Seiwa Pty Ltd v Owners Strata Plan 35042

[2006] NSWSC 1157

CITATION:	Seiwa Pty Ltd v Owners Strata Plan 35042 [2006] NSWSC 1157
HEARING DATE(S):	18 & 19 October 2006
JUDGMENT DATE :	6 November 2006
JURISDICTION:	Equity Division
JUDGMENT OF:	Brereton J
DECISION:	Order that defendant properly maintain and keep in state of good and serviceable repair common property, by repairing waterproof membrane on patio of Unit to standard that repeat water test results in no penetration of water into Unit. Judgment that defendant pay the plaintiff $150,000 loss of use damages. Reserve liberty to plaintiff to apply after 3 months for further (diminution in value) damages of $250,000 in lieu of injunction, if no satisfactory repeat water test.
CATCHWORDS:	REAL PROPERTY – Strata and related titles and occupancy – owners corporation’s duty to maintain common property – whether steel uprights enclosing balcony common property – whether waterproofing membrane common property - whether private cause of action available – whether duty strict – whether contributory negligence available as defence – whether proceedings ought to have been brought in Consumer Trading & Tenancy Tribunal – Remedies – Damages - measure of damages – damages for diminution of value - whether cost of repairing common property recoverable as damages – held, it is not - whether mandatory injunction more just remedy where diminution not necessarily permanent – held, it is, subject to reservation to plaintiff of entitlement to have damages in lieu if mandatory injunction is not performed – damages for loss of use of property.
LEGISLATION CITED:	(NSW) Strata Schemes (Freehold Development) Act 1973, s 5(2) (NSW) Strata Schemes Management Act 1996, ss 62, 138(3)(d) (NSW) Strata Titles Act 1973, s 68 (NSW) Strata Titles Regulations 1973, Reg 9
CASES CITED:	Re Alcan Australia Ltd; ex parte Federation of Industrial Manufacturing and Engineering Employees (1994) 181 CLR 96 Barbagallo v J & F Catelan Pty Ltd [1986] 1 QdR 245 Evans v Balog [1976] 1 NSWLR 35 Evans v Finn (1904) 4 SR(NSW) 297 Fritz v Hobson (1880) 14 ChD 542 Greetings Oxford Koala Hotel Pty Ltd v Oxford Square Investments Pty Limited (1989) 18 NSWLR 33 Grosvenor Hotel Co v Hamilton [1894] 2 QB 836 Hamilton v National Coal Board [1960] AC 633 Haydon v Kent County Council [1978] QB 433 Hosie v De Ferro (1984) 3 BPR 9418 Jaklyn v Proprietors Strata Plan No 2795 [1975] 1 NSWLR 15 Jones v Shire of Perth [1971] WAR 56 Lubrano v Proprietors Strata Plan No 4038 (1993) 6 BPR 97,457 Lyn v Owners Strata Plan No 50276 [2004] NSWSC 88 Minter v Eacott (1952) 69 WN(NSW) 93 Moss v Christchurch RDC [1925] 2 KB 750 Owners Strata Plan 30695 v Strata Corp [2005] NSWSC 405 Owen v John L Norris Holdings Pty Ltd [1964] NSWR 133 Proprietors Strata 464 v Oborn (1975) 1 BPR 9623 Proprietors Strata Plan No. 6522 v Furney [1976] 1 NSWLR 412 Proprietors Strata Plan 159 v Blake (1986) CCH Strata Titles Cases 30-068 Proprietors SP14198 v Cowell (1989) 24 NSWLR 478 Proprietors Strata Plan 30234 v Margiz Pty Ltd (NSWSC, Brownie J, 30 June 1993) Public Trustee v Hermann [1968] 3 NSWR 94 Richmond City Council v Scantelbury [1991] 2 VR 38 Ridis v Strata Plan 10308 [2005] NSWCA 246 Symes v Proprietors Strata Plan 31731 [2001] NSWSC 527 Taylor v Auto Trade Supply Ltd [1972] NZLR 102 Taylor (CR) (Wholesale) Ltd v Hepworths Ltd [1977] 2 All ER 784 Traian v Ware [1957] VR 200 Young v Wheeler (1987) Aust Tort Rep 80-126
PARTIES:	Seiwa Pty Ltd (plaintiff) Owners Strata Plan 35042 (defendant)
FILE NUMBER(S):	SC 4205/06
COUNSEL:	Mr M W Young (plaintiff) Mr G A Sirtes (defendant)
SOLICITORS:	Dixon Holmes du Pont Lawyers (plaintiff) David Le Page, Solicitor (defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BRERETON J

Monday 6 November 2006

4205/05 Seiwa Australia Pty Ltd v Owners Strata Plan 35042

JUDGMENT

1 HIS HONOUR: The plaintiff Seiwa Australia Pty Ltd, whose sole director and shareholder is Shojiro Azuma, is the owner of Unit 14 in Strata Plan 35042. The defendant is the owners corporation of that strata plan. Seiwa claims damages and injunctive relief in respect of alleged breaches by the owners corporation of its duty under (NSW) Strata Schemes Management Act 1996, s 62, properly to maintain the common property, in particular the rectangular steel uprights which provide the framework enclosing a balcony that forms part of Seiwa’s unit, and the waterproofing membrane that seals the floor of its external patio so as to prevent water from the surface of the patio entering into the unit. The owners corporation does not admit that the relevant structures are common property so as to fall within s 62, denies the alleged breaches, says that it has taken all reasonable steps to comply with its duty under s 62, says that Seiwa has caused the damage by its own negligent failure to notify defects to the owners corporation at an appropriate time, and contends that the proceedings should have been instituted in the Consumer Trade and Tenancy Tribunal.

Liability

2 Section 62 of the 1996 Act provides as follows:

62. What are the duties of an owners corporation to maintain and repair property?

(1) An owners corporation must properly maintain and keep in a state of good and serviceable repair the common property and any personal property vested in the owners corporation.
(2) An owners corporation must renew or replace any fixtures or fittings comprised in the common property and any personal property vested in the owners corporation.
(3) This clause does not apply to a particular item of property if the owners corporation determines by special resolution that:
(a) it is inappropriate to maintain, renew, replace or repair the property, and
(b) its decision will not affect the safety of any building, structure or common property in the strata scheme or detract from the appearance of any property in the strata scheme.

3 There is no suggestion in this case that subsection (3) is applicable. It is subsection (1) that is relevant. Section 62(1) imposes on an owners corporation a duty to maintain, and keep in a state of good and serviceable repair, the common property. That duty is not one to use reasonable care to maintain and keep in good repair the common property, nor one to use best endeavours to do so, nor one to take reasonable steps to do so, but a strict duty to maintain and keep in repair.

4 The duty to maintain involves an obligation to keep the thing in proper order by acts of maintenance before it falls out of condition, in a state which enables it to serve the purpose for which it exists [Hamilton v National Coal Board [1960] AC 633, 647 (Lord Keith of Avonholm); Haydon v Kent County Council [1978] QB 433, 464 (Shaw LJ); Ridis v Strata Plan 10308 [2005] NSWCA 246, [161]]. Thus the body corporate is obliged not only to attend to cases where there is a malfunction, but also to take preventative measures to ensure that there not be a malfunction [Greetings Oxford Koala Hotel Pty Ltd v Oxford Square Investments Pty Limited (1989) 18 NSWLR 33 (Young J); Ridis, [162]-[163]]. The duty extends to require remediation of defects in the original construction of the common property [Proprietors Strata Plan No. 6522 v Furney [1976] 1 NSWLR 412, 416 (Needham J); Ridis [164]-[165]]. And it extends to oblige the owners corporation to do things which could not be for the benefit of the proprietors as a whole or even a majority of them [Proprietors Strata Plan 159 v Blake (1986) CCH Strata Titles Cases ¶30-068 (Yeldham J); Ridis, [166]].

5 It follows that as soon as something in the common property is no longer operating effectively or at all, or has fallen into disrepair, there has been a breach of the s 62 duty [cf Ridis [177]]. Insofar as Ridis held that s 62 did not oblige an owners corporation to conduct or procure the conduct of an expert assessment of every possible source of danger in the common property, personal property vested in it, and fixtures and fittings comprised in the common property, that was in the context of a submission that by imposing the statutory duty to maintain and repair, s 62 had the ancillary effect of extending the common law duty of care of an owners corporation as an occupier of the common property to include rigorous duties of inspection. The Court of Appeal rejected the submission that s 62 expressly or implicitly resulted in the imposition of such a common law duty. But that is beside the point; in this case, unlike in Ridis, the plaintiff relies on a statutory cause of action said to arise on s 62, rather than a duty of care said to arise consequentially from s 62 [cf Ridis, [87]-[88]].

6 The duty of an owners corporation under s 62 is owed to each lot owner, and its breach gives rise to a private cause of action under which damages may be awarded to a lot owner for breach of statutory duty. This conclusion was reached by Young J, as his Honour the Chief Judge then was, in respect of the predecessor of s 62, namely Strata Titles Act 1973, s 68, in Lubrano v Proprietors Strata PlanNo 4038 (1993) 6 BPR 97,457, at 13,310-13,311, upon a thorough consideration of earlier authorities to like effect [Jaklyn v Proprietors Strata Plan No 2795 [1975] 1 NSWLR 15, 24 (Holland J); Proprietors Strata 464 v Oborn (1975) 1 BPR 9623, 9624 (Holland J); Proprietors Strata Plan 159 v Blake, 50,654 (Yeldham J); Proprietors Strata Plan 30234 v Margiz Pty Ltd (NSWSC, Brownie J, 30 June 1993). Gzell J has since followed it in the context of the 1996 Act [Lyn v Owners Strata Plan No 50276 [2004] NSWSC 88, [90]].

7 Mr Sirtes, for the owners corporation, argued that this was no longer the case under the 1996 Act. He submitted that the point had not be argued before Gzell J in Lyn, and that the extensive scheme provided by the Act for alternative dispute resolution through an adjudicator and the CTTT evinced an intention that there be no private cause of action. However, the 1973 Act also contained alternative dispute resolution mechanisms (involving a Strata Titles Commissioner and Strata Titles Board). Nothing in the 1996 Act affects the reasoning by which the cases culminating in Lubrano held that there was a private right of action under the 1973 Act. Moreover, given that it was well established by authority that there was such a cause of action under the 1973 Act, Parliament should be taken to have intended, when enacting corresponding sections in the 1996 Act, to have intended them to have the effect which the authorities had given to their predecessors [Re Alcan Australia Ltd; ex parte Federation of Industrial Manufacturing and Engineering Employees (1994) 181 CLR 96, 106], and thus to have intended to preserve the private cause of action. In my opinion, therefore, a breach of s 62(1) gives rise to a private cause of action by a lot owner who suffers damage against the owners corporation.

8 Strata Plan 35042 was registered under the 1973 Act. That Act, like the 1996 Act, had the effect that a strata lot comprised one or more cubic spaces, the base of each being designated as one lot or part of one lot on the floor plan forming part of the strata plan, and being cubic space the base of whose vertical boundaries is as delineated on the sheet of the floor plan and which has horizontal boundaries as ascertained under Strata Schemes (FreeholdDevelopment) Act 1973, s 5(2), but does not include “structural cubic space”. Section 5(2) provides as follows:

(2) The boundaries of any cubic space referred to in paragraph (a) of the definition of floor plan in subsection (1):
(a) except as provided in paragraph (b):
(i) are, in the case of a vertical boundary, where the base of any wall corresponds substantially with any line referred to in paragraph (a) of that definition—the inner surface of that wall, and
(ii) are, in the case of a horizontal boundary, where any floor or ceiling joins a vertical boundary of that cubic space—the upper surface of that floor and the under surface of that ceiling, or
(b) are such boundaries as are described on a sheet of the floor plan relating to that cubic space (those boundaries being described in the prescribed manner by reference to a wall, floor or ceiling in a building to which that plan relates or to structural cubic space within that building).

9 For that purpose, Strata Titles Regulations 1973, Reg 9, prescribed as follows:

(9) A floor plan required for the purposes of s 8 or 9, a strata plan of consolidation or a building alteration plan shall be drawn showing -
…
(e) where the boundary of a lot is defined by reference to the surface of a floor or ceiling – such vertical connections and notations as are necessary to define that boundary; …

10 By virtue of s 5(2), if the base of any wall corresponds substantially with a line on a floor plan, the boundary of the relevant cubic space is the “inner surface” of that wall. Generally speaking, walls that coincide with the boundaries of a strata lot are common property, and the lot boundaries are their inner (from the perspective of the relevant lot) surfaces [Symes v Proprietors Strata Plan31731 [2001] NSWSC 527, [25]-[26]].

The rusted steelwork

11 As has been foreshadowed, Seiwa’s complaints have two aspects. The first relates to the rusting of steelwork that formed the framework of the enclosed balcony.

12 Although it was not admitted that this steelwork was common property, no submission was made on behalf of the owners corporation to the contrary. Indeed the owners corporation replaced it, not long after proceedings were instituted. It formed part of the external wall, and substantially coincided with the external boundary of the lot marked on the plan. The lot boundary was its inner surface, and the steelwork was outside the lot and thus common property.

13 The evidence shows that the steel uprights rusted through, a few centimetres above the level of the sill. The rust damage was extreme, and deprived the uprights of structural integrity. The owners corporation was advised by their own consultant that this posed a danger to the public (as it did to occupants of and entrants in Seiwa’s unit). There is not the slightest question but that in this respect the common property was not properly maintained, and accordingly there was a breach of s 62.

14 Much evidence addressed when the owners corporation first knew of the breach, and how long it took to remedy it. It suffices to say that the problem was present and was drawn to the attention of the owners corporation not later than 3 March 2003, but not remedied until August 2005, a few weeks after these proceedings were instituted. As the duty is a strict one, it matters not whether the problem could have been rectified more rapidly. Breach of the s 62 duty in respect of the steelwork is established through the period from 3 March 2003 until August 2005.

The water penetration

15 The second aspect of Seiwa’s complaint is water penetration from the patio into the living area of the unit, resulting from a defect in the waterproof membrane which sits on top of the concrete floor of the patio underneath the tiles.

16 Mr Sirtes submitted that the membrane was not common property. On the strata plan, the patio bears an annotation in the following terms:

Denotes terrace limited in height to 2.5 above the upper surface of the concrete floor thereof except where covered.

17 Although Mr Young, for Seiwa, at first submitted that the words “except where covered” referred to a cover on the concrete floor, I prefer the construction advanced by Mr Sirtes, that those words refer to a cover of some part of the cubic space above the patio, such as a roof or awning. The effect of the annotation is to describe the upper boundary of part of the relevant cubic space, by reference to a floor. It does not describe the lower boundary. Accordingly, as the floor joins vertical boundaries of the relevant cubic space, the lower boundary of the lot is, pursuant to s 5(2)(a)(ii), the upper surface of the floor.

18 The evidence of Mr Azuma establishes that the tiles (and therefore, necessarily, the membrane, which is under the tiles) had been affixed prior to the date of registration of the strata plan. In those circumstances, the upper surface of the floor was the top of the tiles. The tiles were not themselves within the cubic space and thus do not form part of the lot. As common property is comprised of those parts of an allotment which are not within an individual lot, the tiles, and more particularly the membrane underneath them, were part of the common property.

19 Once again, although there was much dispute as to when the owners corporation was first given notice of this problem, that matters not; it was at least on notice of it by 3 March 2003. Some remedial action was taken, in that a course of tiles was apparently lifted and the waterproof membrane beneath it inspected and the tiles relayed. Some repairs were also made to the window seals. However, Seiwa complains that water penetration continued. In or about June 2005, Seiwa had a water flood test performed, which involved blocking the drains, sandbagging the patio, and filling it with water. As a result, water penetrated through the hob which separates the patio from the interior, into the living area. This proved a defect in the waterproof membrane - as was the opinion not only of Seiwa’s expert Mr Ryan, but also of the owners corporation’s expert Mr Baxendale: if the membrane was functioning properly, water should not have been able to enter the living area, which it could have done only by permeating through the membrane and then the hob. According to Mr Ryan, whose evidence on this I accept, the penetration of water into the unit was attributable to a combination of a defect in the membrane, a defect in the hob, and a defect in the window seals. However, he added that if the membrane were repaired, it would be unnecessary also to repair the hob. [It is unnecessary for present purposes to consider whether defects in the membrane also resulted to the penetration of water into unit 13, below Seiwa’s unit].

20 The owners corporation had the window seals repaired in about March and April 2006. Mr Sirtes submitted that there was no evidence of any ingress of water into the unit since then. That may be so, but as Mr Young rightly submits, it defies logic that repairing window seals could fix a proven defect in the membrane. I am satisfied that there has been a breach of the s 62 duty, by failure to maintain or repair the membrane, since at least 3 March 2003, and that that breach continues.

Reasonable endeavours and contributory negligence

21 The owners corporation pleaded that it had used all reasonable steps to perform its s 62 duty, and that Seiwa was guilty of contributory negligence. Much of the evidence was addressed to these issues. However, both in my opinion are irrelevant. The strict nature of the owners corporation’s duty makes whether or not it took all reasonable steps irrelevant, if ultimately it failed at any time to meet the strict requirements of the s 62 duty. And contributory negligence is no defence to an action for breach of statutory duty. In Lubrano, Young J addressed a submission that the imposition of strict liability on the body corporate would have absurd results, because a unit owner who deliberately threw a metal ball onto the roof breaking tiles so that rain could enter would result in strict liability on the owners corporation, even though the fault was that of the unit owner. His Honour’s response was that the body corporate would have a cross-action against the proprietor for trespass or negligence, which in an appropriate case by virtue of circuity of action might defeat the proprietor’s action against the body corporate, but that did not result in the proprietor having no action for breach of statutory duty against the owners corporation. No such cross-action was brought in this case.

22 In any event, I do not accept that a case of contributory negligence was made out. The essence of the owners corporation’s argument was that the rust damage to the steel uprights should have been seen and reported by Seiwa much earlier than in fact it was. This depends on an argument that it must have taken years for the rusting to progress to the state which it had reached by 2003, and that it must have been obvious to an occupier. However, Mr Ryan’s evidence, which I accept, was that while it might have taken a few months, perhaps up to a year, it would not have been obvious, because the rusting commenced from the inside of the steel members. Although Mr Baxendale was of the view that the rusting commenced from the outside, I found his evidence on this unsatisfactory: he said that he would more readily conclude the rusting to have commenced from the inside if all the members were rusted, but it became apparent that all the uprights were indeed rusted; the location of the worst rusting, a few centimetres above sill level, suggests that it had occurred at the surface level of a pool of water which collected at the foot of and within the hollow uprights, where they were unprotected, rather than from the outside; if that were the mechanism, as I think probable, I do not understand why Mr Baxendale attributes significance to the absence of rusting from horizontal members.

23 Similarly, because of the strict nature of the s 62 duty, it is unnecessary to resolve whether the owners corporation attended to the defects with due diligence and expedition, though I am unable to accept that two-and-a-half years to repair the obviously seriously defective and dangerous steel uprights was a reasonable timeframe. It is plain that some of the delay was occasioned by the owners corporation forming the misconceived view that there was “contributory negligence” on the part of Seiwa.

Discretion – the CCCT

24 The owners corporation also pleaded that this Court should decline relief on the basis that proceedings could and should have been brought or pursued before an adjudicator in the CTTT. The Strata Schemes Management Act provides a process by which an application may be made to the CTTT, a mediation conducted, and in due course an order for settlement of a dispute made. However, there is nothing in the Strata Schemes Management Act which makes the jurisdiction of an adjudicator or the CTTT exclusive, or denies recourse to the ordinary courts. Particularly at the time when proceedings were instituted, there was a real and urgent issue of safety relating to steel uprights, which, had it not been resolved, might well have justified the rare remedy of an interlocutory mandatory injunction. Moreover, the CTTT has no power to award damages [Strata Schemes Management Act, s 138(3)(d)]. Seiwa wished to maintain a claim for damages.

25 This case was before me for final hearing, in radically different circumstances from those which confronted McDougall J in Owners Strata Plan 30695 v Strata Corp [2005] NSWSC 405, where his Honour declined to grant an interlocutory mandatory injunction for the delivery up of documents against a former managing agent, and stayed the proceedings to enable a mediation to take place. The time for any such application to be made in this case was long before it came on for final hearing.

Damages

26 Seiwa claims the cost of rectification works and a prohibitory injunction to restrain any interference with its carrying out of rectification works; alternatively, a mandatory injunction for carrying out of rectification works to the membrane; and in the further alternative, damages in lieu of such an injunction, for the impact on the value of the unit of the continuing defect. It also claims damages for loss of use of the unit.

27 The breach of duty and its consequences in this case are closely analogous to the tort of nuisance, from which guidance can be derived for the measure of damages. Ordinarily, the proper basis for assessing damages for nuisance is the diminution in value of the plaintiff’s land occasioned by the breach [Moss v Christchurch RDC [1925] 2 KB 750; Owen v John L Norris Holdings Pty Ltd [1964] NSWR 1337]. Reasonably foreseeable consequential losses are also recoverable, including for example loss of custom in the case of interruption to a business conducted from the premises [Fritz v Hobson (1880) 14 ChD 542], or costs of relocation [Grosvenor Hotel Co v Hamilton [1894] 2 QB 836, 840; Evans v Finn (1904) 4 SR(NSW) 297]. Although the cost of restoring the plaintiff’s property to its previous condition may be recoverable [Minter v Eacott (1952) 69 WN(NSW) 93 (FC); Taylor v Auto Trade Supply Ltd [1972] NZLR 102; Evans v Balog [1976] 1 NSWLR 35 - unless there is no prospect of the plaintiff performing the works [Hosie v De Ferro (1984) 3 BPR 9418], or such costs are entirely disproportionate to the diminution in value [Public Trustee v Hermann [1968] 3 NSWR 94; Jones v Shire of Perth [1971] WAR 56; Taylor (CR) (Wholesale) Ltd v Hepworths Ltd [1977] 2 All ER 784] – that does not extend to performance of works on the land from which the nuisance emanates. To remove the cause of a nuisance from another party’s land is an act of abatement, to remedy the nuisance. While a person affected by a nuisance is entitled to abate it, including by entering onto the land from which the nuisance arises and removing its cause [Traian v Ware [1957] VR 200], the costs of abatement are not recoverable [Young v Wheeler (1987) Aust Tort Rep ¶80-126; Barbagallo v J & F Catelan Pty Ltd [1986] 1 QdR 245 (FC); Richmond City Council v Scantelbury [1991] 2 VR 38, 47-48], unless as reasonable costs of mitigation, and even then probably not if they involve going onto the land of the other party [Proprietors SP14198 v Cowell (1989) 24 NSWLR 478, 486-7].

28 Essentially, Seiwa’s primary position involves a claim for the cost of undertaking works, not to repair damage to its own property, but to rectify a defect in the common property: it seeks to be permitted to perform the requisite repairs to the common property which the owners corporation ought to have done, and to recover damages for to the cost to it of doing so. This is in the nature of a claim for the costs of abatement. By analogy with the position relating to abatement of a nuisance, in my opinion such damages are not recoverable. In my view, therefore, the damages to which Seiwa is entitled comprise the diminution in the value of its unit occasioned by the continuing defect, and the consequential loss of the use of the unit since August 1994.

Cost of rectification/diminution of value

29 The valuer called by Seiwa, Ms Freeman, was of the opinion that, in a fully rectified condition – that is to say, free of the impact of the breaches of duty - Seiwa’s unit would be worth $1.55 million. She also opined that its value in an unrectified state – subject to the defects - was $1.1 million, and after rectification of the steel work but while the water penetration problem remains outstanding, $1.3 million.

30 Although Ms Freeman was cross-examined, her valuation approach was not seriously impugned, and there was no valuation evidence to contradict her. However, there was evidence that the cost of rectification works would be significantly less, which has two potential consequences: it might suggest error in Ms Freeman’s assessment of the impact of the defects on the value of the unit, and it might indicate that a remedy other than damages for diminution in value is more appropriate.

31 There is a dispute as to how the defective membrane should be rectified. Mr Bosch, a builder called by Seiwa, thought that it was necessary to remove the tiles from the whole of the patio area, replace the membrane and retile; he said that anything less than that could not be guaranteed. Mr Bosch has quoted $105,000 for those works, and Sydney Building Services have quoted $107,000.

32 Mr Ryan, also called by Seiwa, recommends less extensive works, proposing that all the tiles on the patio area between lines “E” and “F” on the strata plan – about half the patio - be removed, and the whole membrane in that area inspected and repaired. However, Mr Ryan conceded that the leakage might be explained by a localised rupture of the membrane near the point where it entered the living area (point “C” on the plan), and that to exclude that possibility one could lift up one or two rows of tiles, re-flash and re-membrane that area, and that it could be ascertained whether that was sufficient to fix the defect by repeating the water test. Mr Baxendale, for the owners corporation, thought that there was nothing to suggest anything more than a localised rupture, which could be remedied by the more limited works conceded by Mr Ryan, namely by lifting one or two rows of tiles.

33 It seems that, except for one occasion during flood testing of the patio, water has never penetrated into unit 13, below the subject unit. It is quite possible that the rupture or defect in the membrane is a localised one. But Mr Bosch and Mr Ryan explained that it might well not be. It is simply not possible to say whether the more limited works proposed by Mr Baxendale and conceded as a possibility by Mr Ryan would remedy the problem; as Mr Bosch says, such works are not a guarantee-able repair. However, the cost of this much smaller scope of works, if it succeeded in remedying the defect, would be considerably less than of the more extensive scopes of repair works.

34 Although the costs of rectification therefore appear – even if the most extensive of the proposed remedial works were adopted – to be significantly less than the diminution in value, several factors need to be born in mind. The first is that a purchaser of the unit would not be in control of the works, but would be reliant upon the owners corporation to perform them, which has already demonstrated a reluctance to do so. The second is that it is unknown whether a more limited or more extensive scope of works would be required, and a purchaser would allow for the risk of the most expensive, anything less not being guaranteed to succeed. The third is that the works would involve vexation and inconvenience, for which a purchaser would expect allowance. And the fourth is that the cost to the owners corporation of effecting repairs is not necessarily the same as the permanent diminution in value of the proprietor’s lot.

35 For those reasons, I do not think that the difference between the costs of rectification and the diminution in value according to her valuation invalidates Ms Freeman’s opinion. Accordingly, the continuing breach of duty in respect of the membrane results, on Ms Freeman’s evidence, which I accept, in the unit in its current state being worth $250,000 less than its value without defects of $1.55 million. Upon assumption that the owners corporation does not remedy the breach, that difference is damage occasioned by the breach to Seiwa. Prima facie, therefore, Seiwa’s damages include $250,000 for diminution in value.

36 That, however, presumes that there will be a permanent depreciation in the value of Seiwa’s unit, which there will not be if the owners corporation performs its duty and repairs the defect. The owners corporation, despite an initial submission that damages were a sufficient remedy, in the course of argument seemed to incline towards preferring a mandatory injunction over damages, at least if it were confined to the more limited scope of works.

37 It may well be said that in this case damages are a sufficient remedy, given that there is no-one now in occupation of the unit, and that if rectification works are not to be performed and damages are awarded on the basis of permanent loss of value, Seiwa would probably sell the unit as is, and be fully compensated by diminution in value damages. But damages awarded on that basis may prove excessive. This is not a case of a past breach for which damages continue to accrue, giving rise to difficulty of assessment, but a continuing breach, which the owners corporation will remain obliged by statute to remedy - even after suffering a judgment for damages, and even after paying damages – including to a purchaser of the unit from Seiwa. The owners corporation could repair the defect for significantly less than the diminution in value. Though the cost to the owners corporation of performing its duty is not the correct measure of damages, it is relevant in considering what in the circumstances is the most just and appropriate remedy.

38 Even though the owners corporation has had ample opportunity to perform rectification works if it wished to do so, in my opinion the most just remedy – the minimum remedy to achieve justice as between the parties - is a mandatory injunction requiring it to perform such works. I am aided in reaching this conclusion by the circumstance that Seiwa sought a mandatory injunction in preference to damages for permanent diminution, and the apparent inclination of the owners corporation, in the course of submissions, also to prefer that course – which appears manifestly more advantageous to it.

39 The injunction should require the owners corporation to repair the membrane, with compliance to be proved by a satisfactory repeat water test. If that can be achieved by the smaller scope of works, that will suffice; if a water test after the smaller scope of tests is unsuccessful, then a larger scale of works will be required. Whether the works proceed in stages, with the smaller scope of works undertaken initially to ascertain if it is sufficient, is a matter for the owners corporation. Seiwa should have the option of obtaining diminution in value damages of $250,000 in lieu of the injunction if the works are not completed within three months.

Loss of use damages

40 Seiwa claims a loss of $5,500 per month, from August 1994 to date. The owners corporation submits that damages should not be permitted for loss of use of the unit, on the basis that there was no true lease between Mr Azuma and Seiwa.

41 Prior to August 2004, Mr Azuma occupied unit 14 with his family. He paid rent to Seiwa, lately at $5,500 per month, which was a rate indicated by a valuation which had been obtained by him for refinancing purposes. The rent was paid by journal entry, by deduction from his creditor loan account in Seiwa. Although there was no written lease, and despite the less than arms-length relationship between Seiwa and Mr Azuma, this arrangement was of financial benefit to Seiwa. There is no reason for supposing that it was other than bona fide, and the circumstance that the rent was fixed in accordance with a valuation reinforces its legitimacy. There is no reason not to use it as a basis for measuring the loss occasioned to Seiwa by the breaches of duty I have found.

42 In about August 2004, having failed by then to secure remediation of the defects, Mr Azuma and his family vacated the unit, being concerned as to their safety in the premises in the circumstances - particularly having regard to the problem with the steel uprights - and he ceased paying rent. Since then, Seiwa has earned no income and received no benefit from use of the unit during the relevant 27-month period from August 2004 to date, and that will remain the case for the three months I will allow for the rectification works to be completed. There has been no allegation of any failure to mitigate.

43 There is evidence (from Seiwa’s valuer, Ms Freeman) that the unit (other than the car park) could not have been tenanted at all until the rust problem was rectified, and thereafter not through agents but only on a private basis. She says that in a fully rectified condition its rental value was $600 per week, before any rectification works $150 per week (for the car park only), and after rectification of the rust problem but while the water penetration problem remained outstanding $450 per week on a private leasing basis. It is therefore possible that, but for the impact of the breaches, Seiwa could have let the unit at $600 per week (equivalent to $31,200 per annum, or $2,600 per month).

44 Mr Azuma and Seiwa have for some time been contemplating selling their unit. Ms Freeman’s evidence is that in a fully rectified condition it would be worth $1.55 million. One measure of damages for loss of use of the unit would be interest, on the price it would have realised had it been sold in a rectified condition, since the date of the hypothetical sale. Interest on a capital sum of $1.55 million at 5% would have generated $77,500 per annum, equivalent to about $6,500 per month.

45 In my view the most probable course of events but for the breaches is that Mr Azuma and his family would have remained in occupation of the unit paying rent of $5,500 per month. Sale was the next most likely, and could have resulted in a greater return, of $6,500 per month. Leasing was the least likely, as it would have produced much reduced financial benefits. Weighing the three possible scenarios and their likelihood, I think a loss of $5,000 per month (or $60,000 per annum) is a fair assessment of the loss to Seiwa of its inability to use the unit during the relevant period, which for 30 months amounts to $150,000.

Conclusion

46 Breach of the s 62 duty in respect of the steelwork is established through the period from 3 March 2003 until August 2005. Breach of that duty, by failure to maintain or repair the membrane, is established from at least 3 March 2003, and continues. Contributory negligence is neither available nor established.

47 Seiwa is entitled to a mandatory injunction for rectification of the membrane, and loss of use damages of $150,000, with additional damages in lieu of the injunction of $250,000 if the works required by the injunction are not performed.

48 Subject to any submissions which the parties might wish to make as to their form, I make the following orders:-

1. Order that by 6 February 2007, the defendant 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 par 1 and substitution of a judgment for further damages of $250,000 in lieu thereof.

4. Order that the defendant pay the plaintiff’s costs.

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