The Owners Corporation SP 90832 v Dyldam Developments Pty Ltd

HIS HONOUR: The Uniform Civil Procedure Rules 2005 (NSW) r 28.2 provides that 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 in the proceedings.

The Court’s discretion to make such an order is a general one, and although special circumstances are not required, the Court must have regard to ss 56(1) and (2) of the Civil Procedure Act 2005 (NSW) which provide:

Much has been said and written about the utility that may be achieved by ordering a separate question in an appropriate case. Perhaps even more has been said and written about the possible pitfalls involved in doing so, of which there are many.

Not infrequently the unwisdom of making an order for a separate question only becomes apparent when the question is being argued, even though it was formulated with the best intentions: see for example TP ICAP Management Services (Australia) Pty Ltd v Bradley Howell; GFI Australia Pty Ltd v Matthew Cotton [2021] NSWSC 656 at [11], [82]-[85]. That is what has happened here.

Having heard substantial, but not complete, argument on the question, I have come to the firm conclusion that given the problems and potential problems associated with the question as framed, the order for its separate determination should be revoked because far from facilitating the just, quick and cheap resolution of the real issues in the proceedings it has a propensity to achieve the opposite.

The present case demonstrates the high level of attention which must be given to assessing the positive and negative considerations of having the particular question determined in advance of the principal case.

The principal case here is a building case.

The plaintiff is the Owners Corporation (the Owners) of a substantial residential strata apartment complex known as the Koi Apartments at 109-113 George Street, Parramatta (the Complex).

The second defendant (Merfad), a developer, retained the first defendant (Dyldam) to design and construct the Complex. Both are in liquidation.

Dyldam engaged the third defendant (Dix) to be the principal certifying authority (PCA) for the Complex. [1] Dix was accredited to do so under the provisions of the Building and Development Certifiers Act 2018 (NSW) (the Certifiers Act). Dix, too, is in liquidation. The terms of its engagement are embodied in a Fee Proposal dated 10 July 2012; it is not necessary to set out its terms here. Dix undertook the role of Building Certifier under the provisions of the “appropriate state legislation”. Stan Spyrou, an employee of Dix, assisted by various other employees of Dix, acted as the certifier for the development of the Complex. On 29 April 2013, Dix issued construction certificates, signed by Spyrou, for the Complex, certifying that it complied with the relevant legislation.

The fourth to tenth defendants are contractors who were engaged to provide services of varying types such as fire protection, plumbing and air conditioning.

The Owners say that the Complex has numerous waterproofing, fire safety and other construction defects.

The Owners frame their claim against Dix under Part 4 of the fairly recently enacted Design and Building Practitioners Act 2020 (NSW) (the Design Act) which is entitled Duty of Care (and comprises ss 36-41). References to sections, are, unless otherwise stated or the context indicates differently, to sections of the Design Act.

Section 37 provides:

Section 36(1) defines construction work to mean “any of the following”:

Under s 4, relevantly, building work means “work involved in […] the construction of a building of a class or type prescribed by the regulations” (which the Complex is) and a reference to a building includes to “part of a building (including a building element)”.

The Owners allege that in carrying out its certification and associated functions, Dix “carried out construction work” because it otherwise had “substantive control over the carrying out of” building work within s 36(1)(d) read with s 36(1)(a). The consequence is, they say, that Dix owed, and owes, to them the duty of care imposed by s 37. They allege that in performing its role as principal certifying authority, Dix breached that duty of care and is liable to them for damages.

The Owners’ Third Further Amended Technology and Construction List Statement (List Statement) identifies in paragraphs C.32ii-vi the construction work said to have been carried out by Dix as:

I was informed from the Bar table that there are no further particulars to be provided.

The thrust of the Owner’s argument is that Dix’s ability, legally, practically, or both, to withhold certificates unless they were satisfied that the work necessary to justify the issue of such certificates had been done, gave Dix substantive control over the carrying out of that building work. The Owners intend to argue not only that Dix’s position as PCA gave it substantive control but that Dix in fact exerted substantive control by requiring particular work to be done or by giving advice that it should be. The latter contention involves facts which may or may not be in dispute.

Dix’s primary position is that Part 4 of the Design Act simply does not apply to certifiers. Its secondary position is that if it does, the Owners have not established that Dix carried out construction work. The secondary position may involve factual contests.

Dix’s argument that the Design Act does not apply to certifiers relies on two foundational propositions: first, the Design Act and in particular Part 4, makes no reference to certifiers which implies that they are not covered; second, certifiers are bound by a Practice Standard, which has statutory force under the Certifiers Act which imposes upon them obligations inconsistent with the duty of care imposed by s 37 and which cover the field. In particular, the Practice Standard requires certifiers to act in the public interest and to avoid conflicts of interest whereas the duty of care imposed by s 37 is owed to particular persons in whose interest the certifier must therefore act.

Sections 13 and 14 of the Certifiers Act provide:

In this context, the Owners and Dix framed, and the Court ordered there to be heard separately, the following question:

Other defendants have an interest in the outcome but were apparently content to leave this contest to the Owners and Dix.

The matter of principle which the framers of the question no doubt intended to have resolved is the important one whether the duty of care imposed by Part 4 of the Design Act on persons who carry out “construction work” applies to persons who carry out certification work as defined in the Certifiers Act.

It is common cause that if Dix carried out construction work, in respect of the development of the Complex, it owed to the Owners the duty of care imposed by s 37 in respect of that work.

This is undoubtedly an important issue, particularly to the building and construction industry. It is, in my opinion, one manifestly worthy of appellate consideration, perhaps even by the High Court. In any event, an appeal (at some stage) must be a realistic possibility.

If the question is answered no and there is no appeal resulting in a contrary answer before the trial runs, the trial would proceed on the footing that Dix is out and it would not participate in it. If, after the trial, the Owners or some other party (who has an interest in Dix being liable, for example, in the context of proportionate liability) appealed against the result of the separate question, and the appeal succeeded, there would have to be an entire retrial.

If the question is answered either yes or no and there is an appeal or appeals (which need leave – but one might assume, given the importance of the question, that leave is a realistic possibility) before the trial runs, preparation for the trial and indeed the trial itself could well be delayed. This would not be a good thing given that this is a 2018 filing and the Owners are, I was informed from the Bar table, self-funding the claim.

The pleadings are closed or close to being closed and the plaintiff’s evidence lay and expert is on. The Court is able to accommodate the final hearing, which is estimated to need 10 days, in June next year, and by all accounts remaining interlocutory steps to ready it for hearing can comfortably be completed in time.

But perhaps more importantly, the question is inutile.

First, it is not framed by reference to any particularised activity said to be the construction work carried out. The List Statement does not identify with any particularity the Certifications particularised and beyond Certifications it refers to Work as recorded in an Amended Fire Safety Schedule and Occupation Certificate. It is not framed so as to determine whether any particular specified activity was itself the carrying out of construction work.

Second, a positive answer simply requires determination of whether Dix did any construction work irrespective of whether that item of work is the subject of a complaint.

Thus, if Dix did one isolated item of construction work which is not the subject of complaint, the question must still be answered “yes”. That answer to the question would plainly be of no utility. It is merely equivalent to a finding that the Owners’ case against Dix is not hopeless and therefore should not be struck out.

It is not coincidental that paragraph 62 of Practice Note SC Eq 3 says that as a general rule applications to strike out will not be entertained in the Technology and Construction List.

Dix’s secondary contention that, even if Part 4 applies, Dix did not carry out construction work, suffers the same vices. If the Court were to find that there was one item of construction work carried out by Dix which was not the subject of complaint, the answer would be yes for that piece of work but might be no for everything else, which the separate question will not test.

So far as Dix’s primary contention that there is no room for the application of Part 4, as a first impression, I see significant complexity with it, in that it is a plenary argument that no certifier can ever have the duty of care because of the existence and terms of the Practice Standard. However, the obligation to comply with the Practice Standard is imposed as a condition of registration and registration is not required by all persons who do certification work including Local Council and the Minister administering the Environmental Planning and Assessment Act 1979 (NSW), or a delegate of the Minister (ss 5(1)-(2) of the Certifiers Act). [2] It may be that a logical, rational or policy reason for distinguishing between private certificates and those who do not have to be registered will need to be identified. I do not think that this a question that should, or indeed can, be adequately dealt with via a separate question on limited facts.

More importantly, however, I consider that there is a prospect that whether the duty applies in any particular circumstance may be dependent on or affected by the nature of the particular work which is the subject of the complaint. This would necessitate a factual enquiry for which the question is not an appropriate vehicle.

A final observation is that an answer to the separate question does not have the utility of bringing an end to the proceedings as a whole.

In all the circumstances, the order for the determination of a separate question, made by consent between the Owners and Dix, should be revoked, and I so order.