Following reports of serious defects in recently completed and occupied residential apartment buildings, a new scheme was launched by the Building Commissioner in November 2022 known as Project Intervene. This offers willing parties a pathway to remediate serious defects as an alternative to litigation.
The scheme provides a platform for owners corporations to have serious defects remediated by encouraging developers to give an undertaking and by facilitating and ensuring that remediation work is carried out. If no such undertaking is given, the Office of the Building Commissioner may issue the developer with a building work rectification order under the Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 (NSW) (RAB Act).
The scheme applies to residential apartment buildings where:
- there is a serious defect as defined under the RAB Act in relation to a building element
- there is a rise in storeys of four or more
- the developer or builder are still trading
- an occupation certificate was issued within the last 6 years.
The scheme will no doubt be popular with owners corporations.
As the scheme gains traction, a question arises in terms of the position of owners corporations who already have litigation on foot. This is particularly relevant given that there is a gap between the application of the scheme (serious defects) and the wider population of defects for which an owners corporation may wish to enforce rights.
In Strata Plan 99576 v Central Construct Pty Ltd [2023] NSWSC 212, the Supreme Court considered whether an existing court proceeding should be stayed on the basis that the plaintiff owners corporation had subsequently initiated the Project Intervene process.
Background
In August 2021, the owners corporation brought proceedings for defects against the builder and developer.
In December 2022, the owners corporation sent a letter to NSW Fair Trading regarding problems with the building and the inability to reach a satisfactory outcome including through the proceedings.
In February 2023, NSW Fair Trading sent a letter to the owners corporation indicating that the matter was being handled by Project Intervene and that a building consultant had been engaged to inspect the building. Later that month, the builder and developer filed a notice of motion for a 12-months stay of the proceedings. Their submissions outlined five bases for the grant of stay:
- there is a prospect that all of the allegedly defective work the subject of the Proceedings may be rectified pursuant to a building work rectification order (or pursuant to an undertaking given) or otherwise by the Secretary pursuant to s 42 of the RAB Act
- there was a risk of inconsistent findings of fact in different courts about the same subject matter if there was an appeal in relation to a building work rectification order to the Land and Environment Court pursuant to s 49 of the RAB Act
- the staying of proceedings aligns with one of the stated aims of Project Intervene, specifically to avoid costly and time-consuming litigation
- it was vexatious and oppressive for the owners corporation to have initiated the Project Intervene process when proceedings were already well underway
- if stay was not granted, there may be considerable wastage of government resources in connection with the Project Intervene process.
Rejection of arguments to justify stay of proceedings
The Court dismissed the stay application and noted that:
- the overall outcome of the Project Intervene process was uncertain, including when that process would be completed, given the possibility of an appeal to the Land and Environment Court or an administrative law challenge to decisions made under the RAB Act
- although there is a risk of inconsistent findings in different courts, that risk is not great enough to warrant the proceedings being delayed
- the owners corporation did not act in a vexatious or oppressive way by communicating to NSW Fair Trading regarding their inability to reach a satisfactory outcome through the proceedings. Further, the builder and developer did not point to any particular prejudice they would suffer if stay was not granted
- the prospect that the process under the Project Intervene and RAB Act may remove the need for the proceedings, or bring about the narrowing of their scope, is too uncertain to justify delay to the proceedings
- even if orders were made and complied with by the builder and developer, the owners corporation would have no recourse to damages under the Project Intervene process, unlike the position in the proceedings.
It is possible that a different result could be obtained in circumstances where proceedings have been filed to preserve limitations periods and the Project Intervene process is triggered earlier and may result in the narrowing of the issues in the proceedings. It will be of great interest how these issues develop in future decisions as Project Intervene gains more and more traction.
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