Stevens v Gary Lewin t/as Gary Lewin Architecture

[2006] NSWSC 1232

CITATION:	Stevens v Gary Lewin trading as Gary Lewin Architecture [2006] NSWSC 1232 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	28/9/06
JUDGMENT DATE :	20 November 2006
JUDGMENT OF:	Bell J at 1
DECISION:	1. Dismiss the plaintiff’s summons; 2. The plaintiff is to pay the defendants’ costs of the appeal.
CATCHWORDS:	Consumer Trading and Tenancy Tribunal jurisdiction with respect to building claims
LEGISLATION CITED:	Architects Act 1921 Architects Act 2003 Consumer Trader and Tenancy Tribunal Act 2001 Home Building Act 1989 Home Building Regulation 2004 Income Tax Assessment Act 1936 (Cth)
CASES CITED:	David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 Grygiel v Baine [2005] NSWCA 218
PARTIES:	David Stevens (Plaintiff) Gary Lewin t/as Gary Lewin Architecture (Defendant)
FILE NUMBER(S):	SC 2006/30038
COUNSEL:	B. Neild (Plaintiff) E. Peterson (Defendant)
SOLICITORS:	David Begg & Associates (Plaintiff) Staunton Beattie Solicitors (Defendant)
LOWER COURT JURISDICTION:	Consumer Trader and Tenancy Tribunal of NSW
LOWER COURT FILE NUMBER(S):	HB05/26179 HB05/24312
LOWER COURT JUDICIAL OFFICER :	Senior Tribunal Member Paull
LOWER COURT DATE OF DECISION:	17/1/06

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

BELL J

Monday 20 November 2006

30038/06 David Stevens v Gary Lewin t/as Gary Lewin Architecture

JUDGMENT

1 BELL J: The Consumer, Trader and Tenancy Tribunal (the Tribunal) has jurisdiction to determine building claims under the Home Building Act 1989 (the HBA). On 17 January 2006 the Tribunal determined that it did not have jurisdiction to determine two, related, claims because they were not building claims for the purposes of the HBA. This is an appeal brought under s 67 of the Consumer Trader and Tenancy Tribunal Act 2001 (The CTTT Act) against that determination.

2 The proceedings have a lengthy history. The plaintiff’s, David and Rosetta Stevens (the Stevens), are homeowners and the defendant, Gary Lewin, is an architect (the architect). On 18 October 2000 the Stevens entered into a contract with the architect for the provision of architectural services with respect to alterations and additions to their residential dwelling (the agreement).

3 In December 2003 the architect commenced proceedings against the Stevens in the Local Court by statement of liquidated claim, claiming the sum of $28.930.00 (together with interest), being monies due on invoices issued under the agreement.

4 The Stevens filed a notice of grounds of defence on 13 February 2004, pleading their defence thus:

Debt not admitted due to revised agreement as per attached.

The Stevens were not legally represented at the date of the filing of their defence. The attachment to the defence comprised copies of email correspondence sent by David Stevens to the architect. It may be inferred from this material that the Stevens were seeking to defend the architect’s claim by relying on a variation to the agreement, which placed a cap on the amount of the architect’s fees. The Stevens joined issue on whether any monies were owing under the agreement as varied.

5 The proceedings were arbitrated on 15 June 2004. Thereafter, the Stevens filed an application for re-hearing. The hearing was listed before the Local Court on 10 and 11 March 2005.

6 On 9 November 2004 the Stevens filed a cross-claim against the architect. The cross-claim included an assertion that the architect had been negligent in approving the payment of certain progress payments for work done by the builder, Woodfast Joinery Pty Ltd (Woodfast), which had not been carried out to the appropriate professional standard.

7 On 16 December 2004 the architect filed a defence to the cross-claim. The proceedings were listed for Review before the Court on 8 February 2005. On the application of the Stevens, the hearing dates in March 2005 were vacated and the proceedings were refixed for hearing on 11 and 12 May 2005.

8 On 29 April 2005 the Stevens advised the architect that they proposed applying to have the proceedings transferred to the Tribunal. A notice of motion claiming an order for transfer was filed in the Local Court. The architect opposed the transfer of the proceedings.

9 On 5 May 2005 the Local Court ordered that the proceedings be transferred to the Tribunal.

10 On 31 May 2005 the proceedings came before the Tribunal for directions. Thereafter the architect filed points of claim in the Tribunal in substitution for the pleading that had been filed in the Local Court. On 23 July 2005 amended points of claim were filed on the architect’s behalf. The architect’s application is proceeding HB05/24312 in the Tribunal.

11 The Stevens’ cross-claim was treated by the Tribunal as a separate application, HB05/26179. This claim was proceeding before the Tribunal on the pleadings filed in the Local Court. The architect’s solicitors sought further and better particulars of the cross-claim. On 19 July 2005 they wrote to the Registrar of the Tribunal advising that they were awaiting receipt of the particulars requested and reserving their right to file an amended defence on receipt of the same. On 31 October 2005 the architect was supplied with the further and better particulars. By this date the Tribunal, of its own motion, had directed the parties to file submissions on the question of its jurisdiction to determine each of these claims. The architect had not applied for leave to file an amended defence to the Stevens’ claim at the date the jurisdictional position was raised.

12 The architect and the Stevens filed written submissions on the jurisdictional issue. Senior Member Paull determined the issue on the papers. On 17 January 2006 she published her determination, making the following orders:

1. I find that the Tribunal has no jurisdiction to determine proceedings HB05/26179 and HB05/24312.
2. The Registrar is to list the proceedings for any costs applications or submissions as to whether the proceedings should be dismissed or transferred to another jurisdiction.
3. If the parties agree and forward consent draft directions and orders within 28 days of the date of this finding in relation to the matters referred to in 2 above, the appropriate orders and directions will be made in chambers.

13 Section 67 of the CTTT Act, relevantly, provides:

67 Appeal against decision of Tribunal with respect to matter of law
(1) If, in respect of any proceedings, the Tribunal decides a question with respect to a matter of law, a party in the proceedings who is dissatisfied with the decision may, subject to this section, appeal to the Supreme Court against the decision.
…
(3) After deciding the question the subject of such an appeal, the Supreme Court may, unless it affirms the decision of the Tribunal on the question:
(a) make such order in relation to the proceedings in which the question arose as, in its opinion, should have been made by the Tribunal, or
(b) remit its decision on the question to the Tribunal and order a rehearing of the proceedings by the Tribunal.
…
(8) A reference in this section to a matter of law includes a reference to a matter relating to the jurisdiction of the Tribunal.

14 The Tribunal held that neither the architect’s nor the Stevens’ claim was a building claim for the purposes of Pt 3A of the HBA and neither were within the jurisdiction that is conferred on the Tribunal by s 48K of the HBA.

15 The decision is challenged on six grounds set out in the amended summons filed on the Stevens’ behalf on 15 March 2006. I will return to these after referring to certain of the provisions of the HBA and the Home Building Regulation 2004 (the Regulation).

16 Part 3A of the HBA concerns the resolution of building disputes and building claims. Jurisdiction with respect to building claims is conferred on the Tribunal by s 48K. Relevantly, that section provides:

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).
…
(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.

17 The scheme of Pt 3A of the HBA is such that the Tribunal is to be chiefly responsible for resolving building claims as defined. Section 48L provides:

(1) This section applies if a person starts any proceedings in or before any court in respect of a building claim and the building claim is one that could be heard by the Tribunal under this Division.

(2) If a defendant in proceedings to which this section applies makes an application for the proceedings to be transferred, the proceedings must be transferred to the Tribunal in accordance with the regulations and are to continue before the Tribunal as if they had been instituted there.

18 The Tribunal is given a number of powers in determining building claims under Pt 3A of the HBA. These include, that it may have regard to the reports of any inspector who may have investigated any matter that has given rise to a building dispute. An inspector may only be called to give evidence by the Tribunal and not by either party to the building claim. The Tribunal may appoint an independent expert to advise it as to any matter that it refers to the expert for advice. In any proceedings for which an independent expert has been appointed, no party may call any other expert to give evidence in the proceedings or tender any report prepared by any other expert, save by leave of the Tribunal (s48N).

19 A building claim is defined for the purposes of Pt 3A of the HBA in s 48A, relevantly, as follows:

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.

20 The Regulations do not declare any claim not to be a building claim for the purposes of Pt 3A of the HBA.

21 The expression building goods or services is defined in s 48A(1):

building goods or services means goods or services supplied for or in connection with the carrying out of residential building work, specialist work or building consultancy 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.

22 It will be noted that building goods or services are those supplied for or in connection with the carrying out of certain work, including residential building work. Residential building work is defined in s 3 of the 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.
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).
It does not include work that is declared by the regulations to be excluded from this definition.

23 Clause 9 of the Regulation makes provision for certain work to be excluded from the definition of residential building work:

9 Definition of “residential building work” – certain work excluded
(1) For the purposes of the definition of residential building work in section 3(1) of the Act, the following is declared to be excluded from that definition:
…
(g) the supervision only of residential building work:
(i) by a person registered as an architect under the Architects Act 1921 or the Architects Act 2003,

24 The architect is a registered architect under s 27 of the Architects Act 2003. A copy of his Certificate of Registration was annexed to the submissions filed on his behalf in the Tribunal, and the fact of his registration is not in issue.

25 The six grounds of appeal set out in the amended summons may be distilled into two (as counsel for the Stevens acknowledged in the course of the hearing). Firstly, that the Tribunal erred in law in failing to consider the submission put on the Stevens’ behalf that each of the claims is a building claim within the meaning of s 48A(1) because it “arises from a supply of building goods or services” (the first limb). Secondly, that the Tribunal erred in law in determining that the agreement was not a contract that is collateral to a contract for the supply of building goods and services within the meaning of s 48A(1) (the second limb).

26 Section 28 of the CTTT Act provides that the Tribunal may, subject to its Act, determine its own procedure. It may require evidence or argument be presented in writing and it may decide the matters on which it will hear oral evidence or argument. The jurisdictional question was determined on the written submissions.

27 The affidavit of the Stevens’ solicitor, David John Allan Begg was read in their case and the documents that are exhibited to it were admitted without objection as exhibit A. The affidavit of Katherine Ann Staunton was read in the architect’s case. Exhibit A includes witness statements signed by the architect and by David and Rosetta Stevens, an expert report and a copy of the agreement.

28 A question arose in the course of the hearing as to what material had been before the Tribunal. The parties were not able to say. They were agreed that the appeal should be determined on the assumption that the Tribunal had before it the pleadings, the parties’ written submissions and the agreement. I approach the determination of the appeal by reference to this material.

29 It was the Stevens’ case before the Tribunal that each of the claims was a building claim, for the purposes of Pt 3A of the HBA, in one or more of three ways:

(a) The services provided by the Architect to the Stevens fall within the definition of “building goods and services”. Accordingly a claim in respect of the provision of those services falls within the definition of “building claim”.
(b) Even if the services provided by the Architect to the Stevens do not fall within the definition of “building goods and services”, the services provided by Woodfast to the Stevens clearly do so fall. The claims relate to the provision of building services by Woodfast. Accordingly, picking up the wording of the definition of “building claim”, the claims arise from the provision of those services by Woodfast.
(c) Again, even if the services provided by the Architect to the Stevens do not fall within the definition of “building goods and services”, the claims arise under the architectural contract, which is a contract that is collateral to the Woodfast contract. The Woodfast contract, as noted previously, is clearly a contract for the supply of “building goods and services” (submissions as to jurisdiction filed on behalf of the Stevens, exhibit A Tab 11, at 4-5 [16]).

30 Counsel for the Stevens acknowledged that the Tribunal had been correct to reject the first of the above contentions.

31 The submissions in support of contentions (b) and (c) made on behalf of the Stevens drew on the decision of the Court of Appeal in Grygiel v Baine [2005] NSWCA 218. That was a case which involved a building dispute between a builder and a homeowner that was commenced in the Tribunal under Part 3A of the HBA. The homeowner had terminated the contract with the builder prior to completion, contending that the work carried out by the builder was defective. The proceedings were commenced by the builder. The homeowner raised, by way of defence to the claim that the builder had not obtained home owners’ warranty insurance, which the HBA requires a person carrying out residential building work to obtain. The homeowner was a solicitor. In response to his defence the builder sought to join a fresh claim against him alleging the negligent provision of legal advice, namely, that he was not required to take out insurance under the Act. The Tribunal refused to allow the claim for negligent legal advice, holding that it was not a building claim for the purposes of Pt 3A of the HBA. Basten JA (with whose judgment Mason P concurred) held that the Tribunal had been wrong to so hold. His Honour favoured an approach which, to the extent that the statutory terminology permits, did not result in an unduly restrictive construction being given to the provisions of Pt 3A of the HBA (at [58]).

32 The case that the builder pleaded against the homeowner/solicitor for negligent legal advice in Grygiel was a building claim because it arose from the supply of building goods and services within the first limb of the definition in that it related to the terms on which the builder supplied building services (at [63]).

33 The builder’s claim against the homeowner/solicitor was also held to a building claim within the second limb of the definition, in that the legal advice was given “under a contract that is collateral to a contract for the supply of building goods or services”. Basten JA explained that the reference to a contract being “collateral to” another contract in the statutory context that it appears in the HBA does not import the general law of contract with respect to collateral contracts. His Honour referred to the decision of the High Court in David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 at 365 in which it was said that the term collateral agreement in s 261(5) of the Income Tax Assessment Act 1936 (Cth) is to be understood in the sense of “related to” or even “in addition to”. Basten JA went on to observe at [69]:

This conclusion is supported by the fact that the definition in s 48A expressly makes provision for the supply of services “whether under a contract or not”, and uses the term “arises” both in relation to a supply and in relation to a contract. Further, where there are both services for residential building work and services “in connection with” residential building work there may be, as already noted, a causal nexus which is not directly dependent upon contract. For these reasons, the concept of a collateral contract, in this statutory context, will be satisfied where there is an appropriate connection with the supply of building services. In my view, that connection will exist, as a matter of law, in a case where a representation is made, or legal advice provided, in relation to the terms or conditions upon which building services are, or are to be, supplied.

34 The architect submitted that the Tribunal had been correct to hold that it did not have jurisdiction to determine his claim or the Stevens’ claim. His was a claim for monies due under the agreement for the provision of architectural services. The agreement was made on 18 October 2000 and his claim did not arise out of the supply of building goods or services by Woodfast, nor was the agreement collateral to the Stevens’ contract with Woodfast.

35 I turn to the first ground of challenge to the Tribunal’s determination. In counsel’s submission, the Tribunal having, rightly, rejected its first contention turned to a consideration of whether the agreement was collateral to the Woodfast contract (the second limb) without determining whether it was a claim arising from a supply of building goods or services (the first limb).

36 The Tribunal noted that the decision in Grygiel favoured a more expansive interpretation of the scope of residential building work than had previously been understood in order to avoid artificial and arbitrary distinctions (at p 4). It gave consideration to the scope and purpose of cl 9(1)(g)(i) of the Regulation, holding that, at the least, the architect’s construction services came within the meaning of supervision for the purposes of (g). Next, the Tribunal considered the purpose of the exclusion of the supervision only of residential building work by registered architects. It noted that architects registered under the Architects Act are subject to the disciplinary regime provided by the Act and that to require an architect to be licensed under the HBA would involve duplication. The Tribunal accepted the Stevens’ submission that in excluding a registered architect who is supervising residential building work from the definition, the Regulation operates to exclude the architect from the licensing (including the requirement for a written contract, insurance and other regulatory) requirements of the HBA (at p 7). The Tribunal moved to consider the first of the three contentions that I have set out at paragraph [29] above. After determining that the architect’s services were not building services supplied for or in connection with the carrying out of residential building work, the Tribunal turned to consider of the second limb of the definition of building claim under s 48A(1), namely, whether the agreement is a contract that is collateral to a contract for the supply of building goods and services (at p 9).

37 It is not clear that the Tribunal did consider the Stevens’ submission that each claim is a building claim as defined in s 48A(1) because it arises from a supply of building goods or services (the first limb). In deciding whether it erred in its ultimate conclusion, that it does not have jurisdiction to determine these claims by reason that each is a building claim under the first limb of the definition, it is necessary to examine the way each of the claims is formulated.

38 The architect’s claim, pleaded in his amended points of claim, recites that on or about 18 October 2000 he and the Stevens entered into the agreement pursuant to which he agreed to provide architectural services to the Stevens. He pleads that it was a term of the agreement that the Stevens would pay him a fee calculated as a sliding scale of percentages of the actual market value of construction at the time of completion (the fee), based on a reasonably high standard of finish and fit out (not including specialist items commissioned by the Stevens). It was a term of the agreement that the fee would be apportioned between the various stages of the architectural services as follows:

(a) Schematic design: 5%
(b) Design development: 5%
(c) Contract documentation: 40%
(d) Tendering and negotiating: 5%
(e) Contract administration: 25%.

The agreement provided for the architect’s fee to be adjusted to suit the actual market value of construction at the time of completion in the event that the actual market value of the construction exceeded $250,000.00. Provision was made for the payment of additional fees at an hourly rate in the event that the architectural services were increased or protracted due to causes beyond the architect’s control.

39 The architect’s claim, for the payment of the monies on invoices issued in accordance with the agreement, comprises the following components:

Fees of $11,880.00 claimed in an invoice dated 9 September 2000 - based on a revised construction cost, being fees for the sketch design, design development, contract documentation, tender and negotiation and contract administration services under the agreement;
Fees of $5,000.00 claimed in an invoice dated 29 July 2003 – being for 95 hours of professional services at $60.00 per hour (minus $200.00 being surplus on an amount paid by the Stevens) being fees payable for protracted or increased services by reason of the builder’s non-performance;
Fees of $8,250.00 claimed in an invoice dated 8 December 2003 - payable for the protraction of services attributable to Woodfast’s insolvency. These fees are particularised as the architect’s attendance at meetings and discussions with the builder in the absence of the Stevens, attending to issues regarding termination of the building contract, sourcing alternate contractors, subcontractors and trades to complete the building works, obtaining prices from alternate contractors, subcontractors and trades to complete the building works, negotiating contracts with alternate contractors, subcontractors and trades to complete the building works, reissuing contract documentation and briefing alternate contractors, subcontractors and trades to complete the building works, calling tenders and meeting alternate contractors on the site to instruct and discuss works with alternate contractors, subcontractors and trades to complete the building works, discussions and correspondence with Woodfast’s liquidator and the Stevens.

40 In Grygiel Basten JA considered, without finding it necessary to decide, that preparatory work may have a sufficient nexus to the carrying out of residential building work to fall within the first limb of the definition of a building claim. In this context, his Honour noted that were this not the case arbitrary distinctions may be drawn and he went on to say (at [57]):

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.

41 The architect’s claim is for the payment of fees due under the agreement. The issue that is raised on the pleadings is whether the parties subsequently varied the agreement. The claim does not raise any issue of loss suffered as a result of inadequate supervision. Looked at without reference to the cross-claim, the architect’s claim does not arise from the supply of building goods or services under the Woodfast contract. There is no causal connection between the claim and supply of the building goods or services.

42 The Stevens’ claim has a number of components to it. They plead the agreement and a subsequent oral agreement to cap the architect’s fees. It is their claim that they have paid an amount of $13,504.00 in excess of the agreed cap and that they are entitled to be repaid this sum (paragraphs 4 – 6). They also claim damages for breach of the architect’s obligation to carry out the design work pursuant to the agreement in a professional manner (paragraph 15 (a), (b), (c), (e) and paragraph 16 (a) to (d)). In these respects the Stevens’ claim is not to be characterised as arising from the supply of building goods and services under the Woodfast contract.

43 The Stevens’ claim includes a claim for damages occasioned by the architect’s breach of contract and/or negligence in approving progress payments to Woodfast in respect of defective work: the sandstone cladding to the wall (paragraphs 7 – 13); the poor sealing of the kitchen bench (paragraph 14 (b)); poor finish to the kitchen cupboards (this claim is associated with a claim in respect of the negligent design of the cupboards)(paragraph 14(c); inadequate waterproofing of the internal bathroom (paragraph 14(d)); and faulty internal lighting.

44 The cross-claim is for the sum of $65,904.00 “plus additional monies once certain damage can be quantified”. To the extent the amounts claimed under the various heads are identified (and assuming the defective design of the kitchen cupboards to amount to half the sum claimed) the amount of the claim that depends upon succeeding on issues that are unrelated to the supply of goods and services by Woodfast is $45,644.00.

45 Counsel for the architect did not submit that the Stevens’ claim was not a claim for the payment of a specified sum of money for the purposes of s 48A(1)(a). Argument was not directed to the requirements of s 48A(1) (a) to (e). In these circumstances I approach the determination of the issues raised by the appeal on the basis that the Stevens’ claim is not excluded as a building claim by reason that it is not a claim that falls within subs (1) (a) to (e).

46 No claim has been brought by the Stevens against Woodfast, or any other person, in relation to the supply of the building goods and services that are said to have been defective, nor has any action been brought by the Stevens against any person for breach of statutory warranty under Part 2C of the HBA. It is their submission that their claim which, inter alia, is for losses that are said to arise from the poor work for which the architect approved payment, is correctly characterised as one that arises from the supply of building goods and services under the Woodfast contract.

47 Counsel for the architect submitted that to the extent that Basten JA assumed that loss suffered as the result of inadequate supervision by an architect of residential building work might be a building claim under the first limb of s 48A(1) (at [57]), his Honour’s observations were not necessary for decision and were made without reference to cl 9(1)(g)(i) of the Regulation.

48 There is no reference to the exclusion from the definition of residential building work of the supervision of such work by registered architects in Grygiel. This is not to say that Basten JA’s observation that loss occasioned by the negligent supervision by an architect of residential building work may be a building claim for the purposes of Part 3A of the HBA is, as the architect’s counsel submitted, wrong. The exclusion under the Regulation is of the supervision by registered architects from being residential building work for the purposes of the HBA and Regulation. This does not exclude the supervision of residential building work by registered architects as being a building claim in a case in which the claim arises from the supply of building goods and services (or under a contract that is collateral to a contract for the supply of building gods and services). As the Tribunal observed, and as counsel for the architect acknowledged, the exclusion of the supervision only of residential building work carried out by registered architects from the definition of residential building work under the HBA serves to relieve registered architects from a scheme of duplex regulation.

49 It remains that the scheme of the Act when read with the Regulation suggests that it was not the intention of the legislature that claims by architects for architectural services including the supervision of residential building work were to be building claims and subject to the jurisdiction of the Tribunal under Part 3A of the HBA.

50 These proceedings were commenced as a claim for monies due under the agreement and do not involve any claim by or against the builder. After the proceedings were transferred to the Tribunal the architect’s claim and the cross-claim were separated and were proceeding as two applications. It is desirable that the two claims are dealt with in the one proceeding. A result that saw the architect’s claim remitted to the Local Court and the Stevens’ cross-claim determined as a building claim in the Tribunal would not accord with the injunction in Grygiel against construing the language of s 48A(1) in such a way as to produce arbitrary outcomes.

51 In Grygiel, the builder’s claim for damages for negligent advice possessed the necessary causal relationship to the supply of building goods and services because the loss that the builder claimed was the right to recover his fees under the contract for the supply of the goods and services. Basten JA was concerned to see that the provisions of Part 3A of the HBA are not construed so as to produce arbitrary results (at [58]). In the present case the architect brought a claim for fees due under the agreement. As I have noted, I do not consider that his claim is properly to be characterised as a building claim within the first limb of the definition in s48A(1). The Stevens’ cross claim (which is before the Tribunal as a separate application) includes the pleading of claims in breach of contract and/or negligence relating to the approval of progress payments submitted by the builder. In determining the scope of claims that answer the description of building claims under the first limb of the definition in s 48A(1) Basten JA noted that the jurisdiction of the Tribunal is not to be expanded beyond the proper construction of the terms used in Part 3A (at [58]). In my opinion the claims for breach of contract and or negligence relating to the approval of progress payments are not properly characterised as arising out of the supply of building goods and services by Woodfast but rather as claims that arise from the obligations assumed by the architect under the agreement.

52 I consider that the Tribunal did not err in law by its failure to hold that the architect’s and the Stevens’ claims arise out of the supply of building goods and services by Woodfast.

53 The Stevens’ second ground of challenge is to the Tribunal’s reasons for holding that neither the architect’s claim nor their claim arises under a contract that is collateral to a contract for the supply of building goods or services (the second limb).

54 The Tribunal discussed the Stevens’ submissions with respect to the second limb in the context of the principles governing collateral contracts at common law (at pp 9-10). At the conclusion of this discussion, the Tribunal noted that the issue would be revisited in the context of a consideration of Grygiel. The Tribunal returned to a consideration of the Stevens’ submission on the second limb (at p 12):

His Honour also considered the concept of a collateral contract as referred to under s 48A of the HB Act stating that this concept “ would be satisfied where there is an appropriate connection with the supply of ‘building service’ ”. He states “ in my view that connection will exist as a matter of law where by (sic) a representation is made or legal advice provided in relation to the terms or conditions upon which building services are, or are to be supplied ”. (sic) (paragraph 69).
As I have stated it has not been put to me, nor is it apparent from the material before me, that the Architect made “ a representation ”. (Or). Provided (advice) in relation to the terms or conditions upon which building services are, or are to supplied” (sic) as his Honour has stipulated.
There is nothing in his Honour’s decision that leads me to conclude (as the homeowners submit) that the Architect’s general contractual obligation to supervise the builder’s work amounts to such a “ representation ” or “ advice ”. Nor, for reasons I have already stated, am I satisfied that there was any link between the builder’s performance and payment to the Architect to constitute such a “ connection ”.

55 On the Stevens’ behalf, it is submitted that the Tribunal, wrongly, fastened on the penultimate sentence in paragraph [69] of Basten JA’s judgment in Grygiel (set out at [33] above), treating it as qualifying the statement of principle in the preceding sentence, whereas it involved the application of the principle to the facts of that case. It is not clear that the Tribunal erred in this respect taking into account the concluding sentence of the extract of its reasons set out above. However, upon an acceptance that the Tribunal did misapprehend the reasoning of the majority in Grygiel, it remains to consider whether it erred in law in concluding that neither the architect’s nor the Stevens’ claim was one that arose under a contract that was collateral to the Woodfast contract. In deciding this question it is clear from Grygiel that in this statutory context the reference to a contract that is collateral to another does not import the general law with respect to collateral contracts.

56 Basten JA noted that s 48A makes provision for the supply of services whether under a contract or not and that services in connection with residential building work may have a causal nexus that is not directly dependent on contract. His Honour held that the concept of a collateral contract for the purposes of s 48A(1) will be met where there is an appropriate connection with the supply of building services (at [69]).

57 It is not apparent that the architect’s claim arises under a contract that is collateral to the Woodfast contract unless it is considered that every contract for the provision of architectural services with respect to the construction of, or alterations to, a residential dwelling, which makes provision for supervision by the architect of any building contract is collateral to the building contract. The architect’s claim under the agreement on the pleadings seems to me to have no appropriate connection with the supply of the building services by Woodfast and is not a claim that arises under a contract that is collateral to the Woodfast contract.

58 The Stevens’ claim is one that is substantially dependent upon whether the contract was varied as alleged and whether the architect’s design services fell below the services of an architect of ordinary skill. To the extent that a component of the claim in breach of contract and/or negligence involves consideration of whether the supply of building services by Woodfast fell below the appropriate standard, it is to be observed that it is not the major part of the claim. It is the only feature of the claim that may be said to have a connection with the supply of building services. The connection is as to manner in which the Woodfast contract was carried out and not to the terms of it. I do not consider that this connection is such as to characterise the Stevens’ claim as one that arises under a contract that is collateral to the Woodfast contract.

59 For these reasons I make the following orders:

ORDERS

1. Dismiss the plaintiff’s summons;

2. The plaintiff is to pay the defendants’ costs of the appeal.

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