Barcrem Pty Ltd v Nisiotis
[2019] VCC 1006
•8 July 2019
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
Case No. CI-19-01552
| Barcrem Pty Ltd | Plaintiff |
| v | |
| Nick Nisiotis and Steve Nisiotis | Defendants |
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JUDGE: | His Honour Judge Woodward | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 26 June 2019 | |
DATE OF RULING: | 8 July 2019 | |
CASE MAY BE CITED AS: | Barcrem Pty Ltd v Nisiotis | |
MEDIUM NEUTRAL CITATION: | [2019] VCC 1006 | |
REASONS FOR RULING
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Subject: CONTRACTS
Catchwords: Building and construction – application to stay a proceeding on the basis that it is a “domestic building dispute” under the Domestic Building Contracts Act 1995 (Vic) – definition of “builder” in the Act – work to which the Act relates – expert evidence – failure to comply with O44 of the Rules
Legislation Cited: Domestic Building Contracts Act 1995 (Vic) ss3, 5, 54 and 57; County Court Civil Procedure Rules 2018 (Vic) O44
Cases Cited:H Buildings Pty Ltd (ACN 091 236 912) v Owners Corporation 1 PS537642N & ORS [2017] VSC 802; Presser v Ocean View Properties Pty Ltd [2006] VSC 143; Burbank Australia Pty Ltd v Owners Corporation [2015] VSC 160; Shaw v Yarranova Pty Ltd (2006) 15 VR 289; Shaw v Yarranova Pty Ltd [2006] VSC 45; Lin Tiger Plastering Pty Ltd v Platinum Construction (Vic) Pty Ltd [2018] VSC 221; Matthews v SPI Electricity Pty Ltd [2012] VSC 340
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr G J Parncutt | Kiatos & Co |
| For the Defendants | Mr L Connolly | Moray & Agnew Lawyers |
HIS HONOUR:
Background and issues
1 The plaintiff (“Barcrem”) has brought a proceeding in this Court for enforcement of a Consulting Agreement dated 28 July 2016 (“Agreement”) in relation to the construction and sale of residential units (“Project”) at 260 Williams Road, Toorak (“Property”). The first defendant and his wife are the owners of the Property. The first and second defendant are brothers and were the joint counterparties to the Agreement (“Developers”). The Developers have applied by summons dated 3 June 2019 for a stay of the proceeding pursuant to s57 of the Domestic Building Contracts Act 1995 (Vic) (“Act”).
2 Section 57 of the Act provides in effect that if a person starts any action arising “wholly or predominantly from a domestic building dispute” in the County Court, the Court must stay any such action on the application of a party to the action, if (for present purposes) the action could be heard by VCAT under subdivision 1 of Part 5 of the Act. The terms that are central to the determination of this application are relevantly defined by the Act as follows (emphasis added):
· “domestic building dispute” is a dispute or claim arising between a building owner and a builder, in relation to a domestic building contract, or the carrying out of domestic building work (s54);
· “domestic building contract” means a contract to carry out, or to arrange or manage the carrying out of, domestic building work (s3);
· “builder” means a person who “manages or arranges the carrying out of domestic building work” or “intends to carry out, or manage or arrange the carrying out of, domestic building work” (s3);
· “domestic building work” includes the erection or construction of a home (s3, s5); and
· “home” means any residential premises (s3).
3 The questions in this application are:
· Have the Developers established that the Project involves construction of residential premises and thus attracts the operation of the Act?
· If so, is Barcrem a “builder” within the meaning of the Act?
· Is the Agreement a “domestic building contract” within the meaning of the Act?
· Does the work contemplated by the Agreement comprise “domestic building work” within the meaning of the Act?
4 As explained below, the answers to the first and second questions essentially determine the answers to the third and fourth questions.
5 I note that in its written submissions, Barcrem also argues that the Developers have conceded jurisdiction by filing an unconditional appearance. I reject this submission. This is not a case where there is some procedural irregularity or arguable want of jurisdiction in the court of the kind discussed in the authorities on which Barcrem relies, where an unconditional appearance might act as a waiver. Rather, s57 imposes a mandatory obligation on the court to stay a subsisting action in the court. The only pre-conditions to the an order for a stay are:
· the making of an application for that order by a party;
· the action can be heard by VCAT under subdivision 1 of Part 5 of the Act; and
· that the court has not heard any oral evidence concerning the dispute itself.
6 Thus an action could have advanced to the point of opening submissions at trial when an application is made by a party, and the court would still be compelled to stay the action (assuming the court had not by then heard any oral evidence concerning the dispute). Apart from the pre-conditions referred to, there are no exceptions. Nor is there any residual discretion preserved to the court, even for exceptional cases. All of the pre-conditions are met in this case.
7 Another issue raised by the Developers’ submissions is whether this proceeding is brought against “a building owner” for the purposes of ss54(3) and 44(3) of the Act. However, Barcrem does not appear to contest this issue. But, for completeness, I note that I agree with the Developers’ submission that the evidence establishes that the first defendant is a joint owner of the Property and is therefore “a building owner” under those sections.
Legislative Context
8 The Developers submit (and it is trite) that in applying the relevant provisions of the Act, regard must be had to the underlying purpose and objectives of the legislation. Section 1(b) of the Act provides that one of the main purposes of the Act is “to provide for the resolution of domestic building disputes and other matters by” VCAT. This purpose is reiterated in s4(b) which provides that one of the main objects of the legislation is “to enable disputes involving domestic building work to be resolved as quickly, as efficiently and as cheaply as possible having regard to the needs of fairness”.
9 These statements of purpose and object are elaborated in the second reading speech, as follows:
“The public policy rationale for [s 57] is the intention to provide a single, inexpensive, time-efficient and expert forum for the resolution of domestic building disputes. Domestic building disputes are a special category of dispute where timeliness of resolution is critical, and where less formal proceedings are more likely to reach the heart of the matter than the full panoply of the law. Therefore, a party to the dispute should be able to have the option of taking advantage of the benefits offered by the tribunal if a matter is brought before the courts for resolution.”
10 In Presser v Ocean View Properties Pty Ltd [2006] VSC 143 at [44], Habersberger J observed:
“[O]ne of the four purposes of the Act is ‘to provide for the resolution of domestic building disputes’ by the Tribunal (s.1(b)). This purpose would not be served in my opinion by deciding that it was not appropriate to grant a stay even though the dispute essentially centres on responsibility for the allegedly unworkmanlike carrying out of an item of domestic building work. Jurisdiction is given to the Tribunal by s.53(1) of the Act to resolve domestic building disputes and the Tribunal’s role in this regard is emphasised by the fact that, pursuant to s.57(2), if the Tribunal has jurisdiction, the Court must stay an action on the application of a party to the action.”
The Agreement
11 Barcrem alleges that the Agreement is partly oral and partly in writing. The particulars to paragraph 2 of its statement of claim state that, in so far as the Agreement was in writing it was “contained in a document entitled ‘Consultancy Agreement’ signed at Reservoir, Victoria on 28 July 2016”. This document was in evidence. It in fact takes the form of a letter from Barcrem headed “Consulting Offer” dated 19 June 2016, with the subject line “Consulting Services the Development and Construction of Residential Units at 260 Williams Road, Toorak” (“19 June Letter”). The letter was signed by Harry Barbon as director of Barcrem on 28 July 2016 and countersigned by the Developers on 28 and 29 July 2016.
12 The 19 June Letter relevantly states as follows (emphasis added):
“Our company will provide consulting services to you for the development of the project including, marketing, sales, finance, construction and completion/settlement of 13 residential units.
The scope of the services are as follows;
1/ Supervision of the completion of all construction and subdivision documentation.
2/ Marketing and sales of the project, including contracts of sale—if required.
3/ Financing of the project.
4/ Ongoing review of documentation as the development progresses, including all amendments to construction drawings as may be required.
5/ Obtaining all relevant permits for the project.
6/ Appointment of the builder.
7/ Supervise the construction of the building in accordance with the building contract, building permits, all construction drawings and compliance with the building surveyors instructions up to the issue of the certificate of completion of the building.
8/ Co-ordination and supervision of the builder and consultants during the construction of the building, including regular meetings between the builder and consultants throughout the construction of the building.
9/ Supervise the approval of the builder’s monthly progress claim in conjunction with the financier’s Quantity Surveyor.
…
12/ Generally all other requirements to complete the project.”
13 The particulars to paragraph 2 of the statement of claim then allege that, to the extent that the Agreement was oral, it was contained in conversations between the parties “on or about 21 July 2016”:
“to the effect that the consulting services to be provided by the Plaintiff would include the supervision of the completion of documentation by the architect, engineers, building surveyor or other expert of any services in relation to the design or construction or the supervision or inspection of the building works in accordance with the building contract or provision of any materials for inclusion in the building works, including supervising of the completion of documentation for tendering of a fixed price construction contract on behalf of the Defendants with the successful tenderer, obtaining all relevant permits for the Project and novating the consultants (the architect, structural engineer and the services engineer) to the successful builder. In addition, the Plaintiff would supervise the approval of the builder’s monthly progress claims in conjunction with the financier’s quantity surveyor, supervise the marketing, presales, contract preparation, as well as settlement of the sales of the units and establish the owners’ corporation.”
14 Even accepting for present purposes that the terms of the Agreement went beyond those contained in the 19 June Letter, Barcrem’s pleading of the oral part of the Agreement does not suggest that it is an exhaustive statement of Barcrem’s obligations under the Agreement. On the contrary, it states that the services “would include” those stated. There is also no suggestion in the pleaded version of the alleged oral terms of the Agreement, that they in any way limited the scope of the written terms or excluded particular written terms. Further, the written terms were signed days after the alleged oral terms and thus, on any view, must be construed as supplementing (if not superseding) any earlier oral terms, not the other way around. There is no pleading of mistake in respect of the 19 June Letter, nor could there be. It was prepared and submitted by Barcrem.
15 The affidavit evidence about the Agreement does not advance this issue. Indeed, it further undermines any suggestion that the written terms of the Agreement contained in the 19 June Letter were in any way qualified by any alleged oral terms. The affidavit of Harry Barbon sworn 19 June 2019, gives a lengthy and detailed summary of things he alleges he was told by the Developers, and what he told them, about the services required and offered by Barcrem. But, according to Mr Barbon’s affidavit, the meeting where this occurred took place on 16 June 2016, not 21 July 2016 as the statement of claim asserts. There is no reference in Mr Barbon’s affidavit to any meeting in July 2016. He does mention what appears to be one further meeting, which he deposes took place on 20 June 2016. He asserts that he told the Developers at that meeting that “the total cost would be $120,000 plus GST” and “[w]e went through the quote”. I take “the quote” to be a reference to the 19 June Letter.
16 There are two things to observe about this evidence. First, Mr Barbon’s summary of what was said at the 16 June 2016 meeting is surprisingly detailed and specific for a discussion that occurred over three years before his affidavit was sworn. Mr Barbon does not depose to having made any notes of the meeting and no notes or other contemporaneous written record of the discussion is exhibited to his affidavit. I note in passing that in his affidavit sworn 24 June 2019, Steve Nisiotis agrees that the meeting occurred on or about 16 June 2016, but gives a much shorter and in some respects varying account of the discussion. Perhaps unsurprisingly, Mr Nisiotis’s account more closely accords with the terms of the 19 June Letter.
17 Second, as I have noted, it is common ground that the meeting where Barcrem’s services were discussed, took place on or about 16 June 2016 and not over a month later on or about 21 July 2016. It follows that Mr Barbon prepared the 19 June Letter in the days immediately after that meeting, presumably intending to encapsulate what was discussed. Mr Barbon does not attempt to explain in either of his affidavits sworn in opposition to this application, how he came to prepare a letter that (on Barcrem’s case) did not accurately state the services Barcrem alleges it intended in fact to provide. In oral submissions, the best explanation that Barcrem’s counsel could offer was that it was a document prepared by a non-lawyer.
18 In these circumstances, there is no sustainable basis for an argument that any discussions between the parties on around 16 June 2016 could support a construction of the Agreement that either contradicts or disregards any of the express terms of the 19 June Letter. In my view, absent a plea of mistake (which, as I have said, is not maintainable by Barcrem as the sole author of the 19 June Letter), the 19 June Letter stands as an accurate (if not exhaustive) description of the services Barcrem agreed to provide to the Developers under the Agreement. More particularly, I am satisfied that the 19 June Letter provides the most reliable source for my analysis of whether, by the Agreement, Barcrem intended “to carry out, or manage or arrange the carrying out of, domestic building work”, and is thus a “builder” within the meaning of the Act.
What work did Barcrem do?
19 Mr Barbon deposes that “Barcrem’s work was confined by its instructions from the Owners which by agreement with the defendants had been limited to” a list of 12 activities set out in the affidavit. These included:
· overseeing the work of consultants engaged by the Developers for the Project;
· monitoring the completion of the working drawings and specifications for construction prepared by the Developers’ consultants, the site survey and design layout and the architect’s plans;
· attending consultants’ meetings, organising the town planner, reviewing documentation with the consultants, obtaining indicative prices from five to six builders;
· conducting site inspections with the Developers and prospective builders to obtain the indicative prices from the builders and also with real estate agents for the pre-sale of the units;
· preparing reports to enable an application to be made by the Developers’ lawyers to extend the Planning Permit;
· giving advice regarding finance for the Project, prospective building companies and amended building plans all prepared by the consultants appointed by the Developers;
· providing information and communication with NAB loan managers in relation to the Developers’ application for a development loan; and
· preparing a development history report for the Developers in collaboration with the Developers’ town planner and the Developers themselves for the purpose of lodging an application to council to extend the planning permit.
20 These activities are all broadly as contemplated by clauses 1 to 5 of the “scope of services” set out in the 19 June Letter. It is common ground that Barcrem did not in fact undertake any of the tasks contemplated by clauses 6 to 12. However, it is also common ground that the Project never reached the stage where Barcrem would have been called on to do so. Mr Barbon deposed that:
“There was no building work undertaken during the entirety of the period that the consulting services were performed by Barcrem for the Owners. No construction took place during Barcrem’s term of engagement, nor was there any Major Domestic Building Contract ever entered into between the Owners and a building company.
…
During the time Barcrem was providing consultancy services, the project did not proceed due to the Owners being unable to obtain unconditional finance.”
21 For his part, Mr Nisiotis deposed in response to these (and similar) statements by Mr Barbon that:
“Whilst I agree that Barcrem did not ultimately supervise any building work or activity on the Project, this was due to the fact that it failed to fulfil its obligations under the Consultancy Agreement and that it subsequently purported to terminate the Consultancy Agreement.”
22 Thus, it is common ground that the relationship ended before the Project had progressed to the appointment of a builder and commencement of construction. In those circumstances, the evidence about what tasks Barcrem in fact undertook (including the affidavit of the architect Mr Doig sworn 18 June 2019), does not support a conclusion that Barcrem did not intend to manage or arrange the carrying out of domestic building work. To the extent that Barcrem submits otherwise, I reject those submissions. If anything, the evidence points the other way. It shows that Barcrem was progressively stepping through the various stages contemplated by the 19 June Letter up to and including the services referred to in clause 5. It is open to infer that had the service referred to in clause 6 (appointment of the builder) been provided, and the later stages of the Project been reached while the Agreement was still on foot, Barcrem would have in turn proceeded to provide each of the services identified in clauses 6 to 12.
Did the project involve construction of residential premises?
23 Barcrem submits that the Developers have not adduced evidence sufficient to establish that the Project involved work to which the Act applies, within the meaning of s5 of the Act. Section 5 relevantly provides that the Act applies to:
· work comprising “the erection or construction of a home”, where s3 provides that “home” means “any residential premises”; or
· “any work associated with the erection of a building on land that is zoned for residential purposes under a planning scheme under the Planning and Environment Act 1987; and…in respect of which a building permit is required under the Building Act 1993”.
24 The Developers note in their submissions that it has been held that home includes “homes” (Winslow Constructions Pty Ltd v Mt Holden Estates Pty Ltd (2004) 10 VR 435 at [2(a)]), and as a matter of ordinary language the definition of homes includes the construction of residential units (see, for example Burbank Australia Pty Ltd v Owners Corporation [2015] VSC 160 at [11]). Barcrem does not seek to rely on the fact that the Project involved multiple residential units as a basis for excluding the operation of the Act. Rather, it submits that: “There is no evidence that the plaintiff is involved in any work that could be described as the construction of residential premises on land zoned for residential purposes or any work requiring a building permit”.
25 In support of this submission, Barcrem cites H Buildings Pty Ltd (ACN 091 236 912) v Owners Corporation 1 PS537642N & ORS [2017] VSC 802 at [91] and [105], as authority for the proposition that determining the application of the Act “requires having regard to the physical characteristics of the building, namely, the nature of the works in question to be determined by the application of objective criteria gleaned from the design purpose of the building at the time of entry into the contract”. Barcrem goes on to submit that there is no current application for a planning permit on foot to show the intended use of the premises and that the application “was filed without any evidentiary material in support other than relying on the wording of the [Agreement]”.
26 The physical characteristics of a building and the nature of the works clearly can assist in determining whether the building is a “home”, particularly in the case of mixed use developments (noting that the Project was residential only, not mixed use). However, it does not follow that only the physical building itself (or the building permit) can reveal whether a project includes the construction of a home. There will be many cases where a dispute arises in a domestic building project, before a building permit is issued or construction commences. The clear purpose of the Act is to capture disputes arising in respect of such projects, including where the dispute arises while the issue or renewal of a building permit and commencement of construction is still pending.
27 In Winslow Constructions Pty Ltd v Mt Holden Estates Pty Ltd (2004) 10 VR 435, the Court of Appeal held (at [2] and [55]) that s5(1)(a)(i) of the Act (which concerns work “associated” with the construction of a home, such as landscaping) did not apply to work performed in contemplation of “merely prospective homes on a proposed residential subdivision”. The court held that: “In such cases there was an insufficient nexus with the erection or construction of a home or homes for the work undertaken by the appellants to be “associated work” of the kind referred to in that subparagraph”. This is an entirely different case. Here the terms of the 19 June Letter expressly provide that the work encapsulated by the Agreement included the commencement and completion of the construction phase.
28 That said, there is no doubt that an applicant for a stay under s57 of the Act must establish by admission or as an objective fact that the relevant project does involve the construction of residential premises. But, in my view, there is also no doubt that the Developers have done so in this case. They rely on:
· paragraph 2 of Barcrem’s statement of claim, which states (emphasis added) that, by the Agreement, Barcrem agreed to provide consultancy services “for the development, construction and sale of residential units at [the Property]…which had commenced in 2004”;
· paragraph 2 of the Developers’ defence, which also pleads (and thereby admits) the “proposed construction of 13 residential units”;
· paragraph 3 of the Affidavit of Danielle Snell sworn in support of the application on 3 June 2019, which deposes that the proceeding relates to “the proposed development and construction of 13 residential units” at the Property;
· the first sentence of the 19 June Letter, which states (emphasis added): “Our company will provide consulting services to you for the development of the project including, marketing, sales, finance, construction and completion/settlement of 13 residential units”; and
· the building permit (including variations) exhibited to Mr Barbon’s affidavit, which identifies the “Nature of Building Work” as “Construction of Multi-Residential Development” and which Mr Barbon deposes was “the building permit [that] had been issued but was suspended due to the liquidation of the builder”.
29 The evidence is overwhelming. It is perhaps indicative of the significant difficulties with its defence of the application more generally, that Barcrem even advanced this argument. I am comfortably satisfied that the Project was the construction of a home within the meaning of the Act.
Is Barcrem a “builder” within the meaning of the Act?
30 On this issue, both parties referred me to Shaw v Yarranova Pty Ltd (2006) 15 VR 289, in which the Court of Appeal by majority (Eames and Neave JJA, Warren CJ dissenting), upheld the decision of Bell J at first instance. Bell J had held that an “off-the-plan” contract of sale which contemplated that a home would be constructed under a separate major domestic building contract, was not a contract to “manage or arrange” domestic building work.
31 Barcrem submitted that entering into the Agreement did not make it a builder for the purposes of the Act “because s3 required the work to be done to be ‘carrying out of domestic building work’ which has been held to refer to the ‘practical activities involved in the work of constructing a building’”. It supports this proposition by setting out the following passage from the decision of Neave JA (Eames JA agreeing) (at [84]):
“I agree with the learned judge below that this requires the words ‘manage or arrange’ and ‘carrying out of domestic building work’ to be read as referring to the ‘practical activities involved in the work of constructing a building’. Under special condition 18.1 NewQuay contracted to enter into a major domestic building contract with a builder, not to construct the building itself. As his Honour said:
‘What [NewQuay] had to do was commission a registered builder to construct the apartment building and in various ways facilitate the construction of the building by that builder. This did not make it a builder for the purposes of the Domestic Building Contracts Act and did not make the contract of sale a domestic building contract as defined in that Act’.”
32 Barcrem then submits (in effect) that s5 therefore refers to work “of a physical or manual nature which occurs on a building site and accompanies the erection or construction of a home” and that its work as contemplated by the Agreement “is plainly not of a physical or manual nature”. In my view, this submission misconceives the Court of Appeal’s decision and the decision of Bell J below (noting that Eames JA, in agreeing with Neave JA, also strongly indorsed Bell J’s analysis – see at [17]). It is worthwhile setting out at some length the relevant parts of that analysis, including passages relied on in submissions by the Developers.
33 Bell J begins by dissecting the parts of the definition of “builder” in s3 of the Act, as follows (Shaw v Yarranova Pty Ltd [2006] VSC 45 at [51] to [54]) (emphasis added):
“The definition of “builder”, understandably, treats the builder as the person who either carries out the work or manages or arranges the carrying of it out. Persons who, as a fact, carry out such work, or manage or arrange the carrying out of such work, are builders, as are persons who intend to do so.
The managing or arranging referred to in para (b) of the definition “builder” is a managing or arranging of the building work itself. It is intended to capture within the scope of the definition indirect methods by which a builder organises the carrying out of building work.
Under the Domestic Building Contracts Act, a person may, as a fact, engage in the activities described in the definition of “builder” and thereby, for the purposes of the Act, be a builder.
…
The expression “to carry out, or to arrange or manage the carrying out of, domestic building work” in the definition of “domestic building contract” has a meaning consistent with the same words in the definition of “builder”. The carrying out, or managing or arranging, of which the definition of “builder” speaks is that of a builder. The carrying out, or arranging or managing, of which the definition of “domestic building contract” speaks, is that of a builder. A person who, under a contract, is to carry out, or to arrange or manage the carrying out of, the relevant work will, by engaging in these activities, be a builder.”
34 Bell J adds (at [59]) that (emphasis added):
“As I have already noted, to ‘arrange or manage’ in the definition of ‘domestic building contract’ refers to the building work. The definition contemplates either that the builder will carry out the work or arrange or manage this activity. The focus in each case is upon the work – essentially, the practical activities involved in the work of constructing a building. The activities are specified in s.5 and I will come to them later. A contract under which a person carries out these activities comes within the definition. So does a contract under which a person arranges or manages these activities as carried out by others. To meet the statutory definition, the contract must be to carry out, or to arrange or manage the carrying out by others of, the activities that constitute the building work.”
35 It is the words “practical activities involved in the work of constructing a building” from this last mentioned paragraph, which Neave JA picks up in her judgment and on which Barcrem relies. But what is plain from a complete reading of the judgments of both Bell J and Neave JA is that a person need not themselves carry out “the practical activities involved in the work of constructing a building” to be a “builder” within the meaning of the Act. A person who “arranges or manages these activities as carried out by others” (emphasis added) is also a “builder”, as is a person who intends to do so. I reject Barcrem’s submission that these decisions support the proposition that a “builder” under the Act is limited to the person or entity directly engaging in the manual building work.
36 Barcrem next submits in substance that, on its true construction, the Agreement does not in any event contemplate that Barcrem would “manage or arrange” the relevant building work. It relies for this purpose primarily on two affidavits from building surveyors, purporting to comprise expert opinion evidence concerning the nature of the work contemplated by the Agreement. The first is the affidavit of Peter Shaw sworn 19 June 2019 (“Shaw affidavit”). The second is the affidavit of Eric Robert Hirschfeld sworn 25 June 2019 (“Hirschfeld affidavit”). For their part, the Developers rely on an expert report of building surveyor Shane Leonard dated 21 June 2019 (“Leonard report”).
37 According to the Shaw affidavit, Mr Shaw is a building surveyor with 35 years’ experience and 25 years’ experience as a building inspector. Mr Shaw deposes that: “I have been instructed that Barcrem Pty Ltd was appointed as a contract manager or contract administrator” for the Project and that Mr Barbon “regularly attended site meetings with consultants” on behalf of the Developers. He states that he reviewed the Agreement, but does not otherwise refer to the Agreement or any of its terms. Instead, his analysis is limited to two matters, as follows:
· First, he examines whether a person who is managing or administering contracts (and thus is a “contract manager” or “superintendent”) is someone who supervises the carrying out of building works. He also discusses the nature of the works performed by an “Owner’s Agent”. Mr Shaw opines that a person carrying out any of these roles does act as a building practitioner.
· Second, on the basis that Barcrem did not prepare any plans or specifications, the Developers never signed a building contract and no construction took place during Barcrem’s engagement, he says “I am of the view that Barcrem did not act as a building practitioner”.
38 Mr Hirschfeld is a building surveyor with 40 years’ experience including holding the position of Municipal Building Surveyor for the former City of Kew for eight years and is currently the director of CRC Building Surveying Pty Ltd, a company specialising in building consultancy and essential services, building permits, council building notices and orders. The Hirschfeld affidavit is essentially a response to the Leonard report. Mr Hirschfeld disagrees with Mr Leonard’s discussion of items 7 and 8 of the 19 June Letter and states that:
“In my view, I would place considerable focus on the proposal in clause 6 that includes “appointment of the builder” and in clause 9 ‘supervise the approval of builders’ monthly progress claim in conjunction with the financier’s quantity surveyor’. This would indicate to me that there was never any intention for Barcrem to act as a building practitioner as suggested in Mr Leonard’s Affidavit (sic)”
39 Each of the Shaw affidavit and the Hirschfeld affidavit is objectionable in its form, flawed in its analysis and offends O44 of the County Court Civil Procedure Rules 2018 (Vic) (“the Rules”). Both affidavits are objectionable essentially because they purport to express an expert opinion on the proper construction of an agreement and the application of the Act to that agreement so construed. In my view, the form of the Agreement is such that these are tasks exclusively for the court.
40 The position may have been different if the Agreement in fact used terms such as “contract administrator”, “superintendent” and “Owner’s Agent” discussed in the affidavits. A court may be assisted by expert evidence as to the common industry understanding of terms such as these. But none of those terms is used. The relevant provisions of the 19 June Letter (and notably clauses 7 and 8) use plain English expressions that are the daily fodder of courts and tribunals construing commercial contracts, including building and construction contracts. There is no evidence to suggest that the relevant terms used in the 19 June Letter are “terms of art” that have a particular meaning or usage that is unique to the building industry.
41 Turning to the analysis, the Shaw affidavit is expressly premised on Mr Shaw’s instructions that Barcrem was appointed only as “contract administrator” or “contract manager”. As noted, neither of those terms is used in the Agreement and it is clear from the 19 June Letter that Barcrem’s proposed role under the Agreement is significantly more extensive. For example, even ignoring for the moment the supervisory roles under clauses 7 and 8, the tasks identified in clauses 2 and 3 are clearly outside those ordinarily performed by a contract manager or project superintendent.
42 Mr Shaw’s discussion of the steps not taken in the completion of the Project is equally problematic. It essentially amounts to drawing conclusions about Barcrem’s agreed role by reasoning backwards from the fact that the Project stalled before a builder was appointed. It entirely overlooks that the definition of “builder” in s3 of the Act includes both what a person does as well as what a person “intends” to do. The complete absence of any reference in Mr Shaw’s analysis to the contractual terms actually defining Barcrem’s agreed role as set out in the 19 June Letter, robs his evidence of all relevance.
43 In relation to Mr Hirschfeld, it is enough to observe that his analysis focuses almost exclusively on clauses 6 and 9 of the 19 June Letter. This is not a case (as counsel for Barcrem contended) of giving prominence to certain clauses over other clauses. Mr Hirschfeld fails entirely to attempt to explain, for example, what clauses 7, 8 and 12 mean and why they should be read as subordinate to clauses 6 and 9. Apart from stating that he does not agree with Mr Leonard’s discussion of clauses 7, 8 and 12, he ignores them. Moreover, any process of reasoning for “placing considerable focus” on clause 6 and 9 is also absent from Mr Hirschfeld’s analysis.
44 Turning finally to compliance with O44 of the Rules, I understood counsel for Barcrem to submit in substance that, as Mr Shaw and Mr Hirschfeld were giving evidence based on specialised knowledge from experience in the industry, compliance with O44 was not required. That is, it was not necessary for them to be given a copy of the Expert Witness Code of Conduct (“Code”) and agree to be bound by the Code. He cited in support of this submission the decision of Croft J in Lin Tiger Plastering Pty Ltd v Platinum Construction (Vic) Pty Ltd [2018] VSC 221 at [46] where His Honour said:
“At this point, it is useful to observe that, in my view, provisions such as regulation 7 of the DBCR must be interpreted in the context of legislation and subordinate legislation directed to matters in respect of the building industry and, consequently, it would not only be absurd, but contrary to the legislative purpose to interpret words and expressions other than in accordance with, or at least, consistently with their accepted meaning and usage in that industry. It follows that the opinions of those with relevant expertise and experience in the building industry are relevant in this respect. Generally, as to the admission of evidence based on specialised knowledge, see Matthews v SPI Electricity Pty Ltd”[2012] VSC 340].”
45 As I have already noted, there is no evidence that any of the terms and expressions used in the Agreement have an “accepted meaning and usage in the industry”. And the evidence of Mr Shaw and Mr Hirschfeld as to the “accepted meaning and usage in the industry” of particular terms, concern terms that do not appear in the Agreement. In any event, neither this passage nor Croft J’s decision generally, is authority for the proposition that Mr Shaw and Mr Hirschfeld were not required to comply with O44. Indeed, a reading of the decision of J Forrest J in Matthews v SPI Electricity Pty Ltd [2012] VSC 340 referred to by Croft J in the passage above, establishes the opposite.
46 As J Forrest J made clear in that decision (at [15]), O44 “is plainly directed to experts ‘engaged’ by a party … to provide an opinion for the purposes of the relevant piece of litigation” and (at [31]) “is confined in its application to an independent expert witness”. His Honour was contrasting for this purpose two other types of witnesses who may give opinion evidence. First, a witness who will give evidence on factual matters, but may also be asked to express an expert opinion on what those facts show. In the case before His Honour, this included fire investigators who conducted initial investigations of the Black Saturday bushfires, but were not available to be engaged by any of the parties to the litigation as an independent expert. Second, what His Honour describes as “internal witnesses”. That is, witnesses with specialised knowledge (such as electrical engineers) who were employees or contractors of one of the parties and thus were precluded from fully complying with the Code.
47 Mr Shaw and Mr Hirschfeld are in neither of these categories and I can see no reason for otherwise accepting their evidence in the absence of proper compliance with O44 of the Rules. Indeed, the deficiencies in their evidence discussed above may have been avoided or lessened if they had both been given a copy of the Code and agreed to be bound by it. I note that Mr Leonard stated in the Leonard report that he had read the Code and agreed to be bound by it. I also broadly agree with the conclusions he reaches in his report. However, with respect, I repeat my view that in the circumstances of this case, the construction of the Agreement and the application of the Act to the Agreement are matters for me and are not assisted by expert evidence of industry practice.
48 The Developers submit that the services set out in clauses 7 and 8 of the 19 June Letter “plainly fall within the definition of builder” in s3 of the Act. I agree. In my view, Barcrem’s agreement to “supervise the construction of the building in accordance with the building contract” and “co-ordination and supervision of the builder and consultants during the construction of the building, including regular meetings between the builder and consultants throughout the construction of the building”, clearly evince an intention by Barcrem to “manage or arrange the carrying out of” the relevant building work. Even more so when regard is also had to its agreement by the 19 June Letter to undertake:
· consulting service for the development of the Project “including…construction and completion”;
· “Appointment of the builder”; and
· “Generally all other requirements to complete the project”.
49 The Macquarie Dictionary (3rd Ed, 2003, The Macquarie Library Pty Ltd) defines “supervise” as “to oversee (a process, work, workers, etc.) during execution or performance ; superintend; have the oversight and direction of”. “Manage” has more varied meanings, but they relevantly include “to take charge or care of…to handle, direct, govern or control in action or use…to conduct affairs”. And the definition of “arrange” includes “to prepare or plan…to make preparations”. So while not entirely synonymous, each expression has overlapping meanings.
50 In my view, the services that Barcrem agreed to provide under clauses 7 and 8 of the 19 June Letter, particularly when read in context of the letter as a whole, fall squarely within the definition of “builder” in s3 of the Act. Thus, paraphrasing Bell J in Shaw v Yarranova Pty Ltd [2006] VSC 45 at [54], Barcrem is a person who, under a contract, is to arrange or manage the carrying out of the relevant work and, by agreeing to engage in these activities, is a builder within the meaning of the Act.
Is the Agreement a “domestic building contract” within the meaning of the Act?
51 As noted above, s3 defines a “domestic building contract” as meaning a contract to carry out, or to arrange or manage the carrying out of, domestic building work other than a contract between a builder and a sub-contractor. Accordingly, by reason of the matters set out in my analysis above, the Agreement falls squarely within the definition of a domestic building contract.
Was the work “domestic building work” within the meaning of the Act?
52 Similarly, s3 of the Act defines “domestic building work” as being any work referred to in s5 that is not excluded from the operation of the Act by s6. In Burbank Australia Pty Ltd v Owners Corporation [2015] VSC 160 at [32], Justice McDonald relevantly observed that:
“It is misconceived to frame a question concerning the application of the DBC Act by reference to the identity of a contracting party (save for a contract between a builder and sub-contractor), whether that party be a developer, builder, vendor or purchaser . Section 5 of the DBC Act, which prescribes the work covered by the Act, directs attention to the nature of the work undertaken rather than the parties to the contract governing the work in question.”
53 I have already found that the Project was “the erection or construction of a home” within the meaning of s5(1)(a) of the Act. Therefore the work the subject of the Agreement is “domestic building work” within the meaning of the Act.
54 It also follows from this finding that the dispute is a “domestic building work matter” within the meaning of s44(2) of the Act. Section 44(2)(e) of the Act provides that a “domestic building work matter” means any matter relating to a domestic building contract or the carrying out of domestic building work, including an “alleged failure to pay money for domestic building work performed under the contract”. In Barcrem’s statement of claim, Barcrem alleges that the Developers are liable to it for an alleged failure to pay money in respect of the works that it performed.
Outcome and costs
55 For the reasons above, this proceeding is a “domestic building dispute” as defined in s54 of the Act and must be stayed pursuant to s57(2) of the Act. I will order accordingly. Subject any application by a party for a different order, I will also order that Barcrem pay the Developers’ costs of the proceeding, including the costs of this application, to be taxed on the standard basis in default of agreement.
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Certificate
I certify that these 20 pages are a true copy of the ruling of His Honour Judge Woodward delivered on 8 July 2019
Dated: 8 July 2019
Simone Karmis
Associate to His Honour Judge Woodward
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