Hawli v NSW Self Insurance Corporation

[2017] NSWCATCD 38

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:	Hawli v NSW Self Insurance Corporation [2017] NSWCATCD 38
Hearing dates:	On the papers
Decision date:	26 May 2017
Jurisdiction:	Consumer and Commercial Division
Before:	G.J. Sarginson, Senior Member
Decision:	1 The respondent, NSW Self Insurance Corporation, is to pay the applicant, Jannine Hawli, the amount of $46,785.29 immediately. 2 The respondent, NSW Self Insurance Corporation, is to pay the applicant, Jannine Hawli, the sum of $2,750.00 in respect of costs, immediately.
Catchwords:	Home Building-Definition of “residential building work”-Whether “residential building work” “commenced”-Construction of policy of home warranty insurance-Amount payable under the policy
Legislation Cited:	Home Building Act 1989 ss 48A, 48K, 92, 99, 102, Sch 1 Cl 2 Home Building Regulation 2014 Reg 40, 49, Environmental Planning and Assessment Act 1979 s81A, and 95 Environmental Planning and Assessment Regulation 2000 Reg 142 Civil and Administrative Tribunal Act 2013 ss 50, 60 Civil and Administrative Rules 2014 Cl 38
Cases Cited:	Woolfe v Alexander Sussman t/as A Sussman Construction Consulting Services and Anor [2001] NSWSC 702 Provincial Homes v Doyle [2004] NSWSC 624 AIM Partnership v Rathchime [2010] NSWSC 860 Grygiel v Baine & Ors [2005] NSWCA 218 Barry v Royal & Sun Alliance Pty Ltd [2003] NSWCTTT 805 Collings Homes v Head & Ors [2002] NSWSC 1219 Allcastle Homes Pty Ltd v Wilkinson [2016] NSWCATAP 3 HIH Casualty and General Insurance (NZ) Limited (in liquidation) v General Reinsurance Australia Limited and Ors [2004] NSWSC 659
Texts Cited:	Bambagiotti Building Disputes & The Home Building Act 1989 (NSW) Thomson Reuters [2012] and Macquarie Dictionary
Category:	Principal judgment
Parties:	Jannine Hawli (applicant) New South Wales Self Insurance Corporation (respondent)
Representation:	Applicant: In person Respondent: M Kelly, Solicitor
File Number(s):	HB 16/55786
Publication restriction:	Nil

REASONS FOR DECISION

1. The matter has been set down, by consent of both parties, for determination of the amount of damages payable to the applicant (‘the homeowner’) by the respondent (‘the home warranty insurer’) under the contract of insurance on the basis of the written submissions and documents filed and served by the parties. In accordance with Section 50 of the Civil and Administrative Act 2013 (‘the NCAT Act’) the Tribunal has the power to determine the matter the matter “on the papers” in such circumstances.

2. The fundamental issue in dispute is the amount of damages the home warranty insurer is liable to pay the homeowner under the contract of insurance. Huxley Homes Pty Ltd (‘the builder’) with whom the homeowner had a written building contract dated 12 April 2016 went into liquidation on 17 October 2016. The contract price was $323,655.95 after written variation. The homeowner seeks payment of $64,731.19 under the policy of home warranty insurance, being 20% of the contract price, on the basis that residential building work had been commenced, but not completed, prior to the builder going into liquidation. The homeowner also seeks an order for costs in respect of the cost incurred in obtaining an expert report.

3. The home warranty insurer submits that it is only liable under the policy to pay to the homeowner the amount of the contract deposit, less the relevant excess under the policy, being the total amount of $17,945.90 as no residential building work had commenced prior to the builder going into liquidation. The home warranty insurer has paid the homeowner the amount of $17,945.90 as an interim payment, pending determination of the dispute in the Tribunal as to whether or not the homeowner is entitled to the amount of $64,731.19.

4. Each party filed and served documents in accordance with Tribunal directions.

HOMEOWNER’S DOCUMENTS AND EVIDENCE

5. The homeowner did not file an affidavit or statutory declaration with her materials setting out the material facts and circumstances regarding her engagement of the builder.

6. The homeowner’s documents are as follows:

7. A letter from the homeowner to the home warranty insurer dated 28 February 2017.

8. The written home building contract dated 12 April 2016.

9. The certificate of home warranty insurance dated 2 May 2016.

10. The written variation to the contract price dated 13 July 2016.

11. A construction certificate issued by Mr Dean, private certifier, dated 19 July 2016.

12. A plan for the property showing set out dimensions by Mr Blackadder, registered surveyor, dated 19 July 2016. The plan relevantly states “Set out dimensions on this plan prepared by Intrax on 19.7.16 are based on Huxley Homes Design Drawings…This information is prepared for the purpose of setting out the Construction shown on that drawing and should not be used for any other purpose. The builder should verify set out dimensions shown on this plain with the latest approved design drawings…”

13. An email from Ms Anderson of the builder to Intrax Consulting Engineers Pty Ltd dated 12 July 2016 “requesting peg out” of the property.

14. An email from Ms Yaakob, NSW State Manager of Intrax Consulting Engineers Pty Ltd dated 12 August 2016 to the homeowner relevantly stating: “Huxley ordered the email (sic) thorough us back in 12th July 2016…They engaged us to do the peg out and hence we invoiced them”.

15. A written tender from Finesse Home Builders dated 31 October 2016.

16. A letter from Marsdens Solicitors to the homeowner dated 2 February 2017. The letter states that it was a term of the Deed between the homeowner and the developer (Dandaloo Pty Ltd) that the homeowner complete construction by 19 December 2016, and that the homeowner was in breach of the Deed. The letter states that the developer would refrain from taking action against the homeowner under the Deed if construction is completed within 6 months (i.e. on or before 2 August 2017).

17. A letter from the home warranty insurer dated 15 December 2016 denying liability under the policy for payment of damages on the basis of non-completion of work by the liquidated builder. The grounds for the decision are expressed as follows:

1. The email supplied by Intrax Consulting Engineers relates to the peg out of the land and pre-dates the issuing of the construction certificate.

2. An undated copy of an email of Ms Anderson of the builder states: “When the job is excavated the 30 weeks start from the turn of the soil”. The home warranty insurer asserted that this email “indicates when the period of construction of the dwelling will commence”.

3. Under the Home Building Act 1989 (‘the HBA’) residential building work “is defined as any work involved in the construction of a dwelling” and there is no evidence of commencement of construction.

18. Email correspondence between the homeowner and the home warranty insurer dated 20 December 2016.

19. An expert report of Mr Bournelis of City Wide Building Consultants Pty Ltd dated 28 February 2017 and tax invoice.

Report of Mr Bournelis

20. The report of Mr Bournelis complies with the NCAT Expert Witness Code of Conduct, and sets out his qualifications. Mr Bournelis inspected the property on 21 February 2017, and took photographs.

21. Mr Bournelis states that when a licensed builder performs residential building work in respect of the construction of a new dwelling, a “sequence of events” occurs. The first is approval for construction of the dwelling from the local authority (i.e. development approval by the local Council). Once approval is granted and relevant fees are paid, the builder is free to commence construction on the vacant Lot.

22. So that the builder can correctly position the dwelling within the allocated boundaries, the builder must carry out a site survey by a registered surveyor. The survey is carried out before, during and after the construction works are commenced and completed. Mr Bournelis states:

“In my experience and as a licensed builder the survey works before during and after construction are always part of the builder’s construction programme and form part of the builder’s scope of works as submitted to the clients and the lending authorities. The costs of this task are also included in the builder’s contract sum”.

23. According to Mr Bournelis, a “construction project” involves activities prior to the breaking of ground and physical construction of the dwelling. Such activities are known as “preliminaries”. A site survey and set out of the works is part of the “preliminaries”. Mr Bournelis states:

“The site set out and construction survey is part of the builder’s scope of works and also forms part of his (sic) construction programme, as without this survey no further works can commence. I am instructed the builder on this occasion being Huxley Homes engaged a registered surveyor to carry out the site survey and set out. Once this task is completed and as the builder has possession of the site the survey will then trigger the next construction task on the site. I am further instructed that post the construction site survey being completed by the Surveyor, Huxley Homes (sic) went into liquidation”.

24. Mr Bournelis refers to the issue of the construction certificate by the private certifier. Mr Bournelis states that “a standard procedure with local authorities (Local Municipal Councils) requires that a physical commencement take place, not necessarily a substantial commencement. A physical commencement will trigger the construction certificate and the building process on a construction site”. According to Mr Bournelis, construction survey work (including the set out) is “engineering work” within the meaning of Section 95(4) and (5) of the Environmental Planning and Assessment Act 1979, and the development consent does not lapse if such work has occurred within the relevant period provided in the development consent.

25. Mr Bournelis comments upon the CRD Building Consultants and Engineers (‘CRD’) report of Mr Oates prepared on behalf of the home warranty insurer. Mr Bournelis asserts that he disagrees with the opinion of Mr Oates that no pegging out had occurred, because the photographs he had taken at his site inspection and the photographs in the CRD report clearly showed peg out markers that relate to the survey by ESG Surveyors (‘survey pegs’) and that “the construction survey pegs also provide a finished level as would be required by the builder so he knows how far to excavate”.

26. Mr Bournelis agrees with Mr Oates that no soil has been turned or ground broken by the builder, but disagrees that no construction has occurred. Mr Bournelis asserts:

“In my opinion…construction has occurred since the owner has signed a contract and the builder has taken possession of the site with construction site survey works being completed being part of his (sic) prelims (sic) works…”

DOCUMENTS, EVIDENCE AND SUBMISSIONS OF THE HOME WARRANTY INSURER

27. The documents of the home warranty insurer were as follows:

28. Written submissions prepared by Mr Kelly, Principal Lawyer of the home warranty insurer.

29. A statutory declaration of Mr Calvert, claims manager of the home warranty insurer, dated 14 March 2017 attaching a copy of the Home Building Compensation Fund policy of home warranty insurance.

30. An expert report of Mr Oates of CRD Building Consultants and Engineers dated 8 March 2017.

Report of Mr Oates

31. The report of Mr Oates complies with the NCAT Expert Witness Code of Conduct, and sets out his qualifications.

32. Mr Oates states that he performed a site inspection on 1 December 2016, and his report contains photographs taken at the site inspection.

33. Mr Oates states at page 8 of his report that no excavation works had been commenced on the site, and although the site “has been surveyed and pegged in reflection of the provided survey plan documentation which in my opinion is not considered to be excavation works. The survey pegging is to mark out the building footprint ready for commencement of the excavation works”.

34. Mr Oates states at page 6 of the report that, under Clause 6 of the written contact between the homeowner and the builder, if in the builder’s opinion the boundaries of the site are unclear, the builder must give the Owner a written notice asking the Owner to provide a survey of the site. If the Owner does not provide a survey within 5 working days, the builder may obtain a survey as agent of the Owner, and charge the Owner the cost of the survey and builder’s margin as an addition to the contract price. Mr Oates states that he was not supplied with any document to indicate the survey was obtained by the builder, and pursuant to the contract, the survey was the responsibility of the homeowner.

35. At page 9 of the report, Mr Oates states that, after completing his report, he was provided with further documents, including the email from Ms Anderson of the builder to the homeowner regarding the builder arranging for the site to be pegged. On the basis of this information, Mr Oates accepted that the builder, rather than the homeowner, had arranged for the site to be pegged out for a survey to occur.

36. However, Mr Oates states that the builder arranging for the site to be “pegged out” did not change his opinion that building work had not commenced. No site establishment had occurred in the form of site fencing, site sheds and amenities, or temporary front boundary crossing. Mr Oates states that the homeowner had only paid the builder a deposit, and the builder “was yet to establish a construction site for the property”. Mr Oates states that a builder does not require a construction certificate to survey land and install survey markers or pegs, but requires a construction certificate before building work can be performed.

37. Mr Oates states that he has reviewed the report of Mr Bournelis. Mr Oates states that he agrees with Mr Bournelis regarding the location, layout and survey pegs at the property. However, Mr Oates disagrees with Mr Bournelis’s comments that survey works are “always” part of the builder’s program and scope of works. Mr Oates states that Clause 6 of the contract is to the effect that a survey is primarily the responsibility of the homeowner, not the builder. Mr Oates states that the comments regarding the builder making allowances for “preliminaries” and reference to information NSW Fair Trading provides owner/builders contained in the report of Mr Bournelis is irrelevant to the issue in dispute.

Written Submissions of the Home Warranty Insurer

38. The written submissions of the Home Warranty Insurer can be summarised as follows:

39. The only issue for determination is whether the installation of boundary pegs in the ground is “residential building work” within the definition contained in the HBA.

40. By reason of Clause 1.3 (b) and (f) of the policy of home warranty insurance, read in conjunction with Clause 40 (4) of the Home Building Regulations 2014, the maximum amount payable under the policy where residential building work has “not commenced” is the loss of the deposit paid (less the excess). Where residential building work has commenced, but there is “non- completion” of the work, the amount payable is limited to “20% of the contract price (including any agreed variation to the contract price) for the work.”

41. “Residential building work” begins with “an act of physical construction such as (i) breaking ground for the slab preparation in the construction of a house; or (ii) the interior strip out in a bathroom refurbishment”, but includes “the work co-ordinating or supervising the physical work”. Other “ancillary work” such as applying for Council approval, is not residential building work within the meaning of the HBA.

42. The home warranty insurer relied upon the authorities of Woolfe v Alexander Sussman t/as A Sussman Construction Consulting Services and Anor [2001] NSWSC 702 at [18]; Provincial Homes v Doyle [2004] NSWSC 624 at [57]; AIM Partnership v Rathchime [2010] NSWSC 860 at [17]; and Grygiel v Baine & Ors [2005] NSWCA 218 to support the proposition that “residential building work” must involve actual physical construction work or the co-ordination or supervision of it. Further, the Tribunal must also consider whether the work “would otherwise be residential building work in a different context” and avoid “arbitrary distinctions”.

43. As the boundary pegging of the site was arranged by the builder prior to the issue of the construction certificate by the private certifier, the Tribunal should infer that “the timing of the peg out was to facilitate the procurement of the construction certificate”. Under Section 81A(2) of the Environmental Planning and Assessment Act 1979 (‘the EPAA’) building work must not commence prior to the issue of a construction certificate by the Council or an accredited private certifier. Boundary pegging is an “ancillary procedure” prior to the commencement of actual building work, and if boundary pegging was “building work” within the meaning of the EPAA, then if it occurred prior to the issue of a construction certificate Section 81A (2) of the EPAA would be contravened. A finding by the Tribunal that boundary pegging was not “residential building work” would be consistent with the provisions regarding the commencement of “building work” in Section 81A (2) of the EPAA.

44. The act of boundary pegging “cannot be considered in a vacuum” and if it constituted the commencement of building work under the policy of home warranty insurance “it would have to be residential building work for every purpose associated with residential development”. Accordingly, if the work was performed or arranged by anyone other than a licensed builder or person holding a license under the HBA and HB Regulation, there would be breach of the HBA, which would lead to “absurdity” as surveying is not regulated by the HBA.

45. If the Tribunal held that Clause 1.3 (f) of the policy was engaged because of a broad interpretation of when residential building work “commenced” but was “not completed”, then then “virtually no claim would ever constitute a “loss of deposit” claim (i.e. to circumstances prior to the commencement of residential building work.

46. If the non-completion component of the policy was triggered by reason of the installation of boundary pegs and prior to “any actual work being undertaken” then “what would be compensated is the loss of a commercial opportunity rather than repairing deficiencies in construction work or completing it” which is inconsistent with the “policy basis for Regulation 40(4) of the Home Building Regulation 2014”.

FACTUAL FINDINGS RELEVANT TO DETERMINATION OF THE DISPUTE

47. From the documentary evidence of the homeowner, I am satisfied that:

48. There was a written contract between the homeowner and the builder dated 12 April 2016 for the builder to construct a residential dwelling on vacant land. The contract price was $323,655.95 after written variation. The homeowner paid the builder a deposit under the contract.

49. On 5 May 2016, a certificate of home warranty insurance was issued; evidencing that home warranty insurance had been taken out by the builder in respect of construction of the dwelling.

50. On 12 July 2016 the builder engaged Intrax Consulting Engineers Pty Ltd (‘Intrax’) to perform a peg out of the site (i.e. install boundary pegs into the ground on the site for purposes including the survey of the site by a Registered Surveyor). Intrax invoiced the builder for the work performed. There is no suggestion in any of the documents that the homeowner engaged Intrax.

51. On 19 July 2016 a registered surveyor, Mr Blackadder, of ESG Engineering Survey Group (‘ESG’), performed a survey of the vacant block, using the boundary pegs that had been installed by Intrax. The survey states that the dimensions on the survey plan that had been prepared by ESG for Intrax “are based on Huxley Homes Design Drawing”. From this document, I infer that Intrax engaged ESG to perform the survey, using the plans provided by the builder. There is no suggestion in any of the documents that the homeowner engaged ESG.

47. On 19 July 2016 the homeowner engaged a private certifier Mr Andrew Dean of Local Certification Services Pty Ltd as a private certifier. The letter of Mr Dean dated 19 July 2016 attaching terms and conditions are addressed to the homeowner, and thank the homeowner for “appointing me as your Principal Certifying Authority (PCA) for your “Single Dwelling”.

48. On 19 July 2016, Mr Dean issued a construction certificate in accordance with Section 81A (5) of the EPAA and Clause 142 of the Environmental Planning and Assessment Regulation 2000.

49. No physical construction work occurred on the site by the builder, nor did the builder perform any site preparation work in the nature of activities such as the installation of temporary fencing, prior to the builder going into liquidation.

50. There is no dispute that the homeowner paid the deposit under the contract of residential building work to the builder, or that the home warranty insurer has refunded the homeowner the deposit (less the claim excess amount).

JURISDICTION OF THE TRIBUNAL

56. By reason of Section 48A (2) of the HBA, an appeal by a homeowner against a decision of a home warranty insurer is a “building claim” within Section 48K of the HBA. The Tribunal determines the appeal on the basis of a re-hearing of the insurance claim (Barry v Royal & Sun Alliance Pty Ltd [2003] NSWCTTT 805, see also the commentary in Bambagiotti Building Disputes & The Home Building Act 1989 (NSW) Thomson Reuters [2012] at pp. 127-132).

57. In the circumstances of this matter, I must re-consider the decision of the home warranty insurer to pay damages under Clause 1.3 (f) of the policy (i.e. only damages for loss of deposit where the work has “not commenced”) rather than Clause 1.3 (b) of the policy (i.e. damages not more than 20% of the contract price resulting from “non-completion of the work”).

58. Proceedings were filed in the Tribunal on 23 December 2016, which is within the limitation period to appeal against a decision of a home warranty insurer under Regulation 49(1) of the HB Regulations (45 days from the date written notice is given by the insurer to the insured of its decision).

RELEVANT LEGAL PRINCIPLES

Statutory Provisions Of The HBA

59. There is no issue in these proceedings that the work performed by or on behalf of, the builder is a type of work that is excluded from the definition of residential building work under Sch 1 Cl 2(3) of the HB, or the HB Regulations.

60. The relevant provisions of the HBA are Sections 48K, 48A and Sch 1 Cl 2(1). Those provisions relevantly state:

Schedule 1 Clause 2

2 Definition of “residential building work”

(1) In this Act, "residential building work"means any work involved in, or involved in co-ordinating or supervising any work involved in:

(a) the construction of a dwelling, or

(b) the making of alterations or additions to a dwelling, or

(c) the repairing, renovation, decoration or protective treatment of a dwelling.

…

48K Jurisdiction of Tribunal in relation to building claims

(1) The Tribunal has jurisdiction to hear and determine any building claim brought before it in accordance with this Part in which the amount claimed does not exceed $500,000 (or any other higher or lower figure prescribed by the regulations).

(2) The Tribunal has jurisdiction to hear and determine any building claim whether or not the matter to which the claim relates arose before or after the commencement of this Division, except as provided by this section.

(3) The Tribunal does not have jurisdiction in respect of a building claim relating to building goods or services that have been supplied to or for the claimant if the date on which the claim was lodged is more than 3 years after the date on which the supply was made (or, if made in instalments, the date on which the supply was last made).

(4) The Tribunal does not have jurisdiction in respect of a building claim relating to building goods or services that are required under a contract to be supplied to or for the claimant on or by a specified date or within a specified period but which have not been so supplied if the date on which the claim was lodged is more than 3 years after the date on or by which the supply was required under the contract to be made or, if required to be made in instalments, the last date on which the supply was required to be made.

(5) The fact that a building claim arises out of a contract that also involves the sale of land does not prevent the Tribunal from hearing that building.

(6) The Tribunal does not have jurisdiction in respect of a building claim arising out of a contract of insurance required to be entered into under this Act if the date on which the claim was lodged is more than 10 years after the date on which the residential building work the subject of the claim was completed.

(7) The Tribunal does not have jurisdiction in respect of a building claim arising from a breach of a statutory warranty implied under Part 2C if the date on which the claim is lodged is after the end of the period within which proceedings for a breach of the statutory warranty must be commenced (as provided by section 18E).

(8) The Tribunal does not have jurisdiction in respect of a building claim relating to:

(a) a contract for the supply of goods or services to which none of subsections (3), (4), (6) and (7) applies, or

(b) a collateral contract,

if the date on which the claim was lodged is more than 3 years after the date on which the contract was entered into.

(9) This section has effect despite clause 5 (Relationship between Tribunal and courts and other bodies in connection with Division functions) of Schedule 4 to the Civil and Administrative TribunalAct 2013.

48A Definitions

(1) In this Part: "building claim" means a claim for:

(a) the payment of a specified sum of money, or

(b) the supply of specified services, or

(c) relief from payment of a specified sum of money, or

(d) the delivery, return or replacement of specified goods or goods of a specified description, or

(e) a combination of two or more of the remedies referred to in paragraphs (a)-(d),

that arises from a supply of building goods or services whether under a contract or not, or that arises under a contract that is collateral to a contract for the supply of building goods or services, but does not include a claim that the regulations declare not to be a building claim. "building dispute" means a dispute that has been notified as referred to in section 48C. "building goods or services" means goods or services supplied for or in connection with the carrying out of residential building work or specialist work, being goods or services:

(a) supplied by the person who contracts to do, or otherwise does, that work, or

(b) supplied in any circumstances prescribed by the regulations to the person who contracts to do that work.

"goods" , "services" and "supply" have the same meanings as in Part 6A of the Fair Trading Act1987.

(2) Without limiting the definition of "building claim" , a building claim includes the following:

(a) an appeal against a decision of an insurer under a contract of insurance required to be entered into under this Act,

(b) a claim for compensation for loss arising from a breach of a statutory warranty implied under Part 2C.

Relevant Authorities In Respect Of ‘A Building Claim’ To ‘Provide Building Goods and Services’ Under the HBA

61. The ambit of the statutory phrase “any work involved in, or involved in co-ordinating or supervising any work involved in: (a) the construction of a dwelling…” has been the subject of significant judicial consideration over the years. The authorities that deal with the issue arise in the context of whether or not the Tribunal has jurisdiction by reason of whether the claim is a “building claim” for the provision of “building goods and services” rather than whether or not there has been a “commencement…of work” under the policy of home warranty insurance.

62. In Woolfe v Alexander Sussman t/as A Sussman Construction Consulting Services and Anor (‘Woolfe’) [2001] NSWSC 702, the Supreme Court (McClellan J as he then was) dealt with an appeal from the Home Building Division of the Fair Trading Tribunal (‘the FTT’) on the issue of jurisdiction. The FTT had found that Ms Woolfe, a homeowner, owed Sussman monies under contract for unpaid services provided under contract. Ms Woolfe took proceedings in the Supreme Court seeking various declarations including a declaration that the decision be set aside as the Tribunal had no jurisdiction.

63. The facts of Woolfe are very different to the facts in this matter. In Woolfe, the homeowner was seeking to redevelop her property, and through a Solicitor, had engaged Sussman. Sussman “was brought in to assess the feasibility of such a project and to give other advice. That project did not proceed but the first defendant continued to provide services by way of valuations, feasibilities, potential cash flows, inquiries as to finance and quotes from project builders” (at para [2]).

64. The decision contains no detailed discussion of the definition of “residential building work” in the HBA, but His Honour expressed the following conclusion (at para [18]):

“In my opinion, residential building work is, as the definition makes plain, confined to building work in pursuance of the physical construction or alteration of a dwelling. It does not extend to goods or services provided in the course of considering the feasibility of the re-development of a property or the means by which suitable valuations and cash flow projections the re-development of the property may be financed”.

65. In Provincial Homes v Doyle and Ors [2004] NSWSC 624 the Supreme Court (Wood CJ at CL) dealt with an appeal by Provincial Homes against a homeowner that Provincial Homes pay the homeowner damages for breach of contract. Provincial Homes had agreed with the homeowner by way of a tender agreement that Provincial Homes would prepare building plans and obtain all relevant certificates, and submit them to Council for development approval. The parties agreed that a written contract would be entered into for the construction of a residential dwelling by Provincial Homes after the Council had issued development consent. The parties also agreed that the homeowner would engage a separate builder to demolish the existing home on the site, before construction of a new dwelling. Provincial Homes prepared plans and lodged them with Council, but the contract was terminated by the homeowner by reason of the repudiatory conduct of Provincial Homes before Council had issued a development consent.

66. Wood C.J. at C.L considered the decision of McClelland J in Woolfe, and the decision of Master Malpass in Collings Homes v Head & Ors [2002] NSWSC 1219 and held the Tribunal had no jurisdiction under Section 84(1) of the HBA (now Section 48K of the HBA). Relevantly, Wood CJ at CL stated (at paras [56]-[60]):

“The critical question which arises in relation to the Tribunal’s jurisdiction is whether the services which were supplied, and in respect of which the claim arose, were services that fell within the meaning of “building services” as defined by s84 (1) of the HBA.

In my view they did not fall within the meaning of that expression, which is defined to mean “services supplied for or in connection with the carrying out of residential building work”. In this regard the authorities previously mentioned have, in my view correctly, confined the services that fall within that definition to those that relate to the carrying out of physical construction work. Preparatory design and approval work has been excluded, even though its performance was a necessary precursor to a potential owner having a dwelling constructed.

The present case is not on all fours with Collings Homes or Woolfe, however, the interpretation of the legalisation there adopted seems to me to bring about the same result. That follows from the circumstances that is the categorisation of the claim, which must be one that “arises from a supply of building…services” that determines jurisdiction.

I do not consider that the words “supplied for or in connection with” the carrying out of residential building work can properly be regarded as extending jurisdiction to claims that arise in relation to services that were supplied in relation to feasibility, design, procurement of approvals, and similar preliminary work, prior to commencement of building. The legislative intent, in my view, was to regulate the building or construction phase and those services which are directly supplied for in in connection with its service”.

67. In Grygiel v Baine & Ors (‘Grygiel v Baine’) [2005] NSWCA 218, the NSW Court of Appeal dealt with an appeal originally arising from a decision of the Consumer Trader and Tenancy Tribunal (‘the CTTT’) that a builder not be allowed to join a company associated with the builder as a co-applicant in proceedings against a homeowner ; join the architect and engineer as cross defendants to his cross claim against the homeowner; and to amend proceedings to include a cause of action in his cross claim against the homeowner on the basis of negligent misstatement (the homeowner being a Solicitor). The Court of Appeal reviewed the relevant authorities on jurisdiction, including Collings Homes, and Woolfe. On the issue of jurisdiction and the scope of Sections 48A, 48K and Sch 1 Cl 2 of the HBA, Basten JA (with whom Mason P agreed) stated (at paras [57]-[58]):

“It is not necessary to determine whether, in relation to the first limb of the definition, services can be supplied “for or in connection with” the carrying out of residential building work, for the purposes of the definition of “building goods or services”, where no residential building is in fact carried out. On one view, the definition of “residential building work” is not limited to activities, such as laying foundations and painting a building, on site, but extends to work of a preparatory nature. Alternatively, preparatory work could be said to have a sufficient connection with the carrying out of building work because its purpose was to give rise to residential building work and it had a sufficient causal nexus with such work: see generally, Technical Products Pty Ltd v State Government Insurance Office (Qld) [1989] HCA 24; (1989) 167 CLR 45 at 47-48 (Brennan, Deane and Gaudron JJ). Accordingly, it is at least arguable that project management arrangements, of the kind address in both Collings Homes cases, would fall within the definition of “building claim”. Were that not the case, distinctions would need to be drawn which might have an arbitrary result, at least from the perspective of the homeowner. Thus, where an architect or project manager provides plans and designs, locates a builder and coordinates and supervises the actual building work, any loss suffered as a result of inadequate coordination and supervision would fall within the building claim, but other conduct would not.

That is not to say that the jurisdiction of the Tribunal under the Home Building Actshould be expanded beyond the proper construction of the terms used in Part 3A. The fact that the Tribunal has a jurisdiction under that Part up to $500,000, whereas its current jurisdiction under the Consumer Claims Act is limited to $25,000, demonstrates the need to maintain proper limits on the jurisdiction. Nevertheless, to the extent that the statutory terminology permits, those limits should not be arbitrary, nor should an unduly restrictive construction be given to the words of the statute, especially to the extent that they mirror the terminology of the Consumer Claims Act. Of particular concern would be a construction which meant that services of a project manager might fall within the definition of “building claim” where residential building works actually eventuated, but not otherwise. Such a distinction can be avoided if the phrase “the carrying out of residential building work” is treated as adjectival, in the sense that it is descriptive of the services with which a connection must be established, rather than being treated as a factual pre-condition to the necessary connection.”

68. In AIM Partnership v Rathchime (‘Rathchime’) [2010] NSWSC 860 the Supreme Court (McDougall J) relevantly dealt with a dispute regarding the issue of costs. Rathchime was the owner of land, and AIM Partnership sued for breach of contract due to failure to pay for services provided. Being an interlocutory decision, the judgment does not set out in detail what services were provided by AIM Partnership to Rathchime. Proceedings were commenced in the CTTT and transferred to the Supreme Court by consent, with an order that costs of the CTTT proceedings be “costs in the cause”. Rathchime sought an order that AIM Partnership pay the costs of transferring proceedings from the CTTT to the Supreme Court, arguing that the CTTT never had jurisdiction because the claim was not a “building claim” for “building goods and services”. On the issue of whether or not the CTTT had jurisdiction, McDougall J stated (at paras [15]-[23]):

“The first question draws attention to the confused and circular definitions in the relevant provisions of the Home Building Act. A building claim is, among other things, a claim for the payment of a specified sum of money that arises from a supply of building goods or services. Building goods or services include, among other things, goods or services supplied for or in connection with the carrying out of residential building work by the person who contracts to do that work. Residential building work is defined to mean, among many things, any work involved in the construction, altering or renovation of a dwelling. There seems to be little doubt - at least at this stage - that we do have a "dwelling" lying at the base of this dispute.

The submission for Rathchime was that the work authorised by the contract in this case was work such as demolition, sewer diversion, bulk excavation and associated works, as defined briefly in the letter of 16 August 2007. By reference to a number of authorities, it was submitted that those works have nothing to do with the "construction" of a dwelling, or (if relevant) the altering or renovation of a dwelling. That is because construction was said to mean the building process itself: See Master Malpass in Collings Homes v Head [2002] NSWSC 1219. Reliance was placed also on the decisions of Wood CJ at CL in Provincial Homes v Doyle [2004] NSWSC 624 at [43] and McClellan J in Woolfe v Alexander Sussman [2001] NSWSC 702.

In Provincial Homes, Wood CJ at CL said, at [43], that if the Tribunal were to have jurisdiction there must be a claim arising from a supply of building goods or services. If I may say so with respect, I agree. Further, his Honour said at [59] and [60], the mere fact that the contract included a commitment to construct a dwelling would not of itself attract jurisdiction. Jurisdiction depended upon a characterisation of the services supplied that give rise to the claim. Thus, his Honour said, even accepting the width of "for or in connection with", preliminary or ancillary work in relation to feasibility, design, approvals and such matters would not come within the Tribunal's jurisdiction.

I accept his Honour's analysis. However, that analysis is relevant to the services with which his Honour was concerned. The services in this case are of a different nature.

In Woolfe, McClellan J said at [18] that residential building work is confined to work in pursuance of the physical construction or alteration of a dwelling, and did not include matters such as feasibility studies, valuations, cash flow projections and the like. Again, I agree. But the services in this case are of a markedly different nature.

In Grygiel v Baine [2005] NSWCA 218, Basten JA (with whom Mason P agreed) referred at [57] and [58] to the width of the connection that could be introduced, or limited, by the words "for or in connection with". His Honour said that on one view the definition might not be limited to matters such as laying foundations or painting, but could extend to preparatory work which could have a sufficient connection with the carrying out of building work because its purpose was to give rise to building work. Were that not so, his Honour said, arbitrary distinctions might arise.

Thus, his Honour said, the Court should not take an unduly restrictive or arbitrary approach to the words whereby the jurisdiction of the Tribunal is conferred. In doing so, as it seems to me, his Honour expressed at least implicit disapproval of the somewhat more restrictive approach taken by Master Malpass in Collings Homes at [33] and [34].

The question in this case is one that requires consideration with a full understanding of the nature of the works undertaken by AIM. It does not seem to me to be possible to say, in some a priori way, that works that could be described as demolition, sewer diversion, bulk excavation and associated works are simply incapable of being residential building work. If that is so, then it cannot be said, again a priori, that the claim is not a building claim.

It should be noted that the letter of 16 August 2007 referred to a "document schedule". It also referred to a "project and construction management proposal". A number of architectural drawings was identified, as was a number of structural and civil drawings. The Court did not have the benefit of seeing those drawings. If, on examination, it appeared that the work described in them comprised work that could be residential building work then it might be possible to conclude that, following the statutory chain of definitions, there was in this case an underlying building claim.”

69. In Allcastle Homes Pty Ltd v Wilkinson (‘Allcastle Homes’) [2016] NSWCATAP 3 (a decision not referred to in the submissions of the home warranty insurer) the Appeal Panel of the Tribunal considered the authorities of Woolfe; Collings Homes; Grygiel; and Rathchime. In Allcastle Homes, the builder had entered into a tender agreement with the homeowner in relation to the construction of a project home, with a written building contract to be executed by the parties upon completion of preparatory work by the builder. No written building contact was entered into, nor did physical work commence by the builder. The homeowners claimed the builder had repudiated the agreement. The homeowners commenced proceedings against the builder in the Tribunal seeking damages on the basis that the failure of the builder to complete its obligations under the tender agreement delayed the homeowners from entering into a building contract with a licensed builder and having the house constructed, which caused them to incur increased expenses and loss.

70. The Appeal Panel of the Tribunal held there was no error in the decision of the Member at first instance that the Tribunal had jurisdiction under Section 48K of the HBA as the claim was a “building claim” for “building goods and services”. The Appeal Panel rejected the argument of the builder that jurisdiction of the Tribunal was limited to physical construction work. The Appeal Panel stated that, in accordance with Grygiel v Baine, “the definition of a building claim should be read widely and generously” [at para 39] and that there was “no real inconsistency” between Gryigel v Baine and Rathchime because “both decisions focus on the nature of the claim and how it arose and both conclude that “the carrying out of residential building work” is not confined to physical construction. The words “for or in connection with” are wide enough to extend to preparatory work that has the purpose to give rise to residential building work (see Grygiel v Baine at [57] and AIM Partnership at [20]-[23])”.

71. The Appeal Panel held the “critical issue is the characterisation of the claim and whether it “arises from” the supply of “building goods or services” which is a definition that should be given broad application” (at [40]). The Appeal Panel further held (at paras [44]-[46]):

“The phrase “arises from” is broad but relies on there being a sufficient causal relationship between the claim and the relevant supply.

It is clear that the preparatory work under the tender agreement had the purpose of giving rise to contemplated residential building work and, as already noted, should therefore be characterised as a supply of building services. The provision of these services under the tender agreement was inextricably connected with the obligation of Allcastle to proffer, and the Wilkinsons to accept, an HIA contract covering an agreed scope of residential building works at an agreed price. Accordingly, the claim arising out of the tender agreement has a sufficient causal nexus with the preparatory work supplied under the tender agreement to be a building claim within the meaning of s 48A.

It does not matter that a building contract was not subsequently entered into or that physical construction was not commenced or completed. Allcastle is correct in contending that the contract for the supply of goods or services under the tender agreement was preliminary to the carrying out of residential building work but, for the reasons we have already outlined, the supply was nonetheless “for or in connection with the carrying out of residential building work” which was in contemplation. As observed by Basten JA at [57] and particularly at [58], to construe s 48A otherwise would be unduly restrictive and arbitrary.”

THE POLICY OF HOME WARRANTY INSURANCE AND LEGAL PRINCIPLES APPICABLE TO CONSTRUCTION OF THE POLICY

Statutory Provisions in the HBA and HB Regulations Regarding Home Warranty Insurance

72. The statutory provisions in the HBA regarding the policy of home warranty insurance is contained in Part 6 of the HBA. Relevantly, under Section 92(1) of the HBA, a person performing residential building work for an amount of the value of the contract between the homeowner and the builder in this dispute must have taken out home warranty insurance before residential building work is commenced and provide a certificate of insurance to the person on whose behalf the work is done. Under Section 99(1)(a) of the HBA, the contract of insurance must insure the person on whose behalf the work is done “against the risk of loss resulting from the non-completion of the work because of the insolvency, death or disappearance of the contractor”. Under Section 102(2) of the HBA, the insurance “must be of a type approved by the Minister and provided by the Self Insurance Corporation” and the policy must “comply with any requirements of the regulations” (Section 102 (4) and (5) of the HBA).

73. Part 6 of the Home Building Regulation 2014 (‘the HB Regulations’) contains the relevant regulations in respect of which the policy must comply. Relevantly, Regulation 40 states:

“40 Losses indemnified

1. An insurance contract must indemnify beneficiaries under the insurance contract for the following losses or damage in respect of residential building work covered by the insurance contract:

1. loss or damage resulting from non-completion of the work because of:

1. the insolvency, death or disappearance of the contractor, and

2. for policies issued on or after 19 May 2009, the suspension of a contractor licence pursuant to section 42A of the Act, and

2. loss or damage arising from a breach of a statutory warranty, being loss or damage in respect of which the beneficiaries cannot recover compensation from the contractor or have the contractor rectify because of:

1. the insolvency, death or disappearance of the contractor, and

2. for policies issued on or after 19 May 2009, the suspension of a contractor licence pursuant to section 42A of the Act.

2. Without limiting subclause (1), an insurance contract must indemnify a beneficiary for the following loss or damage, being loss or damage in respect of which a beneficiary cannot recover compensation from the contractor concerned, or have the contractor rectify, because of the insolvency, death or disappearance of the contractor and for policies issued on or after 19 May 2009, suspension of a contractor licence pursuant to section 42A of the Act:

1. loss or damage resulting from faulty design, where the design was provided by the contractor, or

2. loss or damage resulting from non-completion of the work because of early termination of the contract for the work because of the contractor’s wrongful failure or refusal to complete the work, or

3. the cost of alternative accommodation, removal and storage costs reasonably and necessarily incurred as a result of an event referred to in subclause (1), or

4. loss of deposit or progress payment due to an event referred to in subclause (1), or

5. any legal or other reasonable costs incurred by a beneficiary in seeking to recover compensation from the contractor for the loss or damage or in taking action to rectify the loss or damage.

3. The insurance contract must state that the risks indemnified include the acts and omissions of all persons contracted by the contractor or other person to perform the work resulting in loss or damage of a kind referred to in this clause.

4. For the purposes of subclause (1), if residential building work has not commenced, the loss or damage indemnified against may only include the loss of any deposit paid.

The Terms of the Policy

74. The policy of home warranty insurance relevantly states:

Cover

1.1   Residential building work

(a)   Subject to the terms of the policy and in accordance with the Act and the Regulation, the policy will cover you if you suffer the following losses or damage in respect of the work covered by this policy:

(i)   loss or damage resulting from non-completion of the work because of the insolvency, death, or disappearance of the builder; and

…

(c)   The policy will also cover you for any acts and omissions of all persons contracted by the builder to perform the work resulting in the loss or damage referred to in paragraph (a) or (b).

1.2   Amount of cover

(a)   At our discretion, we will either make good the loss or damage be engaging or paying a builder to repair or rectify the loss or damage, or pay to you the amount of that loss or damage, subject to paragraphs (b) and (c) and the limits on cover set out in subclause 1.3.

…

1.3   General limits on cover

(a)   You must meet the first $250.00 of each claim made.

(b)   If the claim is in respect of loss or damage resulting from non-completion of the work, the policy will not cover you for an amount of loss or damage more than 20% of the contract price (including any agreed variation to the contract price) for the work.

.…

(f)   If residential building work has not commenced, the loss or damage indemnified against under the policy is limited to the loss of any deposit paid.

…

…

Loss and damage for which the policy provides no cover

3.1   The policy will not cover you for:

…

(j)   work that:

(i)   is not residential building work; and/or

(ii)   did not require a certificate of insurance under Part 6 of the Act

regardless of whether a valid certificate of insurance has been issued for it.

7.   Terms with special meanings

In the policy the words in bold have the meaning indicated below:

…

Building claim means a claim for:

(a)   the payment of a specified sum of money;

(b)   the supply of specified services;

(c)   relief from payment of a specified sum of money;

(d)   the delivery, return or replacement of specified goods or goods of a specified description; or

(e)   a combination of two or more of the remedies referred to in paragraphs (a) to (d),

that arises from a supply of building goods or services whether under a contract or not, or that arises under a contract that is collateral to a contract for the supply of building goods or services, and includes a claim for payment of an unspecified sum of money that arises from a supply of building goods or services as defined in section 48A of the Act. It does not include a claim that the Regulations declares is not a building claim

.…

Contract means a contract between you and the builder pursuant to which the work is done or is to be done.…

Residential building work has the same meaning as it does under the Act.

Work means the residential building work which is done or is to be done by the builder to the dwelling under the contract.

...”

Interpretation of Contracts of Insurance

75. The applicable principles for interpretation of clauses in an insurance contract are summarised by Einstein J in HIH Casualty and General Insurance (NZ) Limited (in liquidation) v General Reinsurance Australia Limited and Ors [2004] NSWSC 659 as follows (at para [49]):

“49 It is of course pertinent to recall that the subject exercise concerned one of the proper construction of an insurance policy in which regard it is common ground that in construing the Policy the Court should have regard to the background facts and circumstances to elucidate the parties’ objectively discerned intention and purpose in entering into the insurance contract. The relevant principles are sufficiently summarised in the plaintiff submissions which were put to the arbitrators in the following terms:

“There are four main principles of construction applicable to insurance contracts (see Kelly & Ball: The Principles of Insurance Law, Butterworths at 5.0280). These are as follows:

(a) words and phrases used in an insurance contract are normally to be given their ordinary meaning: Robertson & Thomson v French [1803] Eng. 639;(1803) 4 East 130;

(b) the meaning of words and phrases depends upon the context in which they appear in the contract: Maye v Colonial Mutual Life Assurance Society Limited [1924] HCA 26; (1924) 35 CLR 14. For this reason, it is possible for a word or phrase to have one meaning in one part of a contract, and another meaning in another part of the contract: see Ashmore Aged Care Centres Pty Limited v Cigna Insurance Australia Limited (1988) 5 ANZ Insurance Cases 60-860;

(c) construction of words and phrases in an insurance contract must take account of the main object or commercial purpose of the contract: Glynn v Margetson & Co. [1893] AC 351. The policy must be read in its commercial setting in such a way as to fulfil and not restrain its commercial purpose. Recourse to extrinsic evidence might be had in order that the Court should know the commercial purpose of the contract and its origin, context and the market in which the parties were operating: MGICA Limited v United City Merchants (Australia) Limited (1986) 4 ANZ Insurance Cases 60-729 at 74, 349, per Kirby J; see also Johnson v American Home Assurance [1998] HCA 14; (1998) 192 CLR 266 at 272;

(d) if the words are ambiguous, construe them contra proferentem i.e. against the interests of the person who prepared the contract: Johnson v American Home Assurance, supra at 275; Manufacturers Mutual Insurance Limited v Stargift Pty Limited (1984) 3 ANZ Insurance Cases 60-615.”

APPLICATION OF LEGAL PRINCIPLES TO THE FACTS

76. The key issues for determination are (i) was the pegging out work on the site (which involved the driving of pegs into the ground) that the builder engaged Intrax to perform “residential building work”, and (ii) if so, was that a “commencement” of residential building work?

77. Was There Residential Building Work?

78. I am satisfied that, in the circumstances of this matter, the engagement by the builder of a consulting engineer to peg out the site was “residential building work” within the meaning of Sch 1 Cl 2 (1) of the HBA and within the terms of the policy of home warranty insurance.

79. There was a written contract between the homeowner and the builder, and the builder had taken out home warranty insurance prior to engaging a consulting engineer (Intrax) to perform a peg out of the site. The work that the builder engaged Intrax to perform occurred approximately 3 months after the written contract between the homeowner and the builder was entered into to construct the dwelling, and approximately 2 months after a certificate of home warranty insurance was obtained by the builder. Although Intrax did not excavate the site, physical work was performed in the sense of pegs being installed into the ground, as set out in the photographs taken by Mr Bournelis.

80. The home warranty insurer’s submission that “residential building work” only involves physical alteration of the site by the builder) or the co-ordination of supervision of actual physical alteration of the site by the builder), and any work performed prior to this is mere “preparation” and not “residential building work” is inconsistent with the Appeal Panel decision in Allcastle Homes. In Allcastle Homes, the Appeal Panel held that an “unduly restrictive” interpretation of “any work involved in, or involved in co-ordinating or supervising any work involved in: (a) the construction of a dwelling” should be avoided, and that the carrying out of residential building work is not confined to physical construction (at para [39]).

81. The expert evidence of Mr Bournelis and Mr Oates differ on what use a builder makes of “pegging out” work for a survey. Mr Bournelis states that such work is necessary so that the builder “can correctly position the dwelling within the allocated boundaries and locating the set back off the front boundary he (sic)…must carry out a site survey by a registered surveyor”. Mr Oates asserts that “pegging out” work for a survey is merely a preliminary measure necessary for a site survey to be performed, and the issue of a construction certificate, before actual physical work by the builder commences. As this matter was listed for determination on the papers, and neither Mr Bournelis nor Mr Oates gave oral evidence and were cross examined, it is unnecessary to prefer the evidence of one expert over another.

82. However, the evidence of Mr Oates, when applied to the principles set out in Grygiel v Baine and Allcastle Homes, supports the finding that the pegging out work for a survey engaged by the builder was “work involved in, or involved in co-ordinating or supervising any work involved in: (a) the construction of a dwelling”. Mr Oates states that pegging for a survey is “to mark out the building footprint ready for the commencement of excavation work” (page 8 of his report). Mr Oates further states that “the survey pegging is to mark out the building footprint ready for the commencement of the excavation works”. The engagement of the builder of a consulting engineer to perform such work, in circumstances where there has prior to the work being performed a written home building contract entered into by the parties and the homeowner is liable to pay for the cost of such work to the builder, is a type of work “involved in, or involved in co-ordinating…work involved in (a) the construction of a dwelling”. Clearly, on the evidence of Mr Oates, the builder uses the “pegging out” to determine where excavation works on site should be performed so that the dwelling is located in the correct position on the site.

83. The opinion of Mr Oates that “pegging out” is not residential building work is based upon his assumption that residential building work does not occur unless there is physical work performed on site, such as the erection of temporary fencing or excavation work. However, that assumption is inconsistent with the principles set out in Grygiel v Baine and Allcastle Homes. Further, Mr Oates assertion that Clause 6 of the written contract between the builder and the homeowner renders the responsibility for obtaining a survey on the homeowner rather than the builder does not assist the home warranty insurer in the circumstances of this matter. There is no evidence the builder gave the homeowner a notice to provide a survey under Clause 6, and the emails of the builder and Intrax indicate that it was the builder who engaged Intrax to perform the pegging out of the site. Consequently, Clause 6 of the contract is inapplicable to the circumstances of this matter.

84. The home warranty insurer submits that a finding by the Tribunal that the builder engaging a consultant engineer to perform a “pegging out” of the site is work “involved in, or involved in (supervising or co-ordinating work involved in)…the construction of a dwelling” would lead to arbitrary and inconsistent outcomes.

85. The first issue raised by the home warranty insurer is the operation of Section 81A(2)(a) of the Environmental Planning and Assessment Act 1979 (‘the EPAA’). That statutory provision relevantly provides that “the erection of a building in accordance with a development consent must not be commenced until…a construction certificate for the building work has been issued by the consent authority, the council…or an accredited certifier”. The home warranty insurer submits that to find that the builder engaging a consulting engineer to perform a “pegging out” of the site prior to the issue of a construction certificate would render the builder or the consulting engineer in breach of Section 81A(2)(a) of the EPAA.

76. However, the issue for determination in this matter is whether “residential building work” has “commenced” for the purpose of the home warranty insurance policy between the homeowner and the home warranty insurer. The operation of the EPAA is a different statutory regime to the HBA. “Residential building work” has a specific statutory definition in the HBA, which is adopted in the definition in the policy of home warranty insurance. Section 81A(2)(a) refers to “erection of a building…must not be commenced”. The home warranty insurer provided no legal authorities to support a proposition that “erection of a building” under the EPAA has the same meaning as “residential building work” under the HBA. The issue for determination in these proceedings is not whether the builder engaging a consulting engineer to perform a “pegging out” of the site was the commencement of “erection of a building” under the EPAA, but whether it was (in all the circumstances of this matter) “residential building work” within the HBA, and if so, whether or not such work had “commenced” within the meaning in the policy of home warranty insurance. No inconsistency has been established between the principles set out in Grygiel v Baine and Allcastle Homes in respect of the interpretation of “residential building work” and the operation of Section 81A of the EPAA.

77. The second issue raised by the home warranty insurer is that it would be “inconsistent” and “arbitrary” for “pegging out” work on a site to be “residential building work” performed by the builder in some circumstances, but not others. However, the task of the Tribunal in this matter is to interpret the construction of a policy of home warranty insurance to the particular factual circumstances in this matter, applying the principles set out in Grygiel v Baine and Allcastle Homes, as well as the relevant principles pertaining to the construction of insurance contract terms. For the reasons set out previously, I am satisfied that, in circumstances where there was a written contract for the construction of a dwelling between the homeowner and the builder (and not merely a ‘tender’ document to perform work in respect of the lodgement of a development application with the local council); a contract of home warranty insurance had been taken out by the builder; and the builder had engaged a consulting engineer to perform a “pegging out” of the site, that the builder’s activities fell within the definition of “residential building work” and the definition of “work” within the policy.

78. The third issue raised by the home warranty insurer is that if “boundary pegging” was residential building work the person who performed the work would require a licence, and that there is no relevant licence in the HBA for surveying. However, the issue in this matter is not whether Intrax were licensed under the HBA. The builder was a licensed builder, and had appropriate home warranty insurance. The builder engaged Intrax to perform work that fell within the definition of “residential building work” in respect of the builder and fell within the scope of the builder’s license. Whether or not Intrax had a licence is irrelevant to the issue of whether or not the builder performed “work involved in, or involved in co-ordinating or supervising any work involved in: (a) the construction of a dwelling” under the HBA.

79. The fourth issue raised by the home warranty insurer is that if the Tribunal found that the circumstances of this matter involved the commencement, but not completion, of residential building work, then there would be “virtually no” circumstances in which residential building work had “not commenced” under the policy, which would contravene the “policy basis” for Regulation 40(4) of the HB Regulations. Regulation 40(4) of the HB Regulations states “For the purpose of sub-clause (1), if residential building work has not commenced, the loss or damage indemnified against may only include the loss of deposit paid”.

80. The home warranty insurer provided no authorities in its submissions, other than the authorities referring to the definition of “residential building work” (which did not include reference to, or a discussion of, Allcastle Homes) to support its submission regarding the “policy basis” of Regulation 40 (4) of the HB Regulations, and its interaction with Regulation 40 (1) and (2) of the HB Regulations.

81. There may be circumstances in which the work of the builder involves “residential building work” but it has “not commenced”. It is not for the Tribunal to speculate on what such circumstances may be. The task of the Tribunal is to determine whether or not (a) there was “residential building work” by the builder and (b) whether or not it commenced, but was not completed prior to the builder going into liquidation in the factual circumstances of this matter. For reasons set out previously, I am satisfied that “residential building work” by the builder occurred.

Was there a Commencement of Residential Building Work?

92. “Commencement” is defined in the Macquarie Dictionary as “the act or fact of commencing: beginning”. “Commence” is defined in the Macquarie Dictionary as “1. To begin, start; or 2. To have a beginning; come into being”. Under Clause 1.3 (f) of the policy of home warranty insurance, the homeowner may only recover the deposit of residential building work “has not commenced”, but under Clause 1.3(b) may recover up to 20% of the contract price for “loss or damage resulting from non-completion of the work”.

93. I am satisfied that “residential building work” had “commenced” but had not been completed in the circumstances of this matter. The homeowner and the builder had entered into a written contract for construction of a dwelling. The builder had taken out home warranty insurance. The homeowner had paid a deposit to the builder pursuant to the contract to construct a residential dwelling. The builder engaged a consulting engineer to perform a “pegging out” of the site. The “pegging out” of the site was essential not only to a survey being performed and the issue of a construction certificate by the private certifier, but was also part of the process of the builder determining where excavation works on site should be performed so that the dwelling was located in the correct position on the site. I am satisfied that such activities are a “commencement” of “residential building work, and accordingly Clause 1.3 (b) of the policy of home warranty insurance is engaged.

COSTS

94. The homeowner seeks an order that the home warranty insurer pay the costs of her obtaining the report of Mr Bournelis. A tax invoice of City Wide Building Consultants Pty Ltd in the sum of $2,750.00 dated 27 February 2017 is contained in the homeowner’s documents.

95. Under Section 60 of the NCAT Act, parties are to pay their own costs, unless there are special circumstances. However, under Clause 38 of the Civil and Administrative Tribunal Rules 2014, the Consumer and Commercial Division of the Tribunal may award costs in the absence of special circumstances if the amount claimed or in dispute in the proceedings exceeds $30,000.00.

96. In this matter, the amount claimed or in dispute exceeds $30,000.00. The reason the homeowner obtained the report of Mr Bournelis is that the home warranty insurer determined that Clause 1.3(b) of the policy of home warranty insurance was inapplicable. The homeowner took proceedings in the Tribunal appealing that decision, and has succeeded in the appeal. According to the principle that the unsuccessful party in litigation should pay the costs of the successful party to compensate the successful party for the costs of taking proceedings, including the cost of obtaining expert evidence, I am satisfied the home warranty insurer should pay costs to the homeowner in the sum of $2,750.00.

CONCLUSION

97. Being satisfied that there was a commencement, but non-completion, of residential building work by the builder prior to the builder going into liquidation under Clause 1.3 (b) of the policy of home warranty insurance, the appropriate orders are:

1. The home warranty insurer pay the homeowner the sum of $64,731.19 under Clause 1.3 (b) of the policy of home warranty insurance, less the sum of $17,945.90 that has been previously paid by the insurer. The amount to be paid by the home warranty insurer is $46,785.29.

2. The home warranty insurer is to pay the homeowner costs of $2,750.00.

G.J. Sarginson

Senior Member

Civil and Administrative Tribunal of New South Wales

26 May 2017

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.

Registrar

Decision last updated: 05 July 2017