Cardinal Constructions Pty Ltd v Reed - [1999] WADC 99

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

LOCATION: PERTH

CITATION: CARDINAL CONSTRUCTIONS PTY LTD -v- REED & ANOR [1999] WADC 99

CORAM: LA JACKSON DCJ

HEARD: 14 OCTOBER 1999

DELIVERED : 28 OCTOBER 1999

FILE NO/S: CIVO 173 of 1999

MATTER :IN THE MATTER OF AN APPEAL FROM THE DECISION OF THE BUILDING DISPUTES COMMITTEE GIVEN 15 JUNE 1999

BETWEEN: CARDINAL CONSTRUCTIONS PTY LTD
Appellant
AND
DAVID REED
JANICE PITTMAN
Respondents

Catchwords:

Miscellaneous matters - Appeal from Building Disputes Committee - Practice and procedure - Leave to appeal - Unconscionable conduct

Legislation:

Builders Registration Act 1939

Home Building Contracts Act 1991

Result:

Leave to appeal granted. Appeal allowed in part. Judgment for the appellant for $5,934.33 in lieu of judgment for the respondent for $265.67.

Representation:

Counsel:

Appellant: Ms C Bahemia
Respondents : Mr C Caine

Solicitors:

Appellant: Hammond Worthington
Respondents : Corrin Caine

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

Building Corporation v Earnshaw, unreported; DCt of WA; Library No D990039; 22 February 1999
Watson v Wallington (1999) WADC 84

Case(s) also cited:

J-Corp Pty Ltd v Casey (1993) 10 SR (WA) 43
Kioa v West (1985) 159 CLR 550
Wing Luck Foods v Lay Choo Lim [1989] WAR 358

LA JACKSON DCJ: This is an application for leave to appeal from a decision of the Building Disputes Committee (the "Committee") given on 10 June 1999. At my direction both the question of leave to appeal and the appeal itself were argued at the same time. On reflection I consider that procedure to be inappropriate. The application for leave to appeal should generally be considered separately.
The Committee is a statutory body created by the Builders Registration Act 1939. It consists of a chairperson who is a legal practitioner (s27) and one person as a representative of the interest of consumers and one person as a representative of the interest of builders (ss28, 35). Section 36(1) provides:
"At all its sittings the Disputes Committee shall act according to equity, good conscience and the substantial merits of the case and without regard to technicalities and legal forms, and shall not be bound by the rules of evidence but may inform itself upon any matter in such manner as it thinks fit."
The Committee is, as was described by Viol DCJ in Building Corporation v Earnshaw, unreported; DCt of WA; Library No D990039; 22 February 1999 an informal board designed to give relatively speedy and inexpensive relief to the parties involved in building disputes. In Watson v Wallington (1999) WADC 84 I considered the question of leave to appeal and canvassed various authorities on that subject. It is unnecessary for me to repeat that task. I merely re‑state what I there said at para 25:
"Although it is a matter for the exercise of judicial discretion, in general, the tests to be applied to the application for leave to appeal from a decision of the Committee should be as follows.
1.The applicant must show:
(a)either the decision was wrong or the decision is at least attended with sufficient doubt to justify the granting of leave, and,
(b)substantial injustice would be done by leaving the decision unreversed.
2.The consideration of the criterion in 1(a) is in the context
(a)that it is designed to restrict appeals,
(b)that there is a prima facie presumption in favour of the correctness of the decision of the Committee, and
(c)that its proceedings will, by its nature, be relatively informal."
Perhaps added to that list might be the cases in which an important point of wide application arises for consideration. In such cases, even though the decision of the Committee may plainly be correct, it may well be of assistance to future committees and to those involved in the building industry to grant leave to appeal so that a decision which may be of assistance can be given. Such an expansion would, I am sure, be in the public interest. In this case, as I have said, perhaps, on reflection, wrongly, I directed the appeal and the application for leave be heard together but nonetheless my task will be to consider whether leave to appeal should be granted and, if so, to at the same time deal with the merits of the appeal.
The notice of appeal is as follows:
"TAKE NOTICE that the District Court will be moved before a Judge in Chambers on the day of 1999 at o'clock in the noon or soon thereafter as Counsel can be heard, be Counsel for the abovenamed Appellant for orders that:
1.That part of the judgment of the Building Disputes Committee in Complaint No 0.1196 given on 10 June 1999 whereby the Committee ordered that the builder:
(a)do pay the sum of $5,055.00 for rectification of faulty painting;
(b)do pay $150.00 for repair to ensuite bathroom;
(c)do pay $380.00 for repair to the vanity top;
(d)do pay $1,650.00 for repair to the brick paving; and
(e)do pay $6,200.00 for late completion.
Be set aside and in lieu therefore, the following orders be made:
(a)The Appellant do remedy the exterior finishes, the faulty painting, the vanity top, and the brick paving.
(b)The claim for non‑flexible grout in the ensuite bathroom be dismissed.
(c)The claim for late completion be dismissed.
(d)operation of order no 62/99 be suspended pursuant to paragraph 41(3)(a) of the Builders Registration Act, 1939.
(e)The Second Respondents do pay the Appellant's costs of the appeal.
AND FURTHER TAKE NOTICE THAT the grounds of this appeal are as follows:
1.(As amended) The Disputes Committee erred in law in ordering the Appellant to make payment for exterior painting on the ground that:
1.1there was no valid complaint regarding the exterior painting before the Disputes Committee and therefore the Disputes Committee did not have the jurisdiction to make such Order; or alternatively
1.2if there was a verbal complaint, the Disciplinary Committee failed to observe its own procedures on hearing the complaint and thereby failed to afford the Applicant natural justice.
2.erred in law in failing to allow the Appellant the opportunity to remedy the defects to the painting, vanity top and paving as contemplated by paragraph 17(4)(c)(ii) of the Home Building Contracts Act 1991.
3.erred in fact and in law in failing to take account of its order to remedy no 143 of 1999, in respect of the ensuite bathroom, and the builders compliance with the order.
4. erred in fact and in law in finding the Appellant engaged in unconscionable conduct in the formation of the contract on the grounds that there was no evidence before the Committee upon which it could reasonably find that the Appellant engaged in unconscionable conduct in the formation of the contract.
5.erred in fact and in law in finding liquidated damages of $200.00 per week is a reasonable term to be implied into the building contract between the Appellant and the Second Respondents.
6.erred in law in finding that clause 18(e) of the building contract did not operate so as to relieve the Appellant from all his obligations and responsibilities under the contract (except those associated with the defects liability period)."
Ground 1
Ground 1 can be fairly quickly disposed of. It refers to the painting in para (a). Although it is possible when viewed narrowly the claim was not as precise as might be expected in a court, in my view this matter was fairly and squarely before the Committee. Both parties had adequate opportunity to address it. The very nature of the Committee must allow for a degree of informality. That informality should not be discouraged as to do so would take away from the essential character of the Committee being a body capable of reasonably efficient and inexpensive disposition of disputes in the building industry.
Ground 2
Ground 2 has been abandoned. It takes with it the issues relating to the vanity top in para (c) and the brick paving in para (d).
Ground 3
This relates to para (b), namely $150. This is a trivial sum and in accordance with principle 1(b) in para 3 of these reasons I would not entertain it.
Grounds 4, 5 and 6
The Committee in its decision held that upon the formation of the contract the builder had acted unconscionably. It rectified the contract and inserted a liquidated damages clause for delay at a rate of $200 per week. The Committee found a 31 week delay in completion and ordered the builder to pay $6,200.
Section 15 of the Home Building Contracts Act 1991 is headed "Conduct or terms of contract that are unconscionable etc" and is in the following terms:
"(1)A builder must not -
(a)in connection with the formation or execution of a contract, or the circumstances in which it is entered into, engage in conduct that is unconscionable, harsh or oppressive; or
(b)enter into a contract that contains any provision that is unconscionable, harsh or oppressive.
(2)Without limiting the generality of subsection (1) regard may be had to the following for the purposes of that subsection -
(a)the relative strengths of the bargaining positions of the builder and the owner;
(b)whether, as a result of conduct engaged in by the builder, the owner was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the builder;
(c)whether the owner was able to understand the contract; and
(d)whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the owner or a person acting on behalf of the owner by the builder or a person acting on behalf of the builder.
(3)A provision of a contract shall not be called in question under subsection (1)(b) by reason only that it entitles the builder -
(a)by notice in writing given at any time before the commencement of the home building work to require the owner to satisfy the builder -
(i)that the owner has title to the land on which the work is to be performed; and
(ii)by production of evidence in writing, that the owner is able to pay the contract price;
(b)by notice in writing given at any time before the commencement of home building work that is to be performed by way of a variation of a contract to require the owner to satisfy the builder, by the production of evidence in writing that the owner is able to pay the price agreed for that work;
(c)if the owner fails to satisfy the builder as mentioned in paragraph (a) or (b) within 10 days of receipt of a notice under that paragraph, to terminate the contract or the variation, as the case may be, by notice in writing given to the owner within a further 10 days.
(4)The Disputes Committee may approve a form of contract submitted to it for its opinion on whether any provision is in breach of subsection (1)(b) and a provision in a form so approved shall not be called in question under that subsection.
(5)Forms of contract for various kinds of home building work may be prescribed which are to be taken to comply with all the requirements of this Act.
(6)This section is enforceable under section 21 and not otherwise."
Section 21 provides remedies for breaches of s15 as follows:
"(1)Where an owner claims that a builder has committed a breach of section 15, the owner may apply to the Disputes Committee for relief under this section.
(2)An application under subsection (1) in respect of a contract must be made within 3 years from the time when the contract was entered into or the breach first occurred, whichever is the later.
(3)The Disputes Committee may, in granting relief under this section -
(a)declare the contract or any provision of the contract against which relief is sought to be void from the beginning;
(b)modify the provisions of the contract in such manner as it considers just;
(c)order the repayment to the owner of any amount paid by the owner under a contract or a provision that has been declared void or modified under this section,
and for the purposes of carrying out this section may make such orders and give such directions as the Disputes Committee considers necessary or expedient.
(4)Where it appears to the Disputes Committee in any proceedings, that any person is an associate of a party to the proceedings and has or may have -
(a)shared in the profits of; or
(b)a beneficial interest in,
the transaction in question, the person may be joined as a party to the proceedings and the Disputes Committee may make such orders against, or in respect of, that person as it considers just.
(5)For the purposes of subsection (4), a person is an associate of another person if -
(a)the person is a partner of the latter person; or
(b)where the latter person is a company, the person is a shareholder or officer of the company.
(6)In subsection (5) 'officer' has the same meaning as in the Corporations Law but does not include an employee of the company unless he or she was concerned in the management of the company."
The question of unconscionability arose during the course of the hearing. There had been evidence by the owner as to delay and the question arose as to how if at all she should be compensated for that delay. At page 126 of the transcript of the hearing before the Committee, Mr Caine counsel for the owners said:
"Sir, I'd like to put the claim for compensation in an alternative. We have two alternatives, one being the amount referred to in the specifications, although not referred to in the building contract signed, was nevertheless used by the parties in the execution of this work. Secondly, that is a matter of general damage that $350 a week is a reasonable amount."
At page 131 Mr Caine suggested the Committee had powers pursuant to s17(4)(c) of the Home Building Contracts Act. The Committee did not in its reasons for decision deal with those arguments. I can see some difficulties for the owners, but it is unnecessary for me to consider the arguments. No cross appeal has been made claiming the Committee could have granted the owners $6,200 on any other basis. The first time I could see any question of unconscionability arising was at page 139 in a discussion between the Committee chairperson, Mr Hall, and Ms Bahemia, counsel for the builder. That was at the very end of the proceedings. The owners' claim was never amended to seek a declaration of unconscionability or any modification of the provisions of the contract pursuant to s21(3). Notwithstanding any lack of formal application, the Committee found the builder's action unconscionable and amended the contract to provide $200 per week as liquidated damages for delay.
In my opinion the Committee acted beyond its jurisdiction in so doing. As I have previously noted, the Committee is designed to act relatively informally and to provide prompt and inexpensive remedies to both owners and builders. It must, however, of course, act in accordance with the legislation applying to it. Section 15(6) of the Home Building Contracts Act provides "this section is unenforceable under s21 and not otherwise" (italics provided). Those words do not appear elsewhere in either the Home Building Contracts Act or in s12A of the Builders Registration Act dealing with unsatisfactory building work. Section 21 provides a code within which the owner may apply with respect to a breach of s15. If s21 is not complied with then s15 is not enforceable. It seems to me the very clear words of the legislation do not allow the Committee the scope to make an unconscionability order as distinct from its ability to act generally in a more informal manner. Accordingly the appeal should be allowed to the extent that the Committee ordered the Board to pay to the owner the sum of $6,200.
The finding by the Committee that the builder had acted unconscionably is one which a specialised body such as the Committee may well be better suited to make than the District Court. The finding arose from the way in which the contract was entered into. The tender documents were prepared for the owners by an architect. Included in the documents was a choice of two forms of contract, that of the Royal Australian Institute of Architects and that of the Housing Industry Association. The tender documents also contained under the heading "Annexure to General Conditions" a liquidated damages clause of $350 per week described as contract variables as applicable on this project. When the builder tendered he did so using the HIA form, which does not include a liquidated damages clause, but he failed to advise the owners that there was no liquidated damages clause. He then significantly delayed the performance of the contract. In the circumstances I would not see the Committee's description of his conduct in connection with the formation of the contract as unconscionable as being inappropriate. It may well be that such a finding could also have been made with respect to the delay in the execution of the contract. I note s15(2) of the Home Building Contracts Act commences with the words "Without limiting the generality". Such words are expansive, not restrictive. In fixing the sum of $200 per week and in refusing to accept the builder's submission that he should have been given notice, or that by entering into possession the owners waived their rights, the Committee has acted in accordance with s36 of the Builders Registration Act, and I can see no error.
For these reasons, leave to appeal should be granted and the appeal allowed to the extent of $6,200 ordered to be paid by the builder to the owners.
In lieu of the Committee's order that the builder pay the owners $265.67 there should be an order that the owners pay the builder $5,934.33 and I will hear the parties as to the question of costs before the Committee and the costs of the appeal.