Owners Corporation SP 72357 v Dasco Constructions Pty Limited & Ors [2010] NSWSC 819 (27 July 2010)

Last Updated: 28 July 2010

NEW SOUTH WALES SUPREME COURT

CITATION:
Owners Corporation SP 72357 v Dasco Constructions Pty Limited & Ors [2010] NSWSC 819


JURISDICTION:
Equity Division
Technology and Construction

FILE NUMBER(S):
2009/00298834

HEARING DATE(S):
23/07/10

JUDGMENT DATE:
27 July 2010

PARTIES:
Owners Corporation SP 72357 (Plaintiff)
Dasco Construction Pty Limited (First Defendant)
Lyall Ernest Dix (Second Defendant)
Dix Gardner Pty Limited (Third Defendant)
Peter Prasad Maharaj (Fourth Defendant)



JUDGMENT OF:
Einstein J

LOWER COURT JURISDICTION:
Not Applicable

LOWER COURT FILE NUMBER(S):
Not Applicable

LOWER COURT JUDICIAL OFFICER:
Not Applicable



COUNSEL:
Mr H J A Neal (Plaintiff)
Mr I G B Roberts (First Defendant)


SOLICITORS:
Doyle Edwards Anderson (Plaintiff)
Blackstone Waterhouse (First Defendant)


CATCHWORDS:
Proportionate liability provisions of Civil Liability Act
Whether proportionate liability provisions of Civil Liability Act apply to claims for breach of statutory warranties implied by Home Building Act

LEGISLATION CITED:
Civil Liability Act 2002
Fair Trading Act 1987
Home Building Act 1989
Home Building Amendment (Warranties and Insurance) Act 2010

CATEGORY:
Procedural and other rulings

CASES CITED:
Ace Woollahra Pty Ltd (formerly known as Reed Construction Services Pty Ltd) v Owners - Strata Plan 61424 [2010] NSWCA 101
Buck v Comcare (1996) 137 ALR 335
Jones v Mortgages Acceptance Nominees Ltd (1996) 142 ALR 561
Reinhold v New South Wales Lotteries Corporation (No 2) [2008] NSWSC 187
The Owners Strata Plan No 63312 v Brookfield Multiplex Limited [2010] NSWSC 360

TEXTS CITED:


DECISION:
Defence of proportionate liability as provided by Part 4 of Civil Liability Act 2002 is available to those defending claims brought under Part 2C of the Home Building Act 1989.



JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
TECHNOLOGY AND CONSTRUCTION LIST


Einstein J

Tuesday 27 July 2010

2009/00298834 Owners Corporation SP 72357 v Dasco Constructions Pty Limited & Ors

JUDGMENT

The notice of motion

1 There is before a Court the notice of motion pursued by the plaintiff for an order that paragraph 12 of the first defendant's list response dated 25 May 2010 be struck out.

2 The plaintiff asserts that the defence of proportionate liability as provided by Part 4 of the Civil Liability Act 2002 (NSW) (CLA) is not available to those defending claims brought under Part 2C of the Home Building Act 1989 (NSW) (HBA).

3 The motion raises the interesting question of whether the proportionate liability provisions of the Civil Liability Act apply to claims for breach of the statutory warranties implied by the Home Building Act.

The proceedings

4 The proceedings concern a claim by an Owners Corporation against the first defendant builder in relation to the defective building work.

5 It is admitted on the pleadings that:

i. the work is residential building work;

ii. prior to 24 March 2004, the builder built the building pursuant to a building contract with Developmentlink Concorde Pty Ltd;

iii. section 18B of the HBA implied into the building contract certain warranties;

iv. prior to 24 March 2004, Developmentlink was the owner of the building;

v. on 24 March 2004, upon its registration, the common property of the building vested in the plaintiff;

vi. the plaintiff is a successor in title to Developmentlink.

6 The only cause of action pleaded by the plaintiff against the builder is pursuant to section 18D HBA.

7 Paragraph 12 of the list response seeks to raise the proportionate liability provisions in Part 4 of the CLA. It is propounded on the assumption (which is denied) that the builder was in breach of the statutory warranties created by section 18B HBA.

8 Section 39 (c) of the CLA provides that Part 4 does not affect the operation of any other Act "to the extent that it imposes several liability on any person in respect of what would otherwise be an apportionable claim".

The plaintiff's contentions

9 The plaintiff contends as follows:

i. The HBA is an important remedial statute.

ii. Section 18B of the HBA implies certain warranties into contracts to carry out residential building work.

iii. Section 18B is in Part 2C of the HBA is headed ‘Statutory warranties’. Contextually, the following language in other provisions of Part 2C strongly suggest a legislative intention to create a statutory cause of action for breach of the statutory warranties:

a. S 18C refers to ‘the benefit of the statutory warranties’;

b. S 18D refers to ‘rights ...in respect of the statutory warranty’, and circumstances where the predecessor ‘has enforced the warranty’;

c. Sections 18E and 18F refer to ‘proceedings for a breach of a statutory warranty’;

d. S 18E creates a 7 year limitation period for proceedings for breach of statutory warranty, as opposed to the usual 6 year period for breach of contract.

iv. Even if there is no statutory cause of action, there are nonetheless three reasons why it is an error to say that s 18B does not ‘impose’ liability on the builder simply because the owner’s cause of action may technically be described as breach of contract.

a. First, it is the breach of the warranties implied by section 18B which renders the builder liable to the owner.

b. Second, the words ‘imposes several liability on’ are very wide. It is to be presumed that s 39(c) has some work to do. If the legislature intended s 39(c) to only exclude from the operation of Part 4 liability for breach of statutory duty, one would have expected it to say so, in clear and unambiguous terms.

c. Third, the language in other provisions of Part 2C referred to in para 9 above is consistent with the proposition that breach of the s 18B warranties ‘imposes’ liability on the defaulting builder.

v. Adopting a common sense construction, the clear effect of s 18B is to impose several liability for damages on a builder who is in breach. In the alternative, the relevant provisions of HBA are remedial, and in the event of ambiguity of s 39(c) CLA, it should not be presumed that the legislature intended to take away the important rights created by the HBA: see eg Buck v Comcare (1996) 137 ALR 335 at 340.

vi. S 18D creates a statutory right in the plaintiff to sue the builder on the building contract for the breach of the warranties implied by s 18B, even though it was not a party to the contract, a right which does not exist at common law.

vii. S 18D therefore imposes several liability on the defendant for breaches of the implied warranties, with the result that Part 4 of the CLA does not apply.

The defendant's contentions

10 The defendant put forward the following submissions.

The application of section 34 of the CLA

11 Section 34 of the CLA defines an " apportionable claim" as a claim which is:

(a) a claim for economic loss or damage to property in an action for damages (whether in contract, tort or otherwise) arising from a failure to take reasonable care, but not including any claim arising out of personal injury.

12 The plaintiff's claim in the present proceedings is:

(a) for economic loss;

(b) in an action for damages in contract;

(c) which arises from a failure to take reasonable care.

13 In what follows I accept as correct the defendant’s submission that Part 4 of the CLA applies to the claim.

The proper construction of the HBA and the CLA

14 Part 2C of the HBA does not create a statutory cause of action. Section 18B provides for terms to be implied into certain contracts. Those terms require the builder to meet certain standards such as workmanship and other matters in carrying out its contract work. A failure to meet those standards may give rise to an actionable breach of contract. The cause of action is one in contract.

15 Section 18D gives a successor in title the benefit of those terms. That is, entitles the successor in title to enforce the contract in that manner even though it was not a party to the contract. This construction is supported by section 18D (1A) which provides:

A person who is a non-contracting owner in relation to a contract to do residential building work on land is entitled (and is taken to have always been entitled) to the same rights as those that a party to the contract has in respect of a statutory warranty.

16 There is no issue but that the plaintiff in this case is a non-contracting owner as defined in section 4.

17 Certainly Parliament has been careful to exclude from Part 4 of the CLA a number of types of claims by reference to certain Acts. For example, the legislature:

(a) excluded the matters in section 3B;

(b) allowed for contracting out of Part 4 in section 3A;

(c) excluded personal injury claims.

18 As the defendant has contended it would seem to have been a simple matter for the legislature to include in section 3B actions such as the type made by the plaintiff thereby taking them outside the operation of the Act. It chose not to do so.

19 The proportionate liability provisions of the CLA commenced on 1 December 2004. The HBA was amended in 2004, yet the legislature did not see fit to exclude proportionate liability in respect to statutory warranties. The date of assent was 15 December 2004 and the commencement dates ranged from 29 April 2005 to 1 September 2006.

20 Although there is no direct authority on the issue a similar matter came before McDougall J in The Owners Strata Plan v Brookfield Multiplex Limited [2010] NSWSC 360. In that case his Honour dealt with a defence in response to a relevantly identical claim by an Owners Corporation. His Honour granted the defendant builder leave to amend its list response to plead that its various subcontractors were concurrent wrongdoers pursuant to the CLA. In doing so, McDougall J found the amendments were not hopeless or doomed to fail. I accept the defendant’s submission that McDougall J’s decision in Multiplex implicitly supports its contention that the CLA applies to the plaintiff’s cause of action. The plaintiff replied that McDougall J had not considered s 39, and his decision was confined to a matter of pleading. However, ultimately McDougall J’s judgment assumes that it is possible to successfully plead the relevant sections of the CLA in relation to a breach of the statutory warranties in question. Whilst it may not be determinative, it is relevant that the plaintiff’s submission is directly contrary to an underlying premise of McDougall’s decision in Multiplex. Although in Multiplex the plaintiff sued in negligence as well as relying on the section 18D of the HBA, the plaintiff here cannot avoid the operation of the CLA by pleading its case in a limited way if the underlying fact support both causes of action [Jones v Mortgages Acceptance Nominees Ltd (1996) 142 ALR 561 at 562-563].

21 Section 39(c) of the CLA does not assist the plaintiff. The HBA does not impose liabilities. It implies warranties in certain contracts and gives certain non-contracting parties the benefit of those warranties.

22 As the defendant contended, s 18B and 18D can be contrasted with provisions that in fact impose statutory liability, such as s 42 and s 68 of the Fair Trading Act 1987. Section 42 prohibits certain conduct and s 68 imposes several liability in relation to a breach of s 42. Section 34(1)(b) of the CLA then provides that Part 4 applies to actions for damages under the Fair Trading Act for a contravention of s 42, thus imposing proportionate liability where otherwise several liability for breach of that statutory duty would arise.

23 It is trite that the Court must apply the words of the drafter in their ordinary and natural meaning and by reference to intention in the second reading speeches. The plaintiff did not point to any such ancillary material here to assist its case. I accept that the ordinary and natural meaning of s 34 means that proportionate liability applies.

24 Further and as the defendant has contended the decision in Buck v Comcare (1996) 137 ALR 335 does not appear to assist the plaintiff since there is no ambiguity, with nothing in the words used in section 18B or 18D that imposes any liability.

25 The defendant, in supporting its construction, highlighted that soon after the decision was handed down in Ace Woollahra Pty Ltd (formerly known as Reed Construction Services Pty Ltd) v Owners - Strata Plan 61424 [2010] NSWCA 101, Parliament enacted the Home Building Amendment (Warranties and Insurance) Act 2010 to deal with an apparent anomaly produced by the decision, introducing s 18D(1A). The defendants drew on the fact that at that time Parliament had an opportunity to legislate in order to alter the of the recent decision in Multiplex – outlined above – and did not do so. I am unconvinced this is a legitimate approach to statutory interpretation – assuming as it does that the very recent Multiplex decision was considered by Parliament - and place no weight on this point.

26 I note that the decision of Barrett J in Reinhold v New South Wales Lotteries Corporation (No 2) [2008] NSWSC 187 (see particularly [19]-[22]) supports the proposition that the appropriate time for a decision to be made as to whether there is an apportionable claim under s 34(1) – to which pt 4 of the CLA will apply – is after the substantive causes of action in question have been determined. Against this proposition, the plaintiff contended that the Court should determine the issue at hand as it was likely to affect the course of the litigation in a number of ways. In all of the circumstances I have determined that it is appropriate for the Court to determine the issue of construction raised at an interlocutory stage.

Orders

27 The plaintiff’s notice of motion is dismissed.

28 The parties will be given an opportunity to address as to costs.

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LAST UPDATED:
28 July 2010