Australia: Residential Focus - 23 April 2018: Part 1

Last Updated: 30 April 2018
Article by Christine Jones, Eleanor Grounds and Christopher Yong
Most Read Contributor in Australia, September 2018

High Court finds NCAT doesn't have jurisdiction over disputes between residents of two states

The High Court of Australia has handed down its decision in Burns v Corbett; Burns v Gaynor [2018] HCA 15, finding that the New South Wales Civil and Administrative Tribunal (the Tribunal) does not have the jurisdiction to deal with a dispute arising between two residents of different states. The High Court upheld the decision of the New South Wales Court of Appeal, which determined that the Tribunal is not a "Court of a State" under Chapter III of the Commonwealth Constitution (Constitution). A summary of Burns v Corbett; Gaynor v Burns [2017] NSWCA 3 is available here.

Relevant legislation

Section 39(2) of the Judiciary Act 1903 (Cth) (Judiciary Act) provides, relevantly, that "Courts of the State" have federal jurisdiction in all matters in which the High Court has original jurisdiction. Pursuant to s75(iv) of the Constitution, the High Court has original jurisdiction in all matters "between States, or between residents of different States, or between a State and a resident of another State". Section 76 of the Constitution empowers the Commonwealth Parliament to make laws conferring additional original jurisdiction on the High Court to determine certain other matters, and section 77 gives the Parliament the power to make laws defining the extent to which the jurisdiction of any federal court shall be exclusive of that which belongs to or is invested in the courts of the States, and investing State courts with federal jurisdiction.

Decision

The High Court of Australia unanimously dismissed the five appeals from the Court of Appeal's decision. It is relevant to note that it was common ground in the Court of Appeal matter that the Tribunal was not a Court of a State and that the Tribunal was exercising state judicial power.

The Attorney-General of the Commonwealth's primary argument was that there is an implied constitutional constraint on State legislative power, meaning a State law is invalid to the extent it purports to confer the judicial power found under sections 75 and 76 of the Constitution on a court which is not a "Court of the State". In the alternative, the Attorney-General argued that such a law would be inconsistent with s39(2) of the Judiciary Act and therefore invalid by operation of s109 of the Constitution.

The High Court unanimously dismissed all five appeals, with the majority finding that Chapter III of the Constitution clearly means the powers conferred by sections 75 and 76 of the Constitution may not be exercised by any court other than a "Court of the State" within the meaning of Chapter III.

The majority of the High Court (Kiefel CJ, Bell and Keane JJ, with Gagelar J concurring generally) found:

Sections 28(2)(a) and (c), 29(1) and 32 of the NCAT Act are invalid to the extent that they purport to confer jurisdiction upon [the Tribunal] in relation to the matters between Mr Burns, and Ms Corbett and Mr Gaynor. Pursuant to s 31 of the Interpretation Act 1987 (NSW) they may be read down to avoid that conclusion so that they do not confer jurisdiction upon [the Tribunal] where the complainant and the respondent to the complaint are "residents of different States" within the meaning of s 75(iv) of the Constitution.

Further, Nettle, Gordon and Edelman JJ agreed with the Attorney-General's alternative line of argument, holding that the Tribunal is prohibited from resolving a dispute between residents of different States due to section 39 of the Judiciary Act.

Does this apply to corporations?

While this decision clarifies the Tribunal's inability to resolve disputes between residents of different States, it does not address whether this rule would also extend to a dispute between two corporations operating out of different states or a dispute between a corporation and an individual resident of different states.

NSW Government begins public consultation on changes to strata building bond and inspections scheme

The NSW Government is inviting public comment on proposed changes to the strata building bond and inspections scheme (the Scheme) which was introduced on 1 January 2018. The Scheme, which is established by Part 11 of the Strata Schemes Management Act 2015 (NSW) (the Act), was introduced to incentivise developers to address building defects early and quickly. In particular, it requires developers to pay a building bond equivalent to 2% of the contract price for the building work to the Secretary of the Department of Finance in order to secure funding for the rectification of any building defects. More information on the Scheme can be found here.

The draft Strata Schemes Management Amendment (Building Defects Scheme) Bill 2018 (the Bill) introduces a raft of amendments to the Scheme. All members of the public, in particular industry members and stakeholders, are invited to submit feedback on the Bill. Comments must be made in writing to stratabond@finance.nsw.gov.au by 11 May 2018.

Proposed changes under the Bill

The proposed amendments addressed by the Bill include:

  • Building bonds in the form of a bond (as opposed to a bank guarantee or another form of security prescribed by the regulations to the Act) would only be able to be issued by an approved insurer as defined by the Act. Bonds in the form of bank guarantees would only be able to be issued by an authorised deposit-taking institution.
  • Developers would need to lodge a building bond before applying for the occupation certificate (rather than at any time before an occupation certificate is issued, as is currently required).
  • The Commissioner of Fair Trading (Commissioner) would have the power to enter into premises and use search warrants in order to verify the amount of the contract price or building bond.
  • A developer would be able to apply to the NSW Civil and Administrative Tribunal to have the contract price determined in prescribed circumstances.
  • The owners corporation and the developer would need to agree on the amount to be released from the bond to meet the costs of fixing identified building defects. If they cannot agree, the Commissioner would determine this amount.
  • The Commissioner would have the power to enforce a debt recovery process to recover unpaid or underpaid building bonds from the developer.
  • Building inspectors and the professional associations that appointed them would be protected by a new 'good faith' liability protection which would exclude them from liability for anything done (or omitted to be done) in 'good faith' whilst conducting an inspection.

Penalties

  • The maximum penalty for a developer who fails to lodge a building bond would be increased to range from $22,000 to $1.1 million, with a further $22,000 for each day the offence continues.
  • The Bill also introduces an offence for providing the Commissioner with false or misleading information in relation to the amount required to be secured by a building bond. The maximum penalty would be $110,000 for corporations and $22,000 for an individual.

Home Building Amendment (Cladding) Regulation 2018 commences

The Home Building Amendment (Cladding) Regulation 2018 (NSW) (Regulation) commenced on 20 April 2018. The Regulation amends the Home Building Regulation 2014 (NSW) by inserting a new clause 69A which updates the definition of "major defect" in section 18E(4) of the Home Building Act 1989 (NSW) (the Act).

Clause 69A provides that if the external cladding of a building causes or is likely to cause a threat to the safety of any occupants of the building if a fire occurs in the building, that defect is prescribed as a major defect.

What does this mean?

Defects that fall within the definition of a "major defect" now benefit from an extended warranty period of six years under section 18E of the Act. The definition of "major defect" in section 18E(4) requires, among other things, the defect to be present in a "major element" of the building. As a result of the Regulation it is no longer necessary to establish that the cladding concerned is a major element of the building.

It is important to note that clause 69A only applies in respect of a breach of statutory warranty:

  1. if the warranty period for the breach starts on or after 20 April 2018; or
  2. if the warranty period for the breach started before 20 April 2018, if the period in which proceedings could be commenced for the breach of statutory warranty had not already expired by 20 April 2018.

This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.

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Authors
Christine Jones
Eleanor Grounds
 
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