Frasers Central Park Land No 1 Pty Ltd v Frasers Central Park Equity No 1 Pty Ltd

General information, not legal advice.

Legislation Cited: Environmental Planning and Assessment Act 1979 (NSW), s 6.20
Home Building Act 1989 (NSW), s 18E
Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 (NSW)
Uniform Civil Procedure Rules 2005 (NSW), rr 28.1, 28.2, 28.3

Cases Cited: Bailey v Director-General Department of Energy Climate Change and Water [2010] NSWSC 979
Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334; [1999] HCA 9
Brimson v Rocla Concrete Pipes Ltd [1982] 2 NSWLR 937
Cherry v Steele-Park (2017) 96 NSWLR 548; [2017] NSWCA 295
Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337; [1982] HCA 24
Coughlan v Monash Health [2025] VSC 52
Dinov v Allianz Australia Insurance Ltd (2017) 96 NSWLR 98; [2017] NSWCA 270
Director of Public Prosecutions (Cth) v JM (2013) 250 CLR 135; [2013] HCA 30
Electricity Generation Corporation (t/as Verve Energy) v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7
Hadley v Baxendale (1854) 9 Ex 341
HP Mercantile Pty Ltd v Hartnett [2016] NSWCA 342
LSR3 v New South Wales [2024] NSWSC 1570
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37
Principal Properties Pty Ltd v Brisbane Broncos Leagues Club Ltd [2014] 2 Qd R 132; [2013] QSC 148
QBE Insurance (Australia) Ltd v Tropical Reef Shipyard Pty Ltd [2009] FCAFC 161
Rainsford v Victoria (2005) 144 FCR 279; [2005] FCAFC 163
South Australia v Commonwealth (1962) 108 CLR 130; [1962] HCA 10
State of New South Wales v LSR3 [2025] NSWCA 151
The Owners Strata Plan No 87881 v Frasers Broadway Pty Ltd [2025] NSWSC 1073
Wardley Australia Ltd v Western Australia (1992) 175 CLR 514; [1992] HCA 55
Wurridjal v Commonwealth (2009) 237 CLR 309; [2009] HCA 2
Zurich Australian Insurance Ltd v FKP Commercial Developments Pty Ltd [2023] FCAFC 188

Texts Cited: GC Lindsay, Guide to the Practice of the Supreme Court of NSW (1989, The Law Book Company Limited)
New South Wales, Law Reform Commission, Report on Supreme Court Procedure, (1969)
PW Young, KF O’Leary and AE Hogan, Supreme Court Civil Procedure: New South Wales (2nd ed, 1987, Butterworths)

Category: Procedural rulings

Parties: Frasers Central Park Equity No 1 Pty Ltd (First Cross-Claimant/First Defendant)
SH Central Park Development East Pty Ltd (Second Cross-Claimant/Second Defendant)
Watpac Ltd (First Cross-Defendant)
ACN 103 211 141 Pty Ltd (Second Cross-Defendant)

Representation: Counsel:
S Robertson SC / J Nolan (Applicants)
DT Miller SC / S Odgers (Respondents)
Solicitors:
Maddocks Lawyers (Applicants)
Minter Ellison (Respondents)

File Number(s): 2024/219495

JUDGMENT

1. HER HONOUR: This is an application for an order under r 28.2 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR), which provides:

28.2 Order for decision

The court may make orders for the decision of any question separately from any other question, whether before, at or after any trial or further trial in the proceedings.

2. “Question” includes any question or issue in any proceedings, whether of fact or law or partly of fact and partly of law, and whether raised by pleadings, agreement of parties or otherwise: r 28.1, UCPR. The following question is proposed to be determined separately and in advance of all other questions arising in these proceedings:

“Assuming the correctness of the Cross-Claimants’ contentions in paragraphs C27, C28, C29, C34 of its First Cross-Claim Statement of Cross-Claim filed 14 June 2024, should the First Cross-Claim be dismissed?”

3. The applicants / cross-defendants describe this as, effectively, in the nature of a demurrer. It may assist to consider the distinction between a demurrer and the separate question procedure under the UCPR.

Demurrers and separate questions

4. A demurrer admits, for the purpose of the demurrer, all allegations of fact set out in pleadings but denies their legal sufficiency to entitle the plaintiff to the relief sought: South Australia v Commonwealth (1962) 108 CLR 130; [1962] HCA 10 at 141-2 (Dixon CJ). The ‘pros’ and ‘cons’ of the demurrer procedure were summarised in PW Young, KF O’Leary and AE Hogan, Supreme Court Civil Procedure: New South Wales (2nd ed, 1987, Butterworths) at 97 [10.103]:

“…Demurrers had points for and against them. Favourable to them was the fact that an action could be brought to finality inexpensively on a point of law. The point against them was that very often the matter raised in the demurrer was of a technical nature and the costs were increased, or, alternatively, had the facts been investigated first then the technical question could have been avoided altogether.”

5. Demurrers were removed from this Court’s procedures following reforms effected by the Supreme Court Act 1970 (NSW), as recommended in New South Wales, Law Reform Commission, Report on Supreme Court Procedure*,* (1969) at 16 [34]:

“Demurrers are abolished. This … is an ancient procedure. The model set by the Equity Court in modern times has established that it is unnecessary. The result is achieved by omitting all reference to a demurrer. It is to be noted that a point of law may be raised and may be ordered to be heard and disposed of in appropriate cases.”

6. Today, parties have the choice of seeking a separate question or applying to have the proceedings stayed or dismissed or the pleadings struck out as disclosing no reasonable grounds: GC Lindsay, Guide to the Practice of the Supreme Court of NSW (1989, The Law Book Company Limited) at 81; Brimson v Rocla Concrete Pipes Ltd [1982] 2 NSWLR 937 at 940 (Cross J). In courts where the demurrer procedure is still available, its use is “much less common”: Wurridjal v Commonwealth (2009) 237 CLR 309; [2009] HCA 2 at 414 [277] (Kirby J). Further, as the High Court explained in Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334; [1999] HCA 9 at 357 [50] (Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ):

“… a demurrer assumes that the pleadings exhaust the universe of relevant factual material. The utility of demurrers is… heavily dependent on the pleadings containing all the relevant facts. When the parties are uncertain whether further investigation will reveal further factual material, the utility of the demurrer is diminished.”

7. There is “a clear difference” between the separate question and demurrer procedures: Rainsford v Victoria (2005) 144 FCR 279; [2005] FCAFC 163 at 292 [39] (Kenny J, Hill and Finn JJ agreeing). A demurrer assumes the facts as pleaded will be made out, but the parties remain free to dispute the facts at trial if they fail on the demurrer; a separate question is binding on the parties at trial when all the facts are heard and determined: Coughlan v Monash Health [2025] VSC 52 at [60]-[61] (Forbes J).

8. As to when the Court will order a separate question, Faulkner J set out the principles in LSR3 v New South Wales [2024] NSWSC 1570. On appeal, the Chief Justice noted that this “supplies a valuable summary for judges dealing with interlocutory applications pursuant to UCPR r 28.2”: State of New South Wales v LSR3 [2025] NSWCA 151 at [10] (Bell CJ, Payne JA and Price AJA agreeing). Faulkner J noted at [25]-[32]:

“25 The procedure contemplated by UCPR 28.2 is the final determination of the relevant question. It must be based on a final finding of any necessary facts and/or the parties’ binding agreement on those facts: Bass v Permanent Trustee Co Ltd [1999] HCA 9; (1999) 198 CLR 334 at 355 & 357–358; [45] & [51] (Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ).

26 The Court has a discretion whether to make an order for the separate determination of questions.

27 Ordinarily the Court will hear and determine all issues in the case at the same time: Tallglen v Pay TV Holdings Pty Ltd (1996) 22 ACSR 130 at 141 (Giles CJ in Comm Div). The discretion to order a separate hearing must be exercised with caution: Perre v Apand Pty Ltd [1999] HCA 36; (1999) 198 CLR 180 at 332; [436] (Callinan J). It is for the party who seeks a departure from the ordinary position to demonstrate that departure is desirable in the particular case.

28 Consideration will have to be given to whether there may be overlap between the evidence adduced at the hearing of the separate questions and the subsequent hearing of the rest of the questions. Overlap may make separate questions undesirable. In particular, the Court is unlikely to order separate questions if the determination of the separate questions may require consideration of the credit of a witness who is likely to be a witness at the subsequent hearing of the other questions in the case: Australian National Industries Ltd v Spedley Securities Ltd (in liq) (1992) 26 NSWLR 411 at 434 (Samuels JA).

29 Consideration must also be given to the implications for the case if the separate questions are determined one way or another. An order for a separate question may be appropriate where the determination of the question will resolve the entire dispute or substantially narrow the scope of the dispute. As a practical matter, determination of a separate question may facilitate settlement.

30 These principles demonstrate that careful consideration must be given to the terms of the questions which a party seeks to have separately determined and the legal and factual context in which those questions fall for determination in the particular case. Reasoning which initially favours an order for separate questions may turn out to be superficial as the preparation and hearing of the separate questions progresses: Tepko Pty Ltd v Water Board [2001] HCA 19; (2001) 206 CLR 1 at 55; [168] (Kirby & Callinan JJ).

31 When exercising the discretion under UCPR 28.2, the Court must seek to give effect to the overriding purpose to facilitate the just, quick and cheap resolution of the real issues in the proceedings: s 56(2) of the Civil Procedure Act 2005 (NSW).

32 Ultimately, an application for separate questions is not to be decided in a mechanical way but by reference to a commonsense analysis of the best way to progress the proceedings in accordance with the overarching purpose. As Bell J observed in Owners Corporation SP 70672 v Trustees of Roman Catholic Church [2010] NSWSC 946 at [16]:

‘… the determination of separate questions should generally only be ordered if the court is satisfied that doing so will “facilitate the quicker and cheaper resolution of the proceedings”: Idoport Pty Ltd v National Australia Bank Ltd [2000] NSWSC 1215 at [7(6)] per Einstein J. In considering that question, the court needs to bear in mind that, while superficially it may appear attractive to order separate questions, experience often shows that that is not the case because, for example, of the complications that can arise in relation to appeals or to overlapping factual issues or to questions of credit …’”

9. Ultimately, when considering whether to order a separate question, “close regard must be paid to the particular circumstances of the matter presently before the court”: Bailey v Director-General Department of Energy Climate Change and Water [2010] NSWSC 979 at [13] (Studdert AJ).

10. A separate determination of a question of law can be formulated on the basis of assumed facts, including on the basis that it is contingent upon the assumed facts being established at trial: Bass at [52]; Director of Public Prosecutions (Cth) v JM (2013) 250 CLR 135; [2013] HCA 30 at 154 [30] (the Court). This may be worth doing if determination of the question of law will render the trial unnecessary or reduce its length: DPP v JM at [31]; applied in Zurich Australian Insurance Ltd v FKP Commercial Developments Pty Ltd [2023] FCAFC 188 at [22] (Stewart J, Lee and Cheeseman JJ agreeing). But this course is often not appropriate as “the determination produces no final order which has utility”: Principal Properties Pty Ltd v Brisbane Broncos Leagues Club Ltd [2014] 2 Qd R 132; [2013] QSC 148 at [4] (Jackson J).

11. Separate questions of mixed fact and law should not be determined on the basis of assumed facts, as the parties need to be bound by the facts for all purposes: QBE Insurance (Australia) Ltd v Tropical Reef Shipyard Pty Ltd [2009] FCAFC 161 at [23] (Kenny, Gordon and Jagot JJ). Further, at [26]:

“In order to ensure conformity with the requirements of judicial process, judicial decisions must be based on facts proved or admitted. Judicial decisions based on assumed facts are not suitable for mixed questions of fact and law because the risk of unwitting involvement in a hypothetical exercise is too great”, involving an impermanent factual substratum.”

12. Where the proposed separate question involves the proper construction of a contract, it may be appropriate to determine that question if the parties agree not to revisit that construction at trial, including on the basis of evidence of different surrounding circumstances: HP Mercantile Pty Ltd v Hartnett [2016] NSWCA 342 at [82] (Leeming JA). Otherwise, the question is hypothetical and thus inappropriate for the Court to answer: HP Mercantile v Hartnett at [193] (Payne JA). As Forbes J put it in Coughlan v Monash Health, “Constructional choices are generally best considered on the basis of the facts to which those choices are to be applied”: at [63].

The development

13. Turning to the case at hand, these proceedings – and eight related building defects proceedings – concern a large, high-rise development on Broadway in Chippendale, known as the “Central Park Development”. The development includes residential apartments in two towers, a multi-level shopping centre and restaurants and comprises multiple strata plans.

14. The owner of the development site was the first plaintiff, Frasers Central Parkland No 1 Pty Ltd (the developer). Frasers Broadway Pty Ltd, being the second plaintiff, originally contracted with the developer to develop the site.

15. The builder was Watpac Construction (NSW) Pty Ltd, now called ACN 103 211 141 Pty Ltd (the builder), being the second cross-defendant in these proceedings. The builder is wholly owned by Watpac Ltd, being the first cross-defendant in these proceedings.

16. In December 2010, the builder entered into a Head Contract with Frasers Broadway as principal. Relevantly, the builder agreed to provide the principal with a parent company guarantee executed by Watpac Ltd: cl 5.6; Schedule 17. The parent company unconditionally guaranteed the due and punctual performance of all of the builder’s obligations under the contract to a maximum of $17,635,003.60. Beyond this, the builder’s liability under the contract was limited to 50% of the contract sum, but this limitation did not extend to liability under the Home Building Act 1989 (NSW): cl 34.8. In addition, the builder was not liable for loss falling within the ‘second limb’ of Hadley v Baxendale: cl 34.8.

Change of parties

17. In July 2011, the developer entered into a joint venture agreement and a Phase 1 and 2 Development Agreement with Frasers Central Park Equity No 1 Pty Ltd and SH Central Park Development East Pty Ltd, being the defendants / cross-claimants and the respondents to the motion (the respondents). Under the development agreement, the respondents undertook to carry out the development, including to procure that the construction and commissioning of the works would be carried out in accordance with the development agreement and all applicable Laws and Approvals: cl 4.1. The respondents also agreed to indemnify the developer from all losses that may be incurred in connection with the development and construction: cl 6.1.

18. In July 2011, the Head Contract was novated. Frasers Broadway was replaced by the respondents as the principals. The builder agreed to comply with the contract on the basis that these parties had replaced Frasers Broadway: cl 2.2(b), Novation Deed. The respondents indemnified Frasers Broadway for any claims which may be made against it by the builder or any other person in relation to their acts or omissions under the Head Contract: cl 4(a), Novation Deed. The parent company guarantee was now provided to the respondents instead: cl 5, Novation Deed.

19. In September 2011, the Head Contract was extensively amended. (The Deed of Amendment ran to some 80 pages.) The contract sum was now $596,200,072. In October 2011, the parent guarantee was terminated and replaced by a second “Guarantee and Indemnity Performance Guarantee”. The guarantee was now limited to $29,810,003.60.

Construction

20. The builder designed and constructed the development, which was subdivided into two phases. Phase 1 is now known as “One Central Park” and comprises three strata plans (being West Tower, East Tower and Sky Apartments) and a lot referred to as the Retail Lot. Phase 2 comprises four strata plans, referred to as 1, 3 and 5 Park Lane; 8 Park Lane; Mark 1 and Mark 2.

21. By 2013, stages of the project approached completion. A series of interim occupation certificates were issued from February 2013 on. On 17 January 2014, a final occupation certificate was issued for 1, 3 and 5 Park Lane; 8 Park Lane; West Tower; East Tower; Sky Apartments and the Retail Lot. An interim occupation certificate was issued for Mark 1 and Mark 2 on 17 June 2014.

22. In July 2014, the respondents and the builder executed a Deed of Settlement and Release to resolve various disputes under the Head Contract. The parties acknowledged that the stages of the works had attained practical completion on various dates from October 2011 to 20 June 2014: cl 2.1(a); Schedule 2. In short, the builder agreed to rectify various defects and the respondents agreed to release security, with the parties releasing each other in respect of these matters: cl 3.1. The release did not extend to the builder’s obligations in the defects liability periods or under the Home Building Act 1989 (NSW): cl 3.2.

23. On 7 October 2015, a final occupation certificate was issued for the last stages, being Mark 1 and Mark 2.

Building defects proceedings

24. In the years which followed, multiple building defects proceedings have been commenced in this Court against the builder and the developer under the Home Building Act 1989, specifically:

(a) on 19 December 2019, the owners corporations of 1, 3 and 5 Park Lane commenced proceedings; (b) on 17 February 2020, the owners corporation of West Tower commenced proceedings; (c) on 3 September 2020, the owners corporation of East Tower commenced proceedings; (d) on 1 December 2020, the owners corporation of Sky Apartments commenced proceedings; (e) on 15 December 2020, the owners corporation of 8 Park Lane commenced proceedings; and (f) on 15 and 16 June 2021 respectively, the owners corporations of Mark 1 and Mark 2 commenced proceedings.

25. The owners corporations in each proceedings are represented by the same solicitor. The builder is represented by the same solicitor in each proceedings as well, being Maddocks. The builder has since filed cross-claims in these proceedings against various third-party subcontractors and consultants. For example, the builder has filed a cross-claim in the 8 Park Lane proceedings against 14 consultants and subcontractors.

26. While the builder is a defendant to each of these proceedings, Watpac Ltd is not. Presumably, in light of the seven sets of proceedings which the builder then faced, the builder and its parent took some preventative measures. In June 2021, a new company, BESIX Watpac (NSW 1) Pty Ltd was incorporated. The builder changed its name to ACN 103 211 141 Pty Ltd. In November 2021, BESIX Watpac obtained a builder’s licence. A Modern Slavery Statement later issued by BESIX Watpac (in May 2024) notes that it is a subsidiary of Watpac Ltd and, further, the builder is “non-trading”. The respondents’ solicitor said the fact that the builder changed its name and ceased to trade raised concerns regarding the company’s ability to meet any adverse judgment.

27. In January 2023, the owners corporations in “One Central Park” (being West Tower, East Tower, Sky Apartments) and the Retail Lot were issued with a fire order by the NSW Department of Planning and Environment in respect of cladding on the building. These parties made claims in their respective building defects proceedings relating to the fire order, and each of these proceedings are being case managed together.

28. In February 2023, an eighth set of proceedings were commenced by the owners corporation of the Retail Lot, but represented by a different firm of solicitors than the seven proceedings already on foot. Perhaps for this reason, the Retail Lot proceedings are differently configured. A total of 23 defendants are sued. The first defendant is the builder, followed by 19 consultants and subcontractors. In addition, Frasers Broadway, the developer and the first respondent are the 21st to 23rd defendants. The builder continues to be represented in these proceedings by Maddocks.

29. The damages sought in the eight building defects proceedings is some $180 million.

30. In February 2024, the Secretary of the Department of Customer Service issued a Modified Building Work Rectification Order under the Residential Apartment Building**s (Compliance and Enforcement Powers) Act 2020 (NSW) to the developer and Frasers Broadway, requiring them to cause building work to be carried out to remediate serious or potentially serious building defects. This gave rise to a ninth set of proceedings, commenced by the owners corporations in “One Central Park” (being West Tower, East Tower, Sky Apartments) and the Retail Lot in February 2025. I dismissed these proceedings in October 2025 under r 13.4(1)(c) of the UCPR as the relief could, and should, be sought in proceedings already on foot: The Owners Strata Plan No 87881 v Frasers Broadway Pty Ltd [2025] NSWSC 1073.

These proceedings

31. On 13 June 2024, the developer and Frasers Broadway sent letters of demand to the respondents, seeking to be indemnified under the joint venture agreement and Novation Deed. On 14 June 2024, the developer and Frasers Broadway commenced proceedings against the respondents, seeking declarations that they were entitled to be indemnified under the joint venture agreement and Novation Deed.

32. Also on 14 June 2024, the respondents filed a cross-claim against Watpac Ltd and the builder, seeking to enforce the second guarantee. In particular, prayer three of the Cross-Summons seeks the following relief:

“Further, in so far as any allegations are proven by the plaintiffs in each of the [building defects proceedings], a declaration that the [builder]:

a. breached the Head Contract; and

b. by breaching the Head Contract, breached clause 2.2(b) of the Novation Deed.”

33. That is, the relief sought against Watpac Ltd and the builder is premised upon the plaintiffs in the buildings defects proceedings succeeding.

34. In the Statement of Cross-Claim, the respondents set out the sequence of contractual arrangements, from the Head Contract in December 2010 to the second Guarantee and Indemnity Performance Guarantee in October 2011. It is noted that the builder, the developer and the first respondent are now defendants in the eight building defects proceedings, while the developer and Frasers Broadway have been issued with the Modified Building Work Rectification Order. The pleading continues:

“27. Should the defects, or any of them, be established against the [developer] and/or [builder] in the [building defects proceedings], then any such defects which are established:

(a) will be a result of the [builder] failing to perform, observe and fulfil the Guaranteed Obligations within the meaning of clause 1 of the Second Parent Company Guarantee;

(b) will be caused by or arise out of a breach of the [builder] of one or more of the Guaranteed Obligations within the meaning of clause 2 of the Second Parent Company Guarantee; and/or

(c) will be in respect of or arising in connection with the development and construction of Phase 1 and 2 within the meaning of clause 6.1 of the Development Agreement.”

35. The same allegation is made in the event that the developer or Frasers Broadway are required to comply with the Modified Building Work Rectification Order or to enter an undertaking under the Residential Apartment Building**s (Compliance and Enforcement Powers) Act: par 28. (Both pars 27 and 28 are denied by the applicants.)

36. By reason of these matters, the developer is said to have suffered loss or damage and will continue to suffer loss or damage, of which particulars are given: par 29. These include the costs and expenses of defending the building defects proceedings and prosecuting any cross-claims; liability as may be determined in those proceedings; costs and expenses incurred or to be incurred in relation to the Modified Building Work Rectification Order or to comply with that order or as a consequence of complying with any undertaking given under the Residential Apartment Building**s (Compliance and Enforcement Powers) Act. (The applicants deny par 29 and further say that any loss or damage is “loss or damage arising out of or in connection with defective building work” within the meaning of s 6.20 of the Environmental Planning and Assessment Act 1979 (NSW).)

37. The respondents then plead their obligation to indemnify the developer under the Phase 1 and 2 Development Agreement: Statement of Cross-Claim, pars 30 and 31. The developer demanded indemnity on 13 June 2024: par 32. (The applicants say that the respondents should have raised s 6.20 of the Environmental Planning and Assessment Act in response to the plaintiffs’ demands.)

38. The respondents then plead that they are liable, and will continue to be liable, to the developer for its Loss or Damage under the Phase 1 and 2 Development Agreement: par 33. (The applicants say that the respondents’ liability was extinguished ten years after completion of the work: s 6.20, Environmental Planning and Assessment Act. Further, any cause of action founded on the development agreement is not maintainable, having been brought after six years from when the cause of action first accrued to the plaintiffs.)

39. A similar pleading follows in respect of Frasers Broadway’s loss and damage suffered as a consequence of being sued by the Retail Lot and being the subject of the Modified Building Work Rectification Order: Statement of Cross-Claim, par 34. (The applicants do not admit par 34 but, again, rely on s 6.20 of the Environmental Planning and Assessment Act.) A similar pleading follows in respect of the respondents’ liability to indemnify Frasers Broadway under the Novation Deed, for which Frasers Broadway has made demand: pars 35-38.

40. In October 2024, Watpac Ltd and the builder filed Technology and Construction List Cross-Claim Responses. (Maddocks acts for the builder and Watpac Ltd in these proceedings as well.) The respondents’ solicitors sought further particulars, where a bare denial was made to the paragraphs the subject of the proposed separate question.

41. Amended pleadings were filed in March 2025. In addition to the response to the paragraphs referred to in the proposed separate question, Watpac Ltd and the builder plead various arguments as to why Watpac Ltd is not obliged to indemnify the respondents, including that the guarantee has no force or effect after 60 days after the expiration of the Defects Liability Period applicable to the final Stage of the Work under the Head Contract, said to be 20 June 2015. Reliance is placed on s 6.20 of the Environmental Planning and Assessment Act, together with s 18E of the Home Building Act.

42. In addition, the Deed of Settlement and Release is said to have operated automatically to discharge Watpac Ltd’s obligations under the second guarantee, where the deed substantially changed its obligations without Watpac Ltd’s consent. Entry into the Deed of Settlement and Release is said to have operated automatically to discharge Watpac Ltd’s obligations. Further, it is said that the builder’s liability to the respondents for any failure to perform the Head Contract does not extend to loss falling within the ‘second limb’ of Hadley v Baxendale and is limited to 50% of the contract sum save for liability under the Home Building Act.

43. In June 2025, the respondents filed a reply to the Technology and Construction List Cross-Claim Responses, including:

“The upstream limitation defence against the Landowner

6. In reply to the Guarantor/Watpac Limited's contentions in paragraphs C32 and C33 of the Response:

(a) say the indemnity in the Development Agreement is an obligation to indemnify the Landowner (First Defendant) on demand, such that the cause of action for breach does not accrue until a demand is made to indemnify;

(b) say that on the proper construction of the indemnity in the Development Agreement and the EP&A Act, the Landowner's (First Defendant's) claim on the indemnity is not subject to the provision of section 6.20 of the EP&A Act as the claim is not a civil action for loss and damage within the meaning of the EP&A Act;

(c) say that, in the alternative, insofar as section 6.20 of the EP&A Act could have applied to the claim, by reason of entering the indemnity the Landowner (First Plaintiff) and the Cross Claimants/Joint Venture Developer contracted out of operation of section 6.20 of the EP&A Act; and

(d) say that, in the alternative, to the extent that section 6.20 of the EP&A Act could have applied, the Building Work, as a whole, was completed within the meaning of the EP&A Act after the Occupation Certificate for the last of the whole building, being block 5C known as 'the Marks' on 7 October 2025 (such that on no view was section 6.20 of the EPA Act engaged).”

44. The respondents’ solicitor then proposed short minutes of order for an upcoming directions hearing, proposing that these proceedings be heard after the last of the eight building defects proceedings, with evidence in each of those proceedings to be taken as evidence in these proceedings. Given that the relief sought against Watpac Ltd and the builder was premised upon the plaintiffs in the eight building defect proceedings succeeding, one might have thought that this proposal was eminently sensible.

45. On 10 July 2025, Watpac Ltd and the builder filed this motion. The respondents’ solicitor queried the motion, where the question sought to be determined separately was not understood. The applicants’ solicitor replied that the intent of the motion was to save time and costs by having a dispositive issue, based on the limitation defences pleaded. The assumptions outlined in the motion “are, of course, proposed only for the purpose of determining the separate question and not as admissions for the entirely of the proceedings.”

46. In support of the application, the applicants’ solicitor said that the proposed separate question, if determined in favour of the applicants, is dispositive of the cross-claims. This is irrespective of whether the developer or Frasers Broadway have any liability in the building defects proceedings or in respect of the Modified Building Work Rectification Order. None of the 49 plus affidavits and lay or expert reports served in the building defects proceedings, or to be served in those proceedings, is necessary or relevant to the determination of the dispositive defences pleaded by the applicants.

47. The applicants’ solicitor said that all that needs to be done is to exchange evidence (most likely documentary only) and written submissions, and for a one to two day hearing. Significant document production will not be required, nor evidence from those who negotiated and drafted the agreements. The applicants’ solicitor considers that the separate question should be able to be determined between July and August 2026. Otherwise, the building defects proceedings are expected to be ready for hearing in late 2026 and 2028.

48. On receipt of this affidavit, the respondents’ solicitor raised a number of queries as to precisely what question was to be answered, on the basis of what facts, and how it was said that this would be dispositive of these proceedings. The respondents’ solicitor added that it was unclear whether the applicants now admitted paragraphs C27, C28, C29 and C34 of the Cross-Claim, where those paragraphs were presently denied on the pleadings. The applicants were invited to withdraw the motion or, failing that, confirm that they unconditionally accepted liability under the second guarantee for the developer and Frasers Broadway’s Loss or Damage, and that the respondents had incurred losses which would become immediately due and payable upon quantification.

49. The applicants’ solicitor did not embrace these proposals, explaining that the proposed separate question was similar to a demurrer. Further:

“To be clear: the contentions in paragraphs C27, C28, C29, and C34 of the Cross-Claim are not admitted for the purposes of the proceedings generally. They are assumed as true only for the limited purpose of determining the question of law. Should the question be answered against our clients, all denials in our clients’ Amended Cross-Claim Responses are maintained.

… A negative answer to the separate question would not, and could not, equate to an admission of liability. It would simply mean that the proceedings continue, to be defended on all grounds pleaded.”

50. The respondents’ solicitor is not convinced of the utility of the separate question and believes that there is no real case management benefit. Rather, the solicitor anticipates significant costs and time inefficiencies. Preparation for such a hearing could take months. Extrinsic material and factual or lay evidence may be important. This may extend to correspondence between the parties’ legal representatives. The hearing itself would more likely take up to five days. The estimated cost of preparation and hearing of the proposed separate questions was between $480,910 and $854,320.

51. If Watpac Ltd succeeds on the separate question, then the respondents’ solicitor believes that there is a very strong prospect of being instructed to appeal. Any suggested efficiencies or time savings thought to arise from the separate question would thereby be undermined. If the separate question is answered “No”, then the issues in these proceedings will likely need to be heard twice. In addition, the respondents’ solicitor believes that the separate questions may never ultimately arise. It may be the case that the eight building defects proceedings may resolve through mediation or settlement discussions such that these proceedings will never proceed to a hearing. The solicitor believes that it is more efficient to await the outcome of the building defects proceedings before determining these proceedings.

Submissions

52. The applicants submitted that the case against Watpac Ltd fails in law, regardless of what happens in the building defects proceedings, by reason of limitation issues and other issues of law. Specifically:

(a) The cross-claim against Watpac Ltd cannot be brought by reason of s 6.20(1) of the Environmental Planning and Assessment Act other than in relation to Mark 1 and Mark 2, as these proceedings were commenced more than 10 years after the completion of the work. (b) The cross-claim against the builder cannot be brought against the builder by reason of s 6.20(1) of the Environmental Planning and Assessment Act other than in relation to Mark 1 and Mark 2 and is barred by s 18E(1) of the Home Building Act (except in relation to the Retail Lot proceedings). As such, the cross-claim against Watpac Ltd will also fail. (c) The second guarantee does not apply as it has expired, does not extend to reasonably avoidable loss (such as loss that could be avoided by the cross-claimants relying on s 6.20(1) of the Environmental Planning and Assessment Act) nor obligations voluntarily assumed (such as the obligations voluntarily assumed to Frasers Broadway under the development agreement) and was discharged by the Deed of Settlement and Release. (d) The provision of the Novation Deed under which the respondents sue the builder is not promissory in nature.

53. While individually, these contentions were not a complete answer to the whole of the cross-claim, Watpac Ltd submitted that, cumulatively, they were. The applicants had legal answers to the cross-claim that could be determined on the facts pleaded in the cross-claim, assuming those facts to be correct, and the documents referred to in the pleadings. This was a “concrete” dispute that this Court could and should promptly quell by ordering a separate question: Bass at [45]. The alternative proposal put forward by the respondents was undesirable, as it would take years before the matter would be resolved.

54. All that was needed was to tender relevant documents. There was no statement of agreed facts, nor was this necessary. The applicants accepted that, if they lost on the separate question, then the Court would not save time and it would remain for the correctness or otherwise of its denials to be determined at trial.

55. The respondents submitted that the unusually framed separate question went to limitation arguments which involved questions of fact, or mixed fact and law. It would not resolve these proceedings, or any substantial part of them. The application was not advanced with agreed facts or any concession on Watpac Ltd’s part as to outcome, should the proposed separate questions (or some of them) be resolved adversely to it. Leave would likely result in wasted time and cost, causing further issue and party fragmentation. Rather, all issues in these proceedings should be tried together, and after (or with) the liability of the relevant Watpac and Frasers parties having been determined in the eight building defects proceedings. Resolution of these questions separate from all other issues in the eight building defects proceedings would only serve to delay and frustrate the efficient progress of those proceedings and should not be permitted. It was preferable that all issues in all proceedings be determined at once and together.

56. The respondents further submitted that the proposed separate question was unlikely to resolve the issues referred to by the applicants’ solicitor. The questions as framed by Watpac Ltd permitted only a “Yes” or “No” answer. But Watpac Ltd had to succeed on all questions in order for these proceedings to be dismissed. Failing on any one question meant that the proceedings would go to trial and be defended on all issues. The Court should not permit a question that, by design, would require the re-trying the same issues. Further, these proceedings should be heard after the building defects proceedings are determined so that Watpac Ltd’s liability can be determined in light of concrete and established facts and not hypotheticals.

57. The respondents submitted that more than documentary evidence would be needed. The ‘long-stop’ defence in s 6.20 of the Environmental Planning and Assessment Act was not purely a question of statutory construction but a question of mixed fact and law. There was no authority as to whether a developer could contract with the builder or the builder’s parent in a way that elongated the builder and its parent’s liability. Nor was there any reason in principle or policy why such a contractual arrangement could not outflank a builder’s recourse to the ‘long-stop’, assuming the long-stop actually applied.

58. As to whether the indemnities applied, there were issues of fact as to when any particular claim was made, loss suffered or damage paid. Extrinsic material may be needed to support the parties’ competing constructions of the scope of the indemnity. There was a mixed question of fact and law concerning the builder’s obligations under the Deed of Settlement and Release, and a factual question as to Watpac Ltd’s knowledge of the Deed of Settlement and Release and the extent of its consent (or absence of it). Discovery would be needed. The applicants’ suggestion that the respondents failed to perform “its own indemnified obligations” raised questions of fact: whether or not the obligations were performed, and if not, why not, and therefore whether any alleged non-performance was excusable. Whether the indemnity applied was a question of mixed fact and law as to whether loss arose within 60 days after the expiration of the Defects Liability Period. There was no sense in determining those issues separately from the building defects proceedings.

59. The respondents submitted that there was no readily identifiable case management benefit, where the applicants were represented by the same solicitors, who were also acting in the eight building defects proceedings. Those hearings could not be avoided. Hearing these proceedings first threatened to divert the time and resources of the developer and builder from the eight building defects proceedings. The problem was that the builder positively disputed the building defects in the existing proceedings. The parent had elected not to bring the building defects proceedings to an end more quickly by, for example, admitting that some defects existed. The builder and its parent were keeping alive the question of loss but now seeking to agitate whether any loss was recoverable by a separate question.

60. In reply, the applicants submitted that the respondents' approach discarded the parol evidence rule and the objective theory of contract. The evidence referred to by the respondents' solicitor would be inadmissible: Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 at 352; [1982] HCA 24; Electricity Generation Corporation (t/as Verve Energy) v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 at [35]. Even if such evidence was sought to be adduced, it should be assembled and proceed to hearing in short order. It would cause significant prejudice to Watpac Ltd (which was not a party to the building defects proceedings) to be “vexed” with this litigation for years.

61. The applicants submitted that there was no risk of issues being re-tried as r 28.3(b) of the UCPR empowered the Court – after deciding a separate question – to give or make such judgment or order as the nature of the case requires. If the Court decided an issue unfavourably to the applicants, a judgment or order giving effect to that decision would prevent that issues from being re-tried. Ultimately, the applicants accepted that they would not be entitled to re-agitate an issue on which they failed.

Conclusion

62. There are six matters which, I think, are relevant to the exercise of the Court’s discretion under r 28.2 of the UCPR.

63. First, the damages sought in the eight building defects proceedings are some $180 million. If the costs of the developer, Frasers Broadway and first respondent of defending those proceedings, and costs orders which may be made against them in those proceedings, are factored in, then the potential liability sought to be recovered from the builder is some $200 million, albeit the parent’s guarantee is limited to $29,810,003.60. Given the amounts potentially involved, any separate question will likely be hotly contested. I accept that, if the applicants are successful on the separate question, then the respondents will likely appeal. The same thing may happen if the applicants fail on the separate question.

64. Second, and importantly, depending on how the other eight building defects proceedings go, these proceedings may never need to be determined, either on a separate question, or any appeals from the judgment on the separate question, or at all. The builder denies any liability in the building defects proceedings. The builder may be successful in that regard. The Frasers parties named in those proceedings may obtain a costs order in their favour such that they need not look to the guarantee at all. Even if judgment is entered against the builder or the Frasers parties in those proceedings, then any liability may be reduced by proportionate liability defences or cross-claims against subcontractors, such that it is unnecessary to seek to recover any liability under the guarantee. Or the residual liability of the respondents may be sufficiently reduced such that the applicants’ liability may be more readily resolved commercially.

65. Third, on my review of the pleadings, answering the separate question will require the Court to resolve a number of embedded issues which, by and large, involve questions of mixed fact and law. Resolving the separate question will not simply be a case of construing a handful of contractual documents and statutory provisions.

66. True it is that many of the issues turn on the proper construction of contractual documents. The main focus is on the documents executed from July to October 2011, when the respondents took over the conduct of the development. The respondents may wish to call evidence as to the circumstances in which these documents were executed, in support of their proffered construction. Whether such evidence is ultimately of assistance to the Court in construing the documents will remain to be seen: Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37 at [46]-[49] (French CJ, Nettle and Gordon JJ); Cherry v Steele-Park (2017) 96 NSWLR 548; [2017] NSWCA 295 at [68]-[86] (Leeming JA, Gleeson and White JJA agreeing). But the respondents cannot be excluded from putting on such evidence. Discovery may be needed on this subject. The applicants ultimately accepted that, if either side could demonstrate that there was relevant extrinsic material that informed the construction of the documents, then that evidence could be put forward on the separate question.

67. In respect of the proper construction of the Deed of Settlement and Release executed in July 2014, the respondents are not only entitled to adduce evidence of commercial context if they wish but, further, the applicants’ defence makes this essential. Watpac Ltd says that the deed was entered into without its knowledge or consent. The applicants will, presumably, wish to call witnesses to establish this proposition. The respondents will be entitled to contend otherwise. Discovery will be needed on this subject too.

68. In a similar vein, the applicants contend that the respondents have voluntarily assumed a liability to the plaintiffs, which the respondents should not have done. The assumed liability is said to go beyond the scope of the parent’s guarantee. The circumstances in which the respondents are said to have voluntarily assumed a liability to the plaintiffs will need to be explored. This will involve discovery and evidence, being probably both documentary and lay evidence.

69. And finally on this matter, the applicants contend that the builder’s liability and thus the parent’s liability under the guarantee excludes damages which fall within the ‘second limb’ of Hadley v Baxendale. Whether damages fall within this limb turns on whether the damage be reasonably supposed to have been in the contemplation of the parties, at the time they made the contract, as the probable result of the breach: Hadley v Baxendale (1854) 9 Ex 341 at 254. Resolving this issue appears to involve factual matters. However, I apprehend that the applicants do not propose that this issue be resolved on the separate question but at trial in the event that the applicants fail on the proposed separate question.

70. Fourth, the applicants wish to have these proceedings dismissed by early determination of their limitation defences. Limitation questions should only be decided in advance of trial “in the clearest of cases”: Wardley Australia Ltd v Western Australia (1992) 175 CLR 514; [1992] HCA 55 at 533 (Mason CJ, Dawson, Gaudron and McHugh JJ). At common law, this case does not appear to be an obvious candidate for such an application. Where a cause of action is to enforce a guarantee or indemnity, time does not begin to run until the contingency which activates the guarantee or indemnity is fulfilled: Wardley at 533. The respondents only made a demand on the guarantee in June 2024 (assuming that demand was made by the cross-claim).

71. Turning to statutory limitations, s 6.20(1) of the Environmental Planning and Assessment Act provides:

A civil action for loss or damage arising out of or in connection with defective building work or defective subdivision work cannot be brought more than 10 years after the date of completion of the work.

72. Whether enforcement of the parent’s guarantee is a civil action “arising out of or in connection with defective building work” is not merely a question of law but turns on the facts of the case: see, for example, McDougall J’s analysis in Dinov v Allianz Australia Insurance Ltd (2017) 96 NSWLR 98; [2017] NSWCA 270 at [91]-[93] (Beazley P and Meagher JA agreeing). This does not appear to be a pure question of law but of mixed fact and law.

73. Fifth, the applicants accepted that the Court should have regard to case management considerations, not only in respect of these proceedings but also the eight building defects proceedings, when determining this application. The builder, the developer and the first respondent are presently engaged in eight substantive pieces of litigation in this Court. Given the preventative measures which have been taken in respect of the builder, I presume that Watpac Ltd is providing the resources for the builder to defend those proceedings.

74. These proceedings are the last commenced proceedings and, on their face, depend upon the plaintiffs in the eight building defects proceedings succeeding. Otherwise, these proceedings need not be determined at all. But Watpac Ltd, for its own convenience, wishes to take these proceedings ‘out of order’ and have the separate question determined in advance of the final hearing of any of the building defects proceedings. Practically speaking, this course will require the Watpac and Frasers parties to divert their time and resources to preparing for a hearing on the separate question. This will necessarily take the Watpac and Frasers parties away from preparing the eight building defects proceedings for trial. I am concerned at that prospect.

75. Sixth, the proposed separate question itself raises questions as to what facts are to be assumed and what facts will need to be agreed or proved on the hearing of the separate question. Contrary to the applicants’ submission, it is not the Court’s role to make the separate question work by directing the parties to agree on facts for the purposes for the separate question. Nor is it the Court’s role to fashion the judgment and orders on the separate question to make sure that, contrary to the applicants’ position stated in its correspondence, the applicants are bound by the judgment and orders and cannot re-agitate those matters at a final hearing. An applicant for a separate question should consider such problems and propose solutions as part of its application, rather than leave these problems for the Court to fix. Usually, this will involve the parties proffering a statement of agreed facts as part of the application.

76. Overall, I consider that the applicants have not demonstrated that a departure from the ordinary course of hearing and determining all issues in the case at the same time is desirable. Rather, the Court will be asked to answer a hypothetical question, and the Court of Appeal may be asked to determine an appeal from the judgment on that hypothetical question. Proceeding in this fashion will divert the parties from the eight building defects proceedings, the determination of which will provide the necessary foundation for the determination of these proceedings.

77. I reject the submission, repeatedly made, that Watpac Ltd should not be “vexed” with these proceedings in the interim. Watpac Ltd has guaranteed the builder’s performance of the Head Contract. If it be the case that the builder has breached its obligations under that contract – and that issue is in the process of being determined in the eight building defects proceedings – then Watpac Ltd’s liability under the guarantee will then need to be determined. That is the ordinary sequence of events. Inverting this sequence for the convenience of the guarantor will cause considerable inconvenience to others and may result in the waste of the parties’ resources and court time.

Orders

78. For these reasons, I make the following orders:

79. Dismiss the motion filed on 10 July 2025 with costs.

80. List the matter for directions in the Technology and Construction List on 8 May 2026.

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