Sola v Yallah Project Homes Pty Ltd

The Home Building Act

1. The Home Building Act, Part 2C, deals with certain statutory warranties. In summary the key provisions of relevance here are: 1. Section 18B, whereby certain warranties are implied as a matter of law in every contract to do residential building work; 2. Section 18C which deals with "Warranties as to work by others"; 3. Section 18D which deals with "Extension of statutory warranties"; and 4. Section 18E which provides for how proceedings may be brought for breach of the s 18B warranties.
2. The essential task for us in construing the Act involves two principles: 1. Consideration of the statutory text in its context, which context includes legislative history and extrinsic materials: Commissioner of Taxation v Consolidated Media Holdings Ltd [2012] HCA 55 at [39]; and 2. Ensuring that the construction arrived at has both internal logical consistency and an overall harmonious interpretation: Independent Commission Against Corruption v Cunneen [2015] HCA 14 citing Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28 at [69]-[70].
3. We construe the relevant provisions accordingly. First, s 18B implies certain warranties by the holder of a contractor licence, or a person required to hold a contractor licence before entering into a contract, "… in every contract to do residential building work". Relevantly, they include warranties that: 1. "the work will be done with due care and skill and in accordance with the plans and specifications set out in the contract"; 2. "that all materials supplied by the holder or person will be good and suitable for the purpose for which they are used"; and 3. "the work will be done in accordance with, and will comply with, this or any other law."
4. Those warranties may not be excluded: s 18G.
5. Section 18C provides that: (1) A person who is the immediate successor in title to an owner-builder, a holder of a contractor licence, a former holder or a developer who has done residential building work on land is entitled to the benefit of the statutory warranties as if the owner-builder, holder, former holder or developer were required to hold a contractor licence and had done the work under a contract with that successor in title to do the work…
6. As explained below, a person is not a developer unless, relevantly, the work done will result in at least four residential dwellings being owned by a single person or entity: s 3A(2)(a). Evidently, a duplex cannot qualify.
7. Section 18D is another critical provision, which states: (1) A person who is a successor in title to a person entitled to the benefit of a statutory warranty under this Act is entitled to the same rights as the person's predecessor in title in respect of the statutory warranty. (1A) A person who is a non-contracting owner in relation to a contract to do residential building work on land is entitled (and is taken to have always been entitled) to the same rights as those that a party to the contract has in respect of a statutory warranty. (1B) Subject to the regulations, a party to a contract has no right to enforce a statutory warranty in proceedings in relation to a deficiency in work or materials if the warranty has already been enforced in relation to that particular deficiency by a non-contracting owner. (2) This section does not give a successor in title or non-contracting owner of land any right to enforce a statutory warranty in proceedings in relation to a deficiency in work or materials if the warranty has already been enforced in relation to that particular deficiency, except as provided by the regulations. (emphasis added).
8. As already noted, the Tribunal below treated a dismissal following a withdrawal of the proceedings as a case where "the warranty has already been enforced".
9. The primary meaning of 'enforced' in the Macquarie Dictionary is: "to put or keep in force; compel obedience to: to enforce laws; to enforce rules". In this context, it connotes vindicating the legal rights comprised in the warranty, as opposed to merely commencing proceedings which seek to enforce the warranty, or commencing and then withdrawing such proceedings before a hearing on the merits.
10. That distinction is confirmed by s 18E, which sets out the requirements for valid commencement of proceedings for breach of statutory warranty, including various limitation periods: s 18E(1). Section 18E(2) provides: (2) The fact that a person entitled to the benefit of a statutory warranty specified in paragraph (a), (b), (c), (e) or (f) of section 18B has enforced the warranty in relation to a particular deficiency in the work does not prevent the person from enforcing the same warranty for a deficiency of a different kind in the work ("the other deficiency") if: (a) the other deficiency was in existence when the work to which the warranty relates was completed, and (b) the person did not know, and could not reasonably be expected to have known, of the existence of the other deficiency when the warranty was previously enforced, and (c) the proceedings to enforce the warranty in relation to the other deficiency are brought within the period referred to in subsection (1). (emphasis added)
11. Thus, s 18E, which should be read harmoniously with other provisions in Part 2C of the Act, draws a distinction between "proceedings to enforce the warranty" and where "a person entitled to the benefit of a statutory warranty … has enforced the warranty".
12. The distinction between a final determination of, or judgment in, a matter following a hearing on the merits, as opposed to a withdrawal of a matter prior to any such hearing on the merits, is a familiar one, for example, in relation to the law of res judicata. The power in s 55(1)(a) of the CAT Act may also be contrasted with the powers in s 59 of the CAT Act when proceedings are settled, including powers to dismiss in those circumstances.
13. Finally, the purpose of s 18D(1B) is evidently to prevent double recovery. A withdrawn proceeding is not an instance of prior recovery for breach of the s 18B warranty. So much is clear from the legislative history. The second reading speech to the Home Building Amendment (Warranties and Insurance) Bill 2010 which inserted s 18D(1A),(1B) and (2), followed the decision of the Court of Appeal in ACE Woollahra Pty Ltd v The Owners of Strata Plan 61424 & Anor [2010] NSWCA 101, which held that only the person who contracts with the builder, and that person's successors in title, are entitled to the benefits of the statutory warranties, which, as was explained in the second reading speech to the Bill, meant that "if a person who enters into a building contract is not the land owner, a subsequent purchaser of the land will not get the benefit of the statutory warranties or of the insurance". Accordingly, the amendments provided that: …a legal action or insurance claim cannot be defeated due to the contracting party not being the owner of the land at the time the contract was entered into. Specifically, the Bill will insert into the Home Building Act amendments to the statutory warranty and insurance provisions, to the effect that a land owner who was not a party of the contract will still be covered by the schemes. The amendments will provide that a person who was a non-contracting owner in relation to a contract to do residential building work, is entitled to the same rights as a party to a contract has in respect of a statutory warranty or scheme… A claim by one should preclude a later claim by the other, to avoid a builder or insurer having to pay twice for the loss suffered in relation to the one defect.

Ground 7(b) of the Notice of Appeal

1. Ground 7(b) of the Notice of Appeal asserted that the Tribunal erred in finding that Bouzat and Foley had enforced their claim for damages within the meaning of s 18D(1B) for breach of a s 18B statutory warranty when other proceedings (HB 14/19946 and HB 14/19943) were dismissed under s 55(1)(a) of the CAT Act prior to the determination of their merits. We have earlier explained that the Tribunal below erred on this issue.
2. In Norrie v NSW Registrar of Births, Deaths and Marriages [2013] NSWCA 145 at [62], Beazley ACJ said: It cannot be said that the ordinary meaning of a word or its non-technical meaning is a question of fact, at least as a stand alone proposition. Rather, when the Court is engaged in a task of statutory construction, it is required to have regard to the language used by Parliament and the context in which it is used. That task involves a question of law.
3. Thus, although the decision to summarily dismiss below was an interlocutory one, leave to appeal should be given as the error was one of law, it is of significance for the appellants as it led to the end of their proceedings, and it has wider significance beyond this appeal, namely for the proper construction of the Act. For those reasons, we grant leave to appeal on this question. This error alone means that the decision below must be set aside. There are, however, other errors which must be noticed before the matter is re-heard.

Ground 4

1. These grounds assert that the Tribunal below was in error by finding that Mirko Sola was "an owner builder" and "a developer" within the meaning of s 18C of the Act and had brought their application in reliance on s 18C of the Act, contrary to the contention of the applicants.
2. In a discussion commencing at paragraph 45, the Tribunal Member dealt with the issues of the appellants being either owner builders or developers for the purposes of the Act. The discussion ends at paragraph 62.
3. While the Member considered a concession made that the first named appellant was not an owner builder and other evidence in the proceedings which touched upon the issue, he made no actual finding that the appellants were owner builders.
4. The highest his reasoning goes as regards this issue is at paragraph 51 where he states: "It is difficult to read Ex. 4 as conveying any other meaning than what it discloses, being a reference to the Applicant as Owner/Builders".
5. Despite his comments regarding Ex. 4, the Tribunal Member made no finding that the appellants were owner builders.
6. The Tribunal Member then proceeded to consider the issue of whether the appellants were "developers" who had "done residential building work on the land within the meaning of s 18C of the Act." [53]
7. The finding in paras 61 and 62 below that the first named applicant was a developer and "thus each of the applicants may be taken to have that character" (para 62) involves an error of both fact and law, given s 3A of the Act. Sections 3A(1) and (1A) define when an individual, a partnership, a corporation or particular categories of work amount to work by a developer, by reference to the circumstances set out in s 3A(2) which provides: (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, or (b) the residential building work is done in connection with an existing or proposed retirement village or accommodation specially designed for the disabled where all of the residential units are or will be owned by the individual, partnership or corporation.
8. Evidently, the work done here falls within neither category. Obviously, it was not a retirement village, but equally obviously, given it was a duplex, that being an agreed fact, it could not have been a building or residential development "where 4 or more" of the existing or proposed dwellings are, or will be owned, by that putative developer. By failing to consider this question in coming to the conclusion that the first named applicant and "thus" the second named applicant were developers, the Tribunal below asked itself the wrong question and fell into error.
9. In Qantas Airways Ltd v Chief Commissioner of State Revenue [2008] NSWSC 1049 Handley JA stated at [38]: There is a presumption that defined words in a statute have their defined meanings which is not to be displaced without good reason.
10. In addition, s 6 of the Interpretation Act 1987 states: Definitions that occur in an Act or instrument apply to the construction of the Act or instrument except in so far as the context or subject-matter otherwise indicates or requires.
11. The Tribunal Member considered the evidence in the proceedings and found in paras 61 and 62 that the first named applicant was a developer and "thus each of the applicants may be taken to have that character". In arriving at that finding the Tribunal Member failed to take into account or consider s 3A of the Act.
12. In our view, the factual circumstances of these proceedings relating to the contract between the appellants and the respondent which required the respondent to carry out residential building work, namely the construction of a duplex on land owned by the appellants, did not indicate or require that the definition of developer as contained in s 3A of the Act, should not apply to those circumstances.
13. To the contrary, by reason of the definition of 'developer' in s 3A of the Act, land owners are permitted to have residential work carried out on their behalf which results in no more than 3 existing or proposed dwellings being owned by them, without them being defined as a 'developer' for the purposes of the Act. That is what the appellants did.
14. The Tribunal below, in considering whether the appellants were developers for the purposes of the Act, was bound to correctly construe the definition of 'developer' as contained in s 3A of the Act. His failure to do that was, in our view, an error of law.

'Simultaneous extinguishment'

1. The Tribunal's conclusion that such rights as the applicants had under the building contract between themselves and the respondent, including those warranties implied by operation of s 18B of the Act were, upon completion of the contracts for sale from the applicants to Bouzat and Foley, "simultaneously extinguished in the hands of the applicants and conferred upon Bouzat and Foley" [para 73] was not satisfactorily explained, but it is, in any event, incorrect and should not stand.
2. Evidently, the parties to the contract to do the residential work have rights to enforce the deemed warranties imputed as a matter of law by s 18B.
3. Contrary to the conclusion below, s 18C does not "extinguish" or result in the loss of those rights. Rather, it extends those rights to immediate successors in title as specified in s 18C(1).
4. We have already determined that the applicants do not fall within s 18C(1), in that they were not found to be owner-builders and they were not developers. To that extent, s 18D is irrelevant since the applicants' rights to the statutory warranties arose under s 18B. Nevertheless, we proceed to consider the operation of s 18D.
5. By s 18D, the warranties are extended to the "successors in title": see sub-paragraph (1) and the "non-contracting owner": see sub-paragraph (1A). By sub-section (2), the successor in title or non-contracting owner of work cannot enforce the statutory warranty "if the warranty has already been enforced in relation to that particular deficiency, except as provided by the Regulations". That is to say, sub-section (2) speaks to the inability of the successor in title or the non-contracting owner, to recover, where there has already been recovery by the party to the contract.
6. Sub-section (1B) deals with the loss of rights of the party to the contracts to enforce the statutory warranty "if the warranty has already been enforced in relation to that particular deficiency by a non-contracting owner".
7. We have already explained how a withdrawal of proceedings, which is treated as a statutory dismissal under s 55(1)(a) of the CAT Act, in no sense amounts to an enforcement of the warranties, and such a withdrawal is therefore irrelevant to the operation of s 18D.
8. In Owners Corporation Strata Plan 73019 v Brodyn Pty Ltd, Titanium Group Pty Ltd, Auscore Constructions Pty Ltd [2015] NSWCATCD 43, Senior Member Goldstein said at [32] and [38]: 32. Taking an overview of Part 2C of the Act, it is apparent that a builder faces the potential of owing, at the one point in time, obligations under the statutory warranties referred to in section 18B to: (a) a developer under section 18B of the Act, (b) an owners corporation in respect of common property under section 18D of the Act; and (c) lot owners, also under section 18D of the Act 38. Given that a builder may have obligations under section 18B of the Act to different parties in connection with the one project, one can appreciate the necessity, from a builder's perspective, for a provision such as section 18 D (2) of the Act so that it not liable to different parties for the same defect. That section states: This section does not give a successor in title or non-contracting owner of land any right to enforce a statutory warranty in proceedings in relation to a deficiency in work or materials if the warranty has already been enforced in relation to that particular deficiency, except as provided by the regulations

Conclusion

1. Because the errors made below were significant, all of the orders and the "declaration" there made must be set aside, and the matter must be re-heard with such additional evidence as the member hearing the matter will allow.
2. Because of the Tribunal member's unfavourable views concerning the evidence of both the first named applicant "whose oral evidence must be treated with caution" (para 6) and of the Director and Officer of the respondent, see e.g. para 48, the matter must be reheard by a differently constituted Tribunal.
3. We therefore order: 1. Appeal allowed. 2. Set aside the "declaration" and orders made on 28 April 2015. 3. The whole of the matter to be reconsidered in accordance with these reasons by a differently constituted tribunal, with such further evidence as the Tribunal may allow.

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: 02 May 2016