Solicitors:
Bannermans Lawyers (Applicant)
Madison Marcus (First Respondent)
Harrington Lawyers (Second Respondent)
File Number(s): HB 17/51467
Publication restriction: Nil
[2]
Introduction
The substantive proceedings relate to an application by the Applicant (the Owners) brought under the Home Building Act 1989 (the HB Act). The building works that are the subject of the application consist of a 273 lot strata scheme, comprised of five buildings. As successors in title, the Owners seek to enforce statutory warranties against the First Respondent (the Developer) and the Second Respondent (the Builder).
These are reasons for decision in relation to two interlocutory applications:
1. An application made by the Builder to dismiss the proceedings; and
2. An application made by the Owners to transfer the proceedings to the Supreme Court.
For the reasons set out below, the dismissal application has been refused and the transfer application has been granted.
[3]
Background
The application was lodged on 4 December 2017. The application form indicates that the Owners seek a work order "to the approximate value" of $500,000. In Points of Claim annexed to the application, the Owners seek the following orders:
a. That the Respondents pay the Applicant's damages [sic].
b. That the Respondents return to rectify defective work pursuant to section 48O of the Home Building Act 1989 …..
c. That the Respondents pay the Applicant's costs of these proceedings.
Amended Points of Claim seeking the same orders were filed on 16 February 2018.
Attached to the application is a general building defects report dated 22 December 2016, prepared by Core Project Consulting Pty Ltd (Core Consulting).
The parties were given leave to be legally represented on 17 January 2018, on an application made by the Developer.
The matter first came before the Tribunal for directions on 2 February 2018. On that occasion, the Tribunal made orders including an order that the Owners file revised points of claim.
The matter next came before the Tribunal on 16 March 2018. On that occasion, the Tribunal made orders including an order that the Builder was to provide points of defence addressing jurisdictional issues, including issues in respect to the date of completion of the works and whether the application was within time.
The next directions hearing took place on 18 June 2018. By that date, the Owners had not completed their evidence and time for them to do so was extended until 23 July 2018. The Developer and the Builder were also given extensions of time to provide their evidence and the Tribunal ordered that a joint expert report be filed by 1 October 2018.
On 23 July 2018, the Owners sought a further extension of time in which to provide their evidence. That application indicated that the Owners' expert witnesses needed additional time to finalise their reports due to the size of the complex and the extent of the defects. It was further indicated that one of the expert reports would exceed 1000 pages in length.
The Tribunal considered the extension of time application in chambers and on 27 July 2018 granted an extension of time until 6 August 2018. On the basis that a 1000 page report would be filed, the Tribunal noted that the Owners must satisfy the Tribunal that the application was within the jurisdictional limit of the Tribunal. The Tribunal further noted that if the timetable were not complied with, the Owners would need to show cause why the application should not be dismissed under cl 10 of Schedule 4 of the Civil and Administrative Tribunal Act 2013 (the NCAT Act). The Tribunal extended time for the Developer and the Builder to provide their evidence until 11 October 2018.
On 3 August 2018, the Owners filed four expert reports. The Owners' solicitor's covering letter stated that these reports did not complete the Owners' evidence, that a hydraulics defects report was in the process of being finalised and that the report and a Scott Schedule would be "filed shortly".
The four expert reports filed were:
1. An engineering report dated 4 May 2018 prepared by Wyste Teerling of Core Consulting;
2. A fire safety defects report dated June / July 2018 prepared by Sue Scott of Eagle Fire and Safety;
3. An SMATV (Single Master Antenna Television) System Report dated 17 May 2018, prepared by David Sevier of DigiSat Technology Australia Pty Ltd. (Note: This report had previously been filed on 18 May 2018); and
4. A building defects report dated 2 August 2018, prepared by John Riad of Landlay Consulting.
The longest of these reports is that of Mr Riad, which runs to three volumes and more than 1000 pages.
On 7 August 2018, the Builder sought the dismissal of the application under cl 10 of Schedule 4 of the NCAT Act. The Builder noted that the Owners had not indicated whether the application was within the jurisdictional limit of the Tribunal and also noted that the Tribunal could dismiss the application under s 55 of the NCAT Act.
On 10 August 2018, the Owners filed a hydraulic report dated 7 August 2018, prepared by Mark Albury of ISE Building Services Consultants.
On 27 August 2018, the Owners filed supplementary fire safety defects report dated 23 August 2018, prepared by Sue Scott of Eagle Fire and Safety. In her supplementary report, Ms Scott questions the suitability of light weight cladding panels installed on three buildings in the strata scheme, including whether the installed panels pose a fire safety risk.
On the same date, the Owners filed a Scott Schedule, which runs to 435 pages and lists 804 claimed defects.
The matter was listed for directions on 31 August 2018. On that date, the Owners indicated that they proposed to make an application to transfer the proceedings to the Supreme Court. Procedural directions were made in respect of the proposed application.
The Owners filed an application for transfer of the proceedings on 14 September 2018. In that application, the Owners also sought to amend their application to seek an order for damages in excess of $500,000. In support of the transfer application, the Owners rely on a letter from dated 18 September 2018 from Mr John Riad of Landlay Consulting, one of their expert witnesses, who states that he carried out a preliminary estimate of remedial works and expresses the opinion that costs of remedial works would "exceed $1Mil". Mr Riad is described in the letter as a remedial engineer.
The Developer neither consented to nor opposed the transfer application.
The Builder opposed the transfer application and pressed an application that the proceedings be dismissed under s 55(1)(b) of the NCAT Act on the basis that the proceedings are misconceived. An application to dismiss the proceedings under cl 10 of Schedule 4 was not pressed in oral or written submissions.
[4]
Evidence and submissions
The parties made oral submissions at a hearing on 12 October 2018. The Owners were ordered to file and serve submissions in reply in relation to the transfer application and submissions in response to the dismissal application by 22 October 2019. The Builder was ordered to file and serve submissions in reply in relation to the dismissal application by 29 October 2019.
The decision was reserved, with the applications to be determined on the basis of the oral submissions made on 12 October 2018 and the written submissions.
In making a decision I have considered:
1. The oral and written submissions of the parties;
2. The affidavit of Mr Peter Bijjani, the Builder's solicitor, dated 8 October 2018; and
3. The material contained on the Tribunal's file.
[5]
Issues
The issues to be determined are:
1. Should the application be dismissed on the basis that it is misconceived?
2. Should the proceedings be transferred to the Supreme Court?
[6]
Should the application be dismissed on the basis that it is misconceived?
Section 55 of the NCAT Act relevantly states:
55 Dismissal of proceedings
(1) The Tribunal may dismiss at any stage any proceedings before it in any of the following circumstances:
……
(b) if the Tribunal considers that the proceedings are frivolous or vexatious or otherwise misconceived or lacking in substance,
……..
In summary, the Builder submits that:
The Tribunal must give a harmonious operation to s 55 and to cl 6 of Schedule 4 of the NCAT Act, which deals with transfer of proceedings from the Tribunal to a Court.
The proper meaning of "misconceived" is derived from a holistic analysis of the NCAT Act.
Proceedings in the Tribunal which derogate from party's obligation to cooperate with the Tribunal to meet the "guiding principle" set out in s 36(1) of the NCAT Act are misconceived because to bring such proceedings mistakes the fundamental role of applicants in the Tribunal.
Proceedings which do not facilitate the discharge of this duty are misconceived.
The Owners' proceedings are misconceived because they were commenced without an inquiry being made as to whether the Tribunal had jurisdiction.
Prior to the making the application, the Owners were in possession of reports which indicated the basis for alleging over 100 defects and it ought to have been apparent that those defects might exceed $500,000 to rectify. The reports went into detail about the extent of the alleged defects and the manner of rectification.
It was within the expertise of Core Project Consulting Pty Ltd to given an opinion on rectification costs.
The experts who prepared the reports were not instructed to give an opinion on the total value of the claim. Rather, the applicant made a conscious forensic choice not to ask the authors of the reports to given an opinion on quantum.
The Owners did not take steps to ascertain the total value of the claim until some eleven months after filing the application and only did so because ordered to do so by the Tribunal. The Owners had no intention of quantifying the claim on the "misconceived notion" that it was not required to do so because it was merely seeking rectification orders and not damages.
The Owners did not know the quantum of the claim when it instructed Mr Riad to give an opinion on quantum.
The quantum remains unclear because Mr Riad's quantification concerns the defects on which he has given an opinion, "which means that the quantum is much greater than he has stated because he has not captured the quantum of the defects identified by other experts".
The Owners were reckless as to whether the Tribunal had jurisdiction and passed up repeated opportunities to instruct its experts to quantify the claim or engage another expert for that task. The Owners must have guessed the amount claimed in the application, which coincides with the Tribunal's jurisdictional limit.
Filing the application was plainly advantageous to the Owners because the statutory warranty period for non-major defects expired on 8 December 2017, four days after the application was filed. The Owners have also availed themselves of the benefit of producing multiple reports and affidavits without the need to adhere to strict rules of evidence.
It is up to an applicant to assess whether its claim falls within the Tribunal's jurisdiction. Having concluded that the claim is within the jurisdictional limit, there are significant advantages in terms of costs and time in commencing proceedings in the Tribunal. The quid pro quo for utilising the numerous advantages offered by the Tribunal is that the applicant must make a considered assessment of quantum.
Time and costs have been wasted by the parties and the Tribunal in these proceedings which the Owners now tell the Tribunal it has no jurisdiction to hear.
This matter can be contrasted with a matter where an applicant receives a report prior to filing an application which states that total value of the claim is below $500,000 and subsequently a different report is obtained which concludes that the total value of the claim exceeds $500,000. Transfer would be justified in such proceedings because the applicant took reasonable steps to ascertain the total value of the claim. In the absence of all reasonable steps having been taken, it is difficult to see how an applicant can sign a Home Building Application form indicating that the applicant's belief that the claim does not exceed $500,000.
The commencement of these proceedings does not constitute discharge of the Owners' duty to the Tribunal.
It cannot be said to be consistent with the Owners' duty to the Tribunal to carry on proceedings for eleven months when the Owners had not bothered to check that the Tribunal was the correct jurisdiction for the proceedings.
I have considered the meaning of the term "misconceived".
In Alchin v Rail Corporation NSW [2012] NSWADT 142 Judicial Member Wright SC (as he then was) considered the meaning of the equivalent provision to s 55(1)(b) in the Administrative Decisions Tribunal Act 1977. He stated at [25] to [26]:
25 The expressions used in s 92(1)(a)(i) of the ADA, namely "misconceived" and "lacking in substance" are found not only in the ADA but also in s 73(5)(g) of the ADT Act and similar legislation in other states. With respect to a similar provision found in the Equal Opportunity Act 1984 (Vic), Ormiston JA in State Electricity Commission of Victoria v Rabel [1998] 1 VR 102 at [14] said:
"misconceived" and "lacking in substance" have not, so far as I am aware, been used in this context before though each expression is commonly used by lawyers, the one connoting a misunderstanding of legal principle and the other connoting an untenable proposition of law or fact. If one may discern, in these provisions, an attempt to express the powers of tribunals in non-technical language, then "misconceived" would represent a claim which did "not disclose a cause of action" ..., whereas "lacking in substance" might be seen to represent a claim where the defendant could obtain summary judgment ...
26 This approach of construing "misconceived" as including a misunderstanding of legal principle and "lacking in substance" as encompassing an untenable proposition of fact or law has been applied by the Tribunal in many decisions including, for example, Keene v Director-General, Department of Justice and Attorney-General [2011] NSWADT 59 at [14], McDonald v Central Coast Community Legal Centre [2008] NSWADT 96 at [22] and Stanborough v Woolworths Ltd [2005] NSWADT 203 at [50].
Alchin v Rail Corporation NSW was cited by the Appeal Panel with evident approval in BDK v Department of Education and Communities [2015] NSWCATAP 129 at [63]. The appeal in that matter arose from the Tribunal's decision to dismiss an application on the basis that it was vexatious. The Appeal Panel stated at [64] to [66]:
64 In the present case, the Tribunal referred to the frequently-cited explanation of this term by Roden J in Attorney-General v Wentworth (1988) 14 NSWLR 481 at 491:
1. Proceedings are vexatious if they are instituted with the intention of annoying or embarrassing the person against whom they are brought.
2. They are vexatious if they are brought for collateral purposes, and not for the purpose of having the court adjudicate on the issues to which they give rise.
3. They are also properly to be regarded as vexatious if, irrespective of the motive of the litigant, they are so obviously untenable or manifestly groundless as to be utterly hopeless.
65 It will be seen that Roden J's first category covers conduct that falls within the meaning of 'frivolous', while his third category embraces the kind of cases to which the expressions 'misconceived' and 'lacking in substance' are directed (or, in the case of the UCPR categories, cases not disclosing a reasonable cause of action).
66 In our view a reasonably broad connotation should be given to the meaning of the four categories of conduct identified by s 55(1)(b). The intent of the provision, as we see it, is to seek to give the Tribunal a broad power to deal with abuses of its processes, and for them to be interpreted and applied in a power which captures any kind of abuse of process, that can reasonably be seen to fall within their compass. While 'misconceived' and 'lacking in substance' may be seen as relatively specific terms, we think a flexible, purposive interpretation can be adopted in determining whether proceedings are 'frivolous' or 'vexatious', conscious always of the gravity for an applicant or plaintiff of summary dismissal of proceedings.
[7]
Should the proceedings be transferred to the Supreme Court?
The Owners seek transfer of the proceedings to the Supreme Court, on the basis that the cost of rectifying building defects is likely to exceed the Tribunal's jurisdictional limit of $500,000.
The Owners relevantly submit that:
If a work order is made, there is a risk that the Owners' claim in respect of any non-compliance with the order could be capped at $500,000.
The amount claimed by the Owners is the determining factor in the transfer application and any evidence or submissions provided by the respondent are irrelevant.
It is arguable that the Owners may only recover a money order from the Developer as the Developer is not licensed under the HB Act.
The Owners do not know what it would cost either of the respondents to rectify the defects. However, this is not relevant to the transfer application, as there is evidence that the rectification cost will exceed the Tribunal's jurisdictional limit.
The Owners have asked the respondents to rectify the defects, but the respondents have not attempted to rectify the claimed defects.
In relation to the transfer application, the Builder relevantly submits that:
The Owners require leave to amend the application to seek more than $500,000 pursuant to s 53 of the NCAT Act.
The Owners reliance on Mr Riad's letter is directly contrary to what Schmidt J stated was to occur in similar circumstances in The Owners - Strata Plan No. 70030 v Decon Australia Pty Ltd [2014] NSWSC at [61] (Decon).
The Owners do not know the quantum of their claim because they have not made the necessary inquiries. All that the Owners know is that the claim "will exceed $1Mil" according to Mr Riad's letter.
The application for leave to further amend its claim should be rejected because it is not in the interests of justice to allow the amendment in circumstances where no enquiry into the total value of the claim was made but could have been made by the Owners prior to filing the application.
Prior to and during the course of the proceedings, the Owners gave instructions to experts to prepare expert evidence without instructing them to give an opinion on the cost of rectification.
Mr Riad's letter provided on 13 September 2018 states that a preliminary estimate of the cost of remedial works would exceed $1Mil. It is apparent from the letter than Mr Riad was instructed to determine whether costs would exceed $500K, $750K or $1Mil, which amounts correspond to the jurisdictional limits of the Tribunal, the District Court and the Supreme Court respectively.
Clause 6(1) of Schedule 4 of the NCAT Act provides:
6 Transfer of proceedings to courts or to other tribunals
(1) If the parties in any proceedings for the exercise of a Division function so agree, or if the Tribunal of its own motion or on the application of a party so directs, the proceedings are:
(a) to be transferred to a court (in accordance with the rules of that court) that has jurisdiction in the matter, and
(b) to continue before that court as if the proceedings had been instituted there.
The wording of clause 6(1) indicates that a claim does not need to exceed the Tribunal's jurisdictional limit before proceedings are transferred. The Tribunal has a discretion to transfer proceedings, whether or not such an application is made by one of the parties. The discretion to make such an order, as is the case with any other discretion, must be exercised judicially.
In this case, although the application form indicates that the Owners were seeking a work order to the approximate value of $500,000, the points of claim indicate show that the Owners are also seeking damages. In these circumstances, I accept that a money order has always been sought, even if only in the alternative to a work order.
The Tribunal raised the issue of quantum with the Owners' solicitor during the time the proceedings were before the Tribunal. Mr Riad's opinion on that issue was finally obtained several months after the application was lodged. In these circumstances, I conclude that the Owners' legal representative failed to conduct the proceedings in a particularly efficient manner. I also conclude that the conduct of the proceedings has led to both delay and unnecessary costs being incurred by the parties. However, I have already found that the failure to obtain quantum evidence prior to lodging the application does not render the proceedings misconceived. Further, in my view, the conduct of the proceedings does not of itself warrant the refusal of the application to transfer the proceedings in circumstances where the statutory warranty period for non-major defects has now expired.
In relation to the evidence that the cost of rectifying the claimed defects would exceed $500,000, Mr Riad's opinion in this regard is not contained in an expert report. However, the Builder's submissions do not take issue with the correctness of Mr Riad's opinion in respect of those claimed defects dealt with in Mr Riad's report. Rather, as noted above, the Builder submits that Mr Riad's quantification concerns the defects on which he has given an opinion, "which means that the quantum is much greater than he has stated because he has not captured the quantum of the defects identified by other experts". I conclude from this that the Builder does not disagree that the cost of rectification of all the claimed defects - which now also include a possible fire safety defect relating to cladding - is likely to exceed the Tribunal's jurisdictional limit.
I have considered Schmidt J's decision in Decon. That matter involved an appeal against a decision made by the Consumer, Trader and Tenancy Tribunal (the CTTT) in home building proceedings. The proceedings were characterised by the applicant's delay in complying with Tribunal orders.
[8]
Costs
As the amount claimed in these proceedings exceeds $30,000, r 38 of the Civil and Administrative Rules 2014 and not s 60 of the NCAT Act applies in relation to costs. This means that special circumstances do not need to be established for a costs order to be made. The usual rule in relation to costs applies: that is, that costs follow the event, absent some disentitling behaviour by the successful party: Latoudis v Casey [1990] 170 CLR 534; Oshlak v Richmond River Council [1998] HCA 11.
Where an order is made transferring proceedings from the Tribunal to a Court, it is common to make an order requiring the applicant for transfer to pay the other party's costs arising from the transfer. I propose to make such an order in this case, subject to [74] below.
The Builder has been unsuccessful in both the application to dismiss the proceedings and the application to transfer the proceedings. In such circumstances, I am satisfied that the Builder should pay the Owners' costs of the application for dismissal and the application for transfer.
I have given the parties an opportunity to apply for a different costs order.
[9]
Orders
1. The application to dismiss the proceedings under s 55(1)(b) of the Civil and Administrative Tribunal Act 2013 is refused.
2. The application is amended under s 53(1) of the Civil and Administrative Tribunal Act 2013 to an amount exceeding $500,000.
3. The proceedings are transferred to the Supreme Court of New South Wales pursuant to cl 6(1) of Schedule 4 of the Civil and Administrative Tribunal Act 2013 and are to continue in that Court as if they had been instituted there.
4. Subject to order 5, the Second Respondent is to pay the Applicant's costs of the dismissal application and the transfer application, on the ordinary basis, as agreed or assessed.
5. Otherwise, the Applicant is to pay both parties' costs arising from the transfer of the proceedings, on the ordinary basis, as agreed or assessed.
6. Orders 4 and 5 are suspended and the following orders take effect if any party seeks costs orders different to orders 4 and 5 (an alternative costs order).
7. The party seeking an alternative costs order (the costs applicant) is to file and serve its costs application and a brief submission in support of the application within 14 days of the publication of these orders.
8. The costs respondent(s) is/are to file and serve any submissions response to the costs application within 14 days thereafter.
9. The costs applicant is to file and serve any submissions in reply within seven days thereafter.
10. If more than one party applies for an alternative costs order, the parties are to file an indexed and paginated costs bundle at the end of the submission period.
[10]
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: 09 May 2019
The meaning of "misconceived" in an equivalent provision to s 55(1)(b): s 75(1)(a) of the Victorian Civil and Administrative Tribunal Act 1998 has been considered in a number of cases by the Victorian Civil and Administrative Tribunal (VCAT).
For example, in Ballarto Pastoral Pty Ltd v Department of Primary Industries [2006] VCAT 478, VCAT stated at [32] that "misconceived" in the context of s 75(1)(a) means "obviously untenable or groundless …. or means that the applicant has brought an incorrect type of application". In Kyriakidis v State of Victoria (Human Rights Lits) [2014] VCAT 1039 (21 August 2014), VCAT characterised as misconceived an application in which the complaint as articulated was not capable as a matter of law of enlivening VCAT's power to make the order sought. This conclusion was also reached in Keogh v Higgins (Civil Claims) [2014] VCAT 1256 (3 October 2014).
I am not satisfied that the current application can be characterised as misconceived within the meaning of that term discussed in the authorities set out above. In relation to this, the application does not disclose any relevant misunderstanding of legal principle. There is no dispute that the claim constitutes a building claim, as defined by s 48A of the HB Act. Further, there is no dispute that as successors in title to the original owner, the Owners have the benefit of the statutory warranties set out in s 18B of the HB Act. Whether the Owners have a cause of action for breach of those statutory warranties depends on whether the application was lodged within the statutory warranty period.
In this case, there appears to be no dispute that the application was lodged four days before the expiry of the two year statutory warranty that applies in respect of non-major building defects. The Owners have filed expert evidence capable of supporting a finding that the respondents have breached relevant statutory warranties. Given that at the time of filing the application the Owners did not have expert evidence in relation to all claimed defects, it is not surprising that they did not have quantum evidence at that time. However, even accepting that the Owners could have made inquiries as to quantum prior to commencing proceedings, this does not mean that the application does not disclose a cause of action. On the contrary, the application clearly discloses a cause of action for breach of statutory warranty.
Further, the fact that the Owners did not obtain quantum evidence prior to lodging the application does not mean that the application can be characterised as "obviously untenable", "manifestly groundless" or "utterly hopeless". Nor was the application as articulated one that was not capable as a matter of law of enlivening the Tribunal's power to make the orders sought. As noted above, the application as lodged is a building claim filed in the Tribunal within the relevant time limitation period which is supported by evidence demonstrating a cause of action within the jurisdiction of the Tribunal to hear and determine. The only issue that relevantly raises a question of the jurisdiction is the quantum now claimed.
The respondent submits that proceedings in the Tribunal "which derogate from a party's obligation to cooperate with the Tribunal to meet the "guiding principle" set out in s 36(1) of the NCAT Act are misconceived because to bring such proceedings mistakes the fundamental role of applicants in the Tribunal" and that proceedings "which do not facilitate the discharge of this duty are misconceived".
The "guiding principle" for the NCAT Act is set out in section 36, which relevantly provides:
36 Guiding principle to be applied to practice and procedure
(1) The guiding principle for this Act and the procedural rules, in their application to proceedings in the Tribunal, is to facilitate the just, quick and cheap resolution of the real issues in the proceedings.
(2) The Tribunal must seek to give effect to the guiding principle when it:
(a) exercises any power given to it by this Act or the procedural rules, or
(b) interprets any provision of this Act or the procedural rules.
(3) Each of the following persons is under a duty to co-operate with the Tribunal to give effect to the guiding principle and, for that purpose, to participate in the processes of the Tribunal and to comply with directions and orders of the Tribunal:
(a) a party to proceedings in the Tribunal,
(b) an Australian legal practitioner or other person who is representing a party in proceedings in the Tribunal.
…….
I am not satisfied that the obligation that s 36(3) imposes on parties and their legal representatives starts prior to the commencement of proceedings in the Tribunal. The obligation on parties to cooperate with the Tribunal in giving effect to the guiding principle cannot reasonably be said to start before the Tribunal itself has an obligation to give effect to the guiding principle. Even if that were so, I am not satisfied that commencing proceedings in the Tribunal prior to obtaining clear quantum evidence amounts to a breach of a party's obligation under s 36(3).
In view of its relatively cheap and simple process, it is not unreasonable for a party seeking to enforce statutory warranties under the HB Act at a time when the statutory warranty period is about to expire, to bring those proceedings in the Tribunal. In the ordinary course of events, a decision to do so is of benefit not only to an applicant, but also to the respondent in the proceedings. Both parties have the benefit of the less expensive and more informal Tribunal processes. There may be circumstances in which commencing proceedings without thoroughly investigating whether a claim was within the Tribunal's jurisdictional limit could amount to an abuse of process, but I am not satisfied that this is so in circumstances where all of the expert evidence has not been obtained prior to commencing proceedings.
In my view, to find that an application is misconceived because, prior to commencing proceedings, an applicant has not complied with obligations that come into existence after proceedings are commenced would be contrary to the guiding principle. While it may be "quick" and "cheap" to dismiss proceedings because an applicant has not obtained quantum evidence prior to lodging an application in circumstances when it arguably should have done so, it would not be "just" to do so in circumstances where dismissal of the proceedings means that the applicant would be precluded from pursuing a remedy it otherwise has a statutory right to pursue. To the extent that the Builder and/or the Developer have been put to unnecessary cost because of the Owners' conduct of the proceedings, this can be taken into account in a costs application.
This does not mean that applicants should not obtain evidence to confirm that their claim is within the Tribunal's jurisdictional limit prior to lodging an application. This is a proper course to take and consistent with the Tribunal's guidelines for litigants. However, it is not surprising that some applicants fail to do so, given the relatively short two-year statutory warranty period that applies under the HB Act in respect of non-major defects. Applicants must lodge an application within that period in order to preserve their rights. Preserving rights in respect of the statutory warranty period is particularly important for owners corporations, which have a duty to maintain and keep the common property of a strata scheme in a state of good and serviceable repair under s 106(1) of the Strata Schemes Management Act 2015. A failure to comply with this duty may expose an owners corporation to the risk of an action for damages.
It is also not surprising that an owner that has not obtained clear evidence in respect of quantum will commence proceedings in the Tribunal rather than in a Court. This is so regardless of whether the owner is an individual, an owners corporation, or another legal entity. In relation to this, it is always open to an applicant to submit to the Tribunal's jurisdictional limit even if evidence supports a conclusion that the claim exceeds that limit. Furthermore, by virtue of s 48L of the HB Act the Tribunal is the preferred jurisdiction for the determination of residential building claims.
The failure to obtain quantum evidence until proceedings have been before the Tribunal for some time is likely to lead to delay and increased costs. However, in the present case, where the claim relates to residential building work, where it has been lodged within the relevant limitation period and where there is evidence capable of supporting a cause of action within the Tribunal's jurisdiction, I am not satisfied that the lack of quantum evidence at the time proceedings were commenced means that the proceedings are misconceived. Nor am I satisfied that the commencement of the proceedings can be characterised as a failure to comply with s 36(3) or that the proceedings are otherwise an abuse of process. Any prejudice caused to the Respondents by the Owners' conduct of the proceedings to date can be appropriately dealt with through costs.
The application to dismiss the proceedings under s 55(1)(b) of the NCAT Act is refused.
At the time the applicant commenced proceedings in the CTTT in 2009, the amount claimed was $329,005. That amount was within the CTTT's jurisdiction and had not been amended. Two applications were before the Tribunal on what was supposed to be the date of the final hearing in February 2013:
1. The applicant's application to transfer the proceedings to the Supreme Court because the applicant had obtained evidence that its claim exceeded the CTTT's jurisdictional limit; and
2. The respondent's application to strike out the proceedings under s 30 of the Consumer, Trader and Tenancy Tribunal Act 2001.
The CTTT dismissed the proceedings on the basis that the conduct of the proceedings had caused disadvantage to the respondent. Because it dismissed the proceedings, it did not hear and determine the transfer application.
The applicant appealed the CTTT's decision to the Supreme Court. On appeal, the applicant's position was that the claim before the CTTT, as at the date of the hearing in February 2013, was for an amount beyond its jurisdictional limit. The applicant submitted that the CTTT therefore lacked jurisdiction to determine any matter other than application for referral to the Supreme Court and erred in dismissing the proceedings, as it lacked the jurisdiction to do so.
Schmidt J found that the CTTT had denied procedural fairness to the applicant by not hearing both applications. In particular, Schmidt J found that the CTTT was required to determine whether it had jurisdiction to deal with the application. Schmidt J stated at [63] that jurisdiction "was an issue between the parties that had to be resolved, before the power to dismiss was exercised".
In relation to the issue of jurisdiction, and in particular in relation to the fact that the amount the applicant claimed had not been amended from $329,005, Schmidt J noted:
60 It follows that, contrary to the case advanced for the plaintiff in these proceedings, unless the claim brought before the Tribunal was amended to increase it beyond the statutory limit of $500,000, the proceedings remained within the Tribunal's jurisdiction.
61 That was not how the plaintiff perceived the legislative scheme. It relied on its new expert's statutory declaration to provide a basis for its transfer application, taking the view that his advice that what was claimed would amount to some $1.8 million, was a sufficient basis to bring the claim beyond the Tribunal's jurisdiction. That is not how the Home Building Act operates. Section 48K confines the Tribunal's jurisdiction under the Act to claims brought to the Tribunal which fall below the specified amount, not the advice on which those claims rest.
While I note Schmidt J's comments, the basis on which the Tribunal can amend an application so that it seeks an amount that is beyond the Tribunal's jurisdiction is unclear. Further, in respect of the present proceedings, there is nothing in the wording of clause 6 of Schedule 4 that requires an application to be amended before an order can be made transferring proceedings.
In my view, Schmidt J's comments address the position of the applicant in Decon that the CTTT had no jurisdiction to dismiss the proceedings because on the date of the hearing the claim exceeded $500,000. As at the date of the hearing, the applicant's claim was for $329,005, so it was within the Tribunal's jurisdictional limit. To that extent, Schmidt J's comments are also relevant to the Owners' submission that "the amount claimed by the Owners is the determining factor in the transfer application and any evidence or submissions provided by the respondent are irrelevant".
Decon is on point in respect of this issue. As at the date of the transfer application, the application before the Tribunal was for $500,000, not an amount exceeding that sum. Transfer of proceedings from the Tribunal under cl 6 of Schedule 4 involves the exercise of a discretion, which means that the amount claimed by the Owners is not "the determining factor" in the transfer application. The Builder's submissions in response to the application are clearly relevant to the exercise of the discretion.
That said, I am not satisfied that Schmidt J's comments in Decon establish a condition precedent for an order transferring proceedings from the Tribunal to the Supreme Court; that is, I am not satisfied that the only basis on which proceedings may be transferred is if the Tribunal makes an order amending the application to a sum beyond the Tribunal's jurisdiction.
In any event, the Owners have sought an amendment of the application.
Section 53 of the NCAT Act allows the Tribunal to amend applications. It relevantly states:
53 Amendments and irregularities
(1) The Tribunal may, in any proceedings, make any amendments to any document (for example, an application or appeal) filed in connection with the proceedings that the Tribunal considers to be necessary in the interests of justice.
(2) Any such amendment may be made:
(a) at any stage of the proceedings, and
(b) on such terms as the Tribunal thinks fit,
but may only be made after giving notice to the party to whom the amendment relates.
Although the Owners did not provide evidence specifically addressing "the interests of justice", I am satisfied that the interests of the Owners in being able to enforce the statutory warranties under the HB Act to their full extent outweigh the interests of the Builder in keeping the proceedings in the Tribunal. If the proceedings are dismissed rather than transferred, an application in the Supreme Court seeking to enforce statutory warranties in respect of non-major defects will be time-barred.
Further, if the Owners' application remains in the Tribunal, the Owners will be limited to seeking $500,000 in damages and, while I do not need to decide this point for the purpose of determining the transfer application, the Owners may also be limited to seeking a $500,000 work order. Given that the Builder does not appear to be contesting the claim that rectification costs will exceed $1Mil, I am satisfied that it would be in the interests of justice for the matter to be transferred to a jurisdiction in which the full extent of the Owners' claim can be argued.
In circumstances where there appears to be no real dispute that the cost of rectification of the claimed defects is likely to exceed $500,000, where refusal of the transfer application may have the effect of limiting the Owners' remedy to a sum significantly less than the likely rectification cost, where there is expert evidence in support of the Owners' claim in respect of defective residential building work and where the statutory warranty period in respect of non-major defects has now expired, I am satisfied that an amendment of the application is necessary in the interests of justice.
I am satisfied that a transfer of the proceedings will not limit the ability of either the Builder or the Developer to defend the Owners' claim. In relation to this, the Respondents have not as yet filed and served expert evidence in defence of the Owners' claim. However, to the extent that the Builder and the Developer have incurred additional costs arising from the Owners' delay in obtaining evidence generally and evidence concerning quantum in particular, I am satisfied that this can be dealt with in the context of the determination of costs.
As I am satisfied that an amendment of the application should be allowed to bring the amount claimed outside of the Tribunal's jurisdiction, the discretion to transfer the proceedings to the Supreme Court should be exercised in favour of the Owners.