Unscrupulous builders will use any trick in the book to try escape liability - not this time says Judge Hammerschlag

So what was the trick the builder tried this time?  Quite an audacious one actually.  In terms of s80D of the Strata Schemes Management Act 1996 (NSW), an owners corporation ("OC") of a building must not seek legal advice or commence legal action unless a resolution is passed at a general meeting of the OC approving this.

Now this requirement is in the Strata Schemes Management Act, and based on this, as well as a common sense reading of the section, one would assume that this is intended for the protection of unit owners within a building and not as a loophole through which a builder who has been sued can try escape.  But no, they saw the loophole and they tried to drive their ute through it.

In The Owners Strata Plan No. 73943 v 2 Elizabeth Bay Road Pty Ltd the OC claimed against the builder for breach of the statutory warranties set out in the Home Building Act 1989 (NSW) due to alleged defective building work carried out by the builder.  The OC retained lawyers to bring the claim and the claim was initiated before a resolution to this effect had been properly passed.  The resolution was, however, passed after the event.  And wouldn't you have guessed it, the builder found this out and shouted "hey that's my defence"?

The position is precisely summed-up by Judge Hammerschlag as follows:

"The defendant moves for an order that the proceedings be struck out or dismissed on the grounds that they were commenced "without lawful authority".

It puts that the prohibition in s 80D(1) on initiating legal action is only capable of being removed by a resolution passed before the action is taken and that the plaintiff's resolution passed afterwards is ineffective to remove it. It puts that the absence of a prior resolution is an insuperable statutory inhibition on the commencement of proceedings and denies them legal effect.

The plaintiff accepts, the point having been taken, that to further the action there must be compliance with s 80D(1). It says that the resolution of 7 March 2013 is compliance. It accepts that if this is not the case the action cannot proceed.



This gives rise to the following two related questions:

(a) are proceedings commenced without prior compliance with s 80D(1) of no legal effect, that is, a nullity?

(b) if not, can the bar to legal action imposed by s 80D(1) be lifted by a subsequent resolution?"

Maybe the builders thought they were lucky as there were two authorities relied on by them that found that a failure to pass a resolution at all in terms of s80D would render proceedings brought by an OC void.  However, in those cases, unlike the present, there was no resolution passed after the fact and, in at least one authority, the defence was raised by a unit owner - the very person s80D seeks to protect.

So Judge Hammerschlag's answers to the questions in (a) and (b) above were no to the first question and yes to the second.  His conclusion was as follows:


"Division 3 of the Strata Schemes Management Act is directed to curtailing expenditure and more widely to minimising internal dispute by way of imposing requirements on processes internal to the owners corporation.

The words of s 80D(1) do not, let alone clearly, reveal an intention to take away any common law right of the plaintiff or to curtail the jurisdiction of the court to entertain a claim.



I do not consider that a statutory purpose of a provision directed to limiting expenditure (and then only above particular levels) without specific authority is to visit nullity on legal action taken and the possible forfeiture of common law rights even where the necessary authority is given ex post facto."

A valiant attempt by the builder, but not this time. 

The issue was raised as a preliminary point, so the case still needs to go to a hearing to be finally determined.  Maybe the builder should just put its pride in its pocket and instead of trying to drive his ute through the loophole, drive it back to the building, loaded with tools, to do the necessary repairs or, failing that, loaded with money to pay the OC. 

My bet is they'll try their luck at a hearing.  If they've got the guts to try the preliminary point, they'll think of something to try at the hearing too.  Maybe they'll draw Judge Hammerschlag again.  Because what goes around, comes around.  Especially when you're dealing with loopholes.

Apple eats Samsung: Round one to Apple in the trial of the century

So what's your preference, Apple or Samsung? Apple owners say they'll never use anything else, as do Samsung owners.  Being the two biggest players in the world's (extremely lucrative) mobile phone market, it's unsurprising that these two are fighting each other - in the courts of Australia and just about every other big market economy's country's courts.  In the Federal Court of Australia, though, it's round one to Apple.

OK, so what's the fight about? Well this is about as hard as understanding how a mobile phone actually works, but, simply put, it's something like this: Samsung sued Apple saying it has infringed 3 patents held by it and Apple counter-sued saying Samsung had misused its market power in contravention of the Australian Competition and Consumer Act.  

These proceedings are on foot in the Federal Court and are at the point where the parties have exchanged evidence, by way of witness statements.  In fact, all evidence had to be in by August 2012.  Despite this, in August 2013 Samsung sought to serve two further witness statements.  So Apple's lawyers did what any good lawyers would do and OBJECTED to this new evidence, and Samsung sought leave to rely on the statements.

Judge Bennett is handling the case and she refused the application for leave to introduce the new evidence.  And Samsung's lawyers did what any good lawyers would do and appealed against Judge Bennett's decision to the Full Federal Court.

The appeal was heard by Judges Jacobson, Flick and Griffiths (reported as Samsung Electronics Co Ltd v Apple Inc) and they quickly dismissed it, confirming that Judge Bennett was correct in her reasoning.  The Judges relied on a few grounds in dismissing the appeal but the thrust of their reasoning was that Samsung had not given any good and cogent reason for why these statements were so late - almost 12 months out of time.

Of course Samsung complained that the refusal to allow this evidence to be tendered would prejudice their case and result in substantial injustice but the Judges were unmoved.  They put their response to this as follows:

"... there are limits to the opportunity that a court will afford to a litigant to agitate a case not previously raised, particularly if the litigation is well advanced.  This principle applies not only to applications to amend pleadings but to all interlocutory rulings that bear upon the timely resolution of proceedings".

The parties are back in court on 26 November 2013 and hopefully proceeding with what will no doubt be a long and ugly battle.  When it's all done though, you may well be forced to break that vow that you will never use another make of phone.  The findings in the case could well damage either party substantially, such that they may never recover.  And could it all be because of what seems to be a relatively unimportant ruling on evidence?  Time will tell.

Building and Construction Law

The Consumer, Trader & Tenancy Tribunal is dead.  Long live the NSW Civil and Administrative Tribunal

The end is nigh! The Consumer, Trader & Tenancy Tribunal (CTTT) is about to be no more. As of 1 January 2014 the CTTT and 20 other NSW Tribunals will all merge into the new NSW Civil and Administrative Tribunal (or the NCAT, if you will).

So what does this mean?  Well on a practical level, nothing really.  The NCAT will now hear all former CTTT disputes in its 'Consumer and Commercial Division' - one of 5 divisions within the NCAT, the others being the Administrative & Equal Opportunity, Occupational & Regulatory, Guardianship and Victims Support divisions. Staff from the CTTT will be moved to the NCAT and all existing proceedings will be transferred across.

Now on the subject of proceedings and procedure, a recent decision of the NSW Supreme Court dealing with how proceedings were carried on in the CTTT raises some interesting matter.  It is reported as Cheung v Yang and was handed down on 19 November 2013.

Mr and Mrs Yang got Mr Cheung to convert their garage into a granny flat.  In brief, a dispute arose with the Yangs saying Mr Cheung had done a bad job and refusing to pay, and Mr Cheung demanding his money.  None of that is very important for our purposes.  What is important is what happened at the hearing.

The proceedings were listed for hearing at the CTTT on 30 and 31 July 2012.  Mr Cheung was originally represented but his solicitors withdrew on 11 July 2012.  Prior to that, and on 7 July 2012, the Yangs solicitors served 7 affidavits on Mr Cheung's solicitors, being the evidence they intended to rely on at the hearing.

So on 30 July Mr Cheung arrived at the hearing unrepresented and saying he had no idea that any of the 7 affidavits had been served.  Moreover, Mr Cheung's first language was Korean and he needed an interpreter to assist him at the hearing.  From this point on, the Member of the CTTT hearing the matter seems to have got things horribly wrong. Despite having no representation and despite the fact that Mr Cheung had little, or no, grasp of English, the Member decided to adjourn the proceedings to the next day and give Mr Cheung the opportunity to consider the affidavits.  The proceedings resumed the next day, the affidavits were used as evidence and there was no cross-examination of any witnesses.  On 15 August 2012, the CTTT published its determination, finding Mr Cheung liable and dismissing his cross-claim.

A bit harsh?  Mr Cheung thought so.  He brought proceedings in the NSW Supreme Court to quash the decision of the CTTT and for the matter to return to the CTTT for a proper hearing.  It came before Judge Harrison.

Judge Harrison first dealt with the thrust of Mr Cheung's argument, that the CTTT "had an obligation to ensure that he understood the procedural aspects of the case so that he received a fair hearing.  This was particularly so in the present case as he was unrepresented and needed the assistance of an interpreter".

His honour found, referring to the High Court decision of Kioa v West that:

"The law has now developed to a point where it may be accepted that there is a common law duty to act fairly, in the sense of according procedural fairness, in the making of administrative decisions which affect rights, interests and legitimate expectations... The statutory power must be exercised fairly, that is, in accordance with procedures that are fair to the individual considered in the light of the statutory requirements, the interests of the individual and the interests and purposes, whether public or private, which the statute seeks to advance or protect or permits to be taken into account as legitimate considerations...".

His Honour concluded that "One aspect of the hearing rule is that a person should have matters adverse to that person or that person's interest put to that person for comment or evidence before an adverse decision is made. A decision-maker should not make a decision having had regard to undisclosed material adverse to a party that was credible, relevant and significant to the decision to be made without first putting that material to that person... Furthermore, a decision maker should bring the critical issue or factor on which the decision is likely to, or may possibly, turn to the person's attention so that he or she might have an opportunity to deal with it."

Mr Cheung was not given this opportunity by the CTTT, hence he was denied procedural fairness.  So back to the CTTT His Honour sent them for a new hearing, but by the time they get there they will be in the NCAT.  Maybe the new tribunal will get it right.

Caveats over property: Not hard to register but they can be costly if wrongly done

Let's start with what a caveat is.  A caveat is a notation on the title to a property by a person who claims that they have an "interest in land".  It is recorded with "Land & Property Information (NSW)" and acts to stop the proprietor from dealing with the land in any way.  Examples of those with interest in the land are a purchaser of land who can place a caveat pending settlement, a lessee, or a person who has contributed to the purchase price of the property to stop the proprietor selling without him/her getting back their contribution.  Recording the caveat consists of filling out the right form, which is a brief document, and paying the necessary fee.  A fairly quick and easy process.

But the caveator must have "an interest in the land" and this is sometimes (or often) abused.  In the case of Pascoe & Robinson (as Trustees for 124 Tennyson Rd Gladesville) v Michael James & Ors, decided last week, the Supreme Court decided that the defendants had done exactly that - they had lodged "unmeritorious" caveats over the land in question.  A caveator is meant to lodge a caveat only with "reasonable cause" and where he fails to do so damages can be awarded against him/her.

Messrs Pascoe and Robinson had attempted to sell the land in question but were blocked due to the caveats put in place by the defendants.  Pascoe and Robinson claimed that due to these unmeritorious caveats, they had suffered loss of interest due to the delay they suffered in receiving the proceeds of the sale as well as additional legal costs.

Judge Slattery found that the defendants were liable for the damages suffered by the plaintiffs.  This, the Judge said, was based on the failure of the various caveators, as alleged suppliers of services, to deal with the registered proprietors in an attempt to resolve the issue of why the caveats were put in place.  The defendants had also failed to explain the basis for their claim to have an equitable interest in the property.  They made a vague assertion that their interests were based on invoices but could not sufficiently link these to the property.  The Judge found that the defendants had no caveatable interest, had no actual belief that there was a caveatable interest in the Land, and had no reasonable grounds for holding such a belief.

The defendants were ordered to pay the plaintiffs about $8000 in lost interest and about $38000 in costs.  They probably got off lightly. 

Caveats can be a useful tool in protecting the interests of those who have legitimate claims to some interest in property, but they should be thought about carefully before being recorded.  They are often lodged by people claiming an interest in land merely so as to frustrate the proprietor and in circumstances where there is absolutely no link to the land. 

Before lodging caveats be certain that you do in fact have a 'caveatable interest' or interest in the land.  If you do not, you, like Pascoe and Robinson may find yourself facing an order to pay damages and legal costs.

What happens on tour, stays on tour - High Court decides that your employer can concern itself with your sexlife

The case raised in this posting has been in the newspapers quite a bit, and for good reason I suppose as it is to do with sex, and especially sex "on tour".  What sells newspapers better than stories of sex?  It is reported as Comcare v PVYW and was decided by the High Court on 30 October 2013.

If you don't know about it, the simple facts are that Miss X was employed by the Commonwealth government and was in regional NSW for work training.  While there she took the time to have sex one evening with someone who we can glean must have been a new flame.  During this 'intercourse' the glass light fitting above the bed was pulled from its mount by one of them and it struck Ms X in the nose and mouth.  We glean that the other party must have been a new flame as, as we all know, this sort of intercourse only occurs between new flames.

Miss X was injured and so claimed against the Commonwealth government's insurer.  (How one would love to know what answer was given to the question in the claim form "Please describe, in detail, how the injury occurred.  If possible, attach a diagram or photos that will assist in this explanation.") 

The insurer rejected the claim on the basis that the injury was not suffered by Miss X "in the course of employment".

After three previous hearings (in the Administrative Appeals Tribunal, the Federal Court and the Full Federal Court), the case found its way to the High Court.  In deciding on the matter, the High Court was divided, with 4 Judges saying that Comcare wasn't liable to cover Miss X and 2 saying they were. 

It has long been accepted that the "course of employment" extends beyond the work which a worker is employed to do to include things that are incidental to employment, such as having a lunch break and if required staying away from home for a period.

The central issue the High Court had to grapple with was how far should cover should be extended for employees injured while not specifically at work but while in an interlude between work duties.  The High Court had already decided on this issue in 1992 in Hatzimanolis v ANI Corporation, so the Judges in this case had to decide how to apply Hatzimanolis's to the facts of this case.

The Judges interpreted the test set out in Hatzimanolis's case differently.  The majority found that if an employee is injured while not actually engaged in work it must be asked what the employee was doing when injured. The Court found that in some cases, the injury will have occurred at and by reference to the place. But more commonly, it will have occurred while the employee was engaged in an activity.  When an activity was engaged in at the time of injury, the question is: did the employer induce or encourage the employee to engage in that activity? When injury occurs at and by reference to a place, the question is: did the employer induce or encourage the employee to be there?  If the answer to the relevant question is affirmative, then the injury will have occurred in the course of employment.

The minority did not like the application of 2 different tests by the majority.  Their view was that this was not what Hatzimanolis's case required.  To them the case stated that an injury that an employee sustains at a place where an employer has induced or encouraged the employee to be during an interval or interlude in an overall period or episode of work is, without more, properly to be characterised as an injury in the course of the employee's employment, unless the employee is engaged at the time of the injury in gross misconduct. They said further that it was not necessary that the employee, during that interval or interlude, also be undertaking a particular activity which the employer has expressly or impliedly induced or encouraged the employee to undertake. Nor, absent gross misconduct, is any inquiry into particular private activity of the employee relevant.

The minority found that it was not the business of an employer to concern itself with what an employee was up to in their private time. They stated that Hatzimanolis had established that:

"Gone is the artificial fragmentation of an interval or interlude in an overall period or episode of work spent by an employee at a particular place at the inducement or encouragement of an employer into yet shorter periods of time each of which is to be further separately accounted for and discretely related to the employment relationship. Gone also is the intrusive inquiry that such artificial fragmentation entails into personal choices made by an employee, hour-by-hour or minute-by-minute, during an interval or interlude."

The standard nowadays was simply that "...it is sufficient for an injury sustained by an employee during an interval or interlude in an overall period or episode of work to be in the course of the employee's employment that the employee is where the employee would not be but for his or her employment, and is doing what a man or woman so employed might do without gross impropriety." The test applied by the majority was, in the words of Judge Gageler "... inconsistent with the Hatzimanolis principles; it is a return to the outmoded, artificial and intrusive form of analysis that the Hatzimanolis principles were formulated to overcome."

So what do you think?  Does the effect of the majority's decision seem to be a bit strained?

It means that if you injure yourself in your hotel room by slipping and falling in the shower you are covered or even if you are asleep and the light fitting falls out and hits you in the head you are covered, but if you are engaged in a liaison in the same hotel room and you cause the light fitting to fall you are not.  Is this a valid distinction?  Should an employer concern itself with what an employee does in his or her spare time?  Misconduct is not covered by insurance - is that not enough of a limit?

Certainly, it would seem that what happens on tour, stays on tour.