Stephens v Director General, Department of Fair Trading

[2003] NSWADT 173

CITATION:	Stephens v Director General, Department of Fair Trading [2003] NSWADT 173
DIVISION:	General Division
PARTIES:	APPLICANT Leonard Maurice Stephens RESPONDENT Director General, Department of Fair Trading
FILE NUMBER:	023263
HEARING DATES:	18/06/2003, 19/06/2003
SUBMISSIONS CLOSED:	06/19/2003
DATE OF DECISION:	07/17/2003
BEFORE:	O'Connor K - DCJ (President)
APPLICATION:	Home Builder - suspension of contractor licence - Home Building Act - home builder - suspension of contractor licence
MATTER FOR DECISION:	Principal matter
LEGISLATION CITED:	Home Building Act 1989
CASES CITED:	Director General, Department of Fair Trading v Cohen [2000] NSWFTT 3
REPRESENTATION:	APPLICANT In person RESPONDENT A Wilson, socitor
ORDERS:	1. Decision to disqualify the applicant from holding any authority is affirmed. ; 2. Period of disqualification reduced to five years, commencing 12 August 2002.; 3. Decision to impose a fine set aside.

1 These proceedings arise under the Home Building Act 1989 (HBA). From March 1976 to September 2001, Mr Leonard Maurice Stephens held, pursuant to the HBA and predecessor legislation, contractor licence no 15700 which authorised him to operate as a builder. At various times he had also held authorities to do air conditioning and refrigeration work and to be a CFC/HCFC authorised purchaser and user.

2 On 17 April 2001 the authorised delegate of the Director General, Department of Fair Trading placed a limitation on the builder authority, only allowing him to enter into contracts for which home warranty insurance was not required. On 4 September 2001 the authority was cancelled on the ground of bankruptcy, pursuant to s 22 of the HBA.

3 Subsequently a notice to show cause was issued, requiring Mr Stephens to show cause why further disciplinary action should not be taken. Mr Stephens did not make any submissions. The notice particularised various allegations of improper conduct within the meaning of ss 51 and following of the HBA.

4 On 12 August 2002 the authorised delegate of the Director General decided pursuant to s 62 of the HBA to disqualify Mr Stephens permanently from holding any authority under the HBA, and to impose a penalty of $5000. (The office of Director General has since become the office of Commissioner of Fair Trading, Department of Commerce (‘the Commissioner’).)

5 Mr Stephens has applied to the Tribunal for review of the decision, as permitted by s 83B of the HBA. The hearing was held on 18 and 19 June 2003.

6 The Commissioner presented a bundle of documents to the Tribunal in support of his delegate’s decision.

7 The bundle included an inspection report in relation to a job undertaken by Mr Stephens pursuant to a contract entered into with Mr and Mrs Boguski of Guildford dated 14 February 2000. The report was provided by an assistant technical inspector of the Office of Fair Trading with substantial home building experience and relevant trade qualifications, Mr Mark James Tuckwell.

8 The findings of that report were one of several factors on which the Commissioner relied in reaching his decision. The others were: failures by Mr Stephens to observe the consumer protection requirements of the HBA in relation to that job; Mr Stephens’ bankruptcy; and his failure to return his authorities to the Commissioner when requested to do so, giving rise to a Local Court conviction. In addition to these factors, Mr Stephens said at hearing that he had been convicted of assault on a Federal Police officer in the precincts of the Family Court and been sentenced to, and had now served, a Community Service Order. Mr Wilson for the Commissioner submitted that this information should now also be taken into account, a submission accepted by the Tribunal.

9 Mr Stephens appeared in person and gave evidence. He did not present any documentary material of his own in support of his case, such as testimonials or written explanations for the conduct that had caused concern to the Commissioner.

10 Mr Stephens is now 59 years of age.

11 There was no dispute with the following information given by Mr Stephens:

· He had been a licensed builder since 1973 (the bundle shows 1976).

· No history of previous complaints or disciplinary action.

· In the 1980s he had a thriving business employing over 40 people, and was building three houses a week in the Parramatta-Plumpton region. The business was much smaller by the early 1990s.

12 Mr Stephens referred on several occasions during the hearing to the circumstances of his divorce that had occurred in recent years, difficulties in relation to access, and the amount paid by him by way of financial settlement.

13 As a result in September 2000 he said he placed himself in voluntary bankruptcy. Insolvency of this kind is itself grounds for cancellation of a builder’s licence (see HBA s 22(1)(c)). When these circumstances eventually came to the Commissioner’s attention, the Commissioner proceeded to cancel the licence – in September 2001.

14 At that time, there had also been under examination by the Commissioner a complaint against Mr Stephens in relation to the Boguski job. It was a large-scale renovation of a house (quote $75,000 labour only with the exception of two prime cost items). Mr Stephens entered into a contract to do the work in 10 weeks. The first stage of the work involved substantial demolition and moving of walls of internal rooms. Some rooms were to be reconfigured, and there was to be a new kitchen and bathroom installed.

15 According to Mr Stephens he ceased work on the job after threatening behaviour towards him by Mr Boguski. As to that behaviour, Mr Boguski’s evidence was that one day in August (6 months after work commenced), out of frustration he went to Mr Stephens’ home nearby to inquire about slow progress, and banged so hard on the windows of Mr Stephens’ home office in an attempt to get attention that he smashed them. In the process he badly injured his arms. Mr Stephens was not present when this occurred. At this stage the job was already running 16 weeks late, and was well away from completion.

16 Mr Stephens’ said that his explanation for the delay, to that time, was that the owner had ordered numerous extras and variations. Mr Stephens also referred to various difficulties that were encountered as the job proceeded in relation to the structure of the building, the lay-out of existing rooms and the like. He produced no independent evidence or documentation in support of these concerns. Mr Boguski denied that he asked for any work to be done that fell outside the terms of the quote of 8 February 2000 and the contract of 14 February 2000 which followed. The Tribunal accepts Mr Boguski’s evidence.

17 As to Mr Stephens’ conduct in relation to the regulatory requirements to which he was subject as a licensed contractor, the Commissioner made the following criticisms, with which we agree:

· That Mr Stephens was not entitled to demand from Mr Boguski and his wife a payment of $15,000 as a deposit. The HBA limits deposits prior to commencement of works to 5% of the contract price.

· That Mr Stephens entered into the Boguski contract without the statutorily-required home warranty insurance being in place. Moreover, it was never obtained. This is despite a statement on the contract in Mr Stephens’ handwriting referring to the amount of a premium on the face of the statutory contract, which would convey to the ordinary consumer that insurance was in place.

· That Mr Stephens can produce no written records of variations (as required by the statutory contract).

· That Mr Stephens should have, and did not, notify the Commissioner of his bankruptcy, and therefore traded as a builder while personally insolvent.

18 The Commissioner also referred to the following aspects of Mr Stephens’ conduct as rendering him an unfit person to hold a builder’s licence:
· The statement that appears on his letterhead (both letter stationery and quotes) that he is a member of the Master Builders Association. At hearing Mr Stephens said that he had once been a member of the NSW Branch of the MBA but had in the late 1980s shifted his membership to the ACT Branch of the MBA. This explanation was given in answer to the Commissioner’s evidence – a statement provided to the Commissioner by the NSW Branch that Mr Stephens was not a member. Following Mr Stephens’ reply, the Commissioner obtained a statement from the ACT Branch that he was not and had never been a member there.

· The conviction for failing to return his authorities. Mr Stephens pleaded guilty to this offence and was convicted.

· The further conviction, revealed by Mr Stephens at hearing, involving assault of a police officer at the Family Court.

19 When sitting at the Fair Trading Tribunal which then exercised the primary jurisdiction in respect of builders’ discipline, I dealt at length with the various considerations that are relevant to a decision to impose a sanction on a licensed builder, especially sanctions which might interfere with their licence. The decision was referred to by the Commissioner. These observations remain relevant to the present jurisdiction, now a review jurisdiction: see Director General, Department of Fair Trading v Cohen [2000] NSWFTT 3 service) (Cohen ).

20 In Cohen the Commissioner had sought permanent disqualification of the builder. The builder had entered into 8 contracts for alterations and additions to residential homes without clarity as to insurance cover. It transpired ultimately in separate proceedings that 2 of the 8 jobs did have cover. The Commissioner did not put in issue the quality of the works, though the evidence indicated that a number of jobs were left incomplete and the owners were engaged in various forms of dispute resolution or litigation over the works. Ultimately the Tribunal made an order that the applicant be disqualified for 10 years.

21 This case involves a failure by the applicant to have regard to important regulatory requirements, designed to protect consumers, in respect of one job. There is also evidence before the Tribunal of poor building work: hump in the concrete slab for the bathroom, giving rise to problems in relation to fall and in relation to differences between the level of the outside hallway and the entrance to the bathroom; lack of alignment of the top of door architraves in close proximity to each other (dismissed as an ‘aesthetic issue’ by Mr Stephens); use of inappropriate edging and beading material to deal with gaps and similar difficulties; poor work in relation to painting and in relation to the finish of shelves of built-in wardrobes; and poor framing practice in one area. Mr Stephens’ answer was that these were simply works in progress, all of the alleged defects being capable of rectification. As I understood the evidence of the inspector, these problems should have been avoided, and he did consider most of them could be rectified. What the problems point to is lack of attention to detail especially in laying the slab in a way which will ensure proper fall in the bathroom and proper alignment with the flooring outside the bathroom, and in various aspects of the carpentry associated with door and window surrounds and skirting boards. Without more, these failures would not be sufficient to justify the ultimate disciplinary penalty, disqualification for life. However in this case this bad job only forms one part of a tapestry of misconduct on the part of Mr Stephens.

22 The most concerning aspect of the proceedings, as it was in the earlier disciplinary case to which I have referred (Cohen), was the lack of any insight by Mr Stephens into the gravity of his misconduct for the home owner; and the lack of any insight by Mr Stephens into the gravity of his failure to keep himself properly informed of the requirements governing licensed residential home builders.

23 As to his failures to observe the regulatory requirements listed above, he said that he was a builder and left these things to his secretary at the time. When questioned at hearing, he indicated that he was unfamiliar with the 5% rule and he gave specious answers to the question of why he failed to have insurance cover in place. He showed no sympathy for the plight in which he had left the Boguskis when he ceased active work on the job. Mr Boguski acknowledged in evidence that Mr Stephens had done a good job in the demolition stage, and early on the work was going well. Mr Stephens could give no plausible explanation as to why the job did not continue to proceed in a timely way, other than the claim that numerous extras and variations were imposed.

24 There is no doubt that Mr Stephens is no longer fit to be a licensed home builder, responsible for the supervision of building projects and entry into regulated contracts which are governed by important consumer protection standards, in particular mandatory insurance.

25 The question then arises as to how long Mr Stephens should be prevented from re-applying for entry to the industry. The Commissioner’s decision was permanently; at hearing Mr Wilson for the Commissioner said 15 years was seen as sufficient.

26 I am not satisfied that such a lengthy period is necessary. Mr Stephens said that he had not worked in the industry now for almost 2 years and that he was unemployed and was receiving a Social Security pension. The only independent material before the Tribunal relating to his finances was the notice from the Registrar in Bankruptcy that he was an undischarged bankrupt whose period in bankruptcy would continue until 2007. The consequence of that fact is that Mr Stephens is prevented absolutely by the HBA s 22 from being granted a builder’s licence. The further rule is that no licence is to be granted until at least three years after coming out of bankruptcy unless the Commissioner decides otherwise. So there is a real possibility that Mr Stephens will not be able to obtain any new authority until 2010. Given his present age (and the references that he made at hearing to his health problems), it may well be that Mr Stephens will not choose to re-present for an authority when that becomes possible.

27 The period of disqualification is to be determined, as I see it, by reference to the material relied on in this case. The case is a serious one. Nonetheless, I would place it on the spectrum below the other case mentioned (Cohen, where the disqualification was set at 10 years from holding a contractor licence) though the comparison is a necessarily rather inexact one.

28 In my view, a disqualification period of 5 years is sufficient to mark the community’s disapproval of Mr Stephens’ behaviour. The practical situation is therefore that the first time that Mr Stephens can seek to re-present a case to the Commissioner for grant of an authority will be in late 2007.

29 The Commissioner is not bound to grant the application, and can at that time look, if required, at the question of whether Mr Stephens has come to terms with the misconduct revealed by this case; can give credible assurances that he will pursue business practices that involve strict compliance with the law, especially insurance requirements; and can show that he is conversant with current building practices and standards. But I think it important not to take an approach to the period of disqualification which is crushing, especially in a case like this where no prior or repetitive pattern of misconduct has been relied upon.

30 The maximum penalty under the HBA is $11,000 (s 62(c)). Disqualification will itself normally visit a major financial punishment on the licence-holder. As to the imposition of a financial penalty in this case, I expressed to Mr Wilson my difficulty in seeing what purpose it served in circumstances where the authority itself has been removed. Mr Wilson did not press for the continuation of the financial penalty. There was no dispute that Mr Stephens is in bankruptcy. I am not satisfied that the financial penalty serves any useful purpose in this case.

31 Accordingly my decision is to affirm the Commissioner’s primary decision, but to vary the period of disqualification to 5 years and to set aside the financial penalty.

Orders

1. Decision to disqualify the applicant from holding any authority is affirmed.

2. Period of disqualification reduced to five years, commencing 12 August 2002.

3. Decision to impose a fine set aside.