Victorian Civil and Administrative Tribunal|2003-09-08

Hansen Yuncken Pty Ltd v TS Services Pty Ltd [2003] VCAT 2020 (8 September 2003)

Residential Investments Australia Pty Ltd (ACN 007 049 603)

2. The First Respondent's claim against the Third Respondent is dismissed by consent of those parties with no order as to costs.

3. Order the First Respondent to pay to the Applicant the sum of $608,275.52, plus interest pursuant to the contract of $235,550.30, making together the total sum of $843,825.82.

4. Order the First Respondent to execute such documents and do such things as may be reasonably necessary to secure the release to the Applicant of the sum $190,024, together with any accumulated interest thereon, held in trust pursuant to the agreement made on 20 March 2000 between the Applicant and the First Respondent, such sum to be received by the Applicant in part satisfaction of the sum awarded in paragraph 3 of this order.

5. Order the First Respondent to forthwith deliver up to the Applicant the security bond provided by it to the First Respondent.

6. Liberty is reserved to the Applicant to apply for any necessary orders in aid of enforcement of paragraphs 4 and 5 of this order.

7. Until such time as the security bond is delivered up pursuant to paragraph 5 or until further order, the First Respondent, by its directors, servants, agents or otherwise howsoever are restrained from:

(a). making any claim or demand upon the surety of the bond;

(b). seeking to make any claim or enforce any right or entitlement thereunder;

(c). transferring, charging, pledging, assigning or parting with possession with the bond; or

(d). dealing with the bond in any manner whatsoever, save for the purpose of returning it to the Applicant.

8. Order the First Respondent to pay to the Applicant the further sum of $6,286.82 damages for failing to release the said security bond.

9. The First Respondent's counterclaim against the Applicant is dismissed.

1. These four sets of proceedings were listed for hearing together before me on 7 July 2003 with an estimated duration of 35 days. The combined hearing, interrupted by several short adjournments, occupied a total of 28 hearing days. Each set of proceedings had cross-claims within it, raising other questions to be determined between the various parties. In addition, apportionment or contribution was sought between some parties pursuant to s.131 of the Building Act 1993 ("s.131") and/or s.23B of the Wrongs Act 1958 ("s.23B").

2. All proceedings relate to the construction of an apartment block comprising 48 apartments at 65 Beach Street, Port Melbourne.

3. At the outset the various parties to the disputes and their respective roles should be identified.

4. The Apartments were constructed by Hansen Yuncken Pty Ltd ("the Builder") pursuant to a building contract ("the Building Contract") entered into on 30 July 1998 and varied by a subsequent deed dated 20 April 1999. The other party to the building contract, that is, the party with which the Builder contracted to construct the Apartments, was a developer, TS Services Pty Ltd ("TS Services"). TS Services, and its related company, Residential Investments Australia Pty Ltd ("RIA"), describe themselves as "the RIA Group".

5. The owner of the land upon which the units were constructed was Baxter Lodge Pty Ltd ("Baxter Lodge"). This company was the trustee of a unit trust used as the vehicle of the investors funding the project. It was incorporated expressly for the purpose of the development and entered into a joint venture agreement with TS Services, the substance of which was that TS Services was to carry out the development in exchange for a share of the profits. Baxter Lodge would sell the units to the individual purchasers and the proceeds of sale were to be applied in a particular way specified in the joint venture agreement.

6. Robert Peck YFHK Pty Ltd ("Peck") was the architect of the project. It prepared the architectural plans and supervised the construction for most of the construction period.

7. Gerling. Australia Insurance Company Limited ("Gerling") is an insurer that issued a contract works policy to the Builder that was current at the material times. In general terms, the policy was to indemnify the Builder with respect to certain loss that it might sustain or liability it might have to other persons in regard to building work that it carried out during the period of the policy.

8. In the first proceeding, D671/2000, (`the First Proceeding") the Builder as Applicant claims from TS Services and RIA various sums that are said to be due under the Building Contract. These include outstanding variations, extensions of time and unpaid progress claims. The proceeding was brought against RIA as well as TS Services because the Builder alleges that it is principally liable with TS Services for reasons I shall consider below. RIA denied any liability and TS Services defended and cross-claimed for delay and defective workmanship. TS claimed damages against Peck for defective supervision and design and Peck defended, denying negligence.

9. The second proceeding, D277/2001, (`the Second Proceeding") was brought by the Body Corporate of the strata plan for the apartments. It sought rectification and/or damages with respect to defects in the building and common property. These related principally to water penetration through the outer skin of the building and certain windows and defects in the swimming pool. The Builder claimed apportionment or alternatively, contribution, under s. 131 and s.23B against Peck, alleging defective design. There was a corresponding claim by Peck against the Builder alleging defective workmanship and claiming apportionment under s. 131.

10. The third proceeding, D45/2001, (`the Third Proceeding") was brought by the purchasers of Unit 801, Ian West, Dawn Shepheard and Parbanna Pty Ltd. They sought orders for rectification and/or damages from Baxter Lodge and the Builder with respect to defects in that apartment. Baxter Lodge in turn claimed orders pursuant to s.131 apportioning responsibility for the claimed defects to Peck and TS Services. It also claimed damages from the Builder for defective workmanship. The Builder in turn cross claimed against Baxter Lodge seeking declaratory relief that it was responsible with TS Services and RIA to pay the Builder for the construction of the Units and a further declaration that the proceeds of the sale of units it had received were held by it upon trust for the Builder. Finally, the Builder sought indemnity from Gerling

11. The fourth proceeding, D79/2001, (`the Fourth Proceeding") was brought by the purchasers of Unit 704, Grace Callegari and Phillip Osmond. They sought rectification and/or damages with respect to defects in that apartment from the Builder and to appeal against the decision of HIA Insurance Services Pty Ltd rejecting their claim for indemnity under the applicable domestic building insurance. The Builder claimed apportionment against Peck pursuant to s.131 or s 23B and Peck made a similar claim pursuant to s.131 against the Builder. The Builder also sought indemnity from Gerling.

12. Many of these claims and cross claims have since been resolved and certain of the parties called no evidence. When the hearing commenced on 7 July 2003, Baxter Lodge did not appear and the third and fourth proceedings were largely settled.

13. In the Third Proceeding, D45/2001, the Applicants sought an order that the claim against Baxter Lodge be struck out with no order as to costs. At the request of the parties affected I also indicated that I would strike out the claims brought by Baxter Lodge against the Builder, Peck and TS Services for non-appearance. I think it is more appropriate that those claims be dismissed. During the course of the hearing the other claims were settled as between the Applicants and the remaining respondents and, except for two remaining issues, orders are only required now that the proceeding be struck out with a right of reinstatement with no order as to costs. The two issues remaining to be determined in the third proceeding are the claim by the Builder against Baxter Lodge for a determination concerning the proceeds of sale of the various units and its claim for indemnity against Gerling with respect to the settlement it has made with the Applicants.

14. The Fourth Proceeding has also been settled and save for one matter, orders are only required that the proceeding be struck out with a right of reinstatement with no order as to costs. The outstanding issue is the claim by the Builder against Gerling for indemnity with respect to the settlement it has made with the Applicants.

15. Resolution of the Second Proceeding was assisted by a considerable amount of remedial work carried out by the Builder on the windows and external skin of the building, which was completed shortly before the hearing commenced. This was done pursuant to a written agreement entered into between the Builder and the Body Corporate. Essentially, the agreement provided that the work was to be done on a "without prejudice" basis, with certain consequences to follow upon certification of completion. Peck was not a party to that agreement. Most of the work related to sealing the gaps in the external pre-formed panels to change the drained joint design of the exterior skin to a fully sealed skin. A number of windows and doors were also removed, rebuilt and reinstalled and some compressed cement sheeting was removed and replaced following some underlying structural work. This work appears to have solved the water penetration problem, and the Builder now seeks orders against Peck for contribution or apportionment of the cost it has incurred in doing the work. The remaining claims by the Body Corporate against both the Builder and Peck were settled during the hearing and in regard to those claims orders are only required that they be struck out with no orders as to costs. The claim against TS Services remains, both in regard to defects to the pool and also the inability of the Body Corporate to access the lift control panel on the 9th floor from common property. This problem arose because, when that floor was subdivided, the lift lobby area was included within the title boundary of the 9th floor penthouse.

16. At the conclusion of the hearing I indicated to the parties that I would determine the disputes between the Builder on the one hand and Baxter Lodge, TS Services and RIA on the other, as soon as possible. I did this for two reasons. In the first place, as a result of the failure of any of those three related companies to call any evidence, the evidence of the Applicant is uncontested. It also appears from the evidence of Mr Apperly, the director of those companies, that the profits made from the development have been distributed and that TS Services and Baxter Lodge Pty Ltd are without any substantial assets. An early determination of the claims against those companies was therefore sought by Mr Whitten as a matter of urgency. I was prepared to do this and make a decision on those claims as soon as I had done so, rather than wait until I had dealt with and decided the outcome of the more difficult contested parts of the case.

The claim by the Builder against TS Services and RIA

17. TS Services and RIA defended the Builder's claim in the First Proceeding on the following bases:

(b) The work was not completed in accordance with the plans and specifications;

(d) The works were not such as to provide luxury accommodation;

(e) The Applicant was not entitled to the extensions of time claimed;

(f) The Second Respondent denied that it was a contracting party or the principal of the First Respondent or that it had any liability to the Applicant.

In addition, by way of counterclaim, TS Services sought damages for defective workmanship and materials. In its particulars, the damages sought were:

(a) the cost of rectifying defects, which was said to be $1,557,092;

(d) Loss of goodwill and reputation, for which $1,000,000 was claimed.

17. TS Services also sought damages from Peck with respect to certain defects to the extent that they may have been due to defective design, inspection or supervision. These related to leaking doors and windows and water penetration of the external skin of the building. This claim was settled and on the first day of the hearing, with the consent of those parties, I made an order dismissing TS Services' claim against Peck with no order as to costs between them. Following that order, the only remaining claims in that proceeding were the claim by the Builder against TS Services, TS Services' counterclaim against the Builder and the Builder's claim against Peck pursuant to s. 131 or s. 23B in regard to TS Services' counterclaim against it. I determined that, although I was disposed to make the consent orders sought as between TS Services and Peck, Peck would remain as a Respondent to the Application for the purpose of the s. 131 and s. 23B claims. Since the counterclaim is to be dismissed, it is now unnecessary to consider or determine the s.131 and s. 23B claims in the First Proceeding against TS Services.

18. As to TS Services' counterclaim, the claims with respect to damages for delayed settlements and loss of goodwill were struck out in the interlocutory stages and, due to its failure to file and serve certain material in accordance with an order of the Tribunal made on 30 June 2003, it was precluded from leading any evidence as to the defects claimed.

19. Immediately following the opening by counsel of the Builder's case and before any evidence was called, counsel for the Second and Third Respondents, Mr Stirling, stated that his clients, TS Services and RIA wished to withdraw from the evidentiary stage of the proceedings, reserving the right to make submissions at the end. Mr Stirling was excused from further attendance and thereafter, save for a statement read by a representative of RIA, Mr Wayne Barwood, at the conclusion of the evidence, neither TS Services nor RIA took any further part in any of the proceedings. A witness statement of their common director, Mr Apperly had been filed but they did not call him. At the request of the Applicant's counsel, Mr Whitten, I directed that a summons to witness be issued at the conclusion of the rest of the evidence, directed to Mr Apperly, pursuant to which he attended, produced a number of documents and gave some evidence.

20. In the First Proceeding, evidence was given on behalf of the Builder by its then project manager, Merilyn Voigt, its then site manager, Ron Ellerbock, an administrative officer, Anne Stratton, its then operations manager, Mark Bonnamy and its then Victorian Manager, Tom Wilson. Many documents were produced and proven by these witnesses. The evidence is uncontradicted and I accept it.

21. The first matter to be determined is the claim by the Builder against RIA. The principal identified in the contract was TS Services. Mr Whitten submits that I should nonetheless regard RIA and TS Services as a single entity. The two companies had common directors and some common staff, although the employee who was principally involved in the project, Jan Sigley, was an employee of TS Services, not RIA. The letterhead of RIA was commonly used for correspondence and giving directions to the Builder and to other parties involved. This letterhead had the name of RIA printed on it but not TS Services. By their terms, some of these directions do appear to have emanated from RIA. Some correspondence directed to the Builder was signed by persons who were identified in that correspondence as staff of RIA. The Builder itself sometimes communicated with RIA for instructions and received them. During the course of the work RIA sometimes gave directions to the Builder to vary the works or rectify defects. The complaints by RIA to the Builder about lack of progress were made in its own name, without making any reference to TS Services. In one memorandum to the Builder, Mr Apperly sought a meeting between the other parties and RIA, not TS Services. RIA was referred to in some of the Superintendent's directions as being the principal.

22. Numerous documents to this effect were produced which I have read. However despite all this, it is clear from the face of the contract that the party contracting with the Builder was TS Services. That was the party for which the Builder was doing the work and to which it was to look for payment. There is nothing in the contract to suggest that TS Services entered into the contract otherwise than on its own account. Apart from any inferences to be drawn from the matters stated above, there is no evidence that RIA was the principal or one of the principals on behalf of which TS Services was acting.

23. The common director of both companies (and also Baxter Lodge), Mr Apperly, described TS Services as the primary development vehicle of the group. It was, he said, intended to be the single purpose entity for all their development projects. He said that one employee of TS Services, Mr Barwood, did sales for the group as a whole and he even suggested that the profits from the development that TS Services had received "would have gone to meet normal day to day running costs of the group."

24. Despite this, as I pointed out during argument, there is no evidence of any relationship of agency between TS Services and RIA. An inference would have to be drawn from the evidence as to RIA's actions in the course of the project and the other matters referred to. The matters relied upon by Mr Whitten are equally consistent with RIA assisting TS Services to manage the project. Any actions it took to do this are consistent with the close connection between the two companies. The use of the letterhead is equivocal. The letter accepting the Builder's quote is on RIA letterhead but is expressed to be from TS Services, the signatory identifying himself as a director of TS Services. The same applies to the letter accepting the quote for removal of contaminated soil. For the correspondence, RIA's letterhead is commonly used but the contractual documents are expressly in the name of TS Services. The use of monies received by TS Services by the group as a whole does not establish that it was earned by the group as a whole. There is no evidence as to what the nature of this use was or how it was treated in whatever accounts there might be for these companies.

25. In the alternative, the claim against RIA is expressed to be one of misleading or deceptive conduct. The representations RIA is said to have made are first, that it had the authority to give the various directions and instructions that it gave and secondly, that the Applicant would be paid a reasonable price for undertaking the work. As to the first representation, even if one were to accept that such a representation can be spelled out from RIA's conduct, there is no evidence that it was misleading or deceptive. It does not appear that any direction RIA gave to the Builder was given without the authority of TS Services. As to the second, merely giving a direction on behalf of someone else does not in itself amount to a representation that the party on behalf of which the direction was given will pay for the work directed to be done. The claim against RIA must therefore fail.

26. The contract is the form of General Conditions of Contract (AS2124-1992). The contractual documents included a lengthy tender submission, a Functional Design Brief and many plans and drawings. Much of the design work was done after the contract was entered into. The price was $12,991,856 and the work was to be completed by 6 August 1999. The work was supervised by Peck until February 2000 and then by another company called MCD (Australia) Pty Ltd ("MCD"). Numerous meetings were held and site directions were given by Peck or MCD.

27. Throughout the course of the work, progress claims were submitted by the Builder. The contract required these to be submitted to the "Superintendent", which was Peck. In practice, they were given to Wilde & Woolard, a firm of quantity surveyors that had been engaged to value the work for which progress claims were made. Wilde & Woolard would then advise Peck which would then issue the certificate under the contract. Clause 42 of the contract required the Superintendent to issue a payment certificate within 14 days of receipt of a claim for payment. Within 28 days after receipt of a claim or 14 days of the issue of the certificate, the Principal was required to pay to the Builder the amount of the certificate or, if none had been issued, the amount of the claim. Submission of the various claims is proven by Ms Voigt's evidence.

28. On 2 March 2000, the Builder made progress claim No 19, claiming an amount of $406,581.50. No certificate was ever issued by Peck with respect to the claim, nor by MCD. Accordingly, pursuant to clause 42 of the contract, the amount claimed became due on 30 March 2000. It has not been paid. This part of the claim is established.

Progress claims 17 and 18 - the 20 March agreement

29. In March 2000, TS services retained half of two progress claims (17 and 18) on account of complaints as to certain defects. The two amounts totalled $190,024 and it was agreed that this sum would be retained in a solicitor's trust account pending certification that the defects had been rectified. Practical difficulties with the implementation of this arrangement then arose. There was doubt as to the continuing authority of Peck and MCD in regard to the approval and certification of the rectification work. There was some confusion about the various lists of defects that were produced and no clear system emerged as to how to identify what had been done and what had not been done. A great deal of rectification work was carried out by the Builder to the units, but it does not appear that the completion of the work was ever certified nor is there any direct evidence that every item of the work was done. Nevertheless, it is clear that the sum in question is part of the progress claims referred to and that, subject only to it fulfilling its obligations under the 20 March agreement, the Builder is entitled to receive it. All of the apartments to which the work was to be done have now been sold and transferred and neither TS Services nor RIA have any continuing involvement or interest in having done any work that might remain. There is no evidence of any continuing complaints from owners about defects, apart from what has been raised in these four proceedings. Finally, the Builder has a continuing responsibility to the owner of the relevant unit for any defect that might remain, although there is no evidence that there are any remaining defects. For these reasons I think the Builder is now entitled to an order that the amount held now be released.

30. Claims for extension of time were made from time to time under the contract. Most were resolved but claims for 15.46 days have not been certified and are in dispute. These are verified by the evidence of Ms Voigt and since there is no contrary evidence the Builder's entitlement to the extensions is established. By clause 36 of the contract, where the Builder has been granted an extension of time under clause 35.5, the Principal is required to pay to the Builder such extra costs as are necessarily incurred by it by reason of the delay. These were claimed as variations.

31. The Builder submitted many claims for variations most of which were not disputed. Some of these reflected claims for extra costs incurred by reason of delay. A significant dispute as to the costs arising from two extensions of time (54 and 57) was whether the costs of the crane should be included. Ms Voigt's evidence in this regard is unchallenged. In her witness statement she says that the Builder was entitled to variations totalling $305,805.52 which were not approved for payment. Again her evidence is unchallenged.

32. According to the witness statement of Ms Voigt, when she left the employ of the Builder in about October 2000, there was a balance of $608,275.52. The calculation of this figure is complicated but the figures from which it is derived are set out in her witness statement. Essentially, it represents the difference between the contract price, adjusted to take account of variations, delay costs, prime cost and other adjustments, less the amounts paid. It includes the sum of $190,024 held in trust. Her evidence is not contested and I find that this is the balance due under the contract.

33. Clause 42.9 of the contract provided for payment of interest on late payments at a rate equivalent to 1% above the overdraft rate published by the Commonwealth Bank of Australia from time to time for the amount overdue, accruing on a daily basis and compounding monthly. The evidence of Marcus Worn is that this amounts to $224,403.16, as at 17 July 2003, and the calculations are set out in an exhibit to his affidavit. Between that date and the date upon which this decision is handed down a further 53 days has passed and on my calculations, at the rate established in the affidavit, a further $11,147.14 interest has accrued. This makes a total of $235,550.30. There being no other evidence and it appearing that the calculations are in accordance with the relevant clause, I accept that this is the sum due for interest. This sum should also be allowed and, being payable under the contract, should be added to the balance.

34. Pursuant to clause 5 of the contract, the Builder provided two insurance bonds by Allianz Australia Insurance Limited ("Allianz""), equivalent to 5% of the contract sum as security. The contract provided that the security was to be available where TS Services became entitled to exercise a right under the contract. In this case, TS Services now has no such rights to exercise, nor does it appear that it would have had any such right following the expiration of the defects liability period.

35. Clause 42.8 of the contract provides that the security shall be released within 14 days of the issue of the final certificate, which must in turn be issued within 14 days of the expiration of the time fixed for the lodgement of a final payment claim. The time for lodgement of such a claim expired 28 days from the end of the defects liability period. The last progress claim made was progress claim 19 and it is not expressed to be a final payment claim. Hence the contract required the final certificate to be given no later than 42 days after the end of the defects liability period and the security to be released within 14 days after that date. However no such certificate was given. Peck was not then the Superintendent and it is uncertain whether MCD had authority to issue such a certificate.

36. The form of security required by the contract is such that it cannot be withdrawn by the Builder. The liability of the surety will continue until it is released by the principal. The continuing liability of the surety imposes an ongoing cost upon the Builder which it can do nothing about. For this arrangement to operate on a commercial basis a term must be implied into the contract that the principal will release the security when it is no longer required for the purpose for which it was provided. In this case, there was no "final certificate" and so nothing for the principal to pay "within 14 days". The security should have been released as soon as the time for the issue of the final certificate expired with no such certificate having been issued.

37. Since the defects liability period expired on 19 January 2001 the security should have been released by 2 March 2001. Using the figures set out in the affidavit of Marcus Joseph Worn sworn 5 August 2003 and apportioning the interest, I find that interest charged by Allianz to the Builder attributable to the period after that date is $6,286.82. Since this expense has been incurred as a result of the wrongful refusal of TS Services to release the security, it is a proper head of damages to award against it in favour of the Builder.

38. The Builder also seeks an order that the security be returned. I cannot make an order determining rights as between TS Services and a surety that is not a party to this proceeding. Any order I make must be as between the parties before me. I think appropriate orders can be made pursuant to s. 53(1) of the Domestic Building Contracts Act 1989. That subsection provides as follows:

(1). The Tribunal may make any order it considers fair to resolve a domestic building dispute."

The term "domestic building dispute" is defined in s. 54 of the Act to include a dispute or claim arising between a building owner and a builder in relation to a domestic building contract. I think these words are wide enough to include a dispute concerning the non-return of a security when it should have been returned.

39. It is fair in the circumstances that the bond be returned. It is also both fair and appropriate that, until it is returned, TS Services be restrained from making any claim or demand on Allianz Australia Insurance Limited or doing any other thing to enforce the insurance bond.

40. The only remaining part of the counterclaim is for liquidated damages. This was dependent on evidence of late completion. No evidence was led in this regard. The evidence of the Builder was to the contrary. The counterclaim will therefore be dismissed. These orders are sufficient to dispose of the first proceeding D671 as between the Builder, TS Services and RIA.

41. In its cross claim in the third proceeding, the Builder claimed a number of declarations against Baxter Lodge. In essence, these related to the responsibility of Baxter Lodge for the costs of constructing the Apartments and a declaration that Baxter Lodge holds the proceeds of the sale of the apartments upon trust for the benefit of the Builder pending satisfaction of any damages awarded to it in the first proceeding.

42. TS Services undertook the development of the project pursuant to a joint venture agreement ("the joint venture agreement") dated 25 August 1997 and the entitlement to each of the declarations sought is said to arise from the operation of this agreement and the construction of the units by the Builder on behalf of TS Services.

43. Following a directions hearing on 30 June, the prayer for relief was amended to claim a determination in each case instead of a declaration. This amendment was made because I was listed to hear the case and, not being a presidential member, I cannot exercise the Tribunal's power to make a declaration. The determinations now sought are to the following effect:

(a) A determination that TS Services was at all material times the agent of Baxter Lodge;

(b) A determination that Baxter Lodge is, with TS Services and/or RIA, jointly liable for the satisfaction of any award of damages in favour of the Builder against TS Services and/or RIA in proceeding number D671/2000;

(c) A determination that the costs of constructing the units incurred by the Builder and claimed in proceeding number D671/2000 are agreed project costs pursuant to the joint venture agreement;

(d) A determination that Baxter Lodge holds on trust for the Builder the disbursed settlement funds received by it pending satisfaction by TS Services and/or RIA of any damages awarded to the Builder in proceeding number D671/2000.

The claim for a determination that TS Services was the Agent of Baxter Lodge

44. On the question of any agency between TS Services and Baxter Lodge, the relevant clauses of the joint venture agreement are 2.4 and 7. The first of these is as follows:

"Except as specifically provided in this agreement no party shall act or have authority as agent of the other party or in any way bind or commit the other party to any obligation, duty or liability to any third party."

Clause 7 is a lengthy clause that contains a limited power of attorney that empowers TS Services and certain of its officers to execute certain documents in the name of Baxter Lodge and to do other things that are described in the clause. The clause concludes:

"...nothing in this Clause will entitle the Developer to use the power of attorney herein to sign a mortgage or charge over the Property or for any other purpose than as specifically provided herein."

The matters authorised to be done under the power of attorney do not extend to entering into any contract with the Builder on behalf of Baxter Lodge.

45. There is nothing in the form of joint venture agreement to suggest that, in entering into the Building Contract, TS Services is doing so as agent for Baxter Lodge. TS Services may be bound by its joint venture agreement with Baxter Lodge to choose a Builder and enter into a contract with it, but that alone does not make Baxter Lodge a party to the contract between TS Services and the Builder that it chooses. The joint venture agreement provides that TS Services has authority to mortgage the subject land (clause 7), but only to secure the costs of the development. (see clauses 6.1.2 and 6.2). The exposure of Baxter Lodge is to be pursuant to this mortgage. Otherwise, the general tenor of the joint venture agreement is that the personal liability is to be undertaken by TS Services, not Baxter Lodge. There being no evidence of any agency, I cannot make the determination sought.

The claim for a determination that Baxter Lodge is jointly liable

46. For the reasons already given, I cannot make a determination that Baxter Lodge is liable to satisfy the award of damages to be made against TS Services.

The claim for a determination that the costs of construction are "Agreed Project Costs"

47. The important parts of the joint venture agreement are clauses 4 and 8, which were as follows:

"The Owner and Developer acknowledge that certain costs and expenses contemplated by Clause 3 hereof will be recoverable from the sale proceeds of Units as provided herein. Only those costs and expenses incurred by Developer which have been approved in writing by the Owner as recoverable expenditure ("Agreed Project Costs") may be reimbursed to the Developer from the sale proceeds of Units in accordance with the provisions of this agreement. The Owner agrees not to unreasonably withhold its approval of expenditure incurred pursuant to this agreement and appoints Ian Holman of 46 Rosebery Terrace, Chelmer, Queensland as its sole agent pursuant to this clause. "

"The Owner and The Developer mutually covenant and agree that the proceeds of sale of all Units sold and settled pursuant to this Joint Venture ("settlement funds") will be applied as follows:

8.1 Firstly, in repayment of any monies due to the Financier;

8.2 payment of any agent's commission (other than sales made by the Developer) and other expenses associated with the sale of the Units;

8.3 the Owner will receive the next $3.2 million in settlement funds;

8.4 the Owner will receive the next $1.6 million settlement funds;

8.5 the Developer will receive the next $1.6 million settlement funds;

8.6 the Developer will receive the agreed project costs;

8.7 The balance of settlement funds will be applied as follows:

The important thing about this order of payment is that the two figures of $1.6 million dollars are to be paid out before the agreed project costs. These two figures would seem to represent profits on the development and Mr Apperly's evidence was to that effect. The explanation for this apparently odd order of payment must be clause 3.11, which provides that TS Services is to procure finance for "all construction costs associated with the joint venture". In order for these construction costs to be met before the division of profits with Baxter Lodge, they must first be borrowed from the financier. They could then form part of the first payment. Anything that TS Services paid or incurred on its own account could only be claimed after Baxter Lodge had received back the cost of the land and both it and TS Services had both received their initial shares of the profit. Although Mr Apperly first said that the banking facility established was more than enough to cover the cost of construction, he was unable to say what it was and later in his evidence he said that the costs of the development were well in excess of what had been borrowed from the financier. This inevitably meant that, even if they were agreed project costs, they were not to be paid until after the participants had drawn their profits. As to variations, he said these would have to be funded by the individual unit holders or from the proceeds of sale, again indicating that the variations were to be paid after the first draw down of profits by Baxter Lodge and TS Services.

48. In fact, according to Mr Apperly, there was never any accounting as to what were agreed project costs although he said that after the two amounts of $1.6 million were paid out, the balance was used to pay the other costs of the project. He acknowledged that these would be agreed project costs. Although his evidence would suggest that they were not actually agreed with Baxter Lodge, the companies at this time had common directors. The unit holders had handed control of Baxter Lodge to Mr Apperly and his co-director Mr Bowtell, and Mr Apperly's understanding was that TS Services were to have any surplus from that point to pay the remaining expenses. He said that after payment of these, there was "nothing left". He even included as one of the costs the costs incurred by all three companies in conducting this litigation, although the wording of the joint venture agreement does not seem to me to contemplate costs of that nature.

49. I think the money awarded to the Builder in this proceeding must fall within the definition of "Agreed Project Costs". Although there is no evidence as to any "approval in writing" by Baxter Lodge, for the purposes of the clause 4 of the agreement, TS Services was required by clause 3.1 to "select a builder" and so any money payable by it under the resulting building contract not paid by the financier must be "Agreed Project Costs", otherwise it would not be recoverable without the Owner's consent. Since the Owner collects all the money from the purchasers of the units, that would not be a realistic interpretation of the agreement and cannot have been the intention of the parties. In the case of money falling due under the building contract, the approval in writing is to be found in the agreement itself. In addition to the original contract price, this must also include other sums falling due under the contract in order to bring the development to completion, since this is something TS Services was not only authorised but agreed to do. Indeed, in cross-examination by Mr Whitten, Mr Apperly acknowledged that these moneys should be regarded as Agreed Project Costs. I therefore determine that all moneys falling due to the Builder under the contract were Agreed Project costs within the meaning of clause 4 of the joint venture agreement between TS Services and Baxter Lodge.

The claim for a determination that Baxter Lodge holds disbursed funds upon a constructive trust

50. The first difficulty is that Baxter Lodge no longer holds these funds. Mr Apperly was very vague in his evidence as to the figures but was able to say that the money received by Baxter Lodge has all been distributed to the Unit holders. This is confirmed by a bank statement and financial records he produced pursuant to the summons to witness.

51. The law relating to constructive trusts is complex. A very helpful discussion is to be found in the Chapter on Constructive trusts by Associate Professor Barbara McDonald in the Second Edition of "The Principles of Equity", edited by Patrick Parkinson. It is not the function of this Tribunal to indulge in in-depth legal analyses except insofar as it might be necessary to explain its reasoning.

52. Mr Whitten submitted that the joint venture agreement provided a means whereby certain of the proceeds of sale were to be applied towards the cost of construction. It did make such a provision, but it did so in the course of a commercial agreement between the owner of land and a developer. He said that the joint venture agreement inured to the benefit of the Builder. I agree, but only in the sense that it allowed TS Services to use funds to pay the Builder. The joint venture agreement cannot be construed in my view as having been intended to confer a benefit on the Builder. He submitted that the Builder acted to its detriment in performing the work and incurring the cost of construction. I think this is an artificial way of looking at it. It performed the work because it had entered into a contract with TS Services to do so and it did the work, not on the faith of any agreement between Baxter Lodge and TS Services, but on the faith of a separate building contract it had entered into itself with TS Services. Similarly, it is a rather strained interpretation of the situation to say that the Builder carried out work for the benefit of Baxter Lodge. It did, but only in the sense that it was to the benefit of Baxter Lodge for the work to be done. However in doing the work, it was not the intention of the Builder to confer a benefit on Baxter Lodge. Its intention was to discharge its contractual obligations to TS Services. I agree with Mr Whitten that the amount claimed here amounts to the balance of the cost of construction but I see nothing unconscionable about Baxter Lodge receiving and retaining the money to which it was entitled under the joint venture agreement without first ensuring that the Builder has been paid in full. It was entitled to insist on its rights under the joint venture agreement. There is no evidence that it played any part in TS Services not paying the Builder.

53. The facts in this case cannot in my view justify a determination that there is a constructive trust in favour of the Builder. There is no fiduciary relationship between Baxter Lodge and the Builder. The only connections between them were that they both contracted with TS Services and that Baxter Lodge was the owner of the land upon which the Units were to be built. The proceeds of sale of the various units cannot in my view be considered trust property. The manner in which they were to be dealt with was provided for in the joint venture agreement. Contractual obligations can be enforced in law without calling in aid difficult equitable remedies. The same applies to the obligations vis a vis TS Services and the Builder. The obligation of TS Services to pay the Builder arises in contract and contractual remedies are the appropriate means of enforcement.

54. The actions of the Directors of TS Services in causing that company to disburse funds that might have been used to discharge its obligations to the Builder might be questioned in future proceedings involving those directors and, perhaps, further parties but they are not something that this Tribunal can or should be called upon to examine. As to Baxter Lodge, it has disbursed the money it received to the various unit holders of the Unit Trust of which it was trustee. A determination that the money was, for a short time, held upon trust for the Builder would now seem to be academic. A more appropriate remedy if there is one might be tracing, although it does not seem to me that this share of the "profits" was ever trust money to which the Builder had any entitlement. For these reasons, the determination sought should not be made.

55. I now turn to the Second Proceeding but before dealing with the merits I must first consider something that has arisen since the parties made their submissions following the close of the evidence. On 5 September 2003, a decision was handed down by the Tribunal in Body Corporate No.I/PS40911511E St James Apartments -v.- Renaissance Assets Pty and Multiplex Constructions Pty Ltd (D764/2001) ("the St James Apartments Case"). In that case the Tribunal struck out a proceeding pursuant to s.75 of the VCAT Act on the ground that it was hopeless and doomed to fail. The body corporate of a residential apartment building had brought the proceeding in its own name, alleging that it was the owner of the common property in the building. It claimed damages from a Respondent, alleging negligence in the carrying out of work to (inter alia) the common property. The respondent applied successfully to have the proceeding against it struck out on the basis that the body corporate was not the owner of the common property. Reliance was placed upon s.28(d) of the Subdivision Act 1988, which states as follows:

"In addition to section 24, when a plan providing for the creation of one or more bodies corporate or containing common property is registered--

(a) each body corporate for which the plan provides is incorporated; and

(d) any common property vests in those owners as tenants in common in shares proportional to their lot entitlement; and

(e) the Registrar must create folios of the Register for any common property in the name of the body corporate as nominee for those owners but must not produce a certificate of title for those folios, and may require submission of and cancel any existing certificate of title for common property."

After considering the effect of this section, particularly subsection (d), the learned Deputy President said (on page 3 of the decision):

"It seems to me that when the Applicant became incorporated under the 1988 Act, the common property of the premises became vested in the owners as tenants in common, in shares proportional to their lot entitlement. By reason of s.28(d), I do not see how it can be maintained, under any circumstances, that the common property fell to the ownership of the Applicant. In my view s.28(d) excludes the possibility of the Applicant being the owner of the common property."

56. A copy of this decision was forwarded to me by the solicitors for Peck under cover of a letter requesting the opportunity to make further submissions in reliance on it. Although this course was opposed by the solicitors for the Builder, a further directions hearing was held at which I gave directions for the parties to file further submissions. These have now been received.

57. In his further submissions, counsel for Peck, Mr Grahame, pointed to the Body Corporate's pleading, which alleges that it is the owner of the common property and claims damages against the Builder and Peck on the grounds I have already described. He also referred to the definition of "domestic building dispute" in s.54 of the Domestic Building Contracts Act, which refers to disputes between (inter alia) a "building owner" and a builder or architect. He submitted that it was foundational to the Body Corporate's pleading that it was the owner of the common property.

58. Mr Grahame also submitted that, if the Body Corporate is not the owner of the common property an order under s.131 or s.23B cannot be made. As will appear from what follows, I do not have to decide this point.

59. Both counsel for the Builder, Mr Whitten, and counsel for the Body Corporate, Mr Minahan, pointed out that, in its Points of Defence in the Second Proceeding, Peck admitted that the Body Corporate was the owner of the common property. That is true, but I have to decide claims between Peck and the Builder under s.131 and s.23B and those go beyond Peck's own pleading. Mr Whitten said that, in over three and a half years of litigation, the Body Corporate's ownership had not been put in issue. Again, this does not answer the difficulty. For reasons that will appear later in this decision, in order to decide the Builder's claims under s.131 and s.23B I must determine whether the Body Corporate is entitled to maintain its claim and the Builder did not admit that the Body Corporate was the owner of the Common property.

60. It may also be, as Mr Alstergren has argued, that the ownership or otherwise of the common property, involving as it does the proper interpretation of the Subdivision Act 1988 ("the Subdivision Act"), is a matter of law and not fact.

61. If an application were made by Peck to amend its Points of Defence, I have some sympathy with Mr Whitten and Mr Minahan's submissions that I should not allow Peck at this late stage to change its admission of ownership to a denial. They both refer in their submissions to a number of authorities as to the withdrawal of admissions that I do not need to refer to. Suffice it to say that in this case the evidence has all been given and, save for this new development, the parties have made their closing submissions. It was always open for Peck to have put the argument that found favour in the St James Apartments Case but it did not do so. Generally, a case should not be allowed to be re-opened simply because a party discovers a new argument and wishes to withdraw an admission in order to put it. The other parties have prepared and argued their cases and called their evidence on the pleadings as they stood. However, I do not need to consider any of these matters because, even if I were to allow an amendment, it would not assist Peck since I think that Mr Whitten and Mr Minahan's substantive submissions are well founded.

62. Mr Whitten submits that I should not follow the decision in the St James Apartments Case. It is true that I am not bound by the decision, but it is certainly of considerable persuasive force. As Deputy President Cremean pointed out in the case of Dore -v.- Housing Guarantee Fund Ltd [2002] VCAT 1495:

"To have a point re-argued only two months or so after it was decided by the Tribunal is a wasteful exercise. It is, moreover, an expensive exercise for all concerned including the Tribunal in the allocation of its resources. I consider I am not bound by the Senior Member's decision. But having to re-hear a matter only recently heard is not a practice to encourage. Otherwise, any decision, formally given, might be re-argued again, and again, before different members with different results. It is all the more embarrassing when this happens only a short time, as in this case, after the pronouncement given."

63. I respectfully agree with these comments. I would add that when I read the decision in the St James Apartments Case I considered, with respect, that it was plainly right. However, in the light of the submissions made to me in this case, I feel compelled to reach a different view.

64. Mr Whitten referred to s.28(e) of the Subdivision Act which requires the Registrar of Titles to create folios for the register for any common property "in the name of the Body Corporate as nominee for those owners" but forbids the Registrar from producing a certificate of title for those folios. He pointed out that under s.28A, a share in the common property of a member cannot be dealt with except by the body corporate in accordance with the regulations. He also relied upon s. 29, which states:

(1) A body corporate has perpetual succession and a common seal and is capable of suing and being sued in its own name.

(2) A body corporate and its members have the constitution, duties, functions, powers, rights and liabilities specified in the regulations.

.................................................

(6)The body corporate may in its own name and on behalf of its members execute any document or do anything necessary or convenient to enable it to carry out its duties, functions, powers, rights and liabilities, and the document or thing has effect as if executed or done by the members."

65. He referred to s.30(2) that, which provides that the Body Corporate must be taken to have an insurable interest in the common property, and to s.32(1), which allows it to dispose of any part of the common property in certain circumstances. He also made references to s.38 and the Subdivision (Body Corporate) Regulations 2001.

66. Mr Whitten submitted that these provisions demonstrate parliament's intention to confer upon a body corporate legal standing to be a party to proceedings before the Tribunal in respect of common property. I do not see that intention demonstrated in the provisions he refers to. What does appear is that parliament sets out what the Body Corporate can do and in what circumstances. There does not appear to be any "catch all" provision giving the Body Corporate the power to deal with the common property in ways not set out in the Act.

67. Mr Whitten's key submission, and the one that I think explains how the whole of s.28 operates, is based upon the effect of s.28(e) of the Subdivision Act, which is set out above. By virtue of that sub-section, the Body Corporate is, he submits, the registered proprietor of an estate in fee simple in the common property. I think this is right. Sub-section (e) provides that the Registrar of Titles is to create folios for the common property in the name of the Body corporate. It is implicit in the system set up by the Transfer of Land Act 1958 that a folio is part of the Register Book and when created records an estate or interest in land and the name of the registered proprietor of that estate or interest. (see Transfer of Land Act s.27(4),(7)(a) &(c)(i) and the definition of "land" in s.4(1)). This can only mean that the Body Corporate becomes the registered proprietor of the common property or rather, of an estate in fee simple in it.

68. The folios so created are to be in the name of the Body Corporate "as nominee for those owners", that is, the owners of the specified lots. The use of the plural word "folios" in s.28 would suggest that it is intended that there will be a separate folio with respect to the interest of each owner in the name of the body corporate as nominee for that owner. However the succeeding section, 28A, uses the singular form "folio", suggesting that only one folio is to be created for all the common property. I have no evidence as to the practice adopted by the Registrar in this regard but the difference would not seem to be material.

69. The words "as nominee" are curious and are not explained in the Act. However I think the position of a body corporate can be deduced from the surrounding provisions setting out the extensive powers that it has. Amongst these is a power to dispose of the fee simple estate in the common property in certain circumstances, conferred by s.32(1)(a)(i). By s. 29(6) it can do this and execute the necessary documents in its own name. Section 29(10) of the Subdivision Act, specifically prevents the body corporate from mortgaging the common property. Such a provision would have been unnecessary if the body corporate were not the registered proprietor of the fee simple estate in the common property. Finally, if the body corporate is dissolved, s.37(7) provides that the lots and common property become a single lot and vest in the former lot owners as tenants in common in proportion to their lot entitlements and the Registrar must create a folio of the register accordingly.

70. From these provisions it is clear that upon registration of the plan of subdivision a body corporate becomes registered as proprietor of an estate in fee simple in the common property and it holds this estate in its own name as nominee for the lot owners.

71. Turning now to the Domestic Building Contracts Act 1995 ("Domestic Building Contracts Act"), as stated above, the definition of "domestic building dispute" in s.54 of that Act includes disputes between (inter alia) a "building owner" and a builder or architect. By s.9 of that Act, any person who is the "owner" for the time being of the building or land with respect of which domestic building work was carried out may take proceedings for any breach of the statutory warranties in s. 8. The term "owner" is not defined in that Act. By s.38 of the Interpretation of Legislation Act 1984, in all Acts or subordinate instruments, "land" includes buildings and other structures permanently affixed to land and any estate or interest in land.

72. Although one might speak loosely of "owning land", it is not possible in our legal system to own land. What is owned is an estate or interest in the land. Since there can be more than one estate or interest in the same physical piece of land, so there can be more than one "owner" of the land for the purposes of the Domestic Building Contracts Act. I think it follows that the registered proprietor of an estate in fee simple in land must therefore be an "owner" of the land for the purposes of the two sections in the Domestic Building Contracts Act referred to. Of course, a body corporate would not be the beneficial owner, because it is the registered proprietor only as "nominee" for the lot owners. However it is nonetheless the registered proprietor of an estate or interest in the common property and the Domestic Building Contracts Act does not confine its operation to beneficial owners. If a mere legal owner of land, such as a trustee, contracts with a builder to have domestic building work done on the land, there would seem to be no reason why he could not sue the builder under the Act in his own name if the work should prove to be defective. Similarly, if he, as trustee, buys land upon which domestic building work has been done, s.9 does not say that, because he is only the bare legal owner, he cannot take proceedings for a breach of the warranties implied by s.8 if defects should appear in the work.

73. By virtue of s.28(d) of the Subdivision Act, the unit holders, in whom the ownership "vests" must also be owners within the meaning of the Act. I think the intention of the Act is that they are the beneficial owners but as registered proprietor, the Body Corporate is also an "owner", albeit a bare legal owner.

74. I have therefore concluded that the Body Corporate was entitled to bring the Second Proceeding in its own name. I now proceed to deal with the merits of the remaining issues in that proceeding.

The claim by the Builder against Peck for apportionment under Section 131 of the Building Act 1995

75. These claims relate to the settlement by the Builder of the claim brought by the Body Corporate in regard to the defects in the building that were rectified by the Builder pursuant to the 20 December Agreement. I shall refer to this claim as "the Settled Claim". In essence, the Builder claims that Peck was partly responsible for the defects in the building that were the subject of the Settled Claim and so should contribute towards the cost incurred by it in regard to the rectification work that was done to settle the Settled Claim. The claim is made alternatively under s.31 or s.23B.

76. Section 131 and the following two sections of the Building Act 1995, are as follows:

"Limitations on liability of persons jointly or severally liable

131. Limitations on liability of persons jointly or severally liable

(1) After determining an award of damages in a building action, the court must give judgment against each defendant to that action who is found to be jointly or severally liable for damages for such proportion of the total amount of damages as the court considers to be just and equitable having regard to the extent of that defendant's responsibility for the loss or damage.

(2) Despite any Act or rule of law to the contrary, the liability for damages of a person found to be jointly or severally liable for damages in a building action is limited to the amount for which judgment is given against that person by the court.

"court" includes the Victorian Civil and Administrative Tribunal."

Despite anything to the contrary in the Wrongs Act 1958, a person found to be jointly or severally liable for damages in a building action cannot be required to contribute to the damages apportioned to any other person in the same action or to indemnify any such other person in respect of those damages

Operation of Wrongs Act 1958

133. Operation of Wrongs Act 1958

Except as provided in section 132, nothing in this Division affects the operation of Part IV of the Wrongs Act 1958."

77. The relevant parts of s.23B and the following section of the Wrongs Act are as follows:

(1) Subject to the following provisions of this section, a person liable in respect of any damage suffered by another person may recover contribution from any other person liable in respect of the same damage (whether jointly with the first-mentioned person or otherwise).

(2) A person shall be entitled to recover contribution by virtue of sub-section (1) notwithstanding that that person has ceased to be liable in respect of the damage in question since the time when the damage occurred provided that that person was so liable immediately before that person made or was ordered or agreed to make the payment in respect of which the contribution is sought.

(3) A person shall be liable to make contribution by virtue of sub-section (1) notwithstanding that that person has ceased to be liable in respect of the damage in question since the time when the damage occurred unless that person ceased to be liable by virtue of the expiry of a period of limitation or prescription which extinguished the right on which the claim against that person in respect of the damage was based.

(4) Subject to section 24(2B), a person who in good faith has made or agreed to make any payment in settlement or compromise of a claim made against that person in respect of any damage (including a payment into court which has been accepted) shall be entitled to recover contribution in accordance with this section without regard to whether or not the person who has made or agreed to make the payment is or ever was liable in respect of the damage provided that that person would have been liable assuming that the factual basis of the claim against that person could be established.

(6) References in this section to a person's liability in respect of any damage are references to any such liability which has been or could be established in an action brought against that person in Victoria by or on behalf of the person who suffered the damage and it is immaterial whether any issue arising in any such action was or would be determined (in accordance with the rules of private international law) by reference to the law of a place outside Victoria".

......................................................................................

(2) Subject to sub-sections (2A) and (2B), in any proceedings contribution under section 23B the amount of the contribution recoverable from any person shall be such as may be found by the jury or by the court if the trial is without a jury to be just and equitable having regard to the extent of that person's responsibility for the damage; and the jury or the court if the trial is without a jury shall have power to exempt any person from liability to make contribution, or to direct that the contribution to be recovered from any person shall amount to a complete indemnity.

(2A) Where the amount of the damages which have or might have been awarded in respect of the damage in question in an action brought in Victoria by or on behalf of the person who suffered it against the person from whom the contribution is sought was or would have been subject to-

(a) any limit imposed by or under any enactment or by any agreement made before the damage occurred;

(b) any reduction by virtue of section 26; or

(2B)If in any proceedings for contribution under section 23B the jury or the court, if the trial is without a jury, finds that the amount of any payment made or agreed to be made in settlement or compromise of a claim was excessive the jury or the court (as the case requires) in assessing the amount of the contribution recoverable from any person shall disregard any part of the payment which appears to it to have been excessive."

78. In the present case the work carried out by the Builder was all in regard to defects that formed part of the claim brought against it by the Body Corporate. They were the items that Mr Whitten refers to in his submission as the water penetration issues. It was important that these should have been dealt with in a timely way in order to contain any damage that might have arisen from any further water penetration.

79. The agreement entered into on 20 December 2002 between the Body Corporate and the Builder was that these problems would be rectified by the Builder on a without prejudice basis. Shortly before that agreement was entered into, Peck had been joined as a Respondent to the Second Proceeding on the application of the Builder. Notwithstanding that it was a party to the proceeding, Peck was not a party to the 20 December agreement. I have said that the work which is the subject of this claim against Peck was done pursuant to the 20 December agreement. However, not all of the work that was the subject of that agreement was done and the scope of works and the methodology was changed by the parties during the course of the work. The effect of the doing of the work was to cause the Body Corporate to withdraw its claim in regard to the items rectified. I shall refer to the claim that was so satisfied as "the Settled Claim".

80. The ground upon which Peck's joinder was sought, as set out in the affidavit accompanying the application for joinder, was to enable an order to be made pursuant to s.131 if it should be found that the Builder and Peck were jointly and severally liable to the Body Corporate. Points of claim were not served on Peck by the Builder until 3 February 2003. These included a claim, not only under s.131 but also s.23B.

81. On 31 July 2003, during the course of the hearing, further amended Points of Claim were filed by the Builder and served on Peck by direction of the Tribunal. These set out the following allegations:

(a) that the Builder had entered into the 20 December agreement with a denial of liability;

(b) that it had carried out the rectification work at a cost of $362,884.39;

(c) that Peck was liable in respect of the loss and damage caused by, resulting from or associated with the water penetration.

The Builder then claims judgement against Peck to the extent of its responsibility for the water penetration pursuant to s.131 or alternatively, contribution pursuant to s.23B on the following bases:

(ii) Pursuant to s.23B(2), the Builder is entitled to recover contribution notwithstanding that it has ceased to be liable in respect of the damage since the time the damage occurred;

(iii) Pursuant to s.23B(3), Peck is liable to make contribution, notwithstanding that it has ceased to be liable in respect of the damage since the time the damage occurred;

(iv) Pursuant to s.23B(4), the Builder entered into the December 20 agreement in good faith and performed the work, paid for it and conferred on the Body Corporate the benefit of the value of the work.

82. On 13 August 2003, Peck filed and served Points of Defence to these amended Points of Claim. In this document, after denying the facts alleged, Peck said that:

(a) the rectification works were domestic building works;

(b) the 20 December agreement was a 'major domestic building contract' within the meaning of the Domestic Building Contracts Act 1993 and failed to comply with a large number of specified provisions of that act.

83. The 20 December agreement was formally proved and evidence was also led that the work was done. As a result of the work, the Body Corporate abandoned the Settled Claim. The Body Corporate settled the whole of its claim against Peck shortly thereafter, although I have not been told what the terms of that settlement were. Before dealing with the extent and cost of the work done by the Builder in satisfying the Settled Claim I must first consider whether this claim can be maintained under either head, that is, under s.131 or s.23B.

84. In Wimmera-Mallee Rural Water Authority -v.- FCH Consulting Pty Ltd & anor VSC 3 June 1998 - unreported) Gillard J. Said of s.131 and the following sections:

"The purpose of s.131-s.133 (inclusive) is clear. A party responsible for causing damage in respect of building works is obliged to pay that proportion of the damage for which the party is responsible and is not obliged to contribute any sum of damages which is the responsibility of the other party".

85. In the leading case of Boral Resources (Vic) Pty Ltd -v.-- Robak Engineering & Construction Pty Ltd & anor. [1999] VSCA 66; [1999] 2 V.R. 507, Tadgell J.A. said (at p.509):

"The evident policy of s. 131 is to ensure that damages to be borne by a defendant in a building action (as defined in s.129) are no more than proportionate to that defendant's responsibility for the loss or damage for which compensatory damages are awarded against all defendants in that action."

Later on the same page, his Honour provided the following example:

"If it be assumed that the only parties to the proceeding were P and D, and that P were to obtain judgment against D for damages, it would be open to D to sue X in a fresh proceeding, alleging that X was partly responsible for causing P's compensable damage and claiming contribution from X in respect of D's established liability to P in respect of that damage. D's right of contribution from X (if X were proved to have been partly responsible for P's damage) would prima facie exist, subject of course to any valid defence, independently of s.131 of the Building Act 1993: the right would not be affected by s.132 of that Act, which applies only to deny rights of contribution and indemnity between persons found jointly and severally liable in the same action. The availability to D, under Part IV of the Wrongs Act 1958, of a right of contribution from X would be expressly preserved by s.133 of the Building Act."

"The opening words of s.131(1), 'After determining an award of damages in a building action', cannot be a reference to the judgment for recovery of damages, for there cannot be a judgment in the air or against the world and the judgment against defendants liable is referred to later. The expression....must be understood as referring to determining upon an award of damages and its total amount."

86. It seems clear from the wording of s. 131(1), that an order for apportionment is to be made after determining to make an award of damages in a building action. The Tribunal must give then give judgment against each respondent who is found to be jointly or severally liable for damages, for such proportion of the total amount of damages as it considers to be just and equitable having regard to the extent of that respondent's responsibility for the loss or damage. However the Builder here is seeking to have apportioned, not of an award of damages, but of an amount that it has already paid or incurred, that is, the cost of carrying out the rectification work. I do not believe I can make such an order under s.131.

87. Mrs Crennan submitted that, notwithstanding that the Body Corporate has settled its claims against all parties except TS Services, I should still make an apportionment of damages under s.131. For the reasons which appear below, I do not accept this submission although I do accept her submission that s.131 only contemplates orders for damages in favour of an applicant.

88. The rectification work has been done and the Body Corporate no longer persists with a claim for the cost of carrying it out. I cannot therefore make an award of damages in favour of the Body Corporate with respect to this sum. If the work had not been done and it was found to be appropriate to make an award of damages against the Respondents, then an order under s.131 could be made apportioning the award between the Builder and Peck, if the requirements of the section were otherwise satisfied and it was appropriate to do so. However, an apportionment cannot be made with respect to the amount sought by the Builder here because there is no award to apportion. As I pointed out during argument, s.131 is clearly inappropriate in such a situation as this. Mrs Crennan acknowledged that only the Body Corporate can obtain an order for damages under s.131 and, except in regard to the distinct claims against TS Services, the claims by it are settled.

89. I agree with Mr Whitten's submission that s.23B specifically caters for cases where a settlement of a principal claim has occurred and the party effecting the settlement wishes to claim contribution for someone else. He further submitted that:

(a) both the Builder and Peck were liable in respect of the same damage, ie, the Settled Claim;

(b) although, as result of the carrying out of the rectification work, the Builder has ceased to be liable in respect of the damage, I should find that it was so liable before the rectification work was done;

(d) the carrying out of the work was a "payment in settlement or compromise" of the Settled Claim and was made in good faith.

90. On this basis, he submitted, I should make an order for contribution towards the cost of satisfying the Settled Claim in an amount which I find to be just and equitable.

91. Mrs Crennan submitted that, on either basis, this claim is misconceived. Her first point was that a claim for contribution under the Wrongs Act is blocked by s.132 of the Building Act, set out above. She referred to the passage in the judgment of Tadgell JA quoted above and submitted that what his Honour was saying was that the saving provision in s.132 of the Building Act only operates to deny rights of contribution and indemnity between persons found jointly and severally liable in the same action. She submitted that this means that one cannot have contribution under the Wrongs Act when one has the defendants all joined in the same action. That is not what his Honour said and I do not accept this submission. For the right of contribution and indemnity between persons to be denied, they must be found jointly and severally liable in the same action. In regard to the Settled Claim, I cannot make such a finding. I can make findings to a similar effect in contribution proceedings under s.23B in the same action but not in the action itself. Further, if Mrs Crennan were correct, I could not even do that.

92. The mechanism of s.131 is that, where an application involving several respondents to a building action is successful and two or more respondents are found to be jointly and severally liable, there will then be a determination upon an award of damages and its total amount, a division of the damages between the unsuccessful respondents according to their relative degrees of responsibility and an appropriate award of damages will be made against each of them in favour of the Applicant. Once this has occurred, there can be no subsequent attempt to re-apportion damages between the unsuccessful Respondents pursuant to the Wrongs Act, for the very good reason that an apportionment has already been made. To use the words of Chernov JA in Robak, (p.515) "That issue is subsumed in the resolution of the responsibility of each defendant for the Plaintiff's loss." There is nothing like that situation here. I cannot apportion the damages between the Respondents in this case pursuant to s.131 because the Settled Claim has been settled and so there are no damages to apportion or award.

93. I now turn in more detail to Mrs Crennan's submission that I can make an apportionment under s.131, notwithstanding that the Settled Claim is settled. Indeed, she went further and said that I should make an overall apportionment of the of the Body Corporate's whole claim, including the parts that are settled and those still pending against TS Services and the Builder. She said that my task was to evaluate the whole claim, apportion liability and then make an order for damages only in regard to the claim against TS Services, because all the other claims have been settled. I do not believe this is the sort of exercise the section contemplates. Since there is only one Respondent left, I cannot make any apportionment, and so the exercise would serve no purpose. As Chernov J. pointed out in Robak (at p.515): "...s.131(1) has no operation if there is only one defendant in a building action."

94. Further, the claim against TS Services with respect to the lift service area is a distinct claim and has nothing to do with any of the claims against the other parties. That claim in itself could not be apportioned, even if there were multiple respondents, because TS Services is solely responsible for it. There is not more than one respondent jointly and severally liable with respect to it. In determining how the burden of any of the other claims should be shared (assuming for the moment that they were still alive) the claim in regard to the lift service area would be of no relevance.

95. Mrs Crennan placed considerable emphasis on comments made in Robak which she said indicated that the reservation of recourse to the Wrongs Act found in s.133 of the Building Act was only in favour of third parties or insurers, not against co-defendants. (see the passages quoted above and the judgments of Batt JA (p.512 - line 17) and Chernov JA (p.515 -para 27 -bottom). I think she takes these comments out of context. In each case the learned judge is assuming that the apportionment exercise contemplated by s.131 has been done and damages awards have been made. In the present case, it cannot be done.

96. Mrs Crennan submitted that the 20 December 2002 agreement was a major domestic building contract within the meaning of the Domestic Building Contracts Act. That seems a highly artificial analysis of the situation. The Act contemplates in s.9 that subsequent owners of the land upon which domestic building work is carried out might seek to enforce the statutory warranties to be found in s.8. The overwhelming majority of domestic building disputes are settled by agreement and very often that agreement is that the builder will return and rectify the work claimed to be defective. Where the party for whom the rectification work is done is not the original contracting party, as is the case here, does this make the agreement to return and rectify another domestic building contract? Mrs Crennan suggested that offences had been committed because the December 20 agreement, as a domestic building contract, fails to comply with the Domestic Building Contracts Act in numerous respects. She did not suggest that that had any impact on the way this case must be decided, except to suggest that there would be public policy reasons for not allowing contribution in these circumstances. I do not accept that suggestion. Because of the conclusions I have reached below, it is unnecessary for me to decide these questions because nothing turns on the point.

97. Mrs Crennan says that the damage alleged to have been suffered by the Body Corporate is not "the same damage" as that sought to be recovered by the Builder pursuant to s.23B. She says that what the Builder is seeking to recover is not damages paid to the Body Corporate but rather, a contribution towards the costs it incurred in carrying out work pursuant to the 20 December agreement.

98. She referred to the English case of Birse Construction Ltd -v.- Haiste Ltd [1996] 2 All ER 1. In that case, a builder (B) contracted with a water authority to build certain works and engaged a consulting engineer (H) as engineer for the project. Certificates for the work were to be issued by an engineer employed by the authority (N). The works were defective and B entered into a further agreement with the authority to construct new works in their place. B sued H claiming the damages it had suffered. H then served a Third Party notice on N, claiming contribution pursuant to the Civil Liability (Contribution) Act 1978, alleging that N was a person liable in respect of "the same damage" as H. The Court of Appeal held that the damage suffered by the authority in not having the work carried out properly in the first instance was not "the same damage" as that suffered by B in having to incur the expense of reconstructing the works.

99. The decision is, with respect, unremarkable. The contribution sought against N was not in regard to a claim for the damages suffered by the authority, in regard to which all of parties might have been liable. If it had been, the claim for contribution would have been with respect to the same damage. The claim for contribution failed because it sought contribution in regard to an action by B for the expense it had incurred. That was a claim with respect to damage, but not the same damage as that for which all three were said to be liable. This is clear enough from the passages Mrs Crennan referred to, (see the last paragraph on page 6, finishing on page 7 in the judgment of Sir John May; the penultimate and final paragraphs of the judgement of Roch LJ.; and the penultimate paragraph of the judgment of Nourse LJ.).

100. Both Mr Whitten and Mrs Crennan referred me to the decision of Byrne J of the Supreme Court of Victoria in the case of Meadow Gem Pty Ltd & ors -v.- ANZ Executors and Trustees & ors (unreported - 29 April 2003). In that case his Honour said (at p.29 of the decision)

Hansen Yuncken Pty Ltd v TS Services Pty Ltd [2003] VCAT 2020

At a glance

Court

Decision date

Source

Judgment (359 paragraphs)

Hansen Yuncken Pty Ltd v TS Services Pty Ltd [2003] VCAT 2020 (8 September 2003)

Parties

Legislation Cited (9)