Moraca v Allabadi
[2017] VCC 1853
•15 December 2017
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
BUILDING CASES LIST
Case No. CI-17-01878
| ADRIANA MORACA and TERRENCE ALBERT SCILIPOTI and TERESA SCILIPOTI | First Plaintiff Second Plaintiff Third Plaintiff |
| v | |
| ZEIDOUN ALLABADI and SOLAFA ALLABADI and HALA ALLABADI | First Defendant Second Defendant Third Defendant |
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JUDGE: | HER HONOUR JUDGE MARKS | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 17 November 2017, further written submissions received on 22, 27 and 29 November 2017. | |
DATE OF RULING: | 15 December 2017 | |
CASE MAY BE CITED AS: | Moraca & Ors v Allabadi & Ors | |
MEDIUM NEUTRAL CITATION: | [2017] VCC 1853 | |
REASONS FOR RULING
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Catchwords: STATUTORY INTERPRETATION – Domestic building dispute – Meaning of ‘if a person starts any action arising wholly or predominantly from a domestic building dispute’ – Where action instituted by plaintiffs against defendants does not arise wholly or predominantly from a domestic building dispute – Where third party claim brought by defendants against third party does arise wholly or predominantly from a domestic building dispute – Whether action must be stayed under s57(2) Domestic Building ContractsAct 1995 (Vic).
Legislation:Domestic Building Contracts Act 1995 (Vic); Wrongs Act 1958 (Vic); Domestic Building Contracts (Amendment) Act 2004 (Vic); Estate Agents (Contracts) Regulations 2008; Estate Agents Act 1980 (Vic).
Cases Cited:Swintons Pty Ltd v Age Old Builders PtyLtd [2005] VSCA 217; Domaine Homes (Vic) Pty Ltd v Ria Building Pty Ltd [2005] VCC 111; Shaw v Yarranova Pty Ltd [2006] VSC 45; Nettleton v Vero Insurance Ltd [2008] VSC 554; Presser v Ocean View Properties Pty Ltd [2006] VSC 143; Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (Northern Territory) (2009) 239 CLR 27; Mirvac (Docklands) Pty Ltd v Philp [2004] VSC 301 ; Sargood Bros v Commonwealth (1910) 11 CLR 258; Pyneboard Pty Ltd v Trade Practices Commission (1983) 152 CLR 328; Plaintiff S157/2000 v Commonwealth of Australia (2003) 211 CLR 476.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr T Dowling | Robinson Gill |
| For the Defendants | Mr B Mason | Mason Black Lawyers |
HER HONOUR:
Introduction
1The defendants are developers. They owned a property in Hotham Street, Lower Templestowe. They entered into contracts of sale with the plaintiffs to sell them off the plan units (the sale contracts).
2Under the sale contracts, the defendants agreed to engage a builder, pursuant to major domestic building contracts, to construct the units substantially in accordance with the plans and specifications attached to the sale contracts.
3By special condition 17 of the sale contracts, the defendants agreed:
The Vendor must attend or cause the Builder to attend to rectification of any defects in any part of the building works which are due to defective materials or faulty workmanship provided the Purchaser has notified the Vendor in writing of the defects within 3 months after the Settlement Date. The obligations of the Vendor under this special condition shall cease upon expiration of the 3 month period, all the satisfactory rectification of the notified defects, whichever is the later…
4The first defendant engaged a builder, Rami Taamneh, trading as RT Better Homes (the builder), to build the units. It entered into a major domestic building contracts with him (the building contracts).
5After the units were built, the plaintiffs notified the defendants of alleged defects in the building works.
6The plaintiffs have sued the defendants in this County Court proceeding alleging breach of contract. They say that the defendants have breached the sale contracts because despite demands, they have failed, refused or neglected to rectify the defects.
7The first plaintiff says she has suffered loss and damage of $167,981. The second and third plaintiffs say they have suffered loss and damage of $188,095. The plaintiffs rely on the contents of an expert witness report provided by James Wilson of Buildspect Consulting Pty Ltd, dated 20 January 2017 (the expert report).
8By their defence, the defendants dispute the plaintiffs’ claims, including denying that the plaintiffs have suffered loss and damage from defective materials or faulty workmanship.
Summons to join third party and stay the proceeding
9By summons filed 2 November 2017, the defendants have applied to join the builder as third party to the proceeding to make the claims set out in their proposed third party notice.
10In summary, they seek to pass on any liability they have to the plaintiffs. They say that the first defendant engaged the builder to perform the work and rectify the alleged defects the subject of the plaintiffs’ claims. In the building contracts, the builder agreed to perform that work in a proper and workmanlike manner in accordance with the plans and specifications, and with reasonable care and skill. The terms incorporated into the building contracts include the warranties which s8 of the Domestic Building Contracts Act 1995 (Vic) (DBC Act) import into such domestic building contracts. The damages claimed are particularised with reference to the expert report.
11The defendants have also pleaded in the third party notice that a domestic building dispute arises between the plaintiffs and the builder because, under s9 of the DBC Act, ‘any person who is the owner for the time being’ of premises on which domestic building work was performed may enforce the warranties a builder provides under s8 of the DBC Act. They say the plaintiffs are in that position. They seek to apportion their liability to the plaintiffs, if any, with the builder pursuant to Part IVAA of the Wrongs Act 1958 (Vic).
12The plaintiffs have agreed to the defendants joining the builder to the proceeding.
13I will make orders giving effect to the joinder of the builder as third party, and to the filing of the third party notice.
14The dispute is about the second aspect of the summons: the defendants seek to stay the proceeding pursuant to s57(2) of the DBC Act. The plaintiffs disagree with their construction of s57, and oppose the stay application.
15Section 57(2) is a mandatory provision requiring the Court to stay ‘an action’ as defined in s57(1), on the application of a party, if the action could be heard by the Victorian Civil and Administration Tribunal (VCAT) under the relevant subdivision.
16The parties agree that ‘action’ in s57 means ‘proceeding’: Domaine Homes (Vic) Pty Ltd v Ria Building Pty Ltd [2005] VCC 111, at [19].
17They also agree that the other requirement of s57(2) is made out: no oral evidence concerning the dispute itself has yet been heard.
18For the reasons set out below, I find that the proceeding presently in this Court could not be heard in VCAT under the relevant subdivision.
19I will not stay the proceeding.
Domestic Building Contracts Act (1995) (Vic)
20Part 5 of the DBC Act deals with the jurisdiction of VCAT pursuant to that Act.
21Subdivision 1 of Division 2 of Part 5 relates to domestic building disputes (Subdivision 1).
22Section 57 is within Subdivision 1. It provides:
57VCAT to be chiefly responsible for resolving domestic building disputes
(1)This section applies if a person starts any action arising wholly or predominantly from a domestic building dispute in the Supreme Court, the County Court or the Magistrates' Court.
(2)The Court must stay any such action on the application of a party to the action if—
(a)the action could be heard by VCAT under this Subdivision; and
(b)the Court has not heard any oral evidence concerning the dispute itself.
23Section 1 of the DBC Act states:
The main purposes of this Act are—
(a)to regulate contracts for the carrying out of domestic building work; and
(b)to provide for the resolution of domestic building disputes and other matters by the Victorian Civil and Administrative Tribunal; and
(c)to require builders carrying out domestic building work to be covered by insurance in relation to that work.
24Section 3 of the DBC Act sets out the following definitions:
builder means a person who, or a partnership which—
(a) carries out domestic building work; or
(b)manages or arranges the carrying out of domestic building work; or
(c)intends to carry out, or to manage or arrange the carrying out of, domestic building work;
building owner means the person for whom domestic building work is being, or is about to be, carried out;
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 dispute has the meaning set out in section 54;
25Section 4 of the DBC Act states:
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 builders 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.
26Section 54(1) of the DBC Act states:
54 What is a domestic building dispute?
(1) A domestic building dispute is a dispute or claim arising—
(a) between a building owner and—
(i) a builder; or
(ii)a building practitioner (as defined in the Building Act 1993); or
(iii)a sub-contractor; or
(iv)an architect—
in relation to a domestic building contract or the carrying out of domestic building work; or
(b) between a builder and—
(i) another builder; or
(ii)a building practitioner (as defined in the Building Act 1993); or
(iii)a sub-contractor; or
(iv)an insurer—
in relation to a domestic building contract or the carrying out of domestic building work; or
(c)between a building owner or a builder and—
(i)an architect; or
(ii)a building practitioner registered under the Building Act 1993 as an engineer or draftsperson—in relation to any design work carried out by the architect or building practitioner in respect of domestic building work; or
(d)between a lot owner or an owners corporation and an initial owner (within the meaning of section 68 of the Owners Corporations Act 2006) of land in a plan of subdivision in relation to an obligation imposed on the initial owner under section 68(2) of the Owners Corporations Act 2006.
The dispute
27The parties agree that:
·The claim between the plaintiffs and the defendants cannot be heard in VCAT as it does not have jurisdiction. That claim is not a domestic building dispute as defined by s54 of the DBC Act, and cannot be heard by VCAT under Subdivision 1.
·If the only claim in the proceeding before me (this action) was the one between the plaintiffs and defendants, then no stay application could be made under s57 of the DBC Act.
·The claim between the defendants and the builder could be heard in VCAT. It is a domestic building dispute and can be heard by VCAT under Subdivision 1.
The arguments in favour of staying the proceeding
28The defendants say that, now that they have brought the third party claim against the builder, which arises from domestic building contracts:
·This action now arises wholly or predominantly from a domestic building dispute.
·This action must be stayed under s57 of the DBC Act.
·The effect of s57 is that the plaintiffs cannot pursue their claims against the defendants in relation to the alleged defects under the sale contracts at all. This action must be stayed, and those claims are not justiciable in VCAT.
·But the plaintiffs may, if they choose, sue the builder themselves in VCAT in relation to losses caused by the alleged defects. As current owners of the units, they have the protection of the statutory scheme set up by the DBC Act.
Analysis
29This action includes the plaintiffs’ claims against the defendants, as well as the defendants’ claims against the builder, now contained in the third party notice. Since the plaintiffs’ claims against the defendants cannot be determined in VCAT under Subdivision 1, it follows that s57(2) of the DBC Act is not complied with: this action cannot be heard by VCAT.
30The reference in s57(2) of the DBC Act to ‘the action’ being able to be heard by VCAT under Subdivision 1 means that the entirety of the action must be able to be heard there. The section does not refer to ‘claims’ or to parts of actions being able to be heard by VCAT under the Subdivision.
31The plaintiffs and defendants have agreed that the defendants have the obligations set out in the sale contracts. There is nothing in s57 of the DBC Act or the statutory scheme that takes away the parties’ right to agree to liabilities as between themselves.
32The fact that the plaintiffs could sue the builder in VCAT for breach of domestic building contracts is not to the point. They have not done so. They have chosen to sue the defendants for breach of the sale contracts, as they are entitled to do.
33VCAT is not the only forum for domestic building disputes: see Swintons Pty Ltd v Age Old Builders PtyLtd [2005] VSCA 217 at [17].
Claim by plaintiffs not justiciable in VCAT
34There is no dispute that the claim brought by the plaintiffs against the defendants is not justiciable in VCAT. This is because it arises from the sale contracts which are not domestic building contracts. The claim could not be heard by VCAT under Subdivision 1 of Division 2 of Part 5 of the DBC Act due to the definition of ‘domestic building dispute’ in s54 of the DBC Act.
35It is now (by amendment No.37/2004) expressly provided in s3(4) of the DBC Act that:
A contract for the sale of land on which a home is being constructed or is to be constructed that provides or contemplates that the construction of the home will be completed before the completion of the contract is not, and is not to be taken to form part of, a domestic building contract within the meaning of this Act if—
(a)the home is being constructed under a separate contract that is a major domestic building contract; or
(b)the contract of sale provides that the home is to be constructed under a separate contract that is a major domestic building contract.
36Where a contract of sale in an off the plan purchase of property contains provisions for the vendor to enter into a separate major domestic building contract for the construction of the dwelling, the contract of sale is not a domestic building contract and the developer is not a ‘builder’ under the DBC Act. In Shaw v Yarranova Pty Ltd [2006] VSC 45 (Shaw), Bell J held at [32]–[33] that the contract between the developer and the purchaser was not a contract ‘to carry out’ domestic building work because it expressly contemplated the building would be constructed pursuant to another contract into which the developer would enter with a builder. The contract was not one ‘to arrange or manage’ the carrying out of domestic building work because it expressly recognised that the activities constituting the building work would be undertaken by someone else: Shaw at [59]–[60].
37Clause 15 of the sale contracts expressly provide that the sale contracts are not domestic building contracts.
38I asked Counsel for both parties whether the plaintiffs’ claims against the defendants might be said in any event to arise from a domestic building dispute on the basis that those claims flow from the allegedly defective work performed by the builder under the domestic building contracts with the first defendant. They directed me to Beach J’s decision in Nettleton v Vero Insurance Ltd [2008] VSC 554 (Nettleton), where his Honour considered a similar argument and rejected it. I agree with his analysis.
39In Nettleton his Honour declined to give the word ‘arising’ a ‘broader operation’ to characterise a dispute between a ‘building owner’ and an insurer as, ultimately, ‘a dispute arising between a building owner and a builder’ in similar circumstances. He rejected that argument at [14] for being inconsistent with Parliament’s intention: ‘Had Parliament intended to include within the ambit of a domestic building dispute a dispute between a building owner and an insurer, it could have so provided in express terms.’
40By s3(4) of the DBC Act, Parliament has provided in express terms that disputes between developers and purchasers regarding off the plan developments are not within the ambit of domestic building disputes.
41In Nettleton, Beach J stated at [16]:
If one looked at s 57(1) in isolation, the point is arguable. However, s 57(2) provides that a stay can only be ordered if the proceeding could be heard by the Tribunal under Sub-division one. The section in Sub-division one which gives the Tribunal jurisdiction is s 53(1). That section provides that the Tribunal may make orders “to resolve a domestic building dispute”. That is, to resolve a domestic building dispute as defined by s 54. The dispute between the plaintiff and Vero is not a domestic building dispute. Therefore, any proceeding in relation to the dispute is not one that can be heard by the Tribunal under Sub-division one. In fact, any such proceeding is one that can be heard by the Tribunal under Sub-division 2.[1] It follows that the County Court was wrong to stay the plaintiff’s proceeding. The requirements of s 57(2)(a) were not met. Further, construing s 57(1) in the context of the balance of s 57 (and more particularly in the light of s 57(2)), the County Court proceeding was not one that arose wholly or predominantly from a domestic building dispute. It arose wholly or predominantly from a dispute between a building owner and an insurer.
[1] See s59A of the DBC Act.
Claims by defendants against third party are justiciable in VCAT
The dispute between the first defendant and the builder is a domestic building dispute. It relates to the domestic building work the builder performed at the properties, being ‘the erection or construction of a home’, and satisfying the DBC Act’s definition of ‘domestic building work’ at ss3 and 5. That work was performed pursuant to a domestic building contract, which is defined in s3 of the DBC Act to include a contract to carry out ‘domestic building work’.
When does an action have to arise from a domestic building dispute?
I agree with the analysis of Habersberger J in Presser v Ocean View Properties Pty Ltd [2006] VSC 143 (Presser) at [39]-[40] that the time to look at whether or not a proceeding arises under the DBC Act is when the application for a stay is made. If s57 of the DBC Act is applicable to the action when the application is made, the fact that the action has become so since the commencement of the proceeding is not a bar to the stay being granted.
In Presser, the initial case brought by the plaintiffs against the defendant was not a domestic building dispute, but his Honour held that it became one when a settlement agreement was entered into between the plaintiffs and defendant. He found that the settlement agreement was a domestic building contract under the DBC Act. There were also a number of claims involving third, fourth and fifth parties, and his Honour found that the action, as at the time of the stay application, arose predominantly out of a domestic building dispute. He therefore stayed the action.
The defendants here rely on comments then made by his Honour by way of obiter. His Honour went on to consider the situation if his finding that the plaintiffs and defendant were parties to a ‘domestic building contract’ was incorrect. He said at [43] that the same conclusion would apply. This was because the proceeding concerned ‘which, if any, of the several contracting parties is liable to [the plaintiffs] for the defects in their parquetry flooring,’ and ‘[o]nce that issue has been decided, everything else will fall into place.’
The defendants here argue that this proceeding is analogous to that in Presser. Once the party ultimately responsible for the alleged defects at the plaintiffs’ properties identified, the resulting rights and liabilities between the parties under their respective contracts and under statute will fall into place.
However, those contentions are at odds with the reasoning of Beach J in Nettleton when dealing with the operation of s57(2). His Honour made clear that the action must be one which could be dealt with under Subdivision 1.[2]
[2]See [41] of these Reasons.
Habersberger J in Presser does not address that requirement in his obiter comments in Presser. I respectfully agree with the findings of Beach J in that regard, and adopt those in preference to the obiter comments of Habersberger J.
I assess the position as at the time of the stay application. This action cannot be determined by VCAT.
Plaintiff could sue builder
The defendants refer to the fact the plaintiffs can bring claims directly against the builder by reason of ss8 and 9 of the DBC Act. His work is covered by the requisite domestic warranty insurance.
The defendants rely on those plaintiffs’ possible claims against the builder under ss8 and 9 of the DBC Act, in seeking to apportion their liability (if any) under Part IVAA of the Wrongs Act 1958 (Vic) .[3] They say that the common feature underlying all the claims is whether the builder’s work was defective and, if so, the cost to rectify those defects.
[3]That apportionment claim is presently raised only in the third party notice. The defence will need to be amended to include it if it is to be relied on by way of defence.
The defendants say that because both the plaintiffs and the defendants have direct claims against the builder arising from the work he performed at the plaintiffs’ properties pursuant to the domestic building contracts the first defendant entered into with the builder, this proceeding arises ‘wholly or predominantly from a domestic building dispute’.
The defendants further argue that s3(4) of the DBC Act informs the proper interpretation of when the Court must stay a proceeding under s57. It is part of the context to s57, and demonstrates the DBC Act’s purpose, to which the Court must have regard when construing the DBC Act as a whole: Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (Northern Territory) (2009) 239 CLR 27, at [4]. Section 3(4) of the DBC Act was inserted by the Domestic Building Contracts (Amendment) Act 2004 (Vic) (the Amending Act).
They say that the Amending Act was passed following the Supreme Court’s decision in Mirvac (Docklands) Pty Ltd v Philp [2004] VSC 301 (Mirvac), where it upheld VCAT’s decision that an off the plan contract of sale was a ‘domestic building contract’ for the purposes of s3 of the DBC Act. Mirvac gave rise to a policy concern that an untenable situation would be created in which off the plan contracts of sale complying with the Sale of Land Act 1962 (Vic) could be voidable under the DBC Act, because complying with the former could result in non-compliance with the latter. The Attorney-General’s second-reading speech regarding the Amending Act acknowledged:
This would result in an unacceptable level of uncertainty in a vital sector of the economy and place building jobs at risk. If lenders and developers withdraw from the industry because of the lack of contractual certainty, ordinary purchasers in these developments will also suffer.[4]
[4] Victoria, Parliamentary Debates, Legislative Assembly, 12 May 2004, 1237 (Rob Hulls, Attorney-General).
They argue that Parliament’s swift response was to insert s3(4) into the DBC Act to clarify that such off the plan contracts are not ‘domestic building contracts’ for the purposes of the DBC Act. In doing so, the Attorney-General also noted the DBC Act’s arrangements which already protect purchasers via the warranties builders provide in their favour by reason of ss8 and 9 of the DBC Act:
It is also unnecessary for such off-the-plan contracts of sale to be characterised as domestic building contracts in order for the purchasers to obtain the benefits of the Domestic Building Contracts Act.[5]
[5]Ibid.
The defendants argue that this demonstrates a legislative choice that builders are to be liable only to purchasers for defective work they acquire under off the plan contracts. They say that if Parliament intended for purchasers to be able to pursue their claims against vendors/developers, then it would not have passed the Amending Act. This would have left the Supreme Court’s decision in Mirvac unimpaired, such that purchasers would have retained an authoritative basis to bring claims against developers. The very action of declaring to the contrary conveys Parliament’s intention that purchasers of properties under off the plan contracts of sale are to direct any claims regarding defective building works to the relevant builder, and not to the developer.
They say that s57 of the DBC Act should be interpreted such that a stay is granted in this proceeding even though it means the plaintiffs cannot pursue their contractual claims against the defendants. They argue that granting that stay is consistent with Parliament’s carefully devised scheme in which:
· Vendors/developers do not owe to the purchasers of properties under off the plan contracts of sale the warranties listed in s8 of the DBC Act;
· Instead, purchasers of those properties have the benefit of the warranties builders provide under s8 of the DBC Act, which run with the land by reason of s9 of the DBC Act, and which the parties cannot contract out of by reason of s132 of the DBC Act;
· The builders’ warranties are supported by insurance;
· Vendors/developers warrant to provide at settlement, if requested in writing to do so at least 21 days before settlement, details of any current builder warranty insurance policy in their possession relating to the property;[6] and
[6]This warranty is included in the standard form contract of sale prescribed by the Estate Agents (Contracts) Regulations 2008 for the purposes of s53A of the Estate Agents Act 1980 (Vic). See also General Condition 8 of sale contracts in this case.
· A specialist forum is available to deal with domestic building disputes in a ‘non-legalistic’ manner, and ‘quickly and at minimal cost’.[7]
[7]Victoria, Parliamentary Debates, Legislative Assembly, 24 October 1995, 695 (Jan Wade, Attorney-General).
However, the defendants’ contended construction of s57 would result in a derogation of the plaintiffs’ contractual rights against the defendants arising from the bargain they struck with the plaintiffs in the sale contracts.
The plaintiffs have other, quite separate statutory rights against the builder under ss8 and 9 of the DBC Act (which they have presently chosen not to pursue). This does not mean they lose their rights against the defendants.
Legislation is presumed not to alter or invade common law rights unless such an intention is clearly expressed in the words of the statute. As stated by O’Connor J in Sargood Bros v Commonwealth[8] at 279:
[8](1910) 11 CLR 258; see also Pyneboard Pty Ltd v Trade Practices Commission (1983) 152 CLR 328 at 341; and Plaintiff S157/2000 v Commonwealth of Australia (2003) 211 CLR 476 at 492.
It is a well recognized rule in the interpretation of Statutes that an Act will never be construed as taking away an existing right unless its language is reasonably capable of no other construction.
Orders
I will make orders to the effect that the defendants have leave to join the builder as third party, and to file the third party notice.
I will also order that the summons filed 2 November 2017 is otherwise dismissed.
I direct the parties to consider any consequential orders that should be made as a result of this ruling and provide to me proposed consent orders, or if the parties cannot agree, separate proposed orders, by 2pm on Thursday 22 December 2017. If any party requires a hearing as to those orders, it will be listed for Friday 22 December at 9.30am.
Certificate
I certify that these 15 pages are a true copy of the reasons for ruling of Her Honour Judge Marks delivered on 15 December 2017.
Dated: 15 December 2017
Liz Main
Associate to Her Honour Judge Marks
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