Sacks v Hammoud

[2016] NSWCATAP 225

NCAT Appeal Panel|2016-03-29

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Court

NCAT Appeal Panel

Decision date

2016-03-29

Source

Original judgment source is linked above.

Judgment (18 paragraphs)

[1]

REASONS FOR DECISION

This appeal arises from a claim brought by homeowner, Phillip Sacks, who entered into a contract with Wrent Mettco Pty Ltd (Mettco) in May 2011 for the supply and installation of doors and windows. Doors and windows were installed by the first respondent, Ismail Hammoud, who is apparently Mettco's sole director.
In February 2013, during a torrential downpour, Mr Sacks' home suffered water damage. In June 2015, Mr Sacks lodged an application with the Consumer and Commercial Division of the NSW Civil and Administrative Tribunal (NCAT) seeking a "money order" for loss alleged to have resulted from the water damage.
Mr Sacks characterised his claim as a "consumer claim" under the Consumer Claims Act 1998 (NSW). NCAT does not have jurisdiction to determine a consumer claim if the cause of action giving rise to the claim first accrued more than three years before the date on which the claim is made: s 7(4)(a) of the Consumer Claims Act.
At first instance, the Tribunal dismissed Mr Sacks' application on the ground that it lacked jurisdiction as the three-year limitation period imposed by the Consumer Claims Act had expired. The primary question to be resolved in this appeal is whether the Tribunal erred in holding that the claimed cause or causes of action underlying Mr Sacks' consumer claim accrued when the doors and windows were installed in May 2011. Mr Sacks asserts that each claimed cause(s) of action accrued when the alleged damage to his property was first discovered or became manifest, in February 2013, and therefore the limitation period imposed by the Consumer Claims Act had not expired when he lodged his application with NCAT in June 2015 (the Application).
For the reasons outlined below we have concluded that the Tribunal erred in concluding that s 7(4) of the Consumer Claims Act operated to deprive it of jurisdiction. Consequently, we have decided to allow the appeal and set aside the order of the Tribunal dismissing the Application.

[3]

Factual Basis of the Claim

Mr Sacks' case is as follows. In 2010 and 2011 he undertook major renovations of his home. In the course of those works he decided to replace the existing windows and a sliding door. As this work was outside the scope of the works being conducted by his then builder, he entered a separate contract in May 2011 with Mettco.
According to Mr Sacks, at the time he made the agreement with Mettco, Mr Hammoud said to him, "Don't worry, Phillip, I give you my personal guarantee you will get the best quality work from me. No one has ever complained about my work". Mr Sacks says that Mr Hammoud then provided him with a list of addresses at which he had installed windows and doors.
The written quotation provided to Mr Sacks by Mr Hammoud included the following relevant notes:

All windows will include weather seals for acoustic/climate conditions suited for the region;
All glass and glazing to comply with AS1288;
All work is guaranteed and products are manufactured to Australian standards using the leading window and door systems in energy, structural and weather to suit all locations.

The doors and windows were installed soon after the agreement was made. In June 2011, Mr Hammoud informed Mr Sacks that the work had been completed and presented an invoice to Mr Sacks. According to Mr Sacks, the work was, to his knowledge, incomplete in two respects but he paid the invoice expecting that Mr Hammoud would finish it properly.
Mr Sacks alleges that in February 2013, after heavy rain, water began to leak throughout his home: in the dining room, bathroom and under the stairs. He sought advice from a builder who in turn recommended that a professional water-proofer examine the property to identify the source of the leaks. The water-proofer found gaps underneath the sliding door and windows installed by Mr Hammoud. In the opinion of the water-proofer, heavy wind-driven rain could have caused the leaks.
Mr Sacks took photographs of the damage and gaps. On 9 February 2013, he sent copies to Mr Hammoud by email. On 11 February, Mr Hammoud replied by email requesting Mr Sacks to "get your guy to fix it and send me the bill". The water-proofer, Ricky Americano, quoted a sum of $396 and sealed the gaps he had found. Mettco has paid that sum to Mr Sacks.
While the waterproofing problem was apparently fixed by Mr Americano, the water damage was not. Sometime after the storm, Mr Sacks' builder cut a hole in the dining room ceiling to prevent it collapsing and to enable any further leaks to be identified. In June or July 2013, Mr Sacks identified further damage to paintwork in a room adjacent to the dining room. The paintwork was bubbling and peeling.
Mr Sacks' builder repaired the ceiling at no cost. A painter quoted the sum of $2167 to repair the damaged paintwork. It is in respect of the paintwork repairs that this claim is brought. The ultimate question for the Tribunal will be whether Mettco, Mr Hammoud, or both are liable.

[4]

Decision under appeal

In the proceedings before the Tribunal and on appeal, Mr Sacks relied upon four separate causes of action: "1. Negligence on the part of Mr Hammoud in the manner of installing the windows and sliding door; 2. Breach by Mettco and Mr Hammoud of a statutory guarantee provided by s 60 of the Australian Consumer Law (NSW); 3. Misleading or deceptive conduct on the part of Mr Hammoud; and 4. A breach by Mr Hammoud of his voluntary guarantee or warranty."
Section 7(4)(a) of the now repealed Consumer Claims Act provides: 7 Jurisdiction in respect of consumer claims … (4) Limitation periods The Tribunal does not have jurisdiction to hear and determine a consumer claim if any of the following apply: (a) the cause of action giving rise to the claim first accrued more than 3 years before the date on which the claim is lodged, …
In August 2015, after considering submissions provided by the parties about the application of s 7(4)(a), the Tribunal decided that the cause of action giving rise to Mr Sacks' claim first accrued when the windows and doors were installed (June 2011) and not, as contended by Mr Sacks, when the water damage became apparent (February 2013). Finding that the Application to NCAT was made more than three years after the windows and doors were installed, the Tribunal concluded that by the operation of s 7(4)(a) of the Consumer Claims Act, it did not have jurisdiction to determine Mr Sacks' consumer claim and dismissed the Application.
In written reasons for that decision, the Tribunal failed to distinguish between the various purported causes of action relied upon by Mr Sacks. Nor did the Tribunal consider the evidence about when the alleged water damage first occurred or was discovered, or make any of the findings of fact necessary to determine whether any of the claimed causes of action were available, and if so, first accrued. Further, the Tribunal failed to explain why it decided that "the cause of action" first accrued when the windows and doors were installed.
The approach taken by the Tribunal constitutes a failure to address and determine a necessary issue, and as a consequence, a failure to exercise the jurisdiction conferred on it and invoked by Mr Sacks. Such failure constitutes an error of law: Resource Pacific Pty Ltd v Wilkinson [2013] NSWCA 33 at [42]; Hernady v Raccani [2016] NSWCATAP 67 at [31]; Khan v Kang [2014] NSWCATAP 48 at [28].
We have decided the appeal should be upheld and the order made by the Tribunal should be set aside.
To assist the Tribunal on remittal we set out below the issues that must be addressed to determine whether any of the claimed causes of action are available to Mr Sacks, and, if so, when they first accrued.

[5]

Claims under the Consumer Claims Act: the framework

The Consumer Claims Act was repealed on 1 October 2015. Prior to its repeal NCAT had jurisdiction pursuant to s 7 of the Consumer Claims Act to hear and determine a "consumer claim". Where, as in this case, a consumer claim, which is the subject of an application made under the Consumer Claims Act, was "not finally determined" as at 1 October 2015, the Consumer Claims Act continues to apply: cl 29(2) of Sch 5 to the Fair Trading Act 1987 (NSW).
Section 3A(1) of the Consumer Claims Act defined a "consumer claim" to include a claim by a consumer for the payment of a specified sum of money that arises from a supply of goods or services by a supplier to the consumer, whether under a contract or not. "Supplier" was defined to mean a person who, in the course of carrying on, or purporting to carry on, a business, supplies goods or services: s 3 of the Consumer Claims Act. There is no dispute that Mr Sacks was a "consumer" and Mettco was a "supplier" within the meaning of the Consumer Claims Act.
The primary objects of the Consumer Claims Act were to simplify the resolution of disputes between consumers and suppliers of goods and services and to make available a wide range of remedies available to consumers of goods and services: s 2A. The range of available remedies was much wider than under the common law. They included orders for payment (or relief from payment) of specific sums and orders similar to the equitable remedy of specific performance: see, for example s 8(1)(a)-(h) of the Consumer Claims Act.
In determining a consumer claim wholly or partly in favour of a claimant, the Tribunal may make an order requiring a supplier to pay the consumer a specified sum of money: s 8(1)(a) of the Consumer Claims Act. In exercising that power, the Tribunal must make such orders as, in its opinion, will be fair and equitable to all the parties to the claim: s 13(1) of the Consumer Claims Act.
The Consumer Claims Act did not expressly specify or create causes of action that may underpin a consumer claim. Consumer claims may be brought in reliance on, among other things, common law causes of action, such as negligence or breach of contract, or on statutory causes of action on the basis of misleading and deceptive conduct under s 18 of the Australian Consumer Law (NSW) (ACL NSW) or failure to comply with a statutory "guarantee" in Part 3-2 of the ACL NSW.
In 2010, the Fair Trading Act was amended to incorporate the Australian Consumer Law, a Commonwealth statutory provision: see Schedule 2 of the Competition and Consumer Act 2010 (Cth). The text of the ACL NSW is read into the Fair Trading Act by virtue of the operation of Part 3, Division 2 of that Act. As in Lam v Steve Jarvin Motors [2016] NSWCATAP 186 (Lam) at [45] - [16], the Tribunal has jurisdiction to entertain claims brought in reliance on the ACL NSW.
Part 3-2 of the ACL NSW confers on consumers acquiring goods or services various guarantees. In this appeal Mr Sacks relies on the guarantee conferred by s 60 of the ACL NSW that services will be rendered with due care and skill. Remedies for failure to comply with a consumer guarantee are provided for in Part 5-4.

[6]

Identifying when a cause of action "first accrues"

The term "cause of action" is not defined by the Consumer Claims Act or the ACL NSW. In the context of statutory provisions limiting the period in which proceedings can be commenced, the term has been held to refer to the elements necessary to give rise to a right of action. For example, in Torrens Aloha Pty Ltd v Citibank NA [1997] FCA 77; (1997) 72 FCR 581, Sackville J at 595 referred to the classic formulation of a "cause of action" given by Brett J in Cooke v Gill (1873) 8 LR CP 107 at 116: '[C]ause of action' has been held from the earliest time to mean every fact which is material to be proved to entitle the plaintiff to succeed - every fact which the defendant would have a right to traverse.
In Do Carmo v Ford Excavations Pty Ltd [1984] HCA 17; (1984) 154 CLR 234 at 245, Wilson J wrote: [T]he concept of a 'cause of action' would seem to be clear. It is simply the fact or combination of facts which gives rise to a right to sue. In an action for negligence, it consists of the wrongful act or omission and the consequent damage ... Knowledge of the legal implications of the known facts is not an additional fact which forms part of a cause of action.
Applying these principles, for the purpose of s 7(4)(a) of the Consumer Claims Act, a cause of action "first accrues" when facts which constitute the elements of the relevant cause of action crystallise or combine so that all the elements necessary to entitle a person to make a consumer claim are present.
When the cause of action arises is a question of fact and requires the identification of the applicable measure of damages: Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514 (Wardley) at 526.
In Wardley, the majority (Mason CJ, Dawson, Gaudron and McHugh JJ) commented at 533 on the appropriateness of determining the question of whether proceedings are brought in time in interlocutory proceedings: We … state in the plainest of terms that we regard it as undesirable that limitation questions of the kind under consideration should be decided in interlocutory proceedings in advance of the hearing of the action, except in the clearest of cases. Generally speaking, in such proceedings, insufficient is known of the damage sustained by the plaintiff and of the circumstances in which it was sustained to justify a confident answer to the question.

[8]

(i) Action in negligence

Mr Sacks contends he has available an action in negligence against Mr Hammoud. He alleges that Mr Hammoud failed to exercise due care in installing the windows and sliding doors.
To establish an action in negligence against Mr Hammoud, Mr Sacks must prove on the balance of probabilities that: 1. Mr Hammoud owed him a duty of care either at common law and/or under a statute; 2. Mr Hammoud breached that duty; 3. He suffered loss as a result of that breach and that loss was not too remote.
In Hawkins v Clayton [1988] HCA 15; (1988) 164 CLR 539 at 587, Deane J explained: A cause of action in negligence is complete when the damage caused by the breach of duty is sustained. It is at that time that, in the ordinary case, the cause of action 'first accrues' for the purposes of a provision such as s 14(1) of the Limitation Act [(1969) NSW].
In Scarcella v Lettice [2000] NSWCA 289; 51 NSWLR 302 (Scarcella) at [13], the Court of Appeal emphasised that potential or contingent damage does not qualify as actual damage for the purpose of determining when the cause of action first accrues. Actual damage must be sustained. See also Wardley at 530, 531. For the cause of action to be complete, the actual damage must be "measurable" and be "beyond what can be regarded as negligible": Wardley at 531, Scarcella at [14].
Where the alleged breach of duty relates to the negligent construction of a building, it is now "orthodox doctrine in much of the common law world" that such loss accrues when "the defects become manifest or are otherwise discovered": Scarcella at [16], citing Sutherland Shire Council v Heyman [1985] HCA 41; (1985) 157 CLR 424 at 503-5; see also Cyril Smith & Associates Pty Ltd v The Owners-Strata Plan No 64970 [2011] NSWCA 181 (Cyril Smith) at [10].
Cyril Smith concerned latent defects in a high-rise residential building. The Court held (at [17]-[19] per Basten JA) that such cases constituted an exception to the general rule that a cause of action in negligence accrues when the material damage (which may not be fully manifest) is first suffered. Following the Victorian decision of Pullen v Gutteridge Haskins & Davey Pty Ltd [1993] 1 VR 27, Basten JA (at [17]) stated the test for when a cause of action accrues in such cases: [E]ven where actual damage caused by the latent defect in the building has been suffered more than six years before the commencement of the litigation, the cause of action does not accrue until the link between the physical manifestation and the underlying defect is known or ought to be known.
In McBride v Christie's Australia Pty Ltd [2014] NSWSC 1729, the Supreme Court dealt with a case concerning a forged artwork. The plaintiff bought the painting at auction in 2000. Ten years later, when she was preparing to sell it, she discovered that it was a forgery. She brought proceedings for, among other things, misleading or deceptive conduct against the auctioneer, Christies, and an agent the plaintiff had retained to bid on her behalf at the auction, Vivien Sharp. In addition, the plaintiff brought proceedings against Ms Sharp in negligence.
A limitation defence was raised by the defendants, who claimed that the loss or damage had been suffered immediately upon purchase of the art work. That argument was rejected by the Supreme Court. Bergin CJ in Eq held at [227]-[228] that reasonable diligence could not have disclosed the defect to the plaintiff and that therefore "the plaintiff suffered loss when the defect in the painting was discovered".
Here, unlike the facts considered in Cyril Smith, Mr Sacks does not allege that there was a material lag in time between when the alleged damage was suffered and the alleged link between that damage and the underlying defect becoming known.
Applying the above principles, and assuming Mr Sacks is able to establish each of the elements of an action in negligence against Mr Hammoud, the determination of when the cause of action first accrued requires the Tribunal to make a factual finding about when the alleged damage was first discovered or with reasonable diligence could have been discovered.

[9]

(ii) Action for failure to comply with statutory guarantee: s 60 of the ACL NSW

Mr Sacks contends he has available a cause of action as against both Mettco and Mr Hammoud for breach of the statutory guarantee conferred on him by s 60 of the ACL NSW. Section 60 provides: 60 Guarantee as to due care and skill If a person supplies, in trade or commerce, services to a consumer, there is a guarantee that the services will be rendered with due care and skill. If a person supplies, in trade or commerce, services to a consumer, there is a guarantee that the services will be rendered with due care and skill.
Section 236 provides that if a person suffers loss or damage because of the conduct of another person, and the conduct contravened a provision of Chapters 2 or 3, the claimant may recover the amount of the loss or damage by action against that other person, or against any person involved in the contravention (emphasis added).
The remedy afforded by s 236 is not available to Mr Sacks because the conduct about which he complains - the alleged failure to comply with the guarantee conferred by s 60 - does not constitute a contravention of the ACL NSW. As explained by the Appeal Panel in Lam at [74], [75] because of s 15 of the ACL NSW, a failure to comply with a consumer guarantee does not constitute a contravention of the ACL NSW and, as a result, there is no right to recover damages under s 236 or other compensatory orders.
Section 15 relevantly states: 15 Contraventions of this Schedule Conduct is not taken, for the purposes of this Schedule, to contravene a provision of this Schedule merely because of the application of: … (b) a provision of Division 1 of Part 3-2 (other than section 66(2)); or ...
The consumer guarantee provisions of the ACL NSW, including s 60, are found in Div 1 of Pt 3-2.
Remedies available to a consumer for failure to comply with a consumer guarantee are contained in Part 5-4 of the ACL NSW. They include s 267, which gives a consumer a right to, among other things, recover damages for any loss or damage suffered: s 267(4).
Mr Sacks may only take action under s 267(4) as against Mettco, in respect of the alleged failure to comply with the guarantee under s 60, if: 1. He is a "consumer" within the meaning of s 3 of the ACL NSW: s 267(1); 2. Mettco supplied, in trade or commerce, services to him: s 267(1)(a); 3. The guarantee under s 60 was not complied with because Mettco failed to render the subject services with due care and skill: s 267(1)(b); 4. He suffered loss or damage because of the failure to comply with the guarantee and it was reasonably foreseeable that he would suffer such loss or damage as a result of such a failure: s 267(4).
For current purposes, we will proceed on the basis that Mr Sacks seeks to avail himself of an action under s 267(4) against Mettco, having regard to the requirement for the Tribunal to act "with as little formality as the circumstances of the case permit and according to … the substantial merits of the case without regard to technicalities or legal forms" under s 38(4) of the NCAT Act and also Moloney v Taylor [2016] NSWCA 199 at [30] - [31].

[10]

When does a cause of action under s 267 of the ACL NSW first accrue?

A cause of action under s 267(4) of the ACL NSW has two discrete elements: a failure to comply with a guarantee under Subdivs of Div 1 of Pt 3-2 of the ACL NSW (to which s 60 belongs) and suffering loss or damage as a result of such failure. It follows that the cause of action under s 267(4) does not accrue until loss or damage is sustained as a result of the alleged failure to comply: Wardley at 521; Arcadi v Colonial Mutual Life Assurance Society Ltd (1984) ATPR 40-473 at 45455 (Arcadia) and King v Yurisich [2006] FCAFC 136 at [55]-[61].
In Wardley, the High Court dealt with the question of when a cause of action under s 82 of the now repealed Trade Practices Act 1974 (Cth) accrues as a result of a misleading representations made contrary to s 52 of that Act. The majority (Mason CJ, Dawson, Gaudron and McHugh JJ) stated at 525 that "As loss or damage is the gist of the statutory cause of action for which s 82(1) provides the cause of action does not accrue until actual loss or damage is sustained". Their Honours held at 526 that to determine when a person first suffers economic loss or damage in relation to such conduct it is necessary to have regard to the measure of damages that apply. That measure of damages was a "sum representing the prejudice or disadvantage the plaintiff has suffered as a consequence of altering his position under the inducement". They then went on at 526 to note that, as at common law, under the Trade Practices Act a plaintiff could only recover compensation for actual loss or damage as distinct from potential or likely damage. They said at 527 that while a plaintiff may suffer disadvantage immediately upon entering an agreement induced by a misrepresentation, "to compel a plaintiff to institute proceedings before the existence of his or her loss is ascertained or ascertainable would be unjust".
The gist of the action under s 267(4) of the ACL NSW is that the consumer has suffered loss or damage as a result of the failure to comply with a consumer guarantee.
Applying the above principles, and assuming Mr Sacks is able to establish each of the elements necessary for an action under s 267(4) against Mettco, the determination of when the cause of action first accrued requires the Tribunal to make a factual finding about when the alleged damage became known or could have become known with reasonable diligence.

[12]

(iii) Action for misleading or deceptive conduct by Mr Hammoud

Mr Sacks' third cause of action relates to alleged misleading or deceptive conduct by Mr Hammoud.
Mr Sacks alleges that Mr Hammoud gave him a "personal assurance" that the work would be "the best quality" and suitable for all weather conditions. He claims that this constituted a misleading representation in contravention of ss 18(1) and 29(1)(b) of the ACL NSW in that Mr Hammoud was representing that the building works would be of a particular quality or grade, which they were not, and that his work would be of a high standard, which it was not.
Section 18 provides: 18 Misleading or deceptive conduct (1) A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. …
Section 29(1)(b) provides: 29 False or misleading representations about goods or services (1) A person must not, in trade or commerce, in connection with the supply or possible supply of goods or services or in connection with the promotion by any means of the supply or use of goods or services: … (b) make a false or misleading representation that services are of a particular standard, quality, value or grade; or …
Section 236 as noted provides an action for damages to a person who suffers loss or damage because of the conduct of another person where that conduct contravenes a provision of Chapter 2 or 3. Sections 18 and 29 of the ACL NSW are contained in Chapters 2 and 3 respectively. Section 15 has no application in this case.
To establish a cause of action under s 236 in respect of an alleged contravention of s 18, Mr Sacks must relevantly prove: 1. Mr Hammoud made the alleged offending statements; 2. The offending statements were made in the course of trade or commerce: s 18(1); 3. Those statements were false or misleading or were likely to mislead or deceive: s 18(2); 4. Mr Sacks suffered loss or damage "because of" that conduct: s 236(1)(a).
To establish a cause of action under s 236 in respect of an alleged contravention of s 29(1)(b), Mr Sacks must relevantly prove: 1. Mr Hammoud made the alleged offending statements; 2. The offending statements made by Mr Hammoud were made in trade or commerce, in connection with the supply or possible supply of services; 3. The offending statements constituted a representation that the subject services were of a particular standard, quality, value or grade; 4. That representation was false or misleading; 5. Mr Sacks suffered loss or damage "because of" that representation.

Sacks v Hammoud

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