Kalantzis v Commissioner for Fair Trading, NSW Office of Fair Trading
[2008] NSWADT 236
•22 August 2008
CITATION: Kalantzis v Commissioner for Fair Trading, NSW Office of Fair Trading [2008] NSWADT 236 DIVISION: General Division PARTIES: APPLICANT
RESPONDENT
Constantine Kalantzis
Commissioner for Fair Trading, NSW Office of Fair TradingFILE NUMBER: 073257 HEARING DATES: 29 November 2007 SUBMISSIONS CLOSED: 14 January 2008
DATE OF DECISION:
22 August 2008BEFORE: Grotte E - Judicial Member MATTER FOR DECISION: Principal Matter LEGISLATION CITED: Home Building Act 1989 CASES CITED: Ng & Anor –v- Commissioner for Fair Trading, NSW Office of Fair Trading & Anor (2007) NSWADT 259;
Tadros –v- Commissioner for Fair Trading, NSW Office of Fair Trading (2007) NSWADT 271;
Clyne v NSW Bar Association (1960) 104 CLR 186;
Director-General, Department of Fair Trading –v- Cohen (2000) NSWFFT 3;
Younan –v- Commissioner of Fair Trading, NSW Office of Fair Trading (2007) NSWADT 170
Harb –v- Commisioner of Fair Trading, NSW Office of Fair Trading (2007) NSW ADT 175REPRESENTATION: APPLICANT
RESPONDENT
N Kalantzis, agent
W Maynard, senior legal officerORDERS: (i) The decision made by the Commissioner on 15 August 2007 imposing a monetary penalty is set aside
(ii) The Tribunal substitutes that decision with a determination that the Applicant be reprimanded under section 62(c)in respect of improper conduct under section 51(c) of the Home Building Act 1989 when he breached statutory warranty under section 18B(a) of the Home Building Act 1989 in respect of work undertaken by him at 65 Murray Street, Booker Bay, NSW.
1. The Applicant seeks a review of a decision of the Respondent to take disciplinary action against him under section 56(c) of the Home Building Act 1989 (“the Act”).
2. On 21 May 1991 Mr Kalantzis was issued with a contractor licence under section 20 of the Act and that licence was valid until 21 May 2008.
3. On 16 November 2006 a delegate of the Respondent served a Notice on the Applicant to show cause why disciplinary action should not be taken against Mr Kalantzis on the ground that he was guilty of improper conduct under section 56(c) of the Act. The Notice alleged that Mr Kalantzis breached statutory warranty under section 18B(a) of the Act in respect of work undertaken by him at 65 Murray Street, Booker Bay, New South Wales in that he failed to perform work in a proper and workmanlike manner and in accordance with the plans and specifications set out in the contract entered into on 8 October 2001 with Con, Helen, Tasso and Marien Papanastasiou (“the homeowners”). The Respondent relied on a report by Vijay Badhwar dated May 2007 commissioned by it. This report noted as follows:
- “There has been an ongoing dispute on the quality of works by the Builder, Blue Print developments Pty Ltd, comprising two units at 65 Murray Street, Booker Bay. It is understood that some resolution had been reached in preparing a list of defects and repairs. The repairs were carried out by the Builder and inspected by David Smee of Cardno on behalf of Mills Oakley Lawyers. Alfred Frasca & Associates, in a letter to D’arcy Sloman Solicitors, have disputed that some of the completed repair works have not been satisfactorily carried out. They have also introduced new items in the defect list.”
4. In conclusion, Mr Badhwar stated as follows:
- “The main noted defects are:
1. A missing coat of paint at the top and bottom ends of doors.
2. Missing sealant on vertical faces of vanities adjacent to walls.
3. Control joints in walls and if these should have expansion ties.
4. Cracks in walls and repairs.
5. Water-proofing in garages.
6. Piers under south-west corner.
7. V-groove, weep holes etc.
Most of the defects listed above are of an aesthetic nature only; the only ones that may affect the structural performance being 3 and 6. Expansion ties are only required at location “A”. At other places in masonry veneer construction, these ties are not required.
As far as the piers at the south-west corner are concerned, the foundation soils in the area are sandy and do not experience long-term movements. As recommended, if the disturbed soils are filled with low-strength concrete, additional piers are not required.
The remaining issues are minor aesthetic/functional importance. Vertical sealing of interface between vanity and wall is not critical, neither is the coat of paint at the top and bottom of doors in bedrooms. To remedy some defects. Like cutting a groove behind an existing water heater, should be considered in the context of prevalent standards of construction in the housing industry and its relative criticality.
In the garages, a recess in the edge beam at design stage would have provided a superior outcome.”
5. The Applicant made written submissions in relation to the Notice. He submitted that the matters identified by Mr Badhwar had been rectified.
6. On 15 August 2007 a delegate of the Respondent decided there had been a breach of statutory warranty under section 18B(a) of the Act, which amounted to improper conduct under section 51(1)(c) of the Act and this constituted a ground for taking disciplinary action under section under section 56(c) of the Act. The delegate determined the Applicant should pay a penalty of $3000 in accordance with section 62(c) of the Act.
7. The Applicant applied to this Tribunal for an external review of the decision.
Legislation
8. Section 18B of the Act sets out the statutory warranties implied in every contract to do residential building work. In this matter the relevant warranty is that provided for in section 18B(a):
- 18B Warranties as to residential building work
The following warranties by the holder of a contractor licence, or a person required to hold a contractor licence before entering into a contract, are implied 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.
9 Section 56 of the Act sets out the grounds for taking disciplinary action against a contractor licence. That section relevantly provides:
- 56 Grounds for taking disciplinary action against holder of a contractor licence
The Director-General may take disciplinary action under section 62 against the holder of a contractor licence on any of the following grounds:
…
(c) that the holder is guilty of improper conduct
10 Section 51 of the Act specifies what is to be regarded as improper conduct as a holder of a contractor licence for the purposes of section 56(c):
51 Improper conduct: generally
(1) A holder of a contractor licence who is authorised by the contractor licence to contract to do residential work or specialist work, or a holder of a supervisor or tradesperson certificate, is guilty of improper conduct if the holder:
…
(c) breaches a statutory warranty, or
…
(3) It is a sufficient defence to a complaint that the holder of a contractor licence has been guilty of improper conduct as referred to in subsection (1)(b), (c) or (d) in connection with work undertaken by the holder, if the holder proves to the satisfaction of the Director-General that the holder did all that could reasonably be required to ensure that a nominated supervisor for that work would exercise such degree of control over the doing of the work as would be necessary to prevent the occurrence of the improper conduct.
11 Section 62 sets out the disciplinary action that may be taken pursuant to section 56 of the Act:
- 62 Disciplinary action that may be taken by the Director-General
If after compliance with this Division, the Director-General is satisfied that any ground on which disciplinary action may be taken against the holder of an authority has been established in relation to the holder, 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 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.
12 The following information is taken mainly from the Executive Summary contained in the Building Inspection Report dated 16 January 2006 prepared by the Respondent and provides a good summary of the events leading to the dispute.
13 On 8 October 2001 the homeowners entered into a building agreement with Blue Print Developments Pty Ltd, of which Mr Kalantzis is a principal, to construct a residential flat building consisting of 2 units in accordance with Council approved plans and specifications for the amount of $368, 500.00. Gosford City Council was the Principal Certifying Authority. Construction was commenced in November 2001.
14 On 7 November 2001, the homeowners paid the sum of $18,500 to the Applicant as a deposit. Further amounts were paid as progress payments for constructed works.
15 On 24 May 2002 a dispute arose between the homeowners and the Applicant when the homeowners received a final account of $33,240. The dispute concerned the withholding of the final payment. The homeowners eventually brought proceedings in the CTTT for defective work and the Applicant then brought a cross claim for the unpaid account.
16 The dispute in the CTTT was resolved with an agreement that the homeowners pay the outstanding amount upon an occupation certificate being furnished and that the Applicant carry out any works required to be carried out to obtain the occupation certificate. It was also agreed between the parties that the builder would engage independent licensed contractors to carry out any defective work identified in reports prepared by David Smee and Michael Waddell. It was also agreed between the parties that part of the resolution was that all complaints made by the homeowners to the Police, the Department of Fair Trading relating to the builder would be withdrawn forthwith.
17 The subject residence is located about 300 metres from Ettalong Beach. Construction began in November 2001 and was completed in May 2002.
Evidence before the Tribunal
18 Numerous reports have been obtained by both parties during the course of this dispute.
19 The reports commissioned by the homeowners from Phillips Building Consultants & Inspectors dated 31 January 2003 and from Alfred Frasca and Associates Pty Ltd dated 10 April 2004 (the Frasca report) identified numerous defective works including gaps between vanity/tub and wall, fall in floor to floor waste, no etching on shower screen glass and no lift off hinges at the door in the bathroom, failure to install weepholes and cavity flashing, failure to install damp proof course either at all or correctly, failure to install window sills with correct clearance and a many construction measurements and details differed from the contract Council approved architectural plans, structural plans and hydraulic plans where no amendments were submitted to Council for approval. The reports also identified driveway and stormwater defects as well as roof truss construction defects and pest treatment non-compliance issues.
20 In the proceedings before the Tribunal the Applicant relied on a report prepared by GAB Robins dated 10 December 2003 commissioned by Vero Insurance on its behalf. In that report it was noted that Michael Waddell, Building Consultant, reported that “the general attitude of the builder at all times throughout the inspection was helpful and courteous and…most willing to conform with any directives by Vero Insurance to rectify any defective works” as well as a later report by Michael Waddell of Sergon Building Services (formerly GAB Robins) dated 14 October 2004 also commissioned by Vero [Insurance] Warranty Division, which was completed in coordination with David Smee of Cardno MBK Engineers, who addressed the structural issues (“the Waddell/Smee report”).
21 The Waddell/Smee report identified some of the matters raised by the report prepared on behalf of the homeowners as being incomplete rather than defective and that some of the maters raised were not the responsibility of the builder. Matters that were considered defective were the floor tiles to the ensuite bathroom in unit 2, the step between the garage and the laundry to unit 2 and issues pertaining to the termite chemical barrier.
22 A further report prepared by Michael Cantali for the homeowners dated 10 July 2005 concluded there were many aspects of the building work, which did not comply with the prescriptive requirements of the Building Code of Australia (BCA) or the Australian Standard AS 3700 and approved Council plans. It concluded however that many of the defects related to poor workmanship, aesthetic issues and variations from plans as well as safety and serviceability issues.
23 The Commissioner particularly relied upon building inspection reports prepared by Inspector Donald van Keimpema of the NSW Office of Fair Trading in 2006 and by Vijay Bhadwar referred to earlier in this decision. The van Keimpema reports concluded that some of the items identified as defective in the Frasca report were found to be defective but some were not and some other items had already been agreed to be rectified by the builder. It was the opinion of Inspector van Keimpema that the builder should have been aware that it was his responsibility to ensure the work was carried out in accordance with the Building Code of Australia and the associated Australian Standards.
Applicant’s Case before the Tribunal
24 An agent appeared on behalf of the Applicant and made submissions in support of his application. It was asserted on behalf of the Applicant that the penalty imposed was too harsh and that a caution would have been more appropriate.
25 It was submitted on behalf of the Applicant that the subject building is close to the beach and there inevitably would be some cracking in rendered buildings due to the proximity of the water table. It was submitted that the completed works had been certified by engineers and that there was no cracking in the south-west corner of the building. It was submitted on behalf of the Applicant that the owners themselves had destroyed half of the window-sills in order to expose the flashing and this fact contributed to the cracking that appeared in the building reports.
26 It was submitted on behalf of the Applicant that all of the defects have been rectified and that the delegate of the Respondent was under pressure from the homeowners to take some disciplinary action. It was submitted that a caution would have been more appropriate. It was submitted that the Applicant has been in business for 28 years and this was the first occasion that he was brought before the CTTT.
Respondent’s Case before the Tribunal
27 It was submitted on behalf of the Respondent that the case under review concerns the quality of building work done. The disciplinary action taken by the Commissioner of a monetary penalty of $3000 is appropriate as it is at the lower end of the range of possible fines. The maximum amount that can be given is $11000.
28 It was conceded by the Respondent that although the defective matters were numerous they were minor in nature and not terribly serious and this is reflected in the penalty. Nonetheless, the conduct of the Applicant amounted of a breach of statutory warranty. It was submitted the decision of the Commissioner should be affirmed. It was submitted that a caution or reprimand would only be appropriate in circumstances where the builder had been discourteous or had failed to return to complete work or had failed to apply a final coat of paint.
Consideration
29 The Applicant does not dispute there has been a breach of statutory warranty and that he is guilty of improper conduct. The only question is whether the penalty imposed by the Commissioner is appropriate in all of the circumstances of the case.
30 The Commissioner chose to impose a monetary penalty of $3000 out of a maximum of $11000, which the Applicant claims is excessive.
31 This Tribunal in the decision of Ng & Anor –v- Commissioner for Fair Trading, NSW Office of Fair Trading & Anor (2007) NSWADT 259 referred to and adopted factors which the Fair Trading Tribunal considered to be relevant when assessing the appropriate penalty in matters where there has been a breach of statutory warranty in the case of Director-General, Department of Fair Trading –v- Cohen (2000) NSWFFT 3. These factors were also applied with approval by this Tribunal in Younan –v- Commissioner of Fair Trading, NSW Office of Fair Trading (2007) NSWADT 170 and Harb –v- Commissioner of Fair Trading, NSW Office of Fair Trading (2007) NSW ADT 175. The relevant factors were:
- - the nature, width and extent of the contraventions
- the loss or damage and prejudice in consequence of the contraventions
- the circumstances in which the contraventions took place
- whether the licensee has been found to have engaged in any similar conduct
- the presence of fraudulent or dishonest intent and deliberation on the part of the licensee
- the extent of carelessness or wilfulness of the conduct
- the efforts made to correct the situation and what measures have been taken by the licensee
- what consciousness the licensee had displayed, of its obligations under the relevant statute and to the owners
- the effect upon the licensee
- antecedents
- attitude, building history and future compliance
- the penalty range.
32 The Tribunal in Ng’s case added two further factors, being:
- - any gain made as a result of the contraventions; and
- the degree of cooperation with the authorities.
33 Apart from the conclusions in the Frasca report, there appears to be a general consensus among the various building inspectors that the defects were minor in nature, although numerous. I note the Respondent indicated it was not relying on the Frasca report.
34 I note in particular the comments made by Peter Stubbs, Principal Building Inspector of the NSW Office of Fair Trading on 7 March 2007 in an internal memorandum that the majority of the items are minor in nature but “go to show a lack of adequate supervision on the part of Con Kalantzis”. This view is echoed in the report of Vijay Bhadwar dated May 2007 in which Mr Bhadwar stated that most of the defects are of a minor aesthetic/functional importance and in the first report prepared by Phillips Building Consultants and Inspectors Pty Ltd dated 31 January 2003 in which it was stated that there had been a lack of adequate attention to correct building practices and correct building codes along with adequate attention to details.
35 It is not clear from all of the material what the loss or damage and prejudice was in consequence of the contraventions. Certainly, there was significant delay in the finalisation of the work and the obtaining of the Occupation Certificate from the Gosford City Council. This is another example of a dispute over minor defects, albeit numerous in quantity, spiralling out of control. The evidence shows that at all times the Applicant was willing to rectify the defects and did so. Indeed, the CTTT was able to assist the parties to resolve the dispute. The settlement required both parties to fulfil their contractual obligations.
36 The decision of the Respondent stated there had been five previous complaints against the Applicant in which no further action was taken. There is no evidence regarding these before me and I am therefore unable to assess either their relevance or gravity. There is no evidence before the Tribunal that the Applicant has engaged in any similar conduct.
37 There is no evidence of any fraudulent or dishonest intent and deliberation on the part of the Applicant. Nor is there any evidence of wilfulness. It appears the breach of statutory warranty arose from the failure to adequately supervise the work undertaken and a failure to ensure there was adherence to the Australian Building Code.
38 There is evidence the Applicant was at all times cooperative with the authorities and willing to rectify the defects and indeed did so.
39 The Tribunal notes that Mr Kalantzis has held a contractor’s licence since 1991. It was submitted on his behalf that he has been working in the building industry for 28 years and this has been the only occasion on which he has been before the CTTT. There is no evidence contrary to this submission before the Tribunal and it is accepted.
40 Having regard to all of the relevant factors and in particular to the fact that there is no evidence of any antecedents and because the Applicant willingly rectified the defects, which were identified as minor in nature despite being numerous, the Tribunal is satisfied that imposing a monetary penalty is excessive.
41 As stated in Ng’s case “The purpose of disciplinary action is not to punish but to protect the public: Clyne v NSW Bar Association (1960) 104 CLR 186 at 201”.
42 In weighing the public interest the Tribunal is not satisfied the public interest requires a monetary penalty. In the Tribunal’s view the public interest will be adequately served by a reprimand under section 62(b). Taking no further action is not appropriate because of the number of defects.
Orders
43 The Tribunal makes the following orders:
- (i) The decision made by the Commissioner on 15 August 2006 imposing a monetary penalty is set aside.
(ii) The Tribunal substitutes that decision with a determination that the Applicant be reprimanded under section 62(b) in respect of improper conduct under section 51(c) of the Home Building Act 1989 when he breached statutory warranty under section 18B(a) of the Home Building Act 1989 in respect of work undertaken by him at 65 Murray Street, Booker Bay, NSW.
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