Fair Trading v Owners Corporation Strata Plan 46789 - [2004] NSWSC 443

No judgment structure available for this case.

CITATION: Fair Trading v Owners Corporation Strata Plan 46789 [2004] NSWSC 443

HEARING DATE(S): 03/03/04

JUDGMENT DATE:
25 May 2004

JURISDICTION:
Equity Division

JUDGMENT OF: Master Macready at 1

DECISION: Paragraph 57

CATCHWORDS: Contracts: Agreement to compromise part of a claim in the Consumer, Trader & Tenancy Tribunal of NSW. Appeal from Tribunal as a matter of law. Held that agreement not as extensive as found by Tribunal. Appeal allowed and matter remitted to Tribunal for further consideration.

LEGISLATION CITED: Consumer, Trader and Tenancy Tribunal Act 2001 (NSW)
Building Services Corporation Act 1989 (NSW)
Building Services Corporations Regulations 1990 (NSW)
Building Services Corporation Legislation Amendment Act 1996 (NSW)

CASES CITED: Custom Credit Corporation Limited (In Liquidation) v Commercial Tribunal of New South Wales & Ors [1999] NSWSC 1021
Custom Credit Corporation Limited v Commercial Tribunal of New South Wales & Ors (1993) 32 NSWLR 489
Canham & Ors v Australian Guarantee Corporation Limited & Anor (1990) ASC 55-984
British Launderers’ Research Association v Borough of Hendon Rating Authority [1949] 1 KB 462 at 471-472
Metwally (No 2) v University of Wollongong v (1985) 60 ALR 68 at 71-72; 59ALJR 481 at 483:

PARTIES :
Fair Trading Administration Corporation, v Owners Corporation Strata Plan 46789 & Consumer, Trader and Tenancy Tribunal of New South Wales

FILE NUMBER(S): SC 55056 of 2003

COUNSEL: Mr G.A. Sirtes for plainiff
Mr S.A. Kerr for first defendant

SOLICITORS: D. Catt solicitor for plaintiff
Mallesons Stephen Jaques for first defendant
Crown Solicitor - Submitting appearance for second defendant

- 1 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
TECHNOLOGY & CONSTRUCTION LIST

MASTER MACREADY

Tuesday 25 May 2004

55056 of 2003 FAIR TRADING ADMINISTRATION CORPORATION v OWNERS CORPORATION, STRATA PLAN 46789 & CONSUMER, TRADER AND TENANCY TRIBUNAL OF NEW SOUTH WALES

JUDGMENT

1 MASTER: The plaintiff applies to this court by way of an Amended Summons filed 13 April 2004 in which it brings an appeal against the decision of a Tribunal member of the second defendant pursuant to s 67 of the Consumer, Trader and Tenancy Tribunal Act 2001 (NSW) (“CTTT Act 2001”) and judicial review of certain administrative actions taken by the plaintiff itself. The matter has been referred to me by a judge of the court for hearing, which concluded on 3 March 2004.

2 The appeal relates to a determination by the second defendant to deny the plaintiff a stay on 16 October 2003 in proceedings between the first defendant and the plaintiff. The judicial review of the administrative action is said to relate to a decision by the plaintiff on 26 August 2003 to concede liability in relation to defects in the proceedings between the parties before the second defendant and it is submitted that the agreement was beyond the power of the plaintiff. The determination of the second defendant to deny the plaintiff a stay was made, inter alia, on the basis that there had been an agreement on 26 August 2003 between the plaintiff and the first defendant as to the liability of the plaintiff in respect of certain structural defects.

3 The property which is the subject of the proceedings, is a block of 150 apartments in a building located 1 Missenden Road, Camperdown, known as Rhodes House Terrace Apartments. The first defendant is the Owners Corporation in respect of that property.

The history of the proceedings

4 The comprehensive insurance scheme dealing with claims in respect of residential buildings was created under Part 6 of the Building Services Corporation Act 1989 (NSW) and Form 4 of the Building Services Corporations Regulations 1990 (NSW). That scheme was administered by the Building Services Corporation until that body was abolished by the introduction of the Building Services Corporation Legislation Amendment Act 1996 (NSW) which commenced on 1 May 1997.

5 The plaintiff was created by the amended Act and has administered the scheme since the abolition of the Building Services Corporation.

6 On about 25 August 2000 a complaint was received by the plaintiff relating to the defects in the construction of Rhodes House. The plaintiff received a claim form dated 23 January 2001 on 24 January 2001 seeking benefits under the scheme. That insurance claim was declined by the plaintiff on 4 July 2001 under clause 5(1)(d) of the scheme on the basis that the defects were assessed as being other than “major structural defects” as defined by clause 31 of the Regulations and that written notification of the existence of these defects was not provided to the applicant within the period of three years from the commencement of the residential building work as required by clause 7(1)(c) of the scheme.

7 On 9 July 2001 the first defendant commenced proceedings in the Construction List of this Court being proceedings No.55028 of 2001 against Bradmill Apartments Pty Limited, the developer, and Fletcher Construction Australia Limited, the builder of the relevant apartments.

8 On 6 August 2001 the first defendant lodged an appeal in the Fair Trading Tribunal, New South Wales in respect of the decision of the plaintiff of 4 July 2001 to decline the insurance claim.

9 The second defendant was created by the CTTT Act 2001 which commenced on 25 February 2001. Pursuant to the Savings and Transitional provisions of the CTTT Act 2001 the second defendant had jurisdiction to continue to hear the Tribunal proceedings. The existing Tribunal proceedings were allocated a new proceedings number, being HB 01/78237.

10 In May 2003 the plaintiff agreed to exercise its discretion under s 7(2) to extend time for claims concerning major structural defects.

11 On 16 October 2003, the plaintiff sought a stay of the proceedings pending the determination of the related Supreme Court proceedings. There was detailed argument and the Tribunal member refused the application for a stay of the Tribunal proceedings and set down a timetable for filing evidence in relation to the Tribunal proceedings.

12 At the hearing on 16 October 2003 the Tribunal had before it a letter dated 26 August 2003 from the first defendant to the plaintiff, a letter dated 26 August 2003 from the plaintiff to the first defendant and letter dated 19 September 2003 from the plaintiff to the first defendant. The first letter of the 26 August 2003 reads as follows:

“Dear Ms Kiu

We refer to your facsimile dated 25 August 2003.

Our client is prepared to accept, for the purposes of the proceedings against your client in the CTTT, the following defects as the only major structural defects (‘MSD’):

1 Vertical water penetration through the roof slab into the top floor units and adjacent common foyer;

2 Concrete spalling to soffit of original roof slab;

3 Localised breaches in fire separation;

4 Coping leak in pool enclosure at roof level; and

In light of the apparent agreement between the parties regarding the MSD, our client proposes the directions hearing tomorrow be adjourned for a further 4 weeks on the basis that the parties tell the Tribunal that:

· The defects listed above are MSD (‘Agreed MSD’).

· The parties experts' will meet to discuss appropriate scope of works for each of the Agreed MSD.

· If, by the time this matter is next before the CTTT the parties have not agreed the scope of works for each of the Agreed MSD, those Agreed MSD where the scope of works is still in dispute will be listed for determination by the CTTT.

If the above proposal is acceptable to your client would you please sign and return this letter to us as soon as practicable.

Subject to your client signing and returning this letter so that we can hand it up to the Tribunal, we are prepared to attend the CTTT tomorrow and mention this matter on your behalf.

If you have any queries please contact either Peter Pether or Rosemary Norgate.

We look forward to hearing from you.

13 The terms of the second letter of 26 August 2003 are as follows:

“Dear Ms Norgate

Re: Fair Trading Administration Corporation ats SP 46789
CTTT Proceedings No: HB 01/78237

I refer to your facsimile of 26 August 2003 and my letter of 25 August 2003.

1) Vertical water penetration through the roof slab into the top floor units and adjacent common foyer;

3) Localised breaches in fire separation; and

4) Coping leak in pool enclosure at roof level.

In relation to item 5) ‘Water penetration in fire corridor in basement car park’, the Corporation is of the view that this item is damage that has occurred in consequence of a major structural defect and is covered by the Scheme: clause 5(1)(e)(i) of the BSC Comprehensive Insurance Scheme.

For the purpose of the matter progressing, the Corporation is amenable for items 1) to 5) to be collectively referred to as ‘the agreed major structural defects’.

The Corporation agrees for the matter to be stood over for 4 weeks to allow the experts to discuss and prepare a scope of works for each of the agreed major structural defects. Accordingly, I have enclosed a copy of your facsimile dated 26 August. 2003 which has been endorsed by my client. The original of this document will forwarded to you by DX.

14 After the letter of 26 August 2003 steps were taken to progress the matter but the letter of 19 September 2003 from the plaintiff indicated that the plaintiff was seeking to resile from its position. The letter of 19 September was as follows:-

“Ms Rosemary Norgate
Mallesons Stephen Jacques
DX 113 Sydney

Also by Facsimile: 9296 3999

Re: Fair Trading Administration Corporation ats SP 46789
CTTT Proceedings No: HB 01/78237

I refer to your facsimile of 18 September 2003.

I note that you query the relevance of the Supreme Court proceedings to the issue of the Corporation’s liability in the Tribunal proceedings.

You will note that the basis of the Corporation’s acceptance of liability for those items agreed to be major structural defects is that they are due to bad workmanship by the builder (clause 5(1)(d) of the Scheme). The builder’s defence in the Supreme Court proceedings is that the defects are due to either a lack of maintenance on the part of your client or the actions of your client by its agents in installing equipment or digging test pits. Clearly, if the Court ultimately upholds any of the builder’s arguments and finds it not responsible for the defects affecting Rhodes House, the Corporation ought not, accordingly, be liable for any losses incurred in rectifying those defects, since they had been held not to have been caused by the builder’s negligence.

Further, in the Supreme Court proceedings, your client is seeking, inter alia, the costs of rectifying the defects in the building work. This claim is also being made against the Corporation in the Tribunal proceedings. Clause 8(1)(c) of the Scheme permits the Corporation to set-off any amount received by the beneficiary under a settlement with the builder, or under the judgment of any Court.

Since there are proceedings on foot that involve the builder, there is a real possibility that your client may come to a settlement with the builder, or, if not, that the Court may order that the builder pay your client an amount. If the Corporation has already paid to your client the full costs of rectifying the defective work, this would result in a windfall to your client.

Also, it is noted that should the Court uphold the builder’s argument that some if not all of the defects are due to your client’s lack of reasonable maintenance or failure to mitigate its loss, then the Corporation would similarly not be liable under clause 9(k)(ii) and (iii) of the Scheme.

Accordingly, as all of these issues are currently before the Supreme Court and involve the builder, which is, at least on your client’s case, the primary tortfeasor, it is the Corporation’s position that the Court should be permitted to hear and determine the matter, including determining such issues of fact that will impact on the Tribunal proceedings. The Court is obviously better equipped to make these findings of fact, since its proceedings involve the 2 parties with the most knowledge of the circumstances surrounding the construction of the work, ie. the developer and the builder. Neither of these are parties to the Tribunal proceedings, and in any case, there may be jurisdictional problems in joining them.

Clearly then, to proceed with the Tribunal proceedings, including arranging a meeting in order to resolve the issue of quantum, is premature and may result in both parties incurring unnecessary costs.

Finally, I note that you suggest re-listing the matter. As you are aware, this matter has been re-listed by the Tribunal on 16 October 2003 for further directions. This would appear to be the most appropriate time for the parties to raise their concerns.

Yours sincerely

for Fair' Trading Administration Corporation

15 Although a copy of the decision is not available, a transcript of the proceedings on 16 October 2003 is available [see Exhibit ‘RK 1’] and the decision by Member George was in these terms:-

ex tempore

When this matter came on at about 10:10 this morning, representative of the Fair Trading Administration Corporation, the Respondent in these proceedings, Ms Nash indicated that the Corporation was seeking a stay of these proceedings pending the outcome of parallel proceedings, but between different parties, that are present before the Supreme Court of New South Wales. I have the benefit of Ms Nash's submissions.

Mr Loewenstein for the Applicant, the Owners of Strata Plan 46789, by way of written submission, primarily a chronology setting out the contents of various letters, takes issue with the submissions by the Respondent.

The Respondent’s main argument, as I understand it, being that the events of the 26 September, evidence before me both…as to an accurate extract by Mr Loewenstein in his written submissions and by copies of the relevant letters which have being tabled and marked ‘Exhibit A’ on the interlocutory proceedings.

A letter from ...first of all... first in time by Mallesons Stephen Jaques for the Applicant setting out the basis of an agreement as to items known as major structural defects, the cause of this claim, and an invitation to the Respondent to accept the major structural defects as defined in the letter of Mallesons Stephen Jaques and to sign in the place provided on that letter on behalf of the Fair Trading Administration Corporation. Not only do the Corporation accede to that request and sign the letter but they also of the same date wrote back to Mallesons Stephen Jaques, attention Ms Norgate. The letter, which in essence first of all adopts the Mallesons Stephen Jaques five major structural defects with a slightly expanded description of item 5, but other than that no difference in item 5 that I see and agrees, for the purposes of the proceedings in this Tribunal, for the matter to be stood over for 4 weeks.

I find that those two documents constitute an agreement between, the parties for the resolution of the issue of acceptance of liability on the 5 nominated major structural defects. That leaves aside a determination that was to be reached between the experts as to an appropriate method of rectification and of course quantum was attached to that.

per se

In those circumstances, I refuse the application for a stay. In doing so, I'm mindful of the statutory provisions that Ms Nash has raised for the Respondent, in particular, the provisions of 9(k) as to the exemptions for liability in certain circumstances of the Office of Fair Trading / Fair Trading Administration Corporation.

The existence of those provisions obviously was known to the Respondent at the time that liability was accepted. And it seems to me that the agreement that has been entered into is a legally binding agreement between the parties notwithstanding that the Corporation could have, if it wished, declined liability in reliance of the provisions of 9(k).

Having agreed with the Applicants by specific identification points, as to the major structural defects, that I think leads only to the continuation of the process that was foreshadowed in that agreement which was a meeting of minds as between the experts to try and determined an appropriate method of rectification and presumably a quantum to be set against those issues...against those items.

In terms of procedural orders, what ought to be done? Should I leave the parties to do that by themselves or should I order an expert conclave? I am inclined to the latter.”

16 The Tribunal then went on to make appropriate orders in relation to the further progression of the matter.

Comprehensive Insurance Scheme

17 The scheme is aimed at providing recompense to an owner who suffers at the hands of a builder for construction of residential building work. The Act contains provisions as to what can be paid for under the scheme and it gives rights for recoupment by the plaintiff who administers the scheme from a builder once it has paid out to an owner under the scheme.

18 The terms of the comprehensive insurance scheme are set out in Schedule 1 Form 4 of the Building Services Corporation Regulation 1990 (NSW). Clause 5 of that provision identifies the losses, which are indemnified under the scheme. This includes, inter alia, the cost of rectifying defects in insured building work. Clause 6 provides for maximum levels of payments in various circumstances and clause 7 deals with time limitations for claims under the scheme. Ordinary claims have a time limit of 12 months and structural defects have a time limit of some seven years or other permutations. Clause 8 allows the Corporation to set off various amounts against the liability which is indemnified in clauses 5 or 5A. Included in this is any amount received by the claimant under a settlement or an award against a contractor or a court order in respect of such contractor. This is one of the matters which were raised by the plaintiff in its letter of 19 September 2003 to the first defendant. Clause 9 of the scheme includes a number of exclusions from liability. There are a variety of these exclusions. An example is 9(k) being an exclusion of damage caused by the beneficiaries’ failure to maintain or to take reasonable and timely action to minimise damage.

The appeal

19 The appeal is brought pursuant to s 67 of the CTTT Act 2001 which is in the following terms:

“67 Appeal against decision of Tribunal with respect to matter of law

(1) If, in respect of any proceedings, the Tribunal decides a question with respect to a matter of law, a party in the proceedings who is dissatisfied with the decision may, subject to this section, appeal to the Supreme Court against the decision.

(2) An appeal is to be made in accordance with the rules of the Supreme Court. The rules of the Supreme Court may provide that an appeal (or such classes of appeal as may be specified in the rules) may be made only with the leave of the Court.

(a) make such order in relation to the proceedings in which the question arose as, in its opinion, should have been made by the Tribunal, or

(b) remit its decision on the question to the Tribunal and order a rehearing of the proceedings by the Tribunal.

(5) If a party has appealed to the Supreme Court against a decision of the Tribunal on a question with respect to a matter of law, either the Tribunal or the Supreme Court may suspend, until the appeal is determined, the operation of any order or decision made in respect of the proceedings.

(6) If the Tribunal suspends the operation of an order or a decision, the Tribunal or the Supreme Court may terminate the suspension or, where the Supreme Court has suspended the operation of an order or a decision, the Supreme Court may terminate the suspension.

(7) If a rehearing is held, fresh evidence, or evidence in addition to or in substitution for the evidence on which the original decision was made, may be given on the rehearing.

(8) A reference in this section to a matter of law includes a reference to a matter relating to the jurisdiction of the Tribunal.

20 In their submissions to me, the parties dealt with the matter as though there was an error of law in the conclusion reached by the Tribunal. There was in fact no submission as to the question of whether or not the conclusion of the Tribunal (that there was a contract), was not an error of law. As s 67 of the CTTT Act 2001 giving the right to appeal does not give the right of appeal in these terms, but only where the Tribunal “decides a question with respect to a matter of law”. I will refer to the matter. The present section with which I am concerned does not give a right of appeal for an “error of law”.

21 There has been consideration of a predecessor section to the present one with which I am concerned, namely, section 20(5) of the Commercial Tribunal Act 1984 (NSW). Subsection 5 of that section provides

“Where, in proceedings before the Tribunal, the Chairman or a Deputy Chairman decides a question with respect to a matter of law, a party to the proceedings who is dissatisfied with the decision may appeal to the Supreme Court against the decision of the Chairman or Deputy Chairman.”

22 That section was analysed in some detail in Custom Credit Corporation Limited (In Liquidation) v Commercial Tribunal of New South Wales & Ors [1999] NSWSC 1021. His Honour Mr Justice Greg James considered the nature of the appeal and a number of cases which had dealt with it including Custom Credit Corporation Limited v Commercial Tribunal of New South Wales & Ors (1993) 32 NSWLR 489. He also referred with approval to the decision of Canham & Ors v Australian Guarantee Corporation Limited & Anor (1990) ASC 55-984. There Carruthers J said:

“It is, I think, appropriate that I express my views upon the meaning of the phrase ‘a question with respect to a matter of law’. Despite arguments both by the plaintiffs and the AGC to the contrary, it is my view the draftsman intended this phrase to encompass nothing more than a pure question of law. I think it was the Legislature’s intention that apart from vesting the Chairman or Deputy Chairman with the right and obligation either to decide a question of law himself or to refer it to the Supreme Court, no distinction was to be drawn between the powers and functions of the respective members of the Tribunal. Thus it could not have been the intention of the legislature that the Chairman or Deputy Chairman solely decide other than pure questions of law. Further, I am confident that the legislature would not have intended that the Chairman or Deputy Chairman have the right to refer anything other than a pure question of law to the Supreme Court for decision. It would be quite inconsistent with well established practice, as well as the function of this Court, for a mixed question of fact and law to be referred to it for decision.”

23 Later His Honour went on to deal with the difference between the section with which he was concerned and other more common rights of appeal on questions of law. At paragraphs 93 and 94 he said the following:

Residential Tenancies Act

Warren v Coombs

Supreme Court

Act

Criminal Appeal Act

Judiciary Act

Criminal Appeal Act

24 The question is whether a decision by the Tribunal as to the existence of the contract is a question of pure law.

25 The matter of law, which is said to be involved, is the finding of the Tribunal that certain documents constituted an agreement between the parties for the resolution of the issue of liability on the five nominated major structural defects. The finding as to whether or not such an agreement existed is certainly a matter of law. Any anterior fact-finding is, of course, not a matter of law. Whether a contract existed as a result of certain stated facts is a classic matter of law in that it requires knowledge of the relevant rules of contract law to determine the question. See British Launderers’ Research Association v Borough of Hendon Rating Authority [1949] 1 KB 462 at 471-472.

26 The plaintiff’s submissions as to why the finding constituted what it described as an error of law were as follows:-

(i) the finding that the letter constituted ‘an agreement’ is, with respect, plainly incorrect by recourse to orthodox contract analysis. To begin with, it is unsupported by consideration. This ends the matter, as the document was not executed by the parties as a deed;

(a) (as stated) was the ‘agreement’ supported by any consideration? No;

not

(c) is the ‘agreement’ capable of specific performance? No;

(d) is the ‘agreement’, by its breach, capable of giving rise to damages? It is submitted that the answer to this question is also No;

(e) was there an intention between the FTAC and the Owners Corporation to create legal relations (in a contractual sense). Clearly not. The context in which the correspondence was being written was in relation to the administration of ongoing legal proceedings and there is no evidence to suggest that what was contained in the letter of 26 August 2003 was intended to create legal relations capable, on any view, of sustaining a suit for specific performance.

not

27 As to the submission that there was no consideration if one looks at the terms of the letter written by the first defendant’s solicitors on 26 August 2003, on its face it refers to a confinement of its claim to “only” five defects. It is to be noted that the second letter of 26 August 2003 referred to the signature of the first letter and its return on behalf of the plaintiff.

28 It would seem to me that the agreement to confine the claim to only five defects is an apparent consideration on the face of the documents that is sufficient to support a conclusion that consideration was given by the first defendant.

29 The letter of 25 August 2003 which was a without prejudice letter does not appear to have been tendered to the Tribunal although some reference was made to it in submissions. The sworn evidence before me is that it is only the three letters that I have earlier identified which were before the Tribunal. I think it is fairly clear on the face of the letters that the parties intended them to create legal relationships. They were, in fact, proposing a means whereby their existing legal dispute would be refined and continued forward in the Tribunal.

30 The only real question, which might arise, is whether the letters justify the finding by the Tribunal as to the terms of the agreement.

31 The Tribunal expressed the agreement as being one “between the parties for the resolution of the issue of acceptance of liability on the five nominated major structural defects”.

32 It is probably necessary to have some understanding of the terms of the scheme in more detail to see what in fact the parties were contesting and perhaps have agreed to in the letter. Clause 5 (1) of Form 4 to Schedule 1 provides for the losses indemnified under the scheme. The sub-section says:

“Subject to the maximum payment provisions (clause 6), the method of assessing claim benefits (clause 8) and the exclusions specified in this Scheme (clause 9), the Corporation will indemnify the following losses reasonably incurred by a beneficiary in respect of residential work:”

33 Thereafter follows a number of different categories including (d) and (e) which relevantly are losses in rectifying defects arising from bad workmanship etc. The assessment procedure in clause 8 (c) allows a set off against any liabilities in clause 5 for an amount received, inter alia, by a beneficiary under a judgment of any court against the builder.

34 I have earlier mentioned that the exclusion in clause 9 (k) include normal wear and tear and the beneficiary’s failure to maintain or take reasonable and timely action to minimise the damage.

35 It is to be noted that clause 5 does not make any reference to clause 7. Clause 7 deals with time limitations. Importantly clause 7(1)(b) provides:

“7. (1) Subject to subclause (2), to qualify for the benefits under this Scheme. The beneficiaries must notify the Corporation in writing of the matters that could give rise to the loses referred to in clause 5 or 5A within the following times:

(b) for loss relating to heads of claim in clause 5 (1) (d) or (e) incurred in rectifying major structural defects or in repairing damage to the dwelling that has occurred in consequence of major structural defects – within 6 months after the beneficiary first becomes aware of the defect, but not later than 7 years from:

(2) The Corporation may extend the times specified in subclause (1) if it is satisfied that the delay in notification was due to circumstances outside the control of the beneficiary.”

36 As it appears from the chronology I have given earlier it is clear that by the time all this came to a head the plaintiff had agreed under sub-clause 2 to extend the time for notifying any claim in respect of major structural defects. Clearly the correspondence shows the parties were agreeing that the enumerated defects were major structural defects. Given the agreement for extension of time this would therefore seem to be acceptance that the condition in clause 7, which it was necessary to satisfy in order to qualify for the benefits under the scheme had been met.

37 The Tribunal appears to have formed the view, to use its words “that leaves aside a determination that was to be reached between the experts as to an appropriate method of rectification and, of course, quantum was attached to that”. It might be thought that having made these comments the Tribunal might still be leaving open the question of whether or not it might still have to determine some of the conditions of liability under clause 5, for example, the exclusion in clause 9(k). However, that certainly was not the decision because two paragraphs after the part of the decision that I have referred to, the Tribunal said:

“In those circumstances I refuse the application for a stay. In doing so, I am mindful of the statutory provisions that Miss Nash has raised with the respondent, in particular, the provisions 9(k) as to the exemptions for liability in certain circumstances but the Office of Fair Trading/Fair Trading Administration Corporation.

The existence of those provisions obviously was known to the respondent at the time that liability was accepted. And it seems to me that the agreement that has been entered into is a legally binding agreement between the parties notwithstanding that the Corporation could have, if it wished declined liability in reliance of the provisions of 9(k).”

38 The question is whether the letter can extend to such an extensive agreement. The difficulty is illustrated by the second part of the first letter, which listed the procedure for experts to discuss and agree to the agreed scope of works for rectification. The procedure had a default that in the event there was no agreement, major structural defects will be listed for determination by the CTTT. If they were to be listed for determination by the CTTT then would that include all questions other than those concerning compliance with clause 7 of Schedule 4?

39 It is apparent that the procedure before the tribunal is quite informal. Under section 28 of the CTTT Act 2001 the tribunal is not bound by the rules of evidence and may inquire into and inform itself on the manner in such manner as it thinks fit subject to the rules of procedural fairness. It is to act with as little formality as the circumstances of the case permit and according to equity, good conscience and the substantial merits of the case without regard to technicalities or legal forms. Its procedure is by way of application, which can be amended, and there does not seem to be any procedure either in the Act or the regulations which requires a defence much less any formal system of pleadings.

40 What was before the Tribunal for its determination was the first defendant's claim to be indemnified under the scheme pursuant to clause 5 of the scheme. I have already set out the opening words of that section and it is plain that the indemnity is subject to the matters in clause 8 and clause 9. In determining whether the applicant was entitled to indemnity under the scheme, those matters would have to be addressed at the time the Tribunal carried out its determination.

41 In its reasons the Tribunal refers to the fact that the provisions of clause 9 were well known to the respondent. That is not in doubt. What the Tribunal seems to have decided is that because of that, it must have in some way waived its right to raise that matter or have agreed not to raise that matter. There is no reference in the decision or indeed in the transcript of the hearing before the Tribunal to any matter of fact, which would support either of these views other than, the letters to which the Tribunal referred. For instance there is no suggestion in the debate before the Tribunal to any limited basis for the rejection of the original claim for indemnity under the scheme such that one could characterise the application that was before it as limited to the refusal of the indemnity for any particular reason.

42 On its express terms, the question of whether or not indemnity should be granted under clause 5 includes a determination in respect of matters under clause 8 and clause 9. Having regard to what the parties were addressing, namely the application before the Tribunal, a fair reading of the letter indicates that there was agreement on the existence of major structural defects and as agreed previously the conditions in clause 7 of the scheme had been satisfied. It was merely a refining of the issues before the Tribunal.

43 It seems to me that the extent of the agreement found by the Tribunal was beyond what could be inferred from the terms of the letters at the stage that the proceedings had reached before the Tribunal.

44 It is apparent from the transcript that the Tribunal's decision that there was an agreement of the nature, which it found, was the substantial basis for the discretionary decision to refuse the stay. In these circumstances, it seems to me that the appeal should be allowed, the decision set aside and the matter be remitted to the Tribunal for a redetermination of the application for a stay.

The application for judicial review.

45 Paragraph 4 of the amended summons which was eventually filed by the plaintiff on 14 April 2004 sought a declaration that any decision by the plaintiff as at 26 August to concede liability in relation to the defects alleged by the first defendant constituted a jurisdictional error and was a nullity.

46 Having regard to the finding which I have made on the appeal, it is not necessary for me to address the matter in any further detail. However in case the matter goes further, I will comment on the evidence in support of the application and make findings thereon. I will also address a number of matters which seemed to arise on the application.

47 Mr Elliott who held the position of director of insurance services within the Office of Fair Trading gave evidence. He was responsible for determining insurance claims made under the scheme to which I have been referring. He gave evidence as to the cause of proceedings and any decision that he had made as at 26 August 2003. He was aware of the fact that in making a decision to grand indemnity it was necessary to take into account the provisions of clauses 6, 8 and 9 in any decision under clause 5. He swore to the fact that he had not taken into account the matters which might arise under clauses 8 and 9 of the scheme.

48 Mr Elliott was cross-examined, particularly by reference to exhibit 37, which was an internal memorandum of 25 August 2003 from his legal officer Ms Kiu who sought instructions which were ultimately incorporated in the letter of 26 August 2003. The memorandum started by seeking instructions to concede various items to be major structural defects as outlined in the experts report and for the assessment of the scope of works and costing prepared by the applicant's expert. It continued with the background and in particular referred to the decisions made to extend time in relation to structural defects. The memorandum discussed questions of liability, quantum and then set out recommendations at the end. These were couched in terms of instructions being given to concede liability in relation to certain major structural defects and Mr Elliott put a note “agreed” against two relevant items. The memorandum itself is internally inconsistent in this regard having regard to the issue posed and the background, which it recites. I am satisfied with and accept Mr Elliott's evidence that he had made no decision with respect to the matters in respect of clause 8 and clause 9 at the time he gave instructions. It may well be that because of the terms of the memorandum that they did cross his mind.

49 It is plain from the terms of the letter of 19 September 2003, which was before the Tribunal, that the plaintiff was well alive to the fact that it might wish to raise matters under clause 8 and clause 9 of the scheme. This was the purpose no doubt for making the application for a stay to the Tribunal.

50 The evidence given by Mr Elliott was the foundation for the plaintiff’s claim that its decision, as conveyed by the letter of 26 August 2003 (assuming that the such letter constituted an agreement) was ultra vires and beyond the power of the corporation. I will not deal with the question of whether there was any ultra vires act but I think it may be useful to note the following.

51 The plaintiff was clearly well aware of the lack of consideration by it of the clause 8 and 9 factors by the time of the application for a stay. Arguably it would have been open to it to have suggested to the Tribunal that there was no agreement constituted by the letters of 26 August upon the basis that any such action by it was ultra vires and thus a nullity. As was said by the High Court in Metwally (No 2)v University of Wollongong v (1985) 60 ALR 68 at 71-72; 59ALJR 481 at 483:

“It is elementary that a party is bound by the conduct of his case. Except in the most exceptional circumstances, it would be contrary to all principle to allow a party, after a case had been decided against him, to raise the new argument which, whether deliberately or by inadvertence, he failed put during the hearing when he had an opportunity to do so.”

52 The hearing commenced with counsel for the owners corporation putting to the Tribunal that there had been an agreement as a result of the correspondence. Counsel for the corporation at page 7 sought to withdraw what was conceded to be an admission in the correspondence. She pointed out the fact that the corporation could not accept liability for the exclusions under clause 9 and at the end of that page she conceded they had made a mistake in writing the letters in those terms. After further debate she indicated that she wished to withdraw the admission. There was debate about whether there was any action in reliance upon some admission and reference by the tribunal that prima facie it seemed to be an agreement.

53 At page 13 there is a debate about clause 9 and how the statutory corporation was bound by the scheme. At page 14 Counsel for the corporation made a comment that it would be acting ultra vires. At page 18, counsel for the corporation again made reference to the withdrawal of the admission. At page 20, counsel for the corporation said:

“Yes. We abandoned the issue about whether or not it’s filed on time. The claim was not on time. We subsequently abandoned the issue about whether or not that these are major structural defects. And we still contend that we haven't and cannot abandon the issue under clause 9.”

54 What is apparent from the transcript is that there was no submission that there could be no agreement because any decision made by the corporation without considering the clause 8 or 9 factors was ultra vires and thus a nullity. Instead the argument seems to have been put that all that occurred was an admission which was sought to be withdrawn. That this is so is reflected in the ex-tempore judgment given by the Tribunal which does not deal with any such submission concerning any ultra vires act.

55 In these circumstances it seems to me that there would be substantial difficulty in the plaintiff now seeking to raise this argument before the court.

56 The other matter, which raises some difficulty, is the question of whether it is appropriate for the corporation in these substantive proceedings to seek to set aside its own decision. Given that I have decided that there was no such decision I will not comment further on this ground.

Orders

57 I make the following orders:

1. That the determination of the second defendant to deny the plaintiff stay on 16 October 2003 in the proceedings between the first defendant and the plaintiff in the Consumer Trader and Tenancy Tribunal of New South Wales be set aside.

2. I remit the matter to the Consumer Trader and Tenancy Tribunal of New South Wales for a rehearing of the plaintiff’s application for stay made on 16 October 2003.

********

Last Modified: 05/25/2004

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Citations

Fair Trading v Owners Corporation Strata Plan 46789 [2004] NSWSC 443

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CITATION:	Fair Trading v Owners Corporation Strata Plan 46789 [2004] NSWSC 443
HEARING DATE(S):	03/03/04
JUDGMENT DATE:	25 May 2004
JURISDICTION:	Equity Division
JUDGMENT OF:	Master Macready at 1
DECISION:	Paragraph 57
CATCHWORDS:	Contracts: Agreement to compromise part of a claim in the Consumer, Trader & Tenancy Tribunal of NSW. Appeal from Tribunal as a matter of law. Held that agreement not as extensive as found by Tribunal. Appeal allowed and matter remitted to Tribunal for further consideration.
LEGISLATION CITED:	Consumer, Trader and Tenancy Tribunal Act 2001 (NSW) Building Services Corporation Act 1989 (NSW) Building Services Corporations Regulations 1990 (NSW) Building Services Corporation Legislation Amendment Act 1996 (NSW)
CASES CITED:	Custom Credit Corporation Limited (In Liquidation) v Commercial Tribunal of New South Wales & Ors [1999] NSWSC 1021 Custom Credit Corporation Limited v Commercial Tribunal of New South Wales & Ors (1993) 32 NSWLR 489 Canham & Ors v Australian Guarantee Corporation Limited & Anor (1990) ASC 55-984 British Launderers’ Research Association v Borough of Hendon Rating Authority [1949] 1 KB 462 at 471-472 Metwally (No 2) v University of Wollongong v (1985) 60 ALR 68 at 71-72; 59ALJR 481 at 483:
PARTIES :	Fair Trading Administration Corporation, v Owners Corporation Strata Plan 46789 & Consumer, Trader and Tenancy Tribunal of New South Wales
FILE NUMBER(S):	SC 55056 of 2003
COUNSEL:	Mr G.A. Sirtes for plainiff Mr S.A. Kerr for first defendant
SOLICITORS:	D. Catt solicitor for plaintiff Mallesons Stephen Jaques for first defendant Crown Solicitor - Submitting appearance for second defendant