The Owners - Strata Plan No 79707 v ; Trilogy Capital Services Pty Ltd

Background

1. Annexed to these reasons is a chronology derived from similar chronologies provided by the separate parties. Complicated at first glance, the salient features are these: 1. TCS and TD purchased a block of land and obtained development consent to build a mixed commercial/residential building. 2. TCS and TD owned the land as tenants in common, TD as to 75% and TCS as to 25%. 3. TD contracted with the builder to construct the works, the Construction Certificate being issued on 8 May 2006. The Certificate of Practical Completion of the works was issued on 5 September 2007. The Occupation Certificate for the residential portion of the building was issued on 30 October 2007. 4. Between August and November 2007 TD and TCS made necessary arrangements to apply to the relevant authority, North Sydney Council, for two subdivisions of the premises. First, a stratum subdivision into 2 lots, Lot 1 being for the commercial premises and Lot 2 for the residential premises. Second, a strata subdivision, for Lot 1 to be divided into 7 commercial lots, and Lot 2 into 17 residential lots. 5. At the same approximate time, TD and TCS arranged to transfer their respective holdings to each at a price of $1.00, so that TCS owned 100% of Lot 1 and TD owned 100% of Lot 2. Those transfers were made on 15 November 2007 and were registered on 30 November 2007. 6. On 29 November 2007 the stratum subdivision of the property into Lots 1 and 2 was registered. 7. Finally, on 19 December 2007 strata plans 79706 and 79707 were registered. Strata Plan 79706 referred to the commercial portion, owned by TCS. Strata Plan 79707 referred to the residential portion, owned by TD. The owners, the applicant in these proceedings, of course, are the owners of Strata Plan 79707, the residential strata plan.
2. Those facts are essentially agreed by the parties, although some of the dates differ between them. However, the chronology itself, that is, the chronological order, is agreed.

The Statutory Provisions

1. The issues between the parties fall to be resolved by a consideration of the following provisions of the Home Building Act 1989 "The Act").
2. Section 3A of the Act states: 3A Application of provisions to developers (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 in relation to that residential building work. (1A) Residential building work done on land in the circumstances set out in subsection (2) is, for the purpose of determining who is a developer in relation to the work, deemed to have been done on behalf of the owner of the land (in addition to any person on whose behalf the work was actually done). Note. This makes the owner of the land a developer even if the work is actually done on behalf of another person (for example, on behalf of a party to a joint venture agreement with the owner for the development of the land). The other person on whose behalf the work is actually done is also a developer in relation to 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, or (b) …
3. At the relevant time, s18C of the Act 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 contractor licence, a former holder or a developer who has done residential building work on land is entitled to the benefit of the statutory warranties as if the owner-builder, holder, former holder or developer were required to hold a contractor licence and had done the work under a contract with that successor in title to do the work.
4. The submissions of the parties also refer to s18 of the Strata Schemes (Freehold Development) Act 1973: 18 Vesting of common property on registration of strata plan Upon registration of a strata plan any common property in that plan vests in the body corporate for the estate or interest evidenced by the folio of the Register comprising the land the subject of that plan but freed and discharged from any mortgage, charge, covenant charge, lease, writ or caveat affecting that land immediately before registration of that plan. … (2) …
5. Finally, the parties refer to the Environmental Planning and Assessment Act 1979, s 4 of which provides: 4B Subdivision of land (1)For the purposes of this Act, subdivision of land means the division of land into two or more parts that, after the division, would be obviously adapted for separate occupation, use or disposition. The division may (but need not) be effected: (a) by conveyance, transfer or partition, or (b) by any agreement, dealing, plan or instrument rendering different parts of the land available for separate occupation, use or disposition.

Applicant

1. Section 3A(1A) of the Act means that, although TCS was not a party to the contract between TD and the builder, because TCS was a registered proprietor of the land the building works are deemed to have been done on behalf of TCS as well, provided the circumstances set out in s 3A(2) are met.
2. By s 3A(1) of the Act, because the work is deemed to have been done on behalf of TCS, that makes TCS a developer.
3. Next, TCS comes within s 3A(2)(a) of the Act because the residential building work was done in circumstances where TCS owns or will own 4 or more of the existing or proposed dwellings. The applicant submits that is the case because by, or on, 29 November 2007 the physical construction of the building was completed, the proposed residential dwellings had come into being and TCS owned as tenant in common a 25% share of both Lot 1 (3/614818) and Lot 2 (12/600652) the latter of which was registered on that date.

Respondent

1. The respondent seeks to refute the applicant's submissions, first in relation to the proper meaning of s 18C. There are two aspects of that submission: one is that the applicant must be the "immediate" successor in title, and the other is that the respondent must be "a developer who has done residential building work on land".
2. In relation to the first aspect of that submission, the respondent asserts that the "owner-builder, a holder of a contractor licence, a former holder or a developer who has done residential building work on land" to whom or which the owners corporation is the immediate successor in title is to be considered in that capacity as at the date the lot is subdivided by registration of the strata plan. This is because it is at this time that ownership of the common property passes from the owner to the owners corporation: s 18 Strata Schemes (Freehold Development) Act 1973.
3. Returning now to the summary chronology set out in paragraph 4 above, the respondent submits that the stratum subdivision into Lots 1 and 2 meant that each such Lot could be separately occupied, used and transferred: s4 Environmental Planning and Assessment Act 1979. Therefore, the subdivision of the building on 29 November 2007 resulted in TD having effective 100% ownership of the residential lots while TCS correspondingly had 100% ownership of the commercial lots. This is because on 15 November 2007 TCS transferred its interest in the residential Lot (Lot 2) to TD and, although this is not relevant, TD transferred its interest in the commercial Lot (Lot 1) to TCS.
4. On registration of the strata plan the subject of these proceedings, ownership thus passed from TD to the applicant owners (that is, in relation to the common property).
5. The respondent also submits that the word "immediate" has its dictionary meaning and must refer to the moment ownership passes to the applicant.
6. For those reasons, the respondent submits, the owners do not have the benefit of the statutory warranties because they do not come within s 18C of the Act.
7. Turning now to the respondent's submission in relation to whether the respondent can be characterised as a "developer" pursuant to s 3A of the Act, the respondent submits that a corporation (in this case) can only be a developer if residential work is done on its behalf in the circumstances set out in s 3A(2). While the respondent concedes the relevant works were done in relation to a residential development and the work was in connection with proposed dwellings, the proposed dwellings (or at least 4 of them) were not to be owned by the respondent, and therefore the respondent was not "in the circumstances" set out in s 3A(2).
8. The respondent submits further that such ownership (that is, ownership of 4 separate residential lots) could only occur when the strata scheme was "issued", by which time the respondent did not own any of the residential dwellings. It is true the respondent owned 25% of the land on which the proposed residential dwellings were to be built and would come into existence "on completion and subdivision" but the respondent would own none of those residential dwellings.
9. The respondent submits that s 3A(2) is problematic because the circumstance as to time in s 3A(2)(a) is indefinite. The determination as to who will own which lots (in relation to "proposed lots") must be done at a time when the work is done. The respondent expresses this in the following words: "… if it is known that the Respondent owns no lots in the dwellings constructed on the land when those lots come into existence and are capable of being owned then it is not a developer i.e. the Respondent owned none of the Residential Strata Lots at the time each separate lot being the proposed dwellings were created."

Consideration and Determination

1. In my opinion the essential or crucial distinction between the parties is that the applicant submits that the residential dwellings having come into physical existence by 29 November 2007, at which date TCS was still a 25% owner of both lots as tenant in common, then TCS at that date did own "4 or more" of the residential lots, whereas the respondent submits, while not disputing the above statement, that by the time the applicant became successor in title to whomever owned the residential lots (which occurred on 19 December 2007), only TD owned the residential lots, even if it were accepted that previously TCS owned 25% of the residential lots as tenant in common. Therefore, the applicant is not the immediate successor in title to TCS.
2. I have noted that the respondent did not dispute the assertion by the applicant that by 29 November 2007 the residential lots were in existence and were part-owned by the respondent. However, I do not mean to find that the respondent agrees with the submission. Rather, the respondent is submitting that "either way, the applicant was not the immediate successor in title".
3. In my opinion, the respondent's submission is good. S18 of the Strata Schemes (Freehold Development) Act 1973 makes it plain that ownership of the common property passes to the owners corporation (the applicant) on registration of the strata plan: it is at that moment that the owners corporation becomes the successor in title to the entity who on the date of registration owned the residential lots. In this case, that was TD, not TCS. "Immediate" includes within its meanings not only the sense of "no intervening time" but also "no intervening agent or medium" (Macquarie Dictionary, Revised Edition, 1991).
4. I am not convinced by the respondent's second main submission, that in relation to s 3A(2)(a), that the respondent is not a developer because it was not intended that the respondent would own 4 or more of the residential dwellings when they came into existence. The submission itself has some force in terms of the section, but the problem I have with it is that an entity in the position of the respondent in this case and TD could change such an intention, even more than once, in the period before the residential units come into being and for that matter, after the residential units come into being at least physically. To the extent that the respondent has crafted its submission to meet that difficulty, in relation to the time at which such determination is made, it tends to merge with the first submission, that is, who is the owner at the time the lots come into being at the time of registration of the strata plan.
5. The respondent does not further analyse that submission but consider the situation that would arise if, say, the respondent and TD had signed an agreement, before registration of the strata plan, to transfer their holdings in the respective commercial and residential lots after the strata plan was registered. It may be clear that the respondent "would not own" any residential lots, but nevertheless in such circumstances I would find the applicant was an immediate successor in title to both owners, including the respondent, and this claim could proceed.
6. In any case, I am satisfied the respondent has demonstrated that the applicant is not the immediate successor in title to the owner of the residential lots and therefore does not have the benefit of the statutory warranties.

Annexure: Chronology G Meadows Senior Member Civil and Administrative Tribunal of New South Wales 6 November 2014 I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 05 February 2015