The Owners - Strata Plan 76841 v Ceerose Pty Ltd

[2016] NSWSC 1545

Supreme Court

New South Wales

Medium Neutral Citation:	The Owners – Strata Plan 76841 v Ceerose Pty Ltd [2016] NSWSC 1545
Hearing dates:	29 September, 7 and 14 October 2016; further written submissions 18 and 24 October 2016
Decision date:	02 November 2016
Jurisdiction:	Equity - Technology and Construction List
Before:	Stevenson J
Decision:	Leave to amend granted in part
Catchwords:	PRACTICE AND PROCEDURE – amendment of pleadings –– whether amendment seeks to raise new cause of action – whether such cause of action statute barred – whether defendants irretrievably prejudiced by amendment in any event – CONTRACT – building contract – further defects alleged after expiration of limitation period – whether further building defects bespeak fresh cause of action
Legislation Cited:	Civil Procedure Act 2005 (NSW) Environmental Planning and Assessment Act 1979 (NSW) Home Building Act 1989 (NSW)
Cases Cited:	Astley v Austrust Ltd (1999) 197 CLR 1 Conquer v Boot [1928] 2 KB 336 Creevey v Barrois [2005] NSWCA 264 Dymocks Book Arcade Pty Ltd v Capral Ltd [2011] NSWSC 1423 GIO General Ltd v Love [2009] NSWCA 269 Honeywood v Munnings (2006) 67 NSWLR 466; NSWCA 215 Lane Cove Council v Michael Davies & Associates [2012] NSWSC 727 Onerati v Phillips Constructions Pty Ltd (in liq) (1989) 16 NSWLR 730 Owners Strata Plan 70030 v Decon Australia [2016] NSWSC 19 Rail Corporation of New South Wales v Fluor Australia Pty Ltd [2008] NSWSC 1348 Tekno Ceramics Pty Limited v Milat [2003] NSWCA 254 Weston v Publishing & Broadcasting Ltd (2011) 83 ACSR 206; NSWSC 433
Category:	Procedural and other rulings
Parties:	The Owners – Strata Plan 76841 (Plaintiff) Ceerose Pty Ltd (First Defendant) Prisand Pty Ltd (Second Defendant)
Representation:	Counsel: F C Corsaro SC (Plaintiff) D T Miller SC with M Sheldon (Defendants)   Solicitors: Makinson & d’Apice Lawyers (Plaintiff) Blackstone Waterhouse Lawyers (Defendants)
File Number(s):	SC 2014/58603

Judgment

1. The plaintiff is an owners corporation responsible for the common property of a residential building in Waitara. The building is 8 storeys and comprises 64 residential lots.

2. The first defendant (Ceerose Pty Ltd) was the builder and the second defendant (Prisand Pty Ltd) the owner developer of the building. They are related companies. I will refer simply to “Ceerose”.

3. Construction commenced in September 2005. The strata plan was registered on 5 April 2006. A final occupation certificate was issued on 10 April 2006.

4. The Owners Corporation commenced these proceedings in the Consumer Trader and Tenancy Tribunal (“the Tribunal”) on 1 February 2012 alleging the existence of defects in the building work and breach by Ceerose of the statutory warranties implied in the building contract under s 18B of the Home Building Act 1989 (NSW) (“the HB Act”).

5. The proceedings were transferred from the Tribunal (by then, the New South Wales Civil and Administrative Tribunal) to the District Court of New South Wales in February 2014 and to this Court in May 2016.

6. The Owners Corporation now seeks to amend its claim in a manner that, if allowed, will more than double the total amount claimed.

Decision

7. I refuse to grant the Owners Corporation leave to amend to include what I refer to below as the Water Ingress Defect. I grant the Owners Corporation leave to amend what I refer to below as its Fire and BCA Defects claim on condition that the Owners Corporation’s claim for those defects is limited to $195,000.

Some common ground

8. A number of matters are common ground.

9. The first is that the work carried out by Ceerose on the building was “residential building work” for the purposes of the HB Act.

10. The second is that the statutory warranties under the HB Act were implied in the building contract.

11. The third is that, at the relevant time, the warranty period under s 18E of the HB Act was seven years, and that such period expired on 10 April 2013 (seven years after the date of the final occupation certificate).

12. The fourth is that the 10 year “long-stop” period in s 109ZK of the Environmental Planning and Assessment Act 1979 (NSW) (“the EPA Act”) expired on 10 April 2016 (10 years after the date of the final occupation certificate) and that, from that date, Ceerose was unable to bring a “building action” (as defined in s 109ZI of the EPA Act) against any of its subcontractors arising from the Owners Corporation’s claim.

Background

13. When the Owners Corporation commenced proceedings in the Tribunal, the amount claimed was expressed to be “greater than $30,000”. The jurisdictional limit of the Tribunal was then (and still is) $500,000 for building claims.

14. By 16 November 2012, the Owners Corporation had served a Scott Schedule that stated that the total cost of rectification (not including fire and structural defects: which the parties referred to as “Fire and BCA Defects”) was some $343,000 together with on-costs (contingency, preliminaries, builder’s margin and the like) making a total in the order of $555,000.

15. On 29 November 2012, the Owners Corporation’s solicitors wrote to Ceerose’s in-house counsel:

“You will note from the Scott [S]chedule (current) that the quantum of the claim is above the CTTT jurisdictional limit. Once costings have been prepared for [Fire and BCA Defects] we will have an indication of whether these proceedings need to be transferred to the District Court or Supreme Court.”

16. On 10 April 2013, the seven year period under s 18E of the HB Act expired (see [11] above).

17. The parties engaged in settlement discussions. The progress of the proceedings was delayed while that took place. Settlement discussions broke down in February 2015.

18. In the meantime, the Owners Corporation decided to cause the proceedings to be transferred from the Tribunal to the District Court. That occurred on 17 February 2014. On that date, the Tribunal noted that the reason for the transfer was:

“The [Owners Corporation’s] [S]cott [S]chedule assesses total rectification costs at $554,000.00 [sic: $555,000] and that does not include [Fire and BCA Defects]. The [Owners Corporation] continues to seek the full amount and does not accept the jurisdictional limit of the Tribunal”.

19. The significance of the Owners Corporation’s February 2014 decision to have the proceedings transferred to the District Court (rather than to this Court) is that it gave rise to an apprehension on the part of Ceerose that the total amount of the Owners Corporation’s claim (including the then unquantified claim for Fire and BCA Defects) would not exceed the jurisdictional limit of the District Court ($750,000) and that, accordingly, the amount of the fire and mechanical claims would not exceed the difference between the then quantified claims (some $555,000) and that limit: i.e. something in the order of $195,000.

20. On 19 August 2014, the Owners Corporation filed and served the current iteration of its pleading. In that Statement of Claim the Owners Corporation alleges that the work performed by Ceerose on the common property was defective or in breach of the statutory warranties implied under the HB Act. That allegation is particularised by reference to 538 alleged defects in the common property of the building.

21. In December 2014, Ceerose retained its current solicitor, Mr Venothan Panicker. Hitherto, it had used in-house counsel.

22. On 11 December 2014, Mr Panicker met with Mr Edward Doueihi, the managing director of Ceerose to discuss “the status of the proceedings”.

23. Mr Panicker examined the Owners Corporation’s claim of $343,000 for alleged defects, not including Fire and BCA Defects (see [14] above), and broke them down into 20 broad categories. Mr Panicker concluded that two items exceeded $50,000, four items were for about $25,000 to $30,000, two items were for around $12,000 to $15,000 and the remaining items were for less than $10,000 (with some being for a few hundred dollars).

24. Mr Panicker said that Mr Doueihi said:

“There are a lot of subcontractors who may be responsible for these defects, but I do not want to spend large amounts on legals if the subcontractors might only be liable for small amounts.”

25. Mr Doueihi gave unchallenged evidence that:

“I recall noting that the total value of all the alleged defects was less than $350,000. The individual items ranged from about $200 to $58,000. Given that the claim was in total for less than $350,000 (before the preliminaries, margin, contingency and GST) and that the value of the individual items were [sic] small, it did not make commercial or monetary sense to me to spend large amounts of money to sue the various subcontractors.

I instructed Mr Panicker that as there appeared to be potentially many subcontractors who may be liable, and for small amounts, the Defendants did not wish to spend large amounts of money to sue or cross claim against these subcontractors.”

26. Mr Panicker’s contemporaneous note of the 11 December 2014 meeting records that he advised Mr Doueihi that if it emerged that a “single line item” of the Owners Corporation’s claim was “over say 300k”, Ceerose should “maybe review” whether to bring a cross-claim against subcontractors arising from that matter. Mr Panicker said that Dr Doueihi accepted that advice.

27. Thus, in effect, Ceerose decided not to investigate further the possibility of bringing cross-claims against subcontractors unless and until it emerged that one or more of the yet un-costed claims of the Owners Corporation was in the order of $300,000. In effect, Mr Doueihi decided to take the risk that the Fire and BCA Defects claim, once quantified, would not exceed $195,000 (see [19] above).

28. On 10 March 2015, after settlement discussions broke down, the District Court ordered, by consent, the Owners Corporation to serve its further lay and expert evidence by 5 June 2015. The Owners Corporation did not comply with that order.

29. On 28 August 2015, again by consent, the District Court ordered the Owners Corporation to serve its evidence by 26 February 2016. Again, the Owners Corporation did not comply with that order.

30. That matter was again before the District Court on 8 March 2016.

31. On 7 March 2016, the day before that directions hearing, the Owners Corporation’s solicitor, Mr Matthew Wells, swore and served an affidavit in which he stated:

“Anthony Capaldi’s report dated 4 July 2012…has already been served.

Mr Capaldi was instructed to prepare a supplementary report and in this regard, inspected the property on 16-17 July and 17 August 2015.

The supplementary report of Mr Capaldi is yet to be finalised. I understand that Mr Capaldi underestimated the time it would take him to complete his supplementary report. This is partly due to the complexity of the issues identified by him and the number of defects he was required to address.

Mr Capaldi has identified a deficiency in respect of moisture migrating from the external walls of the building to the internal parts of the building. This is a separate issue to the waterproofing defects already identified in the July 2012 report. In order to address an assumption Mr Capaldi has made in relation to the construction of the building, Mr Capaldi needs to gain access to the wall cavity to view or use a thermal imaging camera to measure and monitor the water levels following a rain event or flood test. Mr Capaldi requires additional time to undertake these investigations.

This defect alone my cost circa $835,000.00 to rectify.” [Emphasis added]

32. I will refer to the “separate issue” to which Mr Wells referred as the “Water Ingress Defect”.

33. Service of Mr Wells’ affidavit was the first notice Ceerose had of the alleged Water Ingress Defect.

34. Mr Capaldi (referred to by Mr Wells) had provided reports to the Owners Corporation’s solicitors concerning this matter in September and December 2015. Mr Wells had tried to send a copy of the December 2015 report to Mr Panicker by email, but accidentally sent the email to an out-dated address. Mr Panicker did not receive the email.

35. Mr Wells said in his affidavit that he expected “liability evidence” (reports from Mr Capaldi and from a Mr Rod Broune) would be to hand by the end of March 2016 and that a report on quantum by a Mr George Zakos would be to hand by early May 2016.

36. Mr Wells said that “[a]lthough the plaintiff is late in serving liability and quantum evidence, I am not aware of any prejudice to the defendant in respect of the late service”. Evidently, Mr Wells was not conscious of the looming expiry of the long-stop period.

37. Mr Wells’ affidavit also annexed a letter of 7 March 2016 from Mr Zakos, which stated that the “current subtotal” of the Owners Corporation’s claim was some $1.66 million including some $490,000 for “General Building and Waterproofing Defects”, some $835,000 for the Water Ingress Defects and some $336,000 for Fire and BCA Defects. The quantum of a further claim for “Structural Defects” was stated to be “awaiting final report”.

38. That letter comprised the first notice Ceerose had of the quantum of the Owners Corporation’s claim for Fire and BCA Defects (that figure not being included in the $555,000 referred to in the 29 November 2012 Scott Schedule (see [14] above).

39. Finally, Mr Wells foreshadowed the Owners Corporation’s application to transfer the proceedings to this Court.

40. On 8 March 2016, over Ceerose’s objection, the District Court extended the time for the Owners Corporation to serve its lay and expert evidence to 9 May 2016.

41. The Owners Corporation served its evidence in mid May 2016. The total amount claimed exceeded $2.3 million. The claim for the Water Ingress Defect was in the order of $1 million including on-costs and GST. The claim for Fire and BCA Defects was in the order of $335,000 with on-costs.

42. In the meantime, on 10 April 2016, the long-stop period under s 109ZK of the EPA Act expired.

43. The proceedings were transferred to this Court in May 2016 and, by Notice of Motion filed on 20 July 2016, the Owners Corporation now seeks to file an amended pleading (a Technology & Construction List Statement) to add a further 45 items, numbered 539 to 583, to the particulars of defects set out in the 19 August 2014 Statement of Claim.

The matters in dispute

44. Ceerose opposes the Owners Corporation’s application to amend so far as it concerns the addition of the Water Ingress Defect and Fire and BCA Defects claim (at least, insofar as that claim now exceeds the $195,000 figure referred to at [19], being the difference between the then quantified claim of $555,000 and the $750,000 jurisdictional limit of the District Court).

45. Ceerose does not oppose the addition of items 539 to 581.

The Water Ingress Defect

46. Mr Miller SC, who appeared with Mr Sheldon for Ceerose, submitted that the Water Ingress Defect is “wholly new” and should be refused for two reasons.

Out of time?

47. First, Mr Miller submitted that the Water Ingress Defect is statute barred as it arises out of a cause of action that expired after the end of the seven year period referred to in s 18E of the HB Act (see [11] above) and does not arise from the “same (or substantially the same) facts as those giving rise to [the] existing cause of action” pleaded by the Owners Corporation for the purposes of s 65 of the Civil Procedure Act 2005 (NSW), and should therefore not be allowed.

48. The Water Ingress Defect does appear to be “new” in one sense. Although the Owners Corporation already made a moisture claim in relation to the flashings in balcony terrace windows and sliding doors and in the roof, the Water Ingress Defect relates to something different, namely an allegation of inadequate weather proofing of the external walls. As Mr Miller submitted, the alleged ingress sites and mechanisms of the Water Ingress Defect are different from those of the existing moisture claims.

49. Indeed, in his written submissions, Mr Corsaro SC, who appeared for the Owners Corporation, accepted that the Water Ingress Defect “was not identified in terms before, but was signalled in Mr Wells’ affidavit of 7 March 2016”.

50. However, the question arises as to whether introduction of the Water Ingress Defect would amount to the introduction of new causes of action.

51. The Owners Corporation’s claim is in contract (albeit relying on the statutory warranties implied by the HB Act).

52. In Onerati v Phillips Constructions Pty Ltd (in liq) (1989) 16 NSWLR 730, Giles J held at 746 that:

“In curial proceedings, for the purposes of the principle of res judicata there is but one cause of action for breach of contract founded upon breach of a promise such as to carry out the work in a good and workmanlike manner. There is not a number of causes of action according to particular defects or classes of defect resulting from the breach.”

53. His Honour followed the decision in Conquer v Boot [1928] 2 KB 336, in which Sankey LJ said:

“The cause of action here is: (1.) the contract to complete in a good and workmanlike manner a bungalow, and (2.) the breach of it. I do not think that every breach of it - every particular brick or particular room that is faulty - gives rise to a separate cause of action. I am of opinion that the cause of action here was the contract and the breach of it… I do not think it is possible to say that every one of these breaches is a separate cause of action.” [At 342]

54. Similarly Talbot J said (at 344):

“There is one contract and one promise to be performed at one time…”.

55. Giles J’s decision in Onerati was followed by the Court of Appeal in Honeywood v Munnings (2006) 67 NSWLR 466; NSWCA 215.

56. It was common ground before me that the same principles apply (as far as concerns res judicata) in relation to the warranties implied into building contracts under s 18B of the HB Act.

57. The Owners Corporation’s claim is for breach of those statutory warranties, that is a claim in contract, and the Owners Corporation now purports to add the Water Ingress Defect as a particular of that claim.

58. Mr Miller submitted that “[t]he judgment in Onerati said nothing about limitations and when a cause of action accrues in contract” and drew attention to an observation to this effect by Sackar J in Lane Cove Council v Michael Davies & Associates [2012] NSWSC 727 at [59].

59. It is true that cases such as Conquer v Boot and Onerati were concerned with the doctrine of res judicata and dealt with circumstances where a party to a building contract had sued a builder to judgment, and then sought to bring further proceedings arising from later discovered defects.

60. However, it seems to me that if there is “but one cause of action for breach of contract” (per Giles J at [52] above) for the purposes of the doctrine of res judicata, the same must be true for the purposes of the law of limitation. That is because both are concerned with whether a right to bring a cause of action has been extinguished.

61. McDougall J proceeded on this basis in Owners Strata Plan 70030 v Decon Australia [2016] NSWSC 19. As in this case, his Honour was dealing with an application for leave to amend a claim for breaches of the statutory warranties under s 18B of the HB Act and to add further allegations of defective work. His Honour stated:

“Many of the submissions of the developers…appeared to assume that what was being sought was either to amend, or to plead fresh causes of action. On the face of things, that does not appear to be correct. As Giles J said in Onerati…at 746, ‘there is but one cause of action for breach of contract founded upon breach of a promise such as to carry out [building] work in a good and workmanlike manner.’ There is not, his Honour said, ‘a number of causes of action according to particular defects or classes of defect resulting from [that] breach’.” [At [16]]

62. That being so, it is at least arguable that the addition of the Water Ingress Defect to the Owners Corporation‘s claim does not introduce a new cause of action and that considerations such as those which concerned Ward J (as her Honour then was) concerning s 65 of the Civil Procedure Act in Dymocks Book Arcade Pty Ltd v Capral Ltd [2011] NSWSC 1423 (especially at [23] ff) do not arise here. In Dymocks her Honour was dealing with a claim in negligence, not contract. Accordingly the Onerati point did not arise for consideration.

62. For those reasons, I would not have refused the Owners Corporation leave to introduce the Water Ingress Defect on a limitations basis (although I may, as a precaution, have ordered that the amendment date only from the date of the application to amend, and not from the commencement of the proceedings).

63. There is, however, more.

Prejudice

65. Mr Miller submitted that the amendment to introduce the Water Ingress Defect should, in any event, be disallowed because of the “obvious and significant” prejudice (to adopt the language of Foster AJA in Tekno Ceramics Pty limited v Milat [2003] NSWCA 254 at [41]) that would thereby be visited on Ceerose by reason of the expiry of the “long-stop” period (see [12] above).

66. The expiry of the long-stop period (on 10 April 2016) means that Ceerose can no longer bring a “building action” against any party arising out of the “building work” it did at the property.

67. “Building action” is defined in s 109ZI of the EPA Act as “an action (including a counter-claim) for loss or damage arising out of or concerning defective building work”.

68. “Building work” is defined in the same section to include “inspection and issuing” of “compliance certificates” under s 109C of the EPA Act.

69. Mr Miller submitted, and I accept, that it was reasonable for Ceerose, and its advisers, to await service of the Owners Corporation’s expert reports (particularly that of Mr Zakos, which quantified the claims) before considering what, if any cross-claims, could or should be brought arising out of the Water Ingress Defect.

70. I agree that the assertions made by Mr Wells in his affidavit of 7 March 2016 did not provide a sound basis on which Ceerose could or should have embarked on such a course.

71. The Owners Corporation was already in breach of two orders of the District Court to put on its evidence. Ceerose opposed the Owners Corporation being given any further time. Further time was nonetheless given. Ceerose was entitled to wait and see what was served. Although Mr Wells’ affidavit foreshadowed that some reports would be served during March 2016, none were served until May.

72. By then, the long-stop period had expired.

73. Mr Miller submitted that potential cross-defendants included HD Projects Pty Ltd (the subcontractor responsible for the supply of labour, materials and equipment necessary for the installation of the structural walling system), Dix Gardner Pty Ltd (the principal certifying authority for the project) and S&W Nader Pty Ltd (the waterproofing subcontractor).

74. Ceerose must show it would have had a “viable and realistic” as opposed to “fanciful or theoretical” claim against these parties (for example see Weston v Publishing & Broadcasting Ltd (2011) 83 ACSR 206; NSWSC 433 at [241]; GIO General Ltd v Love [2009] NSWCA 269; Creevey v Barrois [2005] NSWCA 264 at [56]).

75. S&W Nader was deregistered on 5 October 2014. Obviously, as at 10 April 2016, Ceerose had no viable or realistic claim against that company.

76. However, on 10 April 2016, HD Projects and Dix Gardner were (and still are) trading.

77. In support of the proposition that Ceerose did not have any “viable and realistic” cross-claim that has been lost by reason of the expiry of the long-stop period, Mr Corsaro made a number of submissions.

78. The first was that the subcontracts in questions contain no warranties or indemnities in relation to defect works and that, in any event, any contractual claim that might otherwise have been available to Ceerose against those subcontractors would have expired on 10 April 2013 (see [11] above).

79. However, as Mr Miller pointed out, Ceerose would have had available to it a “direct tort claim” seeking “damages for contribution (so as to make good economic loss), or equating to an indemnity, based on a direct tortious duty to exercise reasonable skill and care in undertaking the works and thereby protecting [Ceerose] from economic loss at the suit of the [Owners Corporation]”.

80. Mr Corsaro also submitted that any such “negligence action against the subcontractors would be futile” as there was no basis “for the establishment of the relevant ‘vulnerability’ on the part of [Ceerose]”.

81. I do not accept that submission. Concurrent liability in both contract and tort is well recognised: for example Astley v Austrust Ltd (1999) 197 CLR 1. The duty would no doubt be commensurate with and circumscribed by the terms of the subcontract. As Mr Miller pointed out, this is not a novel proposition: for example per McDougall J in Rail Corporation of New South Wales v Fluor Australia Pty Ltd [2008] NSWSC 1348.

82. Further, Mr Corsaro submitted that Ceerose “still has the protection of bringing a claim for indemnity or contribution against the certifiers based on the certificates provided”. I do not accept that submission. An action against the certifier would be a “building action” as “building work” is defined to include the issuing of compliance certificates (see [67] above).

83. So far as concerns HD Projects, there are two walls making up the external part of the building; the outer masonry wall and an inner load bearing, structural reinforced concrete wall known as an AFS wall. It is common ground that HD Projects was responsible for construction of the AFS wall.

84. The Water Ingress Defect concerns an allegation that there was water ingress through these two walls as a result of debris filling the gap between the two walls.

85. Mr Corsaro relied on an affidavit sworn by Mr Broune (see [35] above). Mr Broune is a structural engineer. Based on his review of the relevant documents, Mr Broune expressed the opinion that:

“The construction of the external brick skins takes place after the completion of the AFS walls. It may be the case that the construction of external brick skins commenced prior to the completion of the structural frame of the building, but it would have been the case that the AFS walls forming the inner skin of external cavity walls at any given location in the building were completed by HD Projects prior to the construction of the corresponding outer brick masonry leaf.

It then follows in my view that the responsibility for the fixing of ties to support the outer brick skins to AFS walls, the construction of the outer brick masonry leaves, the building in of DPC’s and flashings into the outer brick masonry leaves and the keeping of the cavity between the inner AFS wall leaves and the outer brick masonry leaves clean of obstructions, mortar, debris and the like, was not the responsibility of HD Projects.

It also then follows in my opinion that any circumstance of a blocked or bridged cavity or the like that could result in the transfer of moisture through a cavity wall into a habitable space, as cited in the report of Mr Capaldi dated 9 May 2016, was not the consequence of anything that HD Projects did or failed to do in undertaking the works set out in the Subcontract.”

86. Thus Mr Corsaro submitted that the installation of the AFS wall did not require HD Projects to do any work on the external brickwork of the complex and that Ceerose had not explained how HD Projects, as the AFS installer, could be responsible for failing to clean out the external cavity of the walls.

87. In response, Mr Doueihi swore an affidavit in which he stated:

“[I]t is my opinion that if water is migrating from the outside of the walls into the apartments, then the likely cause of that is the defective installation of the AFS Wall System by HD Projects, and in particular, voids in the concrete infills… [I]f the concrete infill in the AFS Wall System (which was HD Projects’ responsibility) was properly compacted, or tamped, such that it did not have voids in the concrete, there could not be any penetration of water into habitable areas. The fact that there might then be material between the outside brick leaf and inside concrete panel would be irrelevant because the inside AFS wall is effectively a concrete wall which would prevent any water tracking into the habitable areas.”

88. I am not in a position to come to any conclusion as to whether Mr Broune’s opinion should be preferred to that of Mr Doueihi. Both Mr Broune’s and Mr Doueihi’s affidavits were served following the completion of oral argument. Neither was cross-examined.

89. The point is that, now that the long-stop period has expired, Ceerose has lost the opportunity to make a claim against HD Projects and to seek to establish that it was the lack of compaction or tamping of the concrete infill in the AFS wall system that caused the Water Ingress Defect. Based on the material before me, my opinion is that it is by no means “fanciful” or “theoretical” to suppose that Ceerose would have had a good claim against HD Projects. If events occurred as Mr Doueihi has opined, Ceerose would have had a “viable” and “realistic” claim. The opportunity to bring that claim is now lost.

90. So far as concerns Dix Gardner, Mr Corsaro submitted that the relevant occupation certificate was signed by Mr Lyall Dix in his personal capacity, and not on behalf of Dix Gardner, that Mr Dix has now been disqualified from being an accredited certifier and has no insurance cover of any worth.

91. The assertion that Mr Dix gave the relevant certification only in his personal capacity is evidently based upon no more than Mr Corsaro’s instructing solicitor’s “review” of the occupation certificate; which evidence was, in any event, and by consent received only as a contention.

92. However, in response to that contention, Mr Panicker swore an affidavit to which he annexed documents showing that the fee proposal for the certification of the property was issued by Dix Gardner, the invoices issued for the certification were issued by Dix Gardner and that Ceerose paid for the certification work to the bank account of Dix Gardner.

93. In those circumstances, it is clear that the certification work was done by Dix Gardner, not Mr Dix in his personal capacity, and that Ceerose has now lost the opportunity to pursue a cross-claim against that company.

94. In those circumstances, I am satisfied that Ceerose has, by reason of the expiry of the long-stop period, lost an opportunity to prosecute viable and realistic cross-claims and that it would thereby suffer obvious and significant prejudice if the proposed amendment was allowed.

95. For that reason, I refuse to grant the Owners Corporation leave to introduce the Water Ingress Defect into its claim.

The Fire and BCA Defects claim

96. The Fire and BCA Defects were included in the 538 defect particulars annexed to the 19 August 2014 Statement of Claim. There is thus no suggestion that this claim is out of time.

97. However, no figure was ascribed to the Fire and BCA Defects claim until 7 March 2016, when Mr Wells annexed to his affidavit the letter from Mr Zakos to which I have referred and which stated that the amount claimed was some $336,000.

98. For the same reasons I have set out above in relation to the Water Ingress Defect, I accept that it was reasonable of Ceerose to await service of expert reports before making any decision about cross-claims arising from the Fire and BCA Defects claim. As Mr Miller submitted, the one line reference in Mr Zakos’ letter annexed to Mr Wells’ 7 March 2016 affidavit (see [37] above) was not a sufficient basis from which to start enquiries.

99. As I have set out, in December 2014, Mr Doueihi, on behalf of Ceerose decided to defer investigation of any potential cross-claims unless and until a single claim emerged in the order of $300,000. Mr Doueihi was not cross-examined about that (or any) matter and it was thus not suggested to him that his decision was unreasonable or reckless.

100. Looking at Mr Doueihi’s evidence overall, I am satisfied that, had the Owners Corporation served its evidence before the expiry of the long-stop period, in particular, had the Owners Corporation complied with the District Court’s orders of 10 March 2015 or 28 August 2015, Ceerose would have adopted an entirely different approach to the litigation, including the taking of steps concerning cross-claims.

101. In particular, Mr Doueihi gave unchallenged evidence that had he known that the Owners Corporation’s claim “was more than $2 million, I would have pursued legal action against consultants and/or subcontractors responsible for those defects and done so at a much earlier vantage [sic]”.

102. So far as concerns the Fire and BCA Defects claim, because the long-stop period expired before service of the Owners Corporation’s evidence, Ceerose can no longer bring a cross-claim against the fire/BCA certifier, Dix Gardner. It has thus suffered prejudice similar to that it has suffered in relation to the Water Ingress Defect matter.

103. However, bearing in mind that, as at December 2014, it was in effect prepared to take the risk that the Fire and BCA Defects claim might be in an amount up to $195,000 (see [19] to [27] above), the justice of the case requires that I grant the Owners Corporation leave to amend to bring the Fire and BCA Defects claim, but on the basis that this claim be limited to $195,000.

The expanded negligence claim

104. The proposed amendment also seeks to re-cast the Owners Corporation’s existing negligence claim.

105. Although both parties devoted many pages of submissions to this question, it ultimately emerged that Mr Miller’s only objection to it was in relation to the Water Ingress Defect. As I do not propose to allow the Owners Corporation to amend its claim to incorporate this matter, I need not consider this aspect further.

106. In any event, I do not see that the Owners Corporation’s reformulated negligence claims is, in substance, different from the current pleading. If, as Mr Miller contends, it is sure to fail, the proposed amendments will not save it.

Conclusion

107. For those reasons, my conclusions are as I have set out at [7] above.

108. I will hear the parties as to costs.

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Decision last updated: 02 November 2016