Washington Gray Pty Ltd & Gough v Director General, Department of Fair Trading [2001] NSWADT 209 (5 December 2001)

Last Updated: 31 December 2001

NEW SOUTH WALES ADMINISTRATIVE DECISIONS TRIBUNAL GENERAL DIVISION

CITATION: Washington Gray Pty Ltd & Gough -v- Director General, Department of Fair Trading [2001] NSWADT 209

PARTIES: APPLICANTS

Washington Gray Pty Ltd

Robert Gough

RESPONDENT

Director General, Department of Fair Trading

FILE NUMBERS: 013136

013137

HEARING DATES: 26/07/2001

SUBMISSIONS CLOSED: 26/07/2001

DECISION DATE: 05/12/2001

BEFORE: Hennessy N (Deputy President)

LEGISLATION CITED: Administrative Decisions Tribunal Act 1997

Fair Trading Act 1987

Home Building Act 1989

CASES CITED: Hempel v Moore (1986) 70 ALR 551

George v Rockett and Anor ((1990) [1990] HCA 26; 170 CLR 104

Beecham Group Ltd v Bristol Laboratories Pty Ltd ((1968) [1968] HCA 1; 118 CLR 618

TWU v Leon Laidely Pty Ltd (1980) 28 ALR 589

Ashburton Oil v Alpha Minerals [1971] HCA 5; (1971) 123 CLR 614

Tropea -v- Director General, Department of Fair Trading [2001] NSWADT 158

Riverside Nursing Care Pty Ltd v Bishop [2000] FCA 1147

APPLICATION: Home Building Act - home builder - suspension of contractor licence

Home Builder - suspension of contractor licence

MATTER FOR DECISION: Principal matter

APPLICANT REPRESENTATIVE: APPLICANTS

G Flick SC, barrister

RESPONDENT REPRESENTATIVE: RESPONDENT

G Johnson, barrister

ORDERS: Orders of 9 August 2001: 1. The decision of the Director General dated 21 May 2001 to suspend the contractor's licence of Washington Gray Pty Ltd is set aside

2. The decision of the Director General dated 21 May 2001 to suspend the qualified supervisor's certificate of Robert Gough is set aside

3. The decision of the Director General dated 20 July 2001 to suspend the contractor's licence of Washington Gray Pty Ltd is set aside.

Reasons for Decision:

Introduction

1 The applicants, Washington Gray Pty Ltd (Washington Gray) and its director Mr Robert Gough, applied to the Tribunal for the review of two decisions made by the Director General, Department of Fair Trading (Director General). Those decisions, which were made on 21 May 2001, were to:

· suspend for 60 days Washington Gray's contractor licence issued under Part 3 of the Home Building Act 1989 (HB Act); and

· suspend for 60 days Mr Gough's qualified supervisor certificate issued under s 20 of the HB Act.

2 In relation to the first decision, the Tribunal granted a stay of the suspension on certain conditions. The suspension period has since expired. On 20 July 2001 the Director General imposed a further 60 day suspension on Washington Gray relying on the same reasons as the first suspension. Mr Gough's licence has since expired.

3 There are potentially three decisions under review:

· the original suspension of Washington Grays' licence on 21 May 2001;

· the original suspension of Mr Gough's licence on 21 May 2001; and

· the further suspension of Washington Gray's licence on 20 July 2001.

4 Although there is arguably no utility in the Tribunal determining the first two applications, the applicant asked the Tribunal to do so. The respondent did not oppose this course. I decided to review all three decisions, as they raise issues that may affect the professional reputation of Washington Gray and Mr Gough.

Jurisdiction of Tribunal

5 The Tribunal has power to review the decision to suspend the licences under s 64A(8) of the Fair Trading Act 1987 (FT Act) and s 38 of the Administrative Decisions Tribunal Act 1997 (ADT Act). Section 63 of the ADT Act sets out the duties and powers of the Tribunal when reviewing a reviewable decision.

Fair Trading Act: s 64A(2)

6 The Director General made his decision to suspend Washington Gray's contractor licence and Mr Gough's qualified supervisor certificate under s 64A(2) of the FT Act. That sub-section states that:

(2) If the Director-General is of the opinion that there are reasonable grounds to believe that:

(a) a licensee has engaged in conduct that, under legislation administered by the Minister, constitutes grounds for suspension or cancellation of the licence, and

(b) it is likely that the licensee will continue to engage in that conduct, and

(c) there is a danger that a person or persons may suffer significant harm, or significant loss or damage, as a result of that conduct unless action is taken urgently,

the Director-General may, by notice served on the licensee, suspend the licence for a period of not more than 60 days specified in the notice, commencing on service of the notice.

7 Section 64A(6) allows the Director General to serve a "second or subsequent" suspension notice on a licensee.

8 When introducing s 64A into parliament the Hon Mr Watkins, then Minister for Fair Trading, noted that the purpose of s 64A(2) is to give the Director General the ability to "act swiftly" to suspend licences in order to protect the public from "unscrupulous and dishonest" traders. During the period of suspension, further long term action can be taken through "show cause" procedures. The Minister noted that show cause actions "can be cumbersome and may take many months to finalise." Consequently, further suspension orders not exceeding 60 days can be made.

Issues

9 Based on the requirements set out in s 64A(2) of the FT Act, the issues in this case are whether the Tribunal is of the opinion that there are reasonable grounds to believe that:

· Mr Gough and Washington Gray have engaged in conduct that, under legislation administered by the Minister, constitutes grounds for suspension or cancellation of their licences;

· Mr Gough and Washington Gray are likely to continue to engage in that conduct, and

· there is a danger that a person or persons may suffer significant harm, or significant loss or damage, as a result of that conduct unless action is taken urgently.

Approach to the evidence

10 Being the first matter of this kind to proceed to a hearing in the Tribunal, there was some discussion about whether to proceed by way of written evidence, or whether to hear oral evidence including cross-examination of witnesses. According to Dr Flick, representing the applicants, it is the Tribunal's role to conclusively resolve any disputed questions of fact so that it can then form an opinion as to whether such facts provide "reasonable grounds" for a belief. He quoted Hempel v Moore (1986) 70 ALR 551 at 609-610 in support of this proposition. In that case the Federal Court interpreted the words "reasonable grounds for believing" and concluded that "language of this kind has invariably been understood to state an objective requirement." In order to resolve any disputed issues of fact, Dr Flick urged the Tribunal to allow the applicants to cross -examine the respondent's witness on various matters.

11 Alternatively, Dr Flick submitted that the Tribunal must consider such facts and sufficiently resolve such disputes as may exist as best as it is able to do so, in order to consider whether such resolution of those facts provide "reasonable grounds."

12 Mr Johnson on behalf of the respondent submitted that the Tribunal should rely on affidavit evidence only and not allow oral evidence or cross-examination of witnesses. His reasoning was that the suspension procedure in s 64A(2) gives the Director-General power to act quickly to protect the public. In the meantime, show cause actions, which may result in further action such as cancellation of licences, can take place. Given the temporary effect of suspensions, the respondent submitted that the Tribunal should treat applications to review suspensions as interlocutory in nature and limit the inquiry into the factual adequacy of the material said to ground the belief referred to in s 64A(2).

13 I deferred making a decision on this point until the parties tendered and summarised their affidavit evidence and made further submissions. After the completion of those steps, I decided that, in the circumstances of this case, the Tribunal should determine the matter on the basis of affidavit evidence alone, without allowing either party to cross-examine witnesses.

14 The Tribunal has power to determine its own procedure under s 73(1) of the ADT Act. The reason for relying on affidavit evidence alone is that the Tribunal only needs to be concerned with the factual adequacy of the material said to ground the beliefs set out in s 64A(2). Even though the holding of the belief is an "objective requirement" (Hempel v Moore (1986) 70 ALR 551 at 609-610) the belief is not one which must be held with certainty, or even on the balance of probabilities. In George v Rockett and Anor ((1990) [1990] HCA 26; 170 CLR 104 at 116) Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ explained the distinction between reasonable grounds to believe and establishment on the balance of probabilities adding that:

. . . the assent of belief is given on more slender evidence than proof. Belief is an inclination of the mind towards assenting to, rather than rejecting, a proposition and the grounds which can reasonably induce that inclination of the mind may, depending on the circumstances, leave something to surmise or conjecture.

15 Although these proceedings are not interlocutory, they resemble interlocutory proceedings because of the temporary nature of the suspension and the fact that substantive disciplinary proceedings will generally follow. The usual practice when a Superior Court is hearing an application for an interlocutory injunction is not to allow cross-examination. In Beecham Group Ltd v Bristol Laboratories Pty Ltd ((1968) [1968] HCA 1; 118 CLR 618 at 622) Kitt, Taylor, Menzies and Owen JJ observed that:

Where the defendant goes into evidence on the interlocutory application, the Court does not undertake a preliminary trial, and give or withhold interlocutory relief upon a forecast as to the ultimate result of the case . . . (See also TWU v Leon Laidely Pty Ltd (1980) 28 ALR 589 at 600 per Deane J; Ashburton Oil v Alpha Minerals [1971] HCA 5; (1971) 123 CLR 614 at 642-643 per Gibbs J.)

16 Similarly, the Tribunal does not need to make findings on the extensive underlying factual controversy that will need to be determined by the Fair Trading Tribunal on the hearing of any disciplinary proceedings. As the respondent pointed out, the alternative would be to have an inquiry on every factual matter relied on by the respondent. If this course was adopted the hearing of a review of a temporary suspension of a licence would be equivalent to a final hearing of the same factual material as would be fully presented in a disciplinary proceeding.

Background

17 The Director General first issued Washington Gray with a building contractor licence in 1973. Washington Gray's current sole director and nominated supervisor is Mr Gough. Since being licensed Washington Gray has been the subject of 130 consumer complaints. Six of these have resulted in successful claims under the Department's Insurance Scheme. Those claims total $72,880. There has also been another successful claim for $60,000 under the new private home warranty insurance scheme. Until 1996 Mr Gough was also the nominated qualified supervisor and director of Throsby Park Pty Ltd. That company's licence expired in 1996. Between 31 August 1995 and 31 August 1996 Mr Gough was the nominated qualified supervisor of Dainton Gough Housing and Land Pty Ltd.

Scope of the allegations

18 In Part A of the Statement of Reasons, the respondent outlined certain conduct of Washington Gray based on 10 complaints from customers and investigations of those complaints. In Part B of the Statement of Reasons headed "Additional Facts and Conduct" the respondent noted that 130 consumer complaints had been lodged against the company since 1973. In addition, complaints and claims against other companies, namely Throsby Park Pty Ltd and Dainton Gough Housing and Land Pty Ltd were set out. The respondent submitted that these companies are or were corporate licensees in respect of which Mr Gough has held a supervisor certificate under the HB Act and/or has been a director or had some other relevant association. The respondent submitted that because human minds control the actions of corporations, it would be artificial for the Director General to ignore these matters merely because they involve separate legal entities.

19 The applicants submitted that they were not legally or ethically responsible for any of the matters set out in "Part B" and that the Tribunal should disregard those matters. Mr Landis, Mr King and Ms Nealer gave evidence supporting the applicants' submission.

20 Mr Landis is the solicitor for Mr Gough and Washington Gray. He set out in his affidavit of 25 July 2001 the history of Dainton Gough Homes Pty Ltd, Washington Gray, Ranshell Ltd and Throsby Park Pty Ltd. He also particularised Mr Gough's relationship with each of these companies. He noted that on 1 July 1994 Dainton Gough Homes Pty Ltd and Washington Gray sold their business to Ranshell Ltd. Mr Gough's relationship with Ranshell Ltd (which later changed its name to Dainton Gough Homes Limited) was one of commercial adviser, rather than director or officer of the company. Mr King, Mr Gough's accountant, corroborated this evidence in his affidavit of 24 July 2001.

21 Mr Landis asserted that neither Mr Gough nor Throsby Park Pty Ltd was responsible for any insurance claims against Washington Gray or Dainton Gough Homes Ltd during the period from 1 July 1994 to 30 January 1996.

22 Dainton Gough Homes Ltd employed Sandra Nealer from 1 July 1994 to 30 November 1995. She is currently administration clerk for Washington Gray. She gave evidence that Mr Gough was a consultant for Dainton Gough Homes Ltd and was never involved in the construction of any dwelling. In relation to documents held by the Department of Fair Trading regarding complaints and insurance claims, Ms Nealer said that the contracts attributed to Throsby Park Ltd were the responsibility of Dainton Gough Homes Ltd.

23 The applicants submitted that 80% of the complaints in Part B relate to the period after July 1994. Neither of the applicants was legally responsible for any of those complaints. Even if they were responsible for some of those complaints, the number of complaints is not specified and there is insufficient detail about the nature of those complaints or how much money was involved.

24 Mr Heise is employed by the Department of Fair Trading to investigate complaints about residential building work. In his statement of 26 July 2001, he addressed the issues raised by Mr Landis, Mr King and Ms Nealer. He said that in 1995 Departmental officers became concerned that a change in the ownership or control of the Washington Gray project home building business had occurred without reference to the Department.

25 In their written submissions, the respondent set out the insurance history of companies associated with Mr Gough and Washington Gray. The respondent agreed that many of the insurance claims set out in paragraph 19 of their submission relate to a period after of 1 July 1994. However, in their submission, it is unclear whether Mr Gough entirely separated himself from the business after the contract for sale in July 1994. They maintained their reliance on the matters set out in paragraphs 20 and 21 of their submissions on the basis that Mr Gough controlled Dainton Gough Housing and Land Pty Ltd and that the matters in paragraph 21 relate to Washington Gray.

26 The applicants' submission was that during the period from 1 July 1994 to 30 January 1996 there are insurance claims against companies which the Department of Fair Trading has sheeted home to Throsby Park Pty Limited which were the responsibility of Dainton Gough Homes Pty Limited.

27 The onus is on the respondent to establish, on the balance of probabilities, that the applicants are responsible for the matters outlined in Part B of the statement of reason. On the evidence available, I am not satisfied to the requisite standard that the complaints in paragraph 19 of the respondent's submissions which occurred after 1 July 1994 are matters for which either of the applicants are responsible. Consequently, those matters will not be taken account. Apart from the insurance claims detailed in paragraph 19(a) of the respondent's submission, the matters that relate to the period after 1 July 1994 are not particularised. The only finding I can make is that insurance claims were made against Throsby Park Pty Ltd prior to 1 July 1994. I can make no findings about the number, nature or monetary value of those claims.

28 In relation to the matters set out in paragraphs 20 and 21 of the respondent's submissions, I am satisfied that Mr Gough, as Director or Dainton Gough Housing and Land Pty Limited, was responsible for the matters set out in paragraph 20. I am also satisfied that Washington Gray was responsible for the matters set out in paragraph 21. Although all the details of the claims are not set out, their monetary value and the fact that the insurance claims were successful are relevant to the issues to be determined in these proceedings.

Current complaints

29 Since 1996 the activities of Mr Gough have been limited to his association with Washington Gray. The respondent set out a chronology of contracts entered into by Washington Gray in respect of which there are current complaints. The respondent contended that the complaints which raised the most serious questions were those involving Woods and Chisholm.

30 The overall response from the applicants to these complaints is that while some of what the Director General alleges is true, there are explanations in relation to particular conduct which have not been taken into account.

31 Woods complaint. Woods lodged a complaint with the Department on 14 June 2000 in relation to alleged breaches of his contract with Washington Gray to build a home in Terrigal. The contract was entered into on 10 March 1999 and the building work was to commence on 14 April 1999 with completion due by 1 December 1999. According to the respondent, the work was less than 50% completed by 8 May 2000. Even allowing for justified extensions of time the work should have been completed by that time. In their view this constitutes improper conduct by the company under s 51(1)(c) and s 51(2)(a) of the HB Act. There is a dispute between Washington Gray and Woods currently before the Fair Trading Tribunal.

32 Washington Gray says that the work was not completed because Woods was not satisfied with some parts of the construction and refused to pay some progress claims and invoices. Woods has purported to terminate the contract and, in Washington Gray's view, is responsible for the completion of the project. Washington Gray also says that several extensions of time were necessary because of matters including delays in payments by Woods, inclement weather, shortages of trades people and public holidays.

33 The respondent also alleges that the work Washington Gray performed for Woods was not carried out in a good and workmanlike manner in accordance with the plans and specifications. In particular the respondent highlighted the fact that the embankment behind the rear wall of the garage was not retained. A structural engineer engaged by Woods recommended that a retaining wall was needed to support the embankment. According to the respondent it is the responsibility of the builder to identify these sorts of problems during construction and seek engineering advice.

34 There were several other alleged defects in the construction of the Wood's home including water damage to the window reveals and flooring, inadequate pad footings in a number of isolated brick piers supporting the floor and single skin brickwork in parts of the garage. Washington Gray later demolished the piers and constructed new concrete pad footings. An expert consultant noted that brick piers and concrete pad footings had been re-constructed at the top of the embankment behind the garage. In his view, they should have been reconstructed on concrete piers bored down to below the influence region of the embankment. In the respondent's view, the builder should have sought engineering advice if necessary.

35 According to Washington Gray, the contract excluded all retaining wall work. Washington Gray agreed that some window reveals had suffered water damage and had agreed with the manufacturer to replace them when the house was watertight. Washington Gray also said that after the piers were built, the bank started to erode and Washington Gray engaged a geotechnical engineer to inspect the site. It was agreed that the piers should be re-built along the top of the embankment. Washington Gray was in the process of completing this work when Woods terminated the contract. Washington Gray rectified other matters of concern.

36 Chisholm complaint. A complaint by Chisholm was the second matter which was of particular concern to the respondent. On 22 September 1998 Washington Gray entered into a contract with Chisholm to build a home. Chisholm terminated the contract on 8 March 2000 because of alleged structural and other defects and delays in construction. The respondent alleges that allowing for justified extensions of time, after 44 weeks into the contract the work was 70% complete, whereas it should have been finished. Alleged structural and other defects included:

· the verandah slab was constructed to a thickness of 50-60 mm instead of the 115 mm required by the engineer's drawings; (the verandah had to be demolished and rebuilt)

· the head over the living room window was sagging; (the timber beam used was later replaced with a steel beam in accordance with the engineer's drawing)

· reinforcing steel had been omitted from the front edge of the garage slab; (this may result in cracking and should be rectified)

· a number of specified concrete piers were not constructed; (the structural engineer's drawings show that the house was to be constructed on a reinforced concrete strip footing 500mm deep and 350 mm wide) and

· the strip footings were not to the specified thickness in some locations.

37 In summary, the respondent alleged that several structural problems developed in the construction of the house. Some have been rectified, but certain footings and piers still require rectification.

38 Washington Gray agreed that the house is not complete but said that the reason is that Chisholm was not satisfied with parts of the construction and has not paid some progress claims and invoices. Delays in construction are attributable to certain matters including: delays in payments, inclement weather, the need to handle bricks manually because of the steep site and holidays.

39 Washington Gray agreed that the verandah was re-built on the instructions of a consulting structural engineer. However they maintain that the allegations regarding the omission of reinforcing steel from the front edge of the garage slab and failure to construct the specified number of piers are unfounded. Washington Gray maintains that a structural engineer certified the construction of the garage slab. If cracks develop, they have undertaken to replace the slab. Washington Gray also maintains that on this site concrete is not required under isolated brick piers and that no piers are missing. Washington Gray submitted that several other defects alleged by Chisholm are unfounded. This matter is listed for formal mediation in the Fair Trading Tribunal.

40 Garcia and O'Brien complaint. Garcia and O'Brien complained to the Department on 15 April 1999 in relation to 31 alleged defects which they claim Washington Gray would not fix. On 17 February 2000 the Fair Trading Tribunal ordered Washington Gray to rectify certain defects by 16 March 2000. Washington Gray failed to rectify all the defects and a further order was made on 2 May 2000 to rectify the defects by 7 June 2000. The respondent alleges that Washington Gray has not complied with this order. In a recent hearing, the Fair Trading Tribunal ordered that a building consultant inspect the site and report on the rectification of the defective work.

41 Washington Gray states that the home was not completed because the building contract was terminated by agreement and they were asked to leave the site. Washington Gray maintains that they have rectified all defects and any outstanding items are disputed.

42 Delehunt complaint. The Delehunts complained of delay in completion of their home and defects, particularly in relation to the brickwork. The home was due to be completed on 26 November 1999 but was not completed until 8 September 2000. Delays occurred because the incorrect bricks were delivered to the site on two occasions. The respondent alleges that the delivery of the bricks should have been checked by Washington Gray and that extensions of time should not be allowed if Washington Gray failed to supervise the brickwork properly.

43 Washington Gray states that construction was completed on 9 August 2000. In March 2000 Washington Gray commenced proceedings in the Fair Trading Tribunal against Delehunt for an unpaid progress claim for brickwork. By agreement the matter was deferred and eventually withdrawn. Washington Gray is currently on site completing the rectifications. Completion was delayed because of inclement weather and late payment of progress claims. They tried to match the bricks but cannot be held responsible for the baking process of the bricks.

44 Clark complaint. Clark complained of 22 defective building items which Washington Gray had failed to rectify despite many phone calls and faxes. Clark asked Washington Gray to rectify defects on 12 March 1998 when the work was completed but Washington Gray did not rectify the defects until September 2000. Washington Gray maintains that the rectifications were generally completed by 12 June 1998. Washington Gray also stated that rectification of all defects was delayed by Clark's request that work be done on Saturdays.

45 Pacchini complaint. On 16 November 1996 Washington Gray contracted with Pacchini to construct a house. There were defects including cracked tiles and gyprock and uncleaned brickwork. The work was completed on 25 July 1997 and the owners gave Washington Gray a list of defective work. Washington Gray did not rectify all the defects within a reasonable time and some defects had not been rectified by 20 August 2000. In summary, the respondent says that Pacchini made repeated attempts to get Washington Gray to fix the defects and eventually contacted the Department of Fair Trading. An agreement was reached with Washington Gray on 17 September 1999 but despite that agreement Pacchini alleges that there is still outstanding brickwork to be cleaned.

46 Washington Gray states that they have attended to all defects which they are required to rectify. The tiles were laid by Pacchini and are not Washington Gray's responsibility. Washington Gray alleges that they were not told of two of the defects until more than three years after practical completion. Washington Gray states that they completed all defects by 3 February 2000 and that the delay was due to Pacchini's work commitments and holidays.

47 Engel complaint. Engel complained to the Department on 1 April 1999. Construction of their house was initially due to be completed on 1 August 1997, however extensions of time were claimed for Christmas holidays and inclement weather. Taking these periods into account construction should have been completed by 17 March 1998 but it was not completed until 8 May 1998. Several defects were reported including scratched windows, inadequate construction of lead flashing over the verandah and problems with the brickwork over the garage door.

48 Washington Gray states that taking into account extensions of time for inclement weather and holidays, the theoretical completion date should have been 11 April 1998. The actual date of completion was 8 May 1998. They have rectified all outstanding defects.

49 Hodgson complaint. The Fair Trading Tribunal ordered Washington Gray to rectify six outstanding items on the Hodgson residence by 29 September 2000. Four of the six items were fixed by the due date and another defect was fixed shortly after the due date. The final defect was not properly rectified until December 2000. A further hearing took place on 22 December 2000 because Hodgson was not satisfied that all rectification work had been completed including 25 "moving in" items.

50 Washington Gray maintains that they have completed all rectifications within the time ordered by the Tribunal.

51 Bohatdo complaint. Bohatdo complained about the poor quality of brickwork on her home. She also claimed that the contract was not completed within a reasonable time. Relying on statements from Bohatdo about justifiable extensions of time, the respondent estimates that the home should have been completed by 25 June 1997. It was not completed until 6 August 1997. There were also several alleged defects including that the kitchen cupboards did not fit the kitchen. This was because Bohatdo had requested a slightly wider kitchen. In addition, the bricks were not all the same colour. Eventually Bohatdo lodged an insurance claim with the Department for an amount of $53,955 for rendering and painting of all the brickwork to the house. Payment was approved.

52 Washington Gray says that an independent consultant stated that the brickwork was "passable." The major part of the rectification was the rebuilding of the garage gable and panels to the side of the front door. Washington Gray attended to these rectifications. In relation to the kitchen cabinets Washington Gray states that the tender only mentioned expanding the floor area, not the kitchen cabinets. Bohatdo refused Washington Gray access to the site after rectification of the walls was complete. This matter is now before the Fair Trading Tribunal.

53 Toroian complaint. In this case the respondents allege that the applicants have failed to comply with orders of the Fair Trading Tribunal to rectify non-structural defects. Orders were made to rectify defects by 20 October 2000 and then again by 1 March 2001. Washington Gray alleged that the majority of defects were rectified and that some were disputed.

Applicant's submissions on matters other than those arising from s 64A(2)

54 Several submissions raised by the applicants which do not relate to the matters set out in s 64A(2) can be dealt with briefly. Dr Flick alleged five legal errors in the respondent's decision making process which he contended may assist a conclusion that the correct or preferable decision is to set aside the decision. These included denial of procedural fairness, failure to consider relevant considerations, consideration of irrelevant considerations and an unreasonable exercise of power leading to a manifestly excessive decision.

55 I have concluded that the respondent did not make the correct and preferable decision based on the merits of the case. In those circumstances I did not need to consider the alleged legal errors raised by the applicants or the implications of such errors if they were made out. However, as a general comment in relation to these submissions, the Tribunal is conducting a merits review, not a judicial review of the Director General's decision. Under s 63 of the ADT Act the Tribunal must decide what the correct and preferable decision is having regard to the material then before it, including any relevant factual material and any applicable written or unwritten law.

56 The applicants next submission was that s 64A(2) of the FT Act is a "residual power" to be exercised where the HB Act does not provide an appropriate means for resolving a dispute. The HB Act provides for the issuing of licences, the making of complaints, the issuing of show cause notices, the hearing of complaints and suspension or cancellation of licences. The HB Act also allows each party the opportunity to present their case. In these circumstances, the applicants submitted that the FT Act should only be used as a residual power, not as a supplement or alternative to a damages claim.

57 Dr Flick's submission is contrary to the terms of s 64A(7) of the FT Act. That provision states that:

This section has effect despite the provisions of any other Act, and the power conferred by this section is in addition to, and does not limit or displace, a power conferred by or under any other Act that authorises the Director-General or any other person to suspend or cancel a licence or take other action in respect of a licence or in respect of the conduct concerned.

58 This provision makes it clear that s 64A is not a "residual" power in the sense suggested by Dr Flick. Section 64A may be invoked in any circumstances where the elements are made out.

59 In oral submissions, Dr Flick said that the factual material relied on by the Director General involved contractual breaches rather than matters such as fraudulent behaviour or structural defects which could lead to a risk of physical harm. In those circumstances s 64A(2) should not be invoked. Contractual disputes are appropriate matters for claims of damages, but not for interfering with the applicants' livelihood. Even a history of contractual breaches does not justify action being taken under s 64A(2).

60 There is nothing in s 64A(2)(a), or any other provision, which expressly or impliedly restricts the kind of conduct which can be the subject of a suspension order in the way suggested by Dr Flick. Section 64A(2)(a) includes any conduct that constitutes grounds for suspension or cancellation of the licence. This covers a wide range of conduct including contractual breaches and fraudulent behaviour. Where there is evidence of such conduct and the elements in s 64A(2)(b) and (c) are made out, the Director General can suspend a licence under that section.

61 However, depending on the circumstances, the elements of s 64A(2) may be more easily established if extreme conduct such as fraudulent behaviour or potentially dangerous structural defects are involved. In particular such conduct may justify a belief that urgent action needs to be taken to prevent it being repeated. (See, for example Tropea -v- Director General, Department of Fair Trading [2001] NSWADT 158 where there were several allegations of dishonesty and misrepresentation and the Tribunal affirmed the Director General's decision to suspend the applicant's licence.)

Findings and Decision

62 I agree with the following summary of the complaints put forward by the respondent:

1) Chisholm and Woods: significant structural defects, in addition to non-structural defects and delays in rectification;

2) Bohatko and Delehunt: significant defective brickwork, in addition to non-structural defects and delays in rectification;

3) The balance of the complaints involving at least non-structural defects which were often only rectified at an extremely late stage, if at all, and often only after matters had been taken to the Fair Trading Tribunal and after complaints had been lodged with the Department.

63 In relation to the Woods complaint I am satisfied that there were delays and deficiencies in the manner in which the work was carried out. While some delay may be justified, of greater concern is the apparent failure to carry out several aspects of the work in a workmanlike manner resulting in the need for rectification in some cases and major work (such as retaining the embankment) in others.

64 In relation to several of the complaints, I am satisfied that there were undue delays in construction. There are also several complaints where minor as well as major defects occurred, which required rectification. Further significant delays have occurred in the rectification of many of these defects. In addition the matters set out in paragraphs 20 and 21 of the respondent's submissions are relevant.

65 The applicants have offered explanations for many of the matters raised, but these explanations fail to convince me that they have acted within the contracted (or ordered) time frames in terms of construction and rectifying defects. I am also satisfied that they have been responsible for numerous defects, some of which are structural.

66 The respondents submitted that the material set out above establishes that there are reasonable grounds to believe that Washington Gray has engaged in conduct which constitutes grounds for suspension or cancellation of the licence. The breaches of the HB Act which the respondent relies on are:

· Section 51(1)(c) breaches of the statutory warranties required by Part 2C of the HB Act, including the warranties identified in s 18B(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); and 18B(d) (work will be done with due diligence and within the time stipulated in the contract);

· Section 51(2)(a) (breaches the terms of a contract without reasonable cause); and

· Section 51(2)(c) (failure to comply with an order of the Fair Trading Tribunal).

67 In respect of Mr Gough the respondent submitted that the evidence establishes reasonable grounds to believe that Mr Gough, as a nominated supervisor, has engaged in conduct which constitutes grounds for suspension or cancellation of his licence. The presumption in s 53(2) is that Mr Gough has control over the doing of all work for which he is the nominated supervisor. The breaches of the HB Act which the respondent relies on are:

· Section 53(1)(a) (the requirements applicable to the work made by or under this Act or any other Act are not complied with); and

· Section 53(1)(b) (statutory warranties to perform work in a proper and workmanlike manner and with due diligence in accordance with the times stipulated in the contracts).

68 Each of these breaches constitutes grounds for suspension or cancellation of the licence under s 56 and s 57 of the HB Act.

69 While the applicants did not concede that they had engaged in conduct which constitutes grounds for suspension of their licences, they did not make submissions which addressed this issue.

70 Based on the evidence and the submissions, I am of the opinion that there are reasonable grounds to believe that Washington Gray and Mr Gough have engaged in conduct that constitutes grounds for suspension or cancellation of their respective licences.

71 Secondly, the respondent submitted that the evidence establishes that there are reasonable grounds to believe that it is likely that the applicants will continue to engage in the conduct identified. The basis for this belief is the number and seriousness of the complaints alleged against the applicants and their failure to modify their behaviour over several years.

72 The applicants submitted that there was no basis for a belief that it is likely that the applicants will continue to engage in that conduct. They submitted that Washington Gray has performed thousands of building contracts since 1973 and the number of complaints is relatively insignificant by comparison. They also submitted that the company remains ready willing and able to rectify work which is the subject of complaints. Finally, according to the applicants, all work ordered to be performed has been performed.

73 While I accept the applicants' submission that, in their view, all work ordered to be performed has been performed, there is clear evidence that orders of the Fair Trading Tribunal to rectify defects were not complied with within the allocated time frames. I do not find the applicants' assertion that it remains ready willing and able to rectify work which is the subject of complaints convincing. The evidence suggests that their record in this regard is less than satisfactory.

74 Based on the evidence and the parties' submissions, I am of the opinion that there are reasonable grounds to believe that Washington Gray and Mr Gough will continue to engage in that conduct. This opinion is based on a well-documented history in ten matters of long delays in completion, long delays in rectifying defects, a significant number of non-structural defects and some structural defects. There has also been at least one matter which was the subject of a successful insurance claim for $54,150 involving failure to rectify work.

75 In addition, Washington Gray also has been the subject of 130 complaint since 1973. Six of these complaints have resulted in the successful lodgement of claims under the Department's Insurance Scheme. These claims total $72,880. There has also been another successful claim for $60,000 under the new private home warranty scheme.

76 The number of complaints and insurance claims represents a small proportion of the total number of contracts completed. However, it is likely that if Washington Gray continues to enter into home building contracts then a small proportion of clients will experience similar difficulties including delays in construction, minor defects and structural defects as well as delays in rectifying defects.

77 Finally the applicants submitted that the evidence establishes that there are reasonable grounds to believe that there is a danger that persons may suffer significant harm or loss as a result of such conduct unless urgent action is taken. According to the applicants, the basis for this belief is as follows:

· the construction of a house is often a financial burden for the purchasers;

· disputes add an extra cost for which the home-owner has not budgeted and should not have to budget for given the protection of the contract and the legislation;

· the cost of rectifying defective work is a loss or harm which has to be borne either by the home owner or their insurer;

· not all costs associated with rectification or delay are recoverable from an insurer;

· non-economic loss is often suffered by home owners when protracted building disputes occur.

78 The applicants submitted that there is no basis for a belief that urgent action is required to avoid such harm, loss or damage. The applicants submitted that of the ten complaints under consideration, the first was made in October 1998. The complaints have been investigated and despite a recommendation to the Director-General that in December 2000, the decision to suspend was not taken until May 2001.

79 A suspension decision can be made under s 64A(2) without procedural fairness being afforded to the licensee. Section 64A(3) states that:

(3) A notice under subsection (2) has effect according to its terms, whether or not the licensee has been afforded an opportunity to be heard as to whether the licence should be suspended.

80 The applicants submitted that a legislative constraint as to "urgency" requires that a relevant public interest prevail over the private interest of a licence holder in being provided with an opportunity of being heard. (Riverside Nursing Care Pty Ltd v Bishop [2000] FCA 1147 at [12]- [13]). In other words the licensee may be denied the opportunity to be heard if the danger of significant harm, loss or damage occurring justifies urgent action being taken. Finally the applicants argued that significant harm or loss could not arise from a situation where work is not completed on time or there are allegations that work has not been performed in a workmanlike manner.

81 In my view, there are no reasonable grounds to believe that there is a danger persons may suffer significant harm or loss as a result of the applicants' conduct unless urgent action is taken. This conclusion means that the third requirement in s 64A(2) has not been made out and the Director General's decisions must be set aside.

82 In deciding whether the elements of s 64A(3) have been made out, the Tribunal must determine the meaning of that provision. The basis for such a belief does not have to be satisfied on the balance of probabilities. Some things may be left to "surmise or conjecture". (George v Rockett and Anor ((1990) [1990] HCA 26; 170 CLR 104 at 116 Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ.)

83 Section 64A(3) imposes a single requirement, but it has three aspects. These are:

· that there is a "danger"

· that a person may suffer significant harm, loss or damage as a result of certain conduct;

· unless action is taken urgently.

84 According to The Macquarie Dictionary (3rd edition, The Macquarie Library, 1997) "danger" means "liability or exposure to harm or injury." "Risk" has a similar, though slightly less extreme meaning, namely "exposure to the chance of injury or loss." In my view, the word "danger" was used as opposed to the word "risk" because the legislature wished to convey its intention that there be more than a mere chance of harm, loss or injury occurring.

85 The second aspect of the test in s 64A(3) is that a person may suffer significant harm, loss or damage as a result of the likelihood that the licensee will continue to engage in certain conduct. I do not accept the applicants' submission that significant harm or loss could never arise from a situation where work is not completed on time or where work has not been performed in a workmanlike manner. The respondent has listed the kinds of loss and damage that a person may suffer from such conduct. That loss includes the time and expense of making complaints to the Department of Fair Trading and taking matters to the Fair Trading Tribunal. Further financial loss may be incurred from delays in construction, which necessitate paying rent for accommodation elsewhere. Not all such losses are recoverable from an insurer. In addition clients may experience non-economic loss in the form of inconvenience, frustration caused by delays in moving into their home and anxiety about whether their home will be completed and defects rectified.

86 The third aspect of s 64A(3) is that the danger of significant harm, loss or damage can only be avoided if action is taken urgently. I do not accept the applicants' submission that the need for urgent action can be assessed, at least to some extent, on the basis of the conduct of Departmental officers and the Director General in dealing with the complaints. The applicant's allegation that the respondent did not act promptly, even if proved, is not evidence which is relevant to the question of urgency. The need for urgent action must be assessed objectively on the basis of the evidence, not subjectively on the basis of an inference about what was in the mind's of Departmental officers.

87 Given this analysis, the Tribunal must look at the evidence on which the need for urgent action is based. Mr Warden who is the office manager of Washington Gray gave evidence that as at the date of suspension of Washington Gray's licence, it had contracts with eight purchasers to construct homes, which were in various stages of completion. There was no evidence that any of these purchasers had complained or were experiencing difficulties with Washington Gray or Mr Gough. My understanding of the Department's submission was that Washington Gray and/or Mr Gough is free to enter into new contracts at any time. Given their past record, there was a danger that other clients (and/or existing clients) would experience similar harm, loss and damage to that experienced by the complainants.

88 I do not consider that there is such a "danger" in this case requiring urgent action. While there is some chance or risk that existing or other clients will suffer similar significant losses to those apparently already suffered by previous complainants, that risk is low. Washington Gray has entered into and completed thousands of contracts since 1973 and the rate of complaints, especially in recent years, was not high. This relatively low risk means that urgent action was not needed to avoid such loss occurring in the short term. In my view any such risk could have been avoided by, for example, placing a condition on the licence that Washington Gray not enter into any new contracts pending disciplinary proceedings being brought against the applicants.

89 This situation can be distinguished from that in Tropea -v- Director General, Department of Fair Trading [2001] NSWADT 158 where several allegations of dishonesty and misrepresentation had been made. Mr Tropea denied that he had been involved in any wrongdoing. Despite Mr Tropea's denials there were consistent complaints which provided reasonable grounds to believe that Mr Tropea has engaged in improper conduct. The urgency in relation to this matter related, in part, to the need to avoid any continuation of dishonest or fraudulent conduct.

90 The respondent's final submission was that once the opinion is formed that there exists reasonable grounds to believe the matters specified in section 64A(2)(a)-(c) and the occasion arises for the exercise of discretion, the balance moves decisively in favour of the protection of the public. Given that I have found that one element of s 64A has not been made out, there is no need to deal with this submission.

Orders

1) The decision of the Director General dated 21 May 2001 to suspend the contractor's licence of Washington Gray Pty Ltd is set aside.

2) The decision of the Director General dated 21 May 2001 to suspend the qualified supervisor's certificate of Robert Gough is set aside.

3) The decision of the Director General dated 20 July 2001 to suspend the contractor's licence of Washington Gray Pty Ltd is set aside