State of Victoria (Department of Transport and Planning) v L.U. Simon Builders Pty Ltd
[2025] VSCA 52
•11 April 2025
| SUPREME COURT OF VICTORIA COURT OF APPEAL |
| S EAPCI 2024 0094 |
| STATE OF VICTORIA (DEPARTMENT OF TRANSPORT AND PLANNING) | Applicant |
| v | |
| L.U. SIMON BUILDERS PTY LTD (ACN 006 137 220) & ORS (ACCORDING TO THE ATTACHED SCHEDULE) | Respondents |
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| JUDGES: | EMERTON P, BEACH JA and HARRIS AJA |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 4 February 2025 |
| DATE OF JUDGMENT: | 11 April 2025 |
| MEDIUM NEUTRAL CITATION: | [2025] VSCA 52 |
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BUILDING AND CONSTRUCTION – Referral by County Court of questions in form of a special case as to construction and operation of s 137F of the Building Act 1993 – Cladding rectification scheme – Payment by State entities of financial assistance for cladding rectification works – Circumstances in which State subrogated to rights of owners of building against any person in relation to installation or use of non‑compliant or non‑conforming cladding.
BUILDING AND CONSTRUCTION – Where non‑compliant cladding installed on building the subject of a subdivision – Cladding installed on external walls of parts of building owned by individual lot owners, and on common property owned by owners corporation – Victorian Building Authority made a payment of financial assistance to owners corporation pursuant to a funding agreement for the purpose of cladding rectification works on the building – Whether the payment made to owners corporation in its own capacity only or in its own capacity and on behalf of owners of individual lots in the building – Whether State subrogated to rights and remedies of owners corporation only or owners corporation and individual land – Payment made to owners corporation and individual lot owners – State subrogated to rights of owners corporation and individual lot owners.
Building Act 1993, s 137F; Cladding Safety Victoria Act 2020, ss 2, 27, 28, 29, 30, 54; Owners Corporations Act 2006, s 3; Subdivision Act 1988, s 3(1); Interpretation of Legislation Act 1984, ss 37, 38.
Naqebullah v Victoria [2024] VSCA 307; ADCO Constructions Pty Ltd v Goudappel (2014) 254 CLR 1; Victims Compensation Fund Corporation v Brown [2003] HCA 54; Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; Elisha v Vision Australia Ltd [2024] HCA 50.
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| Counsel | ||
| Applicant: | Mr N Pane KC and Mr R Chaile | |
| First to Third Respondents: | Mr PB Murdoch KC with Mr DA Klempfner | |
| Fourth to Eighth Respondents: | No appearance | |
Solicitors | ||
| Applicant: | Corrs Chambers Westgarth | |
| First to Third Respondents: | Colin Biggers & Paisley | |
TABLE OF CONTENTS
Factual Context
Referred questions
Statutory scheme
Some history
Relevant statutory provisions and legislative context
Context: The disputed issues in the County Court proceeding
Question 1: Does s 137F require the payment to the owner of a lot of a building in order for the Crown to be validly subrogated to the rights of that lot owner?
The State’s submissions
LU Simon parties’ submissions
Conclusion – Question 1 should be answered ‘Yes’
Question 2
Question 2(a): In what capacity were the payments made by the Authority?
Submissions of LU Simon
Submissions of the State
Analysis
Section 137F confers power on the Authority to pay to the Owners Corporation on its own behalf, and on behalf of individual lot owners, which results in the State being subrogated to the rights of each of them
The payment was in fact made to the Owners Corporation on its own behalf and on behalf of the individual lot owners
The statutory scheme does not require the financial assistance to be paid by the State entity at the request of a specific owner, for the State to be subrogated to the owner’s rights
The construction does not provide for the State to be subrogated to the rights or remedies of lot owners who have not suffered loss
Form of answer to Question 2(a)
Question 2(b): Is the Crown subrogated to the rights and remedies of the individual lot owners?
Question 3: Who should pay the costs of the special case?
SCHEDULE OF PARTIES
EMERTON P
BEACH JA
HARRIS AJA:
This is a referral from the County Court of a special case stating questions of law for the opinion of the Court of Appeal.[1]
[1]Pursuant to s 76(1) of the County Court Act 1958, which provides that ‘[t]he court which tries or hears any civil proceeding may if it thinks fit reserve any question in the form of a special case for the opinion of the Court of Appeal, which opinion shall be given’.
The referred questions relate to provisions of the Building Act 1993 (Vic) enacted in the context of a State Government program to provide financial assistance to facilitate rectification of flammable external wall cladding on Victorian buildings. Section 137F of the Building Act provides for the State to be subrogated to the rights of an owner of a building, where financial assistance has been paid by or on behalf of the State to that owner in relation to cladding rectification work.
Financial assistance was paid on behalf of the State for rectification work on non‑compliant cladding installed on a building the subject of a plan of subdivision, containing apartments owned by individual lot owners and common property owned by an owners corporation. The cladding rectification work affected individual lots and the common property. The primary issue raised by the referred questions is whether the financial assistance paid to the owners corporation for the cladding rectification work entitled the State to be subrogated to the rights of the owners corporation only, or also to the rights of individual lot owners.
Factual Context
On 26 July 2024, Judge Wise stated a special case which included a section titled ‘Agreed Facts or Facts to be Assumed’. Those facts disclose that, in summary, the proceeding in the County Court involves claims of breach of provisions of the Domestic Building Contracts Act 1995 (Vic) by the respondent builder (LU Simon) in the construction of the Atlantis Towers Building, a 36 storey tower located at 284–300 Spencer Street. The Building is a multiple classification residential apartment and commercial hotel building, constructed by LU Simon pursuant to a Contract entered into with a developer in June 2007. It contains 205 residential apartments which are lots in a Plan of Subdivision and are owned by individual lot owners. The common property in the residential apartments component of the Building is owned by the Owners Corporation No. 1 PS600940E.
In the construction of the Building, LU Simon installed aluminium composite panels (ACPs) on the external walls of and as attachments to the Building, both on the common property and on lots owned by individual lot owners.[2] The special case states that it may be assumed by this Court that the ACPs were combustible and did not comply with provisions of the Building Code of Australia.[3] The ACPs had to be removed and replaced with compliant cladding.[4]
[2]Special case, [22].
[3]The inclusion of assumed as well as agreed facts in a special case is consistent with the practice of the Court of Appeal of accepting both agreed and assumed facts as being the facts on which the answers to the questions should be based. See, for example, Transport Accident Commission v Sweedman (2004) 10 VR 31 (Winneke P, Callaway and Nettle JJA); 35 [2] (Callaway JA); 40 [26] (Nettle JA); Mitchell v Latrobe Regional Hospital (2016) 51 VR 581 583–584 [5] (Osborn and Beach JJA, Forrest AJA).
[4]Special case, [24].
On or about 11 June 2020, the Victorian Building Authority entered into a Funding Agreement with the Owners Corporation, providing for financial assistance to carry out the removal and replacement of the ACPs, and money was subsequently paid by the Authority in accordance with the Funding Agreement.[5] The Funding Agreement provided for the payment in instalments of a grant to fund the design phase of the Project of achieving a rectification solution for the external cladding of the Building, identified as the property at 284–294 Spencer Street.[6] The Funding Agreement described the Owners Corporation as ‘Recipient’ of the grant, and provided for it to conduct the Project, to engage consultants and to undertake a tender process for engagement of a builder to construct the rectification solution.[7]
[5]Special case, [25]–[26].
[6]Funding Agreement, Annexure D to special case, Project Details items 1, 6, and 7; clause 2.
[7]Funding Agreement, Annexure D to special case, cover letter, clauses 5, 6, 7.
The cladding rectification work was carried out on the external walls of parts of the Building constituting the common property and the lots of individual lot owners.[8]
[8]Special case, [27].
The proceeding is brought in the name of the State of Victoria, alleging that it is subrogated to the rights of the individual lot owners and the Owners Corporation, against LU Simon and two of its directors. It is pleaded that the Contract for construction of the Building was a domestic building contract to which the provisions of the Domestic Building Contracts Act apply (and it is to be assumed for the purposes of the special case that this is correct).[9] It is alleged that LU Simon, in using the ACPs in the construction of the Building, breached warranties implied by ss 8(b), (c) and (f) of the Domestic Building Contracts Act to the effect that materials used in the construction would be good and suitable for the purpose for which they were used, and fit for the purpose of the Building, which included residential apartments; and that the work would comply with all laws and legal requirements. The claim against the two directors is that they, as officers of LU Simon, are liable for any amount which LU Simon is required to pay to the State pursuant to s 137F(3) of the Building Act, which provides that any right or remedy against an entity to which the Crown is subrogated is enforceable jointly and severally against the entity and the people who were its officers at the time the act or omission that gave rise to the right or remedy occurred.
[9]Special case, [19].
Referred questions
The following questions were stated in the special case for the opinion of the Court of Appeal:
Question 1: On its proper construction, does s 137F(1) of the Building Act 1993 (Vic) require the Victorian Building Authority or Cladding Safety Victoria (as the case may be) to make a payment to the owner of a lot of a building in order for the Crown to be validly subrogated to the rights and remedies of that lot owner against any person in relation to the installation or use of any non‑compliant or non‑conforming external wall cladding product, or other building work, that required the cladding rectification work to be undertaken?
Question 2: If the answer to Question 1 is “yes”:
(a)Was the first payment recorded in Schedule A to the State of Victoria’s amended statement of claim dated 15 September 2023 (included as Annexure A to this special case) made to the owners’ corporation:
(i)for and on its own behalf; or
(ii)for and on behalf of the individual lot owners; or
(iii)for and on behalf of both the owners’ corporation and the individual lot owners?
(b)On the proper construction of s 137F, is the Crown subrogated to all the rights and remedies of the individual lot owners against LU Simon in relation to the installation or use of any non‑compliant or non‑conforming external wall cladding product, or other building work, that required the cladding rectification work to be undertaken to parts of the Building comprising lots owned by individual lot owners in circumstances where the grant of financial assistance by the Authority was paid to the owners’ corporation established under the Owners Corporation[s] Act 2006 (Vic) in the capacity found in the answer to Question 2(a)?
Question 3: Who should pay the costs of the special case?
For the reasons which follow, we have determined that Question 1 should be answered ‘Yes’; Question 2 should be answered to the effect that the relevant payment was made to the Owners Corporation for and on behalf of the Owners Corporation and the individual lot owners; and the answer to Question 3 is that, subject to any further submissions, the first to third Respondents should pay the costs of the special case.
Statutory scheme
Some history
Section 137F was inserted into the Building Act by s 9 of the Building Amendment (Cladding Rectification) Act 2019, which commenced on 17 December 2019.
That and other amendments were made to the Building Act in response to a report by the Victorian Cladding Taskforce, which was established in 2017 to oversee an audit being undertaken to identify buildings fitted with combustible cladding. The audit had been commenced after the Lacrosse building fire in 2014. The Taskforce was charged with responsibility to oversee the continuing audit of buildings, propose options for rectification, and make recommendations on how to improve compliance and enforcement of building regulations to better protect the health and safety of building occupants.[10] The Taskforce recognised that owners corporations and individual property owners were ill‑equipped to undertake the rectification required. Among other things, the Taskforce recommended that the State take action to rectify buildings with high‑risk cladding and establish a dedicated cladding agency.
[10]Victoria, Parliamentary Debates, Legislative Assembly, 16 October 2019, 3546 (Richard Wynne, Minister for Housing, Minister for Multicultural Affairs, Minister for Planning).
In response to the Taskforce recommendations, the rate of the building permit levy was increased to provide $300 million in funding for the cladding rectification program to be undertaken by the State. Section 137F was enacted in this context to enable the State to recover the costs of rectification from ‘building practitioners or other private actors responsible for the installation of combustible cladding’.[11]
[11]Ibid 3547.
The following year, the government enacted the Cladding Safety Victoria Act 2020, establishing Cladding Safety Victoria as an independent statutory authority, subject to the general direction and control of the Minister for Planning.
Relevantly, the second reading speech for the Cladding Safety Victoria Bill 2020 said this in relation to the provision of funding for cladding rectification works:
Cladding Safety Victoria will need to prioritise those buildings classified as highest risk in the State‑wide Cladding Audit for financial assistance for cladding rectification work under the Cladding Rectification Program. Once a building has been prioritised, the owner will be invited to apply for funding assistance. The Bill empowers Cladding Safety Victoria to require appropriate information to be provided through that application process. Using that application information and its due diligence process, Cladding Safety Victoria will need to determine what amount of financial assistance will be granted and, where applicable, arrange for these payments to be made.[12]
[12]Victoria, Parliamentary Debates, Legislative Assembly, 4 September 2020, 2125 (Lily D’Ambrosio, Minister for Energy, Environment and Climate Change, Minister for Solar Homes).
The second reading speech also made it clear that the Cladding Rectification Program was conceived as a public safety measure:
The Cladding Safety Victoria Bill is a Bill to make our community safer.
For the owners who are concerned about a cladding fire that might put their families at risk. For the young couple renting an apartment who now feel afraid because they were told they couldn’t have a barbecue on their balcony. For the elderly couple who fear a fire evacuation in their high‑risk building because they are not stable on their feet.
But importantly all Victorians will benefit from a safer built environment, coupled with the confidence that the Government is also overhauling Victoria’s building legislative framework to ensure this never happens again.[13]
Relevant statutory provisions and legislative context
[13]Ibid.
Question 2 of the referred questions requires consideration of s 137F of the Building Act as it stood at the time the first payment of financial assistance was made to the Owners Corporation, which was on or about 20 November 2020.[14] Question 1 arises in the context of that payment but is not expressed to be limited to that time. As the statutory scheme relating to cladding rectification (of which the subrogation provisions in s 137F form part) has been the subject of amendment since its introduction, it is relevant to consider the terms of s 137F from the time of its introduction and as amended.
[14]The first date recorded as a remittance advice having been received for a payment in Schedule A to the State of Victoria’s amended statement of claim dated 15 September 2023, reproduced as Annexure D to the special case. The invoice for that payment is recorded as having been issued on 11 November 2020.
At the time of the first payment, ss 137F(1) and (2) provided:
(1)This section applies if–
(a)after the commencement of this Division, the Authority pays an amount to an owner of a building (the payee) by way of financial assistance in relation to cladding rectification work on the building; or
(b)before the commencement of this Division, an amount was paid by or on behalf of the Crown in right of the State of Victoria to an owner of a building (the payee) by way of financial assistance in relation to cladding rectification work on the building.
(2)At the relevant time, the Crown is subrogated to all the rights and remedies of the payee against any person in relation to the installation or use of any non‑compliant or non‑conforming external wall cladding product, or other building work, that required the cladding rectification work to be undertaken.
The ‘relevant time’ is defined in s 137F(10) as follows:
relevant time means –
(a)in the circumstances referred to in subsection (1)(a) – when the financial assistance is paid to the payee; or
(b)in the circumstances referred to in subsection (1)(b) – when this Division commences.
Subsections 137F(1) and (2) were later amended by s 54 of the Cladding Safety Victoria Act, to refer to payments made by that agency, rather than by the State or by the Authority. As amended, s 137F(1) provides:
This section applies if, after the commencement of section 54 of the Cladding Safety Victoria Act 2020, Cladding Safety Victoria pays an amount to an owner of a building (the payee) by way of financial assistance in relation to cladding rectification work on the building.
Section 54 commenced on 1 December 2020,[15] so that the amendments to ss 137(1) and (2) were in effect from that date.
[15]Cladding Safety Victoria Act, s 2; Special Gazette (No 624) 1 December 2020, 1.
Section 137F(2) as amended provides:
(2)When the financial assistance is paid to the payee, the Crown is subrogated to all the rights and remedies of the payee against any person in relation to the installation or use of any non‑compliant or non‑conforming external wall cladding product, or other building work, that required the cladding rectification work to be undertaken.
The Building Act does not (and did not prior to the 1 December 2020 amendments) include a definition of the phrase ‘owner of a building’. It defines the words ‘owner’ and ‘building’ in s 3(1) of the Act as follows:
building includes structure, temporary building, temporary structure and any part of a building or structure;
…
owner in relation to a building, means the owner of the land on which a building is situated …
There is an endnote to the definition of ‘owner’ in the Building Act, which refers to the definition of ‘land’ in s 38 of the Interpretation of Legislation Act 1984 (Vic). That definition is an expansive definition of ‘land’ and reads as follows:
land includes buildings and other structures permanently affixed to land, land covered with water, and any estate, interest, easement, servitude, privilege or right in or over land.
The definition of ‘building’ in the Owners Corporations Act 2006 (Vic) and the Subdivision Act 1988 (Vic) are also inclusive definitions, which expressly include ‘a structure and part of a building or a structure’.[16]
[16]Owners Corporations Act 2006 (Vic), s 3; Subdivision Act 1988 (Vic), s 3(1), paragraph (a) of the definition.
Although the other subsections of s 137F are not directly engaged by the referred questions, it is relevant to refer to them for the context that they provide in construing ss 137F(1) and (2) as required by the referred questions. At the time relevant to the referred questions, ss 137F(3) to (8) provided as follows:
(3)If a right or remedy to which the Crown is subrogated under this section is exercisable against an entity that is not an individual, it is enforceable jointly and severally against the entity and the people who were its officers at the time the act or omission that gave rise to the right or remedy occurred.
(4)If it is proved that an act or omission by an entity occurred without the knowledge or consent of an officer of the entity, a right or remedy is not enforceable as provided by subsection (3) against the officer in relation to the act or omission.
(5)The Crown may exercise its rights and remedies under this section in its own name or in the name of the payee.
(6)If the Crown brings proceedings under this section in the name of the payee, the Crown must indemnify the payee against any costs awarded against the payee in the proceedings.
(7)If, in exercising its rights and remedies under this section, the Crown recovers more money than the amount of financial assistance paid to the payee, the Crown must pay the difference to the payee after deducting costs incurred to recover the money.
(8)The payment of an amount referred to in subsection (1) in relation to cladding rectification work does not affect any right or remedy of the Crown by virtue of subsection (2) to recover from a person in relation to the installation or use of any non‑compliant or non‑conforming external wall cladding product, or other building work, that required the cladding rectification work to be undertaken.
The Cladding Safety Victoria Act, in addition to introducing amendments to s 137F of the Building Act, established the entity Cladding Safety Victoria.[17] It also, in Part 3 of the Act, which came into operation on 1 December 2020, established processes for the provision of financial assistance for cladding rectification work. A municipal building surveyor may notify Cladding Safety Victoria of a building that the surveyor considers requires cladding rectification work, and Cladding Safety Victoria is to prioritise those notified buildings for potential financial assistance.[18] Pursuant to s 29, Cladding Safety Victoria may invite ‘the owner or owners corporation of a building that has been prioritised under s 28 to apply to register for potential financial assistance for cladding rectification work’ and, after considering the application, it may accept or refuse to accept the application. On accepting an application to register the owner or owners corporation for potential financial assistance for cladding rectification work, Cladding Safety Victoria must decide whether to grant or refuse to grant that assistance.[19]
[17]See Cladding Safety Victoria Act 2020, Part 2, ‘Cladding Safety Victoria’, and s 5 which establishes Cladding Safety Victoria as a body corporate with perpetual succession.
[18]Cladding Safety Victoria Act, ss 27, 28.
[19]Ibid s 30.
Context: The disputed issues in the County Court proceeding
The referred questions address an issue which arises from the dispute in the pleadings in the County Court proceeding as to whether the State is entitled to be subrogated to the rights of lot owners in the Building.
The special case refers to the jurisdictional basis of the claim in the County Court (a claim under the Domestic Building Contracts Act which falls within the jurisdiction of both the County and Supreme Courts), the relevant legislation, and relevant parts of the pleadings, which are also annexed to the special case.
The Amended Statement of Claim pleads, in summary, that LU Simon constructed the Building and used cladding which was combustible, not fire‑resistant, and did not comply with the Building Code of Australia. It pleads that in December 2018 the Municipal Building Surveyor for the City of Melbourne issued a Building Notice to the Owners Corporation pursuant to the Building Act, stating that the Building was a danger to the life, safety or health of any member of the public or any person using the Building by reason of the cladding on the external walls of the Building. The Building Notice required the Owners Corporation to show cause why the cladding should not be removed from the Building. It is pleaded that in August 2019 the Municipal Building Surveyor issued a Building Order pursuant to s 111 of the Building Act requiring that the cladding on the external walls of the Building be replaced. The Amended Statement of Claim alleges that the conduct of LU Simon was in breach of warranties in the building contract, incorporated by s 8 of the Domestic Building Contracts Act.[20]
[20]Amended Statement of Claim, [11]–[16].
The State pleads in the Amended Statement of Claim that it is entitled to be subrogated to the rights of both the Owners Corporation for the Building, as the owner of the common property, and the individual lot owners in the Plan of Subdivision for the Building. The Owners Corporation and the individual lot owners are then referred to collectively as the Building Owners.[21] The State states the basis of this plea at paragraphs [17]–[19] of the Amended Statement of Claim:
[21]Ibid [8].
[17]On or about 11 June 2020, the [Owners Corporation], in its own capacity and for and on behalf of the individual lot owners, entered into a funding agreement with Cladding Safety Victoria (CSV), which, at that time, was a business unit of the Victorian Building Authority (VBA), a statutory authority established under the Building Act,
underpursuant to which CSV agreed to provide funding to the Building Owners to fund the performance of cladding rectification works in relation to the Building.…
[18]
Commencing inOn or around 20 November 2020, the VBA madewhenthe first payment of financial assistance to the Building Owners and, thereafter, CSV has made payments of money to the Building Owners in accordance with the funding agreement.…
[19]Upon
CSVthe VBA making the first payment referred to in the preceding paragraph, the State became subrogated to all the rights and remedies of the Building Owners against the Builder in relation to the Combustible Cladding, or other building work, that required cladding rectification work to be undertaken.Particulars
The subrogation of the Building Owners’ rights and remedies occurred by operation of law by reason of s 137F(2) of the Building Act, as was in force as at 20 November 2020, and s 22(2) of the Crown Proceedings Act 1958 (Vic).
By the Defence, LU Simon pleads, as relevant to the issue giving rise to the referred questions:[22]
[22]The Defence also pleaded certain matters relevant to the original Statement of Claim, by which it was alleged that Cladding Services Victoria made the relevant payments, at times prior to Cladding Services Victoria having been established. This pleading was addressed in the amendments to the Amended Statement of Claim by which it was alleged that the payments were first made by the Authority through Cladding Services Victoria which was then a business unit of the Authority, and then by Cladding Services Victoria.
[17] As to paragraph 17, they:
(a)admit that on 11 June 2020, the [Owners Corporation] in its own capacity entered into a funding agreement with the VBA for cladding rectification works in relation to the Building; but
(b)deny that any of the Building Owners other than the [Owners Corporation] (ie the individual lot owners) entered into any funding agreement, whether directly or through the [Owners Corporation], for cladding rectification works in relation to the Building;
(c)otherwise deny paragraph 17;
…
[18] As to paragraph 18, they:
(a)admit that the VBA and Cladding Safety Victoria (bring the corporate entity established by section 5 of the CSV Act, but not ‘CSV’ as defined in the amended statement of claim) have made certain payments to the [Owners Corporation] as recorded in the documents set out in Schedule A to the amended statement of claim;
…
(c)otherwise deny paragraph 18.
[19] They:
(a)deny paragraph 19;
(b)refer to and repeat paragraph 17 above; and
(c)otherwise say that to the extent the State asserts a right to be subrogated to all rights and remedies of the Building Owners, such claim is vexatious or otherwise an abuse of the process of the Court and ought to be stayed or struck out pursuant to Order 23 of the County Court Civil Procedure Rules 2018 as the Building Owners seek to maintain a separate claim against (among others) LU Simon for ‘Cladding Rectification Works’ in the sum of $3,380,454.00.
Particulars
The defendants refer to the Building Owners’ allegations contained in their statement of claim filed on or about 27 September 2023 in County Court proceeding CI‑23‑04711 (the Owners’ Proceeding).
The Owners’ Proceeding had initially been commenced on or about 28 November 2019 in the Victorian Civil and Administrative Tribunal (VCAT) and, by order of VCAT made on 18 August 2023 was referred to the County Court of Victoria as a more appropriate forum.
In its Reply,[23] the State pleads that the separate proceeding referred to in paragraph [19] of the Defence was maintained only as an alternative proceeding given LU Simon’s denial that the State was subrogated to the rights of individual lot owners, and that LU Simon was aware of the alternative nature of that proceeding. Orders had been made on 31 August 2023 for that proceeding and the proceeding in which the referred questions were stated to be heard together as related proceedings.[24]
[23]Dated 22 December 2023, and which was not referred to in the special case, but was filed in the Court of Appeal by agreement.
[24]Orders of Judge Anderson made 31 August 2023, which was not referred to in the special case, but was filed in the Court of Appeal by agreement.
The primary issue in dispute on the pleadings as relevant to the referred questions is, therefore, whether in circumstances where the Authority entered into the Funding Agreement for funding of rectification works with the Owners Corporation, and made payments pursuant to that agreement, the State is subrogated to the rights of both the Owners Corporation and the owners of individual lots in the Building (as pleaded by the State), or whether the State is subrogated to the rights of the Owners Corporation only (as pleaded by LU Simon).
Question 1: Does s 137F require the payment to the owner of a lot of a building in order for the Crown to be validly subrogated to the rights of that lot owner?
The State’s submissions
The State contends that Question 1 should be answered ‘No’, primarily on the basis that ‘the text of s 137F does not require the State to make a direct payment to an individual lot owner, and to construe otherwise is to introduce a qualification or limitation which finds no basis in the language of the provision’.[25] It is also said that it would defeat the purpose of s 137F if it was construed to require the State to make a direct payment to an individual lot owner, and result in inconvenience and absurdity if the State was required to make direct payments to individual lot owners.[26]
[25]Written Case on Behalf of the State of Victoria, [3].
[26]Ibid.
It is submitted that all that is required is that the State entity pay an ‘amount to an owner of a building’, by way of financial assistance (applying s 137F as it read prior to 1 December 2020) or ‘by way of a grant of financial assistance’ (post 1 December 2020). Payment ‘by way of financial assistance’ does not involve any requirement of directness but emphasises that the payment must provide financial assistance to a person. The ordinary meaning of the word ‘pay’ or ‘pays’ does not require a direct flow of funds from the payer to the payee.[27] The State submits that the absence of any need for ‘directness’ accords with the equitable principles of subrogation which establish that a right of subrogation arises when a party advances money to pay a liability that would otherwise be paid by another, and is intended to prevent conduct which is unconscionable, unconscientious or to prevent an inequitable outcome. An inequity would arise if a restrictive interpretation of s 137F was adopted that would preclude the State from recovering public funds expended for cladding rectification works from the parties responsible for having installed the non‑compliant cladding.[28]
[27]Ibid [12], citing Commissioner of State Revenue v Optical Superstore Pty Ltd [2018] VSC 524, [27]. There, Croft J referred to the definitions of ‘pay’ in the Macquarie Dictionary (6th ed, 2013) which included, relevantly, ‘to give (money, etc) as in discharge of a debt or obligation and ‘to satisfy the claims of (a person, etc) as by giving money due’, but also observed that the ordinary meaning of ‘payment’ is ‘not fixed and is context dependent’.
[28]Written Case on Behalf of the State of Victoria, [13].
As to the purpose of the provision, it is submitted that to construe s 137F as requiring the State to make payments to individual lot owners would be inconsistent with the purpose of s 137F as disclosed by extrinsic materials.[29] Specifically, reliance is placed on the description of the objective of s 137F in parliamentary debates relating to the Building Amendment (Cladding Rectification) Bill as being to address the ‘critical public safety issue’ of combustible cladding by allowing the State to assist the conduct of rectification work and then recover from wrongdoers in circumstances where owners corporations are ‘not adequately governed and resourced’ to address the issue.[30]
[29]Ibid [16]–[18].
[30]Ibid [16], referring to Legislative Assembly, Parliamentary Hansard, 16 October 2019, 3545, 3547; 4 September 2020, 2124 (Lily D’Ambrosio, Minister for Energy, Environment and Climate Change, Minister for Solar Homes).
The State also contends that s 137F is a ‘beneficial or remedial provision intended to facilitate the provision of financial assistance to owners of buildings exposed to the significant safety risks posed by combustible cladding’, and is therefore to be given a ‘large and liberal’ meaning.[31] It was acknowledged in oral submissions, however, that the relevant beneficial purpose was the establishment of the cladding scheme rather than the specific subrogation provision.
[31]Written Case on Behalf of the State of Victoria, [8].
Finally, it is submitted that if there are genuinely two alternative constructions of s 137F, to construe the section to require the making of a direct payment to individual lot owners in a building affected by a subdivision would result in inconvenience, and absurdity. It is said that such a construction would involve the State entering into agreements with each lot owner, and may involve the individual lot owners having to deal with contractors individually, which could give rise to complex questions as to how each payment was to be calculated. The time and complexity involved in such a process suggests that a construction which would require this is to be rejected as absurd.[32]
LU Simon parties’ submissions
[32]Written Case on Behalf of the State of Victoria, [19].
LU Simon submits that the State mischaracterises the issue in dispute. LU Simon contends:
The issue is not whether lot owners received a payment directly or indirectly but whether the payments made to the OC can be characterised as payments to the individual lot owners.[33]
[33]LU Simon and the two directors filed joint submissions and given their common position they are referred to in these reasons collectively as LU Simon. Written Case of the LU Simon Parties, 17 October 2024, [8].
LU Simon’s written submissions addressed the issues raised by the referred questions collectively in submissions directed to the conclusion that ‘a unilateral payment by the State to the [Owners Corporation] of money for cladding rectification work on individual lot owner’s lots without any request of the State from the individual lot owners for financial assistance is insufficient to subrogate the State to the rights and remedies of individual lot owners’.[34]
[34]Written Case of the LU Simon Parties, [4].
Specifically, LU Sumon submits that s 137F(1) involved several elements which must be satisfied for s 137F to be operative. They are:
(a)payment of an amount by the Authority;
(b)to the owner of a building (the payee);
(c)by way of financial assistance;
(d)in relation to cladding rectification work;
(e)on the building.
LU Simon, noting that ‘building’ as defined in the Building Act and other relevant legislation includes ‘any part of a building’, contends that the repeated references to ‘building’, first by reference to the payee, and secondly to the location of the cladding work, ‘means that the financial assistance must be in relation to cladding rectification work on the payee’s building (or part of the building). The financial assistance must be provided to the legal person who is the owner of the building or part of the building, which may be different in the context of a building the subject of a plan of subdivision.
Turning to the context, it is submitted that ss 137F and 137G reinforce the conclusion that a payee may only be an owners corporation or individual lot owner with respect to the cladding rectification work on their part of the building. Section 137F requires that the State must account to the payee for any amount the State receives in exercising subrogated rights which exceeds the financial assistance paid to the payee, and s 137G requires a payee to repay any financial assistance to the State to the extent that it receives or recovers an amount from another source with respect to the non‑compliant external wall cladding that required rectification work.
LU Simon contends that the administrative inconvenience of dealing with separate lot owners does not provide any basis on which to construe the Building Act. As the State is subrogated to the rights of the payee of the financial assistance, it is important to ensure that the State does not purport to exercise subrogated rights ‘on behalf of a lot owner who has suffered no loss in relation to the installation or use of any non‑compliant or non‑conforming external wall cladding product, or other building work, that required the cladding rectification work to be undertaken, as would be the case where a lot owner has purchased with knowledge of the defect’.[35]
[35]Written Case on Behalf of the LU Simon Parties, [34].
LU Simon also submits that s 137F is not a remedial provision, as the beneficial or remedial elements of the cladding rectification scheme are found instead in the provisions of the Cladding Safety Victoria Act, which provide for the provision of financial assistance to owners of buildings affected by combustible cladding. As a consequence, there is no basis for any liberal construction of the section.[36]
Conclusion – Question 1 should be answered ‘Yes’
[36]Ibid [27]–[29].
In answering Question 1 it is important to commence by paying close attention to its terms, as the consideration which is called for by the question does not engage some of the more specific matters raised by the parties’ submissions. Question 1 asks whether s 137F requires the relevant entity to
make a payment to the owner of a lot of a building in order for the Crown to be validly subrogated to the rights and remedies of that lot owner against any person in relation to the installation or use of any non‑compliant or non‑conforming external wall cladding product, or other building work, that required the cladding rectification work to be undertaken.
Section 137F(1) relevantly provides that the section applies (with the consequence that the Crown is subrogated to the rights and remedies of the payee) if:
(a)after the commencement of this Division, the Authority pays an amount to an owner of a building (the payee) by way of financial assistance in relation to cladding rectification work on the building; or
(b)before the commencement of this Division, an amount was paid by or on behalf of the Crown in right of the State of Victoria to an owner of a building (the payee) by way of financial assistance in relation to cladding rectification work on the building.
The only relevant difference in the language between Question 1 and s 137F(1) is that the question refers to payment to an owner of ‘a lot of’ a building, where s 137F(1) refers to a payment to ‘an owner of a building’.
Much of the State’s argument in support of its position that Question 1 should be answered ‘No’ was based on a misconception that the issue raised is whether s 137F requires the State to make a payment ‘directly’ to an individual lot owner to be subrogated to the rights and remedies of that lot owner.[37] A significant part of the State’s submissions on Question 1 was directed to that issue.[38] However Question 1 does not refer to a ‘direct’ payment, nor does it raise any issue as to whether it is necessary to make a direct payment to individual lot owners. The question simply asks whether the Authority or Cladding Safety Victoria must ‘make a payment to the owner of a lot of a building’ in order to be subrogated to their rights and remedies.
[37]Written Case on Behalf of the State of Victoria, [2].
[38]Ibid [2], [3], [10]–[12].
It is implicit in LU Simon’s submissions that the phrase ‘an owner of a building’ in s 137F is not the same as ‘an owner of a building or a lot in a building’. However, we are of the view that this submission also misconceives the effect of the section. The words ‘an owner of a building’ will, properly construed, encompass an owner of a lot in a building in the context in which it is found in s 137F.
As emphasised in the submissions of LU Simon, the Building Act defines the word ‘building’ to include ‘any part of a building or structure’. The reference to ‘an owner of a building’ in s 137F will, therefore, include the owner of part of a building. The word ‘owner’ is defined in the Building Act, in relation to a building, to mean ‘the owner of the land on which a building is situated’. This definition engages the expansive definition of ‘land’ in s 38 of the Interpretation of Legislation Act, there being nothing in the Building Act manifesting an intention to displace that definition.[39] That definition of ‘land’ in the Interpretation of Legislation Act is an inclusive definition, which includes
buildings and other structures permanently affixed to land, … and any estate, interest, easement, servitude, privilege or right in or over land.
[39]As reinforced by the reference in the Building Act endnote to the Interpretation of Legislation Act definition of ‘land’.
The interest of a lot owner in the individual lot in a stratified building is an interest in a ‘lot’ under the Subdivision Act.[40] ‘Lot’ is defined in s 3(1) of that Act as meaning ‘a part (consisting of one or more pieces) of any land (except a road, a reserve or common property) shown on a plan which can be disposed of separately and includes a lot or accessory lot on a registered plan of strata subdivision and a lot or accessory lot on a registered cluster plan’ (emphasis added). ‘Land’ is expressly defined in s 3(1) of the Subdivision Act as including ‘buildings’.[41]
[40]The Owners Corporations Act defines ‘lot’ as having the same meaning as it has in the Subdivision Act. It also includes a definition of ‘lot owner’ as ‘in relation to an owners corporation, means an owner of a lot affected by the owners corporation’.
[41]The Owners Corporations Act also defines ‘land’ as including ‘buildings and airspace’.
An interest in a lot of a building subject to subdivision will, therefore, constitute ‘an interest in or right over land’, noting the definition of ‘land’ in the Interpretation of Legislation Act. The ‘owner’ of that lot interest will consequently be an ‘owner of the land on which the building is situated’, within the definition of ‘owner’ in the Building Act. The interest of a lot owner will also constitute an interest in a ‘building’ ‘affixed to land’, which by reason of the expansive definition of land in the Interpretation of Legislation Act (and consistent with the SubdivisionAct definition) would be an interest in or right over ‘land’.
The owner of a lot in a building the subject of a subdivision[42] is, therefore, an ‘owner of a building’ in s 137F(1). The reference in that section to payment of an amount ‘to an owner of a building’ therefore encompasses payment to an owner of a lot in a building. Pursuant to s 137F(2), if a payment is made to an owner of a lot of a building, the State will be subrogated to the rights of that lot owner as payee.
[42]That is, the subject of a registered plan of subdivision.
We make two further observations as to the construction of s 137F.
First, LU Simon correctly submitted that the real issue in this case is whether the payments made to the Owners Corporation can be characterised as payments ‘to’ the individual lot owners. That is a matter more directly engaged by Question 2. The LU Simon submissions also suggested, however, that in a case of a building affected by a subdivision (with owners of individual lots and an owners corporation owning the common property), payments of financial assistance must be made separately to each lot owner and to the owners corporation, for only the amount referable to the cladding rectification work required for the part of the building owned by that particular owner, in order for the subrogation provision in s 137F(2) to apply.[43]
[43]See, for example, Written Case on Behalf of the LU Simon Parties, [33]–[34].
As subsequently discussed in more detail in response to Question 2, there is nothing in the terms of s 137F(1), nor in the context in which it appears in the Building Act, which supports such a construction. Section 137F(1) refers to a payment to ‘an owner of a building’ by way of financial assistance. That does not have the consequence that the payment must be made individually to each owner where there are multiple owners of a building or parts of a building. As a matter of statutory construction, and as acknowledged by LU Simon in oral submissions, s 37(c) of the Interpretation of Legislation Act provides that unless a contrary intention appears, singular words include the plural. The word ‘owner’ in s 137F(1) may therefore be read as ‘owners’. There is nothing in s 137F(1) and its context revealing any intention to displace the construction of the reference to a payment ‘to an owner’ as including a payment ‘to owners’, and so to permit a single payment to owners of different parts of a building.
Secondly, there is nothing beyond the express language of s 137F which would mean it should not be interpreted literally according to its terms, and applied accordingly, so as to give rise to the State’s right of subrogation to the rights and remedies of an owner or owners of a building (including a lot of a building) if a payment is ‘made to’ that owner or owners. It has already been determined by this Court that the scheme introduced by s 137F was intended to have, and does have, retrospective effect. In Naqebullah v Victoria,[44] this Court held that s 137F(3) (which provides that if a right or remedy to which the State is subrogated is exercisable against an entity that is not an individual, it may be enforced against the entity and people who were its officers at the relevant time) has a retrospective operation. The Court held that s 137F(3) was expressed with the necessary clarity of language to manifest an intention to operate retrospectively, as part of a section which was ‘designed to deal with a presently‑existing problem arising from past installation and use rather than future installation and use’,[45] arising in the context of the State having expended money to underwrite remediation.[46] Sections 137F(2) and (3) are part of a scheme enacted with the intention of enabling funding of remediation of past installation or use of flammable cladding, rather than to underwrite future installation or use.[47] Section 137F(1), as part of that scheme, should be construed according to its terms and by reference to that purpose.
[44][2024] VSCA 307.
[45]Naqebullah, [52], [55].
[46]Naqebullah, [54].
[47]Naqebullah, [52].
In construing the terms of s 137F(1) and answering Question 1, we do not regard any comparison or consistency with the principles of equitable subrogation to be necessary, or of assistance. The section creates a statutory right of subrogation, the scope and operation of which falls to be understood by construing the text, context and purpose of the section. The purpose is more readily to be identified in the language of s 137F(1) and by reference to relevant extrinsic materials bearing on statutory construction, than by comparison to equitable principles of subrogation.
Nor do we regard it as necessary to apply any principles relating to the liberal construction of beneficial statutory provisions. We have reservations about characterising s 137F as a beneficial provision in any relevant sense, in circumstances where the authorities referring to this principle of construction make clear that it is necessary to focus on the particular provision, rather than to any broad beneficial purpose of the overall statutory scheme.[48] More importantly, those principles are primarily a manifestation of the requirement that the statutory purpose be considered in all questions of statutory construction, and we have had regard to that purpose.[49]
[48]ADCO Constructions Pty Ltd v Goudappel (2014) 254 CLR 1, 16 [29] (French CJ, Crennan, Kiefel and Keanne JJ); Victims Compensation Fund Corporation v Brown [2003] HCA 54, [33] (Heydon J with McHugh ACJ, Gummow, Kirby and Hayne JJ agreeing).
[49]NSW Aboriginal Land Council v Minister Administering the Crown Lands Act (2016) 260 CLR 232, 270–271[92] (Gageler J) (see also French CJ, Kiefel, Bell and Keane JJ at [32]); ADCO Constructions, [29]; Victims Compensation Fund Corporation, [33].
For these reasons, we conclude that pursuant to s 137F(1) the State is validly subrogated to the rights and remedies of a lot owner of a building where a payment is made by the Authority by way of financial assistance in relation to cladding rectification work to that lot owner. The issue of whether a payment is, in fact, made ‘to’ a lot owner when it is made to an owners corporation is a separate issue, which in this case is raised by Question 2.
The answer to Question 1 should therefore be answered ‘Yes’.
Question 2
Question 2(a): In what capacity were the payments made by the Authority?
The essence of the controversy to which Question 2 relates is whether payments made by the Authority to the Owners Corporation were made to the individual lot owners as well as the Owners Corporation. Question 2(a) asks whether the first payment made by the Authority (on or around 20 November 2020),[50] was made to the Owners Corporation (i) for and on its own behalf; (ii) for and on behalf of the individual lot owners; or (iii) for and on behalf of both the Owners Corporation and the individual lot owners.
Submissions of LU Simon
[50]Schedule A to Amended Statement of Claim, Annexure A to the special case; see also agreed fact in Special Case at [26].
LU Simon’s case focussed on the proposition that s 137F(1), properly construed, had the effect that in order for the State to be subrogated to the rights of a payee, payments had to be made to individual lot owners for the rectification of their part of the building. It was contended that the section does not ‘countenance a payment by the Authority to an owner of part of a building, such as the owners corporation, in respect of a lot in the building owned by another person, because the owner, or owners, of a lot have rights and obligations concerning their rights that are distinct from those of other lot owners’.
LU Simon also submitted that:
[A] unilateral payment to the [Owners Corporation] of money for cladding rectification work on individual lot owners’ lots without any request of the State from the individual lot owners for financial assistance is insufficient to subrogate the State to the rights and remedies of individual lot owners.[51]
[51]Written Case of the LU Simon Parties, [4].
It was contended that without a request for the payment of financial assistance from the lot owner, payment to the Owners Corporation could not constitute payment to that individual owner.
LU Simon also made submissions based on the provisions of the Cladding Safety Victoria Act, which established Cladding Safety Victoria and introduced in Part 3 of the Act provisions relating to financial assistance for cladding rectification work. While acknowledging that the Cladding Safety Victoria Act did not come into operation until 1 December 2020, LU Simon submitted that provisions of that Act underline Parliament’s intention that the financial assistance must be paid to the legal person who is the owner of the building or the part of the building on which the cladding rectification work is undertaken, which will involve a distinction between owners of lots and the owners corporation.
It was said that the distinctions in the Cladding Safety Victoria Act between owners and owners corporations meant that the provisions of s 137F(1) relating to payment of financial assistance should be understood as limiting the power to make payments to owners with respect only to the land they own. In particular, s 29 of that Act provides for applications to register owners and owners corporations for potential financial assistance. Section 30(1) provides that on accepting such an application, Cladding Safety Victoria must ‘decide whether to grant or refuse to grant financial assistance to the owner or owners corporation of the building’. After making such a decision, Cladding Safety Victoria ‘must enter into a funding agreement with the owner or owners corporation of the building’: s 30(7). LU Simon submitted that the funding agreement must therefore be entered into ‘with an owner in relation to the owner’s land and with the owner’s corporation in relation to the owner’s corporation land’. It elaborated:
It would make no sense, for instance, to make a funding agreement with an owner, that is a lot owner, in relation to the owners corporation land, and there would be no point in making an agreement, funding agreement, with the owners corporation in relation to a lot owner's land because neither has relevant rights with regards to the other's building. And in those circumstances there would be no payment … by way of financial assistance for the performance of cladding rectification work on ‘the building’.
It was conceded that such a financial agreement could be entered into with the owners corporation of a building on its behalf and on behalf of owners of lots in the building. However, this would not achieve subrogation of rights under s 137F.
Noting that the relevant provisions of the Cladding Safety Victoria Act were not in force on 20 November 2020 when the payment which is the subject of Question 2 was made, nor when the Funding Agreement was entered into, it was submitted that
Parliament must have had s 137F(1) in mind at the time that it legislated for the process that would lead to financial assistance for cladding rectification work, and it has in mind, at the time of this legislation, that the process for financial assistance for cladding rectification work must take into account, on their own account, owners of lots.
LU Simon also submitted that to construe the provisions as permitting a payment to be made by the Authority (or subsequently Cladding Safety Victoria) to individual lot owners by paying money to the owners corporation, would have the effect of removing the rights of lot owners to address the rectification of their lot.
The LU Simon written case contained no analysis of how the Funding Agreement, pursuant to which the payment referred to in Question 2 was made, is to be construed. The submissions instead noted that the State has not particularised in its Amended Statement of Claim why the Owners Corporation was entering the Agreement ‘in its own capacity and for and on behalf of the individual lot owners’. It was also submitted that although it is asserted by the State that the Funding Agreement was signed by Mr Brkljaca on behalf of the Owners Corporation, that is not borne out by the execution clause of the Agreement, which is said to show that he ‘signed on behalf of the OC alone’. It is also said that there is no allegation by the State that Mr Brkljaca was authorised or empowered by any individual lot owner to contract with the Authority on their behalf.[52]
[52]Written Case of the LU Simon Parties, [22].
In oral submissions, LU Simon submitted that the Funding Agreement ‘nowhere involves the participation of the lot owners as individuals’, and that because it was an agreement between Cladding Safety Victoria as a unit of the Authority and the Owners Corporation, the only recipient of the funding (the payee) was the Owners Corporation, not the lot owners. It was said that the Funding Agreement could not be regarded as extending to financial assistance for cladding rectification work on the property of individual lot owners because the rectification of that property was not one of the functions and powers of the Owners Corporation. However, it was accepted that as at the time of the settlement of the referral of the questions for the special case, no issue was taken with the validity of the Funding Agreement as an agreement extending to the provision of financial assistance for cladding rectification works for the entirety of the Building.
Submissions of the State
The State’s primary position is that the answer to Question 1 should be ‘No’, so that Question 2 does not arise. In the limited submissions it made on Question 2, the State submitted that on a legal and a factual analysis, the payment of financial assistance pursuant to the Funding Agreement was a payment to both the Owners Corporation and the individual lot owners. The State relied on s 10 of the Owners Corporations Act, which provides that an agreement executed by an owners corporation will be taken to be executed on behalf of its members where that execution was necessary or convenient to enable the owners corporation to carry out its functions, powers, rights and obligations. The powers of the owners corporation include the powers in ss 48, 49 and 50 of the Owners Corporations Act, which empower an owners corporation to require lot owners to carry out repairs on their lot, and to authorise a person to carry out those repairs if the lot owner does not comply.[53]
[53]Written Case of the State of Victoria, [22]–[23].
The State submitted that this legal conclusion was consistent with the factual circumstances, which indicated that the individual lot owners had authorised the Owners Corporation to enter into the Funding Agreement with the State. The Funding Agreement was subject to conditions precedent that ‘the lot owners of the Building have approved the Owners Corporation’s entry into this Agreement in accordance with the Owners Corporations Act 2006’, and that the ‘lot owners of the Building have approved any necessary access to the Building for the purpose of carrying out the Project’. There was nothing to indicate that these conditions had not been satisfied.[54]
[54]Written Case of the State of Victoria, [24].
The State disputed that there was any requirement for an individual lot owner to have requested the financial assistance, noting that there is no such requirement in the language or purpose of s 137F. In response to the submission that the provisions of the Cladding Safety Victoria Act bear on the interpretation of s 137F of the Building Act prior to amendment, the State observed that it is only in very limited circumstances that a court may look at a subsequent amending Act to construe an earlier statutory provision. Given the clear construction of s 137F for which it contends, no such reference to the amending act is required. It submitted that if there is any implicit requirement for consent or assent to the financial assistance on the part of the individual lot owners, it should be inferred that the individual lot owners have consented or assented to the provision of the financial assistance, given that the financial assistance was provided for the purpose of the rectification works.
The State also submits that issues relating to any individual lot owner who may not have suffered loss do not bear upon construction of s 137F, but are matters for trial and in cases where the State in its own name, or in the name of affected owners, brings proceedings, may be addressed by the defence.
Analysis
Section 137F confers power on the Authority to pay to the Owners Corporation on its own behalf, and on behalf of individual lot owners, which results in the State being subrogated to the rights of each of them
In addition to contending that the financial assistance was not in fact paid by the Authority to the Owners Corporation on its own behalf and on behalf of the individual lot owners, LU Simon advanced a submission that s 137F, properly construed, did not contemplate the Authority making a payment in such a way. It submitted that s 137F required the Authority to make payments to the owners corporation and the owners of parts of the one building, in their separate legal capacities, with respect to their separate parts of the building, in order for the State to be subrogated to their rights and remedies. It was said that s 137F(1) did not contemplate a payment to the Owners Corporation acting in a capacity on behalf of the individual lot owners, or which otherwise extended beyond financial assistance referable to the Owners Corporation’s interest in the common property of the building.
We do not accept those submissions, for the following reasons.
In the context of a building affected by a subdivision, comprised of common property and individual lots, s 137F(1) in terms does require the payment of an amount by way of financial assistance in relation to cladding rectification work to owners of individual parts of the building. It requires payment to an owners corporation for cladding rectification work on the common property owned by it, and payments to individual lot owners with respect to cladding rectification work on their lot.
However, s 137F(1) is not, by its terms, restricted to payments made separately to each owner. In the case of a building where the cladding rectification work affects both common property and individual lots, the condition that the Authority ‘pays an amount to an owner of a building … by way of financial assistance in relation to cladding rectification work on the building’ is satisfied by a payment to owners of parts of a building for work on all of those parts of the building, or on the building as a whole. We have addressed above the construction of the section which, in combination with s 37 of the Interpretation of Legislation Act, allows for that outcome. There is nothing in the terms of s 137F(1), nor in the Building Act as a whole, which would require the Authority to make or have made such payments individually in circumstances where the entirety of the building, or large parts of it, are affected, rather than making or having made a single payment to the owners corporation on its behalf and on behalf of individual lot owners.
That is particularly the case, recognising that owners corporations are conferred with power under the Owners Corporations Act to take certain actions on behalf of their members, being the owners of individual lots,[55] which will be binding with respect to such lot owners. Section 10 provides that an owners corporation may ‘in its own name and on behalf of its members execute any document or do anything necessary or convenient to enable it to carry out its functions, powers, rights and obligations’, which ‘has effect as if executed or done by the members’.[56] The powers of the owners corporation under ss 48, 49 and 50 of the Owners Corporations Act include powers to require lot owners to carry out works on their lots, to recover as a debt the cost of repair or maintenance works undertaken on behalf of one or more lot owners, and to carry out repair or maintenance works on the lots if the owner does not comply.
[55]‘Members’ is not defined in the Owners Corporations Act. But see the definition of ‘land affected by an owners corporation’, which means ‘the lots the owners for the time being of which are members of the owners corporation together with the common property for which the owners corporation is responsible’.
[56]Section 10 of the Owners Corporations Act stated, as at the time of the execution of the Funding Agreement: ‘[a]n owners corporation may in its own name and on behalf of its members execute any document or do anything necessary or convenient to enable it to carry out its functions, powers, rights and obligations, and the document or thing has effect as if executed or done by the members’.
That section was amended with effect from 1 December 2021 by the Owners Corporations and Other Acts Amendment Act 2021, s 6. It continues, by ss 10(1) and (2), to authorise the execution by an owners corporation of documents or doing of anything necessary or convenient to enable it to carry out its functions, powers, rights and obligations; and that such a document or thing will have effect as if the document was executed or the thing was done by the members of the owners corporation. It also now provides by s 10(3) that an owners corporation may authorise a document to be executed by at least 2 lot owners of separate lots.
We also accept that the ordinary meaning of the word ‘pays’ in s 137F(1) would embrace a payment ‘to’ a person through an agent, so that this aspect of the language of s 137F(1) would comfortably encompass a payment to one owner on its behalf and on behalf of other owners.
Once it is understood that a payment referred to in s 137F(1) encompasses a payment by the Authority of financial assistance to an owners corporation on its behalf and on behalf of owners of lots in the building for cladding rectification work on parts of the building owned by them, it follows from the terms of s 137F(2) that such a payment will result in the State being subrogated to the rights and remedies of the owners corporation and of the lot owners. The amount has been paid to the owners corporation as payee and the owners of individual lots as payees under s 137F(1).[57] The State will then, pursuant to s 137F(2), be subrogated to the rights and remedies of those payees against any person in relation to the installation or use of any non‑compliant or non‑conforming external wall cladding product, or other building work, that required the cladding rectification work to be undertaken.
[57]Taking into account s 37 of the Interpretation of Legislation Act.
These observations relate to s 137F(1) as it stood as at 11 June 2020, the date of the Funding Agreement, and as at 20 November 2020, when the payment the subject of Question 2 was made. We do not accept LU Simon’s submission that the provisions of the Cladding Safety Victoria Act in force from 1 December 2020, which amended s 137F(1), suggest a contrary interpretation which would prevent an agreement for the payment to an owners corporation on its own behalf and on behalf of its members (or would in some way limit the effect of the Funding Agreement to operating on behalf of the Owners Corporation only). The use of subsequent amending legislation to construe a prior enactment is generally limited to circumstances where the terms of the prior enactment are ambiguous,[58] which is not the case for s 137F. Further, the assistance is generally limited to taking into account any indication provided by the amending act that the legislation as earlier enacted was not intended to cover specific circumstances.[59] Here, the amendments to s 137F and the specific processes provided in the Cladding Safety Victoria Act for payment of financial assistance do not say anything about the terms of the original s 137F(1). They simply provide that the entity newly established by the later Act, Cladding Safety Victoria, is henceforth to be the entity responsible for determining applications for and paying the financial assistance referred to in that section, and set out more specific processes by which that financial assistance is to be allocated and paid.
[58]Allina Pty Ltd v Federal Commissioner of Taxation (1991) 28 FCR 203, 212 (Lockhart, Burchett and Gummow JJ); Flanagan v Murdoch Community Services Inc (2010) 188 FCR 300, 310–311 [35] (Gordon J).
[59]Commissioner of State Revenue v Pioneer Concrete (Vic) Pty Ltd (2002) 209 CLR 651, 670 [54] citing Grain Elevators Board (Vic) v Dunmunkle Corporation (1946) 73 CLR 70, 86 (Dixon J); Hunter Resources Ltd v Melville (1988) 164 CLR 234, 255 (Dawson J).
Furthermore, we do not consider that any awareness Parliament may have had of the terms of the Cladding Safety Victoria Act which were not yet in force, including the provisions relating to the manner in which applications for potential financial assistance were to be made and payments were to be administered, is relevant to the construction of s 137F prior to its amendment. Nor would any such awareness provide material assistance in construing the Funding Agreement itself, in circumstances where assent to the Cladding Safety Victoria Act was not given until 4 November 2020, well after entry into the Funding Agreement.
We do not, in any case, consider that the terms of s 137F(1) as amended by the Cladding Safety Victoria Act, or the context provided by the new provisions relating to the process for the payment of financial assistance introduced by that Act, materially alter the position. It is not necessary for the purposes of the referred questions to express a definitive view on the operation of s 137F after 1 December 2020. However, it does appear to us that the language of ss 29(1) and 30(7) of the Cladding Safety Victoria Act, which provides for Cladding Safety Victoria to receive applications from, and to enter into a funding agreement with, ‘the owner or owners corporation of the building’, is broad enough to encompass an agreement with the owners corporation of a building which extends to cladding rectification works on the entire building, including individual lots. Taking into account that the references in ss 29 and 30 to the singular may include the plural,[60] and reading the reference to ‘building’ consistently with the definition in the Building Act as encompassing parts of a building, s 30(7) would also authorise making a single funding agreement with the owners of parts of the building subject to a subdivision, that is, the owners corporation as owner of the common property, and the owners of individual lots. That single funding agreement could be entered into by the owners corporation on its own behalf and on behalf of individual lot owners if the owners corporation was authorised to so act. Sections 137F(1) and 137F(2) would in those circumstances operate by reference to each of the owners being a payee.
The payment was in fact made to the Owners Corporation on its own behalf and on behalf of the individual lot owners
[60]Interpretation of Legislation Act, s 37.
It was an agreed fact identified in the special case that the Authority and the Owners Corporation entered into an agreement, and made payment ‘in accordance with the Funding Agreement’.[61] In these circumstances, the question as to the characterisation of the payment made on or around 20 November 2020 falls to be resolved by the terms pursuant to which the payment was made under the Funding Agreement.
[61]Special case, [25] and [26]. This also appears from the Statement of Claim at [17] and the Defence at [17(a)] where it is admitted that the Authority entered into an agreement with the Owners Corporation in its own capacity.
The Agreement is expressed to be between Cladding Safety Victoria (signed by its Chief Executive Officer on 11 June 2020) and the Owners Corporation (signed by Nevenka Brkljaca, a delegate of the Owners Corporation, to whom, according to the execution clause of the Agreement, power was delegated by a resolution of the Owners Corporation dated 22 January 2020).
Although Cladding Safety Victoria did not exist as a separate legal entity at that time, having been established as a body at the commencement of s 5 of the Cladding Safety Victoria Act on 1 December 2020, no issue is now taken on that basis as to the effectiveness of the Agreement. It is agreed (as stated in the special case and reflected in the amended pleadings) that because Cladding Safety Victoria was a business unit of the Authority at the time of the Agreement and at the time of the relevant payment on or around 20 November 2020, the Agreement was entered into by the Authority, and the payment was also made by the Authority.[62]
[62]Special case, [25], [26]. See also Amended Statement of Claim at [17] and [18] and Defence at [17(a)] and [18(a)].
The Owners Corporation also had legal power to enter into the Funding Agreement. It had power to enter agreements on behalf of individual lot owners who are members of the Owners Corporation, and which would have the effect of binding them. That power was conferred by s 10 of the Owners Corporations Act, which permits an owners corporation ‘in its own name and on behalf of its members [to] execute any document or do anything necessary or convenient to enable it to carry out its functions, powers, rights and obligations, and the document or thing has effect as if executed or done by the members’. LU Simon submitted that the Owners Corporation did not have relevant functions, powers or obligations to which any such document could relate, as the functions and powers under the Owners Corporations Act are circumscribed. The functions under s 4 relate only to the common property, and the powers under s 6 are circumscribed by reference to powers conferred by the Act or regulations or the Subdivision Act, or as necessary to enable it to perform its functions. We accept, however, that the powers of an owners corporation would extend to acting in respect of matters where repair to lots in the building is required, noting the provisions of ss 48 to 50 of the Owners Corporations Act.
Further, no reason was identified by LU Simon why ordinary principles of agency could not permit an owners corporation to enter into an agreement on its own behalf and on behalf of members. LU Simon submitted that the Act would not authorise the making of a funding agreement providing for an amount to be paid by way of financial assistance to an owner acting on its own behalf and on behalf of other owners of the building. It was, however, submitted that a building owner could, having entered into a funding agreement in its own capacity, then direct the Authority to pay the financial assistance to other owners. No reason was identified for that distinction, and we are unable to identify any basis for such a distinction in the statutory scheme.
The special case and the materials provided with it establish that the Funding Agreement was entered into by the Owners Corporation as agent for the individual lot owners, as well as on its own behalf. The conditions precedent in the Funding Agreement provided that the lot owners of the Building were required to approve the Owners Corporation’s entry into the agreement. Specifically, items 3(d) and (e) of the Project Details state that the Owners Corporation has provided the Authority with evidence to the Authority that:
(d)the lot owners of the Building have approved the Recipient’s entry into this Agreement in accordance with the Owners Corporations Act 2006 (Vic);
(e)the lot owners of the Building have approved any necessary access to the Building for the purpose of carrying out the Project.
LU Simon did not submit that these conditions were not complied with, but did submit that it was relevant that the State had not pleaded that the lot owners had conferred any authority on the Owners Corporation. However, the Defence annexed to the special case admits that the Funding Agreement was entered into for rectification works on the Building and there is no pleading in the Defence that the agreement was ineffective.[63] It is also an agreed fact in the special case that money was paid to the Owners Corporation by the Authority ‘in accordance with’ the Funding Agreement. It must be assumed, consistent with the special case, that the conditions were fulfilled and that the lot owners authorised the Owners Corporation to enter into the Funding Agreement on their behalf.
[63]Defence [17].
The Funding Agreement, construed according to its terms and apparent purpose, was an agreement for the Authority to provide financial assistance for the rectification of the whole of the cladding issues affecting the Building. That cladding rectification work involved both external parts of the Building owned by the Owners Corporation, and external parts of the Building owned by individual lot owners. The terms of the Funding Agreement which compel that conclusion are as follows (emphasis added):
(a)The conditions precedent to the Agreement expressed in the cover letter to the Agreement include the requirements that ‘the lot owners of the Building have approved the Recipient’s entry into this Agreement in accordance with the Owners Corporations Act 2006 (Vic)’ and that ‘the lot owners of the Building have approved any necessary access to the Building for the purposes of carrying out the Project’: items 3(d) and (e) of the Project Details in the cover letter to the Funding Agreement.[64]
[64]The cover letter states that the letter and the attached terms and conditions together constitute the Agreement. The Agreement terms refer internally to the Project details in the letter (see definition of ‘Project’ in cl 1.1 which states ‘Project means the project to be carried out by the Recipient, as described in item 7 of the Project Details’).
(b)Clause 2 of the Funding Agreement, which stipulates that the grant of financial assistance is only to be used by the Owners Corporation as Recipient for the purpose of carrying out the Project. The ‘Project’ is described in item 7 of the ‘Project Details’ in the cover letter to the Agreement as follows:
Preparatory design works required to achieve the Rectification Solution in accordance with the Program Guidelines, by:
(a) undertaking all necessary works to investigate the combustible external cladding used on the Building …
There is no distinction made between the combustible external cladding used on the common property of the Building owned by the Owners Corporation, and the lots in the Building owned by individual lot owners.
(c)Payment of the financial assistance (referred to in the Funding Agreement as the Grant) is conditional on the Project Execution Plan, which is likely to identify the scope of the cladding rectification work to be financed with the assistance of the Grant under the Funding Agreement. Clause 4.2(b) provides that payment of each Grant instalment is conditional on Cladding Safety Victoria being satisfied that the Project has been conducted in compliance with the Project Execution Plan.[65] Clause 5.1 imposes the obligation on the Owners Corporation as Recipient to assume all responsibility for conducting the Project activities in accordance with the Project Execution Plan. The Project Execution Plan is defined as the plan prepared and approved in accordance with cl 5.5 of the Agreement, which requires that the plan ‘set out the delivery methodology for how the Recipient intends to undertake the Project, and must contain the information required in the Program Guidelines’. The special case does not include a Project Execution Plan, nor the Program Guidelines. However, having regard to the way in which the ‘Project’ is defined in item 7 of the Project Details, those documents would be expected to extend to the whole of the cladding on the Building.
[65]It is also conditional on achievement to CSV’s satisfaction of the relevant Project Milestones, which are identified in Annexure A and do not give any indication of the scope of the work under the project.
(d)Clause 4.2(h) is directed to the preservation of the State’s rights under the Building Act, and refers expressly to both the Owners Corporation as Recipient, and the lot owners, as follows:
CSV being satisfied that the Recipient has, and has procured that each lot owner has, done everything which the Crown considers necessary or desirable to secure and preserve the Crown’s rights under the Building Act 1993 (Vic), and has not done anything to impair those rights, including the provision to CSV of all assistance in a timely manner, the signing of documents and provision of information to secure and preserve those rights …
(e)Clause 4.5 of the Agreement expressly contemplates the outcome that individual lot owners will receive the benefit of the grant of financial assistance, and makes provision to avoid any double recovery or compensation to them. It states in relevant part (underlining added):
Where any amounts are received by or on behalf of the Recipient [defined in the cover letter as the Owners Corporation of the Building] (or any of the lot owners of the Building, but excluding, for the avoidance of doubt, the registered proprietor from time to time of Lot A on Plan of Subdivision PS 600940E),[66] … as the result of an insurance claim or litigation proceedings, settlement of any claims, settlement of any litigation proceedings, or dividend in any liquidation, bankruptcy or deed of company arrangement relating to the use of combustible external cladding on the Building (Recouped Amounts), the Recipient must reimburse an amount equal to that Recouped Amounts remaining after payment by the Recipient or the lot owners (as applicable) of any reasonable third party costs in recovering the Recouped amounts capped at the Grant amount.
(f)Clause 5, which imposes the obligation on the Owners Corporation as Recipient to conduct the Project, contains clauses dealing with the Owners Corporation’s obligations with respect to lot owners. Clause 5.3 of the Agreement states:
The Recipient must, and must procure that each of its constituent lot owners (to the extent necessary), allow CSV (and any person authorised by CSV) to access any premises or locations at which the Project activities are performed or required to be performed (as reasonably request by CSV from time to time) …
[66]Nothing in the special case, nor in the submissions of the parties, was to the effect that the exclusion of Lot A had any significance to the referred questions.
These clauses make clear that the Funding Agreement was intended to facilitate rectification works on the external cladding on the whole of the Building, including both the common property and individual lots.
The terms of the Funding Agreement also show a specific concern to ensure that the State can preserve its rights under the Building Act, imposing obligations by reference to the Owners Corporation itself and by requiring the Owners Corporation to procure the cooperation of lot owners. Clause 5.1(c) provides (emphasis added):
The Recipient must, and must procure that each lot owner is required to, do everything which the Crown considers necessary or desirable to secure and preserve the Crown’s rights under the Building Act 1993 (Vic) …
The purpose of the Funding Agreement supports the conclusion that it provided for the provision of financial assistance to the Owners Corporation on its own behalf and on behalf of individual lot owners in order to facilitate cladding rectification work on the whole of the Building. The Funding Agreement is to be construed objectively, having regard to how its terms would have been understood by reasonable people in the position of the parties, in the context of the surrounding circumstances and the purpose and object of the transaction.[67] This agreement would have been understood by reasonable people in the position of the Authority and the Owners Corporation as being an agreement between them for the Authority to give financial assistance to the Owners Corporation for the purpose of rectifying all of the cladding issues across the whole of the Building as a single project. This was a practical and efficient solution and consistent with the recognition in ss 48–50 of the Owners Corporations Act that an owners corporation has powers and rights with respect to the repair and maintenance of lots in the building owned by individual lot owners. The alternative would involve the work of preparing individual agreements with the Owners Corporation and each lot owner in the Building, with the complexity of making individual assessments of the cladding rectification required on each lot owner’s part of the Building and estimating the costs of that specific work.
[67]See for example Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451, 461–462 [22] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ); Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165, 179 [40] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ); Elisha v Vision Australia Ltd [2024] HCA 50, [38] (Gageler CJ, Gordon, Edelman, Gleeson and Beech‑Jones JJ).
A solution applying to the whole of the Building, and the whole of the non‑compliant external cladding on the Building, is also consistent with the surrounding legislative context. That context includes the broad safety objectives of the Building Act[68] and, in particular, the legislative purpose in enacting Division 4 of Part 9 of the Building Act relating to ‘Cladding rectification subrogation’. In the second reading speech for the Bill, the Minister for Housing observed[69] that the various amendments to the Building Act, including the provisions relating to subrogation of rights to the State, were intended to implement changes to the regulatory regime to ‘increase safety and compliance of buildings with regulatory requirements’. It would not address the safety issues arising from use of combustible cladding to enter into agreements relating to a building comprising common property and individual lots which provided for rectification of only some of the non‑compliant combustible cladding (that on the common property). Rectifying common property but leaving other combustible cladding in place in parts of the building owned by individual lot owners would expose the entire building to the risk of fire.
The statutory scheme does not require the financial assistance to be paid by the State entity at the request of a specific owner, for the State to be subrogated to the owner’s rights
[68]See s 1(c) relating to the provision of ‘an efficient and effective system for issuing building and occupancy permits and administering and enforcing related building and safety matters’.
[69]Victoria, Parliamentary Debates, Legislative Assembly, 12 November 2019, 3545 (Mr Wynne, Minister for Housing, Minister for Multicultural Affairs, Minister for Planning).
LU Simon’s submission that the absence of any request by the individual lot owners to the State for financial assistance meant that the payment to them through the Owners Corporation was insufficient to subrogate the State to the lot owners’ rights and remedies[70] appeared to have two foundations: first, it is implicit in s 137F that the financial assistance is being provided ‘as a grant’; and secondly, if it is paid as a grant ‘then it’s because somebody has requested a grant and requested payment’.
[70]Written Case of the LU Simon Parties, [4].
Section 137F(1) does not refer to any requirement for a request to be made by the owner of a building before the payment by the Authority of an amount to the owner by way of financial assistance. That section as it was at the time of the first payment also did not describe the payment as a ‘grant’ or otherwise refer to a grant.
The second basis appears to assume that the provisions as to the process for payment of financial assistance under the Cladding Safety Victoria Act, which do in s 30 refer to ‘grants’ of financial assistance, had some bearing on the interpretation of s 137F prior to its amendment, or expressed what was implicit in the previous version of the Act. We have already rejected the proposition that the Cladding Safety Victoria Act can be used to construe s 137F in that way. There was no requirement to make a formal application for financial assistance of the kind now required by s 29 of the Cladding Safety Victoria Act prior to the entry into the Funding Agreement in this case, or before the payment of any financial assistance.
Section 137F(1) as amended now refers to payment ‘by way of a grant of financial assistance in relation to cladding rectification work’. After the amendments effected by the Cladding Safety Victoria Act, by reason of the new ss 29 and 30, the process for the payment of financial assistance requires an application to be made. As a matter of practice, such an application may be made following the identification and prioritisation of the building in question for cladding rectification work. That rectification work will have been identified as necessary, irrespective of the views of individual lot owners. In our view, there remains no basis in the Cladding Safety Victoria Act, or in s 137F as amended, to impose a requirement for a separate request for financial assistance to be made by each lot owner.
We do not, therefore, accept the submission that s 137F(1), at the time of the November 2020 payment, required the owners of parts of a building to individually request the payment of financial assistance, in order for the State to be subrogated to that owner’s rights and remedies.
Moreover, we have concluded above that the individual lot owners authorised the Owners Corporation to enter into the Funding Agreement with the State. This would be a sufficient basis to find that, in substance, the individual lot owners had authorised and implicitly requested the Owners Corporation to seek financial assistance from the Authority for the cladding rectification work on their lots on their behalf.
Finally, we consider it to be implicit in the nature and purpose of the Cladding Rectification Program, as described in the second reading speeches referred to above and as embodied in the legislation, that it does not depend on individual lot owners identifying the need for cladding rectification on their own small part of a building, costing it themselves and then applying individually for a grant of financial assistance in respect of that limited rectification. The audit overseen by the Authority identifies buildings in need of rectification and prioritises rectification works. Unless the works are carried out on the whole of the building, the public safety purposes of the legislation will be frustrated. In our view, it is nonsensical to interpret s 137 as requiring requests for financial assistance to be made by individual lot owners.
The construction does not provide for the State to be subrogated to the rights or remedies of lot owners who have not suffered loss
The LU Simon parties submit that there is a need for ‘an analysis on a lot by lot basis to ensure that a builder and its officers, such as the LU Simon parties, are not sued by the State purporting to exercise subrogated rights on behalf of a lot owner who has suffered no loss in relation to the installation or use of any non‑compliant or non‑confirming external wall cladding product, or other building work, that required the cladding rectification work to be undertaken, as would be the case where a lot owner has purchased with knowledge of the defect’. It is contended that because the financial assistance was provided ‘only to the OC for the rectification works’, this ‘creates an unauthorised dichotomy between the identity of the payee and the person whose rights and remedies are being subrogated to the Crown’.[71]
[71]Written Case of the LU Simon Parties, [34]–[35].
The fact that not all individual lot owners may have been affected by or have rights with respect to non‑compliant cladding is not an issue that could affect the construction of the Agreement, nor the proper construction and application of s 137F(1). If individual lot owners are not in fact affected by cladding rectification issues, they would have no relevant ‘rights or remedies … against any person in relation to the installation or use of any non‑compliant or non‑conforming external wall cladding product or other building’ for the purposes of s 137F(2) and no issue of the Crown being subrogated would arise. If the funds paid pursuant to the Agreement have been used for cladding rectification work (which appears to be agreed),[72] only the Owners Corporation and those lot owners affected by the installation of non‑compliant cladding will have benefitted and would, in practice, be the payees. If any lot owner who has benefitted from cladding rectification work purchased their lot ‘with knowledge of the defect’ (a possibility posited by LU Simon[73]) and that is a valid defence to the claim, then that lot owner will have no right or remedy. There will be no right or remedy of the lot owner to which State could be subrogated, regardless of the owner’s status as a payee. Nor, if that defence was made out, would LU Simon have a liability to that lot owner.
[72]Special case, [26].
[73]Written Case of the LU Simon Parties, [34].
The terms of the Agreement, read in the context of its objectively ascertained purpose and the statutory context in which the Agreement was made, indicate that the Agreement was an agreement with the Owners Corporation for provision of financial assistance for the Owners Corporation and on behalf of the individual lot owners. The first payment made to the Owners Corporation pursuant to that Agreement was a payment made for and on behalf of both the Owners Corporation and the individual lot owners.
Form of answer to Question 2(a)
Question 2(a) asks whether the payment was made to the Owners Corporation (i) for and on its own behalf; (ii) for and on behalf of the individual lot owners, or (iii) for and on behalf of both the Owners Corporation and the individual lot owners. Given the views we have expressed above, the payment falls within the description in paragraph 2(a)(iii). The payment also falls within the scope of paragraphs (a)(i) and (a)(ii) given that the wording of those paragraphs is whether it was made for and on behalf of the entities mentioned, and not whether it was made only for and on behalf of those entities. The answer to Question 2(a) will be that the payment is correctly described in paragraph 2(a)(iii), and was a payment for and on behalf of both the Owners Corporation and the individual lot owners.
Question 2(b): Is the Crown subrogated to the rights and remedies of the individual lot owners?
The issue raised by Question 2(b) is whether, having regard to the answer to Question 2(a), the Crown is subrogated to all the rights and remedies of the individual lot owners against LU Simon in relation to the installation or use of any non‑compliant or non‑conforming external cladding product, or other building work that required cladding rectification work to be undertaken.
For the reasons stated above in response to Question 1, s 137F(1), in referring to payment of an amount ‘to an owner of a building (the payee)’, encompasses payment to an owner of an individual lot in the building as well as to an owners corporation. Both the individual lot owner and the owners corporation can be the payee for the purposes of that subsection.
Section 137F(2) provides that the Crown is subrogated to all the rights and remedies of the payee against any person in relation to the installation or use of any non‑compliant or non‑conforming external wall cladding product or other building work, that required the cladding rectification work to be undertaken. Because the answer to Question 2(a) is that the payment was made to the Owners Corporation for and on behalf of both the Owners Corporation and the individual lot owners, that payment will result in the Crown being subrogated to the relevant rights and remedies of both the Owners Corporation and the individual lot owners.
The answer to Question 2(b) is therefore ‘Yes’.
Question 3: Who should pay the costs of the special case?
Section 76(2) of the County Court Act 1958 expressly provides a discretion for this Court to make such order as it thinks proper as to the costs of and occasioned by the hearing of referred questions on a special case.
In its written case, the State submitted, in response to Question 3, that costs should follow the event, observing also that the special case was made necessary by LU Simon’s stance that the State had not been validly subrogated to the rights and remedies of the individual lot owners.[74] LU Simon, in its responding written case and in its oral submissions, made no contrary submission.
[74]Written Case on Behalf of the State of Victoria, 18 September 2024, [28].
The referred questions have been substantially resolved against the LU Simon parties. Although the State submitted that Question 1 should be answered ‘No’, the substance of its submissions supported the construction of s 137F which we prefer. LU Simon was correct to say that the direction of the State’s submissions on Question 1 was misconceived. However, its own submissions embraced propositions which we have rejected. It is also relevant to the question of the costs of the special case that it was necessitated by the defence raised by the LU Simon parties in the County Court proceedings that the State was not validly subrogated to the rights of individual lot owners.
Subject to any further submissions, we think that it is appropriate in these circumstances that the LU Simon parties pay the costs of the special case.
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SCHEDULE OF PARTIES
STATE OF VICTORIA (DEPARTMENT OF TRANSPORT
AND PLANNING)
Applicant and L.U. SIMON BUILDERS PTY LTD (ACN 006 137 220) First Respondent JIM MOSCHOYIANNIS Second Respondent KANE DEVITT Third Respondent C & K ARCHITECTURE PTY LTD (ACN 058 301 232) Fourth Respondent KHANH HO Fifth Respondent TANAH MERAH VIC PTY LTD (ACN 098 935 490) Sixth Respondent CASELLO PTY LTD (FORMERLLY CASELLO CONSTRUCTIONS PTY LTD) (ACN 081 788 507) Seventh Respondent MULFORD PLASTICS PTY LTD (ACN 000 057 170) Eighth Respondent
1
15
0