The Owners - Strata Plan No 66375 v King - [2018] NSWCA 170 - NSWCA 2018 case summary — Zoe

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The Owners - Strata Plan No 66375 v King

[2018] NSWCA 170

Court of Appeal (NSW)|2018-04-06|Before: Ward JA, Leeming JA, White JA, Ball J

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At a glance

Source facts

Court

Court of Appeal (NSW)

Decision date

2018-04-06

Before

Ward JA, Leeming JA, White JA, Ball J

Source

Original judgment source is linked above.

Judgment (69 paragraphs)

[1]

Background

The Kings acquired the land at Camperdown in 1990 and used the warehouse complex on the land for a number of years in their furniture business (with which a company controlled by the Kings was associated - King Furniture Australia Pty Ltd (King Furniture)).
In about August 1997, the Kings engaged a firm of architects, Bonus Architects Pty Ltd (Bonus), the principal of which firm was Mr Geoffrey Bonus, to investigate the redevelopment of the building, to prepare a concept plan, and to liaise with the planning authorities. Although there was no express finding by the primary judge as to the retainer of Bonus, there are in evidence copies of invoices issued by Bonus to the Kings in August, September, October and December 1998 and again in February 1999 for architectural services, those invoices referring variously to an accepted proposal of 17 August 1997 and an accepted proposal of 20 December 1997. There are also in evidence various documents in which Bonus confirmed the engagement of third parties on behalf of the Kings. (See also the affidavit of Mr John Fredericks, a director of Beach, sworn 8 November 2016 at [17]).
Plans for the development were prepared by Bonus and, in December 1998, Bonus lodged a development application with the South Sydney Council. Meridian was named as the applicant on that application and the application was signed by the Kings (as the owners of the property) and by the Kings in their capacity as directors of Meridian under the common seal of the company. A cheque made payable to South Sydney Council was drawn on King Furniture's account.
Pausing here, the application form was completed in block letters in handwriting that, from a lay perspective, appears to match the block letter handwriting on the later tender documents issued by Bonus (see from [23] below) (and other documents, such as the application for modification of the development consent), from which it may be inferred that someone from Bonus completed the initial development application. Indeed it seems likely (from a comparison with other documents signed in Mr Bonus' name) that this was the handwriting of Mr Bonus himself. (See also the similar handwriting on the Bonus Consulting memorandum of 7 June 1999). However, no finding to that effect was made by the primary judge and (as is relied upon by the Owners Corporation in this appeal) no evidence was called by the Kings from Mr Bonus in the proceedings.

[3]

Grounds of Appeal

By its amended notice of appeal filed 22 December 2017, the Owners Corporation appeals pursuant to s 101 of the Supreme Court Act 1970 (NSW) on the following grounds: 1. The learned judge below erred at law in finding that that [sic] the Appellant had not discharged its onus in establishing that the Respondents signed the underlying construction contract in the form executed by Beach Constructions Pty Ltd (as principals). These errors included: i) a failure to draw the available inference that the critical statements attributed to representatives of Bonus Architects Pty Limited ("Bonus") in the minutes of the site meetings, regarding the execution of the construction contract by the Respondents, were from information provided to Bonus by the directors of Meridian Estates Pty Limited (who were the Respondents); ii) Finding that the only inference that could reasonably be drawn from the failure of the Respondents to give evidence was that they had no recollection whether they signed the subject contract (paragraph [44] of the judgement) when there was no evidence before the Court to that effect. iii) failing to draw the available inference from the Respondents' decision to not give evidence, or to call Mr Bonus to give evidence that the evidence of those witnesses would not have assisted the Respondents in relation to the issue of whether the critical statements attributed to Bonus in the site meeting minutes regarding the execution of the construction contract were from information provided to Bonus by the Respondents or in relation to the question of whether the respondents signed the subject construction contract; iv) by drawing the inference (at [41] of the judgment) that the absence of any further reference in the site meeting minutes to a copy of the executed construction contract needing to be provided to Mr John Stringer (the Commonwealth Bank of Australia Limited's representative) could be due to the Commonwealth Bank of Australia Limited realising that a contract was already in existence and therefore nothing else needed to be done when the history of the bank's requirements as recorded in the site meeting minutes, did not support that conclusion; v) by finding (at [46] of the judgment) that the failure of the Respondents to produce a copy of the subject contract signed by them was "strong evidence that the copies that were sent to them were never executed." vi) by finding (at [47] of the judgment) that the parties' subsequent conduct "was consistent with the contracting party being Meridian and not [the Respondents]". vii) by failing to find that the evidence that the primary judge accepted, that Mr Hills had signed the contracts nominating the Respondents personally as parties to the contract, and that such contracts had been provided to the Respondents, was sufficient in the circumstances of the building works proceeding (even in the absence of a finding that the Respondents had executed such contracts) to establish acceptance by conduct by the Respondents to be parties to the building contract; viii) by not admitting into evidence for all purposes (pursuant to s 87 of the Evidence Act (1995)) the statement made to Mr Fredericks by Mr Bonus shortly before 18 April 2000 that "the Kings are waiting on advice as to whether they should be a party to the contract …". 2. The learned judge below erred at law in failing to find that the Respondents were "Developers" (within the meaning of s 3A of the Home Building Act 1989 (NSW)) ("the HBA") of the Commercial strata development in Layton Street Camperdown known as "The Grace" (the "Property") and were thereby liable to the Appellant (pursuant to s 18C of the HBA) for the building defects found to exist in the property by the primary judge. 3. The learned judge below erred at law (at paragraph [67] of the judgment) in finding that even if the Respondents had been "Developers" of the Property they were not liable to the Appellant in damages (pursuant to the operation of s 18C of the HBA) for breach of the warranties implied by operation of s 18B(c) of the HBA for the "design defects" alleged by the Appellant because the builder "Beach Constructions Pty Ltd ("Beach") was not responsible for the relevant design that gave rise to these defects. 4. The learned judge erred at law for failing to find in respect of the "design defects" that: i) (consistently with The Owners Strata Plan No. 68372 v Allianz Australia Insurance Limited [2014] NSWSC 1807) a builder's liability for breach of the statutory warranties implied by operation of s 18B of the HBA is not dependent on whether the builder was responsible for the design of the defective works; and/or ii) even if the builder of the Property would not have been liable for the "design defect" pursuant to the operation of s 18B of the HBA because the builder was not responsible for the design that defence does not assist the Respondents in respect of a claim brought pursuant to s 18C of the HBA.
There are thus two aspects to the appeal from his Honour's decision: first, as to whether the primary judge drew the proper inference on the issue as to whether the Kings were parties to the construction contract with Beach, and therefore developers within the meaning of s 3A of the Home Building Act; and, second, whether (if the Kings are found to be developers) the Kings are liable for breach of statutory warranties for what the primary judge described as design defects.

[4]

Primary judge's reasons

The primary judge addressed the Owners Corporation's primary case on this issue from [34] of his reasons, noting that there were three steps to that primary case: first, that an inference should be drawn that the contract with which the site meeting minutes are concerned is the contract that was signed and initialled by Mr Hills; second that it should be concluded from the site meeting minutes that the Kings signed that contract; and, third, that by signing the contract the Kings became personally bound by it.
His Honour was prepared to accept the first of those matters (see primary judgment at [35]). His Honour noted that the minutes described the preparation of the contract of the sending of that contract to Beach to be signed; and that the procedure described in the minutes was consistent with the procedure set out in cl 6.2 of AS 2124 (see [55] above) where a Formal Instrument of Agreement was required. His Honour accepted the evidence of Mr Hills that he had executed two copies of the contract which included a Formal Instrument of Agreement and observed that it was difficult to imagine that what was being discussed at the meetings was some other contract.
The primary judge did not accept the second of those matters (see primary judgment at [36]), namely that the evidence established that the Kings had signed the contract executed by Mr Hills.
As to the third of those matters (namely, whether, by signing the contract, the Kings became personally bound by it), this seems to have been addressed briefly (albeit in the context of the sufficiency of the evidence of the site meeting minutes) at [40], when his Honour said that "… in my opinion, the minutes are not sufficient evidence to prove that the Kings actually did sign the contract in their own capacities" (my emphasis).
Turning back to the second of those three matters, at [37]-[38] the primary judge addressed a submission by the Owners Corporation that the minutes of the site meetings were business records admissible as evidence of the facts asserted in them under s 69 of the Evidence Act 1995 (NSW). His Honour said that the critical representations fell into two categories: first, those concerned with the progress in the signing of the contract by the Kings and, in particular, the representation in the minutes of the meeting held on 11 July 2000 that "the contract had been executed by [the Kings]"; and, second, those concerned with the need to provide a copy of the signed contract to Mr Stringer (the quantity surveyor appointed by the Bank) so that he could complete his initial assessment for the Bank to allow funding to commence (referring, by way of example, to statements recorded in the site meeting minutes of 23 May 2000 and 11 July 2000).
The primary judge accepted (at [39]) that it might be inferred that both sets of representations were made by the representatives of Bonus who attended the meetings, but went on to say: However, it is far from clear that any of the representatives from Bonus had or could reasonably be supposed to have had personal knowledge of any of the facts asserted in the minutes concerning execution of the contract by the Kings or the requirements of the Commonwealth Bank before it would advance money under the facility. There is no reason to believe that anyone from Bonus saw the Kings execute the contract. There is no suggestion that anyone from Bonus saw a copy of the executed contract. Similarly, there is no reason to believe that anyone from Bonus had personal knowledge of the circumstances under which the Commonwealth Bank was or was not willing to advance money.
Pausing there, the Owners Corporation argues that whether or not any Bonus representative had or could reasonably be supposed to have personal knowledge of the matters to which his Honour referred in the passage extracted above (which is taken from [39] of the reasons) is irrelevant because this does not exclude the documents being taken into account for the purpose of drawing inferences from the fact that those statements were made (see AT 19.40ff) - in other words, while lack of personal knowledge of those matters might go to the weight of the evidence it does not exclude the drawing of the inference that the Owners Corporation said ought be drawn therefrom. It is submitted that his Honour has not taken into account the available inference that the information as to the signing of the contract by the Kings came from Bonus' clients themselves. Emphasis is placed on the fact that the minutes were sent to the Kings and they did not correct the statements recorded therein.
At [40], the primary judge said that, even if the conclusions (at [39]) were wrong, in his opinion the minutes were not sufficient evidence to prove that the Kings actually did sign the contract in their own capacities. His Honour accepted that if the minutes were admissible as evidence of the facts stated in them they provided "some" evidence that the Kings executed the contract "since that is what they say", but continued: However, the strength of that evidence is undermined by the fact that it is not clear from the minutes precisely who made the relevant statements to the meetings and the basis on which they did so. Predictions in the minutes concerning when the contract would be prepared and distributed by Bonus, which were made by Bonus, were on occasions proved by subsequent events to be unreliable. Moreover, the minutes do not record that a signed copy of the contract was returned to Beach, as might have been expected if both copies had been signed by the Kings. Nor do the minutes record that Mr Stringer had received a signed copy, as might have been expected given what was said in the previous minutes concerning the significance of that matter.
His Honour noted (at [41]) that the minutes of the meeting on 18 July 2000 did record that Mr Stringer (the quantity surveyor) had attended the site that day and that an agreement was reached as to the procedure for future progress claims. His Honour accepted that this was some evidence that Mr Stringer had been provided with a signed copy of the contract (as was stated would happen in the earlier minutes) and that the absence of anything more in the minutes on the subject might be explained on the basis that once Mr Stringer had been provided with a copy of the signed contract it was no longer necessary to address the issue at the meetings. However, his Honour proceeded to say: However, it might equally be said that it was no longer necessary to address the issue at the meetings once Beach had returned the contracts to Bonus, but they continued to do so. Moreover, the fact that the minutes said nothing more about the contract could be explained by the fact that the bank realised that a contract was already in existence and nothing more needed to be done.
As to the statements extracted in the above passage, the Owners Corporation says that these were mere conjecture by the primary judge.
In relation to the reliance placed by the Owners Corporation on the fact that there was no evidence that the Kings had sought to correct the minutes of the meeting on 11 July 2000, the primary judge said that, equally, there was no evidence that the Kings read the minutes or, if they did read them, that by the time of the following meeting they thought it necessary to correct them (at [42]).
As to the submission by the Owners Corporation that statements in the minutes concerning the need to sign the contract in order for the Bank to provide funding were corroborated by the fact that King Furniture had made a progress payment of $285,071 to Beach on 15 June 2000, the primary judge said that this did not establish that the Bank had advanced no funds prior to 18 July 2000 and that it was equivocal "because it is equally consistent with the possibility that the funding provided by the bank did not cover the full project costs" (at [43]). (I interpose here to note that prior to the reference in the site meeting minutes to the construction contract being executed by the Kings and being sent to the Bank's quantity surveyor, the only evidence of construction payments being made appears to be by way of cheques drawn from King Furniture. The Owners Corporation argues that there is no basis to suggest that the Bank provided project funding based on something other than a fully concluded and documented building contract.)
In relation to the fact that the Kings were available to give evidence and did not do so, the primary judge adverted to the Jones v Dunkel inference that might be drawn therefrom (a reference to Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8), to the effect that the Kings' evidence would not have assisted their case, but said that in his opinion "the only inference that can reasonably be drawn from their failure to give evidence is that they have no recollection whether they signed the contract signed by Mr Hills or not and why King Furniture Australia Pty Ltd made the progress payment on 15 June 2000". His Honour considered that, given the relevant events occurred approximately 17 years ago, this was not surprising (see [44]).
As to the other consideration relied upon by the Owners Corporation (that it was inconceivable that the parties would have proceeded with the project absent a signed contract), the primary judge considered that this did not take the matter any further (at [45]). His Honour said that a contract came into existence at the time that Bonus accepted the tender; that the acceptance clearly set out the terms of the contract; that the General Conditions of Contract (AS 2124) specifically catered for the possibility that there would not be a Formal Instrument of Agreement and the Conditions of Tender did not state one way or another whether a Formal Instrument of Agreement was necessary; and that, following acceptance of the tender, work started on the project ("consistent with a contract coming into existence at that time"). His Honour considered that there was no need to sign a formal contract that included a Formal Instrument of Agreement (the Owners Corporation not having pointed to any differences of substance, other than the addition of the Kings as parties, between the contract constituted by acceptance of the tender and the contract signed by Mr Hills).
The primary judge also pointed (as a matter against the evidence relied upon by the Owners Corporation) to the fact that no contract signed by the Kings had been found (at [46]). His Honour accepted that the explanation could be that the copies had been lost (which he considered was to some extent supported by the fact that the executed Development Agreement had been lost), but thought it unlikely that both copies of the contract had been lost (noting that two copies of the contract signed by Beach were in evidence and that no one appeared to have paid close attention to where those contracts had come from (although it was suggested that one copy came from discovery by the Kings and another from Beach) (at [46])). His Honour said: … it is difficult to understand why the Kings would have made a copy of the contract before they signed it; and if the copy they discovered was taken from the original, that is strong evidence that the copies that were sent to them were never executed.
At [47], his Honour said that the parties' subsequent conduct was also relevant to the question of whether the Kings signed the contract and were parties to it. His Honour considered that that conduct was consistent with the contracting party being Meridian and not the Kings - referring to the facts that from the time it was said that the Kings signed the contract Beach had issued invoices addressed to Meridian; that Bonus issued certificates of payment naming Meridian as "The Proprietor" and the invoices were paid by Meridian from an account in its name; and that on 16 November 2001 the occupation certificate was issued in the name of Meridian.

[5]

Site meeting minutes

It is convenient here to examine in some detail the statements recorded in the site meeting minutes, on which the Owners Corporation places weight but to which it does not appear that the primary judge was taken in any great detail at the hearing at first instance.
At the hearing, objection was taken for the Kings to admission of the site meeting minutes (see T 80.42ff) to the extent that they were relied on as business records to prove a representation (on the basis that they did not meet the requirements of s 69 of the Evidence Act), but the primary judge was told that "We are content for them to go in as records or as minutes that record somebody's understanding of the facts that are recorded, but they don't demonstrate anything beyond that" (T 81.7-9). At T 81.45, his Honour gave the ruling that he would admit the minutes and what he would make of them, his Honour would deal with in his final judgment - I read that as, in effect, a ruling that the minutes were admitted subject to weight (to be dealt with as necessary in the final reasons). As it was, there was no limitation placed on the admission of the site meeting minutes into evidence but (as set out above) the primary judge made various observations as to the reliance that could be placed upon them.
As noted earlier, following the initial acceptance of the tender there were regular site meetings attended initially by representatives from Bonus, Beach and Lonsdale (the project manager). The minutes of these site minutes were prepared by the project manager, Michael Kirkby (from Lonsdale), and then distributed to various recipients. The minutes generally followed the same format, with items updated or removed (or added) as the project proceeded; and with entries in the final column noting responsibility for particular items or if they were to be noted. An obvious inference is that items removed from the minutes had been satisfactorily dealt with (one way or another) or were no longer considered relevant by the time they were removed. As and from site meeting No 5, the minutes record distribution of copies thereof to the Kings.
Relevantly, for a number of the site meetings there were in evidence duplicate copies of the site meeting minutes, one or more of which had been annotated in handwriting. It may be inferred that the annotations were made by one or other of the representatives of Beach who had been at those meetings (since the only copies of the minutes were produced by Beach (see AT 10.40) and since the only identification of handwriting on any one of the copies was that of Mr Fredericks (in respect of the minutes of 20 June 2000 - see T 40.33)). It is also relevant to note that it appears from the text of at least two of the copy minutes that the comment typed in the minutes as circulated relates to something communicated after the site meeting in question (see for example item 5.27 in the minutes of site meeting No 5 (18 April 2000)).
The handwritten annotations must logically have been placed on particular copies of the minutes after receipt by the particular recipient. At least in relation to the handwritten annotations it cannot be inferred (and was not, as I understand it, contended), that other meeting attendees or recipients of the minutes had seen or approved those handwritten annotations (though at subsequent site meetings the subject matter of those comments may well have been discussed and then recorded in the minutes of those meetings).
The relevant items for present purposes are those appearing under the heading "Administration" in each of the site meeting minutes.

[12]

Site Meeting No 4 - 11 April 2000

Site meeting No 4 took place on 11 April 2000. Again, Mr Bonus was not in attendance at that meeting but was recorded on the distribution list for the minutes. Three copies of the minutes for this meeting were in evidence (two annotated in handwriting) and there were handwritten notes of the meeting. The copies each bear a fax imprint showing that they were sent by Lonsdale on 13 April 2000. The minutes include the following items: 4.21 A final agreed letter of offer has been issued. Bonus to prepare the contract documents for executing. Bonus 14/4/00 4.22 John Stringer will attend site meetings on the last Tuesday of each month with a view to assessing the progress of works for progress claims. Beach should have their claim prepared in a draft form for this meeting. Given the progress with the contract finalisation as noted above, the meeting to be held on 1 May should be attended by John Stringer. Bonus to arrange for his attendance. Bonus 24/4/00 4.23 As soon as the contract documents are in place John Stringer should be issued with a copy to enable him to provide his initial assessment to the bank to allow funding to commence. These documents should be issued to him as soon as possible. Bonus 17/4/00 4.24 Beach confirmed that Bonus had issued the Progress Claim Certificate for the recent claim. Beach should present this claim to the client for payment. Beach

[14]

Site Meeting No 5 - 18 April 2000

Site meeting No 5 took place on 18 April 2000. The distribution list for the minutes includes for the first time "Meridian Estates" and "David & Gwen King" (seemingly as one recipient, with one fax number there recorded). There were three copies of these minutes in evidence, two bearing handwritten annotations. The fax imprint shows that they were sent from Bonus to Beach. The minutes include the following items: 5.27 Bonus to prepare the contract documents for executing. Bonus Later: Awaiting confirmation from lawyers as to Principal in the contract. 14.04.00 5.28 John Stringer will attend site meetings on the last Tuesday of each month with a view to assessing the progress of works for progress claims. Beach should have their claim prepared in a draft form for issue prior to this meeting. Given the progress with the contract finalisation as noted above, the meeting to be held on 2 May should be attended by John Stringer. Bonus to arrange for his attendance, subject to submission of claim from Beach. Bonus 24.04.00 5.29 As soon as the contract documents are in place John Stringer should be issued with a copy to enable him to provide his initial assessment to the bank to allow funding to commence. These documents should be issued to him as soon as possible. Bonus 17.04.00

[15]

Of relevance to note is that the entry commencing "Later" in item 5.27 is typewritten. It appears therefore to have been an addition made before distribution of the minutes but after the site meeting. (One might infer from the word "later" that this was to indicate that this reflected the understanding of the minute-taker gleaned from some communication after the site meeting.)
On one of the annotated copies there is an entry (in block lettered handwriting similar to that on the contract documents) noting the date the claim certificate was issued (1/5), the date it was signed and returned (2/5) and "NOTE: DATED 20/4". There is a tick against the first sentence in item 5.27.
On the second of the annotated copies there is a tick against item 5.27 and the words against the first sentence of that item "AWAIT". Against item 5.28, there are a number of entries: "RANG MICK K"; "GB HAS ALL INFO FOR MEETING TUESDAY"; "CONTACT FOR SIGNING!"; "+STRINGER WILL BE THERE TOO"; and "STRINGER CANCELLED" (this last entry suggesting that the entries were cumulative). There is also an entry against this item, "CLAIM SUBMITTED 20/4". Against item 5.29 are the words "AWAIT. 26/4".
There was also in evidence a handwritten note of site meeting No 5. It appears to relate only to building issues. In particular, there is no reference to the arrangements for contract execution (nor is there any such reference in handwritten notes of later meetings).
The Owners Corporation relies on the statement recorded in the typewritten minutes at item 5.27 ("Awaiting confirmation …") as an admission made by the Kings, through their agent Mr Bonus, to Mr Fredericks shortly before the meeting of 18 April 2000. The Owners Corporation notes that Mr Fredericks, in his affidavit (at [22]) gave evidence that: I asked Mr Bonus on a regular basis, usually at site meetings, when the contract would be provided. One such discussion, held at a site meeting, was to the following effect: Me: When are you going to get the contract to us? Bonus: I'm preparing it but the Kings are waiting on advice as to whether they should be a party to the contract so we will get it to you as soon as they come back to us.
The Owners Corporation contends that the statement attributed to Mr Bonus should have been admitted as to the truth of the statement pursuant to s 87 of the Evidence Act. The primary judge's ruling, subject to any submissions by the parties, was to admit the words attributed to Mr Bonus starting "but the Kings…" as evidence of what was said and not as evidence of any asserted fact (T 12.26).
The Owners Corporation says that the evidence of Mr Fredericks as to what Mr Bonus told him in April 2000 about the delay in having the contract executed should have been admitted as to its truth, submitting that Mr Bonus had, at the very least, ostensible authority to make statements on behalf of the Kings as to when the contract was likely to be executed and why it had not been executed at that stage. Although Mr Bonus was not present at this meeting, it is clear from the minutes that this is a note of something occurring after the meeting ("Later"). The Owners Corporation places reliance on the fact that the minutes of these meetings were now being recorded as being distributed to the Kings, and not corrected by them, as establishing implied agency (see AT 9.49). Reference is also made in that context to the tender acceptance letter of 5 April 2000, to letters sent by Bonus to third parties "[o]n behalf of our client's [sic] David and Gwen King" in November 1998 and November 1999, and to the letter of 19 July 1999 to the Bank (which is expressed to be "[o]n behalf of David and Gwen King/Meridian Estates Pty Ltd").
The Owners Corporation also notes item 5.35 in these site meeting minutes, which records that: 5.35 Beach have reinsured the building on behalf of Meridian Estates/D&G King for a greater sum and at a lower rate. Beach to provide details for approval. Beach 02.05.00

[37]

Site Meeting No 16 - 11 July 2000

Site meeting No 16 was held on 11 July 2000. Mr Bonus did not attend the meeting. The distribution list is relevantly the same as before. The fax imprint shows the minutes were sent on 13 July 2000. There were two annotated copies in evidence. There was also a copy of the handwritten notes of the meeting. The minutes include the following: 16.26 It was confirmed at the meeting that the contract had been executed by David and Gwen King. Note 16.27 Bonus confirmed that one set of the executed contract documents was being sent to John Stringers [sic] office today to enable him to provide an initial assessment to the bank to allow debt funding to commence. Note 16.28 It was advise [sic] at the meeting that the minute 15.27 of last weeks [sic] meeting minutes turned out to be incorrect. The note in italics advising that information received after the meeting indicated that there were sufficient funds in the existing facility to pay the current claim was incorrect. Bonus to advise if the current claim can be paid for out of cash flow or the debt funding will be required to be initiated for this claim. Bonus 16.29 It was further noted that Beach were to complete the statutory declaration as requested by Bonus and forward that information with the progress certificate to Gwen King. Beach

[43]

Submissions on grounds 1 and 2

The issues raised on this aspect of the appeal are, in essence, what were the proper inferences that the primary judge should have drawn from the material before him. The Owners Corporation notes that this Court is in as good a position as the primary judge in this respect, and is required to make its own judgments on these issues. Certainly, this is not a case that turned on the credibility of the relevant witnesses (the witnesses giving oral evidence being confined to those from Beach - Mr Hills and Mr Fredericks).
While criticism is made (in ground of appeal 1) of various aspects of the primary judge's reasoning, broadly speaking the focus of oral submissions on the appeal was on the alleged error in the weighing of the inferences to be drawn from the sequence of events recorded in the site meeting minutes and contemporaneous documents in relation to the issue and execution of the contract documents. In particular, the Owners Corporation attaches significance to the statement in the 18 April 2000 minutes of site meeting No 5 (see from [99] above) to the effect that confirmation was awaited "from lawyers as to Principal in the contract" (this being at a time just before the commencement of the then new GST legislation on 1 July 2000); and the statements in the minutes linking the execution of contract documents to the commencement of Bank funding.
Although the written submissions focussed principally on the fact that the primary judge had refused to draw an adverse Jones v Dunkel inference with respect to the failure of the Kings to give evidence (and to a lesser extent, on the fact that his Honour did not draw such an inference as to the absence of evidence in the Kings' case from Mr Bonus - notwithstanding the service of an affidavit from him prior to the hearing), in oral submissions Mr Ashhurst argued that the drawing of such an inference was not essential to the appellant's case - rather, the inference that the Kings had signed the contracts in their personal capacities and were bound by the contracts was said to be overwhelming based on the history of the creation of the contracts. It is to that issue that I turn first.

[44]

Owners Corporation's submissions

The Owners Corporation argues that there is a strong logical progression in the evidence which supports the inference not only that the Kings signed the contract documents but that they did so in their personal capacities. That progression may be summarised as follows. First, the acceptance of the tender with the understanding that there would need to be negotiation of the General Conditions of Contract. Second, the consistent statements in the site meeting minutes as to: the issuance of the contract documents; the need to sort out issues in relation to the contract documents; that Bonus was to issue contract documents; the increasing urgency to issue the contract documents; and the need for the formal documents so as to allow the commencement of Bank funding. As already noted, emphasis is placed on the reference to delay caused by the need for confirmation from lawyers as to the Principal and on the fact that this was followed by the handwritten completion of contract details naming both the Kings and Meridian as the Principal. Reference is made to statements in the site meeting minutes as to the issue of the documents to Beach for signing; the execution of the documents by Beach; and the statements as to the provision of the documents to David King for signing, the execution of the documents by the Kings, and the provision of a copy to Mr Stringer "that day"; culminating in the statement by Bonus in its letter of 10 August 2000 to the Bank that the conditions precedent to the loan facility had been met and the commencement of the Bank funding.
The Owners Corporation argues that the above progression of events allows for two (or perhaps three) alternative scenarios: first, that Beach executed the two counterparts of the contract documents (naming the Kings and Meridian) to be provided to the Kings for execution and then to the Bank or its quantity surveyor to commence funding and that the Kings signed the documents as contemplated and the funding duly commenced (which it says is the most likely scenario); or, second that the documentation was prepared (and signed by Beach) with that in mind but the Kings did not execute the documents (or, perhaps, as a third scenario, that they did so only as directors of Meridian).
The Owners Corporation argues that the statements recorded in the minutes of site meeting No 16 (that the contracts had been executed by the Kings and that a copy would be provided to Mr Stringer "that day") and in the Bonus letter to the Bank of 10 August 2000 (that the conditions precedent to the loan facility had been met) are consistent with the preceding history recorded in the site meeting minutes of the need for an executed copy of the construction contract for funding to commence (and inconsistent with the suggestion that the parties simply abandoned the attempt to have the formal instrument of contract executed - compare [41] of the primary judgment). (The Owners Corporation argues that such a conclusion is also inconsistent with the Kings' admission (in their answer to particulars of the defence) that the date of the building contract was 19 May 2000.)
The Owners Corporation submits that the primary judge's reasoning did not take into account that the minutes recorded Mr Bonus acting as the agent for the Kings in negotiating the changes to the contract signed by Mr Hills. It is submitted that the inference should be drawn from the evidence that Mr Bonus was authorised by the Kings to make those changes. It is further submitted that in those circumstances even if the reference in the site meeting minutes to the Kings signing the contracts is disregarded, there nevertheless would have been a contract created by the service of the completed contract on the Kings (in accordance with their instructions) and the parties acting in accordance with the terms of that contract.
As to the absence of a signed copy of the contract, the Owners Corporation submits that, although relevant, this is not conclusive, having regard to the fact that the Bank's records were not in evidence, nor was a signed copy of the Development Agreement produced. The Owners Corporation argues that the primary judge placed too much importance on the Kings' failure to produce a copy of the signed contract in their discovery (it being submitted that it was clearly not in the Kings' interests to have done so, and noting that they were not available to answer any questions about their discovery).
As to the fact that the invoices and certificates issued by Bonus and Beach did not refer to the Kings personally, the Owners Corporation argues that this was not of itself sufficient to affect the clear inferences that were available from the contemporaneous documents referred to above and that, at best, these invoices demonstrated no more than the subjective understanding of the accounts person who issued them.

[45]

Kings' submissions

The Kings argue that the primary judge was correct to reject the proposition that it should be inferred that they signed the formal instrument. They argue that even if such an inference were to be drawn, it should not be inferred that they signed in their personal capacities, thereby novating or varying the existing contract between Meridian and Beach that his Honour found came into existence on acceptance of the tender (see primary judgment at [45]).
Insofar as the Owners Corporation seeks to raise, in the alternative, an argument not pleaded below to the effect that a contract to which the Kings personally were parties came into existence by reason of the service on them of contract documents signed by the builder and "the building works proceeding" (ground of appeal 1(vii)), the Kings say this should be rejected.
Emphasis is placed by the Kings on the finding (at [45]) that a contract came into existence at the time "Bonus, on behalf of Meridian, accepted Beach's tender", noting that this finding is not challenged on appeal (the Owners Corporation's response to this is that it is not necessary to challenge this finding as it is not an essential part of the reasoning on which its claim relies).
The Kings argue that the letter of acceptance of tender clearly sets out the terms of the contract that had been negotiated between Meridian and Beach and (as his Honour recognised at [45]) the General Conditions (AS 2124) specifically catered for the possibility that there would not be a Formal Instrument of Agreement.
It is submitted by the Kings that the finding that a contract was already on foot by the time that the contract documents were proffered for execution significantly undermines the argument that the parties were determined to put a signed agreement in place; noting that there was no evidence of the terms on which the Bank agreed to fund the development nor of the documents that it required in order to allow funds to be drawn.
The Kings argue that it is mere speculation to suggest that the Bank's preparedness to advance funds indicates that Mr Stringer was provided with a copy of the building contract executed by the Kings. They say that the argument of the Owners Corporation requires the Court to infer, based on that speculation, that had the contract been executed it was done so with the intention to novate or vary the existing contract by replacing it with one to which the respondents were parties in their personal capacities.
The Kings point out that there is no indication in the evidence as to whether or not the "confirmation" to which reference was made in the site meeting minutes of 18 April 2000 was ever received (or, if it was received, as to its effect). They contend that it is reasonable to assume that a competent lawyer asked to advise whether or not the Kings should become parties to the building contract in their personal capacities would have advised against such a step - arguing that there is no apparent advantage to being a party to the contract and that there are significant disadvantages in so doing, including exposure to liability for defective work. It is submitted that there is no reason to infer that the Kings' names appeared on the contract by reason of the advice that may have been sought or obtained.
As to the reliance placed by the Owners Corporation on the particulars provided by the Kings to their defence, the Kings argue: first, that the letter in question was not in evidence before the primary judge (saying that had there been an application to tender the letter they may have sought to withdraw the so-called admission or called Mr Bonus to explain "that the date had no significance") and pointing out that there was no reference to this in the Owners Corporation's written or oral submissions at first instance; second, that the statement was not that "the construction contract was executed on or about 19 May 2000" but that "[o]n or about 19 May 2000, Meridian entered into a contract with Beach Constructions" and was expressly made on the limited basis that the parties to that contract were Meridian and Beach only; and, third, that the unchallenged finding by the primary judge was that a contract came into effect when Meridian accepted Beach's tender (well prior to 19 May 2000), noting that the Owners Corporation's case is that the contract was executed some time in July 2000 (well after 19 May 2000). It is submitted that, had the "admission" been before the Court at first instance it could not have been relied upon to establish that the Kings signed the contract.
As to the submission that a contract to which the Kings were parties came into existence when a revised contract was provided to the Kings and the building work proceeded, it is said that this was not pleaded and that there is no basis to conclude, from the parties' conduct, that the Kings were parties to the contract. The Kings point to the certification of progress payments and invoices issued to Meridian and say that the parties' conduct during the project is consistent with them proceeding on the understanding that the only principal was Meridian. (The Owners Corporation says that it is incorrect to say that the parties proceeded on the understanding that the principal was Meridian, pointing to the face of the contract signed by Mr Hills, which named the Principal as the Kings/Meridian.)
As to the submission that the primary judge placed too much reliance on the absence of a contract signed by the principal, the Kings argue that there is no proper foundation for the submission by the Owners Corporation that the Kings could be taken not to have produced a copy of the signed contract because it was not in their interests to do so. The Kings point to the observation by the primary judge that it is difficult to understand why the Kings would have made a copy of the contract before they signed it and submit that the fact that the copy they produced was not signed by them is strong evidence that the copies sent to them were never executed by them. In response to that submission, the Owners Corporation submit that "usual office procedures" may explain why the builder (Beach) made a copy of the then unsigned version of the contract (that the primary judge found Mr Hills had signed), arguing that working copies of the document would not have to be signed and pointing out that the sequence of events was not explored in the cross-examination of Mr Hills.
As to the submission by the Owners Corporation that the invoices and certificates issued in the name of Meridian are merely evidence of the subjective intention of the accounts person who prepared them, the Kings submit that this should be rejected, pointing to Mr Fredericks' oral evidence (to which I have referred earlier) that those documents were accurate. (Of course, against that is the obvious point that Mr Fredericks' evidence could itself only be as to his subjective understanding of who were the parties to the contract - and the loose usage of terminology in much of the documentation, to which I have pointed earlier.)
The Kings argue, in summary, that the proposition that (despite a contract coming into existence on the acceptance of Beach's tender), the parties subsequently agreed to novate or vary the contract to add the Kings as additional parties is unlikely. They argue that this would have defeated the purpose of engaging Meridian as developer; be contrary to the parties' conduct leading up to the formation of the contract by the acceptance of the tender; be contrary to the express prohibition requiring the prior written consent of Meridian; and be inconsistent with the manner in which the parties conducted themselves after the contract was entered into and throughout the project.

[48]

Kings' submissions

The Kings, in response, emphasise that the drawing of a Jones v Dunkel inference is not mandatory (irrespective of whether the witness in question is a party to the proceedings) and that the critical prerequisite before the inference may be drawn is the existence of evidence that needs to be refuted or explained by the party on whose behalf the witness could be expected to give evidence, referring to what was said by Glass JA in Payne v Parker [1976] 1 NSWLR 191 at 202: Unless, upon the evidence, the tribunal of fact is entitled to conclude that [the potential witness] probably would have knowledge, there would seem to be no basis for any adverse deduction from the failure to call him.
The Kings argue that the rule has no application if, for example, the failure to give evidence may be explained by loss of memory. (In reply, the Owners Corporation argue that loss of memory cannot be assumed in favour of the Kings and should have been the subject of evidence - there being no explanation proffered or evidence adduced by the Kings on this issue.) The Kings submit that it was plainly open to the primary judge to infer that the passage of time was the explanation for their failure to give evidence (noting that Mr Hills himself gave evidence to the effect that he had no recollection of signing the contract (see his affidavit at [19]). (In this regard, the Owners Corporation argues that inferences (such as the inference that the explanation for the Kings' failure to give evidence was due to their lack of memory) must be based on admissible evidence and not mere conjecture or speculation. The Owners Corporation emphasises that the only evidence available to the Court on this issue was that the relevant events had occurred 17 years before the hearing. It is submitted that drawing the inference that the Kings did not give evidence because they could not recall events because of the effluxion of time, rather than because their evidence would not have supported their defence of not being parties to the contract, is speculation rather than a permissible inference.)
The Kings point to the recognition by the majority in West v Government Insurance Office (NSW) (Stephen, Mason, Aickin and Wilson JJ) that the delay of over ten years between accident and trial "would surely have grossly affected the recollection of [the] witnesses of such a long-past event, and this may in a sense explain their absence" (at 69).
In reply, the Owners Corporation points to the fact that, in West v Government Insurance Office (NSW) (at 65), the majority found that the evidence in that case was insufficient to support the drawing of any inferences and (at 69) that in those circumstances a Jones v Dunkel inference that might otherwise be available due to the fact that witnesses were not called could not remedy this deficiency in the plaintiff's evidence. The Owners Corporation notes that the passage cited by the Kings is clearly obiter and does not constitute a statement by the High Court that it is reasonable to assume that a party has not been called to give evidence because his or her memory was impaired by the effluxion of time if the events occurred many years before the hearing. Reference is made to RHG Mortgage Ltd v lanni [2015] NSWCA 56 where McColl JA (with whom Sackville AJA agreed) found to the same effect as Murphy J in West v Government Insurance Office (NSW), citing his Honour's judgment on this point as authority (at [75]).
The Kings argue that, in any event, an expectation that they would give evidence addressing the existence or otherwise of a signed formal instrument did not arise because the evidence led by the Owners Corporation in the Court below did not rise to the level of establishing that the contract had been signed so as to require the Kings to refute or explain it.
In this context, the Kings also refer to cl 48 of the General Conditions of Contract (incorporated into the contract formed by the acceptance of Beach's tender) and argue that the Owners Corporation does not explain how the evidence establishes that, prior to the parties' entry into the later, four-party contract, Meridian as principal gave its consent in writing to the varying, discharge or release of the obligations that had by then accrued under the original contract (referring to Fightvision Pty Ltd v Onisforou (1999) 47 NSWLR 473; [1999] NSWCA 323 - see AT 73). It is submitted that the requirement for prior consent excludes an argument that merely signing the formal instrument constituted giving the necessary consent.
In oral submissions, the argument put in relation to cl 48 was that a purported contract could have no effect because it would be in breach of cl 48 (AT 73). (There was no notice of contention to that effect but it was submitted that one was not necessary.) However, ultimately what was said for the Kings in this regard was that at first instance the argument that was put in relation to cl 48 was that this difficulty supported the proposition that the parties did not intend to replace the existing contract (referring to [36] of the respondents' submissions and [21] of the appellant's submissions in reply).
In response to the cl 48 argument, the Owners Corporation maintained its argument that there were two distinct and different contracts: the contract for the construction of the display unit (entered into in May 1999) and the contract for the residential building work for the rest of the building (which it refers to by its date of 19 May 2000). The Owners Corporation argues that if the latter was executed by the Kings with the Principal being identified as "David and Gwen King/Meridian Estates P/L ACN 003 922 012", then the issue of amendment or novation does not arise. The Owners Corporation argues that to the extent that a contract was already created when Meridian accepted the tender from Beach (as the Kings contend and as the primary judge found) then that acceptance must be read in light of the circumstance that cl 8(4) of the Development Agreement authorised Meridian to "enter into a building contract on behalf of the Owner with a licensed builder". Emphasis is placed on the documents (including the site meeting minutes) referred to above that reveal that the parties expected and intended formal contract documents to be executed. It is further submitted that the argument (that the building contract was limited to the acceptance of the tender) is inconsistent with Meridian's cross-claim, in which rectification of the contract was sought (and the admission in the Kings' particulars that the date of the contract was "19 May 2000").
As to the Jones v Dunkel inferences that the Owners Corporation submits should have been drawn, the Kings say that such an inference based on their failure to give evidence would not have filled the gap in the Owners Corporation's case because, to discharge its onus, the Owners Corporation required evidence to the effect that they not only signed the contract but thereby indicated an intention to be bound by its terms in their personal capacities.
As to the complaint by the Owners Corporation that the primary judge did not draw an adverse inference from Mr Bonus not being called as a witness, the Kings again emphasise that Mr Bonus did not make the critical statements recorded in the minutes about the contract having been executed and that there was no evidence to identify who made them or on what basis they were made. It is further submitted that the handwritten annotations on the minutes by Beach cast doubt on their accuracy. (In this regard, the Owners Corporation says it does not rely upon the failure of Mr Bonus to give evidence to prove that the Kings executed the contract, but does say that the lack of his evidence makes it easier for the inference to be drawn, from the information conveyed by the Bonus representatives at the meeting of 11 July 2000, that the contract had been signed by the Kings.)

[49]

(iii) Factors for and against drawing inferences that the Kings were personally parties to the contract

At the hearing of the appeal, both parties handed up schedules of evidence said to be relevant for and/or against the drawing of an inference that the Kings executed the contract and did so (in their personal capacities). Those may be summarised as follows.
The Owners Corporation pointed to the following as matters being in favour of such an inference. It argues that there was no other plausible alternative building contract than that naming the Kings as parties (this, however, requires one to put aside the contract that the primary judge found had come into existence on acceptance of the tender). It points to the evidence that at Bonus' request, Beach had executed and returned two copies of the subject contract in accordance with the process described in cl 6.2 of AS 2124, and to the evidence of Mr Fredericks that in April 2000 Mr Bonus informed him that the Kings were waiting on advice as to whether they should be a party to the contract (noting the similar statement recorded in the minutes of site meeting No 5).
Next, the Owners Corporation points to the correspondence between Bonus and the Bank indicating that the Bank might have to approve the terms of the form of the final building contract before funding could commence; and the minutes of site meetings (Nos 2-15) which link execution of the contract with the commencement of funding; as well as the minutes of site meetings (Nos 13, 15 and 16) recording statements that the contracts had been forwarded to the Kings, that the executed contracts would be collected from the Kings, that the Kings had executed the contracts and that a copy of the executed contracts was being sent to John Stringer; followed by the lack of any further reference (following site meeting No 16) to the need to execute the contracts or to provide a copy to Mr Stringer. Reference is also made to the statement in the minutes for site meeting No 17 recording Mr Stringer as "reaching agreement for the procedure for future payment claims" and to the Bank being asked to authorise the payment for earlier payment claims paid by Meridian or the Kings.
Finally, the Owners Corporation places weight on the fact that the Kings are described in the minutes as parties to whom the minutes should be distributed and there is no evidence of them seeking to correct the statements made in the minutes for site meetings Nos 15 and 16; and on the failure of the Kings to give evidence or to call Mr Bonus to give evidence about the relevant events.
As to the factors against the drawing of such an inference, the Owners Corporation accepts that the following are relevant matters to take into account: that no copy of the contract signed by the Kings was ever produced; that the "acceptance of the tender" would have provided all the necessary terms for a building contract to have been concluded if that was the intention of the parties; that there was no evidence of the contract signed by the Kings being sent to Beach; and that the invoices served by Beach continued to be addressed to Meridian even after the time at which the Owners Corporation says it should be inferred that the Kings executed the contract.
To the above matters, the Kings add the following as facts weighing against the inference that they executed the contract in their personal capacities.
First, the Kings refer to matters relating to the application for development consent and entry into the Development Agreement: namely, that Meridian applied for and obtained development consent in its name to develop the property (and subsequently obtained a construction certificate and occupation certificate on the same basis); and that Meridian and the Kings entered into the Development Agreement by which the Kings appointed Meridian to develop the property and expressly authorised Meridian to enter into a contract with a licensed builder.
Second, the Kings rely upon the contractual arrangements prior to issue of the tender documents: namely that Meridian alone entered into the written contract with Beach to build the display unit; that Meridian retained Bonus to act as development and project manager (referring to the footer on the Bonus Consulting fee proposal and the invoices from Bonus Consulting - see, for example, the invoice of 1 September 2000).
Third, the Kings also place weight on the tender process: namely, that Bonus issued tender documents for the construction of the balance of the project naming Meridian as the sole principal; that Beach submitted a tender naming Meridian as sole principal; and that Bonus accepted Beach's tender expressly "on behalf of the principal, Meridian Estates Pty Ltd"; and that the AS 2124 standard terms included in the tender documents were not marked so as to indicate that a formal instrument of agreement was required.
Fourth, the Kings point to the timing of the first site meeting on 23 February 2000 and commencement of the contract works on or about 26 February 2000; the fact that between February 2000 and the end of June 2000, Beach issued four progress claims and received four certificates of payment (those certificates of payment specifically providing that they were in respect of a contract between Meridian as proprietor and Beach as contractor and making no reference to the Kings as parties). The Kings also refer in this regard to the fact that the total amount certified as at 30 June 2000 was $745,512 (out of a final adjusted contract sum of $10,354,925).
Next, the Kings point to the chronology in relation to the issue of the contract documents: that a set of contract documents was sent to Beach on or about 22 May 2000; that on 19 June 2000 (at about the time that Beach signed and returned the contract documents to Bonus), Beach arranged Contract Works and Third Party Liability insurance naming only Meridian as the interested party; that one copy of the minutes of the site meeting of 11 July 2000 included a handwritten annotation "HAVE NOT REC'D SIGN COPY"; and another copy had the word "NOTED" against that item and against the next item the words, "COPY NOT REC'D BY BC"; and that there is no evidence of a signed copy of the contract having been returned to Beach or to Mr Stringer.
The Kings note that the Bank provided a facility to Meridian under terms dated 15 October 1999 for the purposes of the development and provided funding pursuant to that facility (although I interpose to note that this document or any terms to this effect do not appear in the evidence). They point to the fact that there was no evidence of anyone having ever seen the formal instrument of agreement or any other contractual document bearing the signature of either of the Kings or any company seal; that the contract documents that are in evidence are copy documents bearing the signatures and initials of representatives of Beach only; and that one set of the copy contract documents in evidence came from the Kings' discovery.
Finally, as to the subsequent conduct of the parties, the Kings emphasise that: throughout the project Bonus, as superintendent, certified progress payments expressly pursuant to a contract between Meridian as principal and Beach as contractor; from 8 August 2000, Beach submitted tax invoices to Meridian for the amounts certified by Bonus; on 30 October 2001, Beach wrote to Mr Bonus informing him, pursuant to cl 35 of the contract, that Beach had reached practical completion for the project; and on 12 November 2001 Bonus responded by issuing a Certificate of Practical Completion that certified that matter expressly pursuant to the contract between Meridian as principal and Beach as contractor.

[50]

Determination as to grounds 1 and 2

Leaving aside, for the moment, any adverse Jones v Dunkel inference that might have been drawn by reference to the fact that neither the Kings nor Mr Bonus gave evidence, the chronology of events following the acceptance of Beach's tender points overwhelmingly in my opinion to the Kings having executed the formal contract documents that were issued by Bonus and that had been signed by Mr Hills on behalf of Beach; and to them having returned one or both sets of those documents either to Bonus (for submission in due course to the quantity surveyor) or to the Bank in order to enable the Bank funding to commence.
The increasing note of urgency in the minutes relating to the issue and execution of the contract documents and the provision of those documents to the quantity surveyor, coupled with the coincidence in timing between the recording of entries to the effect that the contract documents had been executed by the Kings and were to be picked up from the Kings that day, on the one hand, and the cessation of any further reference in the minutes to the need for the contract documents to be executed and provided to the quantity surveyor makes such an inference by far the most likely (indeed, I would describe it as irresistible).
The proposition that, after months of entries in the minutes in relation to the execution of the documents (linked as they were to the commencement of the Bank funding), the parties would have decided not to progress the execution of a formal contract (for whatever reason) without recording this in the minutes seems to me to be highly unlikely and not consistent with the manner in which the minutes recorded changes and updates in minuted items from meeting to meeting.
Accepting that the site meeting minutes were not admitted for the truth of the facts asserted in them, they nevertheless may be relied upon as evidence of the understanding of the participants at the relevant site meetings as to the matters there dealt with (bearing in mind that where matters were either incorrectly stated in the minutes or had predicted things that did not come to pass there were corrections made to those matters in subsequent minutes). Various matters recorded in the minutes (as apparent from the chronology I have earlier set out against relevant extracts from the minutes) are consistent with the contemporaneous documents that are in evidence.
Bonus (and by this I include the various representatives of Bonus who attended site meetings from time to time) was acting on behalf of the Kings in relation to the provision of architectural services and, through its Bonus Consulting division, was acting on behalf of Meridian. In both capacities instructions must presumably have been taken from the Kings. Thus it may readily be inferred that when information was conveyed to participants at site meetings by representatives of Bonus as to the position of Bonus' client(s), that was on the instructions of the Kings (whether on their own behalf or on behalf of Meridian).
The inference that minutes of site meetings from and including that of site meeting No 5 were distributed to the Kings is readily available from the distribution list noted on the minutes. The inference that the Kings, whether in their own interests or as directors of Meridian, would have read the minutes and corrected matters relating to them that were incorrect is also one that is readily available.
The matters relied upon by the primary judge as tending against the conclusion that the Kings executed the contract do not, in my respectful opinion, outweigh the conclusion to be drawn from the progression of events recorded in the minutes.
In particular, the fact that no copy signed by the Kings was in evidence does not assist the Kings, having regard to the absence in evidence of other documents that it is common ground were issued, such as the original 21 February 2000 letter of acceptance of tender and the Development Agreement between Meridian and the Kings. The latter, in particular, indicates that the Kings' recordkeeping was not complete. As to the fact that the Kings produced a copy signed by Mr Hills but not one signed by themselves (a matter that the primary judge considered significant), in the absence of explanation from the Kings themselves I do not consider that much weight can be placed on this. It may be that copies were made of documents executed by the Kings as well but that, by happenstance or otherwise, this was the only copy that was retained. As to why a copy would be made only of the document signed by Mr Hills, there may be various explanations - including if this was a copy made for submission to lawyers for advice prior to the signing of any document by the Kings (which I accept is no more than speculation but, with respect, this indicates that it is speculative to place weight on the fact that only a document signed by Mr Hills was produced on discovery by the Kings when their discovery was clearly incomplete in other respects).
Nothing can be taken from the lack of production by the Bank of a copy signed by the Kings (since there were no Bank records produced and it may well be that the copy was produced to the quantity surveyor not the Bank in any event). Nor can anything be taken from the lack of production of such a copy by Beach (for the reason that there is no record of an executed copy having been returned to Beach).
As to the statements by the primary judge (at [39]) there was no evidence that the Bonus representatives at the relevant meeting "saw the Kings execute the contract", as the Owners Corporation point out, inferences from evidence are not unavailable simply because some evidence that is relied upon for the drawing of that inference is itself a hearsay statement. Reference was made to the principles articulated by the High Court in Bradshaw v McEwans Pty Ltd (1951) 217 ALR 1 at 5, namely that "where direct proof is not available it is enough [if] the circumstances appearing in the evidence give rise to a reasonable and definite inference: they must do more than give rise to conflicting inferences of equal degrees of probability so that the choice between them is a mere matter of conjecture" (and see also Holloway v McFeeters (1956) 94 CLR 470; [1956] HCA 25 at 480-481 per Williams, Webb and Taylor JJ). Reference is also made to what was said by the Victorian Court of Appeal in Masters Home Improvement Australia Pty Ltd v North East Solutions Pty Ltd [2017] VSCA 88: The principles, relating to the drawing of inferences in civil cases, are well established. First, any inference must be based on facts established by admissible evidence. Secondly, the process of reasoning must constitute a valid inference, as distinct from speculation or guesswork. Thirdly, and importantly, where the inference is drawn in favour of the party which bears the burden of proof in the case, the conclusion must be 'the more probable inference' from those facts. In other words, the inference drawn by the judge must be reasonably considered to have a greater degree of likelihood than any competing inference. Fourthly, in determining whether an inference is to be drawn as a matter of probability, the tribunal of fact is not required to consider each primary fact, established by the evidence, in isolation. Rather, the Court considers the totality of those facts together, giving effect to their united and combined force. [citations omitted]
I would thus infer that the Kings did sign the contract documents, which named them and Meridian as Principal to the contract ("David & Gwen King/Meridian Estates P/L"). As to the significance of the conclusion that it should be inferred that the Kings did sign the Formal Instrument of Agreement, that raises the question as to whether it should be inferred that they did so in their personal capacities or only as directors of Meridian.
The first point to note in this regard is that there was a clear addition of their names on the contract documents (whereas the initial tender documents named only Meridian). One must infer that this was intentional. The use of the oblique "/" between the two names might have been intended to indicate an alternative (but this would not make sense in the naming of a party to the contract) or it may be taken to indicate that the Kings were additional parties to Meridian as principals to the contract.
In the course of argument, I noted the decision of Giles J, as his Honour then was, in Clark Equipment Credit of Australia Ltd v Kiyose Holdings Pty Ltd (1989) 21 NSWLR 160 ("Clark Equipment"), which was applied by this Court in SAS Realty Developments Pty Ltd v Kerr [2013] NSWCA 56.
In Clark Equipment, Giles J, having considered what was said in National Commercial Banking Corporation of Australia Ltd v Cheung (1983) 1 ACLC 1326; NEC Information Systems Australia Pty Limited v Linton (1985) NSW ConvR 55-240 and Scottish Amicable Life Assurance Society v Reg Austin Insurances Pty Ltd (1985) 9 ACLR 909, concluded (at 174-175), that the proper approach in determining whether a signatory has assented to be personally bound is to ascertain the objective (not subjective) intention as to that issue, having regard to the construction of the document as a whole and the surrounding circumstances (to the extent to which evidence of the latter is permissible); the inquiry not being limited to consideration of the signature and its qualification, if any. There, his Honour declined to find an intention that the directors were personally bound, having regard to the form of the signing clause (which stated that one person was signing for and on behalf of the company and the other as witness) in circumstances where: the same form of words had been used for a person who no one contended was personally bound; the addition of the common seal pointed to the directors having signed simply in that capacity; and the same form of words were used in a separate document where there was no provision for personal responsibility.
In the present case, there is of course no copy of the Formal Instrument of Agreement bearing the Kings' signature and, as they emphasised in the course of argument, it would be mere speculation to contemplate how their signatures were appended to the document. However, what is known is that the copies of the Formal Instrument of Agreement bearing Mr Hills' signature include the description of the Principal as "David & Gwen King/Meridian Estates P/L" and there is a dotted line with a small amount of space for the signing by the Principal. Further, it is clear that there was no formality attributed by the builder (Beach) to the signing of the documents - in the sense that there is no affixation of its common seal nor any statement that Mr Hills was signing as a director or for and on behalf of the company (but it can safely be inferred that he was signing in that capacity since there is no indication that he was to be personally bound).
In my view the description of the Principal in the manner inserted in handwriting in the document is a powerful indicator that the parties' objective intention was that each of the Kings, as well as Meridian, was to be bound by the contract documents. Had the insertion of their names been intended to indicate no more than that they were signing on behalf of Meridian (something clearly not thought necessary in the case of Beach) the wording could easily have made that clear. While the meaning to be attributed to the oblique between the Kings' names and that of Meridian might be open to debate, I consider that it reflects an objective intention that both the Kings (in their personal capacities) and Meridian were to be bound by the contract (not that this indicated alternative principals nor that it indicated that the Kings were signing simply as directors of the company).
That conclusion is supported by the evidence that at around this time Mr Bonus had informed Mr Fredericks that the Kings were seeking legal advice as to whether they should be named as the principal.
Pausing there, the Kings submitted that Mr Fredericks' recollection of events as recorded in his affidavit ought to be disregarded where it conflicts with the contents of the minutes (arguing that because Mr Bonus was not in attendance at site meeting No 5, Mr Fredericks could not have had a conversation with him). I note that Mr Fredericks' evidence was that the reference to "Bonus" in certain of the minutes he was taken to in cross-examination was a reference to the company, rather than to Mr Bonus personally (see T 40.36ff correcting [26]-[27] of his affidavit in that regard). His evidence was (T 39.45) that he "can remember nearly everything on the job", but he agreed (in answer to questions relating to site meeting No 5) that as to who said anything at the site meeting, he relied entirely on what was recorded in the minutes. However, as the reference in the minutes of site meeting No 5 to the Kings seeking legal advice was evidently added "Later", following the meeting, I do not consider that Mr Bonus' absence from site meeting No 5 casts doubt on Mr Fredericks' affidavit evidence of his conversation with Mr Bonus.
There is no evidence as to whether the Kings in fact sought any such legal advice - a matter that it might be expected they could have clarified had they given evidence - or what any such advice might have been. However, the information conveyed to Beach by Bonus was that such advice was being sought and in that context it should be inferred that the decision to include the Kings' names in the description of the principal was deliberate. There was certainly no evidence that the Kings had communicated to Beach that amendment was required to delete their names from that section of the contract documents before the documents would be executed.
Taking into account the reference in the site meeting minutes and in Mr Fredericks' evidence as to the cause of the delay in execution being that the Kings were seeking legal advice as to who was to be the principal to the contract, the most likely inference to be drawn from the addition of the Kings' names in the contract details and in the space for execution by the principal is that it was a deliberate decision by Bonus to add those details on receipt of instructions from the Kings that they were also to be named as parties to the contract.
What then of the reliance placed by the Kings on cl 48 of the contract conditions? There was no challenge to the finding by the primary judge (at [45]) that a contract came into existence on acceptance of the tender. I take the time that this occurred as being on or about 10 April 2000. I do not place weight on the contrary admission said to have been made by the Kings in their answers to particulars, not least because those answers were not in evidence before the primary judge.
However, that contract was one that clearly contemplated further negotiation as to the terms of the contract, and in that sense falls most likely into the third of the categories in Masters v Cameron (1954) 91 CLR 353; [1954] HCA 72, namely, as a contract that was to be binding but under which the parties contemplated that a further contract would be entered into which could add to, vary, supplement or supersede the first. That would include the possibility that the parties could agree, notwithstanding cl 48, to enter into a new contract that would introduce new parties to the contract.
In my opinion, the most likely inference is therefore that the Kings did sign the contract and that they did so on the basis that they were to be personally bound thereby.
That conclusion does not depend on the drawing of an adverse Jones v Dunkel inference from the Kings' failure to give evidence but it is certainly supported by the fact that they did not do so. I do not accept that the evidence adduced by the Owners Corporation was such that it did not call from evidence of the Kings to explain or refute it. The references in the evidence to the awaiting of confirmation as to who was to be the principal under the contract clearly called for explanation if the inference that such advice had been sought (and had been provided) was to be challenged by the Kings; as did the references in the minutes to execution of the contract by the Kings and to the requirements of the Bank in relation to the commencement of funding. I accept that the Kings may well have had limited recollection of events some time ago - but they chose not to give evidence of that explanation. As to the lack of evidence from Mr Bonus, it is not clear from the transcript that the primary judge was invited to draw any adverse inference therefrom, but it would also enable the inferences I have drawn more comfortably to be reached.
Thus I consider that ground of appeal 2 is made out and it is not necessary to determine each of the sub-grounds of ground of appeal 1. (If it were to have been necessary to have done the latter, I would have found that the following sub-grounds were made out: (i), (ii), (iii), (iv), (v), and (vi). This in effect follows from my reasoning above.)
As to sub-ground (vii), as I read it, the error there alleged does not go to making out ground of appeal 1 (that the primary judge erred in finding that the appellant had not discharged its onus in establishing that the respondents signed the underlying construction contract), but rather, articulates an alternative ground upon which the Owners Corporation says it could succeed, being what Mr Ashhurst described as an "Empirnall Holdings-type argument" (referring there to Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523). The argument is that even in the absence of a finding that the Kings executed the construction contracts, the evidence that Mr Hills had signed the contracts nominating the Kings personally as parties, and that the contracts had been provided to the Kings, was sufficient to establish the Kings' acceptance by conduct of the contract. The Kings argued that this was not pleaded below; and distinguished Empirnall Holdings on the basis that the current case is not one where a party (like Empirnall) took advantage of work having been done and then refused to pay because it had not signed the contract. In circumstances where I have found that the most likely inference is that the Kings did sign the contract, and given also that the Owners Corporation's oral submissions only briefly touched on this alternative ground of appeal, I do not consider it necessary here to determine it.
As to sub-ground (viii), the transcript makes clear (see T 12.11ff) that his Honour indicated a tentative ruling on the objection taken to the third sentence of Mr Fredericks' affidavit at [22], in respect of the words attributed to Mr Bonus (see from [104] above), and provided an opportunity for the parties to make submissions as to that tentative ruling. His Honour stated that "otherwise" the tentative ruling would become his final ruling. No submissions were made in respect of the tentative ruling, and his Honour was not asked to admit the statement attributed to Mr Bonus on a broader basis. In circumstances where it does not appear that the Owners Corporation sought to have the statement admitted pursuant to s 87 of the Evidence Act at trial, I would consider (if it were necessary to decide) that this sub-ground of appeal should not be allowed.

[52]

Relevant legislative provisions

At the relevant time, Part 2C of the Home Building Act (titled "Statutory warranties") provided as follows: 18A Time from when Part applies This Part applies to residential building work only to the extent that it is done or to be done under a contract made on or after the commencement of this section. 18B Warranties as to residential building work The following warranties by the holder of a licence, or a person required to hold a licence before entering into a contract, are implied in every contract to do residential building work: (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, (b) a warranty that all materials supplied by the holder or person will be good and suitable for the purpose for which they are used and that, unless otherwise stated in the contract, those materials will be new, (c) a warranty that the work will be done in accordance with, and will comply with, this or any other law, (d) a warranty that the work will be done with due diligence and within the time stipulated in the contract, or if no time is stipulated, within a reasonable time, (e) a warranty that, if the work consists of the construction of a dwelling, the making of alterations or additions or the repairing, renovation, decoration or protective treatment of a dwelling, the work will result, to the extent of the work conducted, in a dwelling that is reasonably fit for occupation as a dwelling, (f) a warranty that the work and any materials used in doing the work will be reasonably fit for the specified purpose or result, if the person for whom the work is done expressly makes known to the holder of the licence or person required to hold a licence, or another person with express or apparent authority to enter into or vary contractual arrangements on behalf of the holder or person, the particular purpose for which the work is required or the result that the owner desires the work to achieve, so as to show that the owner relies on the holder's or person's skill and judgment. 18C Warranties as to work by others A person who is the immediate successor in title to an owner-builder, a holder of a 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 licence and had done the work under a contract with that successor in title to do the work. 18D Extension of statutory warranties 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, except for work and materials in respect of which the person's predecessor has enforced the warranty. 18E Duration of warranties 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. 18F Defence In proceedings for a breach of a statutory warranty, it is a defence for the defendant to prove that the deficiencies of which the plaintiff complains arise from instructions given by the person for whom the work was done contrary to the advice in writing of the defendant or person who did the work. 18G Warranties may not be excluded A provision of an agreement or other instrument that purports to restrict or remove the rights of a person in respect of any statutory warranty is void.
Important for this aspect of the appeal is the reference in s 18C to "a developer who has done residential building work". At the relevant time, the definition of "residential building work" (in s 3 of the Home Building Act) was as follows: residential building work means any work involved in, or involved in co-ordinating or supervising any work involved in: (a) the construction of a dwelling, or (b) the making of alterations or additions to a dwelling, or (c) the repairing, renovation, decoration or protective treatment of a dwelling. • It includes specialist work done in connection with a dwelling and work concerned in installing a prescribed fixture or apparatus in a dwelling (or in adding to, altering or repairing any such installation). • It does not include work that is declared by the regulations to be excluded from this definition.
The version of the Home Building Regulation 1997 (NSW) in force at the relevant time provided, by cl 8, for the exclusion of certain work from the definition of "residential building work" for the purposes of the Home Building Act. By sub-cl 8(1)(f)(i), excluded from "residential building work" as defined was "the supervision only of residential building work … by a person registered as an architect under the Architects Act 1921".
Section 3A of the Home Building Act provided for the application of provisions of the Act to developers, as follows: (1) For the purposes 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 …
Together, the provisions outlined above inform the scope of the reference in s 18C to "a developer who has done residential building work". I will return in due course to the definition and application of this concept in the particular context of this appeal.
The statutory warranty scheme under the Home Building Act was subsequently modified by the 2011 Amendment Act, which sought to respond to what were described in the Second Reading Speech accompanying the corresponding bill as "recent unexpected court decisions, the outcomes of which risk the Act no longer working in practice the way it was intended to operate".
Clause 31 of Sch 1 to the 2011 Amendment Act inserts into what was then Sch 4 of the Home Building Act a new cl 107, providing that the amendments made by the amending Act do not extend to or otherwise affect any decision of a court in proceedings commenced in the court before the commencement of the amendment (whether the court's decision is made before or after that commencement). As the present proceedings were commenced in 2007, as adverted to earlier, the 2011 amendments do not apply.

[53]

Primary judge's reasons

The primary judge considered "the defects case" from [58] of his reasons. His Honour articulated the relevant issue as "whether the loss and damage claimed by the Owners Corporation in respect of a number of defects resulted from breaches of the statutory warranties implied by s 18B of the [Home Building Act]".
After setting out ss 18B and 18C, his Honour held (at [60]): Although s 18C does not expressly say so, it is implicit in the section that the notional contract is a contract for the carrying out of the same work as the contract into which the statutory warranties are implied by s 18B. The legislature could not have intended the notional contract to have a broader or narrower scope than the contract under which the work was actually performed. Consequently, the effect of s 18C is to make the Kings, if they were developers, liable to the Owners Corporation for breaches of the statutory warranties to the extent that Beach was liable to them for breaches of those warranties.
On this premise (that the Kings would only have been liable to the Owners Corporation for breaches of the statutory warranties to the extent that the builder, Beach, was liable to the Kings for breaches of those warranties), his Honour then turned to considering the liability of Beach (at [61]ff). At [67], the primary judge held (in relation to the fire and safety defects): In my opinion, the relevant defects do not involve a breach by Beach (or the Kings) of the warranty implied by s 18B(c) of the HBA. That warranty is not a warranty that the project will comply with the law. It is a warranty that "the work will be done in accordance with ... the law". The "work" is the work done under the contract into which the warranties are implied. In this case, Beach was not responsible for the relevant design. Its obligation under the contract was to construct the development in accordance with the plans and specifications that formed part of the contract. The warranty was not a warranty that those plans and specifications complied with the law but a warranty that the work done in accordance with the plans and specifications complied with the law. That warranty was not breached.
His Honour then applied this reasoning to the acoustic defects (at [69]), to the absence of seals on doors to the goods lifts and the absence of heat detectors in the residential units (at [70]), and the inadequate provision of stormwater overflows for the balconies (at [89]).

[55]

Owners Corporation's submissions

The Owners Corporation submits that his Honour erred (at [60]) because s 18C does not require that the notional contract between the developer and the subsequent homeowner must have the same scope as the contract between the builder and the developer, and it is incorrect to say that the section only allows claims against the developer that the developer could have had against the contractor. The Owners Corporation argues that the legislature could have drafted the section in those terms had it wished to do so (referring by way of example to s 18D).
The Owners Corporation submits that ss 18B and 18C are directed to different purposes; that s 18C is a "standalone provision" (AT 33.46); and that, when analysing what rights a homeowner has against the developer, one assumes that the developer had carried out the work itself without reference to any other contract and that the work was subject to each of the implied warranties, without having regard to the terms of the actual contract between the developer and the builder.
On the Owners Corporation's construction, s 18C creates a notional contract between the successor in title and the developer and implies the statutory warranties into that notional contract as if the work had been performed by the developer for the successor in title. (Of course, this begs the question as to what is "the work" to which the section refers.)
The Owners Corporation accepts that the subject matter of the notional contract is "informed" by the work that the developer "has done"; however, it does not accept that a corollary of this is the additional requirement that the scope of the notional contract must be limited to the scope of the contract (or contracts) that the developer in fact entered into with a contractor.
According to the Owners Corporation, there is no reason to limit the operation of s 18C in the manner that the primary judge did. The Owners Corporation maintains that a purposive construction of the section should be applied, referring generally in this regard to Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28. On such an analysis, the Owners Corporation says (at [60] of their written submissions) that the purpose of the section is: … clearly to provide protection for subsequent successors in title for defective building work as against the person who was responsible for that work being performed in circumstances where the successors in title would otherwise have no legal relationship with that entity.
The Owners Corporation contrasts this purpose with what is said to be the legislative purpose of s 18D, because the latter by its express terms extends the same contractual rights that the developer would have against the builder to the successors in title of the developer. In the Owners Corporation's submission, it cannot have been the legislative intention to narrow the scope of operation of s 18C in the same manner as s 18D is narrowed, because the sections are aimed at different remedies. It is submitted that while a builder should not be liable for any greater liability than was the subject of its building contract, there is "no such limiting concept" with a claim against the developer (written submissions at [62]). The Owners Corporation argues that instead, the opposite applies: namely, that if the developer could avoid liability pursuant to s 18C by arguing that it was not liable because the builder it retained was not in breach of its contract (because of deficiencies in the scope of works that were in fact commissioned by the developer), then the operation of s 18C would be compromised. Similarly, the Owners Corporation submits that the section would be compromised if the developer could avoid liability under s 18C because of poor design that the developer commissioned separately from its construction contract.
In its written submissions, the Owners Corporation refers to this Court's decision in The Owners - Strata Plan No 64757 v MJA Group Pty Ltd (2011) 81 NSWLR 426; [2011] NSWCA 236 ("MJA Group"), noting that the Court there accepted the primary judge's finding that "the notional contract" between the developer and the owners corporation was required to be on the same terms as the actual contract between the builder and the developer. Young JA there said (at [36]) that: … it seems to me that the whole structure of the Act, ss 18B-18E, is that the developer is in a notional contractual relationship with the Owners' Corporation and the contract made by the developer with the builder is what is being looked at as to the content of that notional contract. [my emphasis]
In oral argument, Senior Counsel for the Owners Corporation distinguished MJA Group on the basis that, notwithstanding the relatively wide language used by Young JA, the case was concerned with the more narrow point as to whether or not the claims brought against the developer were statute-barred (and, in relation to that question, with the relevant date of completion of the work).
The Owners Corporation accepts that, when considering the time at which some work was performed, the contract pursuant to which that particular work was performed is relevant. However, the Owners Corporation submits that MJA Group does not stand for the proposition that the only relevant contract, for the purposes of s 18C, is the developer's contract with the builder. By way of example, it was argued that if building work is prepared according to plans or specifications, which were in turn prepared by a consultant retained by the developer, then the relevant contract for the purposes of design defect claims against the developer would be that contract with the consultant, and the developer could not then avail itself of defences available to the builder.

[56]

Kings' submissions

The Kings submit that the Owners Corporation's argument involves reading into the Home Building Act words that are not there. They submit that ss 18C and 18D are not in materially different terms; that both sections confer "the benefit of" the statutory warranties on a third party (that is, on a person not party to the building contract into which those warranties are implied by operation of s 18B); and that both sections do so in terms to the effect that the third party stands in the shoes of his or her predecessor in title and is entitled to enforce the statutory warranties in that person's stead.
The Kings maintain that nothing in the language of s 18C suggests that the scope of the "benefit" of the statutory warranties conferred on the third party by that section is wider than the scope of the benefit conferred under s 18D.
Moreover, the Kings say that reading s 18C in the manner contended for by the Owners Corporation introduces an unacceptable degree of uncertainty into the determination of the parties' rights and obligations. They say that the scope of the benefit of the statutory warranties conferred under s 18C would be unclear and ask, rhetorically, how the scope of a developer's responsibility for work is to be determined other than by reference to the terms of the contract under which the work was performed (as supplemented by the implied warranties).
The Kings submit that "the work" referred to in s 18C must be residential building work, being "the work undertaken pursuant to the contract with the builder" (AT 81.38-39), and that the statutory warranties in s 18B must be implied into that building contract. On their submission, to the extent that a successor in title takes the benefit of the implied contractual terms provided for in s 18B, the successor must be assumed to be stepping into the shoes of the contracting party and becoming entitled to enforce those warranties as if they were the contracting party. The Kings emphasise that this understanding of s 18C is consistent with this Court's reasoning in MJA Group.

[58]

Construction of s 18C

Pursuant to s 18C, an immediate successor in title to a developer who has done residential building work 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".
The principles of statutory construction are well-known and were restated recently by the High Court in SZTAL v Minister for Immigration and Border Protection [2017] HCA 34; (2017) 91 ALJR 936 ("SZTAL"). At [14], Kiefel CJ, Nettle and Gordon JJ summarised the Court's task in this regard as follows: The starting point for the ascertainment of the meaning of a statutory provision is the text of the statute whilst, at the same time, regard is had to its context and purpose [citing Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28 at [69]-[71]; Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27; [2009] HCA 41 at [47]]. Context should be regarded at this first stage and not at some later stage and it should be regarded in its widest sense [citing CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 at 408; [1997] HCA 2]. This is not to deny the importance of the natural and ordinary meaning of a word, namely how it is ordinarily understood in discourse, to the process of construction. Considerations of context and purpose simply recognise that, understood in its statutory, historical or other context, some other meaning of a word may be suggested, and so too, if its ordinary meaning is not consistent with the statutory purpose, that meaning must be rejected.
Applying these principles, I turn first to the text of s 18C, noting four matters that I consider weigh against the construction of s 18C that was adopted by the primary judge (at [60]).
First, s 18C refers to four categories of relevant persons: an owner-builder, a holder of a licence, a former holder (presumably, of a licence), and a developer. Nothing in the text of the provision suggests that more restrictive or onerous requirements should be imposed on immediate successors in title to developers than on immediate successors in title to owner-builders, holders of licences, or former holders of licences. In the latter cases, there may well be no actual building contract in existence, and yet the successor in title will get "the benefit of the statutory warranties" as if there had been a contract. The section does not in any way distinguish developers from owner-builders or licence holders: the plain words of the section are that the immediate successor in title is entitled to "the benefit of the statutory warranties" as if the work had been done under a contract between the developer and the successor in title. In my view, it is problematic to imply into s 18C the limitation that the only rights the successor in title has against the developer are the same rights that the developer has against the builder. If that was what the legislature sought to achieve, it would have been a simple matter to say so.
Second, the construction advanced by the Kings (that ss 18C and 18D are not in materially different terms and that both sections have the effect that the third party stands in the shoes of his, her or its predecessor in title and is entitled to enforce the statutory warranties in that person's stead) disregards what are material differences in the text of the two sections. While s 18C gives an immediate successor in title an entitlement to the benefit of the statutory warranties, s 18D provides a different entitlement, namely, to the same rights as the person's predecessor in title. Section 18C does not use the language of "same rights" and this militates against reading it in the same way as s 18D.
The third textual matter is that s 18C refers to a developer "who has done residential building work" and then to "the work" ("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"). References to "the work" are, clearly enough, references to the "residential building work" which has been "done" by the developer.
It is necessary at this point to return to ss 3 and 3A of the Home Building Act. Section 3A defines "a developer who does the work" to include an individual, partnership, or corporation "on whose behalf" residential building work is done in the circumstances set out in s 3A(2) (the relevant sub-paragraph here being s 3A(2)(a) - set out above at [243]). It is evident from the definition of "residential building work" in s 3 (also set out above, at [241]) that it encompasses many different kinds of "work".
The construction contended for by the Kings (and adopted by the primary judge) works well enough when a developer has contracted with one builder to do all of "the work". But slightly more complex scenarios can be envisaged where this interpretation becomes problematic. Imagine a person, "D", who owns a large residential development, and initially performs some construction work himself or herself on some units or apartments, and then enters into various contracts with different specialists and builders, "B1" to "B10", before the construction is completed. D ultimately sells the property to "P", who sues D pursuant to s 18C in relation to a range of defects. On the Kings' construction, D - who would be a developer as defined in s 3A - is only liable to P insofar as B1 to B10 are liable to D. The statutory warranties in s 18B would be implied into ten different building contracts, there might be ten different completion dates (and hence ten different limitation periods in operation), and P has to investigate - and is limited by - the specific terms of a raft of contracts it never negotiated, while D may escape liability because, for example, B2 performed protective treatment work as contractually requested by D himself or herself.
Some of these problems were adverted to by Campbell JA in Vero Insurance Ltd v Kassem [2011] NSWCA 381; (2011) 86 ACSR 607 at [67]: Consistently with this authority [referring to MJA Group], the limitation period concerning any particular item of damage would commence to run when the work to which the damage relates was completed. That is not necessarily the date on which the works as a whole were completed. MJA Group does not enable one to decide just how finely one subdivides the various tasks that went into the totality of the works, to identify "the work to which [a particular claim for breach of warranty] relates". However it accepts that at least completion of all the work done by the particular contractor or subcontractor who caused the defect can be completion of "the work to which it relates". This has the potential to create a difficulty for a purchaser of residential real estate, if a defect is caused by the work of a contractor whose tasks are completed long before the works as a whole are complete. That is because it is likely in practice to shorten the time in which someone with the benefit of the warranty must find out about the defects and start legal proceedings. However, that is what MJA Group has held the words to mean.
The fourth textual matter is the use of the indefinite article in s 18C when referring to the notional contract (the section referring to "a" contract, not using the definite article "the" when referring to the said contract).
As to contextual matters, it is also relevant to consider ss 18A and 18B. Section 18A creates what Sackville AJA called in Ace Woollahra "an apparent oddity" (at [65], Tobias and McColl JJA agreeing), because it states that the entire Pt 2C applies to residential building work "only to the extent that it is done or to be done under a contract made on or after the commencement of this section". If read literally, this is difficult to reconcile with the fact that s 18C envisages the application of the statutory warranties as between an immediate successor in title and, for example, an owner-builder, in circumstances where plainly enough the residential building work will not have been done under a contract. In Ace Woollahra, Sackville AJA offered the following potential solution: Section 18A … states that Pt 2C applies to residential building work only to the extent that it is done under a contract made on or after 1 May 1997. Section 18C contemplates that the benefit of warranties will pass even in circumstances where residential building work is undertaken without any contract being in place, for example by an owner-builder. It is not necessary to resolve the apparent oddity in the present case. However, the answer may be that s 18A addresses only the time from which Pt 2C applies and therefore may be intended to apply only in those circumstances where a contract is in place.
In my view this is correct, and s 18A should be read as going to the applicability of Pt 2C in a temporal sense, rather than in a substantive sense. That is, s 18A is only relevant where residential building work is done under a contract. Another option might be to read the reference to "a contract" in s 18A as sufficiently broad to encompass the notional contract contemplated by s 18C.
Section 18B sets out the statutory warranties. The sub-paragraphs contemplate the existence of an actual building contract, by referring, for example, to "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" (s 18B(a); see also ss 18B(b), (d)).
On one view, some of the statutory warranties provided for in s 18B would only appear to make sense if one had recourse to an actual contract (see the discussion on appeal: AT 36.18-21). Mr Ashhurst, however, argues that s 18C is clearly intended to operate in circumstances which include the absence of any contract, for example, in a situation where a developer has the work performed without a builder or without providing specifications.
To these situations might be added the case of an owner-builder, where the notional contract is given content only by reference to the s 18B statutory warranties, and not by reference to an actual contract. In fact, a series of decisions in this context demonstrate that it is not impossible or even impractical to shape the notional contract by reference to s 18B, without reference to an actual contract.
See, for example, Atkinson v Crowley [2011] NSWCA 194. There, the question was as to the liability of Mr and Mrs Atkinson, the former owners of a house in Castle Cove, to Mr and Mrs Crowley, the current owners. After purchasing the property in 2006, the Crowleys discovered what they believed to be defects in certain building works undertaken by the Atkinsons. Basten JA noted (at [18]) that it was clear that, for the purposes of s 18C, the Crowleys were "immediate successors in title" to Mrs Atkinson, as owner-builder. This Court upheld the lower tribunal's determination that the Atkinsons were liable to the Crowleys for breaches of the statutory warranties, the underlying basis of that liability being s 18C. Here, there were no references to the need to derive the notional contract from an actual contract, and indeed there was no actual contract.
Similarly, reference may be made to Chan v Acres [2015] NSWSC 1885, where McDougall J considered the position of an "owner-builder" who did "residential building work". There, the plaintiffs were the owner-builder's immediate successors in title for the purposes of s 18C. His Honour held that the effect of s 18C was to create a "deemed or statutory contract between the (in this case) owner-builder and his immediate successors in title, for the purpose of the former giving to the latter the statutory warranties in s 18B" (at [81]). His Honour found (at [86]): In my view, the defects that have been proved, as I have summarised them in the preceding section of these reasons, are such that the case of breach is made good. It could not possibly be said that the work that was done was performed in a proper and workmanlike manner. In many respects, it was not done in accordance with the relevant plans and specifications, although given that there was no written contract, that may be nothing more than a reason why the work was not done in a proper and workmanlike manner.
Again, this decision illustrates the practical possibility of establishing breach of even one of the statutory warranties in s 18B (here, the warranty in s 18B(a)) which does refer to matters "set out in the contract". This aspect of the decision in Chan v Acres was not the subject of appeal (unlike the aspects relating to the establishment of a duty of care for the purposes of negligence claims against Mr Acres, the designer, and the local council). A further example of an owner-builder case which illustrates the same point is Pisano v Dandris [2014] NSWSC 1070; (2014) 17 BPR 33,583 (see from [59] per Hammerschlag J; again, this aspect of the decision was not challenged on appeal).
In the present proceedings, the Owners Corporation accepted that if plans and specifications existed for the work, then they would be "relevant", but maintained that this did not make it necessary to import into the words of s 18C a reference to the actual contract between the builder and developer.
Mr Ashhurst offered the example of plans and specifications which provided for the work to be done in a fashion that was entirely in breach of the Building Code of Australia (with beams of inadequate strength and inadequate soundproofing, for example). It was submitted that in such circumstances, if the homeowner sued the developer, it could not have been the legislative intention that the developer could turn to the contract with the builder and say "that's what I asked the builder to build and therefore I've got no liability to you" (AT 36.31ff).
As to the purpose or object underlying the Home Building Act, relevant to be taken into account both in accordance with s 33 of the Interpretation Act 1987 (NSW) and the approach articulated in SZTAL, I note the following.
Section 18C was inserted into the Home Building Act by the Building Services Corporation Legislation Amendment Act 1996 (NSW) (the 1996 Amendment Act), as part of a suite of reforms to the legislation which included a change of title. The Explanatory Note to the Building Services Corporation Legislation Amendment Bill 1996 (NSW) (the 1996 Amendment Bill) sets out the objects of the Bill, as follows: The objects of this Bill are to amend the Building Services Corporation Act 1989, the Consumer Claims Tribunals Act 1987 and the Contracts Review Act 1980 to require builders, developers and owner-builders to insure residential work privately, to remove the Building Services Corporation's (the BSC) functions relating to building disputes, to confer additional power in building matters on the Commercial Tribunal and building disputes tribunals, and to establish statutory warranties for residential building work and minimum requirements for building contracts. The Bill also dissolves the Building Services Corporation, confers its functions on the Director-General of the Department of Fair Trading and the Fair Trading Administration Corporation and renames the Building Services Corporation Act 1989 as the Home Building Act 1989. The Bill also consequentially amends various other Acts.
The Explanatory Note states that the proposed s 18C "extends the statutory warranties to immediate successors in title to owner-builders, developers and licence holders when they sell land on which residential building work has been done".
In the Second Reading Speech accompanying the 1996 Amendment Bill, the Minister for Fair Trading said: The legislation before the House delivers a package of reforms aimed at establishing the right conditions for fair trading between consumers and contractors in the home building industry. For almost a quarter of a century successive New South Wales governments have struggled to find a workable and permanent solution to the problem of protecting consumers who are building or renovating a home from the pitfalls of dealing with a shoddy or bankrupt builder. … I would now like to introduce one of the other major elements of the reform package: the regulation of contracts. This Government came to office with a commitment to tighten up on the form and content of home building contracts. This commitment recognises the importance of the contracting process to both parties. For too long it has been a process heavily skewed in favour of the builder. The legislation spells out specific inclusions and exclusions in building contracts, as well as statutory warranties which will be common to all building contracts. … As I have mentioned, building contracts will have to contain relevant statutory warranties. These warranties are set out in the bill and are given by the builder. They are implied in every contract to do residential building work. The warranties relate to the performance of the work, the materials to be used, compliance with the law, completion time and fitness for occupation. The warranties will apply not only to the consumer who enters the contract but also to subsequent owners of the property. These statutory warranties will not be able to be excluded by any provision of the contract and will last for seven years from completion of the work. If the work is not completed, the warranties will run from the completion date specified in the contract or, otherwise, the contract date. … The Government believes that the reforms which I have outlined will see the beginning of a new era for consumer protection in the home building industry. Consumers will benefit by fairer building contracts, the improved cover provided under the private insurance scheme and the new powers of the tribunals. Contractors will have greater confidence in the new system, which will provide incentives for those who supply quality, cost-efficient work. Taxpayers of New South Wales will no longer bear the risk of having to underwrite a government-run scheme. Lastly, it will clarify the role of the government and enable it to concentrate its efforts on bringing about value and fairness in the home building industry.
It must be noted that there is difficulty in ascertainment of the purpose of a complex statute such as the Home Building Act and that the level of specificity with which legislative "purpose" is articulated can be critical to the outcome in terms of construction (see, in this regard, Victims Compensation Fund Corporation v Brown [2003] HCA 54; (2003) 77 ALJR 1797 at [33]; Metal Manufacturers Ltd v Lewis (1988) 13 NSWLR 315 at 326; MyEnvironment Inc v VicForests (2013) 42 VR 456; [2013] VSCA 356 at [2]-[18] per Warren CJ; and Pearce & Geddes, Statutory Interpretation in Australia (8th ed, 2014) at [2.11]ff).
As to the purpose which emerges from the provisions of the Home Building Act, there are two decisions which offer convenient summaries of the overall operation of the many provisions of the Home Building Act.
In Festa Holdings Pty Ltd (in liq) v Adderton [2004] NSWCA 228; (2004) 12 BPR 22,491, Mason P considered the changes brought about by the 1996 Amendment Act, as follows (from [22]-[25]): The Home Building Act 1989 was called the Building Services Corporation Act until 1996. The change of title signified a broad shift of emphasis. At inception, the Act established the Building Services Corporation with licensing, regulatory and inspectorate powers in relation to residential building work and "specialist work" (plumbing, gas fitting, electrical work etc). The Corporation dealt with complaints about the conduct of licence holders, subject to a right of appeal to the Commercial Tribunal. The original Act established two BSC Insurance Schemes in which the Corporation was the insurer. Licence holders were required to pay prescribed premiums (s94) and to notify persons for whom residential building work was contracted or commenced to be done that insurance had been taken out (s95). The Department of Fair Trading took over the administration of the insurance scheme in September 1995. In 1996 the Act was substantially recast. Part 2C - Statutory Warranties (ss18A-18G) was added. Warranties by licence holders as to the quality of workmanship and materials are now implied into every contract to do residential building work (s18B). The benefit of those warranties extends to the immediate successors in title of the original warranty beneficiaries (s18D). The warranties endure for seven years after completion of the work (s18E). Part 6 - Insurance (ss90-103E) was substantially amended in 1996. The BSC Insurance schemes were abandoned and the Government ceased to be the statutory insurer. A private insurance scheme was introduced, subject to requirements that insurers meet basic standards. The scheme was compulsory, subject to thresholds (s92), with power to exempt in certain situations, not including contractors doing work under a building contract (s97).
A more recent overview of the scheme of the Home Building Act is set out in Gardez Nominees Pty Ltd v NSW Self Insurance Corporation [2016] NSWSC 532 (albeit, an overview of a later version of the legislation). There, Hammerschlag J described the Home Building Act as a "complex legislative enactment which makes provision concerning the residential building industry", and noted (amongst others) the following key features of the scheme (at [1]): that it requires a person who contracts to do residential building work to hold a contractor licence authorising the person to do that work; that it implies into every contract to do residential work, statutory warranties by the person required to hold such a licence, including a warranty that the work will be performed in a proper and workmanlike manner; and that it prohibits a person from doing residential building work under a contract unless a contract of insurance (called home warranty insurance) that complies with the Act is in force in relation to that work.
His Honour continued (at [3]-[5]): The Act contains provisions which extend the benefit of the statutory warranties to successors in title to persons entitled to the benefit of those warranties, and to a person who is a non-contracting owner in relation to a contract to do residential work on land, being a person who is the owner (under an extended definition of the that [sic] term) of the land, but is not a party to the contract. It also contains provisions that a person must not do residential building work under a building contract unless a contract of insurance that complies with the Act is in force in relation to that work, and which insures a person on whose behalf the work is being done and the person's successors in title, against the risk of being unable, because of the insolvency, death or disappearance of the contractor, to recover compensation from the contractor for breach of a statutory warranty in respect of the work, or to have the contractor rectify any such breach. A provision of a contract of insurance providing cover for the benefit of a person on whose behalf work is done on land is to be read as providing (and to have always provided) for the same benefit in relation to a non-contracting owner of the land. The Act requires a certificate of insurance evidencing the contract of insurance to be provided to the other party to the building contract. A number of provisions of the Act are directed to developers. One example is that a person who is the immediate successor in title to the developer is entitled to the benefit of the statutory warranties as if the developer was required to hold a contractor licence and had done the work under a contract with that successor in title to do the work. Another is that a compulsory contract of insurance does not require a developer on whose behalf residential work is being done to be insured. The combination of making developers liable under the statutory warranties and not requiring compulsory insurance is undoubtedly intended to spur developers on to making sure residential building work is competently done before they on sell to buyers.
What emerges from the above is that the legislature was seeking to strike a fair balance between the interests of consumers and home building contractors and recalibrate a contracting process which was described in the relevant second reading speech as having been, for too long, "heavily skewed in favour of the builder". The Home Building Act seeks to provide a comprehensive scheme of statutory warranties which will enure for the benefit of subsequent owners and close loopholes in situations where, for example, homeowners have been left with no recourse against a bankrupt builder.
That said, the limitations in such an analysis must be acknowledged. As Gleeson CJ explained in Carr v Western Australia (2007) 232 CLR 138; [2007] HCA 47 (at [5]), a purposive approach: … may be of little assistance where a statutory provision strikes a balance between competing interests, and the problem of interpretation is that there is uncertainty as to how far the provision goes in seeking to achieve the underlying purpose or object of the Act. Legislation rarely pursues a single purpose at all costs. Where the problem is one of doubt about the extent to which the legislation pursues a purpose, stating the purpose is unlikely to solve the problem. For a court to construe the legislation as though it pursued the purpose to the fullest possible extent may be contrary to the manifest intention of the legislation and a purported exercise of judicial power for a legislative purpose.
Bearing this caution in mind, I am nevertheless of the view that in this particular case, the textual, contextual, and purposive indications point in the same direction, namely that a developer's liability pursuant to the notional contract contemplated by s 18C of the Home Building Act is not predicated upon, nor limited by, the existence of an actual contract between the developer and a particular builder. Such a conclusion permits s 18C to operate consistently across the different categories of predecessors in title referred to in its text, and it closes a loophole which might otherwise exist permitting developers to, in effect, breach the statutory warranties in s 18B but escape liability because the breaches occurred with respect to work beyond the scope of their particular contract with the builder. The limiting definition of "residential building work" still operates: that is, the work done by (or on behalf of) the developer must be residential building work as defined, but if it meets that criterion, then even if it is beyond the scope of the actual contract, the better view is that it may nonetheless fall within the scope of the s 18C notional contract. Thus, subject to what I have to say as to the conclusions drawn in MJA Group, I would conclude that the primary judge erred in the construction of s 18C (at [60] of his Honour's reasons).
At this point I turn to the two previous decisions of this Court which are relevant to this determination. Neither was, in fact, directly concerned with s 18C: the decision in Ace Woollahra focussed on s 18D, and the decision in MJA Group addressed s 18E. The parties to the present appeal appear to accept that the issue now being considered has not been authoritatively decided before in this Court. However, in the course of the reasoning in both Ace Woollahra and MJA Group, this Court had occasion to consider s 18C. The decisions point in different directions. The Kings effectively relied on MJA Group as an answer to these aspects of the appeal. The Owners Corporation, as noted above, sought to distinguish MJA Group as being concerned with the narrow point as to whether or not the claims brought against the developer were statute-barred and submitted that it does not support the primary judge's reasoning at [60] of the primary judgment.
MJA Group concerned a dispute between the Owners Corporation of a strata plan and a developer. The developer (MJA Group Pty Ltd) owned a site in Dee Why, and decided to redevelop the building on the site so as to create 12 residential units. In order to do this, it entered into a contract with a company, Build-Care Pty Ltd. The Owners Corporation sued the developer under the "notional contract" referred to in s 18C of the Home Building Act. There was no doubt in MJA Group that the developer had "done residential work" on the relevant land within the meaning of s 18C (see at [17] per Young JA; Allsop P and Macfarlan JA agreeing).
In the course of considering the meaning of "the completion of the work" in s 18E, the Court had to ascertain the scope of "the work" referred to in ss 18C and 18E. Young JA (with whom Allsop P, as his Honour then was, and Macfarlan JA agreed) said (at [22]): In 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.
His Honour went on (at [32]-[37]) to say: The primary judge recorded at 10 that the respondent's submission to her was: "The result of the combination of s 3A and s 18C is that where residential building work is done on behalf of a developer and subsequently there is a successor in title then that successor in title will have the benefit of the statutory warranties in respect of the work done on behalf of the developer as though the developer had done the work and not the person who did it on behalf of the developer." The primary judge then said: "That is how I read s 18C. Unless the contractual shell given force by s 18C is to be shaped entirely from the ether, its content must be found in the contract under which the relevant work actually was done by the entity which (actually) did it. Section 18C finds the contract into which the warranties are implied as being the contract under which the relevant residential building work actually was done. That (actual) contract is construed 'as if' the developer had been the person actually doing the work under the contract. The statute vests the developer with that done on its behalf such that the contract reads as against the developer 'as if' the developer 'had done the work'; and in so doing places the developer in the shoes of the relevant contractor for the purpose of enforcement of the statutory warranties in respect of the work. That simultaneously gives content to the warranties implied." The primary judge said that s 18C involved the finding of a contract between the developer and the builder and then creating a notional contract of the same terms between the developer and the Owners' Corporation. She then held that the work under the contract with Build-Care was completed on 5 January 2001 so that the limitation period expired before the appellant issued its claim and so the action was statute barred. The appellant says that her Honour wrongly construed s 18C so that there was a separate right of action in respect of each contract: (a) a right of action against the respondent for defects in the Build-Care work; and (b) a separate right of action for defects in work undertaken by the other builder. The true construction of s 18C is that there is a single right of action in respect of the totality of the residential building work done. On this basis, the work was not completed until the southern wall had been finished some time in March 2001 and the action was within time. In my view, her Honour was correct in her ruling on this question. Additionally to her own reasons, it seems to me that the whole structure of the Act, ss 18B-18E, is that the developer is in a notional contractual relationship with the Owners' Corporation and the contract made by the developer with the builder is what is being looked at as to the content of that notional contract. [my emphasis] Further, though this is not as strong an indicator, it seems to me on parity of reasoning with Stucoid Pty Ltd v Stadiums Pty Ltd (1960) 107 CLR 521, that one reads "the work" as referring to the work the subject of the claim for defects. If this were not so great difficulties would be caused where a project manager had a building erected by multiple subcontractors and one can hardly fix the legislature with the intention to cause such difficulties.
Macfarlan JA agreed with Young JA, and made the following additional comments (at [3]-[4]): The 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" ... 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 of the Home Building Act (the Act) 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. I do not however accept the submission. There is in my view nothing in the language of s 18C, or any other part of the 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.
These passages illustrate that in MJA Group this Court considered that the actual contract between the developer and the builder should determine the content of the notional contract referred to in s 18C.
The series of owner-builder decisions to which I have referred demonstrate that it is possible, and practical, to shape the notional contract by reference to the statutory warranties in s 18B without relying on an actual contract. The primary judge in the decision under appeal in MJA Group, in holding that the content of the notional contract "must be found in the contract under which the relevant work actually was done", made the assumption that the relevant work was done under a contract. This will by no means always be the case. In my view (for reasons identified earlier) it goes beyond the words of s 18C to say that the Court's task is to construe the actual contract "as if" the developer had been actually doing the work under that contract, and stands in the shoes of the relevant contractor.
With respect, I consider that Young JA's reasoning does not take sufficient account of the text of s 18C, the legislative purpose and background underlying Pt 2C, or of the prior decision of this Court in Ace Woollahra (as to which, see below from [308]).
As to his Honour's reference to Stucoid Pty Ltd v Stadiums Pty Ltd (1960) 107 CLR 521; [1960] HCA 41 ("Stucoid"), the principle emerging from that case, in respect of ss 9-10 and 19 of The Contractors' and Workmen's Lien Acts 1906 to 1921 (Qld), is that upon the proper construction of ss 9 and 10, the time for giving a notice of a claim to a charge and a lien runs from the completion of the work under the sub-contract (per Dixon CJ, Menzies and Windeyer JJ at 525). Their Honours adopted that construction because the charge and lien referred to were provided for by ss 4 and 6, which referred to the entitlement of "a contractor or sub-contractor or workman" to a lien upon the whole interest of the employer in the land or upon the moneys payable to the contractor or sub-contractor, as the case may require, for the contract price or wages for his work. It is - as the High Court held - obvious that the time period for, e.g., a sub-contractor's entitlement to a lien (flowing from the non-payment of the particular contract price or wages for particular work) should be dependent upon the completion of that particular work the subject of the sub-contractor's contract. While it may be possible to adopt a construction of s 18C of the Home Building Act which is "on par" with this reasoning, it may be doubted that this should be done, when the High Court's reasoning for the construction adopted in Stucoid is premised upon the particular statutory context of the Act there under consideration (see especially at 526-7).
I do not see that it is sensible, consistent with the statutory language, or conducive to the legislative purpose, to place upon an end consumer or purchaser of residential real estate the onus of discovering, amongst a potential morass of contracts, what the various limitation periods and completion dates might be for all the various causes of action that the developer may have against different building contractors, in order to sue the developer. Campbell JA adverted in some measure to these concerns in Vero Insurance Ltd v Kassem. Section 18C provides the benefit of the statutory warranties to the developer's immediate successor in title as if the developer had done the residential building work himself, herself, or itself, under a notional contract with the successor in title. It is inconsistent with the statutory language to deem not one notional contract in respect of "the work" but many, one for each contract the developer had with each of its contractors.
In Ace Woollahra, Sackville AJA had said (at [58], Tobias JA and McColl JJA agreeing): Section 18C creates what might be described as a deemed contract, where residential building work is done without a building contract in place or, if there is a building contract, the developer is not a party to it. (Section 3A(1) deems a corporation on whose behalf residential building work is done, in the circumstances specified in s 3A(2), to be "a developer who does the work". Section 18C, in substance, uses that expression.) A contract is deemed to exist between the person who has done the work or the developer (as the case may be) and the immediate successor in title to that person or the developer. Section 18C gives only that successor in title the benefit of the statutory warranties as if the person or the developer had done the work under the deemed contract. … Section 18C is closely related to s 96, which obliges a person who does residential building work otherwise than under a contract, or a developer who does residential building work (s 3A), not to do the work unless a complying contract of insurance is in force. … Section 101 provides that an insurance policy required, inter alia, by s 96, must insure a purchaser of land on which the work is done and the purchaser's successors in title against the risk of loss arising from breach of statutory warranty. [my emphasis]
Here, Sackville AJA clearly envisages the operation of s 18C in circumstances where the developer is not a party to the building contract, or even where the developer had done work without a contract in place. Earlier in Ace Woollahra, his Honour had considered s 3A of the Home Building Act and noted that the appeal had been conducted on the "dubious assumption" that the expression in that section, "a corporation on whose behalf residential building work is done", embraced not only a party to a building contract, but a corporation for whose benefit the work is being done under a building contract to which it is not a party. Although noting that the correctness of this assumption had not been debated, his Honour said at [52]: It seems to me that there are good reasons for confining the expression "on whose behalf" to the case where residential building work is undertaken by one party on a contractual basis for another party (as occurred in HIH Casualty and General Insurance Ltd v Jones [2000] NSWSC 359). In my opinion, it is difficult to impute to Parliament an intention that a contractor contravenes the Home Building Act and is liable for criminal penalties (s 92) if the contractor takes out a contract of insurance but the policy does not insure every person on whose behalf, as a matter of fact, the work is being undertaken (s 99).
The analysis of s 18C in Ace Woollahra should be read against this background, which limits the developer's liability.
In the course of argument on this appeal, reliance was placed by the Owners Corporation on my first instance decision in The Owners Strata Plan 62930 v Kell & Rigby Holdings Pty Ltd [2010] NSWSC 612 ("Kell & Rigby Holdings"). There, a claim was made by the owners corporation against both the developers and builder for breach of the statutory warranties in Part 2C of the Home Building Act. The scope of the developer's liability to the owners corporation (pursuant to the s 18C notional contract) was ultimately not predicated upon or limited by the builder's liability to the developer pursuant to the actual contract between developer and builder (and hence, to the owners corporation).
The issue arose as to the apportionment, as between the builder and developers, of any co-ordinate liability to the owners corporation. In that regard I reasoned (at [44]-[45]) that: … insofar as the Developers (and Builders) have a common liability to the Owners Corporation for breach of the statutory warranties, that is a liability for which (in accordance with the principles of equitable contribution) as between themselves each would bear an equal share. However, to the extent that the Developers have suffered damage (measured by their liability in these proceedings to the Owners Corporation) as a result of the Builder's breaches of statutory warranty, they should be compensated for that loss by means of an indemnity in respect of the liability they bear to the Owners Corporation. In determining the extent of that indemnity, what should be excluded is any liability for the costs of installation of the balancing valves and the re-commissioning necessary in that regard, since those amounts were not caused by the Builder's failure properly to commission the system but rather by the decision to amend the design specifications of the system which was approved by the Developers' consultant and in accordance with which the air-conditioning system was installed by the Builder.
The developers were held liable to the owners corporation in relation to their amendment of the design specifications of the air-conditioning system. That amendment had varied the building contract, such that in the outcome, the scope of the builder's liability on the actual contract with the developers did not align with the scope of the developers' liability on the notional contract.
The builder had contended that it built the air-conditioning system in accordance with the plans and specifications in the building contract (see [55], [110], [296], [303]). At [306], I accepted the proposition that, absent a warranty of fitness for purpose, the builder should not be liable for design faults with the air-conditioning system as approved by the developers (and see [309], [417], [431]-[442]). Ultimately, I concluded at [444] that: … the damages which the Developers have incurred by way of the Builder's breach of statutory warranties, while measured in general by the Developers' liability to the Owners Corporation do not, in relation to the air-conditioning claims include the costs referable to the installation of the system as approved by the Developers' consultant. Those were not, in my view, caused by the Builder's breaches but by the decision (made by the Developers' consultant to amend the specifications for the system. Accordingly, I do not consider that the Developers would be in a position to obtain an indemnity for liability … Otherwise, the measure of the Developers' damages by reference to the Builder's breaches of its building contract warranties would encompass any amounts for which the Developers were liable to the Owners Corporation.
That is, the developers were liable to the owners corporation for design faults with respect to the air-conditioning system, even though the builder was not liable to the owners corporation in that respect.
At [90], considering the standing of the owners corporation to bring proceedings relating to individually owned units within the development I had commented that: The operation of section 18C would seem to give rise to a number of notional contracts, each encompassing the relevant residential building work done under the initial contract, in cases where, as here, there are individual owners who have acquired strata title to particular units and the Owners Corporation which has vested in it the common property. In other words, by virtue of s 18C, rights under the contract with the Developers have passed to various successors in title, each of whom, unlike the Developers, has a separate and differing title in respect of separate units or property in the strata plan. However, the reference to the notional contract "encompassing the relevant residential building work done under the initial contract" should not be read as a determination of the issue presently under consideration. That issue was not raised in that case nor was it the subject of considered argument. This decision does not assist in the determination of the present issue. Nor does the decision of Howie J in The Craftsmen Restoration & Renovations v Boland [2008] NSWSC 660 ("The Craftsmen"), to which reference was also made by the Owners Corporation.
After considering all of the above, I have concluded on this aspect of the appeal that a developer's liability pursuant to the notional contract contemplated by s 18C of the Home Building Act is not predicated upon, and limited by, the existence (or terms) of an actual contract between the developer and a particular builder. Provided that the work done by (or on behalf of) the developer is "residential building work", then, even if it is beyond the scope of the actual contract between developer and builder, the better view in my opinion is that it can nonetheless fall within the scope of the notional contract for the purposes of s 18C.
The question then is whether the decision in MJA Group is distinguishable (in circumstances where I could not conclude that the decision in that case was plainly wrong - there being a live debate as to the construction of s 18C in this regard). What I have concluded on this issue is that MJA Group should be distinguished on the basis that the dicta in question in that case were not essential to the ultimate determination of the appeal in that case; and that it is open to this Court not to follow it in this respect (particularly where it does not appear from the judgment that the issue was the subject of considered debate before their Honours as it was, at least to some extent, in the present case).
In my respectful view, the primary judge was therefore in error in holding (at [60] of the primary judgment), that the extent of the liability of the Kings (assuming, as I have concluded, that they were developers) to the Owners Corporation was dependent upon the extent of the builder's liability to the Kings.
As explained above, that conclusion is not, however, sufficient to dispose of this aspect of the appeal; it is necessary to determine, applying this construction of s 18C, whether the Kings were liable for breaches of the statutory warranties under the notional contract.

[59]

The Kings' liability under the notional contract

As set out in the parties' agreed schedule of damages, there were seven items found by the primary judge to have arisen as a result of "design defects". The items (and the associated agreed damages) are: 1. lack of handrails to stairs to common areas leading to some units: $1,481; 2. lack of thermal detectors to car park and kitchens in retail units: $49,648; 3. lack of sprinklers in voids above bathrooms, ensuites, laundries and sub-floor voids: $323,338; 4. failure to wrap acoustic pipes: $4,595; 5. the cost of rectifying the absence of seals on doors to the goods lifts: $19,558; 6. the cost of rectifying the absence of heat detectors in all residential units: $33,955; and 7. the cost of installing stormwater overflows: $20,368.21.
These items are the relevant aspects of the residential building work which is the subject of complaint on appeal (because it is here where, on one view, there may be a difference between the scope of the developer's liability and the scope of the builder's liability).
Leeming JA has outlined a series of counter-factual assumptions which are required to be made in the process of applying s 18C (see below at [357]-[365]). Working through those assumptions and their consequences, I agree that one assumes that the Kings were licensed, and contracted with the Owners Corporation to do the residential building work which is the subject of complaint, under a written contract which included any plans and specifications for the work which were in existence. However, that notional contract must also include the statutory warranties and, notably, thus includes a warranty that the work will be done in accordance with, and will comply with, the Home Building Act or any other law (s 18B(c)).
Applying Leeming JA's analysis with respect to item (c) above (the lack of sprinklers - see [321]), the developers may be taken to have acted fully in accordance with the plans and specifications in the notional contract between themselves and the Owners Corporation (in that those plans did not include installation of sprinklers in the relevant locations). However, that does not avoid the fact that the developers, in the assumed state of affairs, have not acted in accordance with the warranty, written into the hypothetical contract, that the work will comply with the law.
White JA sets out in greater detail the reason why the work done (with respect to the sprinkler system, by way of example) in accordance with the plans and specifications did not comply with the law, and explains why this may appear to throw up a conflict between the statutory warranties in s 18B(a) and (c). As his Honour points out, this case raises the question of the position where work is done in accordance with plans and specifications (assumed to be contained in the notional contract) but that work does not comply with a law (in breach of a warranty also contained in the notional contract). I agree, for the reasons White JA gives at [402]-[409] below, that the statutory warranties can be read together so that impliedly, the developer warrants under the notional contract that the work done in accordance with the plans and specifications will comply with the law, and therefore that s 18B(c) continues to apply even where the non-compliance with the law is the result of design defects in the plans and specifications.
This analysis can be applied to the other defects under consideration (set out at [321] above).

[61]

Ground 4(i) - the builder's liability for "design defects"

As to ground 4(i), the Owners Corporation referred to The Craftsmen, where Howie J (when considering an appeal from the Consumer, Trader & Tenancy Tribunal) held that even if the cause of leaking windows had been the manufacture of the windows (specified by the owner), rather than the installation of those windows, the builder was nevertheless liable to the owner in damages because it was in breach of the statutory warranty implied by s 18B(b) "all materials supplied will be good and suitable for the purpose for which they are used ...". Further, his Honour held (at [95]) that although it was unnecessary for the Court to decide it would seem that the legislative intention was that the only defence to the s 18B warranties was the defence provided by s 18F (that the defects arose from instructions given by the person for whom the work was done contrary to the advice in writing of the defendant). The Owners Corporation also referred to Kell & Rigby Holdings and The Owners Strata Plan No. 68372 v Allianz Australia Insurance Ltd [2014] NSWSC 1807 ("Allianz Australia") on this aspect of the appeal. The Owners Corporation argues that the statement by the primary judge at [67] in the present case is in conflict with the approach in these authorities.
The Kings, in response, argue that the decision in Allianz Australia can be distinguished in that there, although the defects appear to have been caused in part by defective design work performed by others in respect of footings, the builder was treated by the referee as responsible for the defects in the construction work; whereas in the present case the defects arise not from work carried out by the builder, but rather from the omission from the design of items that ought to have been included.
This ground of appeal only arises if the developer's liability pursuant to the notional contract is predicated upon the builder's liability pursuant to the contract with the developer. The Owners Corporation's oral submissions on the second aspect of the appeal focussed predominantly on grounds 3 and 4(ii). On my construction of s 18C (as set out under grounds 3 and 4(ii) above), it would not be strictly necessary to determine this ground.
However, it follows from my reasoning above (see from [321]) that even if I am wrong on the statutory construction issue and the Kings' liability to the Owners Corporation is coterminous with the liability of Beach to the Kings, I would conclude that the Kings remain liable for breach of the warranty implied by s 18B(c). This is because, under the actual building contract, Beach have impliedly warranted that the work done in accordance with the plans and specifications will comply with the law and, as White JA has explained, the work done did not do so. Therefore on ground 4(i) (adopting a different construction of s 18C), I would agree with White JA that Beach would be liable for breach of the warranty in s 18B(c) and hence that the Kings would be liable to the Owners Corporation for that breach pursuant to s 18C.

[63]

Grounds one and two

Grounds one and two turn on whether it should be inferred that Mr and Mrs King became parties to the construction contract. I agree with Ward JA that these grounds are made out. I agree with her Honour's reasons, to which I would add the following, not by way of qualification, but by way of summary of a critical evaluation of a large mass of evidence and competing submissions.
First, I agree that the inference may confidently be drawn that a formal instrument of agreement came into existence and was executed by Beach. As Ward JA has explained in greater detail, the inference is derived principally from the recurring entries in the site meeting minutes and the inherent probability of this being required by the bank. In particular, the letter of 10 August 2007 suggests that the drawdown of project finance had been contingent on Mr Stringer completing a report to the CBA. That is consistent with the minuted item at the meeting on 11 July 2000 that "Bonus confirmed that one set of the executed contract documents was being sent to John Stringer's office today to enable him to provide an initial assessment to the bank to allow debt funding to commence".
There is a ready explanation for the delays which recur throughout the minutes, namely, the need to obtain legal advice as to the effect of the introduction of the GST. There is handwriting (of Mr Bonus) stating "D + G King to be the borrower" on a document which had been provided by Gillis Delaney Brown, which firm was advising the Kings at the time. Indeed, the first GST payment, of $57,576, was paid by King Furniture Australia and accompanied by a note from Mrs King saying "here is your GST. We have to pay it after all!" That tends to confirm that advice was being sought and received at this time as to the GST treatment of construction costs.
Secondly, this is a case where, in conducting the appeal by way of rehearing required by s 75A(5) of the Supreme Court Act 1970 (NSW), this Court is in no worse position than the primary judge. The events took place many years ago, the recollections of the witnesses called by Beach were understandably imperfect, the Kings did not give evidence, and the most important considerations are those drawn from the contemporaneous documents, understood in the light of the circumstances prevailing at the time.
Thirdly, contrary to the Kings' submission, little weight should be attributed to the way in which Bonus Architects (which also traded as Bonus Consulting) identified their client or communicated matters concerning the contract. For the most part, Bonus referred to "Mr and Mrs King/Meridian Estates". There was never an occasion for Bonus to distinguish the company from the natural persons from whom they took instructions.
Fourthly, I agree with Ward JA that the appropriate inference is that when Mr and Mrs King personally signed the annexure to the former formal instrument of agreement, by doing so they bound themselves personally.
Fifthly, I agree with Ward JA that cl 48 does not alter that result. Ultimately, the Kings withdrew their submission that the clause constituted a free-standing answer to the appeal (transcript, 6 April 2018, page 84) (something which was not pleaded, nor decided by the primary judge, nor was the subject of a notice of contention), and instead confined their reliance on the clause to its "supporting the proposition that the parties did not intend to replace the existing contract". On that basis, cl 48 does not stand in the way of the inferences summarised above and addressed in detail by Ward JA.
Sixthly, I agree with Ward JA that these grounds are made out without recourse to Jones v Dunkel inferences from the failure of the Kings to give evidence, but also that the inference is available, and enables the findings to be made all the more confidently.

[64]

Grounds three and four

These grounds proceed on the basis that grounds 1 and 2 are made out and the Kings are "developers". The parties agreed that if grounds 3 or 4 are also made out, such that by reason of s 18C the Kings are liable for "design defects", then the owners corporation is entitled to a judgment of some $5.09 million, whilst if grounds 3 and 4 fail and the Kings are not so liable, then the owners corporation is entitled to a smaller judgment of some $4.62 million.
The primary judge found that there was no breach of the warranty in s 18B(c), irrespective of whether that warranty was owed by Beach or the Kings. The essence of his Honour's reasoning was at [67]: "The 'work' is the work done under the contract into which the warranties are implied. In this case, Beach was not responsible for the relevant design. Its obligation under the contract was to construct the development in accordance with the plans and specifications that formed part of the contract. The warranty was not a warranty that those plans and specifications complied with the law but a warranty that the work done in accordance with the plans and specifications complied with the law. That warranty was not breached."
The appellant challenged that finding in two ways. 1. First, by ground 4(i), it contended that "a builder's liability for breach of the statutory warranties implied by operation of s 18B ... is not dependent on whether the builder was responsible for the design of the defective works". 2. Secondly, in ground 4(ii), it contended that even if the builder were not liable because it was not responsible for the design, "that defence does not assist the [Kings] in respect of a claim brought pursuant to s 18C". (Ground 3 identified error in the primary judge's finding that the Kings were not liable because Beach had not been responsible for the design, but did not take the matter any further. The parties' oral and written submissions did not address ground 3 separately from grounds 4(i) and (ii), and I shall follow the same course.)

[65]

Resolving the question of construction by reference to the findings of fact

The question of construction was largely debated in the abstract, with either or both parties operating on the assumption that this Court would resolve it and remit the matter to the primary judge. There are difficulties in taking that course. One is that proceedings should only be remitted where otherwise there will be substantial wrong or miscarriage: Uniform Civil Procedure Rules 2005 (NSW) r 51.53. Another is that further prolongation of litigation which is already more than a decade old is to be avoided if at all possible. A third is that whether or not a statutory warranty responds to a "design defect" may be difficult to determine in the abstract. Putting the matter no doubt more simply than would be the case in the real world, one could contemplate (a) a defective design which no competent builder could ever be expected to appreciate was defective, (b) a defective design which any competent builder would be expected to reject or at least question, and (c) a range of intermediate possibilities. One could also contemplate design defects which required the performance of physical work on the land (for example, specifying the wrong sort of heat detectors or fire resistant seals on doorways), and design defects where the defect was an omission (for example, failing to specify the installation of any heat detectors or fire resistant seals on doorways). Further, in any case where work is being done lawfully, there will be plans and specifications approved by the consent authority, and a regime of certification in place which is capable of leading to an occupation certificate. That occurred in the present case.
Section 18C has given rise to disputed questions of construction both in the present appeal and in earlier appeals in this Court. I think it is preferable to construe it by bearing in mind the particular facts established by the evidence to which it is said that it applies, rather than in the abstract. For present purposes, I shall put to one side the case of unauthorised residential building work, and confine attention to work done in accordance with plans and specifications which appear on their face to be compliant with the terms of development approval.
At the Court's request, the parties provided helpful supplementary submissions which not only led to the agreed position summarised above as to orders but also illuminated the reasoning which led to that position. The difference of just under $500,000 reflects the unchallenged findings by the primary judge in relation to seven items of which complaint was made. Those items are: 1. lack of handrails to stairs to common areas in some units: $1,481; 2. lack of thermal detectors to carpark and kitchens in retail units: $49,648; 3. lack of sprinklers in voids above bathrooms, ensuites, laundries and sub-floor voids: $323,338; 4. failure to wrap acoustic pipes: $4,595; 5. rectification cost of absence of seals on goods lifts doors: $19,558; 6. rectification cost of absence of heat detectors in all residential units: $33,955; and 7. cost of installing stormwater overflows: $20,368.21. (The balance of the difference in judgment amounts reflects a different interest calculation on out of pocket expenses.)
Accordingly, the issue which arises on these grounds is whether any or all of those seven items amount to a breach of a statutory warranty made applicable to the Kings by reason of s 18C. It will be seen that most of those "design defects" related to improving the fire resistance of an old building, designed for storage of goods, which was being converted to predominantly residential use.
I have found it convenient to focus upon the largest of the seven items, the absence of sprinklers in certain ceiling and sub-floor voids. This was item 30 in Mr Grubits' report. His report did not treat this as a breach of statutory warranty because "Design error as sprinkler design drawings did not show sprinklers in concealed spaces". The cost of addressing the error involved an estimate of an additional 160 sprinkler heads and 350m of pipe. So far as I can see, the reasoning which follows is equally applicable to the other six items.

[66]

Ground 4(ii)

I agree with Ward JA that it is convenient to commence with ground 4(ii). This ground turns on the so-called "notional contract" implicit in s 18C between the appellant and the Kings, and therefore upon the construction of s 18C, which is considered in detail below. However, I first mention the other provisions with which s 18C was introduced. This is not to shrink from the text of s 18C, but rather to recognise that the essence of s 18C is to make applicable other provisions of the Act to the counterfactual assumptions it makes in order to determine the entitlement of certain successors in title.
Sections 18A-18G are reproduced in Ward JA's judgment. All those sections were introduced, together with other amendments, by Schedule 1 of the Building Services Corporation Legislation Amendment Act 1996 (NSW). Schedule 1 was titled "Amendments to BSC Act relating to work and contracts". New ss 7, 7A and 7B were directed to contracts. Section 7 imposed requirements as to the form of contract for building work, including that it be in writing (s 7(1)), dated, signed, attach the name of the licence holder, a description of the work, "any plans and specifications for the work" (s 7(2)(d)), the price and any statutory warranties applicable to the work. Section 7A made it an offence to contract to do work without complying with s 7, and s 7B made it an offence not to give a copy of the contract to the other party. The scope of the provisions ss 7, 7A and 7B (and others) was determined by s 6, and extended to contracts under which the holder of a licence undertook to do any residential building work (there was an exception for urgent work where there was a hazard to health or safety). New s 10 provided that contracts to which s 7 applied but which did not comply with s 7 could not be enforced by a licence holder.
Broadly speaking, persons doing residential building work were required to be licensed, and insured.
Unsurprisingly, ss 18A,18B and 18D-18G are primarily directed to the ordinary case where residential building work is done pursuant to contract. That is at least a partial explanation for the infelicitously narrow wording of s 18A, to which Sackville AJA referred in Ace Woollahra Pty Ltd v The Owners - Strata Plan 61424 (2010) 77 NSWLR 613; [2010] NSWCA 101 at [65], which if read literally and acontextually, would meant that the Part had no application to residential work done where there is no contract (for example, by an owner-builder on his or her own land). The default position is that residential building work will be done pursuant to a written contract, which will have been provided to the other party, and will contain the warranties in s 18B which cannot be excluded (by dint of s 18G) and which extend to a successor in title (by s 18D).
Although this appeal was directed to s 18C, in context that section is best seen as ancillary to the main regulatory purpose, which is premised upon unexcludable disclosed statutory warranties enforceable as a matter of contract. Section 18C dealt with the gap comprised by cases where there is no contract. Section 18C provided: "18C Warranties as to work by others A person who is the immediate successor in title to an owner-builder, a holder of a 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 licence and had done the work under a contract with that successor in title to do the work."
Section 18C conferred a new right upon persons who are the immediate successors in title to a certain class of people (in the present case, a developer) who have done residential building work. The content of that entitlement is determined by reference to how the statutory warranties would apply if both of two counter-factual circumstances have occurred. The two counterfactual circumstances are identified in the words which follow "as if". The first counter-factual circumstance is that the developer was required to hold a licence. The second counter-factual circumstance is that the developer had done the work under a contract with the successor in title. It is plain from the syntax that the words "as if the owner-builder, holder, former holder or developer" apply to each of those two circumstances.
It will also be seen that the second counter-factual circumstance has within it two elements: (a) that the developer had entered into a contract with the successor in title, and (b) the developer had done the residential building work under that contract.
The words "as if" are a mode of drafting described by Windeyer J in Hunter Douglas Australia Pty Ltd Perma Blinds (1970) 122 CLR 49 at 65 as "a convenient device for reducing the verbiage of an enactment". As explained above, the thrust of the new measures introduced with s 18C involved compulsory licensing, contracting and insurance for most classes of residential building work. The legislative regime, however, had to accommodate the possibility that it would not apply to all residential building work (for example, work done by an owner-builder). In such a case there would be no contract, and therefore no statutory warranties. The point of s 18C was to create a new entitlement for persons who became entitled to land on which such residential building work had occurred, by reference speaking generally to the position which would have obtained had a licensed person contracted to undertake residential work with them.
The mode of drafting draws upon the ordinary position addressed in this part of the Act, namely, persons are licensed and will only do residential building work pursuant to written contracts which comply with ss 7-7D. Section 18C deals with the contemplated case of persons who do residential building work but who are not required to be licensed and therefore fall outside ss 7-7D, whose land is thereafter transferred to another. That successor in title is then placed in the same position that he or she would have been in had both counterfactual circumstances obtained.
In the present case, both preconditions to s 18C were established. 1. The owners corporation was created upon registration of the plan: (former) Strata Schemes Management Act 1996 (NSW), s 8. Insofar as the land amounted to the common property of the development, it became vested, at that point, in the owners corporation: (former) Strata Schemes (Freehold Development) Act 1973 (NSW), s 11. The submissions in this Court proceeded on the basis that, by that means, the owners corporation became an "immediate successor in title" to the Kings for the purposes of s 18C. (I do not mean, by the previous sentence, to cast any doubt as to the correctness of this implicitly agreed position; far from it.) 2. The Kings, who are developers, had done residential building work on the land. Once again, this was not in issue, and accorded with what this Court had determined in Ace Woollahra as to the meaning of "on whose behalf" in s 3A of the Home Building Act, coupled with the outcome of grounds 1 and 2 and the facts that the Kings had been co-owners of the land and owned five of the lots created upon registration of the strata plan.
It is also to be borne in mind that the benefit of the statutory warranties is only of assistance if the successor in title has some complaint about the residential building work that was done by (relevantly) a developer.
To determine the entitlement conferred by s 18C upon the successor in title, one applies the section in terms. That involves not merely making the counterfactual assumptions required by s 18C, but working through the consequences of those assumptions by reference to the other statutory provisions. There is quite a deal of work involved in doing so, but that merely illustrates the effectiveness of the drafting device "as if" in the section. As Lord Asquith said in East End Dwellings Co Ltd v Finsbury Borough Council [1952] AC 109 at 132-3: "If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it. ... The statute says you must imagine a certain state of affairs; it does not say that having done so, you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs."
So too, in Valuer-General of New South Wales v In Adam Pty Ltd [2012] NSWCA 20 at [25], Handley JA said, with the agreement of Allsop P and Tobias JA, that a court which is confronted with a fiction imposed by statute has to determine its consequences. The same approach was followed in East West Airlines Ltd v Turner [2010] NSWCA 53 at [51]-[53].
The application of the counterfactual assumptions required to be made by s 18C in the present case are as follows. 1. First, one hypothesises that the Kings were required to be licensed. 2. Secondly, one hypothesises that the Kings had contracted with the successor in title to do the residential building work which is the subject of complaint. It follows on that hypothesis that the Kings were required to enter into a written contract with the owners corporation, prior to doing any of the work. That written contract was required, inter alia, to include the plans and specifications for the residential building work. That is the consequence of the counterfactual assumptions read with s 7(1) and 7(2)(d). 3. Thirdly, one hypothesises that the developer in fact did the work - the residential building work of which complaint is made - and did so "under" the contract referred to in (2) above.
The effect of s 18C is that all of those counterfactual assumptions are to be applied to other provisions, notably s 18B, such that the owners corporation enjoys the benefit of the statutory warranties which would in fact have been required to have been written in the contract pursuant to which the residential building work was done and of which the owners corporation complains.
Applied to item 30 in the actual facts of this case, s 18C requires one to hypothesise a written contract for the installation of the very sprinkler system of which complaint is made, and that the Kings installed that sprinkler system under that contract.
For the reasons given in response to ground 4(i), the counterfactual entitlement of the owners corporation under s 18C does not yield a right to damages. The developers are taken to have installed a sprinkler system in accordance with the specification in the hypothetical contract between them and the owners corporation.
Put differently, there is nothing in s 18C to permit an even more counter-factual result, whereby the developers are taken to have installed the very sprinkler system which has been installed, but under a different contract which provided for a different sprinkler system, namely, one with sprinklers in ceiling and sub-floor cavities. There is no basis in s 18C to hypothesise that the developer installed the sprinkler system of which the owners corporation complains in breach of a contract which had required them to install one in the ceiling and sub-floor cavities.
The foregoing analysis is based simply on what I regard as the natural working out of the "as if" counterfactual assumptions required by s 18C. It is also consistent with what has been held in the passages from The Owners - Strata Plan No 64757 v MJA Group Pty Ltd (2011) 81 NSWLR 426; [2011] NSWCA 236 at [4] and [36], which Ward JA has reproduced, albeit that Macfarlan and Young JJA were construing the section for a different purpose (namely, whether s 18C should be construed "distributively").
I turn to the matters relied upon by the appellant as tending against that construction. 1. I would place no weight upon the use of the indefinite article "as if the ... developer ... had done the work under a contract ..." The indefinite article is syntactically appropriate for the counterfactual contract required to be assumed by the section. 2. It is true that the Kings submitted that ss 18C and 18D were similar. I disagree with that element of their submission. The two sections are dealing with quite different things. One is dealing with an entitlement of an immediate successor in title generated by the work being done under a counterfactual contract. The other is dealing with the rights of subsequent successors in title in relation to residential building work which has been done under an actual contract. However, I do not regard that difference as materially bearing upon the construction of s 18C. 3. It is also true that this result may lead to complexities in any practical case where dozens of subcontractors are employed on a site. However, as was observed in MJA, those difficulties are reduced by bearing steadily in mind that the focus is not on the built dwelling as a whole, but rather the particular residential building work of which complaint is made. In any event, the device chosen by the Parliament is to place the successor in title in the same contractual position as the owner of the land would have been in had there been a contract with the developer under which the residential building work was done. 4. The present case was one where there was a written contract between developer and builder. It is easy to contemplate cases where there was no such contract (an owner-builder is one). But, assuming as I do that the residential building work has been done lawfully, it may be expected that there will nevertheless be plans and specifications which obtained approval from the relevant consent authority, to which the analysis given above could be applied. (The issues which arise where residential building work has been done without approval are quite complex, and were not the subject of any submissions in this appeal; I do not wish to be understood as expressing a view as to the operation of s 18C in such a case.)
I have also now had the advantage of reading White JA's reasons for judgment, which focusses on the proposition that it is now known that the work done on the site did not comply with the Building Code of Australia, and thus was in contravention of condition 53 of the consent. In particular, in respect of item no 30, Mr Grubits determined that CP2 and EP1.4 of the BCA had not been met. CP2 is a performance requirement, which provides: "CP2 (a) A building must have elements which will, to the degree necessary, avoid the spread offire- (i) to exits; and (ii) to sole-occupancy units and public corridors; and (iii) between buildings; and (iv) in a building. (b) Avoidance of the spread of fire referred to in (a) must be appropriate to- (i) the function or use of the building; and (ii) the fire load; and (iii) the potential fire intensity; and (iv) the fire hazard; and (v) the number of storeys in the building; and (vi) its proximity to other property; and (vii) any active fire safety systems installed in the building; and (viii) the size of any fire compartment; and (ix) fire brigade intervention; and (x) other elements they support; and (xi) the evacuation time."
Compliance with CP2 is evaluative. It turns on an evaluation that the "elements" will avoid the spread "to the degree necessary" and in a way which was "appropriate" having regard to 11 specified characteristics of the building. The other requirement, EP 1.4, is of the same nature. It imposes a requirement that an automatic fire suppression system "be installed to the degree necessary" to control the development and spread of fire in a way which was "appropriate" to the specified characteristics of the building.
There are many ways in which those requirements can be satisfied. It is easy to envisage circumstances where there will be a dispute as to whether a proposal is "appropriate" to satisfy those requirements.
The contestability of those requirements is made explicit in condition 54 of the consent, insofar as it required supporting plans, specifications and details "demonstrating" compliance with the BCA. Conditions 53 and 54 were as follows: "53. That all relevant sections of the BCA shall be complied with. 54. That an application for a construction certificate, with supporting plans, specifications and details demonstrating compliance with conditions of this consent and the Building Code of Australia shall be lodged and no building or excavation work shall be commenced until that application has been approved and at least two days written notice of the intention to commence work has been given to the Council."
One of Mr Grubits' reports records that an application for the construction certificate was made on 24 February 2000. There is no reason to think that there was any non-compliance with condition 54, or that work was done in advance of the issue of a construction certificate (which would have been contrary to (former) s 81A of the Environmental Planning and Assessment Act). Further, at the time, the certifying authority was forbidden from issuing a construction certificate authorising a change in building use unless (a) the fire protection and structural capacity of the building will be appropriate to the new use (former Environmental Planning and Assessment Regulation 1994, cl 79E) and (b) the building would comply with the relevant requirements of the Building Code of Australia (former Environmental Planning and Assessment Regulation 1994, cl 79G).
The circumstances confronting the notional builder with a construction certificate and plans and specifications at the time may thus be summarised as follows.
If (as is now known to be necessary in order to achieve compliance with the BCA) additional sprinklers were installed in voids above bathrooms, ensuites, laundries and in sub-floor voids, that would not accord with the specifications, and thus would be a breach of (the notional) contract. It would be a breach of statutory warranty in s 18B(a). It would be unauthorised work liable to be enjoined by the consent authority (or indeed, "any person" under the open standing provisions - see former s 123 read with former s 122 of the Environmental Planning and Assessment Act), and which would, subject to defences, give rise to the offences created by former s 125 of that Act. It would be (or ought to be) be impossible to obtain certification that the work complied with the approved plans and specifications. And the fact that a construction certificate had issued meant that the notional builder could reasonably assume that the certifying authority had consider that the plans yielded a result which complied with the Building Code of Australia.
Although it is now known that the construction certificate should not have issued, my impression from the limited material in the appeal books (no submissions were made on this point) is that demonstrating all that is involved in that proposition, in its application to this development, was a far from straightforward matter.
Ultimately, I respectfully disagree with the concluding reasoning of White JA in relation to these grounds. I do so not because I have reached any final conclusion on the questions of law which are involved, turning as they do upon inconsistent statutory warranties in the notional contract, one requiring construction in accordance with the plans and specifications, the other requiring an outcome that the structure comply with the Building Code of Australia. I do not express a view on whether and if so how that conflict is to be resolved. Rather, I am not prepared to resolve this aspect of the appeal based on the way the parties have hitherto chosen to argue it.
Most of the oral and written submissions were directed to the factual matters relevant to grounds 1 and 2. The entirety of the written and oral submissions on grounds 3 and 4 reflected the parties' choice to argue these grounds in the abstract, by reference to the genus of "design defects", and on the basis that there is no hierarchy between the statutory warranties.
I appreciate that there were good reasons for adopting that stance. Grounds 1 and 2 represent, by far, the largest component of the damages to which the owners corporation is entitled, and were factually intensive. Further, the owners corporation's submission on grounds 3 and 4 was supported by statements in a body of decisions at first instance, including in The Craftsmen Restoration & Renovations Pty Ltd v Boland [2008] NSWSC 660 at [96], in The Owners Strata Plan 62930 v Kell & Rigby Holdings Pty Ltd [2010] NSWSC 612 at [329]-[330] and The Owners - Strata Plan No 68372 v Allianz Australia Insurance Ltd [2014] NSWSC 1807 at [76].
However, contrary to the appellant's submissions, I do not regard the question as merely whether one statutory warranty has priority over the other. In my view, it is necessary to consider the entirety of this highly regulated regime, and that includes the resolution of the contradictory statutory and contractual obligations, some of which are enforceable at the instance of any person and whose breach gives rise to criminal sanctions.

[68]

Conclusion

Mine is a dissenting view on these grounds. Were it otherwise, I would favour directing the parties to make further submissions directed to how the construction favoured by the appellant sits with the balance of the regime. In the absence of submissions, I do not think it would be fair to either of the parties to go significantly beyond the written and oral submissions and resolve these issues summarised above. They are neither unimportant nor, to my mind, straightforward.
However, there is no good reason to require the parties to take that course in order to permit a dissentient to reach a concluded view. Accordingly, it is sufficient that I indicate that at present I would allow the appeal, set aside the judgment below, note that success on grounds 1 and 2 entitles the appellant to judgment in its favour of $4,622,859.69, and that I would permit the parties to be heard further in relation to grounds 3 and 4.
WHITE JA: I also have had the advantage of reading in draft the judgment of Ward JA. I agree with her Honour's reasons and with the additional reasons of Leeming JA for concluding that the Kings were parties to the building contract.
I also agree with Ward JA's conclusion that the Kings were liable as developers under s 18C of the Home Building Act for breach of the statutory warranty in s 18B(c), notwithstanding that the non-compliance of the residential building work with the law was the result of design defects. However, I reach that conclusion by a different route from her Honour's.
I do not consider there is sufficient reason to depart from the view expressed by this Court in The Owners - Strata Plan No. 64757 v MJA Group Pty Ltd (2011) 81 NSWLR 426; [2011] NSWCA 236 that where there is a contract between the developer and the builder, s 18C requires the creation of a notional contract between the developer and the owners' corporation on the same terms as the actual contract between the developer and the builder. In my view that conclusion was part of the reasons that led to the decision in MJA Group that the owners' corporation's claim in that case was statute-barred. I agree with Leeming JA's reasoning that s 18C requires the making of the counter-factual assumptions to which his Honour refers and that leads to the conclusion that the written contract included the plans and specifications for the residential building work that were contained in Bonus' building contract.
The owners' corporation alleged that Beach had breached the warranty in s 18B(c) which required that the work comply with the law. The expert, Mr Grubits, concluded that parts of the work did not comply with the Building Code of Australia ("the BCA"). The BCA was part of the law applicable to the construction of the building.
Contrary to the view of Leeming JA at [348], the plans and specifications were not compliant with all of the terms of the development approval as the work was required to comply with the BCA. The point made by the Kings in their written submissions was that the statutory warranty in s 18B(c) was not that the plans and specifications themselves complied with the law, but rather, so the Kings submitted, that work done in accordance with the plans and specifications complied with the law.
The primary judge observed (at [65]): "65. Relying on the reports of Mr Grubits, the Owners Corporation submits that each of these defects involves a breach of the warranty implied by s 18B(c) (that the work will comply with any law) because the relevant work did not comply with the Building Code of Australia 1996 (BCA). That breach of the law arises because the Development Approval in respect of the project imposed as condition (53) on the approval that 'all relevant sections of the BCA shall be complied with'. Section 76A(1) of the Environmental Planning and Assessment Act 1979 (NSW) (the EPA Act) relevantly provided: If an environmental planning instrument provides that specified development may not be carried out except with development consent, a person must not carry the development out on land to which the provision applies unless: (a) … (b) the development is carried out in accordance with the consent and the instrument. The result is that a failure to comply with the relevant provisions of the BCA is a breach of s 76A(1) of the EPA Act."
The Kings did not dispute that a failure to comply with the relevant provisions of the BCA was a breach of s 76A(1) of the Environmental Planning and Assessment Act 1979 (NSW). Moreover, clause 78A of the Environmental Planning and Assessment Regulation 1994 (as amended by the Environmental Planning and Assessment Amendment Regulation 1998 and the Environmental Planning and Assessment Amendment Regulation 1999), as in force at July 2000, provided that: "All building work (other than work relating to the erection of a temporary building) must be carried out in accordance with the requirements of the Building Code of Australia (as in force on the date the application for the relevant construction certificate or complying development certificate was made)."
The primary judge said: "66. Mr Grubits expresses the unchallenged opinion that each of the identified breaches involved a failure in design - that is, the relevant items were not shown in the drawings or specifications that formed part of the contract. 67. In my opinion, the relevant defects do not involve a breach by Beach (or the Kings) of the warranty implied by s 18B(c) of the HBA. That warranty is not a warranty that the project will comply with the law. It is a warranty that 'the work will be done in accordance with … the law'. The 'work' is the work done under the contract into which the warranties are implied. In this case, Beach was not responsible for the relevant design. Its obligation under the contract was to construct the development in accordance with the plans and specifications that formed part of the contract. The warranty was not a warranty that those plans and specifications complied with the law but a warranty that the work done in accordance with the plans and specifications complied with the law. That warranty was not breached."
In fact, the work done in accordance with the plans and specifications did not comply with the law. This was the result of defective design. The issue thrown up by the asserted conflict between the warranties in s 18B(a) and (c) in the circumstances of this case are not resolved by the characterisation of "the work" in s 18B(c) adopted by the primary judge.
The primary judge's finding is consistent with the reasoning of Mr Grubits that in his opinion the warranty in subpara (a) of s 18B took precedence over the warranty in subpara (c) so that if the reason that the residential building work did not comply with the law was because of a defect in the plans and specifications, then the statutory warranty in s 18B(c) was not breached. Mr Grubits identified four reasons for that opinion, namely: "- The builder has contractual obligations to build according to the plans and specifications. - The builder is unlikely to possess the specialist BCA expertise required to determine compliance with the BCA, particularly for a complex building with a number of Alternative Solutions. - The builder does not have design responsibility and therefore has to accept design advice, and - The hierarchy of the clauses in the HBA can be considered to infer a priority order."
To take the case of item no. 30 to which Leeming JA refers, being the absence of sprinkler protection in voids, Mr Grubits said that the performance requirements "CP2 and EP1.4" in the BCA were not met. This was a design error as the sprinkler design drawings did not show sprinklers in concealed spaces. Mr Grubits said that this was a failure to comply with performance requirements of the BCA "CP2 and EP1.4". Clause CP2 contained the requirement that a building have elements which would, to the degree necessary, avoid the spread of fire to exits and to sole occupancy units and public corridors. EP1.4 was a performance requirement that an automatic fire suppression system be installed to the degree necessary to control the development and spread of fire appropriate to the size of the fire compartment, the function or use of the building, the fire hazard and the height of the building.
The warranties in s 18B (set out in the judgment of Ward JA at [240]) are cumulative; each can be considered independently and without reference to precedence. If the warranties are complied with the residential building work will be carried out in a proper and workmanlike manner and in accordance with the plans and specifications in the contract, the materials will be good and suitable and new (unless otherwise stated), the work will comply with any law, the work will be done with due diligence and within the time stipulated or within a reasonable time, the result of the work will be a dwelling reasonably fit for occupation as such, and, that the work and materials will be reasonably fit for a specified purpose or result if that purpose or result has been made known in a way so as to show that the owner relies on the licence holder's skill and judgment. The assumption is that if the work is done in accordance with the plans and specifications it will comply with the law.
The issue raised in this case is what is the position if work is done in accordance with plans and specifications set out in the contract, but that work does not comply with a law? The same question might arise under s 18B(b) that provides a statutory warranty that materials supplied will be good and suitable for their purpose. What is the position if the specifications provide for the use of materials that are not suitable for their purpose?
The primary judge considered that the "work" referred to in s 18B(c) is the work done under the contract into which the warranties are implied and because Beach's obligation was to construct the development in accordance with the plans and specifications that formed part of the contract, there was no breach of the warranty in s 18B(c) (at [67] quoted at [395] above).
I do not agree. The expression "the work" is first used in s 18B(a) which stated (at that time) 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. That is a reference to "residential building work" referred to in the chapeau to s 18B. The reference to "the work" in s 18B(c) is again a reference to residential building work. As Ward JA observes (at [271] above) in s 18C references to "the work" are to the "residential building work" which has been "done" by the developer. "Residential building work" means, relevantly, "any work involved in ... the construction of a dwelling" (definitions, s 3). It was the work involved in the construction of the dwelling that was required to comply with any law.
This conclusion follows from the text of the legislation. It is confirmed by the purpose of the provision explained in the Minister's Second Reading Speech quoted by Ward JA at [289] that emphasises the then government's intention to "tighten up" the content of home building contracts to redress what was considered to be a process that hitherto had been heavily skewed in favour of the builder. There is nothing in the Second Reading Speech that suggests that any of the statutory warranties could be modified by the contractual terms. To the contrary, the Minister said that "these statutory warranties will not be able to be excluded by any provision of the contract ...".
If the construction of s 18B(c) adopted by the primary judge were correct then it would follow that not only the warranty provided in that paragraph, but also the warranty provided in s 18B(b) could be excluded by a builder's including in the building contract plans for the construction of the building and specifications for the materials to be used in that construction that did not comply with the requirements of the Building Code of Australia, notwithstanding that the Building Code had the force of law. That construction should not be accepted.
The Kings did not seek to support the construction adopted by the primary judge by reference to the reasons in Mr Grubits' report quoted at [397] above that: "- The builder is unlikely to possess the specialist BCA expertise required to determine compliance with the BCA, particularly for a complex building with a number of Alternative Solutions. - The builder does not have design responsibility and therefore has to accept design advice, and - The hierarchy of the clauses in the HBA can be considered to infer a priority order."
The factual premises of that contention should be accepted in the absence of any contradictory material. But the question is not whether it is fair to impose upon the builder responsibility for the failure of the building work to comply with the BCA, but whether s 18B(c) imposes that responsibility. Where the BCA has the force of law, that responsibility is imposed. If the builder has to rely upon the expertise of another, such as an architect or a fire safety consultant, to satisfy the builder's statutory warranty, then the builder might be well advised to negotiate contractual protection for the builder's potential statutory liability. That is not such an extreme outcome that would displace what is otherwise the natural construction of s 18B(c).
The order of provisions is sometimes relevant in the construction of deeds or contracts. Where a contract or deed contains conflicting provisions such that a later provision "destroys altogether the obligation created by the earlier clause" (Forbes v Git [1922] 1 AC 256 at 259) the later provision will be rejected as repugnant to the former. This is a principle of last resort to which recourse may be had only when every other avenue of resolving inconsistencies has been exhausted (Hume Steel Ltd v Attorney-General (Vic) (1927) 39 CLR 455 at 465; Durbin v Perpetual Trustee Co Ltd (1995) NSW ConvR 55-725 at 55,603-4). Generally, inconsistencies in a contract can be resolved by ascertaining the parties' intentions from the language they have used, considering the document as a whole, and endeavouring to harmonise the conflicting parts so as to give effect to each of them. If the later clause can be read as qualifying rather than destroying the effect of the earlier clause, the two will be read together (Australian Guarantee Corporation Ltd v Balding (1930) 43 CLR 140 at 151; Re Media Entertainment & Arts Alliance; Ex parte Hoyts Corp Pty Ltd (No 1) (1993) 178 CLR 379 at 386-7; Lewison and Hughes, The Interpretation of Contracts in Australia (2012, Law Book Co) [9.08], [9.13]).
The statutory warranties can be read together. The builder warrants both that the work will be carried out in accordance with the plans and specifications and that it will comply with the law. Impliedly the builder warrants that the construction of the work in accordance with the plans and specifications will comply with the law. The order of precedence does not mean that s 18B(c) has no application if the non-compliance with the law is the result of design defects in the plans and specifications.
The construction of s 18B that I prefer is consistent with and supported by the decisions of Howie J in The Craftsman Restoration & Renovations v Boland [2008] NSWSC 660 at [96]-[97]), Ward J (as her Honour then was) in The Owners Strata Plan 62930 v Kell & Rigby Holdings Pty Ltd [2010] NSWSC 612 at [329]-[330], and Ball J in The Owners - Strata Plan No 68372 v Allianz Australia Insurance Ltd [2014] NSWSC 1807 at [76].
In my view, the appeal in relation to the primary judge's findings on "design defects" should be upheld on the ground that the defects in question contravened the statutory warranty in s 18B(c) in the contract between Beach and Meridian and the Kings, that is imported into the notional contract between the Kings and the owners' corporation under s 18C.
For these reasons I agree with the orders proposed by Ward JA.

Parties

Applicant/Plaintiff:

The Owners - Strata Plan No 66375

Respondent/Defendant:

King

Legislation Cited (13)

Suitors' Fund Act 1951(NSW)

Building Services Corporation Legislation Amendment Act 1996(NSW)

Environmental Planning and Assessment Regulation 1994(NSW)

Home Building Amendment Act 2011(NSW)

Home Building Regulation 1997(NSW)

Strata Schemes (Freehold Development) Act 1973(NSW)

Strata Schemes Management Act 1996(NSW)

Home Building Act 1989(NSW)s 3A, ss 18B

Environmental Planning and Assessment Act 1979(NSW)ss 76A(1), 81A, 122, 123, 125

Evidence Act 1995(NSW)

Interpretation Act 1987(NSW)

Supreme Court Act 1970(NSW)

Uniform Civil Procedure Rules 2005(NSW)r 51.53.

Cases Cited (56)

nd Dwellings Co Ltd v Finsbury Borough Council [1952] AC 109 East West Airlines Ltd v Turner [2010] NSWCA 53 Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 Festa Holdings Pty Ltd (in liq) v Adderton [2004] NSWCA 228; (2004) 12 BPR 22,491 Fightvision Pty Ltd v Onisforou (1999) 47 NSWLR 473; [1999] NSWCA 323 Forbes v Git [1922] 1 AC 256 Gardez Nominees Pty Ltd v NSW Self Insurance Corporation [2016] NSWSC 532 Holloway v McFeeters (1956) 94 CLR 470; [1956] HCA 25 Hume Steel Ltd v Attorney-General (Vic) (1927) 39 CLR 455 Hunter Douglas Australia Pty Ltd Perma Blinds (1970) 122 CLR 49 Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 Masters Home Improvement Australia Pty Ltd v North East Solutions Pty Ltd [2017] VSCA 88 Masters v Cameron (1954) 91 CLR 353; [1954] HCA 72 Metal Manufacturers Ltd v Lewis (1988) 13 NSWLR 315 MyEnvironment Inc v VicForests (2013) 42 VR 456; [2013] VSCA 356 National Commercial Banking Corporation of Australia Ltd v Cheung (1983) 1 ACLC 1326 NEC Information Systems Australia Pty Limited v Linton (1985) NSW ConvR 55-240 Payne v Parker [1976] 1 NSWLR 191 Pisano v Dandris [2014] NSWSC 1070; (2014) 17 BPR 33,583 Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28 Re Media Entertainment & Arts Alliance; Ex parte Hoyts Corp Pty Ltd (No 1) (1993) 178 CLR 379 RHG Mortgage Ltd v lanni [2015] NSWCA 56 SAS Realty Developments Pty Ltd v Kerr [2013] NSWCA 56 Scottish Amicable Life Assurance Society v Reg Austin Insurances Pty Ltd (1985) 9 ACLR 909 Stucoid Pty Ltd v Stadiums Pty Ltd (1960) 107 CLR 521; [1960] HCA 41 SZTAL v Minister for Immigration and Border Protection [2017] HCA 34; (2017) 91 ALJR 936 The Craftsmen Restoration & Renovations v Boland [2008] NSWSC 660 The Owners - Strata Plan No 64757 v MJA Group Pty Ltd (2011) 81 NSWLR 426; [2011] NSWCA 236 The Owners Strata Plan 62930 v Kell & Rigby Holdings Pty Ltd [2010] NSWSC 612 The Owners Strata Plan No 66375 v Suncorp Metway Insurance Ltd (No 2) [2017] NSWSC 739 The Owners Strata Plan No. 68372 v Allianz Australia Insurance Ltd [2014] NSWSC 1807 Valuer-General of New South Wales v In Adam Pty Ltd [2012] NSWCA 20 Vero Insurance Ltd v Kassem [2011] NSWCA 381; (2011) 86 ACSR 607 Victims Compensation Fund Corporation v Brown [2003] HCA 54; (2003) 77 ALJR 1797 West v Government Insurance Office (NSW) (1981) 148 CLR 62; [1981] HCA 38 Texts Cited: Lewison and Hughes, The Interpretation of Contracts in Australia (2012) Pearce and Geddes, Statutory Interpretation in Australia (8th ed, 2014) Category: Principal judgment Parties: The Owners - Strata Plan No 66375 (Appellant) David Russell King (First Respondent) Gwendoline Louise King (Second Respondent) Representation: Counsel: M Ashhurst SC with P Bambagiotti (Appellant) I G Roberts SC with L Shipway (Respondents)

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