Gittany Constructions P/L v Director General, Department of Services Technology and Administration [2010] NSWADT 164

CITATION: Gittany Constructions P/L v Director General, Department of Services Technology and Administration [2010] NSWADT 164

DIVISION: General Division

APPLICANTS Gittany Constructions Pty Ltd PARTIES: Charles Gittany

RESPONDENT Director General, Department of Services Technology and Administration

FILE NUMBER: 093221; 093227

HEARING DATES: 1 December 2009

SUBMISSIONS CLOSED: 18 December 2009

DATE OF DECISION: 30 June 2010

BEFORE: Higgins S - Deputy President

CATCHWORDS: Home Builder – contractor licence – disciplinary action – improper conduct – failure to comply with a Rectification Order – appropriate disciplinary action in the circumstances - reprimand – penalty

LEGISLATION CITED : Administrative Decisions Tribunal Act 1997 Home Building Act 1989

APPLICANT D Neggo, barrister REPRESENTATION: RESPONDENT J Walsh, solicitor

ORDERS: In respect of each application: 1.The decision of the respondent that each applicant is guilty of improper conduct as defined in paragraph 51(1)(b) of the Home Building Act 1989 is affirmed.The decision of the respondent that, pursuant to section 62 of the Home Building Act 1989, disciplinary action be taken against each applicant is affirmed with a variation as to the nature of that action; namely each applicant is issued with a formal reprimand under paragraph 62(b) of the Act.

REASONS FOR DECISION

Introduction

1 The applicant, Gittany Constructions Pty Ltd (Gittany Constructions), is the holder of a contractor licence under the Home Building Act 1989 (the HBA), and it has sought review of a disciplinary decision made against it by the Assistant Commissioner, Home Building Service, Office of Fair Trading, of the Department of Services Technology and Administration (the respondent). In that decision the respondent found that Gittany Construction was guilty of 'improper conduct' as defined in paragraph 51(2)(b) of the HBA and pursuant to paragraph 62(c) of that Act, imposed a penalty of $1,500.

2 The applicant, Charles Gittany, a director of Gittany Constructions, also seeks review of a disciplinary decision of the respondent that he is guilty of improper conduct under sub-section 54(1) of the HBA and pursuant to paragraph 62(c) of that Act, imposed a penalty of $1,000.

3 The basis on which the respondent made the decisions that are the subject of review was the failure of Gittany Constructions to rectify defective building work, as specified in a Rectification Order served on it on or about 7 May 2007. The alleged defective building work related to the construction, by Gittany Constructions, of a 3 storey block of residential apartments at 5 Koorala Street Manly Vale (the apartment building). The Rectification Order required Gittany Constructions to rectify the defective building work by 15 June 2007. There is no dispute that this work was not completed as specified in the Order. Nor is it disputed that the rectification work did not commence until several months before the hearing of these applications.

Issues

4 The primary issue for determination in these applications is factual; namely whether: (a) had Gittany Constructions, without reasonable cause, failed to comply with the requirements of the Rectification Order?

(b) if it did so fail, whether disciplinary action is warranted and if warranted what is the most appropriate disciplinary action in the circumstances?

(c) in the event Gittany Constructions is found to have, without reasonable cause, failed to comply with the requirements of the Rectification Orders, whether Charles Gittany, as a director of the company, should also be the subject of disciplinary action.

The relevant legislation

5 Part 3A of the HBA deals with resolving residential building disputes and claims. The latter, residential building claims, are claims brought before the Consumer Trader and Tenancy Tribunal: see section 48J of the HBA. The former are disputes notified to the respondent about residential building work undertaken by a person who is the holder of a contractor licence under the HBA: see section 48C of the HBA. Where the respondent is notified of such a dispute, the respondent has power to appoint one of its officers (an inspector) to investigate the matter: see section 48D of the HBA. The investigator (inspector) is given power to issue a Rectification Order as a result of his/her investigation: see 48E of the HBA.

6 The effect of a Rectification Order is set out in section 48F which provides: 48F Effect of rectification order

(1) Except as provided by section 51, a rectification order does not give rise to any rights or obligations.

(2) Subject to section 48I, a rectification order ceases to have effect for the purposes of section 51 if the matter giving rise to the order becomes the subject of a building claim before the date specified in accordance with section 48E (3) (b).

7 Part 4 of the HBA deals with disciplinary action the respondent can take against a holder of an 'authority' under the Act such as, a contractor licence, a tradesperson certificate and other relevant persons (including officers of a corporation who are holders of a contractor licence): see section 50 of the HBA.

8 The grounds on which the respondent can initiate disciplinary proceedings against the holder of a contractor licence are set out in section 56 of the HBA, which relevantly provides as follows: 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:

(a) …

(b) …,

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

(d) …,

(e) …

9 What constitutes improper conduct is set out in section 51 of the HBA, which relevantly provides as follows: 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 …, is guilty of improper conduct if the holder: (a) …, or (b) without reasonable cause, does not comply with the requirements of a rectification order under Division 2 of Part 3A, or (c) …

10 If, following the issue of a Notice to Show Cause, the respondent is satisfied that the holder of an authority (i.e. including a holder of a contractor licence) has engaged in conduct falling within the grounds for taking disciplinary action (e.g. paragraph 56(c) of the HBA), the disciplinary action that is available to the respondent is as follows: 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. 11 Section 54 of the HBA provides that where a corporation is found to be guilty of improper conduct, then each officer of that corporation (e.g. a director of the corporation) is also guilty of such conduct, unless the officer can establish that he/she had no knowledge of the conduct in question. Where the officer fails to establish his/her lack of knowledge, that officer is also subject to the disciplinary provisions in the HBA. Section 64 relevantly provides: 54 Improper conduct: members of partnerships or officers of corporations

(1) An individual who is a member of a partnership or an officer of a corporation that is the holder of a contractor licence is guilty of improper conduct if the holder does any of the things referred to in section 51 or 52.

(2) ….

(3) It is a sufficient defence to a complaint that an individual who is a member of a partnership, an officer of a corporation that is a member of a partnership or a director of a corporation (being a partnership or corporation that is the holder of a contractor licence) has been guilty of improper conduct if the individual proves to the satisfaction of the Director-General that: (a) the improper conduct occurred without the individual's knowledge, or (b) the individual was not in a position to influence the conduct of the other members of the partnership or other officers of the corporation, of which the individual was a member or an officer, so as to prevent the occurrence of the improper conduct, or (c) the individual, being in such a position, used all due diligence to prevent the occurrence of the improper conduct.

(4) Disciplinary action for improper conduct may be taken against an individual who is a member of a partnership, an officer of a corporation that is a member of a partnership or an officer of a corporation (being a partnership or corporation that is the holder of a contractor licence) whether or not any such disciplinary action has been taken against the partnership or corporation.

(5) Division 2 applies to disciplinary action taken against an individual referred to in subsection (4) in the same way as it applies to disciplinary action taken against the holder of an authority, and references in that Division to the holder of an authority extend to an individual so referred to. The evidence

12 The respondent tendered into evidence the section 58 documents (i.e. those documents on which it relied in making its decision: see section 58 of the Administrative Decisions Tribunal Act 1997). Included in these documents were representations of the applicants in regard to the Show Cause Notice and the internal review request. The respondent also tendered into evidence a chronology.

13 The applicants tendered into evidence their own chronology and 3 affidavits. The affidavits were as follows: (a) an affidavit of the applicant, Charles Gittany, sworn on 20 October 2009, (b) an affidavit of Edward Gittany, project manager employed by Gittany Constructions and sworn on 20 October 2009, and (c) an affidavit of Duncan Campbell, solicitor for the applicants and sworn on 19 October 2009.

14 The affidavits were accepted into evidence without objection and the deponents were not required for cross-examination.

The residential building work

15 It is convenient to set out in some detail the background to the residential building work that gave rise to the issue of the Rectification Order and the events, so far as they are relevant, which occurred thereafter.

16 Gittany Constructions was engaged by the developer to construct the apartment building in March 2002. At about the same time, Gittany Constructions obtained Building Owner's Home Warranty Insurance for its construction work of this building. Construction commenced in 2002 and was completed by mid 2003.

17 Just prior to completion of the apartment building issues arose about 'deficiencies in the architectural documentation' for the building and defective work.

18 After the completion of the construction work, the land was subdivided and registered as strata plan SP 70298 (the Owners Corporation), and the units were sold to individual purchasers. In 2004, the address of the apartment building was changed to 5 Koorala Street, Manly Vale. In January 2005, at the request of the Owners Corporation, Rickard Hails Moretti produced a report on the various building defects in the building as a whole and in the individual apartments.

19 Gittany Constructions was subsequently provided with a copy of the report and was requested to attend to the rectification of the defective items as identified in the report. On 30 January 2006, Mr Eddie Gittany, on behalf of Gittany Constructions, responded to the Rickard Hails Moretti report and advised that Gittany Constructions would attend to specified items of defective work and that it would make a decision in respect of the other items upon further inspection.

20 In July 2006, the Owners Corporation made an insurance claim, on Gittany Constructions' insurer, for the defective building work.

21 In December 2006, when Gittany Constructions failed to complete the defective building work, the Owners Corporation lodged a complaint with the respondent. On 24 January 2007, Mr Jack Horsfall, Senior Building Inspector, employed by the respondent, inspected the apartment building. On the same day, Mr Horsfall completed a pro-forma 'Complaint Inspection Advice' in which he named the persons present at the inspection, the work the 'builder' agreed to rectify and other matters that were to be attended to. The Advice also noted that the rectification work was to be completed by 4 May 2007.

22 On being informed that the rectification work had not been done, on 7 May 2007, Mr Horsfall issued a 'Rectification Order', requiring the defective building work, as identified on the 'Complaint Inspection Advice' to be rectified by 15 June 2007. A copy of that Order was sent by registered mail to Gittany Constructions at 5 Sproule Road, Illawong and the covering letter was addressed to Mr Eddie Gittanay.

23 In August 2007, when no rectification work had commenced, the Owners Corporation lodged a building claim, against Gittany Constructions, in the Consumer Trader and Tenancy Tribunal, in regard to the alleged defective building work.

24 In May 2008, pursuant to section 61 of the HBA, a delegate of the respondent issued a Show Cause Notice addressed to each applicant. The Notice required each applicant to show cause as to why the respondent should not make a finding that they were guilty of improper conduct (i.e. failing to under take the rectification work as Ordered) and to decide to take disciplinary action against them. Neither applicant responded to the Show Cause Notice. On 11 March 2009, a delegate of the respondent determined, pursuant to section 62 of the HBA, to take disciplinary action against each applicant on the grounds that he was satisfied that they were each guilty of improper conduct. The delegate also determined to impose a fine of $1,500 on Gittany Constructions and a fine of $1,000 on Mr Charles Gittany.

25 On 25 March 2009, Mr Charles Gittany, wrote to the respondent advising that he and his company had on 'numerous occasions' tried to comply with the law and do all the necessary rectification work, but had been prevented from doing so by the Owners Corporation. He also advised that the matter was currently before the Consumer Traders and Tenancy Tribunal and that they had been advised by their solicitor not to do any work until those proceedings had been determined.

26 On 6 April 2009, Mr Duncan Campbell, solicitor for Gittany Constructions in the proceedings before the Consumer Trader and Tenancy Tribunal, wrote to the respondent requesting an internal review of the respondent's decision. In that request Mr Campbell explained that his firm had not been made aware of the Show Cause Notice as his client understood all matters were being dealt with through the Consumer Trader and Tenancy Tribunal proceedings. Mr Campbell also informed the respondent that following an on-site meeting at the apartment building by the experts of the respective parties, many of the items that had been identified as defective work of Gittany Constructions had been withdrawn. Rectification of the work for which Gittany Constructions was responsible was commenced on 6 October 2009.

Consideration

27 As the proceedings in the Consumer Trader and Tenancy Tribunal were initiated after the date for completion of the rectification work as per the Rectification Order, Gittany Constructions' conduct in failing to comply with the Order remained subject to a possible finding under section 51 of the HBA: see paragraph 6 above.

Had Gittany Constructions, without reasonable cause failed to comply with the Rectification Order?

28 Accordingly, as identified above, the first issue for determination is whether Gittany Constructions had, without reasonable cause, failed to comply with the Rectification Order? In his affidavit, Mr Eddie Gittany explained that he was employed by Gittany Constructions and was the project manager responsible for the construction of the apartment building. He said that in early 2005, his brother, Mr Charles Gittany, spoke to him about the alleged defects to the apartment building and asked him to deal with the issue, which he said he did. Mr Eddie Gittany went on to say that 'in or around mid to late 2006' he directed an employee of Gittany Constructions, 'Joe', to perform the rectification work as identified in his letter of 30 January 2006. He said 'Joe' did commence work but due to the uncooperative and critical behaviour of members of the Owners Corporation 'Joe' was unable to progress with that work.

29 Mr Eddie Gittany acknowledged that he was present during the meeting with Mr Horsfall on 24 January 2007 and that he had agreed to rectify the defects that were set out in the 2005 Rickard Hails Moretti report. He also acknowledged that he was aware that Mr Horsfall had said that the rectification work was to be completed by 4 May 2007, to which he responded 'OK'.

30 Mr Eddie Gittany's evidence was that after the Owners Corporation commenced proceedings in the Consumer Trader and Tenancy Tribunal he was again prevented by the Owners Corporation (on advice from their solicitors) from undertaking the rectification work. However, once the Owners Corporation no longer had legal representation he was able to commence the rectification work on 6 October 2009.

31 Mr Duncan Campbell gave similar evidence in his affidavit.

32 In my opinion, neither Mr Eddie Gittany or Mr Duncan Campbell, in their respective affidavits, addressed or answered the relevant issue; namely the reason why no rectification work was undertaken in the period after the issue of the Rectification Order (7 May 2007) and the date on which the work was ordered to have been completed by (15 June 2007). This was a period prior to the commencement of the Consumer Trader and Tenancy Tribunal proceedings. It was also a period of some 3 months after Mr Eddie Gittany had met with the respondent's inspector, Mr Horsfall and a representative of the Owners Corporation and where he had agreed to undertake the necessary rectification work. On the material before the Tribunal there is no evidence of any attempt to undertake the rectification work or an explanation as to why no such attempt was made. The only evidence of any attempt to do rectification work was that undertaken by 'Joe', an employee of Gittany Constructions. That attempt was almost 12 months prior to the issue of the Rectification Order. Nor is there any evidence before the Tribunal that MR Eddie Gittany or anyone else from Gittany Constructions took issue with the terms of the Rectification Order during the relevant time. Although Gittany Constructions may have taken issue with the ambit of the rectification work the subject of the Rectification Order, there remained a significant amount of work that it agreed it had was responsible for in its letter of 30 January 2006, yet there was no explanation as to why that work was not commenced, let alone completed as ordered.

33 Accordingly, I find that on the material before the Tribunal that, pursuant to paragraph 51(1)(b) of the HBA, Gittany Constructions is guilty of improper conduct in that without reasonable cause it failed to comply with the Rectification Order of 7 May 2007.

Is disciplinary action warranted and if so what is the most appropriate disciplinary action in the circumstances? 34 Factors to be considered when considering whether disciplinary action is warranted and if it is warranted, what disciplinary action is appropriate in the circumstances, include the seriousness of the improper conduct, the period for which the person has been the holder of a contractor licence under the HBA, whether the licence holder has been the subject of previous complaints or disciplinary action, what steps (if any) the licence holder has taken to address the improper conduct to ensure that it would not happen in the future and any other relevant factor.

35 In my opinion, the improper conduct of Gittany Constructions, when considered in isolation, does warrant some form of disciplinary action as Gittany Constructions made no attempt to do any of the rectification work as required under the Rectification Order, despite its undertaking to do so in January 2006 and again in January 2007. Nor did it provide an explanation as to why no rectification work was done during the time required under the Rectification Order. Had it communicated with the respondent or the Owners Corporation as to why it was unable to do the rectification work (in whole or part) during the period in which that work was required to have been completed, I may have come to a different conclusion. Instead I regard their conduct as being a flagrant breach of the Order.

36 As noted above, the extent of the rectification work for which Gittany Constructions was responsible has now, by agreement, been narrowed and that work was commenced in October 2009. The Tribunal has not received any further material to indicate that this work was not being undertaken or further delayed by Gittany Constructions.

37 I also note that Gittany Constructions has been the holder of a contractor licence for 15 years and there is no evidence before me of any other complaints that have made against it. Nor is there any evidence of the respondent having previously taken disciplinary action against it. The delay in the respondent taking disciplinary action is also noted. It was almost 12 months after Gittany Constructions' failure to comply with the Rectification Order that the respondent issued the Show Cause Notices. It is evident from the material that the respondent was at all times aware of the failure. Furthermore, even after the Show Cause notice was issued, it was another 10 months before the respondent made his original decision to take disciplinary action. While I accept that there may have been reasons for this delay there remains the inference that the respondent did not regard the applicants' improper conduct as falling within the more serious end of such conduct.

38 Having regard to all the relevant factors, in my opinion, disciplinary action is warranted. However, in light of this being the first complaint giving rise to disciplinary action the most appropriate action is a reprimand pursuant to paragraph 62(b) of the HBA and not a penalty.

39 Accordingly, for the reasons set out above I find that the decision of the respondent that Gittany Constructions is guilty of improper conduct is the correct and preferred decision. I also find that the decision of the respondent to take disciplinary action in regard to that conduct is the correct and preferred decision. However, I would vary that decision in that the appropriate disciplinary action in the circumstances is a warning.

Should Mr Charles Gittany also be the subject of disciplinary action? 40 There is no dispute that at the relevant time Mr Charles Gittany was the director of Gittany Constructions. He was also the nominated supervisor of Gittany constructions for the purpose of the HBA.

41 Mr Charles Gittany relied on the same material that was relied on by his company, Gittany Constructions; namely it was through no fault of the company that the rectification work had not been done. That is, it was the fault of the Owners Corporation that no rectification work was done. For the reasons set out above, I have not accepted this as a satisfactory explanation as to why the Rectification Order of the respondent's inspector, Mr Horsfall, had not complied with.

42 Further more, from the material before the Tribunal it is evident that Mr Charles Gittany was at all times aware of the Rickard Hails Moretti report and its contents. In regard to the 'Complaint Inspection Advice' and the 'Rectification Order' issued by Mr Horsfall, Mr Charles Gittany does content that he was unaware of these. The material before the Tribunal gives rise to an inference that he was aware of these. Accordingly, on the basis of the requirements of section 54 of the HBA and the findings made against Gittany Constructions it is appropriate that similar disciplinary action be taken against Mr Charles Gittany.

Conclusions

43 For the reasons set out above, I have found that the decision of the respondent that each applicant is guilty of improper conduct as defined in paragraph 51(1)(b) of the HBA is the correct and preferred decision and should be affirmed. I have also found that the decision of the respondent that, pursuant to section 62 of the HBA, disciplinary action be taken against each applicant is the correct and preferred decision and should be affirmed with a variation as to the nature of that action; namely disciplinary action should be in the form of a reprimand under paragraph 62(b) of the HBA.

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