Appellant v Respondent

Supreme Court of Victoria|2015-04-29|Before: McDONALD J

ADMINISTRATIVE LAW - Appeal on question of law - Victorian Civil and Administrative Tribunal - Whether Domestic Building Contracts Act 1995 applies to multi-apartment developments - Whether legal proceedings commenced without being authorised by special resolution - Victorian Civil and Administrative Tribunal Act 1998 s 148 - Owners Corporation Act 2006 ss 18, 97 - Domestic Building Contracts Act 1995 ss 1, 3, , , , - and .

1 The appellant ('Burbank') is the builder of a 67 residential apartment development in Maribyrnong known as Waterford Towers. The respondent ('Owners Corporation') is the owner of the common areas of Waterford Towers. In November 2012, Owners Corporation commenced proceedings against Burbank in the Victorian Civil and Administrative Tribunal ('VCAT') alleging defective construction works in Waterford Towers' common property. Owners Corporation alleged that the work undertaken by Burbank was subject to implied warranties under s 8 of the Domestic Building Contracts Act 1995 ('DBC Act'). It further alleged that it was entitled to the benefit of the warranties pursuant to s 9 of the Act. Save for the claims arising under ss 8 and 9 of the DBC Act, no other claims were made against Burbank.[1]

2 Burbank made an application pursuant to s 75 of the Victorian Civil and Administrative Tribunal Act 1998 ('VCAT Act') to strike out the proceedings. On 13 November 2013, the Tribunal, constituted by Aird DP, dismissed the application. Burbank appealed this decision pursuant to s 148 of the VCAT Act. On 5 February 2014, Burbank was granted leave to appeal. When the appeal was heard by me, Burbank did not press all of the grounds in respect of which leave had been granted. Based on the arguments which were pressed in the hearing before me, three questions fall for determination by the Court:

(1) Does the DBC Act have any application to a multi-apartment development?

(2) Does the DBC Act have any application to developers?

(3) Was there a valid special resolution by Owners Corporation authorising the commencement of the proceedings in VCAT?

3 I have concluded that the first question should be answered in the affirmative. The construction of Waterford Towers, being a multiple residential apartment development, was subject to the DBC Act. The answer to the second question differs depending upon the nature of the works which are the subject of the contract to which a developer is a party. If the work falls within the terms of s 5 (and outside of s 6) of the DBC Act, the Act will apply. If the work does not, the Act will not apply.

4 The third question is answered in the negative. However, the absence of a valid special resolution by Owners Corporation is a procedural irregularity which may be cured. The Court will order that the proceedings in VCAT be stayed until Owners Corporation is authorised by special resolution to bring the proceedings against Burbank.

The application of DBC Act to multi-apartment developments

5 Counsel for Burbank, Mr Andrew, submitted that the DBC Act has no application to a multi-apartment development such as Waterford Towers. If this contention is correct, Burbank's application under s 75 of the VCAT Act should have been upheld. The claims made by Owners Corporation are based solely upon the implied warranties under s 8 of the DBC Act. Absent the Act applying to the contract for the construction of Waterford Towers, there is no legal foundation for the claims made by Owners Corporation.

6 Counsel for Burbank and Owners Corporation submitted before me that there is no authority of the Victorian Supreme Court which has directly considered the question of whether the DBC Act applies to a multi-apartment development. They also submitted that there is no legislation in other Australian States or Territories which is in the same terms as the DBC Act. In the absence of Victorian Supreme Court authority directly on point, the question of whether the DBC Act applies to a multi-apartment development turns on the interpretation of the provisions of that Act.

7 The Court of Appeal recently observed in Treasurer of Victoria v Tabcorp Holdings Ltd:[2]

... the task of statutory interpretation begins, and ends, with the words which Parliament has used. For it is through the statutory text that the legislature expresses, and communicates, its intention.

Interpreting a particular provision requires consideration of the legislative context and - where relevant - the legislative history. But if the words are clear and unambiguous, and can be intelligibly applied to the subject-matter, the provision must be given its ordinary and grammatical meaning, even if the result may seem inconvenient or unjust.[3]

8 Owners Corporation's claims against Burbank in VCAT were based solely on alleged breaches of the warranties implied by s 8 of the DBC Act. The warranties prescribed by s 8 of the Act are 'part of every domestic building contract'. 'Domestic building contract' is defined in s 3 as 'a contract to carry out, or to arrange or manage the carrying out of, domestic building work other than a contract between a builder and a sub-contractor'. 'Domestic building work' is defined in s 3 as 'any work referred to in s 5 that is not excluded from the operation of this Act by s 6'.

9 Section 5 of the DBC Act describes the building work to which the Act applies. Sections 5(1)(a) and (e) are of particular relevance. Section 5(1)(a) provides that the Act applies to 'the erection or construction of a home'. The term 'home' is defined in s 3 as: '[a]ny residential premises and includes any part of a commercial or industrial premises that is used as a residential premises.' It has been held that 'a home' includes 'homes'.[4] Thereafter the definition of 'home' lists a series of exclusions. None of the exclusions cover a residential apartment in a multi-apartment development.

10 Section 5(1)(e) provides that the Act applies to:

any work associated with the construction or erection of a building -

(i) on land that is zoned for residential purposes under a planning scheme under the Planning and Environment Act 1987: and

(ii) in respect of which a building permit is required under the Building Act 1993.

11 The terms of s 5(1)(a) and/or (e) weigh heavily in favour of the conclusion that the DBC Act does apply to a multi-apartment development. Plainly, a multi-apartment development such as Waterford Towers would have been built on land zoned for residential purposes and will have required a building permit under the Building Act 1993 ('Building Act'). Further, as a matter of ordinary language, the definition of 'home' includes a residential apartment in a multi-apartment development. Not only is a residential apartment in a multi-apartment development not included within the specific exclusions within the definition of 'home', it is also not referred to in s 6 of the DBC Act which prescribes seven categories of work to which the Act does not apply.

12 It would have been a very simple matter for the DBC Act to have expressly excluded a residential apartment in a multi-apartment development from the definition of 'home'. An analogous approach was adopted in the House Contracts Guarantee Act 1987 ('HCG Act'). The definition of 'dwelling house' in s 3 of that Act excluded residences which were above or below another residence. The DBC Act is the successor to the HCG Act. This is clear from the terms of s 1(d) of the DBC Act which prescribes that one of its main purposes is to amend the HCG Act, and in particular, to phase out the making of claims under that Act.

13 Section 35(a) of the Interpretation of Legislation Act 1984 provides that a construction that would promote the purpose or object underlying an Act (whether or not that purpose or object is expressly stated in the Act) shall be preferred to a construction that would not promote that purpose or object. In addition to the purpose in s 1(d) of the DBC Act to which reference has been made above, s 1 states that the main purposes of the Act are:

(a) to regulate contracts for the carrying out of domestic building work; and

(b) to provide for the resolution of domestic building disputes and other matters by the Victorian Civil and Administrative Tribunal; and

(c) to require builders to carry out domestic building work to be covered by insurance in relation to that work.

...

(a) to provide for the maintenance of proper standards in the carrying out of domestic building work in a way that is fair to both builders and building owners; and

(b) to enable disputes involving domestic building work to be resolved as quickly efficiently and as cheaply as is possible having regard to the needs of fairness; and

(c) to enable building owners to have access to insurance funds if domestic building work under a major domestic building contract is incomplete or defective.

Construing the reference to 'home' in s 5 of the DBC Act so as to include a residential apartment in a multiple-apartment development does not undermine the purposes or objects of the Act. To the contrary, I cannot discern from the scheme of the DBC Act any basis for excluding the owner of a residential apartment from the benefits which are conferred by the Act. Such an outcome would create two classes of residential premises: a stand alone dwelling house and a residential apartment. The owner of a stand alone dwelling house would have the benefit of the DBC Act whilst the owner of a residential apartment would not. This outcome would not promote the purpose and/or objects of the DBC Act.

14 I am fortified in reaching the conclusion set out above by the fact that the Victorian Parliament has passed regulations[5] exempting builders carrying out works on multi-storey residential developments from the operation of s 136(2) of the Building Act. Section 136(2) provides that a builder must not carry out domestic building work under a major domestic building contract unless the builder is covered by the required insurance. Under s 3 of the Building Act, 'domestic building work' and 'major domestic building contract' have the same meaning as under the DBC Act. The exemption from the requirement for a builder to take out warranty insurance on a multi-storey residential apartment development is premised on the construction of a multi-storey residential development being work which is subject to the operation of the DBC Act.

15 As noted above, both Mr Andrew, who appeared for Burbank, and Mr Manly QC, who appeared with Mr Moss for Owners Corporation, submitted that there is no authority of the Victorian Supreme Court which has directly considered the question of whether the DBC Act applies to a multiple-apartment development. Mr Andrew did, however, rely upon observations in a number of judgments, which he contended supported the proposition that the DBC Act has no application to a multiple-apartment development. First, he relied upon the judgment of Warren CJ in Kane Constructions Pty Ltd v Sopov.[6] One of the matters dealt with in the judgment was the application of s 33 of the DBC Act. That section prohibits a builder from entering into a major domestic building contract that allows the price to change unless the builder warns the owner in the manner prescribed by s 33(2). As to the application of the DBC Act to the development project which was the subject of her Honour's judgment, Warren CJ stated:

I have difficulty in accepting that in a project such as the present where it is a combined, mixed use development of residential, office and gallery and restaurant, developed by a developer, it should be subject to the protections enshrined in the Domestic Building Contracts Act. Picking up on the observations of Hansen AJA in Winslow Constructions, it seems to me that the Act was not intended to apply to developers, and for that reason alone the provisions have no bearing on the present case. Even so, the Domestic Building Contracts Act could only have application to those parts of the project intended for domestic residential use. Those parts of the development intended to be used 'for business purposes' are expressly excluded from the operation of the Act by virtue of s.6(c).

I am of the view, therefore, that the Act does not apply to a project such as the present. However, in the event that the Act did apply, it would be appropriate to consider its application so far as it went to the residential component of the development.[7]

16 It is clear from the passages referred to above that her Honour was not addressing the issue which is before me of whether the DBC Act applies to a multi-apartment development solely for residential purposes. The development which was the subject of her Honour's judgment was a combination of residential, office, gallery and restaurant. Her Honour expressly left open the possibility that the Act could have application to the residential component of the development. I consider Warren CJ's judgment to be distinguishable based on the significant difference between the nature of the development considered by her Honour and a multi-apartment development solely for residential purposes.

17 Mr Andrew also relied upon the judgment of the Court of Appeal in Winslow Constructions. One of the issues in this case was whether civil engineering and infrastructural work carried out by Winslow Constructions fell within the scope of the DBC Act. The Court of Appeal held that the definition of 'associated work' in s 5(1)(a)(i) does not apply to work performed in contemplation of prospective homes on a proposed residential development.[8] Hansen AJA stated that the intent of the DBC Act is to protect individual homeowners rather than commercial developers.[9] His Honour also stated that the DBC Act was 'enacted to regulate the rights of homeowners and builders as distinct from developers having regard to the objects of the DBC Act in s 4 and the Second Reading Speech'.[10]

18 In Sopov, Warren CJ stated that the views expressed by the Court of Appeal in Winslow Constructions:

... with respect to the limitations or application of the Domestic Building Contracts Act are confined to the narrow ambit before the Court on that occasion, and therefore obiter.[11]

19 Plainly, there is a very significant difference between the potential application of the DBC Act to earthworks undertaken as part of preliminary works for a housing subdivision, and the construction of apartments for residential purposes. I agree with the observation of Warren CJ that the statement for the Court of Appeal in Winslow Constructions regarding the application of the DBC Act is confined to the narrow ambit of the facts before the court on that occasion.

20 Mr Andrew also relied upon the judgment of Shelton J in Glenrich Builders Pty Ltd v 1-5 Grantham Street Pty Ltd and 415 Brunswick Road Pty Ltd.[12] It was an agreed matter before Shelton J that the two defendant companies were owner developers. The contracts in question were for the construction of 103 residential units. This was subsequently changed to a 96 apartment residential hotel and serviced apartment complex.[13] The defendants sought a stay of the County Court proceedings pursuant to s 57 of the DBC Act. They contended that the County Court proceedings arose from a domestic building dispute, as defined in s 54 of the Act. Shelton J held that the County Court proceedings did not arise out of a domestic building dispute. His Honour accepted the plaintiff's contention that the DBC Act does not apply to owner developers. In reaching this conclusion, Shelton J relied upon the judgments of Hansen AJA in Winslow Constructions and Warren CJ in Sopov, as set out above.

21 Mr Andrew also referred me to the Court of Appeal's judgment in 1-5 Grantham Street Pty Ltd and anor v Glenrich Builders Pty Ltd.[14] This was an application for a stay pending an appeal from the judgment of Shelton J referred to above. The notice of appeal challenged Shelton J's finding that the DBC Act did not apply to the residential apartment development the subject of the proceeding before him. On the hearing of the stay application, counsel for the appellant abandoned the challenge to Shelton J's finding. Redlich JA and Hargrave AJA said that this was 'quite properly' done.[15] I do not consider that their Honours' observation constitutes a judicial determination by the Court of Appeal of whether the DBC Act applies to a multi-apartment development. The matter was not argued before the Court of Appeal.

22 Mr Andrew also relied upon the terms of the Second Reading Speech of the Attorney-General, Mrs Wade, on 24 October 1995, in respect of the Domestic Building Contracts and Tribunal Bill 1995. He submitted that the contents of that speech demonstrated that the purpose of the legislation was to protect consumers. He submitted that 'the Act is intended to apply only to the homeowner of a traditional dwelling. So if you have a block of apartments, it doesn't matter what the contractual arrangements were, that's not a building that is covered by this Act.'[16]

23 The purposes of the DBC Act are set out earlier in these Reasons. I accept Mr Andrew's submission that the Act has an overriding purpose of protecting consumers. However, no provision of the DBC Act supports an outcome whereby the purchaser of a residential apartment is excluded from such protection. Section 9 of the DBC Act provides that the warranties listed in s 8 run with the building. Where a residential apartment building is constructed pursuant to a contract between a developer and builder, any purchaser of an apartment will then have the benefit of the warranties, even though they were not a party to the original contract. The operation of s 9 is consistent with a statutory intention to extend the protection conferred by s 8 beyond the original contracting parties.

24 Mr Andrew referred to the following passages from the Second Reading Speech:

This bill contains a package of unprecedented reforms to the home building and renovation industry in Victoria, which will be of significant assistance to home owners and builders alike.

Many consumers have complained that HGF is bureaucratic and too slow to make decisions, that it is pro-builder and, on a more philosophical level, that there is an inherent conflict of interest in its multiple roles.

The reforms contained in this bill constitute a comprehensive and integrated package comprising: first, a domestic building disputes tribunal, providing a means by which builder and consumer disputes can be expeditiously and inexpensively handled.

The tribunal will be non legalistic and will deal with matters quickly and at minimal cost... The tribunal will have a wide discretion in the awarding of costs so that the concept of fairness is clearly adhered to.

... a minimum amount of $100,000 insurance will now be required, secondly, ambiguities and inconsistencies in the current coverage will be removed - that is in the case of new home construction, everything from the house itself to paving, driveways, fences and swimming pools will be covered if included as part of the initial contract.

One of the key areas that has caused difficulty in the domestic building industry to date is the owner's ability to understand the domestic building contract.

However, the government still believes that the contracts could still do more to clarify the rights of the building owner, the average Victorian family.

The bill also incorporates a number of statutory warranties into every building contract for the protection of the homeowner.

Domestic building disputes are a special category of dispute where the timeliness of resolution is critical, and were less formal proceedings are more likely to reach the heart of the matter than the full panoply of the law.

The government believes this significant set of proposals set forth a new and fairer relationship between builders and homeowners.

25 There is nothing contained in the extracts from the Second Reading Speech for the Domestic Building Contracts and Tribunal Bill which justifies a departure from the plain meaning of the words used in s 5 of the DBC Act (regarding the application of the Act), and the definition of 'home' in s 3 of the Act. None of the statements made by the Attorney-General are incompatible with the conclusion that the Bill was intended to regulate the construction of all residential premises, including those in multiple-apartment developments. I have concluded that the words used in the DBC Act are clear and unambiguous and support the conclusion that the Act applies to a multi-apartment development. The contents of the Second Reading Speech do not justify any departure from this conclusion.

26 In addition to the judgments relied upon by Mr Andrew, namely Winslow Constructions and Sopov, there are a number of judgments of the Supreme Court of Victoria which have considered the application of the DBC Act to a multi-apartment development. In Shaw v Yarranova Pty Ltd and anor,[17] the Court of Appeal had to determine whether a contract of sale 'off the plan' of an apartment to be built as part of a residential development in the Docklands area of Melbourne was a 'major domestic building contract' under the DBC Act. Before the Court of Appeal no contention was advanced that the work be undertaken in constructing the apartment fell outside s 5(1) which prescribes the work to which the Act applies.[18] Nevertheless, Neave JA (Eames JA agreeing) expressed a clear view that the implied warranties in s 8 of the DBC Act did form part of the contract for the construction of a multi-residential apartment development:

This case raises the issue of whether s 42 applies to all these arrangements, or only to the situation in which the developer is also responsible for the design and construction of the home.

Leaving aside this question for the moment, a purchaser who buys land off the plan (including an apartment or building which is to be constructed) is protected by the existence of a major domestic building contract whichever of these options is followed.

The registration requirements in the Building Act will apply to a person or body carrying out the work. Because the building includes residential apartments, the contract will have to include the provisions of Pt 3 of the DBC Act. Under s 137E of the Building Act depending on the nature of the contract either the developer or the builder will be required to take out insurance. Warranties will be implied into the contract by s 8 of the DBC Act. If the contract of sale to the purchaser is not itself a major domestic building contract the warranties implied into the contract between the developer and the builder will run with the land under s 9.[19]

27 Further, there have been a number of judgments of the Victorian Supreme Court which have proceeded on the basis that the DBC Act does apply to a multi-apartment development. In Mrocki v Mountview Prestige Homes Pty Ltd,[20] the building subject to the dispute was a single building configured as two apartments. Dixon J stated:

Mountview developed a submission that the obligations undertaken by it were not 'work', for the purposes of s.5 of the DBC Act. As I have concluded that there is no breach of clause 11 established, it is not necessary to deal with this submission. However, I will briefly state my view that the introductory words to clause 11, 'To the extent required by the Domestic Building Contracts Act the Builder warrants that ...', do not preclude the consequence that the warranty is devoid of content because the Act has no application. Section 8 of the DBC Act applies to the Contract because the statutory warranties are given by a 'builder' about the work to be carried out under a domestic building contract. 'Builder' includes a person who manages or arranges the carrying out of domestic building work and a 'domestic building contract' means a contract to arrange or manage the carrying out of domestic building work. Mountview is a builder for the purposes of the Act by reason of being a party to a construction management contract, which is a contract to manage the carrying out of domestic building work. The work being managed falls within the description of building work to which the Act applies in s.5 of the DBC Act.[21]

28 Although the observations of Dixon J relate to a development comprising a single building configured as two apartments, they still bear upon the issues which I must determine. Mr Andrew accepted that if the proposition that the DBC Act does not apply to a multi-apartment development was sound, it would apply equally to an apartment building with two-hundred apartments, as opposed to any multi-residential development, including the construction by a developer of two town houses.[22]

29 There are other examples of cases which have proceeded on the basis that the provisions of the DBC Act do apply to a multi-apartment residential development. In The Gombac Group Pty Ltd v Vero Insurance Ltd and Ors[23] the development involved a contract between a builder and a developer to build eight apartments in Fitzroy. In Body Corporate No 1 - PS 40911511E St James Apartments v Renaissance Assets Pty Ltd[24] the development involved the conversion of a building at 350 St Kilda Road, Melbourne from an office building to a residential building comprising a large number of residential units now known as the St James Apartments.

30 The question of whether the DBC Act applies to a multi-apartment development such as Waterford Towers begins and ends with the interpretation of the DBC Act. The language of ss 3, 5 and 6 is unambiguous. A residential development is a residential premises and is a 'home' as defined in s 3. A home includes multiple homes. Further and alternatively, the building which comprises the 67 apartments named Waterford Towers must have been built on land zoned for residential purposes and have required a building permit under the Building Act. As such, the construction of the building is subject to the DBC Act by virtue of s 5(1)(e). Neither the second reading speech for the Domestic Building Contract and Tribunal Bill nor the authorities relied upon by Mr Andrew warrant a departure from my interpretation of the DBC Act. None of the authorities cited by Mr Andrew are binding upon me in respect of the issues which I must determine in these proceedings.

31 Mr Andrew submitted that the statement by Warren CJ in Sopov to the effect that the DBC Act does not apply to developers, constituted ratio decidendi and was binding upon the Tribunal. He submitted that the Tribunal erred in describing the statement as 'no more than observations'.[25]

32 Burbank's submission that the DBC Act has no application to developers must be rejected. It is misconceived to frame a question concerning the application of the DBC Act by reference to the identity of a contracting party (save for a contract between a builder and sub-contractor),[26] whether that party be a developer, builder, vendor or purchaser. Section 5 of the DBC Act, which prescribes the work covered by the Act, directs attention to the nature of the work undertaken rather than the parties to the contract governing the work in question.

33 Plainly, there are instances in which a contract to which a developer is a party will not contain the warranties implied by s 8 of the DBC Act. For example, if the contract is for the construction of a building intended to be used only for business purposes or the construction of a building intended to be used only to accommodate animals. In these instances, the nature of the work is expressly excluded from the operation of the Act by s 6(c) and (d). Conversely, there will be instances in which the nature of the work governed by a contract to which a developer is a party is such that the work will be subject to the implied warranties in s 8. A contract for the construction of a multi-residential apartment development is a case in point.

34 I have set out earlier in these reasons the passage from the judgment of Warren CJ in Sopov which is relied upon by Burbank. The judgment does not constitute authority for the proposition that the DBC Act has no application to any contract to which a developer is a party. Warren CJ expressly left open the question of the application of the DBC Act to those parts of the development which were for residential purposes.

Was there a valid special resolution by Owners Corporation authorising the commencement of proceedings in VCAT?

35 By virtue of s 18 of the Owners Corporation Act 2006 ('Owners Corporation Act'), Owners Corporation was required to have a special resolution authorising the commencement of the VCAT proceedings. In support of its application under s 75 of the VCAT Act, Burbank contended that the proceeding was invalid because it was commenced without any authorisation by special resolution. In the VCAT proceedings, Owners Corporation conceded that a special resolution authorising the bringing of proceedings had not been passed when the proceedings were commenced in November 2012.[27] An interim special resolution was passed by Owners Corporation on 16 April 2013. In the VCAT proceedings, and before me, Owners Corporation conceded that there were some defects in the notice of interim special resolution forwarded to members pursuant to s 97 of the Owners Corporation Act.[28]

36 On 15 July 2013, Owners Corporation sent a further notice of postal ballet to each member of the corporation. On 2 August 2013, Owners Corporation passed a further interim special resolution. On 6 August 2013, a notice was forwarded to lot owners advising them of the interim special resolution. It was conceded both before VCAT and before me that this notice did not comply with s 97(4) of the Owners Corporation Act. That section provides:

The notice under sub-s (2) or (3) must state that the interim special resolution will become a special resolution at the end of 29 days after it was passed unless lot owners who hold more than 25% of the total votes for all the lots affected by the Owners Corporation petition the secretary against the resolution.

37 The Tribunal concluded that notwithstanding non-compliance with s 97(4), 'the requisite notice was included, in substance, with the notice of postal ballet.'[29] Relevantly, the notice of postal ballet dated 15 July 2013 provided:

Following the recently conducted postal ballet where an interim "Special Resolution" was passed to bring legal proceedings against Burbank Pty Ltd, we have received legal advice and are conducting another ballet to ratify and affirm this "Special Resolution".

Type of Resolution

A Special Resolution requires 75% of lot owners or their proxies or representing 75% of lot entitlements of all the lots. If a Special Resolution is voted by at least 50% of all the lot entitlements in favour and no more than 25% against, it is an interim Special Resolution.

An interim Special Resolution requires a notice to be sent to all lot owners and can only be acted on after 29 days. If the secretary received a petition by more than 25% of lot owners against an interim Special Resolution within 29 days of the meeting or ballet, then the interim Special Resolution fails.[30]

38 Owners Corporation submitted that the substance and practical effect of the notice of postal ballet was to provide lot owners with the same information required by s 97(4). I do not accept this submission. The information conveyed to lot owners by the notice of postal ballet dated 15 July 2013 preceded the ballet conducted on 2 August 2013. It is clear from the terms of s 97 that the information which is required to be provided to lot owners pursuant to s 97(4) must be provided within 14 days after the close of the ballet pursuant to which an interim special resolution has been passed. Information which is provided prior to the conduct of the ballet cannot constitute compliance with the requirements of s 97(4). The Tribunal erred in concluding that notwithstanding non-compliance with s 97(4), the special resolution authorising the commencement of the proceedings in November 2012 was valid.

39 The consequence of a finding of non-compliance with s 97(4) is that there has also been non-compliance with s 18 of the Owners Corporation Act which provides that an owners corporation must not bring legal proceedings unless it is authorised by a special resolution to do so.

40 Section 80D of the Strata Schemes Management Act 1996 (NSW) similarly mandates that an owners corporation must not initiate legal action for which any payment may be required unless a resolution is passed at a general meeting of the owners corporation approving the taking of that action. In 2 Elizabeth Bay Road Pty Ltd v The Owners - Strata Plan No. 73943 the New South Wales Court of Appeal held that noncompliance with s 80D did not render legal proceedings invalid.[31] Rather, noncompliance with s 80D constituted a procedural irregularity which could be cured by ratification by a subsequent resolution.[32]

41 Mr Andrew accepted that the reasoning of the New South Wales Court of Appeal in 2 Elizabeth Bay Road applied with equal force in circumstances where there has been noncompliance with s 18 of the Owners Corporation Act. He accepted that noncompliance with s 97(4) (which in turn resulted in noncompliance with s 18) did not have the effect that the proceedings commenced by Owners Corporation against Burbank in November 2012 were a nullity. He accepted that noncompliance with s 97(4) gave rise to a procedural irregularity which was capable of being cured. Mr Andrew submitted that if the court found irregularity by reason of noncompliance with s 97(4), the court should make an order pursuant to s 148(7)(b) of the VCAT Act staying the VCAT proceedings until such time as Owners Corporation passed a valid special resolution.[33] Mr Manly made a submission to the same effect.[34]

42 Section 148(7)(b) confers power on the court when hearing an appeal from VCAT to make an order that the Tribunal could have made in the proceedings. As noted above, both Mr Andrew and Mr Manly accepted that in the event that I concluded that there had been noncompliance with s 97(4), an order could be made staying the VCAT proceedings until such time as there was compliance with s 97(4). The Tribunal noted at [27] of its decision that if it had concluded that there had been noncompliance with s 97(4), the appropriate order would have been to stay the proceeding pending a special resolution authorising the commencement of the proceedings. In circumstances where I have found that there has been noncompliance with s 97(4), I propose to make an order staying the proceeding until such time as Owners Corporation is authorised by special resolution to bring the proceedings which were commenced in November 2012.

43 The Tribunal did not err by dismissing Burbank's application under s 75 of the VCAT Act to strike out the proceedings. The appellant's appeal from paragraph 1 of the Tribunal's orders of 13 November 2013 is dismissed. The Tribunal did err in making the second order of the orders dated 13 November 2013 referring the proceeding to a directions hearing before Aird DP on 5 December 2013. An order should have been made staying the proceedings until such time as Owners Corporation complied with s 18 of the Owners Corporation Act. However, in the VCAT proceedings no such relief was sought by Burbank. The only application before the Tribunal was to strike out the proceeding. In these circumstances, a question arises as to what order for costs should be made in light of my reasons for judgment. I direct the parties to file written submissions, not exceeding 10 pages in length, on the question of what order as to costs should be made. Both submissions are to be filed within seven days of the date of this judgment.

[1] Exhibit A1: The amended points of claim dated 15 August 2013 are exhibit DJ09 to the affidavit of Daniel John Oldham dated 10 October 2013.

[3] Ibid [1]-[2] (citations omitted). See also [99]-[102].

[4] Winslow Constructions Pty Ltd v Mt Holden Estates Pty Ltd [2004] VSCA 159; (2004) 10 VR 435 [2(a)] (Callaway and Buchanan JJA) ('Winslow Constructions').

[5] Regulation 4 of the Building (Multi-Storey Residential Building Exemption) Regulations 2002 (now repealed) inserting reg 15C.2 into the Building Regulations 1999, and reg 1808 of the Building Regulations 2006. The operation of these regulations is discussed in an article annexed to the respondent's supplementary submissions dated 20 February 2015: Jane Hider, 'Domestic Building Contacts Act 1995 - Uncertainty Reigns for Developers and Builders' (2009) 34 Building Dispute Practitioners Society News 4.

[6] [2005] VSC 237 ('Sopov').

[8] Ibid [2] (Callaway and Buchanan JJA).

[16] Transcript of proceedings, Burbank Australia Pty Ltd v Owners Corporation (Supreme Court of Victoria, S CI 2013 6385, McDonald J, 18 February 2015) T28 L26-30.

[22] Transcript of proceedings, Burbank Australia Pty Ltd v Owners Corporation (Supreme Court of Victoria, S CI 2013 6385, McDonald J, 18 February 2015) T43 Ll5-10.

[23] [2005] VSC 442 [8]-[9] (Osborn J). See also Vero Insurance Ltd v The Gombac Group Pty Ltd [2007] VSC 117 [2]-[8] (Gillard J).

[24] [2004] VSC 438; [2004] 11 VR 41 [4]-[7] (Mandie J).

[25] Owners Corporation PS 447493 v Burbank Australia Pty Ltd (Domestic Building) [2013] VCAT 1911(24 October 2013) [32] (Deputy President Aird) ('VCAT Decision').

[26] DBC Act, definition of 'domestic building contract' s 3(1).

[30] Exhibit A1: The notice of postal ballet forms part of exhibit DJO11 to the affidavit of Daniel John Oldham dated 10 December 2013. The relevant extracts from the notice of postal ballet are set out at [19] of the VCAT Decision.

[31] (2014) NSWCA 409 [1]-[2], [51], [105].

[33] Transcript of proceedings, Burbank Australia Pty Ltd v Owners Corporation (Supreme Court of Victoria, S CI 2013 6385, McDonald J, 18 February 2015) T19 Ll1-3.

Building Contracts Act 1995

Civil and Administrative Tribunal Act 1998

Corporation Act 2006

Environment Act 1987

Contracts Guarantee Act 1987

Legislation Act 1984

Owners Corporation Act 2006

Schemes Management Act 1996

(Multi-Storey Residential Building Exemption) Regulations 2002

Building Contacts Act 1995

Building Contracts Act 1995

Civil and Administrative Tribunal Act 1998

Corporation Act 2006

Environment Act 1987

Contracts Guarantee Act 1987

Legislation Act 1984

Owners Corporation Act 2006

Schemes Management Act 1996

(Multi-Storey Residential Building Exemption) Regulations 2002

Building Contacts Act 1995

At a glance

Court

Decision date

Before

Source

Judgment (82 paragraphs)

Parties

Legislation Cited (20)

Cases Cited (2)