Owners Corporation Strata Plan 64757 v MJA Group Pty Ltd

Judgment 1ALLSOP P: I agree with the reasons of Young JA and the additional comments of Macfarlan JA. I agree with the orders proposed by Young JA. 2MACFARLAN JA: I agree with Young JA and add the following comments. 3The appellant argued that "s 18C [ Home Building Act 1989] created a single right of action in respect of the totality of the residential building work done by the Respondent by its several contractors" (Written Submissions [1.7]). It submitted that the consequence of this was that the period within which the appellant, as the new owner of the property, could bring proceedings under s 18C against the respondent, as developer, commenced to run on the date of completion of the last of the building work undertaken for the respondent, even though that last completed work was done pursuant to a contract with a builder other than Build-Care Pty Ltd. If this submission is correct, the appellant commenced these proceedings within the seven year limitation period. 4I do not however accept the submission. There is in my view nothing in the language of s 18C, or any other part of the Home Building Act , that prevents s 18C being construed distributively, so that a subsequent owner acquires a number of causes of action against the developer corresponding with causes of action that the developer has against different building contractors. Such a construction gives the section a sensible operation and is consistent with its language. 5The defective work about which the appellant complains in the present proceedings was done for the respondent by Build-Care Pty Ltd more than seven years before the appellant commenced the proceedings against the respondent. The appellant does not contend that there was any aspect of the contract between the respondent and Build-Care Pty Ltd that deferred the accrual of the respondent's cause of action against Build-Care Pty Ltd and resulted in that cause of action arising within seven years of the commencement of the present proceedings. In these circumstances the primary judge was correct in concluding that the relevant limitation period had expired prior to the commencement of the proceedings and that they are therefore statute barred. 6YOUNG JA: This is an appeal from a decision of Gibb DCJ in a dispute between the Owners' Corporation of a strata plan and the developer of the structure which morphed into the building that was the subject of the strata plan. 7The basal facts are not in dispute, indeed, the majority of them were the subject of a statement of agreed facts. I will set out the basic facts necessary to understand what follows. 8The respondent was the owner of the site at 13-15 Francis Street, Dee Why. It decided to redevelop the building on that site so as to create 12 residential units. In order to do this, it entered into a contract on 6 May 1998 with a company, Build-Care Pty Ltd ("Build-Care"). 9Build-Care performed work under the contract and the parties to the contract agreed that practical completion had occurred on 5 January 2001. 10On 17 January 2001, the local council issued a compliance certificate in relation to the work done at the site. The evidence was that two days' notice had to be given to the council to make the inspection required before issuing such a certificate, so that, as at 15 January, the work under the Build-Care contract would have been finalised. 11However, as at 16 January 2001, work included in the council's building approval had not been done with respect to the external finishing of the southern wall of the building. 12On questioning counsel, we were told it was unclear whether this work, which involved the rendering of the southern wall, was part of the Build-Care contract or not. In March 2001, another builder did this work and there has been no complaint about it. 13The appellant's statement of claim was filed in the District Court on 16 January 2008. It sued under what was described as the notional contract ie the contract referred to in s 18C of the Home Building Act 1989. I will set out the full text of that section in due course. Under s 18E of that Act, proceedings on that cause of action had to be commenced within seven years. The question before her Honour was whether the claim was made within the statutory time limit. Her Honour held it was not, and the appellant appeals against that decision. 14There is no doubt on the agreed facts that the work done by Build-Care was defective and that the cost of remedying the defective work is $377,239.00. Build-Care is now in liquidation. 15Section 18C of the Home Building Act was at the relevant date as follows: A person who is the immediate successor in title to ... a developer who has done residential building work on land is entitled to the benefit of the statutory warranties as if the ... developer were required to hold a licence and had done the work under a contract with that successor in title to do the work. 16Section 3A of the Act is as follows: (1) For the purpose of this Act, an individual, a partnership or a corporation on whose behalf residential building work is done in the circumstances set out in subsection (2) is a developer who does the work. (2) The circumstances are: (a) the residential building work is done in connection with an existing or proposed dwelling in a building or residential development where 4 or more of the existing or proposed dwellings are or will be owned by the individual, partnership or corporation, ... 17There seems no doubt in this case that the "developer ... has done residential building work" on the relevant land within the meaning of s 18C. 18Section 18B of the Act sets out a series of statutory warranties including: (a) a warranty that the work will be performed in a proper and workmanlike manner and in accordance with the plans and specifications set out in the contract. There are five other statutory warranties. 19Section 18E is as follows: (1) Proceedings for a breach of a statutory warranty must be commenced within 7 years after: (a) the completion of the work to which it relates, or (b) if the work is not completed: (i) the date for completion of the work specified or determined in accordance with the contract, or (ii) if there is no such date, the date of the contract. 20Section 7 of the Act provides that a contract to build under the Act must be in writing and subsection (2) says that it must contain, inter alia: (c) a sufficient description of the work to which the contract relates. 21The appeal was heard on 24 June 2011. Mr T Lynch of counsel appeared for the appellant and Mr B DeBuse appeared for the respondent. 22In some respects, the present case is difficult because the legislature has chosen to insert notional relationships into the mix in order to fulfil the legislative policy that, despite lack of privity of contract, the purchasers of home units should have a remedy should the original builder have breached the statutory warranties in s 18B of the Act. 23Both counsel referred to this Court's decisions in Honeywood v Munnings [2006] NSWCA 215; 67 NSWLR 466 and Ace Woollahra Pty Ltd v The Owners-Strata Plan 61424 & Anor [2010] NSWCA 101. 24The principal matter in contention on appeal, as at first instance, was whether the cause of action was commenced in time. This matter involved two key questions: A. How is the notional contract imposed by s 18C constructed? B. What does "completion of work" mean? A subsidiary matter may then arise: C. What is the relevance of the Civil Liability Act 2002? 25Mr Lynch took us through the contract between the respondent and Build-Care. It is edition BC3 produced by the Master Builders' Association of NSW. The works are described as "extend & refurbish existing building including additional 12 units" in accordance with drawings and specifications approved by the Warringah Shire Council. Condition 5 requires time of completion within six months of the date of commencement, which the evidence showed was August 1998. Clauses 21 and 22, so far as are relevant, are as follows: 21. Any defects or other faults which may appear and be notified in writing to the Master Builder within a period of 26 weeks after the date of practical completion and due to materials or workmanship not in accordance with this Contract shall be amended and made good by the Master Builder at his own cost. In the case of default by the Master Builder the Proprietor may recover from the Master Builder the cost of making good. The period of 26 weeks hereinbefore mentioned shall be known as the Defects Liability Period. 22. (a) Upon expiration of the Defects Liability Period or upon completion of the amendment and making good of any defects or other faults appearing and notified to the Master Builder in accordance with Clause 21 of these Conditions whichever is the later date the Master Builder shall give notice thereof to the Proprietor. ... 26Counsel informed us that there were defects notified to Build-Care within the Defects Liability Period. 27It is significant that the appellant, as plaintiff, had three attempts at putting together its statement of claim. As I have indicated, the initial statement of claim was filed on 16 January 2008. That document in paragraph 6 identified Build-Care Pty Ltd as "the Builder". In paragraph 12 it alleged that "the Builder" breached the statutory warranties. Paragraph 11 alleged that, by virtue of s 18C, the respondent was liable to the appellant for the breach of the statutory warranties. 28The next version was filed on 14 January 2009. Again, the term "the Builder" was defined as meaning Build-Care Pty Ltd and otherwise the claims were the same save that claims in tortious negligence were deleted. 29Finally, the further amended statement of claim was filed on 21 July 2009. In that version paragraph 8B endeavoured to define "the Builder" as Build-Care and "Other Builders to the extent of their various works, where all that work was residential building work done by the Defendant"; otherwise the pleadings were the same. 30The respondent says in its outline of submissions, para 2 (Orange 17): On 14 July 2009 the Appellant was granted leave to file a Further Amended Statement of Claim. The Court made the following order: Order per s 64(3) Civil Procedure Act 2005 that the date of commencement of the proceedings in respect of any amendment that would have the effect of adding or substituting a cause of action is taken to be the date on which the amendment is made. 31The respondent contended that "64(3)" was a typographical error for "65(3)". There was no traverse of that allegation. Her Honour did not actually deal with it, but it is part of the notice of contention which is filed by the respondent that if "the work" includes the work that was done on the southern wall, then, for the purpose of limitation of actions, the proceedings would have had to have been commenced no later than March 2008, so that the amended claim on 21 July 2009 was out of time.