Seiwa Pty Ltd v Owners Strata Plan 35042

[2007] NSWSC 232

CITATION:	Seiwa Pty Ltd v Owners Strata Plan 35042 [2007] NSWSC 232 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	16 February 2007
JURISDICTION:	Equity Division
JUDGMENT OF:	Brereton J
EX TEMPORE JUDGMENT DATE:	16 February 2007
DECISION:	Application to substitute monetary judgment dismissed.
CATCHWORDS:	JUDGMENTS & ORDERS – enforcement – where leave reserved to plaintiff to apply for substitution of monetary judgment if mandatory injunction not performed – discretionary consideration.
PARTIES:	Seiwa Pty Ltd (plaintiff) Owners Strata Plan 35042 (defendant)
FILE NUMBER(S):	SC 4205/05
COUNSEL:	M W Young (plaintiff) M a Bradford (defendant)
SOLICITORS:	Dixon Holmes du Pont Lawyers (plaintiff) Alex Ilkin & Co (defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BRERETON J

Friday 16 February 2007

4205/05 Seiwa Australia Pty Ltd v Owners Strata Plan No 35042

JUDGMENT (ex tempore – on admissibility of report)

1 HIS HONOUR: Objection is taken to the report of W L Ryan on the basis that it is annexed to an affidavit of Donald Martin Junn and not to an affidavit of Mr Ryan.

2 While, as a matter of form, there is some validity in that objection, the report itself is Mr Ryan’s own report over his own signature and is not, in that sense, hearsay. If Mr Ryan were required for cross-examination, the practical course was to give a notice indicating that he was required for cross-examination and that if he were not produced then objection would be taken to the admissibility of his report.

3 It seems to me that there is very slight factual contest between the facts deposed to by Mr Ryan in his report and those deposed to by Mr Halliday. To the extent that there is any contest, I note that Mr Halliday is available for cross-examination and the opportunity of cross-examination has been offered and not exercised.

4 Save for one matter to which I will come, I do not think that there is any significant prejudice to the defendant in admitting Mr Ryan’s report. In that conclusion I am fortified by the circumstance that he was, in a sense, appointed by the court to carry out the test and although his report is not addressed to the court, he is, in a sense, acting somewhat like a court expert and reporting on what he has done in pursuance of the order.

5 In his report Mr Ryan offers an opinion as to the cause of water ingress into unit 13 below the subject unit. As I understand his report, the area of that ingress is beneath part of the patio of unit 14 which was not tested on the original water test. In any event, Mr Ryan’s opinion at the original hearing was that that area did not require to be repaired. I do not see how on the present application his opinion as to the cause of the ingress into unit 13 is relevant and, in any event, the defendant has not had an opportunity to respond to that opinion.

6 I reject paragraph 2 under the sub-heading “Opinion” in Mr Ryan’s report. I otherwise admit the report.

JUDGMENT (ex tempore – on application to vary orders)

7 HIS HONOUR: On 6 November 2006 I made the following orders:

(1) Order that by 6 February 2007 the defendants properly maintain and keep in a state of good and serviceable repair the common property in strata plan 35042 by repairing the waterproof membrane on the patio of Unit 14 to the standard that a repeat water test, conducted at the defendant’s expense under the supervision of Mr Ryan under substantially the same conditions as those described in his report on water ingress at Unit 14 dated 17 October 2005, a copy of which is annexure B to his affidavit sworn 10 November 2005 in these proceedings, results in no penetration of water into Unit 14 (“a satisfactory repeat water test”).
(2) Give judgment that the defendant pay the plaintiff $150,000.
(3) Reserve liberty to the plaintiff to apply, after 6 February 2007,(or such further time as the parties may agree or the court may allow) in the event that by that date there has not been a satisfactory repeat water test, for dissolution of the order in paragraph (1) and substitution with a judgment for further damages of $250,000 in lieu thereof.

8 It is common ground that, as at this date, there has not been a satisfactory repeat water test. The plaintiff applies pursuant to the liberty reserved in Order 3 for dissolution of the mandatory injunction and substitution of a judgment for further damages of $250,000. The defendant opposes that course and argues that the circumstance that there has not been a satisfactory repeat water test is not attributable to fault on its part and, indeed, that it has used its best endeavours to comply with the mandatory order.

9 It is clear that Order 3 was not a self-executing order and reserved to the Court a discretion whether, if the event on which it was conditioned were satisfied, the Court would or would not substitute a judgment for further damages in lieu of the mandatory injunction. In order to determine how that discretion should be exercised, it being plain that the event on which the order was conditioned has been satisfied, it is necessary to examine what has, in fact, transpired.

10 Order 1 referred to a repeat water test under the supervision of Mr Ryan “under substantially the same conditions as those described in his report on water ingress at Unit 14 dated 17 October 2005.” The conditions described in that report were as follows:-

... I conducted a water test of the patio area membrane on that day by sandbagging the area on the patio between the balcony and dining area as marked by lines “E” and “F” on the floor plan. The surface drains were taped over and the area filled with water by spraying water on the floor surface of that area to a depth of approximately 40 mm at the drains and 10 mm at the edge of the dining room and the living area, and avoiding any water being sprayed onto the glazing separating the patio and the living area. By allowing water to pond on the patio in this way, the integrity of the patio water proof membrane could be checked and any faults in the hob (which is a low level concrete upstand separating the patio and the living area as can be seen in pictures “B” and “D”).

11 Line “E” was at the northwestern extremity of the patio, near the entrance to what is described in the plan as the balcony and is elsewhere described as the sunroom. Line “F” was in the middle of the main eastern area of the patio outside the dining room of Unit 13. The circumstance that it was the area between lines “E” and “F” that was filled for the original water test meant, inter alia, that the area south of line “F”, a large triangular area at the southern extremity of the balcony, was not the subject of a water test.

12 In his oral evidence at the trial, Mr Ryan said that it would be sufficient to repair the patio up to line “F”, and it was not a matter of repairing the whole balcony. The area south of line “F”, as I understood his evidence at the hearing, was not such as to require repair. In any event, the liability of the defendant established at the hearing did not extend to liability to repair south of line “F”.

13 In early December last year, an application was made by the defendant for a stay of my orders. That application was unsuccessful. An appeal is apparently pending. That, I think, is irrelevant in the present circumstances, save to explain the sequence and timing of events.

14 On 12 January 2007, the defendant obtained a quote from one Murray Stark to conduct repair work on the patio. He commenced work on 15 January 2007, removing two rows of tile for approximately two metres on either side of the area where water penetration had been demonstrated during the original water test and exposing the membrane and flashing in that area.

15 On 16 January 2007, Mr Stark more or less replicated Mr Ryan’s water test, sandbagging lines “E” and “F” and filling the pond so created with water and green dye to approximately the same depth as the original water test, namely 10 mm at the window and 40 mm to 50 mm at the drains. Water penetration into the living area ensued within about thirty minutes, demonstrating a defect in the membrane in that area, just as Mr Ryan’s original test had.

16 On 18 January 2007, Mr Baxendale inspected the membrane and flashing and conducted a further, more limited test in which an area immediately in front of area “C”, to approximately one metre from the window line, was flooded, apparently to determine if the leak was local. That test also resulted in the same water penetration being experienced in the same area and at the same rate, which I take to be within approximately 30 minutes. It is a reasonable inference from this that the leak was local in that area.

17 On 19 January 2007, Mr Stark completed the repairs to the membrane and flashing, and on 22 January Mr Baxendale conducted a further water test which resulted in no water penetration into Unit 14 after about one-and-a-half hours duration. It is not clear what portion of the patio was flooded for the purposes of that test, but it seems that whereas there had been penetration within half an hour from the previous two tests, there was none after one-and-a-half hours from this test.

18 It is noteworthy that each of these three tests was conducted after the tiles had been removed. Mr Ryan’s original water test had produced penetration within three hours, it not being clear how much under three hours it had taken, but at a time when the tiles were in place, so that penetration might be expected to have taken somewhat longer than in circumstances where the tiles had been removed.

19 The defendant then arranged for Mr Ryan to conduct a repeat water test in accordance with the mandatory order. After some difficulties were overcome, this test was conducted on 25 January 2007. In conducting that test, although Mr Ryan had line “E” near the balcony sandbagged, line “F” clearly was not sandbagged and the whole of the patio, including the area south of line “F”, was flooded. I also accept that it was flooded to a significantly greater depth or higher water level than it had been at the time of the original test. I am unable to be precise as to the extent to which the depth was greater, but it was at least 20 mm and possibly as much as 40 mm deeper than it had been on the original occasion.

20 While the test was underway, no water penetrated into Unit 14. However, water did penetrate into Unit 13, below Unit 14. So far as the evidence goes, the penetration into Unit 13 was in the area directly under that part of the patio which lies south of line “F” - that is to say, in an area which had not been tested in Mr Ryan’s original water test. That is not conclusive that that is where the leak came from, but it points in that direction.

21 Because of the penetration into Unit 13, the water test was terminated only about 40 minutes after the test level had been reached. However, because filling commenced at 7.20 a.m. and the test level was reached at 10.33 a.m. - and the test level was at least 50 per cent greater than at the time of the original test - I think it can be said that about the last hour of the filling period also replicated conditions, so far as the test level was concerned, as had been in place at the time of the original test and that it can therefore be said that the membrane was subjected to testing at levels equivalent to or greater than the original test for a period from about 9.30 until 11.19, that is to say, a period of about one-and-three-quarter hours. As I have said, during that period there was no penetration into Unit 14.

22 The reason why there has not been a satisfactory repeat water test in the terms of the orders of 6 November 2006 is that the duration of the test was significantly shorter than required to confirm that water was not penetrating as it had on the previous occasion. Mr Ryan had intended that the test continue for 24 hours. Mr Bosch’s evidence indicated that, on the original test, penetration had taken place within three hours. Because of the early termination of the test, Mr Ryan reported that insufficient time had elapsed for the testing to be satisfactory. In turn, the reason why insufficient time elapsed was that the test had to be terminated because of water penetration into Unit 13 below.

23 On the probabilities, a significant contributing reason to that event was that the test was not carried out in accordance or substantially in accordance with the conditions described in the report of Mr Ryan’s earlier test, but extended over the area south of line “F” where the penetration probably took place. Why Mr Ryan chose to do this or to pond the water to a higher water level than that in the earlier test is not apparent. He has not provided any explanation for doing so. The defendant endeavoured to point out to Mr Ryan, repeatedly the need to replicate the conditions of the earlier test. Mr Ryan took a robust position in asserting that he would not be dictated to by either party how the test would be conducted, and that he would conduct it having read the judgment in accordance with the spirit and the intent of the judgment as he thought fit; but in my view he has not conducted it in accordance with the spirit or intent of the judgment.

24 The plaintiff’s solicitor, who was copied with at least some of the correspondence from the defendant’s solicitor to Mr Ryan, took the view that it was a matter to be left to Mr Ryan; a view which, while not entirely unreasonable, carried with it the risk that if Mr Ryan was not corrected from the course to which he was apparently committed then much time would be lost and costs incurred. As Mr Ryan was originally the plaintiff’s expert, it may well be that a communication to him from the plaintiff’s solicitor to the effect that he ought to replicate the original test would have avoided the present difficulties.

25 On the material presently before me, I am amply satisfied that the defendant has used its best endeavours to comply with Order 1. I am also satisfied on the evidence presently before me that the works undertaken by the defendant are likely to have remedied the defect. It is true that a repeat water test to the requisite standard has not been conducted but it is, I think, of considerable significance that two tests after the tiles were removed produced water ingress into Unit 14 after 30 minutes - they being Mr Baxendale’s test after the repairs which resulted in no ingress, and finally Mr Ryan’s test, though incomplete but under conditions more extreme than those of his original test and in circumstances where the tiles had still not been replaced, produced no ingress after an hour and three-quarters.

26 In those circumstances, on the present state of the evidence and notwithstanding that the condition for making an application under Order 3 of 6 November 2006 is satisfied, I am not prepared to substitute a monetary judgment for the mandatory injunction. If the plaintiff wants to pursue the issue, it may be able to bring about the conduct of a further test, by Mr Ryan or some other appropriate expert which, may prove that repairs have not been carried out to the requisite standard. Alternatively, as things stand, the defendant has still not, despite its best endeavours, complied with its obligation to have a repeat water test conducted in accordance with para 1. Neither party has made any application or sought any order to resolve that difficulty. It is sufficient in the present circumstances if I simply dismiss the plaintiff’s oral application under Order 3.

27 The application is dismissed.

28 I extend time for the performance of the repeat water test referred to in the orders of 6 November 2006 to 6 March 2007.

29 I reserve liberty to the parties to apply, by arrangement with my Associate, in the event of any difficulty arising in the implementation of these orders.

30 In my view, the orders of 6 November were designed to ensure that the burden of having a repeat water test was borne by the defendant, and making any alteration to the way in which the costs of the repeat test are to be borne would detract from that. I appreciate that there are substantial reasons why ultimately it might be inappropriate for the defendant, vis-à-vis Mr Ryan, to pay for more than one water test. I reserve liberty to the defendant to apply, upon notice to Mr Ryan, for orders in respect of the costs of the water tests. That will enable the defendant, if so advised, and preferably after any further test is completed, to approach the court to resolve issues between it and Mr Ryan in that behalf, in the event that they cannot be worked out consensually.

31 So far as the costs of this application are concerned, the starting point is that the application failed. Although the condition for making it was satisfied, the discretionary grounds to justify an exercise of discretion in favour of the plaintiff on the application were not. In particular, the absence of a satisfactory repeat water test was found not to be attributable to fault on the part of the defendant who, I found, made all reasonable endeavours to comply with the order, and I also found that a more proactive role on the part of the plaintiff in the instructions or advice given to Mr Ryan might well have averted the costs occasioned by the application.

32 As, in my view, the grounds justifying an order in favour of the plaintiff on that application were not made out, I think the appropriate exercise of discretion is that the plaintiff should pay the defendant’s costs of the oral application made today.

33 I order that the plaintiff pay the defendant’s costs of today’s application.

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19/03/2007 - Correction to file number - Paragraph(s) Cover page