Lee v Ace NSW Pty Ltd

The Act

1. Part 2C of the Act which concerned 'Statutory Warranties', at the relevant time contained a number of pertinent provisions: 1. By s 18B, there were warranties 'implied in every contract to do residential building work' by a holder of a contractor license, or a person required to hold a contractor license"; 2. By s 18C, warranties were also taken to have been given to other persons, thus '(1) A person who is the immediate successor in title to an owner-builder, a holder of a contractor licence, a former holder or a developer who has done residential building work on land is entitled to the benefit of the statutory warranties as if the owner-builder, holder, former holder or developer were required to hold a contractor licence and had done the work under a contract with that successor in title to do the work.(2) For the purposes of this section, residential building work done on behalf of a developer is taken to have been done by the developer.' 3. By s 18D, the warranties in s 18B were taken to have been given by others. 4. By s 18E, proceedings for breach of warranties are to be commenced in accordance with certain time limits; 5. By s 18F, it is a defence to a claim for breach of statutory warranty for a defendant to prove that the deficiencies of which the plaintiff complains arise from instructions given by the person for whom the work was done contrary to the advice in writing of the defendant of or the person who did the work; and 6. By s 18G, attempts to exclude these warranties are void.
2. Section 18B(f) relevantly provided for: a warranty that the work and any materials used in doing the work will be reasonably fit for the specified purpose or result, if the person for whom the work is done expressly makes known to the holder of the contractor licence or person required to hold a contractor licence, or another person with express or apparent authority to enter into or vary contractual arrangements on behalf of the holder or person, the particular purpose for which the work is required or the result that the owner desires the work to achieve, so as to show that the owner relies on the holder's or person's skill and judgment.
3. Significantly, there were a number of changes to Part 2C incorporated by the Home Building Amendment Act 2014 (NSW) which took effect in 2015. These were not applicable at the time the proceedings were begun, which was on 3 July 2014, and there is no suggestion that the transitional provisions make the current version of Part 2C applicable. Nevertheless there are some significant changes made to Part 2C which are said to bear on the issues before us. In particular, s 18B now has a new subsection (2), which states: The statutory warranties implied by this section are not limited to a contract to do residential building work for an owner of land and are also implied in a contract under which a person (the "principal contractor") who has contracted to do residential building work contracts with another person (a "subcontractor" to the principal contractor) for the subcontractor to do the work (or any part of the work) for the principal contractor.
4. There is also a new s 18BA, which sets out the duties of persons having the benefit of a statutory warranty, including duties to mitigate loss.

Consideration

1. The matter comes before us as of right, because this decision was an ancillary decision within the meaning of s 4 of the Civil and Administrative Tribunal Act, namely as is a decision which is preliminary and concerns whether the Tribunal has jurisdiction to deal with the matter.
2. Section 80(2)(b) provides that an internal appeal may be made in the case of any other kind of decision (including an ancillary decision) of the Tribunal at first instance - as of right on any question of law. We have no doubt that we are considering a question of law. In Norrie v NSW Registrar of Births, Deaths and Marriages [2013] NSWCA 145, Beazley ACJ, who gave the leading judgment, said at [62]: The High Court's obiter remarks in Agfa-Gevaert and their approval in Aktiebolaget Hassle v Alphapharm indicates that it cannot be said that the ordinary meaning of a word or its non-technical meaning is a question of fact, at least as a stand alone proposition. Rather, when the Court is engaged in a task of statutory construction, it is required to have regard to the language used by Parliament and the context in which it is used. That task involves a question of law.
3. The subsequent decision of the High Court in NSW Registrar of Births, Deaths and Marriages v Norrie [2014] HCA 11 does not alter that.
4. We note that her Honour's observations were recently cited with approval by five judges of the Full Court of the Federal Court in May v Military Rehabilitation and Compensation Commission [2015] FCAFC 93.
5. Our task in construing Part 2C, and in particular s 18B(f), in accordance with normal principles of statutory interpretation is to provide a ruling which gives "internal logical consistency and overall consistency" in accordance with the principles of statutory interpretation set out in Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28 at [69]-[70]; see also Independent Commission Against Corruption v Cunneen [2015] HCA 14 at [35].
6. That includes having a harmonious operation of the statute, and ensuring that all words in the relevant provisions of the statute are given work to do. It is also important to look at the purpose of the Act, and the mischief to which it is directed. In this regard, we apply what was said by a unanimous High Court in Federal Commissioner of Taxation v Consolidated Media Holdings Ltd [2012] HCA 55 at [39], this being still the test: see Alphapharm Pty Ltd v H Lunderbeck A/S [2014] HCA 42.
7. The appellant sought to call in aid of his argument, the subsequent enactment of s 18B(2), which he asserted was not done for more abundant caution, but rather, was enacted because Parliament had recognised that without such a provision, a head contractor could not sue a subcontractor in the manner which has occurred in this matter under s 18B.
8. We do not agree. We have also considered the relevant second reading speech and explanatory memoranda, which inserted s 18B(2), the former does not advance matters, but the latter states that the relevant amendment is to 'clarify the rights and obligations of licences and consumers …by providing that, although the principal contractor is primarily responsible to the consumer for breach of statutory warranty (even where the work is undertaken by a sub-contractor) subcontractors are also responsible for statutory warranties." Although that clarification is useful, as we explain below, we consider the warranties did in any event extend to sub-contractors.
9. Mr Snelgrove, who appeared for the appellant in this matter, and whose helpful submissions we acknowledge, had a number of steps in his argument. Fundamentally, he asserted that s 18B only applied for the benefit of "owners", who are defined in s 3 of the Act as follows: "owner" of land means the only person who, or each person who jointly or severally, at law or in equity: (a) is entitled to the land for an estate of freehold in possession, or (b) is entitled to receive, or receives, or if the land were let to a tenant would be entitled to receive, the rents and profits of the land, whether as beneficial owner, trustee, mortgagee in possession or otherwise.
10. He also refers to the fact that when the bill for the original Home Building Act was introduced in 2011, the Minister of the day said: "statutory warranties protect home owners from incomplete and defective residential building work by requiring builders to warrant that work". Accordingly, so the appellant puts it, the owner receives the benefits of the warranties, not the builders, at least until s 18B(2) had been enacted. Evidently, that is not all that 'statutory warranties' did or do.
11. We note in passing that in the ordinary course, a builder might have brought a claim for breach of the contract; here, an oral contract, with the subcontractors. However, that is now time barred.
12. We were informed that there are no decisions of any court dealing with the question of who are the beneficiaries of the warranties under s 18B of the Act as it then stood.
13. The difficulty we have with Mr Snelgrove's argument is that there is nothing in the words of s 18B itself which limits the benefit of the warranty to an owner. Does the rest of Part 2C as it then stood, cast any light on what is not made express in s 18B? (We will later come to the relevance of the amendments namely s 18B(2)).
14. A number of matters may be noticed.
15. First, the opening words of s 18B impose warranties by way of a an express statutory implication upon 'the holder of a contractor license or a person required to hold a contractor license before entering into a contract' but does not expressly say to whom such warranties are taken to be given. Rather, it indicates that such warranties are implied "in every contract to do residential building work", "residential building work" being defined in s 3 of the Home Building Act as: 2 Definition of "residential building work" (1) In this Act, "residential building work" means any work involved in, or involved in co-ordinating or supervising any work involved in: (a) the construction of a dwelling, or (b) the making of alterations or additions to a dwelling, or (c) the repairing, renovation, decoration or protective treatment of a dwelling.
16. The warranties are remedial and contained in beneficial legislation, so there is no reason to give them a particularly restrictive operation.
17. Second, s 18B(f) contains the relevant warranty that "work and any materials used in doing the work will be reasonably fit for the specified purpose or result".
18. Third, that relevant warranty is conditional upon one of the possibilities there set out, applying namely, "if the person for whom the work is done expressly makes known to the holder of the contractor license (or person required to hold such license); or another person with express or apparent authority to enter into or vary contractual arrangements on behalf of the holder or person the particular purpose for which the work is required or the result that the owner desires the work to achieve, so as to show that the owner relies on the holder's or person's skill and judgment" (emphasis added]. The underlined words do not exclude a warranty applying to a head contractor as well as to an owner, to the contrary.
19. Section 18D provides for "extension of statutory warranties By s 18D(1), a person who is a successor in title to a person entitled to the benefit of a statutory warranty under the Act is entitled to the same rights as the person's predecessor entitled in respect of the statutory warranty. Again, the language there is capable of applying equally to an owner or a head contractor.
20. Section 18D(1)(a) provides a person who is a non-contracting owner in relation to a contract to do residential building work on land is entitled (and is taken to have always been entitled) to the same rights as those that a party to the contract has in respect of a statutory warranty. Mr Snelgrove correctly pointed out that this provision would permit, for example, the owners described in the second limb of the definition in s 3 of the Act, for example, a mortgagee in possession or a trustee to take the benefit of the statutory warranty, and that indeed, would give some work for the words "non-contracting owner" to do. However, in our opinion, it is equally consistent with a situation where the head builder was the person seeking to enforce the statutory warranty, as in that case, the freeholder for example, would equally be the "non-contracting owner".
21. Section 18D(1)(b) provides that "subject to the regulations, a party to a contract has no right to enforce a statutory warranty in proceedings in relation to a deficiency in work or materials, if the warranty has already been enforced in relation to that particular deficiency by a non-contracting owner". Again, this does not assist the Appellant because it simply means that the non-contracting owner, freeholder or mortgagee in position alike could not sue a second time when the head contractor has already taken those proceedings.
22. For all of these reasons we consider no error of law has been shown and the appeal is 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

Amendments 10 February 2016 - Coversheet: correct file number from 14/03362 to HB 14/34012. 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: 10 February 2016