Parkview Constructions Pty Ltd v The Owners - Strata Plan No 90018

[2023] NSWCA 66

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:

Parkview Constructions Pty Ltd v The Owners – Strata Plan No 90018 [2023] NSWCA 66

Hearing dates:

2 March 2023

Decision date:

17 April 2023

Before:

Ward P at [1];
Leeming JA at [2];
Simpson AJA at [108]

Decision:

1. Grant leave to appeal to Parkview.

2. Direct Parkview to file a notice of appeal in accordance with the draft notice of appeal but otherwise dispense with the rules as to service.

3. Appeal dismissed.

4. Dismiss the summons filed by The Quay.

5. Parkview and The Quay to pay the costs of the Owners Corporation of the proceedings in this Court.

6. The Quay to pay half of Parkview’s costs of filing the notice of appeal.

Catchwords:

BUILDING AND CONSTRUCTION – residential building work – statutory warranties under Home Building Act 1989 (NSW) – claims by owners corporation against builder and developer – whether claims statutory or contractual – whether single cause of action for breach of contract – whether amendments to introduce new defects more than six years after completion of building work should be permitted – consideration of Onerati v Phillips Constructions Pty Ltd (in liq) (1989) 16 NSWLR 730 holding that builder had res judicata defence when owners sought to raise further defects – consideration of amendments overturning result in Onerati – legislative amendments did not alter nature of claim for breach of contract – appeal from decision permitting owners corporation’s amendments dismissed

Legislation Cited:

Australian Consumer Law, ss 18, 236

Civil Liability Act 2002 (NSW), ss 5B, 5C, 5D, 5E, Pts 1A, 2, 3, 4

Civil Procedure Act 2005 (NSW), ss 56, 64, 65, 100, 101

Corporations Act 2001 (Cth), ss 181-183, 1317H, 1324

Design and Building Practitioners Act 2020 (NSW), s 37

Frustrated Contracts Act 1978 (NSW)

Home Building Act 1989 (NSW), ss 3C, 18A, 18B, 18BA, 18C, 18D, 18E, 18F, 18G, Pt 2C

Home Building Amendment (Statutory Warranties) Act 2006 (NSW)

Home Building Amendment (Warranties and Insurance) Act 2010 (NSW), Sch 1, items [2] and [3]

Interpretation Act 1987 (NSW), s 33

Limitation Act 1969 (NSW), s 14(1)(a)

Restraints of Trade Act 1976 (NSW)

Strata Schemes (Freehold Development) Act 1973 (NSW), s 18

Strata Schemes Management Act 1996 (NSW), s 11

Supreme Court Act 1970 (NSW), s 75A

Uniform Civil Procedure Rules 2005 (NSW), rr 36.16, 51.53

Cases Cited:

Agtrack (NT) Pty Ltd v Hatfield (2005) 223 CLR 251; [2005] HCA 38

Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd (2018) 265 CLR 1; [2018] HCA 43

Bandelle Pty Ltd v Sydney Capitol Hotels Pty Ltd [2020] NSWCA 303

Baron Corporation Pty Ltd v Owners of Strata Plan 69567 [2013] NSWCA 238

Berowra Holdings Pty Ltd v Gordon (2006) 225 CLR 364; [2006] HCA 32

Bridge Shipping Pty Ltd v Grand Shipping SA (1991) 173 CLR 231; [1991] HCA 45

Cassaniti v Ball as liquidator of RCG CBD Pty Ltd (in liq) and related matters; Khalil v Ball as liquidator of Diamondwish Pty Ltd (in liq) and related matters [2022] NSWCA 161

CGU Insurance Ltd v Watson (as trustee of the deed of arrangement in respect of Greaves) [2007] NSWCA 301

Conquer v Boot [1928] 2 KB 336

CSR Ltd v Eddy (2005) 226 CLR 1; [2005] HCA 64

Davis v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs [2023] HCA 10

Dymocks Book Arcade Pty Ltd v Capral Ltd (formerly Alcan Australia Ltd) [2011] NSWSC 1423

Greater Lithgow City Council v Wolfenden [2007] NSWCA 180

H E Daniels Ld v Carmel Exporters and Importers Ld [1953] 2 QB 242

Honeywood as Executrix of the Estate of the late Neville Honeywood v Munnings (2006) 67 NSWLR 466; [2006] NSWCA 215

Horton v Jones (No 2) (1939) 39 SR (NSW) 305

Onerati v Phillips Constructions Pty Ltd (in liq) (1989) 16 NSWLR 730

Parsons v George [2004] EWCA Civ 912; [2004] 3 All ER 633

Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589; [1981] HCA 45

Renowden v McMullin (1970) 123 CLR 584; [1970] HCA 24

Republic of India v India Steamship Co [1993] AC 410

Steamship Mutual Underwriting Association Ltd v Trollope & Colls (City) Ltd (1986) 33 BLR 77; 6 Con LR 11

The Owners – Strata Plan 70030 v Decon Australia [2016] NSWSC 19

The Owners – Strata Plan 76841 v Ceerose Pty Ltd [2016] NSWSC 1545

The Owners–Strata Plan 86807 v Crown Group Constructions Pty Ltd [2023] NSWSC 44

The Owners – Strata Plan No 89005 v Stromer [2021] NSWSC 853

The Owners – Strata Plan No 90018 v Parkview Constructions Pty Ltd [2022] NSWSC 1123

The Owners Corporation Strata Plan 64757 v MJA Group Pty Ltd (2011) 81 NSWLR 426; [2011] NSWCA 236

Thompson v Australian Capital Television Pty Ltd (1996) 186 CLR 574; [1996] HCA 38

Tomlinson v Ramsey Food Processing Pty Ltd (2015) 256 CLR 507; [2015] HCA 28

Trentelman v The Owners – Strata Plan No 76700 (2021) 106 NSWLR 227; [2021] NSWCA 242

Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd (formerly Contour Aerospace Ltd) [2014] AC 160; [2013] UKSC 46

Weldon v Neal (1887) 19 QBD 394

Wollongong Coal Ltd v Gujarat NRE India Pty Ltd (2019) 100 NSWLR 432; [2019] NSWCA 135

Zavodnyik v Alex Constructions Pty Ltd (2005) 67 NSWLR 457; [2005] NSWCA 438

Texts Cited:

Practice Note SC EQ 3

V Palmer, The Paths to Privity: The History of Third Party Beneficiary Contracts at English Law (Austin & Winfield, 1992)

Category:

Principal judgment

Parties:

Parkview Constructions Pty Ltd (Applicant)
The Owners – Strata Plan No 90018 (First Respondent)
The Quay Haymarket Pty Ltd (Second Respondent)

Representation:

Counsel:
M Ashurst SC with L Corbett (Applicant)
G Sirtes SC with D Hand (First Respondent)
S Docker (Second Respondent)

Solicitors:
Mills Oakley (Applicant)
DEA Lawyers Pty Ltd (First Respondent)
HWL Ebsworth Lawyers (Second Respondent)

File Number(s):

2022/00281148

Publication restriction:

Nil

 Decision under appeal 

Court or tribunal:

Supreme Court of New South Wales

Jurisdiction:

Equity – Technology and Construction List

Citation:

[2022] NSWSC 1123

Date of Decision:

24 August 2022

Before:

Stevenson J

File Number(s):

2016/257304

HEADNOTE

[This headnote is not to be read as part of the judgment]

Parkview Constructions Pty Ltd was the builder and The Quay Haymarket Pty Ltd was the developer of a large building comprising some 286 residential apartments and associated parking and storage spaces on the outskirts of the Sydney CBD. The building plan was registered on 1 September 2014, which had the effect of common property vesting in The Owners – Strata Plan No 90018. A final occupation certificate was issued on 15 December 2014, engaging s 3C(2) of the Home Building Act 1989 (NSW), which deemed the completion of the residential building work to have commenced on that date for the purposes of that statute.

Proceedings were commenced by the Owners Corporation on 26 August 2016 in the Technology and Construction List. The Technology and Construction List Statement alleged defects in the common property that were caused by breach of “one or more” of the six statutory warranties specified in s 18B of the Home Building Act. The statement asserted that the Owners Corporation, as the immediate successor in title to the Developer in relation to the common property, was entitled to the benefit of those warranties pursuant to s 18D. The Owners Corporation further asserted that the Developer was taken to have done the residential building work by dint of s 18C(2), and that by s 18C(1), it was entitled to the benefit of the statutory warranties. The alleged defects were said to “include, but are not limited to, the defects identified in Annexure A”, and the Owners Corporation reserved the “right to provide further particulars of defects”. Annexure A identified 85 defects, including some minor defects (such as “Water leak above bathtub”) and some major defects.

The Owners Corporation sought leave to amend its Technology and Construction List Statement in 2021. Those amendments included the inclusion of three further claimed defects, such as the external façade of the building not meeting the requirements of the Building Code of Australia. The primary judge regarded these amendments as raising a point of principle, that being whether a party in the position of the Owners Corporation seeking to bring proceedings in respect of a breach of a s 18B statutory warranty invokes a different cause of action for each defect in work said to be a breach of the statutory warranties. The primary judge held that there was a single cause of action to enforce the promises made in each of the six statutory warranties, and accordingly granted the Owners Corporation leave to amend its statement to include the three new alleged defects.

Both the Developer and the Builder sought leave to appeal from that aspect of the primary judge’s decision. The primary issue on appeal was whether the Owners Corporation’s amendments introduced a “new” cause of action or whether they were aspects of the same causes of action already pleaded in the Technology and Construction List Statement.

The Court (Leeming JA, Ward P and Simpson AJA agreeing) held, granting leave to appeal but dismissing the appeal:

1. The Owners Corporation’s claims are best regarded as claims for breach of contract. While it was never in fact a party to any contract, it has, by reason of the Home Building Act, the ability to sue for breaches of the actual contract between the Builder and the Developer into which the statutory warranties in s 18B are taken to have been incorporated by reason of s 18D(1). The Owners Corporation is also entitled to sue the Developer on statutory warranties in respect of work deemed to have been done by the Developer pursuant to s 18C: [24]-[32], [86].

Baron Corporation Pty Ltd v Owners of Strata Plan 69567 [2013] NSWCA 238, considered.

2. In a conventional case for breach of contract, there is a single cause of action, complete when a defective structure is provided, irrespective of the number of ways in which those defects manifested themselves. Although the Home Building Act makes important inroads into the position at general law, those changes do not alter the fact that the nature of the Owners Corporation’s claim is that the building which is the subject of the contract has not been provided in accordance with the terms of the contract: [90]-[91].

Conquer v Boot [1928] 2 KB 336, considered and applied.

3. Where a successor in title sues a builder or developer on the statutory warranties in s 18B of the Home Building Act, the proceeding is for breach of the single contract (which may be actual or deemed) against that party. An amendment which does nothing more than introduce further departures from the building as promised will not give rise to a new cause of action because the cause of action is for breach of the same contract. The Owners Corporation’s amendments did not therefore introduce a new cause of action, and so could be permitted without resort to s 65(2)(c) of the Civil Procedure Act 2005 (NSW). [88]-[89], [103]-[106]

Onerati v Phillips Constructions Pty Ltd (in liq) (1989) 16 NSWLR 730; Honeywood as Executrix of the Estate of the late Neville Honeywood v Munnings (2006) 67 NSWLR 466; [2006] NSWCA 215, considered.

4. Statutory modifications following Onerati and Honeywood v Munnings preserved the singleness of the cause of action in some circumstances for the purposes of res judicata. The statutory modifications do not produce the result that there is a different cause of action for each defect said to have been caused by a breach of a statutory warranty for the purposes of s 65 of the Civil Procedure Act: [80]-[84], [93]-[102].

The Owners – Strata Plan 70030 v Decon Australia [2016] NSWSC 19, considered.

Judgment

1. WARD P: I agree with Leeming JA.

2. LEEMING JA: Parkview Constructions Pty Ltd by summons (dated 19 September 2022) and The Quay Haymarket Pty Ltd by cross-summons (dated 17 October 2022) seek leave to appeal from part of an interlocutory judgment granting leave to The Owners – Strata Plan No 90018 to amend its Technology and Construction List Statement. The litigation in the Technology and Construction List of this Court has a somewhat unusual history, and the application was regarded, correctly, by the primary judge as giving rise to a question of principle. There was a concurrent hearing in this Court of the application for leave and the appeal.

History of the litigation

3. Parkview Constructions was the builder and The Quay Haymarket was the developer of a large building comprising some 286 residential apartments and associated parking and storage spaces on the outskirts of the Sydney CBD. It will be convenient to follow the approach taken by the primary judge and refer to the parties as the Builder, the Developer and the Owners Corporation.

4. The strata plan was registered on 1 September 2014, and a final occupation certificate was issued on 15 December 2014. Both those dates are significant.

5. Upon registration of the plan, the common property vested, by dint of s 18 of the (former) Strata Schemes (Freehold Development) Act 1973 (NSW), in the Owners Corporation which was constituted by s 11 of the (former) Strata Schemes Management Act 1996 (NSW).

6. The issue of a final occupation certificate engaged s 3C(2) of the Home Building Act 1989 (NSW), which deemed the completion of the residential building work to have occurred on that date for the purposes of that statute, including the limitation periods in s 18E which are central to this appeal.

7. The litigation giving rise to this appeal was commenced so long ago as 26 August 2016. This Court was told that the Technology and Construction List Statement was in a form not uncommonly seen in proceedings in that list. It referred in general terms to the six statutory warranties owed by the Builder to the Owners Corporation pursuant to s 18B of the Home Building Act and asserted that it, as the immediate successor in title to the Developer in relation to the common property, was entitled pursuant to s 18D to the benefit of those warranties. The Owners Corporation further alleged that the Developer was taken to have done the residential building work by dint of s 18C(2), and that by s 18C(1), it was entitled to the benefit of those warranties. The statement then alleged that the common property was affected by defects which were said to “include, but are not limited to, the defects identified in Annexure A”. Annexure A identified 85 defects, some of which were on any view extremely minor (including “Water leak above bathtub – Unit 18.02”, “Communication cupboard still on builder’s key”, “Vanity sloping – water unable to drain – South tower 103 bathroom”) and some were more major. The Owners Corporation reserved the “right to provide further particulars of defects at the Property”, which is consistent with the enumerated defects in Annexure A being regarded as particulars.

8. It seems however to be accepted that the three defects the subject of the Owners Corporation’s application to amend, which gave rise to this appeal, had not been previously listed. Those further three claimed defects were that:

1. the external façade of the building did not meet the requirements of the Building Code of Australia, and used materials that constituted an undue risk of fire spread via the façade;

2. coatings applied to the inside of glass windows had prematurely deteriorated and detached from the glass, and

3. the stair pressurisation systems installed in the two towers and the carpark failed to meet the performance requirements of Australian Standards.

9. No Technology and Construction List Response has ever been filed. The Court was told that during the approximately five years after filing the Technology and Construction List Statement, the parties negotiated in relation to the 85 claimed defects, all of which were either rectified or otherwise resolved. For that reason, an aspect of the amendment which was not opposed was the deletion of the entirety of those 85 defects.

10. The Owners Corporation also sought to amend its Technology and Construction List Statement to advance a new case based on the statutory duty created by s 37 of the Design and Building Practitioners Act 2020 (NSW), a provision which only came into existence years after the proceedings had commenced. The primary judge granted leave to amend. No appeal is sought to be brought from that part of his Honour’s decision.

11. The dispute in this Court is confined to that part of the interlocutory decision that permitted the Owners Corporation to amend its Technology and Construction List Statement to include the three new claimed defects summarised above. At least in part, the parties had known of these defects for many years. For example, in March and May 2018, expert reports were obtained by the Owners Corporation and the Builder concerning the cladding on the building.

12. The Court was not taken to any evidence (if there was any) explaining why the Technology and Construction List Statement had not, years earlier, been amended to reflect the claims that the cladding was defective. There was a deal of evidence concerning exchanges between the parties which, having regard to their stance as to what should and should not be determined by this Court, I shall not attempt to summarise.

13. The motion seeking leave to amend seems to have progressed at the same languid pace as other aspects of this litigation. It was filed on 16 July 2021, but an amendment was served on 9 February 2022 and it was heard on 11 August 2022. Nothing turns on the delay in 2021 and 2022, because both were more than six years after the deemed date of the completion of the residential building work.

The decision at first instance granting the amendment

14. The primary judge heard argument on 11 August 2022, reserved, and produced substantial reasons for judgment of 108 paragraphs, promptly, on 24 August 2022: The Owners – Strata Plan No 90018 v Parkview Constructions Pty Ltd [2022] NSWSC 1123. His Honour regarded the application as raising a point of principle, which he described at [17] and [18] as follows:

That submission raises a question, not hitherto considered by this Court on a final basis as far as I am aware, as to whether a party in the position of the Owners Corporation seeking to bring proceedings in respect of a breach of a s 18B statutory warranty invokes a different cause of action for each defect in work said to be a breach of the statutory warranties.

This in turn raises a question of whether what the parties referred to as the “Onerati principle” applies to proceedings for a breach of a s 18B statutory warranty brought by a successor in title under ss 18C and 18D.

15. His Honour dealt with the statutory regime and various authorities on that regime and concluded that there was a single cause of action to enforce the promises made in each of the six statutory warranties. That conclusion relied upon what was described by his Honour and all parties as the “Onerati principle”, by what had been held in Onerati v Phillips Constructions Pty Ltd (in liq) (1989) 16 NSWLR 730 and followed in Honeywood as Executrix of the Estate of the late Neville Honeywood v Munnings (2006) 67 NSWLR 466; [2006] NSWCA 215. His Honour also relied upon various textual considerations in the legislation, including the singular indefinite article “a” in s 18E(1) and the separate limitation periods in s 18E, and the more recently amended provisions of ss 18D(2) and 18E(2) to conclude that the Onerati principle applied to actions for breach of the s 18B statutory warranties. His Honour said at [60]-[62]:

All these factors point to the conclusion, in my opinion, that a breach of any of the six s 18B statutory warranties either gives rise to “but one cause of action” in respect of that statutory warranty or, perhaps, as may be implicit in Handley JA’s reasoning, “but one cause of action” for breach of the suite of six statutory warranties (in either case, subject to the exceptions provided for in ss 18D(2) and 18E(2)).

A particular defect might constitute a breach of more than one of the statutory warranties. And there may be multiple breaches of the one warranty. I do not see that as being inconsistent with this conclusion.

I see nothing in the words of the [Home Building Act] to compel the conclusion that there is a separate cause of action for each defect constituting a breach of one or more of the statutory warranties.

16. His Honour then considered that the separate warranty periods and the possibility of commencing proceedings before the warranty period commenced did not detract from that conclusion: at [63]-[65]. His Honour referred to the “rolled up” pleading which his Honour said would not, if amended as sought by the Owners Corporation, introduce a new cause of action. His Honour expressed his conclusion as follows at [74]:

My conclusions are as follows:

(1) separate causes of action for breaches of the statutory warranties created by s 18B of the [Home Building Act] do not arise each time there is a defect that constitutes a breach of such warranties;

(2) for each of the six statutory warranties created by s 18B of the [Home Building Act] there are either single causes of action available to a party entitled by reason of ss 18C and 18D of the [Home Building Act] to enforce such warranties or, perhaps, but one cause of action for a breach of the statutory warranties taken together;

(3) subject to the specific exceptions created by ss 18D(2) and 18E(2) of the [Home Building Act], the Onerati principle does apply to claims for breach of those statutory warranties;

(4)   the opinion McDougall J expressed in Decon was correct, and the concession made before me in Ceerose was well made; and

(5)   the Owners Corporation’s proposed amendment to its List Statement to include a claim under the [Home Building Act] in relation to the New Defects has the effect of amending its existing cause or causes of action and does not have the effect of introducing a new cause of action.

17. At [78]-[104], his Honour dealt with the question of prejudice, referring to some of the expert evidence which had been exchanged. His Honour was not persuaded that there was any prejudice to warrant making an order that the amendment commenced at some date later than the commencement of the proceedings, and no challenge was made to that reasoning.

18. Each of the Developer and Builder seeks leave to appeal from the orders insofar as they permitted the Owners Corporation to rely on the three new alleged defects.

19. Each of the Builder and the Owners Corporation agreed that in the event that the primary judge had granted the amendment on an incorrect basis, the application should be remitted to the Technology and Construction List, essentially because, as I understood it, this Court had not been placed in a position where it could properly evaluate the material bearing upon prejudice. This Court will ordinarily, if error is made out, determine the point itself rather than remit to the court below. To that end it is empowered to make findings of fact (pursuant to s 75A of the Supreme Court Act 1970 (NSW)) and it is precluded from ordering a retrial unless it appears that some substantial wrong or miscarriage has been thereby occasioned (Uniform Civil Procedure Rules 2005 (NSW), r 51.53). Regard must also be had to the overriding purpose in s 56 of the Civil Procedure Act 2005 (NSW) of facilitating the just, quick and cheap resolution of the real issues in the proceedings when exercising the discretion to order a further hearing at first instance. However, all the parties are represented by capable practitioners, there is plainly a deal of material, and the parties have had a record of resolving or reducing the issues between them consensually. In those circumstances, it might have been appropriate to accede to the request jointly made by Builder and Owners Corporation to remit the application in the event that error were disclosed.

20. The proposed grounds of appeal were narrow, confining themselves to the question of principle that arose:

1. The Primary Judge erred in law by concluding that there are not separate causes of action for each alleged breach of a warranty contained in s 18B of the Home Building Ac[t] where the plaintiff is relying on rights conferred by s 18C or s 18D of the [Home Building Act].

2. The Primary Judge ought to have concluded that a plaintiff relying on the rights conferred by s 18C or s 18D of the [Home Building Act] has separate causes of action for each alleged breach of a statutory warranty.

3. The Primary Judge should have concluded that the amendments sought by the [Owners Corporation] to introduce new claims under the [Home Building Act] were statute barred by operation of s 18E(1)(a)-(b) of the [Home Building Act] and dismissed the application accordingly.

21. The references in the grounds of appeal to “separate causes of action” for breaches of the statutory warranties require attention to be given first to the regime established by Part 2C of the Home Building Act and secondly to the power to amend which the Owners Corporation invoked.

The Home Building Act 1989

22. Part 2C of the Home Building Act is titled “Statutory warranties”. It comprises ss 18A-18G. Sections 18A-18E of the Home Building Act in the form they took in August 2016 when proceedings were commenced are reproduced as Annexure A to these reasons. Section 18F deals with defences, and need not be reproduced. Section 18G provides that any provision purporting to remove or restrict the rights of a persons in respect of a statutory warranty is void.

23. It is convenient to explain how those provisions (as amended) work so far as is relevant to this appeal.

The statutory warranties

24. The work done by the Builder was “residential building work”, which was done pursuant to a contract between the Developer and the Builder. That contract included the six warranties implied by s 18B(1), and so, by way of example, the Developer had the benefit of the statutory warranty from the Builder that the work was done with due care and skill and in accordance with the plans and specification in the contract: s 18B(1)(a).

25. A theme of Part 2C is that persons who did not enter into contracts are nonetheless entitled to the “benefit of” statutory warranties. Relevantly for present purposes, that arises in two distinct ways.

26. The Owners Corporation was, in respect of work done to the common property of the building, the successor in title to the Developer. Its ownership of, and entitlement to sue in relation to, the common property, was considered in Trentelman v The Owners – Strata Plan No 76700 (2021) 106 NSWLR 227; [2021] NSWCA 242 at [182]-[203].

27. Section 18D entitles successors in title to the benefit of a statutory warranty, but subject, inter alia, to s 18D(2), in cases where the warranty has “already been enforced in relation to that particular deficiency”. By that means, the Owners Corporation can sue the Builder on the contract between the Developer and the Builder. That may be regarded as an extension of contractual liability or alternatively as a relaxation of the rules of contractual privity. The parties to this appeal were divided as to the legal character of the rights thereby conferred, and to which I shall return.

28. Separately from the above, the statute deems a non-existent contract to come into existence, which is then applicable to work deemed to have been done by a developer. More precisely, s 18C(2) deems, for the purposes of s 18C(1), residential building work done on behalf of a developer to have been done by the developer, and s 18C(1) provides that a person who is the immediate successor to, inter alia, a developer who has done residential building work, is entitled to the benefit of the statutory warranties as if the developer had been required to hold a contractor licence and had done the work under a contract with the successor in title.

29. The position is as explained by Barrett JA writing for this Court in Baron Corporation Pty Ltd v Owners of Strata Plan 69567 [2013] NSWCA 238 at [12]-[13]:

The effect of s 18C, construed in the light of s 3A, is that a person who, by virtue of the latter section, is regarded as a “developer” who has done residential building work on land is fixed with a liability to the person’s “immediate successor in title”, that liability being commensurate with the entitlement the section creates, that is, an entitlement to the benefit of the statutory warranties with respect to the work “as if” the developer was required to hold a contractor licence and had done the work under a contract with the successor in title.

Thus, a “developer”, although it did not in fact carry out building work, is liable to its immediate successor in title as if it had done the building work under a contract with the successor and thereby incurred the burden of the statutory warranties by virtue of the statute’s importation of those warranties into a contract between the developer and the successor.

30. The deeming in ss 18C(1) and (2) gives rise to what has been called a “notional contract”: see, for example, The Owners Corporation Strata Plan 64757 v MJA Group Pty Ltd (2011) 81 NSWLR 426; [2011] NSWCA 236 at [32]-[37]. That was the language employed in the submissions in this Court, although it will be seen that in Baron Corporation Barrett JA carefully spoke of the rights conferred as “statutory entitlements”. His Honour’s language is apposite, because rolled up in the “notional contract” is the deeming in s 18C(2) about work done by a developer, the deeming that that work is done pursuant to a contract, and the deeming that the contract includes the s 18B(1) warranties. Nomenclature matters because the way we think about, and engage in legal analysis, is shaped by terminology. See for example Gageler J’s preference for “ancillary liability” over “accessorial liability” because of the capacity of the latter to mislead, in Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd (2018) 265 CLR 1; [2018] HCA 43 at [76]-[77]. To anticipate a point addressed later in these reasons, it would be an unsatisfactory form of nominative determinism to hold that the Owners Corporation’s cause of action against the Developer was “contractual”, as opposed to “statutory”, merely because it was convenient to describe the relations as being governed by a “notional contract”. That said, the label “notional contract” is a good one for many purposes, insofar as it emphasises that the contract did not in fact exist, nor was any construction work actually done by the Developer, in contrast with the claims based on an actual contract between the Builder and the Developer.

31. The Owners Corporation was, as a person with the benefit of a statutory warranty in the two distinct ways indicated above, subject to the duties in s 18BA (as is made explicit by s 18BA(2)), including the duty to mitigate its loss, to give notice and to allow reasonable access. The ordinary meaning of the section is that it applies to statutory warranties implied in the actual contract with the Builder, and also to the same warranties implied in the notional contract with the Developer. The obvious purpose of the section is to confer a benefit upon persons against whom a breach of a statutory warranty may be enforced, which accords with the ordinary meaning.

32. Section 18BA is also significant in another respect. It provides, explicitly, in s 18BA(1) that “Breach of a statutory warranty implied in a contract constitutes a breach of contract”. That statement of the nature of the rights and liabilities created by the statutory warranties has the same scope as the rest of the section, and is applicable both to the claims based on the actual contract between the Builder and the Developer, and also to claims based on the deemed or notional contract in a claim against the Developer.

Proceedings for breach of a statutory warranty

33. Section 18E prescribes rules for bringing proceedings for breach of a statutory warranty. The time for doing so depends on whether the defect is or is not a “major defect”. The six year period for major defects starts “on completion of the work to which it relates” (s 18E(1)(c)), which is a term defined by s 3C. In the case of the building which has given rise to this litigation, that time is December 2014, more than six years before the amendments were formally notified in the motion in 2022, but less than six years before the proceedings commenced in 2016. If the defects were not major defects, then there is a two year period, but the proceedings were commenced within two years of the deemed completion of the work. (The position is more complex than summarised above, as may be seen from The Owners – Strata Plan No 89005 v Stromer [2021] NSWSC 853 at [22]-[26], but the foregoing will suffice for present purposes.) I shall pass over other provisions dealing with the circumstance where a defect only becomes apparent towards the end of the two or six year period.

34. Section 18E is otherwise silent as to the way in which proceedings are to be commenced. Obviously one class of proceedings contemplated by the section is proceedings in the Technology and Construction List of the Supreme Court, which (by reason of the nature of the work and the magnitude of the amounts claimed) can only be heard and determined in the Supreme Court. When a provision such as s 18E refers to “proceedings” without more, it is understood as picking up the body of procedural rules which regulate the conduct of those proceedings, including ss 64 and 65 of the Civil Procedure Act to which I shall shortly turn, as explained in Berowra Holdings Pty Ltd v Gordon (2006) 225 CLR 364; [2006] HCA 32 at [13] and [35]-[36]. No party submitted to the contrary.

35. Section 18E(2), similarly to s 18D(2), contains a reference to “particular deficiency” and deals with the case where a person has enforced a statutory warranty in relation to a particular deficiency in the work. That does not prevent the person from enforcing the same warranty for a deficiency of a different kind in the work, if it was in existence when the work was completed, and the person did not know and could not have been expected to have known of the deficiency, and proceedings are nonetheless brought within the two or six year period. As will be seen, these provisions were inserted in order to overturn a line of decisions in this Court.

36. None of those provisions speaks explicitly of any “cause of action”. Statute makes the concept of “cause of action” important in two ways concerning limitation periods. The ordinary six year limitation period for causes of action founded on a contract which is not a deed derives from s 14(1)(a) of the Limitation Act 1969 (NSW), which speaks of “a limitation period of six years running from the date on which the cause of action first accrues”. But rather than employing the concept of the accrual of a cause of action, s 18E defines a two or six year period from the completion of building work, a time which is determined by s 3C by reference to the issuing of an occupation certificate.

37. The second way is critical for this appeal. By the time the Owners Corporation formally moved to amend so as to include the three new defects in its Technology and Construction List Statement, more than six years had elapsed since the deemed completion of building work. Accordingly, the Owners Corporation sought to rely upon the backdating which is effected by the procedural rules to which I shall turn immediately. They too require regard to be had to the nature of the “cause of action”.

The powers to grant amendments

38. Sections 64 and 65 of the Civil Procedure Act has at all relevant times provided:

64 Amendment of documents generally (cf SCR Part 20, rules 1 and 4; DCR Part 17, rules 1 and 4)

(1) At any stage of proceedings, the court may order—

(a) that any document in the proceedings be amended, or

(b) that leave be granted to a party to amend any document in the proceedings.

(2) Subject to section 58, all necessary amendments are to be made for the purpose of determining the real questions raised by or otherwise depending on the proceedings, correcting any defect or error in the proceedings and avoiding multiplicity of proceedings.

(3) An order under this section may be made even if the amendment would have the effect of adding or substituting a cause of action that has arisen after the commencement of the proceedings but, in that case, the date of commencement of the proceedings, in relation to that cause of action, is, subject to section 65, taken to be the date on which the amendment is made.

…

65 Amendment of originating process after expiry of limitation period (cf SCR Part 20, rule 4; DCR Part 17, rule 4)

(1) This section applies to any proceedings commenced before the expiration of any relevant limitation period for the commencement of the proceedings.

(2) At any time after the expiration of the relevant limitation period, the plaintiff in any such proceedings may, with the leave of the court under section 64(1)(b), amend the originating process so as—

(a) to enable the plaintiff to maintain the proceedings in a capacity in which he or she has, since the proceedings were commenced, become entitled to bring and maintain the proceedings, or

(b) to correct a mistake in the name of a party to the proceedings, whether or not the effect of the amendment is to substitute a new party, being a mistake that, in the court’s opinion, is neither misleading nor such as to cause reasonable doubt as to the identity of the person intended to be made a party, or

(c) to add or substitute a new cause of action, together with a claim for relief on the new cause of action, being a new cause of action that, in the court’s opinion, arises from the same (or substantially the same) facts as those giving rise to an existing cause of action and claim for relief set out in the originating process.

(3) Unless the court otherwise orders, an amendment made under this section is taken to have had effect as from the date on which the proceedings were commenced.

(4) This section does not limit the powers of the court under section 64.

(5) This section has effect despite anything to the contrary in the Limitation Act 1969.

(6) In this section, originating process, in relation to any proceedings, includes any pleading subsequently filed in the proceedings.

39. It was not disputed that the Technology and Construction List Statement is to be treated as an originating process for the purposes of s 65, and the litigation to date has proceeded on that basis.

40. Sections 64 and 65 confer separate powers to grant amendments. Both powers address the time at which the amendment takes effect. An amendment under s 64(3) which adds or substitutes a “cause of action that has arisen after the commencement of the proceedings” takes effect when it is made, but that is subject to s 65. Section 65 is specifically addressed to cases where proceedings have been commenced before a cause of action has expired. The section also speaks of adding or substituting “a new cause of action”. The force of s 65(2)(c) is that a qualified power is given to add or substitute a new cause of action notwithstanding that a limitation period has expired, if the Court is of the opinion that it “arises from the same (or substantially the same) facts as those giving rise to an existing cause of action”. An amendment under s 65 will be taken to have had effect from the commencement of the proceeding by reason of s 65(3), subject to the power of the Court otherwise to order.

41. These powers give rise to the two issues which were central to the contested aspect of the application before primary judge:

1. Did the proposed amendments add a new cause of action or, as the Owners Corporation would have it, were they aspects of the same causes of action already pleaded in the Technology and Construction List Statement?

2. If the proposed amendments added a new cause of action, did it arise from the same or substantially the same facts as those giving rise to the existing causes of action?

42. Only the first of those questions is before this Court. It involves examining the existing Technology and Construction List Statement and identifying the cause of action or causes of action contained in it, so as to determine whether the amendments add a “new” cause of action. That in turn requires an examination of the nature of the cause of action or causes of action upon which the Owners Corporation sues, in light of the rights and obligations of the Owners Corporation, the Builder and the Developer at general law as modified by Part 2C of the Home Building Act.

42. Section 65 overrides the “settled rule of practice” of which Lord Esher MR spoke in Weldon v Neal (1887) 19 QBD 394, to the effect that a defendant was not to be prejudiced by an amendment which, if a new proceeding were commenced, would be statute-barred. Jordan CJ explained that the rule represented the pre-Judicature practice of the Court of King’s Bench, which had prevailed after 1875, although the Courts of Exchequer and Common Pleas had permitted amendments which introduced new causes of action which would have been statute-barred: Horton v Jones (No 2) (1939) 39 SR (NSW) 305 at 313-314. Identifying precisely what the “rule” in fact was may cause considerable controversy (see for example Renowden v McMullin (1970) 123 CLR 584; [1970] HCA 24), as well as being capable of distracting from the issues posed by the statutory provisions: cf Agtrack (NT) Pty Ltd v Hatfield (2005) 223 CLR 251; [2005] HCA 38 at [57]. But, generally speaking, amendments were not permitted if, by dint of the fact that they related back to the time when the originating process was filed, they would disentitle a defendant from reliance on a limitation period: see Bridge Shipping Pty Ltd v Grand Shipping SA (1991) 173 CLR 231 at 236-237; [1991] HCA 45. It is now well settled that s 65 of the Civil Procedure Act (and the earlier rules of court which preceded it) overturned that rule. The history of how that occurred is charted by Handley AJA writing for this Court in Greater Lithgow City Council v Wolfenden [2007] NSWCA 180 at [13]-[19] (there was broadly comparable litigation in the United Kingdom, summarised in Parsons v George [2004] EWCA Civ 912; [2004] 3 All ER 633 at [10]-[18]). The fact that these provisions may be deployed so as to defeat a limitation period is confirmed by s 65(5) explicitly overriding the limitation periods and statutory extinction of causes of action in the Limitation Act. There is no reason to doubt that s 65 also applies to the time limits in s 18E. Indeed, the fact that s 18E(1B) makes it plain that “any other law that permits the period for commencement of proceedings to be extended” is not limited by the limited extension of time conferred by s 18E(1A) tends to confirm that view.

43. If the effect of the Owners Corporation’s amendment was not to introduce a new cause of action, then no difficulty arose in relation to its being treated as having been brought when the Technology and Construction List Statement had been filed. On the other hand, if the amendment did amount to introducing a new cause of action, then it would be necessary to consider the matters in s 65(2)(c) and ask whether it arose out of the same or substantially the same facts, because it would be essential for the amendment to relate back to the filing of the Technology and Construction List Statement; otherwise it would be out of time.

44. The question whether the Owners Corporation’s amendments introduce a “new cause of action” is not asked in the abstract. It is asked in a particular context, namely, for the purpose of determining whether s 65 is required and, if so, whether the qualifications to the power in s 65(2)(c) are engaged. The meaning of legal terms at the forefront of this appeal, like “privity” and “res judicata” and “cause of action”, is not fixed. Instead those terms bear shades of meaning which vary depending on the context. For example V Palmer, The Paths to Privity: The History of Third Party Beneficiary Contracts at English Law (Austin & Winfield, 1992) at 10-11 referred to “privity of condition”, “privity of estoppel”, “privity of bailment” and many other early usages which are more obscure than “privity of contract”: see further Wollongong Coal Ltd v Gujarat NRE India Pty Ltd (2019) 100 NSWLR 432; [2019] NSWCA 135 at [52]-[59]. The different shades of meaning of “res judicata” and “cause of action” are addressed below.

Clearing aside some false issues

46. Some of the submissions introduced false issues, which made the resolution of the appeal more complex than it needs to be.

It is unhelpful to ask whether there is one or more “statutory causes of action”

47. First, the applicants invoked the notion of a “statutory cause of action”. Their written submissions asserted that each breach of a statutory warranty gave rise to a cause of action. This was said to be “consistent with the rights of persons entitled to enforce statutory obligations contained in other Acts, such as the Australian Consumer Law or the Corporations Act.” The forensic purpose was to outflank the so-called “Onerati principle”.

48. I disagree. The Australian Consumer Law imposes various statutory norms of conduct (notably, the proscription against engaging in misleading or deceptive conduct in trade or commerce imposed by s 18), and creates new remedies (notably, damages under s 236, as well as other remedies) in certain circumstances, such as where the applicant suffers loss or damage “because” of the contravention. The Corporations Act 2001 (Cth) similarly imposes obligations (such as those imposed on directors in ss 181-183) and confers remedies (including those in ss 1317H and 1324).

49. Part 2C of the Home Building Act presupposes a construction contract, which gives rise to rights and obligations as a matter of general law, and modifies that law by (a) deeming there to be particular warranties, (b) permitting successors in title to sue on those warranties and (c) altering the time periods during which proceedings may be brought. But none of those statutory modifications of the contractual position at general law detracts from the claim brought by the Owners Corporation being one for breach of contract. That is clear enough in part because it is suing on the statutory “warranties”, which are “implied in every contract to do residential building work”, and also because of the opening words of s 18BA(1): “Breach of a statutory warranty implied in a contract constitutes a breach of the contract”.

50. Even in the case of the Owners Corporation exercising its statutory entitlement to sue the Developer on statutory warranties in respect of work deemed to have been done by the Developer pursuant to s 18C, the effect of statute is to entitle the Owners Corporation to be in the same position as if there were a contract.

51. There is a difference between statute modifying the general law, and statute creating a new cause of action. Statute modifies the general law all the time, including the general law of contract. Examples may be seen in the law of apportionable claims in Part 4 of the Civil Liability Act 2002 (NSW), the entitlement to interest under ss 100 and 101 of the Civil Procedure Act, the modifications of the common law doctrines of frustration and restraint of trade by the Frustrated Contracts Act 1978 (NSW) and the Restraints of Trade Act 1976 (NSW), the tests for breach and causation of contractual promises to take reasonable care in Part 1A of the Civil Liability Act (because “negligence” is defined to include some contractual claims), the requirements of signed writing in a wide range of contracts imposed by statutes ancient and modern, and the quite elaborate law of limitation periods applicable to building cases considered in Bandelle Pty Ltd v Sydney Capitol Hotels Pty Ltd [2020] NSWCA 303. Although the statutory modifications may be very substantial, it is tolerably clear that the statute starts with the notion of a contract between developer and builder, and then modifies the terms and the persons who can sue for breach, and in the case of s 18C, imputes to the developer work which has been done in accordance with those terms. Nevertheless, the result remains a claim in contract. By way of analogy, consider actions for negligence to which the Civil Liability Act applies. Breach is determined by ss 5B and 5C, causation is determined by ss 5D and 5E, and there are many new defences and modifications of common law defences contained in the balance of Part 1A. If damages are sought for personal injury, their availability and quantum will be governed by Part 2, and if they extend to damages for mental injury, their availability and quantum will be governed by Part 3. Nonetheless, the plaintiff’s claim is normally regarded as being for the tort of negligence, notwithstanding that most elements of that claim are now determined by statute.

52. But even if there were any doubt about the juristic nature of the Owners Corporation’s claims, it is resolved by s 18BA. The statute provides explicitly that a breach of a statutory warranty is a breach of contract. This is another reason why nomenclature matters. The point of those introductory words is no more and no less than to characterise the nature of a claim on a statutory warranty. The opening words of s 18BA do not directly confer or alter the rights, liabilities, powers, privileges or immunities of any person. Instead, they characterise the nature of the statutory regime created by that Part, which has consequences by reason of other rules or principles (for example, to pick up the legal principles governing damages for breach of contract including mitigation). In light of s 18BA, it is impossible to avoid the conclusion that, despite the statutory modifications, the claim remains characterised as one of breach of contract.

53. But all of this is peripheral to the main issues in the appeal. Whether or not the entitlement of the Owners Corporation to obtain relief against the Developer and the Builder for breaches of statutory warranties in respect of the three newly alleged defects does not turn on whether the entitlement is a “contractual cause of action” or a “statutory cause of action”. It turns on whether its cause of action is the same, or arose out of the same or substantially the same facts, as that already contained in the Technology and Construction List Statement, for the purposes of ss 64 and 65 of the Civil Procedure Act.

Deficiencies in the pleading

54. Secondly, it was said that there were deficiencies with the pleading. The Construction List Statement is not, strictly speaking, a pleading. It has been called a “quasi-pleading”: see Dymocks Book Arcade Pty Ltd v Capral Ltd (formerly Alcan Australia Ltd) [2011] NSWSC 1423 at [25]. It attracted the obligations in the applicable practice note (Practice Note SC EQ 3 at [9]) to avoid formality, to state the allegations made by the plaintiff with adequate particulars, and to identify the legal grounds for the relief claimed, but that may be put to one side.

55. It was said, not without force, that the Owners Corporation had failed to identify the particular warranties alleged to have been breached in respect of each of the defects. That is a consequence of the way the allegations against both defendants rolled up all of the statutory warranties. Conversely, it was also said that the list of defects was in substance as well as in form merely particulars of breach, which could freely be supplemented from time to time.

56. It is not necessary to venture into this debate, and to my mind the present litigation is an extremely ill-suited vehicle for doing so. There is no challenge to the adequacy of the Technology and Commercial List Statement today, nor was there before the primary judge. No response has been filed despite some seven years of litigation pending in the list. If there have been requests for particulars, or other complaints about the way in which the Owners Corporation has formulated its claim, they were not placed before this Court.

57. I now turn to the issues that were central to the appeal.

The “Onerati principle”

58. It will have been seen that the primary judge relied on the “Onerati principle” to reject the Builder’s and Developer’s submissions that there was no power to grant the amendments in respect of the three new defects. The applicants submitted that the primary judge was wrong to rely on Onerati or some principle for which the case stood. It was said that that decision or principle had no application to claims to amend a pleading, as opposed to claims based on res judicata or other forms of estoppel. It was said that in any event Onerati had been overturned by the amendments to ss 18D and 18E.

59. There is force in some of the Builder’s and Developer’s submissions. Even so, I have concluded that the primary judge was correct to conclude that the amendments did not introduce any new cause of action, and so could be permitted without resort to s 65(2)(c) of the Civil Procedure Act. I do not reach that view on the basis of some rule generalised from what was said in Onerati, and I think it would be dangerous to do so, because that case did not address the situation of a late amendment, and because legislation has been enacted with a view to overturning aspects of what was held in Onerati and subsequent cases. Instead, I reach that view from first principles, which fall to be applied in the peculiar legislative regime created by Part 2C of the Home Building Act, which in many respects departs from the position at general law.

The nature of the problem

60. It is important to bear in mind the various questions which may arise when a plaintiff is advancing a new claim.

61. If there are no pending proceedings, and the claim is out of time, the defendant will have a limitation defence.

62. If proceedings between the same parties have already been brought and litigated to a conclusion, then the defendant may have a defence arising from the judgment which resolved the previous litigation, even if the new claim is within time. If the defendant had succeeded in the first proceeding, then the plaintiff may not subsequently bring proceedings on the same cause of action by reason of res judicata (which largely subsumes what was formerly known as cause of action estoppel, as was noted in Tomlinson v Ramsey Food Processing Pty Ltd (2015) 256 CLR 507; [2015] HCA 28 at [22]). However, even if the plaintiff has succeeded in the first proceeding, the plaintiff may nonetheless be prevented from bringing subsequent proceedings against the same defendant for different loss on the same cause of action. In the United Kingdom, as was pointed out by Lord Goff in Republic of India v India Steamship Co [1993] AC 410 at 417 and Lord Sumption in Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd (formerly Contour Aerospace Ltd) [2014] AC 160; [2013] UKSC 46 at [17], this is not a form of estoppel but rather is based on merger. In Australia, merger in this sense is treated as an aspect of res judicata: see Tomlinson at [20]. Separately from the above, the earlier judgment may also give rise to issue estoppels and an estoppel of the class identified in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589; [1981] HCA 45. There is no occasion in these reasons to be especially precise in articulating the various doctrines, some of which overlap (see for example Zavodnyik v Alex Constructions Pty Ltd (2005) 67 NSWLR 457; [2005] NSWCA 438), of which a defendant may take advantage in such a situation. It is convenient to refer generally to the ways by which a defendant may rely on an earlier judgment as “res judicata”.

63. If on the other hand there are extant undetermined proceedings pending between the parties, a plaintiff may wish to amend so as to add a new claim against the same defendant. Prima facie, the amendment is taken to relate back to the time at which the plaintiff’s unamended claim was filed (this reflects the fact that when pleadings came to be written rather than oral, an amendment would be written on the original document, or sometimes physically attached to the original document). Rules were developed in response to the perceived harshness for a plaintiff being able to deprive a defendant of what would otherwise have been a sound limitation defence by that means. Those rules have been altered by statute, most pertinently s 65 of the Civil Procedure Act which permit some amendments to be made even if they introduce a new cause of action which, if brought in separate proceedings, would be statute-barred. That too turns on a comparison between the already pleaded cause of action, and the amendment which is sought to be made.

64. The point of identifying those varying circumstances is to note that the effect of defining the cause of action broadly or narrowly operates quite differently in each case. If there is a single cause of action, and the new claim represents, say, merely an additional particular of damage, then s 64 will be satisfied, and there will be power to amend where there are pending proceedings. However, the same reasoning will entail that if proceedings between the parties have previously been reduced to judgment, then there will be a defence of res judicata.

65. Another way of putting this is that the “single cause of action” approach favours a plaintiff when it comes to amending pending proceedings, and favours a defendant when it comes to bringing proceedings following a judgment.

66. This tension has long been recognised, as may be seen in, for example, the judgment of Lloyd LJ in Steamship Mutual Underwriting Association Ltd v Trollope & Colls (City) Ltd (1986) 33 BLR 77; 6 Con LR 11 who said at BLR 101:

It may seem hard on the plaintiffs in this case that they cannot amend their statement of claim to include damage to the brickwork. But in general, the proposition for which Mr. Harvey contends would work against the interests of building owners. Thus, if in the present case there had been no question of limitation, and if the plaintiffs had brought an action for damage to the air conditioning and recovered judgment at a time when the damage to the brickwork had not yet occurred, then, if Mr Harvey’s propositions were correct, it would be too late for the plaintiffs to bring an action for the brickwork, not because of any question of limitation, but because of the so-called rule in Conquer v Boot under which a plaintiff must bring forward his entire case in respect of one and the same cause of action at the same time. That rule could work obvious injustice to a plaintiff if Mr Harvey’s universal proposition were correct.

67. It is one thing to prevent a plaintiff advancing further claims against the same defendant arising out of the same contract where there has been a final judgment. It is another thing to determine in what cases a defendant to pending proceedings is entitled to rely on a limitation defence in relation to hitherto unarticulated claims by the plaintiff when there has never been a final determination between the parties. This point was made by Ball J in The Owners – Strata Plan 86807 v Crown Group Constructions Pty Ltd [2023] NSWSC 44 at [13]-[16]. Although the purpose underlying these circumstances is rooted in considerations of finality, the tests apply differently depending on whether there are pending undetermined proceedings or whether the plaintiff is seeking to sue the same defendant twice.

Difficulties in applying those principles

68. Those principles are relatively straightforward to understand, but their application in particular cases may be contestable. The real issue is one of particularity or generality of the identification of material facts which amount to a “cause of action”. The position was explained well by Giles J in Onerati at 738-739. His Honour identified the following passage from Brennan J’s reasons in Anshun:

There is an imprecision in the meaning of the term cause of action, which is sometimes used to mean the facts which support a right to judgment (see per Williams J in Carter v Egg and Egg Pulp Marketing Board (Vict) (1942) 66 CLR 557 at 600, 601); sometimes to mean a right which has been infringed (see Serrao v Noel (1885) LR 15 QBD 549), and sometimes to mean the substance of an action as distinct from its form (see Krishna Behari Roy v Brojeswari Chowdranee (1875) LR 2 Ind App 283). Imprecision in the meaning of cause of action tends to uncertainty in defining the ambit of the rule that a judgment bars subsequent proceedings between the same parties on the same cause of action.

69. After identifying other variations in the language used to describe what was meant by “cause of action”, including “the facts which support a right to judgment”, “every fact which it would be necessary for a plaintiff to prove, if traversed, in order to support his right to a judgment”; “the essential ingredients in the title to the right which it is proposed to enforce”; “the act on the part of the defendant which gives the plaintiff his cause of complaint”, and “rights which can be enforced, or liabilities which can be redressed, by legal proceedings”, Giles J said:

I do not find minute examination of the verbal formulae particularly helpful. The form of words may vary according to the purpose for which the description is required, and in any event may not be illuminating. For example, take the first two descriptions given by Brennan J: are the facts which support a right to judgment to be identified at the level of particularity of failing to install adequate flashing (one cause of action) and leaving mortar bridging the cavity (another cause of action), or at the more abstract level of failure to carry out the work in a good and workmanlike manner? Is the right which has been infringed the right to have adequate flashing installed (one right) and the right to have a cavity not bridged by mortar (another right), or a right to have the work carried out in a proper and workmanlike manner? Is there a right to have a cavity not bridged by mortar as a separate right from a right not to have a cavity bridged by meshing?

70. I respectfully agree. Little assistance is given in identifying the generality or particularity with which the “cause of action” is identified when determining, for the purposes of ss 64 and 65 of the Civil Procedure Act, whether it is “new” compared to what has already been pleaded.

71. In their application to building cases based on breaches of contract, the well established approach, which was applied in Onerati and Honeywood v Munnings, was illustrated by the reasoning in Conquer v Boot [1928] 2 KB 336. Although the plaintiff in that case pointed to different damage said to have arisen from the defendant’s breach of the building contract, it was held that there was a single obligation to complete the building and therefore the cause of action in both claims was the same. The essence of Talbot J’s reasoning, which was reproduced and applied in H E Daniels Ld v Carmel Exporters and Importers Ld [1953] 2 QB 242 at 251-252, was:

There is one contract and one promise to be performed at one time, although no doubt the defendant may have failed to perform it in one or in many respects. There may of course be many promises in one contract, the breach of each of which is a separate cause of action. … Here there is but one promise, to complete the bungalow; and the question whether or not it has been performed is to be decided by the state in which the bungalow was when it was handed over by the defendant to the plaintiff as complete. … The test whether a previous action is a bar is not whether the damages sought to be recovered are different, but whether the cause of action is the same.

72. The weight of authority on these issues has arisen in the context of plaintiffs seeking to bring fresh proceedings against defendants following the resolution of earlier litigation. That is the source of the so-called “Onerati principle”.

73. Giles J reviewed the authorities on res judicata in Onerati. A building case had been the subject of an arbitration lasting some 24 days, resulting in an award in favour of the builder, which sought to have the award adopted, and in response to which the owner sought to advance further claims of defects. His Honour gave the following summary at 746:

1. In curial proceedings, for the purposes of the principle of res judicata there is but one cause of action for breach of contract founded upon breach of a promise such as to carry out the work in a good and workmanlike manner. There is not a number of causes of action according to particular defects or classes of defect resulting from the breach.

2. Accordingly, judgment in one proceedings will be a bar to second proceedings to recover damages with respect to defects or classes of defect not the subject of the first proceedings.

3. This will be so even where the defects or classes of defects the subject of the second proceedings were not apparent to the plaintiff at the time of the first proceedings. (Emphasis added.)

74. It will be seen that that formulation reproduced above makes it clear beyond argument that his Honour was confining the analysis to cases where reliance was placed on the principles of res judicata.

75. In Honeywood v Munnings the reasoning in Onerati was approved and applied. This Court held that because the homeowners had already sued the builder to judgment for certain defects, they could not later sue the builder for defects which subsequently emerged. In response, the current provisions of Part 2C make inroads into what was held in Onerati and later cases. Statute now expressly permits a claim to be made for breach of the same statutory warranty in relation to a different deficiency in the circumstances identified in s 18E(2).

76. In short, what was said in Onerati and Honeywood v Munnings was said in a different context – where a final judgment had been entered and a defendant sought to rely upon res judicata or Anshun estoppel – and was said of an earlier form of the legislation, which was specifically amended to overturn at least some aspects of those decisions. It would be unsafe to rely on what had been said in Onerati which even in its own area of operation had been affected by statute, in the different context of a contested amendment. It is necessary to turn now to those statutory provisions.

Defects and the amendments which led to the exceptions in ss 18D and 18E

77. One way of determining whether the Owners Corporation’s amendments introduce a new cause of action turns on whether the new defects are regarded as allegations of material fact or merely particulars. There is something to be said for both possibilities.

78. On the one hand, they represent matters which the Owners Corporation claims need to be rectified and are therefore a core component of the quantification of damages.

79. On the other hand, there are at least some circumstances in which the claimed defects and their nature are better regarded as material allegations of fact, rather than merely particulars of breach and damage. The separate two and six year periods within which proceedings for breaches of a statutory warranty must be commenced, depending on whether the breach has or has not resulted in a “major defect”, entails that the character of a defect is or may be material to the cause of action. An essential issue when an owners corporation sues more than two years after building work is complete is whether the breaches have resulted in “major defect”. Moreover, where judgment has been obtained on the contractual cause of action, the ordinary rules of res judicata do not apply in respect of claims for breaches of the same contract for damages in respect of any “other deficiency” which is different from the “particular deficiency”, in the circumstances stated in s 18E(2). (It is quite possible that the onus is not the same in each of those cases, and the foregoing should not be regarded as expressing a view on that issue.)

80. Sections 18D(2) and 18E(2) do not directly apply to the present case. But that does not mean they may not be relevant. As noted above, the Builder and the Developer said that they stood in the way of the conclusion that there was a single cause of action.

81. Those provisions were introduced by the Home Building Amendment (Statutory Warranties) Act 2006 (NSW). That measure was intended to overturn the principles recognised Onerati and Honeywood v Munnings. When introduced into the Legislative Assembly, it was explained as follows:

In August 2006 the Court of Appeal delivered judgment in Honeywood as executrix of the estate of the late Neville Honeywood v Munnings & Anor [2006] NSWCA 215. In that case the homeowners sued their builder, Mr Honeywood, for alleged defective work in their dwelling. These were the second proceedings instituted by the consumers, the first being an action in the former Consumer Claims Tribunal in 1999. Mr and Mrs Munnings discovered what they allege are further defects not apparent at the time they first brought action in the tribunal and in September 2001 they commenced second proceedings in the then Fair Trading Tribunal limited to these alleged new defects.

This second legal action was subsequently referred to the Court of Appeal on a question of law. In August this year the court held that a second action based on a breach of the same statutory warranty could not be brought. It was held this was so regardless of the seriousness of the later defect or even if the homeowner was not aware of later occurring latent defects when bringing the first action. As a result, the new action by the consumers was dismissed. The basis of the court’s decision is that all defects due to poor workmanship and the use of poor materials at different times during construction formed part of one composite breach of contract when the builder delivered possession of the dwelling. An application to the High Court for leave to appeal against the Court of Appeal’s decision has been made by the homeowners.

However, regardless of the outcome of that application the Government believes that the decision of the Court of Appeal has wide-ranging consequences for consumers and that legislative action should be taken immediately to clarify the rights of consumers. The need to provide consumers with an ability to take further legal action stems from the nature of building faults. Defects in building work often do not become apparent until some time after the completion of the work. In some cases these may be serious structural faults. That defects or deficiencies may not become apparent for some time after completion of the job is recognised in the seven year period allowed in the Act to take legal proceedings for a breach of statutory warranty. The home warranty insurance scheme, which is based on the statutory warranties, also provides six years cover in respect of structural defects.

...

I now turn to the provisions of the bill. The bill amends section 18E of the Home Building Act 1989. This section prescribes the time period for the taking of legal proceedings for a breach of a statutory warranty. Proposed subsection (2) provides that the fact that a person has enforced one of the warranties under the Act in proceedings in relation to a particular deficiency in the work does not prevent the person from enforcing the same warranty in subsequent proceedings for a deficiency of a different kind. The subsection applies where the deficiency in the subsequent proceedings was in existence when the building work was completed, the homeowner did not know, and could not reasonably be expected to have known, of the existence of the deficiency at the conclusion of the earlier proceedings, and the subsequent proceedings are brought within the seven-year limitation period.

The bill also amends section 18D to clarify its operation. Section 18D extends the benefit of the statutory warranties to a successor in title to the person who had the work done. Proposed subsection (2) is intended to make it clear that the section does not give a successor in title a right to enforce a statutory warranty in relation to a deficiency in the work if the warranty has already been enforced in relation to that particular deficiency by the predecessor. The amendments are proposed to commence on the date of assent of the amendment Act.

82. The amendment introduced s 18D(2) in the following form:

Subsection (1) does not give a successor in title any right to enforce a statutory warranty in proceedings in relation to a deficiency in work or materials if the warranty has already been enforced in relation to that particular deficiency by the person’s predecessor in title.

83. A slightly modified form of s 18D(2), together with new subsections (1A) and (1B) were added by the Home Building Amendment (Warranties and Insurance) Act 2010 (NSW) (see Schedule 1 items [2] and [3]); the differences turn on the notion of a “non-contracting owner”, a new term introduced by the 2010 legislation and which was not said to be relevant to the present appeal. It will be seen that both the 2006 and 2010 amendments authorised further proceedings to enforce the same statutory warranty, even if a judgment had been obtained based on a breach of that warranty, but not where the warranty has already been enforced in relation to that particular deficiency. The effect of the amendments was to favour a “consumer” or “homeowner” by taking away the res judicata defence which a builder or developer might enjoy if there had already been litigation between the parties which had proceeded to final judgment.

84. The amendments made in 2006 and 2010 after Onerati and Honeywood v Munnings were inconsistent with the concept that a judgment obtained on a claim based on a statutory warranty was a defence to a later claim based on the same statutory warranty in respect of some other defect. However, it does not, without more, follow that the amendments altered the basis upon which a plaintiff would be permitted to amend pending, undetermined pleadings. Another way of putting this is that insofar as it could no longer be said, for the purposes of res judicata, that there was a single cause of action, it does not follow that, for the purposes of an amendment, there was no longer a single cause of action. In part that is because of the narrow and carefully qualified scope of the amendments, and in part that is because “cause of action” is a slippery, “chameleonic” term, as described in CGU Insurance Ltd v Watson (as trustee of the deed of arrangement in respect of Greaves) [2007] NSWCA 301 at [57].

Consideration of the main issue

85. In light of the above, it is possible to address the central issue in this appeal.

86. First, the Owners Corporation’s claims are best regarded as claims for breach of contract. The Owners Corporation was never in fact a party to any contract, but it has, by reason of statute, the capacity to sue for breaches of the actual contract between the Builder and the Developer (s 18D(1)), into which the statutory warranties in s 18B(1) are taken to have been incorporated. The Owners Corporation is also entitled to sue the Developer pursuant to the entitlements conferred by s 18C, in respect of which the statutory warranties are also taken to have been incorporated.

87. Secondly, the legal concept of a “cause of action” bears a range of meanings, depending on context. Indeed, Brennan J identified three in Anshun at 610-611. There is an extended and insightful analysis of “cause of action” in Watson at [41]-[57]. What matters for this appeal is whether, for the purposes of s 65 of the Civil Procedure Act, the Owners Corporation’s amendments introduced or did not introduce a “new” cause of action.

88. Thirdly, whatever the precise meaning of cause of action be, it is difficult to escape the conclusion that the Owners Corporation is suing upon at least two causes of action – one based on its entitlement to sue on the actual contract between the Builder and the Developer, standing in the shoes of the Developer, for work done by the Builder, and one based on its entitlement to sue on the deemed contract between it and the Developer for work taken to have been done by the Developer (although in fact done on the Developer’s behalf by the Builder).

89. Those causes of action are separate and distinct, even though they are based on the same physical construction work on the same site. One turns on the work actually done by the Builder; the other upon the work taken to have been done by the Developer. The contracts are different (one is actual, one is deemed), and the parties against which a judgment may be obtained and enforced are different.

90. Fourthly, in each case the contract was performed when construction was completed. To the extent that the contracting party failed to provide that which had been promised, the Owners Corporation was entitled to sue for damages. The claim for damages would be quantified in accordance with familiar principles, including where appropriate the costs of remedying construction work which did not comply with the contractual promise. Conventionally, there is a single cause of action, complete when a defective structure was provided, irrespective of the number of ways in which those defects manifested themselves: Conquer v Boot. On the conventional approach, the Owners Corporation’s amendment would not introduce a new cause of action over and above the existing causes of action advanced against the Builder and the Developer.

91. Fifthly, statute makes important further inroads into the position at general law, including (a) authorising the Owners Corporation to sue as a successor title, (b) deeming the Developer to have done work, (c) deeming the Developer to have entered into a contract with the Owners Corporation upon which the latter may sue, and (d) incorporating the statutory warranties into each of those actual and deemed contracts. Those changes are essential to the Owners Corporation’s ability to sue. But those changes, very significant though they may be, do not alter the fact that the nature of the claim is that the building which is the subject of the contract has not been provided in accordance with the terms of that contract. Section 18BA(1) confirms as much.

92. Sixthly, the introduction of a differential time period during which proceedings on the statutory warranties may be brought unquestionably alters the nature of how a claim is pleaded. In particular, whether or not a defect is a “major defect” will, at least in some cases, be a material fact. There is some force in the proposition that this has a consequential effect upon the characterisation of the cause of action. Take for simplicity a claim where there was one major defect and one defect which was not major. It strains the conventional notions of a cause of action to regard a plaintiff as only having a single cause of action in those circumstances, because the availability of different limitation defences to different aspects of the same claim is hard to reconcile with there being a single cause of action.

93. Seventhly, it is also necessary to bear in mind the further statutory modifications affected by the 2006 and 2010 legislation, introducing inter alia ss 18D(2) and 18E(2). Those amendments were unequivocally favourable to “consumers” (to use the language of the second reading speech). They were directed solely to what were regarded as difficulties arising from the operation of res judicata, and to overturning the consequences of there being a single cause of action. The amendments were careful, and qualified. They fell short of abolishing the whole of the foundation upon which Onerati and Honeywood v Munnings had been based. They left in place the operation of res judicata where there had already been litigation based on the “particular deficiency”.

94. Those changes do not produce the result that there is, for the purpose of s 65, a different cause of action for each defect said to have been caused by a breach of a statutory warranty. Unquestionably the law of res judicata was altered. But it does not without more follow that the new statutory provisions brought about the result that there were any changes for the purpose of an amendment and the operation of s 65 of the Civil Procedure Act.

95. I see no sound basis to regard either the regime which gives a different time frame for bringing claims depending on whether there are “major defects” or the amendments overturning Honeywood v Munnings as altering, by a sidewind, the basal nature of the cause of action, and introducing a new obstacle to plaintiffs seeking to amend after the expiration of the two or six year period in s 18E(1).

85. The legislation may be contrasted with the statutes which provided that judgment obtained against a tortfeasor was not a bar to an action against any other person who would have been liable as a joint tortfeasor in respect of the same damage. In Thompson v Australian Capital Television Pty Ltd (1996) 186 CLR 574; [1996] HCA 38 the High Court held that that statute did not merely abrogate that rule of the common law, but went further and abrogated the rule that a release of one joint tortfeasor releases the others. The joint judgment said at 584:

… [I]t is no longer the case that the victim of a tort committed by joint tortfeasors has only one cause of action; the cause of action is no longer one and indivisible. The concept of a single wrong and a single cause of action having gone, the rule that a release given by one joint tortfeasor releases any others must have gone with it, for that rule is nothing more than another aspect of the same thing, namely, that there is only one cause of action against all joint tortfeasors in respect of the one tort. In other words, once the cause of action is by statute no longer one and indivisible, there is no conceptual basis for the rule that the release of one joint tortfeasor releases the others. The rule must therefore be taken to have been impliedly abolished by the statute. (Footnotes omitted, emphasis added.)

97. Gummow J, with whom in this respect Gaudron J agreed, wrote to the same effect at 613-614. This form of interaction between statute law and judge-made law was considered more recently in Cassaniti v Ball as liquidator of RCG CBD Pty Ltd (in liq) and related matters; Khalil v Ball as liquidator of Diamondwish Pty Ltd (in liq) and related matters [2022] NSWCA 161.

98. But the amendments made in 2006 and 2010 fall short of abrogating the singleness of the cause of action which was the basis of the decisions in Onerati and Honeywood v Munnings for the purposes of the law of res judicata. In particular, they expressly left in place cases where a plaintiff would be precluded from bringing separate proceedings. If the singleness of the cause of action has been preserved in some circumstances for the purposes of res judicata, there is no reason to conclude that its singleness has been wholly abrogated for the purpose of an amendment.

99. Considerations of statutory purpose strengthen the conclusion that the 2006 and 2010 amendments did not affect the position of a plaintiff seeking to amend a pleading in pending proceedings in the position of the Owners Corporation. The purpose of the amendment was plainly to enhance the position of plaintiffs, whose claims had been dismissed in Onerati and in Honeywood v Munnings. There is no basis for imputing any intention to the Legislature to detract from the position of plaintiffs in any respect. Section 33 of the Interpretation Act 1987 (NSW) requires this Court to favour constructions which achieve the statutory purpose, and to disfavour constructions which are antithetical to the purpose.

100. That approach accords with the limited authority as exists on this point. Authority is limited because, as the primary judge rightly recognised, the point had never been squarely argued and determined; decisions are not authority for what was agreed or assumed: CSR Ltd v Eddy (2005) 226 CLR 1; [2005] HCA 64 at [13]; Davis v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs [2023] HCA 10 at [42], [182]. Even so, there is a passage in a judgment of McDougall J in The Owners – Strata Plan 70030 v Decon Australia [2016] NSWSC 19 at [16]:

Many of the submissions for the developers … appeared to assume that what was being sought was either to amend, or to plead fresh causes of action. On the face of things, that does not appear to be correct. As Giles J said in Onerati v Phillips Constructions Pty Ltd (1989) 16 NSWLR 730 at 746, “there is but one cause of action for breach of contract founded upon breach of a promise such as to carry out [building] work in a good and workmanlike manner. There is not, his Honour said, a number of causes of action according to particular defects or classes of defect resulting from [that] breach.”

101. McDougall J noted that the principle was not contested. Likewise, in The Owners – Strata Plan 76841 v Ceerose Pty Ltd [2016] NSWSC 1545 it was common ground that the “Onerati principle” applied to claims under ss 18C and 18D. The judge (coincidentally, the primary judge in the present appeal) said at [59]-[60]:

It is true that cases such as Conquer v Boot and Onerati were concerned with the doctrine of res judicata and dealt with circumstances where a party to a building contract had sued a builder to judgment, and then sought to bring further proceedings arising from later discovered defects.

However, it seems to me that if there is “but one cause of action for breach of contract” … for the purposes of the doctrine of res judicata, the same must be true for the purposes of the law of limitation. That is because both are concerned with whether a right to bring a cause of action has been extinguished.

102. Weight is to be given to the views expressed by those highly experienced judges dealing with litigation of this nature, and familiar with the evolving effect of legislation and the issues which arise in the Technology and Construction List.

Conclusions and orders

103. The consequence is that where a successor in title is suing a builder or a developer on the statutory warranties in s 18B of the Home Building Act, the proceeding is for breach of the single contract (which may be actual or deemed) against that party. At least ordinarily, an amendment which does nothing more than introduce further departures from the building as promised will not give rise to a new cause of action which would otherwise have been out of time, to which s 65 is addressed, because the cause of action is for breach of the same contract. That will not be the case if, say, a plaintiff sues a developer and then, out of time, applies to bring proceedings against the builder, but that is because there is a different cause of action on a different contract. Nor will it be the case if the plaintiff introduces a new cause of action such as negligence.

104. However, I would reserve for further consideration the issue which would arise if the difference in the nature of the defects was acute. In the present case, nothing turns on whether the new defects are or are not “major defects”. That will not always be the case. Suppose a plaintiff had brought proceedings within 2 years of completion of the work, but only for defects which were “major defects”, and then much later sought to amend to include defects which were not major defects, in respect of which the defendant would have had a limitation defence. That case squarely raises the point developed in this Court with force especially by the Builder, that it does not make sense to speak of a single cause of action where part of the damage is subject to a two year limitation period and part is the subject of six year limitation period. I do not wish in these reasons to express a view on the proposition that, for the purposes of s 65 of the Civil Procedure Act, the differentiated limitation period regime has the consequence that a plaintiff may have one single cause of action for breach of contract leading to major defects, and another for breach of contract leading to minor defects. But that is not the present case.

105. None of the above is to say that a plaintiff may freely amend at any stage in the litigation. The ordinary discretionary constraints, having regard to the nature of the amendment, whether the pleadings have closed and whether evidence has been served, whether it will require the vacation of a hearing date, the evidence explaining why it is belatedly sought to be introduced, the prejudice to the other parties and the overriding purpose in s 56 of the Civil Procedure Act will inform the exercise of discretion.

106. For those reasons, the primary judge was correct to proceed on the basis that, in this case, there was a single cause of action being prosecuted against each of the Builder and the Developer, and that the amendments did not introduce a new cause of action. The applicants raised a question of principle which has not hitherto been fully considered, and had the benefit of a concurrent hearing. There should be a grant of leave in favour of the Builder. There is no need for each of the Developer and the Builder to file notices of appeal, but they should share the cost of a single notice of appeal. However, the appeal should be dismissed, as should the Developer’s summons, which is otiose. There is no reason so far as I can see for costs not to follow the event. If some different order is sought, application may be made within the time specified in UCPR r 36.16.

107. I propose these orders:

1. Grant leave to appeal to Parkview.

2. Direct Parkview to file a notice of appeal in accordance with the draft notice of appeal but otherwise dispense with the rules as to service.

3. Appeal dismissed.

4. Dismiss the summons filed by The Quay.

5. Parkview and The Quay to pay the costs of the Owners Corporation of the proceedings in this Court.

6. The Quay to pay half of Parkview’s costs of filing the notice of appeal.

   108. SIMPSON AJA: I agree with Leeming JA.

ANNEXURE

Part 2C of the Home Building Act is relevantly reproduced below in the form it took in August 2016. Section 18BA was inserted on 1 March 2015, and ss 18B and 18E were amended on 15 January 2015, but the amendments applied to residential building works which had been completed where proceedings had not as yet been commenced: see Home Building Amendment Act 2014 (NSW), Sch 1, items 5, 5-29 and 128.

Part 2C Statutory warranties

18A Time from when Part applies

This Part applies to residential building work only to the extent that it is done or to be done under a contract made on or after the commencement of this section.

18B Warranties as to residential building work

(1) The following warranties by the holder of a contractor licence, or a person required to hold a contractor licence before entering into a contract, are implied in every contract to do residential building work—

(a) a warranty that the work will be done with due care and skill and in accordance with the plans and specifications set out in the contract,

(b) a warranty that all materials supplied by the holder or person will be good and suitable for the purpose for which they are used and that, unless otherwise stated in the contract, those materials will be new,

(c) a warranty that the work will be done in accordance with, and will comply with, this or any other law,

(d) a warranty that the work will be done with due diligence and within the time stipulated in the contract, or if no time is stipulated, within a reasonable time,

(e) a warranty that, if the work consists of the construction of a dwelling, the making of alterations or additions to a dwelling or the repairing, renovation, decoration or protective treatment of a dwelling, the work will result, to the extent of the work conducted, in a dwelling that is reasonably fit for occupation as a dwelling,

(f) a warranty that the work and any materials used in doing the work will be reasonably fit for the specified purpose or result, if the person for whom the work is done expressly makes known to the holder of the contractor licence or person required to hold a contractor licence, or another person with express or apparent authority to enter into or vary contractual arrangements on behalf of the holder or person, the particular purpose for which the work is required or the result that the owner desires the work to achieve, so as to show that the owner relies on the holder’s or person’s skill and judgment.

(2) The statutory warranties implied by this section are not limited to a contract to do residential building work for an owner of land and are also implied in a contract under which a person (the principal contractor) who has contracted to do residential building work contracts with another person (a subcontractor to the principal contractor) for the subcontractor to do the work (or any part of the work) for the principal contractor.

18BA Duties of person having benefit of statutory warranty

(1) Breach of a statutory warranty implied in a contract constitutes a breach of the contract and accordingly—

(a) a party to the contract who suffers loss arising from the breach has a duty to mitigate their loss, and

(b) the onus of establishing a failure to mitigate loss is on the party alleging the failure.

(2) The duty of a party to a contract to mitigate loss in respect of a breach of a statutory warranty extends to a person who has the benefit of the statutory warranty or who is entitled to the same rights as those that a party to the contract has in respect of the statutory warranty.

(3) The following duties apply to a person who has the benefit of a statutory warranty but do not limit any duty the person has to mitigate loss arising from breach of a statutory warranty—

(a) when a breach of the statutory warranty becomes apparent, the person must make reasonable efforts to ensure that a person against whom the warranty can be enforced is given notice in writing of the breach within 6 months after the breach becomes apparent,

(b) the person must not unreasonably refuse a person who is in breach of the statutory warranty such access to the residential building work concerned as that person may reasonably require for the purpose of or in connection with rectifying the breach (the duty to allow reasonable access).

(4) A breach of warranty becomes apparent for the purposes of this section when any person entitled to the benefit of the warranty first becomes aware (or ought reasonably to have become aware) of the breach.

(5) If a failure to comply with a duty under this section is established in proceedings before a court or tribunal concerning a breach of a statutory warranty, the failure is a matter that the court or tribunal may take into account. If the failure is a failure to comply with the duty to allow reasonable access, the court or tribunal must take the failure into account.

18C Warranties as to work by others

(1) A person who is the immediate successor in title to an owner-builder, a holder of a contractor licence, a former holder or a developer who has done residential building work on land is entitled to the benefit of the statutory warranties as if the owner-builder, holder, former holder or developer were required to hold a contractor licence and had done the work under a contract with that successor in title to do the work.

(2) For the purposes of this section, residential building work done on behalf of a developer is taken to have been done by the developer.

18D Extension of statutory warranties

(1) A person who is a successor in title to a person entitled to the benefit of a statutory warranty under this Act is entitled to the same rights as the person’s predecessor in title in respect of the statutory warranty.

(1A) A person who is a non-contracting owner in relation to a contract to do residential building work on land is entitled (and is taken to have always been entitled) to the same rights as those that a party to the contract has in respect of a statutory warranty.

(1B) Subject to the regulations, a party to a contract has no right to enforce a statutory warranty in proceedings in relation to a deficiency in work or materials if the warranty has already been enforced in relation to that particular deficiency by a non-contracting owner.

(2) This section does not give a successor in title or non-contracting owner of land any right to enforce a statutory warranty in proceedings in relation to a deficiency in work or materials if the warranty has already been enforced in relation to that particular deficiency, except as provided by the regulations.

18E Proceedings for breach of warranty

(1) Proceedings for a breach of a statutory warranty must be commenced in accordance with the following provisions—

(a) proceedings must be commenced before the end of the warranty period for the breach,

(b) the warranty period is 6 years for a breach that results in a major defect in residential building work or 2 years in any other case,

(c) the warranty period starts on completion of the work to which it relates (but this does not prevent proceedings from being commenced before completion of the work),

(d) if the work is not completed, the warranty period starts on—

(i) the date the contract is terminated, or

(ii) if the contract is not terminated—the date on which work under the contract ceased, or

(iii) if the contract is not terminated and work under the contract was not commenced—the date of the contract,

(e) if the breach of warranty becomes apparent within the last 6 months of the warranty period, proceedings may be commenced within a further 6 months after the end of the warranty period,

(f) a breach of warranty becomes apparent when any person entitled to the benefit of the warranty first becomes aware (or ought reasonably to have become aware) of the breach.

(2) The fact that a person entitled to the benefit of a statutory warranty specified in paragraph (a), (b), (c), (e) or (f) of section 18B has enforced the warranty in relation to a particular deficiency in the work does not prevent the person from enforcing the same warranty for a deficiency of a different kind in the work (the other deficiency) if—

(a) the other deficiency was in existence when the work to which the warranty relates was completed, and

(b) the person did not know, and could not reasonably be expected to have known, of the existence of the other deficiency when the warranty was previously enforced, and

(c) the proceedings to enforce the warranty in relation to the other deficiency are brought within the period referred to in subsection (1).

(3) The regulations may prescribe defects in a building that are not (despite any other provision of this section) a major defect.

(4) In this section—

major defect means—

(a) a defect in a major element of a building that is attributable to defective design, defective or faulty workmanship, defective materials, or a failure to comply with the structural performance requirements of the National Construction Code (or any combination of these), and that causes, or is likely to cause—

(i) the inability to inhabit or use the building (or part of the building) for its intended purpose, or

(ii) the destruction of the building or any part of the building, or

(iii) a threat of collapse of the building or any part of the building, or

(b) a defect of a kind that is prescribed by the regulations as a major defect, or

(c) the use of a building product (within the meaning of the Building Products (Safety) Act 2017) in contravention of that Act.

Note—

The definition of major defect also applies for the purposes of section 103B (Period of cover).

major element of a building means—

(a) an internal or external load-bearing component of a building that is essential to the stability of the building, or any part of it (including but not limited to foundations and footings, floors, walls, roofs, columns and beams), or

(b) a fire safety system, or

(c) waterproofing, or

(d) any other element that is prescribed by the regulations as a major element of a building.

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Decision last updated: 17 April 2023