Pobjie v Commissioner for Fair Trading, NSW Office of Fair Trading
[2007] NSWADT 142
•26 June 2007
CITATION: Pobjie v Commissioner for Fair Trading, NSW Office of Fair Trading [2007] NSWADT 142 DIVISION: General Division PARTIES: APPLICANT
Michael Pobjie
RESPONDENT
Commissioner for Fair Trading, NSW Office of Fair TradingFILE NUMBER: 063016 HEARING DATES: 10-11 November 2006, 17 January 2007, 17 May 2007 SUBMISSIONS CLOSED: 17 May 2007
DATE OF DECISION:
26 June 2007BEFORE: Molony P - Judicial Member CATCHWORDS: Home Builder - suspension of contractor licence - Home Building Act - home builder - suspension of contractor licence MATTER FOR DECISION: Preliminary matter LEGISLATION CITED: Home Building Act 1989
Home Building Regulation 2004CASES CITED: Commissioner of Fair Trading v Pobjie Agencies Pty Ltd and Ors [2005] NSWSC 13
Provincial Houses v Doyle & Ors [2004] NSWSC 624REPRESENTATION: APPLICANT
RESPONDENT
S. Cairns, barrister
P. Singleton, barristerORDERS: 1. Table B to the letter from the Mr Pobjie’s solicitors of 14 May 2007 contains a correct analysis of the pre-2004 contracts which were not considered by Sully J; 2. That Table demonstrates that with respect to the contracts for Brown, Edwards, and Bouche there is an apparent breach of s.8(1)(b); 3. There are no other breaches of that section demonstrated in the evidence presently before me.
REASONS FOR DECISION
Introduction
1 This proceeding is an appeal against a decision of the Commissioner of Fair trading to disqualify Mr Pobjie from holding a licence under the Home Building Act 1989 for a period of 10 years. The proceeding is presently part-heard.
2 Before the Commissioner took the decision to disqualify Mr Pobjie in July 2005 the Commissioner brought proceedings against Mr Pobjie, and others, in the Supreme Court seeking injunctions and ancillary orders under the Fair Trading Act 1987. The Commissioner sought, amongst other things, to have Michael Pobjie restrained from undertaking, supervising or coordinating residential building work for 10 years. The decision of the Supreme Court with respect to the application for injunctive relief under the Fair Trading Act 1987 was delivered on 3 February 2005 by Sully J: Commissioner of Fair Trading v Pobjie Agencies Pty Ltd and Ors [2005] NSWSC 13. Injunctive orders were made restraining Michael Pobjie from undertaking, supervising or coordinating residential building work, but only to 30 September 2005, with liberty to apply.
3 I have already found in the course of this proceeding that a number of factual findings made by Sully J are binding on the parties before me and that they are estopped from denying them. There is substantial agreement between the parties as to which findings made by his Honour create estoppels binding on them. Sully J also made findings of law concerning the interpretation of the Home Building Act 1989 which are binding, in a wider sense, as a matter of law.
4 Because of the extremely large volume of material filed under s.58 of the Administrative Decisions Tribunal Act 1997, which included some 121 complaint files, I adopted, with the consent of the parties, an alternative procedure for addressing that material. Rather than conducting a hearing to traverse, analyse and hear detailed evidence and submissions concerning the s.58 documents, I read and analysed the materials myself. I then provided the parties with a statement of my preliminary conclusions, together with a summary of the information derived from my reading of the complaint files.
5 A question has arisen concerning whether or not in reaching those preliminary conclusions; I have correctly applied the law as stated and applied by His Honour, with respect to the calculation of “the contract price” for purpose of s.8 of the Home Building Act 1989. The issue is clearly stated in a letter from Mr Pobjie’s solicitors:
6 The controversy emanates from the following passage in my statement of preliminary conclusions, and the calculations I performed based on the method outlined. Those words italicised are at the heart of the issue.
“The Tribunal has asked the parties to identify estoppel issues arising from the judgment of Sully J in Commissioner of Fair Trading v Pobjie Agencies Ply Limited & Ors [2005] NSWSC 13 (3 February 2005).
We have made a careful comparison of the method of calculations of maximum deposits which give rise to the preliminary conclusions of the Tribunal that Pobjie Agencies Pty Limited had been guilty of some 44 breaches of section 8(1) of the Home Building Act 1989 ("the Act") (see paragraphs 65 and 92 Tribunal's statement of preliminary conclusions).
The comparison brought out the fact that the Tribunal used a different method of calculating the maximum deposit to that which was used by Sully J. The difference was in the Tribunal's adjustment of the contract price by deducting "check measure" payments. This had the effect of increasing the proportion of the deposit to the adjusted contract price, resulting in the deposit being more than the specified percentage specified under the Act.
In the calculations upon which he based his judgment, Sully J did not adjust the contract price by deduction of the check measure payment. Had he done so, he would not have totally rejected the Commissioner's allegations of some 18 breaches of section 8(1) of the Act (see paragraph 132 of the judgement of Sully J). Had he deducted the check measure payment from the contract price, he would have found 14 breaches as set out in the attached Table A.
It is submitted that an estoppel arises binding the Tribunal to the method of calculation of the contract price for this purpose. Were the method used by Sully J adopted by the Tribunal in its statement of preliminary conclusions as set out in the attached Table B, there would have been a finding that on only 3 occasions did Pobjie Agencies breach section 8(1) of the Act only occurred on 3 occasions.
By way of further explanation of this point, the reason that this approach of Sully J was not obvious at first glance is that Sully J did deduct the check measure payment when ascertaining whether a breach of section 92 had occurred (see paragraph 159 of the judgment of Sully J). He took a different approach however in relation to section 8(1).
7 There is no dispute that in adopting the same approach with respect to the meaning of “contract price” in s.92 I did so in accordance with His Honour’s analysis of the law.
“65. His Honour … found that the payments due on check measurement under Pobjie Agencies pre-March 2004 contracts were not payments for residential building work within the meaning of the Act. As a result, His Honour excluded payments made by consumers on “check measurement” from consideration when determining whether or not pre-March 2004 contracts breached s.8(1). I have adopted that approach by deducting the check measurement payments from the contract prices, and thereby arriving at an adjusted contract price. The adjusted contract price represents that part of the contract price attributable to residential building work, and is the contract price for the purposes of s.8. I have then calculated whether the first payment made under the pre-March 2004 contracts exceeds the limits prescribed by s.8.”
Issues
8 In issue is:
Contract Price Under s.8
a. Whether Sully J. applied some other, and if so what, reasoning with respect to the calculation of the contract price for the purposes of s.8; and
b. Whether His Honour’s findings with respect to the calculation of the contract price for the purposes of s.8 give rise to an estoppel which precludes me from reaching the preliminary findings I did with respect to the contract price for pre-March 2004 contracts.
9 Section 8 of the Home Building Act 1989 relevantly provides:
10 ‘Contract price” and “residential building work’ are defined in s.3 of the Act:
“(1) A person must not:
if the amount of the payment is prohibited by this section.
(a) demand or receive a payment on account before work is commenced under a contract to do residential building work, or
(b) enter into a contract under which the person is entitled to demand or receive a payment on account before residential building work is commenced,
…
(2) The amount of the payment is prohibited if:
(3) The regulations may make provision concerning how a contract price is to be determined for the purposes of this section.”
(a) the contract price is more than $20,000 and the payment is more than 5% of the contract price (or, where another percentage is prescribed by the regulations in respect of a particular kind of work, the percentage so prescribed), or
(b) the contract price is $20,000 or less and the payment is more than 10% of the contract price (or, where another percentage is prescribed by the regulations in respect of a particular kind of work, the percentage so prescribed).
11 In Commissioner of Fair Trading v Pobjie Agencies Ply Limited & Ors at [121] to [132] Sully J discussed the form of the pre-2004 contracts used by Pobjie Agencies. He observed that the contracts uniformly provided for payment of a deposit followed by a second payment to be made on ‘check measure.’ He noted evidence that the “end result of the check measure process was effectively a bill of quantities and a set of drawings and measurements which were capable of being converted into something buildable” (at [123]).
“ contract price means the total amount payable under a contract to do work or to supply a kit home and includes:
(a) the amount that the person contracting to do the work or to supply a kit home is to receive and retain under the contract, and
(b) the amount that the person is to receive under the contract for payment to any other person, and
(c) the amount any third person is to receive (or it is reasonably estimated will receive) directly from the person for whom the work is done or to whom the kit home is supplied in relation to the work done, or the kit home supplied, under the contract:
…
(i) for conveying to the building site or connecting or installing services such as gas, electricity, telephone, water and sewerage, or
(ii) for the issue of development or building consents.
residential building work means any work involved in, or involved in co-ordinating or supervising any work involved in:
It includes work declared by the regulations to be roof plumbing work or specialist work done in connection with a dwelling and work concerned in installing a prescribed fixture or apparatus in a dwelling (or in adding to, altering or repairing any such installation).
(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.
It does not include work that is declared by the regulations to be excluded from this definition.”
12 His Honour then referred to the decision of Provincial Houses v Doyle & Ors [2004] NSWSC 624, where Wood CJ considered the correct interpretation of “residential building work” as defined in section 3 and said at paragraph [60]:
13 Sully J continued (the emphasis is mine):
“I do not consider that the words ‘supplied for or in connection with’ the carrying out of residential 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 the 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 or in connection with its performance.”
14 It can be seen that, Sully J determined that payments to be made on check measure under Pobjie Agency’s pre-2004 contracts were not payments made on account of residential building work. He also determined that payments, or proposed payments, prohibited by s.8 are “payments on account of residential building work.” As a consequence, payments made to Pobjie Agencies on check measurement, which are not payments on account of residential building work, are not payments to which the prohibition under s.8 applies. That analysis of law is binding.
“128 I respectfully agree with that analysis; but for present purposes it is necessary to look more closely at the way in which section 8, rather than section 3, ought to be interpreted.
129 That question is answered correctly, in my opinion, by reading section 8(1) as though it read thus:
130 Such a construction seems to me best to accord with the legislative intent as discerned by Wood CJ at CL. I take the legislative intent to have been to catch by sub-section 1(a) a payment demanded or received independently of some specific contractual entitlement to the payment; and to catch by sub-section 1(b) a payment demanded or received pursuant to some specific contractual entitlement to the payment.
“(1) A person must not:
(a) demand or receive a payment on account of residential building work before that work is commenced under a contract to do that work; or
(b) enter into a contract under which the person is entitled to demand or receive a payment on account of residential building work before that work is commenced,
if the amount of the payment is prohibited by this section.”
131 If that approach be correct, then any breach in each of the present eighteen cases would be a contravention of sub-section (1)(b). That raises the question: Is each of the “On Check Measure” payments a payment on account of residential building work? It seems to me that while ever the reasoning of Wood CJ at CL stands as good law, the answer must be: no.
132 For the foregoing reasons I am of the opinion that the plaintiff has not established, as to this group of eighteen contracts, any contravention of section 8 (1) of the Home Building Act.”
15 It should be noted that His Honour undertook a somewhat similar analysis (at [151] – [159]) in respect of s.92 which is concerned with insuring work, and there expressly deducted the figure payable on check measurement from the stated contract price, in order to arrive at a contract price for the residential building work (at [159]).
16 In doing so Sully J turned his attention to the meaning of the term “contract price” given its extended definition in s.3:
17 It is to be noted that Sully J undertook no such analysis with respect to definition of contract price in its application to s.8.
153 It is certainly the case that “the contract price” as thus defined picks up certain types of payments over and above payments for “residential building work” , understanding that latter expression in the way analysed at paragraph 127 of this judgment.
154 I am not persuaded, however, that the extended definition is intended by the Legislature to apply in section 92, and in particular in section 92(3). The clear focus of section 92(1) and (2) is the insuring of residential building work carried out pursuant to a contract. The extended definition apart, an ordinary and grammatical construction of section 92(3) in the context of which it forms a part, would entail, it seems to me, that the expression “contract price” should be understood as meaning “contract price for the said residential building work”. The reference in section 92(3) itself to “labour and materials” would seem to me to strengthen that construction.
155 Should such a construction of section 92(3) yield to the section 3 extended definition? In my opinion it should not: first because of the general rule of construction that is expressed in section 6 of the Interpretation Act 1987 (NSW); and secondly, because of the common law rule of construction that is expressed conventionally in the maxim: generalia specialibus non derogant.
18 When preparing my preliminary conclusions in respect of pre-2004 contracts, I deducted the check measurement payments from the contract prices, and thereby arrived at an adjusted contract price. I treated the adjusted contract price as representing that part of the contract price attributable to residential building work. I therefore treated the contract price under s.8 as being the total of all payments on account of residential building work which Pobjie Agencies was entitled to demand or receive for the purposes of s.8(1)(b), rather than the contract price as defined in s.3.
19 Sully J at no stage set out the figures in respect to his conclusion that there was no breach of s.8(1)(b). Rather, his Honour simply said that the breaches alleged were not established. That is a finding of fact which gives rise to an issue estoppel binding on both the Commissioner and Mr Pobjie. It is a finding which I noted I was bound by in my preliminary conclusions.
20 The problem that transpires is that the methodology I adopted results in a different conclusion to those which Sully J reached.
21 Mr Pobjie’s representatives assert Sully J “did not adjust the contract price by deduction of the check measure figure.” In the course of submissions it was conceded that Sully J never expressly stated that he had either deducted the check measure figure, or had not done so. The assertion made on Mr Pobjie’s behalf is based on his Honour’s conclusion that there were no breaches of s.8(1) demonstrated, and a retrospective analysis of what the methodology which led him to reach that conclusion “must have” been. That analysis, it is submitted, leads to the conclusion that Sully J used the contract price as defined in s.3, when determining whether there had been a breach of s.8.
22 Table A to the letter from his solicitors illustrate what Mr Pobjie says is the difference between an application of my analysis of the raw data before Sully J, and that now advanced on Mr Pobjie’s behalf. On example will suffice to illustrate. In the case of McMahon the contract price was $39,000. The contract called for the payment of an initial deposit of $1,950, and a second “check measurement” payment of $11,700. By deducting the check measure payments from the contract price, one arrives at an adjusted contract price of $27,300. The deposit paid was 7.14% of the adjusted contract price, but is only 5% of the contract price. Under the adjusted contract price method Pobjie Agencies was in breach of s.8(1)(b), whereas there is no breach if the contract price is used. His Honour found there was no breach.
23 For Mr Pobjie it is said that Sully J ‘must have’ computed the deposit as a percentage of the contract price as defined, to reach the conclusions he did. On a strictly mathematical basis that method of computation proposed by Mr Pobjie yields a result consistent with Sully J’s findings. The difficulty remains the method of computation advanced on Mr Pobjie’s behalf entails the inclusion in the calculation of payments on account of work that his Honour held not to be residential building work. The conundrum is obvious. Yet, contract price is defined in s.3 encompasses matters clearly not residential building work.
24 The term “contract price” is used in a number of provisions of the Act. These are:
25 The term “contract price” appears more frequently in the Home Building Regulation 2004. It is found in:
provisions relating to the form of contracts for residential building work (s.7), for kit homes (s.16D), and for building consultancy work (s.18K);
provisions relating to maximum deposits with respect to residential building work (s.8) and kit homes (s.16E); and,
provisions relating to the provision of insurance for contracts for residential building work (s.92) and for the supply of kit homes (s.92).
a provision exempting licenced contractors form complying with the requirements of that Act with respect to the form of contracts where the contract price is less than a specified amount for residential building work (cl. 15);
26 A significant number of the provisions contained in the Regulation relate to insurance. Given the interpretation Sully J gave to the meaning of contract price for the purposes of s.92 a real question arises as to the meaning of contract price in those provisions. That, however, is not a question that I am bound or required to determine. What I am required to determine is whether, because of his finding that the payments to which s.8 relates are payments on account of residential building work , His Honour also found that contract price, for the purposes of that section, should be construed to mean “contract price for the said residential building work” ?
a provision that the cooling off period provided by the Act does not apply where the contract price does not exceed a specified amount with respect to residential building work (cl. 17);
a provision exempting contracts for the supply of building components the contract price for which is $1,000 (inclusive of GST) or less in connection with a kit home from the Act entirely (cl. 24);
a provision allowing the Commissioner to issue conditional licences to do residential building and specialist work that limit the contracts which a licence holder may enter into by a ceiling of $12,000 on the contract price (cl. 26);
a provision stating that the Commissioner is not required to cancel a contractor licence where the licence holder becomes bankrupt or enters into a scheme of arrangement etc, where the licence is conditioned on the holder not entering into contracts above a ceiling of $12,000 on the contract price (cl. 39);
a provision allowing the Commissioner to renew or restore a licence to do residential building and specialist work that limit the contracts which a licence holder may enter into by a ceiling of $12,000 on the contract price (cl. 39A);
a provision exempting licence holders whose licences prohibit them entering into contracts exceeding $12,000 from the provisions of sections 20 (3) (c) relating to insurance, 22A relating to suspension due to failure to insure, and 40 (2A) which is concerned with non-renewal for failure to comply with the insurance requirements of the Act;
a provision authorising insurance contracts to limit liability resulting from non-completion of building work to an amount that is 20% of the contract price (cl. 58(j)); and
a provision relating to the level of insurance cover required with respect to “residential flat buildings” which is to be determined by reference to the contract price (cl. 69).
27 Sully J’s conclusion that there was no breach of s.8 is consistent with the view that the extended definition of contract price applies in the interpretation of that section, and that contract price for the purposes of the section should not be given the same restricted meaning as that given to it in s.92. The Commissioner in supporting my method of calculation submitted that it was not clear how his Honour had reached his conclusions, and that one should look at what he had said in determining the issue.
28 Sully J did not say that he was attributing a different construction to the meaning of contract price in s.8 to that required by the definition in s.3. This is to be contrasted with his consideration of the meaning of contract price in s.92. He did, however, express a clear conclusion as to how s.8(1) should be read, which impacts on how s.8(2) is read in order for the section to be interpreted consistently.
29 At minimum, his Honour’s analysis requires that s.8(2) be read thus:
30 Such an interpretation is consistent with his Honour’s finding that no breach of s.8 had been demonstrated, and with the balance of his judgment. I have reached the conclusion that it reflects his Honour’s findings.
“(2) The amount of the payment on account of residential building work is prohibited if:
(a) the contract price is more than $20,000 and the payment on account of residential building work is more than 5% of the contract price (or, where another percentage is prescribed by the regulations in respect of a particular kind of work, the percentage so prescribed), or
(b) the contract price is $20,000 or less and the payment on account of residential building work is more than 10% of the contract price (or, where another percentage is prescribed by the regulations in respect of a particular kind of work, the percentage so prescribed).
31 I am reinforced in this conclusion by three things. First, by the more general nature of the maximum deposit provisions of s.8 when compared with the particular focus of s.92 on insuring residential building work. Secondly, by absence from s.8 of words such as the reference to “labour and materials” in s.92(3), which Sully J considered lent support to the conclusion that the extended definition of contract price did not apply to s.92. Finally, by my analysis of the use of the term contract price throughout the Act, which, I consider, points to there being no basis for an application of the maxim generalia specialibus non derogant, with respect to s.8. In this regard I do not think there is an irreconcilable conflict created by reading s.8(2) in the manner outlined, with the extended definition of contract price.
32 I conclude that in my preliminary conclusions I wrongly adjusted the contract price for the purpose of determining whether Pobjie Agencies had breached s.8 with respect to pre-2004 contracts. The contract price for the purposes of s.8 is that provided by the extended definition of contract price in s.3. For Pobjie Agencies’ pre-2004 contracts the contract price was the whole of the price payable under the contracts.
33 I accept that in deciding whether Pobjie Agencies breached s.8(1)(b), the correct approach is to determine whether the payment on account of residential building work that Pobjie Agencies was entitled to demand and receive under those contracts, before work commenced, is more that the prescribed percentage of the contract price as defined in s.3. For that purpose, payments to be made under those contracts on check measure are to be disregarded, because they are not payments on account of residential building work.
Is there an Issue Estoppel
34 I have already said that an estoppel operates in respect to Sully J’s findings that there were no breaches of s.8 demonstrated on the evidence before him.
35 Mr Pobjie submitted that an estoppel also operates in respect to the evidence before me which was not before Sully J. I do not agree. As the Commissioner submitted issue estoppel operates with respect with respect to findings made by Sully J which bind the parties. There are no findings made by the Supreme Court with regard to the additional complaint files before me.
Conclusion
36 I find that:
1. Table B to the letter from the Mr Pobjie’s solicitors of 14 May 2007contains a correct analysis of the pre-2004 contracts which were not considered by Sully J.
2. That Table demonstrates that with respect to the contracts for Brown, Edwards, and Bouche there is an apparent breach of s.8(1)(b).
3. There are no other breaches of that section demonstrated in the evidence presently before me.
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