Owners Corporation SP 79417 v Trajcevski

NCAT Appeal Panel|2016-10-18

Reasons for Decision

Introduction
The appellant appeals from a decision of the Consumer and Commercial Division of the Tribunal dated 29 April 2016 (the 'decision') in which the application was dismissed.
The application had sought orders under the Home Building Act 1989 ('HBA') against the respondents for breaches of the statutory warranties contained in s 18B of the HBA. The appellant also alleged that the respondents owed it a duty of care which had been breached.
The decision dealt with the respondents' challenge to the jurisdiction of the Tribunal to hear the appellant's claim because of time limitation issues under the HBA and because of an issue as to the existence of the alleged duty of care.
The issues raised by the respondents were the subject of a so-called preliminary hearing in the Tribunal in August 2015. Both parties were legally represented. The parties' closing written submissions were provided to the Tribunal by January 2016. The decision described the issues for determination at the preliminary hearing as: 1. Whether the Tribunal has jurisdiction to deal with the application under the HBA by reason of a time limitation; and 2. Whether the Tribunal has jurisdiction to deal with the substantive application at common law.
In the decision, with detailed reasons, the Tribunal dismissed the application (and made directions concerning any application concerning costs).

Background facts

The background facts were outlined by the Tribunal Member at paragraphs 6 - 22 of the decision. These are summarised below.
Residential building work involving the construction of two unit type dwellings was carried out on land that was, at the relevant time, owned by the first and second respondents. For the purposes of carrying out the residential building work, the second respondent obtained an owner builder's permit under the HBA on 1 September 2005. The first and second respondents are directors of the third respondent ('TDPL') which is now, but was not at any relevant time, licensed under the HBA.
A construction certificate for the residential building work was obtained on 27 October 2005. Thereafter work commenced.
The two unit type dwellings involved in the residential building work were known as 96 (lot 1) and 96A (lot 2).
On 12 July 2007 Mr Peter Voutros and Mrs Irene Voutros as purchasers entered into a contract with the first and second respondents as vendors in respect of 96A.
An occupation certificate for the 2 dwellings was issued on 23 August 2007.
A strata plan for the 2 dwellings was registered on 4 September 2007. By reason of the registration of the strata plan pursuant to section 8 of the Strata Schemes Management Act 1996, the appellant was created.
The dwellings constructed on the land were sold. Settlement of the sale of 96A took place on or about 8 October 2007.
The Tribunal Member found that the application should be taken to have been commenced by the appellant on 17 July 2014 despite a subsequent amendment to the application. That finding is not challenged in this appeal.
In relation to the claim made under the HBA, which was for breach of the s 18B warranties, the Tribunal Member found that the application was filed outside the seven year period permitted by s 18E(1) of the HBA, which period he found, by reason of the application of s3B of the HBA, expired on 1 March 2014. The Tribunal Member also found in connection with this aspect of the application that s 41 of the Act did not permit him to extend the time for the filing of the application. The finding concerning s 41 is not challenged in this appeal.
In respect of the common law claim, the Tribunal Member found by reason of settled case law the respondents did not owe a duty of care to the appellant.

Prior proceedings

It is necessary to give a history of relevant prior proceedings in the Tribunal. This subject was dealt with by the Tribunal Member at paragraphs 25 - 27 of the decision and we have added some details taken from material before us on appeal.
On 19 September 2012 the purchasers of lot 96A commenced proceedings HB 12/32193 (the 'prior proceedings') in the Consumer, Trader and Tenancy Tribunal ("the CTTT"), the predecessor of this Tribunal, against the first and second respondents claiming damages for defective building work. There was a settlement of those proceedings on 23 April 2013 effected by way of consent orders whereby the first and second respondents were to cause specific items of work to be carried out by 17 August 2013. The total value of these items as listed in a Scott Schedule and as noted in the Tribunal's orders was $51,907. Both parties were legally represented.
The first and second respondents failed to comply with the 23 April 2013 consent orders. As a result on 13 December 2013 the purchasers sought to renew the prior proceedings under clause 8 of Schedule 4 of the Act.
On 7 February 2014 the first and second respondents by their solicitor wrote to the purchasers (who referred it to their solicitors) stating that they had no standing to renew the prior proceedings or commence new proceedings because the defects the subject of the prior proceedings were to the common property which was owned by the owners corporation, not the purchasers.
The purchasers, with legal representation, withdrew the renewed proceedings on 24 March 2014, conceding that they had no standing to bring their claim because the defects affected the common property owned by the owners' corporation, the appellant. There was an issue in the renewed proceedings relevant to costs, whether the purchasers were aware or should have been aware prior to 7 February 2014 that they were purchasing a lot in a strata scheme. An order for costs was made against the purchasers on 16 July 2014.

Issues raised

We have set out above the grounds of appeal as expressed in the Notice of Appeal. There was no particularisation given of those grounds. In respect of the grounds for leave to appeal, particularisation was given: Decision not fair and equitable The decision fails to take into consideration the previous proceedings commenced by the owners of Lot 2 of the Owners Corporation against the respondents, the orders that were made on that occasion and the failure of the respondents to undertake the rectification works in accordance with those orders; fails to take into consideration the evidence put forward by the applicants including but not limited to a document prepared for and on behalf of the respondents confirming that the date for the purpose of the Home Building Act, 1989 was to be 23 August 2007; fails to take into account oral evidence provided by the respondent in cross examination on 14 August 2015; fails to consider that at all times the building was intended to be a strata subdivision and therefore the finding that the respondent was an owner builder is not fair and equitable to the subsequent owners of the strata subdivision. Decision of the Tribunal against the weight of evidence What evidence did you give at the hearing? What documents did you show the Tribunal? Oral evidence and documentary evidence was provided to the tribunal which shows that the respondent admitted in a signed Deed between the owner of Lot 1 and the respondents that the date for the purpose of the Home Building Act, 1989 was 23 August 2007, the respondent in cross examination confirmed that at all times the construction was to be a strata and as such was not to be the respondent's home for the purpose of the owner builder permit. What evidence should the Tribunal have given more weight to? Why? The written document prepared by the respondents' solicitors on instructions from the respondent.

Grounds of Appeal

The grounds of appeal, we repeat, were expressed in the Notice of Appeal thus: 1. Failure to afford procedural fairness; 2. Failure to take into account a relevant consideration; 3. Failure to consider evidence; 4. No evidence to support a finding of fact. No details were given of the matters said to give rise to any of these alleged deficiencies in the decision. Clearly enough, there was a failure to identify the questions of law said to be involved. The test for the specification of questions of law in a notice of appeal such as this is that it is necessary for the notice to identify precisely the particular question or questions of law (Ferella v Commissioner of State Revenue [2014] NSWCA 378 at [22]) and the Notice of Appeal did not do this.
The Appellant's submissions contain this opening paragraph: The Tribunal is to afford procedural fairness to both parties having regard to the information before it at the hearing of a matter; the Tribunal has failed to afford the appellant procedural fairness in that it has failed to consider evidence before it when handling down the decision and erroneously applied the decision in Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288 [2014] HCA 36 (8 October 2014).
The submissions then appear to raise matters which may be summarised as: 1. Matters along the lines of those raised in the particulars given in the Notice of Appeal in respect of the grounds for leave to appeal, as repeated above in this decision, coupled with a submission that "the direct actions of the respondent in failing to raise the issue of the correct plaintiff in 2012 and in allowing the proceedings to continue until 24 March 2014 was sufficiently foreseeable by the respondents as having the effect that any action commenced for rectification works would be 'out of time' if the Tribunal is to accept that the respondent was an owner builder and the statutory period expired on 7 March 2014. 2. Submissions that the Brookfield Multiplex decision should be distinguished, that "the Tribunal should adopt the principles in Bryan v Maloney" and that "the respondent failed to take reasonable care to prevent foreseeable harm to the plaintiff which has resulted in the appellant being denied procedural fairness. 3. Matters again along the lines of those raised in the particulars given in the Notice of Appeal in respect of the grounds for leave to appeal. The recitation of those matters was prefaced with this paragraph: In reaching the decision, Member Boyce considered that the evidence of the respondent should be preferred over that of the appellant in regards to the completion date of construction. This was erroneous in that the Tribunal failed to consider certain evidence before it or failed to take the evidence on its face value. That recitation was concluded with this paragraph: It is submitted that the Tribunal failed to give sufficient weight to the history of the matter and the conduct of the respondent in those proceedings which have resulted in the appellant being denied procedural fairness.

Failure to afford procedural fairness or other questions of law

Within those submissions there is a challenge to the application by the Tribunal Member of the Brookfield Multiplex decision, particularly with reference to Bryan v Maloney, especially in the context of the dealings between the purchasers of 96A and the respondents ("the first duty issue"). There also appears to be in those submissions an allegation of a wider duty than one to prevent economic loss to the appellant by reason of defective work, along the lines of one to prevent economic loss to the plaintiff by a more timely and explicit warning than that which was given in respect of the prior proceedings of the strata title situation ("the second duty issue").
The first duty issue was prosecuted in an oral address on behalf of the appellant at the appeal hearing. We did not discern that the second duty was addressed at the appeal hearing as a separate issue but it seems to be based on the same material as that relied on for the first duty issue. Neither does the second duty issue seem to have been included in the Points of Claim attached to the application which instituted the proceedings under appeal, nor included in submissions made in those proceedings.
At the appeal hearing the appellant's solicitor addressed, in addition to the first duty issue, the Tribunal Member's application of s3B of the HBA, contending that it was wrong ("the HBA issue"). The HBA issue was not explicitly included in the Notice of Appeal, it is not specified as a ground of appeal but in the particulars of the grounds for leave to appeal there are some mentions of the HBA and matters which may bear on it. To the extent that the proper construction of the HBA may be involved, there would be a question of law involved.
We can discern no other possible question of law within the material in the Notice of Appeal, the appellant's submissions and the appellant's solicitor's address on appeal. We will deal with each of these three issues separately.

The first duty issue

The decision under appeal dealt with this at paragraphs 49-56 under the heading "Common Law Claim".
Despite the deficiencies in the presentation of this issue in the Notice of Appeal, it was dealt with in the subject proceeding and the decision and in the submissions and addresses in the appeal. We will deal with it accordingly.
The Tribunal Member set out in the decision what the applicant had submitted to be a summary of its pleadings: The applicant submits that its pleadings are summarised as follows: [Either or both Mr and Mrs Trajcevski] owed the appellant a duty or duties of care to take reasonable are (sic) to avoid reasonably foreseeable economic loss to the appellant in having to make good the consequences of latent defects caused by the building's defective design and/ or construction; Alternatively, the same duty was owed by [TDPL] to the appellant; By reason of the defective works, [either or both Mr and Mrs Trajcevski] breached that duty, caused the appellant loss and damage and was thereby, negligent; Alternatively, [TDPL] breached its duty of care by reason of the defective works, caused the appellant's loss and damage and was thereby negligent; The appellant claims loss and damage from the respondents at common law.
The Tribunal Member noted submissions concerning Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515, Bryan v Maloney and Brookfield Multiplex. The decision then dealt with those submissions thus: "The law is now settled with the High Court decision of Brookfield and the builder owes no duty of care to the Owners Corporation."
The Tribunal Member also at the same time dealt with an associated request by the applicant that a transfer of the proceedings to the District Court be considered in the event of the Tribunal Member coming to a view on the first duty issue such as he did. The request was dealt with thus: "As to the applicant's submission that if such a finding is made, then the Tribunal should transfer the matter to the District Court. The Tribunal has found that it has no jurisdiction. If it has no jurisdiction it is not able to make orders as sought by the applicant." No issue was raised in this appeal concerning this aspect of the proceedings and we do not deal with it.
The Tribunal Member's reasons on the first duty were indeed short, but we do not see that his conclusion was wrong. Nevertheless we do suggest that, in particular, at least Bryan v Maloney warranted a little more attention, having regard to the reliance which the applicant had put on it. In Brookfield Multiplex (at [179]-[180]) Gaegler J said: "The question addressed in Bryan v Maloney was identified by the plurality in that case (Mason CJ, Deane and Gaudron JJ) as 'whether under the law of negligence, a professional builder who constructs a house for the then owner of the land owes a prima facie duty to a subsequent owner of the house to exercise reasonable care to avoid…foreseeable damage' specified as 'the diminution in value of the house when a latent and previously unknown defect in its footings…becomes manifest' equating to 'the amount which would necessarily be expended in remedying the inadequate footing[s] and their consequences'. Their Honours gave a positive answer to that question. They said that the contrary approach which had then recently come to prevail in the United Kingdom rested on 'a narrower view of the scope of the modern law of negligence and a more rigid compartmentalisation of contract and tort than is acceptable under the law of this country'. The plurality in Bryan v Maloney referred to the relationship between the builder and the subsequent owner of a house as one characterised 'by assumption of responsibility on the part of the builder and likely reliance on the part of the owner', and emphasised that the decision in that case turned 'to no small extent, on the particular kind of economic loss involved' and, in particular, on the building having been 'erected to be used as a permanent dwelling house'… The other member of the majority, Toohey J, similarly emphasised that the decision related to 'the building of a house that is a non-commercial building'…"
Gaegler J also noted (at [184]) that Bryan v Maloney was still a continuing authority as McHugh J observed in Woolcock Street Investments (at [116]): "Nothing in his judgment intended to suggest that Bryan v Maloney would now be decided differently. Whether a different decision would now be reached under current doctrine almost certainly depends on whether evidence would reveal that the purchasers of dwelling houses are as vulnerable as the Court assumed in that case."
At [185] and [186] Gaegler J explained: "Absent any application that Bryan v Maloney should be overruled, and absent data which might permit the making of a value judgment different from that made in Woolcock Investments, the view expressed by McHugh J in Woolcock Investments should in my opinion be accepted. The continuing authority of Bryan v Maloney should be confined to a category of case in which the building is a dwelling house and in which the subsequent owner can be shown by evidence to fall within a class of persons incapable of protecting themselves from the consequences of the builder's want of reasonable care. Outside that category of case, it should now be acknowledged that a builder has no duty in tort to exercise reasonable care, in the execution of building work, to avoid a subsequent owner incurring the cost of repairing latent defects in the building. That is because, by virtue of the freedom they have to choose the price and non-price terms on which they are prepared to contract to purchase, there is no reason to consider that subsequent owners cannot ordinarily be expected to be able to protect themselves against incurring economic loss of that nature. The plurality in Woolcock Street Investments noted that the actual decision in Bryan v Maloney had by then been 'overtaken, at least to a significant extent, by various statutory forms of protection for those who buy dwelling houses which turn out to be defective'. The Court of Appeal in the present case referred in detail to the current statutory regime in New South Wales. If legal protection is now to be extended, it is best done by legislative extension of those statutory forms of protection. Neither version of the putative duty of care should be recognised."
The statutory intervention of the owners' corporation between the purchasers of 96A and the respondents is, in our view, a significant factor. In their judgment in Brookfield Multiplex Crennan, Bell and Keane JJ said at [150]-[151]: "The circumstance that the respondent did not exist at the time that the defective work was carried out points against, rather than in favour of, the duty of care propounded by the respondent given that on this basis, it could not have relied upon the appellant in any way. There is no basis for a finding of fact that there was an assumption of responsibility by the appellant in favour of the respondent, or known reliance on the appellant on the part of the respondent, in relation to the quality of the common property of the serviced apartment complex. Further, an owners corporation acquires the common property in a strata scheme without any outlay on its part. Its assets are not diminished by the acquisition, at least if the common property is worth more than the cost of repairing latent defects (and there is no suggestion here that the common property is worth less than the cost of repair). Accordingly, if one considers the owners corporation independently of the individual lot owners, it is impossible to see that it has suffered any loss by reason of the quality of the common property vested in it. If the respondent is viewed as the alter ego of the purchasers from the developer, the respondent's position is not any stronger…"
We add a few comments. First, that the statutory regime under consideration in Brookfield Multiplex includes the statutory warranties under the HBA, for example Crennan, Bell and Keane JJ in Brookfield Multiplex said at [132] that such provisions "supplement the common law of contract" and at [134] that "By enacting such a scheme of statutory warranties, the legislature adopted a policy of consumer protection…". Secondly, that the statutory intervention of the owners corporation is a measure of disconformity between the respective positions of the purchasers and of the owners corporation (cf French CJ in Brookfield Multiplex at [28]). Thirdly, that we do not see that the facts asserted in the appellant's submissions and in the particulars given in the Notice of Appeal would, if established, constitute sufficient circumstances to make this a special category of case as spoken about by Gaegler J in Brookfield Multiplex such as to bring it within a Bryan v Maloney situation.
In our opinion the Tribunal Member was correct in deciding on the authority of Brookfield Multiplex that there was no duty of care of the sort contended for as (what we have called) the first duty. We decide this issue accordingly.

The second duty issue

We have offered a summary above of this alleged second duty (as we have called it). It would be as well, however, to repeat a few paragraphs from the appellant's submissions which seem to present, principally, the appellant's case in this regard (we have omitted references to evidence and transcript): 3. The Respondent at no time during the previous proceedings raised the following: the correct entity to commence the proceedings for rectification works; and The respondent's status as an owner builder. 4. In support of the submission at 3, it is submitted that the respondent knowingly misled the appellant in that; the respondent Entered into Consent Orders in the proceedings HB12/32193 with the owners of Lot 1 and Lot 2 for certain works to be undertaken by a certain time with the full knowledge that the property was a strata; In November 2013 instructed their solicitor to issue a Deed of Agreement to the parties for the payment of the sum referred to in the order in substitution to undertaking the rectification works. Advised the owner of Lot 2 that for the purpose of Home Warranty Insurance the parties agree that the Completion date shall be 23 August 2007. In February 2014, two (2) months after the renewal proceedings were filed advised the owners of Lot 1 and Lot 2 that the proceedings should have been commenced by the owners corporation. 5. It is submitted that the direct actions of the respondent in failing to raise the issue of the correct plaintiff in 2012 and in allowing the proceedings to continue until 24 March 2014 was sufficiently foreseeable by the respondents as having the effect that any action being commenced for rectification works would be 'out of time' if the Tribunal is to accept that the respondent was an owner builder and that the statutory period expired on 7 March 2014.
This second duty issue (as we have called it) was not specifically raised during the appellant's address as we heard it.
There is no suggestion made in the written submissions, or in the appellant's address as we heard it, of any legal authority for the existence of such a duty as alleged. It seems to be an extreme allegation, as it effectively postulates some responsibility in the respondents for advising the appellant and/or the purchasers of 96A how to pursue a claim against the respondents.
As we have indicated above, this issue appears not to have been raised in the proceedings the subject of this appeal. It is not appropriate to raise on appeal a new point such as this, as ruled in Coulton v Holcombe (1986) 162 CLR 1 and many other cases. The head note in Coulton v Holcombe summarises the situation thus: Parties to litigation are bound by the conduct of their case at the trial. Hence it would be unfair on appeal to an intermediate appellate court to allow, by discretionary amendment, the allegation by one party of a new matter whereby the other party would be subjected virtually to a new trial on an issue different from that already litigated. Any other course would deny expedition finality and justice especially when no substantial public interest or the need for statutory interpretation was involved.
Raising such an issue in this way would be inconsistent with the resolution of the proceedings in this Tribunal justly, quickly, cheaply and with as little formality as possible, which is stipulated in s 3 as an object of the Act and in s 36 as the guiding principle. It is not appropriate for this issue to be raised now. In any event, we have been taken to, but we see no basis in law for, the existence of such a duty. We decide this issue against the appellant.

The HBA issue

The decision dealt with this issue under the heading "Interplay between sub-sections 3B(2) and 3B(3) of the HBA" at pars 30 to 48. To the extent that this issue involves the construction of these statutory provisions it essentially involves a question of law, arising out of the decision's application of s 3B of the HBA, particularly s 3B(3), to establish that the completion date for the purposes of the HBA was 1 March 2007. At the relevant times s 3B provided: (1) The completion of residential building work occurs on the date that the work is complete within the meaning of the contract under which the work was done. (2) If the contract does not provide for when work is complete (or there is no contract), the completion of residential building work occurs on practical completion of the work, which is when the work is completed except for any omissions or defects that do not prevent the work from being reasonably capable of being used for its intended purpose. (3) It is to be presumed (unless an earlier date for practical completion can be established) that practical completion of residential building work occurred on the earliest of whichever of the following dates can be established for the work: (a) the date on which the contractor handed over possession of the work to the owner, (b) the date on which the contractor last attended the site to carry out work (other than work to remedy any defect that does not affect practical completion), (c) the date of issue of an occupation certificate under the Environmental Planning and Assessment Act 1979 that authorises commencement of the use or occupation of the work, (d) (in the case of owner-builder work) the date that is 18 months after the issue of the owner-builder permit for the work. (4) If residential building work comprises the construction of 2 or more buildings each of which is reasonably capable of being used and occupied separately, practical completion of the individual buildings can occur at different times (so that practical completion of any one building does not require practical completion of all the buildings). (5) This section applies for the purposes of determining when completion of residential building work occurs for the purposes of any provision of this Act, the regulations or a contract of home warranty insurance.
The ultimate decision of the Tribunal Member in this regard was: The date of practical completion was 18 months after the owner builders permit was granted to Mrs Tracevski, that is 1 March 2007 and seven years after date is 1 March 2007' (sic) [ 1 March 2014?]. 'The application was filed on 17 July 2014. The application having been filed more than 7 years after the completion date of the building work the application has been filed out of time and the Tribunal has no jurisdiction to entertain the application.
In coming to this decision the Tribunal Member had regard to three decisions of the CTTT: Griffiths v Gates [2013] NSWCTTT 302, Sayegh v Vojodic [2013] NSWCTTT 436 and Labuschagne v Clarke [2013] NSWCTTT 452. The first two of those decisions found that the presumption under s 3B(3) was irrebuttable and the third treated the presumption as rebuttable. The Tribunal Member in the decision preferred the findings in the first two decisions and he quoted the Senior Member in the first decision as saying "the plain interpretation to be placed on s 3B(3) is that it does not provide for a rebuttable provision. However, the wording of the section is that the presumption can only be rebutted by the establishment of an earlier date". Those comments, with respect, accord with the language of s 3B(3) and its proper construction.
In relation to this issue, the Tribunal Member referred (at pars 44 to 46) to submissions that the first and second respondent had no intention of occupying either of the units and of being owner-builders, such that the presumptive provisions of s 3B(3)(d) did not apply. The Tribunal Member pointed out, correctly in our view, that the Tribunal had no jurisdiction to review the departmental decision to issue the owner builder permit and that "the Tribunal accepts on the fact of the issue of the permit that the Secretary (Director-General) was satisfied that the applicant was qualified to have the permit issued to her". We note that the building work was carried out and the strata plan was registered in consequence of the permit. We also comment, as to factual matters, that the appellant apparently was contending for completion to have occurred (in point of fact) on dates ranging from 28 July to 23 August 2007 and that many, if not all, of the allegations concerning non-completion appear to have related to the internal state of 96A rather than the fabric of the building or other external features comprising the common property.
We therefore decide the HBA issue against the appellant.

Leave to appeal

To an extent, we have already dealt with the matters complained of by the appellant in particulars given of the grounds for leave to appeal. Those matters involve factual points including in large part, complaints by the purchasers concerning what befell them in, and in consequence of, the prior proceedings. Our reflection on those complaints and what was put to us in submissions concerning them, lead us to the firm view that there was involved in the proceedings under appeal no substantial miscarriage of justice, whether on the basis that the decision was not fair and equitable or against the weight of evidence as alleged by the appellant, or otherwise. Leave to appeal is not warranted.

Conclusion

For the reasons we have given we dismiss the application for leave to appeal and the appeal and we will give the respondent the opportunity to make an application for costs.

I hereby certify that this is a true and accurate record of the reasons for decision of the New South Wales Civil and Administrative Tribunal. Principal Registrar

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 08 May 2017

At a glance

Court

Decision date

Source

Judgment (14 paragraphs)

Parties

Cases Cited (8)

Cited By (3)