The Owners - Units Plan No. 3115 v The Trustees of the Master Builders Fidelity Fund Scheme

• Jurisdiction: Australia Federal only
• Judge: GRIFFITHS J
• Judgment Date: 13 February 2019
• Neutral Citation: [2019] FCA 115
• Court: Federal Court
• Date: 13 February 2019

FEDERAL COURT OF AUSTRALIA

The Owners – Units Plan No. 3115 v The Trustees of the Master Builders Fidelity Fund Scheme [2019] FCA 115

File number:	ACD 95 of 2017
Judge:	GRIFFITHS J
Date of judgment:	13 February 2019
Catchwords:	STATUTORY INTERPRETATION – where applicant is an owners corporation holding title to the common property of a development of 120 residential and 4 commercial units – where applicant made two claims under fidelity certificates issued by a fidelity fund approved under the Building Act 2004 (ACT) for damage flowing from alleged breaches of statutory warranties – where builder insolvent from 20 July 2017 – where claims rejected by the trustees of the fidelity fund, on the basis the claims brought against the fund were outside the period of cover provided for under the trust deed and legislation governing the fund – whether the trustees of the fidelity fund entitled to reject the claims. ; INSURANCE – whether fidelity certificates issued under the fidelity scheme approved under the Building Act 2004 (ACT) are contracts of insurance for the purposes of the Insurance Contracts Act 1984 (Cth).
Legislation:	Insurance Act 1973 (Cth) Insurance Contracts Act 1984 (Cth) ss 10, 54. Building Act 1972 (ACT) ss 58A, 58C, 58E, 58H, 58K 58O, 58P, 58S, 62, 64, 70 Building Amendment Act 2002 (ACT) Building (Residential Building Warranty) Amendment Act 2003 (ACT) Building Act 2004 (ACT) ss 37, 84, 88 90, 96, 99 103, 104, 166 Legislation Act (ACT) ss 82, 88. Building Regulations 1972 (ACT) reg 19 Building Regulations 2004 (ACT) reg 26 Building (General) Regulation 2008 (ACT)
Cases cited:	Barclay MIS Group of Companies v Australian Securities and Investments Commission [2002] FCA 1606; 125 FCR 374 Koundouris v The Owners – Units Plan No 1917 [2017] ACTCA 36; 323 FLR 375 Lee v Phair, unreported, NSWSC, BC 9605123, 31 October 1996 Medical Defence Union Ltd v Department of Trade [1980] Ch 82 Metropolitan Fire and Emergency Services Board v Capricorn Mutual Limited [2007] VSC 413 Prudential Insurance Co v Commissioners for Inland Revenue[1904] 2 KB 658 The Hancock Family Memorial Foundation Ltd v Fieldhouse (No 3) [2010] WASC 223; 16 ANZ Ins Cas 61-869 Todd v Alterra at Lloyds Ltd [2016] FCAFC 15; 239 FCR 12 ; Mann’s Annotated Insurance Contracts Act, 7th ed at [10.50]
Date of hearing:	17 & 18 December 2018
Registry:	Australian Capital Territory
Division:	General Division
National Practice Area:	Commercial and Corporations
Sub-area:	Commercial Contracts, Banking, Finance and Insurance
Category:	Catchwords
Number of paragraphs:	131
Counsel for the Applicant:	Mr M Orlov
Solicitor for the Applicant:	Kerin Benson Lawyers
Counsel for the Respondent:	Mr PA Walker SC and Mr WDB Buckland
Solicitor for the Respondent:	JS O’Connor Harris & Co Solicitors

ORDERS

		ACD 95 of 2017
BETWEEN:	THE OWNERS - UNITS PLAN NO. 3115 Applicant
AND:	THE TRUSTEES OF THE MASTER BUILDERS FIDELITY FUND SCHEME Respondent

JUDGE:	GRIFFITHS J
DATE OF ORDER:	13 FEBRUARY 2019

THE COURT ORDERS THAT:

1. The amended originating application dated 15 April 2018 be dismissed.

2. The applicant must pay the respondent’s costs, as agreed or assessed.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

GRIFFITHS J:

1. This proceeding raises important issues regarding the operation of a fidelity fund scheme in the Australian Capital Territory (ACT). The scheme provides some consumer protection to residential property owners in respect of residential building work carried out by fidelity fund approved licensed builders in the ACT. The central issue is the nature and extent of that protection in the particular circumstances here.

2. The applicant is the owners corporation for Units Plan No. 3115. The plan relates to a building at 10 Thynne Street, Bruce, which comprises 120 residential units and four commercial units, which building was certified fit for occupation on 25 May 2007. The building is known as the Elara Apartments (Elara). The respondent is the trustee of a fidelity fund scheme (Fidelity Fund Scheme)established under the Master Builders Fidelity Fund Trust Deed (Deed).

3. B & T Developments (ACT) Pty Ltd was the developer of Elara (the developer). The respondent (the trustees) issued multiple fidelity certificates to the developer for residential building work to be carried out at Elara. B & T Constructions (ACT) Pty Ltd was nominated as the builder of the development (the builder).

4. The applicant claims that upon completion of the Elara development, it became the holder of a leasehold estate of the common property of the premises, which it is liable to maintain. It alleges that the building work carried out by the builder was not carried out in accordance with the Building Act 2004 (ACT) (the 2004 Act), with the plans approved for the work, in a proper and skilful way and with good and proper materials. It further alleges that, consequently, defects exist in the common property, load bearing walls, balconies and utility services. The cost of rectifying the defects is estimated at more than $19m, which is only slightly less than the cost of the initial project. The applicant alleges that the builder has breached the statutory warranties applicable to the development. It further claims that it lodged claims on the Fidelity Fund pursuant to the fidelity certificates, but the claims were rejected by the trustees on the basis inter alia that the claims were not submitted in the proper form and/or did not arise within the time periods specified in the relevant legislation or during the currency of any of the fidelity certificates. As will shortly emerge, two separate claims were made on the Fidelity Fund.

5. The applicant seeks declaratory relief to the effect that the trustees were not entitled under the Deed and the fidelity certificates to reject the claims on the Fidelity Fund.

6. It is appropriate to note at the outset that many of the issues which require determination in this proceeding have been made more difficult by anomalies in the drafting of various written instruments, including the Deed and the fidelity certificates, as well as some of the surrounding legislative instruments. The complexity of the Fidelity Fund Scheme was noted in the recent decision of the Court of Appeal of the Supreme Court of the Australian Capital Territory in Koundouris v The Owners – Units Plan No 1917 [2017] ACTCA 36; 323 FLR 375 at [11] and [12], a decision which raised different issues to those in this proceeding. The complexity is compounded by the multiple changes which have been made in the legislative regime since 2002, not all of which have been reflected in the administrative documents.

Summary of other relevant background facts

7. Construction of Elara commenced in June 2005. Under s 37(3) of the 2004...