The Owners, SP 75903 v Dix
[2011] NSWSC 245
•05 April 2011
Supreme Court
New South Wales
Medium Neutral Citation: THE OWNERS, SP 75903 v DIX & ANOR [2011] NSWSC 245 Hearing dates: Thursday 9 December 2010 Decision date: 05 April 2011 Before: Hall J Decision: The separate question set out in paragraph 1 of the Notice of Motion filed on 16 July 2010 is ordered to be determined separately in accordance with UCPR 28.2. The question is answered in the following terms - The residential and commercial building constructed at 228-232 Condamine Street, Manly Vale, as represented in the drawings referred to in the defendants' letter of 20 January 2004 to Rasco Developers and The Jaara Group, has a rise in storeys of 3, within the meaning of clause 57BC of the Home Building Regulation 1997.
Catchwords: STATUTORY CONSTRUCTION - construction of the Home Building Regulation 1997 made under the Home Building Act 1989 - clause 57BC(5) - basis for determining exclusion from exemption for multi-storey building - insurance not required for a building having a "rise in storeys of more than 3" - whether Lower Ground Floor was a level that "includes accommodation only intended for vehicles" and so excluded from the calculation of the number of levels (Regulation was repealed with effect from 1 September 2004)
SEPARATE QUESTION - determination of UCPR 28.2 - separate question determination in relation to clause 57BC(5) of the Home Building Regulation 1997 would be an appropriate exercise of power under UCPR 28.2Legislation Cited: Building Regulations 1994 (Vic)
Building (Residential Building Warranty) Amendment Act 2003 (ACT)
Building (Multi-Storey Residential Building Exemption) Regulation 2002 (Vic)
Environmental Planning and Assessment Act 1979
Environmental Planning and Assessment Amended (Quality of Construction) Act 2003
Home Building Act 1989
Home Building Amendment (Insurance Exemptions) Regulation 2003
Home Building Regulations 1997Cases Cited: Bailey & Bailey v Director-General Department of Energy Climate Change and Water & Ors [2010] NSWSC 979
Ford v Greer [2008] NSWSC 1181 Commonwealth Bank of Australia v Clune & Anor [2008] NSWSC 1125
Fitzgerald v Parramatta Leagues Club Limited [2010] NSWSC 1126
Street & Ors v Luna Park Sydney Pty Limited & Ors [2007] NSWSC 697Category: Principal judgment Parties: THE OWNERS, SP 75903 v Lyall Ernest DIX & ANOR Representation: Counsel:
P: D Grieve QC/W F Kerr
D: D Feller SC/P Bambagiotti
Solicitors:
P: Suzie Broome & Co
D: Norton Rose, Australia
File Number(s): 2007/265329
Judgment
Introduction
HIS HONOUR : The plaintiff, by notice of motion filed on 16 July 2010, seeks an order for the determination and decision of a separate question.
The application raises two issues. Firstly, whether the power of the Court to determine a separate question under the provisions of UCPR 28.2 should be exercised. Secondly, in the event that the power is exercised, the decision on the separate question.
For the purposes of the separate question, the parties agreed on a statement of facts.
The factual matters arising from the Amended Statement of Claim filed on 8 February 2010 were summarised in the plaintiff's written submissions as follows:-
"4. The parties have agreed a statement of facts ("SAF") for the purpose of deciding the separate question. The facts and allegations can be shortly stated as follows:-
(a) the plaintiff ( the OC ) is the owners corporation of a mixed residential and commercial building ( the OC's building ) located at 228-232 Condamine Street Manly Vale (the property)
(b) the first defendant ( Lyall Dix ) is an accredited certifier and an employee of the second defendant (the defendants will be together referred as 'Dix' )
(c) Rasco Development Group Pty Limited and Jaara Group Pty Limited (the developers) were the owners of the property and responsible for constructing the OC's building
(d) in August 2003 the developers appointed Lyall Dix as the principal certifying authority for the construction of the OC's building
(e) the OC's building comprised 5 levels, conveniently grouped in 3:
(i) Basement, which was below ground level
(ii) Lower Ground, which was relevantly above ground (see paragraph 32 below) and contained store rooms, residential units and car spaces
(iii) Ground, Level 1 and Level 2, which were above ground and contained residential and retail units but no car spaces
(f) by letter dated 20 January 2004 Lyall Dix advised the developers that construction of the OC's building was exempt from the requirement to obtain home warranty insurance under the amended provisions of the Home Building Regulation 1997 ( Regulation ) commencing on 31 December 2003
(g) the OC alleges:
(i) in reliance on Lyall Dix's advice the developers did not obtain home warranty insurance from the construction of the OC's building
(ii) there are defects in the common property of the OC's building
(h) the developers are now insolvent and unable to rectify the defects.
5. The OC alleges that Lyall Dix's advice was wrong. Under clause 57BC of the Regulation insurance was not required if the relevant building work related to construction of a building having a 'rise in storeys' of more than 3.
6. The OC contends that OC's building had a rise in storeys of 3 and therefore required home warranty insurance. Dix contends the OC's building had a rise in storeys of 5 and therefore did not require home warranty insurance."
There is no dispute between the parties as to the facts concerning the physical characteristics of the residential building. The issue between the parties is confined to the meaning of the term "storey" in clause 57BC(5) of the Home Building Regulation 1997 (the "Regulation" ) which came into operation on 31 December 2003.
(1) Exercise of the power under UCPR 28.2
Part 28, Division 2 - Separation of Questions - sets out the following provisions relating to the Court's jurisdiction to determine a separate question.
"28.2 The Court may make orders for the decision of any question separately from any other question, whether before, at or after any trial or further trial of the proceedings.
...
'4(1) This rule applies if the decision of a question under this Division:-
(a) substantially disposes of the proceedings of or the whole or any part of any claim for relief in the proceedings, or
(b) renders unnecessary any trial or further trial in the proceedings or on the whole or any part of any claim for relief in the proceedings.
(2) In the circumstances referred to in subrule (1), the Court may, as the nature of the case requires:-
(a) dismiss the proceedings or the whole or any part of any claim for relief in the proceedings, or
(b) give any judgment, or
(c) make any other order.' "
Mr D Grieve QC, who appeared on behalf of the plaintiff, submitted that the plaintiff's claim is two-fold:-
(1) As a consequence of the (allegedly) negligent advice of Mr Dix, the developers did not effect home warranty insurance, required under the Act, with the result that the Owners Corporation cannot claim for the rectification of (alleged) defects under that insurance, thereby causing the Owners Corporation to have suffered loss and damage.
(2) That Mr Dix failed to perform the functions required of him pursuant to the Environmental Planning and Assessment Act 1979 (NSW). This latter aspect is not an issue in the present application.
There are a number of bases upon which the Court may make a separate determination of a question in proceedings.
In determining the power for the decision of any question separately from any other question, the Court is to give effect to the overriding purpose to facilitate the just, quick and cheap resolution of the real issues in the proceedings: s.56 of the Civil Procedure Act 2005; Ford v Greer [2008] NSWSC 1181 at [25] at Commonwealth Bank of Australia v Clune & Anor [2008] NSWSC 1125 at [6].
In Fitzgerald v Parramatta Leagues Club Limited [2010] NSWSC 1126, Barrett J observed at [16]:-
" Counsel on both sides agreed that the question whether separate determination should be ordered is to be approached in the manner stated by Einstein J in Idoport Pty Ltd v National Australia Bank Ltd [2000] NSWSC 1215 at [7] in a passage which has been quoted with approval in a number of later cases and identifies several propositions of particular relevance to the present motion:
1. The power of the court to order the separate determination of an issue is a discretionary power which must be exercised judicially, but cannot otherwise be fettered.
2. In exercising the power, the court must give effect to the overriding purpose of the rules of court which is to facilitate the just, quick and cheap resolution of the real issues in the proceedings.
3. The court begins from the position that it is ordinarily appropriate that all issues in a proceeding should be disposed of at the one time, so that it is for the party who wishes to have a question separately determined to show that it is desirable for that to occur.
4. The separate determination of an issue may prove to be an appropriate procedure in at least the following sets of circumstances:
(a) where the resolution of that separate issue will have the effect of resolving the entirety of the litigious controversies or of substantially narrowing the field of litigious controversy;
(b) where the resolution of that separate issue carries with it a strong prospect that the parties will thereafter be able to resolve their dispute themselves and thus avoid further litigation;
(c) where there is a clear demarcation between that issue and all other issues in the case, including issues going to the credit of witnesses."
In the written submissions for the plaintiff, whilst it is acknowledged that ordering a separate question has been described as an "exceptional" course ( Clune (supra) at [6]), it was said to be appropriate in the present case by reason of the following:-
(1) All parties support the application.
(2) The separate question solely concerns the construction of a single statutory rule.
(3) The parties have agreed upon a statement of facts necessary for the determination, which facts are themselves within a narrow compass.
(4) If the question is determined adversely to the plaintiff, then a substantial part of the plaintiff's case cannot be pursued, so that the separate determination has the likelihood of a substantial saving in cost and time.
It was argued for the plaintiff that, if the issue raised as a separate question were heard and determined adversely to the plaintiff, then the plaintiff could not and would not pursue that part of the case which depends upon the issue raised by the separate question. In that event, it was observed there would be significant savings in terms of evidence and time in relation to matters such as reliance and loss which would be required if all issues were to be tried together at the same time.
Whilst a court may intervene at an early stage in proceedings and order the hearing of a separate question, it remains the case that this is an " exceptional course to be contrasted with the ordinary course of deciding a case in its totality ": Clune (supra) at [6]; Bailey & Bailey v Director-General Department of Energy Climate Change and Water & Ors [2010] NSWSC 979 at [4]; Street & Ors v Luna Park Sydney Pty Limited & Ors [2007] NSWSC 697 at [5]. The decision in Bailey & Bailey (supra) at [4] confirms the need for a court, in determining an application for a separate question, to proceed with caution and with the proposition that in the ordinary course of events all issues should be determined at one trial.
Mr Grieve suggested a number of ways by which time could be saved if the question was decided against the plaintiff: that the claim for negligence directly against Mr Dix would be dropped, that the evidence to be collected and tendered would be reduced and that any reference out to an expert would be substantially reduced, particularly on issues of law.
I have regard and take into account that notwithstanding an unfavourable finding for the plaintiff on the separate question, the second part of the plaintiff's case would still remain for determination at trial, that being negligence in respect of the alleged negligent conduct by Mr Dix referred to in paragraph [7(2)] above. The present matter could also be further complicated by the losing party on a separate question determination if the issue is pursued by way of appeal which could prolong the proceedings.
I also take into account that, if I did find in favour of the defendant on the present application, and this matter proceeds to trial, evidence that would have concerned the matter before me will nevertheless need to be adduced in support of quantum. The question, however, is whether or not this application would " substantially ", rather than necessarily " wholly " dispose of the present matter.
If the plaintiff is unsuccessful, then it appears that substantial time could be saved for a significant part of the plaintiff's claim, as Mr Grieve indicated, would have been determined.
Additionally, matters that favour a separate question determination is the fact that the parties have effectively joined in this application being heard and have agreed on a statement of facts. These aspects distinguish the present case from other cases in which the issue of a separate determination has arisen.
On balance, I am of the opinion that it is appropriate to make an order for the decision of the separate question. I will, accordingly, now proceed with the separate question.
(2) The separate question
In the notice of motion filed on 16 July 2010, an order is sought of the following question:-
"Whether, as at January 2004, on a proper construction of the Home Building Regulations and the Home Building Act 1989 (NSW), the residential and commercial development to be constructed at 228-232 Condamine Street, Manly Vale, the State of New South Wales, represented in the drawings identified in Annexure A hereto (the development ), had a rise in storeys of more than three (3) for the purposes of Regulation 57BC of the Home Building Regulations and part 6 of the Home Building Act 1989 (NSW)."
(1) The designated areas of the Lower Ground floor of the development
The relevant strata plan is comprised of a mixed residential and commercial building constructed in and after 2004. Mr Grieve, on behalf of the plaintiff, tendered a copy of a plan of the Lower Ground floor of the relevant development (Annexure A to the statement of facts and Exhibit B in the proceedings).
The plan or diagram (Exhibit B), indicates that Parts 1 to 6 are home units and that Part 33 is a storage unit.
Sheet 5 of Exhibit 4 depicts a series of spaces identified as "DCS/DVS" . Parts 31 to 35 inclusive are all designated car spaces.
Accordingly, Exhibit B indicates that, including visitor car spaces, the Lower Ground floor contains 14 car spaces and six home units.
(b) The legislative provisions and the provisions of the Building Code of Australia
The relevant legislative and other provisions that bear upon the determination of the separate question are set out below.
(i) Clause 57BC of the Home Building Regulations 1997
The Home Building Regulations was made pursuant to the regulation making powers in the Home Building Act 1989. Under Part 6 of the Act, a person was prohibited from doing residential building work, whether under a contract or otherwise, "unless a contract of insurance that complies with this Act is in force in relation to that work ...": s.62(1)(a) and s.96(1).
In the plaintiff's written submissions, it was observed that Part 6 is a provision of the Act that operated to provide homeowners with insurance protection. Clause 57BC restricts that in the case of multi-storey buildings. That clause was added to the Regulation by the Home Building Amendment (Insurance Exemptions) Regulation 2003, notified in the Government Gazette No 197 (19 December 2003). It was done under the general regulation making power in s.140 of the Home Building Act .
Mr Grieve submitted that bearing in mind the "consumer protection" intention of the legislation, the clause should be construed "so as to restrict the scope of its operation to the maximum extent consistent with its language" ( Plaintiff's Submissions , p.8).
Clause 57BC of the Regulation, Exemptions from Insurance for Multi-Storey Buildings , contains a number of sub-clauses. For the purposes of the present application, the provisions found in clauses 57BC(1) and (5), are important and reproduced below:-
" 57BC Exemptions from insurance for multi-storey buildings
(1) A person who does, or enters into a contract to do, residential building work relating to the construction of a multi-storey building is exempt from the requirements of Part 6 of the Act in respect of that residential building work.
(2) ...
(3) This clause does not apply in respect of residential building work commenced before the commencement of this clause.
(4) ...
(5) In this clause:-
multi-storey building means a building:
(a) that has a rise in storeys of more than 3, and
(b) that contains 2 or more separate dwellings.
rise in storeys has the same meaning as it has in the Building Code of Australia.
storey does not include a space within a building if the space includes accommodation only intended for vehicles ." (emphasis added)
By reason of the fact that the definition in clause 57BC(5) of the expression "rise in storeys" specifically refers to the Building Code of Australia , it is necessary to refer to and set out the relevant provisions of that Code.
At the hearing of the application, a copy of the relevant provisions constituting Part A1, Interpretation , of the Building Code of Australia was tendered as Exhibit A (being version 13 - clause A1.1 - operative from 1 July 2003 to 1 May 2004).
The provisions of clause 2 - Definitions - of clause A1.1 of the Building Code of Australia contained the following definitions:-
" Rise in storeys means the greatest number of storeys calculated in accordance with C1.2
Storey means a space within a building which is situated between one floor level and the next floor level above, or if there is no floor above, the ceiling or roof above, but not -
(a) a space that contains only -
(i) a lift shaft, stairway or meter room; or
(ii) a bathroom, shower room, laundry, water closet, or other sanitary compartment; or
(iii) accommodation intended for not more than 3 vehicles; or
(iv) a combination of the above; or
(b) a mezzanine." (emphasis added)
Clause C1.2 of Part A1 of the Building Code of Australia entitled "Calculation of rise in storeys" sets the method for calculating "rise in storeys" of a building. It is unnecessary here to reproduce the full terms of that provision.
The contentions of the parties
The plaintiff contended that the Lower Ground of the building is not a "storey" because it contains dedicated car spaces, notwithstanding it also contains spaces intended for other purposes such as residential units. In this respect, it was argued that the Lower Ground " includes accommodation only intended for vehicles" within the definition of "storey" in clause 57BC(5).
The defendants, however, contended that the Lower Ground is a storey because the exemption provided in clause 57BC(5) only applies to a space which is wholly dedicated as vehicle accommodation.
The plaintiff in disputing the defendants' contention argued:-
(1) That such an interpretation is contrary to the ordinary meaning of the language used in the definition of "storey" in clause 57BC(5).
(2) The defendants' interpretation would give clause 57BC a field of operation beyond the limited field in which it was intended to operate in excluding residential building work from the protective insurance requirements of the Act.
In relation to "storey" in the definition in the Building Code of Australia (Part A1 - A1.1(2), Definitions ), both parties drew attention to the fact that the definition states that "storey" means a space within a building situated between one floor level and the floor level above (or if no floor above, then the ceiling of the roof above). The general definition was then made subject to specific exclusions (reproduced in paragraph [32] above) all of which are introduced by the phrase "but not" .
Plaintiff's submissions
The issue raised in the submissions for the plaintiff is a narrow one the resolution of which principally turns upon the proper interpretation of the word "storey" in clause 57BC(5) of the Regulation.
The interpretation to be given to that clause essentially determines whether or not the particular construction was a high rise development not requiring insurance or whether it was not a high rise building and did require insurance in accordance with the New South Wales scheme.
The issue between the parties and the subject of this application involves a determination as to how many storeys the construction in question had when Mr Dix gave his advice. That question is to be answered by reference to the provisions of the Act, the Home Building Regulations and the Building Code of Australia definitions.
The parties have agreed that Ground Level, Level 1 and Level 2 are storeys within the meaning of Building Code of Australia, clause A1.1. The issue therefore concerns the status of Lower Ground. It is agreed between the parties that:-
(6) If the Lower Ground floor is a 'storey' within the meaning of clause 57BC then the OC's building has a rise in storeys of 4; and
(7) If the Lower Ground floor is not a 'storey' within the meaning of clause 57BC then the OC"s building has a rise in storeys of 3."
If the former is found, then Mr Dix was correct in his advice and the plaintiff must fail. If the latter is found, Mr Dix was incorrect. The separate question (reproduced in paragraph [20]) would be answered in the negative. I note that even if the plaintiff does establish that Mr Dix's advice was incorrect, that, of course, does not amount to a finding of negligence. It means only that Mr Dix was wrong. The issue of negligence will be a matter for determination by the trial judge.
The plaintiff submitted that the definition of " storey " under clause 57BC(5) is different to that of the Building Code of Australia . It was argued that if the converse were true, the drafters could have merely adopted in the definition of " storey " in clause 57BC(5) the same formulation as appears in the expression " rise in storey " in clause 57BC(5).
The Building Code of Australia definition of " storey " reproduced above has, was earlier indicated, two aspects: the first is an inclusive definition of what a " storey " is by reference to " spaces " and the second involves an exclusive list of certain uses that result in a "space" not being a " storey ".
If the plaintiff's contention is accepted, it was observed that the word " storey " in clause 57BC(5) could be defined as " a space within a building situated between floor levels or between a floor level and the ceiling or roof but not if the space 'includes accommodation only intended for vehicles' ".
The submissions emphasised that the language of exclusion in clause A1.1 was " contains only " whereas clause 57BC refers to " includes ". It was submitted that these two concepts have distinct meanings.
" Contains only ", in the plaintiff's submission, connotates exclusivity. If a space was designed to have any use under clause A1.1(a)(i)-(v), and no other, then it is not to be treated as a " storey ". If the space does contain other uses, then the opposite must be true; it is a " storey ".
On the other hand, the plaintiff's submission was that " include " may entertain both the whole of something, or a part thereof. The Macquarie Dictionary defines " include " as " to contain, embrace, or comprise, as a whole does parts or any part or element ". In the plaintiff's submission, " includes " does not connotate exclusivity - it is different to " contains only " in this respect.
The plaintiff also submitted that the location of the word "only" in the definition of " storey " in clause 57BC is critical. Whereas under clause A1.1 " only " qualifies the verb " contains ", under clause 57BC(5), " only " is used with the word " intended ". That identifies, according to the plaintiff, the relevant characteristic of the accommodation; that it is intended for vehicles and only vehicles. But " only " does not qualify the word " includes " and therefore does not connotate exclusively with respect to what is to be included.
For the exemption in the Regulation to operate so as to exclude floors from being considered as " storeys " only where the entirety of the space is devoted to parking, the plaintiff submitted that the draftsman would have used " only " in conjunction with " includes ".
Under clause 57BC(5), the plaintiff contended that a space that contains designated parking, and other areas on the same level that are not identifiable with vehicle accommodation, such as residential spaces, the level is not a " storey ". In summary, the plaintiff's submission was as follows ( Plaintiff's Submissions , [48]):-
" Lower Ground contains 16 car places (12 resident places and 4 visitor places) as well as store rooms and residential units. Lower Ground is a "space" within the OC's building. The 16 car places are accommodation only intended for vehicles. Lower Ground is thus a space within a building which includes , although not exclusively, accommodation only intended for vehicles. It therefore falls within the exclusion from being a "storey" under clause 57BC(5). "
The plaintiff directed attention to the distinction between the exclusions postulated by clause 57BC(5) and those specified in A1.1 of the Code. In the latter, the exclusion is confined only to " accommodation intended for not more than 3 vehicles " whereas under clause 57BC(5), the exclusion is general and " includes accommodation only intended for vehicles ". The plaintiff submitted this difference indicates that a different meaning was intended by the draftsman between the provisions. The plaintiff's contention was that the difference is to be considered in light of the legislative purpose of the Act. When that is done, it was submitted, the definition of " storey " is to be construed expansively, and thereby it limits spaces that would be considered storeys under the Regulations. Accordingly, the plaintiff's position is that a space that includes any accommodation for vehicles would not be a storey.
Defendants' submissions
The defendant relied upon its Outline Submissions filed on 7 December 2010 and Supplementary Outline Submissions dated 8 December 2010. These were supplemented with oral submissions at the hearing of the motion.
On the question of the construction of clause 57BC(5), it was, firstly, contended that it was necessary to bring to account the purpose and intent of the amendment.
Prior to the Home Building Regulations , home insurance complying with Part 6 of the Act was required in respect of all residential building work as defined in s.3 of that Act. That obligation extended to multi-storey residential buildings.
The reform of the scheme under the Act was said to have been based upon the Grellman Report issued on 30 September 2003. Amongst the recommendations in the report (Option 2) was the following:-
"(a) Excluding high-rise developments from the scheme;"
It was contended that the removal of high-rise projects from the New South Wales scheme reflected their fundamentally different nature from low rise development.
It was observed that the Regulation was the means by which the Executive sought to implement the Inquiry's recommendation for the exclusion of high-rise developments.
It was contended that the history of events leading up to the introduction of clause 57BC of the Regulation indicated that the sole purpose of the amendment was to bring New South Wales into conformity with other states. The purpose was not to promote or conserve the interests of homeowners in multi-storey developments. The liability of the insurance scheme was said to be a fact of significance in interpreting the provisions of the Regulation.
There was no warrant for reading clause 57BC(5) by itself or in context in a restricted way as a provision enacted for the benefit of homeowners.
Attention was drawn to the provisions of the Regulation, which contained the definition of the expression "rise in storeys" which referred to it as "having the same meaning that it has in the Building Code of Australia".
The reference to the Building Code of Australia , in particular, the definition of "rise in storeys" in clause A1.1 emphasised that the definition of "storey" in clause A1.1 is of significance in understanding the way in which clause 57BC(5) was intended to operate.
The steps in the reasoning propounded by the defendants' submissions included the following:-
(1) Clause 57BC was a provision to be determined in the context of the definition of the term "storey" in the Building Code of Australia .
(2) "Storey" in clause A1.1 of the Building Code of Australia operates by way of a general definition following which there are specific exclusions specified.
(3) The definition of "storey" centres on the concept of space, eg, clause A1.1 "storey means a space ... within a building" .
(4) Clause A1.1 of the Building Code of Australia following the general definition referred to in (2) excludes from calculation of the "rise in storeys" , a "space" that has only one or a combination of the qualities listed in sub-paragraph (a) or under (b), is a mezzanine.
Accordingly, the definition of "storey" set out in clause A1.1, without any modification , would have meant, so it was argued, that any floor containing only accommodation intended for "not more than 3 vehicles" was excluded from consideration in calculating the rise in storeys of the building. This, it was contended, meant that the following would be counted as a storey:-
(1) A floor that contained only accommodation for more than three vehicles.
(2) A floor that contained a combination for any number of vehicles, whether or not in combination with other types of use excluded by clause A1.1(a) of the Building Code of Australia .
It was then argued that it followed that retention of this definition, without modification, would have defeated the aim of excluding car-parking from the calculation of a rise in storeys. It was, therefore, necessary to modify the Building Code of Australia usage of the term "storey" .
It was emphasised that the apparent purpose of clause 57BC was to exempt from the requirement of insurance buildings that had a rise in storeys of more than three storeys.
In the defendants' written submissions at [23], it was argued that the plaintiff's proposed construction of "storey" in clause 57BC(5) (which modifies the definition of "storey" in the Building Code of Australia ) has the effect of reducing rather than enlarging the types and configurations of floors within a development which are counted as storeys. It followed, so the argument went, from that construction that if a floor includes any accommodation intended for vehicles, the floor is excluded from the calculation of the rise in storeys.
In relation to the use of the word "only" in the definition of "storey" in clause 57BC(5), it was argued that the word was intended to fulfil a different function and to convey a different sense to the qualification to "storey" in the Code. That meaning, it was submitted, is clearly conveyed if the words "only intended for vehicles" is regarded as an adjectival phrase that qualifies the noun "accommodation" .
The defendant contended that the purposive construction urged by it was supported by reference to extrinsic material. Material relating to the equivalent schemes in Victoria and the Australian Capital Territory was relied upon.
In the defendants' Supplementary Outline Submissions , it was stated that reliance was also placed upon the provisions of s.34 and s.35 of the Interpretation Act 1987.
On the interpretation of clause 57BC(5), it was submitted that, on the plaintiff's construction of the provision as to "storey" in clause 57BC(5), the word "only" in the definition of that term would be surplus and that the definition would fit more closely the plaintiff's construction.
As to the last-mentioned point, I do not, with respect, see that matter as determinative of the construction question. The insertion of the word "only" is not, in my opinion, inconsistent with the construction urged by the plaintiff, but would serve to place emphasis upon the fact that the "accommodation" for the exclusion to operate must be accommodation for vehicular use, and no other.
It follows that I do not accept the submission made on behalf of the defendants that the word "only" was intended to fulfil a different function and to convey a different sense to the qualification to "storey" in clause 57BC. In particular, I do not consider that the definition of "storey" in that provision should be read so that "only" qualifies the word "accommodation" . To construe the provision as the defendants suggest would involve an effective re-wording of the provision or, alternatively, reading the relevant exclusion other than in accordance with the words as used by the draftsman.
The defendants' submissions emphasised the importance of ascertaining the purpose and intent of the amendment to the Regulation by clause 57BC by a reference to the historical and legislative background that gave rise to the requirement for the amendment.
It was submitted that clause 57BC was the means by which the Executive government (through the NSW Office of Fair Trading) sought to implement the Grellman Inquiry's recommendation with respect to excluding high-rise developments.
It was further contended that the history leading up to clause 57BC indicated that "... the sole purpose of the amendment was to bring NSW in conformity with the other States which had removed the necessity for home warranty insurance for high-rise or multi-storey developments" .
It was also argued that this change was not intended to promote or conserve the interests of home owners in multi-storey developments. The intention, it was asserted, was "... to maintain the viability of the insurance scheme generally by removing the requirement for such insurance" : Defendants' Outline Submissions at [13].
The defendants supported their submissions by what was termed "extrinsic material from NSW, Victoria and the Australian Capital Territory" : Defendants' Outline Submissions at [33]. In paragraph [34], reference was made, inter alia, to a report of the Office of Fair Trading dated March 2005 and to the Victorian Building Regulations 1994, as amended by the Building (Multi-Storey Residential Building Exemption) Regulation 2002 (Vic) at [36] to [38] and the provisions of the Building (Residential Building Warranty) Amendment Act 2003 (ACT) at [41].
It was submitted for the defendants that reference to such "extrinsic material" should be considered for the purposes of undertaking a "purposive construction" of clause 57BC(5).
I do not consider that a proper basis has been established for the use of such extrinsic material in the way contended for in the defendants' submissions.
In the defendants' submissions it was argued:-
"40. The significance of the publications by both the NSW Office of Fair Trading and the Victorian Building Commission is that:-
(a) They reflect the inter-state agreement for harmony in the requirements for home warranty insurance as between NSW and Victoria.
(b) In both States, the relevant amendments were the product of executive action, as opposed to Parliamentary action. The regulations are not part of legislation enacted by Parliament, they are the product of a recommendation by the relevant Minister to the Governor. As a purely executive exercise, a statement from the body within that executive for administration of the scheme has a particular persuasion as to the intention of the draftsperson."
Whatever the material as to concerted action by different States (and the ACT) to bring into existence comparable legislation, there is no material which suggests that, in relation to the detail as to what was to be excluded by way of high-rise development, there was any "inter-state agreement" whereby the States and Territory bound themselves to act uniformly for a common approach on that matter.
The provisions of s.34 of the Interpretation Act 1987 permit the use of extrinsic material in the interpretation, inter alia, of statutory rules, which expression includes a regulation that is made by the Governor: s.21.
Section 34(1) provides that consideration may be given to certain materials either to confirm the meaning of a provision is "the ordinary meaning conveyed by the text of the provision" , where a provision is ambiguous or obscure or if the ordinary meaning conveyed by the text of the provision "... is manifestly absurd or is unreasonable" .
I do not consider that the circumstances referred to in s.34(1)(a) or (b) has been shown to exist in relation to clause 57BC. As I have stated, on the evidence in the present proceedings it has not been established that there was any agreement or other fetter upon the Government of New South Wales in determining, as a matter of detail, how the exemption in clause 57BC(5) should be framed.
Finally, in response to paragraph [25] of the plaintiff's submissions on the Grellman Report that "excluding high-rise projects could only occur if independent certification is undertaken at key construction stages" , it was noted that the Environmental Planning and Assessment Amended (Quality of Construction) Act 2003, assented to on 10 December 2003, was the means by which the New South Wales Government put the regime of independent certification into effect.
Consideration
Before dealing with the issue of statutory construction raised by the Separate Question, I will commence by referring to the legislative framework in which the amendment to the Home Building Regulation for the inclusion of clause 57BC(5) arose.
Home Warranty Insurance was initially introduced in New South Wales as a government scheme. Its purpose was to protect consumers from loss where a builder performed faulty work, incomplete work or became insolvent: Final Report of NSW Home Warranty Insurance Inquiry , 30 September 2003 at [12]. It is there recorded that in 1996, legislation was enacted to establish a new private scheme. That became the Private Home Warranty Insurance Scheme in May 1997. In the initial years following the commencement of the private scheme, there were up to five insurers underwriting the market.
In March 2001, with the collapse of HIH, severe dislocation occurred in the home warranty insurance market. In 2002, certain insurers withdrew from the market. This led to further difficulties which do not need to be discussed here.
In the final report of the Inquiry conducted by Mr Richard Grellman (the Grellman Report), the issue of the exclusion of high-rise development from the insurance scheme was addressed. The following is an extract from the report (p.50):-
" Exclusion of high-rise developments
As noted earlier, high-rise construction projects are fundamentally different from stand-alone houses. High-rise housing projects are commercial projects, generally undertaken by a consortium ...
The key consumer risk in high-rise projects is construction quality, thereby minimising the incidence of warranty-related claims, post-completion.
Under Option 2, high-rise projects are removed from the scheme reflecting their fundamentally different nature. Excluding high-rise developments is nationally consistent and recognises the re-insurers' low appetite for such risk."
The report included the following recommendations:-
"· Excluding high-rise developments from the scheme.
· Including mandatory certification for the construction of high-rise projects, by approved certifiers only."
Mr Grellman, in his report, noted submissions made by interested parties, stating, in relation to insurance for high-rise construction:-
"Almost all parties met by the Inquiry stated that high-rise construction projects (three storeys and greater) are fundamentally commercial projects. Accordingly, project risks are materially different to those of an ordinary house construction."
There was no discussion in the report as to how, as a matter of statutory definition, the expression "three storeys and greater" should be determined.
Clause 57BC, Exemptions from insurance for multi-storey buildings
(1) General observations
Clause 57BC, as noted above, provided, inter alia, for the exemption of persons who do, or enter into a contract to do, residential building work relating to the construction of multi-storey buildings from the requirement of Part 6 of the Act in respect of such work.
The exemption for which clause 57BC(1) provided was made subject to the particular limitation expressed in clause 57BC(5). In that respect:-
(1) The exemption in clause 57BC(1) was not intended to apply and does not apply to all multi-storey buildings involving residential building work.
(2) Sub-clause (5) defined the expression "multi-storey building" in a way which limited the exemption to those multi-storey buildings which, in accordance with the definition in clause 57BC(5):-
(a) has a rise in storeys of more than 3; and
(b) that contains 2 or more separate dwellings.
(3) The expression "rise in storeys" and the word "storey" are both defined in clause 2, Definitions of Part A1.1 of the Building Code of Australia.
(4) Whilst "rise in storeys" in clause 57BC(5) expressly adopts the meaning that that expression has in the Building Code of Australia , the same approach was not taken to the word "storey" . The exception in clause 57BC(5) represents a different approach - it departs from the definition of that term as it appears in the Code definition. It was observed for the plaintiff in this respect that it is apparent that the draftsman intended "storey" , as used in clause 57BC, to mean something different to "storey" as used in the Building Code of Australia , since otherwise, the draftsman would simply have adopted the Code meaning, as occurred with the phrase "rise in storeys" .
The nature of and the meaning to be given to "storey" is ascertained by means of the exclusion of certain spaces ( "... does not include a space within a building ..." ). Such a space, it is stated, is excluded in determining whether a multi-storey building has a rise in storeys of more than three if that space "... includes accommodation only intended for vehicles" .
The exclusion by clause 57BC(5) of "a space" that has within it accommodation that is only intended for vehicles, is significantly different from the reference in the definition in paragraph (a)(iii) of the Code definition of "storey" . In clause 57BC(5), for example, there is no specification as to a particular number of vehicles that is accommodated within the "space" . That is one matter that is consistent with an intention in the draftsman of the Regulation that, for the purposes of determining what is and what is not a multi-storey building, spaces which contain an area or areas intended to be exclusively used for vehicle accommodation is or are to be excluded.
It is clear that the exclusion from the exemption in clause 57BC(1) of spaces that include accommodation only intended for vehicles (whatever the number of vehicles accommodated) was intended and chosen as the basis for giving effect to a policy objective of exempting particular types of residential building works from the insurance requirements that would otherwise arise under Part 6 of the Act.
(2) The construction issues
In the construction of "storey" for the purpose of clause 57BC(5), the following matters are to be taken into account:-
(1) The formulation "does not include a space" is an emphatic expression to exclude (the specified spaces).
(2) The word "includes" in the clause carries its ordinary dictionary meaning of "part of a whole" or "a subordinate element" .
(3) If a part of "a space" is for accommodation in the sense that the part is adapted or set aside only for the purpose of accommodating vehicles, then that storey is to be excluded for the singular purpose of determining what is a multi-storey building under the clause.
The above approach to construction of clause 57BC(5) is one, in my opinion, which leads to the conclusion that the exclusion provision in relation to "storey" in clause 57BC does not refer to nor require that a space be wholly dedicated as vehicle accommodation.
To construe the formulation "... the space includes accommodation only intended for vehicles" in clause 57BC(5) as meaning "includes only accommodation for vehicles" would, in my opinion, be a construction that ignores the particular words of the exclusion provision. In terms of context, it is clear that the maker of the amendment to the Regulation elected not to adopt the definition of "storey" in the Building Code of Australia but to express the exclusion from the exemption in its own emphatic terms. That fact, of itself, confirms the need to interpret the words as they appear in sub-clause (5) and not in accordance with a concept that does not accord with the literal meaning of the words in sub-clause (5).
It is not, in my opinion, without significance that the draftsman of clause 57BC(5) employed the word "includes" and not the phrases "but not" and "a space that contains only" in the exclusion provisions in the definition of "storey" in the Code. Given, as earlier discussed, the Building Code of Australia is referred to in clause 57BC(5) in the definition of "rise in storeys" but not otherwise, that fact tends to support the conclusion that the draftsman elected not to employ in clause 57BC(5) similar language in the exclusion to the word "storey" .
In the present case, it is hardly surprising that the Lower Ground level (as distinct from a higher level in the home unit development) contains multiple car spaces. As previously noted, the Lower Ground level contains 14 car spaces and only six home units. The location of car spaces at a lower rather than a higher level in a multi-storey building can hardly be regarded as an unusual design aspect of a home unit construction.
It was submitted on behalf of the plaintiff that the exemption in clause 57BC "... cuts across the legislative intention of consumer protection ...": Plaintiff's submissions on motion for separate question at [30].
For that reason, it was contended that it should be construed so as to restrict the scope of its operation to the maximum extent consistent with its language. I consider that there is some merit to that contention especially given the evident legislative attempt to strike a balance between requiring insurance protection for the owners of residential units in smaller scale high-rise developments as against those who purchase units in more major constructions.
I consider it is also of some significance to note that the word "only" in the definition under clause 57BC(5) operates with respect to the word "intended" in the phrase "only intended for vehicles" . In accordance with the submissions for the plaintiff, the language under clause 57BC(5) is directed to establishing or identifying the relevant nature of the accommodation (that is, accommodation that is only intended to be used for vehicles) and no other. Additionally, I am of the opinion that there is also some significance to be placed upon the fact that the word "only" does not qualify the word "includes" .
The exclusion could have been easily expressed in terms of "... if the space only includes accommodation ..." but it was not expressed in that way and it may be taken that that was a deliberate choice of wording.
The word "storey" in clause 57BC(5), unlike "multi-storey building" and "rise in storeys" is not accorded a definitional meaning in affirmative terms. It is confined to excluding certain specified spaces. I accept, as was submitted for the plaintiff, that the use of the phrase "a space" in clause 57BC(5), by inference, means a space as defined in "storey" in the Code ( "means a space within a building which is situated between one floor level and the floor level next above ..." ) but, as discussed above, differs from the Code definition in terms of what is excluded from "a space" .
In determining the application or operation of clause 57BC, it is appropriate to examine the terms of clause 57BC(5), both by employing a text based examination as well as interpreting the terms of the sub-clause in its context. The context for this purpose may be taken as including both the provisions of clause 57BC itself as well as the relevant provisions of the Building Code of Australia , at least to the extent that the Code provisions are both expressly and impliedly incorporated or cross-referenced. An analysis of both kinds, in my opinion, leads to the conclusion that the Lower Ground level is not to be considered a space within the subject building for the purposes of Clause 57BC(5).
It follows that the advice or opinion provided by Mr Dix in his letter dated 20 January 2004, insofar as it implied that a space is excluded as a storey only if the entirety of the space provides accommodation for vehicles, does not reflect the effect of the exclusion in clause 57BC(5).
Orders
The separate question set out in paragraph 1 of the Notice of Motion filed on 16 July 2010 is ordered to be determined separately in accordance with UCPR 28.2.
That question is answered in the following terms:-
The residential and commercial building constructed at 228-232 Condamine Street, Manly Vale, as represented in the drawings referred to in the defendants' letter of 20 January 2004 to Rasco Developers and The Jaara Group, has a rise in storeys of 3, within the meaning of clause 57BC of the Home Building Regulation 1997.
In relation to costs, I propose to order the defendant to pay the plaintiff's costs of the motion. In the event, however, that the defendant wishes to submit that some other order as to costs ought to be made, then I grant leave to the parties to lodge written submissions with my associate. In that event, the defendants are to lodge such submissions within 14 days of the date of judgment and the plaintiff is to lodge any written submissions in reply 14 days following receipt of any such written submissions.
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Decision last updated: 07 April 2011
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