State of Victoria v L.U. Simon Builders Pty Ltd and Ors (Ruling)
[2024] VCC 1075
•26 July 2024
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
BUILDING CASES LIST
Case No. CI-23-03724
| STATE OF VICTORIA (DEPARTMENT OF TRANSPORT AND PLANNING) | Plaintiff |
| v | |
| L.U. SIMON BUILDERS PTY LTD (ACN 006 137 220) and others according to the Schedule of parties | Defendants |
| and | |
| C & K ARCHITECTURE PTY LTD (ACN 058 301 232) (formerly trading as CK DESIGNWORKS) and others according to the Schedule of parties | Third Parties |
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JUDGE: | HIS HONOUR JUDGE WISE | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 19 July 2024 | |
DATE OF RULING: | 26 July 2024 | |
CASE MAY BE CITED AS: | State of Victoria v L.U. Simon Builders Pty Ltd and Ors (Ruling) | |
MEDIUM NEUTRAL CITATION: | [2024] VCC 1075 | |
RULING
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Subject:PRACTICE AND PROCEDURE – application for referral of questions by way of special case for the opinion of the Court of Appeal pursuant to s76 of the County Court Act 1958 (Vic)
Catchwords: Claim that aluminium cladding on high-rise building defective — Cladding rectified with funds provided by the State of Victoria to Owners Corporation — Claim by State of Victoria to be subrogated pursuant to s137F of the Building Act 1993 (Vic) to the rights and remedies of Owners Corporation and of individual lot owners of apartments — Defendant builder denies that subrogation right triggered as claimed — proper construction of s137F of Building Act referred for opinion of Court of Appeal
Legislation Cited: County Court Act 1958 (Vic); Building Act 1993 (Vic); Cladding Safety Victoria Act 2020 (Vic); Owners Corporation Act 2006 (Vic); Civil Procedure Act 2010 (Vic); Domestic Building and Construction Act 1995 (Vic)
Cases Cited:Owners Corporation 1 Plan No PS 707553K and Ors v Shangri-La Construction Pty Ltd (ACN 130 534 244) and Anor [2023] VCC 1473; Owners Corporation No 1 PS600940E and Ors v L U Simon Builders Pty Ltd (Building and Property) [2023] VCAT 630; Watson v Public Trustee [1984] VR 365; Mitchell v Latrobe Regional Hospital (2016) 51 VR 581; Transport Accident Commission v Sweedman (2004) 10 VR 31; Pezzimenti v Seamer [1995] 2 VR 32; Collins v Black [1995] 1 VR 409; Director of Public Prosecutions (Cth) v JM (2013) 298 CLR 135; Chief Commissioner of Police v Crupi (2023) 72 VR 280; Miller v Martin (Ruling No 1 of 2021) [2021] VSC 28; Collins v Black [1995] 1 VR 409; Henderson v Pioneer Homes Pty Ltd (1979) 25 ALR 179; AWB Ltd v Cole (No 2) (2006) 233 ALR 453; [2006] FCA 913
Ruling: The special case in the form of Annexure A to this Ruling referred to the Court of Appeal under s76 of the County Court Act 1958 (Vic)
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr N Pane KC with Mr R Chaile | Corrs Chambers Westgarth |
| For the Defendants | Mr D Klempfner | Colin Biggers & Paisley Pty Ltd |
| For the Third Parties | No appearance |
SCHEDULE OF PARTIES
| STATE OF VICTORIA (DEPARTMENT OF TRANSPORT AND PLANNING) | Plaintiff |
| v | |
| L.U. SIMON BUILDERS PTY LTD (ACN 006 137 220) | First Defendant |
| and | |
| JIM MOSCHOYIANNIS | Second Defendant |
| and | |
| KANE DEVITT | Third Defendant |
| and | |
| C & K ARCHITECTURE PTY LTD (ACN 058 301 232) (formerly trading as CK DESIGNWORKS) | First Third Party |
| and | |
| KHANH HO | Second Third Party |
| and | |
| TANAH MERAH VIC PTY LTD (ACN 098 935 490) (trading as THOMAS NICHOLAS) | Third Third Party |
| and | |
| CASELLO PTY LTD (ACN 081 788 507) (formerly CASELLO CONSTRUCTIONS PTY LTD) | Fourth Third Party |
| and | |
| MULFORD PLASTICS PTY LTD (ACN 000 057 170) | Fifth Third Party |
Table of Contents
Introduction
Background
This proceeding
The Judicial Resolution Conference
The application
Legal principles
Proper construction of Section 76 – interlocutory referral?
What is the meaning of “any question” in Section 76?
Can a special case be referred based in part on assumed facts?
Considerations relevant to the exercise of the power under Section 76
The State’s proposed special case
The parties’ submissions
Analysis
Whether the pleadings are such that a question or questions of law may be articulated in a way that they can be answered by the Court of Appeal?
Whether the parties have been able to agree sufficient facts (which may be supplemented by appropriate assumptions) so that the rendering of an opinion by the Court of Appeal is likely to resolve the dispute or shorten any trial?
Whether the rendering of the opinion of the Court of Appeal will be useful in finalising the litigation, whether by way of settlement or otherwise?
Whether the referral of a special case for the opinion of the Court of Appeal will advance the overarching purposes in Section 7 of the Civil Procedure Act 2010 (Vic) of facilitating the just, efficient, timely and cost-effective resolution of real issues in dispute?
Whether an appeal from whatever decision is made at first instance is inevitable?
Whether an expeditious resolution by an intermediate appellate court is necessary?
Whether there is likely to be saving of costs to the parties or of court resources if a special case is reserved?
Whether the rendering of that opinion by the Court of Appeal will provide certainty in relation to other cases such as to further the proper administration of the system of justice?
Conclusion
Annexure A
HIS HONOUR:
Introduction
1The plaintiff, the State of Victoria (“the State”), has applied for the Court to reserve certain questions in the form of a special case for the opinion of the Court of Appeal pursuant to s76 of the County Court Act 1958 (Vic).
2The questions are directed to whether, upon certain stated facts and assumptions, the State is entitled to the benefit of a statutory subrogation right provided under s137F of the Building Act 1993 (Vic) (“s137F”) to pursue the rights and remedies to which certain owners of property may be entitled for the installation of allegedly defective combustible aluminium cladding on a high-rise building.
3The issues before me are:
(a) whether the Court should exercise the power to reserve such questions for the opinion of the Court of Appeal; and
(b) if so, to properly formulate a special case for transmission to the Court of Appeal.
4For the reasons that follow, I have determined that the Court should exercise its discretion to reserve such questions for the opinion of the Court of Appeal in the form of the special case proposed by the State.
Background
5The first defendant, LU Simon Builders Pty Ltd (“LU Simon”) was the builder of the Atlantis Towers (“the Building”). The Building is a mixed residential, hotel and commercial building constructed in Spencer Street, Melbourne. The exterior of Building was clad with aluminium composite panels.
6Pursuant to a registered Plan of Subdivision, different parts of the Building have come to be owned by different persons. Relevant to this application, there are 205 Lots on the Plan, some of which include parts of the external façade of the building on which is affixed some of the cladding. Some of those lots are owned by individual apartment owners (“Lot Owners”), and some of them are common property owned by the Owners Corporation (“OC”).
7The use of such cladding on high-rise buildings has caused substantial safety concerns and a raft of complex litigation.
8This was described by his Honour Judge Macnamara in Owners Corporation 1 Plan No PS 707553K and Ors v Shangri-La Construction Pty Ltd (ACN 130 534 244) and Anor[1] as follows:[2]
[1][2023] VCC 1473.
[2]Ibid [1]-[4].
“1 According to the Court of Appeal:
‘Shortly before 2:23 am on 24 November 2014, a fire broke out on the balcony of apartment 805 of the 21 storey Lacrosse apartment tower in Latrobe Street, Docklands. The source of the ignition of the fire was an incompletely extinguished cigarette butt left in a plastic container by a person staying in the apartment, Jean-François Gubitta. The plastic container was sitting on a table with a timber top on the balcony of the apartment. The fire spread from the plastic container to the table and then to the nearby external cladding of the building.’ (Tanah Merah Vic Pty Ltd v Owners Corporation No 1 of PS613436T and Ors [2021] VSCA 72, [1])
2This conflagration generated complex litigation dealt with in the Victorian Civil and Administrative Tribunal in its Domestic Building List by Vice President Judge Woodward (as he then was) ([2019] VCAT 286), ending in the Court of Appeal, with the joint judgment from which I have just quoted. It attracted international attention, and triggered an upheaval in the State’s building regulatory regime.
The reverberations of the Lacrosse conflagration continue to this day. Almost six years after the fire, the Minister for Energy, Environment and Climate Change, introducing a bill to amend the Building Act 1993, said:
‘The Victorian Government is committed to removing the scourge of combustible cladding from our communities. The safety of building occupants is our top priority.
As the Victorian Cladding Taskforce detailed in its final report in July 2019, rectification of combustible cladding on buildings is complex and difficult. Different solutions will be required for different buildings. It will also take time—in large part due to the size and number of affected buildings and the nature of the building works to be carried out.
In the years that followed Melbourne’s Lacrosse Fire in 2014 and the tragic Grenfell fire in the United Kingdom, it’s become clear that often owners corporations are not adequately governed and resourced to deal with complex, large-scale building matters like cladding rectification.
Taking note of the advice of the Cladding Taskforce, the Government decided it needed to intervene to support owners of buildings assessed as higher-risk to rectify their combustible cladding. This support includes funding, but also a critical role for the Government in helping to advise and guide owners and owners corporations through the process of rectification. This is why the Government has established Cladding Safety Victoria.’ (Hansard Legislative Assembly, 4 September 2020, 2124)
3The Minister concluded, saying:
‘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’. (Ibid, 2126)”
9The government response included providing funding to enable the rectification works to be carried out. It also included a statutory mechanism by which the State could recoup such funding as it had laid out against any persons who would otherwise have been liable to the property owners for the installation of arguably defective cladding. This was done by providing to the State a statutory subrogation right in the form of s137F of the Building Act 1993 (Vic).
10Prior to 1 December 2020, that section provided:
“137F Subrogation
(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 noncompliant or non-conforming external wall cladding product, or other building work, that required the cladding rectification work to be undertaken.
(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.
(9) A reference in this section to the rights of a payee includes any right the payee may have under section 86 of the Sentencing Act 1991.
(10) In this section—
Officer—
(a)in relation to an entity that is a corporation—means an officer of the corporation within the meaning of section 9 of the Corporations Act; or
(b)in relation to an entity that is neither an individual nor a corporation means an officer of the entity within the meaning of section 9 of the Corporations Act;
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.”
11That section of the Building Act was subsequently amended from 1 December 2020 to read as follows:
“137F Subrogation
(1)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 a grant of financial assistance in relation to cladding rectification work on the building.
(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.
(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.
(9) A reference in this section to the rights of a payee includes any right the payee may have under section 86 of the Sentencing Act 1991.
(9A)Despite the amendment of this section by section 54 of the Cladding Safety Victoria Act 2020, any right of subrogation conferred on the Crown under this section as in force immediately before its amendment continues to have effect.
(10) In this section—
officer—
(a)in relation to an entity that is a corporation—means an officer of the corporation within the meaning of section 9 of the Corporations Act; or
(b)in relation to an entity that is neither an individual nor a corporation means an officer of the entity within the meaning of section 9 of the Corporations Act.”
12In June 2020, the State entered into a funding agreement with the OC to provide funding to rectify the cladding on the Building (“funding agreement”). The rectification work was successfully completed.
13As discussed further below, there is a dispute between the parties as to the basis upon which payments for the rectification works were made by the State to the OC. The issue is whether the OC received those payments on its own behalf alone or whether it did so on its own behalf as well as on behalf of the individual Lot Owners. That issue has implications for the extent to which the subrogation right under s137F has been triggered in favour of the State.
This proceeding
14The litigation over the Building has had a long history. A related proceeding brought by the OC and individual Lot Owners against LU Simon commenced in VCAT in 2019. That proceeding was eventually referred to this Court in August 2023 – but has now been settled.[3]
[3]The background is set out in Owners Corporation No 1 PS600940E and Ors v L U Simon Builders Pty Ltd (Building and Property) [2023] VCAT 630.
15This proceeding between the State and LU Simon (and its directors) was commenced on 13 July 2023 in which the State relied on the statutory subrogation provided under s137F.
16The State alleges that LU Simon is liable to the OC and the Lot Owners for breaches of warranties incorporated into the building contract[4] pursuant to which the Building was constructed. The State also alleges that it has been subrogated under s137F to the rights and remedies of the OC and the Lot Owners to be exercised against LU Simon.
[4] By the Domestic Building and Construction Act 1995 (Vic) (“the DBC Act”).
17The State also joined the directors of LU Simon to the proceeding, alleging that they are jointly and severally liable with LU Simon under s137F(3).
18In its Defence, LU Simon says that by reason of the manner in which the State provided the funding to complete the rectification works, the statutory right of subrogation under s137F has not been enlivened to the extent that the State alleges. In summary, it says that the State made the payments for rectification works to the OC alone and in its own right. As a consequence, it says that any subrogated right that the State may enjoy against LU Simon is limited to any liability it might have in respect of property owned by the OC, and not in respect of property owned by the individual Lot Owners.[5]
[5] Defence [17(a)]-[17(b)].
19The State says that the payments were made to the OC on its own behalf and on behalf of the individual Lot Owners. As a consequence, it says that the subrogated rights that it enjoys are not limited in the way LU Simon alleges. It says that it is also entitled to be subrogated to the right to pursue damages for the rectification works done to the property of the individual Lot Owners as well.[6]
[6] Amended Statement of Claim [17].
20The different approaches turn on the proper construction of s137F and on the proper legal characterisation of the basis upon which the payments were made by the State to the OC:
(a) In both its pre-1 December 2020 form and its formulation after that date, s137F applies if the relevant State instrumentality pays an amount to “an owner of a building (the payee)” for assistance in cladding rectification work;
(b) Prior to 1 December 2020, s137F(2), which articulates the subrogation right, provided:
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 noncompliant or non-conforming external wall cladding product, or other building work, that required the cladding rectification work to be undertaken.
(emphasis added)
(c) After 1 December 2020, s137F(2) provided:
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.
(emphasis added)
21As set out above, the State alleges that it made the payments to the OC on its own behalf and on behalf of the Lot Owners. Thus it says that its payment of such funds to the OC was at law a payment both to the OC and to the individual Lot Owners. In this way it says that the requirements of s137F(2) have been satisfied and its right to subrogation has been enlivened in respect of rights and remedies enjoyed by the OC as well as the Lot Owners.
22As also set out above, LU Simon denies this and says that payments were made by the State to the OC in its own right alone. It denies that the State made any payment to the Lot Owners, whether through the OC or otherwise. In the result, LU Simon says that the only right of subrogation that the State might enjoy under s137F is in respect of the rights and remedies of an owner of property who is a “payee” – and that the only payee is the OC. Thus, it says the State does not enjoy any right of subrogation in respect of the entitlements of the individual Lot Owners.
23LU Simon joined to the proceeding, as third parties, a number of others who were involved in the design and construction of the Building seeking contribution from them (“Third Parties”). It also says that the State’s claims are apportionable claims in respect of those Third Parties.
The Judicial Resolution Conference
24On 8 March 2024, her Honour Judge Burchell of this Court conducted a Judicial Resolution Conference (“JRC”) for this proceeding.
25During the course of that JRC, her Honour self-evidently considered that the uncertainty surrounding the proper ambit of the State’s right to subrogation was an impediment to further progressing settlement discussions. She appears to have concluded that the JRC would benefit from this question being heard and determined, and then the JRC reconvening.
26Therefore, her Honour made the following Order on 20 March 2024:
1.The Judicial Resolution Conference is adjourned to a date to be fixed after the hearing and determination of the separate question on liability on the subrogation or further Court order.
27On 6 June 2024, I made Orders setting down the subrogation question for preliminary determination on 5 October 2024, together with directions leading to the conduct of that hearing. The questions were formulated as follows.
Question 1:
On its proper construction, does s 137F(1) of the Building Act 1993 (Vic) (“s137F”) 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 made to the owners' corporation:
i.for and on its own behalf;
ii.for and on behalf of the lot owners; or
iii.for and on behalf of both the owners’ corporation and the lot owners?
b. On the proper construction of s137F, is the Crown subrogated to all the rights and remedies of the individual lot owners against the first defendant 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 Act 2006 (Vic) in the capacity found in the answer to Question 2(a)?”
28By those Orders, I also permitted the State to apply for an order referring a special case for the opinion of the Court of Appeal pursuant to s76 of the County Court Act 1958 (Vic) by a particular date.
The application
29The State issued this application on 28 June 2024 seeking such orders. The Summons attached a proposed form of the special case with attachments. The proposed form of the special case is attached as Annexure A to these reasons.
30The application is supported by an affidavit of Robert Anthony Kalenderian (“Mr Kalenderian”) affirmed on 28 June 2024. In that affidavit he set out the background to the application as well as the following:
[12]The question of whether the State has been subrogated to the rights and remedies of individual lot owners has been raised and is required to be determined in cases other than this proceeding. There are two other proceedings in which the same question has been raised by the relevant defendants:
(a)the first proceeding is proceeding no S ECI 2023 00698, which is currently being case managed by the Honourable Justice Croft in the Supreme Court of Victoria (Dixon Street Proceeding), and
(b)the second proceeding is proceeding no CI-24-00651, which I am instructed by the State that the Court has determined should be transferred to the Supreme Court of Victoria by notice of determination made on 19 June 2024 (Harvest Proceeding).
31In respect of the Dixon Street proceeding, although no defence had yet been filed to the Third Party claims, a letter written by the Third Party’s solicitors took issue with the State’s pleaded entitlement to subrogation under s137F as follows:
“More importantly, the SoC pleads that the OC, for and on behalf of the Owners, entered into a funding agreement and that payments were made to the Owners in accordance with the funding agreement. The documents exhibited to the Barbaro Affidavit, however, do not show any payments made directly to the lot owners and the SoC does not plead that the OC was authorised to enter into the funding agreement for and on behalf of the Owners.”[7]
[7]Paragraph 4.9 of letter from Kennedy’s Solicitors dated 8 May 2024: page 212 of Exhibit RK-2 to the Second affidavit of Robert Kalenderian affirmed 28 June 2024.
32I am satisfied that the Dixon Street proceeding raises similar objections to the State’s subrogation claim to those raised against the State in this proceeding.
33In respect of the Harvest proceeding, the State of Victoria, as the Second Third Party, has put on Points of Claim in which it makes claims against the plaintiff (“Hacer”), the builder. Pursuant to s137F, the State claims to be subrogated to the rights and remedies of the Owners Corporation (referred to as the “First Joined Party”) and the individual Lot Owners for rectification costs incurred in respect of allegedly defective cladding.[8]
[8]Paragraphs 29-31 Points of Claim at page 223 of Exhibit RK-2.
34In its defence to those Points of Claim, Hacer:
“den[ies] that any of the Owners other than the First Joined Party (i.e. the individual lot owners) entered into any funding agreement, whether directly or through the First Joined Party, for cladding rectification works in relation to the Building;[9] and
…
[9]Paragraph 29(b) of Defence at page 294 of Exhibit RK-2.
“den[ies] that CSV has made payments of money to any of the Owners other than the First Joined Party (i.e. the individual lot owners).”[10]
[10]Paragraph 30(b) of Defence at page 295 of Exhibit RK-2.
35I am also satisfied that the Harvest proceeding raises similar objections to the State’s subrogation claim to those raised against the State in this proceeding.
36Mr Kalenderian further deposes (by way of submission):
(a) That by reason of those other proceedings raising similar issues to those raised in this proceeding, there is potential for conflicting and inconsistent judgments to be delivered on the proper construction and effect of s137F;
(b) For that reason, it is desirable to have an authoritative decision handed down by the Court of Appeal on the point;
(c) That this proceeding is an appropriate vehicle for such a determination;
(d) This will result in efficiencies in the conduct of the three pieces of litigation concerned.
Legal principles
37Section 76 of the County CourtAct provides:
Court may reserve question for opinion of the Court of Appeal
(1)The 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.
(2)In such case no judgment or order shall be given or made in respect of any matter on which such question has been reserved until such opinion has been given, and the Court of Appeal may make such order as it thinks proper as to the costs of and occasioned by the hearing of such case.
38Although this provision is of long standing and has had statutory predecessors for a very long time, there is little by way of direct authority on its proper application.
Proper construction of Section 76 – interlocutory referral?
39I note that the provision refers to “the court which tries or hears any civil proceeding …”.
40The use of the alternative words “tries” or “hears” makes clear that the Court may make such a reference in the course of, or ancillary to, an interlocutory hearing as opposed to a final trial of a civil proceeding.
41This is confirmed by a statement of principle by the Full Court in Watson v Public Trustee[11] that “A question may be reserved in the form of a special case under s76 at any stage …” (emphasis added).
[11] [1984] VR 365, 366.
42Further, there are a number of cases in which questions have been referred to the Court of Appeal under s76 at an interlocutory stage.
43For example, Mitchell v Latrobe Regional Hospital[12] was a case in which the referral under s76 was made upon the hearing of an application that the plaintiff was not entitled to sue for general damages by reason of certain certificates having been given. The Court of Appeal heard the special case without negative comment on the fact that it arose in an interlocutory context.
[12] (2016) 51 VR 581.
44In Transport Accident Commission v Sweedman,[13] the Full Court decided a constitutional question upon the assumption that the plaintiff was liable in negligence, which issue was reserved for later argument if necessary.
[13] (2004) 10 VR 31, [26].
45Having regard to the setting down of the separate questions for preliminary determination before me, this application is made to the Court hearing those matters. In this way, the Court is empowered to entertain the current application under s76.
46I also consider that the hearing of the current application itself is the hearing of a civil proceeding for the purposes of s76.
What is the meaning of “any question” in Section 76?
47Although s76 states that “any question” may be reserved for the opinion of the Court of Appeal, it is established that only questions of law may be reserved under the section.[14]
[14] Pezzimenti v Seamer [1995] 2 VR 32 at 34 citing Collins v Munro (1887) 14 VLR 1.
Can a special case be referred based in part on assumed facts?
48As referred to at paragraph 40 above, it is clear that a special case may be referred at an interlocutory stage. If that occurs, it is highly unlikely that any findings of fact will have been made by the Court.
49A special case may be referred which assumes the facts set out in one party’s case to be true. To those assumed facts, a resulting question of law may be answered by the Court of Appeal that will render the case successful or unsuccessful when the evidence finally determines whether the assumed facts are true or not.
50In Director of Public Prosecutions (Cth) v JM[15] (“DPP v JM”), the Court likened the reservation of questions of law for a Court of Appeal to the procedure of demurrer. They said this at paragraph 33:
“As six members of the Court pointed out in Bass v Permanent Trustee Co Ltd, demurrer is ‘a form of procedure which assumes the truth of a particular set of facts’. As the joint judgment continued, ‘a demurrer assumes that the pleadings exhaust the universe of relevant factual material’. On that assumption, the answer provided on demurrer has utility for the parties, if no other evidence could add to or qualify the facts asserted in the relevant pleading, because ‘the parties’ rights will be determined when the evidence finally determines the existence or non-existence of those ‘facts’.’ Likewise, when a case is stated under s 302(2) of the C[riminal] P[rocedure] Act, by reference to the assertions of fact which the prosecution will seek to make good at trial, ‘the parties’ rights will be determined [by the jury] when the evidence finally determines the existence or non-existence of those ‘facts’.”
(footnotes omitted)
[15] (2013) 298 CLR 135.
51DPP v JM was discussed by the Victorian Court of Appeal in Chief Commissioner of Police v Crupi.[16] The Court had to consider whether the questions referred to it were questions of law or whether it was asked to draw conclusions of fact. The Court said this at paragraph 89:
“[Director of Public Prosecutions (Cth) v] JM does not call for a different conclusion. JM addresses a very different question. It proceeded on the orthodox approach of using assumed facts. The issue in dispute was the meaning of the statutory term ‘artificial price’. The Court determined that legal meaning (and no factual inquiry was required). However, it was necessary for the legal meaning to be ascertained in a factual context so that the exercise was not hypothetical. The prosecution identified the facts that it contended made out the charge. Those facts exhausted the universe of facts relied on by the prosecution to establish a contravention of the provision and the legal position could be ascertained on the basis of those facts.”
[16] (2023) 72 VR 280.
52The Court then quoted the passage from DPP v JM referred to in paragraph 50 above.
53These authorities allow me to conclude:
(a) that a special case referred under s76 may be made upon assumed facts, as long as the questions reserved for the Court of Appeal’s opinion are questions of law;
(b) the assumed facts must be sufficiently tied to facts that may be supposed to be relied upon by one of the parties so as to make the question reserved not hypothetical; and
(c) the question or questions reserved may not call on the Court of Appeal to decide questions of fact.
Considerations relevant to the exercise of the power under Section 76
54The words of s76 permit the Court to make a referral “if it thinks fit”. There are no express statutory preconditions to the exercise of the discretion or prescribed considerations to be taken into account, save that the Court must “think fit”. The Court, therefore, has an uncontrolled discretion which, on ordinary principles, must be exercised judicially, taking into account all of the facts and circumstances of the case.
55Tate JA in Miller v Martin (Ruling No 1 of 2021)[17] discussed the considerations relevant to the exercise of the discretion to refer a question to the Court of Appeal under the cognate provision to s76, s17B(2) of the Supreme Court Act 1986 (Vic). Her Honour said:
[30] The principles relevant to the reservation of a matter for appellate determination were discussed by Brooking J in Collins v Black, and have since been reiterated by the Court of Appeal. In short, there is no prescriptive criteria and there is no single factor alone that warrants a matter being so reserved; rather, everything depends on the circumstances of each case. However, relevant considerations may include whether the appeal is confined to a question of law alone, the inevitability of an appeal from whatever decision is made at first instance, whether there is an advantage of convenience and any need for expedition in respect of the resolution of the proceedings. A factor tending against reservation of a matter for appellate determination is that the appeal court will determine issues without having the advantage of those issues being defined and considered at first instance.
(footnotes omitted)
[17] [2021] VSC 28.
56In Collins v Black,[18] Brooking JA warned trial judges against a too-ready willingness to refer questions for the opinion of a Full Court. He particularly emphasised that to do so deprives the appeals court of the trial court’s judgment on the questions.
[18] [1995] 1 VR 409, 410.
57Having regard to these authorities, I consider that some of the matters a court might consider when weighing the discretion are as follows:
(a) The criterion of the exercise of the power to state a case or reserve a question is whether it is reasonable to exercise it;[19]
(b) Picking up the words of Young J in AWB Ltd v Cole (No 2)[20] in the context of whether a trial of a separate issue should be set down, the overarching consideration should be whether it is “just and convenient” to do so;
(c) Whether the pleadings are such that a question or questions of law may be articulated in a way that they can be answered by the Court of Appeal?
(d) Related to that, whether that opinion will be useful in finalising the litigation, whether by way of settlement or otherwise?
(e) Whether the parties have been able to agree sufficient facts (which may be supplemented by appropriate assumptions) so that the rendering of an opinion by the Court of Appeal is likely to resolve the dispute or shorten any trial?
(f) Whether there is likely to be saving of cost to the parties or of court resources if a special case is reserved?
(g) Whether an appeal from whatever decision is made at first instance is inevitable?
(h) Whether an expeditious resolution by an intermediate appellate court is necessary?
(i) Whether the rendering of that opinion by the Court of Appeal will provide certainty in relation to other cases such as to further the proper administration of the system of justice?
(j) Whether the referral of a special case for the opinion of the Court of Appeal will advance the overarching purposes in s7 of the Civil Procedure Act 2010 (Vic) of facilitating the just, efficient, timely and cost-effective resolution of real issues in dispute?
[19] Henderson v Pioneer Homes Pty Ltd (1979) 25 ALR 179, 185.
[20] (2006) 233 ALR 453; [2006] FCA 913, [26]-[40].
The State’s proposed special case
58In the proposed special case, the State has set out a series of facts and assumptions upon which the Court of Appeal is to act when stating its opinion on the reserved questions of law.
59The two assumptions relate to the following matters:
(a) that the building contract was a domestic building contract under the DBC Act, had certain warranties incorporated into it by that Act, and the OC and the Lot Owners had the right to sue LU Simon for breach of those warranties as if they were parties to the building contract; and
(b) that the aluminium cladding was combustible and was contrary to certain provisions of the Building Code of Australia.
60The right of the parties to contend to the contrary in any continuation of the proceedings is specifically reserved.
61Depending on the answers given by the Court of Appeal, the matters the subject of those assumptions will still have to be litigated, as will questions of apportionment and the Third Party claims.
62The facts are largely drawn from and conform to a Statement of Facts that the parties agreed for the purposes of the trial of the preliminary determination set down for hearing in October 2024.
63This is useful in that it necessarily and substantially narrows the ambit of any disputed matters of liability to which the question of law must be applied in reaching a final resolution of the issue of liability in the proceeding.
64The questions of law reserved for the opinion of the Court of Appeal are identical to those set down for preliminary determination.
65In this way it can be seen that the stating of a special case for the Court of Appeal will operate as an alternative to the preliminary determination set down for hearing in October 2024.
The parties’ submissions
66The State’s submissions largely echo the matters deposed to in Mr Kalenderian’s affidavit which I set out at paragraph 30 above.
67LU Simon supports the application for referral and the submissions of the State and adds no further submissions of its own.
68Mr N Pane KC, who appeared for the State with Mr Chaile of counsel, informed the Court that the State has instructed that, having regard to the significance of the proposed questions and to the multiple cases affected by their outcome, in the event that the State was unsuccessful on the hearing of the preliminary determination of those questions, it would inevitably appeal those questions.
69Mr D Klempfner of counsel, who appeared for LU Simon, informed the Court that although he had no firm instructions on the matter, if his client was unsuccessful on the questions, he considered it highly likely that his client would appeal.
70Based on these submissions, I consider that it is all but inevitable that these questions will be heard by the Court of Appeal.
Analysis
71The following matters lead me to the conclusion that it is appropriate to refer the questions proposed for the opinion of the Court of Appeal.
Whether the pleadings are such that a question or questions of law may be articulated in a way that they can be answered by the Court of Appeal?
72The subrogation question between the parties has been adequately pleaded and they have joined issue upon it. Paragraphs 17 and 18 of the Amended Statement of Claim clearly articulate how it is that the State says that it is entitled to be subrogated to the rights and remedies of the Lot Owners under s137F. LU Simon’s defence to those paragraphs is equally clear in alleging, in effect, that as the only payments were made to the OC in its own right and that no payments were made to the Lot Owners in any capacity, the subrogation right under s137F has not been triggered in respect of them.
73As discussed at paragraphs 18 to 22 above, this raises questions of the proper construction of s137F, whether in the agreed and assumed facts, payments were made to the OC partly on behalf of the Lot Owners, and whether in those circumstances the State is entitled to exercise the subrogation right under that section in respect of those Lot Owners. These are all questions of law upon which the Court of Appeal is able to provide an opinion.
Whether the parties have been able to agree sufficient facts (which may be supplemented by appropriate assumptions) so that the rendering of an opinion by the Court of Appeal is likely to resolve the dispute or shorten any trial?
74The parties have been able to agree a set of facts (and a few assumptions) that, in my view, will allow any opinion given by the Court of Appeal to be rendered useful in the further conduct of the litigation. Any further litigation on the question of liability will be focussed on the determination of the assumed matters to which the Court of Appeal’s authoritative statement of the law will be applied.[21] This will shorten the length of the remaining matters for trial. It will also reduce the scope of any resulting appeals that might be launched after trial.
Whether the rendering of the opinion of the Court of Appeal will be useful in finalising the litigation, whether by way of settlement or otherwise?
Whether the referral of a special case for the opinion of the Court of Appeal will advance the overarching purposes in Section 7 of the Civil Procedure Act 2010 (Vic) of facilitating the just, efficient, timely and cost-effective resolution of real issues in dispute?
[21] As well as other matters such as apportionment, quantum and the third party claims
75The fact that her Honour Judge Burchell considered the determination of the subrogation question to be a useful step in the ongoing conduct of the JRC, and then ordered the JRC to be reconvened following its determination, is a strong indicator that it was her Honour’s view that it would be useful in potentially leading to a settlement of the case.
76This Court should and does give considerable weight to this factor in its own right and in discharging its duty under s8 to further the purposes enumerated in s7 of the Civil Procedure Act 2010 (Vic) to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute in this litigation.
77This proceeding has had a long history. The parties are engaged in an alternative dispute resolution process that may result in the settlement of the litigation. They have been cooperative in the conduct of interlocutory processes to set down the determination of a preliminary question for trial and for the hearing of this application. From these matters, it can be inferred that the rendering of the opinion on the proposed questions by the Court of Appeal may well assist in bringing the parties to a settlement of the litigation.
Whether an appeal from whatever decision is made at first instance is inevitable?
Whether an expeditious resolution by an intermediate appellate court is necessary?
78The State and LU Simon are well-resourced and sophisticated litigants. As set out above, an appeal of the first instance decision is all but inevitable.
79In this way, it is likely that the Court of Appeal will be called upon to determine these questions of law, whether now or later.
80Taking into account other factors including the length of this litigation and that the opinion of the Court of Appeal may well assist in the resolution of the case, I consider that an expeditious resolution of these questions by the Court of Appeal is desirable.
Whether there is likely to be saving of costs to the parties or of court resources if a special case is reserved?
81Given my comments in paragraphs 74 to 80 above, I consider it likely to result in cost savings to the parties and more efficient use of court resources if a special case is reserved for the opinion of the Court of Appeal.
Whether the rendering of that opinion by the Court of Appeal will provide certainty in relation to other cases such as to further the proper administration of the system of justice?
82This case is but one of three that arise out of the same or similar circumstances. As discussed above, the same subrogation questions arise in the Dixon Street proceeding and the Harvest proceeding.
83I note that the Harvest proceeding contains in its Court heading a VCAT reference suggesting that it was commenced in 2017. I am unable to determine when the Dixon Street proceeding commenced in its first iteration. Suffice to say that I am satisfied that the interests of justice require that both of those proceedings be determined as efficiently and speedily as possible.
84I am also mindful of the possibility that three different trial courts might render inconsistent or conflicting decisions on the subrogation question. That would be undesirable. The pronouncement of an authoritative and binding determination on the question by the Court of Appeal in this case would aid in the coherent and proper administration of justice.
85I am satisfied that the determination by the Court of Appeal of the subrogation questions in this proceeding will be of assistance in resolving those proceedings, whether by way of settlement or to shorten their trials. In that way too, it will aid in the proper administration of justice.
Conclusion
86I am mindful of the caution expressed by Brooking JA in Collins v Black against trial judges too-readily acceding to requests to reserve questions for opinion to the Court of Appeal.[22]
[22] See paragraph 56 above.
87I have weighed that caution against the other factors discussed above and consider that this is a case in which it is “just and convenient” and “reasonable” to reserve for the opinion of the Court of Appeal a special case in the form attached to these reasons.
88The proposed special case will be transferred by the Registry of this Court to the Court of Appeal.
89I will make the following Orders on the plaintiff’s Summons filed 28 June 2024:
(1) The special case in the form of Annexure A to these Orders be referred to the Court of Appeal under s76 of the County Court Act 1958 (Vic).
(2) The costs of the Summons be reserved.
(3) Within fourteen (14) days of today’s date, the parties are directed to submit a Minute of Orders for the further conduct of these proceedings pending return of the opinion of the Court of Appeal on the special case.
- - -
Certificate
I certify that these 24 pages are a true copy of the ruling of his Honour Judge Wise delivered on 26 July 2024.
Dated: 26 July 2024Associate to his Honour Judge Wise
Annexure A
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION |
| BUILDING CASES LIST |
Case No. CI-23-03724
| STATE OF VICTORIA (DEPARTMENT OF TRANSPORT AND PLANNING) | Plaintiff |
| v | |
| L.U. SIMON BUILDERS PTY LTD (ACN 006 137 220) and others according to the Schedule of parties | Defendants |
| and | |
| C & K ARCHITECTURE PTY LTD (ACN 058 301 232) (formerly trading as CK DESIGNWORKS) and others according to the Schedule of parties | Third Parties |
SPECIAL CASE PURSUANT TO SECTION 76 OF THE
COUNTY COURT ACT 1958 (VIC)
INTRODUCTIONA.
Pursuant to a summons issued by the State of Victoria (“the State”), the Court has determined to refer this special case to the Court of Appeal under s 76 of the County Court Act 1958 (Vic), stating questions of law for the opinion of the Court of Appeal. For that purpose, this special case states facts, with references to annexed documents, and the questions for determination by the Court of Appeal. The explanations provided of the annexed documents in this special case are intended to assist the Court of Appeal in making reference to those documents, and do not limit the meaning or effect of the documents which may be found by the Court of Appeal. The documents annexed to this special case form part of the special case.
JURISDICTION AND PARTIESB.
The proceeding relevantly concerns a claim for a breach of ss 8(b), 8(c) and 8(f) of the Domestic Building Contracts Act 1995 (Vic) (“DBC Act”), which the State brings in reliance on its rights of subrogation under s 137F of the Building Act 1993 (Vic) (“Building Act”). The claim for a breach of ss 8(b), 8(c) and 8(f) of the DBC Act is made in respect of the construction, and condition, of the building known as “Atlantis Towers” (“Project”), which is located at 284 – 300 Spencer Street, Melbourne (“Building”). The proceeding is, therefore, one that falls within the jurisdiction of both the County Court and the Supreme Court (in that it may be heard and determined in either forum), and no question of exclusive jurisdiction arises.
The State is and was at all material times the Crown in right of the State of Victoria.
The First Defendant (“LU Simon”):
(a)is and was at all material times incorporated pursuant to the provisions of the Corporations Act 2001 (Cth) (“Corporations Act”);
(b)is and was at all material times capable of being sued in its own name;
(c)has been registered as a commercial builder under the Building Act since 1 July 2018;
(d)has been registered as a domestic builder under the Building Act since 10 July 2018;
(e)at all other material times, has had, among its directors, persons who have been building practitioners registered under the Building Act;
(f)is and was at all material times carrying on business as a builder within the meaning of s3 of the DBC Act.
The Second Defendant (“Moschoyiannis”) is, and was at all material times, a director of LU Simon and, therefore, an officer of LU Simon within the meaning of s 9 of the Corporations Act.
The Third Defendant (“Devitt”) is, and was at all material times, a director of LU Simon and, therefore, an officer of LU Simon within the meaning of s9 of the Corporations Act.
The third parties (“Third Parties”) were joined to this proceeding by a Third Party Notice filed by LU Simon on or around 20 February 2024 and comprise:
(a)C & K Architecture Pty Ltd (ACN 058 301 232), a company which provided architectural services in respect of the Project;
(b)Khanh Ho, the relevant building surveyor under the Building Act for the Project;
(c)Tanah Merah Vic Pty Ltd (ACN 098 935 490), a company which provided fire safety engineer consulting services in respect of the Project;
(d)Casello Pty Ltd (formerly Casello Constructions Pty Ltd) (ACN 081 788 507), a special building subcontractor for aluminium composite cladding; and
(e)Mulford Plastics Pty Ltd (ACN 000 057 170), an importer and distributor of aluminium composite cladding.
SECTION 137F OF THE BUILDING ACTC.
Section 137F was inserted into the Building Act by the Building Amendment (Cladding Rectification) Act 2019 (Vic). From its insertion, and until 1 December 2020, s137F provided:
137F Subrogation
(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.
(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.
(9)A reference in this section to the rights of a payee includes any right the payee may have under section 86 of the Sentencing Act 1991.
(10)In this section—
officer—
(a)in relation to an entity that is a corporation—means an officer of the corporation within the meaning of section 9 of the Corporations Act; or
(b)in relation to an entity that is neither an individual nor a corporation— means an officer of the entity within the meaning of section 9 of the Corporations Act;
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.
Following its insertion, s137F was amended by the Cladding Safety Victoria Act 2020 (Vic). From 1 December 2020, s137F provided (and continues to provide):
137F Subrogation
(1)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 a grant of financial assistance in relation to cladding rectification work on the building.
(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.
(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.
(9)A reference in this section to the rights of a payee includes any right the payee may have under section 86 of the Sentencing Act 1991.
(9A)Despite the amendment of this section by section 54 of the Cladding Safety Victoria Act 2020, any right of subrogation conferred on the Crown under this section as in force immediately before its amendment continues to have effect.
(10)In this section—
officer—
(a)in relation to an entity that is a corporation—means an officer of the corporation within the meaning of section 9 of the Corporations Act; or
(b)in relation to an entity that is neither an individual nor a corporation— means an officer of the entity within the meaning of section 9 of the Corporations Act.
THE PLEADINGSD.
By amended statement of claim dated 15 September 2023, the State seeks damages from LU Simon on the basis of alleged breaches by LU Simon of ss 8(b), 8(c) and 8(f) of the DBC Act in its construction of the Building. The State also seeks relief against Moschoyiannis and Devitt on the basis that they are jointly and severally liable for any relief ordered to be paid by LU Simon to the State under s 137F(3) of the Building Act. A copy of the amended statement of claim is Annexure A to this special case.
By defence dated 8 February 2024, each of LU Simon, Moschoyiannis and Devitt denies the claims made by the State. Importantly, as part of their
Defence, LU Simon, Moschoyiannis and Devitt deny that the State has been subrogated to the rights and remedies of the individual owners of lots in the Building (“individual lot owners”) 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 cladding rectification work to be undertaken in respect of the Building under s 137F of the Building Act. Accordingly, there is a joinder of issue as to whether the State has been subrogated to the rights and remedies of the individual lot owners so as to enable the State to claim, and to receive, the entirety of the amount of financial assistance that it provided for cladding rectification work at the Building. It is the joinder on this issue, which involves a question of law, which has given rise to this special case. A copy of the defence is Annexure B to this special case.
Further, by third party notice, LU Simon seeks damages, contribution or indemnity and declaratory relief against the Third Parties in the event that it is found to be liable to the State of Victoria. A copy of the third party notice is Annexure C to this special case.
AGREED FACTS OR FACTS TO BE ASSUMEDE.
The Building comprises a multiple classification residential apartment and commercial hotel building.
Owners Corporation No.1 PS600940E is (“OC”):
(a)an owners corporation within the meaning of the Owners Corporation Act 2006 (Vic);
(b)the owners corporation for the residential apartment part of the Atlantis Towers Building;
(c)the owner of the property identified as common property no 1 in Plan of Subdivision PS600940E (“Plan of Subdivision”).
The common property of the Building included certain portions of the external façade of the Building, as identified in the Plan of Subdivision.
There are 205 lots on the Plan of Subdivision which:
(a)are residential apartments in the Building;
(b)are owned by individual lot owners;
(c)include certain portions of the external façade of the Building, as identified in the Plan of Subdivision.
On or about 20 June 2007, LU Simon entered into a written contract with the developer, Avon Grange Pty Ltd (ACN 052 923 207) for the construction of the Building (“Contract”).
The works carried out by LU Simon pursuant to the Contract comprised both domestic building work and other work, as the Building comprised both residential and commercial components.
To the extent that it is necessary, it may be assumed by the Court of Appeal (without any derogation to the right of any party to contend to the contrary at any subsequent trial of this proceeding) that:
(a)the Contract is a ‘domestic building contract’ to which the provisions of the DBC Act apply;
(b)by reason of sub-paragraph (a), there were terms of the Contract by operation of s 8 of the DBC Act pursuant to which LU Simon warranted that:
(i) all materials to be supplied by LU Simon for use in the work carried out under the Contract would be good and suitable for the purpose for which they were used (s 8(b) of the DBC Act);
(ii) the work under the Contract would be carried out in accordance with and would comply with all laws and legal requirements including the Building Act and the regulations made under that Act (s 8(c) of the DBC Act); and
(iii) the work under the Contract and any material used in carrying out the work would be reasonably fit for purpose of the Building, being a building containing residential apartments (s 8(f) of the DBC Act); and
(c)pursuant to s 9 of the DBC Act, the OC and the individual lot owners may take proceedings against LU Simon for a breach of each of the warranties referred to in sub-paragraph (b) as if they were a party to the Contract.
At all material times:
(a)the construction of the Building was required to comply with the Building Code of Australia (“BCA”), which was adopted by and formed part of the Building Regulations 2006 (Vic) made under the Building Act 1993 (Vic);
(b)pursuant to cl C1.1 of the BCA, the Building was required to be of Type A construction, being the most fire-resistant type of construction prescribed under the BCA;
(c)pursuant to cl 3.1 of Specification C1.1 of the BCA, the external walls of the Building, being a building required to be of Type A construction, were required to be non-combustible;
(d)pursuant to cl CP2(a)(iv) of the BCA, the Building was required to have elements which would, to the degree necessary, avoid the spread of fire in the Building; and
(e)pursuant to cl 2.4 of Specification C1.1 of the BCA, a combustible material could only be used as an attachment to a building element if
it did not constitute an undue risk of fire spread via the façade of the Building.
LU Simon built the Building.
As part of the construction, LU Simon installed aluminium composite panels (“ACPs”) to the external walls of and as attachments to the Building. The ACPs were installed on and were attachments to:
(a)parts of the Building comprising common property; and
(b)parts of the Building comprising lots owned by individual lot owners.
To the extent that it is necessary, it may be assumed by the Court of Appeal (without any derogation to the right of any party to contend to the contrary at any subsequent trial of this proceeding) that the ACPs were combustible and did not comply with clauses 3.1 and 2.4 of Specification C1.1 of Volume 1 of the BCA.
The non-compliant ACPs had to be removed and replaced with compliant cladding (“cladding rectification work”).
On or about 11 June 2020, the Victorian Building Authority entered into a funding agreement with the OC by way of financial assistance in relation to the cladding rectification work (“Funding Agreement”). A copy of the Funding Agreement is Annexure D to this special case.
The Victorian Building Authority paid money to the OC in relation to the cladding rectification work, in accordance with the Funding Agreement.
The cladding rectification work was carried out on the external walls of:
(a)parts of the Building comprising common property; and
(b)parts of the Building comprising lots owned by individual lot owners.
QUESTIONSF.
The Court refers the following questions 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 s137F, 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 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?
SCHEDULE OF PARTIES
| STATE OF VICTORIA (DEPARTMENT OF TRANSPORT AND PLANNING) | Plaintiff |
| v | |
| L.U. SIMON BUILDERS PTY LTD (ACN 006 137 220) | First Defendant |
| and | |
| JIM MOSCHOYIANNIS | Second Defendant |
| and | |
| KANE DEVITT | Third Defendant |
| and | |
| C & K ARCHITECTURE PTY LTD (ACN 058 301 232) (formerly trading as CK DESIGNWORKS) | First Third Party |
| and | |
| KHANH HO | Second Third Party |
| and | |
| TANAH MERAH VIC PTY LTD (ACN 098 935 490) (trading as THOMAS NICHOLAS) | Third Third Party |
| and | |
| CASELLO PTY LTD (ACN 081 788 507) (formerly CASELLO CONSTRUCTIONS PTY LTD) | Fourth Third Party |
| and | |
| MULFORD PLASTICS PTY LTD (ACN 000 057 170) | Fifth Third Party |
0
9
0