The Owners – Strata Plan No. 91174 trading as Owners Corporation Throsby Street v RPF Building Pty Limited

The plaintiff is the owners’ corporation for Strata Plan 91174, being the residential portion of a mixed-use development at 18 Throsby Street in Wickham, which is a suburb of Newcastle (the Development). The first defendant, RPF Building Pty Limited, is the builder contracted for the Development. The second defendant, RPF Throsby Pty Limited, is the developer.

The plaintiff commenced these proceedings in the District Court in 2017 claiming damages for allegedly defective building works.

The proceedings were transferred to this Court on 18 March 2019 when it became apparent that the claim exceeded the monetary jurisdictional limit of the District Court.

The parties entered in a Deed of Settlement on 10 August 2020.

Clause 3.1 of the Deed provides:

On one reading of the description of the parties to the Deed immediately above the Recitals, the reference to “RPF” is a reference to the developer RPF Throsby Pty Limited. However, it is also arguable that the description of the parties should be read as applying the definition “RPF” to RPF Building Pty Limited and RPF Throsby Pty Limited. The parties’ submissions concerning the proper construction of the Deed implicitly proceed on the basis of the second reading, which I will therefore adopt. However, the question whether the term “RPF” refers to the developer only, or to the builder and the developer, is not determinative of the resolution of the question ordered to be determined separately which is the subject of these reasons.

The Deed defines the “Works” to be carried out by “RPF” under clause 3.1 as meaning:

The “Final Rectification Scope” is defined as the scope of works in Schedule A to the Deed, which is a 28-page list of numbered work items with a description of the method of rectification for each item agreed between the parties.

The Deed defines “Certification” as meaning:

Clause 3.6 of the Deed provides:

Mr Nathan Halstead is a Registered Building Surveyor, an Accredited Member of the Australian Institute of Building Surveyors, a Registered Certifier – Fire Safety, an Accredited Practitioner – Fire Safety Assessment, and a Registered Professional Engineer – Fire Safety in New South Wales, Queensland and Victoria.

Pursuant to clause 3.7 of the Deed, these proceedings were stood over while the Works were being carried out for a period that was initially envisaged to be 11 months, but which was extended on several occasions with the consent of all parties in accordance with clause 3.8 of the Deed. Those extensions expired in February 2024.

On 6 February 2024, Mr Halstead signed a document entitled “Conditional Deed Completion Statement” to which I will refer in more detail below.

Clauses 3.9 and 3.10 of the Deed relevantly provide:

Clause 4 of the Deed provides:

Clause 5 of the Deed provides:

Clause 6 of the Deed provides:

As I have already mentioned, Mr Halstead issued a document entitled “Conditional Deed Completion Statement” on 6 February 2024 (the Completion Statement).

The Completion Statement contains the following “Project Description”:

The operative part of the Completion Statement is in Section 5 of the document entitled “Statement”. Section 5 states:

The works excluded from the confirmation in Section 5 of the Completion Statement comprise eight work items from the Final Rectification Scope which are listed in Section 3 of the Completion Statement, entitled “Exclusions”.

The confirmation in Section 5 of the Completion Statement is otherwise subject to Section 4, which is entitled “Limitations”. Section 4 states that:

Section 2 of the Completion Statement, entitled “Information Attached to This Decision”, contains a list of 92 documents. Those documents, which were tendered in evidence at the hearing before me, comprise in excess of 450 pages of material. The list in Section 2 does not identify the specific Final Rectification Scope work item or items to which each of the 92 documents corresponds. Most of those documents have been described in the Section 2 list as having been prepared by RPF Building, or by Mr Andrew Cranston of RPF Building.

On 15 February 2024, the Court made an order by consent granting leave to the plaintiff to amend its Statement of Claim in these proceedings by:

On 7 March 2025, the Court granted leave to the plaintiff to further amend its Statement of Claim in these proceedings by:

At the same time, the Court made the following orders:

I understand the reference in the terms of the separate question to the continuation of these proceedings to be a reference to the continuation of the plaintiff’s claims for rectification or damages for the cost of rectification of defective building works, and damages for breach of the Deed, as pleaded in the Further Amended Statement of Claim.

The answer to the separate question turns on the proper construction of the Deed, including whether the Completion Statement issued by Mr Halstead is a “Certification” within the meaning of the Deed.

The defendants accept that the plaintiff is entitled to continue the proceedings in respect of the eight work items listed in Section 3 of the Completion Statement as Exclusions, but contend that they are not entitled to do so in respect of the 17 work items in paragraph 22A of the Further Amended Statement of Claim that are not Exclusions.

The defendants submit that the Deed operates to bar the plaintiff from bringing any claim in respect of any work item in the Final Rectification Scope upon that work item being certified by Mr Halstead. The defendants place particular reliance on clauses 3.9 and 3.10 of the Deed which they submit provide the mechanism by which the dispute that is the subject of the proceedings is to be finally resolved. The defendants submit that, save for the eight work items identified as Exclusions, the Works have been certified by Mr Halstead issuing the Completion Statement. The defendants submit that this is a complete answer to the plaintiff’s claim in respect of the 17 work items referred to above by reason of clauses 3.9 and 3.10 of the Deed. The defendants submit that the Further Amended Statement of Claim impermissibly seeks to go behind Mr Halstead’s certification in the Completion Statement in respect of those 17 items.

The plaintiff submits that clause 3.1 of the Deed, read together with the definitions of “Works” and “Certification”, imposes two obligations on the defendants:

The plaintiff submits that it is no part of Mr Halstead’s role under the Deed to certify whether work items in the Final Rectification Scope have been completed by the defendants. The plaintiff submits that Mr Halstead’s role is limited to certifying that those works are compliant with the relevant standards and laws.

The plaintiff submits that the release in clause 5 and the bar in clause 6 of the Deed are not enlivened if the defendants fail to perform their obligation under clause 3.1 to complete the work items in the Final Rectification Scope, even if Mr Halstead has certified those work items as compliant. The plaintiff’s claim in paragraph 22A of the Further Amended Statement of Claim is that the defendants failed to perform some 20 of those work items, 17 of which are covered by the Completion Statement as I have mentioned above.

In addition to submitting that clauses 5 and 6 of the Deed are inoperative by reason of the defendants’ alleged failures to complete those work items, the plaintiff submits that clause 4.2 of the Deed expressly entitles the plaintiff to continue these proceedings in respect of those work items.

The plaintiff submits that clauses 3.9 and 3.10 of the Deed, properly construed, merely prevent the plaintiff from asserting that work items which have in fact been completed as required by clause 3.1 of the Deed are non-compliant with relevant standards and laws if Mr Halstead has certified them as compliant.

The plaintiff further submits that the Completion Statement does not, in terms, contain a certification by Mr Halstead that the Works are compliant with relevant standards and laws. Rather, Mr Halstead purports to confirm that the Works have been completed in accordance with the Deed, which the plaintiff submits is extraneous to Mr Halstead’s role provided for in the Deed.

Further or alternatively, the plaintiff submits that, even if that confirmation statement in Section 5 of the Completion Statement is read as a statement of compliance with relevant standards and laws, the express Limitations in Section 4 of the Completion Statement mean that it cannot be understood as capturing all relevant standards and laws as required by the Deed. In particular, the plaintiff submits that the second limitation in Section 4 can reasonably be read as Mr Halstead eschewing any confirmation or certification that the work items in the Final Rectification Scope in Schedule A to the Settlement Deed are fully compliant with the Building Code of Australia.

The defendants submit that the statement in Section 5 of the Completion Statement confirming that the “building work has been completed in accordance with the deed other than the works listed in the exclusions above” is, in substance, a statement that the work items in the Final Rectification Scope in Schedule A to the Settlement Deed have been completed in a manner that is compliant with relevant standards and laws, save for the Exclusions.

The Deed is a commercial contract. Its terms are to be understood objectively, according to what a reasonable businessperson, placed in the position of the parties, would have understood them to mean, having regard to the circumstances surrounding the Deed and the commercial purpose and objects to be achieved by it. [1] The Court is entitled to approach the task of construing the Deed on the basis that the parties intended to produce a result which makes commercial sense. However, the commercial object of the Deed cannot be used to give the words used by the parties a meaning that they cannot reasonably bear. [2] Caution is required when resort is had to assertions of commercial sense (or, conversely, commercial inconvenience) as a reason for construing a commercial contract in a manner that departs from the ordinary meaning of the language that the parties have in fact used. [3] There is “no licence for ‘judicial rewriting’ of an agreement”. [4] The Court is not permitted to depart from the ordinary meaning of the words used by the parties merely because it regards the result as inconvenient or unjust. [5]

It is obvious from the terms of the Deed that its commercial purpose was to provide for the resolution of these proceedings. The Deed achieved that object by:

A reasonable businessperson placed in the position of the parties at the time they entered into the Deed and reading the terms of the Deed would have understood that this was its commercial purpose and would have understood the role of “Certification” in achieving that purpose under the contractual scheme that I have described above.

I infer from the parties’ agreement recorded in clause 3.6 of the Deed to appoint Mr Halstead to “provide Certification of the Works” that the parties were aware of Mr Halstead’s professional qualifications referred to at [11] above. That knowledge is also to be attributed to the reasonable businessperson when applying the principles referred to at [39] above.

That reasonable businessperson would have understood the language used by the parties in recording their agreement in clause 3.6 that Mr Halstead was “appointed to provide Certification of the Works”, and in defining “Certification” as meaning certification from Mr Halstead that “the Works completed are compliant with the relevant standards and laws”, to mean that the Works would “achieve Certification” as referred to in clause 3.9 of the Deed when Mr Halstead, applying his professional judgment, ascertained that each item of work in the Final Rectification Scope had been completed, formed the view that it had been completed in compliance with the relevant standards and laws, and issued a document recording his certification of those matters. The reasonable businessperson would not have attributed to the parties an intention that Mr Halstead could “provide Certification of the Works” by, for example, merely gathering together certifications and statements prepared by other persons, without applying his own professional judgment to the questions whether the work items in the Final Rectification Scope had been completed and were compliant with relevant standards and laws. The reasonable businessperson would not have attributed to the parties an intention that this would suffice to oblige the plaintiff to give up the pursuit of its claims for relief in respect of defective building works in these proceedings.

On the face of the terms of the Completion Statement and the documents listed in Schedule 2 of the Completion Statement which were tendered at the hearing of the separate question, Mr Halstead has merely confirmed that RPF Building or a third party has certified that the work items in the Final Rectification Scope have been completed (other than the eight items expressly excluded in Section 3 of the Completion Statement), and has then confirmed that either RPF Building or a third party has certified that those works are compliant with relevant standards and laws, subject to the Section 4 Limitations. No evidence was adduced at the hearing of the separate question to establish that Mr Halstead has done anything more than he appears to have done on the face of the Completion Statement and the documents listed in Schedule 2. The defendants were unable to explain how Mr Halstead’s confirmation that RPF Building or third parties had certified compliance (subject to the Section 4 Limitations) constituted “certification from Nathan Halstead that the Works completed are compliant with the relevant standards and laws”. In relation to the second limitation in Section 4 of the Completion Statement, the defendants did not contend that the Building Code of Australia was not a relevant standard. In any event, confirmation of certification by others does not amount to certification by Mr Halstead applying his own professional judgment as required on my construction of the Deed.

For those reasons, the Completion Statement does not constitute a “Certification” within the meaning of the Deed, the defendants have not completed the “Works” they are required to carry out under clause 3.1 of the Deed (which are defined as including “Certification”), and the issue of the Completion Statement did not enliven clause 3.9 of the Deed. In those circumstances, clause 3.10 expressly preserves the plaintiff’s right to continue these proceedings. If and to the extent that the allegedly defective works identified in paragraph 22A of the Further Amended Statement of Claim constitute material breaches of the Deed, then clause 4.2 operates harmoniously with clause 3.10 to reserve the plaintiff’s right to continue the proceedings in respect of those work items, subject to clause 4.1. However, the evidence adduced at the hearing of the separate question does not permit me to form a view about whether those are material breaches or whether the plaintiff has complied with clause 4.1 in relation to any or all alleged material breaches. By reason of clause 6.2 of the Deed, clause 6.1 does not operate to bar the plaintiff from framing its claim as a claim for relief in respect of the defendants’ breaches of clause 3.1 of the Deed in failing to carry out the “Works” required by the Deed (including “Certification”).

My reasons above should not be understood as accepting the plaintiff’s submission that clause 3.1 of the Deed imposes two separate obligations on the defendants. [6] On the contrary, clause 3.1 imposes a single obligation on the defendants to “carry out the Works at its cost”. By reason of the definition of “Works” in clause 1.1, that obligation incorporates the dual elements of completing the works identified in the Final Rectification Scope and obtaining the “Certification” from Mr Halstead. I reject the plaintiff’s submission that it is no part of Mr Halstead’s role to certify that those works have been completed. The subject matter of the “Certification”, as defined in the Deed, is “the Works completed”. Ascertaining that each work item has been completed is therefore the first step in the process that Mr Halstead is required to undertake in order to certify (or decline to certify, as the case may be) that the work item is compliant with relevant standards and laws. It is therefore necessarily implied in any “Certification” within the meaning of the Deed that Mr Halstead, applying his own professional judgment, has satisfied himself that the works certified as compliant with relevant standards and laws have in fact been completed. In this way, “Certification” within the meaning of the Deed will evidence the defendants’ compliance with the whole of its obligation under clause 3.1 of the Deed in respect of those work items within the scope of the certification and will enliven the plaintiff’s obligation under clause 3.9 to file a notice of discontinuance of these proceedings, subject to clause 3.10. The defendants’ performance of the whole of that obligation under clause 3.1 will enliven the release in clause 5 of the Deed.

Contrary to the plaintiff’s submissions, the provisions of clause 4 of the Deed do not support a different interpretation. Clause 4 applies to all material breaches of the Deed, including, for example, any breach by the defendants of their obligation under clause 3.4 to obtain Home Warranty Insurance. To the extent that a material breach arises from a failure to complete all or any part of the “the Works” (including “Certification”), clause 4.2 operates harmoniously with clause 3.10, as I have explained above.

As I have said, the parties have chosen “Certification” as the means for determining whether the work items in the Final Rectification Scope have been completed and are compliant with relevant standards and laws. Contrary to the plaintiff’s submissions, clause 4.2 of the Deed does not entitle the plaintiff to continue these proceedings or to sue the defendants for breach of the Deed in respect of any alleged failure to complete work items in the Final Rectification Scope that are the subject of a “Certification” within the meaning of the Deed. However, as I have explained above, a statement or certificate that does not record Mr Halstead’s determination that the items of work in the Final Rectification Scope have been completed and are compliant with relevant standards and laws is not a “Certification” within the meaning of the Deed. Mr Halstead does not perform the task conferred on him by the Deed by issuing a statement or certificate that merely confirms a determination about those matters made by RPF Building, or by third parties. [7]

For all of those reasons, the question ordered to be determined separately on 7 March 2025 must be answered in the negative. There is no reason why costs should not follow the event.

The orders of the Court are as follows: