Strata Plan 87060 trading as the Owners - Stata Plan No. 87060 v Loulach Developments Pty Ltd

Case •

[2025] NSWSC 413

•

30 April 2025

No judgment structure available for this case.

Supreme Court


New South Wales

Medium Neutral Citation: Strata Plan 87060 trading as The Owners – Stata Plan No. 87060 v Loulach Developments Pty Ltd [2025] NSWSC 413
Hearing dates: 28 April 2025
Date of orders: 28 April 2025
Decision date: 30 April 2025
Jurisdiction:Equity - Technology and Construction List
Before: Williams J
Decision:

Leave to amend granted.

Catchwords:

PRACTICE AND PROCEDURE – Proposed amendment to defendants’ Technology and Construction List Responses to introduce alternative limitation defences under s 18E of Home Building Act 1989 (NSW) in addition to existing limitation defences relying on that section – Where plaintiff opposed leave to amend on the sole basis that the proposed amendments were said to be futile – HELD: Amendments not futile. Leave granted.

Legislation Cited:

Civil Procedure Act 2005 (NSW) ss 56-60, 64

Home Building Act 1989 (NSW), ss 3B, 18A, 18B, 18C, 18E and Schedule 4, Part 19 Cll 106, 109

Home Building Amendment Act 2011 (NSW)

Cases Cited:

Alamdo Holdings Pty Ltd v Australian Window Furnishings (NSW) Pty Ltd [2006] NSWSC 1073

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

SZTAL v Minister for Immigration and Border Protection (2017) 262 CLR 362; [2017] HCA 34

Wardley Australia Ltd v State of Western Australia (1992) 175 CLR 514

Zurich Australian Insurance Ltd v Metals & Minerals Insurance Pte Ltd (2009) 240 CLR 391; [2009] HCA 50

Texts Cited:

N/A

Category:Procedural rulings
Parties: Strata Plan 87060 trading as The Owners - Strata Plan No. 87060 (ABN 3636 7849 628) (Plaintiff)
Loulach Developments Pty Ltd (ACN 073 810 796) (First Defendant)
Loulach Steel Pty Ltd (Second Defendant)
Representation:

Counsel:
Mr F Hicks SC with Mr D Byrne (Plaintiff)
Mr I G Roberts SC with Mr T Maltz (Defendants)

Solicitors:
JS Mueller & Co (Plaintiff)
Centurion Lawyers (Defendants)
File Number(s): 2019/198332
Publication restriction: N/A

Judgment

  1. The plaintiff owns the common property in Strata Plan 87600, which is a multi-storey building located in North Parramatta containing residential lots and three commercial tenancies together with basement carparking.

  2. The first defendant was the developer of the building and the registered owner of the property at all material times until the common property vested in the plaintiff upon registration of the strata plan on 25 July 2012. The plaintiff is the immediate successor in title to the first defendant in respect of the common property.

  3. The second defendant carried out the construction of the building.

  4. The first and second defendants – which I will refer to as the developer and the builder respectively – are related companies.

  5. The plaintiff commenced these proceedings against the developer on 26 June 2019. The plaintiff subsequently amended to join the builder as the second defendant to the proceedings, but that amendment took effect from 26 June 2019 pursuant to an order made by the Court on 13 May 2020. The plaintiff sues the developer and the builder for, inter alia, alleged breach of statutory warranties under s 18B(1) of the Home Building Act 1989 (NSW) (the HB Act).

  6. The developer and the builder do not admit that the work undertaken by the builder was residential building work within the meaning of the HB Act. In paragraph 9 of their respective Technology and Construction List Responses, [1] the developer and the builder contend that they did not enter into a contract for the building work. They plead that the builder carried out that work under informal, ad hoc arrangements with the developer in circumstances where both companies are owned by the same group of extended family members. They therefore deny that the HB Act applies. [2]

    1. The developer’s Further Amended Technology and Construction list Response filed on 27 July 2022 and the builder’s Amended Technology and Construction list Response filed on 27 July 2022.

    2. HB Act, s 18A.

  7. In paragraph 23 of their List Responses, each of the developer and the builder plead that, if the HB Act is applicable (which they deny), then the plaintiff’s entire claim is barred by s 18E of the HB Act, read together with s 3B of the HB Act, because the works were completed within the meaning of s 3B of the HB Act more than seven years prior to the commencement of these proceedings on 26 June 2019.

  8. The following particulars are set out in support of that contention:

“Particulars

Practical Completion with the meaning of s.3B HBA, occurred more than seven years (adopting the period in s 18E, HBA as it may apply to the work addressed by these proceedings) prior to the commencement o the proceedings having regard to: (i) the proceedings were commenced against the First Defendant on 26 June 2019; (ii) the proceedings were commenced against the Second Defendant on 20 May 2020, pursuant to orders which had the effect that the amendments made to join the Second Cross-Claimant took effect from 26 June 2019; (iii) The last inspection “… (d) after the building work has been completed and prior to any occupation certificate …” occurred on 16 June 2012 and then 20 June 2012 (the Occupation Certificate itself is dated 4 July 2012); and (iv) the First Defendant will ask the court to infer that the work was complete within the meaning of s. 3B HBA, no later than when the last inspection took place (or earlier, depending on any further evidence adduced).

Further particulars may be able to be provided following discovery, subpoenas and the preparation of evidence.”

  1. The seven-year limitation period referred to in the existing paragraph 23 refers to the period stipulated in s 18E of the HB Act before it was amended by the Home Building Amendment Act 2011 (NSW) (the 2011 Amendment Act) to provide that proceedings for breach of a statutory warranty must be commenced before the end of a warranty period of six years in respect of major defects. That amendment commenced on 1 February 2012.

  2. Part 19 of Schedule 4 to the HB Act contains transitional provisions relating to the 2011 Amendment Act, including (emphasis added):

“106   Purpose and operation of amendments

The amendments made by the amending Act are made for the purpose of the avoidance of doubt and accordingly (except as otherwise provided by this Part) those amendments extend to—

(a)    residential building work commenced or completed before the    commencement of the amendment, and

(b)    a contract of insurance entered into before the commencement of the    amendment, and

(c)    a loss or liability that arose before the commencement of the    amendment, and

(d)   the notification of a loss before the commencement of the amendment.

…

109   Proceedings for breach of statutory warranties

The amendment made to section 18E by the amending Act does not apply in respect of a contract for residential building work entered into before the commencement of the amendment.”

  1. Relevantly for present purposes, cl 109 provides for an exception to the cl 106(a) extension of the 2011 amendments to residential building work commenced or completed prior to 1 February 2012. Insofar as the 2011 amendments concern the reduction of the s 18E limitation period from seven years to six years after completion of the work, those amendments do not apply “in respect of a contract for residential building work entered into” before 1 February 2012.

  2. The developer and the builder now seek leave to amend their respective List Responses by pleading an alternative limitation defence relying on a six-year limitation period under s 18E of the HB Act as amended by the 2011 Amendment Act. The proposed amendment involves the addition of the following paragraph 23A in each List Response:

“Alternative s 18E HBA limitation defence

23A. The limitation period under the applicable edition of s 18E of the HBA is a six-year limitation period and therefore the Plaintiff’s HBA claims are time barred.

Particulars

(i) Completion took place by no later than 4 July 2012, either pursuant to s 3B HBA (see [23] above), or pursuant to s 3C HBA on the date of issue of the final occupation certificate (being 4 July 2012).

(ii) Section 18E was amended in 2011 by the Home Building Amendment Act 2011 and introduced a maximum 6-year limitation period. This six-year period is applicable due to that amendment’s retrospective effect: Sch 4 Pt 19, cl 106(a); and the fact that (as pleaded above at [9(a)]) no contract was ‘entered into’ prior to commencement of the amended s 18E in 2012: Sch 4 Pt 19, cl 109. In all subsequent amendments of s 18E, the applicable maximum limitation period was also 6 years.

(iii) The Defendants will not assert that any of the works were non-major works, and thus do not rely on any 2-year limitation period under s 18E HBA.”

  1. The plaintiff opposes the paragraph 23A amendments on the sole basis that they are futile. It is not submitted that the proposed amendments would be contrary to the overriding purpose, the dictates of justice, or any other guiding principle in ss 56-60 of the Civil Procedure Act 2005 (NSW) for any other reason.

  2. Thus, the question whether the Court should exercise the discretion under s 64 of the Civil Procedure Act to grant leave to amend to each of the developer and the builder by inserting the proposed paragraph 23A into their List Response turns on whether each proposed amendment is so obviously untenable that it cannot possibly succeed and does not admit of argument. [3]

    3. Alamdo Holdings Pty Ltd v Australian Window Furnishings (NSW) Pty Ltd [2006] NSWSC 1073 at [11], referring to the well-known passage from the judgment of Barwick CJ in General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125 at 129.

  3. In relation to the builder, the plaintiff submits that the proposed amendment is futile because:

  1. there plainly was a contract entered into between the developer and the builder, even if it was not in writing and even if it did not comply with the other requirements of Part 2 of the HB Act;

  2. it is beyond doubt that the builder commenced works prior to 1 February 2012 and the contract therefore must have come into effect – that is, been “entered into” within the meaning of cl 109 of Part 19 of Schedule 4 to the HB Act – before 1 February 2012; and

  3. the 2011 amendment to s 18E of the HB Act reducing the limitation period from seven years to six years therefore does not apply by reason of clause 109 of Part 19 of Schedule 4 to the HB Act, and the applicable limitation period under s 18E is seven years as pleaded in the existing paragraph 23 of the builder’s List Response.

  1. Alternatively, the plaintiff submits that, if there was no contract between the developer and the builder (as each defendant contends in paragraph 9 of its List Response), then the statutory warranties under s 18B(1) of the HB Act will not be applicable to the builder and the limitation period under s 18E will be irrelevant to the builder’s defence of the plaintiff’s claims.

  2. I reject those submissions. As the builder submitted, the question whether there was a contract between it and the developer is a contested issue of fact and law to be determined at trial. Senior counsel for the plaintiff very properly acknowledged that the Court could not determine that question on this amendment application. As I have already mentioned, the builder has pleaded that it carried out the work pursuant to informal, ad hoc arrangements with the developer. It is common ground that the development consent was granted on or about 10 June 2009 and the occupation certificate was issued on or about 4 July 2012. It must follow, as the builder submitted, that if the arrangements between the builder and the developer are found to have been contractual at trial, there is likely to be a contest about whether those arrangements are properly characterised as a single contract, or as several contracts entered into between the builder and the developer at various different times during the period in which the works were carried out. I therefore reject the plaintiff’s submission that it is beyond doubt that any contract must have been entered into prior to 1 February 2012. The builder’s contention that, by reason of cl 109 of the transitional provisions, the 2011 amendment reducing the s 18E limitation period from seven years to six years does apply to any contract or contracts that may be found to have existed between it and the developer, is not untenable. Whether or to what extent that contention is correct will turn in part on those contested questions of fact and law that are likely to arise at the trial.

  3. The plaintiff’s alternative submission is founded on an erroneous assumption that there are only two possibilities: (1) there was one contract between the builder and the developer which was entered into before 1 February 2012; or (2) there was no contract between the builder and the developer. For the reasons explained immediately above, there are a range of possible findings in between those two extremes which might be made at trial, including a possible finding of multiple contracts one or more of which was entered into after 1 February 2012.

  4. In relation to the developer, the plaintiff submits that the proposed amendment is futile because:

  1. whether or not there was a contract between the developer and the builder, the work was carried out under a notional contract between the developer and the plaintiff (as the immediate successor in title to the developer) under s 18C of the HB Act;

  2. on the proper construction of cl 109 of Part 19 of Schedule 4 to the HB Act that notional contract is a contract that was “entered into” within the meaning of cl 109 at the time the work was done;

  3. the work was substantially completed, and the notional contract was therefore “entered into” within the meaning of cl 109, prior to 1 February 2012; and

  4. the 2011 amendment to s 18E of the HB Act reducing the limitation period from seven years to six years therefore does not apply by reason of clause 109 of Part 19 of Schedule 4 to the HB Act, and the applicable limitation period under s 18E is seven years as pleaded in the existing paragraph 23 of the developer’s List Response.

  1. I reject those submissions, which turn on the words “contract …. entered into” in cl 109 of the transitional provisions being construed as including the statutory entitlements arising by operation of s 18C of the HB Act, which have been described as a “notional contract”.

  2. As both parties submitted, the construction of cl 109 must take into account the text of cl 109 in the context of and having regard to the purpose of the 2011 Amending Act and the HB Act as a whole. [4]

    4. SZTAL v Minister for Immigration and Border Protection (2017) 262 CLR 362; [2017] HCA 34 at [14] (Kiefel CJ, Nettle and Gordon JJ).

  3. The developer relied on High Court authority that the ordinary meaning of the words “contract … entered into” captures the act or acts of the parties to an ‘actual contract’ by which they bind themselves to that contract at a particular point in time, and does not plausibly extend to statutory rights conferred on persons who are not parties to any such ‘actual contract’. [5] The developer submitted that the ordinary meaning of those words in cl 109 therefore does not capture entitlements that are created by s 18C of the HB Act and which benefit the plaintiff as if the building work had been done under a contract between the developer and the plaintiff albeit that no such contract in fact exists. [6] In my view, that submission is strongly arguable.

    5. Zurich Australian Insurance Ltd v Metals & Minerals Insurance Pte Ltd (2009) 240 CLR 391; [2009] HCA 50 at [23]-[26] (French CJ, Gummow and Crennan JJ).

    6. Parkview Constructions Pty Ltd v The Owners – Strata Plan No 90018 [2023] NSWCA 66 (Parkview) at [28]-[30] and [49]-[53] (Leeming JA, Ward P and Simpson AJA agreeing).

  4. The developer further submitted that it is reasonably arguable that contextual and purposive considerations do not displace the ordinary meaning of the words “contract … entered into” in cl 109. In particular, the developer referred to the subject matter of cl 109 (being an exception to the application of the amended s 18E to residential building work commenced or completed prior to 1 February 2012 under cl 106) and to the apparently deliberate choice to delineate the scope of that exception by reference to when the relevant building contract was “entered into” rather than by reference to the timing of the commencement or completion of the work. The developer submitted that this contrast between the language used in cl 106(a) and the language used in cl 109 indicates that the legislature did not intend to capture in cl 109 the timing of the entirely notional contract which is not entered into but is derived from the “as if” drafting device in s 18C of the HB Act.

  5. The plaintiff’s submission in response that there is “no rational basis” for concluding that the words “contract … entered into” in cl 109 do not apply to a “notional contract in force by operation of s 18C” fail to grapple with the fact that there is no contract in force by reason of s 18C, notwithstanding that the effect of s 18C is to put the plaintiff in this case in the same position as if there were a contract. The plaintiff’s submission merely raises the question identified by the developer: why were the words “contract … entered into” used in cl 109, given their established ordinary meaning, if the legislature intended to capture the statutory entitlements under s 18C of the HB Act? The plaintiff’s submissions do not address the substance of that question, which seems to me to be relevant to the proper construction cl 109.

  6. I acknowledge the plaintiff’s submissions that claims for breach of statutory warranty have been described as contractual in nature, [7] and that the developer’s construction of cl 109 would result in different limitation periods applying to the plaintiff’s claims against the builder and against the developer. I accept that those matters are relevant to the proper construction of cl 109, but they do not seem to me to be necessarily determinative. As the developer submitted, there are various potential reasons why different limitation periods may apply in respect of a developer compared to a builder on the facts of any given case. The choice of language in cl 109 is of central relevance to the question of construction, and the developer’s submissions referred to at [23] above are reasonably arguable. For that reason, the developer’s construction of cl 109 which underpins its proposed paragraph 23A amendment is not so obviously untenable that it cannot possibly succeed.

    7. Parkview at [51].

  7. For all of those reasons, I am not satisfied that the paragraph 23A amendments proposed by the builder and the developer are futile. To put it another way, this is not a case in which the plaintiff’s arguments are so clearly correct that it is appropriate for the Court to decide in advance of the hearing that a seven-year limitation period applies, and to refuse leave to amend so as to shut the defendants out of contending at trial that a six-year limitation period applies on the proper construction of the relevant statutory provisions. [8]

    8. Wardley Australia Ltd v State of Western Australia (1992) 175 CLR 514 at 533-534 (Mason CJ, Dawson, Gaudron and McHugh JJ).

  8. Those are my reasons for making orders at the conclusion of the hearing of the defendants’ amendment application on 28 April 2025 granting leave to amend by introducing paragraph 23A into each defendant’s List Response, and by making certain other uncontroversial amendments.

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Endnotes

Decision last updated: 30 April 2025

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