The Owners-Strata Plan No.79707 (the appellant) has appealed a decision of the Tribunal which declared that Trilogy Capital Services Pty Ltd (the respondent) was not a developer in relation to the residential building work to the common property of Strata Plan No 79707. The effect of the declaration is that the appellant is not entitled to the benefit of statutory warranties under s18B of the Home Building Act 1989 (the Act) and the appellant cannot maintain its claim for defective work against the respondent.
For the purpose of the hearing of the proceedings before the Tribunal, the parties agreed that the Tribunal should determine a preliminary issue. In fact it appears that there were three preliminary issues to be determined by the Tribunal. They were:
1. "whether Trilolgy Services is a 'developer' in relation to the residential building work to the common property of Strata Plan No. 79707".
2. "whether or not in circumstances where the [appellant] became the owners corporation of the Strata Plan SP 979707 containing 17 residential units at the time when Lot 102 in SP1118872 from which the strata plan was created was not owned by the respondent, the [appellant] could be, for the purpose of section 18C of the Home Building Act 1989 … an immediate successor in title to the respondent."
3. "whether the [owners corporation is] entitled to claim against (sic) breach of the statutory warranties against Trilogy Services, as successors in title pursuant to Section 18D of the Act."
The chronological facts relevant to these proceedings are not controversial and are agreed between the parties. Annexed to these reasons is a chronology which was annexed to the reasons of the Tribunal member. The facts recorded in the chronology are apparently essentially agreed by the parties, although there may be some dates where there is a difference between the parties.
The respondent and Trilogy Capital (Cremorne Developments) Pty Ltd (TCD) purchased a block of land as tenants in common. TCD as to 75% and the respondent as to 25%.
They later obtained development consent to build a mixed commercial and residential building.
TCD contracted with a third party builder to construct the works. The construction certificate was issued on 8 May 2006. The certificate of practical completion was issued on 5 September 2007. The occupation certificate for the residential portion of the work was issued on 30 October 2007.
Between August and November 2007 TCD and the respondent applied to the local 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. Secondly, a strata subdivision for Lot 1 to be divided into 7 commercial lots and Lot 2 into 17 residential lots.
TCD and the respondent also arranged to transfer their respective holdings to each other at a price of $1.00, so that the respondent owned 100% of Lot 1 and TCD owned 100% of Lot 2. Those transfers were made on 15 November 2007. As of this date the respondent held no proprietary interest in the residential premises, the subject of these proceedings. On 29 November 2007 the stratum subdivision of the property into Lots 1 and 2 was registered.
On 19 December 2007 strata plans 79706 and 79707 were separately registered. Strata Plan 79706 referred to the commercial portion, owned by the respondent. Strata Plan 79707 referred to the residential portion of the strata plan.
It is in respect of defective work on common property of the residential portion of the strata plan that the appellant commenced proceedings against the respondent, claiming the respondent was a "developer" for the purpose of the Act and thus liable for the defective work. The proceedings were commenced shortly before the expiration of the seven year limit prescribed by section 18B of the Act.
The respondent denied liability, contending it was not a "developer" for the purpose of the Act, seeking dismissal of the application.
[2]
The statutory framework
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) the residential building work is done in connection with an existing or proposed retirement village or accommodation specially designed for the disabled where all of the residential units are or will be owned by the individual, partnership or corporation.
At the relevant time s18C of the Act provided:
18C Warranties as to work by others
(1) A person who is the immediate successor in title to an owner-builder, a holder of a contractor license, 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 license and had done the work under a contract with that successor in title to do the work.
(2) For the purpose of this section, residential building work done on behalf of a developer is taken to have been done by the developer.
Section 18D (1) provided:
Extension of Statutory Warranties
(1) A person who is a successor in title to a person entitled to the benefit of a statutory warranty under this Act is entitled to the same rights as the person's predecessor in title in respect of the statutory warranty.
In their submissions to the Tribunal, both parties referred to s18 of the Strata Schemes (Freehold Development) Act 1973 which was in these terms:
18 Vesting of common property on registration of strata plan
(1)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 the registration of that plan.
(2)…
The appeal proceeds as of right from a decision of the Consumer and Commercial Division on a question of law only. It is the appellant's contention that the Tribunal erred in finding that:
1. the respondent is not a developer in relation to the residential building work to the common property of strata plan number 79707;
2. the respondent is not a successor in title to the developer;
3. the statutory warranties under section 18B of the Act are not enforceable by the owners of strata plan number 79707 against the respondent;
4. on a question of law in construing sections 3A and 18 C;
5. the Tribunal failed to consider section 18 D of the Act.
The appellant also submitted that the Appeal Panel ought to substitute orders that the statutory warranties under section 18C of the Act are enforceable by the appellant against the respondent under section 18D and make orders that the matter be remitted to the Consumer and Commercial Division to determine the nature and scope of the defective building work; the breaches of the statutory warranties; and the quantum of the appellant's loss and damage arising from those breaches.
Section 3 of the Act and schedule 1 define "owner" and "dwelling" as follows:
owner
of land means the only person who, or each person who jointly or severally, at law or in equity:
(a)is entitled to the land for an estate of freehold in possession, or
(b)is entitled to receive, or receives, or if the land were let to a tenant would be entitled to receive, the rents and profits of the land, whether as beneficial owner, trustee, mortgagee in possession or otherwise.
dwelling means a building or portion of a building that is designed, constructed or adapted for use as a dwelling (such as a detached or semi-detached house, transportable house, terrace or townhouse, duplex, villa-home, strata or company title home unit or residential flat).
[3]
Section 3A (2) (a) of the Act
The appellant's submission was that the respondent was a developer as the circumstances set out in s3A (2) (a) of the Act were met, since on 28 November 2007:
1. the residential building work, being the physical construction of 17 residential units had been constructed and completed while the respondent owned the land as shown by:
1. the certificate of practical completion being issued on 5 September 2007; and
2. the final occupation certificate which was issued on 30 October 2007;
1. the proposed 17 residential strata lots were therefore in physical existence and completed and were proposed residential strata lots on registration of the strata plan SP79707; and
2. the respondent owned a 25% share as tenant in common of lot 3/614818 and lot 12/600652, and therefore a 25% share of the proposed 17 residential strata units in what later on 19 December 2007 became strata plan No. 79707.
Consequently, and in the circumstances, the respondent was a developer within the meaning of section 3A of the Act.
[4]
Section 18C - an immediate successor in title to developer
The appellant made the following submissions on these matters:
1. for the reasons set out in par 18 above, for the purposes of 18C, the respondent was a developer;
2. TCD was also a developer of the land;
3. the respondent and TCD were jointly the developer and therefore the term "developer" for the purpose of s18C could be read as either:
1. the developer (jointly) or ;
2. the developer - comprising two or more developer(s);
1. developer (jointly) - the respondent transferred its interest in the title to TCD, however TCD was still part of the original developer and therefore this transfer had no effect for the purposes of s18C. The appellant in taking title from TCD was the immediate successor to the developer (jointly) as there was no intervening transfer to a party who was not either the respondent or TCD being the developer (jointly);
2. developer(s) - the respondent was a developer but jointly with TCD they were the developer. The appellant was the successor in title to a developer being the respondent however the liability under s18C was by the developer being both the respondent and TCD;
3. this interpretation was supported by not only the wording of s18C (1) but also the wording of s18C (2) which states "work done on behalf of a developer is taken to have been done by the developer";
4. the respondent was therefore liable to the appellant under s18C (1) of the Act.
[5]
Section 18D - successor in title to person entitled to the benefit of a statutory warranty
The appellant made the following submissions on these matters:
1. pursuant to section 18D of the Act:
1. a person who is a successor in title ([TCD] from [the appellant] and then [the appellant] from [the respondent]) ;
2. to a person entitled to the benefit of a statutory warranty under the Act ([TCD] has rights for breaches of statutory warranty against [the appellant] as developer pursuant to s78C of the Act);
3. is entitled to the same rights as the person's predecessor in title ([the appellant] therefore has the same rights as [TCD] against [the respondent] as a developer) in respect of the statutory warranty.
1. the residential building work was completed by the time that the respondent transferred its interest in the land to TCD. As a result TCD took the property as the immediate successor in title from the respondent who was a developer, and so TCD could enforce the statutory warranties against the respondent pursuant to s18C of the Act;
2. section 18D of the Act states that the appellant as a successor in title to TCD can enforce the rights previously held by TCD pursuant to section 18C against the respondent;
3. therefore, even if it is found that the appellant were not the immediate successor in title to the respondent (pursuant to s18C), the appellant was a successor in title to TCD. Since the appellant was a successor in title to TCD (who was entitled to the benefit of the statutory warranties under s18C against the respondent), the appellant was entitled to the same rights as TCD in respect of the statutory warranties pursuant to s18D.
[6]
Was the respondent a developer
We are of the view that here, the proposed residential development referred to in s 3A of the Act, was the development of a building comprising 17 strata title home units, each of which was a dwelling within the meaning of that word in s3A (2).
We are also of the view that it was not proposed that four or more of those strata home units would be owned by the respondent. The strata home units could not be owned until after the strata plan had been registered. It was never the intention that the respondent would own any of those strata home units after the strata plan had been registered. We are therefore of the opinion that the respondent was not a developer within the meaning of s3A of the Act.
[7]
Was the appellant an immediate successor in title to the respondent
The appellant acquired title to the common property upon registration of the strata plan (s18 (1) Strata Schemes (Freehold Development) Act 1973 - see par 14 above).
Immediately prior to that registration, the land which would become common property, was owned by the owner of the land on which the proposed strata residential building was built. That land was lot 2 and the owner of that land was TCD. Accordingly upon registration of the strata plan, the appellant became the immediate successor in title to TCD. It was not the immediate successor in title to the respondent.
So far as the appellant's submissions recorded at par 19 (b) - (g) above are concerned, the appeal panel does not accept them for the following reasons:
1. the respondent was never a developer in relation to the residential building work because it was never the intention that the respondent would own any of the strata home units after the strata plan was registered (see pars 21 and 22 above);
2. as it was never such a developer, it was not a joint developer with TCD, nor was it and TCD the developer.
[8]
Was the appellant a successor in title to a person entitled to the benefit of a statutory warranty
Although the third preliminary issue raised a question concerning the meaning of s18D of the Act, and although the appellant made submissions to the Tribunal on s18D, the Tribunal member did not make any reference to that section in his reasons for decision. This resulted in the appellant relying upon the fifth ground of appeal set out in par 15 above.
However as we are of the view that the appellant's submissions concerning s18D should be rejected, it follows that the failure of the Tribunal member to refer to, or deal with, the section in his reasons for decision, has no effect upon the outcome of the appeal.
It appears to be conceded by the appellant that in order for the appellant to succeed against the respondent on a cause of action based on s18D, it is necessary that the respondent be a developer (see par 20 (a) and (b) above. See also par 6.1 of the respondent's submissions: "For the reasons set out in paragraphs 4.1 to 4.10 above, it is submitted that there is no application of section 18D of the Act as the [appellant was] not the successor in title to a developer". The conclusion that [the respondent] is not a "developer" is sufficient to additionally dispose of this appeal." There was no response to that submission in the appellant's reply submissions on appeal 10 April 2015.
Whether that be conceded or not, we are of the view that in order for the respondent to succeed on a cause of action based on s18D, it Is necessary for the respondent to be a developer. For the reasons set out above we are of the view that the respondent is not a developer.
[9]
Costs
Each party has sought an order against the opposing party that the opposing party pay the other party's costs of the appeal and of the hearing at first instance.
Section 60 (1) and (2) of the Civil and Administrative Tribunal Act 2013 in effect provide that each party is to pay the party's own costs but the Tribunal may award costs in relation to proceedings before it only if it is satisfied that there are special circumstances warranting an award of costs.
Section 60 (3) sets out 7 circumstances which the Tribunal may have regard to in determining whether there are special circumstances warranting an award of costs. Two of those circumstances are: (1) the nature and complexity of the proceedings; and (2) any other matter that the Tribunal considers relevant.
Both parties made submissions on costs, on issues which no longer arise having regard to the fact that the appeal will be dismissed.
The appeal panel is of the view that a number of legal issues which were raised in the proceedings resulted in the proceedings becoming complex. Both parties engaged lawyers to prepare detailed written submissions and appear at the hearing of the appeal. Lawyers appeared for the parties at the hearing before the Tribunal member. These matters satisfy the appeal panel that there are special circumstances warranting an award of costs. The appeal panel therefore proposes to order that the appellant pay the respondent's costs of the application lodged by the appellant and determined by the Tribunal member and the respondent's costs of the appeal.
[10]
Orders
The appeal panel answers the three preliminary issues as follows:
Question 1: whether the respondent is a 'developer' in relation to the residential building work to the common property of Strata Plan No. 79707.
Answer 1: No.
Question 2: whether or not in circumstances where the appellant became the owners corporation of the Strata Plan SP 979707 containing 17 residential units at the time when Lot 102 in SP1118872 from which the strata plan was created was not owned by the respondent, the appellant could be, for the purpose of section 18C of the Home Building Act 1989 … an immediate successor in title to the respondent.
Answer 2: No.
Question 3: whether the appellant is entitled to claim breach of the statutory warranties against the respondent, as successor in title pursuant to s18D of the Act.
Answer 3: No.
The appeal panel orders that the appeal be dismissed.
The appeal panel orders that the appellant pay the respondent's costs of the application lodged by the appellant and determined by the Tribunal member and the respondent's costs of the appeal.
[11]
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: 17 August 2015