Pollak v Yapp

Court of Appeal (NSW)|2019-05-31|Before: Bell P, Payne JA, White JA, Darke J

Solicitors: Sachs Gerace Broome (Appellant) Day Legal (Respondents) File Number(s): 2019/134106 Decision under appeal Court or tribunal: Supreme Court of New South Wales Jurisdiction: Equity Division Citation: [2019] NSWSC 449 Date of Decision: 24 April 2019 Before: Darke J File Number(s): 2019/8599

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

Judgment

BELL P: I agree with the reasons of and orders proposed by White JA.
PAYNE JA: I agree with White JA.
WHITE JA: This is an appeal from orders of the Equity Division (Darke J) for specific performance of a contract for the sale of land entered into between the respondents as vendors and the appellant as purchaser (Yapp v Pollak [2019] NSWSC 449). The contract was made on 30 June 2018. The land consists of a three-level residential property in Forbes Street, Woolloomooloo. The purchase price is $2,765,000. The stipulated date for completion was 1 October 2018. The primary judge recorded that the contract has not proceeded to completion owing to a dispute concerning Special Condition 49 of the contract. That condition provides: "49. Works Notwithstanding clause 35, the vendor discloses works have been carried out in accordance with the Development Approval annexed to the contract, however, the lower staircase requires replacement. The vendor agrees to ensure the replacement of the lower staircase is carried out in accordance with the Development Approval prior to settlement. The vendor warrants that all Development Consent Conditions will be satisfied on or before completion and will provide an occupation certificate to the purchaser prior to settlement. The purchase cannot make a claim or requisition or rescind or terminate in respect of this work."
The primary judge dismissed a cross-claim brought by the purchaser in which he sought orders that the vendors specifically perform and carry into effect Special Condition 49 of the contract by satisfying all of the development consent conditions of a development approval referred to in the contract and providing an occupation certificate in accordance with that Special Condition.
Other relevant terms were Special Conditions 34, 35 and 48. They provided: "34. Faults and defects The purchaser acknowledges that the property is sold in its present condition and state of repair and subject to all faults and defects of quality both hidden and apparent. 35. Condition of Property The property, together with appurtenances hereto is sold in its present state of repair and the purchaser acknowledges that it buys the property relying on its own inspection, knowledge and enquiries that it does not rely on any warranties or representations made to it by or on behalf of the vendor. The purchaser shall not call upon the vendor to carry out any repairs whatsoever in relation to the property sold. ... 48. Requisitions The Purchaser is deemed to have made the attached Requisitions on Title pursuant to clause 5 and the Vendor is deemed to have made the attached replies. Nothing in this clause prevents the Vendor from amending the replies prior to completion. The Purchaser acknowledges that the Vendor shall not be under any obligation to answer any requisitions on Title the substance of which are already contained in the said Requisitions."
The attached Requisitions on Title and the attached replies that formed part of the contract included requisition 15 that read as follows: "15. (a) Have the provisions of the Local Government Act, the Environmental Planning and Assessment Act 1979 and their regulations been complied with? (b) Is there any matter that could justify the making of an upgrading or demolition order in respect of any building or structure? (c) Has the vendor a Building Certificate which relates to all current buildings or structures? If so, it should be handed over on completion. Please provide a copy in advance. (d) Has the vendor a Final Occupation Certificate issued under the Environmental Planning and Assessment Act 1979 for all current buildings or structures? If so, it should be handed over on completion. Please provide a copy in advance. (e) In respect of any residential building work carried out in the last 7 years: (i) please identify the building work carried out; (ii) when was the building work completed? (iii) please state the builder's name and licence number; (iv) please provide details of insurance under the Home Building Act 1989."
The attached answer was as follows: "15. (a) Yes, as far as the vendor is aware. (b) Not as far as the vendor is aware. (c-d) Vendor relies on information in Contract for Sale. (e) i Demolition of carport, addition of ground floor area at the rear and internal alterations. ii Around September 2017 iii Taste Renovations North Pty Ltd - Builder number 280538C iv Details attached to contract"
Although Special Condition 49 referred to the "Development Approval annexed to the contract ..." only the plans the subject of the development approval were attached. The development approval in question was given by the Council of the City of Sydney ("the Council") on 26 September 2017. The approved development was described as: "Alterations and additions to an existing dwelling including demolition of existing car port, new ground floor rear addition and internal alterations."
Conditions of the approval included the following: "(1) APPROVED DEVELOPMENT (a) Development must be in accordance with Development Application No. D/2017/1171 dated 25 August 2017 and the following drawings prepared by Building Design and Technology Pty Ltd: Drawing Number Drawing Name Date A1.01 Proposed Site and Floor Plans (Rev.A) 17/8/2017 A1.02 Elevations and Section (Rev.A) 17/9/2017

and as amended by the conditions of this consent. (b) In the event of any inconsistency between the approved plans and supplementary documentation, the plans will prevail. (2) DESIGN MODIFICATIONS The design of the building must be modified as follows: (a) The proposed removal of the existing window on the primary Forbes Street façade is not approved, and is to be deleted. (b) The alignment of the rear wall of the proposed ground floor extension is to match the angled alignment of the first floor rear wing addition. (c) The eave extending from the rear wall of the proposed ground floor rear addition is to be deleted and replaced with a lightweight shading device separate from the roof form. (d) The proposed ensuite adjoining existing bed 2 is to avoid contact the existing fireplace and chimney breast which are to be retained. (e) A Schedule of Materials, Colours and Finishes is required. The modifications are to be submitted to and approved by Council's Area Planning Manager prior to the issue of a Construction Certificate. ... (27) OCCUPATION CERTIFICATE TO BE SUBMITTED An Occupation Certificate must be obtained from the Principal Certifying Authority and a copy submitted to Council prior to commencement of occupation or use of the whole or any part of a new building, an altered portion of, or an extension to an existing building."

Some but not all of the works authorised by the development approval had been carried out. On 12 June 2018, the vendors were advised by their builder that the certifier for the building works would not issue an occupation certificate in relation to the renovation works until the lower staircase at the property was replaced. There were other works authorised by the development approval that had not been attempted.
The purchaser inspected the property on 26 June 2018 in the company of the real estate agent. He observed that the property appeared to have been recently the subject of building works. On 28 June he went online and inspected council records, including an assessment of the development application and the development approval.
One of the vendors, Mr Orena, deposed that repair work to the lower staircase was completed in August 2018.
On 24 August 2018 Mr Hallal, the accredited certifier, issued an interim occupation certificate in respect of the property. Under the heading "Preliminaries" the interim occupation certificate identified the property and gave as a description of the works "Stage 1 - Internal Demolition and Construction of Internal Stairs Only". After referring to the development consent and construction certificate (the issue of which is a required preliminary to the issue of an occupation certificate) the certificate identified the "Area of Occupancy" as "[XXX] Forbes Street, Woolloomooloo". The certifier stated that: "● The building is suitable for occupation or use in accordance with its classification under the Building Code of Australia BCA class 1a; ● The health and safety of the occupants has been considered."
The solicitors acting for the purchaser were Sachs Gerace Broome ("SGB"). The solicitors acting for the vendors were Cunningham Legal. On 29 June the parties negotiated upon the terms of Special Condition 49. It went through a number of iterations before assuming its final form. The purchaser asked that Special Condition 35 be omitted but this was not agreed to. On appeal, the purchaser submitted that Special Condition 49 should be construed contra proferentem such that any ambiguity should be resolved against the vendors.
As the clause was subject to detailed negotiations described in the primary judge's reasons (Judgment [12]-[17]), I do not accept that submission. There is no identified proferens (Birrell v Dryer (1884) 9 App Cas 345 at 351-2, 354; Levison v Farin [1978] 2 All ER 1149 at 1156; North v Marina [2003] NSWSC 64; (2003) 11 BPR 21,359 at [61]-[65], [71]; Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522; [2005] HCA 17 at [17]; Kim Lewison and David Hughes, The Interpretation of Contracts in Australia (2012, LawBook Co) at 306-308). In any event, for the reasons below, I do not consider there is any real doubt or ambiguity attending Special Condition 49 to which the contra proferentem rule of construction could be applied.
On 27 August 2018 Cunningham Legal forwarded to SGB the interim occupation certificate with respect to the property said to be "in satisfaction of Special Condition 49". The dispute between the parties crystallised on 3 September 2018.
On 3 September 2018 SGB wrote to Cunningham Legal as follows: "We refer to email received from Julia Gallimore of your office on 27 August 2018 attaching interim occupation certificate in purported satisfaction of special condition 49 to the contract. The occupation certificate provided is said to be for 'Stage 1 - Internal Demolition & Construction of Internal Stairs Only'. Special condition 49 contains a warranty by the vendor that all development consent conditions will be satisfied. Kindly confirm that all development consent conditions in relation to development application no. D/2017/1171 have now been satisfied, and if so, provide copy occupation certificate. We look forward to receiving your earliest reply."
Cunningham Legal replied on 5 September as follows: "We refer to your letter dated 3 September 2018. The occupation certificate provided certifies that the works to the internal stairs have now been completed to a satisfactory standard and is fit for occupation. The development application remains open as not all approved works were carried out and provides a future opportunity for the purchaser to make alterations to the property without obtaining a new Development Application approval. A final occupation certificate may be obtained once the development application lapses. ..."
The statutory provisions relating to the issue of interim and final occupation certificates are addressed further below. As at 30 June 2018 amendments had been made to the EPA Act that removed the provisions that provided for the issue of both kinds of certificate. Those amendments were then not scheduled to commence until 1 September 2018. On 1 September 2018 the operation of the amendments was deferred for a further year to 1 September 2019 (Environmental Planning and Assessment (Savings, Transitional and Other Provisions) Regulation 2017, cl 18(2)).

The primary judge's reasons

Before the primary judge, the purchaser contended that Special Condition 49 requires that the respondents not only replace the lower staircase in accordance with the development approval, but also complete the remainder of the works the subject of the development approval. Only after all such works have been completed and a final occupation certificate provided in respect thereof could the respondents call for completion.
The primary judge began his reasoning by referring to the principles of construing written commercial agreements as set out by the High Court in Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 at [35], Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544; [2017] HCA 12 at [16] and Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 352-3; [1982] HCA 24. There was no issue in relation to those well-known principles and it is unnecessary to restate them.
The primary judge observed Special Condition 49 was an exception to Special Condition 35 (Judgment [37]).
The primary judge interpreted the first sentence of Special Condition 49 to be a disclosure that works had been undertaken on the Property pursuant to the development approval, but in one respect - the lower staircase - those works were not in accordance with the approval (Judgment [38]). His Honour regarded the disclosure as referring to the works for which development approval had been given which had been carried out. The second sentence was found by the primary judge to carry the promise to replace the lower staircase in accordance with the approval. In this sense, this promise was the "exception" to Special Condition 35, in that it was the only part of the "present state" of the Property that the respondents undertook to alter (at Judgment [39]).
The primary judge reasoned that the third sentence of Special Condition 49 was concerned with the work the vendors had promised by the preceding sentence to do, rather than any remaining uncompleted work the subject of the approval. In other words, the primary judge found that the warranty in the third sentence (that all development consent conditions would be complied with before completion) was given only in respect of the work to be done in replacing the lower staircase (at Judgment [40]). The primary judge then said: "[41] So construed, Special Condition 49 contains a warranty by the vendor that all development consent conditions in respect of that work will be satisfied on or before completion, and a promise by the vendor that an occupation certificate in respect of that work will be provided prior to settlement."
The primary judge rejected the purchaser's submission that this would render the warranty superfluous and said that the warranty would survive completion. His Honour observed that the purchaser's submission also assumed a redundancy. If the vendors' obligation was to complete all the works the subject of the development approval, there would be no need for the specific promise in the second sentence to replace the staircase (Judgment [42]). His Honour observed that construction arguments founded on redundancy are never strong (Teele v Federal Commissioner of Taxation (1940) 63 CLR 201 at 207; HP Mercantile Pty Ltd v Hartnett [2016] NSWCA 342 at [154]).
The purchaser also contended before the primary judge that Condition 1 of the development approval requires all of the works the subject of the approval to be completed. The primary judge disagreed. He reasoned that the approval is permissive rather than mandatory in nature and that the effect of Condition 1 is not to require the doing of all works the subject of the approval but to require that any such works actually done are in conformity with the approved plans and two drawings specified in Condition 1 (and any variations thereto as a consequence of Condition 2) (at Judgment [43]-[44]). The primary judge also said that the argument advanced was underpinned by the purchaser's submission that completion of the works was necessary to satisfy all development consent conditions.
The purchaser argued that the occupation certificate contemplated by Special Condition 49 could only be a final occupation certificate and that given that such a certificate was only obtainable on the completion of all of the works the subject of the approval, Special Condition 49 ought to be read as requiring all the works to be completed. The primary judge rejected this submission and held that an interim occupation certificate satisfied the description of "an occupation certificate" in s 109H of the Environmental Planning and Assessment Act 1979 (NSW) (the "EPA Act"), and that the parties did not specify that only a final occupation certificate would be required by Special Condition 49 (Judgment [47]). Nor was the primary judge persuaded by the submission that the interim occupation certificate was deficient because it "merely confirms that the internal stairs may be occupied" (Judgment [47]).

Extent of vendors' obligation to carry out works

The purchaser's principal case both before the primary judge and on appeal was that Special Condition 49 required the vendors to complete all of the works the subject of the development approval and obtain a final occupation certificate in respect of those works. As to the first of these contentions, before the primary judge the purchaser's submissions focused upon the third sentence of Special Condition 49, that is: "The vendor warrants that all development consent conditions will be satisfied on or before completion."
The purchasers submitted that this was a warranty that all of the works that were subject of the development approval would be completed in accordance with the development consent conditions.
The primary judge rejected that submission and I agree with his Honour's reasons for so doing. His Honour said: "43 I am also unpersuaded by the defendant's submission that the warranty requires the plaintiff to complete all of the works the subject of the development consent. The submission is underpinned by the contention that completion of the works is necessary in order to satisfy all development consent conditions. It was put that until all the works are complete, Condition 1 of the consent remains unsatisfied. 44 I do not think that is correct. The consent is in the nature of a permission to carry out certain development. Condition 1 mandates that any development be in accordance with the development application and the two drawings, as amended by the conditions of the consent, including Condition 2. However, it would be contrary to the permissive nature of consent to read Condition 1 as including a requirement that the entirety of the works be carried out. Accordingly, a failure to carry out all of the works does not leave Condition 1 unsatisfied; nothing that is required by Condition 1 remains to be done. The defendant accepted that the development consent was permissive in nature, but maintained that the obligation to complete all of the works sprang not from the consent, but from the terms of Special Condition 49. Nevertheless, the warranty contained in Special Condition 49 refers to satisfaction of the development consent conditions, so the scope of the warranty depends at least in part upon the content (or requirements) of the development consent conditions. 45 The defendant also submitted that the construction favoured by the plaintiffs involved the reading in of words of qualification. That is true, but only in the sense that the scope of the third sentence of Special Condition 49 is qualified having regard to the subject matter of the immediate context in which it appears. In any case, for the reasons just given, the language of the third sentence cannot be read as a promise to complete all of the works the subject of the development consent. Had such a promise been intended, appropriate words to that effect could easily have been included."
On appeal, Mr Stoljar SC, who appeared with Mr Farland for the purchaser, also relied upon the first sentence of Special Condition 49 as informing the scope of the warranty in the third sentence of Special Condition 49. He submitted that when read with the answers to the requisitions that formed part of the contract and the development approval that is taken to be part of the contract, the first sentence is a representation (a disclosure) that all of the works the subject of the development approval had been carried out and, except in respect of the lower staircase, had been carried out in accordance with the development approval. The purchaser referred to the answer contained in the requisition attached to the contract which stated that the building work that had been carried out in the last seven years was "demolition of carport, addition of ground floor area at the rear and internal alterations." This was said to be in materially the same terms as the description of the development that had been approved.
As noted above (at [8]), the Council described the "Approved Development" as "alterations and additions to an existing dwelling including demolition of existing carport, new ground floor rear addition and internal alterations." (Emphasis added)
The descriptions are not identical. The summary of the approval in the development consent is that the approved development is to alterations and additions to the dwelling which "include", not which "comprise" the demolition of existing carport, new ground floor rear addition and internal alterations. The vendor's answers to the requisitions contained in the contract do not impliedly convey that all of the work the subject of the development approval had been carried out. They therefore do not support a construction of the first sentence of Special Condition 49 that the vendor disclosed that all work had been carried out, rather than that some work had been carried out.
The better construction of the first sentence, and one which is consistent with the third sentence of the clause, is that the vendors represented that any works that had been carried out were carried out in accordance with the development approval (except for the lower staircase), rather than that all work permitted by the approval had been carried out.
The terms of the development approval and the plans forming part of that approval were a contractual document. The actual state of the building at the time of contract was an objective matter that was known to both parties, or at least is taken to have been known to both parties by reason of the purchaser's inspection of the property. Special Condition 35 contained an acknowledgment that the purchaser bought the property relying on his own inspection. Moreover, Special Condition 34 contained an acknowledgment by the purchaser that the property was sold in "its present condition". A comparison between the plans that formed part of the contract and the building would have revealed that some of the works for which development approval had been given had not been carried out. One of the vendors, Mr Orena, deposed that: "The works which were authorised by the Development Application in relation to the Property, which have not been carried out are the kitchen extension, third level bedroom, bath/walk-in robe ensuite conversion, above garage outdoor living area and ducted air conditioning shown on the plan of proposed renovations for the Property, prepared by Building Design and Technology Pty Limited dated April 2017 are at Exhibit GO1 at pages 142 to 143."
Some of the work referred to by Mr Orena that had not been carried out was not work that was the subject of the development consent, namely a third level bedroom and an "above garage outdoor living area". Nor were we referred to anything shown on the plans that were the subject of the development approval that referred to ducted air conditioning. Nonetheless, it would be apparent on inspection that the kitchen extension shown on the plans and the "bath/walk-in robe en suite" conversion shown on the first floor plan had not been carried out.
That is, the fact that works that were permitted to be carried out pursuant to the development approval had not all been carried out would have been apparent on an inspection of the building.
As the primary judge said, had it been intended that the vendors would promise to complete all of the works the subject of the development approval, words to that effect could easily have been included. Instead, Special Condition 49 was confined to a promise by the vendors that the lower staircase would be replaced.
It was common ground at trial and on appeal that the development approval was permissive and not mandatory. No question arose in relation to the power of the Council under s 9.34(1)(a) and item 13 of Part 1 of Schedule 5 of the EPA Act to give a development control order requiring the completion of authorised works.
The next matter advanced before the primary judge was that Special Condition 49 required the vendors to provide a final, and not an interim, occupation certificate prior to settlement. The assumption in the purchaser's submissions, which was pressed on appeal, was that a final occupation certificate can only be issued when all of the works the subject of a development consent have been completed. If this assumption is correct in relation to alterations made to an existing building (not involving a change of use of the building), and if it is correct that on its proper construction Special Condition 49 requires the provision of a final, and not an interim, occupation certificate, then the (asserted) requirement for a final occupation certificate would support the purchaser's contention that the vendors were required to carry out all of the works for which development approval had been given.
However, neither premise is established. For the reasons below, in the case of alterations to a portion or portions of an existing building, or extensions to an existing building, there is no inference under the sections of the EPA Act with which this appeal is concerned that a final certificate can only be issued when all of the works permitted by the development approval have been completed.
Nor can Special Condition 49 be read as requiring the vendors to provide a final occupation certificate rather than an interim occupation certificate. As the primary judge observed, both fall within the description of "an occupation certificate" in Special Condition 49 because that term takes its meaning from s 109H of the EPA Act, which relevantly provides that both "final" and "interim" occupation certificates are a "kind of occupation certificate".
When the contract was entered into the amendments to the EPA Act concerning occupation certificates were to commence on 1 September 2018. That was before the date of completion of 1 October 2018. When Division 6.3 of Part 6 of the EPA Act commences it will provide for only the issue of one kind of occupation certificate (EPA Act s 6.4). Section 6.9(1) and (2)(a)(ii) will relevantly provide: "6.9 Requirement for occupation certificate (cf previous ss 109H (1), 109M, 109N) (1) An occupation certificate is required for: (a) the commencement of the occupation or use of the whole or any part of a new building, or (b) the commencement of a change of building use for the whole or any part of an existing building. (2) However, an occupation certificate is not required: (a) for the commencement of the occupation or use of a new building: ... (ii) that is the subject of a compliance certificate in circumstances in which that certificate is an authorised alternative to an occupation certificate (such as a swimming pool or altered part of an existing building)."
"New building" will be defined in s 6.1 in similar terms to the existing definition in Part 4A of the EPA Act.
For the reasons below, the question whether the purchaser can lawfully occupy the whole of the premises does not depend upon whether the occupation certificate is final or interim. In the case of an existing building whose use is unchanged, an occupation certificate is required for the occupation or use of an altered portion of the existing building, or an extension to it.
If the parties are to be taken to have contracted on the basis of the legislation in force at the date of contract, there was time for the vendors to obtain an interim occupation certificate rather than a final certificate, as they did. But the issue is a red herring. If the works for an altered portion or portions of the building were complete and satisfied the requirements in the consent, the vendors could obtain a final certificate for those works, even if other works permitted by the development approval had not been carried out.
For these reasons I would reject the purchaser's principal contention.

Sufficiency of occupation certificate

On appeal the purchaser advanced an alternative case. In the course of opening, counsel for the purchaser submitted that the interim occupation certificate related only to certain demolition and stairs when even on the plaintiff's evidence there had been significantly more work than the demolition and the stairs. The vendors submitted that this case had not been raised before the primary judge. It was not specifically pleaded.
The purchaser submitted that the primary judge found that the interim occupation certificate merely confirmed that the internal stairs could be occupied. He initially submitted in writing that this meant that the rest of the property could not be occupied lawfully.
The primary judge reasoned as follows (at [46]-[47]): "46 Reasonable business persons in the positions of the parties would have understood Special Condition 49 as providing for: (a) a promise by the vendor to ensure that prior to settlement the lower staircase is replaced in accordance with the development approval; (b) a warranty by the vendor that all development consent conditions in respect of that work will be satisfied on or before completion; (c) a promise by the vendor that an occupation certificate in respect of that work will be provided prior to settlement; and (d) an agreement by the purchaser not to make any claim or requisition, or seek to rescind or terminate the contract, in respect of that work. 47 It appears that the plaintiffs have complied with their obligations under Special Condition 49. They have had the lower staircase replaced, and have provided an occupation certificate in respect of that work. The plaintiffs are not required to complete all the works the subject of the development consent, or provide a final occupation certificate, whether in respect of such works or otherwise. The interim occupation certificate provided by the plaintiffs satisfies the description of 'occupation certificate'. That description is to be read in the light of the legislative background existing at the time the contract was entered into, including s 109(H)(1) of the Environmental Planning and Assessment Act which identifies an interim occupation certificate as one of two kinds of occupation certificate. The parties to the contract did not (despite the defendant's suggestion) specify that a final occupation certificate was to be provided. I do not accept that the occupation certificate provided by the plaintiffs is deficient because it merely confirms that the internal stairs may be occupied. Even if the certificate is so limited, Special Condition 49 envisages an occupation certificate that relates to the lower staircase works. In my opinion, the occupation certificate meets that description."
As discussed at [42] above, the primary judge was right in finding that the reference to "an occupation certificate" in Special Condition 49 did not require the provision of a final occupation certificate.
It does not appear that the primary judge finally determined whether the occupation certificate provided was limited to confirming that only the internal stairs could be occupied. His Honour's statement in the penultimate sentence of para [47] that "Even if the certificate is so limited" suggests that his Honour was not expressing a concluded view on that question. Rather, his Honour argued that even if the certificate were so limited, nonetheless the occupation certificate provided would suffice.
The only reasonable business-like construction of Special Condition 49 is that the occupation certificate to be provided to the purchaser must be one that permitted the lawful occupation by the purchaser of the entirety of the property being purchased. Although not elaborated upon in submissions before the primary judge, nor in the written submissions in support of the appeal, the purchaser contends that the interim occupation certificate does not allow him lawfully to occupy the whole of the property. That raises the questions why is an occupation certificate required, and for what is an occupation certificate required?
Section 109C of the EPA Act relevantly provides: "109C Part 4A certificates (1) The following certificates (known collectively as Part 4A certificates) may be issued for the purposes of this Part: ... (c) an occupation certificate, being a certificate that authorises: (i) the occupation and use of a new building, or (ii) a change of building use for an existing building, ... (2) An occupation certificate: (a) may be an interim certificate or a final certificate, and (b) may be issued for the whole or any part of a building. ... (4) In this section: new building includes an altered portion of, or an extension to, an existing building."
The relevant prohibition is in s 109M of the EPA Act, which relevantly provides: "109M Occupation and use of new building requires occupation certificate (1) A person must not commence occupation or use of the whole or any part of a new building (within the meaning of section 109H) unless an occupation certificate has been issued in relation to the building or part. ..."
Section 109N(1) provides: "109N Change of building use of existing building requires occupation certificate (1) A person must not effect a change of building use for the whole or any part of an existing building unless an occupation certificate has been issued in relation to the building or part."
Section 109H relevantly provides: "109H Restrictions on issue of occupation certificates (1) There are two kinds of occupation certificates, as follows: (a) an interim occupation certificate that authorises a person to commence occupation or use of a partially completed new building, or to commence a new use of part of a building resulting from a change of building use for an existing building, (b) a final occupation certificate that authorises a person to commence occupation or use of a new building, or to commence a new use of a building resulting from a change of building use for an existing building. It is not necessary for an interim occupation certificate to be issued before a final occupation certificate is issued with respect to the same building. ... (3) An interim occupation certificate must not be issued to authorise a person to commence to occupy or use a partially completed new building unless: (a) a development consent or complying development certificate is in force with respect to the building, and (b) in the case of a building erected pursuant to a development consent but not a complying development certificate, a construction certificate has been issued with respect to the plans and specifications for the building, and (c) the partially completed building is suitable for occupation or use in accordance with its classification under the Building Code of Australia, and (d) such other requirements as are required by the regulations to be complied with before such a certificate may be issued have been complied with. (4) An interim occupation certificate must not be issued to authorise a person to commence a new use of part of a building resulting from a change of building use for an existing building unless: (a) a development consent or complying development certificate is in force with respect to the change of building use, and (b) the part of the building is suitable for occupation or use in accordance with its classification under the Building Code of Australia, and (c) such other requirements as are required by the regulations to be complied with before such a certificate may be issued have been complied with. (5) A final occupation certificate must not be issued to authorise a person to commence occupation or use of a new building unless: (a) a development consent or complying development certificate is in force with respect to the building, and (b) in the case of a building erected pursuant to a development consent but not a complying development certificate, a construction certificate has been issued with respect to the plans and specifications for the building, and (c) the building is suitable for occupation or use in accordance with its classification under the Building Code of Australia, and (d) such other matters as are required by the regulations to be complied with before such a certificate may be issued have been complied with. (6) A final occupation certificate must not be issued to authorise a person to commence a new use of a building resulting from a change of building use for an existing building unless: (a) a development consent or complying development certificate is in force with respect to the change of building use, and (b) the building is suitable for occupation or use in accordance with its classification under the Building Code of Australia, and (c) such other matters as are required by the regulations to be complied with before such a certificate may be issued have been complied with. (7) In this section: new building includes an altered portion of, or an extension to, an existing building."
The purchaser submitted that a final occupation certificate could not be issued until all of the works the subject of the development consent were complete. Much to the same effect, the vendors submitted that such a certificate could only be issued upon completion of all works described in the construction certificate. The construction certificate was not in evidence. For present purposes it may be assumed that the works certified in the construction certificate were the same works the subject of the development consent.
The purchaser referred to the Minister's Second Reading Speech for the Environmental Planning and Assessment Act 2017 (NSW) ("the Amending Act") (this being the Act bringing about the changes referred to at [43] above) where the Minister said: "Part 6 relates to certification of building and subdivision works. It represents an important part of the Government's response to the independent review of the Building Professionals Act 2005 - the Lambert report. The bill simplifies and consolidates provisions currently in parts 4, 4A and 8 of the Act that regulate building and subdivision certification into a single more logical structure. This will benefit the building industry, including certifiers who can find the current arrangements challenging to navigate and understand. The measures will increase the efficiency and effectiveness of regulation and result in improved development outcomes."
The Lambert Report said: "Issue 4.1: Clarifying criteria for the issue of an occupation certificate At present there is a lack of clarity about the purpose of an OC and the tests for its issue. OCs are required for all types of new buildings and structures, including structures which cannot be occupied such as swimming pools. They are also issued for modifications to existing buildings. Further, there is confusion about what an OC actually certifies. Consumers generally assume a very broad scope whereby an OC means that the building or structure complies with the relevant planning approvals and the BCA, with the rationale of linking the development back to the consent once construction is completed. However, under the EP&A Act, an OC authorises occupation of the completed building or structure, and certifies non-inconsistency with applicable conditions of consent, but does not necessarily confirm that it is in accordance with the planning approvals and BCA. Further, there is provision in the EP&A Act for both an interim and final OC. An interim OC authorises the occupation or use of a partially completed new building. A final OC authorises occupation or use of a new building that is completed or a new use of a building resulting from a change of use. It is also not unusual for an interim OC to be issued but for a final OC not to be sought. There is a need for the certification process to complete what was started and that is to assess and confirm whether the completed building conforms to the planning and building approvals. The current OC does not achieve this requirement."
Although these materials show there was confusion in the building industry about when final and interim occupation certificates could be issued, they do not throw any light on the interpretation of the existing provisions.
The requirements for the issue of either an interim occupation certificate or a final occupation certificate in respect of a new building are identically expressed in s 109H. An interim occupation certificate may be issued in respect of a partially completed new building whereas a final occupation certificate is to be issued once the new building is complete.
If the development consent were for the construction of a new building in the ordinary sense, or for a change of use of an existing building, then a final occupation certificate could only be issued on completion of the new building or the works required for the change of use. If the development consent were for the alteration of a portion or portions of, or an extension to, an existing building, a final certificate could be issued once the works for the alteration of a portion or the extension to the building had been completed.
In the case of a new building (in the ordinary sense), or works for the alteration of the use of an existing building, an interim occupation certificate could be issued if the building or works were only partially complete, provided the area to be occupied could be certified as ready for occupation and the work done complied with the requisite standards. In the case of an altered portion of an existing building or an extension to an existing building, an interim occupation certificate could be issued if the works were partially complete, but the altered portion or extension were ready for occupation and the work done complied with the requisite standards.
The building in question (as a whole and in the ordinary sense) is not a new building. It is an existing building. There was no proposed change of use of the building. The building and each part of it was to be continued to be used as a residence. I do not accept the submission faintly made for the purchaser that because the definition of "building" includes "part of a building" (EPA Act, s 1.4) that a change of use of a part of a building, e.g. from a bedroom to a study or a study to a bathroom, involved a change of use. The use of the building for residential purposes was unchanged. An occupation certificate was only required in respect of an "altered portion" of the building or an "extension to" the building.
Counsel could not assist with any authority on the meaning of the expression "altered portion of ... an existing building". In my view, that expression requires first the identification of a "portion" of an existing building and then a determination as to whether that portion has been altered. That is, it refers to the alteration of a portion of a building, rather than alterations within a portion of a building. Remodelling a kitchen by changing bench tops and the oven and stove, even though these may be fixtures, does not involve the alteration of the portion of a building that comprises the kitchen. On the other hand, moving a wall to change the dimension of the kitchen would be to alter a portion of the building. The altered kitchen would then answer the definition of "new building" in s 109H(7).
Accordingly, for this argument of the purchaser to succeed he must show that the occupation certificate issued was confined to authority to occupy the staircase and that there was some other altered portion of the building or extension to the building not covered by the occupation certificate such that he could not lawfully occupy the whole building.
The first is not established. Accordingly, the second does not arise. If it did I consider that it should not be allowed to be raised on appeal having regard to the pleadings and conduct of the trial.
As can be seen above, s 109H(3)(d) provides that an interim occupation certificate can only be issued if requirements of the regulations are complied with. The same requirement arises in relation to the issue of a final occupation certificate (s 109H(5)(d)).
The Environmental Planning and Assessment Regulation 2000 deals with the form of an application for an occupation certificate. Regulation 149(1) provides: "149 Applications for occupation certificates (cf clause 79J of EP&A Regulation 1994) (1) An application for an occupation certificate must contain the following information: (a) the name and address of the applicant, (b) a description of the building to which the application relates, including the existing and new classifications of the building under the Building Code of Australia, as identified by the development consent, (c) the address, and formal particulars of title, of the land on which the building to which the application relates is situated, (d) the type of occupation certificate applied for (that is, interim or final), (e) a list of the documents accompanying the application, and, if the certifying authority so requires, must be in the form approved by that authority."
The form of application completed in the present case included a requirement of the applicant to "describe works as per the Development Consent".
This requirement is not found in reg 149(1)(a)-(e), but was presumably a requirement of the certifying authority expressed in the concluding words of reg 149(1), being a requirement in the form approved by the certifying authority. That requirement is understandable having regard to reg 154(1B). Regulation 154 relevantly provides: "154 Health, safety, compliance with development consent and other issues: section 109H (cf clause 79O of EP&A Regulation 1994) (1) For the purposes of section 109H (3) (d) and (4) (c) of the Act, an interim occupation certificate authorising a person: (a) to commence occupation or use of a partially completed new building, or (b) to commence a change of building for use for part of an existing building, must not be issued unless the building will not constitute a hazard to the health or safety of the occupants of the building. ... (1B) An occupation certificate authorising a person to commence occupation or use of a new building, or a partially completed new building, must not be issued unless the design and construction of the new building, or any part of the new building that is completed, are not inconsistent with the development consent in force with respect to the new building. This subclause applies only if the development consent (excluding any construction certificate forming part of the consent) was issued on or after 1 March 2013. Note. A complying development certificate is a form of development consent. (2) In this clause: new building has the same meaning as it has in section 109H of the Act."
It does not follow from the fact that the certifying authority required the applicant for the occupation certificate to describe the works to be approved as per the development consent, being a matter to which the certifying authority had to give regard pursuant to reg 154(1B), that the extent of the authority to occupy the building or relevant part thereof was confined to the area the subject of the description of works.
Regulation 155 prescribes the form that an occupation certificate must take. Regulation 155(e) provides: "155 Form of occupation certificate (cf clause 79P of EP&A Regulation 1994) (1) An occupation certificate must contain the following: ... (e) a statement to the effect that: (i) the health and safety of the occupants of the building have been taken into consideration where an interim occupation certificate is being issued, and (ii) a current development consent or complying development certificate is in force for the building, and (iii) if any building work has been carried out, a current construction certificate (or complying development certificate) has been issued with respect to the plans and specifications for the building, and (iv) the building is suitable for occupation or use in accordance with its classification under the Building Code of Australia, and (v) a fire safety certificate has been issued for the building (if a fire safety schedule is required under Part 9), and (vi) a report from the Fire Commissioner has been considered (if required)."
The vendors submitted that a final occupation certificate could only be issued on completion of all works described in the construction certificate, following the issue of the development consent. They submitted that if a final certificate were issued at an earlier stage this would create confusion by suggesting that works that might subsequently be done had the characteristics set out in reg 155(e).
This would be true if reg 155(e) applied to the building as a whole. But "building" includes parts of a building (EPA Act, s 1.4). There is no reason that a final certificate of occupation could not be issued authorising occupation of completed alterations to a portion of a building or completed extensions to a building, even if approved work for alterations of other portions of the building or extensions to it had not been completed or even commenced.
Evidence was admitted without objection of an email from the vendors' builder to the vendors on 12 June 2018 that: "The PCA has finalised all inspections at the your home [sic] & has mentioned that he will not issue O.C with the existing staircase on ground level. All other requirements are compliant and are in accordance with all BCA regulations. The DA mentions that the stairwell will be removed & replaced, however only 50% of this was actioned. ..."
Although not forming part of the occupation certificate, the certifier provided with the occupation certificate a document called "Record of Inspection". The record identified three inspections having taken place on 16 November 2017, 29 November 2017 and 17 August 2018. The first was a "pre-commencement" inspection. The second was a "Framing Inspection". The Record of Inspection also included a final inspection on 17 August 2018. It was described as follows: "Undertook Final inspection of the works to determine that all works had been completed as per the approval. All works were undertaken as per the approved drawings and consistent with the CC consent. I have advised the applicant of all the certification required by the Occupation Certificate."
It is apparent from this record that the certifier was satisfied that all works undertaken pursuant to the development consent and the construction certificate were compliant.
This record was required to be provided to the Council together with the occupation certificate and so would be available on search to any person who sought to construe the occupation certificate. When read with the record of inspection, it is clear that the occupation certificate purported to relate to the whole of the building in Forbes Street, Woolloomooloo. That was described as the "Area of Occupancy". The certification was that "the building" was suitable for occupation and use in accordance with its classification under the Building Code of Australia.
Because the occupation certificate purported to apply to the whole of the building, it necessarily applied to all such parts of the building as constituted altered portions of the building or extensions to the building.
If the alterations to portions (or parts) of the building or any extension to the building were complete, a final occupation certificate could have been issued, even though other works approved by the development approval had not been undertaken. It may be that the certifier laboured under the confusion referred to in the Lambert Report and evidenced by the parties' submissions. However, the evidence as to what work was done or not done does not permit the drawing of a conclusion on this question.
The interim occupation certificate is as efficacious as a final certificate would be in permitting occupation of the area covered by the certificate: in this case, the whole building.
In any event, the onus was on the purchaser to show that the occupation certificate does not authorise occupation of the whole of the building. If, contrary to my view, the occupation certificate should be construed as applying only to occupation of the staircase, it was necessary for the purchaser to show that there was some other part of the works that constituted either an altered portion of the building, or an extension to the building, that was not covered by the certificate.
On appeal, the purchaser sought to do that by reference to the plans and from the evidence given by Mr Orena quoted at [35] above as to the works the subject of the development consent that had not been carried out.
Mr Orena was not cross-examined before the primary judge. It does not appear that any submissions were advanced to the primary judge to the required detail on this question. The vendors complain that this question was not raised before the hearing before the primary judge. It was only faintly raised in the course of counsel's opening. The purchaser's defence and cross-claim merely asserted that the vendors had "... not provided an occupation certificate in accordance with Special Condition 49 of the Contract". Whilst the present contention falls within the width of that pleading, the pleading does not specifically identify the issue that was sought to be raised. Hence no direct evidence was given as to what works were done. The purchaser's case was that the vendors were required to do all of the works that were permitted by the development approval. There was no pleading, nor any specific submission, that any particularly identified works going beyond "Internal Demolition and Construction of Internal Stairs" were done that amounted to the alteration of a portion of the building or an extension to the building.
The plans annexed to the development consent do suggest that alterations approved to the ground floor level involved the demolition of existing internal walls (apparently not load-bearing) to expand an existing living and dining room space into an adjacent room, the installation of a toilet on the ground floor and the erection of stairs, the extension of the kitchen and removal of a toilet adjacent to the kitchen and demolishing a concrete slab for the carport to provide a courtyard in place of a carport.
Condition 2(b) of the development approval indicates that there was to be a realignment of the rear wall of the proposed ground floor extension.
Prima facie, it appears to me that the proposed alterations to the ground floor, going beyond the kitchen extension, involved an alteration of portions of the building. But I would be reluctant to draw that conclusion in the absence of any evidence specifically directed to the question.
In relation to the first floor of the building, there was development consent to proposed changes which included demolishing an existing internal (and apparently non-load-bearing) wall between a bathroom and a study, and installing an en suite bathroom between two bedrooms. It appears from Mr Orena's evidence quoted above at [35] that the "bath/walk-in robe en suite conversion" was not carried out. It might be inferred from this evidence that the conversion of the former bathroom and study to a larger bathroom involving the demolition of existing walls was carried out which, again, might be an alteration to a portion of the existing building.
No evidence specifically addressed to these questions was adduced. The primary judge was not asked to determine whether any of the works involved an alteration to a portion of the building, or an extension of the building. Were it necessary to decide, I consider that the issue sought to be raised on appeal was not sufficiently identified at trial and should not be permitted to be raised on appeal. It was only during the course of oral submissions on appeal that the particular issues raised by the purchaser's contention that not all of the works that were done were covered by the occupation certificate were ventilated.
For the reasons earlier given, I consider that the occupation certificate allows occupation of all of the areas for which an occupation certificate may have been required, that is, all areas that may have comprised altered portions of the building or an extension to the building.
For these reasons I propose that the appeal be dismissed with costs.

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: 20 June 2019

Environmental Planning and Assessment Act 2017(NSW)

Environmental Planning and Assessment Regulation 2000(NSW)

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