Sydney Capitol Hotels Pty Ltd v Bandelle Pty Ltd

[2019] NSWSC 1825

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:	Sydney Capitol Hotels Pty Ltd v Bandelle Pty Ltd [2019] NSWSC 1825
Hearing dates:	26 November 2019
Date of orders:	18 December 2019
Decision date:	18 December 2019
Jurisdiction:	Equity - Technology and Construction List
Before:	Hammerschlag J
Decision:	Paragraph 16 of the defendant’s Technology and Construction List Response is struck out as disclosing no reasonable defence
Catchwords:	STATUTORY CONSTRUCTION – Environmental Planning and Assessment Act 1979 (NSW) ss 6.19 and 6.20 – proper construction – whether this action is one for loss or damage arising out of or in connection with defective building work – defendant did building work, including on a ventilation duct under a building contract to which the plaintiff was not party – plaintiff occupied part of the building and suffered damage when a fire attributable to the defective building work occurred – Held: that the loss or damage suffered by the plaintiff did not arise out of and was not in connection with the defective building work within the meaning of s 6.20.
Legislation Cited:	Environmental Planning and Assessment Act 1979 (NSW)
Cases Cited:	Australian Rail Track Corporation Ltd v Leighton Contractors Pty Ltd [2003] VSC 189 Dinov v Alliance Australia Insurance Limited (2017) 96 NSWLR 98 Wardley Australia Ltd v Western Australia (1992) 175 CLR 514
Category:	Procedural and other rulings
Parties:	Sydney Capital Hotels Pty Ltd - Plaintiff Bandelle Pty Ltd - Defendant
Representation:	Counsel: D.S. Weinberger with A. Jordan - Plaintiff D. Hand - Defendant   Solicitors: Gells Lawyers - Plaintiff Farrar Lawyers - Defendant
File Number(s):	2019/263542

Judgment

1. HIS HONOUR:   On 2 January 2017, a fire broke out on the ground floor of the building at 730-743 George Street, Sydney. The plaintiff occupied level 5 and had done so since 1997. The fire activated the sprinkler system on level 5, causing material damage and consequential loss to the plaintiff.

2. The fire is said to have been caused by defective building work done by the defendant on the exhaust duct system which serviced shops and restaurants on the ground floor and passed through level 5. The building work was completed in 1997.

3. The plaintiff and the defendant were never a party to any contract under which the defendant did the work, that is, the defendant contracted with someone else to do it.

4. The plaintiff alleges that the defendant owed it a duty of care in doing the work to avoid the risk of harm to it. It alleges that the defendant breached that duty and that the damage suffered by the plaintiff is as a consequence of that breach.

5. The plaintiff has sued the defendant for damages.

6. The defendant has pleaded that the plaintiff’s claim is statute-barred because of s 6.20 (the section) of the Environmental Planning and Assessment Act 1979 (NSW) (the EPA Act), which provides, relevantly:

6.20 Limitation on time when action for defective building or subdivision work may be brought (cf previous s 109ZK)

(1) A civil action for loss or damage arising out of or in connection with defective building work … cannot be brought more than 10 years after the date of completion of the work.

..

7. Section 6.19 of the EPA Acct contains the following definitions:

…

building work includes the design or inspection of building work and the issue of a complying development certificate or a certificate under this Part in respect of building work.

civil action includes a counter-claim.

…

8. The plaintiff alleges that the defendant owed it a duty of care in doing the work to avoid the risk of harm to the plaintiff. It alleges that defendant breached the duty, as a consequence of which the plaintiff suffered damage.

9. The parties are agreed that the Court should determine, as a separate question, the availability of this defence, notwithstanding that the determination of limitations defences in advance of the trial is not a course ordinarily embarked upon: see Wardley Australia Ltd v Western Australia (1992) 175 CLR 514. The core facts necessary to decide the question are agreed for all purposes.

10. The plaintiff agrees that if the defence is available, it is to be upheld and the proceedings dismissed. The parties agree that if the defence is not available, the action is to proceed in the ordinary course.

11. The issue then, is whether, on the proper construction of the section, the loss or damage suffered by the plaintiff is loss or damage “arising out of or in connection with defective building work”.

12. The plaintiff argues that the section should be construed narrowly so as only to protect a party who does defective building work from a claim by a person with whom that party contracted to do the work. [1] The plaintiff and the defendant were never in a contractual relationship with respect to the work.

    1. The argument did not address the position of a successor in title to the person who contracted for the work to be done. It was not necessary to do so, because plainly the plaintiff is not relevantly in the position of a successor in title to anyone.

13. The plaintiff relies for support on Australian Rail Track Corporation Ltd v Leighton Contractors Pty Ltd [2003] VSC 189 (Australian Rail) and Dinov v Alliance Australia Insurance Limited (2017) 96 NSWLR 98 (Dinov).

14. In Dinov, the Court of Appeal considered the operation of s 109ZK of the EPA Act, the predecessor to the section. The wording of the two sections differs slightly, but it is agreed that the difference is immaterial for present purposes.

15. The predecessor s 109ZK previously referred to a “building action” rather than a civil action, which s 109ZI defined as “an action (including a counter claim) for loss or damage arising out of or concerning defective building work” (emphasis added). The structure of the section is slightly different and it refers to “damage arising out of or in connection with defective building work” (emphasis added). The operation of the new section is certainly not narrower than that of its predecessor, although it might be wider.

16. In Australian Rail, a beam constructed by the defendant on a highway overpass in Victoria collapsed and blocked the railway tracks beneath. The track itself was not damaged, but the obstruction caused pure economic loss to various persons. Bongiorno J considered a provision in a statute to the same general effect as the section.

17. First, his Honour concluded that the work there was not building work. His Honour went on to determine that the provision should not be construed to include claims brought by plaintiffs who are but accidentally, incidentally or indirectly affected by what might be described as defective building work.

18. His Honour had reference to parliamentary materials which he considered supported the view that the section under consideration was not concerned with cases where claimants have no interest in the building work and no interest in the building itself. His Honour considered that the purpose of the statute was not to change the general law of tortious liability, but to regulate liability, inter se, of building owners and building practitioners. His Honour considered that to give the statute its ordinary and grammatical meaning would give it an operation which was obviously not intended.

19. Dinov concerned a different category of situation. An insurer, who had issued a policy of homebuilding insurance, took an indemnity from the directors of the builder in respect of a portion of any money the insurer had to pay out on the policy. The insurer paid out and claimed on the indemnity, which the directors failed to honour. The insurer sued them for damages for breach of the indemnity. The Court of Appeal held that the action was not one for loss or damage arising out of or concerning defective building work. It arose out of breach of the indemnity.

20. Bongiorno J’s reasoning was referred to with approval at [107]. McDougall J (with whom Beazley P and Meagher JA agreed) said:

In my view, the approach taken by Bongiorno J represents the correct approach to construction that should be taken in this case. The connecting factor must be construed so as to give effect to the evident purpose of the legislation. Relevantly, that purpose is to impose an absolute time bar for the protection of those who otherwise would have some legal liability in damages for defective building work.

21. On the plain and grammatical meaning of the section, the damage suffered by the plaintiff arises out of or is in connection with the defective building work. That work was done pursuant to a contract and caused the fire, which in turn caused the damage suffered by the plaintiff.

22. Usually, the plain and grammatical meaning of words enacted by parliament is the best clue as to Parliament’s objective intention. One can readily appreciate the force of an argument that a builder should not be liable for defective building work ten years after it is done, irrespective of who suffers damage by it.

23. However, and albeit strictly obiter, the Court of Appeal has supported the reasoning in Australian Rail that the words should be given a restricted meaning. Although if I were deciding the matter afresh, I would reach a different conclusion, I do not consider that I should depart from this approach. Put another way, I think the approach is wrong so far as it applies here, but I do not think it is so clearly wrong that I should not follow it.

24. Taking this approach, the plaintiff was merely an occupier of part of the building where the fire occurred, as a consequence of which it suffered damage. That loss and damage was caused by the defective building work in only an accidental, incidental or indirect sense in the meaning contemplated by Bongiorno J and the Court of Appeal. Hence, the section does not apply.

25. The answer to the question: Is the plaintiff’s claim statute barred by the operation of s 6.20 of the Environmental Planning and Assessment Act 1979 (NSW)?, is no.

26. It follows that para 16 of the defendant’s Technology and Construction List Response, which pleads the operation of the section, discloses no reasonable defence, and must be struck out.

27. The action will otherwise proceed in the ordinary course.

28. The defendant is to pay the plaintiff’s costs of the determination of the separate question.

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Endnote

Amendments

31 March 2020 - Representation to Include A. Jordan