Orantia v Xpertise Construction Pty Limited

[2022] NSWCATCD 115

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:

Orantia v Xpertise Construction Pty Limited [2022] NSWCATCD 115

Hearing dates:

11 May 2022

Date of orders:

7 July 2022 [amended 25 July 2022]

Decision date:

07 July 2022

Jurisdiction:

Consumer and Commercial Division

Before:

K Andronos SC, Senior Member

Decision:

Pursuant to Section 63 of the Civil and Administrative Tribunal Act 2013, orders published are amended to read as follows

(1) Pursuant to s. 48O(1)(a) of the Home Building Act 1989, the respondents to pay to the applicant the sum of $15,000 immediately.

(2) Pursuant to s. 48O(1)(b) of the Home Building Act 1989, the sum of $161,545.28 claimed by the respondents in respect of works performed at xx Blackett Drive, Castle Hill is not due or owing.

Catchwords:

BUILDING AND CONSTRUCTION — Home building contract

Legislation Cited:

Home Building Act 1989 (NSW)

Cases Cited:

Cooke v Wilson (1856) 1CBNS 153

Chapman v Smith [1907] 2 Ch 97

Texts Cited:

Nil

Category:

Principal judgment

Parties:

Julius Orantia (Applicant)
Xpertise Construction Pty Limited (First Respondent)
Mohammed Hussein (Second Respondent)

Representation:

Applicant (Self-represented)

File Number(s):

HB 22/08184

Publication restriction:

Nil

REASONS FOR DECISION

1. In these proceedings the applicant seeks a money order under section 48O(1)(a) of the Home Building Act 1989 (NSW) (the HBA) in respect of breach of statutory warranties under section 18B of the HBA. The claim is brought against Xpertise Construction Pty Limited (XCPL) and Mr Mohammed Hussein.

2. The applicant also seeks an order under section 48O(1)(b) of the HBA that he is not liable to pay certain moneys allegedly due to the respondents, which moneys were demanded by XCPL after a dispute arose as to the adequacy of performance by the builder under the contract.

Procedural history

3. On 23 February 2022 these proceedings were commenced against XCPL alleging the work undertaken by that respondent was defective, incomplete and not done in accordance with the contract. The applicant denied variations to the contract that would have resulted in any funds being still owed to the builder.

4. On 15 March 2022 the Tribunal directed that Mr Hussein be joined as a party and notice was provided to him by the Tribunal on 16 March 2022. That notice included notification to the effect that:

1. the hearing had been adjourned to a date to be fixed;

2. he had been joined as a respondent;

3. the applicant sought orders that the respondent pay him $15,000 and that the applicant be relieved of payment of $161,545.28;

4. the applicant had filed and served all documents;

5. the applicant alleged that the work undertaken by the respondent was defective, incomplete and not done in accordance with the contract;

6. the applicant denies any variations to the contract and disputes that any funds are owed to the builder.

5. On 17 March 2022 the parties were notified by the Tribunal of the hearing date.

Appearances

6. On 11 May 2022 the applicant appeared at the hearing listed for that date. There was no appearance for the respondents XCPL or Mr Hussein, who is the sole director and secretary of XCPL.

7. The Tribunal file contains an ASIC search of XCPL, dated 25 February 2022 which details the relationship between it and Mr Hussein, its sole director and secretary. Its registered address, which has remained unchanged since 29 January 2019, is shown as xxx Guilford Road, Guilford. The Tribunal further contains file copies of notices sent by the Tribunal to the respondents at that address on 16 March and 17 March 2022. The originals of those notices have not been returned. I was satisfied on this basis that the respondents had notice of the hearing and there is no explanation for their non-attendance. I was also satisfied that the respondents were served by express post with a copy of a bundle of documents filed by the applicant with the Tribunal on 10 March 2022. Accordingly, I heard the proceedings ex parte and admitted the bundle into evidence.

Jurisdiction

8. The claim arises in respect of work performed on residential premises at in Castle Hill (the Property) pursuant to a building contract dated 5 October 2021 (the Contract). Pursuant to section 48O of the HBA, the claim is within the jurisdiction of the Tribunal. These proceedings were commenced some 2 months after cessation and are therefore brought within the time period allowed under s. 18E of the HBA.

Opportunity for further submissions

9. The applicant conducted the hearing on the apparent basis that the party with whom he contracted was only the first respondent, XCPL. On inspection of the written contract, it appeared that the true party who contracted as the builder may well have included Mr Hussein personally. The identity of the contracting party is an issue which is addressed below.

10. The money claim is for $15,000, being the applicant’s estimate of the cost of rectifying what are alleged to be the defective works and certain other repairs for which the applicant says the builder is liable. That estimate is itself based on an estimate provided by Top Notch Home Maintenance and Building Pty Limited (Top Notch) and a claim for to damage and expenses incurred in relation to the applicant’s swimming pool caused by the performance of the works.

11. In the course of the hearing, a quote for the rectification of the defects in the sum of $95,887, provided by Complete Constructions Pty Limited (Complete Constructions) on 10 May 2022, became available to the applicant. While the Tribunal was apprised of it, it had not been received into evidence and had not been served on the respondents. It relies on the identification of defects in a report of Gordon Xue from Jim’s Building Inspections (North Sydney) dated 6 March 2022 (the Xue building report), which was already in evidence. Not all of the defects identified in the Xue building report are the subject of the Top Notch estimate. The Complete Constructions quote purports to estimate the cost of rectifying all of those defects.

12. I adjourned the proceedings briefly to allow the applicant to consider whether to seek leave to amend his claim to seek recovery of the higher sum. An amendment would have necessitated an adjournment to give the respondents an opportunity to consider their position in respect of the larger claim. Having considered his position, the applicant elected not to seek an adjournment to amend his claim and the proceedings were heard on 11 May 2022.

13. The applicant made that decision on the apparent basis that XCPL was unlikely to have sufficient assets against which any judgment could be executed and that in all likelihood he would need to prove his claim in a liquidation. He did not appear to consider the prospect of obtaining judgment against Mr Hussein.

14. On 13 May 2022, I made interlocutory orders providing the applicant with an opportunity to make submissions as to whether he ought have leave to amend and to reopen his case and rely on further evidence in support of an amended case. The respondents were also given an opportunity to make submissions on these issues.

15. Neither party took up the opportunity. Therefore, I proceed on the basis of the application as filed and the orders made joining Mr Hussein on 15 March 2022.

Findings of fact and consideration: money claim by the applicant

16. The applicant relied on a bundle of documents filed with the Tribunal on 10 March and served on the respondents at about that time. I have not taken into account the Complete Constructions estimate in determining the applicant’s claim.

Findings of fact – the Contract

17. On or about 5 October 2021 the applicant and the “Contractor” entered into the Contract. As indicated above, the identity of the Contractor is an issue in these proceedings.

18. The Contract appears to have been prepared by, or on behalf of, the Contractor. The Contract itself names the Contractor as Mohammed Hussein, the second respondent. It gives as his address 34 Railway Street Yennora. He signed it in his own name. The address for the Contractor provided for in the Contract is neither the registered office nor principal place of business of XCPL according to the ASIC search on the Tribunal file. The search discloses that XCPL’s registered office is at xx Guilford Road, Guilford and its principal place of business is xx Railway Street Old Guilford. These addresses have been unchanged since January 2018.

19. An ABN and an ACN are quoted in the Contract. They are those of XCPL, not Mr Hussein, although they are expressly (and wrongly) identified in the Contract as those of Mr Hussein. Another feature of the Contract is cl 31. That clause provides that XCPL gives no warranties in relation to the Property nor will it “accept any liability or damage either direct or consequential which may arise from the above nominated elements of sections”. Of course, s. 18G of the HBA has the effect that such a clause is ineffective to exclude liability for breaches of the statutory warranties in s. 18B. Nevertheless, the existence of the clause indicates that the parties considered XCPL would otherwise have been liable under the Contract.

20. The Contract itself imposes obligations on the Contractor to perform works on the existing house at the Property, to construct a granny flat and to perform certain works outside. A scope of works provides for work in the existing house in removing and replacing the kitchen, removing the existing laundry to the main house and replacing it with a new laundry and butler’s pantry and certain other demolition works in the lounge area. A more detailed schedule of works was prepared but only part of it is in evidence. There were also variations, for which the applicant paid an additional $31,000 over the agreed contract price.

21. The exterior works included a retaining wall and backpropping pool house columns. The granny flat was to be constructed and fitted out at a “prestige” standard. Appliances were to be supplied for both the house and granny flat.

22. The contract price was $150,000. The respondents requested and the applicant paid a deposit of $30,000. Together with agreed variations, the total price paid by the applicant to the respondents was $181,000.

23. The respondents did not have insurance under the home compensation fund.

Consideration - Who did Mr Hussein bind as Contractor when he signed the Contract?

24. As a general rule, a person who signs a written contract is to be considered the contracting party, unless it clearly appears that he executes it as agent: Cooke v Wilson (1856) 1 CBNS 153 at 154.

25. Whether a person who signs a contract is personally liable when contracting for either a named or unidentified principal rests on the parties’ intention, ascertained by construing the terms of the particular contract in their context: Chapman v Smith [1907] 2 Ch 97 at 103. Where the terms of a contract specify the contracting party (i.e. the putative agent) is liable to perform the contract, either in addition to or to the exclusion of the putative principal that person will be bound to perform the obligations under the contract.

26. The principal will also be bound where the contract on its proper construction is entered on its behalf as well.

27. There is a certain ambiguity in the identification of the Contractor in the Contract. Mr Hussein is named personally, however, some indicia clearly point to XCPL as the contracting party. By reason of the facts as I have found them, I consider that the parties’ intention, objectively determined as at the time of contract, was that both Mr Hussein and XCPL were liable to perform the obligations of the Contractor under the Contract. I base this conclusion on the express identification and signature of Mr Hussein in his own right and the use of XCPL’s ABN and ACN. Further, Mr Hussein is the sole director and shareholder of XCPL and XCPL’s address was not specified. The existence of the otherwise ineffective cl 31 also supports this conclusion. Although I accord it very little weight, I note that subsequent demands for payment under the Contract were made by Mr Hussein on XCPL’s behalf.

Findings of fact – licences

28. Prior to commencing these proceedings, the applicant sought redress from the Department of Fair Trading.

29. Both XCPL and Mr Hussein hold contractor licences. According to a letter from the Department of Fair Trading to the applicant of 8 February 2022, XCPL’s licence – No 371392C – is a licence only for contracts not requiring insurance under the Home Building Compensation Fund. Similarly, the letter indicates that Mr Hussein’s licence – No 193713C – was also a licence only for contracts not requiring insurance under the Home Building Compensation Fund. The letter from the Department of Fair Trading establishes as a fact that the licences of both respondents did not permit either of them to undertake the work under the Contract, which is a conclusion expressed in the letter itself.

30. As indicated in the letter from the Department, the works under the Contract required that the builder hold a valid a licence for which insurance was required under the Home Building Compensation Fund. The licences of the respondents did not permit either of them to undertake the work under the Contract. Accordingly, the works were treated by the Department as unlicensed work and the Department was unable to assist the applicant.

Findings of fact – works and defects

31. The respondents commenced work soon after entry into the Contract and ceased in about mid-December 2021. Over the course of the period of October to December 2021, the applicant paid about $181,000 to XCPL being the full contract price together with an additional sum for variations.

32. From about mid December 2021 the applicant and his wife started to notice what appeared to them to be sub-standard work. On 13 December 2021, the applicant’s wife sent an email to Mr Hussein identifying a number of matters in the work which had been performed which needed to be corrected or completed. The list was extensive and included both tasks that had not yet been completed and those which had been completed defectively. At about that time, Mr Hussein commenced attending to the matters in referred to in the 13 December 2021 email. However, shortly thereafter all work ceased.

33. On 12 January 2022, the applicant’s wife sent another email to Mr Hussein seeking compensation for damage caused to the pool and pool cleaner at the Property, which resulted from those performing work under the Contract emptying the pool without cleaning it. The estimated cost to repair or replace the pool liner was $2,700. The estimated replacement cost for the cleaner was $752.

34. I accept that such damage was caused as a result of the defective performance by the respondents of the Contract. I further accept the estimates in the 12 January 2022 email as reasonable.

35. Neither Mr Hussein nor anyone else on behalf of XCPL repaired, replaced or offered reimbursement in respect of the damage caused to the pool and the pool cleaner.

36. The applicant also relies on the Xue building report, referred to at paragraph 11 above. The applicant contends that the defects identified in that report were caused by the respondents. That report, the which runs to some 45 pages, identifies safety hazards, substandard workmanship and incomplete work in the work performed by the respondents. Defects are identified in the Xue building report include:

1. Unprotected electrical installation in the bathroom;

2. Damage to the fencing by the driveway caused by tradesmen;

3. Incomplete/substandard construction of the retaining wall;

4. Damage to a shed door caused by tradesmen;

5. Open joints in the exterior walls installed by the respondents;

6. Window and door installations not weather tight;

7. Masonry mortar defective;

8. Substandard painting;

9. Step cracking of the exterior brickwork;

10. Binding/jamming of installed door;

11. Door misalignment on closing;

12. Defective plasterboard finishes;

13. Missing grout;

14. Inconsistent tile colouring in the bathroom;

15. Loose fittings in the bathroom;

16. Defective positioning of the toilet;

17. Defective pipe penetration of the kitchen walls;

18. Misaligned bathroom mouldings;

19. Defective plasterboard finishes on the verandah;

20. Unsuitable entry and irregular door clearances;

21. Poor painting and materials in the entry and dining room;

22. Cracked floor tiles;

23. Kitchen shelf installation not level;

24. Kitchen cornice cracking;

25. Kitchen cabinet drawers misaligned;

26. Kitchen pantry defective stone surfaces and uneven tile installation;

27. Kitchen pantry inconsistent tap installation;

28. Defective tap installation;

29. Missing downpipes no overflow installed for hot water dripping tray;

30. Incomplete installation of doors and windows;

31. Unfinished painting of eaves;

32. Missing beads at entry;

33. Holes in doors;

34. Defective bathroom benchtop sealant;

35. Missing covers for power sockets;

36. Defective edge sealing;

37. Kitchen Incomplete door and window installation

38. Kitchen incomplete sealants to junctions, missing screw caps and incomplete pocket door installation;

37. Photographic evidence also demonstrates substandard and incomplete work. Further the Top Notch estimate identifies defects and incomplete work in the granny flat, main house and outside areas. The work identified by Top Notch as required to complete the works and rectify the defects included:

1. Painting, completion of the bathroom, bedroom and various other work to complete the granny flat;

2. Completion of the living room, kitchen and laundry renovations in the main house;

3. Repair and completion of works at the entry and exterior of the Property.

38. I accept that the matters identified in the Xue building report and the Top Notch estimate are defects and that those defects were caused by the respondents. I further accept that where incomplete works have been identified, those works were required to have been completed by the respondents under the Contract.

39. I find that the cost of rectifying these defects and completing the work is at least $11,500.00 (not including GST), which is the price estimated by Top Notch. Top Notch’s estimate for work to be done referred specifically to work to be done in the granny flat, main house and exterior.

40. The total price as estimated by Top Notch is $11,500.00, which together with GST comes to $12,650.00. I find this sum is reasonable and is the minimum sum which would be necessary to rectify the defects and complete the works as identified. Together with the cost of remedying the damage caused to the pool and the pool cleaner referred to at paragraphs 33 and 34 above, I accept the applicant’s loss is at least $15,000.00.

Consideration – breach of statutory warranties under s. 18B Home Building Act: defects and unlicensed work

41. Section 18B of the Home Building Act provides:

18B   Warranties as to residential building work

(1)  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)  a warranty that the work will be done with due care and skill and in accordance with the plans and specifications set out in the contract,

(b)  a warranty that all materials supplied by the holder or person will be good and suitable for the purpose for which they are used and that, unless otherwise stated in the contract, those materials will be new,

(c)  a warranty that the work will be done in accordance with, and will comply with, this or any other law,

(d)  a warranty that the work will be done with due diligence and within the time stipulated in the contract, or if no time is stipulated, within a reasonable time,

(e)  a warranty that, if the work consists of the construction of a dwelling, the making of alterations or additions to a dwelling or the repairing, renovation, decoration or protective treatment of a dwelling, the work will result, to the extent of the work conducted, in a dwelling that is reasonably fit for occupation as a dwelling,

(f)  a warranty that the work and any materials used in doing the work will be reasonably fit for the specified purpose or result, if the person for whom the work is done expressly makes known to the holder of the contractor licence or person required to hold a contractor licence, or another person with express or apparent authority to enter into or vary contractual arrangements on behalf of the holder or person, the particular purpose for which the work is required or the result that the owner desires the work to achieve, so as to show that the owner relies on the holder’s or person’s skill and judgment.

(2)  The statutory warranties implied by this section are not limited to a contract to do residential building work for an owner of land and are also implied in a contract under which a person (the principal contractor) who has contracted to do residential building work contracts with another person (a subcontractor to the principal contractor) for the subcontractor to do the work (or any part of the work) for the principal contractor.

42. In my view, the defects, loss and damage identified above were the result of the failure by the respondent to comply with the warranties in s.18B(1)(a), (b) and (d) of the HBA. I therefore find that the respondents have breached the warranties in s. 18B(1) of the HBA by reason of:

1. the defects and damage identified in the Zue building report and 12 January 2022 email, which I find were caused by of s.18B(1)(a), (b) and (d) of the HBA;

2. the performance of unlicensed work, which I find was in breach of s. 18B(1)(c) of the HBA.

43. The present proceedings are a building claim within the meaning of s. 48A of the HBA. Section 48O of the HBA relevantly provides:

48O   Powers of Tribunal

(1)  In determining a building claim, the Tribunal is empowered to make one or more of the following orders as it considers appropriate—

(a)  an order that one party to the proceedings pay money to another party or to a person specified in the order, whether by way of debt, damages or restitution, or refund any money paid by a specified person,

(b)  an order that a specified amount of money is not due or owing by a party to the proceedings to a specified person, or that a party to the proceedings is not entitled to a refund of any money paid to another party to the proceedings

….

44. I find that by reason of the respondents’ breaches of the statutory warranties under the HBA, they are liable to the applicant under s. 48O(1) of the HBA to pay to the applicant the sum of $15,000 by way of damages for such breaches.

Subsequent demands for payment – factual findings and consideration

45. Mr Hussein, rather than attend to the outstanding and defective works, responded by making extravagant claims for additional payments. In about mid January 2022, after receipt of the 12 January email, Mr Hussein sent what appears to be an invoice in the sum of $289,502.93. That invoice acknowledged payment in the sum of $181,000, leaving the sum allegedly owing of $108,502.32.

46. Mr Hussein later made other demands in different sums and acknowledging different amounts as having been paid by the applicant and his wife. He made another claim for $126,302 based on a total price of $305,302 of which only $179,000 was acknowledged as having been paid. A further, formal demand on XCPL letterhead signed on its behalf by Mr Hussein was made on 15 February in the sum of $161,545.28.

47. The basis on which Mr Hussein made those claims is unclear. What is clear, however, is that neither Mr Hussein nor anyone on behalf of XCPL performed any works that could conceivably justify the claims for additional payment demanded in that correspondence. I find that the applicant and his wife are not liable on any basis to make any payment in respect thereof.

Disposition

48. On the basis of the material before me I am satisfied that, on its proper construction, both Mr Hussein and XCPL are parties to the Contract and both are liable for its defective performance. The evidence establishes that the work performed by the respondents pursuant to that Contract was defective and that the damages suffered by the applicant is at least $15,000.00, being the sum claimed in these proceedings.

49. I am further satisfied that no work was performed by the respondents that entitles them, or either of them, to any further payment from the applicant. The applicant had paid the full contract price and not received the full benefit to which he was entitled. There is no basis on which the respondents are entitled to any further payment.

50. On the basis of the findings I have made, it is appropriate to make orders under s. 48O(1)(a) and (b) of the HBA. Accordingly, I make the following orders:

1. Pursuant to s. 48O(1)(a) of the Home Building Act 1989, the respondents are to pay to the applicant the sum of $15,000 immediately.

2. Pursuant to s. 48O(1)(b) of the Home Building Act 1989, the sum of $161,545.28 claimed by the respondents in respect of works performed at xx Blackett Drive, Castle Hill is not due or owing.

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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: 30 August 2022