Berkovich and Farinola
[2012] WASAT 29
•14 FEBRUARY 2012
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL
STREAM: COMMERCIAL & CIVIL
ACT: BUILDING SERVICES (COMPLAINT RESOLUTION and ADMINISTRATION) ACT 2011 (WA)
CITATION: BERKOVICH and FARINOLA [2012] WASAT 29
MEMBER: MS NATASHA OWEN-CONWAY (MEMBER)
HEARD: DETERMINED ON THE DOCUMENTS
DELIVERED : 14 FEBRUARY 2012
FILE NO/S: CC 1616 of 2011
BETWEEN: LOURO BERKOVICH
DRAGICA BERKOVICH
ApplicantsAND
LEONARDO FARINOLA
DIANA FARINOLA
Respondents
Catchwords:
Jurisdiction of Tribunal Referral to Tribunal by Building Commissioner Section 11(1)(d) of the Building Services (Complaint Resolution and Administration) Act 2005 (WA) Cost plus contract Home Building Work Contract
Legislation:
Builders' Registration Act 1939 (WA), s 12A
Building Services (Complaint Resolution and Administration) Act 2011 (WA), s 5, s 5(1), s 5(2), s 11(1)(d), s 133, s 133(1)
Home Building Contracts Act 1991 (WA), s 3, s 14(1), s 17, s 29, Sch 1
State Administrative Tribunal Act 2004 (WA), s 47(2)
Result:
Application dismissed in part for want of jurisdiction
Category: B
Representation:
Counsel:
Applicants: Self-represented
Respondents : Self-represented
Solicitors:
Applicants: Self-represented
Respondents : Self-represented
Case(s) referred to in decision(s):
Nil
REASONS FOR DECISION OF THE TRIBUNAL:
Summary of Tribunal's decision
On 14 October 2011, the Building Commissioner's authorised officer referred a complaint made to the former Building Disputes Tribunal by Mr and Mrs Berkovich on 11 March 2011 against Mr and Mrs Farinola to the State Administrative Tribunal.
The complaint against the respondents made to the Building Disputes Tribunal is that Mr and Mrs Farinola, who conducted business as builders in partnership, had failed to complete the construction of the home they were obliged to construct pursuant to the contract between the parties dated 11 December 2009. The contract between the parties is entitled 'cost plus contract'. It is common cause between the parties that Mr and Mrs Berkovich cannot or will not pay any additional monies to Mr and Mrs Farinola or their agents so that Mr and Mrs Farinola may complete the construction of Mr and Mrs Berkovich's home to the level of practical completion. Mr and Mrs Farinola contended that they are not obliged to complete the construction of the home to practical completion as their contract with Mr and Mrs Berkovich required them to complete the construction of the home to lockup stage. Alternatively, Mr and Mrs Farinola contend that they are not obliged to undertake any work in circumstances in which their last account remains unpaid. Further or alternatively, Mr and Mrs Farinola contend that they have terminated the contract to construct Mr and Mrs Berkovich's home as a result of Mr and Mrs Berkovich's breach of contract in not making payment of the last invoice issued by Mr and Mrs Farinola pursuant to the terms of the contract.
Mr and Mrs Berkovich wish to raise issues concerning their lack of knowledge, and consent to the terms of the cost plus contract signed by them on 11 December 2009. Further, Mr and Mrs Berkovich wish to raise the issue of whether Mr and Mrs Farinola contracted with them, rather than a third party who represented herself to Mr and Mrs Farinola as Mr and Mrs Berkovich's agent.
The Tribunal concluded that, as the majority of the complaint items concern a breach of a cost plus contract by the respondents which are unrelated to the proficiency or the building services provided by Mr and Mrs Farinola, the Tribunal has no jurisdiction to hear and determine the dispute concerning those complaint items. The matters raised by Mr and Mrs Berkovich concerning misrepresentation or unconscionable conduct, allegedly inducing them to enter into the cost plus contract with Mr and Mrs Farinola and pay a considerable sum of money to Mr and Mrs Farinola for the construction of the home pursuant to that contract, are not matters that are properly the subject of the existing complaint. In the case of these contractual complaints, the Tribunal has concluded that the application is misconceived and, pursuant to s 47(2) of the State Administrative Tribunal Act 2004 (WA), has dismissed that part of the application. As to the additional matters concerning alleged unconscionable conduct and/or misleading and deceptive conduct, those matters are not raised by the complaint to the Building Disputes Tribunal, were not therefore referred by the Building Commissioner to this Tribunal for determination and cannot be determined in these proceedings.
The Tribunal has concluded that two items referred to in the existing complaint concern issues of proficiency, sufficiency and quality of the building services supplied by Mr and Mrs Farinola in the construction of Mr and Mrs Berkovich's home, and are properly within the Tribunal's jurisdiction. Accordingly, in relation to those two items, directions will be made to properly progress the dispute concerning those two items to a hearing in the Tribunal.
The complaint to the Building Disputes Tribunal and the referral to the Tribunal
On 11 March 2011, Mr and Mrs Berkovich (applicants) lodged a complaint in the Building Disputes Tribunal (Disputes Tribunal) against Mr and Mrs Farinola (respondents) and, on its face, also against Ms Mirjana Jovevska, who is described by the applicants in their complaint form to have 'acted on behalf of builder'. The Disputes Tribunal thereafter treated the complaint as having been made against the respondents to these proceedings only. However, it is quite clear, from the information that the applicants have provided to the Tribunal, that their intention was at all times to bring the complaint also against Ms Jovevska.
The complaint items are identified as both proficiency, sufficiency and quality issues, and contractual issues, unrelated to the proficiency, sufficiency and quality of the building services supplied by the respondents in the construction of the home. In each case, the applicants refer to 'the attached'. The attachments to the complaint include:
•a letter dated 29 February 2011 from Mr Farinola on behalf of the respondents to the applicants;
•a letter from the applicants to Mr Farinola dated 17 February 2011;
•a certificate of insurance issued by QBE Insurance complying with the Home Building Contracts Act 1991 (WA) (HBC Act); and
•a copy signed cost plus contract, plus the schedule of particulars thereto (but without the addition of any plan, specification or addendum).
The letter dated 17 February 2011 from the applicants is the only document attached to the complaint form, which now comprises the substance of the application in the Tribunal. The letter identifies the following items:
SMALL GARAGE: | NO POWER POINT FOR ROLLER DOOR. ROLLER DOOR FITTED WONT [sic] COME DOWN: broken |
KITCHEN MAIN: | no PAINT TO WALLS ABOVE CUPBOARDS. BROKEN TILE ON KITCHEN SPLASHBACK. |
LOUNGE/ DINING: | HOLE IN WALL surrounding POWERPOINT. NO SKIRTING BOARDS. IN SOME AREAS SKIRTING BOARDS THAT ARE THERE NEED PAINTING. |
HALLWAY: | NO MANHOLE. NO SKIRTING BOARDS. |
FRONT BEDROOM: (LHS) | HOLE IN WALL. NO DOOR HANDLE ON DOOR. NO DOOR HANDLE ON WARDROBE DOOR. SKIRTING BOARDS NEED PAINTING. |
MAIN BEDROOM: | NO DOOR HANDLE. HOLE IN WALL BESIDE POWER SWITCH. |
ENSUITE: | NO TAPS TO VANITY X 2. NO SHOWER TAPS[.] NO TOILET[.] NO SHOWER ROSE. |
MAIN TOILET: | NO DOOR. NO DOOR HANDLE. |
MAIN BATHROOM: | NO VANITY TAPS X 2. NO TAPS ON BATHTUB. NO DOOR HANDLE. |
KEYS: | NO FRONT DOOR KEYS[.] NO SLIDING DOOR KEYS (3 DOORS)[.] NO WINDOW KEYS. NO ROOF INSULATION[.] |
GRANNY FLAT: | |
BATHROOM: | NO SHOWER ROSE. NO VANITY TAPS X 1[.] NO DOOR[.] NO DOOR HANDLE. NO DOOR HANDLE TO WALKIN WARDROBE. |
LAUNDRY: | NO LAUNDRY TUB INSTALLED. NO HANDLE ON DOOR. |
KITCHEN: | WALL NOT PAINTED NEAR KITCHEN CUPBOARDS. STOVE DELIVERED NOT INSTALLED[.] ELECTRICIAN ADVISED STOVE FAULTY[.] WIRES DAMAGED. |
FRONT ENTRANCE TO MAIN HOUSE: | NO DOOR HANDLE ON FOYER DOOR. NO SKIRTING BOARDS[.]WEATHER STRIP FOR FRONT DOOR NOT INSTALLED[.] |
TO DATE: 17/2/2011 | ELECTRICITY NOT CONNECTED[.] WATER NOT CONNECTED. GAS NOT CONNECTED[.] |
All but two items concern a failure to complete the contract. The two exceptions are:
1)the roller door fitted to the small garage will not work; and
2)the main kitchen splashback includes a broken tile.
These matters involve the proficiency and quality of the building services supplied by the respondents to the applicants in the construction of the home.
On 29 August 2011, the Building Services (Complaint Resolution and Administration) Act 2011 (WA) (BS(CRA) Act) came into effect.
The complaint therefore automatically transferred from the Disputes Tribunal to the Building Commissioner on the commencement day, pursuant to s 133(1) of the BS(CRA) Act. The Building Commissioner thereafter dealt with the complaint pursuant to the BS(CRA) Act as if it had been commenced pursuant to s 5 of the BS(CRA) Act (s 133 of the BS(CRA) Act). On 14 October 2011, the Building Commissioner's authorised delegate referred the proceedings to the Tribunal pursuant to s 11(1)(d) of the BS(CRA) Act.
The application in the Tribunal
The matter listed for a directions hearing on 7 November 2011 was adjourned to enable the applicants to consider various unidentified issues discussed at that directions hearing with the presiding Senior Member. The matter was again listed for a directions hearing on 29 November 2011. The hearing was concluded in the absence of Mrs Berkovich, who was representing the applicants on that day, on account of her having to leave the hearing room and the building following an emotional outburst towards the conclusion of that directions hearing. The following orders were made by the Tribunal, having regard to the fact that mediation was not, in the Tribunal's opinion, a viable option for dispute resolution.
1.By 13 December 2011 the respondents shall file in the Tribunal a statement of response the applicant's claims that
(a)the respondents has not completed the work pursuant to the contract.
(b)certain items of work undertaken by the respondents is faulty or unsatisfactory or not carried out in a proper and proficient manner together with any documents upon which they wish to rely.
2.By 27 December 2011 the applicants shall file in the Tribunal a statement in response and any document on which they wish to rely.
3.The second named applicant informed the Tribunal that the applicants claim the respondents and Ms. Jovevska 'tricked' her and the first named applicant into entering into the contract with the respondents to construct the dwelling, the subject of the contract between the parties.
4.The Tribunal has informed the second named applicant that the matter referred to in order 5 is not the subject of any application presently before the Tribunal and cannot therefore be determined by the Tribunal in these proceedings.
5.Subject to any further order, the issue of the Tribunal's jurisdiction to hear and determine the applicants' complaint that the applicants seek an order that the respondents perform the contract to completion shall be determined entirely upon the submissions filed, any documents filed by the parties and the material referred to the Tribunal by the Building Commission.
The parties have filed the following documents in the Tribunal in compliance with the order for directions made on 29 November 2011.
The respondents have filed:
•a copy of a letter dated 29 November 2011 addressed 'to whom it may concern' and to each of the applicants, the title being 'notice of termination of costs plus contract';
•a letter dated 19 December 2011;
•a building licence application;
•a letter from the City of Cockburn dated 27 November 2009;
•a copy of a letter from Mrs Berkovich to the respondents dated 19 May 2011;
•a copy of an account issued by the respondents showing that, as at 30 December 2010, the applicants were indebted to the respondents in the sum of $7,229.41 for work performed by the respondents pursuant to the contract;
•a copy of an invoice from the respondents to the applicants dated 1 June 2011, being tax invoice 2013 including GST;
•a copy of a letter dated 2 November 2011 from All Class Plumbing and Gas Fitting;
•a copy of a letter dated 29 November 2011 from All Class Plumbing and Gas Fitting;
•a copy of a letter from Liquid Force Plumbing and Gas dated 4 January 2010;
•a copy of a letter from Malhotra Electrical dated 6 November 2009;
•a copy of a memo from Harmony Roof Tiles to the respondents dated 5 September 2011;
•a copy of a further costing, undated;
•a copy of the schedule of particulars to the contract together with the last page of the contract;
•a copy of a letter from the respondents to the applicants dated 24 February 2011; and
•a copy of a letter from the respondents to the Disputes Tribunal dated 30 June 2011.
The applicants have provided to the Tribunal the following additional documents:
•a handwritten letter received by the Tribunal on 12 December 2011 from Mrs Berkovich; and
•an annotated copy of a letter from the respondents to the applicants dated 24 February 2011 with handwritten annotation to the rear of the letter.
The issues
The issue of the jurisdiction to bring this complaint to the Disputes Tribunal was not determined by the Disputes Tribunal before the introduction of the BS(CRA) Act. A resolution of that issue is now required, the matter having been transferred to the Building Commissioner by operation of law and the matter having been referred to this Tribunal for determination.
Jurisdiction
As noted earlier, all but two of the items of complaint concern the failure of the respondents to complete the construction of the home to practical completion pursuant to the contract. In summary, the respondents state that they have suspended the works following the nonpayment of their last invoice. Alternatively, the respondents contend that they are not obliged to do any further work, even if that invoice is paid, as the respondents contend that they are obliged by the contract to perform the work to lockup stage only. Further and alternatively, the respondents contend that the contract is at an end, and terminated by the respondents' letter to the applicants dated 29 November 2011. These matters go to the substantive issue between the parties. The Tribunal must first determine whether it has jurisdiction to hear and determine a claim for breach of the contract between the parties which, on the face of the contract, is a cost plus contract.
Section 17 of the HBC Act provides that:
If an owner or builder under a contract claims that
(a)there has been a breach of
(i)the contract, not being a breach in respect of which a building remedy order may be made under the Building Services (Complaint Resolution and Administration) Act 2011; or
(ii)a provision in Part 2;
or
(b)the owner or builder is entitled to compensation under Schedule 1,
then, subject to the Building Services (Complaint Resolution and Administration) Act 2011, the owner or builder may make a complaint under section 5(2) of that Act.
In this case, the work to be undertaken by the respondents pursuant to the contract between the parties is 'home building work' as defined by s 3 of the HBC Act. A 'contract' is defined in s 3 of the HBC Act, unless a contrary intention appears in the HBC Act, to mean a 'home building work contract'. A 'home building work contract' is defined to mean 'a contract between a builder and an owner for the performance by the builder of home building work', but expressly excludes a 'cost plus contract'. Therefore, where there is a complaint that there has been a breach of a cost plus contract for the performance of 'home building work', the complainant could not bring a complaint pursuant to s 17 of the HBC Act in the Disputes Tribunal prior to 29 August 2011 and now cannot make a complaint about that breach of contract pursuant to s 5(2) of the BS(CRA) Act.
This is not a case where there is a complaint by the owner or the builder to compensation under Sch 1 of the HBC Act which arises from the builder's non-compliance with the prescriptive terms of a cost plus contract as provided for by s 14(1) of the HBC Act and where the owner has elected to terminate the cost plus contract because of the builder's failure to comply with the prescriptive requirements of s 14(1) of the HBC Act. In that particular kind of case, s 17 of the HBC Act allowed a complaint to be made to the Disputes Tribunal prior to s 29 of the HBC Act, and now, following the introduction of the BS(CRA) Act, allows a complainant to make a complaint pursuant to s 5(2) of the BS(CRA) Act.
Unless a complaint may be brought pursuant to s 5 of the BS(CRA) Act, the Tribunal (where the Building Commissioner has referred the dispute to the Tribunal) does not have any jurisdiction to hear and determine the breach of contract claim. In this case, the contract meets the definition of a cost plus contract as provided for in s 3 of the HBC Act as follows:
cost plus contract means a contract under which a builder is entitled to recover an amount excluding prime cost items and provisional sums that is not determined at the time when the contract is entered into, being an amount that includes the actual cost to be incurred in
(a)acquiring materials; and
(b)performing work,
specified in the contract, together with an additional amount that comprises either
(c)a sum calculated as a percentage of that cost; or
(d)a specified sum,
or both;
In this particular case, cl 5(b) of the schedule of particulars to the contract between the parties provides that the consideration for the contract is a percentage fee calculated at the rate of 15% of the cost of the works, plus GST. The cost of the works is defined in cl 6 of the contract to include the following:
(i)the cost of labour and services supplied wholly in connection with the works;
(ii)the net cost of all subcontracts wholly in connection with the works;
(iii)all fees payable to statutory authorities having jurisdiction over the works;
(iv)fees for licensed surveyor, structural engineer, architect or other professional consultants engaged by the builder;
(v)the premiums payable for all insurances as specified in cl (viii) hereof;
(vi)the net cost of all building materials including temporary structures used wholly for the works and including the cost of cartage. The cost shall be normal trade cost and any discounts applicable for prompt or cash payment shall remain with the builder;
(vii)the cost to rectify any defects as part of the defects liability period, other than making good faulty materials or workmanship;
(viii)the cost of plant, equipment and services used wholly for the works;
(ix)any cost to repair, replace and/or rebuilt any damage or loss as a result of causes beyond the control of the builder. Any amounts recoverable from an insurance claim shall be credited to the favour of the owner;
(x)any excesses payable for insurance claims by the builder;
(xi)any GST payable on the supply of the works.
The contract therefore provides that the applicants will pay the respondents the cost of the works, being the cost of the acquisition of materials required in the performance of the contract works and the cost of the performance of the contracted works, plus a sum calculated as a percentage of that cost in this case, 16.5% inclusive of GST. The Tribunal is satisfied that the contract between the parties is a 'cost plus contract' as defined in the HBC Act. The Tribunal is satisfied that the cost plus contract between the parties is not a 'home building work contract' as defined by s 3 of the HBC Act. The complaints concerning the breaches of the contract between the parties are therefore not breaches which can be the subject of a complaint pursuant to s 5(2) of the BS(CRA) Act. Accordingly, the dispute concerning the contractual issues and the noncompletion of the work by the respondents is, to that extent, beyond the jurisdiction of the Building Commissioner and, upon referral, beyond the jurisdiction of the Tribunal. Accordingly, the Tribunal concludes that, save as stated below in the case of the two matters concerning the proficiency and quality of the work undertaken by the respondents, the application in the Tribunal is to be dismissed pursuant to s 47(2) of the SAT Act without a determination of the merits.
The two exceptions to the dismissal are the complaints concerning the nonfunctioning garage roller door to the small garage and the broken tile to the kitchen splashback. The Tribunal considers that these matters are properly made pursuant to the now repealed s 12A of the Builders' Registration Act 1939 (WA) and, upon introduction of the BS(CRA) Act, were transferred to the Building Commissioner pursuant to s 133 of the BS(CRA) Act and thereafter correctly treated by the Building Commissioner as if they had been made pursuant to s 5(1) of the BS(CRA) Act. As such, the Building Commissioner, acting through his authorised delegate, referred these two complaint items to the Tribunal pursuant to s 11(1)(d) of the BS(CRA) Act and are within the Tribunal's original jurisdiction as conferred by that Act. Accordingly, the Tribunal shall order that these two items of complaint are within its jurisdiction.
To date, the Tribunal has been provided with no information or evidence in support of these two items of complaint. The matter is listed for further direction on 14 February 2012 and, at that time, orders for directions will be made to progress these two complaint items for hearing and determination by the Tribunal.
Additional matters
The Tribunal can find no order made by the Disputes Tribunal determining that the current respondents are the correct respondents or that Ms Jevovska is not also a person who should be a respondent. At the directions hearing on 29 November 2012, Ms Jevovska attended with Mr Farinola, who represented the respondents. On that occasion, both Mr Farinola and Ms Jevovska asserted that the respondents undertook the construction of the home pursuant to the contract to the stage of lockup and thereafter Ms Jevovska has undertaken the construction work to date. Upon that basis, it would appear that, on the face of it, Ms Jevovksa is responsible for the cracked tile to the kitchen splashback and that the respondents are responsible for the nonoperating garage door. Whether and to what extent the respondents and Ms Jevovska are liable for any work lacking in proficiency and suitable quality is a question yet to be considered and resolved by the Tribunal, and the parties and Ms Jevovska should be given an opportunity to make short submissions on this issue.
The matter is listed for direction on 14 February 2012 and, at that time, the issue of the correct respondents and whether Ms Jevovska should be joined as a respondent will be considered and raised with the parties.
Orders
1.Subject to order 2, the applications are dismissed pursuant to s 47(2) of the State Administrative Tribunal Act 2004 (WA).
2.The following complaint items are within the Tribunal's jurisdiction:
(a)broken tile on main kitchen splashback; and
(b)small garage roller door will not operate.
3.The complaint items referred to in order 2 comprise the application.
I certify that this and the preceding [27] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
___________________________________
MS NATASHA OWEN-CONWAY, MEMBER
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