Strata Plan 99960 v SPS Building Contractors Pty Ltd (No 2)

[2023] NSWSC 1064

Supreme Court

New South Wales

Medium Neutral Citation:

Strata Plan 99960 v SPS Building Contractors Pty Ltd (No 2) [2023] NSWSC 1064

Hearing dates:

1 September 2023

Decision date:

06 September 2023

Jurisdiction:

Equity - Technology and Construction List

Before:

Ball J

Decision:

(1)   Order 2 made on 16 March 2023 be varied such that it reads:

"The Defendant may not rely on evidence in chief in response to the Plaintiffs' claim served after 12 May 2023 without leave of the Court."

(2)   The Defendant be granted leave to rely upon the following evidence in chief, which was served on the Plaintiff on 26 July 2023:

(a)   the Supplementary Report of David Wood of Liquid Hydraulics dated 17 July 2023; and

(b)   part 2 of the Expert Report of George L Zakos of GL Zakos & Associates Pty Ltd dated 25 July 2023.

(3)   The Defendant be granted leave to rely on the Scott Schedule served on the Plaintiff on 26 July 2023.

(4)   The notice of motion filed on 11 August 2023 otherwise be dismissed.

(5)   Each party pay its own costs of the notice of motion.

(6)   Stand the matter over to 8 September 2023 for directions and for the purpose of fixing a hearing date.

Catchwords:

CIVIL PROCEDURE — Whether defendant may rely on additional evidence after failing to comply with guillotine orders — Where proceedings have not been set down for hearing — Plaintiff will not suffer any prejudice if the evidence is allowed — Leave granted

CIVIL PROCEDURE — Pleadings — Amendment — Late application for amendment — Where defendant builder seeks to file cross-claim against subcontractors — Where defendant wanted evidence from its own experts before joining cross-defendants — Where defendant has already delayed in serving evidence and joining cross-defendants would cause substantially more delay — Leave refused

Legislation Cited:

Civil Procedure Act 2005 (NSW)

Home Building Act1989 (NSW)

Uniform Civil Procedure Rules 2005 (NSW)

Category:

Procedural rulings

Parties:

Strata Plan 99960 (Plaintiff | Respondent)
SPS Building Contractors Pty Ltd (Defendant | Applicant)

Representation:

Counsel:

JJ Young (Plaintiff | Respondent)
S Docker with C Langford (Defendant | Applicant)

Solicitors:

OMB Solicitors (Plaintiff | Respondent)
Twomey Dispute Lawyers (Defendant | Applicant)

File Number(s):

2021/238327

Publication restriction:

None

JUDGMENT

Introduction

1. By a notice of motion filed on 11 August 2023, the defendant, SPS Building Contractors Pty Ltd (the Builder), seeks leave to rely on certain evidence it served on 26 July 2023 and to file a cross-summons and cross-claim list statement, the effect of which would be to join six cross-defendants to the proceedings.

Background

2. The plaintiff (the Owners Corporation) is the owner of common property in a strata development in Tweed Heads which consists of 45 townhouses (the Development). It claims damages from the Builder for breaches of the warranties implied by the Home Building Act1989 (NSW) in respect of defects said to exist in the common property.

3. The proceedings were commenced on 20 August 2021. As is too often the case in proceedings of this type, there were delays by both parties in preparing the case for trial, starting with delays by the Owners Corporation in serving material in support of its claim. Eventually, on 31 March 2022, the Owners Corporation served its expert evidence and a Scott Schedule, which clearly sets out the nature of the defects in respect of which it makes a claim and the costs of rectifying each of those defects. It is apparent from the Scott Schedule that the total amount claimed is $5,836,627.

4. On 13 April 2022, the Court directed the Builder to serve its evidence and Scott Schedule by 1 July 2022. That deadline was not met. Various explanations are given by the Builder for the delay including difficulties in obtaining suitable experts and a focus on an application for security for costs, which ultimately failed. It appears that the solicitors for the Builder, in a letter dated 5 July 2022 (which is not in evidence), raised with the solicitors for the Owners Corporation the fact that it would be necessary for the Builder to file cross‑claims against a number of subcontractors engaged by the Builder in connection with the construction of the Development. However, the matter was not raised with the Court, and nothing was done at that time to advance those cross-claims.

5. Further delays were caused because of difficulties in arranging a time when the Builder’s expert, Mr George Zakos, could inspect the Development and the terms on which he could engage in invasive testing relating to the alleged defects in the common property. Eventually, Mr Zakos was able to inspect the Development and carry out tests between 26 and 29 September 2022 and again between 20 and 23 February 2023.

6. In the meantime, the Owners Corporation served its lay evidence on 22 December 2022.

7. On 16 March 2023, the Court granted a further extension to the Builder to serve its evidence and Scott Schedule to 12 May 2023. It made a guillotine order at that time.

8. The Builder served some of its evidence on 12 May 2023. However, it did not serve its evidence on quantum and its Scott Schedule until 26 July 2023. On the same day, it served a supplementary report from its hydraulics expert. It also indicated that it expected to finalise its cross‑claim within a further two weeks. According to the Builder’s Scott Schedule, the cost of rectifying admitted defects is $1,017,756.00.

Leave to rely on additional evidence

9. In my opinion, the Builder should be permitted to rely on the evidence it had served (and its Scott Schedule). The proceedings have not been set down for hearing. The hearing is expected to take 5 to 7 days. It will not occur until the first half of next year. If the matter is set down for hearing now, there will be sufficient time for the Owners Corporation to serve evidence in reply. Consequently, the Owners Corporation will not suffer any prejudice if the evidence is allowed. The Builder has given some explanation for the delay. Moreover, it will suffer very real prejudice if it is not permitted to rely on the evidence, since there will be no evidence from it in relation to the quantification of loss.

Leave to file cross-claim

10. On the other hand, I have concluded that the Builder should not be permitted to file its cross‑claim. There are several reasons. First, if leave is granted, that is likely to cause very substantial delay where there has already been substantial delay on the part of the Builder. Each of the proposed six cross‑defendants will need to investigate the claim against it and is likely to want to serve expert evidence going to liability and quantum. There is no reason to think that the cross-defendants will do that any more quickly than either the Owners Corporation or the Builder. If the cross‑claim is filed, the case could not be set down for hearing until the interlocutory steps relating to the cross-claim are completed or close to completion. That could easily involve delay of a further year. Particularly having regard to the delay that has already occurred, a delay of that length is unacceptable.

11. Second, in my opinion, the Builder has not given an adequate reason for the delay. On any view, the Builder knew the case it had to meet by 31 March 2022, when the Owners Corporation served its Scott Schedule. The only reasons it gives for the delay in filing its cross-claim is that it was preoccupied with other tasks and it wanted to obtain evidence from its experts on the strength of the Owners Corporation’s claim before incurring the expense of joining other parties.

12. Neither of those matters provides an adequate explanation for the delay. The other tasks undertaken by the Builder were not so significant or demanding that its legal advisers could not have prepared a cross‑claim at the same time. The second explanation offered by the Builder is not a legitimate reason for delay in filing a cross‑claim. The expectation is that cross‑claims will be filed as soon as practicable after proceedings are commenced so that the claim and cross‑claim can progress at the same time. That expectation is reflected in Uniform Civil Procedure Rules 2005 (NSW) r 9.1(1), which provides that a party may make a cross-claim in proceedings commenced by statement of claim within the time given to the party to file a defence and, in proceedings commenced by summons, before the return date specified in the summons. It is quite contrary to the policy lying behind that rule to permit a party to delay in making a decision whether to file a cross‑claim until after it has served its evidence. It is also quite contrary to s 59 of the Civil Procedure Act 2005 (NSW) which provides:

In any proceedings, the practice and procedure of the court should be implemented with the object of eliminating any lapse of time between the commencement of the proceedings and their final determination beyond that reasonably required for the interlocutory activities necessary for the fair and just determination of the issues in dispute between the parties and the preparation of the case for trial.

There is nothing special about this case, and if such an approach were applied generally it would lead to unacceptable delays in the hearing of cases.

13. Moreover, it is hard to accept the Builder’s evidence that it wanted to assess the strength of the Owners Corporation’s claims before filing cross-claims. The Owners Corporation’s claims in respect of roofing defects total $587,837 and in respect of waterproofing defects total $107,732. According to the Builder’s expert, the costs of rectifying defects of the first type is $18,453 and of the second type is $45,134. Yet the Builder still seeks leave to file cross-claims against the subcontractors said to be responsible for those defects. As might be expected, the decision to file cross-claims appears to be driven by the value of the relevant claims against the Builder, not the assessment of those claims by the Builder’s expert.

14. Third, there is nothing to prevent the Builder from bringing separate proceedings against the subcontractors. It is true that those proceedings will be more difficult to pursue because the Builder will not be entitled to rely on the Owners Corporation’s evidence in support of its cross‑claim. It is also true that if the separate proceedings against the subcontractors are not heard at the same time as these proceedings (which is almost certain) there is a risk of inconsistent judgments. But they are risks that exist in any proceeding where the defendant may be entitled to make a cross‑claim against third parties, and they are matters that any defendant needs to consider when balancing the advantages and disadvantages of bringing a cross‑claim.

15. In the present case, the Builder knew the nature and extent of the claim against it by 31 March 2022. On any view, it was aware by 5 July 2022 of the parties against whom it had potential cross‑claims. At that time, it made a decision not to pursue those cross‑claims. It must bear the consequences of that decision.

Costs and orders

16. Both parties have enjoyed partial success in relation to the notice of motion. Accordingly, it is appropriate to order that each party bear its own costs of the notice of motion.

17. The orders of the Court therefore are:

1. Order 2 made on 16 March 2023 be varied such that it reads:

"The Defendant may not rely on evidence in chief in response to the Plaintiffs' claim served after 12 May 2023 without leave of the Court."

2. The Defendant be granted leave to rely upon the following evidence in chief, which was served on the Plaintiff on 26 July 2023:

1. the Supplementary Report of David Wood of Liquid Hydraulics dated 17 July 2023; and

2. part 2 of the Expert Report of George L Zakos of GL Zakos & Associates Pty Ltd dated 25 July 2023.

3. The Defendant be granted leave to rely on the Scott Schedule served on the Plaintiff on 26 July 2023.

4. The notice of motion filed on 11 August 2023 otherwise be dismissed.

5. Each party pay its own costs of the notice of motion.

6. Stand the matter over to 8 September 2023 for directions and for the purpose of fixing a hearing date.

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Decision last updated: 06 September 2023