The Owners – Strata Plan 65111 v Meriton Apartments Pty Ltd [2016] NSWSC 650

Significance

In interpreting the powers granted to a certifier under a settlement deed courts will prefer a construction that advances the aims of the agreement. Read on for the rest of the analysis by Erasmus Lovell-Jones.

Facts

Meriton Apartments Pty Limited (builder) developed and built a residential tower in George Street, Sydney. Following completion of the development in March 2001, the Owners Corporation (owners) was formed. In June 2002, the Council of the City of Sydney (council) identified various non-compliances with the Building Code of Australia (BCA) in relation to fire and life safety, and commenced proceedings against the owners and the builder.

These proceedings were settled by a settlement deed between the owners, the builder and the council (Settlement Deed). The Settlement Deed required the builder to carry out rectification works to achieve the Designated Standard (being specific BCA fire and life safety requirements identified by the parties in the Settlement Deed). The Designated Standard permitted very limited and specific minor departures from the BCA requirements. The rectification works and the achievement of the Designated Standard were to be assessed by an independent certifier.

In January 2008 the owners sued the builder for alleged defects in the common property. In March 2014 the proceedings were referred to an architect (referee) for inquiry and report. The referee found that the builder had failed to carry out the rectification works to the Designated Standard and determined that the builder pay the owners $1.17 million for outstanding fire and life safety defects. A dispute arose regarding the extent to which the referee's report should be adopted.

The builder argued that the Settlement Deed empowered the independent certifier to issue directions entitling the builder to carry out the rectification works in a manner which would not promote the achievement of the Designated Standard. The parties sought a preliminary judgement from the NSW Supreme Court on the proper construction of the Settlement Deed.

Decision

Stevenson J found that the referee had correctly construed the Settlement Deed.

His Honour found that, although the certifier under the Settlement Deed was authorised to give directions to promote compliance with the Designated Standard, the certifier was not empowered to give directions which would result in non-compliance. For a direction to be a 'proper' direction under the Settlement Deed, it would need to advance compliance with the Designated Standard.