Court of Appeal Supreme Court New South Wales

• Medium Neutral Citation: Baron Corporation Pty Ltd v Owners of Strata Plan 69567 [2013] NSWCA 238
• Hearing dates: 18 July 2013
• Decision date: 29 July 2013
• Before: McColl JA (at [1]); Barrett JA (at [2]); Young AJA (at [61])

Decision

1. Grant leave to appeal.

2. Direct that a notice of appeal in the form of the draft in the white folder be filed within seven days.

3. Appeal allowed.

4. Set aside Order 1 made in the Equity Division on 13 June 2013 and order in lieu:

"Order that the question whether

(a) for the purposes of the Home Building Act 1989, the second defendant is a 'developer' who did the work, being the construction of the common property in the land the subject of Strata Plan 69567 known as and situated at 37 Morley Avenue Rosebery as contended in paragraph 11A of the Second Further Amended Technology and Construction List Statement; and

(b) the plaintiff, being the owner of the common property, is, pursuant to s 18C of that Act, entitled to the benefit of the statutory warranties implied by s 18B of the Act and may enforce the statutory warranties against the second defendant as if the second defendant had constructed the common property under a contract with the plaintiff

be answered 'no'".

5. Set aside Order 3 made in the Equity Division on 13 June 2013 and order in lieu:

"Order that the costs of the hearing of the separate question on 15 and 16 April 2013 otherwise be the second defendant's costs in the cause."

6. That the respondent pay the costs of the applicant/appellant in this Court.

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

• Catchwords: CONTRACTS — building, engineering and related contracts — Home Building Act 1989 — warranties implied by statute — whether owners corporation under strata scheme entitled to statutory warranties as against “developer” — liability of non-contracting owner to immediate successor in title — whether appellant was the party “on whose behalf” the “residential building work” was done and therefore a “developer” for the purposes of the Act.
• Legislation Cited: Home Building Act 1989, ss 3A, 4(1), 6(1)(a), 7, 18B, 18C, s 18D(1A), 92, 99(1); Home Building Amendment (Warranties and Insurance) Act 2010; Strata Schemes (Freehold Development) Act 1973, s 18(1)
• Cases Cited: Ace Woollahra Pty Ltd v The Owners - Strata Plan 61424 [2010] NSWCA 101; (2010) 77 NSWLR 613
• Category: Principal judgment
• Parties: Baron Corporation Pty Ltd - Appellant; The Owners - Strata Plan No 69567 - Respondent
• Representation: Counsel: F Corsaro SC - Appellant; I G B Roberts SC/T J Davie - Respondent; Solicitors: Colin Biggers & Paisley - Appellant; Bannermans Lawyers - Respondent
• File Number(s): 2013/156063

Decision under appeal

• Citation: Owners - Strata Plan No 69567 v Baseline Constructions Pty Ltd [2013] NSWSC 409
• Date of Decision: 2013-04-24 00:00:00
• Before: Stevenson J
• File Number(s): SC2011/63243

Judgment

1 McCOLL JA: I agree with Barrett JA's reasons and the orders his Honour proposes.

2 BARRETT JA; One of the purposes of the Home Building Act 1989 is to cause every contract for the carrying out of residential building work by a contractor who is (or is required to be) licensed under that Act to contain certain implied warranties by the contractor. The statutory warranties include a warranty that the work will be performed in a proper and workmanlike manner in accordance with the plans and specifications and a warranty as to the quality of all materials.

3 The questions that arise in these proceedings concern the provisions of the Home Building Act as in force on 22 October 2009. Also relevant, however, is a provision introduced into the Act in 2010 which, because of the words "is taken always to have been entitled", is relevant to a determination of the position at 22 October 2009.

4 The questions arise upon an application for leave to appeal (and, if leave to appeal is granted, an appeal) brought by Baron Corporation Pty Ltd ("Baron") against Owners of Strata Plan 69567 ("the Owners Corporation") in relation to three residential apartment buildings at Rosebery in respect of which strata plans have been registered under the Strata Schemes (Freehold Development) Act 1973. By virtue of s 18(1) of that Act, the Owners Corporation is now the proprietor of the land that constitutes the common property of each strata scheme. Baron was one of the two registered proprietors of that land immediately before registration of the strata plan.

5 The issue for determination is whether the Owners Corporation has the benefit of the statutory warranties in such a way that it can assert a liability of Baron upon those warranties. The Owners Corporation maintains (and the primary judge held) that a provision of the Home Building Act causes Baron to be liable to it upon the statutory warranties.

6 Baron was not a contractor by which residential building work was done. There is therefore no direct basis for the imposition of liability on Baron. The question whether Baron was liable to the Owners Corporation on the statutory warranties turns on the interpretation of provisions of the Act imposing upon a "developer" liability "as if" it was required to be licensed and had entered into a contract for the doing of such work.

The core statutory provisions

7 The provisions of the Home Building Act of particular relevance for present purposes are s 3A, s 18B and s 18C.

8 Section 18B causes warranties there set out to be "implied in every contract to do residential building work". The warranties are expressed by the section to be warranties "by the holder of a contractor licence, or a person required to hold a contractor licence before entering into a contract". In a direct sense, therefore, the benefit of the statutory warranties is enjoyed by the person with whom a contractor who is (or should be) licensed enters into a "contract to do residential building work".

9 Special provision is made for cases in which residential building work is done in connection with a building or residential development where four or more dwellings are owned by one entity. This special provision is in s 3A which, so far as relevant, is in these terms:

"(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 who does 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

. . . "

10 Section 3A thus causes an individual, partnership or corporation to which it refers to be regarded as a "developer", for the purposes of the Act, in relation to particular work.

11 The significance of such "developer" status in relation to particular work lies in s 18C:

"A person who is the immediate successor in title to . . . a developer who has done residential building work on land is entitled to the benefit of the statutory warranties as if the . . . 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."

12 The effect of s 18C, construed in the light of s 3A, is that a person who, by virtue of the latter section, is regarded as a "developer" who has done residential building work on land is fixed with a liability to the person's "immediate successor in title", that liability being commensurate with the entitlement the section creates, that is, an entitlement to the benefit of the statutory warranties with respect to the work "as if" the developer was required to hold a contractor licence and had done the work under a contract with the successor in title.

13 Thus, a "developer", although it did not in fact carry out building work, is liable to its immediate successor in title as if it had done the building work under a contract with the successor and thereby incurred the burden of the statutory warranties by virtue of the statute's importation of those warranties into a contract between the developer and the successor.

The Equity Division proceedings

14 In proceedings in the Technology and Construction List of the Equity Division, Stevenson J was called upon to determine, as a separate question, whether the Owners Corporation was entitled to the benefit of the statutory warranties as against Baron.

15 As I have said, the issue was whether Baron was a "developer" for the purposes of s 18C and therefore a person against whom the Owners Corporation (accepted as being "the immediate successor in title to" Baron) could claim the benefit of statutory warranties under the Act by virtue of that section. Because it was accepted that Baron remained the owner of at least four of the dwellings, the answer depended on whether Baron was, in terms of s 3A(1), a person "on whose behalf" the relevant residential building work had been done.

16 The primary judge considered two possible bases on which it might be concluded that Baron was a person "on whose behalf" residential building work had been done. His Honour rejected one basis but accepted the other. The separate question was therefore answered by saying that Baron was liable to the Owners Corporation on the statutory warranties. On appeal, Baron challenges that conclusion but the Owners Corporation seeks to uphold it, including on grounds stated in a notice of contention.

Facts

17 The facts are not controversial. Immediately before the registration of the strata plan, Baron and a related company (Oldtex) were the registered proprietors of the Rosebery land as tenants in common. In order to develop the land, development agreements were entered into with another related company (Metro). Each development agreement related to a particular stage. Baron and Metro were the parties to two of the development agreements; Baron, Oldtex and Metro were the parties to the other agreement.

18 Under each development agreement, Metro undertook to the other party or parties that it would provide (or procure the provision of) certain services being, in essence, the co-ordination and supervision of building and related work for the construction of the residential flat building. It was Metro's task to engage building and other contractors, to liaise with the local council, consultants and others, to ensure that all applications for rezoning and development consent were made in good time, to effect all necessary insurances, to develop and administer cost/times procedures, to monitor and comply with the terms and conditions of the building contract, to manage any environmental and industrial relations issues and to undertake all marketing, promotion and sale of the project by appointing appropriate agents.

19 Each development agreement contained provisions to the following effect:

(a) Metro agreed that it would not perform any of the stipulated services that required the holding of a licence under the Home Building Act, unless it held such a licence (it will be necessary to refer to this provision in greater detail presently);

(b) Metro agreed that it entered into the agreement as "head contractor" and that it would perform its obligations under the agreement with the standard of skill, care and diligence expected of a reasonably competent "head contractor";

(c) Metro agreed that it would enter into all contracts and arrangements "in its own right" and be responsible for payments to be made under those contracts;

(d) Baron agreed to pay Metro "the Fee", which was any profit realised from the development after payment of an amount of $300,000 to a company called Newbart Investments Pty Ltd and $6 million to Baron "in consideration for its investment in the original property", together with certain "Approved Costs Overruns" and the Development Costs.

20 Metro retained Baseline Constructions Pty Ltd ("Baseline"), a licensed contractor, to carry out the necessary building work.

21 There was thus a contractual relationship between Metro and Baseline and a contractual relationship between Metro and Baron (one of the two registered proprietors of the relevant land), but no contractual relationship between Baron and Baseline.

22 Baseline in due course completed the construction of the buildings and strata plans were registered, in consequence of which, as I have said, the Owners Corporation became the proprietor of so much of the land as constituted the common property of each strata scheme.

Earlier case law

23 The Home Building Act makes no attempt to identify circumstances in which one person is to be taken to do building work "on behalf of" another. Nor is there any attempt to define the expression "on behalf of".

24 The meaning of the expression in this particular statutory context was addressed by this Court in Ace Woollahra Pty Ltd v The Owners - Strata Plan 61424 [2010] NSWCA 101; (2010) 77 NSWLR 613 ("Ace Woollahra"). After referring to the fact that, depending on context, "on behalf of" may have any of several meanings, Sackville AJA said (with the concurrence of Tobias and McColl JJA) at [51] - [52]:

"Taken in isolation the words 'on whose behalf' can describe non-contractual relationships. However, while the Home Building Act is not necessarily notable for consistency of drafting, it is significant that s 4 of the Home Building Act, which immediately follows s 3A, appears to use the expression 'on behalf of' to mean pursuant to a contractual relationship. (Section 4 provides that a person must not contract to do any residential building work except as or on behalf of an individual, partnership or corporation that holds a licence.) It is true that the Home Building Act uses the expression 'party to the contract' or equivalent expressions from time to time: see, for example, s 10(1), s 16G (dealing with the enforceability of contracts). But, as a matter of language s 3A and s 99 are capable of being read more restrictively than the parties, no doubt for different reasons, were prepared to accept.

It seems to me that there are good reasons for confining the expression 'on whose behalf' to the case where residential building work is undertaken by one party on a contractual basis for another party (as occurred in HIH Casualty and General Insurance Ltd v Jones [2000] NSWSC 359). In my opinion, it is difficult to impute to Parliament an intention that a contractor contravenes the Home Building Act and is liable for criminal penalties (s 92) if the contractor takes out a contract of insurance but the policy does not insure every person on whose behalf, as a matter of fact, the work is being undertaken (s 99)."

25 In Ace Woollahra, two parties (PRC and Wallis) had entered into a joint venture agreement for the development of a site by the construction of home units and registration of a strata plan. PRC alone was the registered proprietor of the land; and, upon registration of the strata plan, the owners corporation became the "immediate successor in title to" PRC. But it was Wallis, to the exclusion of PRC, that had entered into the contract under which a licensed contractor carried out the building work.

26 This Court held that it was Wallis alone that was properly regarded as the person "on whose behalf" the building work had been done. PRC was not such a person because, on the view the Court took, the matter was to be determined solely by reference to contractual relationships. That view was, in large part, a product of practical considerations going to the need to give the legislation a certain and readily ascertainable operation. This was explained by Sackville AJA thus (at [53]):

"How would a contractor, or his or her insurer, ascertain the identity of all persons on whose behalf, as a matter of fact and not merely contract, the residential building work was to be undertaken? How would the policy be framed? If the policy followed the wording of cl 42(1)(a)(i) of the Home Building Regulation 1997 ('a person ... on whose behalf residential building work covered by the contract is done or is to be done'), how far would it reach? Mr Lynch suggested that the key points in the present case were that PRC was the registered proprietor of the Woollahra site, was intended to register the strata plan and was to share in the profits of the development. No doubt it would be feasible for a contractor to ascertain the registered proprietor of the land, but what of the other matters identified by Mr Lynch? And what if the work was not being carried out for the benefit of the registered proprietor but for a third party, such as a purchaser from a registered proprietor under a contract for sale not yet completed?"

The decision of the primary judge

27 The primary judge held that, applying the reasoning in Ace Woollahra, Baron was not a party "on whose behalf" Baseline carried out the building work. This was because Baseline did the work "on a contractual basis" (to use Sackville AJA's words) for Metro, not Baron.

28 The judge then turned his attention to a provision of the Home Building Act that was not in force at the relevant time (22 October 2009). Section 18D(1A) came into effect by virtue of the Home Building Amendment (Warranties and Insurance) Act 2010. Section 18D(1A) 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."

29 The Act of 2010 also added definitions, as follows:

"non-contracting owner, in relation to a contract to do residential

building work on land, means an individual, partnership or corporation that is the owner of the land but is not a party to the contract and includes any successor in title to the owner."

"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."

30 The primary judge held that Baron was, in relation to the contract between Metro and Baseline, a "non-contracting owner". That being so, his Honour said (at [70]):

"Section 18D(1A) has the effect that Baron (as a 'non-contracting owner') is deemed always to have had 'the same rights as those that a party to the contract' [that is, Metro] had against Baseline 'in respect of a statutory warranty'."

31 His Honour then said (at [71] - [72]):

"Thus, Baron is, to this extent, deemed to be in a relationship with Baseline equivalent to a contractual relationship. That is, by operation of s 18D(1A), there is a statutorily created contractual relationship; or something equivalent thereto.

If the statutorily created contractual relationship is deemed to always have existed between Baron and Baseline and if, accordingly, Baron is deemed always to have been entitled to enforce the statutory warranties against Baseline then, in my opinion, as a matter of ordinary language, it follows that Baseline must always have been carrying out the work on behalf of Baron (as well as on behalf of Metro)."

32 In reaching that conclusion, the judge rejected a submission that the construction he preferred caused the retrospective effect of s 18D(1A) to benefit a "non-contracting owner" to an extent greater than that justified by the words "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."

33 The judge also considered a separate basis for the contention that Baron was a party "on whose behalf" the relevant building work had been done, namely, that, whether or not it had been done by Baseline under its contract with Metro, the work had been done by Metro pursuant to the anterior development agreements to which Baron and Metro were parties. His Honour rejected that proposition as a matter of construction of the development agreements themselves.

Issues and arguments on the appeal

34 Baron maintains on appeal that the primary judge misinterpreted s 18D(1A) and afforded it an operation and effect not permitted by its terms. Baron says, quite simply, that while s 18D(1A) causes a "non-contracting owner" to have "the same rights as those that a party to the contract has in respect of a statutory warranty", the section is not the source of what the judge called "a statutorily created contractual relationship; or something equivalent thereto". Baron submits that the section vests in the "non-contracting owner" the benefit of the statutory warranties enjoyed by the contracting party without causing the "non-contracting owner" to be party to a contract or contractual relationship to which it is a stranger.

35 The Owners Corporation argues that the effect of s 18D(1A) in the present case is that the relevant residential building work carried out by Baseline was undertaken by it on a contractual basis for Baron. That, it is said, not only supplies the nexus contemplated by Ace Woollahra (building work "undertaken by one party on a contractual basis for another party") but also avoids the practical difficulties of interpretation to which Sackville AJA referred. His Honour was concerned that, if any extended meaning were given to s 3A(1), there would be a need to undertake potentially difficult factual inquiries in a search for persons on whose "behalf" building work had been done. The Owners Corporation points out that, on the approach that commended itself to the primary judge, no such difficulty arises since the only inquiry s 18D(1A) necessitates is as to the narrow and objectively certain question of the ownership of the land.

36 The Owners Corporation also challenges the primary judge's construction of the development agreements to which Baron and Metro were parties. His Honour's concluded that, according to the correct construction of the agreements, the services that Metro rendered thereunder did not amount to the doing of residential building work, so that Baron was not a person "on whose behalf" such work was done (by Metro). The Owners Corporation, by notice of contention, says that that conclusion is erroneous.

The purposes of the amending Act of 2010

37 The primary judge made brief reference to the second reading speech in relation to the Bill that became the Home Building Amendment (Warranties and Insurance) Act 2010. It may be accepted that, according to that speech (23 June 2010), the purpose of the new legislation was "to overcome the effect of a recent Court of Appeal decision in the case of Ace Woollahra v The Owners-Strata Plan 61424 and Building Insurers' Guarantee Corporation". The Parliamentary Secretary, the Hon Michael Veitch, said:

"That decision has created considerable uncertainty in relation to the statutory warranty and home warranty insurance schemes, and has cast significant doubt on whether the scheme protects all home owners as intended. The bill will amend the Home Building Act to clarify the entitlements of home owners to statutory warranties and home warranty insurance, where loss is suffered due to defective residential building work. The bill will change the Act to protect home owners who have building work done, as well as subsequent purchasers of homes and apartments in circumstances where it now appears no benefits are available."

38 More instructive, I think, are the Explanatory Notes that accompanied the Home Building Amendment (Warranties and Insurance) Bill 2010 when it was introduced into Parliament. The full text of the Explanatory Notes is:

"Part 2C of the Home Building Act 1989 (the Principal Act) sets out the statutory warranties relating to work and materials that are implied in every contract to do residential building work entered into by the holder of a contractor licence or a person required to hold a contractor licence before entering into a contract (the

contractor). Under section 18D of the Principal Act, the statutory warranties are extended to successors in title unless a predecessor in title has enforced the warranty in the same respect. Under section 92 of the Principal Act, a contractor must not do residential building work under a contract unless a contract of insurance providing home warranty insurance in compliance with the Principal Act is in force. Section 99 of the Principal Act requires the insurance to cover the risk of the person on whose

behalf the work is done being unable to recover from the contractor because of the insolvency, death or disappearance of the contractor and the person or the person's successors in title being unable to recover compensation from such a contractor for a breach of a statutory warranty.

In Ace Woollahra Pty Ltd v The Owners--Strata Plan 61424 & Anor [2010] NSWCA 101 (the Ace Woollahra case) the Court of Appeal held, in effect, that only a contracting party and any successors in title to that person are entitled to enforce the statutory warranties under Part 2C of the Principal Act and to obtain compensation under home warranty insurance under the Principal Act.

The object of this Bill is to amend the Home Building Act 1989 to ensure that, where a contractor enters into a contract for residential building work on land with a party or parties who are not the owners of the land, the owner or owners of the land will be

deemed to be persons on whose behalf work is done and will be entitled to the benefit of any statutory warranty. As a consequence, any successors in title will also be able to recover for the breach of statutory warranty. Any contract of insurance is deemed to extend to such an owner and the insurer will, without the need for specific

provision in a contract of insurance, be able to pay a claim under a contract of insurance on the basis of this extended operation of the statutory warranties, contracts and insurance policies and will be entitled to recover the amount from the contractor.

The Bill will overcome the effect of the decision in the Ace Woollahra case (though not affecting the actual decision in that case or the rights of the parties involved).

The Bill also includes savings and transitional provisions and makes a related amendment by way of statute law revision."

39 Of significance, for present purposes, is the statement that the object of the new legislation was to ensure that "where a contractor enters into a contract for residential building work on land with a party or parties who are not the owners of the land, the owner or owners of the land will be

40 deemed to be persons on whose behalf work is done and will be entitled to the benefit of any statutory warranty." (emphasis added). The "on behalf of" language corresponds with that in s 3A.

41 The new s 18D(1A), as included in the Bill and enacted, did not, in dealing with the matter of statutory warranties, deem a non-contracting owner to be a person "on whose behalf" the work was done. It only deemed a non-contracting owner to have the benefit of the statutory warranties that were enjoyed in a direct way, and as a matter of contract, by the person who had entered into the contract with the building contractor.

42 Deeming of the first kind (that is, deeming of a non-contracting owner to be a person "on whose behalf" the work was done) was, however, effected by another provision of the amending Act of 2010. Part 6 of the Home Building Act deals with home warranty insurance. Section 92 prohibits the doing of residential building work under a contract unless relevant and complying insurance is in force. Section 99(1) requires a contract of insurance to insure "a person on whose behalf the work is being done" against certain risks. Section 92C, added by the Act of 2010 in response to the Ace Woollahra decision, states, in sub-s (1):

"If the holder of a contractor licence enters into a contract to do residential building work on land and a contract of insurance that complies with this Act is in force in relation to that work, the benefit of the contract of insurance is taken to extend (and to have always extended) to any non-contracting owner in relation to the land at the time the contract to do residential building work was entered into as if the non-contracting owner were a person on whose behalf the work is done."

43 It is this s 92C that deems a non-contracting owner to be a person "on whose behalf" building work was done; but it does so solely for the purpose of the provisions concerning insurance and the benefit of insurance. Section 92C was introduced, clearly enough, to bring a "non-contracting owner" within the class of persons protected by relevant insurance, that class being defined by the words "a person on whose behalf the work is being done".

Discussion

44 As it applied to the present case, s 92C, as enacted in 2010, had the effect that the benefit of relevant contracts of insurance was deemed always to have extended to Baron and to the Owners Corporation (each being within the definition of "non-contracting owner") "as if" each was, as referred to in s 99(1), "a person on whose behalf" the building work was done and therefore a person enjoying the benefit directly. Section 18D(1A), as enacted in 2010, had effect for the quite distinct and different purpose of determining who had the benefit of the statutory warranties included in the contract between Metro and Baseline. Section 18D(1A) deemed each of Baron and the Owners Corporation, as a "non-contracting owner", always to have had the benefit of the warranties the direct entitlement to which rested with Metro.

45 In summary, s 18D(1A) caused each of Baron and the Owners Corporation to have retrospectively the benefit of statutory warranties while s 92C caused each of them to have retrospectively the benefit of insurance. But neither section said anything about whether Baron was, as referred to in s 3A(1), "a corporation on whose behalf residential building work is done in the circumstances set out in" s 3A(2). More precisely, the operation of s 3A(1) in relation to the building works carried out by Baseline under its contract with Metro was in no way altered by the status of "non-contracting owner" given to Baron by the Act of 2010.

46 Nothing enacted or implied by the Act of 2010 caused Baron to be regarded, for the purposes of s 3A(1) (as distinct from s 92C), as a person "on whose behalf" residential building work was done.

47 Nor, in my opinion, is it correct to say that the Act of 2010 caused Baron to be in a contractual relationship (or something equivalent) with Baseline. As far as the statutory warranties were concerned, s 18D(1A) caused Baron to have "the same rights as those that" Metro had. There was thus an attribution to Baron of rights identical with those of Metro, as distinct from a vesting or assignment of Metro's rights. The section left existing rights with Metro and created identical rights in Baron, so that both Metro and Baron had the rights. The process of attribution did not give rise to any contractual or like relationship. It merely enabled Baron to assert against Baseline, as a matter of statutory entitlement, rights identical with those that Metro could assert against Baseline as a matter of contractual entitlement under a contract incorporating the warranties implied by statute.

48 As this Court observed in Ace Woollahra, there are good reasons for confining the expression "on whose behalf" to cases where the residential work is undertaken by one party "on a contractual basis" for another. But no provision of the Home Building Act as in force at 22 October 2009 (or introduced by the Act of 2010 so as to affect the position at that earlier date) caused any contractual relationship to come into existence between Baseline and Baron or caused work done by Baseline for Metro under a contract between those companies to be done by Baseline "on a contractual basis" for Baron.

49 I am respectfully of the opinion that it was incorrect for the primary judge to hold that a "statutorily created contractual relationship" (or "something equivalent thereto") was brought into existence between Baseline and Baron by the 2010 Act so as to create a situation where, for the purposes of the provisions regarding statutory warranties, "Baseline must always have been carrying out the work on behalf of Baron (as well as on behalf of Metro)". All that that Act relevantly did with respect to statutory warranties was to create in Baron retrospectively a statutory entitlement as against Baseline coextensive with the contractual entitlement (as to statutorily implied warranties) already enjoyed by Metro as against Baseline.

Conclusion on the appeal

50 It follows that, subject to any contrary conclusion arising from the Owners Corporation's notice of contention, the separate question addressed by the primary judge should have been answered by holding that Baron was not a "developer" for the purposes of s 18C and that the Owners Corporation, although it was Baron's "immediate successor in title", could not, by virtue of s 18C, assert the benefit of the statutory warranties as if Baron had done the work under a contract with the Owners Corporation.

Issues and arguments on the notice of contention

51 The Owners Corporation, by notice of contention, says that, according to their correct construction, the development agreements to which Baron and Metro were parties were agreements for the doing of residential building work by Metro for Baron, so that Baron was, for that reason (and in a direct sense), a person "on whose behalf" such work was done. The Owners Corporation says that the primary judge wrongly rejected that argument.

52 It was submitted before the primary judge by counsel for the Owners Corporation that a conventional building contract is one "to get the work done, more often than not by subcontractors". The submission was supported by reference to s 6(1)(a) of the Home Building Act which provides that s 7 (which, among other things, requires that a building contract be in writing) applies to contracts under which the holder of a contractor licence undertakes "in person, or by others" residential building work. The Act was thus said to contemplate that a building contract to which the Act applies may provide for the work to be done by someone other than a party to the contract.

53 The judge accepted that that analysis may be correct, as a matter of generality, but said that he was required to consider the proper construction of the terms of the particular agreements. Statements made in the context of differently worded agreements were considered to be of little, if any, assistance.

54 His Honour then subjected the development agreements to a close textual analysis that need not be repeated here. He noted that, by clause 2.1, Baron appointed Metro to provide the "Services" (as defined), that Metro undertook to "perform or procure" the "Services" and that Metro was required to "under take the project to" perform the "Services" which were defined by reference to distinct tasks or outcomes listed in paragraphs (a) to (l) of Schedule 1. His Honour did not read these provisions as imposing on Metro an obligation to "under take the project". This was because, in Schedule 1, the word "to" appeared after the words "under take the project". His Honour said (at [44] of his reasons):

"I do not read cl 2.1 and Schedule 1 so as to impose upon Metro an obligation to 'under take the project'. That is because, in Schedule 1, the word 'to' appears after the words 'under take the project'. In my opinion, a reasonable person would understand from this language that the parties intended Metro's obligations to be to perform the services in subparagraphs (a) to (l), and thereby 'under take' 'the Project'; and not to itself 'under take the Project'."

55 Acknowledging that there were, however, some contrary indications in the text, the judge turned to what are, for present purposes, the key provisions in clause 2.4, as follows:

"a. The Developer [ie, Metro] will ensure that it shall not perform any of the Services which require it to hold a licence under the Home Building Act unless it holds a licence of the appropriate class under the Home Building Act.

b. To the extent that any person performing any of the Services requires a licence pursuant to the Home Building Act, the Developer will ensure that any such person holds a licence of the appropriate class under the Home Building Act prior to the time when that person would have been required to perform the relevant works."

56 It was argued before the primary judge that these provisions did not circumscribe the concept of the "Services" or remove from Metro's contractual responsibility activities that could not lawfully be contracted for except by licensed persons. His Honour dealt with that submission as follows (at [57] - [58]):

"The construction for which Mr Roberts contended attributes to Metro an understanding that it should not, and a promise that it would not, perform any work requiring a licence under the Act unless licensed; but an intention to contract to do work requiring a licence without having such a licence, thereby putting itself in breach of the Act. That is, Mr Roberts' construction attributes to the parties an intention that Metro act unlawfully.

It seems to me most unlikely that the parties so intended. This fortifies my conclusion that my reading of Schedule 1 set out at [44] above is the correct one."

57 The same submission was advanced on appeal and must again be rejected.

58 According to that submission, Metro is to be taken to have promised to do "residential building work". But by virtue of s 4(1) of the Home Building Act, Metro was forbidden to contract to do "residential building work" because (as is common ground) it never held a licence under the Act. If the unlicensed contractor's promise extended to the doing of "residential building work", a court, having regard to s 10, might not enforce the promise, with the result that Baron could not be said to have had any right to the performance of any of the "Services" that entailed "residential building work". The construction for which the Owners Corporation contends should be rejected on that basis.

59 In any event, a court will not lightly impute to contracting parties an intention to make a contract prohibited by statute where, as here, there is an express provision excusing or excluding performance to the extent that it entails the doing of things that it is unlawful to contract to do. The effect of such a provision can only be to confine the scope of the promise to perform so that it does not extend to the doing of those things. That is a further reason for rejecting the construction propounded by the Owners Corporation.

Conclusion on the notice of contention

60 The judge correctly construed the development agreements to which Baron and Metro were parties. The Owners Corporation's contention therefore fails.

Disposition

61 I propose orders as follows:

1. Grant leave to appeal.

2. Direct that a notice of appeal in the form of the draft in the white folder be filed within seven days.

3. Appeal allowed.

4. Set aside Order 1 made in the Equity Division on 13 June 2013 and order in lieu:

"Order that the question whether

(a) for the purposes of the Home Building Act 1989, the second defendant is a 'developer' who did the work, being the construction of the common property in the land the subject of Strata Plan 69567 known as and situated at 37 Morley Avenue Rosebery as contended in paragraph 11A of the Second Further Amended Technology and Construction List Statement; and

(b) the plaintiff, being the owner of the common property, is, pursuant to s 18C of that Act, entitled to the benefit of the statutory warranties implied by s 18B of the Act and may enforce the statutory warranties against the second defendant as if the second defendant had constructed the common property under a contract with the plaintiff

be answered 'no'".

5. Set aside Order 3 made in the Equity Division on 13 June 2013 and order in lieu:

"Order that the costs of the hearing of the separate question on 15 and 16 April 2013 otherwise be the second defendant's costs in the cause."

6. That the respondent pay the costs of the applicant/appellant in this Court.

62 YOUNG AJA: I agree with Barrett JA.

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Decision last updated: 29 July 2013