Tadros v Commissioner for Fair Trading, NSW Office of Fair Trading

[2007] NSWADT 271

CITATION:	Tadros v Commissioner for Fair Trading, NSW Office of Fair Trading [2007] NSWADT 271
DIVISION:	General Division
PARTIES:	APPLICANT Tony Tadros RESPONDENT Commissioner for Fair Trading, NSW Office of Fair Trading
FILE NUMBER:	073105
HEARING DATES:	9 July 2007
SUBMISSIONS CLOSED:	9 July 2007
DATE OF DECISION:	23 November 2007
BEFORE:	Montgomery S - Judicial Member
CATCHWORDS:	Home Builder - improper conduct - Home Building Act - home builder - improper conduct
MATTER FOR DECISION:	Principal matter
LEGISLATION CITED:	Home Building Act 1989 Home Building Regulation 2004
CASES CITED:	Director-General, Department of Fair Trading v Cohen [2000] NSWFTT 3 Pilipczyk & anor v Commissioner for Fair Trading, NSW Office of Fair Trading [2007] NSWADT 85
REPRESENTATION:	In person W Maynard, solicitor
ORDERS:	The decision under review is affirmed.

REASONS FOR DECISION

1 The applicant seeks review of a decision of the respondent to take disciplinary action under section 62(c) of the Home Building Act 1989 (“the Act”).

2 On 25 February 2003 the applicant was issued with a contractor licence under section 20 of the Act, and that licence authorised him to do residential building work within the category of ‘general building work’. The licence was valid until 25 February 2007.

3 On 31 March 2006 a delegate of the respondent served notice on the applicant to show cause why disciplinary action should not be taken (“the Notice”). The Notice specified as the grounds for disciplinary action that the applicant was guilty of improper conduct under section 51(1)(c) of the Act as a result of a breach of a statutory warranty under section 18B(a) of the Act to perform work in a proper and workmanlike manner and in accordance with the plans and specifications set out in the contract entered into between the applicant and Mr Ben Woods and Ms Jaclyn Johnson ("the Homeowners"). That contract was for the carrying out of residential building work at 1106 Victoria Road, West Ryde, New South Wales.

4 The applicant made written submissions in relation to the Notice. On 30 August 2006 a delegate of the respondent decided that the grounds for taking disciplinary action had been established, and determined to cancel the applicant’s licence. The delegate also determined to disqualify the applicant for a period of 2 years, from being any of the following:

(i) the holder of any contractor licence, supervisor certificate, tradesperson certificate or building consultancy licence,

(ii) a member of a partnership, or an officer of a corporation that is a: member of a partnership, that is the holder of a contractor licence, a supervisor certificate, a tradesperson certificate or a building consultancy licence,

(iii) an officer of a corporation that is the holder of a contractor licence, a supervisor certificate, a tradesperson certificate or a building consultancy licence.

5 The applicant requested an internal review of the determination. On 30 March 2007 the General Manager, Home Building Service of the Office of Fair Trading, affirmed the decision of the delegate that the applicant was guilty of improper conduct under section 51(1)(c) of the Act, and affirmed the decision to cancel the applicant’s licence and to disqualify him from the identified roles for a period of 2 years from 4 September 2006.

6 The applicant has applied to the Tribunal for external review of the decision.

Legislation

7 Section 4 of the Act provides that it is an offence to contract to carry out building work unless a person is the holder of a contractor licence. Division 1 Part 3 of the Act sets out provisions for the issuing, suspension and cancellation of contractor licences.

8 Section 18B of the Act sets out the statutory warranties implied in every contract to do residential building work. In this matter the relevant warranty is that provided for in section 18B(a):

18B Warranties as to residential building work

The following warranties by the holder of a contractor licence, or a person required to hold a contractor licence before entering into a contract, are implied in every contract to do residential building work:

(a) a warranty that the work will be performed in a proper and workmanlike manner and in accordance with the plans and specifications set out in the contract,

9 Under section 120 of the Act the Director General is to maintain a register of particulars of contractor licences, and other licences, certificates, and permits. Clause 80 of the of the Home Building Regulation 2004 (“the Regulation) sets out the particulars that are to be recorded in the register.

10 Section 56 of the Act sets out the grounds for taking disciplinary action against the holder of a contractor licence. That section relevantly provides:

56 Grounds for taking disciplinary action against holder of a contractor licence

The Director-General may take disciplinary action under section 62 against the holder of a contractor licence on any of the following grounds:

…

(c) that the holder is guilty of improper conduct,

11 Section 51 specifies what is regarded as improper conduct as a holder of a contractor licence for the purposes of section 56(c):
51 Improper conduct: generally

(1) A holder of a contractor licence who is authorised by the contractor licence to contract to do residential building work or specialist work, or a holder of a supervisor or tradesperson certificate, is guilty of improper conduct if the holder:

…

(c) breaches a statutory warranty, or

…

(3) It is a sufficient defence to a complaint that the holder of a contractor licence has been guilty of improper conduct as referred to in subsection (1) (b), (c) or (d) in connection with work undertaken by the holder, if the holder proves to the satisfaction of the Director-General that the holder did all that could reasonably be required to ensure that a nominated supervisor for that work would exercise such degree of control over the doing of the work as would be necessary to prevent the occurrence of the improper conduct.

12 Section 62 sets out the disciplinary action that may be taken pursuant to section 56 of the Act:
62 Disciplinary action that may be taken by Director-General

If, after compliance with this Division, the Director-General is satisfied that any ground on which disciplinary action may be taken against the holder of an authority has been established in relation to the holder, the Director-General may do any one or more of the following:

(a) determine to take no further action against the holder,

(b) caution or reprimand the holder,

(c) make a determination requiring the holder to pay to the Director-General, as a penalty, an amount not exceeding $11,000 (in the case of an individual) or $50,000 (in the case of a corporation) within a specified time,

(d) vary the authority held by the holder, by imposing a condition on the authority, including a condition requiring the holder to undertake a course of training relating to a particular type of work or business practice within a specified time,

(e) suspend the authority for a period not exceeding its unexpired term,

(f) cancel the authority,

(g) disqualify the holder, either temporarily or permanently, from being any one or more of the following:

(i) the holder of any authority, or any specified kind of authority,

(ii) a member of a partnership, or an officer of a corporation that is a member of a partnership, that is the holder of an authority,

(iii) an officer of a corporation that is the holder of an authority.

Background

13 In May 2005 the respondent received a complaint from the Homeowners concerning the work that the applicant carried out at their property. Mr Garry Christy, a Building Inspector with the respondent’s Home Building Service, conducted a site inspection and prepared a building inspection report ("the Christy report"). That report concluded that the work was defective. Mr Phillip Connor prepared a further report ("the Connor report") and that report also concluded that the work was defective. The respondent issued the Notice to the applicant based on those findings and allowed the applicant time to make submissions. The respondent obtained a further building inspection reports by Michael Ell Consulting Engineers Pty Ltd ("the Ell report") and a report by Mr Paul Dengate, Co-ordinator Building Inspections with the respondent’s Home Building Service ("the Dengate report"). The time for the applicant to make submissions was extended to allow him to take those reports into account.

14 The applicant made submissions in the response to the Notice. He admitted to some of the alleged defects and asserted that some were incomplete work rather than defects. He stated that the Homeowners did not give him a fair opportunity to rectify or complete any works on site.

15 In June 2006 the Consumer, Trader and Tenancy Tribunal (“the CTTT”) heard an application brought by the Homeowners against the applicant. That matter was determined on 10 July 2006 and the applicant was ordered to pay the Homeowners the sum of $99,332. The applicant was subsequently ordered to pay the Homeowners’ costs in relation to that application.

16 On 30 August 2006 the respondent’s Director, Operations and Governance Home Building Service determined to cancel the applicant’s licence and to disqualify him from the identified roles for a period of 2 years.

17 The applicant sought an internal review of the respondent’s determination. The General Manager of the respondent’s Home Building Service undertook that review and affirmed the original determination.

Applicant’s case

18 The applicant appeared on his own behalf and made submissions in support of his application. He asserts that the penalty imposed on him is excessive and that a caution would have been sufficient.

19 He generally accepts the defects and incomplete works that were identified in relation to the Homeowners’ works but disputes the extent of some of the identified defects. He believes that the Homeowners’ claim was exaggerated. He tendered a report by C.S. Barratt building consultants, which expresses concern about the conduct of an experts conclave held on 14 June 2006, and which cast doubt on the extent of the rectification works needed in relation to the defects in the Homeowners’ works. He says that he was never given the opportunity to have a builder quote on the works.

20 The applicant’s evidence is that he regrets the problems with the Homeowners’ works and that he demonstrated his remorse by paying the amount ordered by the CTTT. He stated that he had at all times acted promptly and consciously and endeavoured to resolve the dispute with the Homeowners and offered to rectify the works, but was not allowed the opportunity to do so. The homeowners’ work was one of the first jobs of his career as a builder. He ultimately paid a very high price financially for those early mistakes. He argues that some allowance should be made for that relative inexperience. He says that he has learnt from his experience to be very cautious and alert to prevent any mistakes from happening in the future.

21 He provided details of subsequent works that he had undertaken and stated that he has built relationships with many clients who have been satisfied with the standard of his work and have shown trust in him. He provided a number of references in support of this contention. He says that he has built some strong relationships with trusted contractors who he knows he can rely on and guarantees the best work possible for his clients.

22 He stated that he has high values and respects his clients. He is dedicated to continue and to rectify mistakes. As he is still new in the building industry he has continued to learn and progress in the trade. He has learnt to be more thorough when choosing contractors to prevent similar problems from ever occurring again.

23 He says that his workmanship and competence have vastly improved his dealings with the Homeowners. He says that therefore the protection of the public from sub-standard workmanship cannot be said to be an issue any longer. He further submits that the financial penalty he suffered in paying the very substantial costs of rectification and the legal costs associated with the proceedings before the CTTT were sufficient penalty for the mistakes of the past. They ought to be seen as a significant incentive for him to improve.

24 He contends that the respondent’s determination should be set aside.

Respondent’s case

25 The respondent relies on the reasoning provided in relation to the original decision and the internal review decision. It also relies on the various reports that were considered in reaching those decisions. Copies of the Christy report, the Connor report, the Ell report and the Dengate report are in evidence as is the CTTT decision. The reports identified many defective items, some of which were serious. The respondent submits that the defective items identified in these reports clearly demonstrate that the applicant lacked competence.

26 The respondent argues that it cannot condone nor can it be seen to condone a licence holder who is both inexperienced and incompetent entering into a contract to do residential building work so as to use that job for on-the-job training in order to acquire the necessary level of skills and competence that the licence holder should have possessed at the time of entering into that contract.

27 Mr Maynard, solicitor for the respondent, submits that the need to protect the public requires the taking of disciplinary action. Cancelling the licence is a recognition that the applicant is unsuitable to continue to hold a contractor licence. The period of disqualification is intended to prevent the applicant from inflicting further harm upon the public.

28 Mr Maynard submits that the Tribunal should take notice of the CTTT decision as that tribunal had the opportunity to consider all the evidence. He submits that the CTTT order is to be seen in the context of a need to rectify and complete work on a contract between the applicant and the Homeowners. The contract price was $58,500. The applicant was ordered to pay the Homeowners the sum of $99,332. This demonstrates the substantial problems with the works.

29 Mr Maynard referred to views expressed by Acting Deputy President Handley in Pilipczyk & anor v Commissioner for Fair Trading, NSW Office of Fair Trading [2007] NSWADT 85. At paragraph [91] the Acting Deputy President set out a number of relevant factors in considering an appropriate penalty:

91 Thus, in my view, there was a breach of the statutory warranty by both Mr Pilipczyk and HBU. The Tribunal must therefore consider the second issue, whether disciplinary action should be taken and, if so, what from that should take. In doing so, it should be noted that the object of sanctions under the legislation is to protect the consumers of home building services and not to punish. However, as the Commercial Tribunal acknowledged in McIlveen , at page 29 “[t]he concept of public protection is wide; it embraces fitness, the maintenance of public standards, public confidence and deterrence both of the particular builder and others in the same occupation”. Other relevant factors in considering an appropriate penalty were identified by the Fair Trading Tribunal, comprising Judge KP O’Connor, Chairperson, in Director-General, Department of Fair Trading v Cohen [2000] NSWFTT 3 (‘Cohen (2000)’), at paragraph 45:

“a) the nature, width and extent of the contraventions

b) the loss or damage and prejudice in consequence of the contraventions

c) the circumstances in which the contraventions took place

d) whether the licensee has been found to have engaged in any similar conduct

e) the presence of fraudulent or dishonest intent and deliberation on the part of the licensee

f) the extent of carelessness or wilfulness of the conduct

g) the efforts made to correct the situation and what measures have been taken by the licensee

h) what consciousness the licensee had displayed, of its obligations under the relevant statute and to the owners

i) the effect upon the licensee

j) antecedents

k) attitude, building history and future compliance

l) the penalty range.”

30 Mr Maynard submits that this is an appropriate approach to be adopted in this matter. He accepts that in this matter the disciplinary action only relates to one contract but the extent of the contraventions in that job was substantial. The cost of rectification was almost $100,000. The respondent concedes that the applicant paid the amount of the rectification and that the defects have been rectified. The respondent also concedes that there is no suggestion of fraud or dishonesty by the applicant. Mr Maynard submits that it was a matter of incompetence rather than carelessness or wilfulness. The contraventions took place in circumstances where the applicant was inexperienced. Mr Maynard contends that while the applicant ultimately took responsibility for the problems, he did not initially concede fault or acknowledge the need for rectification. Therefore it cannot be said that he had demonstrated consciousness of his obligations under the Act and to the Homeowners.

31 Mr Maynard submits that the disqualification will protect the public but will not prevent the applicant from gaining further experience. He can then reapply for a licence. He says that he penalty is appropriate to protect the public and the effect upon the applicant is therefore not so great as to outweigh the public interest. It cannot be said that the applicant’s reputation has been lost as he has not been in the industry long enough to build up a reputation. He will still be able to work in the industry. The applicant is a director of a building company with a nominated supervisor. He can still seek work in the building industry.

32 Mr Maynard submits that the penalty is appropriate and accordingly the decision under review should be affirmed.

Findings

33 I have considered each of the reports filed by the parties and the other evidence presented in their cases. I have also taken their submissions into account.

34 The first issue for determination is whether a ground for taking disciplinary action under section 62 of the Act has been established. The respondent relied on breaches of the statutory warranty under section 18B(a), and argued that the applicant was guilty of improper conduct under section 51(1)(c) of the Act. I am satisfied that the evidence supports that conclusion. It is abundantly clear form the reports in evidence that the residential building work carried out at the Homeowners’ property was not done in a proper and workmanlike manner. For the reasons argued by the respondent, it is my view that the applicant is guilty of improper conduct.

35 It is next necessary to determine whether disciplinary action should be taken under section 62 of the Act, and if so, what form it should take. The respondent submits that the determination should stand. The applicant submits that the penalty imposed on him is excessive and that a caution is sufficient.

36 The purpose of disciplinary action under the Act has been the subject of discussion in numerous cases (see for example Pilipczyk and Cohen referred to above). The purpose is not to punish the applicant, but to protect the public. In weighing this issue I have considered the evidence and the factors referred to in Pilipczyk and I have taken the respective arguments into account.

37 I agree with the respondent submission in regard to the weight to be placed on the CTTT findings and Cohen factors. In my view the problems that are evident in the Homeowners’ works are a consequence of the applicant’s inexperience. It is in the interests of the protection of the public that the applicant should not be licensed in the industry until he has had the opportunity to obtain further experience. I agree that a contract to do residential building work cannot be used by a licensee for on-the-job training in order to acquire the necessary level of skills and competence that they should already possess.

38 I accept that since the Homeowners’ works the applicant has undertaken several other projects and in doing so he has not come to the respondent’s further attention. Nevertheless I am not satisfied that sufficient time has passed since the problems with the Homeowners’ works or that his additional experience is sufficient for him to be able to re-enter the industry in a licensed capacity.

39 In my view the respondent’s determination is reasonable in the circumstances. It should therefore be affirmed.

40 I note that there is no stay in place in this matter. The applicant has therefore already been the subject of the disqualification since 4 September 2006. The period of disqualification should be recorded as commencing on that date.

Orders

The decision under review is affirmed.