The Owners Strata Plan 62930 v Kell & Rigby Holdings Pty Ltd - [2010] NSWSC 612

CITATION: The Owners Strata Plan 62930 v Kell & Rigby Holdings Pty Ltd [2010] NSWSC 612

HEARING DATE(S): 24-28 May, 1&2 June 2010

JUDGMENT DATE :
29 June 2010

JURISDICTION: Equity

JUDGMENT OF: Ward J

DECISION: Plaintiff has established breach of various statutory warranties under Home Building Act. Finding that defendants jointly and severally liable to plaintiff in the sum of $276,581.46 (to be adjusted if necessary in accordance with reasons for judgment). As between defendants, first defendant liable to indemnify second to fourth defendants for all amounts they are liable to pay to plaintiff, other than in relation to installation and commissioning of balancing valves. First defendant therefore liable for $253,352.21 and second to fourth defendants for $23,229.25. Submissions as to costs and quantum to be made before final orders entered.

CATCHWORDS: BUILDING AND CONSTRUCTION - owners corporation claim against developers and builder for breach of statutory warranties - assessment of damages for breach - HELD - various breaches of statutory warranty established - were breaches causative of loss – reasonableness of rectification sought - LIMITATIONS - whether developers’ cross-claim against builder was statute barred - HELD - developer’s claim for equitable contribution was not statute barred - APPORTIONMENT of liability as between developers and builder

LEGISLATION CITED: Building Code of Australia
Civil Procedure Act 2005 (NSW)
Environmental Assessment and Planning Act 1979 (NSW)
Environmental Planning and Assessment Regulation 2000 (NSW)
Environmental Planning and Assessment Regulation 1998 (NSW)
Environmental Planning and Assessment Regulation 1994 (NSW)
Family Provision Act 1982 (NSW)
Federal Court of Australia Act 1976 (Cth)
Federal Court Rules [1979] (Cth)
Home Building Act 1989 (NSW)
Law Reform (Miscellaneous Provisions) Act 1946 (NSW)
Limitation Act 1969 (NSW)
Local Government (Approvals) Regulation 1993 (NSW)
Supreme Court Rules 1970 (NSW)
Uniform Civil Procedure Rules 2005 (NSW)
Wrongs Act 1958 (Vic)
Wrongs Act 1935 (SA)

CASES CITED: Abigroup Ltd v Abignano (1992) 39 FCR 74
Acohs Pty Ltd v RA Bashford Consulting Pty Ltd (1997) 144 ALR 528
Air Link Pty Limited v Paterson (No 2) [2003] NSWCA 251
Albion Insurance Co Ltd v Government Insurance Office (NSW) (1969) 121 CLR 342
Aon Risk Services Australia Limited v Australian National University [2009] HCA 27; (2009) 239 CLR 175
Armstrong v Commissioner of Stamp Duties (1967) 69 SR (NSW) 38
Bartlett v Sidney Marcus Limited [1965] 1 WLR 1013; [1965] 2 All ER 753
Blake v Norris (1990) 20 NSWLR 300
Bebonis v Angelos (2002) 56 NSWLR 127
Bellgrove v Eldridge [1954] HCA 36; (1954) 90 CLR 613
Belan v Casey [2003] NSWSC 159
Bialkower v Acohs Pty Ltd & RA Bashford Consulting Pty Ltd (1998) 83 FCR 1; (1998) 154 ALR 534; (1998) 41 IPR 33
Brandi v Mingot (1976) 12 ALR 551
Brewarrina Shire Council v Beckhaus Civil Pty Limited [2005] NSWCA 248
Building Insurers’ Guarantee Corporation v Strata Plan No 57504 [2010] NSWCA 23
Burke v LFOT Pty Limited (2002) 209 CLR 282
Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (No 4) (2006) 229 ALR 136; [2006] FCA 446
Craythorne v Swinburne (1807) 14 Ves 160 ; (1807) 33 ER 482
Central Coast Leagues Club v Gosford City Council (unreported, NSWSC, 9 June 2008)
Commonwealth of Australia v McLean (unreported, NSWCA, 31 December 1996)
Davies v Evan Humphreys (1840) 6 Meeson Welsby 153; (1840) 151 ER 361
De Cesare v Deluxe Motors Pty Ltd (1996) 67 SASR 28
Dering v Winchelsea (1787) 1 Cox Eq Cas 318
Director of War Service Homes v Harris [1968] Qd R 275
Duke Group Ltd (In Liq) v Pilmer (1998) 27 ACSR 1
Ex parte Snowdon; In Re Snowdon (1881) 17 Ch D 44
Feast Contractors v Ray Vincent Limited [1974] 1 NZLR 212
Fernance v Nominal Defendant (1989) 17 NSWLR 710
Gagner Pty Ltd t/as Indochine Café v Centuri Corp Pty Ltd (2009) 262 ALR 691; (2009) 236 FLR 401; [2009] NSWCA 413
Gladstone Park Shopping Centre Pty Ltd v Ross Wills (1984) 2 FCR 334, (1984) 55 ALR 387
Gray v Queensland Housing [2004] QSC 276
Greater Lithgow City Council v Wolfenden [2007] NSWCA 180
Gregory Paul Montfroy v Roads Corporation (trading as VicRoads) [2005] VSC 320
Hancock v B W Brazier (Anerley) Ltd [1966] 1 WLR 1317
HML v R [2008] HCA 16; (2008) 235 CLR 334; (2008) 245 ALR 204
Ho v Powell (2001) 51 NSWLR 572; [2001] NSWCA 168
Honeywood v Munnings [2006] NSWCA 215
Hungerfords v Walker [1989] HCA 8; (1989) 171 CLR 125
James Hardie & Co v Wyong Shire Council (2000) 48 NSWLR 679
Janet Campbell v CJ Cordony & Sons Ply Ltd [2009] NSWSC 63
Jones v Bartlett [2000] HCA 56; (2000) 205 CLR 166
Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298
Jones v Mortgage Acceptance Nominees Ltd (1996) 63 FCR 418; (1996) 142 ALR 561
Karacominakis v Big Country Developments Pty Ltd & Anor [2000] NSWCA 313
Katsilis v Broken Hill Pty Co Ltd (1977) 18 ALR 181; (1977) 52 ALJR 189
Kavalee v Burbidge (1998) 43 NSWLR 422
McGee v Yeomans [1977] 1 NSWLR 273
McLean v Discount and Finance Ltd (1939) 64 CLR 312
Mahony v McManus (1981) 180 CLR 30
Manufacturers Mutual Insurance v GIO (1993) 7 ANZ Ins Cas 61-158; (1993) Aust Contract R 90-023
Mesaros v A V Jennings Properties Ltd (Home Building) [2008] NSWCTTT 865
Miller v Cannon Hill Estates Ltd [1931] 2 KB 113
Minister of Employment and Workplace Relations v Gribbles Radiology Pty Ltd [2005] HCA 9; (2005) 222 CLR 194
New Cap Reinsurance Corporation v Reaseguros Alianza SA (2004) 186 FLR 175
Qantas Airways Ltd v AF Little Pty Ltd [1981] 2 NSWLR 34
Oates v Consolidated Capital Services Ltd (2009) 257 ALR 558; (2009) 233 FLR 283; (2009) 72 ACSR 506; [2009] NSWCA 183
Owners Corporation Strata Plan 65255 v Kell & Rigby Pty Limited (Home Building) & ors [2008] NSWCTTT 544 (29 September 2009)
Owners-Strata Plan No 43551 v Walter Construction Group Limited [2004] NSWCA 429
Owners Corp SP 77144 & Ors v Andelini (Home Building) [2008] NSWCTTT 1506
Pilmer v Duke Group Ltd (In Liq) [2001] HCA 31; 207 CLR 165; (2001) 75 ALJR 1067; 180 ALR 249
Proctor v Jetway Aviation Pty Limited [1984]1 NSWLR 166
Radford v De Froberville [1977] 1 WLR 126
Riverina Wines Pty Limited v Tetra Pak Marketing Pty Limited and Ors [2007] NSWSC 1014
Rodgers v Federal Commissioner of Taxation (1998) 158 ALR 220
Sterling Estates Development Corporation Pty Limited v Malouf & Anor [2003] NSWCA 278; (2003) 58 NSWLR 685
Tabcorp Holdings v Bowen Investments Pty Limited [2009] HCA 8
The Craftsmen Restoration and Renovations v Thomas Boland [2008] NSWSC 660
The Insurance Commissioner v Joyce [1948] HCA 17; (1948) 77 CLR 39
Weldon v Neal (1887) 19 QB 394
Westpoint Management Ltd v Chocolate Factory Apartments Ltd [2007] NSWCA 253
Whiley Investments (Qld) Pty Ltd v Pet's Paradise (Qld) Pty Ltd [2009] VSC 144
William Gary Quick v Stoland Pty Ltd [1998] FCA 1200
Wilson v Kybren P/L (Home Building) [2002] NSWCTTT 742
Wolmershausen v Gullick [1893] 2 Ch 514

TEXTS CITED: Heydon D., Cross on Evidence, 7th Australian ed, Butterworths, 2004
Meagher, Gummow & Lehane, Equity Doctrines and Remedies, 4th ed, Butterworths, 2002
Young P., Croft C. and Smith M, On Equity, Lawbook Co., 200

PARTIES: The Owners Strata Plan 62930 (Plaintiff)
Kell & Rigby Holdings Pty Ltd (First Defendant)
Hung Wai Investment Pty Ltd (Second Defendant/First Cross-Claimant)
John Knight Waterhouse (Third Defendant/Second Cross-Claimant)
Margaret Ann Waterhouse (Fourth Defendant/Third Cross-Claimant)

FILE NUMBER(S): SC 2008/290664

COUNSEL: R Cheney (Plaintiff)
M Elliott (First Defendant)
D M Loewenstein (Second, Third & Fourth Defendants/First, Second & Third Cross-Claimants)

SOLICITORS: Paul Bard Lawyers (Plaintiff)
Horton Rhodes Lawyers (First Defendant)
Hickey Lawyers (Second, Third & Fourth Defendants/First, Second & Third Cross-Claimants)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
TECHNOLOGY AND CONSTRUCTION LIST

WARD J

29 JUNE 2010

2008/00290664 THE OWNERS STRATA PLAN 62930 V KELL & RIGBY HOLDINGS PTY LIMITED & ORS

JUDGMENT

1 HER HONOUR: This matter concerns a dispute in relation to the construction of a residential unit complex in Kirribilli (known as The Kirribilli Grande). The residential building work was carried out pursuant to a contract dated 27 October 1998 between Hung Wai Investment Pty Limited (Hung Wai) and Mr & Mrs Waterhouse (together, the Developers) and Kell & Rigby Holdings Pty Limited (the Builder). It is not disputed that implied into that contract were the statutory warranties set out in s 18B of the Home Building Act 1989 (NSW).

2 Practical completion of the work under the contract between the Builder and the Developers was certified on 20 May 2000 and a final occupation certificate for the property was issued by the Council on 2 June 2000.

3 Following registration of the strata plan in July 2000, the Owners Corporation of the Strata Plan (the Owners Corporation), as immediate successor in title to the Developers, became entitled to the benefit of the statutory warranties as if the Developers were required to hold a contractor-licence and had performed the work under a contract with the Owners Corporation, pursuant to s 18C of the Act, to do the work. Pursuant to s 18D of the Act, a person who is a successor in title to a person entitled to the benefit of a statutory warranty under the Act (here, the Owners Corporation) is entitled to the same rights as enjoyed by the person’s predecessor in title (here, the Developers). (I interpose to note that in the course of submissions it was contended by Counsel for the Builder, Mr Elliott, that the Owners Corporation does not have standing to sue for breaches of warranty in relation to work carried out in areas other than the common property, an issue relevant in the context of various of the so-called Scott Schedule claims. It is not disputed, however, that in relation to the principal claims made by the Owners Corporation, it has the requisite standing.)

4 Initially the Owners Corporation brought its claims for relief by way of Statement of Claim filed in the District Court on 30 March 2007. The District Court proceedings were subsequently transferred, on the Owners Corporation’s application, to this Court pursuant to orders made on 13 June 2008.

5 The Owners Corporations contends that the residential building work was carried out by the Builder and the Developers in breach of various of the s 18B statutory warranties and that as a consequence loss and damage have been sustained for which both the Builder and the Developers are liable. The claim, as particularised in the Owners Corporation’s Amended Summons filed 31 October 2008, was in excess of $1.5 million (though it seems to have been conceded during the course of the hearing that the quantum of the claim has been overstated to some extent at least in relation to the cost of rectification of the bathrooms and other items such as ‘drummy’ render).

6 The Developers and the Builder have cross-claimed against each other for contribution and indemnity. In the case of the Developers, a claim is also made, pursuant to a further amendment made to their Amended Cross-claim during the course of the hearing, against the Builder for damages in respect of the breaches of warranty alleged by the Owners Corporation in its claim (though not exceeding the amount for which the Developers might be held liable to the Owners Corporation, in other words seeking by way of damages the full indemnity alternatively claimed by way of equitable contribution).

7 A limitations defence pursuant to s 18E of the Act is pleaded by the Builder against both the Owners Corporation and the Developers on the basis that the work to which the respective claims relate was completed more than seven years prior to the commencement of the proceedings. The Builder also raises a defence to the claim based on an alleged failure to mitigate and/or the incurring of unreasonable costs by the Owners Corporation. At least the mitigation part of that defence appears to relate only to one aspect of the claim, namely the air-conditioning works. (It is not clear to me what costs are said to have been unreasonably incurred in that regard and it seemed to me that this part of the defence was not pressed at the hearing.)

8 The complaints made by the Owners Corporation in relation to the building work broadly fall within three categories: first, complaints made as to bathroom dampness or moisture (attributable, it is said, to the lack of a waterstop or other effective waterproofing in the bathrooms); secondly, complaints made as to the operation of the air-conditioning system (or, to be more precise, its lack of operation at the outset of occupation of the building and ongoing equipment failures associated with the system); and, thirdly, complaints made as to miscellaneous items of work (including drummy render; cracks in the swimming pool tiling; and problems with underfloor heating in some of the bathrooms), referred to as the Scott Schedule claims.

9 By way of a general summary of its position, the Builder contends that the vast majority of the Owners Corporation’s claims should be dismissed and that, on those claims for which it does accept liability (or may be found liable), the quantum of damages recoverable by the Owners Corporation is nowhere near the amount that has been claimed.

Bathroom/Scott Schedule claims

10 In the case of most of the bathroom claims and many of the Scott Schedule claims, the Builder contends that there is no (or no satisfactory) evidence of the alleged defects and that, even if there were, the alleged defects do not amount to breach of any statutory warranty (such as, for example, the existence, some eight or more years after practical completion, of isolated instances of cracked tiles or the like in one or more of the units).

Air-conditioning claims

11 In the case of the air-conditioning claims, the position is more complicated.

12 To the extent that the claim made is in relation to the fitness for purpose of the particular air-conditioning system actually installed (the design of which admittedly differed from the initial contract specifications by the inclusion of particular “three way values”), as opposed to the manner of installation, then the Builder says that what it supplied was what it was contracted to supply and that it is not liable for design faults or any failure of that system to operate satisfactorily. In this regard, it is submitted for the Builder that the statutory warranty as to fitness for purpose is to be read as being subordinate to the statutory warranty as to the performance of work in a proper and workmanlike manner. Thus the Builder contends, as I understand it, that the Owners Corporation cannot complain as to the adequacy of the system which was installed following approval from the Developers’ mechanical engineer/architect, provided that the installation itself was carried out in a proper and workmanlike manner. (The congruence between what was actually installed and the air-conditioning specifications as amended forms the basis of the Builder’s claim that the Developers should bear the full amount of any liability which may be found in respect of the Owners Corporation’s air-conditioning claims.)

13 However, to the extent that the air-conditioning claim is for a breach of warranty arising from a failure properly to ‘commission’ the air conditioning system, ie a claim going to the manner of installation of the system, then (while the Builder accepts that it did not carry out a complete commissioning of the system) the Builder says that this was not causative of any loss.

14 The Builder accepts that it is open on the evidence to conclude that the absence of balancing valves for a period of time caused damage to the system that needed to be repaired (in particular, it seems that the absence of the balancing valves was the cause of the compressors failing in the chillers and hence the replacement of the burnt-out compressors in 2002/3 was destined to be a failure because of the continuing absence of balancing valves at that time). However, as I understand the Builder’s principal submission, it is that any damage referable to the lack of balancing valves (whether or not their absence would have been revealed on a proper commissioning) is damage for which the Builder should not be held liable, since the decision to change the specifications of the system was one approved by the Developers, through their consultants. (The Developers deny that any such “approval” was given by the Architect as their agent, as such. They have admitted in their Defence to the Second Cross-Claim that the amended system was approved by their mechanical engineer, George Floth Pty Limited.)

15 There is also a dispute as to the Owners Corporation’s claim for recovery of the cost of replacement of ‘three way’ valves (as and when they failed), which are said not to have been good and suitable for the purpose for which they were used (nor reasonably fit for the specified purpose). The replacement of the original three way valves (other than in the limited instances where the replacement was by the very same type of valves) required modification to the pipework/wiring. As I understand it, the Owners Corporation contends that the need for replacement of the original valves (over time) was not something referable to the design of the system nor was it something caused by the lack of a complete commissioning of the system (and so is not part of the commissioning claim as such) but simply a claim as to the adequacy of the materials used. The Builder submits that there is no evidentiary basis for such a claim (on the basis that there was no testing of the valves to show that they were defective but simply a comment, or assumption, in the joint report that they might have been substandard). In any event, the Builder maintains that any claim as to adequacy of materials was one that was abandoned during the opening submissions for the Owners Corporation. I consider in due course the competing contentions in this regard.

Quantum

16 As to the overall quantum of the claim, the Builder contends that, even if the Owners Corporation establishes that there were breaches of statutory warranty causative of loss in relation to the various claims, the amount claimed has been grossly inflated.

17 As to the bathroom claims (quantified by the Owners Corporation as being in the order of $690,000), the major cost is the claim for the complete re-tiling of the bathroom floors and walls. It is said that it is unreasonable of the Owners Corporation to press for rectification in the manner it has done in that regard. Similarly, as to the amount claimed for rectification of defects identified by the building expert called by the Owners Corporation (Mr Ken Goddard) and referred to as the Scott Schedule claims, there was much criticism of the manner in which this had been costed (particularly in relation to the rate claimed for items such as rectification of drummy render at $892 per square metre). Following the cross-examination of Mr Goddard by Counsel for the Builder, Mr Elliott, in which Mr Goddard was tested as to the basis for his costings, there was implicitly a measure of acceptance by the Owners Corporation of that criticism, insofar as the Owners Corporation now seems broadly to accept that where there is a divergence between the basis of costing any building rectification work as between Mr Goddard and the expert called for the Builder (Mr Greg Beard), Mr Beard’s costings should be adopted and I have done so.

18 As to the air-conditioning claims, unlike the position with the other claims where the rectification work has not yet taken place, what is sought is reimbursement of moneys already spent by the Owners Corporation. It seeks to recover amounts paid to Quitstar, MM Brown and Youl & Associates, totalling $290,298.85, being the costs it says were incurred in having the air-conditioning system restored to the position in which it would have been had there been conformity with the statutory warranties. (There is in issue a question whether the amounts invoiced by the air-conditioning consultants at least from 2003 properly reflect amounts for which the Builder is liable even if the claim is otherwise made out.)

19 The Builder concedes some parts of the claims ($4,884.38 for minor air-conditioning defects and $42,989 for the agreed Scott Schedule claims). The Builder says that if a waterstop is required to be installed in any of the bathrooms the cost for that should be no more than $2,895.60 per bathroom (assuming a complete replacement of the floor tiles in the shower recess area); that the disputed Scott Schedule items (even if allowed) should be costed on the basis explained by Mr Beard. In relation to the main air-conditioning claims, the Builder says that any liability (which is not conceded) should be no more than $119,320.80 (comprising the costs of the balancing valves and commissioning up to 2003 when the valves were installed but no costs thereafter).

20 The Owners Corporation also claims interest on monies paid in respect of the works carried out to rectify the air-conditioning and ventilation works, in accordance with the principles considered by the High Court in Hungerfords v Walker [1989] HCA 8; (1989) 171 CLR 125 (and, more recently in the context of costs incurred in having defective building work rectified, in The Craftsmen Restoration and Renovations v Thomas Boland [2008] NSWSC 660 per Howie J). There did not appear to be any dispute with that proposition (assuming liability was found for those rectification costs on the part of the Builder/Developers).

21 As to the cross-claims between the respective defendants, both concede that any liabilities they may have to the Owners Corporation on the Owners Corporation’s claim are co-ordinate liabilities for the purposes of the application of the equitable doctrine of contribution. However, the Developers say that this is a case in which the Builder should bear full responsibility for any liability to the Owners Corporation (by reason of the Builder’s breach, on that hypothesis, of the statutory warranties implied into its contract with the Developers); whereas the Builder says that any liability referable to the installation of the particular air-conditioning system in question should be borne wholly by the Developers (since its installation was approved by their consultant) and that any remaining liability should be borne equally as between the Developers and the Builder. In further answer to the Developers’ claim for a complete indemnity, the Builder says that the Developers’ cross-claim is statute barred.

Issues

22 The issues to be determined, as distilled from the pleadings and with the assistance of Counsels’ submissions, may be summarised as follows:

(i) Was there a breach by the Builder of any one or more of the s 18B statutory warranties in relation to:

(a) the waterproofing of the bathrooms;

(b) the installation and commissioning of the air-conditioning; and

and, if there was a breach of statutory warranty in relation to any one or more of the above, was that breach causative of any loss and, if so, what amount is recoverable for compensation in relation to the rectification of that breach?

(ii) Does the Builder have a limitations defence against the Owners Corporation’s claim and/or against the Developers’ cross-claim?

Summary

23 By way of summary, my findings in relation to the above issues are as follows, for the reasons set out in more detail later in this judgment:

(i)

Breach of statutory warranties

(a) Waterproofing of the bathrooms

24 I find that the Owners Corporation has established the following breaches of the statutory warranties implied into the building contract:

(i) a breach of each of the s18B(a) and (c) warranties in respect of the failure to install (or to install correctly) a waterstop in the bathrooms of units 3A, 6A and 7B (noting that in unit 7B there are two bathrooms, one in the master bedroom ensuite and one adjacent to the study/TV room – hence 4 shower recess areas); and

25 Other than as above, I find no breach of statutory warranties in relation to the bathrooms.

26 The consequence of the breach of warranties noted in (i) above is that the bathrooms in question have not been built in a manner compliant with the Building Code of Australia and bear the risk of water migration within the bathrooms without the benefit of the protection contemplated by the Code (even though alternative waterproofing methods may have been applied and seem, at least in the case of units 3A and 6A, to have provided effective waterproofing to date). I accept the Owners Corporation’s contention that a waterstop should be retro-fitted to each of the bathrooms in units 3A, 6A and 7B. I consider that the Owners Corporation’s proposal for a complete re-tiling of the floor and wall tiles in the bathrooms is not reasonable and that the approach to be adopted should be limited to the complete replacement of the shower recess tiles (that being the alternative recommended by Mr Beard in paragraph 19 of his 20 May 2010 affidavit) at a cost estimated by him in the table contained in paragraph 49 of his 27 May 2010 affidavit at $2,895.60 per bathroom.

27 The rectification works for units 2C and 7B, consequent upon the breach of warranty noted in (ii) are costed by Mr Beard in his 27 May 2010 affidavit and included within the items in the Scott Schedule. (For unit 2C, this does not appear to extend beyond any sum allowed to retrofit the waterstop. For unit 7B, this includes $1,361.50 (para 131) for item 9.17(i) in the Goddard Report and $541.13 (para 136) for item 9.17(vi) of the Goddard Report.) I also consider that, in view of the excessive moisture readings in unit 2C, there should be an allowance made to permit destructive testing of the shower recess in that unit and the retro-fitting of a waterstop and any other waterproofing works as may be necessary depending on the outcome of that destructive testing.

28 As to the underfloor heating in units 2C and 7B, which I am prepared to infer was affected by the moisture levels and defective works in those bathrooms, I accept the evidence of Mr Tsikas that repair is likely to include the removal of a small number of tiles. If it does, then the cost for so doing should encompass the removal of sufficient floor tiles (making use of any architectural break in the bathrooms) to allow for as close a match to the remaining floor tiles as is reasonably practicable having regard to the approach recommended by Mr Beard. That has not been separately costed and it seems to me that if this work were to be carried out in conjunction with the other bathroom work required for those two bathrooms, there may be costs savings (I have in mind, for example, that Mr Beard has already costed the waterstop rectification costs on a conservative basis, allowing for 4sq m tiles, when the shower recess areas are much less than that). Given that it may not ultimately be necessary to remove the tiles in the main bathroom areas of units 2C and 7B (depending on how the moisture proofing of the underfloor heating connections is ultimately to be achieved), it seems to me that this aspect of the claim should either be dealt with by the provision of a further costs estimate from Mr Beard, allowing an additional sum for the costs of those works as part of the shower recess works in those units, or for an indemnity in respect of the reasonable costs of attending to those works. I will hear submissions on which of those courses of action would best achieve the statutory mandate for the just, quick and cheap resolution of this aspect of the dispute.

Installation and commissioning of the air-conditioning

29 I find that the Owners Corporation has established the following breaches:

(i) a breach of the s18B(a) warranty in respect of the failure properly to commission the air-conditioning (using that term in the composite sense of calibration and setting of controls followed by acceptance testing and correction of any deficiencies in the system as installed);

(ii) a breach of the s18B(b) warranty in respect of the installation of three way valves which the experts, in their joint report, appear to accept were faulty or not fit for purpose (described by the experts as ‘substandard’); and

30 In respect of (i) (the failure properly to commission), the cause of the air-conditioning failure and ongoing equipment failures in relation to the chillers and the three way valves was attributed by the experts to the lack of balancing valves in the system as installed. Had there been a proper commissioning it is highly likely that those problems would have become apparent and could have been avoided.

31 It is unclear what separate part (if any) any failure properly to calibrate the system had to play in the failures caused by the lack of balancing valves (ie other than the fact that a proper calibration might have demonstrated the problems likely to be encountered by a lack of balancing valves).

32 In the absence of identification by the experts of any particular failure of calibration (and an explanation as to what effect any such failure would have had on the ultimate failures of the system beyond those caused by the lack of ‘commissioning’ in the sense of acceptance testing), I consider that the damages referable to the failure of commissioning do not extend beyond the costs incurred by the Owners Corporation in investigations to ascertain the cause of the air-conditioning problems (which would not have been necessary had there been a proper commissioning in which those problems would have been identified in the first place) and the cost of the repairs carried out to the chillers at a time prior to the discovery that the lack of balancing valves was the cause of the system’s failures (since the evidence is that until the balancing valves were installed any repair to the chillers would be likely to prove unsuccessful and thus the initial repairs to the chiller were costs thrown away).

33 Those particular costs have not, as I understand it, been separately quantified (ie the cost of the investigations in relation to the system failures or thrown away by the initial chiller repairs does not seem to have been separated out from the cost of the installation and commissioning of the balancing valves to correct those failures). Rather, a number of the invoices in evidence before me seem to conflate the two aspects of the work in an overall charge. Ultimately however, the distinction between those components of the costs referable to the balancing valves is not material (other than insofar as it may be relevant to the contribution claims as between the Builder and the Developers) since the cost of installation and commissioning of the balancing valves (which I would have excluded from the damages recoverable for breach of the s 18B(a) warranty) seems to me to be recoverable for breach of the s 18B(f) warranty in any event.

34 (I note that there is conceded an amount of $4,884.38 for breach of the s 18B(a) warranty in relation to insulation seal defects and blockage to vents and the like. As I understand it, this is not included in what I have described as the failure properly to commission.)

35 The cost of replacement of the three way valves is recoverable for the breach identified in (ii) above.

36 As to the breach of warranty in (iii) above, the damages recoverable are the costs referable to the installation of the balancing valves and the re-commissioning of the system necessary to rectify the deficiencies of the system and to render it reasonably fit for the specified purpose (but not costs referable to routine maintenance or repairs of the system).

(c) Scott Schedule items

37 Of the defects identified in Mr Goddard’s report, which forms the basis for the Scott Schedule claims, I find that there has been a breach of the statutory warranty implied by s 18B(a) in relation to those items accepted by Mr Beard in respect of drummy render or otherwise as defects including pool skylight framing (as noted in the annotated Scott Schedule attached); a breach of the warranty implied by s 18B(e) in relation to the defective waterproofing of the swimming pool paving; and a breach of the warranty implied by s 18B(a) in relation to the underfloor heating in units 2C and 7B.

38 With one qualification, the damages recoverable for those items are included in the annotated Scott Schedule attached, adopting the costings of Mr Beard in that regard. The qualification I make is that if it is necessary for tiles to be removed in order to rectify the problem to the underfloor heating in units 2C and 7B, then I consider that it would be appropriate to adopt the same process suggested by Mr Beard for the replacement of the shower floor tiles in relation to the bathroom floor tiles so removed. (This does not appear to have been separately quantified. I would either allow an amount to cover the cost of replacement of the bathroom floor tiles in both units on the assumption that a suitable architectural break is not likely to be present or an indemnity for the reasonable cost of those works. Given the possibility of costs savings by combining any necessary works in this regard with the other works in those bathrooms, I think it would be appropriate for Mr Beard to provide further costings to enable this amount to be quantified but I will hear from the parties in relation to that issue.)

(ii) Does the Builder have a limitations defence against the Owners Corporation’s claim and/or against the Developers’ cross-claim?

39 The effective date of completion of the building works at the latest was 2 June 2000. Accordingly, the Owners Corporation’s claim for breach of statutory warranties was brought within time (and there was no submission to the contrary by Mr Elliott).

40 As to the Developers’ cross-claims against the Builder, I am not persuaded that s 18E of the Act (which requires that ‘proceedings’ for breach of statutory warranty must be commenced within the period specified), should be construed as referring only to the ‘primary proceedings’ for breach of statutory duty and not to any claim that might be brought (whether by way of separate proceedings or by way of cross-claim in the so-called primary proceedings) by someone other than the plaintiff in those proceedings.

41 Had the initial cross-claim filed by Mr and Mrs Waterhouse been a claim (ie, a proceeding) for breach of statutory warranty (as opposed to a claim for equitable contribution) I would not have been persuaded that it was within the time period allowed for the commencement of such proceedings since it was filed more than 7 years from the completion of the work. However, I do consider that anything turns on this, since there is no such limitation on the time for the making of a claim for equitable contribution (albeit that the claim for contribution is in relation to an underlying liability for breach of statutory warranty.) I also note that the cause of action on which the Waterhouses rely is one arising out of precisely the same facts as the cause of action on which Hung Wai relies and hence it seems to me that it would have been open for them to invoke the court’s general power of amendment to overcome any such limitation problem in any event.

42 I find that the limitations defences pleaded by the Builder fail.

(iv) As between the Builder and the Developers, what apportionment should there be in respect of any co-ordinate liability to the Owners Corporation?

43 Both the Builder and the Developers seem to have proceeded on the basis that equitable contribution other than in equal shares is warranted in this case (though putting very different submissions as to how the apportionment of liability as between them should be calculated). I am not satisfied that as between those parties any order for equitable contribution should be otherwise than on an equal share basis.

44 Accordingly, insofar as the Developers (and Builders) have a common liability to the Owners Corporation for breach of the statutory warranties, that is a liability for which (in accordance with the principles of equitable contribution) as between themselves each would bear an equal share.

45 However, to the extent that the Developers have suffered damage (measured by their liability in these proceedings to the Owners Corporation) as a result of the Builder’s breaches of statutory warranty, they should be compensated for that loss by means of an indemnity in respect of the liability they bear to the Owners Corporation. In determining the extent of that indemnity, what should be excluded is any liability for the costs of installation of the balancing valves and the re-commissioning necessary in that regard, since those amounts were not caused by the Builder’s failure properly to commission the system but rather by the decision to amend the design specifications of the system which was approved by the Developers’ consultant and in accordance with which the air-conditioning system was installed by the Builder.

Proceedings

46 The history by which the present dispute came to be before this Court is relevant in light of the limitations defence that is maintained by the Builder against the Developers’ cross-claim.

47 As noted earlier, the Owners Corporation first commenced proceedings in the District Court by Statement of Claim filed on 30 March 2007, there claiming the sum of $750,000. It is conceded, as I understand it, that in all material respects the nature of the pleadings set out in the District Court Statement of Claim was the same as those framed in this Court.

48 After the filing of defences to the claim, cross-claims were filed by the Developers against the Builder. The first Cross-Claim/Statement of Cross-Claim was filed in the District Court in the interests of Hung Wai (one of the Developers) on 9 May 2007, in which it claimed contribution or indemnity from the Builder in respect of any amount which might be adjudged due from the cross-claimant to the Owners Corporation and similarly a contribution or indemnity for costs in respect of the Owners Corporation’s proceedings against the cross-claimant. (Therefore, the first of the Developers’ Cross-Claims was filed within seven years of the date of practical completion of the building works.) The Cross-Claim filed for the Waterhouses (which was in identical terms to that filed for Hung Wai) was not filed until 13 July 2007 (a date which on any view of things appears to be more than 7 years from the date of completion of the work).

49 There was no debate before me as to whether the claim brought by the Owners Corporation against the Developers was within time (although the Owners Corporation’s Commercial List Statement pleads otherwise). Rather, it seems to have been conceded by the Builder (having regard to the submissions made in relation to the Developers’ cross-claims) that the building work was completed at the latest by the date on which the certificate of occupancy was issued (2 June 2000).

50 Nevertheless, for completeness, I note that the issue as to what is meant by the date of completion of the work for the purposes of s 18E was considered by the Consumer, Trader & Tenancy Tribunal in Owners Corporation Strata Plan 65255 v Kell & Rigby Pty Limited (Home Building) & ors [2008] NSWCTTT 544 (29 September 2009). There, Senior Member Durie rejected a submission by the builder that in determining the limitations period reference was to be had to the date of completion of the particular items of work of which complaint was made (referring to what was said in Honeywood v Munnings [2006] NSWCA 215, at [470], that all defects due to poor workmanship and the use of poor materials at different times during construction formed part of the one ‘composite breach of contract when the builder delivered possession of a poorly constructed home”.) Senior Member Durie held that completion did not mean practical completion (a term well understood in the building industry which could readily have been used had that been the intention of the legislature) but nor did it mean that all contractual obligations had been completed so that a certificate of occupancy could be issued. Rather, the Tribunal held that ‘completion’ of the work for the purposes of s 18E meant the date upon which the construction of the building “effectively came to an end” and adopted as that date the time by which permanent power to the building had been connected (a date shortly before the strata plan was registered). There was no suggestion in that case that the defects liability period (or, more precisely, completion of works to rectify any defects during that period) was to be taken into account.

51 I would have been inclined to consider that practical completion was a relatively clear signpost that the building works, as such, had reached completion but the difference between practical completion (20 May 2000) and what might be said to be the latest date on which effective completion (if the reasoning in the CTTT in Owners Corporation Strata Plan 65255 v Kell & Rigby Pty Limited (Home Building) applies) was reached in this case (2 June 2000) is not material in this case since, on either view, the relevant date was less than seven years from the date on which the Owners Corporation commenced its proceedings (and Hung Wai filed its first Cross-Claim).

52 Accordingly, the claims made by the Owners Corporation for breach of statutory warranty (and the Hung Wai cross-claim, assuming for present purposes it were to be characterised as a claim for breach of warranty to which s 18E of the Act applied) were clearly within time. Therefore, on the facts, any issues as to the existence of a limitations defence can only arise in relation to the Waterhouses’ cross-claim (or any new cause of action raised by the amendment to the Developers’ Cross-Claim during the course of the hearing).

53 On 23 May 2008, the Owners Corporation filed a Summons in this Court seeking the transfer of the District Court proceedings to this Court. An order for the transfer of the proceedings was made by consent on 13 June 2008. On 24 June 2008, the Owners Corporation amended its Summons to claim relief by way of damages against the defendants and filed their Technology and Construction List Statement. Responses to the Owners Corporation’s List Statement were in due course filed by the defendants, together with cross-claims as between the Developers and the Builder.

54 The Developers’ Cross-Claim, filed on 14 August 2008, claimed relief against the Builder by way of contribution or indemnity for any sums recoverable by the Owners Corporation against any of the Developers pursuant to s 5 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) or, in the alternative, on the basis of co-ordinate liability. (It was conceded by Mr Loewenstein that the claim pursuant to s 5 of the Law Reform (Miscellaneous Provisions) Act has no foundation where, as here, the Owners Corporation’s claim is based on breach of a statutory warranty and not in tort. Thus no reliance is now placed on this claim.)

55 The Builder’s Cross-Claim against the Developers, filed on 31 October 2008, seeks an order for equitable contribution in respect of the common or co-ordinate liabilities of the Builder and Developers to the Owners Corporation with an order for full contribution from the Developers in respect of liabilities related to the air-conditioning system (on the basis that it is alleged that the air-conditioning system built by the Builder through its sub-contractor was built in a proper and workmanlike manner and in accordance with the plans and specifications set out in the building contract (para 5) and that the plans and specifications for the air-conditioning system were created and/or approved by the Developers’ architect and consultant mechanical engineer (para 6)). It is asserted that even if there had been a commissioning of the system following its construction of a kind that had identified the defects in the system (and hence in the underlying plans and specifications), to the extent that the Developers decided to do any further work on the air-conditioning system as a result that would have been at the Developers’ cost (and therefore this is not a cost for which the Builder should be made liable) (particulars to para 8).

56 On 5 February 2009, Hung Wai filed its Defence to the Second Cross-Claim/Statement of Cross-Claim, in which it denied that the specifications for the air-conditioning system were created and/or approved by its architect but relevantly admitted that the plans and specifications were created and/or approved by its consultant mechanical engineer (George Floth). A defence in the same terms was filed for the other Developers on 25 February 2009.

57 By way of a Third Cross-Claim, filed on 25 February 2009, the Developers sought contribution and indemnity from George Floth in relation to its approval of the ‘as installed’ drawings for the air-conditioning and ventilation system furnished by the Builder’s sub-contractor, Quitstar Pty Limited. Judgment was entered for George Floth on that cross-claim pursuant to orders made by McDougall J on 26 November 2009, following the hearing of separate questions for determination as to the construction of a limitation of liability clause in the contract between the Developers and George Floth. (No evidence was called during the hearing before me from the architect or from George Floth in relation to the air-conditioning system or the circumstances surrounding its installation and commissioning.)

58 An Amended Technology & Construction List Cross-Claim Statement was filed on 25 March 2010 by the Developers in which they expressly repeated, for the purposes of the Cross-Claim only, paragraphs 1-15 of the Owners Corporation’s contentions in its Technology & Construction List Statement and went on to assert that, in the event that the Owners Corporation succeeded against any one or more of the Developers, then the Developers claimed an entitlement to contribution to or indemnity for any damages payable by them to the Owners Corporation. That entitlement to contribution or indemnity was said to be pursuant to reliance upon the breach by the Builder of the statutory warranties pleaded in paragraphs 10 and 11 of the Owners Corporation’s Contentions (or in the alternative pursuant to s 5 of the Law Reform (Miscellaneous Provisions) Act – a claim not now pressed for the reasons noted above) or (again, in the alternative) in reliance on the principle of co-ordinate liability. Accordingly, it was not until the amendment made to the Developers’ cross-claims in March this year that the basis for the claimed entitlement to contribution or indemnity was put by reference to the alleged breach of statutory warranties under the Act, though they had at all times since their cross-claims were filed in the District Court sought contribution or indemnity for any amount in respect of which they might be held liable on the Owners Corporation’s claims for breach of warranty.

59 During the course of the hearing, the Developers sought leave (which I granted over the Builder’s objection) further to amend their Amended Technology & Construction List Cross-Claim Statement in order to insert the words “damages or” before the words “contribution to or indemnity” in paragraph 3. Mr Loewenstein made it clear that the extent of the damages so claimed was limited to the amount that the Owners Corporation might successfully recover from the Developers in these proceedings on their breach of statutory warranty claim. The amendment was put on the basis that it was for more abundant caution, where the indemnity sought from the Builder was a full indemnity (that being the measure of the damages claimed to have been sustained as a result of the alleged breach of the statutory warranties). This was said to be simply an amendment to provide an alternative legal vehicle by which the claim for an indemnity could be allowed, it arising from exactly the same matrix of facts.

60 Reliance was placed on Air Link Pty Limited v Paterson (No 2) [2003] NSWCA 251. There, Mason P considered the line of authorities relating to amendment of pleadings following McGee v Yeomans [1977] 1 NSWLR 273, in which Glass JA described the settled rule of practice to which reference had been made in Weldon v Neal (1887) 19 QB 394 (precluding leave to amend if the proposed amendment would prejudice the rights of the opposing party existing at the date of amendment) and “all the finespun distinctions which it had engendered” as having been “totally destroyed” by the precursor in the Supreme Court Rules 1970 (NSW) to what now appears in s 65 of the Civil Procedure Act 2005 (NSW) and the corresponding Uniform Civil Procedure Rules 2005 (NSW) permitting amendments in respect of claims which arise out of the same or substantially the same set of facts as those involved in the original claim.

61 In Greater Lithgow City Council v Wolfenden [2007] NSWCA 180, the Court of Appeal confirmed that amendments to permit the pleading of a cause of action which was statute barred could be allowed under the more general power under s 64 of the Civil Procedure Act to grant leave to amend at any stage. Handley AJA there said (at [18]) that, by using substantially the same language in ss 64 and 65 of the Civil Procedure Act (and, in particular, the provisions of s 65(4)), as that used in Pt 20 rr 1 and 4 of the Supreme Court Rules, the legislature must be taken to have endorsed the McGee line of authority (which had been reaffirmed in Proctor v Jetway Aviation Pty Limited [1984]1 NSWLR 166; Fernance v Nominal Defendant (1989) 17 NSWLR 710 and Bebonis v Angelos (2002) 56 NSWLR 127) and that this Court should apply the settled construction of the former rules to the current sections.

62 In Riverina Wines Pty Limited v Tetra Pak Marketing Pty Limited and Ors [2007] NSWSC 1014, it was said that in order to determine whether a new cause of action arises from the same, or substantially the same, facts as those giving rise to the existing cause of action, some comparison between the original proceeding and the proposed amendment needs to be made. (This was the approach adopted by White J in New Cap Reinsurance Corporation v Reaseguros Alianza SA (2004) 186 FLR 175, at [91].) Reference was made to the approach of Wilcox, Tamberlin and Emmett JJ, in Rodgers v Federal Commissioner of Taxation (1998) 158 ALR 220, to the question (in the context of the Federal Court Rules [1979] (Cth)) as to what was meant by “substantially the same” as one requiring an enquiry as to whether the same facts would need to be addressed in order to ascertain liabilities arising under different claims. That question is to be answered as a matter of general impression. Here, precisely the same facts are relied upon to sustain the claim by the Developers to damages for breach of statutory warranty as their respective claims for contribution and indemnity (and, indeed, the relief sought in that regard is identical in quantum).

63 The objection raised by the Builder to the amendment was principally on the basis, as I understood it, that the amendment went beyond matters of form (because, had the damages claim been pleaded at the outset, it would have been open to the Builder to plead a defence of estoppel based on the instructions it said had been given by the Developers in relation to the approval of the amended air-conditioning specifications). (It was also submitted that the amendment altered the basis from which the court would proceed in determining any apportionment between the parties from the in principle equality of contribution to a basis not founded on any assumption of equality of contribution. I accept that this is the case.)

64 It seemed to me that in substance the claim for damages by way of a complete indemnity was predicated on the same facts (and thus from a factual point of view) took the matter no further than the claim already made for a complete indemnity (based on the proposition for which the Developers contend that, as between the Developers and the Builder, it is the latter who bears full responsibility for the Owners Corporation’s loss, having been in breach of the statutory warranties implied in its original contract with the Developers themselves). The Builder was already raising (in its Cross-Claim against the Developers) a claim that the Developers should bear in full any liability in respect of the air conditioning system by reference to its alleged approval of the variation to the air-conditioning system (and thus had raised the matters on which any estoppel/causation claim would be based in answer to a claim for damages) and the Developers had confirmed that no more was sought on the damages claim than was already sought by way of the complete indemnity which had been claimed.

65 In those circumstances it did not seem to me that there was any prejudice likely to be suffered by the amendment and I gave leave for the amendment accordingly.

Background

66 As noted above, the building works contract was entered into on 27 October 1998. It was a lump sum contract with a fixed price of $18.7 million. To the contract was appended a notice pursuant to the Act setting out the applicable statutory warranties under s 18B(a)–(f) of the Act (and notifying the time period within which proceedings for breach of the statutory warranty must be commenced).

67 Quitstar, as noted above, was the Builder’s sub-contractor in relation to matters including the air-conditioning and ventilation services to be provided for the development. It appears that it was Quitstar who proposed the variations to the air-conditioning system which included the introduction of the three way valves in place of the original specification for ‘stat’ valves.

68 Clause 4.02 of the building contract (on which the Developers rely in answer to any suggestion that the Builder can avoid liability by reason of the fact that the air-conditioning works were subcontracted to Quitstar) provides, relevantly, that the Builder, by sub-contracting any part of the works, is not relieved of its responsibilities under the contract.

69 Clause 5.02.01 of the building contract records the agreement of the Developers and the Builder that the Architect (Mr Bruce Swalwell) is authorised to do any or all of the acts listed in sub-clause (a), including to issue instructions to the Builder in respect of the matters listed in (i) – (xvi). These include instructions in respect of “the Works” and “Variations”. It is conceded by the Developers that in, exercising the authority granted under this clause, the Architect is acting as agent of the Developers. However, a distinction is drawn in that regard by Mr Loewenstein between the agency role for which provision is there made and the Architect’s role under clause 5.02.02 as assessor, valuer or certifier in respect of the matters there listed (including the proper execution and completion of the Works). Moreover, there was no formal “instruction” from the Architect in relation to the introduction of the three way valves.

70 The building works in question involved the demolition of two residential houses on adjacent blocks of land (which had been separately owned by Hung Wai and the Waterhouses, respectively) and the construction of a residential unit complex comprising 14 individual strata title lots (including two penthouse units) and common property. The car-parking levels in the building are accessible only via a car-lift (a matter relied upon by Mr Goddard when costing the rectification works). There is an indoor swimming pool and gymnasium on the basement level. Emphasis was placed by Mr Cheney, on the location of the development (on the waterfront at Kirribilli opposite the Opera House) (and on the money paid by the various individual owners to acquire their residential units, as evidenced by the transfers tendered as Exhibit G) as being of relevance when considering the proportionality of the manner in which the Owners Corporation now claims that rectification of the alleged defective works should be effected.

71 As noted earlier, practical completion was certified in May 2000 and a final occupation certificate was issued on 2 June 2000 (Exhibit E pp264/5). The strata plan was certified on 14 July 2000 and registered, according to Dr Hines (the first secretary and treasurer of the Owners Corporation after registration of the Strata Plan), on 25 July 2000.

72 Shortly prior to practical completion, there was an exchange of correspondence between the Builder and the architect in relation to approval of variations to the air conditioning system as installed. The Builder relies on correspondence from George Floth in May 1999 concerning the air conditioning variations.

73 On 5 May 1999, Quitstar sent a facsimile transmission to the Builder and George Floth attaching schedules of equipment and technical data, including a description of the chiller proposed to be installed (Exhibit E, pp 1897-1899). On 11 May 1999, George Floth wrote to the Architect asking for instructions in relation to the proposed amendment (Exhibit E p 560).

74 The Builder concedes that there was no formal communication of approval by the Architect to the proposed variation. Mr Elliott quite candidly informed me that there was no such instruction in writing to be found in the material before the court. However, he submits that on the balance of probabilities such approval was given, by reference to the ‘as built’ drawings identifying the chillers (the use of which had been proposed by Quitstar) (Exhibit E p 2866), those as built drawings having been certified by, among others, the Architect and George Floth.

75 Mr Elliott then relies on the evidence by the Builder’s air-conditioning expert, Mr Field, as to the normal process for approvals of variations of that kind (paras 6/7 of his affidavit) and the subsequent issue of a certificate of practical completion issued by the Architect that raised no issue as to the variation. Similarly, the use of the three way valves was disclosed in the Quitstar plans (Exhibit E p 3188). Mr Obrart was cross-examined as to the process by which approvals of this kind were given and, though he said that it depended on the nature and size of the changes and the nature of the relationship between the parties (T 99), seemed to accept that the process of approval of drawings was consistent with the process on which the Builder now relies as evidence of the giving of approval to this variation (T 105.43.). (Mr Obrart also accepted that it would be unwise for an architect to sign off on practical completion without obtaining appropriate approval/certification of documentation by experts – T 101, but, in a somewhat resigned fashion, said that this was not as unusual as one would think – T 103, hence I doubt that much can be drawn from the certification of practical completion insofar as approval of the air-conditioning variation is concerned.) Nevertheless, the correspondence from George Floth, the approval or certification of the plans as submitted, and the concession in the Developers’ Defence to the Second Cross-Claim that George Floth created and/or approved the plans and specifications, together lead me to the conclusion that the Developers, through their consultant, consented to the design amendment (albeit not necessarily as a formal contract variation).

76 Dr Hines acquired his unit in the Kirribilli Grande in August 2000. He was the first occupant of the building after Mr Waterhouse. He gave evidence, by affidavit sworn 29 April 2008, as to the difficulties he and his family had experienced with the air-conditioning system and attempts by the Owners Corporation to remedy the problems (including the resolution in September 2002 to engage Mr Youl as a consultant to supervise the complete rectification of the air-conditioning system), as well as his observation of problems with ventilation and paintwork in the building. He gave evidence in particular as to the discomfort suffered by his family in January 2001 when there was not chilled air (simply ambient air circulating through the system) and the temperature was 30 degrees – T 78 and to the need for callouts for repairs to the air-conditioning and the striking of a special levy to fund ongoing repairs - T 82 and Exhibit E p443(a) and 443(b).

77 It seems that the problems with the air conditioning system were brought to the Builder’s attention by a letter to Mr Sean Gibbeson, the site manager, on 15 March 2001 (Exhibit E p362). (The fact that no evidence was adduced in these proceedings from Mr Gibbeson was a matter of criticism by Mr Cheney, albeit in relation to a different issue, namely the scope of the bathroom works as actually carried out.)

78 Thereafter, the firm MM Brown and Associates was commissioned by the Owners Corporation to repair and commission the air conditioning and ventilation systems. Its managing director, Mr Hartwell, who has worked in the industry since 1961, gave evidence as to his firm’s attendances at the building from June 2002 to August 2007 in relation to the air-conditioning problems and that the principal complaint was that the air-conditioning system was not cooling the units. The first inspection took place in about June 2002. Mr Hartwell noted that all operating switches on both chillers had been switched to manual, which he said in his experience was indicative of problems with the automatic settings of the system. He made certain recommendations in relation to a rectification and maintenance programme. Rectification work commenced in December 2002.

79 Annexed to Mr Hartwell’s affidavit sworn 29 April 2008 was a report obtained by his firm from KC Balancing in which certain recommendations were made in relation to the air-conditioning system. Objection was raised to the admission of this report (and the conclusions drawn by Mr Hartwell in relation to this report) in part on the basis that it was unfair that the Builder should have to cross-examine multiple experts in relation to opinions expressed as to the air-conditioning system. I allowed the report in question (and the fact that recommendations had been made to the Owners Corporation) as relevant to the issue of what was before the Owners Corporation (since there was a claim made of failure by it to mitigate). However, in relation to Mr Hartwell’s statements of opinion as to the necessity for the works described in the recommendations contained in the report of KC Balancing, there was nothing in his affidavit that I considered would enable me to assess the weight of Mr Hartwell’s stated opinion as to the necessity of the recommendations and I ultimately excluded that evidence for that reason. Mr Hartwell was not required for cross-examination on his affidavit evidence.

80 According to Mr Hartwell’s affidavit evidence, the first faulty three way valve was found in 2004. He recommended the acquisition of the remaining valves held in stock by the supplier of that kind, on the basis that this would avoid the need for alteration to the pipework which would be necessary if different valves were used. It seems that a programme was put in place for the replacement of the three way valves as and when they failed (which suggests an appreciation at that stage of the likelihood of their ongoing failure). Mr Hartwell’s affidavit itemised the replacement of the three way valves from July 2004 onwards through to June 2006.

81 Mr Youl, a mechanical engineering consultant, was commissioned by the Owners Corporation to oversee the work of MM Brown. Mr Youl also gave evidence in the proceedings. Annexed to his affidavit were copies of callout records for an 18 month period, showing more than one callout a month, excluding what were described as callouts for preventative maintenance and servicing of the system (Exhibit E p658).

82 Under the contract, the defects liability period expired 26 calendar weeks after practical completion (Clause 9.11, Item H in the Appendix) (ie, in about November 2000). It could reasonably be assumed that, prior to the expiry of that period, there was an inspection of the building for the purposes of identifying defects requiring rectification by the Builder. However, there is no evidence of this. I mention this because one of the criticisms made by Mr Elliott of Mr Goddard’s defects report is that what he has done based on an inspection in 2008 is simply to list as defects items which might have been perceived to be defects had they existed at the time of practical completion of the building works back in 2000, without addressing the question as to when (and in some cases how) those defects had appeared. A number of those identified defects (for example, isolated cracked tiles or rusted railings) could well have been due to incidents after the building works were completed. The Builder contends that there is no basis for a finding that a number of these items were a result of any defective work on the part of the Builder or for which it should now be held responsible. I agree. In that regard, one might have thought that any visible cracking or staining at the time of completion of the works would have been the subject of complaint during the defects liability period and, if items of which complaint is now made were not so identified, that the likelihood is that they were due to later events (such as the ordinary use of the units). Whatever may have been the case in relation to inspections at the completion of the works, on the evidence, I am unable to conclude whether or not various of the alleged defects were referable to any breach of statutory warranty by the Builder.

83 I should, for completeness, also note that reference was made in opening submissions to the retention of ownership by Hung Wai of one of the units in the building (and as to the occupation or use of that unit by a member of Hung Wai’s staff from time to time) in the context of evidence that there had been complaint made by a Ms Joyce Chan in relation to the air-conditioning in that unit and as to the attendance by representatives of Hung Wai at one or more meetings which considered and approved the works to be undertaken on behalf of the Owners Corporation in an attempt to rectify the air-conditioning problems. (Mr Loewenstein confirmed that the Developers admitted the ‘notional occupancy’ of unit 7A in the building by Hung Wai.) Nevertheless, it was not ultimately submitted that the making of any complaint as to the operation of the air-conditioning (or approval in general meeting of the members of the Owners Corporation of the rectification works) amounted to any admission against the interests of the Developers (and clearly it could not amount to any admission against the interests of the Builder). There is, in any event, no dispute that there were ongoing problems with the air-conditioning in the building or that works (of the kind commissioned by the Owners Corporation) were required to address those problems.

Claims

84 The claims made by the Owners Corporation in these proceedings, as noted earlier, are based solely on alleged breaches of statutory warranties.

85 The particulars of the alleged defective works said to amount to breach of the statutory warranties are set out at least in part in paragraph 11 of the Amended Summons. I say ‘in part’ because it seems that these particulars are not intended to be exhaustive, since the Owners Corporation also expressly places reliance on ‘the defective work more particularly described in lay and expert evidence served by it in these proceedings’. Nevertheless, insofar as the Amended Summons does particularise the alleged defective work, it comprises the following:

86 The principal defects about which the Owners Corporation complain, as noted earlier, relate to the waterproofing in the bathrooms and the installation and commissioning of the air-conditioning system. (Relevantly, in relation to the latter, Mr Cheney confirmed during the course of submissions that the Owners Corporation relied on breaches of both fitness for occupation and fitness for purpose and the case was conducted on that basis.)

87 A number of issues of principle have been raised in the context of the statutory warranty claims, which I address at the outset before turning to my assessment of the expert witnesses and the issues for determination.

Standing

88 Section 18C of the Act provides that:

A person who is the immediate successor in title to an owner-builder, a holder of a contractor-licence, a former holder or a developer who has done residential building work on land is entitled to the benefit of the statutory warranties as if the owner-builder, holder, former holder or developer were required to hold a contractor-licence and had done the work under a contract with that successor in title to do the work.

89 The Developers concede that the effect of s 18C of the Act is that the Developers are liable to the Owners Corporation as if they had undertaken the building work under a contract with the Owners Corporation. (Although the Builder’s Amended Technology & Construction List Response (para C13) filed 31 October 2008 denies this allegation, it did not appear to be a matter seriously in dispute during the hearing and no basis was put forward as to why the Owners Corporation would not have the benefit of s 18C in this regard.) There is, however, a dispute as to whether the Owners Corporation has standing to raise issues in relation to damage other than to common property.

90 The operation of section 18C would seem to give rise to a number of notional contracts, each encompassing the relevant residential building work done under the initial contract, in cases where, as here, there are individual owners who have acquired strata title to particular units and the Owners Corporation which has vested in it the common property. In other words, by virtue of s 18C, rights under the contract with the Developers have passed to various successors in title, each of whom, unlike the Developers, has a separate and differing title in respect of separate units or property in the strata plan.

91 What then is the residential building work in respect of which each separate successor in title has the benefit of the statutory implied warranties? If the notional contract with each successor entitles that successor to the benefit of the statutory warranties in respect of the whole of the residential building work for the development, then arguably the standing issue would not arise and a claim could be made by each successor for breaches in relation to the overall works (though there would surely then be an issue as to what damage one successor might have suffered by breach of a statutory warranty in relation to work over an area of the building in which it has no immediate interest). The more likely construction of s 18C, it seems to me, is that each successor in title has the benefit of the statutory warranties but only insofar as they pertain to work (albeit done under an entire contract) in relation to that successor’s now separately owned property.

92 It is well accepted that the Owners Corporation, as legal owner, has standing to sue in relation to matters concerning the common property, as discussed by Spigelman CJ (with whom McColl and Ipp JJA agreed) in Owners-Strata Plan No 43551 v Walter Construction Group Limited [2004] NSWCA 429, at [49]. Individual owners, similarly, have standing to sue in relation to matters concerning their strata title. Thus in Owners Corp SP 77144 & Ors v Andelini (Home Building) [2008] NSWCTTT 1506, without discussion, Senior Member Paull proceeded on the basis that the individual lot owners and the relevant Owners Corporation there had standing to sue in respect of defective work for damages for the reasonable cost of rectification of the work that “pertained to their individual lot and in the case of the Owners Corporation, the reasonable cost of the rectification of the common property in issue”.

93 It seems to me difficult for the Owners Corporation to argue that it has standing, as the entity having title to the common property, in its own right to sue in relation to matters concerning property of which various individual Owners Corporation have title. Therefore, on the standing issue I would accept the Builder’s contention that it is not for the Owners Corporation to make complaint as to breach of statutory warranties in relation to building work in areas other than common property. (In any event, it is difficult to see how any loss could have been suffered by the Owners Corporation, as opposed to individual owners, for breach of warranties in relation to individual titles within the complex.) I have dealt with the relevant Scott Schedule claims on that basis.

Warranties

94 Whilst reliance is placed on each of the statutory warranties implied into the building contract (by s 18B(a)-(f) of the Act, inclusive) in the Amended Summons, in his opening submissions Mr Cheney informed me that the Owners Corporation did not press any claim based on the warranties provided for by s 18B(b), insofar as it relates to the use of ‘new’ materials, or s 18B(d). (This concession seems to have caused some misunderstanding as to whether any claim based on the warranty provided for under s 18B(b) was being pressed at all, a matter of relevance when considering the question of the three way valves – and I consider this issue later in that context.)

95 As I understand it, what the Owners Corporation now relies upon are alleged breaches of the following warranties:

s 18B(a)

s 18B(b)

s 18B(c)

Building Code of Australia

Environmental Assessment and Planning Act

s 18B(e)

s 18B(f)

Reasonable fitness for occupation

96 In relation to the warranty implied by s 18B(e), there is a question as to what amounts to reasonable fitness for occupation in the context of the Owners Corporation’s present claims (ie, that there is excessive dampness or moisture in the bathrooms or that the air-conditioning failed properly to cool the air inside the units or as to the existence of drummy render or the like).

97 Mr Cheney maintains that the use of the qualifier as to reasonableness means that it is not necessary for the Owners Corporation to show that the building was rendered uninhabitable by the defects of which complaint is now made. I note that this is the conclusion which was reached, in considering the import of the statutory warranties under the Act, by Senior Member Bordon in the Consumer Tenancy and Trader Tribunal in Mesaros v A V Jennings Properties Ltd (Home Building) [2008] NSWCTTT 865. In that case, the Tribunal found on the evidence that there had been extensive damage occasioned by the building works, including a “substantial significant settlement and/or swelling of the foundations” and a significant tilt to the concrete slab on which the house was built. (Thus it is apparent that the damage was far more extensive than the damage reported in the Goddard report in this case.) Senior Member Bordon said:

The Court has a wide discretion to make appropriate orders for contribution between wrongdoers to ensure that each party liable in respect of the same damage makes a just contribution by paying a proper share towards discharging the common obligation: see Albion Insurance Company Ltd v Government Insurance Office of New South Wales (1969) 121 CLR 342 at 350-1 per Kitto J and Jones v Mortgage Acceptance Nominees Ltd (1996) 142 ALR 561 at 563-5 per Davies J.

On the facts I have found, I am satisfied that Bialkower was the primary, but not the sole, cause of the breach of s52 by RMS and RMC. McCann misunderstood the information initially communicated by Bialkower and failed to adopt Bialkower's suggestion that Infosafe not be mentioned in the item. Bialkower had the opportunity, but failed, to correct McCann's misunderstanding when the proposed article was facsimiled to him.

427 On appeal in Bialkower v Acohs Pty Ltd & RA Bashford Consulting Pty Ltd (1998) 83 FCR 1; (1998) 154 ALR 534; (1998) 41 IPR 33, the Full Federal Court (Beaumont, Hill and Sundberg JJ), upheld the rateable apportionment which had been made by the primary judge but did so under the Wrongs Act 1958 (Vic). The Full Court stated (at 545);

The general law doctrine of contribution requires that the parties between whom it takes place be under coordinate liabilities to make good the one loss. Coordinate liabilities are those which stem from a common obligation. We agree with Davies J in Jones that joint tortfeasors were earlier refused relief by way of contribution, not because of the absence of a common or coordinate obligation, but because it was thought that such relief should not be granted to wrongdoers. We need not decide whether the principle of contribution is limited to cases where there is a common obligation or a coordinate liability, or whether contribution can be ordered in any case where the circumstances give rise to an equity in favour of a person who has suffered a loss because of an act intended to benefit others: see Cummings v Lewis (1993) 41 FCR 559 at 592-9.

It is not necessary in order that liabilities be coordinate or common that parties be jointly liable. The liability may be joint, joint and several or several: Dering v Lord Winchelsea (1787) 1 Cox Eq Cas 318; Meagher, Gummow and Lehane, Equity — Doctrines and Remedies (3rd ed, 1992) pp 289-90. It is sufficient if two people are both liable in respect of the one loss, even if they are liable on different causes of action: Street v Retravision (NSW) Pty Ltd (1995) 135 ALR 168 at 176; Jones at 564. There is no contribution between persons each liable in respect of a distinct portion of the one obligation. They do not share their obligation in respect of the same subject matter. The position is otherwise where persons are liable upon the whole of an obligation but with a limitation upon the quantum recoverable. Where the limitation in amount differs between the obligors, each is liable to contribute rateably according to his undertaking: see Ellesmere Brewery Co v Cooper [1896] 1 QB 75 and Retravision at 177.

Albion

428 From my reading of decision of the Full Court in Bialkower, it would seem that the court there did more than reserve the question as to what would be the position under the common law and went on to make the following observations, in obiter, questioning the power of a court to award apportionment unequally (at 546):

Jones

we doubt whether the general law of contribution authorises an apportionment such as that made by the primary judge. Contribution is “founded on equality” (

Albion

at 351), though it is true that “equality” in the maxim “equity is equality” is not literal equality, but proportionate equality:

Re Steel (dec'd)

Jacobs’ Law of Trusts in Australia

Snell

Snell's Equity

Jacobs

The matter was not argued before us, and since the apportionment can be supported by s 23B of the Wrongs Act, we need not decide the issue, which will be a live one in jurisdictions such as New South Wales which do not have a provision such as s 23B.

429 In Duke Group Ltd (In Liq) v Pilmer, at 495-496, the primary judge ordered contribution in unequal portions (from 383);

the proceedings against Quilty and Singleton and the first defendants claim indemnity or contribution by reason of breach of fiduciary and statutory duties. The same basis of claim is also made against Harold Abbott, Lee-Steere and Somes as well as a claim in negligence, it being alleged that they were in breach of a duty of care to the first defendants. No proceedings for indemnity or contribution have been instituted by any of the director defendants against the first defendants.

It has been seen that the claims against the director defendants for breach of fiduciary and statutory duties involve conduct which is clearly tortious even though the conduct of Quilty and Singleton has not been categorised in that way. An example is that all of the director defendants are alleged to have been in breach of the duty to exercise a reasonable degree of care and diligence in the exercise of their powers and the discharge of their duties. However, they are duties which the director defendants owed to Kia Ora, not to Nelson Wheeler Perth.

… [his Honour then made findings regarding the proportional liability as between the defendants] ...

Section 25 of the Wrongs Act 1935 (SA) provides for contribution between joint tort-feasors, which is an apt description of the first defendants and the director defendants. However, there is no allegation of any liability in tort against Quilty and Singleton. Also, there is no allegation of liability in tort on the part of Harold Abbott, Lee-Steere and Somes to the plaintiff. Nonetheless, there has been no suggestion that the first defendants are not entitled to contribution from the director defendants as a matter of law. Their conduct clearly constitutes a tort and s 25 provides for contribution where damage is suffered by any person as a result of a tort. It is appropriate to categorise all of the director defendants as tort-feasors.

On that basis, I apportion responsibility for the loss sustained by the plaintiff as indicated and the first defendants are entitled to contribution accordingly.

430 This order was subject to a separate appeal, a point noted by the High Court in Pilmer v Duke Group Ltd (In Liq) [2001] HCA 31; 207 CLR 165; (2001) 75 ALJR 1067; 180 ALR 249, at 298-299, although the issue whether unequal apportionment may be made for equitable contribution was not discussed, and it was noted that in that case, any unequal apportionment was done under the Wrongs Act 1935 (SA).

431 I have found for the Owners Corporation against the Builder and the Developers in respect of breaches of one or more of the statutory warranties in relation to the bathroom claims (those being in respect of units 2C, 3A, 6A and 7B); for most of the air-conditioning claims; and for part of the Scott Schedule claims.

432 The Developers contend that the Builder should bear the full liability to the Owners Corporation since that liability is predicated on the Builder’s breach of the statutory warranties (and hence a breach of its contract with the Developers). The Builder contends that liability for the air-conditioning should be borne in full by the Developers and the balance borne 50/50 on the basis of an equal contribution.

433 While there is a suggestion in the authorities that in appropriate cases equitable contribution may be able to be determined by reference to the proportionate culpability of the parties, such a proposition is contrary to the traditional approach of equity in this context.

434 If the question were simply to be to determine where principal responsibility for the breaches of statutory warranty lies, that would in my view lead to a conclusion that the Builder was principally responsible for the defective workmanship and materials claims (ie the bathroom claims, part of the air-conditioning claims and the Scott Schedule claims) but the position in relation to the breach of warranty for fitness of purpose in relation to the air-conditioning system is more complicated. The Developers, through their consultant(s), made possible the completion of the works with an air-conditioning system that was not reasonably fit for the purpose identified in the mechanical specifications. The Builder then compounded what seems to have been the inevitability of failure (of a system not reasonably fit for its required purpose) by failing properly to commission the system. Had it not failed in that aspect of the works, the Developers would have had an opportunity to rectify the situation at that stage (whether or not that would have been at the Developers’ cost).

435 However, the fact that the respective cross-claimants/cross-defendants bore (as between themselves) a different degree of culpability for the losses suffered by the Owners Corporation does not, on the accepted principles of equitable contribution, warrant an order that for equitable contribution other than on a 50/50 basis as between the Builder and the Developers and I would have determined the equitable contribution claims on that basis.

436 That does not finally determine the position as between the respective defendants because the Developers also have a claim for damages for breach of statutory warranties arising out of the same facts as those on which their equitable contribution claim is made. Those damages are claimed by reference to the extent of their liability to the Owners which they would otherwise not have suffered had the Builders not been in breach of the statutory warranties contained in their building contract in relation to the works. In any such assessment, one would need to take into account the extent to which the Developers’ own conduct was causative of the loss.

437 Had the Builder properly commissioned the system, the fundamental deficiencies in the operation of the system should thereby have become apparent. The Developers have been deprived of the opportunity to remedy those problems at a very early stage. Just because their consultant had accepted the modification of the system suggested by Quitstar does not mean that when the shortcomings of that modification were made apparent to them they would not have taken steps to resolve those problems and thus avoided later problems arising from the failure of the system.

438 As to the question of liability for the air-conditioning claims, Mr Loewenstein took issue with the suggestion that any conduct by the architect or by George Floth in relation to the amendment to the air-conditioning specifications was conduct by either of them as agent for the Developers and noted that no allegation of agency had been pleaded in respect of the acts or omissions of either of them.

439 Mr Loewenstein referred to the Guideline Terms of Agreement between the Developers and George Floth governing the contractual relationship between them. Further, it was said that the admission by the Developers in their Defence to the Builder’s cross-claim, to the effect George Floth was the Developers’ consultant mechanical engineer and approved the amendments to the specifications does not create any obligation on the part of the developer.

440 As I understand it, the basis on which the Builder contends that the cost of installation of the balancing valves (quantified at $38,740 excluding GST) rests entirely with the Developers is not based on any allegation of agency as such, but rather it is that the Builder was entitled to act on the instructions of the architect and the Developers’ consultants and that it did so.

441 Insofar as the cause of the failure of the air-conditioning system was due to the lack of balancing valves, and that this was an approved variation, it is said that the Builder did not breach its contract with the Developers in terms of installation of the system. Further, it is said that because of the amendment to the specifications, even if a full commissioning of the system as installed would have led to the awareness of a need for balancing valves and a decision by the Developers to engage the Builder or someone else to retro-fit them, that would have been something for which the Developers would have been liable to pay (it falling outside the amended contractual specifications as a consequence of the variation from stat valves to three way valves). Thus, if Developers wanted to add something to the system it is said they would have had to pay for it.

442 For these reasons, it is submitted by the Builder that, when considering contribution as between the Builder and the Developers in respect of the cost of any liability for the installation of balancing valves, then if there is to be any departure from an equal pro rata contribution, the Developers should meet the whole of that cost.

443 As to the balance of the air-conditioning claims, the Builder submits that the Act renders both the Builder and the Developers liable when there is a breach of statutory warranty and that a pro rata equitable contribution is appropriate where the Builder supplied what it had been instructed to supply and that system was accepted by the Developers. The Builder points out that the Developers had the assistance of a specialist air-conditioning designer and an architect and can be presumed to have been in a position to make an informed decision about what should or should not installed. To that extent, I would be inclined to agree with Mr Elliott’s submission but I do not accept that he can make good the submission that the Developers were also in a position to know what testing was satisfactory, in circumstances where there is no evidence to which I was taken to suggest that the Developers in any way were responsible to overview supervise or certify the testing. Therefore, it seems to me that while any claim for damages as between the Developers and the Builder would not include the installation of the balancing valves themselves (that being a design decision accepted by the Developers), it would include losses resulting from the late discovery of the extent of the problems likely to be caused by the design modification.

444 I am therefore of the view that the damages which the Developers have incurred by way of the Builder’s breach of statutory warranties, while measured in general by the Developers’ liability to the Owners Corporation do not, in relation to the air-conditioning claims include the costs referable to the installation of the system as approved by the Developers’ consultant. Those were not, in my view, caused by the Builder’s breaches but by the decision (made by the Developers’ consultant to amend the specifications for the system. Accordingly, I do not consider that the Developers would be in a position to obtain an indemnity for liability in respect of the Owners’ Corporation‘s liability for the breach of the s 18B(f) warranty by the Builder. Otherwise, the measure of the Developers’ damages by reference to the Builder’s breaches of its building contract warranties would encompass any amounts for which the Developers were liable to the Owners Corporation.

445 The total amount for which the Builder and Developers are jointly and severally liable to the Owners Corporation, on the calculations set out earlier, is $276,581.46.

446 In terms of the claims between the Builder and the Developers, the Builder is liable (by way of damages for the breach of statutory warranties in its contract with the Developers) to indemnify the Developers for all amounts which the Developers by reason of those breaches are liable to pay the Owners Corporation other than the cost of the installation and commissioning of the balancing valve costs ($46,458.50), the need for which was due to the decision to amend the design specifications of the air-conditioning system. Those amounts, excluded from the indemnity, would fall to be apportioned equally between the respective defendants. Thus, as between the defendants I find that the Builder is liable for the sum of $276,581.46 less a half share of the balancing valve costs ($253,352.21) and the Developers are liable for the sum of $23,229.25, being the balance half share of the balancing valve costs.

Conclusion

447 For the reasons set out above, I have concluded that:

(i) in relation to the bathroom claims:

(a) there was a breach of the s 18B(a) and s 18B(c) warranties by reason of the failure to install a correctly positioned waterstop in units 3A, 6A and 7B (for which breach the remedy is that a waterstop should be retro fitted to those units and a sum of $2,895.60 allowed for each shower recess (4 in total since there are two in 7B) in order to allow for the re-tiling of the shower floor in those units in accordance with Mr Beard’s costings);

(b) there was a breach of the s 18B(a) warranty by reason of the acknowledged defective work in units 2C and 7B (to be compensated for by payment of the sums agreed by Mr Beard plus, in the case of 2C, investigation and if necessary the retro-fitting of a waterstop or other further waterproofing measures to address the excessive moisture in that unit);

(c) there was otherwise no breach of the s 18B warranties in relation to the bathrooms (other than the issue of underfloor heating which I deal with below).

(ii) in relation to the air-conditioning claims:

(a) there was a breach of the s 18B(f) warranty by reason of the installation of an air-conditioning system which was not reasonably fit for the purpose specified in the mechanical specifications contained in the contract (which subsisted even after the amendment to the air-conditioning plans to allow for the substitution of three way valves in the air-conditioning system) (for which the Owners Corporation is entitled to compensation for the cost of the installation of balancing valves and subsequent recommissioning of the system);

(b) there was a breach of the s 18B(a) warranty by reason of the failure of the Builder properly to commission the air-conditioning system (in the sense of a failure properly to calibrate the system and/or to carry out full acceptance testing on the system as installed, which failure led to the loss of the opportunity to investigate and remedy the deficiencies in the system at that point (sounding in damages to compensate for the cost incurred in the later investigations) and the cost thrown away by the unsuccessful replacement of the chiller compressors (which would not have been incurred had the problems been identified at an earlier stage);

(c) there was a breach of the s 18B(b) warranty in relation to the installation of faulty three-way valves (to be compensated for by reimbursement of the cost of installation of the replacement valves);

(d) there was also a breach of the s 18B(a) warranty in relation to the miscellaneous insulation item conceded by the Builder (in the order of $4,800);

(e) the Builder is not liable for routine air-conditioning maintenance;

(f) there is no deduction required for any failure to take reasonable steps to mitigate loss as I have found no such failure as a matter of fact.

(iii) in relation to the Scott Schedule claims:

(a) liability is as itemised in the annotated Scott Schedule attached, including liability for the rectification of the underfloor heating in units 2C and 7B (to be costed at $750 per unit plus the cost of replacement of only such tiles as reasonably necessary in order to effect the repairs).

(iv) the cross-claim by the Developers against the Builder for equitable contribution is not barred by reason of s 18E of the Act.

(v) in relation to the contribution claims as between the Builder and the Developers:

(a) subject to (b), as between the respective cross-claimants and cross-defendants, liability for the Owners Corporation’s loss should be borne equally pursuant to the doctrine of equitable contribution;

excluding

448 Accordingly, on the evidence put before me on quantum, I consider that the Builder and the Developers are jointly and severally liable to the Owners Corporation in the sum of $276,581.46 and that, as between the Builder and the Developers, the Builder is liable for $253,352.21 and the Developers are liable for the sum of $23,229.25.

449 I will list the matter for any submissions as to the proper quantification of the claims in accordance with my findings and as to costs. I direct the parties to bring in short minutes of order on that occasion.

**********

Part A – Items agreed by Builder
Goddard report	Description			Amount
9.5 (i)	The skirting board on western wall of foyer adjacent to master bedroom ensuite shower.			$283.00
9.6 (i)	Crack between the cornice and rendered wall on the southern wall of entry hall			$306.00
9.6 (ii)	Cracked and drummy render above the skirting board on the southern wall of entry hall			$1,444.00
9.6 (iii)	Vertical crack in the cement render adjacent to the vertical ‘V’ joint on northern wall			$772.00
9.6 (iv)	External corner of the cornice on north west corner of the entry hall is cracked			$84.00
9.6 (x)	Crack between the cornice and rendered wall on the western wall of main bedroom.			$1,886.00
9.7 (ii)	External corner of cornice opposite bedroom 2 doorway has cracked and there is a crack between the bottom of the cornice and the wall			$152.00
9.7 (iii)	Crack in plasterboard ceiling sheet adjacent to bedroom 3 doorway to be reset			$168.00
9.7 (vii)	Damaged base of columns behind the kitchen sink unit.			$361.00
9.7 (ix)	Eastern wall inside the meter room. The cement render on this wall ‘drummy’			$1,290.00
9.9 (i)	Excessive dampness in the skirting board on the eastern end of the external aluminium sliding doors			$1,597.00
9.12(i)–(iv)	Water damage to the western wall and skirting board at the northern end in bedroom 2			$3,998.00
9.16 (i)	The window sill in the south east corner of bedroom 4			$1,615.00
9.16 (ii)	Crack between the wall and ceiling. The crack runs the full length of the east wall of fourth bedroom			$878.00
9.17 (ii)	The insulation in the ceiling had not been removed from around the down light.			$240.00
9.17(iv)	Casement window on the s/e corner of dining room.			$250.00
9.19	Some floor tiles paving around the perimeter of pool.			$18,315.00
9.20	The framing for the skylights around pool.			$9,350.00
Total				$42,989
PART B – Items not agreed by Builder
Goddard Report		Description	Ruling			Amount
APARTMENT 1A – section 9.4 of Goddard Report
9.4(ii)		One cracked wall tile adjacent to toilet door in main ensuite	Hairline crack less than 1mm not visible from a viewing position of 1.5m under normal lighting Evidence does not establish that the item was the result of defective workmanship.			Nil
9.4(vi)		2 cracked wall tiles at top of eastern wall of guest ensuite and adjacent to toilet pan	Hairline crack less than 1mm not visible from a viewing position of 1.5m under normal lighting Evidence does not establish that the item was the result of defective workmanship.			Nil
9.4(vii)		Western wall of the study cracked and crazed. Drummy render.	Evidence does not establish that the item was the result of defective workmanship. In any event issue already rectified.			Nil
9.4		Underfloor heating in bathroom.	No evidence that this is a defect or was caused by defective works.			Nil
APARTMENT 1B – section 9.5 of Goddard Report
9.5(iv)	Western wall of the study cracked and crazed.		Hairline crack less than 1mm not visible from a viewing position of 1.5m under normal lighting Evidence does not establish that the item was the result of defective workmanship.			Nil
9.5(v)	Cement render on the southern dining room wall adjacent to the window and sliding doors cracked; “drummy” areas of render on the wall. The vertical crack has loose sections of cement render around the crack.		Accepted as defect.			$315
9.5(vi)	Crack in northern wall of laundry. This wall is also “drummy”. There is also general cracking between the cornice and rendered wall		Accepted as defect.			$495
9.5(vii)	Eastern wall adjacent to the main bedroom window is cracked and ‘drummy’		Accepted as defect.			$315
APARTMENT 1C – Section 9.6 of Goddard Report
9.6(vii)		Door to the toilet on the southern side of the guest bathroom is binding on the door jam	Not common property.			Nil
9.6(viii)		Vertical crack in the western wall of the dining room adjacent to the southern windows. The cement render on this wall is “drummy”.	Accepted as defect.			$365.63
9.6(ix)		Vertical crack in the eastern wall of main bedroom adjacent to the southern window. The cement render on this wall is “drummy” and is to be removed and re-rendered	Accepted as defect.			$360
9.6		Underfloor heating in bathroom	No evidence that this is a defect or was caused by defective works.			Nil
APARTMENT 2A – Section 9.7 of Goddard Report
9.7(i)		Wall adjacent to the meter cupboard. The wall is cracked and ‘drummy’	Accepted this is a defect in his first report.			$945
9.7(v)		Western wall in hallway leading to bedrooms 2 & 3. The cement render on wall has crazed and is drummy	No evidence of drummy (not disputed by Mr Goddard T175.5).			Nil
9.7(vi)		Cracked wall tiles in the powder room adjacent the toilet pan. There are four cracked tiles.	Hairline crack less than 1mm not visible from a viewing position of 1.5m under normal lighting Evidence does not establish that the item was the result of defective workmanship. (In cross-examination Mr Goddard admitted it was not a defect – T 175.44.)			Nil
9.7(viii)		Western wall of master bedroom has cracked, crazed and is ‘drummy’. There is a small crack between the cornice and wall. All cracks on this wall are ‘Fine cracks that do not need repair’.	Per Mr Goddard’s report, not a defect requiring repair.			Nil
APARTMENT 2C - Section 9.9 of Goddard Report
9.9		Underfloor heating in bathroom	Infer damage due to moisture as a result of waterproofing problem			$750
Rust on arch bar over the door from dining area to balcony	Evidence does not establish that the item was the result of defective workmanship			Nil
APARTMENT 3A – section 9.10 of the Goddard Report
9.10(i)		Knobs on the vanity units that have broken off and loose	Not common property.			Nil
9.10(ii)		Sealant has come away from between the vanity unit and the upturn in ensuite off bedroom 3	Not common property.			Nil
9.10(iv)		Aluminium sliding doors from living area to balcony. The doors are very difficult to bring together for locking.	Not common property.			Nil
APARTMENT 3B – section 9.11 of the Goddard Report
9.11(i)		Cracks in the ceiling and cornices.	Evidence does not establish that the item was the result of defective workmanship.			Nil
9.11(ii)		The cement render in the dining room is ‘drummy’ in a number of areas	Accepted as defect.			$452.45
APARTMENT 5A – section 9.12 of the Goddard Report
9.12 (v – xi)		Wall in the living room which is adjacent to the kitchen area finished with a mottled extremely high gloss (similar to a polyurethane finish). Crack and “drummy” render on the eastern side of the wall adjacent to the glass screen. Cracked and “drummy” render on the southern side of wall starting at the cornice and running down behind the picture. Cracks on western side of wall.	Hairline cracks of less than 1mm. Evidence does not establish that the item was the result of defective workmanship. No evidence of drummy render. (Accepted by Mr Goddard in cross-examination that cracks did not require repair – T 177.6 and no dispute as to conclusion re drummy render – T 177.15.)			Nil
APARTMENT 6A – section 9.14 of the Goddard Report
9.14(i)		Cracked and drummy Render on western wall, southern end of master bedroom	Issue already rectified. No loss.			Nil
APARTMENT 7A – section 9.16 of the Goddard Report
9.16(iv)		Crack and ‘drummy’ render on the western wall at the southern end of the dining room	Accepted as defect			$762.50
450 APARTMENT 7B – section 9.17 of the Goddard Report
9.17(i)		Floor waste is 2mm above floor tiles	Infer defective workmanship		$1,361.50
9.17(iii)		Wind noise between the external aluminium doors from living room to balcony where the centre stiles of doors close against each others when the doors are fully closed	No evidence to indicate that this was caused by any defective workmanship.		Nil
9.17(v)		Stains on the stainless steel balcony railings	No evidence that this is the result of defective works.		Nil
9.17(vi)		Cracked and ‘drummy’ render in northern wall on east side of master bedroom	Accepted as defect.		$541.13
9.17		Underfloor heating in bathroom	Infer damage due to moisture as a result of waterproofing problem		$750

Section 9.21 of Goddard

9.21 The mortar joints between the sandstone panels. Accepted as defect. $3,210

Total calculations for schedule B

Section Sub total amount – as identified above

9.4 NIL NIL

9.5 $315 + $495 + $315 $1125

9.6 $365.63 + $360 $725.63

9.7 $945 $945

9.9 $750 $750

9.10 NIL NIL

9.11 $452.45 $452.45

9.12 NIL NIL

9.14 NIL NIL

9.16 $762.50 $762.50

9.17 $541.13 + $750 $1291.13

9.21 $3210 $3210

a TOTAL for Schedule B items $9261.71

CITATION:	The Owners Strata Plan 62930 v Kell & Rigby Holdings Pty Ltd [2010] NSWSC 612
HEARING DATE(S):	24-28 May, 1&2 June 2010
JUDGMENT DATE :	29 June 2010
JURISDICTION:	Equity
JUDGMENT OF:	Ward J
DECISION:	Plaintiff has established breach of various statutory warranties under Home Building Act. Finding that defendants jointly and severally liable to plaintiff in the sum of $276,581.46 (to be adjusted if necessary in accordance with reasons for judgment). As between defendants, first defendant liable to indemnify second to fourth defendants for all amounts they are liable to pay to plaintiff, other than in relation to installation and commissioning of balancing valves. First defendant therefore liable for $253,352.21 and second to fourth defendants for $23,229.25. Submissions as to costs and quantum to be made before final orders entered.
CATCHWORDS:	BUILDING AND CONSTRUCTION - owners corporation claim against developers and builder for breach of statutory warranties - assessment of damages for breach - HELD - various breaches of statutory warranty established - were breaches causative of loss – reasonableness of rectification sought - LIMITATIONS - whether developers’ cross-claim against builder was statute barred - HELD - developer’s claim for equitable contribution was not statute barred - APPORTIONMENT of liability as between developers and builder
LEGISLATION CITED:	Building Code of Australia Civil Procedure Act 2005 (NSW) Environmental Assessment and Planning Act 1979 (NSW) Environmental Planning and Assessment Regulation 2000 (NSW) Environmental Planning and Assessment Regulation 1998 (NSW) Environmental Planning and Assessment Regulation 1994 (NSW) Family Provision Act 1982 (NSW) Federal Court of Australia Act 1976 (Cth) Federal Court Rules [1979] (Cth) Home Building Act 1989 (NSW) Law Reform (Miscellaneous Provisions) Act 1946 (NSW) Limitation Act 1969 (NSW) Local Government (Approvals) Regulation 1993 (NSW) Supreme Court Rules 1970 (NSW) Uniform Civil Procedure Rules 2005 (NSW) Wrongs Act 1958 (Vic) Wrongs Act 1935 (SA)
CASES CITED:	Abigroup Ltd v Abignano (1992) 39 FCR 74 Acohs Pty Ltd v RA Bashford Consulting Pty Ltd (1997) 144 ALR 528 Air Link Pty Limited v Paterson (No 2) [2003] NSWCA 251 Albion Insurance Co Ltd v Government Insurance Office (NSW) (1969) 121 CLR 342 Aon Risk Services Australia Limited v Australian National University [2009] HCA 27; (2009) 239 CLR 175 Armstrong v Commissioner of Stamp Duties (1967) 69 SR (NSW) 38 Bartlett v Sidney Marcus Limited [1965] 1 WLR 1013; [1965] 2 All ER 753 Blake v Norris (1990) 20 NSWLR 300 Bebonis v Angelos (2002) 56 NSWLR 127 Bellgrove v Eldridge [1954] HCA 36; (1954) 90 CLR 613 Belan v Casey [2003] NSWSC 159 Bialkower v Acohs Pty Ltd & RA Bashford Consulting Pty Ltd (1998) 83 FCR 1; (1998) 154 ALR 534; (1998) 41 IPR 33 Brandi v Mingot (1976) 12 ALR 551 Brewarrina Shire Council v Beckhaus Civil Pty Limited [2005] NSWCA 248 Building Insurers’ Guarantee Corporation v Strata Plan No 57504 [2010] NSWCA 23 Burke v LFOT Pty Limited (2002) 209 CLR 282 Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (No 4) (2006) 229 ALR 136; [2006] FCA 446 Craythorne v Swinburne (1807) 14 Ves 160 ; (1807) 33 ER 482 Central Coast Leagues Club v Gosford City Council (unreported, NSWSC, 9 June 2008) Commonwealth of Australia v McLean (unreported, NSWCA, 31 December 1996) Davies v Evan Humphreys (1840) 6 Meeson Welsby 153; (1840) 151 ER 361 De Cesare v Deluxe Motors Pty Ltd (1996) 67 SASR 28 Dering v Winchelsea (1787) 1 Cox Eq Cas 318 Director of War Service Homes v Harris [1968] Qd R 275 Duke Group Ltd (In Liq) v Pilmer (1998) 27 ACSR 1 Ex parte Snowdon; In Re Snowdon (1881) 17 Ch D 44 Feast Contractors v Ray Vincent Limited [1974] 1 NZLR 212 Fernance v Nominal Defendant (1989) 17 NSWLR 710 Gagner Pty Ltd t/as Indochine Café v Centuri Corp Pty Ltd (2009) 262 ALR 691; (2009) 236 FLR 401; [2009] NSWCA 413 Gladstone Park Shopping Centre Pty Ltd v Ross Wills (1984) 2 FCR 334, (1984) 55 ALR 387 Gray v Queensland Housing [2004] QSC 276 Greater Lithgow City Council v Wolfenden [2007] NSWCA 180 Gregory Paul Montfroy v Roads Corporation (trading as VicRoads) [2005] VSC 320 Hancock v B W Brazier (Anerley) Ltd [1966] 1 WLR 1317 HML v R [2008] HCA 16; (2008) 235 CLR 334; (2008) 245 ALR 204 Ho v Powell (2001) 51 NSWLR 572; [2001] NSWCA 168 Honeywood v Munnings [2006] NSWCA 215 Hungerfords v Walker [1989] HCA 8; (1989) 171 CLR 125 James Hardie & Co v Wyong Shire Council (2000) 48 NSWLR 679 Janet Campbell v CJ Cordony & Sons Ply Ltd [2009] NSWSC 63 Jones v Bartlett [2000] HCA 56; (2000) 205 CLR 166 Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298 Jones v Mortgage Acceptance Nominees Ltd (1996) 63 FCR 418; (1996) 142 ALR 561 Karacominakis v Big Country Developments Pty Ltd & Anor [2000] NSWCA 313 Katsilis v Broken Hill Pty Co Ltd (1977) 18 ALR 181; (1977) 52 ALJR 189 Kavalee v Burbidge (1998) 43 NSWLR 422 McGee v Yeomans [1977] 1 NSWLR 273 McLean v Discount and Finance Ltd (1939) 64 CLR 312 Mahony v McManus (1981) 180 CLR 30 Manufacturers Mutual Insurance v GIO (1993) 7 ANZ Ins Cas 61-158; (1993) Aust Contract R 90-023 Mesaros v A V Jennings Properties Ltd (Home Building) [2008] NSWCTTT 865 Miller v Cannon Hill Estates Ltd [1931] 2 KB 113 Minister of Employment and Workplace Relations v Gribbles Radiology Pty Ltd [2005] HCA 9; (2005) 222 CLR 194 New Cap Reinsurance Corporation v Reaseguros Alianza SA (2004) 186 FLR 175 Qantas Airways Ltd v AF Little Pty Ltd [1981] 2 NSWLR 34 Oates v Consolidated Capital Services Ltd (2009) 257 ALR 558; (2009) 233 FLR 283; (2009) 72 ACSR 506; [2009] NSWCA 183 Owners Corporation Strata Plan 65255 v Kell & Rigby Pty Limited (Home Building) & ors [2008] NSWCTTT 544 (29 September 2009) Owners-Strata Plan No 43551 v Walter Construction Group Limited [2004] NSWCA 429 Owners Corp SP 77144 & Ors v Andelini (Home Building) [2008] NSWCTTT 1506 Pilmer v Duke Group Ltd (In Liq) [2001] HCA 31; 207 CLR 165; (2001) 75 ALJR 1067; 180 ALR 249 Proctor v Jetway Aviation Pty Limited [1984]1 NSWLR 166 Radford v De Froberville [1977] 1 WLR 126 Riverina Wines Pty Limited v Tetra Pak Marketing Pty Limited and Ors [2007] NSWSC 1014 Rodgers v Federal Commissioner of Taxation (1998) 158 ALR 220 Sterling Estates Development Corporation Pty Limited v Malouf & Anor [2003] NSWCA 278; (2003) 58 NSWLR 685 Tabcorp Holdings v Bowen Investments Pty Limited [2009] HCA 8 The Craftsmen Restoration and Renovations v Thomas Boland [2008] NSWSC 660 The Insurance Commissioner v Joyce [1948] HCA 17; (1948) 77 CLR 39 Weldon v Neal (1887) 19 QB 394 Westpoint Management Ltd v Chocolate Factory Apartments Ltd [2007] NSWCA 253 Whiley Investments (Qld) Pty Ltd v Pet's Paradise (Qld) Pty Ltd [2009] VSC 144 William Gary Quick v Stoland Pty Ltd [1998] FCA 1200 Wilson v Kybren P/L (Home Building) [2002] NSWCTTT 742 Wolmershausen v Gullick [1893] 2 Ch 514
TEXTS CITED:	Heydon D., Cross on Evidence, 7th Australian ed, Butterworths, 2004 Meagher, Gummow & Lehane, Equity Doctrines and Remedies, 4th ed, Butterworths, 2002 Young P., Croft C. and Smith M, On Equity, Lawbook Co., 200
PARTIES:	The Owners Strata Plan 62930 (Plaintiff) Kell & Rigby Holdings Pty Ltd (First Defendant) Hung Wai Investment Pty Ltd (Second Defendant/First Cross-Claimant) John Knight Waterhouse (Third Defendant/Second Cross-Claimant) Margaret Ann Waterhouse (Fourth Defendant/Third Cross-Claimant)
FILE NUMBER(S):	SC 2008/290664
COUNSEL:	R Cheney (Plaintiff) M Elliott (First Defendant) D M Loewenstein (Second, Third & Fourth Defendants/First, Second & Third Cross-Claimants)
SOLICITORS:	Paul Bard Lawyers (Plaintiff) Horton Rhodes Lawyers (First Defendant) Hickey Lawyers (Second, Third & Fourth Defendants/First, Second & Third Cross-Claimants)

Section 9.21 of Goddard
9.21	The mortar joints between the sandstone panels.	Accepted as defect.	$3,210

Total calculations for schedule B
Section	Sub total amount – as identified above
9.4	NIL	NIL
9.5	$315 + $495 + $315	$1125
9.6	$365.63 + $360	$725.63
9.7	$945	$945
9.9	$750	$750
9.10	NIL	NIL
9.11	$452.45	$452.45
9.12	NIL	NIL
9.14	NIL	NIL
9.16	$762.50	$762.50
9.17	$541.13 + $750	$1291.13
9.21	$3210	$3210
a TOTAL for Schedule B items		$9261.71