Brown v B and T Homes Pty Limited and Anor (Civil Dispute)

ACT CIVIL & ADMINISTRATIVE TRIBUNAL

BROWN v B & T HOMES PTY LIMITED & ANOR (Civil Dispute) [2016] ACAT 59

XD 595/2015
Catchwords: CIVIL DISPUTE – whether ceiling insulation is a structural or non-structural element of the building – statutory warranties – limitation period

Legislation cited: Building Act 2004 ss 85, 88, 142

Limitations Act 1985 s 11, 32
Building (General) Regulations 2008 s 38

Cases cited:Brirek Industries Pty Ltd v McKenzie Group Consulting (Vic) Pty Ltd [2014] VSCA 165
Brookfield Multiplex Ltd v Owners Corporation Strata Plan
61288 (2014) 254 CLR 185
Bryan v Maloney (1995) 182 CLR 609

Tribunal: Senior Member A Anforth

Date of Orders:  7 June 2016
Date of Reasons for Decision:         7 June 2016
AUSTRALIAN CAPITAL TERRITORY             )
CIVIL & ADMINISTRATIVE TRIBUNAL           )        XD 595/2015

BETWEEN:
KATE BROWN
Applicant

AND:
B & T HOMES PTY LIMITED
First Respondent
B & T DEVELOPMENTS PTY LIMITED
Second Respondent

TRIBUNAL: Senior Member A Anforth

DATE:7 June 2016
ORDER

The Tribunal Orders that:

The application is dismissed.

………………………………..
President E Symons for and on behalf of Senior Member A Anforth

REASONS FOR DECISION

The applicant is the owner of a town house in Canberra that is part of a strata complex which she bought in 2010 (unit 1). Settlement of the conveyance occurred on 21 October 2010. The first respondent was the builder of the unit but not the owner from whom the applicant purchased the unit. That owner was the second respondent, B & T Developments Pty Limited. Mr Bulum was the director of both companies.
The Certificate of Occupancy and Use (COU) was issued on 20 August 2004. The unit had been completed and occupied since 2005 by tenants of B & T Developments Pty Ltd to the time of the sale to the applicant.
After the purchase of the unit the applicant found that there was no ceiling insulation in the roof cavity. Each of the other units in the complex had insulation.
The applicant took the matter up with the Owners Corporation and with the respondent. The first respondent undertook some investigations but in the end did not install the insulation. The applicant asserts that at a site meeting on 22 May 2014 Mr Bulum offered to install the insulation and the applicant accepted this offer.
The applicant asserts that at a site meeting on 16 June 2014 the engineer for the first respondent, Mr Ruckschloss, confirmed that the insulation would be installed.
On behalf of both respondents, Mr Bulum denies both the above assertions.
The insulation replacement work was not done and the applicant retained a different tradesman to install the insulation and then sought reimbursement for this sum of $4158 (inclusive of GST) from the respondents.
The applicant lodged her claim with the tribunal on 22 May 2015 seeking reimbursement for the cost of the installing the ceiling insulation. The claim as lodged named only the first respondent. Annexed to the application were the following documents which form Exhibit 1:
(a)The approved plans.
(b)An email of 5 February 2015 from the Owners Corporation to the first respondent concerning rectification work needed including the insulation to unit 1. The email refers to an agreement at a site meeting to this effect.
(c)An email of 24 February 2015 following up on the above email.
(d)An email from the Owners Corporation to the applicant of 2 March 2015 reporting that Mr Bulum denies that he agreed to insert the insulation.
(e)An email of 24 April 2015 from the applicant to the first respondent making demand for the cost of having another tradesmen insert the insulation.
(f)A quote from Alexander Watson for the installation of the insulation in the sum of $4158 inclusive of GST.
The first respondent did not file a response to the applicant’s claim and default judgment was entered in favour of the applicant on 1 July 2015.
On 28 August 2015 the first respondent filed an application for interim orders to set aside the default judgment. The application was supported by a statement from Mr Goundar who is said to be the managing director of the first respondent since 22 June 2015. The statement asserted that the applicant’s claim had never come to his predecessor’s attention notwithstanding that it was served on the registered address of the first respondent company.
On 16 September 2015 a differently constituted tribunal set aside the default judgment.
On 18 September 2015 the first respondent filed its response to the claim. The response (Exhibit 2) alleged:
(a)various deficiencies in the pleading of the applicant set out in her application;
(b)denial that any oral agreement had been reached on site for the first respondent to install the insulation;
(c)a denial that any contract existed between the applicant and the first respondent (as opposed to B & T Developments Pty Limited);
(d)the applicant had the opportunity to inspect the unit before her purchase;
(e)B & T Developments Pty Limited gave no warranties on the sale (clause 7.3 of the contract for sale);
(f)there was nothing in the contract that required the installation of the insulation by B & T Developments Pty Limited;
(g)if there were any such requirement then it ‘merged’ on settlement of the conveyance which extinguished the applicant’s right to compensation against B & T Developments Pty Limited; and
(h)there was no duty of care in tort owed by the first respondent to the applicant.
On 13 October 2015 a differently constituted tribunal joined B&T Developments Pty Limited as a party, the second respondent, and made orders for the timetable for filing of evidence and submissions. The matter was listed for hearing on 16 December 2015.
On 10 November 2015 the applicant filed her evidence (Exhibit 3) consisting of:
(a)a time line of events since 11 November 2013 which essentially addressed the history of the applicant’s complaint to ACT Planning and Land Authority;
(b)a statement by Jillian Curry who is a member of the Executive of the Owners Corporation. She stated that she had been personally present at a meeting with Mr Bulum on 22 May 2014 at which Mr Bulum said he would install the insulation. Ms Curry said that she also present at a meeting on site on 16 June 2014 when Mr Ruckschloss confirmed that the insulation would be installed;
(c)a report of 7 January 2014 from Mr Zeller, inspector, Utilities, Land and Lease Regulation Section, which confirmed inter alia the absence of the insulation;
(d)a report on the house energy rating dated 13 June 2010 rating the house 4.5 stars. This report was obtained by the second respondent as part of the sale process. The report indicates the presence of ceiling insulation;
(e)various photographs of the ceiling space showing a suspended ceiling arrangement;
(f)a submission that repeated the events of the two site meetings in May and June 2014;
(g)various correspondence between the Owners Corporation and the first respondent over defects that led to an Emergency Rectification Order for work unrelated to the present claim;
(h)a email from Mr Leary of ACTPLA to the applicant stating that the first respondent had undertaken at the site meetings to rectify the absence of insulation; and
(i)an email of 24 April 2015 from Mr Gaughran for the Owners Corporation and the applicant stating that there was no written commitment from Mr Bulum to install the insulation but that he made the oral commitment before Mr Leary of ACTPLA during a site meeting to do the work.
Neither respondent complied with the procedural orders, and Mr Goundar sought an adjournment of the hearing and an extension of time for filing evidence and submissions. A differently constituted tribunal refused the adjournment.
The hearing commenced on 16 December 2015. The applicant appeared in person and Mr Goundar appeared for the respondents. Orders were made for the filing or further evidence by the parties and the matter was adjourned to 12 February 2016. Orders were made for both parties to notify the other party of witnesses required for cross examination. The orders made on this occasion and sent to the parties only nominate B & T Homes Pty Limited as the respondent and not B & T Developments Pty Limited as the second respondent. It is not clear from the record why this was the case. The appearance slip completed by Mr Goundar on that day nominates both companies as respondents.
Mr Goundar tendered a copy of the contract of sale between the applicant and the second respondent which was in the form of the standard ACT Law Society Contract for sale (Exhibit 4). There was no building report annexed to the contract of sale and no building report commissioned by the applicant was tendered.
On 14 January 2015 the applicant filed (Exhibit 5) extracts from the Building Code of Australia relating to insulation.
On 29 January 2016 the respondents filed their submissions (Exhibit 6). The submissions:
(a)recited the history of the construction and sale of the town house;
(b)repeated the claims of defective pleadings by the applicant;
(c)denied any contractual relationship between the applicant and the first respondent;
(d)neither respondent denied having had any way of knowing whether the tenants who were in occupation prior to the sale in 2010, removed the ceiling insulation;
(e)the applicant had the opportunity to inspect before purchase;
(f)the second respondent gave no warranties;
(g)the claim against the second respondent as the owner/seller has no basis in law;
(h)the first respondent as the builder owes no duty of care in tort to the applicant as a subsequent purchaser of the unit, relying on Brookfield Multiplex Ltd v Owners Corporation Strata Plans 61288 [2014] HCA 36;
(i)if any duty in tort was owed then the limitation period for that claim had expired;
(j)any promise given on behalf of the first respondent at any site meeting was not supported by consideration on the applicant’s part that is sufficient to form a contract for the installation of the insulation; and
(k)the engineer, Mr Ruckschloss, had no authority to make any promises on the part of the first respondent.
The respondents filed a statement from Mr Bulum dated 29 January 2015 in which he denied making any promises of any kind regarding the applicant’s insulation at either site meeting; and that Mr Ruckschloss was not his agent.
The respondents were critical of the applicant for not having Ms Gaughran, Ms Leary and Ms Curry present as witnesses at the hearing. There does not appear to have been any notice given by the respondents on the need to have these people present for cross examination per the procedural orders made. Mr Bulum was also not present for cross examination on his statement.
On 12 February 2016 the applicant appeared in person and Mr Goundar appeared for the respondents. After hearing from the parties the matter was reserved for decision. Orders were made that the parties could file and serve submissions directed to the application of the Building Act 2004 (ACT) and the Limitations Act 1985 (ACT) within a fixed timetable after which the Tribunal would move to decision without further hearing from the parties. There was no objection raised to this course of action.
On 22 March 2016 the applicant filed her submissions to the effect that:
(a)section 88(1) of the Building Act 2004 applied and provided a six year warranty; and
(b)that she only became aware of the defect in March 2014.
On 24 March 2016 the respondents filed their submissions:
(a)the statutory warranty under section 88 of the Building Act 2004 has a limitation period set out in regulation 38 of the Building (General) Regulations 2008 which is 6 years for structural elements and two years for non-structural elements;
(b)the ceiling insulation is a non-structural element;
(c)the statutory warranty had expired before the applicant made her claim; and
(d)the breach, if it existed, was one that dates from completion of the building in 2005.

Legislation

Section 88 of the Building Act 2004 provides:
88Statutory warranties
(1)By force of this section, every contract for the sale of a residential building, and every contract to carry out residential building work to which the builder is a party, is taken to contain a warranty under this section.
(2)The builder warrants the following:
(a)that the residential building work has been or will be carried out in accordance with this Act;
(b)that the work has been or will be carried out in a proper and skilful way and—
(i)in accordance with the approved plans; or
(ii)if the work involves or involved handling asbestos or disturbing friable asbestos—in accordance with approved plans that comply with this Act in relation to the asbestos;
(c)that good and proper materials for the work have been or will be used in carrying out the work;
(d)if the work has not been completed, and the contract does not state a date by which, or a period within which, the work is to be completed—that the work will be carried out with reasonable promptness;
(e)if the owner of the land where the work is being or is to be carried out is not the builder, and the owner expressly makes known to the builder, or an employee or agent of the builder, the particular purpose for which the work is required, or the result that the owner desires to be achieved by the work, so as to show that the owner is relying on the builder’s skill and judgment—that the work and any material used in carrying out the work is or will be reasonably fit for the purpose or of such a nature and quality that they might reasonably be expected to achieve the result.
(3)Each of the owner’s successors in title succeeds to the rights of the owner in relation to the statutory warranties.
(4)The warranties end at the end of the period prescribed under the regulations after the completion day for the work.
(5)In subsection (2):
owner means—
(a)for a contract mentioned in subsection (1) for the sale of a residential building—the person to whom title in the land where the building was built is transferred under the contract; or
(b)for a contract mentioned in subsection (1) to carry out residential building work—the owner of the land where the work is to be carried out under the contract.
Section 85 of the Building Act 2004 defines the ‘completion day’:
85Meaning of completion day for pt 6
(1)In this part:
completion day, for residential building work, means the day the work is completed or the day the contract relating to the work ends, whichever is the later.
(2)Without limiting subsection (1), the work is taken to have been completed no later than the day a certificate of occupancy (if any) is issued for the work.
Regulation 38(1) of the Building (General) Regulations 2008 provides:
38End of statutory warranties—Act, s 88 (4)
(1)The period for the end of a warranty is—
(a)for residential building work in relation to a structural element of a building—6 years after the completion day for the work; or
(b)for residential building work in relation to a non-structural element of a building—2 years after the completion day for the work.
(2)In this section:
non-structural element, of a building, means a component of the building that is not a structural element.
structural element, of a building, means—
(a)a load-bearing component of the building (whether internal or external) that is essential to the stability of the building or part of it; or
(b)a component (including weatherproofing) forming part of the external walls or roof of the building.
Examples—par (a)
a foundation, floor, wall, roof, column or beam
Section 142 of the Building Act 2004 provides:
142Limitation of liability for building actions
(1)A building action may not be brought more than 10 years after—
(a)if a certificate of completion of the relevant building work has been given under this Act—the day the certifier gives the certificate; or
(b)if paragraph (a) does not apply, but the certifier has, in the course or on completion of the building work, inspected it—the day when the last inspection took place; or
(c)if neither paragraph (a) nor paragraph (b) applies—the day the relevant building was 1st occupied or used.
(2)Also, a building action in relation to building work may not be brought more than 10 years after—
(a)if an entity has given a notice under section 24 (2) that the entity’s appointment as certifier for the building work has ended—the day the entity gave the notice; or
(b)if an entity’s appointment as certifier for the building work has ended under section 19D and the entity need not give notice under section 24 (2)—the day the entity’s appointment ended.
(3)Subsections (1) and (2) do not apply to a building action if a shorter limitation period applies to the building action under another Territory law.
(4)In this section:
building, in relation to building work that consists of, or includes, the alteration of a building, means the building as altered.
Section 11 of the Limitations Act 1985 sets out the standard six year limitation period that applies in contract and tort actions:
11General
(1)Subject to subsection (2), an action on any cause of action is not maintainable if brought after the end of a limitation period of 6 years running from the date when the cause of action first accrues to the plaintiff or to a person through whom he or she claims.
(2)Subsection (1) does not apply to a cause of action in relation to which another limitation period is provided by this Act.
Section 32 of the Limitations Act 1985 provides for an extension of the time limit in section 11 where the defendant ‘confirms’ in writing the existence of the cause of action within the limitations period:
32Confirmation
(1)If, after a limitation period fixed by or under this Act for a cause of action begins to run but before the end of the limitation period, a person against whom (either solely or with other persons) the cause of action lies confirms the cause of action, the time during which the limitation period runs before the date of the confirmation does not count in the reckoning of the limitation period for an action on the cause of action by a person having the benefit of the confirmation against a person bound by the confirmation.
(2)For this section—
(a)a person confirms a cause of action if, but only if, he or she—
(i)acknowledges, to a person having (either solely or with other persons) the cause of action, the right or title of the person to whom the acknowledgment is made; or
(ii)makes, to a person having (either solely or with other persons) the cause of action, a payment in relation to the right or title of the person to whom the payment is made; and
(b)a confirmation of a cause of action to recover interest on principal money operates also as a confirmation of a cause of action to recover the principal money; and
(c)a confirmation of a cause of action to recover income falling due at any time operates also as a confirmation of a cause of action to recover income falling due at a later time on the same account.
(3)If a person has (either solely or with other persons) a cause of action to foreclose the equity of redemption of mortgaged property or to recover possession of mortgaged property, a payment to him or her of principal or interest secured by the mortgage or a payment to him or her otherwise in relation to his or her right or title to the mortgage is a confirmation by the payer of the cause of action.
(4)An acknowledgment for this section shall be in writing and signed by the maker.

Findings of fact

The Tribunal finds that:
(a)the Certificate of Occupancy and Use was issued on 20 August 2004;
(b)the applicant’s purchase from the second respondent settled on 21 October 2010;
(c)the contract for sale contained an Energy Rating Certificate which implied the existence of the ceiling insulation;
(d)the applicant’s unit was the only one that did not have ceiling insulation;
(e)the insulation is a non-structural element for the purposes of regulation 38;
(f)by virtue of (c) above, the absence of the insulation was a breach of the contract of sale with the second respondent upon which the applicant could have reacted prior to settlement. Where the applicant now retains any rights under the contract arising from this misdescription depends on the terms of the contract of sale and the law relating to merger of rights on completion. This was not a matter argued in this case;
(g)the applicant is a successor in title to the second respondent and so is entitled to the benefit of the implied statutory warranties in section 88 as against the first respondent;
(h)the absence of the insulation is a breach of the warranties implied on behalf of the first respondent under section 88(2). The approved plans provided for insulation which was inserted in the other units;
(i)the applicant only became aware of the breach on 11 November 2013 when the matter was brought to her attention by an ACTPLA inspection;
(j)the absence of the insulation is a defect that was present and discoverable from the time of issue of the COU, it was not a latent defect in the sense of one that only developed or became discoverable at a later point in time;
(k)at two site meetings on 22 May 2014 and 16 June 2014 Mr Bulum either explicitly undertook to rectify the absence of insulation or allowed Mr Ruckschloss to create that impression in those present without correction. There were independent witnesses to both conversations;
(l)there was no written confirmation of the liability by either respondent by Mr Bulum or any person on behalf of the respondents;
(m)the applicant commenced her action in the Tribunal on 22 May 2015;
(n)the ceiling in question is a floating ceiling to which the insulation could only have been inserted at the point construction. It is most unlikely that any tenant or other person could have entered the cavity of the floating ceiling and removed the insulation. The inevitable inference is that the insulation was never in place; and
(o)there is no evidence concerning whether the omission of the insulation was deliberate or accidental and there is no evidence that the misdescription in the contract for sale was deliberate or fraudulent as opposed to an innocent mistake.
The first respondent stands accused in contract under the implied warranties in section 88 and in tort for their own negligence. The second respondent stands accused in contract only based on the contract for sale.
The real issue is not whether there had been a breach by the first and second respondents but rather whether the applicant’s claims have been made out of time. This requires a consideration of:
(a)when does the limitations clock start running in the present matter for the purposes of the Limitations Act and the Building Act respectively;
(b)how long is the limitations period under each of these statutes; and
(c)was any part of the claim brought within the relevant limitations periods

The limitations period in contract

There is no contract at common law between the first respondent/builder and the applicant. The only contractual relationship between them is the warranty which arises by implication from section 88 of the Building Act 2004. This warranty is time limited under sections 85, 88(4) and regulation 38. For a non-structural element it expired two years commencing no later than the date of issue of the COU. Thus this warranty expired by September 2006. Even if the lack of insulation is viewed as a structural element the warranty still expired by September 2010.
It is too late for the applicant to access the rights implied under this warranty.
Even if (counterfactually) the applicant had been the original owner that contracted with the first respondent/builder, the six years limitation in section 11 of the Limitations Act 1985 would have expired six years after the issue of the COU which again would have been by September 2010.
Section 142 of the Building Act 2004 contains a ten year absolute bar on commencing actions for building work. This ten years is an absolute outer limit. It does not operate to provide an automatic extension of the six year limitation period. The construction of the applicant’s unit and its insulation is ‘building work’ for this purpose. The effect of section 142 is to bar any action commenced more than ten years after the issue of the COU i.e. by September 2014. The applicant did not commence her claim until May 2015.
On any view any action by the applicant against the first respondent for the original omission of the insulation is time barred.
The applicant pleads a second contractual relationship with the first respondent arising out of the representations made by Mr Bulum at the site meetings in mid 2014 which is still within time to sue upon. These representations are not ‘confirmations’ of the original breach within the meaning of section 32 of the Limitations Act 1985 because they were made outside the original limitations period and were not in writing.
The representations made at the site meetings only take on contractual force if they constitute a new contract in their own right between the applicant and the first respondent. In order to constitute a new contract there must have been consideration flowing both ways. The applicant says that her consideration lay in her forbearance to sue the first respondent on the original breach, in return for the installation of the insulation. The difficulty with this argument is that limitations period in contract (and in tort also for reasons given below) had already expired and so there was no issue of forbearance on the applicant’s part. The effect is that the representations made by Mr Bulum and Mr Ruckschloss on the behalf of the first respondent was a gratuitous promise that is not enforceable by the applicant save if it had been recorded in a deed.
As against the second respondent, the applicant’s only contract was the contract of purchase. It appears to the Tribunal to contain no warranties by the second respondent that survive settlement and all rights under this contract appear to have merged on settlement. There is no evidence that the misdescription in the contract was deliberate or fraudulent. Prima facie it appears to the Tribunal that there is no action presently open to the applicant on the misdescription. This cause of action was not argued before the Tribunal in this case. The comments above are by way of observation only
Any cause of action based on the misdescription in the contract is still within the six years limitation period until 21 October 2016. This is not to suggest that any such cause of action necessarily exists. Should the applicant wish to commence such an action after taking legal advice, any new claim will need to have regard to the time limits.

Limitations period in tort

The omission of the insulation was always a ‘patent defect’ discoverable upon inspection. It has not lead to any damage of the property. It is therefore a species of patent defect commonly referred to as ‘non-economic loss’.
There has been a body of jurisprudence on whether an action lay in tort for non-economic loss by a subsequent purchaser against the original builder. The respondents submitted that the jurisprudence, and in particular Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288 (2014) 254 CLR 185, now precludes any such action and to that extent overruled Bryan v Maloney (1995) 182 CLR 609. Bryan was a case closer in point to the present matter and involved the successor purchaser of a residential premises. The High Court in Bryan held that liability in tort existed between the builder and the successive purchaser. Brookfield involved the construction and purchase of a commercial building and the High Court stressed that the lack of ‘vulnerability’ in a commercial purchaser was not equal with that of a citizen purchasing a home to live in.
The presently constituted Tribunal does not accept that Brookfield precludes any action in tort by the applicant. However it is not necessary for present purposes to go into a detailed analysis of Brookfield because the limitations issue is still decisive.
The six year limitations period for an action in tort only commences running from the time the damage accrues. In the case of a patent defect of the present kind the clock starts at the issue of the COU with the consequence that the action in tort is also time barred by September 2010.
Section 142 of the Building Act 2004 applies to actions in tort as well as in contract and hence the ten years absolute limit comes into play.[1] Even if the absence of the insulation were classed as a latent defect that only became patent in 2010 or thereafter, section 142 still has the effect of guillotining action in tort against the first respondent commenced after 20 August 2014 which would bar the present claim by the applicant.

Conclusion

[1] Brirek Industries Pty Ltd v McKenzie Group Consulting (Vic) Pty Ltd [2014] VSCA 165

The applicant has a genuine complaint. There seems little doubt to the Tribunal that the first respondent did not install the insulation at all. There was no building report annexed to the contract of sale and none tendered by the applicant. It is not known if any report was in fact done by either party as part of the sale. Had a report been done it would be surprising if it did not pick up something as obvious as the lack of insulation in the ceiling. Nevertheless this point is not relevant to the present suit between the present parties.
The problem is that each of the applicant’s potential causes of action is statute barred in one form or another as set out above.
This does not prevent the first respondent from acting as a responsible corporate citizen to make good this obvious oversight on its part. Unfortunately the Tribunal cannot make orders to this effect.
………………………………..
President E Symons for and on behalf of Senior Member A Anforth
HEARING DETAILS

FILE NUMBER:	XD 595/2015
PARTIES, APPLICANT:	Kate Brown
PARTIES, RESPONDENT:	B & T Homes Pty Limited B & T Developments Pty Limited
COUNSEL APPEARING, APPLICANT	N/A
COUNSEL APPEARING, RESPONDENT	N/A
SOLICITORS FOR APPLICANT	N/A
SOLICITORS FOR RESPONDENT	N/A
TRIBUNAL MEMBERS:	Senior Member A Anforth
DATES OF HEARING:	12 February 2016

[2016] ACAT 59

7 June 2016

Key Legal Topics

Areas of Law

Civil Litigation & Procedure

Legal Concepts

Limitation Periods