Sorbello & Donnelly v Whan

Consumer Trader and Tenancy Tribunal Act 2001 s 21, s 65, s 67, s 67(3), s 67(3)(a) LEGISLATION CITED : Home Building Act 1989 s 3, s 12, s 18C, s 29, s 29(1), s 29(1)(a), s 31, s 31(3), s 48K, s 90,

Azzopardi v Tasman UEB Industries Ltd (1985) NSWLR 139 CASES CITED : Gunn & Anor v Steain & Ors [2003] NSWSC 1076 Kalokerinos & Anor v HIA Insurance Services P/L & Anor [2004] NSWCA 312 Smith v Collings Homes Pty Ltd [2004] NSWCA 75

PARTIES : Michael Sorbello & Another v Elizabeth Whan & 2 Ors Troy Donnelly & Another v Elizabeth Whan & 2 Ors

FILE NUMBER(S) : SC 30117 of 2006 ; 30107 of 2006

COUNSEL : Mr Bailey SC and Mr A Crossland - Applicant Mr T Lynch - Respondent

LOWER COURT JURISDICTION : Consumer Trader and Tenancy Tribunal of NSW

LOWER COURT FILE NUMBER(S) : HB 04/21783; HB 04/21795

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

30107 of 2006 Michael Sorbello & Another v Elizabeth Whan & 2 Ors 30117 of 2006 Troy Donnelly & Another v Elizabeth Whan & 2 Ors

JUDGMENT 1 His Honour: Separate applications were brought by Troy Wayne Donnelly and Belinda Bentvelzen (Donnelly and Bentvelzen) and Michael Sorbello and Sarah Sorbello (the Sorbellos) in the Consumer, Trader and Tenancy Tribunal against Elizabeth Whan and Gary Whan. The applications arose out of the purchase by Donnelly and Bentvelzen and the Sorbellos of adjacent properties from Mrs Whan. The applicants contended before the Tribunal that Mrs Whan was liable to arrange for the repair of pump-out systems on each of the properties. The applications were heard together by a single Member of the Tribunal. On 2 August 2006, the Tribunal Member published Reasons for Decision dismissing the applications. 2 By Further Amended Summonses filed in this Court Donnelly and Bentvelzen and the Sorbellos seek in the first instance that the decisions of the Tribunal be set aside and the following orders made:

(a) That Elizabeth Whan in Supreme Court proceedings 30117 of 2006 pay the amount of $8,195.00 to Donnelly and Bentvelzen;

(b) That Elizabeth Whan in Supreme Court proceedings 30107 of 2006 pay the amount of $18,093.00 to the Sorbellos. 3 The plaintiffs seek in the event that the Court refuses to make these orders that both matters be remitted to the Tribunal to be decided according to law. In the alternative orders in the nature of certiorari and mandamus are sought. For the sake of convenience, the appeals are heard together. 4 Elizabeth Whan is the first defendant, the Consumer, Trader and Tenancy Tribunal of New South Wales is the second defendant and Gary Whan is the third defendant. The second defendant submits to the orders of the Court. 5 Section 67 of the Consumer, Trader and Tenancy Tribunal Act 2001 (the CTTT Act), so far as is material, provides as follows: " 67 Appeal against decision of Tribunal with respect to matter of law

(1) If, in respect of any proceedings, the Tribunal decides a question with respect to a matter of law, a party in the proceedings who is dissatisfied with the decision may, subject to this section, appeal to the Supreme Court against the decision. (2) ………….. (3) After deciding the question the subject of such an appeal, the Supreme Court may, unless it affirms the decision of the Tribunal on the question: (a) make such order in relation to the proceedings in which the question arose as, in its opinion, should have been made by the Tribunal, or (b) remit its decision on the question to the Tribunal and order a rehearing of the proceedings by the Tribunal. " 6 When an appeal is brought under s 67(1) it is necessary for the summons to state grounds "which clearly identify the decision of a question with respect to a matter of law which is the subject of appeal, and to state grounds on which the decision is claimed to be incorrect": see Kalokerinos & Anor v HIA Insurance Services P/L & Anor [2004] NSWCA 312 per Bryson J at [58]. 7 The plaintiffs contended before the Tribunal that Mrs Whan was liable to remedy the defects in the pump-out systems by reason of the statutory warranties found in s 18B of the Home Building Act 1989 (the HBA). The plaintiffs argued that Mrs Whan was an owner-builder and they as immediate successors in title to an owner-builder were entitled to the benefit of the statutory warranties as a result of the operation of s 18C of the HBA. Section 18C provides: " Warranties as to work by others 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. " 8 The definition of owner-builder is found within s 3 of the HBA: 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. " 9 Section 90 which is within Part 6 of the HBA defines owner-builder work to mean: "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." 10 Within Division 3 of Part 3 s 29 is found. Subsection 29(1) defines in this Division owner-builder work to mean 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. " 11 There was no dispute before the Member that the subject work was residential building work which exceeded the prescribed amount. 12 The Tribunal Member in the Reasons for Decision set out the following Background to the proceedings: "The building works the subject of these applications are at numbers 9 and 11 Lieutenant Bowen Rd, Bowen Mountain. It is not disputed that the land on which both houses are constructed was purchased by Mrs Whan and was in her name alone. The land which was two lots had one building which straddled the boundary of the two lots at the time of purchase. In early 2001 a development application was lodged in the name of Mrs Whan to make alterations and additions such that one building would be partly demolished and rebuilt as two separate residences and sold separately. After the granting of development consent Mrs Whan entered into a contract with a builder, AFPA Building Services, to do some of the required work to achieve this objective. The contract was in the names of both Elizabeth Whan and Garry (sic) Whan, but was only signed by E Whan as owner, and witnessed by Garry Whan. The contract had a number of exclusions, that is the following items were specifically excluded: bulk excavation, part demolition, plumbing, electrical, painting, rubbish removal, P.C items. These items were not the responsibility of the builder, but of the owner. ….…..Mrs Whan and her husband lived very briefly in the two properties, which were then sold to the two sets of applicants in this matter. It is not disputed that Mrs Whan did not apply for an owner builder permit in relation to these properties."

13 During the Reasons for Decision, the Member quoted what was said by Associate Justice Harrison in Gunn & Anor v Steain & Ors [2003] NSWSC 1076 at [16-18]. In that case, a literal interpretation of the term "owner-builder" found in section 3 of the HBA was rejected and a purposive approach was adopted. Her Honour rejected the contention that the Tribunal Member had erred in finding that the "qualification" in the definition of "owner-builder" to someone "who is issued an owner-builder permit for that work" was to be a deeming provision and not a pre-requisite to what constitutes an owner-builder. 14 Her Honour said [at 18]: "As the Tribunal Member said, to interpret the definition of owner-builder in s3 as a prerequisite to what constitutes an owner builder would potentially result in persons electing not to obtain permits so as to avoid legislative requirements in the HBA as to insurance (s95) and also education (s31(2)(d)), and disclosure provisions in sale contracts (s 95(2A)). Such an interpretation would frustrate the purpose of the legislation. Where there is ambiguity surrounding Parliamentary intention in a statute, a court should prefer the construction, which appears to achieve the legislative purpose rather than one that appears to defeat or frustrate that purpose: New South Wales v Macquarie Bank Ltd (1992) 30 NSWLR 307, Kirby P at 319." 15 In the present proceedings, the Member acknowledged he was bound by Gunn v Steain but determined that it could be readily distinguished. The Member said: " In Gunn v Steain it was possible to deem the home-owner to be the holder of a permit, as had she chosen to apply for one she would have been eligible. In this instance, Mrs Whan could not have been the holder of an owner-builder permit, as what she was intending to build, and did in fact build, was not a single dwelling, nor yet a dual occupancy. She was intending to build, and did build, two buildings, on two blocks of land. It is hard to deem somebody to hold a permit which, had they applied for, they could not have been issued with. Thus, it appears to me that Mrs Whan was not an owner-builder, and to the extent that the application was run on the basis that she was, it fails, as the Tribunal does not have jurisdiction." 16 The Member had earlier on in the Reasons for Decision made reference to s 31 of the HBA as setting out the circumstances in which an owner-builder permit cannot be issued by the Director-General. Section 31 is as follows: " Issue of owner-builder permits (1) (Repealed) (2) The Director-General must reject an application for an owner-builder permit if the Director-General is not satisfied: (a) that the applicant is an individual of or above the age of 18 years, or (b) that the applicant owns the land concerned, whether or not together with another or other individuals, or (c) that the single dwelling-house or one of the dwellings comprising the dual occupancy concerned will be occupied as the residence (being, in the case of a dual occupancy, the principal residence) of the applicant after the work authorised by the permit is done, or (d) that the applicant has completed any applicable education course or training approved by the Director-General for the purposes of this section.

(3) The Director-General must reject an application for an owner-builder permit if the applicant was, during the 5 years (or, if the regulations prescribe another period, during the other period) occurring immediately before the application was lodged, issued with another owner-builder permit (or an owner-builder permit under the Builders Licensing Act 1971), unless the Director-General is satisfied: (a) that the application and the other permit both relate to the same land and to related owner-builder work, or (b) that special circumstances exist."

17 The scope of this Court's power in dealing with appeals pursuant to s 67 of the CTTT Act was considered by Bryson JA (with whom Santow JA agreed) in Kalokerinos at [41] when he said: "…………..In my opinion s67 makes a careful delimitation of what the Supreme Court may do. The Supreme Court may only deal with a decision on a question with respect to a matter of law which is appealed against, and subs 67(3)(a) does not have the effect of making an appeal against such a decision a gateway into a wider review and correction of the proceedings in the Tribunal. In careful language s67 authorises the Supreme Court to decide the question the subject of the appeal; it does not seem to me to be consistent with the provisions of s67 overall and the careful language which it uses in delimiting and conferring power to interpret subs 67(3)(a) as by implication greatly widening what may be the subject of an appeal. Subsection 67(3) speaks of what the Supreme Court may do after deciding the question the subject of an appeal, and confers no authority to go on to decide any other question." 18 The Summonses identify the decisions of questions with respect to matters of law which are the subject of appeal as follows:

"(A) The Member decided each of the following questions of law:

1. Where: a. a person owns a property which is a single lot; and b. that person constructs a single dwelling ( the new dwelling ) on that lot; and c. the new dwelling is in part comprised of materials and structures which belonged to a dwelling ( the previous dwelling ) which had been situated across the boundary between the aforementioned lot and an adjacent lot; and d. the previous dwelling was partly demolished in order to construct the new dwelling; e. the residential building work could not be lawfully carried out on the land concerned except with development consent under Part 4 of the Environmental Planning and Assessment Act 1979; is that person entitled to an owner builder's (sic) permit under the Home Building Act 1989?
2. Where a. a person did residential building work; b. the reasonable market cost of the labour and the materials involved in the work exceeded the amount prescribed for the purposes of section 29(1)(a) of the Home Building Act 1989 c. the work related to a dwelling ( the new dwelling ) on a lot which she owns ( the first lot ); and d. the new dwelling was in part comprised of materials and structures which belonged to a dwelling ( the previous dwelling ) which had been situated across the boundary between the aforementioned lot and an adjacent lot; and e. at the time of the residential work the person owned the adjacent lot;

f. the previous dwelling was partly demolished in order to construct the new dwelling; g. the residential building work could not have been lawfully carried out on the land concerned except with development consent under Part 4 of the Environmental Planning and Assessment Act 1979; h. the work involved construction of the new dwelling; i. the person resided in the new dwelling after selling it. j. the person was not entitled to an owners builders (sic) permit under the Home Building Act 1989; k. the person did not apply for an owner builder's (sic) permit; l. the person has sold the new dwelling to another person; m. the person was not at the time of the residential building work the holder of a contractor license (sic) under the Home Building Act or a developer for the purposes of the Act; is that person an owner builder for the purposes of the Act?

3. Did the CTTT, in the circumstances set out in 2 (a)-(m) above, have jurisdiction to make orders sought by the Plaintiffs?

(B) The Member decided in the negative each of these questions and was in error in respect of each of those decisions. (C) Each of the questions above was integral to the Decision and the Applicant would have succeeded had the questions been answered correctly. (D) The Plaintiffs were not given procedural fairness with respect to the finding that the First Defendant was not an owner-builder for the purposes of the Home Building Act 1989."

19 The first and third defendants contend that no error of law is disclosed in the Reasons for Decision of the Member. They submit that the Member treated himself to be bound by what was said in Gunn v Steain but sought to distinguish it upon the basis that Mrs Whan could never have been an owner-builder. Factual findings were made by the Tribunal, they argue, that the work the subject of the proceedings was work that was not eligible for the issue of an owner-builder permit because it was not a single dwelling and it was not a dual occupancy. The factual findings which were made, they submit, are found in the following passage in the Reasons when the Member said: "In this instance, Mrs Whan could not have been the holder of an owner-builder permit, as what she was intending to build and did in fact build, was not a single dwelling, nor yet a dual occupancy. She was intending to build, and did build, two buildings, on two blocks of land." 20 The findings of fact which the first and third defendants contend are not amenable to review by this Court are that Mrs Whan was intending to build, and did build two buildings on two blocks of land. 21 It is implicit from the Member's Reasons that the following further facts were found: (i) The land purchased by Mrs Whan consisted of two lots and had one building which straddled the boundary of the two lots at the time of purchase.

(ii) In early 2001 a development application was lodged in the name of Mrs Whan to make alterations and additions such that the one building would be partially demolished and rebuilt as two residences and sold separately. (iii) After the granting of development consent Mrs Whan entered into a contract with a builder, AFPA Building Services to do some of the required work to achieve this objective. (iv) The contract had a number of exclusions which were not the responsibility of the builder but of the owner. (v) Mrs Whan and her husband lived very briefly in the two properties, which were then sold to the two sets of applicants (Donnelly and Bentvelzen) and (the Sorbellos). (vi) Mrs Whan did not apply for an owner-builder permit. 22 Although the Member did not enunciate upon which provision of the HBA his determination that Mrs Whan could not have been the holder of an owner-builder permit was founded, it seems that the Member placed reliance upon subs. 31(2)(c) which provides: "(2) The Director-General must reject an application for an owner- builder permit if the Director General is not satisfied: (c) that the single dwelling-house or one of the dwellings comprising the dual occupancy concerned will be occupied as the residence (being, in the case of a dual occupancy, the principal residence) of the applicant after the work authorised by the permit is done." 23 In Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 Glass JA considered the distinction between errors of law and fact. His Honour said at 156: "A finding of fact in the Commission may nevertheless reveal an error of law where it appears that the trial judge has misdirected himself ie he has defined otherwise than in accordance with law the question of fact which he has to answer…….Further an ultimate finding of fact, even in the absence of a misdirection, may reveal error of law if the primary facts found are necessarily within or outside a statutory description and a contrary decision has been made, Hope v Bathurst City Council (1980) 144 CLR 1 at 10; Australian Gas Light Co v Valuer-General (1940) 40 SR (NSW) 126 at 138; 57 WN 53 at 55." 24 In Hope, Mason J said at 7: "Many authorities can be found to sustain the proposition that the question whether facts fully found fall within the provisions of a statutory enactment properly construed is a question of law." 25 The Member appears to have concluded that the Director-General was required by subs. 31(2)(c) to reject an application by Mrs Whan for an owner-builder permit if she had applied. In my opinion the Member arrived at a conclusion which cannot reasonably be supported and an error of law is disclosed. Mrs Whan intended to build and did build two single dwelling-houses which were each located on a separate lot. The first and third defendants occupied each single dwelling-house after the work was done. The primary facts that were found did not necessarily lead to the conclusion that the Director-General must have rejected an application by Mrs Whan for an owner-builder permit. 26 The primary facts as found were capable of satisfying the Director-General that the single dwelling-house on each lot would be occupied as the residence of the applicant after the work authorised by the permit was done which are the matters of which the Director-General is required to be satisfied pursuant to subs. 31(2)(c). The work to be undertaken on each lot on the primary facts was capable of being found to be owner-builder work as defined in subs. 29(1) of the HBA. A question may have arisen as to whether it was necessary for Mrs Whan to apply for an owner-builder permit for each single dwelling-house to be built in which case the Director-General would then be required to consider the existence of special circumstances for the granting of two applications: see subs. 31(3) of the HBA. With respect, the Member erred in law in concluding that Mrs Whan was ineligible for an owner-builder permit. 27 The plaintiffs contend that the Member fell into error when he stated in the Reasons for Decision that: "In Gunn v Steain it was possible to deem the home-owner to be the holder of a permit, as had she chosen to apply for one she would have been eligible."

As the plaintiffs point out, the Associate Justice in her judgment did not consider the eligibility of the applicants in that case for an owner-builder permit. 28 It is evident why her Honour did not do so. An interpretation of the definition of owner-builder that imports a requirement of eligibility for an owner-builder permit would lead to consequences which could not have been intended by the Legislature. An individual who undertakes owner-builder work although ineligible for the grant of an owner-builder permit as a consequence of s 31 of the HBA would not be subject to the obligations imposed on the holders of a permit by the Act thereby depriving successors in title of the protections afforded by the legislation. A purchaser, for example, of a dwelling house constructed by an unqualified individual, who by reason of the failure to undertake an applicable education or training course approved by the Director-General was ineligible for an owner-builder permit, would not be entitled to the benefit of statutory warranties under s 18B of the HBA. The need for consumer protection in these circumstances is manifest. Notwithstanding that the work was in breach of s12 of the HBA, the unqualified and ineligible builder would benefit. As is stated in Pearce and Geddes: Statutory Interpretation in Australia (2006) 6th Edition at [2.37] p 61: "It is reasonably clear that the courts will resist strongly an interpretation of an Act that will permit a person to take advantage of his or her own wrong." See also, for example, The Firm (Australia) Pty Ltd v South Sydney Council [1999] NSWLEC 5 per Lloyd J at [7]. 29 The Member, I am satisfied, misdirected himself by importing into the definition of owner-builder a requirement of eligibility for an owner-builder permit and thereby made an error of law. The Member erred in law in dismissing the applications and making orders for costs against the applicants. 30 The circumstances detailed in questions one and two in the Grounds of Appeal do not precisely reflect the primary facts as found by the Member. Accordingly I propose to answer the first question in the Grounds of Appeal as follows:

On the facts found by the Tribunal the person ( Mrs Whan ) may be entitled to an owner-builder permit under the HBA.

As a result of this decision the circumstances in the second question do not arise. 31 There was misapprehension on the Member's part when he determined that the Tribunal did not have jurisdiction as Mrs Whan was not an owner-builder. The issues to be determined did not concern jurisdiction but went to the merits of the separate applications by Donnelly and Bentvelzen and the Sorbellos. The errors of law established in these appeals are non-jurisdictional in nature. The Tribunal was vested with the jurisdiction to hear and determine the applications by virtue of s 48K of the HBA and s 21 of the CTTT Act. 32 On the primary facts as found the Member did have the jurisdiction to make the orders sought by the plaintiffs. The answer to the third question in the Ground of Appeal is that the Tribunal had jurisdiction to make the orders sought by the plaintiffs. 33 A Ground of Appeal is that the plaintiffs were not given procedural fairness. The plaintiffs submit that the Tribunal decided the applications on a basis that was never put to them, namely, that Mrs Whan was not eligible to obtain an owner-builder permit because she intended to build (and did build) two dwellings. With that submission I do not agree. The issue was raised during submissions on 25 May 2006: see for instance exhibit A Tab 2 TP 95 L25-42, TP 102 L 14-19 and the plaintiffs were provided with the opportunity to address it. Procedural fairness was not denied. 34 In written submissions and in oral argument the defendants contend that the issue presented in the appeals was whether the term "owner-builder" when used in s18C of the HBA has some meaning other than the definition in s3. They argue that what was said in Gunn v Steain by Harrison AsJ was obiter dicta and was incorrect. I reject this contention. The decisions of the Member with respect to a matter of law which are appealed against by the plaintiffs do not raise for consideration the correctness of the judgment in Gunn v Steain. The Member considered that he was bound by the judgment in that case but sought to distinguish it. The plaintiffs do not cavil with the Member's decision to be bound by the judgment but raise on appeal the distinction made by the Member. The issue presented in the appeals so far as the term "owner-builder" when used in s18C arises solely upon this limited basis. In the passage of the judgment of Bryson JA in Kalokerinos which I have quoted (at 17 supra) the constraints in dealing with appeals pursuant to s 67 of the CTTT Act were affirmed. The Court may only deal with a decision of a question with respect of a matter of law which is appealed against (emphasis added) and is not to be regarded as a "gateway" into a wider review: see also Smith v Collings Homes Pty Ltd [2004] NSWCA 75 per Mason P at [23-25]. Accordingly, I do not propose to consider whether Gunn v Steain was correctly decided. 35 In the event of error being found, the plaintiffs submit that the preferable course would be to make the orders that should have been made by the Tribunal. They propound that the available evidence is sufficient to decide the applications in the plaintiffs' favour and subs. 67(3)(a) of the CTTT Act enables this Court to make such orders. The first and third defendants contend that the Member's decision was confined to the determination of the term "owner-builder" and did not deal with many of the merits of the application. They submit that subs. 67(3)(a) does not enable this Court to deal with the substantive merits which are undetermined. 36 The approach to s 67 to which I have referred does not encourage a broad view of what the Court may do under subs. 67(3)(a). If subs. 67(3)(a) does not have the effect of making an appeal into a wider review of the proceedings in the Tribunal, it does not seem to me this Court has the power to go on to determine issues of law and fact which were not the subject of findings by the Tribunal. The focus of subs 67(3) is on the question the subject of the appeal. In the event of there not being remaining issues to be determined after the decision on the question, this Court then, to my mind, has the power to make such order that should, in its opinion, have been made by the Tribunal. This is not the case in the present proceedings. There are issues of law and fact which were not determined by the Member. I propose to remit the decisions that I have made on the questions the subject of each of the appeals to the Tribunal and order a re-hearing of each of the proceedings. Although the Court has the power to grant prerogative relief pursuant to s 65 of the CTTT Act I do not consider that it is appropriate to do so. Summary of Decisions 37 The decisions on the questions the subject of each of the appeals are as follows:

Question one: On the facts found by the Tribunal the person ( Mrs Whan ) may be entitled to an owner-builder permit under the HBA. Question two: As a result of the decision on question one the circumstances in the second question do not arise. Question three: The Tribunal had jurisdiction to make the orders sought by the plaintiffs. 3(D): The plaintiffs were not denied procedural fairness.

Orders 38 I remit my decisions on the questions the subject of each of the appeals to the Consumer, Trader and Tenancy Tribunal and order a re-hearing of each of the proceedings by the Tribunal.

In each of the appeals, the first defendant and third defendant are to pay the costs of the plaintiffs.

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.