Chen v Kevin McNamara & Son Pty Ltd
[2012] VSCA 63
•4 April 2012
SUPREME COURT OF VICTORIA
COURT OF APPEAL
| LIMIN JAMES CHEN and MEI FANG XU | S APCI 2009 3826 |
| Appellants | |
| v | |
| KEVIN McNAMARA & SON PTY LTD (ACN 072 144 579) | First Respondent |
| and | |
| GEORGE P DEUTSCH | Second Respondent |
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| JUDGES | MAXWELL P, REDLICH JA and ROBSON AJA |
| WHERE HELD | MELBOURNE |
| DATE OF HEARING | 15 September 2011 |
| DATE OF JUDGMENT | 4 April 2012 |
| MEDIUM NEUTRAL CITATION | [2012] VSCA 63 |
| JUDGMENT APPEALED FROM | [2009] VSC 294 (Hargrave J) |
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ARBITRATION – Building contracts – Legislative prohibition on reference of disputes to arbitration – Dispute over construction of inground water tank – Whether ‘domestic building contract’ – Whether works carried out under domestic building contract – Whether building permit required – Whether tank was class 10b structure under Building Code – Approach to classification of buildings and structures – Whether ‘retaining wall, swimming pool or the like’ – No permit required – Appeal dismissed – Domestic Building Contracts Act 1995 (Vic) ss 3, 4, 5(1), 14, 54, Building Act 1993 (Vic) ss 3, 16, Building Regulations 2006, Regulation 1801, Building Code of Australia cll 1.3.2, 1.3.3 considered.
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Appearances: | Counsel | Solicitors |
| For the Appellants | Mr Hugh Foxcroft SC | Francis V Gallichio |
| For the First Respondent | Mr John Digby QC with | Russell Kennedy |
| For the Second Respondent | No appearance |
MAXWELL P:
I have had the advantage of reading in draft the reasons for judgment of Redlich JA. For the reasons given by his Honour, I too would dismiss the appeal.
REDLICH JA:
This is an appeal from orders made by Hargrave J in the Commercial and Equity Division of the Supreme Court of Victoria, refusing declarations sought by the appellants (‘the Owners’), that the arbitration instituted by the first respondent (‘the Builder’) against the Owners, and the nomination of the second respondent as arbitrator, were void and that his rulings regarding the dispute were a nullity. His Honour also refused injunctions to restrain both the Builder and the arbitrator from proceeding with the arbitration.
The Owners are the registered proprietors of 17 Yarradale Road, Toorak, a residential property with waterfront access. Between June and August of 2008, the Owners contracted with the Builder to design and construct building works on their property. Initially the work was confined to the construction of a tennis court, at the rear of the property. Later agreements between the parties saw the works expanded to include the addition of a large reinforced concrete rainwater storage tank (‘the tank’), with an approximate 100,000 litre capacity, to be built underneath the tennis court slab and various landscaping works around the property. The agreements also encompassed other associated works with the project, such as the transportation and barging of both machinery and materials along the Yarra River to the property.
By late 2008 a dispute arose between the Builder and the Owners in relation to the works. The Builder claimed moneys owed. The Owners denied all liability and claimed that the costs of the work were excessive and that they had been misled as to the true nature and extent of the work. The Builder denied these claims.
The initial contract between the Owners and the Builder contained an arbitration clause. On 13 January 2009, the Builder served a notice of dispute in accordance with the terms of the original contract, and requested the Institute of Arbitrators and Mediators of Australia to nominate an arbitrator to act in the matter.
In February 2009 the arbitrator was appointed. The parties were notified. Upon receipt of the notification, the Owners, through their solicitors, wrote to the arbitrator and claimed that his appointment, and the arbitration clause itself were void by virtue of s 14 of the Domestic Building Contracts Act 1995 (‘DBC Act’). The Owners further claimed that the arbitrator had no lawful authority to determine any matter relating to the dispute. They sought the Builder’s agreement that the matter should be determined by the Victorian Civil and Administrative Appeals Tribunal (‘VCAT’).
The Owners’ claims rest upon the contention that the works undertaken and contemplated were a ‘domestic building dispute’ and as such were to be resolved pursuant to the regime of the DBC Act. Section 54 of the DBC Act defines a domestic building dispute as one arising between an owner and a Builder, in relation to a domestic building contract.[1] The DBC Act expressly prohibits arbitration clauses in domestic building contracts or agreements.[2] The Owners assert that the works were domestic building works and that the arbitrator therefore had no jurisdiction to determine any dispute in relation to the tennis court, the tank or the landscaping works.
[1]Domestic Building Contracts Act 1995 (Vic), s 54(1)(a)(i).
[2]Ibid s 14.
On 16 February 2009 the arbitrator called a conference to determine essential preliminary matters including whether he could enter into the reference and proceed with the arbitration, as well as the overall validity of the arbitration process. After receiving submissions from both parties, the arbitrator determined that the matter was within power, and elected to proceed with the arbitration and to give directions.
The Owners issued proceedings in the Supreme Court of Victoria, in March 2009. His Honour considered that the only matter requiring resolution was ‘whether or not the construction of the water tank required a building permit under the Building Act 1993’.[3] His Honour found that the tank was not a class 10b structure under the Building Act and did not require a building permit. Therefore the works were not domestic building works and hence the contract was not a domestic building contract. Accordingly the arbitration clause in the contract remained operative.
[3]Limin Chen and Mei Fang Xu v Kevin McNamara and Sons [2009] VSC 294, 23.
The Owners contend that the trial judge should have found:
(i)The tank was a class 10b structure, as defined by 1.3.2 of Volume Two of the Building Code of Australia;
(ii)The work carried out by the Builder constituted domestic building work as defined by s 3 of the Act of the DBC Act;
(iii) The arbitration clause in the contract was void; and
(iv)The arbitrator did not have jurisdiction to determine any dispute between the parties.
Although the Owners rely on several grounds of appeal, and contend that the trial judge erred in both fact and law, it was not disputed on appeal that a determination of the question whether the trial judge was correct to conclude that the water tank was not a class 10b structure would resolve each of the Owners’ contentions.
Although the Owners contended that there were three separate contracts governing the works undertaken by the Builder, the trial judge found that there was only one contract governing all the proposed works for the tennis court, the tank, and the landscaping works. That part of his Honour’s judgment is not challenged.
To determine whether the arbitrator had jurisdiction to proceed with the arbitration it was necessary to review the definitions in the DBC Act and other associated legislation to determine if the works were domestic building works subject to the DBC Act.
The DBC provides:
Section 3
(1) In this Act—
…
building includes any structure, temporary building or temporary structure and also includes any part of a building or structure;
domestic building contract means 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;
domestic building work means any work referred to in section 5 that is not excluded from the operation of this Act by section 6;
Section 4
The objects of this Act are—
(a)to provide for the maintenance of proper standards in the carrying out of domestic building work in a way that is fair to both Builder and building owners; and
(b)to enable disputes involving domestic building work to be resolved as quickly, as efficiently and as cheaply as is possible having regard to the needs of fairness; and
(c)to enable building owners to have access to insurance funds if domestic building work under a major domestic building contract is incomplete or defective.
The trial judge referred to the definition of domestic building contract as one for the carrying out of domestic building works. Such work is defined in s 5. It was accepted at trial and on appeal that the only work defined in s 5 that was capable of applying to the tank was that set out in s 5(1)(e) and (f),[4] which provides as follows:
[4][2009] VSC 294, [21].
s 5 (1) This Act applies to the following work—
(e)any work associated with the construction or erection of a building—
(i)on land that is zoned for residential purposes under a planning scheme under the Planning and Environment Act 1987; and
(ii)in respect of which a building permit is required under the Building Act 1993;
(f)any site work (including work required to gain access, or to remove impediments to access, to a site) related to work referred to in paragraphs (a) to (e).
It was common ground that the land was zoned for residential use. Accordingly, the issue at trial and on appeal was whether or not the construction of the tank required a building permit under the Building Act 1993 (‘the Act’). If it did not, the works would not fall within s 5(1)(e)(ii).
Under the Building Act, building work requires a permit unless a specified exemption applies. Section 3 of the Act provides:
Definitions
(1) In this Act—
building includes structure, temporary building, temporary structure and any part of a building or structure;
Section 16 provides:
(1) A person must not carry out building work unless a building permit in respect of the work has been issued and is in force under this Act and the work is carried out in accordance with this Act, the building regulations and the permit.
(2) Subsection (1) does not apply to building work exempted by or under this Act or the regulations.
The Building Regulations 2006 contain a list of exemptions defined by reference to the provisions of the Building Code of Australia (the Code).[5] It was agreed both at first instance and on appeal that the building of the tank did not require a permit unless the tank was a class 10b structure as set out in clause 1.3.2 of Volume Two of the Code.[6] That clause defined a class 10b structure as follows:
a structure being a fence, mast, antenna, retaining or free standing wall, swimming pool, or the like.
[5]Regulation 1801.
[6]Item 5 under column two of the table in Schedule 8.
Reference must also be made to the ‘Principles of Classification’ set out in A 3.1 of Volume One of the Code which are tied to the purpose of the building in the following way:
the classification of a building or part of a building is determined by the purpose for which it is designed, constructed or adapted to be used.[7]
[7]Building Code of Australia 2008, A3.1
The Owners argued that the tank should be classified either as a ‘retaining wall’ or as a ‘swimming pool’. It was common ground at trial that the tank featured retaining walls as a component of the structure. The Owners thus contended that the tank was a class 10b structure as it fell within the scope of a ‘retaining wall…or the like’.
His Honour rejected this submission. He found that it was necessary to consider the structure as a whole, not its constituent parts. His Honour considered that to be classified as a 10b structure, the structure must ‘be’ a specified structure or the like and not merely ‘include’ as a component part, a specified structure or the like.’[8] That approach was thought to be supported by the requirement that the classification be determined by the purpose for which it is to be designed.[9] Accordingly his Honour found that the tank was
obviously designed and constructed for the collection and storage of rain water for subsequent use in the garden. It was not designed or constructed to hold back soil … which is the purpose of a retaining wall.[10]
[8]Ibid [39] (emphasis in the original).
[9]Ibid 2008 1.3.1.
[10][2009] VSC 294, [41].
The Owners contended on appeal that the trial judge had failed to adopt the proper approach to statutory interpretation, as enunciated by the High Court in CIC Insurance v Bankstown Football Club Ltd,[11] by not construing the inter-related statutes to produce a sensible, efficient and just operation. The Owners further submitted that his Honour had taken an unduly restrictive approach to the principles of classification, and had attached too much emphasis to the word ‘purpose’ in the Principles for Classification under the Code.
[11](1997) 187 CLR 384 (Brennan CJ, Dawson, Toohey and Gummow JJ).
The Owners relied on technical drawings to show that the tank was a highly engineered and technically complex structure. They contended that there are similarities between the water tank and a swimming pool. Much like a swimming pool it is comprised of reinforced concrete and it requires hydrostatic valves to maintain pressure and structural integrity. They are both designed and constructed to hold a body of water. They are both governed by an overarching concept of safety to users and property. They further submitted that the purpose of both structures is to hold and contain water; it is their social purpose that provides the point of differentiation. The Code is only concerned with the purpose to which a building is designed and engineered; social purposes are governed by planning laws.
The Builder countered that whilst there was some similarity in form, the tank was not like a swimming pool because they differ in their form as well as ultimate purpose. He drew attention to the definitions section of the Code and specifically to the definition of a swimming pool. A swimming pool is defined as:
any excavation or structure containing water and used principally for swimming, wading, paddling, or the like, including a bathing or wading pool, or spa.
The Owners submitted in the alternative that the tank was a retaining wall or like a retaining wall. During submissions counsel developed the argument that the tank comprised six retaining walls so that if it is not possible to classify the tank as a class 10b structure, then its constituent components, the retaining walls, should be classified as 10b structures that require a building permit.
The Owners contended that the correct methodology for interpreting the provision ‘retaining wall’ within the statutory framework, was to begin with the definition section of the DBC Act. The definition of building in the Building Act includes ‘structure’ or ‘any part of a building or structure’. In approaching the question of classification according to the Code, it was submitted that consideration be first given to the classification of the structure. If that structure is unable to be classified, then the objects of the Building Act set out in s 4 and the goals of the Code, namely to protect people and property, require that regard be had to the constituent components of the structure, to see if they are individually classifiable. Counsel contended that clause 1.3.3 of the Code operated in a similar fashion to cascading clauses and commanded that each separate part of a building or structure be classified separately. It was said that the ultimate purpose for which the tank was designed and constructed, was to ensure the safety of the people using the structure.
It was readily conceded by the Builder that the tank was comprised of retaining walls, but the purpose for which the tank was designed and constructed was not that of a retaining wall. The Builder contended that the tank was a structure, and as such it was not permissible or helpful to attempt to classify its constituent components. He pointed to the references in clauses 1.3.1 and 1.3.2 of the Code to habitable and non-habitable buildings. Section 10b is the only provision that refers to ‘structure’. The Code in 1.3.1 directs users to have regard to the purpose of the structure, not to a component of the structure. A structure does not have any sub-classifications available to it. He submitted that the content of the Code and the accompanying explanatory diagrams do not support any further sub-classification of a structure. That proposition was said to be reinforced by the operation of the 10 per cent rule in 1.3.3. Section 1.3.3 requires buildings to be separately classified when more than 10 per cent of the floor area of a building is used for the purpose of a different classification.
The Owners advanced a further argument grounded in public policy to support their preferred construction. An attractive argument was advanced that a suite of legislation, regulations, and the Code had been created to ensure public safety through regulation of building design and the need for permits. Reference was made to the goals of the Code to achieve ‘nationally consistent, minimum necessary standards of relevant health, safety, amenity and sustainability objectives efficiently.’[12] It was submitted that these goals must be read in conjunction with the performance requirements of structures as set down in part 2.1 of Volume 2 of the Code.
[12]Building Code of Australia 2008, volume 1, p8.
The tank is a large, highly engineered structure made up of several tonnes of concrete and reinforced steel. The structure measures 10 metres by six metres with a depth of 1.8 metres holding up to approximately 100,000 litres of water. The roof of the structure also forms part of a tennis court. It was submitted that there is a very real need for the structure to be sound and compliant with all necessary safety and building standards. This is required, it was said, in the interests of public safety, ongoing amenity and the safety of any adjoining properties, emphasis being placed on the dangerous consequences of such structures being exempt from building and planning permits.
The Owners highlighted the need for the structure, during both construction and use, to be able to withstand such things as earth movements, thermal effects, construction activity, and groundwater pressures. They submitted that the public safety requirements as detailed in the goals and the structural requirements of the Code were highly relevant given the location of the water tank on a sloping site, close to the Yarra river, its part of the tennis court structure and the loads that the structure must bear. Due care and diligence protections still exist and are in operation for the water storage tank and underground conduits.
The Builder drew attention to other complex structures that are highly engineered, and may impact on public safety, that do not require a building permit, such as substantial underground piping and conduits. He submitted that Parliament is aware of the complex nature of underground conduits and the potential risks to public safety in the event of a structural failure, yet despite these concerns the legislature has declined to include the structures in the 10b classification. Attention was drawn to the fact that the most recent Building Code issued in 2011 includes an amendment to class 10 structures to add a class 10c structure which includes a private bushfire shelter. Parliament has not specified water storage tanks as a structure in 10b although there has been a significant increase in the demand for water storage tanks as a result of the extended period of drought that has been experienced in Victoria. The inclusion of private bushfire shelters, that may be comprised of retaining walls or the like, indicates Parliament’s clear intention that bushfire shelters require a building permit prior to construction.
Conclusion
The language which has actually been employed in the text of the legislation is the surest guide to the intention manifested by the legislation.[13] While the meaning of the text may require consideration of the context, which includes the general purpose and policy of a provision, in particular the mischief it is seeking to remedy, the court cannot ordinarily depart from what is the discernable intent as to do otherwise is to encroach on the powers of the legislature.[14] Even if the outcome in the present case were to be regarded as anomalous, such considerations do not allow the court to ignore the actual words of the statute and the criteria, namely the purpose of the structure, which Parliament has chosen as determinative of the need for a permit.
[13]Byrnes v R (1999) 199 CLR 1, 542 (Kirby J); Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27, [47]; Wik Peoples v Queensland (1996) 187 CLR 1, 168–169; Saeed v Minister for Immigration and Citizenship (2010) 241 CLR 252, [31].
[14]See Cooper Brookes (Wollongong) Pty Ltd v FCT (1981) 147 CLR 297; Hall v Jones (1942) 42 SR(NSW) 203; Ganter v Whalland [2001] NSWSC 1101.
Having regard to the language employed, the statutory framework within which the provisions are to be construed and the importance given to the purpose of the structure, the reference to structure must be understood as a reference to the structure as a whole and not to its individual component parts.
If the entire structure is a retaining wall, then it is a retaining wall and falls within a class 10b structure; if the entire structure is not, it cannot be classified as a class 10b structure. Separate classification of a structure is only required when a separate structure exists. It is not necessary to classify each individual component of the structure, unless expressly directed to do so by either legislation or the regulations. The Code does not contemplate a further sub-classification of a structure in 10b.
A series of retaining walls were used to form the structure of the water storage tank but they became part of the structure itself. The tank was not designed or constructed to hold back soil or water.[15] The tank was both designed and constructed for the sole purpose of collecting and storing of rainwater to be used around the house and garden at a later point. The tank was not designed or constructed to restrict or stop the movement of soil from one location to another as in the case of retaining walls.
[15][2009] VSC 294, [41].
The tank is a structure that does hold water. It does not however have the necessary element of public access that is required, for swimming, wading, paddling or the like. The tank is fully enclosed and will not be principally used for recreational activities. The tank was neither designed or constructed to be a swimming pool. Having regard to the purpose for which the structure was designed and constructed and when read in conjunction with the definition section of the Code, the tank is not a swimming pool nor is it like a swimming pool.[16]
[16]Australian Building Code 2008, 1.1.1.
The tank is neither a swimming pool, or a retaining wall, or the like. That was also the view of Hargrave J. As it is not contended that the tank is otherwise a class 10b structure, the appeal should be dismissed.
ROBSON AJA:
I have read in draft the reasons for judgment of Redlich JA. I agree that the appeal should be dismissed for the reasons his Honour gives.
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