Body Corporate for Sun City Resort CTS 24674 v Sunland Constructions Pty Ltd & Ors [2010] QSC 463

QUEENSLAND - PROCEDURE UNDER RULES OF COURT - Other matters before trial - Judicial discretion to order a question to be decided separately before trial under

r 483 Uniform Civil Procedure Rules 1999 (Qld) - where the question is ripe for determination - where separate determination of questions of law may result in substantial savings and reduce the number of parties at trial - whether the discretion should be exercised

CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS - where a trade contract was entered into by building contractor and trade contractor to design and install aluminium windows, doors, glazing and other items for residential unit building - where building contractor, trade contractor, project developer and project financier enter into a deed - where the side deed includes provisions by which the trade contractor promises to perform its obligations under the trade contract - whether the side deed is a contract that was entered into to have work carried out on land

STATUTES - ACTS OF PARLIAMENT - OPERATION AND EFFECT OF STATUTES - RETROSPECTIVE OPERATION - INTEPRETATION - RULES OF CONSTRUCTION - where the trade contract and side deed were entered into prior to the commencement of the Body Corporate and Community Management Act 1997 (Qld) - where s 38(3) of the Act enables a body corporate to enforce the rights, if any, of the original owner under a contract entered into to have work carried out on land that becomes scheme land - where contractor submits that the Act does not have retrospective operation - whether s 38(3) of the Act may apply to a contract that was entered into before the commencement of the Act - whether the body corporate was subrogated to the rights granted to original owner in the side deed under s 38(3), upon the establishment of the community titles scheme

Acts Interpretation Act 1954 (Qld), s 14A(1)

Body Corporate and Community Management Act 1997 (Qld), ss 5(d), 5(f), 38(3)

Building Units and Group Titles Act 1980 (Qld), s 27(7)

Uniform Civil Procedure Rules 1999 (Qld), r 483

Allman v Country Roads Board [1957] VicRp 81; [1957] VR 581, cited

Australasian Memory Pty Ltd v Brien (2000) 200 CLR 270, cited

Bass v Permanent Trustee Company Ltd [1999] HCA 9; (1999) 198 CLR 334, cited

Baker v R [2004] HCA 45; (2004) 223 CLR 513, cited

Carr v Western Australia [2007] HCA 47; (2007) 232 CLR 138, cited

Coleman v Shell Co of Australia Ltd [1943] NSWStRp 41; (1943) 45 SR (NSW) 27, applied

Cooper Brookes (Woollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297, applied

Doro v Victorian Railways Commissioners [1960] VicRp 12; [1960] VR 84, cited

Fisher v Hebburn Ltd [1960] HCA 80; (1960) 105 CLR 188, cited

Greg Beer t/a G & L Beer Covercreting v J M Kelly (Project Builders) P/L [2008] QCA 35, cited

Jomal Pty Ltd v Commercial and Consumer Tribunal & Ors

[2009] QCA 326, cited

Jones v Director of Public Prosecutions [1962] AC 635, cited

Kraljevich v Lake View and Star Ltd [1945] HCA 29; (1945) 70 CLR 647, cited

Maxwell v Murphy [1957] HCA 7; (1957) 96 CLR 261, cited

Menniti & Ors v Winn & Anor [2008] QCA 66, cited

Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355, applied

Reading Australia Pty Ltd v Australian Mutual Provident Society [1999] FCA 718, cited

Robertson v City of Nunawading [1973] VicRp 81; [1973] VR 819, cited

Saraswati v The Queen [1991] HCA 21; (1991) 172 CLR 1, cited

State of Queensland v Dale and Meyers Operations Pty Ltd [2010] QSC 361, cited

Sykes v Queensland Gas Company & Anor [2009] QCA 163, cited

The Commonwealth v SCI Operations Pty Ltd [1998] HCA 20; (1998) 192 CLR 285, cited

B O'Donnell QC and D S Piggott for the plaintiff/respondent

R A Holt SC and P W Telford for the fourth defendant/ applicant

Malleson Stephen Jacques for the fourth defendant/applicant

[2] Sun City Resort is a 40 level residential unit building at the Gold Coast. It was constructed between 1996 and 1998. The second defendant ("Sunland Constructions") was engaged as construction manager by Sunland Southbank Pty Ltd pursuant to a construction management agreement ("the construction management agreement") dated 27 September 1996. Sunland Constructions engaged the fourth defendant ("G James") pursuant to an agreement dated

6 February 1997 to design, manufacture and install aluminium windows, doors, glazing, curtain walling and associated works to form the exterior of the Sun City Resort building ("the trade contract").

[3] Sunland Constructions, Sunland Southbank, G James and Westpac Banking Corporation (as mortgagee) entered into a deed styled "Side Deed - Trade Contractor" ("the Side Deed"). G James executed the Side Deed in May 1997. Clause 27 of the trade contract obliged G James to execute such an agreement with the project's financier, Westpac, regarding the completion of the project, in a form acceptable to Westpac. Clause 27 of the trade contract indicated that the purpose of the additional agreement was to allow the assignment of the trade contract in certain circumstances.

[4] Clause 2.1(a) and (b) of the Side Deed relevantly provided:

(a) (Completion of Work) the Trade Contractor warrants to the Principal and the Mortgagee that:

• (i) ...
  • (ii) it shall perform its obligations under the Trade Contract and complete the Trade Contract Work with reasonable skill, care and diligence and in accordance with the Trade Contract.

(b) (Warranties) the Trade Contractor gives to the Principal and the Mortgagee the same warranties, guarantees and indemnities that it has given to the Construction Manager under the Trade Contract;" (emphasis added)

[5] The "warranties, guarantees and indemnities" given by G James under the trade contract include:

(a) a warranty against defects in the design, materials and workmanship of the installed curtain wall for 7 years;

(b) a warranty against faulty design, materials and workmanship of the window installation for 7 years;

(c) a warranty of all glazing against faulty materials and workmanship for a period of 7 years.

"2.2 The Trade Contractor's liability to the Principal and the Mortgagee far [sic] breach by the Trade Contractor of clause 2.1 shall be limited or excluded to the same extent (if at all) that the Trade Contractor's liability to the Construction Manager is expressly limited or excluded by the Trade Contract."

"2.3 The Obligations of the Trade Contractor under clause 2.1:

(a) take effect immediately upon the execution of this deed;

(b) are additional to and do not derogate from or replace the Obligations of the Trade Contractor under the Trade Contract."

[8] Clause 3 of the Side Deed addressed enforcement of the trade contract.

[9] Clause 4 of the Side Deed made provision for the novation of the contract in certain circumstances to either Sunland Southbank or Westpac ("the New Construction Manager") in which event G James was bound to perform the trade contract for the benefit of the New Construction Manager, and the New Construction Manager was bound to perform the trade contract as if it originally entered into the trade contract in the place of Sunland Constructions.

[10] Clause 5 of the Side Deed was to the effect that execution of it and any consent or approval given under it by Sunland Southbank or Westpac, and any action taken by them pursuant to the Side Deed did not impose on Sunland Southbank or Westpac any obligation or duty to G James (including an obligation to pay for trade contract work) except to the extent expressly provided by the Side Deed.

The establishment of the community titles scheme, the creation of the body corporate and its claim

[11] On 13 July 1997 the Body Corporate and Community Management Act 1997 (Qld) ("BCCM Act") took effect.[1] It effectively replaced the Building Units and Group Titles Act 1980 (Qld) ("the 1980 Act") as the statute regulating strata titles in Queensland. The 1980 Act included provision to the effect that a body corporate, upon registration of the building unit plan, was deemed to have been a party to an enforceable contract for the carrying out of work for the purpose of constructing or preparing the common property, and that the body corporate could sue in respect of that contract.[2] The BCCM Act contained a different provision which enabled a body corporate to enforce the rights, if any, of the original owner under a contract entered into to have work carried out on land that became scheme land. This provision was s 38(3) of the BCCM Act. This application is concerned with the proper construction of s 38(3) in respect of facts which are not in dispute.

[12] The plaintiff ("the body corporate") was created on 27 July 1998, when the community titles scheme for the Sun City Resort was established. The glazed exterior of the Sun City Resort became common property upon the establishment of the community titles scheme on 27 July 1998.

[13] On 8 July 2004 the body corporate commenced these proceedings, alleging water ingress at the Sun City Resort and claiming damages against, amongst others,

G James. The body corporate relies on s 38(3)(a) of the BCCM Act in the form the section was originally enacted, being the form in which it stood on 27 July 1998. In essence, the body corporate's claims against G James rely upon the Side Deed and contend that it is "subrogated" by operation of s 38(3) of the BCCM Act to the rights of the original owner of the land under the Side Deed.

[14] Section 38(1) of the BCCM Act provides that a body corporate for a community titles scheme may sue and be sued for rights and liabilities related to the common property as if the body corporate were the owner of the common property. Section 38(3) states:

"If, before a community titles scheme is established, a contract is entered into to have work carried out on land that becomes scheme land:

(a) the body corporate is, on the establishment of the scheme, subrogated to the rights (if any) of the original owner under the contract to the extent that the contract applies to work affecting scheme land that is common property; and

(b) a lot owner is, on the establishment of the scheme, subrogated to the rights (if any) of the original owner under the contract to the extent that the contract applies to work affecting scheme land that is the lot." (emphasis added)

[15] The body corporate alleges that on 27 July 1998, when the scheme was established, it was subrogated to the rights granted to Sunland Southbank in the Side Deed by operation of s 38(3). G James contends that s 38(3) does not operate in respect of the Side Deed because the Side Deed and the trade contract were entered into prior to the commencement of the BCCM Act. It also contends that the Side Deed is not the kind of contract to which s 38(3) applies.

[16] G James seeks orders pursuant to UCPR 483 to have the following question determined separately, before the trial of the proceeding:

(a) "Is the side deed dated February 1998 between (inter alia) Sunland Southbank Pty Ltd and the Fourth Defendant "a contract entered into to have work carried out on land that becomes scheme land" within the meaning of s 38(3) of the Body Corporate and Community Management Act 1997 (Qld) (the BCCMA)?"

(b) In the alternative to paragraph 1, a declaration that the side deed dated February 1998 between (inter alia) Sunland Southbank Pty Ltd and the Fourth Defendant is not "a contract entered into to have work carried out on land that becomes scheme land" within the meaning of s 38(3) of the BCCMA.

[17] The question posed by G James arises for determination in circumstances in which it is sued only in contract for claims arising from the operation of the Side Deed. The body corporate is not a party to the Side Deed and instead relies on the operation of s 38(3) so as to be subrogated to the rights of Sunland Southbank. By its defence, G James has denied that it has a liability to the plaintiff by operation of

(a) both the Side Deed and the trade contract were entered into prior to the enactment of the BCCM Act on 13 July 1997, which Act does not have retrospective operation;

(b) as a matter of construction, the Side Deed is not "a contract to have work carried out on land that becomes scheme land" within the meaning of the section.

In the event that G James succeeds in its application, the body corporate would lack privity to enforce the provisions of the Side Deed against G James and the body corporate's action against G James would necessarily fail.

[18] The body corporate consents to the separate determination of the question posed by G James.

The discretion to order that these questions be determined separately

[19] UCPR 483 provides for the Court to make an order for a question to be decided separately and before the trial of the proceeding. If such a question is "ripe" for preliminary determination, then it may be appropriate to make an order pursuant to

r 483(1).[3] Such an order will not be appropriate in many circumstances, including where there are disputed questions of fact.[4] A number of the discretionary considerations that apply in making an order for a separate decision appear in the judgment of Branson J in Reading Australia Pty Ltd v Australian Mutual Provident Society,[5] an authority which has been referred to with approval by judges of this Court. The factors identified in Reading and other authorities favour the making of an order under UCPR 483 on the present application. The question has been appropriately formulated. The facts that are relevant to its determination are not in dispute. The question is ripe for determination. The preliminary determination of the issue might be said to create the potential for a multiplicity of appeals. However, the determination of the issue in favour of G James would end the body corporate's action against it. Such an outcome would involve a substantial saving of costs to G James and the body corporate, and reduce the number of parties at trial. It is also possible that the resolution of the question in favour of the body corporate may contribute to the settlement of the litigation. However, I place limited reliance upon this factor. I consider that it is appropriate to order that the question be the subject of separate determination.

[20] The question for separate determination of whether the Side Deed is "a contract entered into to have work carried out on land that becomes scheme land" within the meaning of s 38(3) of the BCCM Act involves two questions of law. The first is whether s 38(3), upon its proper construction, may apply to a contract that was entered into before the commencement of the BCCM Act on 13 July 1997. If

s 38(3) may apply so that a body corporate is, on the establishment of a scheme, subrogated to the rights of the original owner under such a contract, then the second issue is whether the Side Deed is a contract that was "entered into to have work carried out on land" that became scheme land.

May s 38(3) apply to a contract entered into prior to 13 July 1997?

[21] G James submits that the body corporate's action cannot be maintained in that it necessarily requires s 38(3) of the BCCM Act to be given "retrospective operation". It submits that there is no express statement within the Act that it has, or was intended to have, retrospective operation. G James relies upon the presumption that a statute will not be construed to give it retrospective effect so as to "confer or impose or otherwise affect rights or liabilities which the law had defined by reference to the past events."[6] Dixon J in Kraljevich v Lake View and Star Ltd stated:[7]

"The presumptive rule of construction is against reading a statute in such a way as to change accrued rights the title to which consists in transactions passed and closed or in facts or events that have already occurred. In other words, liabilities that are fixed, or rights that have been obtained, by the operation of the law upon facts or events for, or perhaps it should be said against, which the existing law provided are not to be disturbed by a general law governing future rights and liabilities unless the law so intends, appears with reasonable certainty. But, when the alteration in the law relates to the mode in which rights and liabilities are to be enforced or realized, there is no reason to presume that it was not intended to apply to rights and liabilities already existing and its application in reference to them will depend rather upon its particular character and the substantial effect that such an operation would produce."

An exception to the presumption against retrospectivity applies to a law that relates only to a matter of procedure.[8] However s 38(3) cannot be characterised as a law that is merely procedural. It confers a specific right on a body corporate to be subrogated to the rights of a party to a contract that was entered into before the community titles scheme was established. G James submits that the changes to the law made by s 38(3) of the BCCM Act were not changes in the mode of enforcement or realisation of existing rights or liabilities, and that the presumption against the retrospective operation of legislation leads to the conclusion that s 38(3) does not have a retrospective operation in respect of a contract entered into before the Act commenced.

[22] The body corporate submits that the natural meaning of s 38(3) is that it operates on the establishment of a scheme in respect of all contracts that satisfy two criteria - it was entered into prior to establishment of the scheme, and it is for work to be carried out on land that becomes scheme land. It further submits that it is significant that the only timing qualification expressed by s 38(3) with respect to contracts is that the contract be made before the establishment of the scheme.

G James' argument is said to introduce an additional timing qualification, namely that the contract has been entered into after the Act commenced. This is said to involve reading into the section words that are not there.

[23] The body corporate submits that the presumption against the "retrospective" operation of a statute upon which G James relies in its submissions does not apply. It submits that the event which engages the operation of s 38(3) is the establishment of the scheme, being an event that necessarily occurs after the section commences. As s 38(3) does not purport to create or change rights and liabilities prior to that future event, the body corporate submits that it does not come within the principles of statutory interpretation concerning retrospectivity. That the rights and liabilities created by s 38(3) are with respect to contracts executed prior to the BCCM Act taking force is not sufficient to attract the presumption.

[24] Reliance is placed upon authorities to the effect that the operation of an Act is not to be considered "retrospective" for the purpose of the presumption against the retrospective operation of statutes merely because the statute's effect is to create further particular rights or liabilities with respect to past matters or transactions.[9]

[25] Two further reasons are advanced why the construction of s 38(3) contended for by G James should be rejected. The first is that it will create a lacuna, or loophole, between the operation of s 27(7) of the 1980 Act and s 38(3) of the BCCM Act. There will be circumstances (as in this case) in which:

(a) Section 27(7) of the 1980 Act will not apply because although the contract for work was made whilst section 27(7) was in operation, the building unit plan was registered after the BCCM Act commenced;

(b) Although s 38(3) of the BCCM Act was in force (because the community titles scheme was established after 13 July 1997), section 38(3) does not apply to the contract because it was entered into before the commencement of that section.

The second reason arises from the fact that for community titles schemes established shortly after 13 July 1997, all or most of the contracts for work to be done on the land would likely have been entered into before the section commenced. In those circumstances, G James' construction would mean that body corporates established soon after the BCCM Act commenced would not be able to enforce many or most of the contracts that affected scheme land.

[26] These outcomes are said to highlight the improbability that the legislature intended the interpretation for which G James contends. The body corporate submits that the objects of the legislation, which include giving body corporates control of the common property and consumer protection for buyers of lots in community titles schemes, would be much better served by an interpretation of s 38(3) by which it may apply to a contract entered into at any time before the establishment of the scheme.

[27] In reply to the body corporate's submissions, G James places reliance upon the tense in which s 38(3) is cast. The use of the expression "a contract is entered into" is submitted to indicate that the section is intended to apply to contracts that are entered into after the Act is passed.[10] G James submits that the only temporal requirement is that the contract be entered into before the community titles scheme is established. The provision is said to not expressly or impliedly affect contractual rights and obligations arising from contracts entered into prior to the commencement of the Act. It submits that such a retrospective operation would require clear words.

[28] As to the body corporate's submissions that the interpretation contended for by

G James would create a lacuna and improbable and apparently unintended consequences in respect of body corporates established soon after the BCCM Act commenced, G James submits that it is for the legislature to correct the lacuna created by the section.[11] It also submits that in a case where the meaning of the provision is clear, it is not appropriate for a court to avoid or modify that meaning by applying a perceived general legislative purpose.

Principles of statutory interpretation and the retrospective operation of legislation

[29] The meaning of s 38(3) in the form it stood upon the establishment of the community titles scheme for Sun City Resort is to be determined by reference to its language and its context in the BCCM Act.[12] The starting point is the text of the provision. The interpretation that would best achieve the purpose of the Act is to be preferred to any other interpretation.[13] The purpose of the Act is to be found in the words of the statute, including its stated objectives, not distilled from some general policy which is applied without regard to the language of the statute.[14]

[30] The body corporate points to two of the objects of the BCCM Act:

"(d) to ensure that bodies corporate for community titles schemes have control of the common property and body corporate assets they are responsible for managing on behalf of owners of lots included in the schemes;"

"(f) to provide an appropriate level of consumer protection for owners and intending buyers of lots included in community titles schemes;"[15]

However, reference to these objects is of limited assistance in the task of construing s 38(3) in this case. The construction contended for by G James does not deprive the body corporate of control of the common property. Entitling the body corporate to enforce rights conferred by s 38(3) might be argued to provide a degree of consumer protection for owners of lots. However, legislation rarely pursues a single purpose at all costs, and to construe s 38(3) as though it pursued the purpose of consumer protection "to the fullest possible extent may be contrary to the manifest intention of the legislation and a purported exercise of judicial power for a legislative purpose."[16]

[31] In Project Blue Sky Inc v Australian Broadcasting Authority[17] it was said:

"... the duty of a court is to give the words of a statutory provision the meaning that the legislature is taken to have intended them to have. Ordinarily, that meaning (the legal meaning) will correspond with the grammatical meaning of the provision. But not always. The context of the words, the consequences of a literal or grammatical construction, the purpose of the statute or the canons of construction may require the words of a legislative provision to be read in a way that does not correspond with the literal or grammatical meaning."

The literal or grammatical meaning of a provision that does not give effect to the purpose of the legislation cannot be regarded as "the ordinary meaning".[18] A departure from a literal interpretation is not confined to situations where the operation of the statute appears to be absurd, capricious or irrational. It extends to any situation in which for good reason the operation of the statute on a literal reading does not conform to the legislative intent as ascertained from the provisions of the statute.[19] This will be the case where the purpose of the provision indicates that the legislature did not intend the grammatical meaning to apply.

"It is a cardinal principle applicable to all kinds of statutes that you may not for any reason attach to a statutory provision a meaning which the words of that provision cannot reasonably bear. If they are capable of more than one meaning, then you can choose between those meanings, but beyond that you must not go".[20]

Accordingly, it is not permissible to depart from the clear meaning of a statute because it produces an inconvenient result. The relevant inquiry is whether a meaning other than the grammatical or literal meaning is reasonably open. As Mason and Wilson JJ stated in Cooper-Brookes:

"[T]here are cases in which inconvenience of result or improbability of result assists the court in concluding that an alternative construction which is reasonably open is to be preferred to the literal meaning because the alternative interpretation more closely conforms to the legislative intent discernible from other provisions in the statute.[21]

[33] The presumption concerning the retrospective operation of legislation was summarised by Dixon CJ in Maxwell v Murphy:[22]

"The general rule of the common law is that a statute changing the law ought not, unless the intention appears with reasonable certainty, to be understood as applying to facts or events that have already occurred in such a way as to confer or impose or otherwise affect rights or liabilities which the law had defined by reference to the past events."

In a case in which the presumption applies it may be outweighed by other factors. However, before considering whether the presumption is outweighed in a particular case it is necessary to decide whether the presumption arises. In this regard, authorities highlight the need for care as to what is meant by "retrospective" before concluding that the presumption is engaged.[23] In Coleman v Shell Co of Australia Ltd[24] Jordan CJ noted some ambiguity in the use of the word "retrospective". His Honour stated:

"It is not retrospective because it interferes with existing rights. Most Acts do. There is no presumption that interference with existing rights is not intended; but there is a presumption that an Act speaks only as to the future."

After a consideration of the authorities, Jordan CJ stated:

"... as regards any matter or transaction, if events have occurred prior to the passing of the Act which have brought into existence particular rights or liabilities in respect of that matter or transaction, it would be giving a retrospective operation to the Act to treat it as intended to alter those rights or liabilities, but it would not be giving it a retrospective operation to treat it as governing the future operation of the matter or transaction as regards the creation of further particular rights or liabilities."

This passage has been cited with approval by the High Court.[25] The same proposition relating to the future operation of statutes based on past events was stated in Robertson v City of Nunawading:[26]

"[The] principle is not concerned with the case where the enactment under consideration merely takes account of antecedent facts and circumstances as a basis for what it prescribes for the future, and it does no more than that."

Bennion on Statutory Interpretation[27] states:

"It is important to grasp the true nature of objectionable retrospectivity, which is that the legal effect of an act or omission is retroactively altered by a later change in the law. However the mere fact that a change is operative with regard to past events does not mean that it is objectionably retrospective. Changes relating to the past are objectionable only if they alter the legal nature of a past act or omission in itself. A change in the law is not objectionable merely because it takes note that a past event has happened, and bases new legal consequences upon it."[28]

[34] Where an Act fails to include transitional provisions, a court is required to draw inferences about the operation of the new substantive enactment. It is required to interpret the Act in order to determine what Parliament must have intended in the absence of transitional provisions.[29] In doing so the court is required to apply rules of statutory construction. These include seeking to avoid a construction that produces an absurd result, since this is unlikely to have been intended by Parliament.[30]

[35] The general presumption that an enactment is not intended to have retrospective effect may be outweighed in a particular case by other factors, including other presumptions. Upon a consideration of relevant factors the conclusion may be reached that some retrospective effect was intended. Some such retrospective effect may be intended where it appears from the language of the statute and its purpose that the legislature intended to confer a benefit on some person. If the apparent purpose of the legislation is to confer such a benefit upon the happening of a future event then the presumption that an enactment should be given a purposive construction will carry substantial weight and may outweigh the general presumption against retrospectivity. This may be the case in circumstances in which the benefit is conferred upon the happening of a future event, and its conferral also depends upon a past matter or transaction which may have taken place prior to the commencement of the Act..

[36] If the presumption against retrospectivity is engaged in a particular case, a court may be required to consider the weight which must be given to that presumption and the weight which must be given to other presumptions and factors that guide the determination of legislative intention.[31] The presumption against retrospectivity may be rebutted where there is a "necessary intendment" that the Act is to operate retrospectively. Such a necessary intendment may be found in the words of the Act, the purpose of the provision and presumptions that the legislature did not intend to deprive persons for whose benefit the provision was enacted of its benefit upon the happening of a future event.

[37] I was informed that the BCCM Act did not contain transitional provisions in relation to construction contracts that were entered into before it commenced operation in respect of a building unit development whose plan had yet to be registered under the 1980 Act. I have not been able to locate any. The transitional provisions adopted the general approach that building units plans were no longer to be registered under the 1980 Act, and instead community titles schemes were to be established under the BCCM Act.[32]

[38] Section 27(7) of the 1980 Act was in the following terms:

"In any case in which work is carried out for the purpose of constructing or preparing the common property the body corporate, upon registration of the plan, shall be deemed to have been a party to an enforceable contract for the carrying out of such work, and may sue in respect of that contract."

This provision of the 1980 Act ceased to apply upon the commencement of the BCCM Act, which contained a different substantive provision in relation to the conferral of rights upon a body corporate following the establishment of a community titles scheme, namely s 38(3). Such a scheme might be established within days or weeks of the commencement of the BCCM Act. In circumstances in which s 27(7) of the 1980 Act did apply to such a scheme, a question arises about the meaning of s 38(3) of the BCCM Act. The question is whether in enacting

s 38(3) the Parliament apparently intended it to benefit a body corporate that was established within days or weeks of the commencement of the BCCM Act in respect of contracts that were entered into before the Act commenced.

[39] The tense of the language used in s 38(3) suggests that it applies only to contracts that are entered into after the Act commences. The opening words of s 38(3) contain the condition that "a contract is entered into to have work carried out", not a condition that is cast in terms such as "if ... a contract is or has been entered into to have work carried out."

[40] By the same token, the opening words of s 38(3) do not expressly confine its operation to a contract that was entered into "after the commencement of the Act". But the absence of this additional temporal condition may be explained on the basis that such words were unnecessary by reason of the presumption against the retrospective operation of legislation. This serves to highlight the need to consider the nature of presumption against retrospectivity. As the judgment of Jordan CJ in Coleman indicates, an Act would not be given a retrospective operation because it creates new rights and liabilities. As Bennion states, a change in the law is not objectionable merely because it takes note that a past event has happened, and bases new legal consequences upon it.

[41] Section 38(3) does not alter the legal nature of the contract that provided for work to be carried out on land that becomes scheme land. It does not alter the rights and liabilities of the parties to that contract. Instead, it creates new rights in a body corporate to be subrogated to the rights, if any, of the original owner under the contract.

[42] The provision governs the future operation of an existing contract by creating a statutory right to be subrogated upon the establishment of a community titles scheme. It assumes that a past event has happened, namely entry into a contract to have work carried out, and creates a further particular right in the body corporate. In this regard the Act is not "retrospective" in the sense discussed in the High Court authorities that approve Coleman. The Act takes the rights of the parties to an existing contract as a fact and creates an entitlement to be subrogated to those rights.

[43] I accept the body corporate's submission that the presumption against the retrospective operation of a statute does not apply.

[44] If, however, I had decided that the presumption arose, that would not have disposed of the issue of interpretation. It still would have been necessary to resolve the question of whether s 38(3) should be construed so that it may apply to contracts entered into before it commenced operation. The resolution of that issue would depend on the weight to be given to the presumption against retrospective operation and the weight to be given to other factors that bear upon the interpretation of the section.

[45] Those factors include the improbability that the legislature intended a body corporate to be denied the statutory protection of either s 27(7) of the 1980 Act or

s 38(3) of the BCCM Act because, as matters transpired, the relevant contracts were entered into before the BCCM Act commenced and the community titles scheme was only able to be established after the BCCM Act commenced. It seems improbable that the legislature intended such an outcome in circumstances in which the BCCM Act did not contain relevant transitional provisions. There is nothing in the Act to suggest that the legislature intended a party to a building contract to not be subject to the statutory rights conferred upon a body corporate by either s 27(7) of the 1980 Act or s 38(3) of the BCCM Act if the group or community titles scheme could not be established until after the BCCM Act commenced. The improbability that the legislature intended such an outcome in respect of a scheme that was established within days or weeks after the Act came into effect supports the conclusion that the legislature intended s 38(3) to apply in respect of contracts that were entered into before the section commenced.

[46] An interpretation that avoids such an improbable result is reasonably open on the language of the section, the purpose of which is to confer rights upon a newly-created body corporate. Substantial weight should be given to the presumption that the legislature did not intend to create the absurd result that a body corporate established within days or weeks of the Act's commencement is denied the benefit of either s 27(7) of the 1980 Act or s 38(3) of the BCCM Act for no apparent reason. The legislature should not be taken to have intended to deprive body corporates, for whose benefit the provision was enacted, of its benefit because those body corporates were established soon after the Act commenced. These considerations concerning the meaning of the section outweigh the weight to be given to the presumption against retrospectivity.

[47] Expressed differently, the language of the Act, its purpose, the particular beneficial purpose of s 38(3) and the presumption that the legislature did not intend the absurd outcome of depriving body corporates of the section's benefit simply because a contract was entered into some time before the Act commenced, show a "necessary intendment" that s 38(3) was to operate in some respects retrospectively. Its intended retrospective operation was in respect of contracts entered into before the Act commenced.

[48] The conclusion that I earlier reached about the proper construction of s 38(3), and the alternative approach which I have outlined that reaches the same conclusion, do not involved an impermissible exercise of judicial power to correct a lacuna created by the legislature. The issue is whether the legislature created such a lacuna. The preferred purposive interpretation of the section leads to the conclusion that it did not, and that, upon its proper construction, s 38(3) may apply to a contract that was entered into prior to 13 July 1997.

Is the Side Deed a "contract entered into to have work carried out on land that becomes scheme land" within the meaning of s 38(3) of the BCCM Act?

[49] G James submits that the Side Deed is not a contract "entered into to have work carried out on land that becomes scheme land". It particularly submits that:

(a) the purpose of the Side Deed is to provide security, principally for the benefit of the project's financier, Westpac;

(b) the work was to be carried out by it pursuant to the trade contract, and the Side Deed merely contains additional promises which, in the event of default under the trade contract, enable Sunland Southbank and Westpac to sue on the warranties given under the Side Deed, so as to protect their financial interests;

(c) in other words, G James submits that the promise it gave in the Side Deed to perform its obligations under the trade contract was not a promise to perform work: that promise was made to Sunland Constructions in the trade contract;

(d) there were no obligations imposed by the Side Deed regarding the performance of the work under the trade contract unless and until a novation occurred pursuant to cl 4 of the Side Deed;

(e) the covenants in cl 2.1(a)(ii) of the Side Deed were covenants as to the manner of performance of the obligations which were contained in the trade contract, but did not impose an obligation to perform work.

In addition, G James advances a more general submission about the character of the Side Deed, namely that it was entered into to allow the assignment of the trade contract in certain circumstances, and that the inclusion of the promise and warranties in cl 2.1(a) and (b) did not alter its character.

[50] The Side Deed should be construed to give effect to the words used by the parties to it, and so as to make commercial sense of it. It was entered into as one of a number of documents. The trade contract formed part of the factual matrix within which the parties to the Side Deed reached agreement, and it is permissible to have regard to

cl 27 of the trade contract so as to construe the words used in the Side Deed and to understand the background against which it was made. Clause 27 of the trade contract obliged G James to enter into such an agreement with Westpac "regarding the completion of the project". Clause 27 stated that the purpose of the agreement to which Westpac was to be a party was to "allow the assignment of the trade contract in certain circumstances".

[51] There is no dispute that such a separate agreement is a commonly used mechanism to protect the financial interests of the owner and project financiers so as to ensure the completion of the project. Such protection might be needed in the event that Sunland Constructions failed to pay, otherwise breached or threatened to breach its obligations towards G James. Whilst one mechanism contained in the Side Deed to secure the financial interests of the owner and the financier was novation of the trade contract by Sunland Southbank or Westpac, this was not the only mechanism to protect their financial interests. Clause 3 of the Side Deed ("DEALINGS WITH OR ENFORCEMENT OF TRADE CONTRACT") contained detailed provisions. By cl 3.1(a) G James promised to not terminate, rescind, cancel or suspend the trade contract for any reason without giving Sunland Southbank and Westpac prior written notice of its intention to do so and allowing them a prior reasonable period after the giving of that notice to consult with G James and to remedy or rectify the default. This kind of contractual mechanism gave some protection to the interests of Sunland Southbank and Westpac by ensuring the continuation of the trade contract. For example, Sunland Southbank or Westpac might pay money and remedy a default by Sunland Constructions without itself assuming obligations of the kind that would arise upon novation of the trade contract.

[52] The provisions of cl 2.1(a) of the Side Deed under consideration by which G James promised Sunland Southbank and Westpac that it would perform its obligations under the trade contract were part of a contract which in general terms had the purpose of securing the financial position of Sunland Southbank and Westpac.

[53] I do not accept the submission of G James that the Side Deed does not contain an independent promise to perform the work under the trade contract. By

cl 2.1(a)(ii) (a clause expressly concerned with "Completion of Work"), G James warrants to Sunland Southbank and Westpac that "it shall perform its obligations under the Trade Contract and complete the Trade Contract Work with reasonable skill, care and diligence and in accordance with the Trade Contract". The word "warrants" in cl 2.1(a) means promises. The ordinary meaning of cl 2.1(a) is that G James promises to perform its obligations under the trade contract and to thereby complete the work described in the trade contract. The promise to perform its obligations and to complete the work is a separate and additional promise to carry out the work that it is obliged to perform under the trade contract. The promise is enforceable by Sunland Southbank and by Westpac. Work that was carried out by G James fulfilled separate obligations given to Sunland Constructions under the trade contract and to Sunland Southbank and Westpac under the Side Deed. In carrying out work that it was obliged to perform under the trade contract, it discharged its obligations under both the trade contract and the Side Deed.

[54] G James submits that it would be a curious result if cl 2.1(a)(ii) of the Side Deed were construed as an autonomous obligation to carry out the work required by the trade contract. It submits that there would be an obligation arising from a direct promise by G James to perform the work but there would be no corresponding obligation on Sunland Southbank or Westpac to pay for it. I am not persuaded by this argument. If Sunland Constructions did not pay for work performed by G James when payment was due, then, subject to compliance with notification requirements, G James might terminate the trade contract and bring to an end its obligations under that contract. In that event, neither Sunland Southbank nor Westpac could insist upon G James continuing to perform work because G James would have no obligation under the trade contract to perform it. In short, the construction contended for by the body corporate does not require G James to work without remuneration. In practical terms, if Sunland Constructions did not pay for the work, and if Sunland Southbank or Westpac did not remedy Sunland Constructions' default after receiving notice of that default, then G James could take steps to end its obligations under the trade contract and, as a consequence, end its identical obligations under the side deed to carry out work on the project.

The obligation to perform work pre-dates any novation

[55] I do not construe the Side Deed as providing that unless and until the novation provisions in cl 4 of the Side Deed were enlivened, G James had no obligation to Sunland Southbank to perform the trade contract works pursuant to cl 2.1(a)(ii). The provisions of clauses 2, 3 and 4 of the Side Deed should be viewed as providing a variety of complementary mechanisms to secure the positions of Sunland Southbank and Westpac. Clause 2 imposed a variety of obligations on G James. Clause 3 regulated, amongst other things, termination of the trade contract in the event that Sunland Constructions did not pay G James, in which event provision was made for Sunland Southbank or Westpac to remedy the default. Clause 4 provided an additional mechanism, namely novation, which might be resorted to in the event that Sunland Constructions became insolvent and could no longer perform its obligations under the trade contract. The existence of the mechanism for novation under cl 4 does not mean that G James had no obligation under cl 2.1 of the Side Deed to perform its obligations under the trade contract and to thereby complete the work.

The obligation in cl 2.1(a)(ii) is not only about the manner of performance of the work

[56] G James submits that the focus of the promise in cl 2.1(a)(ii) is the manner of performance of obligations, not the performance of work. This submission is not supported by the words used by the parties in cl 2.1(a)(ii). That clause first and foremost obliges G James to perform its obligations under the trade contract. The word "and" in the clause indicates an additional obligation to complete the trade contract work "with reasonable skill, care and diligence", and the balance of the clause requires it to do so "in accordance with the trade contract". The clause is not concerned only with the manner in which obligations contained in the trade contract are performed. It imposes an independent obligation to perform obligations under the trade contract. The promise given in cl 2.1(a)(ii) relates to the performance of work.

[57] The fact that reference to the trade contract is necessary to ascertain the nature and extent of the work to be carried out by G James does not alter the fact that G James promises in cl 2.1(a) to perform its obligations, and thereby to perform the work stated in the trade contract.

[58] G James submits that the Side Deed "did not contain a promise to perform work per se", however, its promise to perform its obligations under the trade contract amounted to a promise to perform work. Clause 2.1(a)(ii) should be construed so as to make commercial sense. Rather than restate at length the obligations contained in the trade contract, cl 2.1(a)(ii) imposed a simple obligation to perform them and this, in practical terms, obliged G James to carry out work on the land.

[59] Associated with G James' submission that the purpose of the Side Deed was to provide security for the benefit of Sunland Southbank and its financier, Westpac, is a submission about the character of the contract. G James submits that the Side Deed was entered into for the purpose stated in cl 27 of the Trade Contract and to the extent that, in addition to providing for a possible assignment, it also contained warranties, its character did not thereby change. Clause 2.1(a) merely created a potential liability if G James breached its warranties. G James submits that, given the purpose for which it was entered into, the Side Deed should not be characterised as a contract "entered into to have work carried out on land that becomes scheme land". It submits that the terms of s 38(3) of the BCCM Act require the purpose of the contract be identified, and submits that the purpose of the Side Deed was to secure finance, not to have work carried out on the land.[33]

[60] The body corporate submits that the section is not concerned with the purposes of entering into the contract, that the words "entered into" do not refer to the parties' purpose, but instead refer to the fact that a contract is made and that the statute's reference to a contract "entered into to have work carried out on land" is to a subject matter of the contract.[34] It submits that it is sufficient that a material part of the contract has as its subject matter the carrying out of work on the land, and that it is not a question of looking at purpose at all.[35]

[61] I do not accept the body corporate's submission that one does not look at the purpose or purposes for which the contract was entered into. Those purposes, however, are derived from the terms of the contract, and certain admissible extrinsic material that identifies the factual matrix within which the parties reached their agreement. In order to engage the statutory subrogation of rights provided for by s 38(3), it is necessary to characterise the Side Deed as a contract that has as one of its purposes the carrying of work on land that becomes scheme land.

[62] The terms of s 38(3)(a) do not indicate that this should be the sole purpose of the contract since the body corporate is, on the establishment of the scheme, subrogated to the rights (if any) of the original owner under the contract "to the extent that the contract applies to work affecting scheme land that is common property". The section contemplates that the contract might make provision for other work to be done on other land or for other obligations to be performed that do not involve work being carried out on land. In short, the statute does not subrogate the body corporate to all of the original owner's rights under the contract.

[63] The promise or promises given by G James in cl 2.1(a) of the Side Deed related to "Completion of Work". The purpose of this contractual provision was to ensure that G James performed its obligations under the trade contract and thereby carried out work on land that was to become scheme land. In doing so, it secured the financial position of the owner of the land and its financier. The completion of the project by the carrying out of the work specified in the trade contract on the land was part and parcel of the commercial objective of the Side Deed.

[64] A substantial purpose of the Side Deed was to have G James carry out work on the land and to thereby secure the position of Sunland Southbank and Westpac. This purpose might be achieved by the threatened enforcement by Sunland Southbank or Westpac of remedies in contract in respect of the promises made in cl 2.1(a) and the "warranties, guarantees and indemnities" given to them by cl 2.1(b), or, if necessary, by the novation of the contract pursuant to cl 4.

[65] I conclude that the Side Deed should be characterised as a contract that "was entered into to have work carried out on land that becomes scheme land" within the meaning of s 38(3). This was a substantial purpose of the Side Deed so as to achieve a broader commercial objective.

(a) section 38(3) of the BCCM Act may apply to a contract entered into prior to 13 July 1997; and

(b) the Side Deed is "a contract entered into to have work carried out on land that becomes scheme land" within the meaning of s 38(3).

1. Pursuant to r 483 of the Uniform Civil Procedure Rules, 1991 the following question be determined separately before the trial of this proceeding:

"Is the side deed dated February 1998 between (inter alia) Sunland Southbank Pty Ltd and the Fourth Defendant "a contract entered into to have work carried out on land that becomes scheme land" within the meaning of s 38(3) of the Body Corporate and Community Management Act 1997 (Qld)?"

2. The question for separate determination be answered "yes".

[2] Building Units and Group Titles Act 1980 (Qld), s 27(7).

[3] State of Queensland v Dale and Meyers Operations Pty Ltd [2010] QSC 361 at [19] citing Reading Australia Pty Ltd v Australian Mutual Provident Society [1999] FCA 718.

[4] Bass v Permanent Trustee Company Ltd [1999] HCA 9; (1999) 198 CLR 334 at 355 [45] - 358 [54].

[6] Maxwell v Murphy [1957] HCA 7; (1957) 96 CLR 261, Dixon CJ, at 267; see also Fisher v Hebburn Ltd [1960] HCA 80; (1960) 105 CLR 188.

[7] [1945] HCA 29; (1945) 70 CLR 647 at 652.

[8] Sykes v Queensland Gas Company & Anor [2009] QCA 163.

[9] Baker v R [2004] HCA 45; (2004) 223 CLR 513 at 528, [30]; Australasian Memory Pty Ltd v Brien (2000) 200 CLR 270 at 282, [25]-[27]; The Commonwealth v SCI Operations Pty Ltd [1998] HCA 20; (1998) 192 CLR 285 at 309, [57]; and Coleman v Shell Co of Australia Ltd [1943] NSWStRp 41; (1943) 45 SR (NSW) 27 at 30-31.

[10] Allman v Country Roads Board [1957] VicRp 81; [1957] VR 581.

[11] Greg Beer t/a G & L Beer Covercreting v J M Kelly (Project Builders) P/L [2008] QCA 35 at [26].

[12] Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 at 381.

[13] Acts Interpretation Act 1954 (Qld) s 14A(1).

[14] Menniti & Ors v Winn & Anor [2008] QCA 66.

[16] Carr v Western Australia [2007] HCA 47; (2007) 232 CLR 138 at 143 [5] followed in Jomal Pty Ltd v Commercial and Consumer Tribunal & Ors [2009] QCA 326 at [29] and [50].

[18] Saraswati v The Queen [1991] HCA 21; (1991) 172 CLR 1 at 21 citing Cooper Brookes (Woollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297 at 321.

[20] Jones v Director of Public Prosecutions [1962] AC 635 at 662.

[21] Cooper-Brookes (supra) at 320 (emphasis added).

[22] [1957] HCA 7; (1957) 96 CLR 261 at 267.

[26] [1973] VicRp 81; [1973] VR 819 at 824.

[29] Bennion on Statutory Interpretation (supra) at pp 314-315. See also Bennion Understanding Common Law Legislation: Drafting and Interpretation, Oxford University Press 2001 at 67.

[30] Bennion on Statutory Interpretation, p 969.

[31] As to the limited weight which may be given to the presumption against retrospectivity in a case in which the legislature intended the statute to have some retrospective operation so as to avoid injustice to certain parties see Doro v Victorian Railways Commissioners [1960] VicRp 12; [1960] VR 84 at 86.

[32] BCCM Act, Chapter 7, s 271, and see s 273 ff as to the limited continuing operation of the 1980 Act.

[33] Oral submissions, 26 November 2010, 1-27, line 28.

[34] Transcript 26 November 2010, 1-44, lines 30-55.