Harb v Commissioner of Fair Trading

[2007] NSWADT 175

CITATION:	Harb & Anor v Commissioner for Fair Trading, NSW Office of Fair Trading [2007] NSWADT 175
DIVISION:	General Division
PARTIES:	FIRST APPLICANT Peter Harb SECOND APPLICANT Steven Harb RESPONDENT Commissioner for Fair Trading, NSW Office of Fair Trading
FILE NUMBER:	063422 and 063423
HEARING DATES:	24 & 25 July 2007
SUBMISSIONS CLOSED:	25 July 2007
DATE OF DECISION:	3 August 2007
BEFORE:	Handley R - Acting Deputy President
CATCHWORDS:	Home Builder - improper conduct - Home Building Act - home builder - improper conduct
MATTER FOR DECISION:	Principal matter
LEGISLATION CITED:	Home Building Act 1989
CASES CITED:	Building Services Corporation v McIlveen (Commercial Tribunal of NSW, unreported, 18 February 1997) Commissioner of Fair Trading v Harb & Anor [GD] [2004] NSWADTAP 17 Director-General, Department of Fair Trading v Cohen [2000] NSWFTT 3 Harb v Commissioner for Fair Trading, Office of Fair Trading [2005] NSWADT 171 Harb v Commissioner of Fair Trading [2003] NSWADT 185
REPRESENTATION:	APPLICANTS E Olsson, Senior Counsel RESPONDENT V Griswold, solicitor
ORDERS:	The decisions of the Commissioner dated 15 November 2006 are set aside and, in substitution thereof, both Steven Harb and Peter Harb are to be issued with a reprimand in respect of their improper conduct in relation to construction work at 15 Stuart Street, Blakehurst, and, in addition, a penalty of $2,000 is imposed on Peter Harb, payable to the Commissioner within two months of the date of this decision.

1 This matter involves applications by Peter Harb and Steven Harb (‘the Applicants’) for a review of decisions of the Commissioner for Fair Trading, NSW Office of Fair Trading (‘the Commissioner’) to impose disciplinary action on them for improper conduct in relation to defective residential building work carried out at Blakehurst, NSW.

Background

2 Peter Harb was issued with a contractor licence (no 65651C) authorising him to carry out residential building work in the category of “general building work” on 7 July 1995 and his brother Steven Harb was issued with a similar licence (no 93973C) on 3 August 1998.

3 On 1 November 1998, the Applicants, trading as Harb Constructions, entered into a contract with Mr Ekrem Salih and Mrs Gulsun Salih to construct a two story dwelling at 15 Stuart Street, Blakehurst for the sum of $250,000. Construction work began shortly afterwards and was completed about 2 September 1999, there having been two variations to the contract involving payment of a further $99,000. Mr and Mrs Salih have been in occupation of the property since December 1999.

4 According to Peter Harb (affidavit dated 30 April 2007), at about the time of completion of the construction work, he requested a final payment from Mr and Mrs Salih of approximately $32,000. Mr and Mrs Salih refused payment and, in late 1999, lodged an application in the Fair Trading Tribunal (‘FTT’), identifying nine defects and seeking an order for non-payment of the final payment. At the direction of the FTT, the Harbs, who had been denied access to the property, were given access and permitted to remedy the defects, whereupon the FTT, by order dated 9 June 2006, directed Mr and Mrs Salih to make the outstanding payment.

5 By letter dated 10 September 2003, received on 17 October 2003, Mr and Mrs Salih complained to the Commissioner about defective work in the construction of the dwelling, relying on a report by Alfred Frasca, Consulting Structural Engineer, dated 2 July 2002, appraising the building work on the dwelling.

6 At about the same time, it appears they also made a claim on the home warranty insurer, Vero Insurance, in respect of the alleged defects identified in the Frasca report. Vero appointed a building consultant, Paul Robinson, to conciliate at a meeting of the parties on 28 January 2004. This was unsuccessful, so a conclave of experts was established comprising Mr Robinson, G Gleeson, Consultant Engineer, and Warren Holley, Residential Building Specialist, who met at the site on 9 March 2004 to examine the validity of the defects identified in the Frasca report. The three experts agreed to a joint response, estimating the cost of rectification of defects at $5,813.40. Mr Holley subsequently produced a report dated 4 July 2006 in relation to proceedings initiated by the Salihs in the Consumer, Trader and Tenancy Tribunal (‘CTTT’), and summarised the conclave’s response relative to items identified in the Frasca report in a ‘Scott Schedule’ in evidence in these proceedings,

7 In response to the Salihs’ complaint to the Commissioner, Norman Foster, a Senior Building Inspector with the Office of Fair Trading (‘the OFT’), inspected the dwelling (on 1 April 2004, 22 October 2004 and 10 December 2004) and prepared a report, dated 29 April 2005. In this report, Mr Foster identified various defects in the work carried out by Harb Constructions.

8 The OFT therefore alleged that the work carried out by Harb Constructions had not been performed in a proper and workmanlike manner, in breach of the statutory warranty implied into every contract to do residential building work by s 18B of the Home Building Act 1989 (‘the HBA’). Such a breach of a statutory warranty constitutes ‘improper conduct’ under s 51(1)(c) of the HBA, in respect of which the Commissioner may take disciplinary action against the holder of a contractor licence.

9 On 21 April 2006, a delegate of the Commissioner issued a ‘Notice to Show Cause’ to both Peter and Steven Harb inviting them to show cause why disciplinary action should not be taken against them. The Applicants’ solicitors made submissions on their behalf dated 12 May 2006 and 5 July 2006. On 15 November 2006, the delegate decided (1) to disqualify Peter Harb from holding a contractor licence or associated licence for a period of three years, and (2) to cancel Steven Harb’s contractor licence and disqualify him from holding a contractor licence or associated licence for a period of three years, with effect from 15 November 2006.

10 On 28 November 2006, both Peter Harb and Steven Harb filed applications with the Tribunal for review of these decisions, together with applications for stay of the decisions. On 29 January 2007, a stay was granted in respect of the decision affecting Steven Harb until the determination of his application. No stay was granted in respect of Peter Harb.

11 The Applicants were also involved in disciplinary proceedings arising out of their improper conduct in relation to renovation work performed for Mr and Mrs Daniels on an existing dwelling in Harris Street, Balmain, pursuant to a contract dated 12 December 2000 (‘the Daniels complaint’). On 11 October 2002, the then Director-General of Fair Trading (now the Commissioner) determined: (1) to cancel Peter Harb’s contractor licence, to disqualify him from holding such an authority for a period of five years from 23 October 2002, and to impose a penalty of $5,000; and (2) to cancel Steven Harb’s contractor licence and disqualify him from holding such an authority for a period of two years. The decision of the Tribunal on a review application filed by the Applicants (Harb v Commissioner of Fair Trading [2003] NSWADT 185) was set aside by an Appeal Panel (Commissioner of Fair Trading v Harb & Anor [GD] [2004] NSWADTAP 17) and remitted to the Tribunal as originally constituted for redetermination.

12 On 1 August 2005, the Tribunal: (1)(a) affirmed the decision of the Commissioner dated 11 October 2002 to cancel Peter Harb’s contractor licence, (b) set aside the Commissioner’s decision to disqualify him from holding such a licence for a period of five years from 23 October 2002 and to impose a penalty, and (c) substituted a decision disqualifying him for a period of three years from that date; and (2)(a) set aside the decision of the Commissioner to cancel Steven Harb’s contractor licence and disqualify him from holding such an authority for a period of two years, and (b) substituted a decision to reprimand him for his improper conduct and impose a penalty of $1,650 (Harb v Commissioner for Fair Trading, Office of Fair Trading [2005] NSWADT 171).

13 Peter Harb has not reapplied for a contractor licence, instead awaiting the outcome of the current proceedings.

The Relevant Law

14 Section 18B(a) of the HBA implies the following (statutory) warranty by the holder of a contractor licence in every contract to do residential building work:

“a warranty that the work will be performed in a proper and workmanlike manner and in accordance with the plans and specifications set out in the contract”

15 Pursuant to s 51(1)C, the holder of a contractor licence who is authorised by the licence to do residential building work “is guilty of improper conduct if the holder ... (c) breaches a statutory warranty”.

16 Section 56 provides that the Director-General (defined in s 3 as meaning the Commissioner) may take disciplinary action against the holder of a contractor licence on the ground that “the holder is guilty of improper conduct”. Section 62 states that the Director-General may do any one or more of the following:

“(a) determine to take no further action against the holder,

(b) caution or reprimand the holder,

(c) make a determination requiring the holder to pay to the Director-General, as a penalty, an amount not exceeding $11,000 (in the case of an individual) or $50,000 (in the case of a corporation) within a specified time,

(d) vary the authority held by the holder, by imposing a condition on the authority, including a condition requiring the holder to undertake a course of training relating to a particular type of work or business practice within a specified time,

(e) suspend the authority for a period not exceeding its unexpired term,

(f) cancel the authority,

(g) disqualify the holder, either temporarily or permanently, from being any one or more of the following:

(i) the holder of any authority, or any specified kind of authority,

(ii) a member of a partnership, or an officer of a corporation that is a member of a partnership, that is the holder of an authority,

(iii) an officer of a corporation that is the holder of an authority.”

17 The issues for the Tribunal to decide are first, whether the Applicants were guilty of ‘improper conduct’ by reason of their breach of the statutory warranty implied by s 18B(a) of the HBA in relation to the construction of Mr and Mrs Salih’s dwelling in Stuart Street, Blakehurst, and, if so, second, whether the appropriate disciplinary action was to disqualify Peter Harb from holding a contractor licence or associated licence for a period of three years, and to cancel Steven Harb’s contractor licence and disqualify him from holding a contractor licence or associated licence for a period of three years.

Oral Evidence

Steven Harb

18 Steven Harb (‘Steven’) provided an affidavit dated 30 April 2007 and gave oral evidence at the hearing. He stated that between 1994 and 1998, before being granted a contractor licence in August 1998, he worked as a carpenter. Since August 1998, he has practised continuously as a builder and started working in partnership with his brother, Peter Harb (‘Peter’), in late 1998. Although both he and Peter signed the contract with Mr and Mrs Salih, at that stage he was only helping Peter in an administrative capacity, while working elsewhere. Steven said he had no supervisory or other involvement in the Salih project, and was not aware of any complaint concerning work on the contract until after the end of the project.

19 Steven said that he had been prepared to rectify the nine defects identified by Mr and Mrs Salih early in the FTT proceedings but was unable to do so because the Salihs denied him access to the site. He understood from Mrs Salih’s evidence at the FTT hearing (in early 2000), that she only complained of the nine defects identified. After the FTT member directed the Salihs to allow access to the site, they carried out the rectification work and the Salihs paid the outstanding payment.

20 Steven said he heard nothing more from the Salihs until approximately 2004 when Mr Frasca’s report was sent to Vero Insurance, the home warranty insurer, and Vero contacted the Applicants. His brother subsequently met with representatives of Vero, with the Salihs and with their respective building consultants.

21 Steven said he is the owner and nominated supervisor of Harb Constructions Pty Ltd which he has run since 2003, and the holder of Builder’s Licence Number 135959C. To the best of his knowledge, no building complaints have been lodged against Harb Constructions Pty Ltd since he undertook responsibility for it in 2003, although he acknowledged the disciplinary action taken against him in relation to the Daniels complaint, referred to above, for not paying a monetary order of the CTTT within the prescribed time.

22 Steven said Harb Constructions Pty Ltd currently has on foot a number of building contracts including the construction of 18 units at Guildford which are about half completed. If he were to loose his contractor licence, the Guildford project would “in all likelihood collapse causing literally millions of dollars in losses and numerous legal proceedings from all aggrieved parties involved in the project” (affidavit par 32). Steven said the company has successfully completed a variety of projects, and he provided references from eight personal, professional and business associates.

Peter Harb

23 Peter Harb provided an affidavit dated 30 April 2007 and gave oral evidence at the hearing. He said that he has been issued with a ‘Notice to Show Cause’ on only one other occasion (in relation to the Daniels complaint), which did not concern a complaint about the quality of the work or a breach of contract. The disqualification for a period of three years caused him a lot of hardship, but he has learned from the experience, remains committed to the building industry, and has continued working in the industry as an employee. Although the period of disqualification has now expired, he has not yet applied for another contractor licence. Since being disqualified in October 2002, Peter has worked as an employed builder for his brother’s company.

24 Peter said that having completed his Higher School Certificate in 1989, he worked in the building industry and completed his TAFE studies. He was granted a contractor licence in 1995 and commenced practice on his own before going into partnership with his brother Steven in 1998. One of their first projects was that for Mr and Mrs Salih. Although both he and Steven signed the contract, he was in charge of the job on a day-to-day basis and Steven did not have any involvement in the construction side of the project. Peter was responsible for most of the building work, except for some tiling, some prime cost items (for example, bathroom items), retaining walls, concreting and the stencilled driveway, which were the responsibility of the Salihs or their contractors.

25 When the work under the contract was practically complete, Peter requested a final payment from Mr and Mrs Salih of about $32,000. When they refused to pay, he suspended further work, there still being some minor matters requiring completion. Peter said that after practical completion of the building work, there is a 90 day defects liability period specified in the contract. He expected to receive a list of defects from the Salihs and to be given access to the property to address these. This did not happen. Instead, Mr and Mrs Salih lodged an application in the FTT seeking an order for non-payment of the final progress claim. The Salihs had identified nine defects (no other items were mentioned) but refused access to Peter and his brother to allow them to carry out the work. At the direction of the FTT, the Salihs subsequently allowed them access, they rectified the nine defects, and the FTT ordered payment of the outstanding progress claim, which the Salihs paid in full.

26 Peter said he heard nothing more from the Salihs until about three or four years later, when he became aware of a claim the Salihs had made on Vero Insurance. He was invited to attend a meeting on site with the Vero representative on 28 January 2004. Subsequently, Peter’s solicitor advised Vero that the matter had previously been dealt with in the FTT, and Peter believes Vero declined the insurance claim. The Salihs lodged an appeal against that refusal and that matter is currently before the CTTT.

27 Peter stated that Harb Constructions did not carry out the tiling work in the house. The Salihs selected the tiles and instructed him on which tiler to engage, a person unknown to Peter. When Harb Constructions left the site, the external tiling and column tiling on the balconies had not been carried out.

28 Peter stated that other than the nine defects rectified in 1999 and the work schedule prepared by Vero Insurance, he was not advised of any other defects until being provided with a copy of the Frasca report by Vero in January 2004. He has not been asked to carry out any further rectification work, but remains willing and able to do so. Peter believes some work has been done on the site since Harb Constructions left, but is not aware of the details.

29 Peter provided references from seven personal, professional and business associates. He said his referees were all aware of the current proceedings, but he had not asked them to mention their awareness of his disqualification in their written reference.

30 In his affidavit, Peter commented on various defects in the construction work on the dwelling referred to by the delegate of the Commissioner in his decision dated 15 November 2006. Peter was also cross-examined in relation to some of these defects. Where relevant, Peter’s comments are referred to below under the heading ‘Discussion and Findings’. I also note that the conclave took into account the Applicants’ comments, to which there is reference in the Scott Schedule.

Alfred Frasca

31 As stated above, Mr Frasca, a Consulting Structural Engineer, prepared a report dated 2 July 2002, appraising the building work on the dwelling at Blakehurst. He gave oral evidence at the hearing. Mr Frasca has worked as a consultant since 1982. In February 2002, Mr and Mrs Salih commissioned him to inspect the site and prepare a report. On 16 May 2002, Mr Frasca inspected the site for the purpose of preparing the report. He said that the Salihs provided him with the Council approved documents and he did not attend the Council to inspect their files. The Salihs also provided him with a report prepared by Mr Martin of GMB Building Consultants Pty Ltd, together with other reports.

32 In cross-examination, Mr Frasca acknowledged that he is not a builder and did not study the building contract. It was not part of his brief to consider what work was done by different contractors, and he is not aware of whether Mr Harb built the retaining walls.

Norman Foster

33 At the time of the Salihs’ complaint to the OFT in October 2003, Mr Foster was a Senior Building Inspector. He said he is a cabinet joiner by trade and experienced in residential developments. He is now the OFT’s Co-ordinator of Building Disputes.

34 Mr Foster made inspections of the site to investigate the complaint on 1 April 2004, 22 October 2004 and 10 December 2004. He prepared a report dated 29 April 2005. He also attended a site meeting with a representative of Vero Insurance, probably in late 2003, but did not attend a meeting between ‘the conclave’ experts on 9 March 2004. Mr Foster said he used the Frasca report to identify the items claimed to be defective rather than to draw any conclusions – his investigation was not influenced by and was independent of the Frasca report. In the course of his investigation, he met with the Applicants in their offices at Parramatta on 22 April 2004. Mr Foster did not attend Council to inspect their files. He asked the builder and the owners to provide him with all relevant documentation.

35 In cross-examination, Mr Foster said the plans approved by Council show the Salihs as home builders. However, the home warranty insurance was provided by Harb Constructions, indicating that they took responsibility for the building work and would have undertaken to obtain the final certificate from Council before occupation of the house. Mr Foster agreed that it was possible that not all work undertaken on the property was carried out by Harb Constructions – for example, the stencilled driveway and retaining walls.

36 Mr Foster said that practical completion of a property means ‘fit for purpose’. There then follows a period during which the builder returns to the property to undertaken minor rectification work, for example, cracking in the plaster which occurs because of settlement. The Applicants were not given the opportunity to remedy such minor defects. (Further reference to Mr Foster’s report and oral evidence appears under the heading ‘Discussion and Findings’ below.”

The Applicants’ Submissions

37 Ms Olsson, for the Applicants, said the matter is unusual because of the period of more than four years that elapsed between the time that the Salihs occupied the house (in December 1999) and the time their complaints to the OFT were laid before the Applicants (in 2004). The burden of proof borne by the Commissioner, these being disciplinary proceedings, requires that the Tribunal be ‘comfortably satisfied’ with respect to each alleged defective item that it amounted to a breach of the statutory warranty.

38 Ms Olsson submitted that the Tribunal should reject the evidence of Mr Frasca, who “sought to exaggerate defects and recommend demolition and reconstruction of most aspects of the house” (submissions par 25). His report refers to work the Applicants did not carry out, such as the stencilled driveway, some tiling on the balconies and the spar in the bathroom. The Tribunal should prefer the evidence of Mr Foster and Mr Holley and “be comfortably satisfied that the majority of items which required attention were readily able to be rectified and that it would be a fairly inexpensive task to do so” (submissions par 26). The majority of defects were at the minor end of the spectrum, and it should be remembered that the Applicants had no opportunity to rectify any defects.

39 Ms Olsson submitted that in weighing the expert evidence, the Tribunal can be guided by a number of facts: first, that neither Mr Foster nor Mr Holley endorsed Mr Frasca’s recommendations of demolition and reconstruction, suggesting that neither considered the defects warranted substantial rectification; second, that the Salihs have apparently not carried out any rectification, suggesting that the defects are of a more minor nature; and third, that the building is performing satisfactorily.

40 Ms Olsson submitted that even if a breach of a Code or Australian Standard is established, the Tribunal must still consider whether it amounts to a breach of the statutory warranty. If the defect does not require rectification and has no consequence other than that it is a technical breach of the Code or Standard, then it ought not be accorded the status of a breach of warranty. It should also be acknowledged that it “is wholly unnatural to assert that a builder cannot make an error or commit an oversight in supervision at any stage, ever, during a construction period” (submissions par 39).

41 With regard to penalty, Ms Olsson said the key consideration is that of proportionality viewed over the conduct as a whole, the intent being to protect the public rather than punish those found to have been guilty of improper conduct.

42 In the case of Steven Harb, he has only one relevant antecedent – the 2002 disciplinary proceedings where the only finding against him was that he did not pay a monetary order in the CTTT within the prescribed time. The matter had nothing to do with his skill, knowledge or ability as a builder. In the present case, Steven Harb should not be judged in 2007 in relation to work carried out in 1998/1999 in which he had no actual hands-on involvement. He has conducted a successful business since 2001 (when the Daniels matter arose) and gave unchallenged evidence on the projects his company has underway and of the impact on those projects were he to loose his licence.

43 In the case of Peter Harb, who had day-to-day responsibility for construction of the Salihs’ house, there is no evidence of structural or other failure of the work carried out by him. The contraventions, while not trivial, are at the minor end of the scale of defective works and would have been rectified in the defects liability period had the Applicants been notified of the defects and access been allowed. The Salihs did not notify the Applicants of the defects in issue, nor have the Applicants been given an opportunity to rectify them. The home warranty insurer declined the Salihs’ claim.

44 Ms Olsson contended there is no evidence that Peter Harb is lacking in the appropriate skill, ability or knowledge to perform the functions of a builder. Indeed, the evidence suggests he has learned his lesson as a result of the Daniels matter and is a better builder than in 1998/1999. He has effectively served a further self-imposed two years of disqualification since the disqualification period in the Daniels matter expired in October 2005, and this should be taken into account in determining any penalty. Peter Harb is well regarded in the community and has conducted himself well since the Daniels matter. He presents as a competent, skilled and honest man.

45 Ms Olsson submitted that in the case of both Applicants the appropriate order is that no further action be taken against them.

The Commissioner’s Submissions

46 Ms Griswold, for the Commissioner, submitted that the issue is whether the Applicants breached the statutory warranty. If breaches occurred, disciplinary action is warranted. Ms Griswold submitted that the Commissioner has established that work completed by the Applicants for the Salihs was defective pursuant to the Building Code of Australia and the relevant Australian Standards, and was not carried out in a workmanlike manner, as per the Foster and Holley reports and the Frasca report to the limited extent that it corroborates the Foster and Holley reports. The Commissioner relies, in particular, on the Foster report, which is independent, comprehensive and credible.

47 Ms Griswold said the Applicants had notice of problems prior to completion of the works in 1999. The Salihs’ conduct in locking out the Applicants was relevant and taken into account in the FTT proceedings. Nevertheless, the Applicants had an obligation to carry out the building works properly and in a workmanlike manner in the first place, despite provision for rectification. Ms Griswold said that it was only some minor work carried out at the property that was not done by the Applicants.

48 With regard to the appropriate penalty, Ms Griswold noted that although the Applicants’ defective work took place before the disciplinary action taken against them in relation to the Daniels matter, the disciplinary history is significant and cannot be ignored. She submitted that the disciplinary history indicates a risk to public safety and a significant penalty should be imposed.

Discussion and Findings

Whether there was ‘Improper Conduct’

49 I have reviewed the Holley report dated 4 July 2006 and the Scott Schedule in which the joint response of the 2004 conclave of experts was recorded against the findings of the Frasca report and the Foster report. With regard to the interior of the house, I note the conclave disagreed with a number of defects identified in the Frasca report, and both agreed and disagreed with responses in the Foster report. The conclave found numerous minor defects, including cracks in the cornices in three of the bedrooms, and in the plasterboard and render at various locations, and cracks in the grouting in the bathrooms in respect of some of which the application of a flexible sealant was required. None of defects appear to be serious and can be readily rectified. In his affidavit dated 30 April 2007 (p 6-7), Peter Harb said the cracking in the cornices, plasterboard and render was not present when he left the site and was not reported to him. He thought the cracking might be due to settlement. He accepted that the absence of flexible sealant in the wet areas was “incomplete work”, although he noted there has not been a complaint about dampness or water penetration.

50 With regard to the exterior of the house, some of the defects in the mortar joints identified in the Frasca and Foster reports were found by the conclave to be within normal tolerances, but the conclave agreed that relatively minor rectification work was required in the brickwork at two points and some further brick cleaning was required. Peter Harb acknowledged that this was incomplete work. With regard to flashings, the damp proof course and weepholes, the conclave found some minor defects requiring rectification, while other defects alleged in the Frasca report were dismissed as not being defects. In his affidavit (p 10-11), Peter Harb said there had been no complaint about water penetration or dampness. If weepholes were blocked, they would have been cleared in the defects liability period.

51 The conclave found no structural defects in the dwelling, relying on information from the engineer as to compliance. With regard to the roof, the conclave disagreed with most of the defects alleged in the Frasca report – for example, the conclave found “no evidence of roof spread whatsoever”. In oral evidence, Mr Foster found there was roof spread of a minor nature that could be readily rectified. In his affidavit (p 12-13), Peter Harb said the roof was inspected and certified by both the engineer and the Council. If there has been a technical breach of the relevant Australian Standard, and had it been brought to his attention, he would have arranged for it to be fixed.

52 Mr Holley reported that the total cost of the rectifications agreed by the conclave was estimated to be $5,813.00.

53 Turning to the Foster report, I note many of Mr Foster’s concluding comments are in relation to the provision of the various warranties and certificates required. Mr Holley found, contrary to Mr Foster, that the builder had provided the necessary certification. Mr Foster referred to a lack of warranty and service details in relation to the spar and air conditioning. I note the Applicants did not install the spar and the air conditioning, which are not part of the contract work. In terms of the current proceedings, the most damning concluding comment made by Mr Foster is that in his opinion (report p 3), “the quality of workmanship is poor throughout the dwelling and is indicative of poor work practices, planning, administration and supervision”.

54 Mr Foster’s report is a comprehensive one, illustrated with photographs of the defects identified. He proved to be a credible witness. However, it appears that some of the defects identified by Mr Foster in relation to tiling, and the retaining walls and stencilled driveway, on which he commented, as well as the spar and air conditioning, were not the responsibility of the Applicants.

55 In oral evidence, Mr Foster said that hairline cracking is an aesthetic problem and not a defect. He said new houses settle and the Applicants were not given the opportunity to remedy such minor defects. As noted above, he found minor problems with the roof, which, he said, can be readily rectified. Mr Foster said there was no evidence of water penetration either in the wet areas or externally as a result of defects. With regard to the brickwork, while there were defects, he had no concerns as to its structural adequacy.

56 I note that all the inspections on which the reports were based were undertaken some years after practical completion of the dwelling in September 1999. The Foster report and the Scott Schedule indicate that most of the cracking in the cornices, plasterboard and render was probably caused by settlement. Many of the defects, of which there is a substantial list, are, in my view, based on my reading on the Foster and Holley reports and the Scott Schedule, of a relatively minor nature, which can be readily rectified. While no opportunity has been allowed for rectification, the Applicants state they are willing and able to undertake necessary rectifications.

57 In summary, I am comfortably satisfied that there is evidence of poor workmanship in so far as there are a significant number of relatively minor defects requiring rectification. I do not accept they are all due to incomplete work. However, it must be borne in mind that, first, except pursuant to the FTT order in early 2000, the applicants have been denied the opportunity to remedy defects, second, more than four years had passed from the practical completion of the dwelling (in September 1999) before the inspections by Mr Foster and the conclave (in early 2004) on which they based their assessments, third, some defects identified by Mr Foster in his report were not the Applicants’ responsibility, and fourth, as the experts recognised, there will have been some wear and tear on the dwelling in the period since practical completion as a result of the Salihs being in occupation since December 1999.

58 I conclude that that the Applicants have been in breach of the statutory warranty implied by s 18B(a) of the 1989 Act in so far as there is evidence from the significant number of minor defects identified in the Foster report and the Scott Schedule that some work on the dwelling was not performed in a proper and workmanlike manner. In terms of the degree of seriousness of the breach, the evidence of Mr Foster and the conclave indicates that the defects are of a relatively minor nature that can be readily rectified. As noted, the Applicants remain willing and able to undertake such rectification if access to the property is allowed.

Disciplinary Action

59 Having found the Applicants are guilty of improper conduct, I must consider what disciplinary action, if any, should be taken against them and, in particular, whether the Commissioner’s decision in this regard was the correct and preferable decision.

60 I note that the object of disciplinary action under the HBA is to protect the consumers of home building services and not to punish. However, as the Commercial Tribunal acknowledged in Building Services Corporation v McIlveen (Commercial Tribunal of NSW, unreported, 18 February 1997) (‘McIlveen’), at p 29, “[t]he concept of public protection is wide; it embraces fitness, the maintenance of public standards, public confidence and deterrence both of the particular builder and others in the same occupation”. Other relevant factors in considering an appropriate penalty were identified by the FTT, comprising Judge KP O’Connor, Chairperson, in Director-General, Department of Fair Trading v Cohen [2000] NSWFTT 3 (‘Cohen’), at par 45:

“a) the nature, width and extent of the contraventions

b) the loss or damage and prejudice in consequence of the contraventions

c) the circumstances in which the contraventions took place

d) whether the licensee has been found to have engaged in any similar conduct

e) the presence of fraudulent or dishonest intent and deliberation on the part of the licensee

f) the extent of carelessness or wilfulness of the conduct

g) the efforts made to correct the situation and what measures have been taken by the licensee

h) what consciousness the licensee (a) had (b) displayed, of its obligations under the relevant statute and to the owners

i) the effect upon the licensee

j) antecedents

k) attitude, building history and future compliance

l) the penalty range.”

61 Turning first to Steven Harb, and having regard to the factors identified in Cohen, I note that he was granted a contractor licence in August 1998 and, shortly after this, in September 1998, he was a co-signatory with his brother Peter Harb to the contract with the Salihs. However, I accept that Steven Harb had no actual, hands-on involvement in the work pursuant to the contract. I have found that the defects are of a relatively minor nature and can be readily rectified. I accept that Steven Harb is willing to remedy the defects if given the opportunity to do so. With regard to his antecedents, I note that apart from this matter and the Daniels matter, there have been no complaints made or disciplinary action taken in respect of Steven Harb’s work. The Daniels matter post-dated the work in relation to the Salihs’ contract and involved not paying a CTTT monetary order within the prescribed time. On a remittal, the Tribunal substituted a decision reprimanding Steven Harb for his improper conduct and imposing a penalty of $1,650.

62 I note Steven Harb’s evidence as to the number and value of building contracts that his company, Harb Constructions Pty Ltd, has on foot and the serious consequences for that work if his contractor licence is cancelled. Mr Harb has supplied eight references from personal, professional and business associates that attest to his competence as a builder, the building projects in which he has been involved, and his honesty and integrity.

63 In my view, the public interest and the protection of the consumers of building services, would not, in this instance, be served by cancelling Steven Harb’s contractor licence and imposing a period of disqualification. Rather, he should be reprimanded for his improper conduct in this matter.

64 In the case of Peter Harb, I note that he was granted a contractor licence in July 1995 and, in September 1998, was a co-signatory with his brother Steven Harb to the contract with the Salihs. Peter Harb was responsible for the work under the contract on a day-to-day basis. I accept that he is willing to remedy the defects if given the opportunity to do so. With regard to his antecedents, I note that apart from this matter and the Daniels matter, there have been no complaints made or disciplinary action taken in respect of Peter Harb’s work. As noted above, the Daniels matter post-dated the work in relation to the Salihs’ contract and involved not paying a CTTT monetary order within the prescribed time. On a remittal, the Tribunal affirmed the decision to cancel Peter Harb’s contractor licence but substituted a disqualification period of three years from 23 October 2003.

65 I note Peter Harb’s evidence that despite his disqualification period having expired in October 2005, he has not reapplied for a licence and has continued working as an employed builder for his brother’s company. Mr Harb has supplied seven references from personal, professional and business associates that attest to his competence as a builder and project manager, some of the building projects in which he has been involved, and his honesty, integrity and community involvement.

66 In my view, the public interest and the protection of the consumers of building services, would not, in this instance, be served by imposing a further period of disqualification on Peter Harb. My impression is that he has learned from the Daniels matter, which, as noted, post-dated the current matter. Rather, Peter Harb should be reprimanded for his improper conduct in this matter and, in addition, given his day-to-day responsibility for the work under the contract, a penalty should be imposed. Given that the defects here are of a relatively minor nature, a penalty at the low end of the range of financial penalties open to the Commissioner is appropriate. I therefore impose a penalty of $2,000, payable to the Commissioner within two months of the date of this decision.

Decision

The decisions of the Commissioner dated 15 November 2006 are set aside and, in substitution thereof, both Steven Harb and Peter Harb are to be issued with a reprimand in respect of their improper conduct in relation to construction work at 15 Stuart Street, Blakehurst, and, in addition, a penalty of $2,000 is imposed on Peter Harb, payable to the Commissioner within two months of the date of this decision.