Commissioner for Consumer Affairs v Laprac Pty Ltd

[2010] SADC 119

DISTRICT COURT OF SOUTH AUSTRALIA

(Civil)

COMMISSIONER FOR CONSUMER AFFAIRS v LAPRAC PTY LTD & ANOR

[2010] SADC 119

Judgment of His Honour Judge Tilmouth

8 September 2010

ADMINISTRATIVE LAW

Complaint against a licensed building work contractor alleging various breaches of the Act - allegations found proved - defendants fined.

Building Work Contractors Act 1995 ss 21, 28, 34, & 35; Petracaro v Commissioner for Consumer Affairs (1994) 62 SASR 387, referred to.

COMMISSIONER FOR CONSUMER AFFAIRS v LAPRAC PTY LTD & ANOR
[2010] SADC 119

1. There is before the court a complaint of the Commissioner for Consumer Affairs against the first defendant a building company, and the second defendant, the Director and sole shareholder thereof.  The defendants have been in businesses and held building licenses since 1991, without blemish until now.  They are a major contractor for Stratco Metal.

2. The complaint is laid with respect to defective building work undertaken by them for property owners at Two Wells, work commenced in May 2008. The building work in this particular instance comprised an outback veranda or patio on a residential property. It was completed by an employee of the first defendant. He unfortunately took it upon himself to make modifications. A development application with respect to this work was completed by the second defendant and lodged with the local council. In this he understated the cost of the proposed development at $9,900. The job was quoted at $14,000. This avoided a small extra council fee. In addition, any building work costing more than $12,000 must be covered by a statutory scheme of insurance, which it was not in this instance: s 34 & 35 Building Work Contractors Act 1995 (SA) and R 5(4)(b) Building Work Contractors Regulations 1996.

3. The failure to obtain such insurance is the second of six grounds of complaint. The first is that there was no formal contract as required by s 28 of the Act.  The third ground of complaint is the misleading statement in the development application itself.  The fourth and last complaint against the first defendant, is negligent workmanship in respect of this job.  These faults are admitted.  Grounds five and six relate to the natural defendant.  Ground five attributes to him the unlawful and negligent conduct of the building work in his capacity as the Director of the first defendant, as particularised in the first four counts.  The sixth and final ground of complaint against him is that he negligently supervised the subject job.

4. It is necessary to note that a report was obtained in September 2008 identifying a number of significant defects (summarised in particulars 4.2 of the complaint) and in Exhibit P1, tab 9.  It appears relations between the parties had broken down to the point that the second defendant resolved to approach Stratco to appoint an independent contractor to remedy the problems: see Exhibit P1 tab 10 and Exhibit P1 tab 5 p 21-23.  A Mr Turpin was nominated for this purpose.  Proceedings were issued in the meantime, involving both claim and counter-claim, the builder seeking the balance of $8,000 due under the contract and the home owners cross-claiming for damages.  A subsequent report of 1 October 2009 prepared at the request of the court in the summary proceedings, found the remedial work was inadequate for the reasons identified therein – Exhibit P1 tab 11.

5. At some point in time those proceedings were settled, on terms which have not been disclosed.  Of course settlement may well have been on terms struck for legal, business or costs reasons, quite apart from the particular merits of the case.  It is clear however that by the terms of the settlement, the defendants were absolved of any further liability for the remaining problems.

6. The defendants have learnt their lesson arising from the deficient paperwork and sloppy workmanship, attendant upon this particular job.  They have new systems in place which ensure compliant contracts are supplied and executed as required.  They tried to find a way through what proved to be an intractable problem, by engaging an independent contractor to fix the problems, at the defendants’ cost.  The court was not informed why he failed to do so.  When interviewed in April 2009 the second defendant was co-operative with the Department of Consumer and Business Affairs and made straight-forward admissions.  It also appears there was an early offer to acknowledge the complaint filed in this court.

7. It is important that builders and those who run building firms, understand their obligations under the Building Work Contractors Act.  There was a suggestion in this case that under valuing contracts to avoid insurance implications was rife in the industry.  The message needs to be understood by the industry that this practice will not be tolerated.

8. In the end result we have an unfortunate building dispute which became unsatisfactory from the point of view of the parties.  The builder responded by agreeing at its cost, to have the problems rectified.  For reasons which are not explained that did not come about, but in the end result the parties settled the litigation thus putting an end to the builders continuing responsibility to finish the work.  It is evident that in the aftermath the consumer remains dissatisfied and the builder has ultimately been financially disadvantaged by this project.  The parties did not advise the court what the residual cost of the poor workmanship was, or what the damage might have been.

9. Apart from the second defendant, the first defendant employs another workman and there are three sub-contractors largely dependent upon it for their source of work.  The court was told it turns over around $40,000 gross per annum.  The failure to properly document or to insure in this instance, was a one-off.

10. Nevertheless, there are important public policy considerations to uphold, namely to protect the residential building market against practices forbidden by the Building Work Contractors Act.[1]Noticeably this includes keeping proper paperwork, advising consumers of their full rights and taking adequate insurance cover so that consumers are not exposed: Petracaro v Commissioner for Consumer Affairs.[2]

    [1]    Schomburgk v Brown, 8/10/97, no DCAAT-97-133, Judge Sulan

    [2] (1994) 62 SASR 387 at 390

11. In the combined circumstances the court is satisfied that there is “proper cause for disciplinary action” against the builder within the meaning of s 21(1) of the Act, and against the second defendant as building work supervisor, under s 21(2). Given that this situation is quite out of character for a business which has been in operation for nearly 20 years, and that the builder has changed its practices as a consequence, it is appropriate to impose a modest deterrent fine in the circumstances.

12. In all the circumstances the first defendant is fined $1200. The second defendant is fined $400. They will be allowed four months and six months respectively within which to pay those fines, or such longer time or times as the Commissioner for Consumer Affairs may allow, if any. It should be clearly understood however, that these fines are imposed on the footing that the defendants immediately corrected their practices and come before the court with an untarnished record. Had that not been the case, the fines would have been substantially higher. There will be no order as to costs of these proceedings: s 42G(2) District Court Act 1991 (SA).