Fair Trading Administration Corporation v The Owners Strata Plan 58185 & Anor [2010] NSWSC 96 (8 February 2010)

Last Updated: 2 March 2010

NEW SOUTH WALES SUPREME COURT

CITATION:
Fair Trading Administration Corporation v The Owners Strata Plan 58185 & Anor [2010] NSWSC 96


JURISDICTION:


FILE NUMBER(S):
30049/09

HEARING DATE(S):
14th September 2009

JUDGMENT DATE:
8 February 2010

PARTIES:
Fair Trading Administration Corporation - (Applicant)
Strata Plan No. 58185 - (1st Respondent)
Consumer Trader and Tenancy Tribunal - (2nd Respondent)

JUDGMENT OF:
Latham J

LOWER COURT JURISDICTION:
Not Applicable

LOWER COURT FILE NUMBER(S):
Not Applicable

LOWER COURT JUDICIAL OFFICER:
Not Applicable



COUNSEL:
G Elliott - (Plaintiff)
T Davie - (1st Defendant)


SOLICITORS:
W Maynard - (Plaintiff)
P Koroknay - (1st Defendant)
IV Knight - (2nd Defendant)


CATCHWORDS:
ADMINISTRATIVE LAW - whether initial proceedings affected by jurisdictional error - whether claim under statutory insurance scheme was barred - determination of liability outside prescribed statutory period.

LEGISLATION CITED:
Consumer Trader and Tenancy Tribunal Act 2001
Building Services Corporation Act 1989 (now superseded by the Home Building Act 1989)

CATEGORY:
Principal judgment

CASES CITED:
Craig v State of South Australia [1995] HCA 58; (1994-1995) 184 CLR 163
Kirk v Industrial Relations Commission [2010] HCA 1
Bahadori v Permanent Mortgages Pty Ltd [2008] NSWCA 150
Fair Trading Administration Corporation v Owners Corporation SP 43551 [2002] NSWSC 624
Hristorforidis v FTAC [2007] NSWSC 1243
Owners of Strata Plan 43551 v FTAC ; Walter Construction Group v FTAC [2004] NSWSC 158
Walter Construction Group v FTAC ; FTAC v Owners SP 43551 [2005] NSWCA 65
Owners Strata Plan 51673 v FTAC [2009] NSWSC 816
Owners of Strata Plan 43551 v FTAC ; Walter Construction Group v FTAC

TEXTS CITED:


DECISION:
1. The orders and decision of the second defendant on 11 June 2009 in matter no. HB 08/49526 were beyond power and are null and void.
2. The claim made by the first defendant on the plaintiff on 7 August 2008 was barred by the operation of the Comprehensive Scheme contained in Form 4 of Schedule 1 of the Building Services Corporation Regulation.
3. The plaintiff is not liable to the first defendant under the Scheme.
4. The first defendant is restrained from prosecuting application HB08/49526 before the second defendant.
5. The second defendant is restrained from further hearing application HB08/49526.
6. I award costs in favour of the plaintiff.



JUDGMENT:

IN THE SUPREME COURT

OF NEW SOUTH WALES

COMMON LAW DIVISION

LATHAM J

8 FEBRUARY 2010

30049/09 FAIR TRADING ADMINISTRATION CORPORATION v THE OWNERS – STRATA PLAN No. 58185 & CONSUMER TRADER AND TENANCY TRIBUNAL

JUDGMENT

1 HER HONOUR : The plaintiff, the Fair Trading Administration Corporation (FTAC), filed a summons on 9 July 2009 seeking prerogative relief restraining the second defendant, the Consumer Trader and Tenancy Tribunal (CTTT) from proceeding with an application brought by the first defendant, the Owners of Strata Plan 58185 (SP 58185). The second defendant has filed a submitting appearance in these proceedings.

2 The background to the application before the CTTT is not in dispute. The first defendant lodged a complaint, which qualified as a notification, with the Department of Fair Trading (the plaintiff’s predecessor) in September 1999 regarding allegedly defective work at a unit block in Dee Why. In April 2000, the Department obtained an independent technical report concerning the complaints, a copy of which was sent to the first defendant in May 2000, with the request that an enclosed insurance claim form be completed in order to progress the matter under a now defunct home warranty insurance scheme.

3 It is pertinent to refer in detail to the letter of 22 May 2000 from the Department. It advised the first defendant to read an enclosed document titled “Notice of Insurance Rights” before completing the “Insurance Claim Form” and went on to impress upon the first defendant the importance of including a number of documents with the claim. The letter stated that the documents must be provided before a claim could be assessed, and that “the insurance claim will not be registered until you provide” certain information. Further, the letter stated that “lodgement or acknowledgement of a claim does not necessarily mean that a settlement will be made in the owner’s favour.”

4 No further correspondence was received from the first defendant until 11 June 2005, when an email from a strata manager requested advice in respect of water penetration into a number of units. The strata manager queried whether it was “worth trying to do an insurance claim”. According to the plaintiff in these proceedings, this related to a claim upon a private insurer. On 15 June 2005, the plaintiff sent a copy of the independent technical report of April 2000 to the strata manager.

5 No further correspondence was received by the plaintiff until 1 February 2008 when the first defendant’s solicitor raised the alleged defective waterproofing and requested the date of the commencement of the building work. That information (30 September 1996) was provided, along with the date of the original complaint.

6 The following day, the solicitor for the first defendant wrote to the plaintiff asking for an insurance claim form. A completed form was returned to the plaintiff on 7 August 2008. On 28 August 2008, the plaintiff advised the solicitor that the claim was declined, on the basis that clause 10 of the Comprehensive Insurance Scheme, contained in Form 4 of Schedule 1 of the Building Services Regulation, absolved the plaintiff of liability 10 years after the commencement of building work. In other words, the plaintiff maintained that any liability it once had, expired on 1 October 2006 and that no claim had been made before that date.

7 On 1 October 2008 the first defendant commenced proceedings before the second defendant by way of an appeal against the plaintiff’s refusal of the claim. On 27 May 2009, the second defendant heard argument on the question whether clause 10 of the Scheme operated as a bar to the proceedings. On 11 June 2009, the second defendant determined that the complaint lodged in October 1999 notified matters that could give rise to losses, and that it satisfied the requirements of a claim for the purposes of the Scheme.

The Claim for Prerogative Relief

8 A preliminary issue arises for consideration, namely, whether the plaintiff’s proceedings in this Court are properly brought under s 65 of the Consumer Trader and Tenancy Tribunal Act 2001 (the CTTT Act). Section 65 provides :-

(1) Except as provided by this section, a court has no jurisdiction to grant relief or a remedy by way of:

(a) a judgment or order in the nature of prohibition, mandamus, certiorari or other relief, or

(b) a declaratory judgment or order, or

(c) an injunction,

in respect of any matter that has been heard and determined (or is to be heard or determined) by the Tribunal in accordance with this Act or in respect of any ruling, order or other proceeding relating to such a matter.

(2) A court is not prevented from granting relief or a remedy of a kind referred to in subsection (1) in relation to a matter in respect of which the jurisdiction of the Tribunal to determine the matter was disputed if the ground on which the relief or remedy is sought is that:

(a) the Tribunal gave an erroneous ruling as to its jurisdiction, or

(b) the Tribunal erred in refusing or failing to give a ruling as to its jurisdiction when its jurisdiction was disputed.

(3) A court is not prevented from granting relief or a remedy of a kind referred to in subsection (1) in relation to a matter in respect of which the Tribunal has made an order if the ground on which the relief or remedy is sought is that:

(a) the Tribunal had no jurisdiction to make the order, or

(b) in relation to the hearing or determination of the matter, a party had been denied procedural fairness.

9 It is apparent that relief of the kind claimed by the plaintiff can only be entertained if the Tribunal’s jurisdiction to determine the matter was disputed and error in the course of a ruling on jurisdiction is alleged, or if the Tribunal has made an order and it is alleged that the Tribunal had no jurisdiction to make it. (There is no issue here in relation to denial of procedural fairness).

10 The plaintiff contends that s 65(2)(a) and (3)(a) apply in the circumstances of this case. At the same time, the plaintiff concedes that the Tribunal had jurisdiction to determine whether the first defendant’s claim was barred by Clause 10 of the Scheme. That issue was “the matter” to which s 65(2) and (3) refers. The first defendant is therefore on relatively strong ground in submitting that s 65(2) cannot apply.

11 To the extent that s 65(3)(a) is said to apply (there being no argument that the Tribunal made orders on 27 May 2009), the first defendant maintains that the plaintiff’s reliance upon Craig v State of South Australia [1995] HCA 58; (1994-1995) 184 CLR 163 is misconceived. The plaintiff’s submission is that the Tribunal fell into jurisdictional error because, paraphrasing Craig at [12], it misconstrued a statute or other instrument and thereby misconceived the nature of the function which it performed or the extent of its powers in the circumstances of the particular case.

12 As the first defendant correctly observed, the full passage in Craig from which the plaintiff draws comfort contains a critical qualification. It is not just the misconstruction of a statute or other instrument by an inferior court that triggers jurisdictional error according to Craig. It is the misconstruction of the statute or other instrument establishing the tribunal or conferring jurisdiction upon it that triggers jurisdictional error. Even then, it may be difficult to discern the line between jurisdictional error and an error within jurisdiction.

13 Clause 10 of the Building Services Corporation (BSC) Comprehensive Insurance Scheme is to be found in Form 4, a document that prescribes the operation of the Scheme. Form 4 appears in Schedule 1 to the Regulations enacted pursuant to s 91 of the Building Services Corporation Act 1989. Section 105(1) of that Act, now superseded by the Home Building Act 1989, established the plaintiff and made it the insurer under the Scheme. The Act conferred jurisdiction on the Tribunal to determine disputes of the nature under consideration.

14 The first defendant maintains that the Tribunal was not considering that part of the Act that conferred jurisdiction, so that s 65(3)(a) does not apply. The first defendant’s distinction between one part of an Act that confers jurisdiction and the remainder of that Act cannot, in my view, be sustained. The Scheme is an instrument, that is a statutory document, made under the Act, the whole of which confers jurisdiction on the Tribunal. The conferral of jurisdiction to determine matters arising under the Act includes the determination of the limits of the operation of the Scheme. An error of law in the construction of the Scheme is capable of giving rise to jurisdictional error.

15 This is entirely consistent with what the High Court has recently said in Kirk v Industrial Relations Commission [2010] HCA 1 at [72], by way of a discussion of the meaning of the decision in Craig. The three examples given in Craig of an inferior court acting beyond jurisdiction, namely :-

(a) the absence of a jurisdictional fact;

(b) disregard of a matter that the relevant statute requires be taken to account as a condition of jurisdiction (or the converse case of taking account of a matter required to be ignored); and

(c) misconstruction of the relevant statute thereby misconceiving the nature of the function which the inferior court is performing or the extent of its powers in the circumstances of the particular case,

are not prescriptive of jurisdictional error. They do not mark “the boundaries of the relevant field.”

16 Here, it is submitted that the tribunal has misconstrued a part of the statute that conferred jurisdiction, resulting in a misconception as to the extent of its powers in the circumstances of this case. I am satisfied that s 65(3)(a) applies.

17 Before leaving this topic, it is pertinent to observe the distinction between the operation of s 65 and s 67 of the CTTT Act. As Tobias JA noted in Bahadori v Permanent Mortgages Pty Ltd [2008] NSWCA 150 at [33], :-

it is clear that an appeal under s 67(1) is confined to matters of law with the consequence that it is not open to the Supreme Court on any such appeal to make any findings of fact not agreed or expressly or inferentially made by the Tribunal or to substitute findings of fact for those made by the Tribunal. This is so even though such findings may be relevant to and determinative of the issue that is before the Tribunal and in respect of which error of law is alleged. On the other hand, invoking of that Court’s jurisdiction under s 65 would enable it to make such findings of fact as were necessary in order to establish that the Tribunal’s ruling that it had ... jurisdiction to determine the applications was erroneous.

18 This distinction is of some importance to the determination of the Summons. The plaintiff submits that this Court should find as a fact that the first defendant lodged a complaint within 10 years of the commencement of building work, but that the claim for insurance under the Scheme was not made until 10 years after the commencement of building work. The Tribunal’s reasons are obscure, but it seems to have accepted that the first defendant made a claim under Clause 7 of the Scheme when it notified the plaintiff of the defects in 1999. In other words, the Tribunal construed a notification as a claim, whereas the plaintiff maintains that they are separate and distinct events. The Court would not be free to make the finding of fact contended for by the plaintiff, had the proceedings been brought under s 67.

The Scheme

19 The functions of the plaintiff pursuant to the Act establishing the Scheme include the promotion and protection of the interests of owners and purchasers of dwellings, and the promotion of building standards.

20 In general terms, the Act and the Scheme thereunder express a legislative intention :-

to provide both complainants and potential beneficiaries under the insurance schemes with a timely resolution of disputes affecting the interests of owners and purchasers of residential premises. ........................... [The] Act and Regulations ..... promote finality in the resolution of complaints and insurance claims, in particular, [by the setting of] time limits with respect to the notification of claims and the lodgement of complaints according to the classification of the defect(s), deemed refusal of a complaint 40 days after lodgement, and time limits with respect to the lodgement of appeals.

Hristoforidis v Fair Trading Administration Corporation [2007] NSWSC 1243 at [34].

21 Clause 1 of Form 4 does not contain a definition of “claim” or “claimant”. It refers to a “beneficiary” being “a person or persons entitled to claim a benefit provided under this Scheme”. Beneficiaries are defined in clause 4 as the owner, or his/her agent, of land on which residential building work was carried out, and the owner’s successor in title. Developers and contractors are excluded as beneficiaries.

22 Clause 5 of Form 4 prescribes the types of losses that were indemnified under the Scheme. Generally speaking, they were losses incurred in rectifying defects due to bad workmanship, faulty materials, faulty designs and failures to comply with plans or legislative requirements. Clause 5(2) refers to “claims .... made under one only of the heads of claim ...”.

23 Clause 6 prescribes maximum payments “in respect of a claim made under any combination of heads of claim in clause 5(1) ..”.

24 Clause 7 sets out certain time limits within which a beneficiary “must notify the Corporation in writing of the matters that could give rise to the losses referred to in clause 5” in order to “qualify for the benefits under this Scheme”. Clause 7 differentiates “major structural defects” from “general defects”. In the case of the former, notification must be given within 6 months of the beneficiary becoming aware of the potential defect and not later than 7 years from the commencement of the building work. In the case of the latter, notification must be given within 6 months of the beneficiary becoming aware of the potential defect and not later than 3 years from the commencement of the building work. Clause 7(2) gives the Corporation a discretion to extend the time limits if it is satisfied that the delay in notification was due to circumstances outside the control of the beneficiary.

25 Clause 8 is headed “Assessment of Claims”. It provides for set offs against liabilities the Corporation may incur, circumstances justifying the refusal to pay a “claim” and various other limits to recovery. Clause 8(3), (4) and (5) refer to “claims under clause 5(1)(c)” and “claims under clause 5(1)(d) or (e)”. Clause 9 provides for exclusions from the Scheme.

26 Clause 10 is headed “Finalisation of Liability”. It relevantly provides :-

Despite clause 7(2), the Corporation has no further liability under this Scheme more than 10 years after :

(a) the commencement of the residential building work in relation to which the Scheme applies, for any reason attributable to that work ;

27 A number of observations arise from the terms of Form 4. Consistent with the obligations usually imposed upon persons seeking to recover losses under an insurance policy, this Scheme requires notification of "matters that could give rise to the losses", within a matter of months of those matters coming to the attention of the beneficiary. The outer limits of the notification, that is, within 3 or 7 years of the commencement of building work, necessarily provides for the owner’s successor’s in title, where the owner has taken no action, and for those potential defects which are not discoverable in the short term.

28 As Burchett AJ said in Fair Trading Administration Corporation v Owners Corporation SP 43551 [2002] NSWSC 624 at [24] :-

It is important to note that the [time limits are] measured from the first awareness by the beneficiary (not someone else) of "the defect", although what must be notified is described as "matters that could give rise to the losses", not the actual defects that, in a precise sense, are the causes of those matters. A degree of imprecision in a notice seems to be contemplated by a provision so framed.

29 The imprecision allows for the fact that, at the time the owners or successors in title become aware of matters affecting the habitability of the premises or its general condition (eg. water penetration, cracks in walls, faulty tiling), it is not possible to confirm that the matters are defects for which the Corporation is liable. Some importance attaches to the use of the words “could give rise to .. losses”. At the time of notification, they are only matters that might qualify as defects for the purposes of the Scheme. Notification generally prompts the Corporation to inspect the building and order a report (as occurred in this case) in order to confirm or refute that the matters about which complaint has been made are the result of faulty building work, and not some other intervening cause (eg. Clause 9 (d), (e), (f), (g), (i), (j) and (k)). This terminology supports the proposition that no liability is incurred by the Corporation from the mere fact of notification.

30 The Scheme itself recognises the existence of claims as distinct from notifications. If nothing more than compliance with the notification requirements was required to constitute a claim under the Scheme, it would be incumbent on the Corporation to attempt to assess the losses incurred, including a determination of whether the defects were general or structural, whether any set offs were applicable, and the cost of rectifying or completing the defective work. All of the information necessary to carry out these tasks is not provided with the notification. In any event, it was part of the agreed facts in this case that the first defendant did not make a claim until 7 August 2008.

31 The Scheme contemplates at least the following stages in the treatment of a given complaint : notification of matters that could give rise to losses within the prescribed time frames, investigation by the Corporation of those matters, confirmation that the matters are losses indemnified by the Scheme and are not subject to exclusion, lodgement of a claim, assessment of the claim including whether set offs applied, and finally payment of the determined amount. The absence of any prescribed claim form does not deprive the use of the term “claim” within Form 4 of meaning.

The Construction of Clause 10

32 The first defendant’s contention is that liability arose in the Corporation for payment under the Scheme at the time of notification, not at the time of claim. On the basis of this assumption, clause 10 did not apply to the circumstances of this case, because notification occurred within 3 years of the commencement of building work and there had been no need for the Corporation to extend the time limits set by clause 7.

33 The plaintiff’s submission is that liability cannot arise until four requirements have been met, namely, a relevant loss within the terms of clause 5 has occurred, there has been a notification of the matters potentially giving rise to a loss within the relevant time frame, a claim has been lodged in relation to that loss and there has been an assessment of the claim. The plaintiff does not dispute that the first two of these requirements are satisfied. However, in the absence of the last two requirements, according to this argument, no liability attaches to the Corporation. Clause 10 applies, so that the first defendant cannot recover for any losses pursuant to a claim made 12 years after the commencement of building work.

34 A plain reading of clause 10 makes it abundantly clear that it is directed to a notification that may have exceeded the relevant time limit, but has been given the benefit of clause 7(2). The reference to further liability assumes that liability has been established and assessed under the Scheme. The object of the clause is to ensure that, whatever liability has been accepted for defects notified out of time, liability for any defects attributable to the building work is determined once and for all at the expiration of 10 years from the commencement of that work. Clause 10 says nothing about when liability arises in the Corporation, that is, whether it is at the point of notification or at some later stage.

35 In Hristorforidis v FTAC [2007] NSWSC 1243 at [33], I said :-

This provision indicates on its face that, notwithstanding the existence of circumstances justifying the lodgement of a claim more than 3 years or more than 7 years after the commencement of building work, no claim would be entertained after 10 years.

36 I acknowledge that this passage refers to the lodgement of a claim and that, strictly speaking, that does not accord with the construction of clause 10 according to its terms. However, in Hristorforidis there was no issue that notification had occurred and later, a claim had been lodged. The issue in that case concerned the power of the Corporation to reconsider a claim it had earlier declined, simply because it decided to re-classify the nature of the defects.

37 Clause 10 has been the subject of comment in other decisions of this Court. However, all of them were determined on the basis that a claim had been made.

38 Owners of Strata Plan 43551 v FTAC ; Walter Construction Group v FTAC [2004] NSWSC 158 and Walter Construction Group v FTAC ; FTAC v Owners SP 43551 [2005] NSWCA 65 were relied upon by the first defendant to support its contention that liability arises at the time of notification. In the former, Grove J held at [65] and [70] that :-

clause 10 is directed to termination of liability but liability is not the same concept as payment. I would construe the words "has no further liability" to mean that there can be no determination of such a liability after the designated span of 10 years. I would not construe the words to exclude requirement to make actual payment for a liability which has been established within the time.

.....................................................................

I do not construe clause 10 as an arbitrary bar discharging FTAC from fulfilling a liability which has been established within the relevant period of time.

39 In the latter, Santow JA (with whom Sheller JA and Tobias JA agreed) said :-

[119] If clause 10 were construed as operating to exonerate FTAC from a liability it would otherwise have under the Scheme if it could dispute and delay payment beyond 10 years from the time the original residential building work commenced, it would place a premium on the kind of litigious point taking that has, regrettably, characterised these proceedings.

[120] ............... Clause 10 is simply designed to make sure that FTAC does not under clause 7(2) extend the time specified in clause 7(1) beyond the 10 years. But where the beneficiary has in fact complied with a notification requirement, FTAC is able to ascertain the nature of the liability in question within a reasonable timeframe, even if the execution of rectification work is delayed by ongoing dispute as to the full quantum of that liability. (italics not in original)

40 The italicised words immediately above are called in aid by the first defendant as authority for the proposition that liability arises where FTAC has been notified in a manner that allows it to ascertain the nature of the liability in question.

41 I cannot agree. The proceedings in Walter Construction Group were conducted on the basis that a series of claims were lodged (see Walter Construction Group v FTAC ; FTAC v Owners SP 43551 at [1] and [22]) and that FTAC had accepted liability, as Grove J makes clear at [70]. One of the issues was whether the FTAC could rely upon clause 10 to deny liability, in circumstances where the FTAC had agreed to settle a claim, made within the relevant time frame, but later sought to revoke that decision.

42 Even if Santow JA’s comments at [120] are taken at face value, without placing them in the context of the circumstances with which he was dealing, they do not support the first defendant’s position. There is nothing in the judgment of the Court of Appeal or in Grove J’s judgment at first instance that grapples with the question, when does liability arise. In any event, this seems to me to be the wrong question. The question is, when is liability determined. The plaintiff in this case was never in a position to ascertain the nature of the liability in question, including the quantum, because the quotes for the rectification work which were an essential part of the claim were never submitted.

43 The first defendant also relies on Owners Strata Plan 51673 v FTAC [2009] NSWSC 816, a decision of Tamberlin AJ which is, I am informed, subject to appeal. In the course of that decision, his Honour said :-

66 Clause 10 of the Scheme refers to Clause 7(2) which permits an extension of time where FTAC is satisfied that the delay in notification was due to circumstances outside the control of the beneficiary. An effect of Clause 10 is that there can be no extensions of time after the 10 year period. Clause 10 is cast in wide terms to provide that no further liability can arise under the Scheme after the expiry of 10 years from the commencement of the building work for any reason whatsoever related to the building work.

67 This clause does not in my view affect claims that have already been notified within 10 years in relations to systemic defects or defects arising from the same underlying cause. The word “further” is significant here as is the term “liability” so that where a liability has crystallised within the 10 year period so as to become an “existing” liability, later manifestations arising from the same underlying defect are not excluded and there is no issue as to further or additional liability.

68 FTAC submits that such an interpretation could potentially expose it to innumerable claims for the indefinite future. However, for a later manifestation in other units or parts of common property to be the subject of a claim outside the 10 year statutory period, it will be necessary for the claimant to establish that the manifestation arises on a manifestation previously notified underlying defect. In practical terms, it will become increasingly difficult as time passes after a period of 10 years to establish such a nexus. If the nexus with the previously notified defect can be established by appropriate evidence then a claim cannot be said to be inconsistent with the beneficial intent of the Scheme.

69 I note that when the matter was before Ms Grey, FTAC appears to have accepted that the expiration of the 10 year period provided for in Clause 10 did not prevent claims being made and liability attaching in cases where the defect in a particular unit or common property is a manifestation or particularisation of a defect already notified.

44 Once again, Tamberlin AJ was dealing with specific claims that had been made, not just a notification, and FTAC had accepted liability for some defects : see [9] to [12]. The issue was whether a referee failed to take account of clause 10 when she determined that notification of certain defects in a unit was no more than particularisation of an earlier notification in respect of the same defect in a different unit. I note that, in agreeing with the referee, his Honour accepted that clause 10 did not affect claims that were made within the 10 year period in respect of “systemic” defects. It appears to me that the controversy in this decision centres upon the notion of “systemic” defects, rather than any interpretation of clause 10.

45 In summary, none of these decisions assist in the resolution of the issue in this case. This case does not raise the consequences of an extension of time limits under clause 7(2), nor does it turn on a failure to notify within the requisite time. Rather, this is an instance of a complete failure on the part of the first defendant to pursue the claim with the plaintiff.

The Tribunal’s Decision

46 The Tribunal began by noting that "the preliminary question ... to consider is whether the respondent was correct in not considering the claim of the applicant based upon clause 10 of the BSC Comprehensive Insurance Scheme”.

47 The Tribunal went on to refer to the statement of agreed facts, consistent with the history of the matter outlined above. The substantive part of the Tribunal's decision appears as follows :-

The applicant submits that the filing of the documents in 1999 is sufficient to substantiate a claim pursuant to clause 7 of Form 4 of the Scheme.

In effect, the applicant is the author of the refusal of the claim by filing a formal insurance claim in August 2008, and not merely referring to a claim made pursuant to clause 7 of Form 4 of the Scheme.

The Tribunal accepts the submission and reference to the authorities that the filing of the assistance form in October 1999 constitutes a notification of matters that could give rise to losses and satisfied the requirements of clause 7 of Form 4. (italics not in original)

48 The Tribunal made the following relevant orders :-

1. The Tribunal is satisfied that the applicants notified the insurer within the time limit allowed under clause 7 of Form 4 of the Building Comprehensive Insurance Scheme pursuant to Building Services Corporation Act 1989.

2. Matter is adjourned for further directions.

49 It is clear from the italicised words that the Tribunal held in effect that a notification was a claim. No attempt was made to deal with the submissions of the respondent below (the plaintiff in these proceedings) that have been repeated here, although I accept that there is no requirement to give extensive reasons under the CTTT Act. However, there never was any dispute that the first defendant had notified the plaintiff within time. To that extent, the first order made by the Tribunal is superfluous.

50 The issue underlying “the preliminary question”, namely whether a claim as distinct from notification was a necessary step in the determination of liability, was not articulated by the Tribunal. In order to answer that question, it was necessary to look at the operation of the Scheme as a whole. I am satisfied that the answer is “yes”, primarily for the reasons that I have set out at [19] to [31].

Temporal Limits to the Determination of Liability

51 Once it is accepted that a claim was necessary for the determination of liability, the lodgement of a claim 12 years after the commencement of building work is necessarily inconsistent with the expression of a legislative intention to finalise liability, even where it has been established, in the first 10 years of the life of a building. Grove J’s statement in Owners of Strata Plan 43551 v FTAC ; Walter Construction Group v FTAC at [65], namely, “I would construe the words ‘has no further liability’ to mean that there can be no determination of such a liability after the designated span of 10 years”, support that conclusion.

52 The first defendant’s argument might be tested by the following example. A beneficiary lodges a claim in May 2000 in respect of a building commenced in September 1996, the claim is assessed, and payment is made under the Scheme for rectification works to be carried out. Some years later, the building is sold and the successors in title discover that the rectification work has not addressed the defect. Clause 10 would operate to prevent a further claim in respect of the same defect in August 2008. That result does not sit comfortably with the proposition that there is nothing barring the first defendant from lodging a claim in August 2008.

53 The escalating cost of rectification occasioned by lengthy delays in lodging a claim under the Scheme would place a considerable burden on the Corporation, particularly if beneficiaries were permitted to indefinitely postpone a claim which was the subject of a notification within time. The objects of the Scheme would be frustrated by such an approach.

54 It follows that the plaintiff is entitled to the relief claimed in the Summons, subject to this qualification. In my opinion, it is not solely the operation of Clause 10 that barred the claim, or absolved the plaintiff of liability. As I have attempted to demonstrate, the whole of Form 4 leads me to the conclusion that the claim is barred. Therefore, I make the following declarations and orders :-

1. The orders and decision of the second defendant on 11 June 2009 in matter no. HB 08/49526 were beyond power and are null and void.

2. The claim made by the first defendant on the plaintiff on 7 August 2008 was barred by the operation of the Comprehensive Scheme contained in Form 4 of Schedule 1 of the Building Services Corporation Regulation.

3. The plaintiff is not liable to the first defendant under the Scheme.

4. The first defendant is restrained from prosecuting application HB08/49526 before the second defendant.

5. The second defendant is restrained from further hearing application HB08/49526.

6. I award costs in favour of the plaintiff.

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LAST UPDATED:
1 March 2010