Roberts v Goodwin Street Developments Pty Ltd

[2023] NSWCA 5

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:

Roberts v Goodwin Street Developments Pty Ltd [2023] NSWCA 5

Hearing dates:

8 November 2022

Date of orders:

10 February 2023

Decision date:

10 February 2023

Before:

Ward P at [1]; Kirk JA and Griffiths AJA at [80]

Decision:

Appeal dismissed with costs

Catchwords:

BUILDING AND CONSTRUCTION — Contract — Defects — Duty of care — Whether statutory duty of care under the Design and Building Practitioners Act 2020 (NSW) applies in relation to “boarding houses” — Meaning of “building work” — Meaning of “construction work”

BUILDING AND CONSTRUCTION — Contract — Damages — Whether proper measure of damages to reversionary interest in property is the rectification of the damage or the diminution in value of the reversionary interest

CIVIL PROCEDURE — Commercial List, Technology and Construction List — Procedure — List Statements — Where respondent failed to plead action on the case in trespass in List Statement — Whether denial of procedural fairness to determine the matter on that basis

Legislation Cited:

American Restatement (First) of Torts

Civil Procedure Act 2005 (NSW)

Community Land Management Act 1989 (NSW)

Community Land Management Act 2021 (NSW)

Conveyancing Act 1919 (NSW)

Corporations Act 2001 (Cth)

Design and Building Practitioners Act 2020 (NSW)

Design and Building Practitioners Regulation 2021 (NSW)

Environmental Planning and Assessment Act 1979 (NSW)

Home Building Act 1989 (NSW)

Interpretation Act 1987 (NSW)

Landlord and Tenant Act 1927 (UK)

Uniform Civil Procedure Rules 2005 (NSW)

Cases Cited:

Abbahall Ltd v Smee [2003] 1 WLR 1472

Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27; [2009] HCA 41

Alston v Scales (1832) 9 Bing 3

Arthur Robinson (Grafton) Pty Ltd v Carter (1968) 122 CLR 649; [1968[ HCA 9

Banque Commerciale SA., en liquidation v Akhil Holdings Ltd (1990) 169 CLR 279; [1990] HCA 11

Baxter v Taylor (1832) 4 B & AD 71

BCEG International (Australia) Pty Ltd v Xiao [2022] NSWSC 972

Beaudesert Shire Council v Smith (1966) 120 CLR 145; [1966] HCA 49

Birtchnell v Fred Walker and Co Pty Ltd (1930) Argus LR 176

Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (2008) 166 FCR 494; [2008] FCAFC 38

Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288 (2014) 254 CLR 185; [2014] HCA 36

Bryant v Quinn [2022] NSWCA 163

Capello v Hammond & Simonds NSW Pty Ltd [2021] NSWCA 57

Chulcough v Holley (1968) 41 ALJR 336

Coleman v Seaborne Pty Ltd [2007] NSWCA 60

Commissioner of Taxation v Consolidated Media Holdings Ltd (2012) 250 CLR 503; [2012] HCA 55

Cotterill v Hobby (1825) 107 ER 1133; (1825) 4 B&C 465

Dare v Pulham (1982) 148 CLR 658; [1982] HCA 70

Dodd Properties Ltd v Canterbury City Council [1980] 1 WLR 433

Ehlmer v Hall [1993] 1 EGLR 137

Evans v Balog [1976] 1 NSWLR 36

Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22

Gagner Pty Limited (t/as Indochine Café) v Canturi Corporation Pty Limited (2009) 262 ALR 691; [2009] NSWCA 413

Gibb v Federal Commissioner of Taxation (1966) 118 CLR 628; [1966] HCA 74

Gimtak Pty Ltd v Cathie [2001] VSC 88

Goodwin Street Developments Pty Ltd atf Jesmond Unit Trust v DSD Builders Pty Ltd (in liq) [2022] NSWSC 624

Gould & Birbeck & Bacon v Mount Oxide Mines (1916) 22 CLR 490; [1916] HCA 81

Graham v Markets Hotel Pty Ltd (1943) 67 CLR 567; [1943] HCA 8

Haines v Bendall (1991) 172 CLR 60; [1991] HCA 15

Hansen v Gloucester Developments Pty Limited [1992] 1 Qd R 14

Hanson v Newman [1934] Ch 298

Haviland v Long [1952] 2 QB 80

Hosking v Phillips (1848) 154 ER 801; (1848) 3 Exch 168

House v The King (1936) 55 CLR 499; [1936] HCA 40

Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (2008) 73 NSWLR 653; [2008] NSWCA 206

Ipstar Australia Pty Ltd v APS Satellite Pty Ltd (2018) 329 FLR 149; [2018] NSWCA 15

Irontrain Investments Ltd v Ansari [2005] EWCA Civ 1681

James v Hutton [1950] 1 KB 9

Jaquin v Holland [1960] 1 WLR 258

Jones v Gooday (1841) 8 M & W 146; 151 ER 985

Jones v Herxheimer [1950] 2 KB 106

Jones v Llanrwst Urban District Council (1911) 1 Ch 393

Joyner v Weeks [1891] 2 QB 31

Keddel v Regarose Pty Ltd [1995] 1 Qd R 172

Kingston v Keprose Pty Ltd (1987) 11 NSWLR 404

Krnjulac v Lincu [2015] NSWCA 367

Loxton v Waterhouse (1891) 7 WN (NSW) 98

Maori Trustee v Rogross Farms Ltd [1994] 3 NZLR 410

Mayfair Property Company v Johnston [1894] 1 Ch 508

Minter v Eacott (1952) 69 WN (NSW) 93

Moss v Christchurch Rural District Council [1925] 2 KB 750

Nowlan v Marson Transport Pty Limited (2001) 53 NSWLR 116; [2001] NSWCA 346

Obeid v Australian Competition and Consumer Commission (2014) 226 FCR 471, [2014] FCAFC 155

Port Stephens Shire Council v Tellamist Pty Ltd (2004) 135 LGERA 98; [2004] NSWCA 353

Public Trustee as Administrator of Estate of the late John Andrew McDonald v Hermann [1968] 3 NSWR 94

R v A2 (2019) 269 CLR 507; [2019] HCA 35

Re Australian Federation of Construction Contractors; Ex parte Billing (1986) 68 ALR 416; [1986] HCA 74

Rodrigues v Ufton (1894) 20 VLR 539

Rust v Victoria Graving Dock Co, and London and St Katharine Dock Co (1887) 36 Ch D 113

Saeed v Minister for Immigration and Citizenship (2010) 241 CLR 252; [2010] HCA 23

Sharman v Evans (1977) 138 CLR 563; [1977] HCA 8

Shell Company of Australia Ltd v Bailey [1980] WAR 233

Smiley v Townshend [1950] 2 KB 311

South Western Sydney Local Health District v Gould (2018) 97 NSWLR 513; [2018] NSWCA 69

State of South Australia v Simionato [2005] SASC 412; (2005) 143 LGERA 128

Stephens v The Queen (2022) 96 ALJR 871; [2022] HCA 31

Swiss Re International SE v Simpson (2018) 354 ALR 607; [2018] NSWSC 233

Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272; [2009] HCA 8

The Metropolitan Association for Improving the Dwellings of the Industrious Classes v Fetch (1858) 5 CB(NS) 502

Van Dal Footwear Ltd v Ryman Ltd [2010] 1 WLR 2015

Walker Group Constructions Pty Ltd v Tzaneros Investments Pty Ltd (2017) 94 NSWLR 108; [2017] NSWCA 27

Texts Cited:

Croft C, Hay R and Virgona L, Commercial Tenancy Law (Lexis Nexis, 4th ed, 2017)

Edelman JE, McGregor on Damages (Sweet & Maxwell, 21st ed, 2020)

Edgeworth B, Butt’s Land Law (Thomson Reuters, 7th ed, 2017)

Fleming JG, Fleming’s Law of Torts (Thomson Reuters, 10th ed, 2011)

McGregor H, Mayne and McGregor on Damages (Sweet & Maxwell, 12th ed, 1961)

Category:

Principal judgment

Parties:

Daniel Roberts (Appellant)
Goodwin Street Developments Pty Ltd (Respondent)

Representation:

Counsel:
L Chan, A Lim and K Sharma (Appellant)
NJ Kidd SC and RR Sud (Respondent)

Solicitors:
Richard Green Construction Lawyers (Respondent)

File Number(s):

2022/00151935

Publication restriction:

Nil

 Decision under appeal 

Court or tribunal:

Supreme Court of New South Wales

Jurisdiction:

Equity – Technology & Construction List

Citation:

[2022] NSWSC 624

Date of Decision:

19 May 2022

Before:

Stevenson J

File Number(s):

2018/260981

HEADNOTE

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

Background

Daniel Roberts, the appellant, is a builder who operated through a company, DSD Builders Pty Ltd, which is now in liquidation. DSD was engaged by Goodwin Street Developments Pty Ltd (the respondent) under a building contract entered into on 10 July 2017 for the construction of student accommodation in Jesmond, NSW (the Contract), on land owned by the respondent (the Property). Work was well advanced when the parties fell out, DSD did no further work on the site after 2 March 2018.

The appellant then entered onto the Property and damaged the buildings and removed fixtures including doors, windows and stairs. On 19 March 2018, this damage was discovered by the respondent, which immediately terminated the Contract.

The respondent brought two claims against the appellant: first, that the appellant was liable in tort for deliberately causing damage to the Property; and second, that the appellant owed a statutory duty of care under s 37 of the Design and Building Practitioners Act 2020 (NSW) (DBP Act) and was liable for a separate list of defects in the construction work. There was no dispute between the parties as to the costs to repair the damage under each claim.

As regards the first claim, the trial judge accepted that a trespass claim could not be made out as at the time of the damage, the respondent did not have exclusive possession of the Property. However, the respondent was successful in its alternative claim, which had not expressly been pleaded in terms, namely, that the tort could be characterised as an action on the case for injury to its interest in the reversion. On that basis, the primary judge upheld the claim for rectification costs.

The respondent was also successful at trial in its second claim under s 37 of the DBP Act.

On appeal, in respect of the first claim the appellant contended that the primary judge had: (1) denied the appellant procedural fairness by permitting the respondent during the hearing to recharacterise its claim in trespass as an action on the case (Ground 1) and (2) erred in measuring the damages for the tort claim on the basis of the cost to repair the damage, rather than the diminution in the value to the reversionary interest (Ground 2). It was accepted by the appellant that Ground 1 would fail if Ground 2 was not made out.

In relation to the second claim, the appellant contended that the trial judge had wrongly construed the DBP Act finding that it applied to boarding houses, being the category of building in question (Ground 3).

The Court (Kirk JA and Griffiths AJA, Ward P dissenting on Grounds 1 and 2, but agreeing on Ground 3) dismissed the appeal, and held as follows:

As to Ground (1):

1. The appellant’s concession that this ground could not succeed if Ground 2 was not made out – which it is not – should be accepted: [157] (Kirk JA and Griffiths AJA).

2. In any case, attaching a different legal label to the respondent’s claim did not alter the fact that the type of damages claimed was open to be claimed by it based upon the material facts outlined in its List Statement, and did not alter in any significant respect the nature of the claim made for rectification damages. It had been open to the appellant to apply for an adjournment if he could make out some prejudice, but no such application was made: [175]-[177] (Kirk JA and Griffiths AJA).

   Rodrigues v Ufton (1894) 20 VLR 539, considered.

3. To decide a case on a different basis than what the pleadings have stated would be a denial of procedural fairness: [66], [74] (Ward P, dissenting).

As to Ground 2:

1. Assessing damages in both tort and contract must remain flexible, because the award of damages is based on the circumstances of each case. Nevertheless, in certain types of case particular approaches to the assessment of damages have become accepted as to how the compensatory principle is to be given effect: [91]-[96], [120] (Kirk JA and Griffiths AJA).

   Arthur Robinson (Grafton) Pty Ltd v Carter [1968] HCA 9, (1968) 122 CLR 649; Chulcough v Holley [1968] ALR 274, (1968) 41 ALJR 336; Sharman v Evans [1977] HCA 8, (1977) 138 CLR 563; Evans v Balog [1976] 1 NSWLR 36; Gagner Pty Ltd (t/as Indochine Cafe) v Canturi Corporation Pty Ltd [2009 NSWCA 413, (2009) ALR 691; Port Stephens Shire Council v Tellamist Pty Ltd [2004] NSWCA 353, (2004) 136 LGERA 98, considered.

2. As in a contract claim, the prima facie approach to assessing damages for tortious damage to property when the owner has possession of the property, or soon will resume possession of the property, is by reference to the costs of repairing the damage to the property or the diminution in value to the property. The former is not merely a proxy of the latter. If the wrongdoer seeks to challenge the reasonableness of the aggrieved party’s election between these measures, it bears the evidentiary burden of establishing unreasonableness: [97]-[115], [119]. In this case, the evidentiary burden lay with the appellant, as the party challenging the assessment of damages on the basis of rectification costs: [146]-[147], [151] (Kirk JA and Griffiths AJA).

   Joyner v Weeks [1891] 2 QB 31; Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (2008) 166 FCR 494, [2008] FCAFC 38, considered.

   Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272, [2009] HCA 8; Gagner Pty Ltd (t/as Indochine Cafe) v Canturi Corporation Pty Ltd [2009] NSWCA 413, (2009) 262 ALR 691; Evans v Balog [1976] 1 NSWLR 36; Minter v Eacott (1952) 69 WN (NSW) 93, followed.

   Abbahall Ltd v Smee [2003] 1 WLR 1472; Moss v Christchurch Rural District Council [1925] 2 KB 750; Cotterill v Hobby (1825) 107 ER 1133, 4 B & C 465; Jones v Llanrwst Urban District Council [1911] 1 Ch 393; Hanson v Newman [1934] 1 Ch 298, distinguished.

3. The appellant failed to discharge his evidentiary burden. If he wished to contest the respondent’s election, he needed to take appropriate steps. This may have included raising the issue in his Technology and Construction List Response, adducing evidence in support of his position (if appropriate) and/or raising the matter in his written submissions below. He failed to take any of these steps: [147]–[151] (Kirk JA and Griffiths AJA).

4. Although the appellant did not advance an argument in the proceeding below to the effect that the respondent did not intend to reinstate the property (and that, therefore, reinstatement costs would not constitute an appropriate remedy), such an argument would fail, having regard to the indirect evidence contained in a valuation report indicating that the respondent did have such an intention: [153]-[155] (Kirk JA and Griffiths AJA).

When establishing whether one basis of assessing damages is more reasonable over the other, the plaintiff is required to demonstrate to the primary judge in a comparative exercise, that the cost of rectification is reasonable and not disproportionate to the diminution in the value of the reversion: [43] (Ward P, dissenting).

As to Ground 3:

1. The primary judge’s conclusion that s 37 of the DBP Act applied as regards boarding houses was correct, albeit that the Court adopted different reasoning to his Honour.

2. The general definition of “building work” in s 4(1) of the DBP Act does apply to the further definition of “building work” in s 36(1), but only as regards the first topic addressed in the general definition (identifying the type of work undertaken), with the second topic (identifying what type of buildings that work is undertaken on) instead being addressed by the definition of “building” in s 36(1). A boarding house falls within the definition of “building” in the Environmental Planning and Assessment Act 1979 (NSW), thereby falling within s 36 of the DBP Act. Section 37 of the Act thus applied here: [230]-[232] (Kirk JA and Griffiths AJA, Ward P agreeing at [79]).

JUDGMENT

1. WARD P: This is an appeal from a decision of Stevenson J in the Technology & Construction List of the Equity Division (Goodwin Street Developments Pty Ltd atf Jesmond Unit Trust v DSD Builders Pty Ltd (in liq) [2022] NSWSC 624), in which his Honour found the appellant, Daniel Roberts, liable to the respondent, Goodwin Street Developments Pty Ltd, for damages on what is known as an action on the case (or trespass) for damage to the reversionary interest of the respondent in property located at Jesmond in Newcastle; and quantified the damage to the reversionary interest on the basis of the cost of rectification (rather than diminution in value to the reversionary interest). The primary judge separately and in addition thereto found the appellant liable for damages for breach of a statutory duty of care in relation to construction work carried out on the property.

Background

2. The appellant is the husband of the sole director of a building company, DSD Builders Pty Ltd (DSD), which is now in liquidation. On 10 July 2017, DSD entered into a building contract with the respondent for the construction of student accommodation (three residential boarding houses) at a site owned by the respondent in Jesmond, NSW (the Property), close to the campus of the University of Newcastle (see at [1]-[3] of the primary judgment).

3. The primary judge found (and this finding is not challenged by the appellant) that the appellant, although not a director of DSD, introduced himself as “the builder” in relation to the project; attended every site meeting at the Property between August 2017 and February 2018; and supervised the work performed at the Property (see at [133]-[137] of the primary judgment). At the time that the works commenced on site in July 2017, DSD had employed a licensed supervisor at the site (Mr Johnstone) but he left the employ of DSD about a month after works commenced and was not replaced.

4. In early 2018, there was a dispute between the respondent and DSD as to alleged defective building works and the progress of the works. On 2 March 2018, there was a site meeting between Mr Roberts, directors of the respondent and persons claiming to represent creditors of Mr Roberts, at which demands and threats were made by the creditors’ representatives as to money allegedly owing to their clients. Later that day, the respondent issued a notice to DSD under the building contract requiring DSD to remedy defaults in respect of defective works within ten working days (see at [8] of the primary judgment). The notice indicated that if the defaults were not so remedied the respondent might terminate the building contract.

5. It does not appear that there was any attempt to remedy the alleged defects. Indeed, DSD did no further work at the site after 2 March 2018.

6. The primary judge found (and again this finding is not challenged) that between 2 March 2018 and 19 March 2018, the appellant entered onto the Property and maliciously damaged the buildings there being constructed, including by making saw cuts through structural floor beams and wall structures; drilling holes in the valleys of gutters, walls, water and sewer pipes; rendering power cables unserviceable; pouring concrete into sewer pipes; making holes in internal wall sheeting, external cladding and ceilings; and removing fixtures such as doors, windows, stairs and skylights which had previously been installed there (see at [23]-[24]; [89]-[91] of the primary judgment).

7. On 19 March 2018, a director of the respondent attended the Property and observed substantial damage to the buildings. The matter was reported to the police. The respondent that same day terminated the building contract with immediate effect, thereby (and relevantly in terms of the claim in trespass as pleaded – see below) becoming entitled to take possession of the Property and exclude DSD therefrom (see at [11], [32] and [40] of the primary judgment).

Proceedings

8. Proceedings were commenced by the respondent in August 2018 against DSD. In April 2019, the appellant was joined as the second defendant to the proceedings (see the primary judgment at [12]).

9. In early 2021, DSD was the subject of a winding up order in insolvency and a liquidator was appointed to the company. The proceedings against DSD were stayed by operation of s 471B of the Corporations Act 2001 (Cth) (see at [13] of the primary judgment). What then remained were the claims against the appellant.

10. As set out in the second further amended technology and construction list statement, the claims made against the appellant were: first, for damages for negligence pursuant to the extended statutory duty of care in Pt 4 of the Design and Building Practitioners Act 2020 (NSW) (the DBP Act) (see at [36]-[40] of the second further amended construction list statement); and, second, for damages in trespass and conversion to the building works while the builder (DSD) was in possession of the building site (see at [41]-[45] of the second further amended technology and construction list statement). The respondent claimed around $300,000 for the cost of rectifying the defective works and around $586,000 for the cost of making good the damage caused to the site in March 2018 (see at [16] of the primary judgment).

8. The appellant did not give evidence at the hearing and did not call any expert witness or other evidence in relation to the quantum of the respondent’s loss. The respondent adduced evidence, including expert evidence as to the existence and cost of repair of the property damage and the existence and cost of repair of the defective works (none of which was challenged by the appellant).

9. The claim in conversion was not able to be maintained (and was abandoned at the hearing), as the respondent was not in possession of the Property at the relevant time (possession being the gist of an action in conversion). The primary judge found that DSD was contractually entitled to possession of the site until the building contract was terminated on 19 March 2018 and therefore as at the time the damage was done to the site, the respondent was not entitled to exclusive possession of the site (see at [40]-[41]).

10. Nor, strictly understood, was the claim in trespass able to be maintained (possession or the immediate right to possession being necessary for standing in a trespass to property claim). However, this difficulty as to standing appears only to have emerged (or been appreciated by the respondent) on the second day of the hearing (and it is the nub of the complaint the subject of the first of the grounds of appeal – see below). It is fair to say that this seems to be a product of the manner in which the claim was pleaded by the respondent (as a claim for “trespass to land” for malicious damage – see [41]; [43] of the second further amended technology and construction list statement), there being no reference to an action on the case in trespass for permanent injury to the respondent’s reversionary interest; and the fact that the appellant did not in his list response raise any issue of standing in relation to the claim in trespass (simply asserting that he had not been on site at the development since February 2018 and otherwise denying the allegations at [41]-[45]) (see [14] of the list response) and articulating the issue as being whether he maliciously damaged the works and converted the materials, fixtures and fittings at the site the subject of the proceedings and, if so, what damages should be awarded (see at [B4] of the list response).

11. When the issue of standing to sue for trespass was raised in the course of oral submissions before the primary judge, there was some debate as to whether the claim as pleaded encompassed a claim for damages to the respondent’s reversionary interest (i.e., what is known as an action on the case in trespass – see Fleming JG, Fleming’s Law of Torts (Thomson Reuters, 10^th ed, 2011) at [3.50]; RodriguesvUfton (1894) 20 VLR 539; LoxtonvWaterhouse (1891) 7 WN (NSW) 98; RustvVictoria Graving Dock Co, and London and St Katharine Dock Co (1887) 36 Ch D 113).

12. At T 92.16-44, there was an exchange between the primary judge and Counsel for the appellant in which complaint was made that an action on the case had not been pleaded; rather, the case had been brought against the appellant on the basis that the owner (the respondent) retained exclusive possession and therefore had the right to bring a claim against the appellant for trespass and conversion. Counsel for the appellant made clear (as implicitly recognised by the primary judge at [51] of the primary judgment) that the case against the appellant had changed and that the appellant had not come to court to meet a claim for damages for an action on the case and was not in a position to meet such a case because the measure of damages for an action on the case was the quantum of the permanent injury caused to the reversionary interest and that an investigation into any diminution in the value of the reversionary interest had not been undertaken.

13. The appellant notes that no leave was sought by the respondent to amend the pleadings (the respondent here contends that an action on the case in trespass has been subsumed into the law of trespass and was thus encompassed within the pleaded case). The appellant maintained that an action on the case in trespass was a different cause of action to trespass; and that the appellant would be prejudiced if the respondent were permitted to run such a case in circumstances where it was not pleaded (on the basis that the measure of damages for an action on the case is potentially different from that in trespass).

14. The primary judge addressed the question of the respondent’s rights as a reversioner from [42] of the principal judgment, saying that the implication of the appellant’s submission (that any action in trespass or conversion lay with DSD) was that the respondent, as owner of the site, was without a remedy and commenting that this would be a strange result (see at [43]; [44]). His Honour went on to explain that, as reversioner, the respondent was entitled to bring an action on the case for trespass or an action “of trespass on the case” (citing Beaudesert Shire Council v Smith (1966) 120 CLR 145; [1966] HCA 49 (Beaudesert) at 152 per Taylor, Menzies and Owen JJ) if a trespass occurred resulting in permanent injury to the reversion or that would necessarily affect the reversioner’s interest when the property falls into possession (see at [48] of the primary judgment). (Pausing here, the nub of the appellant’s submission as put in oral submissions to the primary judge seems to have been not that the respondent was without a remedy, but that the respondent had not pleaded a cause of action for which it had standing; the complaint being that the appellant had not come to court to meet that unpleaded case.)

15. His Honour noted that permanent injury to the reversion in that context means “such as will continue indefinitely unless something is done to remove it” (see at [49] of the primary judgment) and that the malicious damage done to the Property (a few days before the reversion fell in) was thus “permanent” in the relevant sense (see at [50]).

16. His Honour noted (at [51]) the appellant’s submission that the measure of damages of permanent injury to the reversion was the diminution in the value of the reversionary interest and that the appellant was not in a position to meet such a case; and that the respondent had not adduced any evidence of any diminution in value to its property – rather, its evidence was directed to the cost of repair.

17. The primary judge quoted at [52] the statement made in Gagner Pty Limited v Canturi Corporation Pty Limited (2009) 262 ALR 691; [2009] NSWCA 413 (Gagner) at [30] (per Campbell JA, Macfarlan JA and Sackville AJA agreeing) that the fundamental objective of an award for damages in tort is to provide “that sum of money which will put the party who has been injured … in the same position as he would have been in had he not sustained the wrong for which he is now getting his compensation or reparation”. His Honour then noted at [53] that if an injured party is entitled to regain possession of the reversion shortly after the damage has been done then the cost of repairs will better represent that sum of money than may be the case where the injured party is not able to retake possession for a lengthy period following infliction of the damage (citing by way of example Joyner v Weeks [1891] 2 QB 31 (Joyner) and the observations of Finkelstein and Gordon JJ, her Honour then sitting in the Federal Court, in Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (2008) 166 FCR 494; [2008] FCAFC 38 (Bowen v Tabcorp) at [9]-[10].

18. His Honour concluded that the appropriate measure in the present case was the reasonable cost of repairing the damage (see at [54]), about which there was no controversy (see at [55]), those costs being in the order of $586,000 (see at [25]).

19. As noted above, his Honour then turned to the evidence as to who caused the damage and found that the damage to the Property was done by the appellant (in company with other persons who had been identified by an employee of the company that had provided scaffolding services to the project) and thus found the appellant liable to the respondent in respect of the malicious damage to the Property, quantifying the respondent’s loss by reference to the cost of rectifying the damage (see at [89]-[91]; [53]-[54] of the primary judgment).

20. In addition, his Honour found the appellant liable to the defendant for breach of the duty in s 37 of the DBP Act to exercise reasonable care to avoid economic loss by defects in or related to a building for which the work is done and arising from the construction work, with the respondent’s loss being quantified by reference to the cost of rectifying the defective work (see at [138], [148]) being an amount of approximately $300,000 (see at [138], [141], [148]).

21. In so doing, the primary judge found that the phrase “building work” when used in Pt 4 of the DBP Act includes building work relating to a boarding house (which was the type of building being constructed at the Property) (see at [102]-[130] of the primary judgment).

Appeal

25. By his amended notice of appeal filed on 10 August 2022, the appellant raised various grounds of appeal, only three now being pressed:

A. The discretion miscarried

1.   There was a miscarriage of the exercise of the discretion of the trial judge when his Honour permitted the respondent to bring a cause of action based upon an action on the case in trespass ([46] to [48] of the Primary Judgment) in circumstances where:

a.   the trial judge did not apprehend that the respondent was seeking leave to run an alternative case in relation to the malicious damage that was not grounded upon the pleadings which had limited the causes of action to trespass and conversion (see [41] to [43] Second Further Amended Construction List Statement);

b.   the respondent had not sought leave to amend their pleadings;

c.   the trial judge did not order the respondent to amend its pleadings;

d.   the trial judge did not apprehend that the appellant had made a forensic decision not to adduce any evidence in relation to malicious damage including any evidence in relation to quantification of damages on the basis of a diminution in value of the reversionary interest ([51] of the Primary Judgment);

e.   the trial judge did not grant the appellant leave to adduce evidence in reply in circumstances where the appellant had not prepared any evidence in relation to loss of value of the reversionary interest;

f.   by reason of subparagraphs 1. [sic; presumably ‘a’] to e. above, there was a denial of procedural fairness or natural justice.

B.   Incorrect Measure of Damages

2.   The trial judge erred in assessing damage to permanent injury to the reversionary interest on the basis of the cost of repair rather than a diminution in value to the reversionary interest ([54] of the Primary Judgment).

C.   Error in Construction

3. The trial judge erred in construing “construction work” and “building work” in Part 4 of the Design and Building Practitioners Act 2020 (NSW) to include boarding houses ([118] and [119] of the Primary Judgment) in that, on a proper construction of the term “building work”, boarding houses do not fall within the meaning of “building work”.

Determination

26. As the respondent maintains that the appellant’s ground 1 is dependent on ground 2 succeeding (that being the contention that the primary judge erred in assessing damages payable by the appellant by reference to the cost of repairing the damage that he caused, rather than by reference to the diminution in value of the respondent’s interest in the Property) and the appellant appeared to concede that if ground 2 did not succeed then ground 1 would also fail (AT 1.25-28), it is convenient to deal first with ground 2.

Ground 2 – Assessment of damages for trespass on the case

27. The appellant’s proposition in relation to ground 2 is that, in order to obtain the costs of rectification (on a claim for damages for permanent injury to the reversion) the respondent was required to prove that its desire to reinstate the Property was reasonable in the circumstances (the appellant citing Evans v Balog [1976] 1 NSWLR 36 (Evans) at 40 per Samuels JA, with whom Moffitt P and Hutley JA agreed; Gagner at [103]; Port Stephens Shire Council v Tellamist Pty Ltd (2004) 135 LGERA 98; [2004] NSWCA 353 at [199] per Santow JA, dissenting on the outcome; State of South Australia v Simionato [2005] SASC 412; (2005) 143 LGERA 128 at [92] per Besanko J (his Honour then sitting on the Supreme Court of South Australia) Debelle and Nyland JJ agreeing; and Hansen v Gloucester Developments Pty Limited [1992] 1 Qd R 14 (Hansen) at 15-17 per Williams J, Shepherdson J agreeing).

28. The appellant contends that the respondent was required to establish that it intended to reinstate the property and that the cost of restoration was not disproportionate to any diminution in value given the nature of the property.

29. As to the first, the appellant says that there was no evidence of the desire to reinstate the Property (referring to evidence as to the cessation of construction works in early 2018) and that a valuation obtained of the Property in March 2019 assessed the value on three separate bases, one of which was a sale in its current condition.

30. As to the second, the appellant says that there is no evidence of the value of the Property prior to it being damaged and that, without such evidence, it is impossible to determine whether the cost of restoration is disproportionate to any diminution in value given the nature of the Property.

31. The appellant’s complaint is thus that the primary judge did not undertake the exercise that was required to be undertaken; in that his Honour had to be satisfied that the cost of rectification was reasonable in the circumstances and that, to be so satisfied his Honour needed to have evidence both that the respondent intended to reinstate the Property and that the diminution in value to the Property as a result of the damage was not disproportionate to the cost of cure (AT 2.40-47); the foundation of the appellant’s argument being that the compensatory principle is qualified by a notion of reasonableness.

32. The appellant notes that the Property was acquired on 19 May 2016 for $600,000; that the land was valued by the Valuer General on 1 July 2018 at $344,000; that the building contract was for the tendered price of $1,789,276; and that the total amount paid to DSD was $1,174,386.01, being approximately 65% of the total building price.

33. The 12 March 2019 valuation of the Property valued it in its incomplete state at $1.7 million (assessed on the basis that about 60% of the works had been completed with an in situ build value of $1,109,351).

34. The difficulty raised by this is that, on any view of things, the buildings were in an incomplete state at the time of the termination of the building contract and the cost of rectification of defective works was agreed to be about $300,000 but there does not appear to have been an assessment of the diminution in the value of the reversionary interest that was caused by the malicious damage (i.e., the difference in the value of the incomplete buildings with the defective works absent any malicious damage the value of the incomplete buildings with the defective works after the malicious damage had occurred). The nub of the appellant’s complaint as to disproportionality is that it is impossible on the evidence to assess whether the cost of rectification of the malicious damage is reasonable having regard to what the diminution in value of the reversionary interest was by reference to that malicious damage.

35. The appellant argues that, on the face of the valuation evidence, there would appear to be a disproportionality between the costs of rectification of the damage (being $586,000) and the value of the property in its damaged state being $1.7 million (see AT 11.27-37).

36. There was some debate as to where the onus lies in relation to the issue whether rectification costs are reasonable in the circumstances. As I understood the respondent’s oral submissions, the respondent accepted that it was for the respondent to establish that rectification is a reasonable course to adopt (i.e., that the onus lies on a plaintiff to establish this) but that if a defendant seeks to contest that by arguing unreasonableness then it may have an evidentiary onus to establish that this is a situation falling within the “fairly exceptional circumstances” (to use the language in Bowen v Tabcorp) where the cost of rectification is disproportionate to the diminution in value of the reversion and should not be awarded (see AT 36.33-41). (Such concession is to my mind of some relevance when considering the conclusion reached by Kirk JA and Griffiths AJA on this issue – see below, though I accept as their Honours point out that the question of onus is a matter of law.)

37. The respondent maintains that his Honour’s reasoning and conclusion (as to the claim by a reversioner for damage where trespass occurs occasioning permanent injury to the reversion) is correct, referring to Shell Company of Australia Ltd v Bailey [1980] WAR 233 (Shell Company) at 236 and 242, and Beaudesert at 152 where the High Court described such actions as “an action on the case for trespass” or “actions of trespass on the case”.

38. The respondent points to cases where permanent injury to the reversion sounded in damages for the cost of repairing the damage caused (JonesvLlanrwst Urban District Council (1911) 1 Ch 393 (JonesvLlanrwst); AlstonvScales (1832) 9 Bing 3; The Metropolitan Association for Improving the Dwellings of the Industrious Classes v Fetch (1858) 5 CB(NS) 502; and Baxter v Taylor (1832) 4 B & AD 71) noting that the decision of Parker J in JonesvLlanrwst was applied by the Full Court of the Supreme Court of Victoria in Birtchnell v Fred Walker and Co Pty Ltd (1930) Argus LR 176 (at 177), where in substance, the damages awarded were for the cost of repairing the damage caused. Reference is also made in this context to Mayfair Property Company v Johnston [1894] 1 Ch 508 at 516-520, where the entitlement to damages was in substance the cost of rectifying the damage to the land.

39. The respondent says that that approach to damages reflects the modern approach to damages where a building is damaged by tortious conduct. In cases involving tortious damage to a building, the cost of repair is an appropriate measure of damages, unless it is shown that it would be unreasonable for a plaintiff to repair the land (citing Evans at 39-40; Hansen at 15; and Gagner at [89]-[103] (and [30]-[31])).

40. The respondent says that the primary judge awarded damages by reference to an entirely appropriate measure of damages, being the cost of rectification of the damage to the Property that the appellant caused. It is said that there was no contention (much less evidence) that it would be unreasonable for the respondent to repair the damage to the Property maliciously caused by the appellant.

41. In response to a query as to where there was evidence of the diminution in value of the reversion, the respondent pointed (see at AT 40) to the March 2019 valuation of the Property; and argued (at AT 40.39-47) that:

So one assesses the value as if the building were completed [$3.75 million], then one deducts from that cost of sales, gets net proceeds, then one deducts a profit and risk factor, then one deducts less development costs, including a provision allowance to attract a new builder and contingencies and so forth. So that there’s an amount of $1.15 million which is the assessed cost to complete the development as observed by the valuer after the damage has been done, and after the items had been removed, as found by the trial judge, and the valuation assessment for land of this sort involves the assessed cost of completing the works so as to result in completed houses being deducted on a dollar for dollar basis.

42. The submission of the respondent was that the valuation methodology shows the cost to complete the works, including the cost to repair the damage that was done, and that the cost to repair the damage and replace the items that were taken from the buildings can in effect be deducted from the assessed value of the completed buildings. On that basis the respondent would say that, if the cost of rectifying the malicious damage was $586,000, then the cost of completion would be $1.15 million less the $586,000 (so that in the respondent’s submission it can be concluded that the cost of rectifying the malicious damage was reasonable and not likely to exceed the diminution in value caused by that conduct (see AT 41.27-36)) and indeed it was suggested that the cost of rectification measure of damages might be less than the diminution in value of the reversion.

42. The difficulty, however, is that it does not appear that the primary judge was taken through such an exercise, and it is not apparent that there was a basis on which the diminution in value of the reversion was able to be or was assessed by the primary judge in determining whether the cost of rectification of the malicious damage was reasonable and not disproportionate to the diminution in the value of the reversion. That is hardly surprising in circumstances where the respondent came to court on the basis that it was entitled to rectification costs based on what might be described as a standard trespass to land claim; not on the basis that it was claiming for damages to its reversionary interest in the land (an action on the case).

43. That, in essence, is the link between grounds 1 and 2. It is not disputed by the appellant that, in an appropriate case, the cost of rectification may be a relevant indicium of the diminution in value of the reversionary interest. However, the complaint that there was no evidence of that diminution in value is well-founded. While it may have been reasonable for the primary judge to infer from the evidence that the respondent intended to reinstate the Property before sale (and the valuation might well have been intended for a loan for that purpose), the difficulty is that the exercise of determining whether that cost was reasonable having regard to a comparison with the diminution in value of the reversionary interest cannot have been carried out in the absence of that diminution having been assessed.

44. On that basis, in my opinion ground 2 is made good. I have taken into consideration the reasoning of Kirk JA and Griffiths AJA for the contrary conclusion (see below). I accept that there is an evidentiary onus on a defendant seeking to argue unreasonableness as such, though as noted I understood the respondent to accept that it is for the plaintiff to establish that rectification was a reasonable course to adopt (see [36] above). In the absence of evidence from which one could assess the diminution or likely diminution in value of the reversionary interest, I am not persuaded that the respondent satisfied that onus in the present case.

Ground 1 – Denial of procedural fairness or natural justice

46. Turning back to ground 1, the appellant in written submissions appeared to put this as a House v The King error, invoking the principles relating to challenges to the exercise of a discretion by reason (see House v The King (1936) 55 CLR 499; [1936] HCA 40 at 505 per Dixon, Evatt and McTiernan JJ); i.e., where the primary judge: acted on the wrong principle; allowed extraneous or irrelevant matters to guide or affect him or her; mistook the facts; or did not consider some material consideration. In his written submissions, the appellant submits that the discretion of the primary judge miscarried (in the House v The King sense) by allowing the respondent to run an unpleaded alternative case of an action on the case in trespass. In oral submissions, however, it was accepted that the complaint here is as to an error of law – that being a complaint as to a denial of procedural fairness.

47. The appellant says that (as is historically correct) an action on the case in trespass is a separate cause of action to trespass; and the appellant complains that the primary judge did not grapple with the appellant’s submission that the damage to the reversionary interest is usually quantified by the diminution in value to the land rather than on the basis of the costs of rectification (the latter being a guide to, but not necessarily conclusive evidence of, the diminution in the value of the reversion). In this regard, the appellant refers to Edelman JE, McGregor on Damages (Sweet & Maxwell, 21^st ed, 2020) at [39-043]; Hosking v Phillips (1848) 154 ER 801; (1848) 3 Exch 168 (Hosking); Cotterill v Hobby (1825) 107 ER 1133; (1825) 4 B&C 465 (Cotterill); Jones v Llanrwst at 404; Hanson v Newman [1934] Ch 298 at 319 to 320 and 322 to 323 per Denning LJ, Singleton and Bucknell LLJ agreeing at 328; Smiley v Townshend [1950] 2 KB 311; JaquinvHolland [1960] 1 WLR 258 and Van Dal Footwear LtdvRyman Ltd [2010] 1 WLR 2015.

48. Insofar as the primary judge relied upon Joyner and the observations of Finkelstein and Gordon JJ in Bowen v Tabcorp at [9]-[10] as to the measure of damages for an action on the case in trespass (see at [53] of the primary judgment), the appellant says that the cost of rectification is only a guide for calculating the diminution in the value of the reversion; it is not conclusive (citing [7.900] of Edgeworth B, Butt’s Land Law (Thomson Reuters, 7^th ed, 2017) (Butt’s Land Law) where reference is made to Graham v Markets Hotel Pty Ltd (1943) 67 CLR 567; [1943] HCA 8 at 583, 587, 595; Jones v Herxheimer [1950] 2 KB 106; Haviland v Long [1952] 2 QB 80) and will not always be the appropriate measure of damage to the reversion. The appellant refers in this regard to [7.900] of Butt’s Land Law where the author says, in the context of damages for breach of a covenant to repair, that reinstatement damages are only awarded in a relatively narrow range of cases.

49. The appellant says that, in assessing damage to the reversionary interest for breach of the covenant to repair, the proportionality between the benefit in fulfilment of the obligation and the cost of compliance is a relevant consideration (citing [10.13] in Croft C, Hay R and Virgona L, Commercial Tenancy Law (Lexis Nexis, 4^th ed, 2017) referring to Gimtak Pty Ltd v Cathie [2001] VSC 88).

50. As to the applicable principles as to the quantification of damages for permanent injury to the reversionary interest, the appellant points to Cotterill; Hosking quoting Parke B at 182; and Moss v Christchurch Rural District Council [1925] 2 KB 750, in which damages were assessed on the basis of the diminution in value of the reversionary interest.

51. While the appellant accepts that the costs of cure is a relevant indicium of the proper measure of damages, the appellant’s complaint is that he was prejudiced by the fact that the respondent only decided to run an (unpleaded) case based upon an action on the case in trespass on the second day of the hearing. The appellant says that there was no opportunity for him to file and serve valuation evidence quantifying the damage to the reversion on the basis of a diminution in value; and that such evidence is an essential facet in the valuation of the damage to the reversionary interest. As a result, the appellant says that he has been denied procedural fairness.

52. The respondent argues that the prejudice claimed to have been suffered (namely, the lost opportunity to serve evidence quantifying the damage to the reversion on the basis of a diminution in value rather than cost of rectification) is illusory (on the basis that the primary judge was correct to apply the cost of rectification measure of damages by reference to the authorities considered in relation to ground 2 of the appeal).

53. In any event, the respondent says that the premise of appeal ground 1 (that the cause of action upheld by the primary judge was not pleaded) is a false premise. In support of that contention, reference is made to the following in the second further amended technology and construction list statement.

54. First, the identification in Part B (“Issues Likely to Arise”) that one such issue was whether the appellant maliciously damaged the works and converted materials, fixtures and fittings in March 2018 after the respondent issued a show cause notice, and what damages (including aggravated and exemplary damages) should be awarded for that conduct (see at B[15] of the second further amended technology and construction list statement). The appellant further noted that the appellant’s list response stated that the same issue was likely to arise.

55. Second, the contentions that: the building contract with DSD was entered into on 10 July 2017 (see at A[1]; C[36] of the second further amended list statement) and was terminated on 19 March 2018 (see at C[8]; C[36]); in the period from 10 July 2017 until 19 March 2018, the appellant supervised or otherwise had substantive control over the carrying out of the building work at the Property (see at C[36]); during DSD’s possession of the Site, the Property was maliciously damaged (see at C[21]); and the malicious damage was done by the appellant in the period from 2 March 2018 to 19 March 2018 (see at C[41]).

56. Third, the contentions that, in the premises, the appellant is liable to the respondent in trespass to land (see at C[43](a)); and the appellant is liable to pay damages to the respondent for the cost of rectifying the damage done to the Property (see at C[45](a)).

57. The respondent maintains that the second further amended technology and construction list statement pleaded facts that were clearly wide enough to include a claim that the malicious damage was done by the appellant, during DSD’s possession of the Property, in the 17 day period immediately prior to the building contract being terminated; and that, in those circumstances and because of that conduct, the appellant was liable to respondent as a trespasser to pay damages to the respondent for the cost of rectifying the damage done to the Property.

58. The respondent dismisses the appellant’s contention that the second further amended technology and construction list statement pleaded an action in trespass but did not plead an action on the case in trespass as being “an argument about semantics”. The respondent says that the cause of action of a reversioner sometimes described as “action on the case in trespass” may equally aptly be described as an “action in trespass”, noting that it was so described by the Full Court of the Supreme Court of Western Australia in Shell Company at 236 and 242.

59. In the circumstances, the respondent says that it was not necessary for the second further amended technology and construction list statement to use the words “action on the case in trespass” and that the facts pleaded in the second further amended technology and construction list statement and the use of the words “liable in trespass to land” are sufficient to include the claim that the primary judge upheld.

60. Further, the respondent says that the second further amended technology and construction list statement is not a pleading and it is noted that the Court’s practice note prescribes that a List Statement should identify the grounds for the relief claimed without formality (Practice Note SC Eq 3 at [9]). The respondent says that therefore no issue of the primary judge allowing it to run an unpleaded cause of an action on the case in trespass arises.

61. In addressing this ground, it is relevant at the outset to note that, while commercial list statements and responses differ from pleadings in substance, they nevertheless stand in the place of pleadings in proceedings commenced in the Commercial List and Technology and Construction List.

62. In Ipstar Australia Pty Ltd v APS Satellite Pty Ltd (2018) 329 FLR 149; [2018] NSWCA 15, Bathurst CJ (with whom Beazley P (as Her Excellency then was) and Leeming JA agreed) opined that a commercial list statement and commercial list response stand in the place of pleadings in proceedings in the Commercial List of the Supreme Court. His Honour stated (at [260]) the following:

260. Proceedings in the Commercial List of the Supreme Court are commenced by summons and are governed by Practice Note SC Eq 3, which does not specifically refer to the filing of a reply to a commercial list response. If these proceedings were commenced by statement of claim, the filing of a reply would be permitted by r 14.4 of the Uniform Civil Procedure Rules 2005 (NSW) (the UCPR). Further, a “pleading” is relevantly defined in the dictionary to the UCPR to include “a statement of claim, defence, reply and any subsequent pleading for which leave is given”. Although Part 14 of the UCPR does not directly apply in proceedings commenced by summons (see r 14.1), a commercial list statement and a commercial list response stand in the place of pleadings. In circumstances such as the present case where a reply to the commercial list response was permitted, it would seem to me that such a reply forms a part of the pleadings.

[emphasis added]

63. In Capello v Hammond & Simonds NSW Pty Ltd [2021] NSWCA 57, Leeming JA (with whom Macfarlan and McCallum JJA agreed) opined (at [26]) that the “list statement” and “response to list statement” which identify issues in proceedings in the Construction List in accordance with Practice Note SC Eq 3 stand in the place of pleadings. His Honour concluded that Pt 14 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) therefore applies to commercial list statements.

64. In Swiss Re International SE v Simpson (2018) 354 ALR 607; [2018] NSWSC 233 Hammerschlag J (as his Honour then was) noted at [34] that, while the commercial court “does not operate as one of strict pleading, it is also not one of no pleading”.

65. In BCEG International (Australia) Pty Ltd v Xiao [2022] NSWSC 972, Rees J further noted at [369] that, even if Pt 4 of the UCPR is not applicable to commercial list statements and responses, parties to litigation in the Commercial List must still comply with the obligations in ss 56 to 58 of the Civil Procedure Act 2005 (NSW), which require parties to articulate the issues clearly and precisely, such obligation continuing during trial (see also Nowlan v Marson Transport Pty Limited (2001) 53 NSWLR 116; [2001] NSWCA 346).

66. There is no reason to treat commercial list statements and responses in the Technology and Construction List any differently. Thus, by reference to the authorities considered below, the relief granted in proceedings in that List ought therefore be confined to the cause or causes of action pleaded in the list statement. To decide the case on a different basis would be a denial of procedural fairness.

67. The central role of pleadings was authoritatively expressed by the High Court in Banque Commerciale SA., en liquidation v Akhil Holdings Ltd (1990) 169 CLR 279; [1990] HCA 11 (Banque Commerciale). At 286-7 Mason CJ and Gaudron J said (omitting citations) that:

The function of pleadings is to state with sufficient clarity the case that must be met. In this way, pleadings serve to ensure the basic requirement of procedural fairness that a party should have the opportunity of meeting the case against him or her and, incidentally, to define the issues for decision. The rule that, in general, relief is confined to that available on the pleadings secures a party’s right to this basic requirement of procedural fairness. Accordingly, the circumstances in which a case may be decided on a basis different from that disclosed by the pleadings are limited to those in which the parties have deliberately chosen some different basis for the determination of their respective rights and liabilities.

68. Brennan J, as his Honour then was, at 288 expressed the principle in the following terms (omitting citations):

When the pleadings bring the parties to the issue, the court’s function is to determine that issue and to grant relief founded on the pleadings unless the parties are allowed to alter the issues at the trial without amendment of the pleadings (as to which, see the observations in London Passenger Transport Board v Moscrop (29). The rule is clearly laid down in the judgment of this Court in Dare v Pulham (30):

Apart from cases where the parties choose to disregard the pleadings and to fight the case on issues chosen at the trial, the relief which may be granted to a party must be founded on the pleadings.

69. Procedural fairness requires that any relief granted is to be confined to that properly pleaded (see Banque Commerciale at 286-287; see also Gould & Birbeck & Bacon v Mount Oxide Mines (1916) 22 CLR 490; [1916] HCA 81 at 517 per Issacs and Rich JJ). Likewise in Dare v Pulham (1982) 148 CLR 658; [1982] HCA 70 at 664 it was said that “the relief which may be granted to a party must be founded on the pleadings”.

70. Ipp JA noted in Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (2008) 73 NSWLR 653; [2008] NSWCA 206 (at [424]) that the rule that, in general, relief is confined to that available on the pleadings secures a party’s right to a basic requirement of procedural fairness; and that, apart from cases where the parties choose to disregard the pleadings and to fight the case on additional issues chosen at the trial, the relief that may be granted to a party must be founded on the pleadings.

71. Where a judicial officer goes beyond the case that was pleaded and run at trial, there will be a denial of procedural fairness (see Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22 (Farah) at [132]-[133]; Krnjulac v Lincu [2015] NSWCA 367 at [12]-[23] per Bathurst CJ (Leeming JA and Emmett AJA agreeing). Indeed, in Farah, the Court held at [132] that:

… It was unjust to the appellants to decide the respondent’s appeal to the Court of Appeal on an independent ground which was never pleaded by the respondent, never argued by the respondent before the trial judge, and never argued by the respondent in the Court of Appeal. … The relevant part of the Court of Appeal's judgment would have come as a complete surprise to all parties. …

72. Such procedural unfairness can only be remedied by the Court raising with the parties the alternative basis upon which the case may be determined, so as to give the parties an opportunity to be heard (and, if appropriate, adduce evidence directed to that prospect) (see South Western Sydney Local Health District v Gould (2018) 97 NSWLR 513; [2018] NSWCA 69 at [70]-[73] per Leeming JA, with whom Basten and Meagher JJA agreed).

73. More recently, in Bryant v Quinn [2022] NSWCA 163 (Bryant v Quinn), a not dissimilar point arose.

74. In the present case, and accepting the informality of “pleadings” in the Technology and Construction List, the pleaded claim did not make clear that the complaint was as to permanent injury to the reversionary interest of the owner (the respondent). It is one thing to say that trespass in an action on the case might be subsumed into an overall category of trespass to land, but the causes of action are distinct and standing to sue in the present case was only for an action on the case for damage to the reversionary interest. The submission that an action on the case was pleaded notwithstanding the absence of reference to those words must be rejected. It was not for the appellant to trawl through the pleading in order to divine that, because there was a pleading that malicious damage was occasioned to the premises during a period in which DSD (not the respondent) had possession of the site, this must have been an action for damages to the reversionary interest because a permanent injury had been occasioned to the reversion. The fact that it was not clear is demonstrated by the evident surprise it occasioned to the appellant’s counsel at the hearing, there being a candid acknowledgement that this was not the case the appellant had come to court to meet.

75. True it is that there may be criticism of the list response for not raising the standing issue; and that the appellant may be said to have taken a forensic decision not to contest certain issues (as to damages) relying on what the primary judge himself considered (at least in the course of argument) would, if made good, be a “knock out point”.

76. The difficulty here is that the appellant, having raised the pleading issue and having adverted to the prejudice that would be caused if the unpleaded alternative case were to be entertained (namely, that investigations had not been undertaken as to the value of any diminution in value of the reversionary interest – presumably in order to test comparatively whether there was disproportion between an award for the costs of rectifying the damage (which is what was claimed) and the diminution in the value of the reversion), was left in the position that there was no acquiescence in an expansion of the pleaded case and did not have the opportunity properly to address such an expanded case. True it is that the appellant did not seek an adjournment for that to be done; nor did the appellant on this appeal identify what evidence it might have adduced had that opportunity been extended to him.

72. Nevertheless, in circumstances where it cannot be said that evidence of the diminution in the value of the reversionary interest would not have been relevant (nor that such evidence might not have enabled an argument to succeed to the effect that the costs of rectification would not be the appropriate measure of damages in the present case) it cannot be said that the complained loss of opportunity is illusory. In those circumstances, accepting that Kirk JA and Griffiths AJA have on balance come to the opposite conclusion (see at [175]), and considering that the balance here is more finely drawn than in Bryant v Quinn, I have ultimately concluded, with respect, that there has been a denial of procedural fairness in the departure from the “pleaded” case. Accordingly, I consider that ground 1 is made good; and I would have remitted the matter for re-hearing on this aspect of the claim.

Ground 3 – Whether “building work” extends to boarding houses

78. I agree with Kirk JA and Griffiths AJA, for the reasons that their Honours have given, that ground 3 of the appeal should be rejected.

Orders

79. For the above reasons, I would have proposed that the appeal be allowed in part and the matter remitted to the Equity Division for re-hearing of the claim for damages for permanent injury to the respondent’s reversionary interest in the Property the subject of this proceeding. Costs would have then fallen to be determined on the basis that the appellant was partly successful on the appeal. As it is, having regard to their Honours’ contrary conclusions on grounds 1 and 2, an order for the dismissal of the appeal with costs is the appropriate order to be made.

80. KIRK JA and GRIFFITHS AJA: Mr Daniel Roberts, the appellant, is a builder who operated through a company, DSD Builders Pty Ltd, which is now in liquidation. The company contracted with Goodwin Street Developments Pty Ltd, the respondent, to construct three residential boarding houses intended for use as university student accommodation on land owned by Goodwin. Work was well advanced when the parties fell out. DSD did no further work on the site after 2 March 2018, immediately following a site meeting. On 19 March 2018 a representative of Goodwin attended the building site and observed that substantial deliberate damage had been done to the buildings and that numerous items – including doors, windows and stairs – had been removed. Goodwin terminated the building contract that day.

81. Goodwin sued Mr Roberts in the Supreme Court. It had initially sued DSD, but later joined Mr Roberts. The claim against the company was stayed automatically after it went into liquidation. Goodwin made two types of claim against Mr Roberts:

1. It sued him in tort with respect to the deliberate damage. The primary judge, Stevenson J, held that Mr Roberts had caused this damage. There was no dispute that the cost to repair the damage and replace the missing items was some $586,000. The respondent initially labelled the tort claim as a claim in trespass. The appellant submitted below that such a claim could not be made out in circumstances where, at the time of the damage, the owner did not have exclusive possession of the building site. The primary judge accepted that submission, but then accepted the respondent’s fallback submission that its claim could be treated as an action on the case. On that basis his Honour upheld the claim for the rectification/reinstatement costs.

2. Goodwin sued Mr Roberts for a separate list of defects in the building work that had been undertaken. This claim was made pursuant to the statutory duty of care with respect to construction work arising under s 37 of the Design and Building Practitioners Act 2020 (NSW) (DBP Act). There was no dispute that the cost to rectify these defects was of the order of some $300,000.

82. The primary judge upheld both claims, and Mr Roberts was ultimately ordered to pay Goodwin the sum of $948,820.59 plus costs.

83. Mr Roberts appeals with respect to each of the two claims, raising three grounds of appeal:

1. As regards the first claim, addressed to the deliberate damage, he alleges that there was a denial of procedural fairness by the primary judge in permitting Goodwin to characterise its claim as an action on the case in trespass, as opposed to a claim directly in trespass. However, it was conceded in argument that this ground could not succeed if the second ground was not made out.

2. Also as regards the first claim, the appellant alleges that the primary judge erred “in assessing damage to permanent injury to the reversionary interest on the basis of the cost of repair rather than a diminution in value to the reversionary interest”. This ground thus raises an issue about the assessment of damages for Goodwin’s tort claim.

3. As regards the second claim, directed to the building defects, he argues that the primary judge erred in construing the references to “construction work” and “building work” in relevant parts of the DBP Act as extending to work done on boarding houses. This ground turns on issues of statutory construction.

84. In our view none of the grounds is made out and the appeal should be dismissed with costs. It is appropriate first to address ground 2, then ground 1, followed by ground 3.

Ground 2 – Assessment of damages for injury to the reversionary interest

85. As noted, the appellant does not dispute that the amount awarded by the primary judge correctly reflected the costs of making good the damage to the property that he was found to have caused. Nor does he dispute that Goodwin was entitled to claim damages on an action on the case for damage to its reversionary interest in the land even though it was not in exclusive possession of the land at the time the damage was done: note eg Rodrigues v Ufton (1894) 20 VLR 539 at 543-546. What he disputes is whether those rectification costs represented the proper measure of compensation.

86. The appellant contends that the primary judge failed to grapple with his submission that the damage to the reversionary interest is usually quantified by the diminution in value to the land, rather than on the basis of the cost of rectification. The appellant acknowledges that it is possible for the cost of rectification to be a guide to the diminution in the value of the reversion, but says the onus lies on the claimant to prove that awarding such an amount is reasonable, and that that involves showing both that the claimant actually intends to reinstate the property and that the cost of restoration is not disproportionate to any diminution in value. The appellant cites various authorities in support of these contentions.

87. On close examination, neither general principle nor the authorities cited by the appellant support his position. In the circumstances of the case there was an evidentiary onus on him to establish that awarding damages for the cost of reinstatement was unreasonable in all the circumstances. He did not discharge that onus. In any case, the evidence supports an inference that Goodwin intended to rectify the damage done to the buildings. We do not understand the respondent to have conceded that the appellant did not bear an evidential onus, although its submissions were not pellucidly clear on the point (for example, stating elliptically in address that “[w]hilst there may be an onus on the plaintiff to prove that it’s reasonable to have the damages measured by reference to the cost of rectification, any question of unreasonableness is an onus on the defendant”). In any event, where the onus lay is a matter of law. Further, it was clear that the respondent submitted that insofar as there was any onus on it that onus was discharged on the evidence.

88. It is useful to start by referring to the reasons of the primary judge, then identifying the applicable principles, before turning to examine the authorities on which the appellant relies, then applying the law to the facts of the case.

The reasons of the primary judge

89. Given their central importance to ground 2, it is desirable to set out in full the pertinent part of the primary judgment (footnotes omitted):

46   Although Goodwin did not have exclusive possession of the site at the time the damage was done to its property in March 2018, it was a reversioner by reason of the fact it would, in due course (whether because the works were completed or because it exercised entitlement to retake possession) become entitled to exclusive possession of its property.

47   In the circumstances that existed when the damage was done, Goodwin was in a position very shortly to obtain exclusive possession of the site and thus fall into possession of the reversion. It did so a number of days later, on 19 March 2018, when it terminated the building contract, and re-took possession.

48   A reversioner, including a lessor who has leased its property to a lessee, or an owner who has temporarily given another (such as a builder) exclusive possession of its property, is entitled to bring “an action on the case for trespass” or an action “of trespass on the case”, if during that other person’s possession of the property, a trespass occurs resulting in “permanent injury to the reversion”, or that will “necessarily affect the reversioner’s interest when the property falls into possession”.

49   Permanent injury to the reversion in this context means “such as will continue indefinitely unless something is done to remove it”.

50   The “injury” done on the site in this case was thus “permanent” in this sense.

51   Ms Chan [appearing for Mr Roberts] submitted that the measure of damages to permanent injury to the reversion is the diminution in the value of the reversionary interest and that she was not in a position to meet such a case. In any event, Goodwin had not adduced evidence of any diminution in value to its property. Rather, its evidence was directed to the cost of repair.

52   However, the fundamental objective of an award for damages in tort is to provide “that sum of money which will put the party who has been injured … in the same position as he would have been in had he not sustained the wrong for which he is now getting his compensation or reparation”.

53   If, as here, the injured party is entitled to regain possession of the reversion shortly after the damage was done, the cost of repairs will better represent that “sum of money” than may be the case where the injured party is not able to retake possession for a lengthy period following the infliction of the damage.

54   I am satisfied that the appropriate measure of Goodwin’s loss for the damage done to the property is the reasonable cost of repairing the damage.

55   As I have said, there is no controversy about what that reasonable cost is.

Applicable principles

90. The basal compensatory principle is well settled (Haines v Bendall (1991) 172 CLR 60 at 63; [1991] HCA 15; citations omitted):

The settled principle governing the assessment of compensatory damages, whether in actions of tort or contract, is that the injured party should receive compensation in a sum which, so far as money can do, will put that party in the same position as he or she would have been in if the contract had been performed or the tort had not been committed.

91. There can be some differences in assessing such damages for contract and tort. For example, in contract it is relevant to take into account the fact that the parties have given consideration for the due performance of their respective contractual obligations and may have agreed in advance as to what is to occur in the event of a breach. However, the basic compensatory principle is the same for both.

92. In seeking to put the injured party in the same position account must be taken of what is reasonable. For example, in Arthur Robinson (Grafton) Pty Ltd v Carter (1968) 122 CLR 649; [1968] HCA 9, Barwick CJ said that: a compensation award “ought to be a fair and reasonable compensation for the injuries received” (at 656); this involves “moderation” and not “attempting a perfect compensation” (at 657); and the question “is not what are the ideal requirements but what are the reasonable requirements” of the injured person (at 661). In Chulcough v Holley (1968) 41 ALJR 336, at 338, Windeyer J said that a plaintiff “is only entitled to be recouped for such reasonable expenses as will reasonably be incurred as a result of the accident”. And in Sharman v Evans (1977) 138 CLR 563, at 573; [1977] HCA 8, Gibbs and Stephen JJ referred to “[t]he touchstone of reasonableness”. These statements are taken from personal injury cases but they manifest general principle.

93. The object of putting the claimant in the same position as if the wrong had not occurred may often “be achieved in different ways, and a proper assessment is determined by the circumstances of the case and by the overriding requirements of what is reasonable”: Evans v Balog [1976] 1 NSWLR 36 at 39. In assessing what is reasonable compensation to the particular claimant the court must bear in mind “what he was, what he now is, and how he is likely to meet his [injury]”: Arthur Robinson at 656 per Barwick CJ.

94. In certain types of case particular approaches to the assessment of damages become accepted as to how the compensatory principle is to be given effect. Of course, and consistently with the statements just quoted, such conventional practices “must yield if the facts of the instant case require some different method to be adopted for assessing the appropriate amount of compensation”: see GagnerPty Ltd (t/as Indochine Cafe) v Canturi Corporation Pty Ltd [2009] NSWCA 413; (2009) 262 ALR 691 at [31] per Campbell JA, with whom Macfarlan JA and Sackville AJA agreed. To similar effect, in Port Stephens Shire Council v TellamistPty Ltd [2004] NSWCA 353; (2004) 135 LGERA 98 at [186], Santow JA (dissenting in the result) said that, in applying the compensatory principle “to the multifarious situations of tortious compensation, the Court must not be constrained by rigid or inflexible rules”. His Honour added at [187] that such “rules and principles as the common law has developed to assess the damages of an injured party are not inflexible, and must always be applied with the overriding goal of compensation”.

95. A conventional approach has developed with respect to compensating an owner for damage to realty. The issue often arises, and appears first to have arisen, in claims by landlords against tenants for breach of a lease conditions relating to the condition of the property (in particular a covenant to repair). It can also arise with respect to claims for breach of building contracts. As addressed below, the approach has also been applied to tort claims.

96. The primary judge invoked certain cases dealing with breach of a covenant to repair. One of those was Joyner v Weeks [1891] 2 QB 31. As the appellant acknowledged, that decision is authority for the proposition that the measure of damage for breach of a tenant’s covenant to repair is in general the cost of rectification, at least when the issue arises at the end of the term of the lease. Fry LJ described this as the “ordinary prima facie rule” (at 45). This “rule” has been altered in the United Kingdom by s 18(1) of the Landlord and Tenant Act 1927 (UK) (quoted below at [134]). It has similarly been altered in some parts of Australia, including this State: Conveyancing Act 1919 (NSW), s 133A. That alteration does not undermine the significance of the common law authority in throwing light on application of the compensatory principle applicable to claims, whether in tort or contract, where that statutory alteration does not apply.

97. In Minter v Eacott (1952) 69 WN (NSW) 93 the Full Court of the NSW Supreme Court considered an action for nuisance by withdrawal of lateral support for land. KW Street CJ adopted a principle from the American Restatement (First) of Torts, §929, vol 4, p 660 that he paraphrased as follows (at 95; see similarly Owen J at 96 and Clancy J at 97):

[T]he plaintiff has an election to claim as compensation the difference between the value of the land before the harm and the value after the harm, or he may claim the cost of restoration which has been or may be reasonably incurred. I think that due emphasis has to be given to that word “reasonably”.

98. That language indicates that the claimant has a measure of choice as to how to frame the claim for compensation.

99. There is a helpful analysis of Joyner in the joint judgment of Finkelstein and Gordon JJ in Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (2008) 166 FCR 494; [2008] FCAFC 38. In that case the tenant, Tabcorp, had altered without permission the foyer of the building it leased. The landlord sued for the cost of reinstating the foyer to its previous state. Their Honours pointed out at [10] that the proposition “firmly established” in Joyner is that if an action is brought at or near the termination of a lease, “the rule … is that the landlord is entitled to recover the cost of repairs”. They approved Fry LJ’s description of this as the “ordinary” or “prima face rule”. The plurality then noted at [11] that the High Court had applied Joyner in Graham v Markets Hotel Pty Ltd (1943) 67 CLR 567, including by Latham CJ (with whom Rich J agreed), who said at 582 that:

The general rule for assessing damages for breach of a covenant by a lessee to deliver up the demised premises in repair was settled by Joyner v Weeks, where it was held that the damages were the cost of putting the premises into the state of repair required by the covenant.

To similar effect, see at 586 per Starke J and at 593 per Williams J.

100. The plurality of the Full Court in Tabcorp also referred approvingly at [12] to the following statement by Tipping J in delivering the New Zealand Court of Appeal’s decision in Maori Trustee v Rogross Farms Ltd [1994] 3 NZLR 410 at 420 (emphasis added):

The rule in Joyner v Weeks is not an absolute rule. It is, however, the prima facie rule which will be applied unless the lessee can show by sufficiently cogent evidence that in both the short and the long term the lessor will definitely suffer no loss or will suffer a loss which can definitely be assessed at less than the prima facie measure.

101. The emphasised words suggest that, at least in a case in contract, the defendant carries an evidentiary burden in demonstrating that the cost of repair is not the appropriate measure for damages in a particular case.

102. The suggestion that there is an evidentiary onus on the party who challenges the reasonableness of an award of damages based on the cost of reinstatement or repairs is also implicit in the language of “prima facie” rule. That understanding is reflected later in the joint judgment in Tabcorp (emphasis added):

29   Speaking generally in cases of work done (or not done) or damage caused to property in breach of contract, the bases for assessing damages are: (a) the cost of reinstatement; or (b) the diminution in the value of the property due to the breach of contract. The correct measure is whatever is reasonable for the wronged party to recover. An assessment of what is reasonable in a particular case is not to be measured in purely economic terms: Ruxley [1996] AC at 353, 358-359, 360-361, 370-371. Personal preferences of a subjective nature are not irrelevant when choosing the appropriate measure of damage: Atkins (GW) Ltd v Scott (1991) Construction Law Journal 215 at 331; Radford v De Froberville [1977] 1 WLR 1262 at 1270-1273. This is especially so if the plaintiff’s "predelictions" (the word used by Oliver J in Radford [1977] 1 WLR at 1271) are not excessive or extravagant: Parramatta City Council v Lutz (1988) 12 NSWLR 293 at 312. See also Black Creek Deer Farm Pty Ltd v ANZ [1996] V ConvR 66,534 (54-549) at 66,541-66,542.

30   Put another way, we reject the view that objective reasonableness is to be determined solely from the viewpoint of an hypothetical rational economic actor. Such an approach would have the effect of subsuming the "cost of reinstatement" measure of damages within the "damage to the reversion" measure. That is to say, costs of reinstatement would generally be given only if there were a roughly equivalent diminution in value of the property caused by the wrongful conduct.

building means a building of a class or type prescribed by the regulations.

construction work means building work and the preparation of regulated designs and other designs for building work. …

(2) In this Part, a reference to building work applies only to building work relating to a building within the meaning of this Part. …

(4) The regulations may—

(a) prescribe additional work that is construction work for the purposes of this Part, and

(b) exclude work from being construction work for the purposes of this Part. …

30 Extension of duty of care

(1) A person who carries out construction work has a duty to exercise reasonable care to avoid economic loss caused by defects—

(a) in or related to a building for which the work is done, and

(b) arising from the construction work.

(2) The duty of care is owed to each owner of the land in relation to which the construction work is carried out and to each subsequent owner of the land. …

198. Various preliminary matters were set out in Pt 1 of the original DBP Bill. They included definitions for the purposes of the Bill generally. The term “building work” was defined in cl 4 of the Bill in terms which are the same as those enacted in s 4 of the Act (save only that cl 4(3) was updated to refer to Pt 4 rather than Pt 3, after the statutory duty of care provisions became Pt 4).

199. Thus, at this time, the definition of both “building work” in cl 4 (applying to the Bill generally) and “building” in cl 29 of Pt 3 (applying only to Pt 3) operated by reference to foreshadowed regulations. There was no further definition of “building work” in Pt 3.

200. In his second reading speech in the Legislative Assembly the Minister described cl 30 as imposing a statutory duty of care on people who carry out construction work. He explained that this duty was owed to certain categories of owner, saying as follows (Legislative Assembly Hansard, 23 October 2019 at 1663, emphasis added):

This means that owners of property will be receiving protections that are owed to them against any kind of defect that arises from construction work and will be properly safeguarded under this law. The duty deliberately does not extend to owners who are developers or large commercial entities, as the Government considers these entities to be sufficiently sophisticated and able to contractually and financially protect their commercial interests. The bill sets out that construction work means building work, regulated designs and other types provided for building work. But it is also futureproofed so that the regulations may prescribe or exclude certain types of construction work if it is determined appropriate. While the regulations have not been finalised, it is envisaged that the duty of care will apply to construction work in a building that is a class 1, 2, 3 and 10 under the Building Code of Australia.

Therefore, houses, multi-unit residential buildings and other buildings such as boarding houses, hostels, backpackers' accommodation, residential parts of hotels, motels or schools will all obtain the duty of care provided for under this bill—that is, people will be protected where they live or intend to live or reside. Clause 30 also sets out the specifics of the duty. It is important to note that the duty of care is owed to each owner and subsequent owner of the land on which the construction work is or was carried out and whether it was carried out under a contract or other arrangement with the owner or a previous owner. Therefore, the duty would be owed, for example, to the owners corporation of a strata scheme and its members and to other owners who may not have been owners at the time the construction work was carried out.

201. It is relevant to note the Minister’s unequivocal stated intention that the duty of care would apply to boarding houses.

202. During the course of the subsequent second reading debate in the Legislative Assembly the Minister noted that various changes would be made to Pt 3 of the DBP Bill following public consultation (Legislative Assembly Hansard, 13 November 2019 at 1615). He said that to ensure that the provision applied as intended, the proposed duty of care would apply retrospectively to classes 1, 2, 3 and 10 of the Building Code of Australia (BCA) or a building containing those classes. It may be interpolated here that the BCA classifies buildings and structures by reference to the purpose for which they are designed, constructed or adapted to be used. Relevantly, class 1(b) applies to “a boarding house” with specified characteristics. It is common ground that the boarding houses the subject of these proceedings fall within class 1(b).

203. The DBP Bill was passed by the Legislative Assembly in November 2019, as amended on the Government’s motion. The following features of the DBP Bill at that time should be noted:

1. The definition of “building” in cl 4 of Pt 1 still depended upon the regulations.

2. The definitions provision in Pt 3 was now in cl 30, and “building” was defined to mean a building in class 1a, 1b, 2, 3, 10a, 10b or 10c of the BCA (thus including boarding houses) or a building of another class or type prescribed by the regulations. Thus, rather than simply wait for the regulations to define the scope of the buildings to which the duty of care applied, certain buildings were specifically identified within cl 30 as falling within that scope by reference to classes of building in the BCA.

3. The term “construction work” was defined in cl 30(1) as meaning, inter alia, “building work”, but there was no separate definition of “building work” in Pt 3.

4. However, it was made clear in cl 30(2) that, in Pt 3, a reference to “building work” applied only to building work relating to a building within the meaning of the Part. That provision – which had been in the original Bill as cl 29(2) – remained the same throughout the legislative process, and was enacted as s 36(2). The provision manifests an intent that the buildings to which Pt 3 (later Pt 4) applied may not be the same as the types of buildings addressed in other parts of the legislation.

5. The duty of care itself was imposed by cl 31. Provision was made for Pt 3 to operate retrospectively where the loss first became apparent within a period of six years immediately preceding the commencement of cl 31 (see Sch 1, Pt 2, cl 5).

204. The Bill then went to the Legislative Council where it was debated on 19 November 2019. There was then a long gap until 2 June 2020 – not least because of the start of the Covid-19 pandemic – when the debate resumed. During that hiatus there were extensive consultations and negotiations which led to a desire for further amendments to expand Pt 3.

205. For present purposes it is sufficient to note the following remarks by Mr David Shoebridge MLC in moving some amendments proposed by The Greens to the duty of care provisions (Legislative Council Hansard, 2 June 2020 at 65, emphasis added):

I turn now to briefly discuss the various amendments. Amendment No. 1 provides that the duty of care applies to all buildings and includes a definition of "building" for the purpose of the duty of care and that "building" has the broad meaning of "building" in the Environmental Planning and Assessment Act. Amendment No. 2 makes clear that the duty of care extends to building work, including residential building work within the meaning of the Home Building Act. This amendment will ensure that the duty of care amendments will have broad coverage, which is the intent. Amendment No. 3 extends the definition of "construction work" for the purpose of this duty of care to include supervising, coordinating and project managing or otherwise having substantive control over the carrying out of any work.

206. Those three amendments were all made to the definitions clause in Pt 3 (now s 36 in Pt 4), and were as follows:

[Amendment no 1:]

building has the same meaning as it has in the Environmental Planning and Assessment Act 1979.

[Amendment no 2:]

building work includes residential building work within the meaning of the Home Building Act 1989.

[Amendment no 3 – insert into the definition of “construction work” the following:]

(d)  supervising, coordinating, project managing or otherwise having substantive control over the carrying out of any work referred to in paragraph (a), (b) or (c).

207. The Government accepted these amendments (amongst others).

208. On 3 June 2020 the Bill as amended was returned to the Legislative Assembly, where the amended version was passed. The Minister referred in the Assembly to the Government working co-operatively with Mr David Shoebridge MLC and gave the Government’s support to those amendments which “collectively clarified the operation of the duty of care protections in the bill”. After stating that the Bill was always meant to be about class 2 residential buildings (defined in the BCA as “a building containing 2 or more sole-occupancy units each being a separate dwelling”), the Minister said that the Government was not in a position to oppose both The Greens and Labor “moving to expand the duty of care to all classes of buildings” (Legislative Assembly Hansard, 3 June 2020 at 2331, emphasis added). By necessary inference this included class 1b buildings.

209. The effect of these amendments was that the definition of “building work” in Pt 4 was expanded from the general definition of that term so as to include residential building work within the meaning of the Home Building Act. Another effect was to remove from the definition of “building” any dependency upon the foreshadowed regulations. Rather, it was given a particular meaning for the purposes of the Part, being that contained in the Environmental Planning and Assessment Act.

210. In addition, the retrospectivity period was extended from six to ten years. Further, Pt 4 was to commence immediately upon assent to the Bill, even though other parts would not commence until later. The Minister described this as a “sensible amendment [which] is consistent with the Government’s intention to commence these important protections without delay”.

Relevant principles of construction

211. There was little dispute about the principles of statutory construction to be applied here. The parties accepted that the Court was required to focus on the text, construed in context and taking account of the relevant purpose sought to be achieved: see eg Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27; [2009] HCA 41 at [47]; R v A2 (2019) 269 CLR 507; [2019] HCA 35 at [32]-[37].

212. Sections 33 and 34 of the Interpretation Act 1987 (NSW) are pertinent. The former provision states that, in interpreting a statutory provision, a construction that would promote the purpose or object underlying the Act (whether that purpose is explicit or implicit) shall be preferred to a construction that would not promote that purpose or object. The general effect of the latter provision is to permit the Court to refer to some extrinsic materials in ascertaining the purpose or object underlying an Act and then to confirm that the ordinary meaning of the text was intended. However, s 34 does not permit resort to such materials for the purpose of departing from the ordinary meaning of the text unless either the meaning of the provision to be construed is ambiguous or obscure or in its ordinary meaning leads to a result that is manifestly absurd or unreasonable: see Re Australian Federation of Construction Contractors; Ex parte Billing (1986) 68 ALR 416 at 420; [1986] HCA 74. Unsurprisingly, the parties did not dispute that the meaning of ss 36 or 37 of the DBP Act was ambiguous on the issue at hand.

213. The Court should also be mindful of the following observations in Saeed v Minister for Immigration and Citizenship (2010) 241 CLR 252; [2010] HCA 23 at [31] per French CJ, Gummow, Hayne, Crennan and Kiefel JJ:

Statements as to legislative intention made in explanatory memoranda or by Ministers, however clear or emphatic, cannot overcome the need to carefully consider the words of the statute to ascertain its meaning.

214. The appellant gave some emphasis to that principle. The importance of not losing sight of the text must constantly be borne in mind. But it does not mean that courts ignore extrinsic materials, nor that they do not take account of the mischief to which the provisions in question were addressed. That point was made by Kiefel CJ and Keane J in R v A2, just after having referred to Alcan and Saeed amongst other cases (footnotes omitted):

[36] These cases serve to remind that the text of a statute is important, for it contains the words being construed, and that a very general purpose may not detract from the meaning of those words. As always with statutory construction, much depends upon the terms of the particular statute and what may be drawn from the context for and purpose of the provision.

[37] None of these cases suggest a return to a literal approach to construction. They do not suggest that the text should not be read in context and by reference to the mischief to which the provision is directed. They do not deny the possibility, adverted to in CIC Insurance Ltd v Bankstown Football Club Ltd, that in a particular case, “if the apparently plain words of a provision are read in the light of the mischief which the statute was designed to overcome and of the objects of the legislation, they may wear a very different appearance”. When a literal meaning of words in a statute does not conform to the evident purpose or policy of the particular provision, it is entirely appropriate for the courts to depart from the literal meaning. A construction which promotes the purpose of a statute is to be preferred.

215. That passage echoes McHugh JA’s observations in Kingston v Keprose Pty Ltd (1987) 11 NSWLR 404 at 424:

Once the object or purpose of the legislation is delineated, the duty of the Court is to give effect to it in so far as, by addition or omission or clarification, the relevant provision is capable of achieving that purpose or object. Where the court can see the purpose of a provision from an examination of its terms, little difficulty should be met in giving effect to that purpose. The days are gone when judges, having identified the purpose of a particular statutory provision, can legitimately say, as Lord Macmillan said in Inland Revenue Commissioners v Ayrshire Employers Mutual Insurance Association Ltd [1946] 1 All ER 637 at 641, of the means used to achieve the purpose: “The legislature has plainly missed fire”. Lord Diplock, in an extra judicial comment on that decision has said, that “if … the Courts can identify the target of Parliamentary legislation their proper function is to see that it is hit: not merely to record that it has been missed”: “The Courts As Legislators”, The Lawyer and Justice (Sweet & Maxwell) (1978) at 274.

216. Of course, as the High Court has emphasised in recent times, it is always necessary to come back to the text when identifying the correct construction: see eg Commissioner of Taxation v Consolidated Media Holdings Ltd (2012) 250 CLR 503; [2012] HCA 55 at [39].

217. In this case, given the inter-relationship between ss 36 and 37, it is also relevant to recall the general principle that definitions are not to be treated as though they are substantive provisions. Thus, in Gibb v Federal Commissioner of Taxation (1966) 118 CLR 628 at 635; [1966] HCA 74, Barwick CJ, McTiernan and Taylor JJ said:

The function of a definition clause in a statute is merely to indicate that when particular words or expressions the subject of definition, are found in the substantive part of the statute under consideration, they are to be understood in the defined sense – or are to be taken to include certain things which, but for the definition, they would not include. Such clauses are, therefore, no more than an aid to the construction of the statute and do not operate in any other way. As was said by Sutherland (Statutes and Statutory Construction, 2nd ed., vol. 2, p. 687),

"Such definitions can, in the nature of things, have no effect except in the construction of the statutes themselves".

Consequently the effect of the Act and its operation in relation to dividends as defined by the Act must, we think; be found in the substantive provisions of the Act which deal with "dividends".

218. Also relevant here is s 6 of the Interpretation Act, which provides that “[d]efinitions that occur in an Act or instrument apply to the construction of the Act or instrument except in so far as the context or subject-matter otherwise indicates or requires”. In other words, the statute may be taken to otherwise provide, such that a general definition is construed not to apply in a particular context within the statute.

Sections 36 and 37 of the DBP Act construed

219. The central issue that divides the parties is what types of buildings are subject to the statutory duty of care provided for in Pt 4. That issue depends on whether and, if so, how the general definition of “building work” in s 4(1) of the Act applies having regard to the further specific definition of that notion in s 36(1). The primary judge considered that the general definition did not apply at all. In all the circumstances that is a reasonably open construction. However, in our view it is not the construction which best reflects the applicable principles of construction and resolves the tensions within the Act.

220. His Honour thought it significant (at [113]) that different Parts of the DBP Act commenced at different times, and he considered that the statutory regime only operated coherently if the s 4 definition of “building work” applies to those Parts of the DBP Act which commenced on 1 July 2021 (ie Pts 2, 3, 5–9) and not to Pt 4, which commenced on 10 June 2020 with retrospective operation (as did Pt 1). There is some force to this point. It is notable that Pt 4 commenced immediately, whereas the definition of “building work” in s 4(1) could not operate of itself until a regulation was made to identify the types of building to which it applied. The regulations were not in fact made until some time later, and it may be inferred that, at the least, it was understood that a delay in making the regulations was a real possibility. In the Minister’s original second reading speech in the Legislative Assembly he referred to the fact that the regulations had not been finalised (as quoted above at [200]).

221. However, any delay in making the regulations would not deprive the definition of “building work” of all practical effect in the context of Pt 4. That is so because given that the further definition of “building work” in s 36(1) states that that notion, in Pt 4, includes residential building work within the meaning of the Home Building Act, there was at least some content provided for the term in s 4 (for the purposes of Pt 4 only) regardless of when the regulations were made. Regardless of when the regulations were made, “building work” for the purposes of Pt 4 included, from the beginning, residential building work within the meaning of the Home Building Act.

222. Nevertheless, it creates uncertainty for any provision to have immediate effect but with only partially delineated content, let alone one which applies with retrospective effect. The content was only partially delineated because, beyond the inclusive reference to the definition in the Home Building Act, it remained to be filled out by the regulations. It is relevant to take account of what the reasonable expectations of the public would be with respect to the extent of retrospective operation of a law: see Stephens v The Queen (2022) 96 ALJR 871; [2022] HCA 31 at [33]. Here, those reasonable expectations favour a construction promoting greater certainty in the application of Pt 4. Complete certainty is not possible, because on any view the regulations may affect the scope of the work to which Pt 4 applies. That is so because s 36(5) of the DBP Act provides that the regulations may add or subtract to the type of work that is included as “construction work” for the purposes of the Part. It is that term of “construction work” which is the subject of the statutory duty in s 37. Even so, although complete certainty is not possible, it remains the case that one relevant construction factor is to increase certainty. Here, that militates against the construction supported by the appellant to the effect that the statutory definition of “building work” in s 4(1) applies without qualification to the further definition of that term in s 36(1), because that leaves the scope of the buildings to which Pt 4 applies substantially at large, save for the extent to which the definition of residential building work in the Home Building Act applies.

219. A further important factor militating against the appellant’s construction is the significance of the definition of “building” in s 36(1) of the DBP Act, both as a matter of text and purpose. With respect to text, it is relevant that s 36(2) provides that “[i]n this Part, a reference to building work applies only to building work relating to a building within the meaning of this Part”. As the primary judge noted at [116], the reference to “building” in that section must be understood in terms of the definition of “building” in s 36(1), which refers in turn to the broad definition in the Environmental Planning and Assessment Act. As noted above at [203(4)], this provision did not change over the course of the parliamentary process, which suggests that it was always envisaged that the types of building to which the duty in Pt 4 applied may be different from those the subject of building work in other parts of the DBP Act. Section 36(2) supports a conclusion that the issue of the type of building to which Pt 4 applied (being the second of the issues addressed in the definition of “building work” in s 4(1)) was always intended to be the subject of distinct articulation, separate from any regulations made addressing the issue generally for the purposes of s 4(1).

220. The effect of the limitation in s 36(2) is that, for the purposes of Pt 4, the statutory duty of care is limited to building work relating to a “building” within the meaning of Pt 4. The type of “building” to which Pt 4 applies is exhaustively defined there by reference to the meaning of that term in the Environmental Planning and Assessment Act.

221. That understanding gains significant support from the parliamentary process in relation to Pt 4. It is apparent that both Mr Shoebridge, in moving amendments to the Bill in the Legislative Council, and the Government in accepting them, considered that the effect of the amendments was to expand the coverage of Pt 4. Those amendments included inserting the two specific definitions of “building” and “building work” for the purposes of Pt 4. Mr Shoebridge said that in light of the amendments the “duty of care applies to all buildings”, and the Minister in the Legislative Assembly referred to “expand[ing] the duty of care to all classes of buildings”. That parliamentary intention would be defeated on the appellant’s construction.

222. Furthermore, that was from a starting point where, prior to the expansionary amendments made in the Legislative Council, the Minister had referred to the Bill applying to boarding houses in any event (see above at [200]). In that context it would be surprising if Pt 4 was construed so as not to apply to boarding houses, as the appellant submits.

223. The appellant contends that the statutory duty imposed by s 37 is effectively displaced in the case of a boarding house because a boarding house is not a “dwelling” for the purposes of the Home Building Act. The appellant says that this is significant because “building work” is defined in s 36(1) as including “residential building work” within the meaning of the Home Building Act, and that term is defined in turn by reference to the notion of a “dwelling”, which is further defined in terms which expressly exclude boarding houses: see cll 2 and 3 of Sch 1 of the Home Building Act.

224. Merely because a boarding house is not a “dwelling” for the purposes of the Home Building Act does not have the effect, however, of taking a boarding house outside the scope of s 37. That is because the definition in s 36(1) of “building work” is not an exhaustive definition. Rather, the reference to “residential building work” within the meaning of the Home Building Act simply makes clear that such work constitutes “building work” for the purposes of s 36(1). But there is room left for other work relating to a building to qualify as “building work”. In effect, this aspect of the appellant’s argument presupposes that the word “includes” in the definition of “building work” in s 36(1) should be read as “means”. Yet that is the alternative construction put in the appellant’s written submissions which was rightly abandoned in the course of argument.

225. A matter that weighs against the construction adopted by the primary judge is that it leaves open the question of what type of work (as opposed to what type of buildings) are encompassed by the notion of “building work” in Pt 4. On his Honour’s construction it appears that issue is to be answered by reference simply to the ordinary meaning of the words. Whilst that is an open construction, it might be thought to be surprising that the issue was intended to be left at large given the careful definition in s 4(1), which is broadly consistent (as regards the type of work) with the definition of “residential building work” in the Home Building Act.

226. That consequence is avoided if the fourth construction noted above at [193] is adopted, such that the general definition in s 4(1) does apply to the further definition of “building work” in s 36(1), but only as regards the first topic addressed in the general definition (identifying the type of work undertaken), with the second topic (identifying what type of buildings that work is undertaken on) instead being addressed by the definition of “building” in s 36(1). That is the construction which best gives effect to the text, context and purpose of the relevant provisions. It reduces the uncertainty as to the retrospective operation of Pt 4. It takes full account of the definition of “building” in s 36(1) and the provision made in s 36(2). In so doing, it acknowledges that the mischief to which Pt 4 was directed involved a broader class of buildings than for other parts of the Act, and that this included boarding houses. It does not completely disapply the general definition of “building work” in s 4(1), and in that way makes clear what type of work is encompassed by the notion of “building work”.

227. The appellant suggested that it would be artificial to apply the general definition in s 4(1) in this way, given the extent to which that general definition depends upon filling out by regulation. There is some force to that point, but no construction here is straightforward. Adopting the fourth construction gives some effect to the fact that s 4(1) commences with the words “[f]or the purposes of this Act”, which on its face includes Pt 4. Further, it addresses the issue of what type of work is encompassed by “building work” within Pt 4, where it appears unlikely that the Parliament intended that to be left to ordinary meaning.

228. In this case, as noted, it is common ground that each of the boarding houses falls within class 1b of the BCA. The parties did not dispute that a boarding house is a “building” within the meaning of the Environmental Planning and Assessment Act, and thus within the meaning of that term in s 36(1). Nor is it disputed that the type of work undertaken fell within the types of work identified in the definition of “building work” in s 4(1). Accordingly, the statutory duty of care applied here.

229. For these reasons, ground 3 of the appeal should be rejected.

Conclusion

234. None of the three grounds of appeal have been made out. The appeal should be dismissed, with costs.

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Decision last updated: 10 February 2023