Fair Trading Administration Corporation v Meriton Apartments Pty Limited

[2010] NSWDC 22

Reported Decision: 10 DCLR (NSW)118

District Court

CITATION:	Fair Trading Administration Corporation v Meriton Apartments Pty Limited [2010] NSWDC 22
HEARING DATE(S):	4-5 May 2009 and 12-16 October 2009
JUDGMENT DATE:	20 January 2010
EX TEMPORE JUDGMENT DATE:	22 January 2010
JURISDICTION:	Civil
JUDGMENT OF:	Hungerford ADCJ
DECISION:	1. Verdict and judgment for the plaintiff against the defendant in the sum of $473,247 plus interest from 20 March 2006 to 22 January 2010 in the sum of $174,128.96. 2. The defendant is to pay the plaintiff’s costs on the ordinary basis up to and including 22 April 2009 and on an indemnity basis from 23 April 2009 onwards. 3. The exhibits are to remain with the file, to be returned on application by the parties to the Registry after 28 days.
CATCHWORDS:	BUILDING AND CONSTRUCTION CONTRACTS - Proceedings for recovery of a debt from builder by statutory insurer for defective building work - Losses incurred by insurer from payments to owners under comprehensive insurance scheme - Whether losses reasonably incurred in respect of building work - Whether matters that could give rise to losses notified by owners to insurer within 6 months after first becoming aware of defects - Whether notified not later than 3 years from commencement of building work - Distinction between “major structural” and “general” defects - Whether a deemed refusal of insurance claim - Appeal by owners part refusal of claim by insurer - Whether resultant approval of claim was for purposes of insurance scheme so as to support recovery from builder - Whether decisions by insurer affecting owner’s claim meant further decisions were ultra vires the insurance scheme to preclude recovery from builder - Cost of rectifying defects - Whether rectification work reasonable and necessary - Betterment value from remedial action - Interest - Costs.
LEGISLATION CITED:	Builders Licensing Act 1971, s 34(3). Building Services Corporation Act 1989, ss 3, 49(1), 53, 55, 56, 57, 58, 59, 60(1), 63(1), 74, 85, 86, 87, 88, 89, 91, 98(1), 105(2) and 105(3) and Pt 4, Pt 5 and Pt 6. Building Services Corporation Regulation 1990 and cll 31 and 32, cll 5(1), 7(1) and 7(2) of Form 4 of Sch 1. Strata Titles Act 1973. Uniform Civil Procedure Rules 2005, Sch 3.
CASES CITED:	Apollo Shower Screens Pty Ltd v Building and Construction Industry Long Service Payments Corporation (1985) 1 NSWLR 561. Bailey v Marinoff (1971) 125 CLR 529. Builders’ Licensing Board v Inglis (1985) 1 NSWLR 592. Builders Registration Board of Queensland v Rauber (1983) 47 ALR 55. Carr v FTAC (unreported, NSWCTTT). Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389. Craig v State of South Australia (1995) 184 CLR 163. Fair Trading Administration Corporation v Owners Corporation – Strata Plan 43551 [2002] NSWSC 624. Flood v Fair Trading Administration Corporation (Home Building) [2004] NSWCTTT 755. Hassell; Re Quirk (1937) 37 SR(NSW) 192. Hristoforidis v Fair Trading Administration Corporation [2007] NSWSC 1243. Jones v Dunkel (1959) 101 CLR 298. Kabourakis v Medical Practitioners Board of Victoria [2006] VSCA 301. McCallum Developments v Owners Corporation SP 53908 [2002] NSWSC 1103. Minister for Immigration v Kurtovic (1990) 92 ALR 93. Owners – Strata Plan 43551 v Fair Trading Administration Corporation; Walter Construction Group Ltd v Fair Trading Administration Corporation [2004] NSWSC 158. Owners – Strata Plan 58068 v Fair Trading Administration Corporation [2009] NSWSC 850. Owners Corporation SP 56911 v Fair Trading Administration Corporation (Home Building) [2007] NSWCTTT 181. P & V Sammut Homes Pty Ltd v Building Services Corporation (unreported, NSWSC, 24 April 1997). Walter Construction Group Ltd v Fair Trading Administration Corporation; Fair Trading Administration Corporation v Owners – Strata Plan 43551 [2005] NSWCA 55. Woods & Wilson v Fair Trading Administration Corporation [2004] NSWCTTT 523.
PARTIES:	Fair Trading Administration Corporation – Plaintiff Meriton Apartments Pty Limited – Defendant
FILE NUMBER(S):	1153 of 2006
COUNSEL:	Mr GA Sirtes SC and Ms S Callan for Plaintiff Mr DS Weinberger for Defendant
SOLICITORS:	Holding Redlich for Plaintiff. Daniel Grynberg, Meriton Group for Defendant.

JUDGMENT

1 The construction of an apartment building complex in two blocks of home units on the banks of the Parramatta River fronting Sorrell Street and Church Street, Parramatta during the period from late-1993 to mid-1995 allegedly resulted in defects of a major structural and general nature. The project was of sizeable proportions and involved building works for the construction of one hundred and forty-eight apartments and common property areas to be carried out by Meriton Apartments Pty Limited. Shortly after completion the sale of units commenced. On 24 July 1995 the strata plan for the property was registered and the Owners Corporation for Strata Plan No 50396 was created under the Strata Titles Act 1973.

Factual context of issues

2 At a meeting on 5 February 1996 of the Council of the Body Corporate it was resolved that “a list of building finishing problems to be supplied to Don Carvalho (representative of the builder on the Body Corporate) at the next meeting.” Apparently, some residents had noticed, as recorded in the Minutes of an Extraordinary General Meeting of the Proprietors of the Strata Plan on 4 September 1995, “water puddling on roof of lower section of the building”. Mr Carvalho took the view, as he said at the 5 February 1996 meeting, that “we should not record building defects in the minutes of Council Meetings, as this will negatively affect unit sales”. In any event, by July 1996 members of the Council identified certain defects and then engaged a structural engineer to investigate such defects which duly occurred by a report on 30 August 1996. In general terms, the defects allegedly arose from bad workmanship, faulty or unsuitable materials and failure to comply with plans and specifications.

3 Thereupon, the Owners Corporation on 26 September 1996 lodged a complaint through the strata managers with the then Building Services Corporation (BSC) seemingly under Div 3 of Pt 4 of the then named Building Services Corporation Act 1989 (BSC Act) about the defects. It seems, although there was some dispute about the detail, that the Owners Corporation in the meantime was advised by the builder, Meriton Apartments, that the identified defects would be rectified but it was said that that did not occur, certainly not completely and satisfactorily. Indeed, in a letter dated 7 August 1998 to the strata managers the structural engineer advised:

“Generally no further work has been performed since our last review in September 1997 with only a few issues considered to be complete. Repairs have been attempted on a number of items and these have either been poorly executed or have not rectified the root cause of the problem. Meriton have simply ignored many other issues with the spurious claim that it is ‘existing’ and is therefore not their responsibility.”

4 And so it was that on 14 October 1998 the strata managers on behalf of the Owners Corporation lodged an insurance claim in relation to the defective work with BSC for payment of the costs for remedying the defective work from the BSC Comprehensive Insurance Scheme (BSC Insurance) pursuant to Pt 6 of the BSC Act. Eventually, on 19 July 1999 BSC advised that the claim had been approved “in principle”. However, on 20 July 1999 the Owners Corporation caused an amended or further insurance claim to be lodged which, on 23 March 2000, was also approved “in principle” as to major structural defects in the amount of $3,500 but the claim for other defects, including general defects, was declined. By this stage the Fair Trading Administration Corporation (FTAC) had succeeded BSC and the Owners Corporation lodged on 23 June 2000 an application in the Fair Trading Tribunal for a review of the decision of FTAC; an amended application was filed on 12 January 2001 with the Owners Corporation seeking indemnity under BSC Insurance. After considering engineering reports on the state of the building defects, including the timing and sequence of the various events, FTAC informed the Tribunal on 3 December 2001 it admitted liability for the claims, subject to final quantification from quotations for the work, and on 23 January 2002 advised the Owners Corporation of approval to settle the claim for $527,645 under the insurance scheme. On 22 March 2002 FTAC advised the Owners Corporation approval had been given for an additional amount of $77,000 thus giving a total amount of $604,645.

5 BMP Industrial Pty Limited successfully tendered to perform the rectification work according to a scope of works prepared by the Owners Corporation’s structural engineers, Rickard & Partners Pty Limited, and the work proceeded over the period from about May 2002 to December 2002. In the result, FTAC made payments to BMP Industrial from the insurance scheme in the total sum of $634,824, including $30,263 for the cost of expert reports and investigations. It was accepted by FTAC that there had been a “betterment” from the rectification work, and not therefore a loss, in the amount of $107,584 so that that amount should be deducted resulting in a net amount of $527,240.

6 These proceedings concerned an endeavour by FTAC to recover from Meriton Apartments as the builder the amount paid by it under BSC Insurance of $527,240.

The claim and the defences

7 The claim made by FTAC as plaintiff against Meriton Apartments as defendant was quite straightforward. It sued for a statutory debt pursuant to s 98(1) of the BSC Act which provides:

“(1) Any amount paid by the Corporation under BSC Insurance may be recovered by the Corporation in a court of competent jurisdiction as a debt from the person by whom the residential building work concerned was done or contracted to be done.”

8 It was common ground that the Owners Corporation, being the successor in title to the owner for whom the residential building work was done, on 14 October 1998 lodged with the plaintiff a claim for the losses incurred in rectifying the alleged defects in the building works relating to bad workmanship, faulty or unsuitable materials and failure to comply with plans and specifications. The claim was made for indemnity under the BSC Insurance scheme being the scheme set out in Form 4 of Sch 1 to the Building Services Corporation Regulation 1990 (BSC Regulation). The reasonable costs incurred in rectifying those alleged defects, from the quotations given by BMP Industrial in accordance with the scope of works prepared by Rickard & Partners, were $634,824. It was pleaded that the plaintiff accepted liability under the BSC Insurance scheme, as noted in the consent orders made on 3 December 2001 by the Fair Trading Tribunal, and on 24 December 2001 the plaintiff agreed to indemnify the Owners Corporation for the losses in rectifying the defective works in the amount claimed. BMP Industrial duly performed such works and the plaintiff paid progress amounts to it accordingly over the period from 21 May 2002 to 6 November 2002.

9 Therefore, the plaintiff’s claim was to recover from the defendant the amount of $634,824 plus interest and costs of the proceedings.

10 In its defence, the defendant Meriton Apartments admitted it carried out the subject building works but did not admit the alleged defects caused losses in being rectified in the amount claimed or at all; entitlement to recovery by the plaintiff was not admitted. Indeed, in answer to the claim as a whole the defendant pleaded it rectified all defects and, in any event, the claim was made out of time.

11 In further resisting the plaintiff’s claim, the defendant relied on non-compliance by both the Owners Corporation and the plaintiff with certain provisions of the BSC Act and BSC Insurance for two principal propositions, namely, that -

(1) the payments by the plaintiff to the Owners Corporation were for a purpose wholly extraneous to the purposes of the statutory scheme for indemnity insurance so that recovery by the plaintiff from the defendant may not occur; and

(2) the plaintiff had no power or obligation to consider the claim lodged by the Owners Corporation on 14 October 1998 so that any payments made by it to the Owners Corporation were ultra vires the statutory scheme and not therefore recoverable as a debt from the defendant.

The issues

12 Each of the parties attended to the various issues arising in the proceedings and made available statements to that effect. The statements were framed in slightly different ways but the subject matter of the issues as raising the relevant matters for determination may be stated as being -

(1) Notification within six months of awareness by the Owners Corporation of defects.
(2) Notification by the Owners Corporation within a period of three years or seven years from the commencement of the building works for respectively general defects and major structural defects.
(3) Extension of time for notification of defects.
(4) Distinction between “major structural defects” and “general defects”.
(5) Whether a deemed refusal of the insurance claim by the plaintiff and need to extend time to appeal.
(6) Whether decisions on claims as affecting amounts paid were for statutory purposes under the insurance scheme so as to be recoverable.
(7) Quantum of claim and as including whether the work was reasonable and necessary; betterment; interest and costs.

Statutory scheme

13 The BSC Act, as its long title indicates, is “An Act to make provision concerning the residential building industry and certain specialist work: to constitute the Building Services Corporation and define its functions; and for other purposes.” Relevantly for present purposes, “residential building work” is defined in s 3 of the statute to mean “any work...involved in: (a) the construction of a dwelling...”; and a “dwelling” is defined as including a “strata or company title home unit or residential flat”. Plainly, the statute has application in the present case.

14 Part 4 of the BSC Act provides a mechanism for dispute resolution between any person affected adversely by defective or incomplete building work and the holder of a contractor licence (such as the defendant). “Defective work” is defined in s 49(1) to include residential building work: “(a)...carried out otherwise than in a good and workmanlike manner or in breach of a duty of care, or (b)...faulty or unsuitable materials have been used, or...(d)...carried out otherwise than in accordance with any contract...”; “incomplete work” is defined in s 49(1) to mean any contracted work that “has not been completed within the time specified in the contract concerned or within a reasonable time afterwards”. Section 53 of the BSC Act makes conduct of the holder of a licence “improper” if “(a) the work is done otherwise than in a good and workmanlike manner, or (b)...faulty or unsuitable materials are used...”. Section 55 enables any person to make a complaint to BSC about the holder of a licence that the holder is guilty of improper conduct. It was pursuant to those provisions that the Owners Corporation here made the complaint to BSC on 26 September 1996 about the alleged defects in the building.

15 It is to be noted that s 56(1) of the BSC Act, unless special circumstances existed, barred BSC accepting a complaint as to defects not being major structural defects (general defects) if the building work substantially commenced more than three years before the complaint was made and for major structural defects if substantial commencement was more than seven years before the complaint was made; as required by s 57(1)(a) the licence holder to whom the complaint related had to be informed of the complaint in writing but s 57(2) relieved that requirement if it failed to act promptly in the matter of the complaint. The defendant relied on non-compliance with the time limits so prescribed by the Owners Corporation to support the submission that the payments made under BSC Insurance were wholly extraneous to its purpose and that BSC had no power to consider the claims lodged by the Owners Corporation for indemnity under the scheme. A distinction made by the defendant, to which later reference will be made, was between “complaints” under s 56 and “notification” or “claims” under the insurance scheme.

16 Division 3 of Pt 4 of the BSC Act is concerned with the handling of complaints by BSC which, as s 58 states, is to attempt a resolution of any dispute and have defective work rectified and incomplete work completed; s 59 enabled BSC to seek an order from the Fair Trading Tribunal to require the licence holder to rectify or complete building work but any order so made does not affect the exercise by BSC of any of its other functions: see s 60(1).

17 Where there is non-compliance with any such order, BSC may apply, under s 63(1), by notice for the respondent builder to show cause why it should not be dealt with by the Fair Trading Tribunal. Division 4 of Pt 4 of the BSC Act concerns the hearing of show cause actions and s 74 thereof sets out the determinations which may be made, including cautions, reprimands, penalties, imposing licence conditions or suspension and licence cancellation. This case did not move in that direction.

18 However, in relation to the insurance claim lodged by the Owners Corporation, which was subject to appeal proceedings in the Fair Trading Tribunal, the provisions of the BSC Act in Pt 5 are relevant. Section 85 enables an appeal to be made by a claimant under BSC Insurance aggrieved by a decision. Any such appeal is subject to a time limitation under s 86 of 30 days after notice of the decision being served on the aggrieved person or, arguably in the present case, after the decision is taken to have been made; sub-s (2) of the section in that latter respect deems BSC to have refused an application if it has not served on the claimant notice of the decision within 40 days of its lodgement or such longer period if agreed by BSC and the claimant; and sub-s (3) enables an appeal to be lodged, by leave of the Tribunal, within a further 30-day period. Section 88 empowers the Tribunal to confirm the decision or substitute for that decision any other that BSC might have made. Section 89 gives finality to any decision on appeal by the Tribunal which is taken to be that of BSC.

19 Part 6 of the BSC Act deals with BSC Insurance and specifies in s 90(2) the time at which building work is taken to have been commenced as determined in accordance with cl 32(1) of the BSC Regulation being relevantly “when the footings of the structure were placed”. Then, as earlier stated, s 98(1) deals with the right of BSC, now FTAC, as the plaintiff, to recover an amount it has paid under BSC Insurance to the Owners Corporation from the licence holder, here Meriton Apartments as the defendant.

20 The BSC Regulation in Form 4 in Sch 1 contains the details for the operation of BSC Insurance as to the presently applicable BSC Comprehensive Insurance Scheme. There was no issue that this scheme relevantly applied to the present case in favour of the Owners Corporation as beneficiary. Pursuant to cl 5(1)(d) of the scheme the beneficiary, the Owners Corporation, was entitled to indemnity from the plaintiff for the losses in rectifying defects in the building work performed by the defendant due to bad workmanship, faulty or unsuitable materials or failure to comply with plans and specifications; cl 5(1)(c) similarly dealt with the cost of completion of insured building work.

21 Of present importance, cl 7 of the scheme provides time limitations to be met by a claimant/beneficiary to qualify for benefits under the scheme. As to incomplete building work for a loss under cl 5(1)(c), the claimant must notify BSC in writing of the matters that could give rise to the losses within 12 months from the contract date, the date provided in the contract for commencement of work or the date work ceased, whichever is the latest: see cl 7(1)(a). As to losses arising under cl 5(1)(d) for rectification work being major structural defects the claimant must notify BSC in writing within 6 months after becoming aware of the defects but not later than 7 years from the commencement of the building work: see cl 7(1)(b). For rectification work other than major structural defects (general defects), the time period again is within 6 months of awareness but not later than 3 years from the commencement date: see cl 7(1)(c). Clause 7(2) enables BSC to extend those limitation times if it is satisfied the delay was due to circumstances outside the claimant’s control.

22 The BSC Regulation is cl 31 defines a “major structural defect” relevantly as “an inherent or damage-induced defect: (a) in an element that provides essential supporting structure to the whole or any part of a dwelling…which renders the element inadequate for its structural purpose; or (b) in a substantial functional element essential to the habitability of a dwelling…which is of such a kind that the element itself does not have adequate structure for its purposes.” A defect, not being a major structural defect as referred to in s 56(1)(a) of the BSC Act and in cl 7(1)(c) of the BSC Regulation, and widely referred to as a “general defect” (although that expression itself is not referred to in the statutory scheme), thus comprehends other defects in building works.

23 The first thing to observe about the statutory scheme is that the prime object of BSC, as specified in s 105(2)(a) of the BSC Act, is “to promote and protect the interests of owners and purchasers of dwellings” and, in doing so, is in accordance with para (b) of that sub-section “to set, assess and maintain standards of competence of persons doing residential building work or specialist work”. Section 105(3)(c) expressly empowers BSC to insure under the statute such residential building work against its non-completion or as being defective; hence, the BSC Comprehensive Insurance Scheme in Sch 1 to the BSC Regulation. I think it to be apparent from the stated object that the legislation is to be construed in a beneficial manner in favour of an insured owner or purchaser and not in a strict sense as would otherwise defeat the expressly intended statutory object: see McCallum Developments v Owners Corporation SP53908 [2002] NSWSC 1103 at [36]; Woods & Wilson v Fair Trading Administration Corporation [2004] NSWCTTT 523; and Owners Corporation SP56911 v Fair Trading Administration Corporation (Home Building) [2007] NSWCTTT 181 at [k], [l].

24 It is next, I think, appropriate to observe as to the statutory scheme that it is concerned with two regimes: first, dispute resolution and disciplinary provisions in Pt 4 of the statute and Pt 5 of the Regulation; and, second, insurance schemes in Pt 6 of the statute and Pt 6 of and Sch 1 to the Regulation. In Woods & Wilson, followed in Flood v Fair Trading Administration Corporation (Home Building) [2004] NSWCTTT 755, Mr R Phillips, a senior member of the Consumer, Trader and Tenancy Tribunal, drew a distinction between “complaints” made under s 56 of the BSC Act in Pt 4 about the conduct or qualifications of a builder triggering disciplinary hearings and “claims” made under the BSC Comprehensive Insurance Scheme in Pt 6 and said they were “not to be confused” one with the other. This distinction was adopted by the defendant here to base a submission that the insurance claim was made out of time because the plaintiff treated the “complaint” by the Owners Corporation pursuant to s 56 as a “notification” pursuant to cl 7(1)(b) and (c) of the insurance scheme. I will return to this later. Suffice it to comment at this point that I do not see the two regimes as mutually exclusive in what they provide or that satisfaction of a condition in one may not also be satisfaction of a condition in the other. As Studdert J commented in McCallum Developments (at [36]):

“The obligation to notify is an obligation imposed upon the claimant beneficiary but the scheme prescribes no formality concerning that notification and the language of Form 4 should not be construed narrowly because of the beneficial nature of the legislation.”

25 The plaintiff’s exercise of its statutory powers in meeting the Owners Corporation’s claim for indemnity under BSC Insurance by making various decisions, up to five such decisions were pleaded, was said by the defendant to be ultra varies the BSC Act, the BSC Regulation and the scheme under BSC Insurance as being beyond its powers and therefore not recoverable by it as a debt from the defendant under s 98(1) of the BSC Act or at all. The basis for this approach depended upon the functus officio doctrine, that is, the final exhaustion of powers, and relied on the terms of the present statutory scheme as explained by Latham J in Hristoforidis v Fair Trading Administration Corporation [2007] NSWSC 1243 where her Honour (at [40]) followed what the Court of Appeal of Victoria said in Kabourakis v Medical Practitioners Board of Victoria [2006] VSCA 301 as to the question of the status of an administrative decision as being:

“… whether the statute manifests an intention to permit or prohibit reconsideration in the circumstances that have arisen. But, ...as a rule a statutory tribunal cannot revisit its own decision simply because it has changed its mind or recognises that it has made an error within jurisdiction. More often than not, the requirements of good administration and the need for people affected directly or indirectly by decisions to know where they stand mean that finality is the paramount consideration, and the statutory scheme, including the conferring and limitation of rights of review on appeal, will be seen to evince an intention inconsistent with capacity for self-correction of non-jurisdictional error. In the bulk of cases, logic and commonsense so much incline in favour of finality as to permit of no other conclusion.”

26 Her Honour considered the statutory scheme here in s 105(2) and (3) as evincing a legislative purpose, amongst others, of setting and maintaining building standards as affecting the interest of builders even though consistent also with the interests of owners and purchasers of residential dwellings. Therefore, her Honour applied the functus doctrine to hold that the powers of FTAC to determine an owner’s claim under the insurance scheme were spent on the making of the initial decision to refuse them because it was made beyond the statutory time limitation period so that the later review decision, made after representations by the Minister, approving the claim was, in the absence of jurisdictional error, ultra vires with no entitlement to bring recovery proceedings against the builder under s 98(1) of the BSC Act.

27 In this respect as to the finality of decisions, it is instructive to refer to other authority on the operation of the scheme under BSC Insurance as did Latham J in Hristoforidis (at [35]-[39]). Such authority arose in litigation where FTAC sought to renege on an initial decision favouring an owner/claimant. Grove J in Owners-Strata Plan 43551 v Fair Trading Administration Corporation; Walter Construction Group Ltd v Fair Trading Administration Corporation [2004] NSWSC 158 found that the scheme under the legislation prevented the re-opening of FTAC’s decision to settle the owner’s claim. His Honour’s view was upheld on appeal in Walter Construction Group Ltd v Fair Trading Administration Corporation; Fair Trading Administration Corporation v Owners-Strata Plan 43551 [2005] NSWCA 55 where Santow JA tellingly observed in the leading judgment:

“[Having] embarked upon a decision-making process, whether that decision be simply to settle the claims of the owners, or to resolve a dispute in relation to the claims by so doing, FTAC was now functus in the sense used in Minister for Immigration v Kurtovic ...[Even] had FTAC failed to consider factual material available, ..., any such failure could not deny its ability to make a decision. It is therefore not open to FTAC, having thereby spent its decision-making powers, to now seek to unravel its decision-making processes ...”.

28 The extract relied upon from Minister for Immigration v Kurtovic (1990) 92 ALR 93 at 112 stated:

“The result is that when the decision-maker attempts to resile from his earlier position he is prevented from doing so not from any doctrine of estoppel, but because his power to do so is spent and the proposed second decision would be ultra vires. The power is one of interpretation of the stature conferring the particular power”.

29 For completeness, it may be acknowledged that the exception to the functus doctrine here for jurisdictional error in making the initial decision depends upon the following characterisation of jurisdictional error as laid down in Craig v State of South Australia (1995) 184 CLR 163 at 177-178:

“Again, an inferior court will exceed its authority and fall into jurisdictional error if it misconstrues that statute or other instrument and thereby misconceives the nature of the function which it is performing or the extent of its powers in the circumstances of the particular case. In the last-mentioned category of case, the line between jurisdictional error and mere error in the exercise of jurisdiction may be particularly difficult to discern”.

30 Finally as to the statutory scheme, and about which I did not understand there to be any issue between the parties, the phrase in s 98(1) enabling the plaintiff to recover from the defendant any amount paid by it under BSC Insurance “as a debt” does not, without more, mean that any such amount paid can be recovered without the need for the basis of the debt to be scrutinised and properly established. As Kirby P (as his Honour then was) said in Builders’ Licensing Board v Inglis (1985) 1 NSWLR 592 and 597-598 in relation to a similarly worded provision in s 34(3) of the then Builders’ Licensing Act 1971:

“The word ‘debt’ can seldom be construed to include damages, for example, for breach of covenant. The procedural advantages of recovery of a debt have been known to our law for a very long time. They include the entitlement to sue upon a default summons, to require a sworn defence, to secure default judgment without more proof of the claim, and so on. But for the statutory provision that the amount paid for repair of a defective building could be recovered ‘as a debt’, it would not be susceptible to default procedures. It would require the Board, in every case, to sue for the recovery of the sums paid. The Board would then have to prove, in every case, even uncontested cases, the defects complained of, the repairs effected, the reasonableness of the costs incurred, and so on. It is this necessity to which I take s 34(3) of the Act to be addressed. In many cases the builder will not contest the Board’s claim. Such claims can then be sued in debt. The costs of litigation, leading to default judgment, will thereby be reduced. And the sum recoverable from the builder will be fixed by the default judgment.

But where, as here, there is a contest, the entitlement to recover as a debt should not, in my view, bypass the normal requirement that, when a claim is disputed, he who alleges must particularise and prove. In short, I read the subsection as addressed to a procedural impediment, not to removing rights so fundamental as are at stake here”.

31 The approach in Inglis was followed by Newman J in P & V Sammut Homes Pty Ltd v Building Services Corporation (unreported, NSWSC, 24 April 1997) where (at 13) his Honour said that in order to succeed in an action under s 98 of the BSC Act “all elements” of the claim had to be proven. Studdert J in McCallum Developments (at [25]) similarly found the approach in Inglis equally apposite to s 98 of the BSC Act and agreed with the analysis by Newman J in Sammut Homes; specifically, his Honour said that FTAC was required to prove as part of the elements of its claim compliance with the time limitations in cl 7(1) of Form 4 in Sch 1 to the BSC Regulation or, alternatively, that time had been extended under cl 7(2).

The alleged defective building work

32 Potential problems with the building work carried out at the site first arose when, as recorded in the minutes of an Extraordinary General Meeting of the Proprietors of the Strata Plan on 4 September 1995, water was seen to be “puddling on roof of lower section of the building”. Dennis Enrico Piccoli, an owner of one of the units in the complex, was elected to the Council of the Body Corporate at the first Annual General Meeting of the Proprietors on 4 September 1995 after its constitution on 24 July 1995 and from 19 September 1995 to late-1997 he was the Chairman until Ronald George Rudgley, another unit owner and inaugural member of the Council, assumed that position following his service as Secretary. It seems, significantly, that the first meeting of the Council was that held on 19 September 1995 when Mr Piccoli and Mr Rudgley were elected to their respective offices; the Minutes of the meeting did not record any matters of moment in terms of problems with the integrity of the building, other than minor matters such as “front door lock sticking”, “garbage room lock” and “loose bollards”. The next Council meeting was scheduled for 31 October 1995.

33 Thereafter, Mr Piccoli gave evidence that at meetings of the Council defects in the building were often discussed as a result of observations by Council members and, although he could not recall the detail of various items and when they were seen, he agreed that at a Council meeting on 5 February 1996 it was decided “a list of building finishing problems to be supplied to Don Carvalho (the defendant builder’s representative on the Council) at the next meeting”. Following a request by the other Councillors at its meeting in July 1996, Mr Piccoli agreed to inspect the property and prepare a list of defects. He did so on 22 July 1996 by making notes of what he saw and his wife prepared on 23 July 1996 a handwritten list which that day was forwarded to the then managing agent of the property, Bright and Duggan Pty Limited. At its meeting on 16 August 1996, no doubt as a consequence of Mr Piccoli’s list of defects, the Council resolved:

“In accordance with item 22 of the previous meeting, it was agreed that the Body Corporate should engage the services of a qualified structural engineer to conduct a survey of the building and prepare a report of any defects found. The report to be sent to the managing agents Bright & Duggan for taking up the matter with the builder on behalf of the Body Corporate.
...
The Body Corporate requires that Bright & Duggan notify Meriton (the builder) of the building defects now under review, acknowledge this letter and confirm that Meriton has been notified.

The Body Corporate requests that you advise Meriton not to undertake any repair work until the inspection by our appointed structural engineer has been carried out and a report presented to the builder...”

34 Mr Rudgley deposed in his affidavit events consistent with those stated by Mr Piccoli but added that at the Council meeting on 5 February 1996 defects were discussed but Mr Carvalho advised to the effect that “we should not record building defects in the minutes of Council Meetings as this will negatively affect unit sales”. This advice was said to have been followed.

35 The defects recorded by Mr Piccoli in his 23 July 1996 list amounted to eighteen defects in the Sorrell Street tower building and fifteen defects in the Church Street riverside low-rise building. It is difficult to categorise such defects with any specificity as they were wide-ranging from missing manhole covers to structural cracks, and included items such as construction material and debris in the boiler room, unsecured light fittings, holes in ceilings, carpet replacement, water penetration in various areas, break-up of concrete on vehicle ramp and so on.

36 Rickard & Partners Pty Limited, building consulting engineers, were duly appointed after the 16 August 1996 Council meeting and two of its engineers inspected the building on 23 August 1996 and the car park area on 28 August 1996. In its report of 30 August 1996, Rickard & Partners detailed defects in the two buildings and the car park which should be rectified but cautioned it was only “an initial or preliminary investigation as the time constraints placed upon us did not allow for a full and comprehensive investigation”. The identified defects were set out in an attachment to the report which commented as to them:

“Many of the defects related to the structure and common areas of the building, particularly the roof areas of both buildings. We have noted the defects observed in these areas, and have compiled the information so that it may be separately sent to the contractor for their attention. Please note that a recommended method of rectification has not been included due to the aforementioned time constraints, though we suggest that our advice be sought before any remedial works are performed.

A copy of the defects should also be sent to the Department of Fair Trading with an accompanying letter to inform them that further investigations of the building are required to determine the full extent of defects within the building...there will undoubtedly be numerous other problems discovered.

...From our initial investigations, it appears that significant amounts of money ($100,000’s) will need to be spent on remedial building works to repair/complete the building, ...”

37 On 2 September 1996, Mr Piccoli forwarded to the managing agent of the property the report and accompanying schedule of defects by Rickard & Partners with a request it be provided to the defendant to make good the defects; failing a favourable response by 16 September 1996, Mr Piccoli instructed the managing agent to inform the Department of Fair Trading of the defects. Apparently, no timely response from the defendant was received, other than it carrying out superficial repairs, and, so, on 23 September 1996 Mr Piccoli instructed Bright & Duggan to complete and lodge a complaint form with the Department with a copy to Meriton Apartments. Thereupon, on 26 September 1996 a notification of complaint, together with the schedule of defects prepared by Rickard & Partners, was lodged with the Department by the strata manager, Bright & Duggan. The complaint stated the first awareness of the defects was on 7 September 1995. It is to be observed that the defects identified by Rickard & Partners to very many areas of the building were numerous and principally related to water penetration causing weathering, drainage, wall and floor cracking, concrete and tiling faults, inadequate roof structure, incorrectly applied roof membrane and faults in the pool area.

38 The defendant on 23 October 1996 wrote to the Department following an inspection by its site foreman, Rowan Ireland, a week earlier. Mr Ireland did not give any evidence in the proceedings. In relation to each item in the list of defects the defendant indicated what action, if any, it would take and emphasised “only genuine and reasonable concerns are to be rectified”-the stated action included “to rectify”, “no further action”, “could not locate”, “no problems with water on other developments, no further action”, “rubble to be removed”, “reinforcement is adequate” and so on. Overall, one I think may comment that the defendant’s response to the defects claimed was less than favourable but where it commented that “a 10 day period to view all the defects is inadequate”. The writer of the defendant’s response was its Assistant Project Manager, Benjy Levy, but who did not give evidence.

39 There then occurred an exchange of correspondence concerning the defects between the defendant, the strata manager and the Department. I do not propose to recite that material as it is sufficient for present purposes to note that by 18 September 1997 the defendant advised the Department that effectively work to correct the defects had been completed and a few remaining works only were outstanding but as to which work was currently in progress.

40 At an Annual General Meeting of the Owners Corporation on 12 November 1997 Mr Rudgley was elected as chairman in place of Mr Piccoli. At the same meeting, Bright & Duggan was terminated as the strata manager and Premier Strata Management Pty Limited was appointed as the managing agent.

41 On 5 May 1998, the defendant advised the Department, in effect, that it had completed all remedial work. The Owners Corporation, dissatisfied with the outcome of its complaints as many of the original defects still existed and some were seen to be worse, commissioned Rickard & Partners to inspect the property and determine the state of its condition. It did so in a report dated 7 August 1998. As I have commented earlier, that report concluded many of the defective items had “either been poorly executed or have not rectified the root cause of the problem...[or have been] simply ignored”. Thereupon, on 13 October 1998 Premier Strata Management forwarded to the Department, apparently received on or about 14 October 1998, a claim under BSC Insurance in relation to the outstanding defects at the property. In the meantime, Dominic Votano of Premier Strata Management corresponded with the defendant in an attempt to have it rectify the defects but no outcome by June 1999 satisfactory to the Owners Corporation was achieved. Indeed, Mr Votano said the defendant, through Mr Ireland who I repeat did not give evidence, informed him on 23 November 1998:

“I have two people on staff to attend to the remedial building work at all the Meriton buildings in Sydney. I have not been allocated an adequate budget to adequately attend to these works.”

42 The defects in the building identified by Rickard & Partners were not challenged by the defendant either in testing the report or by other evidence. It is true that other evidence of an expert nature was led by both parties in the proceedings, to which reference will have to be made, but I am satisfied that the Rickard & Partners’ assessment of the condition of the building should be accepted.

Processing of insurance claim

43 Consideration of the insurance claim then proceeded at the request of the Owners Corporation. Vincent Paul Kennedy was the Department’s claims officer and had such responsibility for the Owners Corporation’s present insurance claim which he said was received on 14 October 1998 and acknowledged by letter dated 5 November 1998. The defendant was advised in writing the same day of such a claim and informed it was the Department’s duty to seek recovery against a building contractor for the amount of the claim settlement; the defendant was invited to make a written submission.

44 Mr Kennedy, in processing the claim, arranged for a review report from RBF Consulting Pty Limited as to the defects identified by Rickard & Partners and not considered to have been rectified by 2 December 1998. A consultant, Ronald Fox, submitted the report on 15 June 1999. Mr Fox summarised his view in this way:

“The majority of the claim items are general defects or incomplete work however there are some items which are major structural defects. There are some new defects brought to my attention on site and I could not see any correspondence on the file informing the builder of these problems...”

45 Premier Strata Management was advised on 16 July 1999 of Mr Fox’s report receiving attention. On the same day, Mr Kennedy ascertained from Parramatta City Council that the final inspection of the property occurred on 3 August 1995, that is, no doubt on the completion of the building work.

46 As part of the plaintiff’s consideration of the insurance claim, a senior claims officer Carolyn Dollimore on 16 July 1999 prepared a “submission/history” and noted that the date of awareness of the defects was 7 September 1995 (seemingly taken from the 26 September 1996 notification of complaint lodged by Bright & Duggan) so that being about six months beyond the required time limit in cl 7(1)(b) and (c) of the insurance scheme in Form 4 an extension was necessary under cl 7(2) for the claim to proceed. Ms Dollimore recommended such extension due to the unsuccessful attempts to have the defendant rectify the defects and, on 19 July 1999, Rodney George Elliott, the claims manager, approved the extension of time, as he said in evidence, “because delays by the builder in rectifying defects was recognised as a circumstance outside the control of the Owners Corporation”.

47 From Ms Dollimore’s review, the following relevantly significant dates were recorded by her-

• Date work commenced was 21 September 1993
• Date work was completed/ceased was 3 August 1995
• Complaint date was 27 September 1996
• Date of awareness of defects was 7 September 1995

48 On 19 July 1999, Ms Dollimore wrote to Premier Strata Management and advised “that approval in principle has been granted to settle your client’s claim under Clause 5(1)(d) of the Comprehensive Insurance Scheme. The final approval sum will be established upon receipt of an acceptable quotation for the works in accordance with the engineer’s report. The reasonable cost of an engineer’s report will also be covered by the Department’s insurance provisions.” On the same day, the Department advised the defendant of this approval in principle and repeated its intention to recover from the defendant the amount of the claim paid by it.

49 However, on 20 July 1999 Mr Votano sent to the Department, which was received on 22 July 1999, a further insurance claim form by amending that of 14 October 1998 by completing the statutory declaration portion of it. Then, on 26 July 1999 Mr Votano, consistent with the Department’s requirement for approval, asked Rickard & Partners to draw up a specification of the work to be carried out and to obtain three quotations for it.

50 In November 1999, Rickard & Partners prepared tender documentation for rectification of the building defects and put the work for tender. Five quotes were received with lump sum tender prices ranging from $462,035 to $785,844 and on 13 January 2000 those quotes were notified to the Owners Corporation which, by Mr Votano, were sent to the Department on 8 February 2000 with a covering letter from Rickard & Partners. The fee from Rickard & Partners for its work was $35,397.

51 Ms Dollimore then instructed Dickinson Building Consultants Pty Limited t/as Warren J Dickinson to assess the quotations and for that purpose Mr Dickinson inspected the site on 8 March 2000 in the company of Mr Votano and Mr Rudgley. On 23 March 2000, Mr Dickinson presented his quotation assessment report based on the original complaint assessment by Rickard & Partners of 30 August 1996 as lodged with the Department and the more recent schedule of works which formed the basis of the quotations. Mr Dickinson found all of the complaints to be general defects with no major structural defects. Further, he considered that unsatisfactory rectification work had been performed to the ceilings of two of the units “to the value of $3,500, and not to the value of the quotes ranging from $462K to $785K”. Therefore, he recommended the amount of $3,500 be allowed under the insurance scheme but “that the remainder of the complaint items are declined for the reasons that they are not located in habitable areas of the dwelling (and not therefore major structural defects), together with the fact that the date of notification of those complaint items is outside the time limitation of the scheme.” On 4 April 2000, Chris Palombe, a senior technical consultant with the Department, agreed with Mr Dickinson’s assessment.

52 In the result, by letter dated 23 May 2000 (but apparently received on 6 June 2000) to the Owners Corporation, Mr Kennedy advised “approval in principle has been granted to settle your claim for the items listed” which covered the two items recommended in the report of Mr Dickinson to the value of $3,500; otherwise, Mr Kennedy said the items were declined “as being out of time”. This can only relate to a view, given the extension of time as to the six month period from the date of awareness of the defects that the three year limitation period to notify general defects (as Mr Dickinson had classified them) had not been met as notice was given on 26 September 1996 but where commencement of the work had been on 21 September 1993. It is to be interposed in this respect that the complaint notification form lodged by the then strata manager, Bright & Duggan, was signed by Gary Anderson but he did not give evidence.

53 It is to be interposed also that there was some material in the proceedings as to when the Department’s letter of 23 May 2000 was sent as might affect the Owners Corporation’s appeal rights to lodge within 30 days of it being served pursuant to s 86(1)(a) of the BSC Act. A file note made by Mr Kennedy said the letter of advice was issued on 25 May 2000, not received until 6 June 2000 on Mr Votano’s understanding and where the schedule of declined items, stated as “Schedule B”, was not included but where in fact “Schedule C” listed those items. Mr Kennedy described this as “unfortunate”. In any event, no issue arose in the present proceedings as to any time limitation point for an appeal and I am satisfied in the circumstances that that was a correct position to take. I accept advice of the plaintiff’s decision was served on 6 June 2000.

54 On 21 June 2000 the Owners Corporation lodged an appeal in the Fair Trading Tribunal against the present plaintiff as respondent to challenge the unfavourable decision pursuant to s 85(d) of the BSC Act. It was filed well within the 30-day limitation period which did not expire until 6 July 2000.

55 On 4 October 2000, Mr Dickinson confirmed his earlier report of 23 March 2000, although he did concede that an additional four items may be re-categorised as justified.

56 On 12 January 2001 the Owners Corporation lodged an amended application with the Tribunal by providing more specific grounds of appeal.

Appeal proceedings

57 In accordance with s 87 of the BSC Act an appeal is to be by way of rehearing the evidence given before the BSC and hearing any new evidence in addition to or in substitution for any evidence so given. Under s 88, in deciding the appeal the Tribunal may confirm the challenged decision or substitute for that decision any other that the BSC might have made. Section 89 makes any such decision by the Tribunal on appeal to be final and is taken to be a decision of the BSC.

58 The solicitors for the Owners Corporation, Andreones, proceeded to review the material then held, to search for other relevant documents related to the issues, particularly as concerning the time limitation periods, and to obtain the views of other building consultants on the existence and nature of the alleged defects whether major structural defects or general defects.

59 Andreones instructed Wayne Dennis Dyer, who from May 2001 to May 2003 was a building consultant with Bonacci Rickard (NSW) Pty Limited (formerly Rickard & Partners), to review the defects in the property as identified in the Rickard & Partners reports against what Mr Dickinson had concluded. Mr Dyer prepared four reports dated 15 August 2001, 10 October 2001, 15 November 2001 and 28 November 2001; Mr Dyer reviewed also a report dated 13 August 2001 by Marton Marosszeky who then was a building consultant with Block Developments Pty Limited, and later with Evans & Peck, engaged to advise the plaintiff. In the final report, Mr Dyer relevantly concluded:

“In summary of the 49 listed defects identified in Rickard & Partners reports of 30 August 1996 and 2 December 1998, 12 of these items have been rectified and a further 37 remain defective. Of the outstanding 37 items Mr Dickinson has reported and commented on 25, the remaining defects have not been inspected or commented on.

Mr Dickinson’s assessment of the defects inspected only classifies 2 defects as justified complaints and the remainder as unjustified complaints.

Mr Marosszeky’s assessment of the defects vary to Mr Dickinson’s view, where he believes 11 defects (Dickinson classified as being non-justified) are justified complaints and the builder should rectify.

Mr Marosszeky’s report has also stated a number of defects from Rickard & Partner’s report of 1996 are not justified defects. We disagree with this, as we feel the poor workmanship and failure by the builder to rectify has contributed to the problem, as the drainage and water ponding would [have been] far less if corrected when first advised ... Mr Dickinson and Mr Marosszeky have not inspected all the complaint items. Following our inspection on 10 August 2001 ... all defects are still evident and deteriorating...”

60 Mr Dyer, for reasons set out in the Bonacci Rickard report of 10 October 2001, considered the tender by BMP Industrial Pty Limited as the lowest tender represented “value for money”.

61 The Bonacci Rickard review, and particularly that contained in the final report of 28 November 2001, is of much significance because Mr Dyer was able to consider the various earlier building reports as to the claimed defects. Also, he was not required by the defendant for cross-examination and, so, his evidence stands unchallenged. Relevantly, Mr Dyer in the report identified twelve items as “new defects”, in the main related to water penetration. I took this to mean “new” in the sense that they were not identified as defects as such at the time of the report by Rickard & Partners on 30 August 1996. However, it is apparent, as Mr Dyer recorded, that these later defects were identified in December 1998 as noted in the report by Mr Dickinson and as to which Mr Dyer said in the report:

“It is our belief the building was constructed and completed with the defects existent. As the building was completed in 1995 and the defects outlined below were identified in August 1996. This is a very short time from completion of the buildings to have such a significant amount of cracking and water penetration evident.”

62 In other words, as I understand what Mr Dyer was saying, the faults existed at the time the building was completed and continued as such but the identification in August 1996 disclosed some results of the existing defects with still other results not becoming manifest until August 1998, and perhaps later. Nevertheless, I would take it, they existed from the time of completion of the construction work and, significantly, related to water penetration which had been one of the initial problems seen as referenced by the water puddling on the roof.

63 By letter dated 30 November 2001, entitled as a “Calderbank letter”, Andreones wrote to the Department concerning the issues in the appeal proceedings and to convey the appellant Owners Corporation’s offer of settlement. In summary form, Andreones made the following points as to the issues -

• The nature and extent of the defects affecting the building were those described in the Bonnaci Rickard report by Mr Dyer of 28 November 2001, and included some of the defects included in the original handwritten list prepared by Mr Piccoli and the defects listed in the report of 12 July 1999 by Fire Control as to faulty fire doors.
• The appellant first became aware of the defects concerned on or about 1 September 1996 when it received the inspection report by Rickard & Partners dated 30 August 1996 so that the building complaint filed on 27 September 1996 was only 26 days into the six-month statutory time-limitation period allowed for lodging such a complaint.
• Building work commenced on the project in the first half of November 1993 so that the complaint filed on 27 September 1996 was within the statutory time-limitation periods for both general defects and major structural defects of respectively three years (to be by mid-November 1996) and seven years (to be by mid-November 2000).
• To the extent it may be necessary to extend the time limitation period, discretion should be exercised to do so.
• If necessary, the identified defects should be classified as general defects and major structural defects as set out in the Bonacci Rickard report.
• In support of the commencement date of the building work being in November 1993, reference was made to a letter dated 4 November 1993 from the builder to Parramatta City Council, that “work is about to commence on this project”; a letter dated 16 November 1993 from the builder to Parramatta City Council that it was “commencing construction of a development on this site”; and a letter dated 4 November 1993 from the Water Board to Parramatta City Council that “construction activity has commenced on site”-these letters were in evidence in the present proceedings.
• The Owners Corporation proposed that the appeal proceedings be settled by the respondent agreeing to indemnify it under BSC Insurance in the sum of $527,645 (inclusive of GST) plus costs, where the principal sum was derived from the quotation given by BMP Industrial to rectify the defects identified by Bonacci Rickard.

64 In further support of the proposed offer of settlement in terms of additional information concerning the date of commencement of the construction work, Andreones on 30 November 2001 advised the Department that building plans contained in the development application to Parramatta City Council supported the commencement of building work on the site being the first half of November 1993-documents to this effect were put into evidence in the present proceedings.

65 It is necessary at this stage of the review of events to point out that the defendant no longer had available many of the documents concerning this construction project. For example, it was unable to produce any site diary or work schedules which clearly would have been useful in a determination of the most important date that work commenced on the site. It is true that some of its documents were apparently produced during the appeal proceedings in the Fair Trading Tribunal, including what seemed to be a summary of invoices from a concreter, N & S Concrete, which referred to the footings in terms “11 Nov 93 Inv 3270 2/11 Footings 200.00”. Given cl 32 of the BSC Regulation deeming building work to commence on the date footings were placed, that invoice would establish the relevant commencement date as 2 November 1993. Indeed, an affidavit sworn by the defendant’s solicitor, Katerina Mihail, who had the care and conduct of the matter stated that the lack of documents held by the defendant was “due to a number of reasons including employees leaving and the passage of time. Meriton’s usual practice is to destroy records after 7 years... in the normal course from around 2000 files relating to this matter would have been destroyed”. In the result, other than expert evidence from a construction consultant, George Louis Zakos, the defendant led no evidence in the proceedings.

66 The appeal was before Mr P H Molony, a senior member of the Fair Trading Tribunal, for hearing on 3 December 2001 but who then ordered by consent:

“1) Proceedings adjourned to a telephone directions hearing to be held at 2.00pm on 21 January 2001.
2) Certify for Legal Representation.
3) Costs reserved.”
The Tribunal notes:
“4) the admission of the Respondent of the claim notified to it on 27 September 1996, including the Rickard & Partners report dated 30 August 1996 and the note of Mr Piccoli dated 23 July 1996.
(5) the undertaking of the Respondent:
(a) to reconsider the claim already made by the Applicant to the extent that any such claim is not already comprehended by the admission in paragraph 4.
(b) to quantify all of the claims already made by the Applicant in these proceedings, that is, in 4 and 5(a) above will be made by 21 December 2001.”

67 Clearly then, and as Mr Elliott deposed in his affidavit:

“The Department accepted and changed its position in relation to the commencement date of the work consistent with the advice received from Andreones in their letter dated 30 November 2001. The effect of this was that in the context of the proceedings in the Tribunal, the Department considered that any arguments that had been based upon the expiration of the three year notification period for general defects under clause 7(1)(c) of the Scheme appeared to be nullified by this fresh evidence.”

68 Mr Elliott then had Richard Napthali of the Department’s Building Assessment Unit review the file. On 5 December 2001, Mr Napthali relevantly reported:

“All of the complaint items are considered to be General Defect items with the exception of the block work at level 4 carpark which is classified MSD (major structural defect).

The quotes provided do not include any items which would be considered out of time for general defects based on the information on file relating to the commencement date of November 1993 and the date of the complaint. Therefore all items quoted by the builders based on the Engineer’s schedule appear to be in time and justified.”

69 Mr Elliott indicated agreement with Mr Napthali’s recommendations and, accordingly, gave instructions for the Owners Corporation’s claims in the appeal proceedings to be settled. However, on 12 December 2001 Andreones, consistently with the Department’s undertakings to the Tribunal, asked the Department to provide indemnity for the fire service defects and the “new” defects as set out in the earlier referred to Bonacci Rickard report of 28 November 2001. Andreones pointed out that the fire service defects first came to awareness in May 1998 when Parramatta City Council gave notice of intent to issue certain notices relating to compliance with fire safety requirements and on or about 19 August 1998, within the six-month period, the Department was given notice of them. As to the “new” defects, it was said by Andreones, and as I have earlier recorded in dealing with them, that they were included in the original Rickard & Partners report concerning water penetration issues and the handwritten list prepared by Mr Piccoli on 23 July 1996.

70 On 24 December 2001, the Department advised Andreones, by reference to the Tribunal’s orders made on 3 December 2001, that the respondent FTAC accepted “liability for the claim with respect to all items contained in the relevant Bonacci Rickard report” and the Owners Corporation was requested to obtain up to date quotations for the work. This was done through Mr Seton of Wizard Building Services who on 18 January 2002 recommended the revised quotation from BMP Industrial be accepted and, accordingly, an amount of $527,645 (inclusive of GST) was approved on or about 23 January 2002-the defendant was advised of this. On 22 March 2002, Andreones was advised of approval of an additional amount to cover the fire services claim and the “new” matters in the amount of $77,000 (inclusive of GST) giving a total claim approved of $604,645-the defendant was so advised.

71 On 29 July 2002, the Fair Trading Tribunal made orders by consent determining the appeal proceedings in the following terms:

“The Tribunal notes that:
1. The applicant submitted a claim to the respondent under the Comprehensive Insurance Scheme on or about 26 September 1996, being insurance claim No. 193/5936 (‘the Insurance Claim’).

2. The applicant commenced these proceedings to appeal against the respondent’s determination of the insurance claim by filing an application in the Fair Trading Tribunal on 21 June 2000 (‘the application’).

3. By short minutes of consent orders made on 3 December 2001 (‘the first consent order’), the respondent agreed to:
a. Extend indemnity to the cost of rectifying certain defects affecting the applicant’s building, being defect items No. 1 to 43.3 and 66 to 68.7 in the report of Bonacci Rickard dated 28 November 2001 (‘the Report’), and
b. Reconsider its liability in respect of the balance of the insurance claim, being defect items 44 to 65 in the report.

4. The respondent subsequently issued the following determinations in respect of the insurance claim:
a. An offer of indemnity to the sum of $527,645.00 for the rectification of the defect items No. 1 to 43.3 and 66 to 68.7 in the report, and
b. An offer of indemnity to the sum of $77,000 for the rectification of defect items 44 to 65 in the report.


5. The applicant has accepted the offers of indemnity listed in paragraph 4 above.

6. The issue of costs was reserved for further hearing under paragraph 2 of the first consent orders.

7. The parties have agreed that the respondent will pay the applicant the following amounts in relation to the costs and disbursements incurred by the applicant:
a. $36,736.30 in respect of legal costs and disbursements,
b. $8,464.00 in respect of the fees of Mark Brabazon, Barrister-at-law, in relation to the Fair Trading Tribunal proceedings up to the date of the first consent orders,
c. $1,650.00 in respect of the fees of Mark Brabazon in respect of the Fair Trading Tribunal proceedings from the date of the first consent orders to the date of these orders,
d. $30,263.25 in respect of expert’s costs and disbursement, and
e. $490.00 in respect of the applicant’s witnesses’ fees.

Total: $77,603.55.

7. The respondent undertakes to assess the following expert costs and disbursements (‘the additional expert costs’) as part of the insurance claim:
a. The costs and disbursements incurred by the applicant by engaging Rickard & Partners (now Bonacci Rickard) from August 1996 to the date of filing the application, being $10,821.00, and
b. The costs and disbursements incurred by the applicant by engaging Bonacci Rickard to administer and supervise the rectification works being carried out by BMP Industrial Pty Ltd, being $26,453.65

Total: $32,274.65

8. The respondent agrees that it has been provided with all invoices and estimates of costs and disbursements required to assess the component of the insurance claim relating to the additional expert costs.

BY CONSENT, the Tribunal orders that:

A. The respondent pay the applicant the sum of $77,603.55 by 26 August 2002,

B. The respondent assess the component of the insurance claim relating to the additional expert costs and forward to the applicant’s solicitors a formal determination attaching a Department of Fair Trading Authorisation of payment form by 19 August 2002, such authorisation of payment to be executed by the applicant and returned to the respondent prior to payment of additional expert costs,

C. The applicant file a Notice of Discontinuance of these proceedings in the Registry within 7 days of receiving the respondent’s payment pursuant to paragraph A above, and

D. Liberty to apply to the Tribunal with 3 days notice if these orders are not complied with.”

72 Following the obtaining of the up-to-date quotations on settlement of the appeal proceedings in December 2001, BMP Industrial duly performed the rectification work concerned and payments were made to it by the plaintiff under the insurance scheme from 21 May 2002 to 6 November 2002, plus $30,263 on 23 October 2002 in respect of the expert’s costs. The total payment was $634,823 and was subject to inspections by Mr Seton during the rectification work of its satisfactory completion. That amount represented the plaintiff’s claim against the defendant.

Expert evidence

73 Two expert building consultants gave evidence in the proceedings, Mr Zakos for the defendant and Mr Marosszeky for the plaintiff. I have earlier briefly referred to their involvement and it is necessary only to shortly deal with what they said. Indeed, in the important respect of betterment resulting from the rectification work the experts agreed in a joint report of 14 October 2009 on a figure, accepted by the parties, that a deduction should be made for betterment from any amount awarded to the plaintiff in the sum of $107,584. I accept this as proper.

74 As to the amount claimed for preliminaries for the rectification work, the experts reached agreement that a rate in the range of 12.5 per cent to 17.5 per cent of the tender price would be reasonable. The plaintiff’s claim was for an amount of $120,120 for preliminaries, that is, 25 per cent of the tender price as set out in the amended Scott Schedule dated 8 April 2009. This component covers such matters as site accommodation, supervision, materials handling, general site labour, waste removal, insurances and overheads. Generally, as the evidence showed, preliminaries account for about 8 to 12 per cent of the tender price for residential building work, although for rectification it is usually higher in the range of 10 to 15 per cent. In light of the experts’ agreement, I will accept a reasonable figure for preliminaries here of 15 per cent instead of the 25 per cent claimed.

75 Mr Zakos was asked to review the Scott Schedule prepared by the plaintiff in respect of a few items only, being items 1,2, 3,8, 14,16 and 22 but as to which the cost was about 80 per cent of the total claim, to comment on reasonableness and the costs incurred in carrying out the defective work. He inspected the site on 29 September 2008, about six years after the rectification work was done and was provided with the affidavits of Mr Votano, Mr Dyer, Mr Seton, Mr Elliott and Mr Kennedy, the Scott Schedule and drawings related to the building. Apart from item 1 which concerned preliminaries, the remaining six items dealt with by Mr Zakos in his first report of 17 December 2008 were accepted by him as defects and as leading to some rectification work but where what was done was said to be excessive-this aspect is really covered by the experts’ agreement on betterment and need not be further considered. As to some items, such as item 22 concerning the fire door where “double-dipping” in the claim was alleged, the experts finally agreed that that did not occur.

76 By reference to the Rickard & Partners Report of 30 August 1996, Mr Zakos was asked also to identify the items which were not major structural defects. He expressed the opinion that only defect 1 as to the roof membrane in the tower building, defect 11 in the tower building in Unit 147 and defect 22 in the tower building lift plant room were major structural defects as they directly affected the habitability of the building or its structural integrity; otherwise the defects were properly categorised as general defects.

77 Mr Zakos also expressed the view that items 1 to 43.3 inclusive in the Bonacci Rickard report of 28 November 2001 were contained in the Rickard & Partners report of 30 August of 2006 in one form or another. However, he said items 44 to 68 in the later report (said earlier in these reasons to be called the “new” items) were not included in the earlier report.

78 Mr Zakos dealt also with those defects which he thought were raised for the first time after September 2000. The relevance of that date is clearly that it was more than seven years after the alleged commencement of the building work in September 1993 having in mind the time limitation period in cl 7(1)(b) of Form 4 of the insurance scheme. By reference to the numbering in the Bonacci Rickard report 28 November 2001, Mr Zakos concluded, after he considered the relevant documents, that -

• defects 1 to 43 were clearly identified in the Rickard & Partners Report of 30 August 1996;
• defects 44 to 49(part of the so-called “new” defects) were notified prior to September 2000, probably in December 1998;
• defects 50 to 54 (part of the so-called “new” defects) were said in the Bonacci Rickard Report to have been identified on 10 August 2001 or 27 November 2001;
• defects 55 to 65 were identified by Mr Piccoli in his handwritten list of defects prepared on 23 July 1996 after his inspection on 22 July 1996; and
• defects 66 to 69 (relating to the fire service doors) were identified in the scope of works put to tender in October 1999.
  

79 Mr Marosszeky was qualified as an expert by the plaintiff. He was asked to prepare a technical report in response to the report of Mr Zakos and to comment on a number of matters raised by the original Scott Schedule prepared by the plaintiff’s solicitors in 2008 and the amended Scott Schedule prepared by him in April 2009. He did so in a report dated 8 April 2009. Mr Marosszeky as requested by FTAC, first inspected the site on 14 May 2001 to classify the perceived defects as major structural or general. He reacquainted himself with the building and to view the rectification work carried out by a site visit on 6 February 2009.

80 As a general proposition, Mr Marosszeky considered that all issues relating to water penetration into the building and fire safety non-compliance were major structural defects.

81 Of significance, having in mind that the present claim was based on “rectification” work as distinct from “incomplete” work (the distinction is made in cl 5(1)(c) as compared to cl 5(1)(d) in Form 4 of the BSC Insurance Scheme), Mr Marosszeky was referred to the amended Scott Schedule and agreed that items 5 ($4,680 cost), 10 ($780) and 11 ($1,456) were incomplete work-the total value is $6,916.

82 Mr Marosszeky in his report expressed the view that items 10 and 17 in the Rickard & Partners report of 30 August 1996, being respectively items 6 (corrosion protection to steel structures on roof terrace level costing $2,600) and 16 (roof waterproof membrane above pool costing $83,044) in the amended Scott Schedule, were not defects under the insurance scheme because there were no leaks through the slabs into habitable spaces. However, as to item 17 (16) both Mr Marosszeky and Mr Zakos agreed in the joint report that the estimate for this rectification work was reasonable but subject to a betterment in the value of $66,544.

83 The date of the commencement of actual residential building work on the site was raised with Mr Marosszeky in cross-examination with the suggestion that for a building such as the one here concerned it would be at least two months before the pouring of concrete footings. He agreed there would have been “quite extensive site preparation and excavation probably in this case demolition of an existing building”. However, and although a little unsure, Mr Marosszeky added that “the period would be relatively short, rather than-it would be at the lower end of that range of one to six months rather than the upper end of it...if there were no basements at all on a building site (seemingly the case here, certainly not extensively so) that footings would be cast within a month of starting.”

84 What I think emerges from the expert evidence, on any view of it, is that there were in the subject building very many defects requiring rectification. Much of the contest between the experts was the categorisation of the defects as major structural or general and the extent to which rectification work was required. In that latter respect, the agreement to a value for betterment avoids the need to look precisely at each defect. Therefore, I accept the Scott Schedule, as prepared in its final form by Mr Marosszeky and as read in conjunction with the Bonacci Rickard report of 28 November 2001, as stating the relevant defects; this is subject to Mr Marosszeky’s evidence about those items considered to be incomplete work rather than rectification.

Notification of defects within six months of awareness

85 A fundamental point against the plaintiff’s claim, indeed a complete bar to it, was that the Owners Corporation failed to notify BSC of the defects within six months after first becoming aware of them contrary to cl 7(1)(b) and (c), of Form 4 of BSC Insurance. Counsel for the defendant, Mr DS Weinberger, submitted that the date of awareness was 7 September 1995, as appeared in the complaint form dated 26 September 1996 completed by the Owners Corporation’s then strata manager, so that it was in excess of 12 months before notification of the defects was made. Counsel emphasised that that was consistent with the record in the minutes of the proprietors of 4 September 1995 of “water puddling on roof of lower section of the building”, particularly having in mind that water penetration was the primary defect with which this case was concerned. The strata manager, Bright & Duggan, was represented on the Body Corporate and on the Council by Mr Wyatt and the complaint form was completed and signed by its employee, Mr Anderson. The plaintiff’s case, said Mr Weinberger, invited the finding that the strata manager “plucked a date out of thin air which had no factual basis whatsoever”. In the alternative, Mr Weinberger submitted the date of awareness was 5 February 1996, still beyond the six-month limitation period, when at a Council meeting it was resolved to supply the builder’s representative on the Council with “a list of building finishing problems”.

86 Mr GA Sirtes SC, who appeared with Ms S Callan of counsel, submitted for the plaintiff that the relevant date of awareness of defects was 30 August 1996 being the date when Rickard & Partners presented its report identifying a large number of defects. As the complaint form was completed on 26 September 1996, and lodged with BSC the following day, then, as senior counsel put, the time limitation of six months had been well met. As to the 7 September 1995 date, Mr Sirtes submitted it was not supported by and was inconsistent with the evidence so as to be factually wrong. In that respect, reliance was placed on the evidence of Mr Piccoli that he prepared a list of defects on 23 July 1996 after inspecting the premises the day before at the request of the other Council members and, in the result, the Council at its 16 August 1996 meeting decided to retain Rickard & Partners as “a qualified structural engineer” to “prepare a report of any defect found”. Significantly, Mr Sirtes emphasised that the two Council members who gave evidence, Mr Piccoli and Mr Rudgley, were not cross-examined at all about their awareness of the defects identified in the Rickard & Partners report so that that failure enabled an inference to be drawn that the defendant feared to do so: see per Handley JA in Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 418 - 419.

87 At its highest, but not to amount to relevant “awareness”, it was put to the plaintiff that the Owners Corporation was aware of the September 1995 “puddling of water” and the February 1996 “finishing problems”. It was not until the Rickard & Partners report of 30 August 1996 that awareness of relevant defects arose and even though members of the Council noticed defects from time-to-time which led to the February 1996 decision to refer certain “finishing problems” to Mr Carvalho as the builder’s representative on the Council.

88 In Fair Trading Administration Corporation v Owners Corporation-Strata Plan 43551 [2002] NSWSC 624, Burchett AJ as to the six-month requirement said (at [24]):

“...It is important to note that the 6 months is measured from the first awareness by the beneficiary (not someone else) of ‘the defect’, although what must be notified is described as ‘matters that could give rise to the losses’, not the actual defects that, in a precise sense, are the causes of those matters. A degree of imprecision in a notice seems to be contemplated by a provision so framed.”

89 The question was further considered by McDougall J in Owners - Strata Plan 58068 v Fair Trading Administration Corporation [2009] NSWSC 850 where his Honour, in citing with apparent agreement what had been earlier said by Burchett AJ in Owners Corporation-Strata Plan 43551, commented (at [59]):

“The language of the comprehensive scheme is not particularly clear. Clause 7(1)(b), (c) speaks of a period ‘within six months after the beneficiary first becomes aware of the defect’. However, by the introductory words of cl 7(1), what is required is notification ‘of the matters that could give rise to the losses referred to in cl 5...”: that is to say, relevantly, losses in rectifying defects in insured building work due to’ the specified causes (cl 5(1)(d)). It follows, in my view, that awareness of a widespread problem with (for example) moisture penetration will attract the obligation to notify because it is, obviously enough, something ‘that could give rise to’ a claim for faulty workmanship or materials or the like. It is not necessary that the precise nature or cause of the defect be known before the obligation to notify arises.”

90 For myself, I would only add that the degree of awareness required, in an objective view of the beneficiary’s observation of the problems, must be real and reasonably informed and not the result of mere speculation or supposition. In other words, that the matters seen could give rise to discernible financial losses in rectifying whatever be the causes of the defects. Of course, and consistent with what McDougall J said and as to which I did not understand there to be any issue, once notification be given of matters that could give rise to a loss then it is unnecessary to give further notification as and when other defects manifest and become known because the operation of the insurance scheme had already been triggered.

91 In the present case, on the evidence, observations were made as early as 4 September 1995 at the first general meeting at the proprietors as to water puddling on the roof (but, significantly, not as to any water penetration into the building itself) following the constitution of the Owners Corporation on 24 July 1995 and with the building complex completed in August 1995; the first meeting of the Council of the Body Corporate was not held until 19 September 1995 when office bearers were elected. At that stage, no matters of concern with the building were raised other than cosmetic and functional things like locks sticking and loose driveway posts. It was not until 5 February 1996 that only “finishing problems” (but not particularised) were seen and the builder was to attend to them. Then, it seems following observations by various members of the Council, other problems were discussed at Council Meetings until Mr Piccoli prepared a list of defects on 23 July 1996 after his inspection of the building for that purpose on 22 July 1996. Council, at its meeting on 16 August 1996, decided to commission Rickard & Partners to inspect the site and identify defects which it duly did, albeit in a preliminary way due to time constraints, on 30 August 1996.

92 Mr Weinberger in supporting a 7 September 1995 awareness date relied on the proposition that the onus was on the plaintiff to displace what was said in the complaint form, otherwise that date stood. He pointed to the plaintiff’s failure to lead evidence from Mr Wyatt and Mr Anderson who were in a position to explain why the strata manager cited that date as the date of awareness. I do not accept that submission. It involves requiring the plaintiff to prove the negative, always a difficult task, where what was asserted by it was a later date: see Apollo Shower Screens Pty Ltd v Building and Construction Industry Long Service Payments Corporation (1985) 1 NSWLR 561 at 564-565 per Hunt J. To the extent the plaintiff obtained evidence pointing to a later date then, in my view, the evidentiary onus shifted to the defendant to make good, if it could, its assertion for the earlier date. In that respect, I think it was up to the defendant to call evidence from Mr Wyatt and/or Mr Anderson, and its failure to do so properly enables a Jones v Dunkel (1959) 101 CLR 298 inference against it.

93 I find that the relevant nature and degree of awareness of the defects arose not earlier than when Mr Piccoli inspected the building on 22 July 1996 and prepared the handwritten list the next day which was considered by the Council of the Owners Corporation on 16 August 1996. Therefore, the date the Owners Corporation itself as the beneficiary first became aware of the subject defects was 16 August 1996. The notification to BSC on 26 September 1996 was within the six-month limitation period in cl 7(1)(b) and (c). This aspect of the defence therefore fails.

Notification of defects within limitation period after commencement of building work

94 In a submission/history dated 16 July 1999, Ms Dollimore of the Department in assessing the Owners Corporation’s claim for indemnity under BSC Insurance noted the date building work commenced as being 21 September 1993. That was in accordance with a file note in the Department’s records of Chitra Sekar of 4 October 1996. On this basis, Mr Weinberger submitted for the purposes of cl 7(1)(c) of Form 4 that the statutory limitation period of three years from the commencement date of insured building work to notify general defects was exceeded as the complaints form was not completed until 26 September 1996, that is, three years and five days later. It was accepted that for major structural defects under cl 7(1)(b) the notification was within time as the limitation period was seven years. Mr Weinberger emphasised, in a manner similar to his earlier approach as to the awareness point, that neither Ms Sekar nor Ms Dollimore was called to give evidence for the plaintiff.

95 Having in mind cl 32 of the BSC Regulation, which provides for the purposes of s 90 of the BSC Act, that residential building work is taken to have been commenced “when the footings of the structure were placed or, if no footings are involved in the work, when the work substantially commenced”, Mr Weinberger submitted the test as to the footings was not exclusive and permitted proof of commencement other than by reference to footings. Counsel relied on Owners-Strata Plan 58068 where McDougall J (at [79]) commented to that effect as to the operation of cl 32. Thus, the date recorded by Ms Dollimore should be accepted.

96 Against those submissions, Mr Sirtes put that the date of commencement of building work was after 26 September 1993, a date not earlier than November 1993 was suggested, so that the three-year limitation period was not exceeded. Senior counsel relied on cl 32 of the BSC Regulation to fix the commencement date as the time from when the footings were placed which, on the invoice from N & S Concrete, was probably 2 November 1993.

97 As further support for a November 1993 commencement date, Mr Sirtes relied on the files obtained from Parramatta City Council of correspondence from the defendant builder and the Water Board documents, as earlier specified, which were all created in November 1993 and referred to “commencing construction”, “work is about to commence” and “construction activity has commenced”.

98 Beyond the file note by Ms Dollimore, I think the evidence of a November 1993 commencement date for the building work was compelling. Further, it seems to me to be extraordinary that a builder, particularly one the size of Meriton Apartments, provided no evidence in either oral or documentary form to support its assertion of a commencement date before 26 September 1993. Even were one to accept Ms Mihail’s evidence that the defendant had destroyed relevant documents, difficult to do so because the defendant was well aware of this dispute about defects and the real potential for litigation in a timely way, there remains the position that not one witness was called by it to address this issue and no explanation offered for the omission. It is only appropriate to draw a Jones v Dunkel inference against it.

99 I find that building work commenced on the site, certainly the placement of footings, not earlier than November 1993. The three-year limitation period in cl 7(1)(c) for notification of general defects by 1 November 1996 was met as the notification was given on 26 September 1996. The defence on this point therefore fails.

Extension of time for notification of defects

100 The finding made that notification of the defects was within the six-month limitation period in cl 7(1)(b) and (c) makes it unnecessary to deal with the defence that BSC did not properly exercise its discretion on 19 July 1999 to extend time under cl 7(2) due to circumstances outside the control of the Owners Corporation. This issue simply does not arise.

Distinction between “major structural” and “general” defects

101 In view of the finding that building work commenced on the site not earlier than November 1993 for the purposes of the three-year limitation period in cl 7(1)(c), it is unnecessary to make a distinction as to whether the defects were major structural defects or general defects. The defence on this aspect does not arise.

Whether a “deemed” decision and need to extend time to appeal

102 It was common ground that the Owners Corporation lodged its insurance claim with BSC on 14 October 1998. There was no time-limitation period prescribed in either the BSC Act or in Form 4 within which such claim had to be made once the limitation periods in cl 7(1) had been met to trigger the operation of the insurance scheme.

103 However, Mr Weinberger submitted that, by the operation of s 86(2) of the BSC Act, such a claim was taken to have been refused if BSC as the decision-maker did not serve notice on the applicant of its decision within 40 days of the claim being lodged, that is, by 23 November 1998. A claimant aggrieved by any decision made by BSC was able to appeal against the decision to the Fair Trading Tribunal under s 85(d) but by reason of s 86(1)(b) it had to do so within 30 days, that is by 23 December 1998, after the decision was taken to have been made under s 86(2). As the owners did not lodge an appeal until 21 June 2000, without an extension of time under s 86(3), it was consequently out of time and FTAC, and indeed the Fair Trading Tribunal had no power or competence to deal with it.

104 Mr Sirtes pointed out that Mr Weinberger’s submission rested solely on the construction of s 86(2) as contended for by him but that as a matter of law it was wrong-that is, the deeming provision in s 86(2) had no application to the present case of a claimant seeking a decision under BSC Insurance. The direct point, said senior counsel, had received careful and considered attention in Owners Corporation SP56911, cited earlier in these reasons, where Mr GJ Durie, a senior member of the Consumer, Trader and Tenancy Tribunal, found that s 86(2) only applied to an “applicant” under s 85(a) for the issue or alteration of an authority and not to the other classes of persons identified in paras (b), (c), (d) and (e) of the section as a “holder”, “respondent”, “claimant” or “person”.

105 Mr Durie reasoned the matter in this way:

“v. Section 85 creates 5 different categories of persons who have a right to appeal to the Tribunal against a decision of the Corporation. In each of those categories the person given the right to appeal is described in a different manner: there are respectively an applicant, a holder of an authority, a respondent, a claimant, and a person who has entered into a contract. Having been so described initially, there is then a qualification applicable to each. The person must be aggrieved.

w. I then turn to s 86(1), which sets out a time limit applicable to all such persons. They are now generically referred to as the persons aggrieved. This is the necessary reference back to s 85. Section 86(2) then provides for applicants whose application to the Corporation has not been served within a specified period.

x. In my opinion, when it came to pass the legislation, Parliament could have continued to use the generic description of person aggrieved in s 86(2) but did not. Instead it used but one of the five particular descriptions given in s 85. It makes sense not to use the descriptions in s 85(b) and (c), but had Parliament intended to give a right to appeal against a deemed refusal for those in all remaining categories, it could very easily have done so. Further, there is the use of the word ‘application’ in s 85(a) which is picked up in s 86(2). ‘Application’ is not a word which would normally be used in respect of an insurance matter and both the remaining categories relate to insurance.

y. Does this interpretation further the purpose of the legislation?
I consider that it does. Protection of homeowners depends on a supply of competent builders, and a part of providing that supply is to ensure that the numbers are adequate and remunerated. As Ms Campora submitted, livelihood is involved in applications within s 85(a) and a prompt decision is required.

z. There is a negative side for owners. Should the Corporation not respond there would need to be action for a mandamus. One would hope that that was never necessary. There are also the political steps referred to in Ms Campora’s submissions and the availability of intervention by the Ombudsman.”

106 In deciding the case, as he said, Mr Durie followed his earlier oral decision in Carr v FTAC (unreported). Neither decision has been the subject of challenge on appeal and still stand.

107 According to the pleading here, and as the matter was argued by Mr Weinberger, the unchallenged deemed refusal of the Owners Corporation’s claim lodged on 14 October 1998 meant that there was no obligation to consider it further after the deemed refusal on 23 November 1998 and the expiry of the appeal limitation period on 23 December 1998. In the result, counsel put that any later payments made by the plaintiff to the Owners Corporation in purported satisfaction of its claim were ultra vires the insurance scheme and, therefore, irrecoverable under s 98 of the BSC Act.

108 On consideration of Mr Durie’s decision, I am of the view that his reasoning was logical and the ultimate result properly open as a matter of pure statutory construction. As an unchallenged decision by a specialist tribunal, and which followed an earlier decision, I think for reasons of comity also that it should be followed in the present case unless one considered it to be clearly wrong. I am not persuaded the decision was erroneous and I propose to follow it. Therefore, the defence on this issue fails.

Whether other decisions for purposes of the insurance scheme

109 The defence pleaded that a number of decisions made by BSC, and later FTAC, were made ultra vires the BSC Act, BSC Regulation and BSC Insurance and so were void and of no effect. It followed that payments made to the Owners Corporation were outside the insurance scheme and therefore irrecoverable from the defendant under s 98 by the plaintiff. It is convenient to deal with each decision in turn.

110 Decision of 19 July 1999: The Owners Corporation was advised on 19 July 1999 by FTAC that its claim lodged on 14 October 1998 had been “approved in principle...The final approval sum will be established upon receipt of an acceptable quotation...” It happened that on 20 July 1999 the Owners Corporation filed an amending claim by completing the statutory declaration portion of the original claim form, but, in my view, nothing turns on this and the relevant decision may be taken as that made on 19 July 1999.

111 As argued, Mr Weinberger put that this decision was made beyond power because s 86(2) of the BSC Act had deemed the Owners Corporation’s claim to have been refused 40 days after it was lodged. I have already decided against this submission in dealing with the “deemed” decision point and need to extend time to appeal. In any event, the decision having been made, Mr Weinberger submitted that as no appeal had been lodged against it within 30 days and there being no application to extend time to appeal, FTAC had determined the claim and did not have the power to make any payments to the Owners Corporation beyond the ambit of the decision-that amount was nil and, so, the plaintiff wholly failed in its present case for recovery. In other words, on the making of this decision the power of FTAC was spent, that is, it was functus officio. Counsel relied on the decision, earlier cited, of Latham J in Hristoforidis and on the authorities referred to by her Honour.

112 Mr Sirtes’ position was that the 19 July 1999 “decision” was not a decision attracting an appeal as the Owners Corporation could not be said to have thereby been “aggrieved” by an “in principle” decision in its favour to settle the claim as would justify an appeal. As senior counsel said:

“The Court is invited to conclude that, by its terms, this correspondence was in substance nothing more than a preliminary indication of FTAC’s view with respect to the claim made subject to the provision of further material that FTAC required and upon which it proposed to determine the claim.”

113 I agree with what Mr Sirtes submitted. Even though it may be said an “in principle” decision may be appealed, as s 85(d) says by referring to “any decision”, I do not see how the Owners Corporation here had the standing to appeal because it could not be said, it seems to me, that it then was aggrieved by what had been decided-it had been advised of approval to settle its claim subject only to quotations for the work being obtained.

114 In any case, the decision concerned could not be said to have determined the claim, certainly not in any final way. The decision in Hristoforidis, in my view, is quite distinguishable in that it was concerned with a decision by FTAC under the BSC Act and BSC Insurance to refuse a claim but then, following intervention by the local member of Parliament and the Minister, it changed its mind and granted the claim. That is not, indeed is far from, the position here.

115 Also, in my view, reliance by Mr Weinberger on the functus doctrine to say this decision “spent” FTAC’s power to make further decisions was misplaced. The decision here was of a preliminary or interlocutory nature, whereas the doctrine is concerned only with the “final” determination of something. In Ex parteHassell; Re Quirk (1937) 37 SR (NSW) 192 Davidson J, with whom Street and Maxwell JJ concurred, said (at 195):

“It is established by the cases to which reference has been made that, when an arbitrator or judicial officer has given his award or adjudication, as the case may be, he is functus officio, and cannot add to, amend, or detract from what he has done.”

116 In Bailey v Marinoff (1971) 125 CLR 529, the High Court (Barwick CJ, Menzies, Owen and Walsh JJ, and Gibbs J dissenting) held that there was no inherent power in a court to deal further with an appeal which had already been dismissed by formal order. It was observed by Barwick CJ (at 530):

“Once an order disposing of a proceeding has been perfected by being drawn up as the record of a court, that proceeding apart from any specific and relevant statutory provision is at an end in that court and is in substance, in my opinion, beyond recall by that court. It would, in my opinion, not promote the due administration of the law or the promotion of justice for a court to have a power to reinstate a proceeding of which it has finally disposed.”

117 To a similar effect, Menzies J stated (at 531-532):

“However wide the jurisdiction of a court may be to vary orders which have been made, it cannot, in my opinion, extend the making of orders in litigation that has been brought regularly to an end.”

118 The decision of 19 July 1999 was not a final decision in any relevant sense: The defence so argued that it was must fail.

119 Decision of 23 May 2000: FTAC made a decision on 23 May 2000 approving the Owners Corporation’s claim of 14 October 1998 in the amount of $3,500 in respect of two items and otherwise refusing the claim as being out-of-time in respect of the failure to meet the three year limitation period for general defects. It was argued by Mr Weinberger that this decision was ultra vires as the decision-making power was spent in the making of the 19 July 1999 decision but in view of the finding against that submission it must be accepted, in my view, that the ability of FTAC to make the 23 May 2000 decision properly existed. It was a decision in respect of which the Owners Corporation could be aggrieved and so an appeal was available.

120 In fact, on 21 June 2000 an appeal was filed but Mr Weinberger put that it was filed beyond the 30- day period allowed under s 86(1)(a) of the BSC Act so as to be ineffective absent an extension of time. As I have already found, the appeal was lodged in time because the challenged decision was not served on the Owners Corporation until 6 June 2000. Mr Weinberger’s submission was not made out.

121 Decision in or about December 2001: In the context of the appeal proceedings, the Owners Corporation through its solicitors, Andreones, made written representations to FTAC on 30 November 2001 providing, in effect, fresh material to support compliance with the three-year limitation period for general defects. As Mr Elliott accepted in his affidavit, that fresh material from Andreones caused the Department to review its position by an assessment carried out by Mr Napthali of the Department’s Building Assessment Unit. Mr Napthali, in finding all defects (with one exception) to be general defects, concluded that based on a commencement date for building work of November 1993 “all items quoted by the Builders based on the Engineer’s schedule appear to be in time and justified”. The previous rejection of the claims that they were brought beyond the time-limitation period could not therefore be supported in light of the fresh evidence raised during the appeal process. Mr Elliott accepted that and gave instructions for the claims to be settled.

122 As a fact, I have found the defects concerned were notified by the Owners Corporation within the limitation period for both major structural and general defects. Therefore, it seems to me, the conclusion reached by Mr Napthali, and as approved by Mr Elliott, was correct. In the context of the appeal process, which essentially had the purpose of reviewing the decision of 23 May 2000, I think Mr Elliott’s decision was perfectly proper and open to be made. If it were otherwise, then, in my view, it would be to deny the due process of the statutory appeal. The decision was given effect by the consent orders, as outlined earlier, made by the Fair Trading Tribunal on 3 December 2001.

123 Mr Weinberger’s resistance to the ability of the plaintiff FTAC to make this decision was that its power to do so was spent on the making of the 23 May 2000 decision. However, it is plain, as I see it, that the decision was not of the type struck down in Hristoforidis, where there was a mere change of mind following political intervention, but rather a properly based decision on fresh facts available in the appeal proceedings. Indeed, I think one may go so far as to say, in the circumstances as they developed, that FTAC had a duty to decide as it did during the appeal proceedings thereby avoiding a full and costly hearing on appeal but where it genuinely accepted the merits of the Owners Corporation’s case. The defence on this aspect must fail.

124 Decision of 23 January 2002: On or about this date, FTAC approved payment to the Owners Corporation of $527,645 in accordance with Mr Seton’s recommendation in the report by Wizard Building Services to accept the quotation for the rectification work from BMP International.

125 Again, Mr Weinberger denied the ability of FTAC to make this decision because its power had been spent. In rejecting this, I need only emphasise that the acceptance of the quotation was expressly contemplated in the consent orders made by the Tribunal on 3 December 2001 as part of the ultimate resolution of this dispute. This defence fails.

126 Decision of 22 March 2002: FTAC decided on this date to pay the Owners Corporation an additional amount of $77,000 to cover the claims as to the fire doors and what was described as “new” matters in the Bonacci Rickard report of 28 November 2001 related to water penetration. Yet again, Mr Weinberger submitted this decision could not be made because FTAC had already exhausted its powers. I disagree.

127 It need only be pointed out that in the consent orders made by the Tribunal on 3 December 2001 it was expressly noted that FTAC undertook to the Tribunal to quantify all of the claims made by the Owners Corporation. These so-called additional matters were not specifically notified until they were detailed in the Bonacci Rickard report of 28 November 2001. As to the fire service defects, as I have earlier recorded, they came to awareness in May 1998 on notices being received from Parramatta City Council and the Department was given notice of them on 19 August 1998, that is, within a six-month period of first awareness of them and, as Mr Marosszeky classified them as major structural defects, within seven years of commencement of the building work. The so-called “new” defects as being related to water penetration were effectively included in the original Rickard & Partners report of 30 August 1996 and the handwritten list by Mr Piccoli on 23 July 1996.

128 I consider that FTAC had the power to make this decision as part of the appeal process. The defence must fail.

129 Findings on the various decisions: In the result, I find that FTAC properly had power to make the various decisions referred to. The consent orders made by the Tribunal on 29 July 2002 ultimately resolved the dispute in a final way as between FTAC and the Owners Corporation by an indemnity under BSC Insurance in the sum of $604,645 plus experts’ reports and disbursements of $30,263 giving a total of $634,908. In my view, the result so reached was within the terms of the scheme under BSC Insurance. As such, as between the present plaintiff and defendant, on payment being made it became recoverable as a debt under s 98(1) of the BSC Act.

Other matters

130 A number of matters of a miscellaneous nature arose during argument and it is appropriate to deal with each of them.

131 Section 56(1)(a) of BSC Act: Mr Weinberger submitted that this provision prevented BSC accepting the Owners Corporation’s 26 September 1996 complaint for general defects in the building work and treating it as notification pursuant to cl 7(1) of Form 4. Thereby, no notification of defects under cl 7(1) had been made within the limitation period. The section appears in Pt 4 of the BSC Act dealing with dispute resolution and disciplinary provisions concerning builders and the consequent making of rectification orders under s 59 or determinations by the Fair Trading Tribunal under s 74 of disciplinary measures. BSC Insurance is dealt with in Pt 6 of the BSC Act which in s 91 enables the prescription of BSC Insurance by the BSC Regulation; Form 4 in Sch 1 to the BSC Regulation is the result.

132 I have reviewed earlier the statutory scheme and found that it concerned two regimes being those respectively Pt 4 and Pt 6. Mr Sirtes submitted that s 56, and hence Pt 4 also in its entirety, has no application to the present case. However, I commented that the two regimes were not mutually exclusive so that satisfaction of a condition in one may also be satisfaction of a condition in the other. Thus, it seems to me, a complaint under s 56(1) could also be regarded as a notification of defects under cl 7(1). The informality and lack of specificity of a notification under cl 7(1), as was said by Studdert J in McCallum Developments (at [36]), “should not be construed narrowly because of the beneficial nature of the legislation”.

133 I am satisfied that the notification given by the Owners Corporation to BSC on 26 September 1996 was a valid notification pursuant to cl 7(1) of BSC Insurance. And that is so whether or not it also was a complaint under s 56(1).

134 Section 57(1)(a) of BSC Act: It was argued by Mr Weinberger for the defendant that s 57(1)(a) operated to prevent BSC accepting the complaint because there was no evidence Meriton Apartments had been informed beforehand in writing of the matters concerned. Mr Sirtes suggested that the section “does not embroider any further requirement upon FTAC (such as communicating with the relevant builder) before it makes a payment under the CIS”. I would only add that Meriton Apartments, on an overall view of the evidence, was very well aware from an early stage of the details of this dispute.

135 In my view, s 57 has no relevant application to the present case. It is a provision concerned with the relationship between a builder and an owner whereas BSC Insurance is concerned with the relationship between the statutory insurer and the owner as the insured: see Builders Registration Board of Queensland v Rauber (1983) 47 ALR 55 where the High Court made plain that the statutory insurer need not have any dealings with the builder as a pre-condition for making payments under the insurance scheme. I see nothing in the present BSC Act or Form 4 to require any advice to the builder before any payment is made to a beneficiary. In any event, on the facts, it is to be accepted that Meriton Apartments was made aware of the complaint about the defects and in the following years it was engaged in detailed contact with FTAC, and to some extent the Owners Corporation through its representative on the Council and the strata manager.

136 “Notification” or “claim” as distinct from “complaint”: Perhaps related to the s 56 point, Mr Weinberger relied on Flood for the proposition that “complaints” made under s 56 were not to be confused with “claims” made under the scheme of BSC Insurance. In Flood (at 6), Mr R Phillips, a senior member of the Consumer, Trader and Tenancy Tribunal, referred to his earlier decision in Woods & Wilson v Fair Trading Administration Corporation [2004] NSWCTTT 523 and said complaints under s 56 “which can act as a trigger for disciplinary hearings, are not to be confused with claims under the comprehensive policy”.

137 Given the distinction, as I have said, I do not see why a complaint as to defective building work may not also properly be a notification of defects for the purposes of the insurance scheme. After all. what is required for each regime is simply a trigger to commence its operation.

138 That the advice (to use a neutral term) may have a dual purpose is clearly apparent from the pro-forma in this respect. In s 56 and Form 4 situations the form is to be completed and sent to BSC, the same entity dealing with both dispute resolution and disciplinary matters, on the one hand, and the insurance scheme, on the other. Further, the form itself asks the question “on which date did you first become aware of the disputed items”-the answer only can have relevance to the insurance scheme where cl 7(1)(b) and (c) require the six-month limitation period from date of first awareness of the defects whereas no such limitation is made under s 56(1); yet both cl 7(1)(b) and (c) and s 56(1)(b) and (a) respectively lay down the limitation period of three years for general defects and seven years for major structural defects from the date work commenced, a matter raised in the form. Although it is true, as Mr Weinberger pointed out in support of the distinction he relied upon, that s 56(1) talks about “residential building work” and cl 7(1) refers to “insured building work”, in my view that is a distinction without a relevant difference because cl 1(1) of Form 4 defines the latter as meaning the former where performed, as here, by a licensed builder. The dual purpose of the complaint form, such as that completed and filed here on 26 September 1996, will be manifest and as being consistent with the respective statutory provisions. I do not think Mr Phillips in Flood suggested otherwise, only that there was to be no confusion between the two. However, if he did consider each excluded the other then I would respectfully disagree. It follows, I am satisfied, that Mr Weinberger’s argument on this aspect is not accepted.

139 Defects Identified in November 2001: A submission was put by Mr Weinberger that certain defects which were not specifically identified by the Owners Corporation until the Bonacci Rickard report of 28 November 2001 were outside the time limitation periods in cl 7(1) of Form 4 and so should be excluded from consideration as not being in the original notification of 26 September 1996. This related to the fire services defects and the so-called “new” defects from water penetration. I have earlier, for the reasons then given, included such defects in the allowable claim but the general question arises whether defects claimed for rectification need to be specifically identified in the original notification for the purposes of cl 7(1). Mr Sirtes said not.

140 In Owners Corporation-Strata Plan 43551 Burchett AJ (at [24]) emphasised that what was to be notified within the limitation period were ‘matters that could give rise to the losses’, not the actual defects that, in a precise sense, are the causes of those matters”. In McCallum Developments (at [42]), Studdert J found to a similar effect. It follows, in my view, that Mr Sirtes was correct in his submission.

Quantum of claim

141 I am satisfied on an overall view of the evidence as detailed earlier, particularly that of Mr Marosszeky and that in the Bonacci Rickard reports, and even in the reports of Mr Zakos, that there existed in this building a variety of defects reasonably requiring rectification but which the defendant failed to remedy. The plaintiff’s assessment of the defects by Mr Fox and Mr Dickinson was to a similar effect. The quotation to do the rectification work by BMP Industrial, as recommended by Mr Dyer, represented “value for money” for the work to be done. Mr Weinberger did not seriously challenge this.

142 The plaintiff made payments for the rectification work. The defendant is liable under s 98(1) of the BSC Act to recover to the plaintiff the losses thereby incurred. It only remains to determine the amount.

143 The plaintiff approved for indemnity to the Owners Corporation the amount of $634,908. However, it sought recovery from the defendant of only $634,824. In the amended Scott Schedule prepared by Mr Marosszeky the actual total cost of the rectification work was $628,879 ascertained from the payments made to BMP Industrial and for the experts’ reports, a difference of $5,945.00 although the amended schedule noted a “discrepancy” of $5,481. On the state of the evidence, I am unable to settle on a precise figure and, indeed, in evidence Mr Marosszeky could not explain the differences. In the absence of clarification by the parties, who may wish to further consider this aspect, I would feel it only reasonable to accept the lower figure of $628,879.

144 From the appropriate total amount, it was agreed that an amount of $107,584 should be deducted for betterment pursuant to the joint experts’ report of Mr Marosszeky and Mr Zakos dated 14 October 2009. I accept that.

145 Preliminaries were claimed in the amended Scott Schedule in the amount of $120,120 which was equivalent to 25 per cent of the tender price. However, the joint experts’ report said the rate should reasonably be in a range of 12.5 to 17.5 per cent. I have decided earlier to allow 15 per cent which I calculate at $72,072. Thus, $48,048 should be deducted from the total amount for preliminaries.

146 During Mr Marosszeky’s evidence he agreed that items 5 (roof drainage for $4,680), 10 (exposed electrical cabling for $780) and 11 (handrail in car park for $1,456) in the amended Scott Schedule related to incomplete work rather than defective work-the total amount is $6,916. Mr Weinberger added in his submissions, but without asking Mr Marosszeky, that items 4, 6, 7 and 11 in the Schedule in the total amount of $11,516 related also to certain incomplete work and should be disallowed. The total for which a deduction was sought was $18,432. I disagree. It is true that the plaintiff pleaded in the statement of claim losses in “rectifying” the building work as distinct from “completion”-the distinction is made in Form 4 in cl 5(1)(d) and cl 5(1)(c) respectively. However, rectification in cl 5(1)(d)(iii) includes in rectifying defects, and as was pleaded, “failure to comply with plans and specifications” which, I think, may properly apply to all of these items in that they were simply not finished as required. On the other hand, I think the completion of building work in cl 5(1)(c) refers more to the failure to perform building work to completion in the time allowed or as required under the contract. There should be no deduction for these items.

147 Mr Weinberger identified items 6 and 16 in the amended Scott Schedule as appropriate for deduction as Mr Marosszeky said in his report of 8 April 2009 that they were not defects under the insurance scheme as they both related to the provision of waterproof membranes on roofs but where there were no leaks through the slabs into habitable spaces. The amount for these two items in the schedule is respectively $2,600 and $83,044, a total of $85,644. However, as I have earlier remarked, Mr Marosszeky and Mr Zakos in the joint experts’ report accepted the reasonableness of this amount for rectification work but only that it should be reduced by $66,544 for betterment-that will therefore be attended to within the deduction of $107,584 for betterment and no further deduction need be made.

148 In the joint experts report in relation to items 26 to 51 of the amended Scott Schedule it was noted that they comprised items from the Bonnaci Rickard report of 28 November 2001 and “approved variations for which there is no documentation explaining the basis of the variation”. Mr Weinberger submitted these items, which amounted to $91,114 should be disallowed, and with a further reduction in preliminaries on this account. It seems that items 26 to 30 and 44 to 51 in the sum of $64,250 were “additional works” and items 31 to 43 in the sum of $26,379 were in the Bonnaci Rickard report as items 44 to 65.

149 The basis for Mr Weinberger’s opposition to those amounts was that it was “simply not clear in relation to a number of the items as to whether they are defects within clause 5(1)(d) or some other matter…the result of design for example”. Mr Sirtes pressed the claim as being within that approved by FTAC as settled on appeal.

150 It is apparent from the report of Mr Zakos, and indeed that also of Mr Marosszeky and Bonnaci Rickard, that items 26 to 51 in the amended Scott Schedule relate to the so called “new” work in the Bonnaci Rickard report, as referred to earlier, as concerning the water penetration problems. One may concede some difficulty in the state of the evidence in precisely sourcing each and every one of these items. However, what is clear, it seems to me, is that they were the subject of the defects approved for rectification pursuant to the quotation from BMP Industrial and within the approved amount for indemnity as settled on appeal. I am satisfied they should be allowed for recovery by the plaintiff.

151 In the result, using an actual loss of $628,879 and allowing for deductions of $48,048 for preliminaries and $107,584 for betterment, a total of $155,632, the net amount I would calculate for recovery by the plaintiff under s 98(1) of the BSC Act is $473,247. This is subject to the parties having leave to address the so called “discrepancy” amount in the amended Scott Schedule and checking my mathematical calculations.

Interest

152 Mr Sirtes claimed interest at rates prescribed by Sch 3 of the Uniform Civil Procedure Rules 2005 from 21 May 2002 when the plaintiff made its first of seven progress payments to BMP Industrial for the rectification work. Mr Weinberger, although not opposing interest, submitted that it should not commence until the date of the filing of the statement of claim, that is, 20 March 2006. Counsel supported this by the proposition that the defendant had no debt under s 98(1) until it was sued and was under no obligation before then to make any payment to the plaintiff.

153 It is true that the defendant was informed by the plaintiff on 23 January 2002 of approval of an indemnity in favour of the Owners Corporation under BSC Insurance and that recovery as a debt would be sought. The defendant’s response, however, on 12 February 2002 was that it would defend any attempted recovery. The course of these proceedings shows the vigour with which recovery was opposed. In any event, it was not for about four years later that proceedings were commenced in this Court.

154 I think it to be only just and reasonable in the circumstances that interest be allowed on the amount of the debt but commencing from the date of filing the statement of claim on 20 March 2006 to the date of judgment.

Costs

155 The parties were agreed that costs should follow the event. The defendant should pay the plaintiff’s costs of the proceedings on the ordinary basis in an amount as agreed or assessed.

Orders

156 The plaintiff is entitled to a verdict against the defendant in an amount to be quantified plus costs. The parties are directed to confer and to prepare short minutes of order to give effect to this decision including as to interest.

157 The matter will be listed at 10.00 am on Friday, 22 January 2010 for a speaking to the minutes and the making of final orders.

22 January 2010

COUNSEL ADDRESSED ON QUANTUM, INTEREST AND COSTS

158 In the determination of this matter I make the following orders-

1. Verdict and judgment for the plaintiff against the defendant in the sum of $473,247 plus interest from 20 March 2006 to 22 January 2010 in the sum of $174,128.96.
2. The defendant is to pay the plaintiff’s costs on the ordinary basis up to and including 22 April 2009 and on an indemnity basis from 23 April 2009 onwards.
3. The exhibits are to remain with the file, to be returned on application by the parties to the Registry after 28 days.

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