Leung v Alexakis - [2018] NSWCATAP 11 - NSWCATAP 2017 case summary — Zoe

NSWNSWCATAP

Leung v Alexakis

[2018] NSWCATAP 11

NCAT Appeal Panel|2017-07-21

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At a glance

Source facts

Court

NCAT Appeal Panel

Decision date

2017-07-21

Catchwords

Home Building Act 1989 - s 48MA - preferred outcome principle, applicability to work done by holder of owner-builder permit.

Source

Original judgment source is linked above.

Catchwords

Home Building Act 1989 - s 48MA - preferred outcome principle, applicability to work done by holder of owner-builder permit.

Judgment (15 paragraphs)

[1]

Introduction

The appellants are the successors in title to residential premises located at Concord (property).
The respondent is the previous owner of the property, who held an owner builder permit issued under the Home Building Act, 1989 (HB Act) and had carried out residential building work at the property under that permit from about October 2011. The property was sold to the appellants in about September 2014.
The appellants filed in the Tribunal application HB 15/38098 seeking to enforce the statutory warranties applicable to the residential building work carried out by the respondent, their entitlement to do so arising from the fact they were successors in title. The application was lodged on 14 June 2015.
In that application the appellants sought the following orders: An order to do work or services as stated below to the approximate value of $100,000. To fix the water leak issue in the basement and surrounding areas. Total Amount Claimed: $100,000.
That application was heard on 23 August 2016. The Tribunal made orders and published reasons for decision on 31 March 2017. The orders made by the Tribunal were as follows: 1 The respondent at her own cost is to engage appropriately qualified and licensed trade persons to demolish the stormwater works the subject of these proceedings and reconstruct them in accordance with the plans of D Mitsopoulos & Associates Plans dated 21 August 2011. 2 The works referred to in Order 1 above are to be completed within 4 months of the date of these orders taking effect. 3 The applicants are to give the respondent's tradespersons reasonable access to comply with order 1 above. 4 The parties are given leave to apply by 31 May 2017 to have the proceedings listed for a costs application.

[2]

Notice of Appeal and submissions

The appellants filed a Notice of Appeal on 28 April 2017.
At the hearing of the appeal, the appellants sought leave to rely on an Amended Notice of Appeal. This application was not opposed and leave was therefore granted. That Amended Notice of Appeal raised the following grounds: 1 That the Tribunal at first instance erred in law in granting the respondent, an owner builder, the right pursuant to s 48 MA of the Home Building Act ("HBA") to return to the appellants' home to carry out works by appropriately qualified tradesperson is. Particulars (a) The appellants rely on the grounds specified in the written submissions dated 22 June 2017. 2 That the Tribunal at first instance erred in law in finding that s48MA of the HBA apply to owner builders and should be a work order under s48MA. Particulars (b) The appellants rely on the grounds specified in their written submissions dated 22 June 2017.
The appellants said the work orders made by the Tribunal should be set aside and that an order should be made for the respondent to pay the appellants the sum of $180,600.97.
In support of the appeal, the parties provided an agreed bundle of documents. In addition, each party provided written submissions and made oral submissions at the hearing of the appeal.
In their written submissions dated 22 June 2017 at para 1.2, the appellants identified the errors which the Tribunal made in the following terms: (a) That in exercising the discretion to make a work order under section 48O of the HBA, the exercise of the discretion miscarried in that the Tribunal, inter alia: (i) Failed to take into account a relevant consideration, being those matters prescribed by section 48O(3) of the HBA; and/or (ii) Applied the wrong principle of law. (b) That the Tribunal failed to provide adequate reasons as to why (as opposed to if) a work order should be made against an owner builder in the circumstances of this case; (c) That the Tribunal failed to properly construe and interpret the terms of section 48MA of the HBA.
The appellants made submissions about each of these grounds under the following headings: 1. Ground 1 - Exercise of discretion miscarried. 2. Ground 2 - Adequacy of reasons. 3. Ground 3 - Proper construction of section 48MA.
In relation to the ground 1 the appellants said that the Tribunal failed to take into account mandatory considerations applicable to consumer claims set out in s79U of the Fair Trading Act, 1987 (FT Act). These provisions applied to claims under the HB Act because of s 48O(3) of the HB Act. In making this submission, the appellants accepted that they "must demonstrate a failure by the Tribunal to take into account a relevant consideration that it was obliged to take into account, as distinct from a piece or pieces of evidence put forward before the Tribunal, in respect of the issues which it was determining". Having referred to what the appellants described as a "non-exhaustive list of factors the Tribunal ought to consider … set out in section 79U(1)" of the FT Act, the appellants submitted that this did not change the mandatory requirement of s79U(1) "that a work order (or any order for that matter) must be fair and equitable to all the parties".
The appellants submitted that the reasons of the Tribunal indicate that the Tribunal was following a "clear directive" and that the Tribunal failed to direct its mind as to whether a work order should be made and whether it was just and equitable in the present case.
The appellants say that no analysis or reasons are provided for the decision that was made and that the Tribunal should have considered the following: 1. That a work order was not appropriate in circumstances where a party does not hold a contractor licence which authorises him to carry out the work, the subject of the orders; 2. The nature and extent of the rectification works required, which for the most part was structural works of an invasive nature; 3. the likely time to complete the works, estimated to exceed 60 hours of labour and 4 days of equipment hire; 4. The appellants having no control over who would eventually carry out the works to the property, exactly when those works would be carried out and the terms of any contract; 5. the respondent's demonstrated history of engaging contractors that are not at arm's length, a matter expressly proscribed in s79U of the FT Act. 6. The lack of utility of such an order in circumstances where the appellants could themselves engage appropriately qualified and licensed tradesperson carry out the works, with the added benefit to the appellants that they could control those works. 7. Most of the defects were serious in nature and included structural elements and waterproofing. 8. The fact that the respondent husband, Mr Alexakis had been "less then forthright" when giving evidence and the respondent's recalcitrant position maintaining she was not responsible for the defective work "do not inspire confidence in their ability to undertake the required rectification work".
The appellants also submitted that issues might arise from the need for the owner builder to enter into a contract with a third party. These problems included the possibility of a charge over the appellants' land if the respondent did not pay the builder carrying out the rectification work and the operation of s7D of the HB Act.
It should be noted at this point that the preceding submission appears misconceived. It presupposes that a predecessor in title can create a charge over land which that person no longer owns without the consent of the current owner.
Lastly, the appellants say that the Tribunal misconstrued the meaning and operation of s48MA of the HB Act, a matter dealt with in ground 3.
In oral submissions concerning this ground, the Appeal Panel asked the appellants' Counsel to indicate what, if any, specific matters in the list of factors set out in s79U of the FT Act the appellants contended the Tribunal had failed to take into account. In this regard it should be noted that s48O(3) of the HB Act makes s 79U applicable "with any necessary modifications, to and in respect of the determination of a building claim" and that the factors in s79U(2) are only required to be taken into consideration "if they are material to the particular circumstances of the case". The Appeal Panel sought to have the appellants identify those additional matters in s 79U that might be relevant to determining what is fair and equitable to all parties, over and above or different to those matters which might be relevant to the exercise of any discretion arising from the operation of s48MA of the HBA Act.
No additional factors were relied upon to those matters identified by the appellant as relevant to the proper exercise of a discretion under s48MA. However, in making this submission the appellants did not concede that s48MA permits a work order to be made in favour of a person holding an owner builder permit.
Consequently, it is unnecessary in this appeal to resolve the issue of whether or not the "preferred outcome" principle set out in s48MA modifies the approach to be taken by the Tribunal under s79U(1), namely to be "satisfied that the orders will be fair and equitable to all the parties to the claim".
In relation to ground 2, the appellants referred to the Tribunal's decision at [58] - [61] and said that having determined s48MA could apply, the Tribunal failed to provide any reasons as to why it should apply in the present circumstances. Rather, the Tribunal's only reason for making a work order was that there was a "clear directive" in the section. In reaching this conclusion, the Tribunal failed to discuss, analyse or consider whether, in the circumstances of this case, a work order should be made.
In addition, the appellants said that the order made was inappropriate in that it required third parties to carry out the rectification work. This, the appellant said was "in stark contrast to the terms of s48MA itself requiring that the works are carried out by a party to the proceedings".
Ground 3 involved alleged errors concerning the construction of s48MA.
First, the appellants said that the proper construction of 48MA meant that any work order made could only be one which required work to be carried out by a party to the proceedings, and not by a third person on behalf of the party to the proceedings. In this regard the appellants referred to the text of the section and the use of the expression "by the responsible party". The appellants submitted that the language used excluded an order that rectification work be performed by a third person "on behalf of" the responsible party. Consequently, the Tribunal failed to give this expression its ordinary and natural meaning.
The appellants relied on the speech of Lord Diplock in Wentworth Securities Ltd v Jones [1980] AC 74 at 105-106 and said that before words could be read into an Act, the following conditions must be fulfilled: 1. It must be possible to determine from a consideration of the provisions of the Act read as a whole precisely what the mischief was that it was the purpose of the Act to remedy. 2. It must be apparent that the draftsman and Parliament had by inadvertence overlooked, and so omitted to deal with, an eventuality that was required to be dealt with if the purpose of the Act was to be achieved. 3. It must be possible to state with certainty what was the additional words that would have been inserted by the draftsman and approved by Parliament had their attention been drawn to the omission before the Bill passed into law.
The appellants said that these conditions were satisfied in the present case and that the construction propounded by the appellants is supported by each second reading speech for the Home Building Amendment Bill, 2014 (NSW) by which s48MA was enacted. In this regard the appellants referred to the use of the words "builder", "homeowner" and "owner builder" in the speeches and submit that when discussing s 48MA reference is made to "builders" and not "owner builders". The appellants submit that the deliberate use of the phrase "builder" confirms that where a work order is made, it is the responsible party that must carry out the work, and no other person.
The appellants further submitted that having found: 1. no other person other than the respondent was the "responsible party" within the meaning of s48MA; and 2. the respondent was not suitably qualified or licensed to carry out the rectification works, an order could not be made for some person other than the respondent to carry out the rectification works because such undertaking would mean that the works were not carried out "by the responsible person.
The respondent filed a reply to appeal dated 6 June 2017.
The effect of the respondent's written and oral submissions can be summarised as follows: 1. Section 48MA was introduced to make provision for the issue of rectification orders and to require a court or tribunal, when determining a building claim, to have regard to the principle that rectification of the defective work by the responsible party is the preferred outcome; 2. The respondent was the "responsible person" as defined in s48MA. As such, a work order was permitted whether or not the respondent personally carried out the work in question. 3. A consideration of the principle set out in s48MA is mandatory in determining a claim under the HB Act; 4. The Tribunal provided cogent and sufficient reasons in paragraphs 53 and 55-61 to satisfy the requirements in respect of reasons for making a work order; 5. The submission by the appellants that they would not have any control over rectification works is "emotive and irrelevant".
We note the respondent made further submissions which were said to be by way of contention. Those submissions were to the effect that if the decision of the Tribunal was set aside and the above submissions of the respondent rejected, the Appeal Panel ought to conclude that the respondent did not in fact construct part of the stormwater works and that she had not in fact constructed any defective works. The Appeal Panel indicated that if such contentions were to be pursued, the respondent would need to file a Notice of Appeal in the nature of a cross-appeal to challenge those conclusions. Directions were made to permit this to occur.
As no Notice of Appeal has been filed, it is unnecessary to consider this aspect further.
Also at the hearing of the appeal, the Appeal Panel made directions to permit the parties to file and serve any further submissions concerning: 1. the proper construction of s48MA; and 2. the manner in which any discretion should be exercised or what orders should be made if the appeal on grounds 1 and 2 in the appellant's submissions dated 22 June 2017 were successful.
Both parties filed supplementary submissions.
In their further submissions the appellants said that the legal principles to be applied in construing s48MA established: 1. Regard must be had to the language used and the scope and purpose of the statute. 2. One consideration is the object of the legislation. Whether the statute was passed for the protection of the public is an important, although not the only, consideration. 3. The statute is to be construed in the ordinary way: one must have regard to all relevant considerations and no single consideration, however important, is conclusive. 4. Generally, statutory interpretation requires an analysis of the text, context and purpose.
Having set out these principles, the appellants provided an analysis of the authority granted to the holder of an owner builder permit to undertake residential building work. They submit that an owner builder can carry out works on a site specified by the permit, that work being briefly described in the permit by reference to a particular development consent. The appellants referred to the Appeal Bundle at AB Vol 1 page 104, being the owner builder permit number 390020P date 21 November 2011 (Owner Builder Permit), issued to the respondent, as an example.
The appellants refer to s 32AA of the HB Act and said that the authority granted to the owner builder does not permit them to contract with another person to do the work in question unless that other person is the holder of a contractor licence.
The appellants also submitted that s32AA "prevents an owner-builder from doing specialist work or work that requires a contractor's licence and must only contract with persons holding those licenses". In making this submission, the appellants referred by way of footnote to s4(1) of the HB Act which prevents a person from contracting to do residential building work or any specialist work as defined by the HB Act unless they were the holder of a contract or licence.
The appellants then said that there is no time limit imposed in an owner builder permit and that cl17 of the Home Building Regulation, 2014 (HB Reg 2014) provides that an owner builder permit cannot be issued unless the holder holds a current general construction induction training card (within the meaning of the Work Health and Safety Regulation, 2011).
In relation to cl 17, it should be noted that the HB Reg 2014 was not in force when the Owner Builder Permit was issued, which was on 21 November 2011. There does not appear to be a regulation to similar effect in the Home Building Regulation, 2004 (HB Reg 2004), which was in force at the time the Owner Builder Permit was issued.
The appellants then submitted that the HB Act has two principal purposes, namely the protection of consumers of residential building services and the licensing and regulation of contractors in the residential building sector. Relying on the second reading speech of the Legislative Assembly, the appellant says that s 48MA is to "further support the timely and cost-effective resolution of disputes", however the section should not be construed in a manner so as to extend to owner builders for the following reasons: 1. The insertion of s48MA was made at the same time as s95 of the HB Act was amended. The effect of the amendment to s95 was to make the owner builders ineligible to obtain home warranty insurance. In this regard the appellants again rely on the second reading speech which indicates that the changes to the home warranty insurance scheme was to provide for insurance in respect of building work carried out by qualified licensed builders not by owner builders. The appellants say that this recognition of risk, a matter also recognised by superior courts when considering the difference between work carried out by owner builders and work carried out by licensed contractors, should lead the Tribunal to conclude that s48MA should not extend to owner builders. 2. Division 2 of Part 3A of the HB Act only enables inspectors to issue rectification orders to contractors. The definition of contractors does not include owner-builders. Consequently, the mandatory requirement for the investigation/dispute resolution procedure to be undertaken as a precondition to the commencement of any proceedings does not apply to disputes involving owner builders. It would be "incongruous" for the Tribunal to resolve disputes by way of work orders in respect of work done by owner builders in circumstances where the legislature has expressly excluded inspectors from issuing work orders in such circumstances. The fact the legislature did not amend Division 2 to apply to owner builders is an indication that the legislature did not intend s48MA to extend to claims against owner builders.
In relation to the question of how any discretion might be re-exercised, if the Appeal Panel reached the conclusion that the Tribunal failed to exercise or failed to properly exercise any discretion in its decision at first instance, the appellants put forward two propositions: 1. "Given the nature and scope of the work required and the matters referred to (at para 3.26 of the appellants' primary) submissions (which we have set out in these reasons above), it is not appropriate in this case for a work order to encapsulate some or all the work". 2. Alternatively, that any work order should be subject to the conditions set out in paragraphs 2.4 (a)-(e) of the supplementary submissions.
In reply, the respondent reiterated the substance of her earlier submissions and said that the Tribunal undertook a process of evaluating the evidence in relation to whether or not a work order should be made and properly exercised its discretion.
In response to the appellants' submission concerning the form of work order, the respondent generally agreed with the appellants proposed order, subject to modification in the following terms: (a) An order that all persons to carry out the specialist work provide evidence to the Appellants that they are suitably qualified, licensed and insured prior to any works commencing. (b) An order that the respondent pay all costs associated with obtaining any relevant approval/s for the rectification work. (c) An order that the work be inspected and signed off by the Building Certifier, Building Certificates Pty Ltd at the respondent's cost. (d) An order that the works being commenced within 30 days of orders and be completed within 90 days. (e) An order that in the event that the respondent does not comply, the appellants are entitled to reinstate the proceedings at any time within 12 months from the date of non-compliance (noting that the application can be made immediately in the event of non-compliance with the orders to return to the property and commence work within 21 days.

[4]

The applicability of s 48MA in determining claims against owner builders

Section 48MA of the HB Act provides: 48MA Rectification of defective work is preferred outcome in proceedings A court or tribunal determining a building claim involving an allegation of defective residential building work or specialist work by a party to the proceedings (the responsible party) is to have regard to the principle that rectification of the defective work by the responsible party is the preferred outcome.
While this section was introduced by amendments made by the Home Building Amendment Act, 2014 (2014 HB Amendment Act) there is no dispute in this appeal that the provisions of this section apply to residential building work commenced or completed before the commencement of the amendment and/or in connection with a loss, liability, claim or dispute that arose before the commencement of the amendment: see cl 120(1)(a) and (d) of Part 20 of Sch 4 of the HB Act. Rather, the question is whether this section operates in relation to a claim by a successor in title against a person who is liable for defective residential building work carried out pursuant to an owner builder permit. Put another way, is a claim against a person who carries out work or has others carry out work on their behalf as the holder of an owner builder permit "a building claim involving an allegation of defective residential building work by a party to the proceedings" within the meaning of s 48MA of the HB Act" and is the principle in s 48MA limited in application to where the person against whom the claim is made will personally do the rectification work.
In Commissioner of Taxation of the Commonwealth of Australia v Consolidated Media Holdings Ltd [2012] HCA 55; 250 CLR 503, the Court said at [39] (p519]: "This Court has stated on many occasions that the task of statutory construction must begin with a consideration of the [statutory] text" (citation omitted). So must the task of statutory construction end. The statutory text must be considered in its context. That context includes legislative history and extrinsic materials. Understanding context has utility if, and insofar as, it assists in fixing the meaning of the statutory text. Legislative history and extrinsic materials cannot displace the meaning of the statutory text. Nor is their examination an end in itself."
Section 48MA is found in Part 3A of the HB Act- Resolving building disputes and building claims. This part confers jurisdiction on the Tribunal to hear building claims (see s 48K) and grants power to the Tribunal to make orders as permitted by s 48O of the HB Act.
The starting point in determining whether, on its proper's construction, s 48MA applies to claims against the holder of an owner builder permit is a consideration of the restrictions about who may carry out of residential building work, the authority granted to a holder of an owner builder permit to carry out such work and the liability to third parties imposed upon a person who carries out such work under an owner builder permit. It is in this context that the expression "a building claim involving an allegation of defective residential building work or specialist work by a party to the proceedings" must be considered.
Prior to doing so, we should note two preliminary matters.
First, there is no dispute work carried out by the respondent was owner builder work as defined in s 29(1) of the HB Act for which an owner builder permit was required. This section provides: owner-builder work means residential building work: (a) the reasonable market cost of the labour and materials involved in which exceeds the prescribed amount, and (b) that relates to a single dwelling-house or a dual occupancy: (i) that may not be carried out on the land concerned except with development consent under Part 4 of the Environmental Planning and Assessment Act 1979, or (ii) that is complying development within the meaning of that Act.
Secondly, the Owner Builder Permit was issued to the respondent in 2011. Since that time, the HB Act has been amended on a number of occasions. In addition, the HB Act has been reorganised such that definitions initially found in the introductory sections of the Act and Regulations are now found in Sch 1. For convenience we will refer to the HB Act in its present form but reference any amendments to the legislation and/or the location of the original definitions as existed in 2011 as appropriate. Differences in text which are irrelevant to these reasons will not be noted.

[5]

Who may carry out residential building work?

The carrying out of residential building work and the liability for that work is regulated by the HB Act.
Part 2, Division 2 places restrictions on who may carry out residential building work. Relevantly, ss 12 and 13 provide: 12 Unlicensed work An individual must not do any residential building work, or specialist work, except: (a) as, or as a member of a partnership or an officer of a corporation that is, the holder of a contractor licence authorising its holder to contract to do that work, or (b) as the holder of an owner-builder permit authorising its holder to do that work, or (c) as an employee of the holder of such a contractor licence or permit. Maximum penalty: 1,000 penalty units in the case of a corporation and 200 penalty units in any other case. 13 Unqualified residential building work (1) An individual must not do any residential building work, except: (a) as the holder of an endorsed contractor licence, a supervisor or tradesperson certificate or an owner-builder permit, authorising its holder to do that work, or (b) under the supervision, and subject to the direction, of the holder of an endorsed contractor licence or supervisor certificate authorising its holder to supervise that work. Maximum penalty: 1,000 penalty units in the case of a corporation and 200 penalty units in any other case. (2) If the same facts establish an offence under this section and an offence under another provision of this Act or under any other Act or law, an individual is not liable to be convicted of both offences.
The effect of these sections is that, in the absence of holding an appropriate licence or being under the supervision of the holder of an appropriate license or certificate, an owner of property may not do residential building unless they are the holder of an owner builder permit.
Schedule 1 cl 2 (formerly a definition in s 3 of the HB Act) defines "residential building work" as follows: 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. (2) Each of the following is included in the definition of residential building work: (a) roof plumbing work done in connection with a dwelling, (b) specialist work done in connection with a dwelling, (c) work concerned in installing in a dwelling any fixture or fixed apparatus that is designed for the heating or cooling of water, food or the atmosphere or for air ventilation or the filtration of water in a swimming pool or spa (or in adding to, altering or repairing any such installation).
However, it does not include work other than specialist work the reasonable cost of which is less than the prescribed amount: see Sch 1 cl 3(a) of the HB Act, formerly HB Reg 2004 cl 9(a).
There is no dispute in the appeal that the work done by the appellants was more than the prescribed amount. Therefore, work in connection with stormwater drainage is not excluded from the definition of residential building work in the HB Act or in the regulations: see HB Act Schedule 1 clause 2 2014 formerly HB Reg 2004 Reg 9.
Specialist work is defined in Sch 1 cl 21 (formerly in s 3 of the HB Act) as follows: specialist work means the following work whether or not done in connection with a dwelling: (a) plumbing and drainage work, other than roof plumbing work, (b) gasfitting work, (c) electrical wiring work, (d) any work declared by the regulations to be refrigeration work or air-conditioning work. Note. Work can be specialist work whether or not it is done in connection with a dwelling (so it can include work done in connection with commercial or industrial work).
The HB Act (Sch 1 cl 1) defines plumbing and drainage work as follows: plumbing and drainage work means: (a) plumbing and drainage work within the meaning of the Plumbing and Drainage Act 2011, or (b) any plumbing work or drainage work that, because of a relevant law, can be done lawfully only by the holder of an endorsed contractor licence, a supervisor or a tradesperson certificate or some other specified person, or (c) water plumbing work comprising the construction of or work on a fire suppression system that is connected or to be connected to a water main.
Previously, specialist work included "plumbing work" (see previous definition of "specialist work" in s 3 of the HB Act). Section 3 of the HB Act then defined "plumbing work" as follows: plumbing work means: (a) on-site plumbing and drainage work, being plumbing and drainage work within the meaning of the Plumbing and Drainage Act 2011, or (b) any plumbing work or drainage work that, because of a relevant law, can be done lawfully only: (i) by the holder of an endorsed contractor licence or of a supervisor or tradesperson certificate, and (ii) if a relevant law so provides, by some other specified person.
Aside from changing "plumbing" to "plumbing and drainage" and adding plumbing work relating to a fire suppression system connected to a water main, there was no substantial change to these definitions.
As can be seen from the definitions: 1. plumbing and drainage work is specialist work; 2. not all specialist work is residential building work; and 3. when plumbing work is done in connection with a dwelling, it is residential building work within the meaning of the HB Act.
Unlike specialist work being electrical wiring work and refrigeration or air-conditioning work, the HB Act does not itself require plumbing work to be carried out by the holder of an endorsed contractor licence, a qualified supervisor or under the supervision of such a person (as applicable) or by a the holder of a tradespersons certificate: cf s14 (Unqualified electrical wiring work) and s15 (Unqualified refrigeration or air-conditioning work). However, there are similar restrictions for plumbing work found in the Plumbing and Drainage Act, 2011 (PD Act) which provides: 6 Plumbing and drainage work to be carried out only by authorised persons (1) A person must not do any kind of plumbing and drainage work unless the person: (a) holds an endorsed contractor licence or a supervisor certificate in force under the Home Building Act 1989 authorising the holder to do that kind of work, or (b) does the work under the immediate supervision of the holder of such a licence or certificate, or (c) holds a tradesperson certificate in force under the Home Building Act 1989 authorising the holder to do that work under supervision and does that work under the general supervision of the holder of a licence or certificate referred to in paragraph (a).
We note the restriction for plumbing and drainage work is only in respect of doing the work.
Section 4 of the PD Act defines plumbing and drainage work in the following terms: 4 Plumbing and drainage work - meaning (1) In this Act, plumbing and drainage work means: (a) the construction of, or work on, a plumbing installation that connects, directly or indirectly, with a network utility operator's water supply system, downstream from the point of connection to a network utility operator's water supply system, or (b) the construction of, or work on, a plumbing installation that connects, directly or indirectly, with any other water supply system, if the construction or work is residential building work within the meaning of the Home Building Act 1989, or (c) the construction of, or work on, a sanitary plumbing system, or (d) the construction of, or work on, a sanitary drainage system upstream from its point of connection to: (i) a system for the disposal of sewerage, or (ii) a system for the re-use of sewerage or other wastewater, or (iii) an on-site wastewater management or treatment system, or (iv) a network utility operator's sewerage system, or (e) any other type of construction or work declared by the regulations to be plumbing and drainage work. (2) A plumbing installation means an installation that conveys, or controls the conveyance of, water but does not include anything connected to, extending or situated beyond the outlet from a fixture, fitting or pressurised line. (3) A sanitary plumbing system means an assembly of pipes, fittings, fixtures and appliances used to collect and convey sewage to a sanitary drainage system. (4) A sanitary drainage system means an assembly of pipes, fittings and apparatus (usually located below ground level) used to collect and convey the discharge from a sanitary plumbing system, together with discharge from fixtures directly connected to a drain, to a sewer. (5) Subject to the regulations, plumbing and drainage work does not include any of the following work: (a) the construction of, or work on, stormwater pipes, (b) the construction of, or work on, fire suppression systems, (c) the construction of, or work on, network utility operator, local council or county council water or stormwater mains, sewers or sewerage systems, (d) roof plumbing work (being work declared by the regulations under the Home Building Act 1989 to be roof plumbing work), (e) exempt owner/occupier work, being work that: (i) involves repairing a tap or showerhead in a dwelling (other than a repair of a thermostatic mixing valve, tempering valve or backflow prevention device) or the installation of water-restricting or flow-regulating devices to tap end fittings (including showerheads) in a dwelling, and (ii) is carried out by the owner or occupier of the dwelling, or a person authorised to carry out the work by the owner or occupier of the dwelling who does not receive payment or other consideration for carrying out the work. Note. Work excluded from the definition of plumbing and drainage work still has to be done in accordance with any other relevant legislation, for example the Home Building Act 1989.
There is no dispute in the present appeal that the work found to be defective was "stormwater works": see order 1 made 31 March 2017 and decision at [30], [34] and [63]. Accordingly, the work is not plumbing and drainage work, being excluded under s 6(5) of the PD Act.
We have not been referred to any other law that requires a person who does work to stormwater drainage to hold an endorsed contractor licence, supervisors certificate or tradesperson certificate within the meaning of definition (b) of plumbing and drainage work in Sch 1 cl 1 of the HB Act (formerly definition (b) of plumbing work in s 3 of the HB Act). Therefore, it is not specialist work within the meaning of the HB Act.
As stated above, the respondent was the holder of the Owner Builder Permit who carried out residential building work at the property at Concord. The Owner Builder Permit authorised the carrying out of building work in respect of "DA- 11/2011", a development approval issued by the Canada Bay Council.
It is not in dispute that the development approval included the construction of stormwater works and was done in connection with alterations or additions to a dwelling. It follows that while not specialist work, the stormwater work is residential building work within the meaning of the HB Act.

[6]

What authority is granted to a holder of an owner builder to do such work?

As the holder of the Owner Builder Permit, s 32 conferred upon the respondent the following authority: 32 Authority conferred by owner-builder permits (1) An owner-builder permit authorises its holder to do such residential building work as is described in the permit on the land specified in the permit.
The work authorised by the Owner Builder Permit was: Renovation and extension of existing residential property. Authority No: DA-112011 Council Area: Canada Bay Council
This authority is constrained by s32AA of the HB Act which provides: 32AA Unlicensed contracting (1) The holder of an owner-builder permit must not contract with another person for that person to do any residential building work (or any part of the work) for the holder unless the person is the holder of a contractor licence to do work of that kind. … (2) The authority conferred by an owner-builder permit: (a) is subject to the conditions applicable to the permit for the time being, and (b) may, on the application of the holder of the permit, be varied by an order of the Secretary set out in a notice served on the holder of the permit.
The Owner Builder Permit does not record any relevant conditions to limit what work may be done by the respondent. Further, as stated above, the stormwater work is not specialist work required by the HB Act or PD Act to be done by or under the supervision of : 1. the holder of an endorsed contractor licence; 2. a supervisors certificate; or 3. trade persons certificate.
Accordingly, the respondent was authorised to do the work, the subject of the dispute.
Also, as her husband, Mr Alexakis, was a licensed plumber: see Decision at [21] (a matter not in dispute this appeal), he was also able to do any plumbing and drainage work, or supervise others to do that work.
The Tribunal found: 1. Mr Alexakis in fact supervised the work. (See decision at [21]-[23]); 2. The work was defective as the work was not constructed in accordance with the approved plans and specifications (decision at [27]); and 3. Consequently, by reason of water ingress, the property was not reasonably fit for occupation as a dwelling and the statutory warranty found in s 18(B)(1)(e) of the HB Act (formerly s 18B(e) of the HB Act) had been breached (decision at [43]).
These findings were also not in dispute in this appeal.

[7]

What is the liability to third parties imposed by the HB Act upon a person who has done residential building work under the authority of an owner-builder permit?

Section 18C of the HB Act provides: 18C Warranties as to work by others (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.
That is an owner-builder who has done residential building work on land is liable to an immediate successor in title for any breach of the statutory warranties as if the owner-builder "had done the work under a contract with the successor in title to do the work".
In this regard "owner-builder" means "a person who does owner-builder work under an owner-builder permit issued to the person for that work": see Sch 1 Definitions of the HB Act.
We should note at this point that, previously, the definition of "owner-builder" in s 3 of the HB Act was in the following terms: owner-builder means a person who does owner-builder work (within the meaning of Part 6) and who is issued an owner-builder permit for that work.
However this difference is irrelevant for two reasons.
First, Part 6, as it formerly was, which dealt with the requirements for insurance, required an owner-builder to have insurance. Those obligations for insurance were removed by the 2014 HB Amendment Act. Section 90 (now repealed), defined owner-builder work as follows: owner-builder work means owner-builder work within the meaning of Division 3 of Part 3 that involves: (a) the construction of a dwelling, or (b) the alteration of, or additions to, a dwelling, or (c) the construction of an inground swimming pool.
Division 3 of Part 3 in the former HB Act included, in s 29, a second definition of owner-builder work which was in the same terms as the present s 29 which we have set out above. Section 29(1) of the former HB Act said: owner-builder work means residential building work: (a) the reasonable market cost of the labour and materials involved in which exceeds the prescribed amount, and (b) that relates to a single dwelling-house or a dual occupancy: (i) that may not be carried out on the land concerned except with development consent under Part 4 of the Environmental Planning and Assessment Act 1979, or (ii) that is complying development within the meaning of that Act.
It would appear the effect of the former section was to provide that only owner-builder work for which insurance was required would attract the statutory warranty requirements. However, for present purposes, that distinction is irrelevant as the respondent was an owner-builder for the purpose of s18C under both the former and subsequent definitions because of the work being undertaken being alterations or additions to a dwelling.
Secondly, cl 120 of Schedule 4 of the HB Act provides that the amendments made by the 2014 HB Amendment Act apply to residential building work commenced or completed before the amendment and to any loss, liability, claim or dispute that arose before the commencement of the amendment: see 120(1)(a) and (d).
There is no issue raised in this appeal that the work done by the respondent was work to which s18C applied. The respondent did not contend that work done by Mr Alexakis, her husband, was not work done by her as owner-builder within the meaning of s18C of the HB Act.
In this regard, in Chan v Acres (2015) NSWSC 1885, McDougall J was required to consider the liability of a person (Mr Acres) who did owner builder work in the context of a claim for apportionment between that person and an engineer and the local council. At [27]-[28] and [90] His Honour said in relation to the work done by the owner-builder, Mr Acres: 27. Mr Acres retained a number of contractors (none of whom gave evidence) to carry out the construction work. One contractor, Mr Dowell, held a licence to work as an excavator. He performed other tasks including excavation, forming up the slab, placing the slab steel and pouring the concrete, and many other matters. Other contractors were retained to perform other work. In particular, a Mr Pintaric was retained to undertake the blockwork. 28. Mr Acres said, in effect, that as he engaged each contractor, he showed the contractor numerous documents, including a copy of the Actron drawings, the MHE drawings, the development approval (including a presently irrelevant modification pursuant to s 96 of the EPA Act), and informed the contractor that he would need to carry out his trade work in accordance with those documents. If that practice were followed, it failed in very important respects to achieve the stated object of compliance with the drawings. … 90. Mr Acres said that some of the works that had been the subject of complaint were not works done by him as owner-builder. The works that Mr Acres said fell into this category were (by reference to the list set out above) items 12, 15 and 16. In addition, as to item 20, Mr Acres said that he did not carry out or arrange for the carrying out of any work on the existing roof or skylight. Finally, as I have noted, Mr Acres said that if there were defects in the skillion roof over the western extension, he was not responsible because that roof had sustained storm damage when a tree fell on it, and had been repaired by tradesmen retained by his insurer.
When dealing with apportionment, McDougall J then said at [456]- [458]: 456. The liability that Mr Acres has does not rest on any actual negligence or fault on his part. It is a liability imposed on him by statute. It is a liability that arises simply because s 18C of the HB Act operates as between him and the plaintiffs. There is no real question of "culpability". I do not think that he has been shown to have acted in any relevant way unreasonably. 457. By contrast, as it seems to me, both MHE and the Council departed in serious ways from the proper standard of care to be expected of them, in respect of the breaches that have been conditionally or otherwise found against them respectively. 458. Turning to the relative importance of the acts as contributing to the damage, or their causal potency, again, in the counter-factual universe but otherwise on the facts as I have found them, Mr Acres' contribution must be regarded as minimal at most. True it is that the defective building work was carried out by contractors whom he engaged. True it is that he assumed the responsibility, as owner-builder, of supervising and co-ordinating those works. However, as I have pointed out, he was in no real position to judge of their sufficiency, or of the extent (if any) to which they complied with the structural drawings. That was a matter that he left, and in my view was entitled to leave, to others.
It is clear from these passages that the Court accepted that the expression "owner-builder … who has done the work" in s 18C(1) includes work done by the owner-builder or "by contractors whom (the owner-builder) engaged" and that the owner builder "assumed the responsibility, as owner-builder, of supervising and co-ordinating those works". This is because there is a statutory liability imposed on the owner-builder to a successor in title "as if the owner-builder … had done the work under a contract with that successor in title to do the work".
While the Court ultimately apportioned liability such that the engineer and the Council was required to indemnify Mr Acres for 100% of his liability to the plaintiff, Mr Chan, it is clear from the reasons that the Court found Mr Acres liable under s 18C of the HB Act to Mr Chan, as successor in title, for work Mr Acres did and for work he arranged for others to do on his behalf. That is Mr Chan was responsible for the work that was the subject of the owner-builder permit.
On appeal by the Council, the Court of Appeal of the Supreme Court of New South Wales set aside the order the Council indemnity Mr Acres for his liability to the successor in title, Mr Chan: Kur-ring-gai Council v Chan [2017] NSWCA 226. However the liability of Mr Acres remained unaffected. In this regard, Meagher JA (with whom McColl JA and Sackville AJA agreed) said at [108]-[109]: 108. In their submissions in support of the judgment in favour of Mr Acres on his cross-claim, the purchasers submit that the primary judge's conclusion that Mr Acres was entitled to an indemnity should be upheld. In doing so, they describe the loss suffered by Mr Acres, and against which he should be indemnified by the Council, as that arising "as a consequence of the negligent issuing of the final occupation certificate". In support of that submission reference is made to Judgment [463]. 109. As the purchasers' submission recognises, correctly in my view, the only actionable breach of duty found as between the Council and the purchasers and between the Council and Mr Acres was that of the Council in failing to exercise reasonable care in issuing the occupation certificate. However, if the Council had not issued that certificate, as it is contended should have been the position, the latent defects would have existed and remained unrectified. As against that scenario, Mr Acres is not shown to have suffered any loss. But for the Council's negligence, he would have continued to own a property which was subject to those defects. Instead, he sold that property at a price which did not take account of their existence and by reason of the statutory warranties is liable for the cost of rectifying them. If, as the purchasers' damages claim assumes, the difference between what they paid Mrs Acres and the value of what they received is represented by that cost, Mr Acres is no worse off.
That is, in dismissing Mr Acres' cross-claim against the Council and setting aside the judgement in favour of the successors in title (Chan and Cox) against the Council, the Court of Appeal accepted that Mr Acres was liable to the successors in title to the extent found by McDougall J at first instance.

[9]

Meaning of "party" in s 48MA

The first question is whether the expression "party" includes the holder of an owner builder permit.
The appellant submitted that the word "party" was limited to a "builder". This submission was based on the Second Reading Speech for the Home Building Amendment Bill, 2014, being the comments of the Minister for Fair Trading, with the Minister on 27 May 2014. There the Minister said: A builder will not be able to enter land without the owner's consent, particularly where there have been issues where the homeowner is concerned about the builder's behaviour. But, if access was unreasonably refused, this would be taken into account by the court or tribunal in determining a building claim. A court or tribunal will have regard under these reforms, to the principle that the rectification of building work by the responsible party is the preferred outcome.
There are a number of problems with this submission.
First, the HB Act does not define the word "party", let alone define the word to mean "builder".
The word "party" is defined in s 22 of the Interpretation Act, 1987 (Interpretation Act) as follows: party includes an individual, a corporation and a body corporate or politic.
The HB Act refers to a "residential building work or specialist work by a party to the proceedings". The use of the word "party" in this context is to a party to legal proceedings in a court or tribunal, that is an individual, corporation or body corporate. There is no reason why, in this context, the word party should be give any meaning to limit the expression to a particular, undefined, class of parties called "builders".
Secondly, the expression "builder" is not defined in the HB Act. In the Macquarie Dictionary (Revised Third Edition) builder is defined as: A person who builds. A person who contracts for the construction of buildings and supervises workers who build them.
As explained above, the HB Act authorises an individual to carry out residential building work if they are the holder of a contractor licence, a supervisor certificate a tradesperson certificate or an owner builder permit, authorising its holder to do work. If work is done by any such persons, including the holder of an owner-builder permit, that work would fit within the definition of "builder".
Thirdly, the use of the word "builder" in the Second Reading Speech provides little or no assistance in determining whether the word "party" is to have a different meaning to that defined by the Interpretation Act and the ordinary meaning arising from the context in which it is used. In this regard, in the context of recourse to extrinsic material for the purpose of construing a statute, s 34(3) of the Interpretation Act provides: In determining whether consideration should be given to any material, or in considering the weight to be given to any material, regard shall be had, in addition to any other relevant matters, to: (a) the desirability of persons being able to rely on the ordinary meaning conveyed by the text of the provision (taking into account its context in the Act or statutory rule and the purpose or object underlying the Act or statutory rule and, in the case of a statutory rule, the purpose or object underlying the Act under which the rule was made), and (b) the need to avoid prolonging legal or other proceedings without compensating advantage.
Lastly, we do not accept the submission: 1. that the context in which the word party is used in s 48 MA, namely "a building claim involving an allegation of defective residential building work or specialist work by a party to the proceedings (responsible party)" and the application of the principle that the preferred outcome for "rectification of the defective work by the responsible party" is otherwise limited to cases where the party is the holder of a contractor licence; or 2. that in applying the principle in s 48MA that the form of order is limited to an order in terms that the responsible person do any rectification work personally.
Section 48MA is not a section which confers order making power on the Tribunal and should not be construed in a manner that otherwise limits the power of the Tribunal to make orders in connection with building claims. Rather, it is a section that requires preference be given to particular types of orders, namely orders requiring rectification by a responsible party of defective residential building work.
The power to make orders is found in s 48O of the HB Act. That section provides: 48O Powers of Tribunal (1) In determining a building claim, the Tribunal is empowered to make one or more of the following orders as it considers appropriate: (a) an order that one party to the proceedings pay money to another party or to a person specified in the order, whether by way of debt, damages or restitution, or refund any money paid by a specified person, (b) an order that a specified amount of money is not due or owing by a party to the proceedings to a specified person, or that a party to the proceedings is not entitled to a refund of any money paid to another party to the proceedings, (c) an order that a party to the proceedings: (i) do any specified work or perform any specified service or any obligation arising under this Act or the terms of any agreement, or (ii) do or perform, or refrain from doing or performing, any specified act, matter or thing. (2) The Tribunal can make an order even if it is not the order that the applicant asked for. (3) Sections 79R and 79T-79V of the Fair Trading Act 1987 apply, with any necessary modifications, to and in respect of the determination of a building claim.
These powers are cast in wide terms, not limited to ordering a party to perform a contractual obligation or to do any rectification work personally. While the Tribunal can order a person to do specified work, perform a specified service or perform any obligation under the HB Act or an agreement (see s 48O(c)(i)), the Tribunal may also order a party "to do or perform … any specified act, matter or thing" (see s 48O(c)(ii)).
This would include ordering a party who is liable for defective building work to engage another person to perform rectification work and for the party who is liable to pay for such work. Alternatively, it would allow orders to be made to require a party to take steps to cause a subcontractor to carry out rectification work, including any specialist work which may require a particular authority.
There is no reason this power should be construed in a manner which confines its scope or to interpret s 48MA as having that effect on the general powers. As the High Court said in Owners of "Shin Kobe Maru" v Empire Shipping Company Inc [1994] 181 CLR 404 at 421: It is quite inappropriate to read provisions conferring jurisdiction or granting powers to a court by making implications or imposing limitations which are not found in the express words.
Further, as explained below, such a construction would mean that anyone who was liable for work of a subcontractor or third party and who had not done the work themselves may be liable to pay compensation, rather than have the benefit of the preferred outcome principle and an order which enabled them to rectify the work at their cost and/or require the subcontractor or third party who had done defective work for the responsible party to return to the site to rectify the defects at no cost to the person who was primarily liable to a homeowner or successor in title. It would also exclude from the operation of s 48MA any corporation who can only do work through its employees, agents and subcontractors.
This construction would limit the scope for cost-effective resolution of disputes and not permit those willing to return to site to rectify defects to do so. This would be contrary to the goals stated by the Minister for Fair Trading in the Second Reading Speech, as set out below. In these circumstances, there is no basis to limit the expression "party" and/ or the application of the principle in s 48MA to building claims against persons who hold a contractor licence or might otherwise be a person carrying on a business as a builder. Rather, it includes the holder of an owner-builder permit against whom a building claim is made.

[10]

To what "work" does s 48MA apply?

The second question is to what work does s 48MA apply?
There are two possible interpretations as to what work is included in the expression "work by a party to the proceedings" used in s 48MA. They are: 1. Both work done personally or for which the person was responsible; or 2. Only work done personally by the party.
For the following reasons, in our view the first interpretation is correct and s 48MA applies to building claims involving both work done personally by a party to the proceedings and work done on their behalf.
By its terms, s 48MA makes clear that a court or tribunal in determining a claim for defective work is to have regard to the principle that rectification of the defective work by the responsible party is the preferred outcome.
Liability for defective residential building work can be imposed upon a party by a contract, under common law or by legislation. Each of these may give rise to a building claim within the meaning of Part 3A: see s 48A and decisions such as Grygiel v Baine & Ors [2005] NSWCA 218 per Basten JA at [47] and following.
Section 18B imposes an obligation upon a person who contracts to do residential building work, whether they are the "holder of a contractor licence or a person required to hold such a contractor license before entering into a contract": see introductory words of s 18B (1) of the HB Act, formerly 18B.
It is clear that work to which the statutory warranties in s 18B of the HB Act apply, done by a person (contractor) who contracts with a homeowner to do residential building work (including work which is specialist work), includes work carried out by subcontractors of that contractor. That is because the terms of the warranty and the contractual obligation is in respect of the whole of the work to which the contract relates.
As explained above, an owner-builder is not required to hold a contractor licence by reason of the authority conferred upon them as the holder of an owner-builder permit. Consequently, s18B does not apply directly to work done under an owner-builder permit.
However, the benefit conferred on a successor in title under s 18C of the HB Act is that, as against an owner builder, the successor in title "is entitled to the benefit of the statutory warranties as if the owner-builder … (was) required to hold a contractor licence and had done the work under a contract with the successor in title to do the work". That is, there is a deemed contract in respect of the work performed. see eg The Owners Strata Plan No 66375 v Suncorp Metway Insurance Ltd (No 2) [2017] NSWSC 739 at [60].
The warranties in s 18B implied in the deemed contact are in the following terms: (a) a warranty that the work will be done with due care and skill and in accordance with the plans and specifications set out in the contract, (b) a warranty that all materials supplied by the holder or person will be good and suitable for the purpose for which they are used and that, unless otherwise stated in the contract, those materials will be new, (c) a warranty that the work will be done in accordance with, and will comply with, this or any other law, (d) a warranty that the work will be done with due diligence and within the time stipulated in the contract, or if no time is stipulated, within a reasonable time, (e) a warranty that, if the work consists of the construction of a dwelling, the making of alterations or additions to a dwelling or the repairing, renovation, decoration or protective treatment of a dwelling, the work will result, to the extent of the work conducted, in a dwelling that is reasonably fit for occupation as a dwelling, (f) 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.
While s 18B has been modified by 2014 HB Amendment Act to change warranty (a) from work will be done "in a proper and workmanlike manner" to "with due care and skill", the owner-builder is required to ensure the work undertaken under the owner-builder permit is in accordance with the plans and specifications and in accordance with the development approval. As with the position where there is an actual contract, the work to which the owner-builder permit relates and which is the subject of the deemed or notional contract, is the work to which these warranties apply, whether or not the work was physically done by the holder of the owner-builder permit.
This view is consistent with: 1. the decision of McDougall J in Chan to which we have referred above; 2. the fact that residential building work includes the supervision and co-ordination of work, work which the holder of an owner builder permit is generally authorised to do even where work is done by others; and 3. those cases dealing with the notional contract and the liability of a developer under s 18C where work is done by others on behalf of a developer:
Otherwise, an owner-builder could simply have others physically do the work on their behalf (whether or not under a contract) and thereby avoid any liability of the owner-builder to a successor in title and defeat the purpose of s18C.
It follows that pursuant to s 18C the holder of an owner-builder permit is liable to a successor in title for the works required to be carried out under the owner-builder permit, whether physically done by the holder or someone on their behalf.
Having reached this conclusion, in our view there is no logical reason why the expression "work by a party" in s 48MA should be given a meaning different to that work for which a party may be liable for breach of contract or breach of statutory warranties whether that work is done by: 1. "the holder of a contractor licence, or a person required to hold a contractor license before entering into a contract" (s 18B); or 2. "an owner-builder, a holder of a contractor licence, a former holder or a developer who has done residential building work". (s 18C)
The alternative construction to limit the expression "work by a party" to work physically done by that party would exclude from the operation of s 48MA all work done by. 1. a company who contracted to do residential builder work; 2. a contractor's employees or subcontractors for which a contractor is liable whether under s 18B or otherwise; 3. the holder or former holder of a contractor licence who carried out residential building work for no reward or consideration (ie not under a contract) and who is liable under s 18C; 4. contractors or subcontractors of an owner-builder who is otherwise liable under s 18C. 5. work done by others on behalf of a developer for which a developer is liable.
As the Second Reading Speech in respect of the 2014 HB Amendment Act by the Minister for Fair Trading on 6 May 2014 makes clear: 1. A homeowner should not to be permitted to unreasonably refuse a builder access to a building site to rectify defective work; 2. s 48MA was intended to ensure that, at least, "builders" who were liable to a person for defective work, should be able to return to carry out necessary rectification work if they are willing; and 3. the amendments were to "further support the timely and cost-effective resolution of disputes".
These goals would not be met by giving a construction to s 48MA which limited its operation to rectification of some, but not all, of the defects for which the party may be responsible, being only those defects arising from work physically done by the person against whom a building claim is made.
It follows that there is no basis to conclude: 1. that the principle in s 48MA is limited to circumstances in which defective residential building work: 1. was directly carried out by the party responsible; and/or 2. is to be directly rectified by that person; or 1. that the order making power of the Tribunal pursuant to s 48O is otherwise confined in the manner suggested.
That is not to suggest that where a person does not hold a contractor licence, supervisors certificate or tradesperson certificate they are automatically entitled to an order in their favour that they be permitted to carry out rectification work of any defects. Rather, as explained below, where a claimant proves an entitlement arising from a breach of statutory warranties against a responsible party, there is a discretion to be exercised which requires consideration be given to all relevant facts in determining what orders should finally be made.

[11]

Did the Tribunal properly exercise its discretion and/or give adequate reasons for doing so?

At [61] the Tribunal said: Having rejected the applicants' submission, that s 48M (sic) does not apply to the owner builders, it is appropriate that I follow the clear directive in that provision and order the respondent to carry out the rectification work in accordance with the engineers plan.
It is apparent from the reasons that the Tribunal considered that it was mandatory to make an order that the respondent carry out the rectification work. The form of order required the respondent to "engage appropriately qualified and licensed tradesperson is to demolish the stormwater works the subject of these proceedings and reconstruct them in accordance with the plans of D Mitsopoulos & Associates Plans dated 29 August 2011".
In our view the Tribunal incorrectly interpreted the obligation imposed upon it under s 48MA in making orders in connection with a building claim.
Rather, there was a discretion the Tribunal was required to exercise as to whether or not to make an order for compensation, an order in the nature of a work order or some other order as permitted by s 48O(1). In this regard, s 48O(2) provides the Tribunal can make a work order even if not asked for by the applicant who makes a claim for defective residential building work. In doing so, s 48MA requires the Tribunal "to have regard to the principle that rectification of the defective work by the responsible party is the preferred outcome". Section 48MA is not, in terms, mandatory. Rather, it is a factor to be taken account of in the exercise of a discretion about what orders should be made to resolve a building claim.
Being expressed as a "preferred outcome", it operates in the manner of a presumption. That is, unless the facts of the particular case make it inappropriate to order rectification of the defective work by the responsible party, an order should be made in terms that give effect to the principle.
It follows that in so far as the Tribunal approached its task in deciding what order should be made on the basis it was mandatory to make a work order, it failed to exercise any discretion and failed to identify and weigh up the relevant factors necessary to such exercise of discretion. This constitutes an error of law: House v R [1936] HCA 40; (1936) 55 CLR 499 at 504-5.

[12]

What was the proper exercise of discretion?

Having determined that the Tribunal failed to exercise any discretion, the Appeal Panel is able to re-exercise the discretion pursuant to s 81(2) of the NCAT Act.
The parties have made submissions about what orders should be made.
The appellants' primary submission is that a money order should be made in their favour. The factors against making a work order are set out at paragraph 15.
Alternatively, the appellant submitted a work order should be in the following form: 1 An order that all persons who are to carry out the specialist work provide evidence to the Appellants that they are suitably qualified, licensed and insured prior to any works commencing. 2. An order that the respondent pay for all costs associated with obtaining any relevant approval/s for the rectification work. 3 An order that the work be inspected and signed off by an independent expert nominated by the Appellants at the respondent's cost, which are agreed to be not in excess of 60 inspections, each inspection is anticipated not to be in excess of 4 hours per that inspection (including travel time) at the rate of $250 per hour plus GST. 4 An order that the work be carried out within 3 months. 5 An order that in the event the respondent does not comply, the appellants are entitled to reinstate the proceedings at any time within 12 months from the date of non-compliance (noting that the application can be made immediately in the event of non-compliance with the orders to return to the property and commence work within 21 days).
The respondent maintained a work order was appropriate. The work order proposed by the respondent was in slightly different terms. These differences (using the same numbering) were: 3 An order that the work be inspected and signed off by the Building Certifier, Building Certificates Pty Ltd at the respondent's cost. 4 An order that the works being commenced within 30 days of orders and be completed within 90 days.
In making these submissions, the respondent relied on the Tribunal's reasons at [13] - [14] of the document entitled Respondent's Short Submissions filed 17 July 2017: 13 Clearly the Tribunal below was obligated to consider s 48MA, that it did so is evident in paragraphs 53, 55, 56, 57, 58, 59, 60 and 61 the judgement. 14 It is respectfully submitted that these reasons are cogent and sufficient when read with the balance of the judgement to satisfy the threshold of "sufficiency of reasons".
In our view, the paragraphs of the Tribunal's reasons referred to by the respondent do not record a consideration by the Tribunal of any relevant facts and circumstances in the exercise of the discretion which we have found to exist. Paragraph [61] of the decision does not support this submission for the reasons explained above.
Consequently, it is necessary for the Appeal Panel to consider the matters identified by the parties and determine whether, in the circumstances of this case, the preferred outcome principle should apply.
Neither party suggested that the works proposed by order 1 of the Tribunal made 31 March 2017, namely the demolition and reconstruction of the stormwater works in accordance with the plans of D Mitropoulos & Associates Plans dated 29 August 2011, were not the works reasonably necessary to rectify the defective work as found by the Tribunal. Neither party challenge the Tribunal's finding that the cost to carry out this work was $180,600.97.
The issue is whether preferred outcome principle should be displaced.
The following facts, as found by the Tribunal, count against a work order: 1. The respondent has an owner-builder permit which authorised her to carry out the work in question. In carrying out this work she became responsible for its proper completion. 2. Her husband is a licensed plumber. The Tribunal made adverse findings against the husband, however accepted his evidence that the works as built did not comply with the engineers plans approved by the local council. In doing so, the Tribunal found that the husband "took charge" and was "less then forthright as to why the works were not constructed in accordance with the engineers plans". 3. The effect of these findings is that the respondent failed to ensure the works, when constructed, complied with the statutory warranties and met all required standards and specification.
This is because they demonstrate an inability to perform the work properly.
However, the respondent is prepared to consent to a work order on terms that those people who carry out the rectification work "are suitably qualified, licensed and insured prior to any works commencing". In providing this consent, the respondent does not appear to challenge the terms of order 1 originally made by the Tribunal, namely that she "at her own cost is to engage appropriately qualified and licensed trade persons to demolish the stormwater work the subject of these proceedings and reconstruct them in accordance with the plans of D Mitsopoulos & Associates Plans dated 21 August 2011".
If such an order was made on terms that the respondent engages independent contractors, appropriately licensed and insured, that would ameliorate any concerns which the appellants might have about the respondent arranging for the carrying out of rectification work. On the other hand, such an order would give effect to the preferred outcome and, having regard to her husband's background as a plumber, provide a means by which the respondent is given the opportunity to carry out the rectification work in a manner which will allow her to make good the defects and minimise the cost to her.
An order in this form would: 1. ensure works were carried out by the holder of a contractor licence who would be required to provide insurance in respect of the work; and 2. minimise any risks associated with "structural works of an invasive nature".
As to the other factors raised by the appellants against the making of the work order, it seems to us the form of orders proposed will require: 1. the works to be started and finished within a specified timeframe; 2. the certification and inspection of the work by an independent certifier- a matter otherwise required for local council purposes, at the respondent's cost; 3. a process which, if not complied with, will entitle the appellants to apply to the Tribunal to renew the proceedings and seek a money order or other relief as permitted by Sch 4 cl 8 of the NCAT Act.
In this way, the effect can be given to the principle in s 48MA with no injustice to the appellants.
In relation to inspection of work, in our view an order of the type in order 3 proposed by the respondent is appropriate, that is the building certifier should be responsible for inspection and certification of all works carried out. Order 3 should be modified to read as follows The work, the subject of order 1, is to be inspected by Building Certificates Pty Ltd (certifier) at such times and in such manner as is necessary for the certifier to confirm in writing at the conclusion of the work that all work has been done in accordance with order 1 and to enable the certifier to provide all necessary certificates to relevant authorities in conformance with the development approval and other requirements applicable to that work. The costs of the certifier are to be paid by the respondent.
While the appellants will have no direct control over the work, they will have the capacity to apply to the Tribunal in the event the work order is not complied with according to its terms and within the required time.
Having regard to the Christmas period and the need for the respondent to engage appropriate contractors, orders should be made in the form proposed by the respondent to require commencement of the work in 30 days and completion within 90 days from the date of these orders.
Finally, an order should be made permitting renewal of the proceedings pursuant to Sch 4 cl 8 of the NCAT Act in the event the respondent fails to comply with the orders as varied by the Appeal Panel in the time required.

[14]

Orders

The Appeal Panel makes the following orders: 1. The appeal is allowed in part. 2. The orders made by the Tribunal on 31 March 2017 are varied as follows: 1. The respondent at her own cost is to engage appropriately qualified and licensed trade persons to demolish the stormwater works the subject of these proceedings and reconstruct them in accordance with the plans of D Mitsopoulos & Associates Plans dated 21 August 2011. 2. All persons who are to carry out the specialist work are to provide written evidence to the Appellants that they are suitably qualified, licensed and insured prior to any works commencing; 3. The respondent is to pay for all costs associated with obtaining any relevant approval/s for the rectification work. 4. The work, the subject of order 1, is to be inspected by Building Certificates Pty Ltd (certifier) at such times and in such manner as is necessary for the certifier to confirm in writing at the conclusion of the work that all work has been done in accordance with order 1 and to enable the certifier to provide all necessary certificates to relevant authorities in conformance with the development approval and other requirements applicable to that work. The costs of the certifier are to be paid by the respondent. 5. The work is to be commenced within 30 days of the date of these orders and is to be completed within 90 days of the date of these orders. 6. Pursuant to Schedule 4 clause 8 of the Civil and Administrative Tribunal Act, 2013 the applicants have leave to renew the proceedings if these orders are not complied with by the respondent within the time specified. 1. Subject to order 4, each party is to pay their own costs of the appeal. 2. In the event a party (costs applicant) contends that an order different to order 3 should be made, the following orders and directions are made: 1. the costs applicant is to file any application for costs (cost application) within 14 days from the date these orders are published, such application to include any evidence and submissions, including submissions about whether an order can be made dispensing with a hearing pursuant to s 50(2) of the Civil and Administrative Tribunal Act, 2013. 2. The respondent to the costs application is to file and serve any evidence and submissions in reply within 21 days from the date of these orders, including submissions about whether an order can be made dispensing with a hearing pursuant to s 50(2) of the Civil and Administrative Tribunal Act, 2013. 3. The costs applicant is to file any submissions in reply within 28 days from the date of these orders. 4. Order 3 ceases to have effect if a cost application is filed in the time permitted by these orders.

[15]

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: 05 January 2018

Leung v Alexakis

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Judgment (15 paragraphs)

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Cited By (35)