Australia: Residential Focus - 9 October 2018: Part 1: Owner and developer under the HBA

Last Updated: 12 October 2018
Article by Christine Jones and Lauren Stables
Most Read Contributor in Australia, November 2018

In The Owners – Strata Plan 81837 v Multiplex Hurstville Pty Ltd (2018) NSWSC 1488, the Supreme Court of NSW (the Court) considered whether certain parties to a Development Management Agreement (DMA) fell within the definitions of Owner and Developer of land within the meaning of the Home Building Act 1989 (NSW) (HBA) such that they would owe the HBA statutory warranties to successors in title.

Facts

Sydney Land Holdings Pty Ltd (SLH) was the registered proprietor of an industrial site (the Property). SLH obtained development consent to redevelop the Property as a mixed residential, retail and commercial development (the Project). SLH and eleven other companies entered into a DMA in relation to the Project. The First Defendant, Multiplex Hurstville Pty Ltd (Multiplex), was appointed as the development manager under the DMA. The Second Defendant, SLH 22 Pty Ltd (SLH 22), was one of eight parties defined as the Trustees under the DMA and entered into the DMA in a trustee capacity.

The Project included the construction of an apartment tower consisting of 116 residential apartments (Apartment Tower). The Owners Corporation of the Apartment Tower alleged that the building had a number of defects. The Owners Corporation contended that Multiplex and SLH 22 fell within the definitions of Owner and Developer under the HBA, that it is the successor in title to those companies for the purposes of s 18C of the HBA and that it has the benefit of the statutory warranties against those companies under s 18B of the HBA.

In deciding the case, the Court first examined whether Multiplex or SLH 22 was an Owner of the land within the meaning of the HBA.

Definition of owner and developer under the HBA

In Schedule 1 of the HBA, an Owner of land is defined as the only person who, or each person who jointly or severally, at law or in equity:

  • is entitled to the land for an estate of freehold in possession, or
  • is entitled to receive, or receives, or if the land were let to a tenant would be entitled to receive, the rents and profits of the land, whether as beneficial owner, trustee, mortgagee in possession or otherwise.

Under s 3A of the HBA, an individual, partnership or corporation on whose behalf residential building work is done may be deemed a Developer. S 3A contemplates arrangements where work is done for someone other than the Owner and deems both to be Developers, provided relevant circumstances are satisfied.

Under s 18C(2) of the HBA, an immediate successor in title to a Developer who is deemed to have done the residential building work, is entitled to the benefit of the statutory warranties against the Developer.

Key provisions of the DMA

The Owners Corporation claimed that by virtue of the DMA, Multiplex acquired all of the powers, rights, entitlements and characteristics to satisfy the definition of an Owner under the HBA. The Court reviewed the relevant provisions of the DMA, which are set out below.

  • Management - Under the DMA, Multiplex was appointed as SLH's development manager to do all things that Multiplex would be legally entitled to do if it were owner of the Property. The DMA contained detailed provisions concerning the manner in which Multiplex would manage the development. This included selecting, contracting, supervising and monitoring the builder and the building work. Multiplex was appointed as SLH's attorney to sign documents and SLH agreed to do all things necessary as reasonably required by Multiplex in connection with the Project.
  • Title and Possession - SLH remained registered proprietor of the property, however all title documents were delivered to Multiplex. Multiplex was also granted exclusive possession of the Property and SLH was unable to assign, sell, lease, mortgage or charge the property without Multiplex's consent.
  • Sale proceeds and financial entitlements - SLH was entitled to all sale proceeds, whilst Multiplex was entitled to a Development Management Fee. The Development Management Fee was calculated by reference to the amount equivalent to the sale proceeds and any rent or licence fee paid by a person for use or occupation of the Property.
  • Call option - The DMA included a call option, entitling Multiplex to call for the Property or the parts of the Property that had not been transferred to purchasers under sale of land contracts. Multiplex was required to pay consideration if it exercised the call.

Was Multiplex an Owner of the Property for the purposes of the HBA?

The Court held that none of the clauses within the DMA gave rise to Multiplex being an Owner and Developer within the meaning of the HBA. Multiplex was not given entire dominion over the land or a present right of beneficial enjoyment over the land. The extensive powers granted to Multiplex were only for the purposes of Multiplex exercising its responsibilities as development manager.

Multiplex's contractual right to receive an amount equal to the rents paid to SLH in the form of the Development Management Fee did not satisfy the definition of an Owner under the HBA. For a person to be an Owner, that person's entitlement to the rent must arise by virtue of an estate in freehold and not a contractual arrangement.

The Owners Corporation's claim placed most reliance on the call option within the DMA. The Owner's Corporation submitted that Multiplex should be regarded as an Owner because it could obtain a vesting order in respect of the Property. The Court held that Multiplex's interest in the Property remained contingent, until Multiplex exercised the option. Multiplex did not exercise the option and therefore could not be classified as a beneficial owner of the Property merely because it would be entitled upon exercise of the option.

Was SLH 22 an Owner of the Property within the meaning of the HBA?

The Owners Corporation submitted that SLH 22 was also an Owner of the Property within the meaning of the HBA and contended that:

  • SLH held its interest in the Property on trust for SLH 22 and the other trustees;
  • SLH 22, as beneficiary, had an equitable interest in the trust property being the Property itself and, later, SLH's interest in the strata scheme
  • SLH 22 had a beneficial interest in the land to the extent SLH held its registered interest
  • accordingly, SLH 22 was an owner of the Property for the purposes of the HBA.

The Court acknowledged that the SLH 22 and SLH did not enter into a deed of trust, an oral declaration of trust or execute any document which established a trust relationship. The Court held that whilst a commercial relationship existed between SLH and SLH 22, the evidence did not warrant the conclusion that the relationship was of a trustee and beneficiary. SLH 22 was therefore not an Owner or Developer of the Property within the meaning of the HBA.

With increasingly complex arrangements for the development of property, participants should consider whether their roles and rights have a character to bring them within the definition of a Developer under the HBA, with the unintended consequence of the HBA statutory warranties attaching.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Christine Jones
Lauren Stables
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions