Is a vendor entitled to require a purchaser to acquire an additional lot of land?

The case of Riddle v White Constructions Pty Ltd [2018] NSWSC 384 involved a contract that concerned the sale of a lot in a proposed subdivision. After the contract had been entered into with the purchaser, the vendor realised that an additional lot of land needed to be purchased to achieve registration of the subdivision. The vendor later included this additional lot of land in the contract for sale to the purchaser. However, the purchaser refused to purchase this additional lot, arguing that they were under no obligation to do so. The vendor served a notice to complete the purchase of both lots, and later terminated the contract.

The Court held that under the terms of the contract the purchaser was bound to purchase only one of the lots. The fact that the vendor had to acquire the additional lot to achieve registration of the subdivision plan did not entitle the vendor to add this additional lot into the contract for sale. The Court held that the vendor wrongfully terminated the contract and ordered that the deposit be returned to the purchaser.

Availability of quantum meruit in construction termination cases

The High Court will soon consider a builder’s capacity to recover payment on a Quantum Meruit basis, where an owner has repudiated a construction contract in the case of Mann & Anor v Paterson Constructions Pty Ltd. The Court’s decision will be significant in that they will be required to reconsider the current common law precedent which allows a builder to be paid on a quantum meruit basis where it has accepted an owner’s repudiation. The current common law position is that a builder to a construction contract can recover payment from the owner for any unpaid work performed prior to the termination. In most cases the builder is only entitled to be paid for amounts calculated under the contract. However, an idiosyncrasy in the law exists whereby in the circumstance where a construction contract is terminated by repudiation, the builder is able to recover payment from the owner on a quantum meruit basis (as much as is deserved).

In late 2018, the High Court granted the appellants (Owners – Mann) special leave to appeal the decision made by the Victorian Court of Appeal, on the grounds that the Court of Appeal held that the respondent (builder), having terminated a contract upon the repudiation of the owners was able to sue on a quantum meruit basis. The case was heard on the 14th May 2019, with the decision expected to be handed down within the coming months. B+a will provide an update on the case following the handing down of the High Court’s judgement.

Is an owner required to permit the return of a builder to rectify defects?

The recent case of The Owners – Strata Plan 89401 v Galyan Pty Ltd considered whether it is unreasonable for an owner to not permit the return of a builder to rectify defects. The case involved an owners corporation (the owners – strata plan 8940) who made a complaint to NSW Fair Trading regarding building defects attributable to the builder (Gaylan). The owners corporation, in communicating with the builder, sought the rectification of defects with no suitable response and subsequently commenced proceedings as the expiration of the defect liability period was impending. The builder was then instructed that he was not permitted to return to the premises to rectify the remaining defects. In reaching the decision, the Court had regard to whether the owners corporation had reasonably lost confidence in the ability of the builder to rectify the defects. The Court heard evidence relating to the fact that the builder’s representative had failed to provide a scope of work and other requested information and failure to attend the property at appointed time to carry out the work. The Court ruled that the builder had not sufficiently demonstrated that the owners corporation was unreasonable in not allowing the builder back on site to rectify defects. The builder was ordered to pay the owners corporation’s costs.  This case demonstrates that despite the Court preferring to be consistent with the Home Building Act and allow builders back onsite to complete rectifications, in certain circumstances this is not always reasonable.

When will owners of adjoining blocks be exempt from land tax?

In Cooney v Chief Commissioner of State Revenue [2017] NSWCATAD 375, Mr Cooney and Ms Grant owned and lived together in a residence (No. 25) and purchased an adjoining block (No. 27). There was a residential building on No. 27, however they had not lived in it for many years. The owners claimed that the two blocks should be regarded as a single parcel of land as their place of residence and thus exempt from land tax assessment under Schedule 1A of the Land Tax Management Act 1956.

The Court applied the ‘four unities’ test which states that continuous blocks of land comprise a single parcel if they are undivided by physical separation, use, occupation and title. The lots were physically undivided and there was unity of title and occupation of the blocks. Both blocks were used as part of their surrounding environs of their home and for storage. The clause 13 restriction that tax exemptions are not permitted for dwellings capable of separate occupation did not apply since the dwelling on No. 27 was dilapidated and not capable of occupation. The Court ordered that the land tax assessments for 2015 – 2016 be revoked.

NSW Security of Payment Update – what you need to know about the new legislation

As stated in our previous article – in November 2018 amendments were made to the Building Construction Industry Security of Payment Act 1999 (NSW). The amendments did not automatically come into force, with it being necessary for NSW Fair Trading to consult with the construction industry to see when the new laws should commence. Whilst there still remains no defined date for when the amendments will come into force, last week the NSW government indicated that the amendments to the Act will commence in a singular tranche at the end of 2019. Furthermore, the NSW Government also released the draft Building and Construction Industry Security of Payment Amendment Regulation 2019 which is required to support some of the amendments. The NSW government has advised that the amendments to the regulation will likely be finalised and published by the middle of this year, with the amendments to both the act and regulation to come into effect three months later.

With the proposed amendments likely commencing at the end of 2019, it is necessary that parties involved in construction projects in NSW should consider whether their contracts and project practices will comply with the amendments.

Landlords to be aware of what is included in a ‘landlord installation’

The recent case of Cheng v Wang (Building and Property) [2019] VCAT 496 illustrates the importance of a landlords in Victoria maintaining and repairing ‘landlord installations’ leased to tenants under retail and commercial leases. The case involved a landlord who leased a restaurant premises to a tenant, which included the following landlord installations: a dishwasher, tables, chairs, crockery and cutlery, stoves, fridges and freezers stereo, cool room and sundry equipment including pots and pans. The tenant sought to recover the costs of maintaining, repairing and replacing the landlord’s installations for over a period over 30 years. The tenant argued that under s52(2) of the Retail Leases Act (Vic) that the landlord is obliged to repair and maintain the landlord’s installations, regardless of any conflicting clauses included in the lease. The VCAT ruled in favour of the tenant, ordering the landlord to pay the tenant for costs incurred and further ordered the landlord to repair, maintain and replace items in the future. This case illustrates that by including landlord installations in a lease may have a disadvantageous effect on the rent, accordingly landlords must be aware of their obligations under section 52(2).

Residential Building – Date of Completion and Commencement of Statutory Warranty Periods

Section 3B of the Home Building Act 1989 (NSW) details the date of completion of residential building work. The recent case of Ashton v Stevenson [2019] NSWCATAP considered the application of this section in a situation where the original owner-builder and the new owner of the property disputed the ‘date of completion’ of the building works. The date of completion is relevant as it marks the commencement of the statutory warranty period. Under section 3B(3)(d) of the Act, the date of completion for owner-builder work is 18 months after the issue of the owner-builder permit. The new owner of the property relied on this provision, arguing that 7 February 2015 was the date of completion as it was 18 months following the date of the owner-builder permit. The original owner-builder relied on section 3B(3) which stipulated that sub-sections under 3B(3) should be applied unless an earlier date for practical completion can be established. In providing evidence from carpenters who had completed work on the property in May 2014, the owner-builder claimed that there was sufficient evidence to establish an earlier date for practical completion. The tribunal agreed with the owner-builder, ruling that under s3B(3) there was adequate evidence to establish an earlier completion date. This decision illustrates the importance of identifying evidence of possible earlier completion dates when determining the commencement of statutory warranty periods.

Are architectural designs protected by copyright?

A case in the Supreme Court has given an important warning to prospective home builders when it comes to home designs. In Milankov Designs & Project Management Pty Ltd v Di Latte [2018] WASC 14, the court found the Di Latte’s breached the copyright of Milankov Designs when they used his designs to build their house without permission.

Usually when an architect or design consultant prepares designs for a fee, there is an implied licence for their client to use the designs for the purpose for which it was sought. However in the Milankov case, the court held that an implied licence will not apply where it would be inconsistent with the terms of a written contract. The contract itself was only for the first stage of the building, and so there could be no implied licence that the Di Latte’s could use the designs to complete the building.

Electronically exercising an option to renew a lease

The recent case of Kegran Pty Ltd v Warrik Pty Ltd [2018] NSWSC 1357 illustrates some of the issues encountered by parties when serving notices to exercise an option to renew a lease. In this case, the lessor challenged the exercise of an option, claiming that it was not properly served by the lessee. The option clause stated that the lessee would be able to exercise their option if they notified the lessor of their intention to exercise not less than 6 months before the date of termination. It also stipulated that any notice provided to the lessor must be served personally, sent to the lessor’s facsimile number or forwarded by prepaid security post to the lessor.  The lessee argued that the option was properly exercised by means of email that was addressed to the sole director of the lessor, within the adequate time period. Despite the fact that the lease did not provide for service by email, the Court held that the lessee had validly exercised their option to renew the lease as the notice provisions were in relation to the general subject of the notice and were not to be strictly applied. This case highlights that whether or not a lessee has validly exercised their option to renew often depends on the interpretation of the terms of a lease.

Hotel occupier liable in negligence for failure to warn of risk

In the case of Ratewave Pty Limited v BJ Illingby [2017] NSWCA 103, the New South Wales Court of Appeal held that an occupier is liable in negligence for failure to warn of a risk. The matter concerned the occupier who was the owner of a hotel. In the lobby of the hotel there was a low raised wooden platform, on which a statue was placed. The respondent tripped over the platform, and successfully claimed damages in negligence.

On appeal, the Court upheld the finding of negligence. The Court found that the risk was foreseeable, and was obvious, meaning the occupier had a duty to warn others of the raised platform. The Court emphasised that a hotel lobby is not a place where people would expect to find a trip hazard of this kind. The Court also indicated that a warning sign would have been sufficient to meet the occupier’s duty of care to the respondent. This case demonstrates the necessity of occupiers to be aware of, and rectify any potential hazards on their premises.