next to the price if the price is known.
(6) A contract must not include in the contract the name of any person other than the holder of a contractor licence as, or so it may reasonably be mistaken to be, the holder's name.
(7) This section does not prevent the holder of a contractor licence with a business name registered under the Business Names Registration Act 2011 of the Commonwealth from also referring in such a contract to the business name.
(8) This section does not apply to:
(a) a contract that is made between parties who each hold a contractor licence and is for work that each party's contractor licence authorises the party to contract to do, or
(b) a contract to do specialist work that is not also residential building work.
Note. The exception in paragraph (a) applies to a subcontracting arrangement between licensees, and to a contract between licensees for work to be done on premises that one of the licensees owns.
10 Enforceability of contracts and other rights
(1) A person who contracts to do any residential building work, or any specialist work, and who so contracts:
(a) in contravention of section 4 (Unlicensed contracting), or
(b) under a contract to which the requirements of section 7 apply that is not in writing or that does not have sufficient description of the work to which it relates (not being a contract entered into in the circumstances described in section 6 (2)), or
(c) in contravention of any other provision of this Act or the regulations that is prescribed for the purposes of this paragraph, 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, and the contract is unenforceable by the person who contracted to do the work. However, the person is liable for damages and subject to any other remedy in respect of a breach of the contract committed by the person.
(2), (3) (Repealed)
(4) This section does not affect the liability of the person for an offence against a provision of or made under this or any other Act.
92 Contract work must be insured
(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 under which the person 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.
Maximum penalty: 1,000 penalty units in the case of a corporation and 200 penalty units in any other case.
(2) 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) a contract of insurance that complies with this Act is in force in relation to that work in the name under which the person 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.
Maximum penalty: 1,000 penalty units in the case of a corporation and 200 penalty units in any other case.
(2A) An individual who is convicted of a second or subsequent offence under subsection (1) or (2) is liable to a penalty not exceeding 500 penalty units or imprisonment for a term not exceeding 12 months, or both.
(3) This section does not apply if the contract price does not exceed the amount prescribed by the regulations for the purposes of this section or (if the contract price is not known) the reasonable market cost of the labour and materials involved does not exceed that amount.
(4) If the same parties enter into two or more contracts to carry out work in stages, the contract price for the purposes of subsection (3) is taken to be the sum of the contract prices under each of the contracts.
(5) A contract of insurance that is in force in compliance with this section in relation to residential building work (the original work) done by a person extends to any residential building work done by the person by way of rectification of the original work.
Note. Accordingly, this section does not require a separate contract of insurance in relation to the rectification work.
(6) To avoid doubt, this section extends to residential building work that is also owner-builder work (when the work is done under a contract between the person who contracts to do the work and the owner-builder).
94 Effect of failure to insure residential building work
(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) A contractor who applies to a court or tribunal for a remedy under this section, or who is awarded money under this section, is not guilty of an offence under section 92 (2) by virtue only of that fact.
(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) in relation only to a contract entered into before 30 July 1999 - the court or tribunal is not to be limited by the fact that the required contract of insurance was not obtained until after the date of the contract.
(2) However, the contractor remains liable for damages and subject to any other remedy in respect of any breach of the contract committed by the contractor.
(3) Residential building work that is uninsured work at the time the work is done ceases to be uninsured work for the purposes of this section if the required contract of insurance for the work is subsequently obtained.
(4) If a person commenced residential building work before 30 July 1999 and entered into a contract of insurance that complies with this Act in relation to that work after the contract for the residential building work was entered into, that contract of insurance is, for the purposes of this section or any previous version of this section, taken to have been in force in relation to the residential building work done under the contract for the residential building work whether that work was done before or after the contract of insurance was entered into.
Note. If a contract of insurance is in force in relation to part of the residential building work, this section applies only in relation to the part of the work that is not insured.
At par [22] of its reasons the Tribunal identified the persons involved in this matter:
22. That is, we have the following:
a. Ms Rachel Ng and Mr Simon Lauer - applicant homeowners;
b. Mr Ike Comer - "National Sales and Marketing Manager" for a number of companies and allegedly the "Builder" in this application, respondent;
c. Mr Do Hyun Park also known as "Charlie" - an unlicensed painter, associated in some way with Mr Comer, who worked on the site; and
d. Mr Dae Sup Kim also known (to Ms Ng) as "Charlie" but really "Johnson" - unlicensed builder and former carpenter, whose role in this application is yet to be determined.
Subsequently in par [67] and following the Tribunal made a number of factual findings:
67. I was most impressed with Ms Ng as a competent and shrewd person, although I do not necessarily accept all her evidence. This is because, having decided that she is a competent and shrewd person, I cannot believe she was taken in by Mr Comer to quite the extent she alleges. Assuming, without deciding for the moment, that Mr Comer did engage in misleading and deceptive conduct and misrepresented the true state of affairs, what did Ms Ng, and Mr Lauer, have before them?
68. Mr Comer turned up in answer to an inquiry on a web site, HI Pages. He presented, according to Ms Ng, as being obliging and positive, no matter what the issue was. He would organise everything, he would be available at all hours, he was a sales agent for one company and then for another company, he provided three separate contracts (2 to begin with), he wanted all payments to be in cash or cash cheques (but none of them to be $10,000 or more), he assured Ms Ng that the insurance situation was all in order (without providing any documentation), he stated he had other business interests, including one in relation to socks and he wondered whether Mr Lauer would be able to assist in selling these socks to Woolworths, another in relation to timber in Indonesia and would the applicants be interested in investing in that. Add to that Mr Comer's personality and manner, which is striking to say the least - "colourful", as suggested by Mr Zikmann. Place all those factors against Ms Ng's background of education and experience and I am unable to believe she noticed nothing to suggest that perhaps this "builder" might require a little easy investigation, such as checking his licence, checking the insurance, obtaining proper paperwork in relation to approval of the works by the relevant certifier (if required) and an appropriate engineer (if required). It simply defies belief that Ms Ng placed her trust in the respondent despite all these factors.
69. I find that the applicants sought and found a person who would have the relevant works carried out with a minimum of formality and the avoidance of any expense that could be avoided. I find also that the applicants did not wish to concern themselves with niceties such as insurance and licences.
70. However, at the same time, I have no doubt that Mr Comer did misrepresent his position, qualifications and experience. He did so in the witness box. Contrary to his oral evidence, I am satisfied that Mr Comer had previously worked for Mr Kim and Mr Park (but not at the same time), in relation to finding work for them to do in their capacity as builder or painter. The evidence for this in relation to Mr Park is not clear, but that is not true for his relationship with Mr Kim. The use of S & J letterhead and the two business cards for S & J and Satisall derived from this prior relationship.
71. Mr Comer, in my opinion, knew what he was about in making use of these prior relationships with Mr Park and Mr Kim. His experience with the L & R Heritage Roofing company makes that obvious. According to him, and I accept this evidence, this company was a thriving business employing many people and involved in many projects. It seemed clear to me, watching Mr Comer and carefully listening to his answers, that he was well aware of Home Building Act requirements in relation to licences and contracts and particularly in relation to avoiding obtaining home owners warranty insurance. His evidence was carefully tailored to avoid making any concessions in that area but his general familiarity was plain.
72. I find that Mr Comer was unconcerned whether he used a spurious current business relationship with Mr Park and Satisall, or Mr Kim and S & J, so long as he obtained the signatures of Mr Lauer and Ms Ng on his "contracts".
73. These contracts, as demonstrated comprehensively by the applicants, did not comply with the HB Act. I find this was a deliberately informal arrangement dressed up, a little, to look like a real building contract. As noted above, I find that the applicants were content with approach. I reject the submission and evidence of the applicants that had they known the true state of affairs they would not have signed the contracts, at least in the sense that in my view the applicants made no attempt to satisfy themselves of the true state of affairs.
74. I find that there was no actual, qualified and licensed builder on this project. I find Mr Kim had nothing to do with the actual works and that he was not aware that his company name (or an approximation of his company name) and his licence number were being used in the way they were. I am satisfied that all this was known to Mr Comer.
75. Mr Park was clearly involved with the project, but not, in my opinion, as the builder. I am satisfied that he was under the direction of Mr Comer. Although Mr Park may have, and on balance probably did, produce the "Credit Memos" and a tax invoice, that also was under the direction of Mr Comer and with the assistance of Mrs Comer. I am satisfied that Mr Park did organise the trades to work on the project and passed on amounts of money in payment, having received the funds from Mr Comer. However, I am otherwise unimpressed with Mr Park as a witness. His readiness to change his evidence in circumstances in which it appeared to me that he had no difficulty understanding the questions the first time, suggests and I find that he was willing to say, on occasion, anything which would help him avoid responsibility. The evidence in support of my findings in relation to organising trades and making payments is found in the documentary evidence provided by the applicants and to some extent supported by the applicants.
76. In the absence of any supporting evidence from Mr Comer, I do not accept their "my dog ate the homework" defence in relation to missing copies of business documents and emails. Both these witnesses claim to be running a variety of businesses and to have done so for some time. I do not accept their excuses for the lack of supporting documentation and of failing even rudimentary backup and preservation of business records.
77. Mr Comer's blustering denials that he made certain misrepresentations to the applicants were not persuasive. Taking his evidence as a whole, including his descriptions of L & R Heritage Roofing, his inability, and refusal, to provide any documentary support for his alleged previous experience, and the readiness with which he relied on, in my opinion, spurious business cards and invalid contractual documents, I am satisfied that the applicants have demonstrated Mr Comer breached s 18 of the ACL.
78. I am satisfied, in the absence of any finding that Mr Kim was involved in this project, or rather my finding that Mr Kim was not involved in the project, leads to the conclusion that Mr Comer was the moving party in producing and signing the three "contracts" and that he is therefore the "builder" for the purpose of these proceedings, at least in a contractual sense, if otherwise in breach of every relevant section of the HB Act.
79. In that sense, Mr Comer, as the other party to the contracts, is responsible for the building works, even if he did not personally perform any of the physical building tasks. Of course, that is not at all unusual in home building claims. That is the sense in which the applicants submitted that it was "irrelevant" who actually did the building work and in that sense I accept the submission.
80. Mrs Comer's evidence was, in my view, carefully designed to avoid any responsibility on her behalf or on her husband's behalf. She asserted she attached the scopes of work prepared by Mr Park to each of the contracts but cannot produce a copy of any one of the scope of works. I have already indicated I do not accept the convenient excuses for being unable to do so. Her evidence was characterised by a readiness to answer forcefully and positively in relation to any issue designed to relieve her or Mr Comer from any responsibility, then to immediately deny any further involvement, knowledge or understanding of the process in answer to follow up cross examination. Examples of this are given above in summarising the evidence.
After making these findings, the Tribunal dealt with the appellants claim in respect of deposits paid for the kitchen and windows and for alleged defects:
69. First, I am satisfied that the applicants paid a total of $24,000 to Mr Comer for deposits for the kitchen and windows: this is not really disputed by the respondent. I find that the applicants have no contractual arrangement with either manufacturer and therefore no reason to approach either manufacturer for a refund of any amount paid to either. The evidence in relation to what may have actually been paid is inconclusive, but that is not an issue for the applicants. I order that Mr Comer pay the sum of $24,000 to the applicants within 28 days of the date of these orders.
70. In the absence of any challenge to the expert evidence, and indeed given what appeared to me to be a concession that the amount of $2,040 should be paid to the applicants in regard to defective works, I order that amount be paid by Mr Comer also within 28 days.
The remaining paragraph of the Tribunal's reasons gave rise to what has caused most contention in this appeal.
69. I find that works to the value of $26,000.00 have been completed and I accept the submission of the respondent that the applicants will be unjustly enriched if an order is made that those payments be returned. I am not satisfied the applicants have suffered any damage (apart from the very minor defects claim already accounted for) in that regard.
On behalf of the appellants it is contended that there was no evidence before the Tribunal to warrant the finding that "works to the value of $26,000.00 have been completed", and the apparently consequential finding that the appellants would be unjustly enriched if a restitution order were not made. Moreover, according to the appellants, the question of unjust enrichment was not an issue raised before the Tribunal below and they were given no opportunity to address it. The appellants also rely on the asserted failure of the Tribunal below to "consider and determine the statutory test set out in s 94(1A) of the Act.
There seems to be force in the appellants' contention that they were taken by surprise in relation to the restitution issue. Although we were not provided with a transcript of the proceedings before the Tribunal, it seems common ground that at no stage did the respondent seek a quantum meruit order as contemplated by s 94(1A) of the Act. Although the learned member below based his decision on a finding that works to the value of $26,000 had been completed, there was no reference to evidence supporting this finding. Apparently, the Tribunal was basing its conclusion on an invoice dated 16 April 2014 from S & J Construction to the appellants in the sum of $26,000.00. However, that invoice makes it clear that the work was only partly completed. Moreover, there is obviously significant difference between the amount of money claimed by an unlicensed contractor for only partly performed and uninsured work, and the value of that work.
More significantly to our minds is the failure of the Tribunal below to make a finding in accordance with s 94 (1A) of the Act that it would be just and equitable to make a quantum meruit order. Barrett J in Eddy Lau Constructions Pty Ltd v Transdevelopment Pty Ltd [2004] NSW SC 273 considered the circumstances relevant to such a finding in the result concluding that the (builders) blameworthiness was not such as to make it inappropriate to provide a reasonable reward . In Pender v Robwenphi Pty Ltd [2008] NSW 1144 Hall J, after referring to the analysis by Barrett J in Eddy Lau Constructions, said:
It is from the analysis by Barrett J in Eddy Lau Constructions (supra) that the conduct of the party in breach is an important matter for consideration. In that respect, ignorance or oversight of the statutory requirements under the Act stands in marked contrast to a contravention that is wilful or deliberate.
On the face of its reasons, the Tribunal below failed to consider its factual findings in the context of the analysis required by both Eddy Lau Constructions and Pender. This would constitute an error in law.
In our view, it was not sufficient, as Mr Gledson contended, that evidence as to work carried out was given at the hearing and was subject to cross examination and that the Tribunal by its reference to s 94(1A) was obviously aware of its requirements. In our opinion, the decisions of both Eddy Lau Constructions and Pender make this clear.
It follows that the conclusion stated in par [83] of the reasons of the Tribunal below cannot be allowed to stand even though it is not formalised except inferentially in any order.
Under s 81 of the Civil and Administrative Tribunal Act 2013 (NCAT Act), we may substitute another decision for the decision below. In the interests of the just, quick, and cheap resolution of this matter (s 35 NCAT Act) we propose to decide the issue on the papers. As it seems apparent, the parties have not had the opportunity to address the specific question as to whether on the evidence the respondent has established an entitlement to relief under s 94(1A) we will give them an opportunity to do so. When giving our decision upon the issue we will also deal with the matter of costs.
We give these directions:
1. Respondent to file and serve within 14 days any submissions he wishes to make in support of an order for a quantum meruit allowance under the Home Building Act.
2. Appellants to file and serve any submissions in reply within another 14 days.
3. Respondent to have right to reply within 7 days.
Subject to par [18], orders for the disposal of the appeal including costs will be determined on the papers.
[3]
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
[4]
Amendments
30 September 2016 - coversheet, incorrect representative
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Decision last updated: 30 September 2016