Following reports of serious defects in recently completed and occupied residential apartment buildings, a new scheme was launched by the Building Commissioner in November 2022 known as Project Intervene. This offers willing parties a pathway to remediate serious defects as an alternative to litigation.
The scheme provides a platform for owners corporations to have serious defects remediated by encouraging developers to give an undertaking and by facilitating and ensuring that remediation work is carried out. If no such undertaking is given, the Office of the Building Commissioner may issue the developer with a building work rectification order under the Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 (NSW) (RAB Act).
The scheme applies to residential apartment buildings where:
- there is a serious defect as defined under the RAB Act in relation to a building element
- there is a rise in storeys of four or more
- the developer or builder are still trading
- an occupation certificate was issued within the last 6 years.
The scheme will no doubt be popular with owners corporations.
As the scheme gains traction, a question arises in terms of the position of owners corporations who already have litigation on foot. This is particularly relevant given that there is a gap between the application of the scheme (serious defects) and the wider population of defects for which an owners corporation may wish to enforce rights.
In Strata Plan 99576 v Central Construct Pty Ltd [2023] NSWSC 212, the Supreme Court considered whether an existing court proceeding should be stayed on the basis that the plaintiff owners corporation had subsequently initiated the Project Intervene process.
Background
In August 2021, the owners corporation brought proceedings for defects against the builder and developer.
In December 2022, the owners corporation sent a letter to NSW Fair Trading regarding problems with the building and the inability to reach a satisfactory outcome including through the proceedings.
In February 2023, NSW Fair Trading sent a letter to the owners corporation indicating that the matter was being handled by Project Intervene and that a building consultant had been engaged to inspect the building. Later that month, the builder and developer filed a notice of motion for a 12-months stay of the proceedings. Their submissions outlined five bases for the grant of stay:
- there is a prospect that all of the allegedly defective work the subject of the Proceedings may be rectified pursuant to a building work rectification order (or pursuant to an undertaking given) or otherwise by the Secretary pursuant to s 42 of the RAB Act
- there was a risk of inconsistent findings of fact in different courts about the same subject matter if there was an appeal in relation to a building work rectification order to the Land and Environment Court pursuant to s 49 of the RAB Act
- the staying of proceedings aligns with one of the stated aims of Project Intervene, specifically to avoid costly and time-consuming litigation
- it was vexatious and oppressive for the owners corporation to have initiated the Project Intervene process when proceedings were already well underway
- if stay was not granted, there may be considerable wastage of government resources in connection with the Project Intervene process.
Rejection of arguments to justify stay of proceedings
The Court dismissed the stay application and noted that:
- the overall outcome of the Project Intervene process was uncertain, including when that process would be completed, given the possibility of an appeal to the Land and Environment Court or an administrative law challenge to decisions made under the RAB Act
- although there is a risk of inconsistent findings in different courts, that risk is not great enough to warrant the proceedings being delayed
- the owners corporation did not act in a vexatious or oppressive way by communicating to NSW Fair Trading regarding their inability to reach a satisfactory outcome through the proceedings. Further, the builder and developer did not point to any particular prejudice they would suffer if stay was not granted
- the prospect that the process under the Project Intervene and RAB Act may remove the need for the proceedings, or bring about the narrowing of their scope, is too uncertain to justify delay to the proceedings
- even if orders were made and complied with by the builder and developer, the owners corporation would have no recourse to damages under the Project Intervene process, unlike the position in the proceedings.
It is possible that a different result could be obtained in circumstances where proceedings have been filed to preserve limitations periods and the Project Intervene process is triggered earlier and may result in the narrowing of the issues in the proceedings. It will be of great interest how these issues develop in future decisions as Project Intervene gains more and more traction.
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In practice and courts
Decisions Reserved as at 26 May 2023
The Court of Appeal maintains a list of matters before the Court for which judgment is reserved. Read more here.
Published – articles, papers, reports
Better Planning for Stronger Growth
National Cabinet has meet in Brisbane and announced a number of reforms to support a national approach to housing supply and affordability, including offering incentives for new build-to-rent projects (28 April 2023). Read more here.
NCC classification of Specialist Disability Accommodation
The National Disability Insurance Scheme offers support to eligible people for various types of Specialist Disability Accommodation (SDA). Practitioners often seek advice about the application of National Construction Code classifications to SDA – and specifically whether classifications other than Class 3 can apply. This article clarifies that Classes 1a, 1b, 2 and 3 could each be appropriate for particular types of SDA – depending on the nature of the building (2 June 2023). Read more here.
Cases
FKP Commercial Developments Pty Limited v Zurich Australian Insurance Limited (No 2) [2023] FCA 582
INSURANCE – separate question – construction of design and construction professional indemnity insurance policy – extension of cover clause – a requirement that “the insured [be] legally liable in the provision of the professional services” is not a causal requirement – the provision by the insured of professional services must be a substantive element of the factual matrix in which the liability arises.
Home Building Act 1989 (NSW).
Noori Homes Pty Ltd v Patel [2023] NSWCATAP 149
APPEALS – appeal on question of law – scope of question of law.
APPEALS – from exercise of discretion – acting on the wrong principle.
APPEALS – from exercise of discretion – Rregard to irrelevant considerations.
APPEALS – leave to appeal – principles governing – leave to appeal refused.
BUILDING AND CONSTRUCTION – Home Building Act 1989 (NSW) – Building dispute – where the builder breached statutory warranties – money order made against the builder.
Civil and Administrative Tribunal Act 2013 (NSW); Civil and Administrative Tribunal Rules 2014 (NSW); Home Building Act 1989 (NSW); Home Building Amendment Act 2014 (NSW).
Masri v Commissioner for Fair Trading [2023] NSWCATOD 73
ADMINISTRATIVE LAW – Home Building Act – administrative review of decision to refuse application for owner builder permit – special circumstances – occupancy.
CIVIL PROCEDURE – summary disposal – dismissal of proceedings.
Administrative Disputes Review Act 1997; Civil and Administrative Tribunal Act 2013; Environmental Planning and Assessment Act 1979; Home Building Act 1989.
Owners SP 92450 v JKN Para 1 Pty Limited [2023] NSWCA 114
BUILDING AND CONSTRUCTION – contract – implied terms – statutory warranties – whether building complied with Building Code of Australia (BCA) – where performance requirements of BCA specified that external walls must be “non-combustible” – whether external cladding met performance requirements for fire resistance – Where cladding did not comply with “deemed-to-satisfy” provisions – Where no “alternative solution” prepared prior to issue of construction certificate – Home Building Act 1989 (NSW), s 18(1)(c) – where breach of s 18(1)(c) conceded.
BUILDING AND CONSTRUCTION – contract – damages – claim for reinstatement damages – evidentiary onus of proving reinstatement would be unreasonable.
Building Products (Safety) Act 2017 (NSW); Environmental Planning and Assessment Act 1979 (NSW); Environmental Planning and Assessment Regulation 2000 (NSW); Home Building Act 1989 (NSW); Supreme Court Act 1970 (NSW); Uniform Civil Procedure Rules 2005 (NSW).
Trajkovski v Harrison [2023] NSWCATAP 143
LAND LAW – Strata Schemes – apprehended bias – hearing rule – alleged excessive interference in the proceedings – Section 237(5) of the Strata Schemes Management Act 2015 (NSW).
Civil and Administrative Tribunal Act 2013 (NSW); Strata Schemes Management Act 2015 (NSW).
The Owners – Strata Plan No. 74442 v Harrison [2023] NSWCATAP 144
LAND LAW – Strata Schemes – apprehended bias – hearing rule – alleged excessive interference in the proceedings – Section 237(5) of the Strata Schemes Management Act 2015.
Civil and Administrative Tribunal Act 2013; Civil and Administrative Tribunal Rules 2014; Strata Schemes Management Act 2015.
LCM Operations Pty Ltd v Rabah Enterprises Pty Ltd [2023] NSWSC 590
CONTRACTS – brothers undertake property development through two companies – defendant company owns land and provides funds – related company is project manager – oral agreement – project manager charges $14.8M fee for construction including cost of build – fee recorded in “financial records” of both companies – defendant claims tax deduction but does not pay fee – project manager does not remit GST on fee – project manager wound up by ATO – brothers’ explanation of arrangement logically uninviting – post-contractual conduct – claim in debt successful.
SET-OFF – whether right to set-off loans made by defendant – contractual right of set-off – principles at [182] –[184] – whether right of set-off inferred from conduct – oral agreement – post-contractual conduct – no contractual right of set-off.
RESTITUTION – Quantum meruit – principles at [208]-[210] – defendant freely accepted benefit of project manager’s services – reasonable person would have realised project manager would expect to be paid – unjust for defendant to retain benefit without making restitution.
A New Tax System (Goods and Services Tax) Act 1999 (Cth); Corporations Act 2001 (Cth); Income Tax Assessment Act 1997 (Cth).
Walker Corporation Pty Ltd v The Owners – Strata Plan No 61618 [2023] NSWCA 125
LAND LAW – strata title – strata managing agent – where three owner corporations of Finger Wharf development at Woolloomooloo passed resolutions terminating appointment of strata managing agent and appointing new one – where strata managing agent is different to managing agent appointed for Wharf as a whole by building management committee as a result – where clause of strata management statement (“SMS”) required owners’ corporations to “appoint and retain” the same strata managing agent as the building management committee appoints as strata manager for Wharf as a whole – whether clause of SMS inconsistent with Strata Schemes Management Act 2015 (NSW), not authorised by Strata Schemes Development Act 2015 (NSW) or uncertain.
Masri v Commissioner for Fair Trading [2023] NSWCATOD 73
ADMINISTRATIVE LAW – Home Building Act – administrative review of decision to refuse application for owner builder permit – special circumstances – occupancy.
}CIVIL PROCEDURE – summary disposal – dismissal of proceedings.
Administrative Disputes Review Act 1997; Civil and Administrative Tribunal Act 2013; Environmental Planning and Assessment Act 1979; Home Building Act 1989.
Timilty Constructions Pty Ltd v Culina (No 2) [2023] NSWCATAP 148
COSTS – APPEAL – NCAT – whether amount in dispute on appeal was more than $30,000 – usual order under r 38 – whether disentitling conduct – apportionment of issues – appeal allowed in part – mixed success on appeal – exercise of discretion that each party pay their own costs.
Civil and Administrative Tribunal Act 2013 (NSW); Civil and Administrative Tribunal Rules 2014 (NSW); Home Building Act 1989 (NSW); Interpretation Act 1987 (NSW); Uniform Civil Procedure Rules 2005 (NSW).
McLachlan v Edwards Landscapes Pty Ltd [2023] NSWSC 532
BUILDING AND CONSTRUCTION – jurisdiction of NSW Civil and Administrative Tribunal under the Home Building Act 1989 (NSW) – where claim substantively concerns breach of statutory warranty.
APPEALS – leave to appeal – whether leave required – interlocutory decisions – where matter transferred from Local Court to NSW Civil and Administrative Tribunal.
Design and Building Practitioners Act 2020 (NSW); Home Building Act 1989 (NSW); Local Court Act 2007 (NSW).
The Owners–Strata Plan No. 86807 v Crown Group Constructions Pty Ltd (No 2) [2023] NSWSC 520
CIVIL PROCEDURE – originating process – amendment – claim under Design and Building Practitioners Act 2020 (NSW) – where no evidence of non-compliance with the Building Code of Australia – discretionary matters – Where delay in bringing application – where no evidence of irremediable prejudice – leave granted conditional on evidence that building work did not comply with Building Code of Australia.
CIVIL PROCEDURE – originating process – amendment – claim under Design and Building Practitioners Act 2020 (NSW) – whether claim apportionable – determination as to the applicability of Pt 4 of the Civil Liability Act 2002 (NSW) unnecessary to grant of leave to amend.
Building Code of Australia; Civil Liability Act 2002 (NSW); Design and Building Practitioners Act (2020) (NSW); Environmental Planning and Assessment Act 1979 (NSW); Home Building Act 1989 (NSW); Law Reform (Miscellaneous Provisions) Act 1946 (NSW); Limitation Act 1969 (NSW); Limitation Act 1969 (NSW).
Goodman v Commissioner for Fair Trading [2023] NSWCATOD 66
ADMINISTRATIVE LAW – Home Building Act – administrative review of decision to refuse application for renewal of licence – fit and proper person requirement – whether applicant took all reasonable steps to avoid external administration – whether applicant is capable of doing the work for which the certificate is required.
Administrative Disputes Review Act 1997; Home Building Act 1989.
Legislation
NSW Legislation
Environmental planning instruments
Bathurst Regional Local Environmental Plan 2014 (Amendment No 21) – published LW 2 June 2023
Cabonne Local Environmental Plan 2012 (Map Amendment No 3) – published LW 2 June 2023
Camden Local Environmental Plan 2010 (Map Amendment No 3) – published LW 2 June 202
Central Coast Local Environmental Plan 2022 (Map Amendment No 7) – published LW 2 June 2023
Cessnock Local Environmental Plan 2011 (Amendment No 36) – published LW 2 June 2023
Dubbo Regional Local Environmental Plan 2022 (Map Amendment No 4) – published LW 2 June 2023
Nambucca Local Environmental Plan 2010 (Amendment No 32) – published LW 2 June 2023
Narromine Local Environmental Plan 2011 (Amendment No 11) – published LW 2 June 2023
Tamworth Regional Local Environmental Plan 2010 (Amendment No 26) – published LW 2 June 2023