Author: baron + associates

The NSW Civil and Administrative Tribunal has highlighted in a recent case that even where owners of a property have no direct contract with a subcontractor, they will have a right to certain statutory warranties.

In the recent decision of AJ Gouros Investments Pty Ltd trading as Adelaide Concrete Polishing & Grinding Pty Ltd v Pongraz [2018] NSWSCATAP 129 a flooring contractor was engaged by a builder to polish concrete floors, but failed to complete the work properly. The owners of the property attempted to begin proceedings, claiming that they were owed warranties under s18B of the Home Building Act 1989, but the flooring contractor claimed they were barred from doing so as his contract was with the builder, not the owners.

However s18D(1A) of the Home Building Act states that a person who is a non-contracting owner is entitled to the same statutory warranties as a party to the contract. Therefore the court ultimately decided that the owners in this case fit into the definition of a non-contracting owner, and were entitled to the statutory warranties. This is an important reminder that the Home Building Act will create obligations even where there is no contract, and so subcontractors seeking to avoid direct liability to owners may need to seek assurances from their head contractors.

A recent case in Germany has decided that Facebook accounts can be passed on in an estate, raising questions about social media platforms’ current policies surrounding user deaths. Currently, Facebook allows for an account to be terminated or turned into a memorial page after death, but the decision in Germany’s Federal Court of Justice has highlighted an issue with this policy when family members of the deceased request access to the accounts.

In this matter, the mother of a fifteen year old who was killed in a train accident wanted to access her daughter’s Facebook account to help her determine whether the death was a suicide, but due to Facebook’s current policy she was blocked from doing so. Facebook claimed this strict policy was to protect the privacy of the daughter’s contacts, but the mother argued that the social media accounts could be likened to private diaries that should be considered as part of her estate. The court agreed, holding that the daughter’s contract with Facebook was a part of her estate that legally passed to her mother upon her death.

While there is no current case law on this issue in Australia, this case highlights an increasingly important issue with estate planning and digital wealth, particularly for those with an online business or profitable social media accounts. Even wanting to pass on photos or videos stored on a digital device or cloud can be complex, and so it is recommended that a letter of wishes as to any accounts be included.

The NSW State Government has introduced changes to zoning regulations to keep up with demand for cafes in ‘hipster’, industrial neighbourhoods. In recent years, the retail landscape of Sydney has been changing, with consumers now wanting to be closer to producers and manufacturers making local goods. This has led to an interesting rise in demand for food and drink experiences in previously industrial areas such as Alexandria.

In response to this, the State government has introduced changes to the Standard Instrument (Local Environmental Plans) Order 2006 in order to allow land use that would have previously been prohibited in industrial zones. Now, the instrument has expanded the definition of ‘light industry’ to include artisan food and drink industries and garden centres.

There are key differences in the law between a licence and a lease, mainly revolving around exclusive possession of the premises. A lease endows this exclusive right on the tenant, where as a licence allows nonexclusive occupation.

In the case of Friendly Inn Holdings Pty Ltd v St George Bank [2012] NSWSC 127 the Supreme Court highlighted the circumstances in which a licence is appropriate. In this case, the plaintiff showed an interest in purchasing a hotel in Kangaroo Valley for $2.95 million. The defendants agreed to the sale and were under the impression it was to be settled imminently, and so allowed the plaintiff a licence to occupy the premises and start running the hotel. When it became clear the sale was not going to go through, the defendants cancelled the licence immediately and took possession of the hotel.

The plaintiff argued that he was in fact leasing the property as he was paying $12,000 in rent per month and was therefore entitled to reasonable notice of a termination. However, the court found that the agreement was in fact a short term licence that was conditional upon completing the contract for sale of the hotel. Licences are usually granted in cases like these where a more flexible arrangement is required, and therefore the notice given to the plaintiff was in fact reasonable.

In the recent case of Kids Club Rozelle Pty Ltd v European Hire Cars Pty Ltd [2018] NSWSC 1115 the Supreme Court had to determine the validity of a Deed of Surrender and Release where the tenant had made deceptive and misleading statements in the lead up to its creation. In this case, the parties entered into a lease with the intention of the tenant building a childcare centre on the land. When the funding for the childcare centre fell through, the tenant made false and misleading statements to the land owners, saying that they had impending offers to assign the lease, while in fact no such offers existed. The land owner’s did not want the lease to be assigned, and claimed that the misleading conduct induced them into entering the deed of surrender to terminate the lease early.

The court accepted that the conduct of the tenant in claiming there were offers to take an assignment of the lease was misleading and in breach of the Australian Consumer Law, but ultimately they found that it was not the only factor that induced the defendants to sign the deed of surrender. The court found that there were other factors in the defendant’s decision, as they believed the rent being paid was below market value, they didn’t want the lease to be assigned, and wanted to end their association with the plaintiff. Therefore while the conduct was misleading, the deed of surrender was still valid.

The recent case of Harris v Morabito Holdings [2018] NSWSC 912 is just one of an increasing number of construction disputes in which the courts have relied on the reports of a special referee to make a decision. Special referees are an independent third party who are not bound by the usual rules of evidence and can make their own inquiries about the questions they have been assigned.

In this case, a dispute between the developers and their builder revolved around the builder’s defective works, so the special referee decided to inspect the site himself. He came to the conclusion that the builder was required to pay $328,000 to the developers. However the developers were unhappy with this amount and strongly argued against the report being accepted. McDougall J held that the court had the discretion to accept, vary or reject a special referee’s report, and in this case the court found no reason not to accept it.

The NSW government is set to introduce new legislation that will stop real estate agents from requesting or accepting a gift or benefit that may lead to a conflict of interest. The main conflicts of interest happen when real estate firms receive commission from other service providers in exchange for customer referrals. While the expansion of the Property, Stock and Business Agents Act 2002 is set to prohibit such behaviour, no mention is made of other benefits real estate agents may still enjoy, such as gifts from their clients.

The NSW government has announced changes to the Conveyancing Act that will increase the protections for home buyers purchasing residential properties off-the-plan. Off-the-plan purchases are those made before the property has been built, and may expose purchasers to associated risks.

The reforms will affect disclosures, cooling off periods, the holding of deposits and sunset clauses by

• allowing buyers to terminate the contract or claim compensation if they are materially impacted by any changes to the plan that was disclosed,
• imposing a requirement that buyers be provided with a copy of the proposed plan, proposed by-laws and a schedule of finishes,
• extending the cooling off period to ten business days

A creditor has successfully defended an unfair preference claim in the recent case of Heavy Plant Leasing [2018] NSWSC 707 by arguing they did not have reasonable grounds to suspect the insolvency of a subcontractor. Unfair preference claims occur where a creditor has been given an advantage over other creditors by receiving payment for their outstanding liabilities in circumstances where they knew, or ought to have known, that the company was insolvent. But s588FG(2) of the Corporations Act 2001 provides a defence to such a claim if a creditor could not have reasonably suspected that the business was insolvent.

In this case, the defendant argued that the nature of the construction business meant late payments were not enough of an indication that that the subcontractor might be facing insolvency. The court agreed with the defendant and noted that in the construction industry late payments are a common issue, as subcontractors are often reliant on progress payments from head contractors for cash flow.

Retail and commercial leases often have make-good clauses that oblige tenants to return the premises to their original condition at the end of the lease. However these clauses can easily lead to disputes when the parties have different understandings of what their exact obligations are, especially when costly fit-outs have to be removed or installed.

The consequences of failing to comply with such a clause were discussed in James v Hutton and J Cook & Sons Ltd [1950] 1KB9, where the court held that the landlord will normally be entitled to recover the amount it would cost to carry out the repair works. In order to avoid such a dispute, the lease should clarify what the exact make-good obligations are, including the state of the premises when it was taken over, what state the premises should be returned to and what fixtures and fittings the landlord wants removed or kept.