The Supreme Court of Victoria was required to consider the application of the Domestic Building Contracts Act 1995 (Vic) to multi-apartment developments. McDonald J held that, subject to the nature of the works falling within the definition of “domestic building work”, the Act applies to multi-apartment developments and to developers of such developments.

Facts

The Owners Corporation issued proceedings in the Victorian Civil and Administrative Tribunal against the builder of a multi-apartment development (“Burbank”) for breaches of the implied warranties in s8 of the Domestic Building Contracts Act 1995(Vic) (the “Act”), arguing that it was entitled to the benefit of the warranties under s9 (that provides that the warranties run with the building). Burbank applied to have the proceeding struck out on the following bases:

  • the Act does not apply to multi-apartment developments;
  • the Act does not apply to developers; and
  • there was no special resolution by the Owners Corporation authorising the commencement of proceedings in the Tribunal.

If the Act did not apply to either multi-apartment developments or developers or both, then the Owners Corporation would not have the benefit of the implied warranties in the Act nor would the Tribunal have jurisdiction to hear the matter.

Decision

The Tribunal dismissed the application and Burbank appealed to the Supreme Court of Victoria.

Burbank relied on an extract from the decision of Chief Justice Warren in Kane Constructions Pty Ltd v Sopov [2005] VSC 237 (“Sopov”) to the effect that the Act was not intended to apply to developers; and even if the Act applied to mixed-use developments, the Act would only apply to those parts intended for domestic residential use. Burbank also relied on the decision of the Court of Appeal in Winslow Constructions Pty Ltd v Mt Holden Estates Pty Ltd (2004) 10 VR 435 (“Winslow”) to the effect that civil engineering and infrastructural work carried out by the builder in respect of a proposed residential development was not within the scope of the Act.

McDonald J held that the Act applied to multi-apartment developments because the language of the Act intended that it do so. His Honour referred to the following in support of this construction:

  • section 5(1)(a), which provides that the Act applies to the “erection or construction of a home”;
  • section 3, which defines a home as “[a]ny residential premises and includes any part of a commercial or industrial premises that is used as a residential premises”;
  • section 5(1)(e), which provides that the Act applies to any work associated with the construction or erection of a building on land that is zoned for residential purposes under a planning scheme under the Planning and Environment Act 1987 and in respect of which a building permit is required under the Building Act 1993;
  • the exclusions, which do not exclude from the Act a residential apartment in a multi-apartment development;
  • sections 1 and 4, which set out the purposes and objects of the Act, and His Honour noted that including an apartment in a multi-apartment development does not undermine them; and
  • the regulations, which exclude multi-storey residential apartment developments from the requirement for warranty insurance, which presupposes that such work is subject to the Act.

McDonald J distinguished Sopov on the basis that it dealt with mixed-use developments and that, in any event, the decision suggested that the Act applied to the residential aspect of mixed-use developments. His Honour also distinguishedWinslow on the basis that in Winslow the works there were preliminary and did not involve the construction of the apartments.

McDonald J held that the Act applied to developers, depending on the nature of the work undertaken. His Honour held that it is misconceived to consider the application of the Act by reference to the contracting party when the Act directs attention to the nature of the work undertaken.

Using examples to demonstrate the point, McDonald J noted that where a contract is for the construction of a building to be used for business purposes only, or to accommodate animals, then this work is expressly excluded from the Act. However, where the work involves the construction of a multi-residential apartment development the Act will apply.

On the final issue, McDonald J noted that it was a requirement of s18 of the Owners Corporation Act 2006 (Vic) for the Owners Corporation to have a special resolution authorising the commencement of the Tribunal proceedings. His Honour noted that there were defects in the notice given and that the special resolution given was therefore not valid. Relying on the New South Wales authority of 2 Elizabeth Bay Road Pty Ltd v The Owners – Strata Plan No. 73943 (2014) NSWCA 409, His Honour held that this defect did not have the effect that the proceedings were a nullity, but instead this was a procedural irregularity which could be cured by subsequent ratification. His Honour noted that s148(7)(b) of the Victorian Civil and Administrative Tribunal Act 1998 (Vic) confers power on the court to make an order that the Tribunal could have made in the proceedings, and ordered that the proceeding in the Tribunal be stayed until such time as there was compliance with the procedural requirements for commencing proceedings.

Discussion

A practice is occurring where owners corporations and residents in multi-apartment developments issue group-style proceedings in the Tribunal against a builder for relief in respect of breaches of the warranties implied by the Act. This decision assists those litigants, as it resolves the uncertainty arising from the decision in Sopovconcerning the application of the Act to multi-apartment developments. The decision also makes it clear that the Act applies to developers, subject to the nature of the building being built. Finally, the decision emphasises the importance of an owners corporation ensuring that it has approval to commence the proceedings, and has followed the prescribed procedures for obtaining that approval.