Builders' Registration Board of Western Australia and Danmar Homes Pty Ltd and Anor - [2010] WASAT 28

JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL

STREAM: VOCATIONAL REGULATION

ACT: BUILDERS' REGISTRATION ACT 1939 (WA)

CITATION: BUILDERS' REGISTRATION BOARD OF WESTERN AUSTRALIA and DANMAR HOMES PTY LTD & ANOR [2010] WASAT 28

MEMBER: DR B DE VILLIERS (MEMBER)
MR D MOUCHEMORE (SESSIONAL MEMBER)
MR R CAMPBELL (SESSIONAL MEMBER)

HEARD: 13 JANUARY 2010

DELIVERED : 25 FEBRUARY 2010

FILE NO/S: VR 218 of 2008

BETWEEN: BUILDERS' REGISTRATION BOARD OF WESTERN AUSTRALIA
Applicant
AND
DANMAR HOMES PTY LTD & ANOR
First Respondent
DANIEL JOSEPH WHITE
Second Respondent

Catchwords:

Disciplinary proceedings against builder for negligence who allegedly built houses without a building licence and without complying with approved plans Responsibilities of a builder to apply for building licence and to build in accordance with approved plans Do the same obligations rest on a subcontractor Responsibilities of subcontractor Test for subcontractor Relationship between builder and subcontractor Can the Tribunal rely on extrinsic information and evidence to determine the relationship between parties - Tribunal must take all information into account Tribunal not limited to the terms of the written contract Test of reasonability and the standard expected of a reasonable and competent builder What would a fair-minded and reasonable builder do in the same circumstances What would a fair-minded and reasonable subcontractor do in similar circumstances - Did the subcontractor fail to adhere to the reasonable standard

Legislation:

Builders' Registration Act 1939 (WA), s 12D, s 13(1), 13(1)(C)
Construction Contracts Act 2004 (WA)
State Administrative Tribunal Act 2004 (WA), s 11(4), s 32(2)(a), s 32(2)(b), s 32(4), s 32(7)

Result:

The application for disciplinary proceedings is dismissed

Category: B

Representation:

Counsel:

Applicant:     Mr M Mannes (Representative)
First Respondent           :     Mr P Monaco
Second Respondent       :     Mr P Monaco

Solicitors:

Applicant:     Builders' Registration Board of Western Australia
First Respondent           :     GV Lawyers
Second Respondent       :     GV Lawyers

Case(s) referred to in decision(s):

Builders' Registration Board of Western Australia and Utopia Industries Pty Ltd [2006] WASAT 295
Max Spiccia Homes Pty Ltd and Anor v Builders' Registration Board of Western Australia [2007] WADC 200
Qbsa v Phipps Keith Ralph D025-97 [1997] QBT 163 (25 September 1997)
Re Lamperd [1983] 63 FCA 22, 470
Strempel v Wood & Anor [2005] WASCA 163
Voli v Inglewood Shire Council (1963) HCA 15 (1963) 110 CLR 74 (29 May 1963)

REASONS FOR DECISION OF THE TRIBUNAL:

Summary of Tribunal's decision

The Builders' Registration Board of Western Australia applied for disciplinary steps to be taken against the respondents on grounds that they had commenced with the building of dwellings in a retirement village without the necessary building licences and that they had deviated from the approved plans.
The Builders' Registration Board had a two-fold argument: firstly, it contended that Danmar Homes Pty Ltd was the builder of the works and in this capacity it had the responsibility to ensure that the necessary building licences were in place prior to the works being undertaken. Danmar Homes Pty Ltd further had to ensure that the works complied with the specifications of the approved plans. Secondly, the Builders' Registration Board contended that even if Danmar Homes Pty Ltd had been a subcontractor to the registered builder, (Kemmish Nominees Pty Ltd) as was contended by Danmar Homes Pty Ltd, it should nevertheless have sighted the building licences and the approved plans and it should have ensured that all works took place in accordance with approved plans. The respondents were therefore negligent by not adhering to the standard of care that a reasonable and competent builder would have applied.
The respondents rejected the contention that they were negligent. Their reply to the allegations was twofold. Firstly, they said that Danmar Homes Pty Ltd was not the registered builder for the work but that Kemmish Nominees Pty Ltd was the registered builder. This perspective was confirmed by two directors of Kemmish Nominees Pty Ltd in evidence before the Tribunal. According to the directors, Danmar Homes Pty Ltd was a subcontractor to Kemmish Nominees Pty Ltd. Secondly, as a subcontractor to Kemmish Nominees Pty Ltd, Danmar Homes Pty Ltd was not required to apply for building licences. Kemmish Nominees Pty Ltd repeatedly assured Danmar Homes Pty Ltd that proper building licences had been issued. Furthermore, Danmar Homes Pty Ltd built in accordance with the working plans Kemmish Nominees Pty Ltd provided to it. There was no obligation on Danmar Homes Pty Ltd to sight the approved building plans. Danmar Homes Pty Ltd therefore complied with the standard that would be expected of a reasonable and competent subcontractor.
The Tribunal agreed in general with the Builders' Registration Board that a legal obligation exists for a subcontractor to take reasonable steps to ensure that building licences are current and that works take place in accordance with approved plans. The facts of each situation must be considered to determine if the legal standard has been met by the subcontractor.
The Tribunal dismissed the application for the following reasons: if all the evidence about the contract and arrangements between Danmar Homes Pty Ltd and Kemmish Nominees Pty Ltd and Moss Glades Pty Ltd were taken into account, it appears that Danmar Homes Pty Ltd was not the principal builder but a subcontractor for Kemmish Nominees Pty Ltd; Kemmish Nominees Pty Ltd had effective control over the building site, had applied for the building licences, liaised with the local authority about the licences and building plans, oversaw all the works on site, gave daytoday directions to Danmar Homes Pty Ltd, ensured quality control of the works, had permanent presence and an office on the site and signed off on all the works completed by Danmar Homes Pty Ltd.
In so far as the duties of Danmar Homes Pty Ltd as a subcontractor were concerned, the Tribunal was satisfied that Danmar Homes Pty Ltd acted in a way that a reasonable and competent builder would have done and that it was not negligent by relying on the assurances given by the registered builder, Kemmish Nominess Pty Ltd. Danmar Homes Pty Ltd made repeated enquiries with Kemmish Nominees Pty Ltd about the building licences and received assurances that licences had been issued and that everything was under control; it took directions from Kemmish Nominees Pty Ltd; and it built in accordance with plans, that according to Kemmish Nominees Pty Ltd, had been approved; and it received repeated assurances from Kemmish Nominees Pty Ltd that issues with the local authority were being attended to.
The Tribunal concluded that the Builders' Registration Board failed to demonstrate that a reasonable competent subcontractor would have taken further steps in the discharge of its duties. The precaution taken by Kemmish Nominees Pty Ltd was not inconsistent with what a reasonable subcontractor would have done in similar circumstances.
The application was therefore dismissed.

Background

The Builders' Registration Board (BRB) lodged the application for disciplinary action on 21 November 2008 pursuant to s 13(1) of the Builders' Registration Act 1939 (WA) (BR Act).
The first directions hearing took place on 15 January 2009, at which the Tribunal made orders for the matter to be sent to mediation. The matter did not settle in mediation and the Tribunal made orders on 12 March 2009 for a statement of agreed facts to be filed. The Tribunal also gave leave for the application to be amended.
At a directions hearing held on 7 May 2009, the matter was again referred for mediation. It failed to settle and was set down for a directions hearing on 1 October 2009. Orders were made at this directions hearing for the matter to be heard on 30 November 2009. At the request of the parties, the hearing was adjourned to 13 January 2010. The hearing took place as scheduled and the decision was reserved on the same day.
In accordance with s 11(4) of the State Administrative Tribunal Act 2004 (WA) (SAT Act), the Tribunal constituted a legally qualified member, (Member de Villiers), a person who has specialised experience in the building industry, Sessional Member Mouchemore and a person who is familiar with the interests of persons engaged in the building industry, Sessional Member Campbell. Mr Mouchemore is a registered builder and building surveyor with extensive experience in the building industry. Mr Campbell is a registered electrical worker and contractor and also has extensive experience in the industry. He is also an adjudicator under the Construction Contracts Act2004 (WA). Both sessional members bring to the Tribunal substantial practical experience and theoretical knowledge in regard to the issue under consideration.
The parties made extensive written and oral submissions in support of their respective positions. Several witnesses were called to give evidence. The Tribunal took all of the submissions, information and evidence presented to it into account.

Powers of the Tribunal in disciplinary proceedings

The BRB may commence disciplinary proceedings against a builder if there is a proper cause to do so under s 12D of the BR Act).
The Tribunal has, in accordance with s 13(1) of the BR Act, the power to suspend or cancel the registration of builder or to impose a fine if there is a proper cause for disciplinary action against a builder. Under s 13(1)(C), this may apply to a builder:
(c)who has been guilty of any negligence or incompetence in connection with the performance of any building work or who has been convicted of any offence against this Act or any regulation; or

Agreed statement of issues

The parties agreed on the following issues for the Tribunal to determine. The Tribunal used these issues as an agenda for the hearing and will summarise its reasons in accordance with those issues.
1.Whether the First Respondent was negligent in connection with the performance of building work at Lot 36 (No 12) Gribble Road Gwellup ('the Site') by carrying out building work without ensuring that there was a valid building licence in place with respect to the building work.
2.Whether the First Respondent was entitled to rely on the representation by Kemmish Nominees Pty Ltd ('Kemmish'), also a registered builder, that a valid building licence was in place with respect to the building work the First Respondent was to carry out at the Site.
3.Whether the First Respondent is entitled to rely on its claim to be a subcontractor of Kemmish in view of the contracts entered into between the First Respondent and Moss Glades Pty Ltd ('Moss Glades').
4.Whether extrinsic evidence is admissible with respect to the issues at paragraph 1, 2 and 3 given that the First Respondent entered into contracts with Moss Glades that appear to be entire, that is, they contain all the terms and conditions of the agreement.
5.Whether the First Respondent was entitled to rely upon representations by Kemmish and Moss Glades that:
5.1the plans supplied to the First Respondent were identical to the plans approved by the City of Stirling.
5.2the building work carried out by the First Respondent was in accordance with the plans approved by the City of Stirling.

Facts

The facts giving rise to the application can be succinctly summarised as follows:
•Danmar Homes Pty Ltd (Danmar) and Kemmish Nominees Pty Ltd (Kemmish) are registered builders under the BR Act.
•Moss Glades Pty Ltd (Moss Glades) is the owner of the building site at Lot 36 (No 12) Gribble Road Gwellup.
•Kemmish applied for and was issued building licences by the City of Stirling (City or Council) for the works which involved building dwellings in a retirement scheme.
•The directors of Moss Glades Pty Ltd are Mr Leonard Walter Whyman and Mr Eion Samuel Martin.
•The directors of Kemmish are Mr Leonard Walter Whyman, Mr Eion Samuel Martin and Mrs Linda Jennifer Whyman.
•The second respondent, Mr Daniel Joseph White, is the sole director and secretary of Danmar.
•Danmar entered into contracts with Moss Glades to build a number of units in a retirement scheme. On 4 December 2006 it agreed to build unit 1, unit 23, unit 25, unit 42 and unit 47. On 19 March 2007 it agreed to build unit 16. On 8 June 2007, it agreed to build unit 18.
•The contract required that Danmar would do all that was reasonably necessary to ensure that approvals for the works were obtained.
•The building work was carried out between 4 December 2006 and 28 February 2008.
•The site preparation works and services for the works were done by Kemmish.
•The work done by Danmar did not commence within 12 months from the issuing of the building licences to Kemmish.
•The building work for unit 16, unit 18, unit 23 and unit 47 were not in accordance with the plans approved by the City.
•The City approved all the works retrospectively.
•The Building Disputes Tribunal, (BDT) in other proceedings regarding workmanship issues, determined that Kemmish was the registered builder for each of the units.

Orders sought

The BRB seeks orders that in respect of each of the buildings a finding be made that:
a)there is a proper cause for disciplinary proceedings; and
b)the first respondent's registration be suspended for six months and both respondents be fined on grounds that they undertook the works without a valid building licence and, also failed to comply with the approved building plans. The BRB also seeks to be awarded the cost of the proceedings.

Summary of evidence

Several persons were called to give evidence. The evidence can be summarised as follows:

Leonard Walter Whyman

Mr Whyman, who is a director of Moss Glades and of Kemmish, told the Tribunal that he had told Mr White, the sole director of Danmar, that the building licences for the works had been issued to Kemmish by the City and that the licences were current. He explained that Kemmish had the responsibility for all dealings with the City, including applying and issuing of building licences and compliance with plans. Kemmish had started with works on all the sites before Danmar had been contracted.
He explained that: Kemmish approached Danmar since it (Kemmish) did not have the capacity to undertake all of the buildings works; the previous contractor had withdrawn; and Kemmish required a reputable company to do the work. After some negotiations with Danmar, an agreement was reached for Danmar to do the works.
Mr Whyman said that the directors of Moss Glades and Kemmish were the same persons and that nothing turns on the fact that the contract was between Moss Glades and Danmar. The contract was merely a standard home building contract, and in their minds, the arrangement was between Kemmish as registered builder and Danmar.
Kemmish had a permanent office on site, had full control over the site, supervised the work of Danmar, and had the final authority over all works. Mr Whyman referred to examples where Kemmish turned away contractors of Danmar and where Kemmish had given instructions to staff employed by Danmar. He further said that Danmar built in accordance with the plans that it (Kemmish) provided to Danmar. He said the contracts may as well have been with Kemmish because in their minds they were just one company doing business. Technically, the contract was between Danmar and Moss Glades, but if all the evidence is taken into account, it is clear that Danmar was the subcontractor for Kemmish. The obligation in the contract for Danmar to ensure that all approvals were in place, must be read in the context of the overall arrangements between the parties. Kemmish assured Danmar that the licences were valid even after concerns were raised by the City.
At no stage was Danmar required or authorised to liaise directly with the City. The relationship that existed between Danmar, Kemmish and Moss Glades was so good that no one paid any attention to the finer detail of the contract.

Mr Eion Samuel Martin

Mr Martin is a director of Moss Glades and of Kemmish. He is a registered builder and architect. He confirmed that the building licences had been applied for by, and issued to Kemmish. He also confirmed that Mr Leonard Whyman did all negotiations and other liaison with the City on behalf of Kemmish. He further confirmed that the work on the sites commenced prior to Danmar being contracted, but when Danmar became the subcontractor, Kemmish supervised all works.
He explained that the directors of Kemmish and of Moss Glades were essentially the same persons and that nothing should be made of the building contract being with Moss Glades and not with Kemmish. In their minds, he said, they were not separate companies because they were the same people going about their business.
He explained that Danmar never received nor was it entitled to the approved building plans. As the registered builder, Kemmish assured Danmar that the building licences were valid and current and that the plans given to them had been approved by the City. There was no need for Danmar to sight the original approved plans. A subcontractor would not be expected to sight the actual building licence or the actual approved plans. Subcontractors build on the instruction of the registered builder.

Mr Robert George Williams

Mr Williams is the registered builder and construction manager for Danmar. According to him, the registered builder for the works at all times was Kemmish. Danmar was the subcontractor for Kemmish and worked to the directions of Kemmish. He accepts that it may be confusing with the same two directors being responsible for two companies but in his mind, things were always clear Moss Glades was the owner of the land and Kemmish was the registered builder.
The building contract used by the parties was merely off the shelf and it was always understood that Danmar was a subcontractor for Kemmish who in turn was the registered builder.
Danmar was informed by Kemmish that current building licences were in place for each unit. Although he accepted that Mr Whyman and Mr Martin are directors of Moss Glades and of Kemmish, he also accepted that his instructions came from them in their capacity as Kemmish directors since Kemmish was the registered builder. He says he 'had no reason to doubt the information' given to him by Kemmish. Danmar never had any direct dealings with the City since that was the responsibility of the registered builder, being Kemmish.
When Danmar commenced work on site, basic site works had already been completed by Kemmish. According to him, 'this was consistent with information provided to me by the directors that they wanted Danmar Homes to be the subcontractor to complete the works'.
As construction manager, he also accepted the assurance from Kemmish that the plans provided to Danmar had been approved by the City. There was no reason or need for him to question the advice. The building packages given to him to build were consistent with Danmar's role as subcontractor. Clients could choose which of several options they preferred.
Danmar was not requested to amend any plans nor did it amend any plans. Danmar merely added detailed specifications for purposes of construction. There is nothing unusual or untoward about it. Danmar would not give approved plans to subcontractors and similarly Danmar did not expect approved plans from Kemmish.
He confirmed that Danmar was called in early 2007 by Mr Adrian Rodney Snape from the City to inquire about the currency of the building licences. Danmar was again given the assurance by Kemmish that the building licences were valid and that it (Kemmish) would clarify the issue with the City. He did not hear from Mr Snape again and no steps were taken by the City to stop the works. He therefore assumed that whatever misunderstanding gave rise to Mr Snape's visit, it had been cleared.

Mr Daniel Joseph White

Mr White is the sole director of Danmar. He explained that a salesperson for Danmar was approached by Mr Martin to inquire if Danmar would be interested in completing the buildings after the previous builder had withdrawn from the project: Mr Martin did not say whether he was talking on behalf of Kemmish or on behalf of Moss Glades since the directors of the two companies were the same.
According to Mr White the registered builder for the works was Kemmish since Mr Martin was a registered builder and a previous councillor of the City. The land and the units were owned by Moss Glades. Danmar was, in his understanding, at all material times, the subcontractor of Kemmish to complete the works.
There was never any doubt in his mind that Kemmish was the registered builder and that Mr Martin, on behalf of Kemmish, had responsibility to supervise all the works done by Danmar. He relied entirely on the information given to him by Mr Whyman and Mr Martin who happened to be the directors of Kemmish and of Moss Glades.
The contract used was the standard contract Danmar always uses when it is the registered builder, and in retrospect, he acknowledges that a special contract to set out the relationship between Danmar and Kemmish may have been preferable. On the other hand, he is used to making agreements over the table and it is therefore not strange to have a working relationship without a detailed, legal agreement. Much of his work takes place on the basis of good faith and a gentleman's understanding.
It was not unusual in the building industry that the identity of the person or entity to whom invoices are submitted, is different to that of the registered builder. It was within the discretion of the parties to decide who should be invoiced for works. That does not change the basic relationship between the registered builder (Kemmish), and the subcontractor (Danmar).
Danmar has been in the building industry for many years and if it had been the registered builder for these works, it would have applied for the building licence from the City. He was assured by both directors that building licences were in place and he had no reason to doubt the information.
He visited each of the building sites before commencement of works by Danmar and it was clear to him that Danmar was taking over work from Kemmish. Although most of the building work had to be done by Danmar, that did not change the relationship as a subcontractor for Kemmish.
He was impressed by the professionalism of Mr Martin and there was no reason to doubt that building licences were current and that the plans provided to Danmar had been approved.
The building plans were provided to Danmar by Kemmish and Danmar was told that the plans had been approved by the City. Danmar did not make any variations to the plans. Detailed specifications for purposes of construction were added to the plans, but that did not equate to alternation. In the instances where the buildings were not in accordance with the plans, they were due to a different type of brick being used, and due to instructions from Kemmish. The only major deviation from the plans was when a double garage rather than a single garage was built. This, however, was in accordance with the plan provided by Kemmish.
All the deviations from the approved plans were given retrospective approval by the City.

Contentions by the Builders' Registration Board

The contentions of the BRB can be summarised as follows:
•Danmar must be treated as the primary builder of the works. This is because Danmar entered into a contract with Moss Glades and the contract required Danmar to do all that was necessary to ensure that building licences had been issued. The Tribunal must be guided primarily by the terms of the contract and not by extrinsic information.
•Danmar failed to ensure that building licences were current when it commenced works and it further failed to adhere to the approved building plans.
•Danmar was not a subcontractor for Kemmish since the contract it entered into to do the building work was with Moss Glades; Danmar invoiced Moss Glades for work; and Danmar was paid by Moss Glades. The contractual relationship was therefore between Danmar and Moss Glades which puts Danmar in the position of the builder.
•Even if Danmar was a subcontractor, the reasonable and competent subcontractor of such a large scale project would have taken steps to ensure that proper building licences were in place, that approved building plans were sighted and, that such plans were adhered to.
•The finding of the Building Disputes Tribunal that Kemmish was the registered builder, does not bind the Tribunal.

Contentions of the respondents

The contentions of the respondents can be summarised as follows:
•Danmar was the subcontractor for Kemmish who in turn was the registered builder. The Tribunal must take into account the extrinsic information which shows that Kemmish applied for the building licences, Kemmish was the registered builder, Kemmish had ongoing presence on site and was in control of the site, and Kemmish directed Danmar in its daytoday activities.
•Danmar sought and received assurances from Kemmish that all building licences were in place and current.
•Danmar built the dwellings in accordance with the plans provided to it by Kemmish. It was told by Kemmish that those were based on the approved plans and there was no reason for Danmar to question it.
•The site works and services for the sites were completed by Kemmish. It was only after Kemmish realised that it could not complete the building work, that it sought a subcontractor. The quotation for Danmar as subcontractor was then accepted.
•The fact that the contract was entered into with Moss Glades is explained by the fact that the two companies essentially had the same directors. The intent of the parties and the extrinsic information show that it was always the intent for Kemmish to be the registered builder and for Danmar to be a subcontractor for it. The directors of Kemmish confirmed in their evidence before the Tribunal that Kemmish was the registered builder and not Danmar.
•As subcontractor, Danmar acted in a reasonable way as a competent and diligent subcontractor would do. It was therefore not negligent in the discharge of its obligations. The City would in any case only make available approved plans to the registered builder and not to subcontractors.
•The variations from the approved buildings can all be explained and the works have since been approved by the City.
•The Building Disputes Tribunal has already found that Kemmish was the registered builder and there is no reason why in these proceedings a different conclusion should be reached.
•No-one suffered any prejudice or loss there were no 'victims'. An incorrect contract may have been used but the Tribunal must be guided by the substance of the arrangements and not be limited by the form of the contract.

Consideration of the issues as identified by the parties

The Tribunal will deal separately with the issues as identified by the parties:

Is extrinsic evidence admissible or is the Tribunal bound to only take account of the terms of the contracts?

The respondents contended that the Tribunal should take into account all information about the agreement reached between the parties. There was, according to the respondents, no legal basis to contend that only the written contracts should be relied upon.
The BRB contended that the contracts entered into between the parties contain all the terms and conditions of their agreement and therefore there is no need or justification to take into account extrinsic information. The contracts were clear, precise and specific and leave no doubt as to the intention of the parties.
The Tribunal is satisfied that it can take into account all the information about the interaction between the parties before it, to properly categorise the relationship between Danmar, Kemmish and Moss Glades. This conclusion flows from the following reasons:
•The SAT Act requires and empowers the Tribunal to take into account all relevant information when determining a dispute. Section 32(2)(a) of the SAT Act provides that the Tribunal is not bound by the rules of evidence; s 32(2)(b) of the SAT Act provides that the Tribunal must act according to the substantial merits of the case; s 32(4) of the SAT Act provides that the Tribunal must inform itself on any matter that is sees fit; and s 32(7) of the SAT Act requires the Tribunal to ensure that all relevant material is disclosed. It is clear from this statutory framework that the Tribunal is not only empowered to take into account extrinsic evidence, it is required to do so unless the enabling act specifically provides otherwise.
•There is nothing in the enabling act, the BR Act, to suggest the Tribunal is limited in its discretion to only take into account the provisions of the contracts the parties had entered into.
•The BRB itself made extensive references to matters that were not, strictly speaking, arising from the contracts. The BRB for example drew the attention of the Tribunal to the fact that invoices were made out to Moss Glades and that Moss Glades made the payments. It further made several references to the situation on site as to who had control, who was doing what and so forth. In effect, the BRB through their submissions, encouraged the Tribunal to take into account extrinsic evidence.
The Tribunal therefore finds that extrinsic evidence is admissible in order to properly categorise the relationship between Danmar, Kemmish and Moss Glades.

Was Danmar a subcontractor or the builder for purposes of the proceedings?

This question goes to the heart of the proceedings. The views of the parties are summarised above and there is no need to repeat it in detail.
In essence, the BRB says that:
(a)Danmar was the registered builder and therefore had a duty to ensure that valid building licences were in place; and
(b)Even if the Tribunal found that Danmar was a subcontractor, it still had a duty of care since the reasonable and competent subcontractor would have taken such precautionary steps.
Danmar in essence says that:
(a)Kemmish, and not Danmar was the registered builder; and
(b)Danmar acted reasonably, since it questioned Kemmish about the building licences and plans. Kemmish gave it the assurance that building licences and plans were current and that any issues arising from the works were being discussed between Kemmish and the City.
The relationship between Danmar, Kemmish and Moss Glades is indeed, at first glance, confusing. The following are key elements that reflect the different aspects of the relationship:
•Moss Glades and Kemmish had, in effect, the same directors, except for Mrs Linda Whyman who was also a director of Kemmish. She did, however, not play an active role in any of the events leading to these proceedings.
•Danmar's sole director, Mr White, was approached by Mr Martin who is a director of Kemmish and of Moss Glades to provide a quotation to complete the building works.
•Mr Martin explained that the previous builder had withdrawn from the works and that Kemmish did not have the capacity to complete such large works. Kemmish would, however, undertake the basic site preparation works
•Mr Martin informed Danmar that building licences had been issued to Kemmish by the City, and that the building plans for the respective dwellings submitted by Kemmish had also been approved.
•The contracts entered into for the building works were concluded between Danmar and Moss Glades and were standard 'off the shelf' home building contracts.
•Danmar invoiced Moss Glades for payments of its work. Moss Glades paid Danmar for its work.
•Mr Martin and Mr Whyman had a permanent office on the building site from where they oversaw construction. Mr Martin says, as registered builder, he conducted the supervision on behalf of Kemmish in accordance with the duties of a registered builder. In fact, Mr Whyman explained that if necessary, Kemmish would, override a decision by Danmar in regard to daytoday work.
•Mr Whyman said that Danmar took its instructions from Kemmish as registered builder.
•Danmar had no interaction with the City in regard to the building licences or the plans.
•The BDT determined in earlier proceedings, that Kemmish was the registered builder and therefore responsible for any shortcomings or deficiencies in the works.
The Tribunal is satisfied, when all evidence and information is taken into account, that Danmar was not the registered builder for the works but that it was a subcontractor for Kemmish.
The Tribunal reaches this conclusion for the following reasons.
The Tribunal must, as has been found above, take into account all information about the interaction between Moss Glades, Kemmish and Danmar to properly characterise their relationship. There is no statutory requirement that only the terms of the contract be taken into account to properly categorise the relationship between the parties. If all the information is considered, the Tribunal is satisfied that it was the understanding, agreement and intention that Kemmish was the registered builder and that Danmar was a subcontractor for it
The building licence application submitted to the City clearly identified the registered builder as Kemmish. The building licence issued by the City identified the licensee as Kemmish. Kemmish, Moss Glades and Danmar acted in accordance with this intention and understanding although it may have been confusing at times due to the fact that Moss Glades and Kemmish essentially had the same directors.
The finding of the Tribunal that Kemmish was the registered builder, is consistent with the information before the investigation conducted by the BRB on 3 July 2007 when, in reply to a question by the interviewer, Mr Martin responded:
Interviewer: Mr Streeton;
And you've got a subcontractor agreement with them [Danmar], would that be correct? You've got like some building contracts that you signed with Danmar Homes for the for the units under construction? Is that correct?
Mr Martin: Yeah.
The Tribunal accepts that the fact that Mr Martin and Mr Whyman were both the directors of Moss Glades and of Kemmish, may appear confusing. However, if the entire picture of their activities as presented during evidence to this Tribunal and to the BRB is considered, it is clear that Moss Glades was the owner of the land, Kemmish was the registered builder and Danmar was the subcontractor. The parties acted in accordance with this understanding.
The conduct of the parties was consistent with the relationship as summarised above. It would have been unrealistic and impractical to expect Mr Martin and Mr Whyman to indicate each time to Danmar whether they were talking as directors of Kemmish or as directors of Moss Glades. As was so effectively pointed out during evidence, it would give rise to a situation where Mr Martin as the director of Moss Glades would authorise himself as the director of Kemmish to engage in a discussion with Danmar. It was therefore entirely reasonable for Danmar to assume that when they spoke to Mr Martin and to Mr Whyman, the two of them represented Kemmish, since (Kemmish) was the registered builder.
The Tribunal further notes that it was Danmar who had been approached by Mr Martin to undertake building work that another builder could not complete. This adds to the conclusion that Danmar was subcontracting for Kemmish, otherwise Danmar, who are reputable builders, would have approached the City directly to apply for building licences.
At the time when Danmar was approached, Mr Martin told Mr White that Kemmish was the registered builder, that building licences had been issued and that the plans had been approved. Mr Martin was a registered builder, an architect and a previous councillor of the City, and there was no reason for Mr White to doubt that all the necessary requirements were in place. It was further obvious to Mr White that Danmar would be a subcontractor for Kemmish for reasons set out above.
The Tribunal accepts that even when concerns were expressed during the building process by the City about the currency of the building licences and compliance with building plans, Mr Martin assured Danmar that everything was in order and that he would meet with the City and clarify any misunderstandings. There were, after all, no direct dealings between Danmar and the City. Danmar therefore relied on Kemmish to address the concerns raised by the City. The City did not raise any further concerns with Danmar and this added to their perception that Kemmish had clarified whatever misunderstandings may have existed.
The Tribunal understands that the home building contracts that were entered into between Danmar and Moss Glades give the impression, at first glance, that Danmar was to be the registered builder. The Tribunal, however, accepts the explanation given by Mr White during the hearing that Danmar only used these 'off the shelf' pro forma contracts for reasons of convenience, and because in previous projects where it, (Danmar), had been the registered builder, it used similar contracts. Mr White conceded that with the benefit of hindsight, it might have been better to have clarified the relationship between Danmar and Kemmish with a tailormade contract, but he added that in the building industry it is common to have extensive oral, gentlemen's agreements upon which work is done.
Mr White said he also did not find it unusual that although the registered builder was Kemmish, the invoices had to be sent to Moss Glades. He said it often happened in the building practice, that he would be far advanced with building, before a contract is signed or before was is told who to invoice. Mr White further explained that it is not uncommon that the entity or person who is invoiced, is not the same as the person who gives instructions, or is not the same person as the registered builder.
The Tribunal notes that the BDT found that, in order to determine who the registered builder was, for purposes of proceedings arising from workmanship issues under the BR Act, it was Kemmish.
It is proper for this Tribunal to take the finding of the BDT into account and, unless the weight of evidence goes against it, to make a determination that is consistent with the finding. If not, it would give rise to a curious and confusing outcome where the BDT found that Kemmish was the registered builder for purposes of one proceeding, while the Tribunal found Danmar was the registered builder for purposes of another proceeding.
Finally, the Tribunal notes the consistency of the evidence given by Mr Martin and Mr Whyman in this Tribunal, and the evidence given to the BRB in the interview it conducted on 3 July 2007. In that interview, it was explained that:
a)Danmar was the subcontractor for Kemmish;
b)Kemmish was the registered builder;
c)Kemmish had undertaken the site preparation works;
d)Kemmish has an office on site and was responsible for daytoday control and supervision.
In their interview with the BRB that took place on 25 January 2008, Mr Williams and Mr White also gave the following information that was consistent with their evidence before this Tribunal:
a)Moss Glades was the owner of the land and not the registered builder. Kemmish was the registered builder;
b)Kemmish approached Danmar to do building work for it;
c)Kemmish retained responsibility to supervise the work;
d)All discussions with the City were the responsibility of Kemmish as registered builder;
(e)Danmar was given 'repeated' assurances that building licences were current and plans had been approved;
(f)The standard contract was only used for purposes of convenience and did not reflect the entire agreement between the parties; and
(g)There was no reason for Danmar as subcontractor, to sight the building licences or the approved plans.

The Tribunal is therefore satisfied that on the basis of all the evidence and information before it, Danmar should be regarded as the subcontractor for Kemmish for purposes of these proceedings.

Was Danmar negligent in the discharge of its duties as subcontractor?

The BRB contends that, although the duty to take out a building license and to comply with building plans ordinarily lie with the registered builder, it is not in the nature of a nondelegable duty. Each registered builder, even those who work as subcontractors, therefore has a duty to ensure that a building licence is in place and that work takes place in accordance with approved plans. The exact nature and extent of the duty, and whether it has been properly discharged, are determined by the circumstances of each case.
The BRB therefore submits that Danmar, even if it was a subcontractor, was retained to do almost the entirety of the construction (except for the ground works), and it therefore had a duty to ensure proper building licences were in place and to sight the approved plans and to build in accordance with it.
The question, according to the BRB, is not who was ultimately responsible for the works, but whether the reliance of Danmar on the verbal advice it received from Kemmish was reasonable. The BRB says the reliance was not reasonable. According to the BRB 'each practitioner, in this case each registered builder, had a duty, the circumstances of each case will determine the extent of that duty', (para 20 of closing submissions).
The BRB refers to the matter of Strempel v Wood & Anor [2005] WASCA 163 in which it was found that in a matter of medical negligence, the surgeon, at [63], should have also applied his own knowledge to the type of treatment required and should not only have relied exclusively on a colleague's advice. The patient should have had the 'benefit of two specialists applying themselves to the issues and contributing to the assessment. The first respondent made no contribution' and that amounted to negligence, see [69].
The BRB contends on the basis of this finding, that Danmar could not therefore rely exclusively on Kemmish since it, (Danmar), also had a duty of care to ensure that all building licences and plans were in place.
Danmar contends in reply that it was not negligent and performed its duties in a manner consistent with those of a reasonable and competent subcontractor. Danmar contends that it also uses subcontractors and it is not reasonable to expect a subcontractor to inspect or sight building licences or approved plans.
Danmar submits that as a subcontractor it did what was reasonable, by accepting the assurance from the registered builder that the building licences were valid, and that the building plans had been approved.
According to Danmar: Mr Martin, who is a director of Kemmish, is a registered builder; Kemmish was issued with the building licences; Mr Martin gave them the assurance that the building licences were valid; and that the respective plans had been approved. There was no reason to question the credibility of Mr Martin or to double check the correctness of the assurances he gave. In the evidence Mr White gave to the BRB, Mr Streeton, at T: [79] [25.01.08] said as follows:
You're dealing with a person who is a former City councillor, an architect and a registered builder. It would be only fair for us to assume that he knew what he was doing in relation to any negotiations with the council or anybody else regarding the building licence.
Danmar, who also uses subcontractors on other building projects, explained that it is not the duty of the subcontractor to apply for a building licence, to demand sight of the building licence, or to demand sight of the approved plans. Subcontractors take their instructions from the registered builder and if any breach of a building licence occurs, the registered builder is accountable. The same applies to adherence to building plans. It is common practice for a registered builder to provide unstamped plans to a subcontractor for detailed specifications to be added and for work to commence. It is therefore not negligent for a subcontractor to use unstamped plans provided to it by the registered builder.
The BRB did not refer the Tribunal to any decisions by other courts or specialist building bodies in Australia where the duty of care of a subcontractor in regard to a building licence or adherence to building plans had been considered.
The BRB also did not call any expert witness from the building industry to explain what the industry would see as the reasonable discharge of duties by a subcontractor in a similar situation as Danmar.
The BRB referred to the matter of Voli v Inglewood Shire Council (1963) HCA 15 (1963) 110 CLR 74 (29 May 1963) at 84 (Voli) where it was held that the test as to whether an architect who provided drawings and specifications for a specific stage of a hall, was negligent in the discharge of such duties must be determined on the basis of due care, skill and diligence of a person in the same profession. In those proceedings, it was found that an architect, could in some instances, use as a defence, that a third party had a duty to identify faults in plans for which the architect was responsible. The court stressed however that in those proceedings the architect could not raise as a defence that 'by obtaining approval in this case the architect shed all liability for negligence' at 88. This means that as far as the reasonable care of an architect in those proceedings were concerned, at 84:
… He is not required to have an extraordinary degree of skill or the highest professional attainments. But he must bring to the task he undertakes the competence and skill that is usual (emphasis added) among architects practicing their profession.
and at 85:
… And it is convenient, because whether a duty of care arises from a particular situation or relationship may be, and often is, a question of law; but whether or not that duty was performed is ultimately a question of fact, to be judged by what, in the circumstances of the particular case and in the light of the apparent risks, a reasonable man would or would not do. (emphasis added).
The test for the Tribunal is therefore twofold:
•Firstly, what is the legal standard required from a subcontractor; and
•Secondly, whether the reliance by Danmar on verbal assurances was reasonable.
The Tribunal will now deal with these questions.

(i) Legal standard required from a subcontractor

The BRB refers to the matter of Re Lamperd [1983] 63 FCA 22, 470 at 476 477 which was adopted by the Queensland Building Tribunal when it considered the meaning of 'negligence' under a similar provision, Qbsa v Phipps Keith Ralph DO 2597 [1997] QBT 163 (25 September 1997).
The following standard was adopted to determine negligence:
The better approach is to seek to define the standard of care required, departure from which will be negligent, rather than to nominate a degree of departure which is necessary to make the negligence an offence.
In order to set the appropriate standard, the BRB then refers to the matter of Builders' Registration Board of Western Australia and Utopia Industries Pty Ltd [2006] WASAT 295 (Utopia Industries) in which it was found that failure to ensure that a valid building licence was in place, constitutes ground for disciplinary action.
It must be noted, however, that in the matter of Utopia Industries above, the registered builder who was held to be negligent, was not a subcontractor. In Utopia Industries, the registered builder assumed that the project manager had applied for a building licence. The project manager was not the registered builder. The Tribunal in those proceedings found that there was a duty on the registered builder to ensure that a building licence was in place. The registered builder in the Utopia Industries matter was, however, not a subcontractor as in the proceedings currently before this Tribunal, and the person on whose advice it relied was not a registered builder.
The question remains therefore, what is the legal standard that applies to a subcontractor?
The BRB contends that the Tribunal's response to the two questions should be that:
a)There is an obligation on a subcontractor to ensure that proper building licences were in place and that the works were in accordance with the plans especially in light of the fact that Danmar was responsible for most of the building works; and
b)Danmar failed in its duty since it had a contract not with Kemmish but with Moss Glades and it never sought nor received any written confirmation of the approved building licences, nor had it sight of the approved plans everything was by word of mouth. Danmar therefore failed to meet the standard of due care expected of a subcontractor in these circumstances.
The BRB further refers to the decision on the matter of Max Spiccia Homes Pty Ltd and Anor v Builders' Registration Board of Western Australia [2007] WADC 200 (Max Spiccia), in which it was held that a builder who relied on the oral assurances of a trusted worker that a building licence had been in place, had been negligent. The fact that the builder had commenced construction without 'having laid eyes on the licence' was negligent, at [97]. According to the BRB, Danmar was negligent in not sighting the building licence and not sighting the approved plans.
The Tribunal notes, however, that in these proceedings Danmar did not merely rely on the word of a worker or employee. Danmar accepted the verbal assurances from the registered builder to whom a building licence for the work had been issued. The situation in which Danmar found itself, therefore cannot be equated to the Max Spiccia matter.
The Tribunal is satisfied that, as is contended by the BRB, that a subcontractor has a duty to take reasonable steps to ensure that the work it does is properly approved and lawful. A subcontractor cannot accept an instruction from any person off the street and then defend itself in disciplinary proceedings by saying it had no duty to ensure that a building licence was in place or that a building plan had been approved.
The Tribunal is satisfied that a subcontractor has, in general terms, a duty to satisfy itself that a building licence has been issued and that the work is being done in accordance with approved plans.
This is an appropriate legal standard as referred to in the Voli matter. A subcontractor therefore cannot close his eyes and blindly accept an instruction to build from any person who purports to be a registered builder without even considering whether the information it receives is accurate or whether the person giving the instruction is lawfully entitled to give such an instruction.
In response to the first question, the Tribunal therefore is satisfied that the BRB has shown that a legal duty rested on Danmar as subcontractor to take steps that are reasonable to ensure that building licences have been issued and plans have been approved.

(ii) Was the reliance of Danmar on verbal assurances reasonable?

The nature and extent of the enquiries that fall within the duty of care of a subcontractor and what is regarded as reasonable, would depend on all the surrounding facts and circumstances.
The Tribunal is, however, satisfied that a subcontractor cannot rely on or use as an absolute defence, that it had no duty whatsoever to make enquiries about proper approvals in regard to a building licence or approved building plans, merely because it is a subcontractor.
It is obvious, as has been contended by the BRB, that the standard of enquiry expected of a registered builder doing very minor subcontracting work would be different from the standard required from a registered builder doing major construction. It is ultimately for the Tribunal to determine whether the necessary standard of care had been adhered to.
As was pointed out in the Voli matter, it is not an 'extraordinary degree' of care that is required. It is what is regarded as 'usual' by the normal standards of conduct in the profession.
The question for the Tribunal is therefore what would be the reasonable or usual level of care that is applied by the reasonable, competent and fairminded registered builder in a similar situation.
The Tribunal follows the legal standard set in the Voli matter, but we do not agree with the BRB that the circumstances of the Voli matter are of direct applicability to these proceedings.
In the Voli matter, the issue centred on the professional standard of design of an architect that relied on the defence that the plans had been approved by another body. In these proceedings, however, Danmar did not merely rely on the assurances of a third party. Danmar, as subcontractor, relied on the repeated assurances of the registered builder, Kemmish, who had applied for and had been granted the building licences and who had control over the building site. The facts in Voli can therefore not be equated to the facts in these proceedings.
The same can be said of the applicability of the Max Spiccia matter to these proceedings. In those proceedings, the court found that a builder who relied on the advice of a nonbuilder had acted negligently. The same does not apply in these proceedings where Danmar acted on the advice of Kemmish, who was a reputable, registered builder, who had applied for a building licence, who was granted a building licence, and who had a range of plans approved for construction.
The Tribunal must take into account all the facts and circumstances to determine if Danmar had been negligent by failing to act in accordance with its duty as a reasonable and competent builder given the nature and scope of works it had been retained to do.
The Tribunal carefully considered the submissions of the parties. It came to its decision after thorough analysis of the evidence and consideration of all the facts and information presented to it.
The Tribunal notes that the BDT did not call as expert witness, any person from the building industry to explain what the 'reasonable' standard would be within the industry in a matter such as the one under consideration. The Tribunal had the benefit of the experience of the two sessional members who constituted the Tribunal, and their understanding of the reasonable standard of care expected of subcontractors, was of great assistance.
The Tribunal is not satisfied that the BRB has shown that Danmar was negligent in the discharge of its duties as a subcontractor when it relied on the assurances given by Kemmish.
The Tribunal comes to this finding for the following reasons:
•Kemmish, as a registered builder, had applied for and was granted building licences by the City.
•Kemmish retained another builder to do the work but it withdrew from the project.
•Mr Martin, a director of Kemmish and registered builder, approached Danmar to do the work.
•Danmar took over from the previous builder who was also subcontracting for Kemmish.
•When Danmar was approached to do the work, building licences had already been issued and plans had already been approved by the City and it was never understood by Danmar or Kemmish that Danmar would apply for building licences or submit plans for approval.
•Danmar was, as had been found by the Tribunal, the subcontractor for Kemmish.
•Kemmish assured Danmar that building licences had been issued by the City and that building plans had been approved. Mr Martin confirmed in the hearing that he had repeatedly given these assurances to Danmar.
•Danmar relied on the assurances of Mr Martin who was not only a registered builder, but also an architect and excouncillor of the City and he had, together with Mr Whyman, daytoday control of the building site.
•Danmar explained that Mr Martin's arrangements and presentation of the project were of the highest professional standard and that when he presented them with the scope of work and matters related thereto, there was no reason whatsoever to question or doubt the assurances he had given.
•Kemmish had day to day control over the works; it had an office on site; it demonstrated its experience in building and; it supervised the work of Danmar and its staff and contractors.
•Danmar was provided by Kemmish with a range of working plans which, according to Kemmish, had been approved by the City. The plans involved several options from which clients could choose. Danmar used the plans to do further detailed drawings and to develop specifications for building, but they did not deviate from the plans given to them. The Tribunal does not find it untoward per se for a registered builder to provide unstamped, approved plans to a subcontractor for the purpose of drawing detailed specifications and construction.
•After the City had raised queries about the building licences and compliance with plans, Danmar immediately sought assurances from Kemmish and was told that building licences were in place; that there was a misunderstanding on the part of the City; and that Kemmish would take the matter up with the City to clarify any issues.
•The City did not, after they had become aware that the building licences may have expired, or that works were not compliant with plans, issue a stop work notice. The City also did not visit the site again. Danmar therefore had reason to accept that the misunderstanding between the City and Kemmish had been clarified.
•Danmar had no direct interaction or dealings with the City prior to or during the building process.
•All variations in the buildings have been retrospectively approved by the City.
Flowing from the Voli decision, the Tribunal is not satisfied that a subcontractor in the same position and faced by the same circumstances as Danmar, would in the normal and usual course of its duties, have acted to the standard that the BRB proposes. In retrospect one might say that extraordinary care should have been taken by Danmar and that it should have bypassed the registered builder to make direct inquiries from the City but 'extraordinary care' is not the test for what the reasonable and competent subcontractor would have done.
The Tribunal concludes that the BRB failed to show that Danmar was negligent in the discharge of its duties as a subcontractor in regard to the building licences and the building plans. It was reasonable for Danmar to have relied on the repeated verbal assurances given by Kemmish that building licences had been issued and that plans had been approved.

Summary of findings

The findings of the Tribunal in reply to the issues identified by the parties are therefore as follows:
1)The first respondent was not negligent by carrying out building work without ensuring that a valid building licence was in place.
2)The first respondent was entitled to rely on the representation of Kemmish that valid building licences were in place.
3)The first respondent was entitled to rely on its claim to be a subcontractor for Kemmish regardless of the terms of the contracts that had been concluded.
4)Extrinsic evidence is admissible to determine the exact nature of the agreement between Moss Glades, Kemmish and Danmar.
5)The first respondent was entitled to rely on representations by Moss Glades and by Kemmish that the plans provided were identical to the plans approved by the City and the building work was in accordance with the plans approved by the City.
The Tribunal finds that there is not a proper cause for disciplinary action against the first or the second respondent.
The application should therefore be dismissed.
The application for costs will be dealt with in subsequent proceedings.

Orders

1.The application for disciplinary proceedings against the first respondent and the second respondent is dismissed.

2.The application for costs is set down for a directions hearing to be held on 18 March 2010.

I certify that this and the preceding [118] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
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DR B DE VILLIERS, MEMBER