Hogan v Allan (Home Building) [2005] NSWCTTT 255 (6 April 2005)

CONSUMER, TRADER AND TENANCY TRIBUNAL

Home Building Division

ORDERS

In full and final resolution of all issues in dispute in applications HB 04/40368 and HB 04/40968 the Tribunal orders that:

1. In HB 04/40368, the contractor T Allan shall pay as compensation for the rectification of defects the sum of three thousand dollars ($3,000.00) to the homeowner P Hogan.

2. In HB 04/40968, the homeowner P Hogan shall pay as restitution in quantum meruit the sum of two thousand dollars ($2,000.00) to the contractor Tony Allan.

3. Orders 1 and 2 shall be set-off against each other so that on or before 2 May 2005, the contractor T Allan shall pay the homeowner P Hogan of “…”, Rose Bay, NSW, 2029 the sum of one thousand dollars ($1,000.00).

REASONS FOR DECISION

1. APPLICATIONS HB 04/4036 AND HB 04/40968

1.1 Ms P Hogan [the homeowner] of “…”, Rose Bay, lodged application HB 04/4036 at the Sydney Registry on 26 August 2004. Under the heading: “What is your dispute about?” Ms Hogan wrote:

T Allan represented himself as a “Builder & Carpenter” and undertook to “rebuild bathroom including glass block curved wall, etc” yet I have now discovered he is licensed only as a “Carpenter & Joiner”.

Under the heading: “If the matter is referred for hearing what order/s do you want?” was written:

. . . relief of payment of monies claimed until the cost of rectification is determined. Costs unknown at this stage.

In the course of the proceedings Ms Hogan clarifed the orders being sought by her to the following:

(a) A money order for the restitution of certain moneys paid to the contractor allegedly obtained by misrepresentation and deception.

(b) An order for relief from payment of moneys presently claimed by the contractor.

(c) A compensatory money order to cover the cost of rectification of alleged defective works

1.2 Mr T Allan [the contractor] lodged a cross-claim number HB 04/40968 at the Sydney Registry on 30 August 2004. Under: “What is your dispute about?” he wrote:

P Hogan has breached our contract and terminated it with no notice. She also has two outstanding invoices to pay me which are both in arrears and subject to weekly penalties of 10% compounding as per contract.

Contract date: 30/6/04 Cost plus agreement. Amount paid $15,402.16

And under: “If the matter is referred for hearing what order/s do you want?”:

An order to pay me the amount of $9,499.73 [$10,449.70 as of 3/9/04]

_____________________________________________________________

Total value of claim $10,449.70

2. PRELIMINARY PROCEEDINGS

2.1 It is noted that Mr Allan moved his residence to Queensland in September 2004. The applications were first listed for hearing before Member J. Deamer on 23 September 2004, when both parties appeared in person. The Tribunal found that the case was not yet ready for hearing and accordingly issued directions for the filing and exchange of evidence to be completed by 21 October 2004.

2.2 The Registrar listed the applications for a concurrent formal hearing on 28 October 2004 and hearing notices were posted out on 12 October 2004. Mr Allan, by facsimile letter received at the Sydney Registry on 20 October 2004, requested that this hearing be by telephone. On 28 January 2004 the matter again came before Member Deamer, Mr Allan being present by telephone and Ms Hogan present in person. The Member directed the Registrar that the matter was not suitable for hearing by telephone and issued further procedural directions:

1. P Hogan is to provide Tony Allan with copies of three witness statements by 5 November 2004.

2. Any statements in reply by Tony Allan are to be provided to the Tribunal and P Hogan by 15 November 2004.

3. Both parties are to attend the next hearing in person.

2.3 Mr Allan in a facsimile letter received at the Sydney Registry on 8 November 2004 notified the Registrar that he and his family would be visiting Sydney over the Christmas period and requested that the matter be listed for hearing on 20/12/04. Accordingly, the applications were listed for a full day formal hearing before Member M. Noone on that day.

3. HOMEOWNER’S EVIDENCE

3.1 Documents and exhibits filed before or at the hearing

1. Building Inspection Report No. 24077 from B Horan, SBIC Advisory Service Pty Ltd resulting from an inspection made on 31/8/04 (including photographs) [the Horan Report].

2. File of documents received by the Registry on 3 September 2004: Homeowner’s 15 page statement of “background and facts of claim” plus a summary of items of claim and appendices A to P:

A. Contractor’s original budget estimate 12/7/04.

B. Calculations of true value of invoices dated 14/8 & 19/8/04.

C. Budget provided to contractor on 30/7/04.

D. Quotation/contract dated 30/6/04.

E. Full set of invoices received from the contractor.

F. Homeowner’s budget provided to contractor on 19/8/04.

G. Contractor’s notes concerning payment of tiler and electrician.

H. Hall & Hedderman invoice annotated by contractor and email from Slade Hedderman.

I. Termination notice (written over quotation/contract) dated 20/8/04.

J. From Brodie Services — three letters of demand.

K. Decima brochures re installation of bath.

L. Letters from contractor to homeowner.

M. Letter from homeowner to contractor, 24/8/04.

N. Statement of M Rekisha, 30/8/04.

O. Stock supplies list supplied by contractor 14/8/04.

P. Receipt from R Chebli for full payment of tiling work.

3. File of documents received by the Registry on 15/9/04: Homeowner’s single page covering letter, with attachments:

A. Plans for bathroom prepared by the contractor.

B. Contractor’s time-line chart.

C. Drawing concerning changed measurement of bathroom mirror.

D. SBIC Building Inspection Report [Horan Report noted as item 1 above].

E. Letter to Brodie Services, 3/9/04.

F. From Brodie Services “Notice of Intention to Commence Proceedings”, 6/9/04.

G. Contractor’s invoice, dated 3/9/04.

H. Invoice No. 2026 from “All Types of Rubbish”, dated 22/7/04.

I. Megasealed Group, quotation for preventative work, dated 13/9/04.

4. File of documents received by the Registry on 6/10/04: Covering letter (2pp) with the following documents attached:

A. Receipt from Eminent Waste Pty Ltd.

B. Quotations to complete rectifications recommended in the Horan Report:

• Plumbers:

•Bondi Plumbing.

•Wedgefield Plumbing Services.

• Roger’s Prestige Tiling.

• Megasealed Group.

• M Healy, Carpenter.

C. Papers provided by the contractor to homeowner:

• A Casey, plumbing quotation 15/7/04

• A Casey, plumbing invoice 10/8/04

• Hall & Hedderman invoice 16/8/04

D. 21 digital photographs taken during the course of works (B&W). At the hearing coloured copies of these were tendered.

E. Contractor’s estimates of tiles required and invoice from City Ceramics dated 11/8/04.

5. File of documents received by the Registry on 21 October 2004: Letter to the Registrar (27pp). Detailed responses to the papers filed and exchanged by the contractor. Attachments:

A. Contractor’s timesheets.

B. Contractor’s budgets — 12/7, 26/7 & 31/7.

C. Contractor’s drawings.

D. Project management time-lines chart.

E. Ashfield Croydon Timber yard invoice 11/11/00.

F. Swadlings Timber & Hardware invoice 28/7/04.

G. Documents relating to Roger’s Prestige Tiling.

6. Letter from SBIC with attachment: “GUIDE TO INTERNAL WET AREA WATERPROOFING”, Master Builders Assocn. Waterproofing Council, 1st edition 2004”.

7. Statutory declarations of:

• M Poole, made 22/10/04

• M Rekisha, made 24/10/04.

• S I Vegh, made 24/10/04

8. Spreadsheet: calculations of moneys paid and expenditure incurred.

9. Two digital photographs of frameless shower screen embedded in silicone.

3.2 Background

In summary, Ms Hogan averred that the primary purpose of the bathroom renovation project at her residence was to overcome a major damp problem.

Ms Hogan stated that she had requested her son S Vegh to ask G Hall an electrician friend at his surf club at North Bondi, to recommend some good builders to quote for the bathroom renovation. Mr Vegh, a resident at “…” and an eyewitness to material events, attended the hearing as a witness and attested to his sworn statement dated 24/10/04. He averred that G Hall had recommended three builders, one of whom was T Allan. His sworn statement concluded:

My mum did not speak to G… Hall about finding a builder — I did. We discussed Builders (not Carpenters). There was no discussion about any of the builders being carpenters — mum and I would not have employed a carpenter to re-build a bathroom.

I am amazed that G… now says he told me the people he was telling me about were carpenters — this is not true and I don’t know why he would say it except that he probably believes the bad things that T… is saying about my mum. …

T… asked my mum if Makoto and I would labour for him. My mum said he must ask us. He asked us and negotiated $15 per hour. T… gave us instructions and showed us how to use the jack hammer and which walls to demolish etc. He also told me to dig out the sand under the bathroom floor. When I broke a pipe with the jack hammer T… was not there and my mum rang him and asked him to call a plumber immediately as water was spraying everywhere, but did not, instead he came and fixed it himself.

Only T… gave me instructions what to do. My mum paid me because T… asked her to.

T… controlled all aspects of the building job. He told my mum what was happening when she asked — but you could see he did not like explaining things to her.

M Rekisha, in a sworn statement dated 24 October 2004 declared:

I have lived with P Hogan and S Vegh since October 2002 as a home-stay student (from Japan). I am 19 years old and studying HSC at Rose Bay Secondary College.

T… asked me if I would labour for the bathroom building. He told me he would pay me $15.00 per hour.

T… told me what to do when I was working and showed me how to do it. I did demolishing walls, I used the jack hammer and also dug sand out from under the old bathroom. He also asked me to clean up each evening when I came home. Sometimes there was a big mess from the building.

Only T… told me what to do, except sometimes …P reminded me that I still had to clean up — as that was one of my jobs for T… and sometimes I came in late.

T… told me that P… would pay me and she did.

P… never gave me jobs to do.

Ms Hogan stated that Mr Allan provided her with a quotation for the job. He said that he would only work on an hourly rate on a cost plus basis. He also presented himself as an experienced builder and project manager. She agreed that she signed the “contact acceptance” at the foot of the contractor’s quotation proffered to her on 30/6/04, and that the scope of the agreed works was for the design and re-building of the bathroom at her residence. Additional work mentioned of installing a french door between the kitchen and back bedroom was abandoned by the contractor due to time constraints.

3.3 Contractual relationship

Ms Hogan was adamant that she contracted with Mr Allan as a building contractor. She stated that she had definitely not employed Mr Allan merely as a carpenter sub-contractor. She said that there was no question about her trying to save money by doing the project as an owner builder. From the outset Mr Allan took full control of the project. In her written statement she says:

T… Allen was recommended to me as a good builder by another tradesman who has worked with him on a number of building jobs. He represents himself to be a builder on his letterhead — he has 2 versions, on one he calls himself “Builder — Carpenter” on the other “Building Management”. On all weekly timesheets he also describes himself as “Builder” …

I am now told by another tradesman that T… Allen now argues that I was undertaking the bathroom re-building work as an “Owner Builder” whatever that might mean. If this was so, why were each of his time sheets completed as Builder, and why was he employing tradesmen and charging me a 20% Builder’s Overhead & Margin?

I only discovered by chance, on 24/8/04, from the Office of Fair Trading web site that he is not a builder, and that calling himself as such is a misrepresentation of his capacity and licence. He is in fact only a licensed carpenter & joiner and not a licensed builder. He is not licensed to undertake bathroom rebuilding or renovations. I was on the web site checking the appropriate process to manage a building dispute when I found this information. I had previously no idea that this information was available.

3.4 Insurance

Ms Hogan stated that she was unaware at the time of entering the contract of the statutory provisions regarding insurance of residential building works valued at over $12,000.00. No insurance cover was ever in force in relation to works for this project.

3.5 Cost estimates, conduct of works and termination of contract

Ms Hogan stated that no fixed contract price was agreed for the works. She asserted that the contractor’s initial estimate for the job was $25,815 including GST. This was updated by him during the course of the works. On 31/7/04 the estimate had gone up to $35,913.16 including GST. She became very concerned that the price would further escalate and entirely blow out her budget. Ms Hogan also complained that the timesheets provided by the contractor did not accurately reflect the actual hours he worked on the job. In her written statement Ms Hogan states:

I found that I was increasingly finding him hanging around watching other tradesmen work and not adding value to the project. …

… he insisted on telling each experienced tradesman how to do their job, interfering and causing a lot of bad feeling. This was particularly evident with the tiler. …

Several times during the week commencing 16/8/04 I had asked T… what he was doing - and asked him to leave as he was getting in the way of tradesmen and hanging around. I was extremely concerned how many hours he worked during my absence.

On 20 August 2004 a meeting took place between the parties. Ms Hogan’s written statement recollects that on this occasion:

I discussed with him my concerns regarding the bath installation, invoicing irregularities and his excessive hours on the job including breaching my instructions & our agreement on 9/8/04 that he would limit hours to 8hrs per week. I advised him that he appeared to believe he had a key card to my bank account — and he did not. I also discussed with him the toxic atmosphere that had developed in my home with tradesmen and that I had increasingly observed his lack of respect towards me and tradesmen. He advised that was how you treated tradesmen, you had to be bullying and assertive and keep on top of them. I advised that I believed much better and happier results were achieved through respect.

He also told me it was ‘a building site’ and that was what they were like. I advised it remained my home and it was unacceptable.

I advised that based on his responses to my questions and his attitude that I must terminate our arrangement. I handed him a copy of his original Quotation, with my termination written across it. Tony agreed that I had the right to terminate at any stage. He offered a few suggestions regarding treatment of a timber door pillar in the shower that had somehow not been included in the tiler’s scope of works and also said he was happy for me to take over his tradesmen and pay them.

T… requested that I pay both invoices, ie, 14/8/04 and 29/8/04 (that he had just given me) on Monday. I said that I would consider it, but made no promises. …

[by Monday 23/8/04] it became obvious at that stage that it would not be wise to pay T… Allen his outstanding monies as it would be needed to rectify these 2 aspects of my bathroom, ie the bath installation and the waterproofing problems.

3.6 Alleged defects

(a) Bath

Ms Hogan stated that she saw that the contractor had installed the bath with foam sealer contrary to the manufacturer’s instructions (tendered) that foam sealer was not to be used for this kind of bath. The bath is drummy if you tap it. Also, the bath was incorrectly tiled in and installed.

The Horan Report found:

The bath has not been installed in harmony with the manufacturer’s specification sheets provided with the bath . . . “DO NOT INSTALL BATH ON FOAM”.

The bath has not been set back against the wall . . . instructions were not followed by the contractor as outlined in the specification sheets for the bath installation specification sheets With two photographs illustrating point: “Tiles are sitting on rim of bath – rim should be inside the wall.”

Two quotations for rectification were tendered:

- From Bondi Plumbing Pty Ltd

Remove and reinstall bath: $1,028.00

- From Wedgefield Plumbing

Remove and reinstall bath: $1,265.00

(b) Glass blocks wall, shower recess, tiling and waterproofing

Ms Hogan said that the glass blocks had been waterproofed at the ground level and required further waterproofing work for a satisfactory completion of this item in the scope of works. Two close up photographs of the shower screen embedded in silicone in the floor were tendered.

The Horan Report found:

We are of the opinion that the waterproofing system installed in this bathroom does not comply with the Australian Standard (AS 3740). The design allows the shower screen to penetrate into the the bed supporting the floor tiles. One wall of the shower recess has been constructed using glass blocks.

The AS 3740 (Waterproofing of wet areas within residential buildings) states that a metal angle should be installed on the floor before the tiles are laid and this should be covered with the membrane. The angle should protrude through the tiles and then the shower screen sits on top of the angle. The purpose of this is to prevent water escaping from the shower recess by means of capillary action. Also the glass wall that has been installed adjacent the wall and floor tiles have not been waterproofed. Water will escape through the joint between the bricks and the tiles in due course. We are of the opinion that the glass bricks should be framed with a waterproof Wall section on the floor and the wall. We refer to p.9 of AS 3740 under “Flashing angles and corner reinforcing tape”. . . .

SUMMARY: We are of the opinion that the design and method used to build and waterproof the shower recess is “not fit for purpose and will break down in the short/long term”.

Quotations for rectification were tendered:

- From Megasealed Group

Additional waterproofing $ 328.90

- From Roger’s Prestige Tiling

Retile bath, floor and walls $1,320.00

(c) Defective carpentry

The Horan Report found that:

We . . . observed that some of the carpentry work is messy and not completed to a satisfactory standard. For example the cut-out of the timber flooring (trap door) adjacent to the bathroom door is messy and should be repaired as required (with photo of item). The repairs should include sanding the cut ends of the boards and also the removal of one more section of timber due to a cut mark on the face of the timber required (with photo of item). Also a section of timber due to a cut mark on the face of the timber. Also a section of skirting should be installed in the hallway in order to complete the work.

The timber flocking (packing) adjacent to the bathroom timber door frame is excessive. The screws holding the door frame in place do not penetrate far enough into adjacent timber in order to provide a firm and solid fixing system. We recommend that all the screws and packing be removed and then another narrow stud fixed between the door frame and the wall. The door frame can be secured to this stud and the screws will penetrate far enough to keep it firm. The timber post that the timber door frame has been secured to is also inside the shower recess and this will rot in due course if it is not waterproofed and tiled over.

A quotation for rectification was tendered:

- From M Healy, Carpenter

To rectify carpentry problems $242.00

The Horan Report concluded:

The defects outlined in this report should be rectified as required.

3.7 Reimbursement for money allegedly obtained through deception

Ms Hogan also complained of the contractor’s invoicing irregularities and of his misrepresentations of amounts of monies paid to sub-contractor tradespersons and of him ignoring her instructions concerning hours of work.

Ms Hogan submitted that she should recover restitution of certain moneys paid to the contractor and obtained by him, she alleged, by misrepresentation and deception. This particularly related to the charge imposed for the 20% builder’s overhead & marginand to many of the hours he worked as an unlicensed builder. It also concerned payments invoiced and not yet paid. In addition, the charge imposed on each invoice for stock supplies reflected unfair charges for consumables normally absorbed by tradesmen in their hourly charge. She stated that she had never before known anyone to charge for consumables especially each week.

She also submitted that only approximately 10 per cent of the hours worked by the contractor were spent on carpentry. She submitted that, in recognition of the work actually done by the contractor, she should be reimbursed 50% of hours worked for the paid invoices.

1. 1. Relief from payment of moneys claimed by the contractor

The homeowner submitted that on all the evidence and the particular circumstances of this case, she should be relieved from payment for the full value of all of the contractor’s outstanding invoices as yet unpaid.

4. CONTRACTOR’S EVIDENCE

4.1 Documents and exhibits filed before or at the hearing:

1. Letter from T Allan with attached 4pp statement “Addressing Mr. Horan’s Report” undated. Received at Registry 21 October 2004.

2. Quotation/contract (one page) dated 30 June 2004 and executed by both parties.

3. Four A4 size annotated digital photographs of bathroom works.

4. Documents filed at the Registry on 17/9/04 (43 pp), comprising:

A. Copy of fax letter dated 17/9/04 from T Allan to the Registrar with attached statement, cv, testimonials.

B. Set of four invoices dated 16/7/04, 27/7/04, 30/7/04, 6/8/04. All “paid by cash” from T Allan to P Hogan

C. Letter from A Casey Plumbing dated 23/8/04 — warranty for plumbing.

D. Letter from LA Waterproofing dated 23/8/04 — waterproofing certified.

E. Letter T Allan to P Hogan dated 23/8/04.

F. Letter from A Casey Plumbing dated 9/9/04.

G. Seven invoices from T Allan to P Hogan 14/8/04, 19/8/04, 23/8/04, 26/8/04, 3/9/04, 10/9/04, 17/9/04.

H. Letter T Allan to P Hogan dated 24/8/04.

5. Spreadsheet giving breakdown of all monies paid and owed to the contractor.

6. Handwritten summary of costs incurred by the contractor.

4.2 The contract and the contractual relationship

In summary, Mr Allan stated that when he first met Ms Hogan in June 2004 to discuss the bathroom renovation project, she had told him that she wanted him to do the job without employing him as a builder “as such”. After this he drew up the plan. He also agreed to help her find other needed sub-contractor trades and to get three quotes from every trade. He did not charge for this service or for any other coordination work performed by him.

Mr Allan agreed that he had never held a building contractor’s licence. He was licensed as a carpenter and joiner and had also worked as a project manager on building sites for six years. He had completed Certificate IV in Building Studies, Residential at TAFE NSW in 2003, but had not applied for a NSW builder’s licence because he had decided to move to Queensland. He never intended to let Ms Hogan or anybody else think that he was a licensed builder. As far as he was concerned he worked solely as a carpenter sub-contractor for Ms Hogan. He did not know that she did not have an owner builder’s permit for the job but recalled telling her, at the outset, about taking out Home Warranty insurance.

Mr Allan stated that all the invoices presented to the homeowner related to his carpentry work. He was there to do the carpentry and to attend to details. None of the other tradespersons on the job worked for him. They all worked for Ms Hogan and were all separately paid by her. The homeowner paid him the first four invoices in cash. The total amount paid to him on these four invoices was $15,401.40.

As documentary evidence of the contract upon which his debt claim was based, a printed single page quotation/contract form dated 30/6/04, addressed to the homeowner was tendered:

T… Allan

Building & Carpentry

[address, tel, fax, email]

Licence N0. 989 44C

ABN 34 995 743 627

Dear P…

To re-build bathroom, inclu glass block curved wall etc

Install french doors off kitchen

Regards, [signed T… Allan]

_______________________________________________________________

Confirmation: By return of signed copy of this quotation I/we hereby agree to payments as described below for completion of works detailed above.

Cost Plus Agreement: My labour: $49.50 per hour

Subcontractors/ Materials: Cost to me including all trade discounts passed on

Builder’s overhead’s: 20%

GST: 10%

Payment terms: Weekly invoices are payable within 7 days of date on invoice

( Add 10% compounding per week in arrears thereafter)

Note: This agreement is controlled by the Building Construction Industry Security of Payment Act 1999

Contract Acceptance: Customer Signature [signed P. Hogan] Date: 30/6/04

4.3 Homeowner’s conduct

Before completion of the renovation works he had received from the homeowner a copy of the above quotation/contract document over which homeowner had handwritten these words:

20/8/04

Dear T… Allen,

No further work is to be undertaken on this project as the arrangement detailed in this document is terminated effective 0800 today.

P Hogan

Ms Hogan had refused to pay for all of the work completed by him up to this time. She had refused to give him any further access to the site to complete the job.

4.4 Alleged overcharging and deceptive conduct

Mr Allan strongly denied these allegations. He had never engaged in deceptive or misleading conduct. To the contrary, he considered that he had assisted the homeowner at all stages of the project.

4.5 Alleged defects

(a) Bath

Mr Allan stated that the plumber sub-contractor A… Casey had installed the bath. This job was not his responsibility. He also submitted, in any case, that the requirement to recess the bath into the wall had been superseded by other methods and that the overall appearance of the installation was good.

(b) Glass blocks wall, shower recess, tiling and waterproofing

Mr Allan submitted that all the requirements of the AS 3740 had been met and that his work was structurally sound, well waterproofed and of good appearance.

(c) Defective carpentry

Mr Allan admitted that some minor aspects of the carpentry work had been unfinished at the time the homeowner terminated the contract. He was denied an opportunity to finish these details but this was no fault of his own.

4.4 Money order sought

The contractor’s total debt claim, quantified by him and notified to the homeowner in writing on 26 August 2004, was in the following terms:

Invoice to 14 August 2004 $4,845.65

[The Tribunal noted that this invoice was for labour, rubbish removal,

subcontractors’ work in waterproofing, plumbing,

electrical, tiling, hardware supplies (invoices from

suppliers and subcontractors also tendered)]

10% interest (account overdue) as per contract $484.57

Invoice to 19 August 2004 $2,390.27

[This invoice was for labour, subcontractors’ plumbing,

and tiling work, hardware supplies and buider’s margin

(invoices from suppliers and subcontractors tendered)]

10% interest (account overdue) as per contract $239.03

10% witheld from invoice to 16/7/04 $369.69

10% witheld from invoice to 23/7/04 $245.39

10% witheld from invoice to 30/7/04 $609.40

10% witheld from invoice to 6/8/04 $315.73

_____________________________________________________________________________

Total including GST $9,499.73

On 3 September 2004 Mr Allan sent Ms Hogan a further invoice claiming the amount owing at that date with 10% compounding interest, “as per contract” had risen to the sum of $10,449.70.

5. FINDINGS

After careful consideration of all the oral and documentary evidence and exhibits tendered by each party, the Tribunal finds, on the balance of probabilities as follows:

5.1 The contract

The Tribunal finds that the contract between P Hogan and T Allan, expressed in the written quotation signed by the homeowner was a home building contract for residential building work made between a homeowner and the contractor and is thus subject to the provisions of the Home Building Act 1989.

5.2 Head contractor or sub-contractor?

The Tribunal finds that the contractor, T J Allan, at all material times, did not hold a building contractor’s licence. He did hold a licence, number “…”, which was a licence restricted to contracting to do, doing and supervising carpentry and joinery work only.

The Tribunal finds that both in pre-contractual negotiations prior to the formation of the contract and during the active period of building the new bathroom, the contractor both through his communications to the homeowner and by his conduct in supervising the work of other trades and managing the entire project, is found to have held himself out to the homeowner to be a fully qualified and licensed building contractor. On all the evidence, he is also found to have acted throughout in the capacity of head contractor and project manager of the entire scope of works, which the Horan Report found to include: “… demolition, plumbing, electrical, waterproofing, tiling and carpentry work”. In reaching this key finding, the Tribunal notes that the contractor’s printed quotation form and invoices are both headed “T Allan - Building & Carpentry”. The Tribunal also accepts the veracity of the sworn evidence of M Rekisha and S I Vegh concerning the formation of the contract and the actual conduct of the works.

The Home Building Act 1989 (as amended), Section 4 provides:

Unlicensed contracting

A person must not contract to do:

(a) any residentiial building work, or

(b) any specialist work,

except as or on behalf of an individual, partnership or corporation that is the holder of a licence authorising its holder to contract to do that work

The Tribunal notes that under Section 10 of the Act a “builder” who does not hold an appropriate licence cannot enforce rights under the contract. However, an unlicensed builder is not precluded from recovering a just quantum meruit award.

The Tribunal finds that no fixed contract price was ever agreed to by the parties. The written contract, in the form of a contractor’s quotation accepted by the homeowner was on the basis of “costs plus”.

5.3 Insurance

The Tribunal finds that the value of the building works substantially exceeded $12,000.00 and that no Home Warranty Insurance was ever taken out.

The Home Building Act 1989 (as amended), Sections 92 provides:

Contract work must be insured

A person must not do residential building work under a contract unless:

(a) a contract of insurance that complies with this Act is in force in relation to that work, and

(b) a certificate of insurance evidencing the contract of insurance, in a form prescribed by the regulations, has been provided to the other party (or one of the other parties) to the contract.

The Tribunal notes that pursuant to Section 94 (1) failure to insure by a building contractor results in no enforcement of the contract by him. Thus the contractor’s debt claim must be held to be unavailable. However, the Tribunal may allow recovery on a quantum meruit basis if the Tribunal considers it to be just and equitable: s. 94 (1A) of the Act.

5.4 Moneys paid to date by homeowner to contractor

The Tribunal finds that the total of moneys which have been paid by the homeowner to the contractor is $15,402.40.

5.5 Conduct of building works and termination of the contract

The Tribunal finds that this was a contract which either party could terminate by reasonable notice to the other party. In fact, the homeowner terminated the contract with no notice at all on 20 August 2004. In so doing she was left with some of the project works incomplete.

The Tribunal having found that the contractor, in objective terms, did contract unlawfully as a head building contractor, while not holding the requisite licence, it follows that the homeowner was entitled to lawfully terminate the contract at any time.

However, on all the evidence presented, the Tribunal cannot find that it has been established that the contractor at any time intended to take unfair advantage of the homeowner by cheating or overcharging her.

5.6 Defects

The Tribunal finds that, on all the evidence presented, the homeowner has established her case for a compensatory award for the defects covered in the Horan Report and for the quotations for rectification tendered by her. The Tribunal finds that all of the findings made by Horan and reasons are therefore persuasive. The Tribunal also found the Master Builders Association Waterproofing Council Guide to Internal Wet Area Waterproofing supported it in reaching these findings on the waterproofing issues in dispute.

Mr Allan must be held responsible for his own and the sub-contractor’s defective work under Section 18B implied warranties, Home Building Act 1989.

The Tribunal finds that all the rectification works quoted for are justified. The Tribunal notes that the quotations, in total, range from just below to a little above $3,000.00. The Tribunal holds that a fair and equitable compensatory award for the rectification of these defects, for which quantum has been established by the homeowner, is the sum of $3,000.00.

5.7 Quantum meruit

In its terms, the contractor’s claim is one of debt based upon the contract. However, as noted, due to the contractor’s breaches of Sections 4 and 92, Home Building Act 1989, the contract relied upon by the applicant is now unenforceable by him and therefore all contractually based remedies are no longer available. At issue therefore is whether he might possibly receive an award in restitution — quantum meruit — to be set-off against any compensatory award made by the Tribunal to the homeowner?

The High Court of Australia in Pavey & Mathews Pty Ltd v Paul (1987) 162 CLR 221, explained that the true foundation for a quantum meruit award, is the execution of work and its acceptance by the other party.

At 256-7 Deane J. stated:

[Unjust enrichment] constitutes a unifying legal concept which explains why the law recognises in a variety of distinct categories of case, an obligation on the part of the defendant to make fair and just restitution.

The restitution remedy differs markedly both in viewpoint and operation from a debt claim or a claim for damages for breach of contract. Unlike the contract based claims, the restitutionary remedy is not a remedy of right but may be awarded on equitable principles at the discretion of the court. Thus compensation for the loss of some expected profit from the contract or reference to the terms of the contract concerning interest upon late payments are not germane to restitution in quantum meruit. For a contractor to be awarded restitution in quantum meruit, the Tribunal must first be satisfied that the other party has been found not merely to have been enriched but to have been unjustly enriched. The Tribunal must also be satisfied that it is just and equitable, in the particular circumstances of the case, to award an appropriately sized figure of monetary restitution to the contractor. In summary, it must be established, to the satisfaction of the Tribunal that an adjustment representing an approximate net unjust enrichment should be disgorged by the homeowner. What might be a just and equitable award depends upon the particular circumstances of each case.

There may be many relevant factors to consider in exercising the discretion to award or not award a quantum meruit. These include the conduct of the party seeking restitution and the requirement of establishing an unjust enrichment of the party resisting the claim.

Having carefully reviewed all the evidence and all of its findings, the Tribunal notes as material factors against granting a restitutionary award are the findings concerning the contractor contracting to do work as a head building contractor without a proper licence to so contract and that he did not fulfil contractual obligations in regard to the items found to be defective. On the other hand, the Tribunal is satisfied that the contractor although misguided, in objective terms, by representing himself as a building contractor, did not do so with any positive intent to take advantage of the homeowner. He was also willing to complete and rectify all carpentry aspects of the job. And, it is found, he did, in fact, positively assist the homeowner with the project management and in finding suitable tradespersons. On all the evidence the Tribunal cannot find that at any stage it has been established, on the balance of probabilities, that Mr Allan formed a positive intention to deceive Ms Hogan.

The Tribunal finds that a fair and equitable restitutionary adjustment must be made in this case. In making this adjustment all the detailed evidence concerning the costs of the project and all the work actually completed by the contractor has been carefully reviewed by the Tribunal. The Tribunal finds that a just award for restitution in quantum meruit in all the particular circumstances of this case to be the sum of $2,000.00.

COSTS

The contractor has applied for costs in obtaining legal advice and for travel costs in attending hearings. This is not a case where the parties were legally represented at the hearings. The Tribunal also notes that each party has partly succeeded in their respective applications. In these circumstances and given the restrictive provisions concerning costs in the Consumer, Trader & Tenancy Tribunal Act 2001 and Consumer, Trader & Tenancy Tribunal Regulation 2002, and the amounts ultimately awarded to each party, the Tribunal rules that each party shall bear their own costs.

DETERMINATION

A. HB 04/40368

On all the findings and for the reasons given above, the Tribunal holds that the homeowner P Hogan be awarded as compensation to enable rectification works to be completed the sum of three thousand dollars ($3,000.00).

B. HB 04/40968

On all its findings and for the reasons given above, the Tribunal holds that the contractor T Allan be awarded in quantum meruit the sum of two thousand dollars ($2,000.00).

Orders accordingly

Each party shall bear their own costs

M. Noone

Member

Consumer, Trader and Tenancy Tribunal

6 April 2005